{"prompt": "Human: Total revenue was approximately $1.5 billion, representing a 7.5% decline versus last year, which exceeded our expectation and reflects continued sequential improvement.\nAs anticipated, our Aviation segment remains the primary driver behind the revenue decrease.\nOn both the GAAP and an adjusted basis, earnings grew by a 160% or more year-over-year.\nGAAP continuing earnings per share grew to a $1.10 per share or $1.01 per share on an adjusted basis.\nAdjusted EBITDA margins expanded more than 400 basis points to 8.3% compared to last year.\nAnchoring these results was elevated demand for higher margin Work Orders for virus protection as well as our EnhancedClean services which are longer term in nature.\nEffective labor management continued to be a lever for profitability.\nAs you may remember, the majority of our contracts are performance based, so any efficiencies we find in staffing as occupancy drops or schools are in a hybrid situation [Phonetic] in order to our benefit.\nThis is the advantage of having a flexible labor model.\nEarl, will discuss our segments in more detail, but overall, our industry group drivers are similar to what we saw during the balance of last year.\nNot surprisingly our Aviation and Technical Solutions segments were challenged by the pandemic due to decreased global travel and limited site access for retrofit projects and educational facilities.\nEducation as the segment though grew top and bottom line during the quarter, which shows how well our team has adapted operationally to the hybrid learning system and Business & Industry and Technology & Manufacturing are still strong outperformers.\nWe've been able to offset COVID related revenue compression with higher margin Work Orders, EnhancedClean contracts and labor management.\nWe're now almost at the one-year mark since the start of the pandemic and I've just summarized our fourth consecutive quarter of strong results.\nThis sustained performance suggests that we have reached a level of consistency in our results and stabilization across our client portfolio.\nLet me now provide some thoughts on where we believe the operating environment is headed, especially in light of our full year guidance.\nBefore I dive into what momentum to normalcy looks like in 2021, I want to underscore that normalcy does not imply less vigilance around virus protection.\nOver the past several months, there have been countless news and scientific journals reminding us that COVID-19 and its after effects will continue to linger over the foreseeable future.\nMany believe it will be a permanent fact of life with people getting regularly vaccinated similar to how we handle flu vaccinations.\nWe are so enthusiastic that vaccine rollouts are under way across the country.\nMost importantly, the vaccines will save lives, but the rollouts will also lead to momentum back to work, school, travel and attending entertainment venues.\nHowever vaccine rollouts have not been uniformed on a state by state basis nor have stayed policies on masking, public gatherings and other factors that impact infections and new cases.\nThese factors as well as the ongoing discovery of new variants highlight how societies need to respond to COVID-19 on an elevated level, will not end in the near-term.\nThis is why it's so critical for us to partner with our clients and assess their evolving needs and engage our expert advisory panel.\nIn B&I, the vaccines will spur momentum back to work, which for us means a return of more traditional janitorial work as well as the continuation of disinfecting given higher occupancy.\nCurrently, average occupancy across the country is approximately 15%.\nWe anticipate this could increase to 25% by Labor Day and grow to 50% plus through calendar year-end.\nAs clients begin to plan their returns, they are focusing on building trust in their facilities through health and safety protocols, rigor around cleaning, disinfecting and especially physical spacing will be incorporated into their plans.\nFor this reason, we do not anticipate a near-term reduction space utilization across commercial real estate, especially with Class A buildings and blue-chip clients.\nFor a sector like education, we believe the hybrid models will be in effect for at least the rest of the school year.\nSoon, if not already, institutions will start planning for the fall 2021 semester with a push for more in-person learning in the K through 12 segment and higher ed.\nHow this unfolds could vary by region.\nWe should have a better line of sight when we speak to you after Q2 earnings.\nAnd I'm sure as vaccine adoption continues to expand, there's probably no sector more poised for a robust volume recovery than Aviation.\nWe are definitely hearing about pent-up demand for personal travel and minimally a modest return of business travel.\nFor ABM, our business portfolio consists of both airlines and airports.\nAs airports were opened during the pandemic, operations in areas like terminal cleaning, transportation and shuttle service enabled us to mitigate reduced volumes on the airline side.\nAnd ultimately, this diversification helped us breakeven last year, which was a major achievement.\nOn the airline side, current travel volumes are approximately 50% of pre-COVID levels.\nAssuming vaccine rollouts gain traction, we believe we could see that grow moderately by year-end.\nAs both airlines and airports see increased traffic, the need for disinfection, virus protection and EnhancedClean will grow.\nOn an enterprise level, we conducted a Pulse Survey of approximately 200 clients last month that largely aligned to our own full year expectations.\nMost respondents are expecting their facilities to more fully reopen and their companies to be endorsing reoccupancy in varying forms by September and they plan to continue taking multiple measures to protect spaces against COVID-19 as they reopen primarily in the areas of surface and air disinfection.\nAnd even with the increase in flexible work schedules and work from home protocols, the vast majority of our clients say that they expect the total amount of space utilization to remain largely the same.\nNow, the size of our survey, it's just a subset of our client base, but it supports what we are hearing more broadly as we communicate with our customers on their future plans.\nIt also speaks to our confidence in providing full year guidance today.\nFor fiscal 2021, we are introducing full year guidance of earnings per diluted share of $2.85 to $3.10 or $3.00 to $3.25 on an adjusted basis.\nOur outlook for adjusted EBITDA margins is 6.6% to 7%, which compares to 6% last year.\nWe also expect to return to growth by the second half of this year and consistent demand for high margin Work Orders and EnhancedClean services through year-end.\nWe also anticipate retaining most of our labor arbitrage through year-end.\nOur success will not translate to complacency.\nBased on how the pandemic has changed our trajectory, we have been capitalizing on our momentum to elevate our brand and business.\nAt the end of February, we launched ABM's first national TV commercial.\nIt was a celebratory moment for the entire firm and we could not be proud of.\nIf you've not seen it on CNBC or Bloomberg TV, you can find it on our IR website today.\nAs we discussed last year, we are going to be investing in our clients, team members, and infrastructure.\nWe're focused on providing technology and data analytics capabilities to enhance client and team member experiences.\nWe are also prioritizing areas like talent development to further empower our people and create even more consequential relationships with our clients.\nWe are committed to building upon our strong culture and fostering a community of belonging where team members feel connected, valued, and inspired.\nThis reinforces our mission and vision as an organization and will have significant long-term commercial outcomes for us.\nInternal initiatives such as our culture and inclusion council are dedicated to driving meaningful social change and cultivating an inclusive environment for everyone at ABM and we are taking active steps to turn this vision into reality.\nI'm excited to share that we have entered into partnerships with organizations that are focused on building a more equitable society.\nABM has made a commitment to support the NAACP Legal Defense and Educational Funds, the Hispanic Scholarship Fund, the Afterschool Alliance, and the Thurgood Marshall College Fund.\nWe are partnering with these organizations in an effort to make a difference in the areas of advocacy and civil rights, basic human needs, education, and workforce development.\nWe were just starting to discuss the coronavirus and its impact on the economy.\nAt that time I reiterated how our diversified portfolio coupled with our nimble operating model or hallmarks of our long-term success over the past 110 years.\nOur results over the past 12 months has proven this beyond a doubt and with our solid liquidity and leverage, we are better positioned than ever to pursue growth and profitability that will unlock even greater shareholder value.\nThe dedication of the ABM team continues to fuel our performance quarter-after-quarter.\nWe have a culture like no other in our industry.\nI'm proud that our results have been the greatest proof point of our resilience, agility and excellence.\nToday marks my 100th day at ABM and my early impressions about the organization's drive to collaborate and execute have only grown.\nAs I continue to evaluate and assess our business needs, my main area of focus will be on helping to determine the appropriate enablers for both strategic growth and continuous improvement.\nAs I will discuss in more detail shortly, our strong results over the past several quarters coupled with our leadership position in the marketplace provides us with great opportunity to invest in our future growth potential.\nI look forward to finalizing our thoughts on areas such as our internal investment strategy and sharing with all of you over the course of the year.\nNow onto the results.\nRevenue for the quarter was $1.5 billion, a decrease of 7.5% compared to last year.\nThe decrease in revenue reflects the continued impact COVID-19 has had across our business segments.\nAs a reminder, the pandemic had not yet impacted operations significantly until our second quarter last year and as such this quarter reflects the full year-over-year impact.\nPartially offsetting this revenue decline was the ongoing demand for higher margin disinfection related Work Orders and EnhancedClean services.\nWork Orders were particularly strong within our Business & Industry and Technology & Manufacturing industry groups.\nOn a GAAP basis, our income from continuing operations was $74.6 million or $1.10 per diluted share compared to $27.9 million or $0.41 last year.\nIn addition to our strong operational performance, the increase versus last year was driven by favorable development in prior year self-insurance adjustments.\nWe saw an $11.4 million benefit this year compared to $6.6 million in the first quarter of fiscal 2020.\nAdditionally, we saw our second consecutive quarter of current year positive insurance trend recording a benefit of approximately $3 million.\nOn an adjusted basis, income from continuing operations for the quarter increased to $68.3 million or $1.01 per diluted share compared to $26.2 million or $0.39 last year.\nOur GAAP and adjusted earnings growth versus last year continued to be driven by significant increases in higher margin Work Orders and EnhancedClean services.\nAs our clients have incorporated health and hygiene services such as disinfection into their operation at higher levels, we continue to experience higher margin as a result of direct labor efficiencies, as our operators proactively manage the deployment of labor commensurate with COVID-19 related revenue decline.\nAdditionally, results also reflect one less working day, which amounted to labor expense savings of approximately $6 million.\nOther items such as corporate discretionary expense, amortization, and interest were also lower compared to last year.\nThese results were partially offset by our planned infrastructure and organizational investment in areas such as IT.\nHowever, I want to note that our investment spend for the quarter was approximately $4 million, which was lower than originally anticipated.\nDuring the quarter, we generated adjusted EBITDA of approximately $124 million for a margin rate of 8.3% compared to $68.8 million or 4.3% last year.\nI will now discuss our segment results.\nAs I referenced earlier, these results reflect the ongoing impact of COVID-19, which has resulted in revenue compression across our services.\nAs Scott discussed, our diversified segment structure has been a strength for us during the pandemic and each segment has been impacted by the pandemic in different ways, both positively and negatively.\nIn most cases though with perhaps the exception of Technical Solutions, our segment results reflect some combination of a mix shift toward higher Work Orders and EnhancedClean services.\nLabor modulation on lower service demand as well as operational investments in areas such as EnhancedClean.\nB&I revenue was $809.4 million, which was down just $11.5 million or 1.4% versus last year.\nThe parking and sports and entertainment businesses were the predominant drivers of the revenue decline due to the ongoing pandemic.\nAlmost entirely offsetting this decline was increased demand for higher margin Work Orders and EnhancedClean services at our national accounts and certain client in corporate sectors such as financial institutions.\nOperating profit for the quarter reflected this more favorable mix of business resulting an $85.7 million or a margin of 10.6% compared to last year's $38.2 million and 4.7% respectively.\nTechnology & Manufacturing remains one of our most resilient segments.\nT&M produced solid results for the quarter as it has since the beginning of the pandemic.\nThe segment reported revenue of $249.2 million, an increase of 6.5% versus last year with an operating profit of $26.9 million or a margin rate of 10.8%.\nWork orders and EnhancedClean services drove demand for T&M particularly within the industrial manufacturing, pharmaceuticals, and high-tech sectors.\nWe also experienced growth with our logistic clients as we supported them during the peak holiday season.\nOur Education segment grew revenues of $209.4 million with operating profit of $21.5 million or 10.2% margin.\nWe believe these results reflect some stabilization as schools have continued the hybrid learning model that has been in effect since the back half of last year.\nPerformance was primarily attributable to direct labor management due to modified staffing levels and other expense savings as well as demand for disinfection and COVID related Work Orders.\nLooking ahead, we anticipate some reinstitution of a traditional selling season in 2021, which did not really exist last year due to the pandemic.\nWe continue to monitor how schools are going to evolve their approach to teaching in the current environment particularly as vaccination rollouts progress.\nAviation reported revenue of approximately $143 million with operating profit of $3.2 million.\nAs anticipated, this segment remain most impacted by COVID-19 and its effect on global travel.\nThe quarter saw a modest sequential increase in travel due to the holiday, but also reverted quickly due to lockdowns in areas such as the UK.\nWe continue to operate according to flight and passenger demand, providing higher tech services such as electrostatic spraying as we managed variable costs and expenses on a real time basis to match demand.\nFinally, Technical Solutions reported revenue of $113 million versus $142 million last year.\nThis decline was driven by site access issues as clients such as an education continue to limit traffic into their facilities in order to protect administrative staff, teachers and students.\nHowever backlog remains healthy above $150 million and we remain focused on churning through these projects as soon as possible.\nOperating profit was $6 million or 5.3% on a margin basis.\nTurning to cash and liquidity.\nWe reported positive cash flow during the first quarter despite this traditionally being a cash flow negative period.\nThis even includes the deferral of approximately $31 million in payroll taxes from the CARES Act.\nWe generated more than $45 million in cash flow from operations and free cash flow of approximately $39 million for the quarter.\nOur strong performance enabled us to end this quarter with total debt including standby letters of credit of $851 million and a bank adjusted leverage ratio of 1.8 times.\nAdditionally, we ended the quarter with cash and cash equivalents of $378 million.\nGiven the consistency of our leverage and cash position over the last several quarters, we believe we have reached a point of stability both operationally and financially.\nAs a result, we are evaluating our capital allocation priorities.\nIn addition to organic investments in our business, we are also exploring the M&A market for potential targets to drive growth and build on our current momentum.\nWhile remaining cognizant of our reentry into M&A, we will also consider share repurchases opportunistically.\nWe currently have approximately $145 million remaining in our authorized share repurchase program and we'll balance any potential activity with our M&A efforts to ensure maximum flexibility.\nDuring the quarter we paid our 219th consecutive quarterly cash dividend of $0.19 per common share for a total distribution of $12.7 million to shareholders.\nNow turning to our guidance outlook.\nWe are introducing a fiscal 2021 GAAP guidance outlook range of $2.85 to $3.10 and on an adjusted basis $3.00 to $3.25 per share.\nScott shared with you some great context from an operating perspective that supports our guidance.\nSo let me now provide some additional assumptions behind our guidance.\nGiven our performance during the first quarter, we believe revenue will continue to improve sequentially with a return to growth in the back half of the year.\nAnd as growth improves and turn positive we will have to staff back up accordingly.\nTherefore there may be a partial reduction in the level of labor efficiencies we have experienced over the past year, but make no mistake, we do expect to retain a portion of these savings based on new opportunities and labor management practices we have adopted during COVID.\nAnd as it relates to higher margin Work Orders and EnhancedClean services, we do not anticipate a material slowdown in demand for the balance of the fiscal year.\nWe expect our investments to pick up throughout the remainder of the year as we support the strategic initiatives namely in our IT transformation.\nOn a year-over-year basis, we do expect an increase in corporate expenses for the year although timing may vary from quarter-to-quarter as you saw in the first quarter.\nAdditionally, as a reminder, we undertook furlough and expense reduction efforts during the third quarter of last year.\nAnd as such, expect to see year-over-year increase in expenses as we have resumed a portion of those expenditures.\nWe are still in the planning and design phase of our technology roadmap and we will update you as we finalize our plans.\nI'd also like to remind everyone that we will see an extra working day in Q2 and one less working day in Q3.\nEach working day should represent approximately $6 million of labor expense similar to Q1.\nWe continue to expect an effective tax rate of approximately 30% for 2021.\nThis tax rate does not include discrete tax items such as the work opportunity tax credit and the tax impact of stock-based compensation awards.\nAt the end of December, WOTC was formally extended by Congress through 2025 and current estimate suggest a $5 million or $0.07 impact on 2020.\nAnd finally, while we are not guiding to free cash flow, until we can finalize the impact of our tech transformation on capital expenditures.\nI want to express my enthusiasm for the strong start to the year.\nGiven our strong cash flow performance to-date, we believe we'll be able to achieve a range above our historical $175 million to $200 million and look forward to updating you as we finalize our longer-term plan.\nIn closing, we're excited about our performance for the quarter as well as our outlook for the year and we look forward to updating you on our continued progress next quarter.\n Assistant:", "chosen": "q1 adjusted earnings per share $1.01 from continuing operations.\nq1 gaap earnings per share $1.10 from continuing operations.\nfor fiscal 2021, company expects gaap income from continuing operations of $2.85 to $3.10 per diluted share.\nfor fiscal 2021, company expects adjusted income from continuing operations of $3.00 to $3.25 per diluted share.\n"}
{"prompt": "Human: Regarding today's program, we will first review our fourth quarter and full fiscal year 2021 financial and operating results.\nAfter that, we will take a short break, we will then begin the Investor Day portion of the program where we will provide an update on our strategic positioning, discuss our newly announced Elevate initiative and provide a multi-year outlook.\nAfter that, we will host a Q&A session.\nFollowing our comments, we are hosting a virtual Investor Day, where we will provide a long-range strategic update and financial outlook, including a comprehensive discussion of our Elevate investment initiative.\nFiscal 2021 was an exceptional year for ABM, highlighted by continued strong financial performance and the acquisition of Able Services, a key transaction that substantially expanded our geographic footprint and broadened our capabilities.\nThroughout the year, our global team continued to execute at the highest level, successfully navigating a dynamic environment with agility, resiliency and dedication to serve our clients.\nFourth quarter revenue grew over 14% to $1.7 billion and adjusted earnings per share increased 23%, representing a great finish to our fiscal 2021 year, where revenue of $6.2 billion was accompanied by an adjusted earnings per share increase of 47% to $3.58.\nOur strong revenue growth in the fourth quarter was driven by one month of contribution from Able, as well as organic growth in our B&I, Aviation and Technical Solutions verticals, which more than offset a modest decline in our Education segment.\nI'm pleased with the progress we've made in enhancing our overall profitability as full year adjusted EBITDA margins reached a record 7.3% and fourth quarter adjusted EBITDA margins increased 40 basis points from prior year.\nThroughout the year, we continued to experience demand for disinfection and virus protection services as clients prioritized our EnhancedClean protocols to maintain hygiene in high traffic spaces.\nIn addition, we continued to manage our labor cost efficiently as office occupancy trends increased gradually through the year.\nAs anticipated, overall demand for our higher margin work orders and EnhancedClean services eased as the year progressed, yet we maintained elevated in the fourth quarter compared to pre-pandemic levels.\nGoing forward, we expect that ongoing concerns around COVID-19 variance will lead to incremental opportunities for our disinfection services, providing support for our adjusted EBITDA margins exceeding 6% in fiscal 2022 per our guidance.\nTurning to our segment performance.\nFourth quarter revenue growth was led by a continued rebound in aviation.\nThis industry group, which was most impacted by the pandemic, generated 43% year-over-year revenue growth in the fourth quarter as air travel trends improved markedly over the prior year and we capitalized on new business opportunities, including the expansion of our parking operations at airports.\nOur fourth quarter was also benefited from 21% growth in Technical Solutions revenue, reflecting growth in our emerging e-mobility business and improved access to client-site.\nTechnical Solutions backlog increased by 20% sequentially compared to the third quarter and reached a record level in the fourth quarter, driven by the transition to electric vehicles and the associated need for charging stations, our e-mobility business has significant long-term growth potential.\nKey growth drivers for this business include federal stimulus funds designated for energy efficient projects as well as the recent passage of the federal infrastructure bill that included $7.5 billion toward deploying EV charging stations nationwide.\nOur B&I segment continued to perform well as revenue grew at a double-digit rate in the fourth quarter, benefiting from the addition of Able, new contract wins and continued client demand for work orders.\nWhile office occupancy trended higher over the past year, office occupancy levels remained low by historical standards, which should lead to a continued tailwind from labor efficiencies perspective in this segment during the first half of fiscal 2022 and possibly longer.\nFourth quarter revenue and margins declined compared to the prior year.\nEarlier this year, we communicated that the return of students to school on a full-time basis with diminished Education segment labor efficiency, as increased staffing would be required to accommodate educational institutions reopenings in the fall.\nThis [Indecipherable] we expected, though the unusual rapid staffing ramp combined with the state of the labor markets resulted in higher labor costs, dampening segment margins in the quarter.\nWith this staffing increase now behind us, we believe Education segment profitability will return to more normalized levels starting in the first quarter.\nFive years ago, we announced 2020 vision, a long-range strategic plan to drive profitable growth and shareholder value.\nToday, we are building on the success of that initiative with Elevate, a multi-year comprehensive investment initiatives that will enhance our strategic and competitive positioning, leverage the advantages of leading-edge technologies, inclusive of data and analytics and enable us to capture incremental growth and profit opportunities arising from macro shifts in demographics, rapidly changing workplace dynamics and the heightened need for increased corporate sustainability.\nElevate will include strategic investments in revenue growth initiatives, team member development, workforce management and digital transformation.\nThese investments will accelerate our organic growth, strengthen profitability and create a more rewarding experience for both clients and team members.\nThe total Elevate investment is estimated to be $150 million to $175 million and the initiatives is expected to be largely completed by the end of fiscal 2025.\nIn fiscal '22, we expect to invest approximately $80 million in Elevate, enabling us to significantly advance the implementation of our digital transformation.\nWith these foundational elements in place, by the end of fiscal 2022, we anticipate lower levels of Elevate investments in subsequent years.\nWe are excited about the opportunities that Elevate will provide and we'll share more detail with you on this whole initiatives in a few minutes on the Investor Day portion of the program.\nWe are entering fiscal 2022 from a position of strength, supported by a healthy balance sheet, solid cash flow and favorable growth trends across our businesses.\nWe continue to support our clients by providing high value services and solutions that have enabled them to navigate unprecedented challenges over the past couple of years and with the recent acquisition of Able, we significantly expanded our capabilities to comprehensively address our clients' evolving needs across the spectrum of facilities management and engineering solutions.\nNow I'd like to comment briefly on our guidance.\nFor fiscal 2022, we forecast GAAP earnings per diluted share of $2.05 to $2.30 and adjusted earnings per share of $3.30 to $3.55.\nWithin this guidance, we assume an easing of COVID related disinfection services and work orders, leading us to project fiscal '22 adjusted EBITDA margins of 6.2% to 6.6%, inclusive of synergies from Able Services acquisition.\nWhile earnings per share and margins are projected to decline from fiscal 2021, they are significantly above pre-pandemic levels and above our targeted long-term metrics we outlined in 2019 when we signaled an aspirational margin range of 5.5% to 6%.\nWe'll provide more detail on our outlook and fiscal 2022 guidance later during our virtual Investor Day portion of the program.\nI'll now turn over the call to Earl for a discussion of our financials.\nFourth quarter revenue increased 14.2% to $1.7 billion, primarily driven by one month of contribution from the acquisition Able Services, continued client demand for disinfection services and a generally improving economic environment.\nGAAP income from continuing operations in the fourth quarter was $34.3 million or $0.50 per diluted share, compared to $53.1 million or $0.78 per diluted share in the same period last year.\nThe decrease in GAAP income reflects higher operating and corporate expenses, which included acquisition related costs of $19.7 million, initial investments in our Elevate initiative and a lower benefit from self-insurance adjustments related to prior years.\nOn an adjusted basis, fourth quarter income from continuing operations grew 25% to $58.2 million or $0.85 per diluted share compared to $46.7 million or $0.69 per diluted share in the fourth quarter of last year.\nThe increase in adjusted earnings per share reflects revenue growth and a benefit from the absence of a reserve for notes receivable related to a single project within the company's Technical Solutions segment recorded last year, partially offset by reduced labor efficiencies and disinfection work.\nCorporate expenses were $40.9 million higher compared to the fourth quarter of fiscal 2020, due to acquisition-related expenses, a lower benefit from prior year self-insurance adjustments and costs related to hiring initiatives.\nCorporate expenses in the fourth quarter of fiscal 2021 were also impacted by $10.3 million of initial investments in the Elevate transformation initiative that Scott mentioned, and that we will discuss more fully later on.\nNow turning to our segment results in the fourth quarter.\nB&I revenue increased 17.5% year-over-year to $933 million, driven primarily by a one-month contribution from Able Services, increased office occupancy and the expansion of key accounts.\nExcluding the contribution from Able, B&I revenue increased 4.7% from the prior period.\nOperating profit in B&I declined 3% to $82.1 million from the same period last year, reflecting an easing in higher margin work orders.\nAviation revenue increased 43% to $201.7 million, marking the second consecutive quarter of robust year-over-year revenue growth.\nThis improvement was driven largely by increased airline passenger volume and the expansion of our airport parking operations.\nAviation operating profit increased to $13.2 million, compared to $3.5 million in last year's fourth quarter, driven by the significant rebound in revenue as well as our efforts to emphasize higher margin airport facility services.\nRevenue within our Technology & Manufacturing segment was essentially flat year-over-year at $245.5 million, as new business starts were offset by reduced client demand for COVID related work orders and EnhancedClean.\nHowever, operating margins for T&M improved to 10% in the fourth quarter, up 40 basis points from last year's fourth quarter benefiting from efficient labor management and contract expansions.\nEducation revenue declined 3.7% to $204.4 million, largely reflecting the timing of contract rebids.\nWhile client retention rates remain consistent on a year-over-year basis, certain contract rebids were not completed in the fourth quarter, impacting segment revenue.\nOperating profit totaled $7.7 million, down from $15.1 million in last year's fourth quarter.\nThe decline in segment operating profit was in part due to normal seasonality.\nHowever, the magnitude of the decline this year was amplified by the widespread reopening of educational institutions that necessitated a near instantaneous ramp-up of staff, as Scott has discussed.\nMoving forward, we anticipate Education segment profit margins will be approximately 6% in fiscal 2022, representing an increase of more than 100 basis points compared to pre-COVID levels, resulting from a sustained uplift in labor efficiency and higher disinfection revenue.\nRevenue within our Technical Solutions segment grew 21% to [Technical Issues] million, aided by continued strong growth in our emerging electric vehicle charging infrastructure business, improved access to client sites and strengthened client demand for energy efficient solutions.\nSegment operating income returned to profitability and generated an operating profit margin of 12.8%.\nWe ended the fourth quarter with $62.8 million in cash and cash equivalents, compared to $394.2 million with total debt of $1.06 billion as of October 31, 2021.\nOur total debt to pro forma adjusted EBITDA, including standby letters of credit was 1.9 times at the end of the fourth quarter of fiscal 2021.\nAs for our dividends, I am pleased to report the Board approved a 2.6% increase in our quarterly dividend to $19.5 to be paid out in February.\nNow, I'll briefly discuss our outlook.\nAs Scott mentioned, our guidance for full year fiscal 2022 adjusted income from continuing operations is a range of $3.30 to $3.55 per diluted share.\nOur adjusted earnings forecast reflects a favorable growth outlook across our business segments in fiscal 2022, as well as an expected easing in COVID-19 related disinfection work and a reduction in labor efficiencies from anticipated rising office occupancy rates.\nPlease note that our adjusted earnings guidance excludes approximately $72 million in Elevate related expenses that are planned in fiscal 2022.\nThese are general and administrative expenses for delivering and implementing technology and process solutions related to our digital transformation.\nWe plan to exclude these expenses from adjusted earnings to provide for more accurate comparisons regarding operating performance.\nWe expect that fiscal 2022 tax rate to be approximately 30% excluding any discrete items.\nFiscal 2022 will have one additional workday compared to fiscal 2021.\nAs a reminder, each workday represents approximately $7 million of labor expense.\nIn terms of the timing of quarterly workdays throughout the year, we will have one additional work day in both the first and fourth quarters versus the comparable periods in fiscal 2021 and one less workday in the second quarter.\nCapital expenditures for fiscal 2022 are expected to be approximately $54 million, including $8 million related to Elevate investments.\nWe forecast depreciation to be approximately $50 million for the year.\nI'm super excited to kick off the Investor Day portion of our program, especially in light of the incredible results we shared earlier.\nJoining me are the members of our executive leadership team, who you'll be hearing from later today.\nThis team brings an incredible mix of industry experience and diverse backgrounds.\nWe'll share our strategic plan that will unlock significant long-term value for our shareholders and strengthen our industry-leading position through end market repositioning and building on our core services.\nOur new strategic plan will transform ABM from a position of strength, using what we learned from 2020 vision and our COVID response to launch our organization into the next phase of our journey.\nWe're going to leverage the market trends that will impact our business over the next five years.\nThis will not only sharpen our focus, but also inform the investments we'll be making and we're going to optimize our portfolio of services and markets and geographies to better position our businesses to thrive as society evolves and moves forward, and we will innovate in the areas of technology and data to modernize service delivery.\nThis will improve the productivity of our frontline workforce and create digital connections with our clients and our teammates and will drive profitable growth, will accelerate organic revenue growth rates by close to 50% with sustainable adjusted EBITDA margins almost double where we started in 2015, while building on our significant cash flow.\nOver the course of the next hour, we'll dive into each one of these elements.\nBut before we jump into our strategic plan and tell you how we're going to elevate ABM, we'll briefly lay the foundation for first.\nSo we're confident that we can implement our strategic plan because we've done it before.\nIn 2015, we launched 2020 vision, a watershed moment for ABM, driving long-term profitable growth and enhancing shareholder value.\nThese investments we'll make over the next few years are a direct result of learnings from the success of 2020 vision.\nSo let's start with a review of what we've accomplished.\nFirst, our go-to-market strategy shifted us from a service-centric to a client-centric organization and created industry groups organized by end market.\nThis allowed us to focus on industries where we have a meaningful competitive advantage, like Business & Industry, with our unmatched commercial real estate portfolio.\nIt also gave us the opportunity to seek out segments where we knew we could build a leadership position, like we did with Education.\nWe are now clearly the number one facilities provider in that segment.\nThis approach was well received by clients and led to improved organic growth.\nYou see, having an established industry group structure makes it easier for us to cross sell multi service solutions to our clients, leading to stickier, higher margin contracts.\nWe were also aggressive in optimizing our portfolio by divesting non-core assets like security and government services and quickly reinvesting those proceeds into an emerging higher growth, higher margin service line, our Technical Solutions business.\nThrough the acquisition of GCA, we were able to take to sub-scale vertical markets, Education and Technology & Manufacturing and solidify them as stand-alone industry groups.\nIn a moment, we'll share the ways we'll continue to evolve our industry group mix toward high growth, high-margin sectors.\nWe also now have mature key corporate functions like centralized shared services for finance and HR.\nWe were able to improve productivity and we're now in a position to take advantage of our scale as we continue our growth trajectory through synergistic M&A.\nA good example of the benefits of scale is how our procurement team continues to drive efficiencies in large dollar spend categories, as we have more meaningful relationships with our suppliers.\nThe power of this has never been more evident than during the pandemic when we were able to procure PPE and supplies, while others could not.\nThis provide a critical protection for our team members and our clients.\nProcurement is among many key areas where we can find synergies from M&A, and our sales culture dramatically change through 2020 vision.\nThis resulted in a record five consecutive years of new sales growth and unparalleled achievement for us.\nAnd in the field, we established standard operating procedures and a consistent service delivery approach, so our large-scale national clients knew what they can expect from market to market.\nTo fund our acquisition strategy during 2020 vision, we upsized our credit facility from $800 million to $1.6 billion.\nWe also consistently increased our dividend for over 55 years.\nAnd this past quarter, we paid our 222nd consecutive dividend.\nWe'll continue to drive growth and create value by focusing on thoughtful capital allocation to fund organic investments, pursue M&A and distribute cash to shareholders.\nWe learned a lot through 2020 Vision and I'm proud of the financial results we delivered.\nOur journey started with a 3.8% adjusted EBITDA margin.\nBy 2019, our adjusted EBITDA margin expanded by 140 basis points to 5.2%.\nRevenue grew by 23% to $6.5 billion and adjusted earnings per share grew 27%, reaching $2.05 per share.\nAnd we delivered these results during one of the worst labor crises in recent memory from 2018 to 2019.\nAnd we displayed the resilience that investors have come to expect from ABM year-after-year.\nWe also continue to evolve on the executive leadership front.\nToward the end of 2019, we made a key hire bringing on Josh Feinberg, our Chief Strategy and Transformation Officer.\nJosh helped guide our 2020 Vision as a partner at BCG.\nAnd now, he is instrumental in developing our strategic vision and building a digitally enabled operating model.\nI'll hand it off to Josh now to continue laying the foundation for our strategic plan.\nReally appreciate the introduction.\nI feel so fortunate to be here.\nIt's truly a pleasure to chart ABM's path forward from a position of strength.\nAnd we have a lot to leverage our market leadership position in a large and still very fragmented industry, our unmatched footprint and service portfolio, our blue chip client base in our industry-leading team.\nBut perhaps more than anything else, our business continues to prove time and time again to be incredibly resilient.\nWe were tested in 2020 and 2021 as the COVID-19 pandemic took hold.\nWe acted quickly and decisively, rapidly building and deploying new capabilities and mobilizing our teams to lead our clients through the unpredictable shutdowns and reopenings we've all experienced over the past 20 months.\nAnd throughout it all, we perform at record-breaking profitability.\nSo how did we do it?\nAnd how has it further strengthened us for the path ahead?\nWe prioritized the health and safety of our team members and clients, always our top priority, by assembling an advisory council with some of the nation's leading experts in industrial hygiene and infectious disease and establishing the leading pandemic-specific health, safety and operations protocols that we quickly deployed across our client base.\nWe laser-focused on our cash flow and liquidity.\nWhen many in our industry struggled, our cash position improved significantly.\nWe developed our own proprietary experts-backed solutions, EnhancedClean & EnhancedFacility to deliver healthy safe spaces and peace of mind to our clients and their employees, so buildings could reopen and stay open.\nWe've built and deployed a flexible labor model to accommodate the changing landscape.\nAnd we shifted our growth to pandemic appropriate end markets, like manufacturing and distribution, which helped offset the revenue decline in more impacted areas like aviation.\nThese actions led to bottom line profitability beyond expectation, driving our pre-COVID adjusted EBITDA margin baseline from 5% up to 7.3% in 2021, while generating cumulative COVID-related revenues of $600 million over 2020 and 2021.\nOur ability to perform during the pandemic clearly illustrates our agility and resilience.\nBut the structural enhancements we made during this time, particularly the installation of a flexible labor model and the conversion of higher margin disinfecting into permanent scope additions, will serve us well going forward.\nOur world has fundamentally changed over the past 20 months.\nSociety's demand for healthy and safe spaces will continue well into the future, especially as new variants continue to emerge.\nWe are confident that this will translate into long-term margin expansion, whether new variants continue or not.\nWe have moved beyond being a trusted partner.\nWe are now a trusted and differentiated brand.\nToday, we are well positioned to invest in our future and are fortunate to be launching our strategy from a position of strength.\nWe have unrivaled competitive advantage anchored in our market leadership across all end markets and industries we serve, unparalleled reach with a large distributed network of people and branch offices to serve our clients across the US and UK, a unique portfolio of services spanning janitorial, engineering, parking, technical solutions and aviation services, a trusted reputation that we have earned over the last 110 years of long-lasting client relationship and a strong balance sheet that we will use strategically and opportunistically as expansion possibilities arise.\nOur performance during the pandemic afforded us the opportunity to look ahead and craft our longer-term strategy, while others struggle day to day.\nWe started by refreshing our deep understanding of the market and trends, impacting our industry now and for years to come.\nFive trends rose to the surface.\nFirst, societal shifts are leading to the demand for healthy, safe and efficient spaces as well as a renewed commitment to diversity, equity and inclusion.\nChanges in demographics, higher rates of urbanization and consumer preferences have accelerated the need for expanded logistics ecosystem from clients like Amazon, Walmart, FedEx and UPS looking to enhance the reach.\nSecond, the future of work is centered on drastically changing employee expectations, which are causing employers to rethink workplace design, assess the appropriate work models for their teams and create efficient collaboration tools to drive sustained improvements in employee productivity and satisfaction.\nThis trend highlights the need to invest in dynamic workforce capabilities and employ flexible operations to accommodate rapidly changing workplace dynamics.\nThird, sustainability is no longer a consideration for the future.\nIt is required to operate a business responsibly right now.\nOur recently published Sustainability Report reaffirms our commitment to leaving a healthier planet for the next generation and beyond.\nMore specifically, the demand for renewable energy, clean air, reduction in energy consumption and the elimination of harmful pathogens are just a few sustainability trends that directly align to our janitorial, facilities engineering and technical solutions businesses, all of which our strategic growth priorities.\nFourth, mobility is shaping various industries, leading to significant investments in autonomous vehicles and electrification, which is driving new infrastructure builds across the world.\nThis presents a substantial opportunity for our fast-growing EV charging segment in our Technical Solutions business, in our Smart Parking Solutions, in our B&I and Aviation segments.\nIt continues to accelerate with leading-edge technologies and data and analytics, becoming more prevalent in day-to-day use.\nSmart buildings are evolving with artificial intelligence, cloud computing and IoT sensor technology.\nThis is leading to our investment in both workforce and client-facing technology at a time when clients are demanding innovation.\nOur purpose, putting people above all else and amplifying what matters most to them has never meant more.\nThe value and demand for what we do has never been higher.\nOur clients will benefit, our team members will benefit, society will benefit and our investors will benefit.\nWe've anticipated the seismic shifts ahead.\nWe're prepared to embrace these changes and capitalize on the future they've opened up.\nThis is our time.\nLet me now pass it back to Scott to unveil our strategic vision.\nTo continue to win in the future, we must build on our positioning to capture the opportunity ahead and sustain the resilience our shareholders depend on.\nElevate is the next step in our journey.\nWe will elevate the client experience as a trusted advisor and innovate with multi-service solutions and consistent service delivery to drive sustained profitable growth.\nWe'll elevate the team member experience by training and developing the next generation of leaders and building on our inclusive culture and will elevate our use of technology and data to power client and team member experiences with cutting-edge data and analytics, processes and tools that will fundamentally change how we operate our business and result in significant financial returns.\nThis will separate us from our competitors that just don't have the financial resources to make these investments, w will elevate ABM.\nLet's take a look at the Elevate launch video that brings our vision to life.\nwe are really inspired by this vision.\nRene is responsible for leading operations for all of our industry groups and has created an environment centered on collaboration, accountability and client focus.\nHe is now going to take you through the market landscape, our service line and industry group portfolio and a view into how we'll elevate the client experience.\nWe play in a large and diverse market with many different types of competitors.\nThe total addressable market although very large at $250 billion is highly fragmented.\nOftentimes our greatest competition comes from small regional players and local companies.\nWhile we are well positioned from a competitive standpoint in each market, growth rates for our core services tend to be generally in line with GDP.\nYou'll see that we plan on investing in our platform in ways that our competition cannot.\nWe're also well positioned to ensure business continuity for our clients in response to new variants given our established protocols, expert advisory council and the essential services we provide to meet their needs.\nElevating the client and team member experiences through the use of technology and data will differentiate ABM in the marketplace and help us achieve above market growth.\nWe operate with a vast number of service lines to well-defined and diversified end markets and geographies.\nWhile the diversity of our business is a strategic choice we want to preserve, we continue to evolve our focus.\nWe spent significant time and effort analyzing market trends, competitive intelligence, client needs and economics to assess both our current portfolio and potential adjacencies.\nLet's take a look at how we're structured and provide you with an aerial view of our industry groups and service lines.\nLet's start with our service lines.\nJanitorial Services have always been the core of ABM service offering.\nOur position as a market leader in the geographies we operate opens up tremendous possibilities for growing into new whitespace.\nWe will pursue organic initiatives to improve our client retention rates and maintain our market leading position.\nWe will also invest heavily in tools to unlock efficiencies in our frontline workforce.\nWe're excited to share more about these initiatives later on today.\nWe will also seek out M&A opportunities to grow our footprint in geographies with favorable economies of scale.\nOur foothold in key markets provides a firm foundation for synergies.\nAdvances in technology and a focus on sustainability, particularly in energy efficiency and consumption have propelled engineering services to the forefront.\nPreventative maintenance dictated by time based schedule is phasing out as facilities are now being outfitted with Edge networks sensors and other smart devices to drive data that allow our engineers to predict failures before they happen.\nThe demand for expert engineering services is high and the ability to lead with advanced processes and technology, one of our key areas of investment over the next few years is quickly becoming a place where we can differentiate.\nWe'll also continue to seek out opportunities to improve our scale in key markets through M&A like we did with Able Services.\nSuccess in parking centers around technology and advanced revenue management capabilities as we seek to optimize our clients parking facilities operations and revenue.\nWe will continue to modernize our parking business and create a consistent operating model around technology and automation to drive value for our clients.\nWe've already begun to deliver first generation smart parking solutions to enhance the parking experience at LAX [Indecipherable] automation artificial intelligence and machine learning are some of the ways we can provide frictionless entry and exit, smooth way finding and automated payment solutions.\nWe can also offer a unique bundling opportunity with the installation and modernization of EV charging stations.\nWe are consolidating this data into a single analytics platform to drive revenue and over the next few years, we will invest in scaling these areas to become a unique solution provider for our clients.\nWe are increasingly pursuing client opportunities that include multiple services.\nOur ability to self-perform engineering, janitorial and other maintenance services is a big differentiator with prospective clients.\nAlong with a strong strategic partnership network, these contracts require a dedicated technology platform to manage the full suite of services and advance procurement capabilities to negotiate service contracts where we need a subcontract.\nThere is a continuum between adding an additional service versus a fully integrated IFS contract and there is a lot of white across that spectrum.\nOur goal is to move further along that continuum toward IFS.\nThe Able acquisition advanced our position in this area, as you'll see, when we dive deeper into that strategic move a little later.\nThese capabilities provide higher margin and increased retention or stickiness, a key to growing our business and profit profile.\nOur industry group structure was similarly strengthened by this new strategic approach.\nLet's start with a review of our Technical Solutions business.\nTechnical Solutions has been our highest growth and highest margin business for years.\nHistorically, we've achieved these results with our HVAC, mechanical, electrical and lighting services, which are often bundled together and packaged in a unique offering to our clients to generate cost savings, while yielding healthy margins for ABM.\nWe call that bundled energy solutions.\nWe're seeing greater demand for services in higher growth segments of the market related to electrification, sustainable energy savings programs and power and electrical, consistent with the long-term mega trends we discussed earlier.\nOur team is poised to continue on a growth trajectory powered by the momentum we're seeing in the market for vehicle electrification, where we are one of the largest installers of electrical vehicle charging stations in the country; bundled energy solutions that guarantee energy savings and address critical aging infrastructure; power and electrical services that support the growth of mission-critical facilities like data centers for clients in technology, healthcare and the federal government.\nThe $1 trillion bipartisan infrastructure bill that just passed will open doors for us.\nIn fact, it allocates $7.5 billion that could be used to construct EV charging stations.\nWe are planning investments in talent and technology to attract salespeople who can sell these complex solutions, highly skilled engineers and project managers, and hardware and software to build unique solutions and integrate data sources.\nThe revenue and margin potential for ATS continues to be very high, relative to other industry groups.\nInvestments in public infrastructure, the growth of electrification and the focus on energy and sustainability project significant market growth for years to come.\nNext, let's turn to B&I, our largest industry group.\nB&I is anchored by our commercial real estate client portfolio, which consists of both third-party managed and owner managed facilities.\nJanitorial, engineering and parking are the primary service lines in B&I, which have generated solid margins and cash flow for ABM.\nWe are planning investments in workforce management that will increase the productivity levels of our onsite operations as well as our use of technology like sensors, autonomous equipment and data platforms.\nTo enhance our value proposition to clients by providing real-time insights to better run their facilities.\nB&I fared extraordinarily well throughout the pandemic.\nWhile we sustained some top line impact due to facility closures early on and more recently low rates of occupancy, our margins flourished as we were able to drive labor efficiencies and higher margin EnhancedClean services to our clients.\nRevenue growth potential for B&I.\nIs that a company average and remains a reliable source of organic growth year in and year out, given its overall size and impact on the organization.\nThe margin potential for B&I continues to be above the industry group average and will be further augmented by elevated investments.\nThe market for commercial office space is projected to grow at modest rates with the types of clients on the upper end of that growth range very much aligned to our operating model, skewing toward large national companies.\nNext, let's cover our Education segment.\nEducation is operating a near pre-COVID levels as schools have largely returned to in-person learning across the country.\nWe expect both higher education and K-12 schools to continue to invest in disinfection programs, while also focusing on indoor air quality.\nWe are advising clients on different ways to pay for these services, including government funding through the CARES Act and other programs.\nOur breadth of services in this segment makes us a true industry leader with janitorial, facilities engineering, landscape and ground services in all markets.\nOur education clients have also been a major focus for cross-selling bundled energy solutions from the ATS group.\nRevenue growth and margin potential for education is slightly below company average.\nHowever, there is an upside as our team shifts focus to higher margin contracts with private higher-education institutions that have longer buying cycles.\nThe education market is primarily in-sourced, but we are well positioned to generate more first generation outsourcing opportunities with integrated service offering that includes janitorial, engineering and grounds.\nThis solution was bolstered by the acquisition of Able Services.\nNow, let's switch gears and turn to Aviation.\nAviation was our most impacted industry group during the COVID-19 pandemic.\nHowever, our exposure to airports and not just airlines insulated us against the more severe impact as flight volumes dropped almost 90% during the peak.\nOur breadth of service offerings in this space and our commitment to providing healthy and safe spaces for passengers both on-board and in airports helped us sustain a significant portion of our revenue over the last few years.\nAs flight volumes are returning to normal, we're also continuing to secure higher margin service contracts with airports and related facilities, which tend to be more stable.\nWe're an end-to-end provider of services in the aviation industry as we handle everything from parking and transportation, to wheelchair, to cabin cleaning and many below the wing services like baggage handling.\nWhile revenue in our Aviation segment remains below pre-pandemic levels, we expect to see continued growth, driven in part by new airport parking, transportation and janitorial contracts.\nOver the last few years, we've evolved from 45% airport clients and 55% airline clients to 55% airport clients and 45% airline clients as airports are less impacted by fluctuating passenger volume.\nRevenue growth potential for aviation is projected to be high with the aviation sector recovering after the initial COVID shutdown.\nWhile margin potentially is structurally lower than company average, we're expecting significant improvement in this area due to volume improvements and customer mix.\nWe believe the market potential is high, given the recently passed infrastructure bill.\nFinally, let's discuss some key trends in our Technology & Manufacturing business.\nOver the last few years, our presence in logistics, distribution and manufacturing has grown double-digits.\nAs we covered earlier, several mega trends are accelerating growth in these markets.\nConsumer preferences have changed.\nThey now expect faster fulfillment without an increase in costs, which is leading to a boom in US distribution and warehouse space that is now reaching urban markets.\nEstimates show that 1 billion square feet of net new US distribution warehouse space is needed to support e-commerce growth due to consumer demands.\nThis represents more than 100% growth in these types of facilities.\nABM has a strong presence in this high growth market and has client relationships with the likes of Amazon, Walmart, FedEx and UPS, who've experienced significant growth over the last few years.\nAdd to this robust end markets like food and beverage, auto, aerospace and other large industrial companies, and we are uniquely positioned to compete in this growing market.\nToday, we're excited to announce the creation of a new industry group, Manufacturing and Distribution.\nM&D will replace our T&M industry group and shift our incredible portfolio of technology clients into B&I where they're best served.\nThis will allow us to become even more client-centric in how we deliver our services to manufacturing and distribution clients who have similar business needs and are also essential service providers in our economy.\nIt will also leverage ABM's scale to drive service excellence, increasing density and proximity of support to all of our technology, manufacturing and distribution clients as well as position M&D for innovation and growth by putting our best operation around each client and focusing on large specialized client sites to give us a better chance to expand multiple service offerings to these accounts.\nThe accelerated growth of our technology clients with their expanded office footprint is best served by B&I and the branch network with roughly $300 million in annual revenue moving over.\nThis includes clients like Facebook, Google and Adobe.\nM&D will maintain our large manufacturing clients and add distribution clients with roughly $400 million in annual revenue moving over.\nRevenue growth potential for M&D is projected to be well above average as we leverage foundational client relationships with large organizations who are realizing exponential growth.\nMargin potential is projected to be high due to the specialization required to perform service in these unique high demand facilities.\nThat variability makes it difficult to support how each team member can be most productive across the organization.\nWe will transform how we work together adopting industry leading smart processes and tools by investing in a new workforce platform with modern time keeping, scheduling forecasting modules, providing a simple user interface that our teams can manage and access via desktop, tablet or mobile.\nUltimately, our goal is to create a digital connection with our workforce to enable just in time and on-demand training and development, providing them with insights to get their jobs done more productively, which will deliver better client satisfaction.\nWe expect these investments to produce significant benefits due to increased labor productivity and will also provide us with better controls to help us comply with the ever-changing regulatory environment in these areas.\nWe are a people business.\nOur team members will be a driving factor in our long-term success if we empower them to inspire, lead, manage and execute.\nTo accomplish this, we will strengthen our culture and reaffirm our commitment to an inclusive workplace.\nLast year, we launched a culture and inclusion council and now this cross-functional, multi-level council is beginning to help in this area.\nWith the guidance of the council, we selected outside organizations to partner with.\nAs a result, we've entered into multi-year partnerships with respected organizations like the Hispanic scholarship fund, the after-school Alliance and The Thurgood Marshall College Fund.\nAll our focus on building a more equitable society for the next generation.\nThis not only resonates with our leaders, but directly to our team members at every level.\nWe will empower and engage workforce through improved talent acquisition capabilities and enhanced coaching and development programs, beginning with the frontline manager.\nWe will evolve our rewards by implementing a totally reward system and recognition program that enhances ABMs value proposition for team members and drives retention and productivity.\nWe will build stronger HR capabilities by enhancing our HR shared services center that provides team members with support in HR related information 24/7, while we continue to evolve our broader HR capabilities.\nWhile we're excited about our vision to elevate the team member experience, we realize we are in the midst of a global labor shortage.\nOur teams have been keenly focused on mitigating this risk by launching several targeted initiatives to keep our client facility staffed, including strategies to better attract and retain talent.\nIn this spring, we launched a rapid recruiting program that expands the reach of most of our impactful recruiting activities, like deploying local sourcing teams, hosting grassroots hiring events, opening new stand-alone brick and mortar recruiting centers in key markets, driving incentive programs and social media brand promotion across all our major channels.\nThese activities have driven a strong pool of candidates and we will continue to invest in these programs across all of our key markets.\nStructural realignment of our centralized field recruiting model has significantly improved yield and accepted offers.\nThis is resulting in both improved time to fill and more hires with the same number of recruiters.\nWe expect to continue to realize staffing efficiencies as we scale these initiatives.\nWhile we've improved our candidate flow, we've also started to build additional solutions to retain our team members.\nWe developed a predictive retention model to identify areas of the business that may experience higher levels of team member attrition.\nThis data coupled with strong HR and operational partnership has led to site-specific action plans.\nEarly results show reduction in turnover in half of all site where this approach has been deployed.\nWith a solid strategy in place to keep our facility staffed and the investments we're making and enhancing our workforce management capabilities, we feel as prepared as we can be considering the current tight labor market.\nNow to introduce you all to the third pillar in our strategic plan is Melanie Kirkwood Ruiz, our Chief Information Officer.\nMelanie is a visionary technology leader with more than 20 years of experience across diverse industries, including gaming, commercial real estate, manufacturing, healthcare and aviation.\nMelanie will explain how we elevate ABM through the use of technology and data.\nElevating the client and team member experiences requires us to create a digital connection that links the buildings we service to our teams and our clients.\nThis connection will be enabled with technology and real-time data to promote visibility, it's a facility operations and insights to drive meaningful action.\nThis will result in increased productivity and improvements in client satisfaction and retention.\nLeading-edge technologies such as AI, machine learning and advanced data analytics are radically changing the way we do business and deliver value to our clients and team members.\nTo effectively capture the opportunities in front of us and stay at the leading edge, we must embrace these trends and develop a digital platform consistent with our market leadership position.\nWe will elevate our use of technology and data by investing in our systems, tools, business processes and operating models to enable the following outcomes.\nWe will engage our clients and team members in new ways to further differentiate us in the industry.\nThis includes launching a new team member at that will serve as a one-stop shop to manage their schedules and shifts, access new training and development content and communicate with their managers and clients.\nBy developing and deploying client-facing technology and data platforms, we can drive actionable insights that improve service delivery and our ultimate value to the client.\nWe will expand our use of data by building and advanced data and analytics capability that will develop data products for high value use cases like some of the ones [Indecipherable] mentioned already, team member retention, hyper targeting for sales and recruiting among others.\nThis will establish data and analytics as a strategic asset for ABM.\nWe will modernize the digital ecosystem to support core activities and enable high value business outcomes.\nInvestments in this area will include upgrades to enterprise software like our ERP and payroll systems along with infrastructure and cyber security builds to support our new capabilities.\nTechnology data, and process will power our ability to provide best-in-class client and team member experiences.\nWe will undergo a fundamental transformation with careful pace and cadence.\nAnd now to talk through our 2022 guidance and forward outlook is Earl Ellis, ABM's Chief Financial Officer.\nI am so pleased to have the opportunity to share with you our fiscal 2022 guidance and the details of our strategic investments that will transform ABM over the years to come.\nThese investments will accelerate our organic growth, expand our profitability and significantly enhance both our client and team member experiences.\nOver the next four years, we are confident these investments will drive substantial and sustainable improvements to our operational and financial performance, while improving both employee and client retention.\nNow before I dive into the details of our fiscal '22 guidance and longer-term outlook, I think it's important to first ground us in what's transpired over the past year and a half.\nSince the third quarter of fiscal 2020, we have experienced significant tailwinds from the dramatic impact of COVID-19.\nThe substantial increase in demand for disinfecting services combined with our team's continued strong operational execution and drive for labor efficiencies contributed to record adjusted EBITDA margins exceeding 7% in fiscal 2021.\nThis represents a more than 200 basis point improvement versus pre-COVID adjusted EBITDA margins in fiscal 2019.\nMuch of this improvement reflects COVID related benefits from increased work orders, EnhancedClean and labor efficiencies.\nWhile we anticipate an easing of these tailwinds as we emerge from the pandemic, we are confident that we can retain approximately 50 basis points to 70 basis points of uplift over the long-term as we expect to maintain a portion of both the disinfection related revenue and profitability along with a higher baseline level of labor efficiency.\nSo turning to fiscal 2022 guidance.\nAs we build upon the improved positioning gained over the past 18 months, we are guiding to an adjusted EBITDA margin within a range of 6.2% to 6.6%.\nThis represents a meaningful improvement over our baseline pre-pandemic adjusted EBITDA margin of 5.2% reported in fiscal 2019, but lower than fiscal 2021 as the pandemic tailwinds ease and our business begins to normalize.\nIn addition, our adjusted EBITDA margin guidance includes the initial benefits of Elevate, which I will speak to shortly in more detail, as well as contributions from the initial synergies associated with Able Services acquisition.\nAs we look to fiscal '22 and beyond, we are excited about the topline and bottom line opportunities from Elevate.\nOur Elevate strategy includes a series of discrete transformational investments that total between $150 million to $175 million.\nThese investments are wide-ranging, from workforce management, to data analytics, to the digitization of platforms that will support employee recruiting, development and retention.\nIn short, we believe Elevate is a game changer.\nIt will allow for the implementation of leading-edge processes, technology and tools that will drive a higher level of substantial financial performance and, at the same time, benefit our team members and clients by providing more digital tools and actionable data to enrich their experiences.\nUltimately, Elevate will enable ABM to grow faster and more profitably and provide a higher value proposition for our clients.\nBy design, the Elevate plan is front-end loaded as we plan to spend approximately $80 million in fiscal 2022 or by approximately $45 million in fiscal '23 and approximately $15 million in each of the following two years.\nOf the $80 million planned in fiscal 2022, approximately $72 million will be a discrete expense and will be reported as items impacting comparability and as such will not be included in adjusted earnings per share guidance of $3.30 to $3.55.\nThe balance of approximately $8 million will be included in capital expenditures.\nThe relatively large investment in year one is necessary to meaningfully advance our digital transformation.\nAnd with these elements in place by the end of fiscal 2022, we anticipate we can begin to scale the benefits across the organization with lower levels of investments in subsequent years.\nNow, to help conceptualize the individual components of the Elevate program, let me categorize the investments over the next four years in three buckets; digital transformation, workplace and people and our go-to-market initiatives.\nAbout half of our investments will be focused on digital transformation initiatives as we invest in client-facing technology, data and analytics and our enterprise IT infrastructure.\nWe will make our technology more robust and seamless as we better harness our data to create a competitive advantage while we upgrade and refine our business processes.\nThese enhancements will enable us to engage our clients in new ways, use our data to more effectively drive decision-making and modernize our digital ecosystem.\nAbout 30% of the investments will be allocated toward workforce management and the investment in our people.\nWe will make significant investments in centralized workforce management tools and capabilities, including forecasting and scheduling solutions and standardize task management.\nThese investments will allow us to deploy labor more efficiently and deliver a greater value to our clients.\nWe will invest in on-demand and just-in-time training tools and advanced career development capabilities that will not only improve recruiting and retention, but also position ABM as an employer of choice.\nThe remaining 20% will be used to fuel our organic growth initiatives and our go-to-market strategies, including investments in centralized platforms to support capabilities such as hyper sales targeting, price optimization and strategic account management.\nElevate will drive revenue growth and increased profitability by supporting favorable business mix, increasing client retention, optimizing price escalations and driving cost efficiencies primarily through labor optimization.\nOur goal is for Elevate to accelerate our organic revenue growth rate to the mid-single digit range, up approximately 50% versus our previous growth rate with potential upside from additional strategic acquisitions.\nAs revenue growth accelerates, we also anticipate a corresponding and gradual improvement to our adjusted EBITDA margins of approximately 20 basis points annually starting in fiscal 2023.\nIn summary, we are confident that Elevate will enhance our potential to capture profitable growth.\nThe related investments are expected to generate $110 million to $130 million in incremental adjusted EBITDA on a run rate basis by fiscal 2025, driving a projected internal rate of return of 28%.\nTo put this in perspective, at the conclusion of Elevate in fiscal 2025, we envision ABM will generate annual revenue of approximately $9 billion with a sustainable adjusted EBITDA margin of 7%, representing a significant improvement from our baseline level of $7 billion in revenue with a normalized adjusted EBITDA margin below 6%.\nWe are also targeting annualized free cash flow at a run rate of approximately $400 million by fiscal 2025.\nWhile these financial metrics are compelling, the benefits and strategic value of Elevate go well beyond financial returns.\nWe are confident Elevate will be a transformational initiative, strengthening our competitive position in the facility services industry and creating a more rewarding experience for all of our team members.\nWe couldn't be more excited about our future.\nOur industry-leading position will be rooted in innovation and technology and enable us to drive significant long-term value for our shareholders.\nBy implementing our new strategic plan, we can ensure growth based on our commitment to transform from a position of strength, leverage our understanding of market trends, optimize the portfolio of services and end markets, innovate in technology and data to modernize service delivery and drive enhanced profitable growth.\nOur goal is to be a roughly $9 billion business with [Technical Issues] sustainable adjusted EBITDA margins by the end of 2025.\nTo achieve this and build the capabilities to expand our position in the market, we expect to make investments in areas of the business that Earl just spoke about.\nThese investments will drive improvement across several key metrics.\nFrom a growth perspective, our investments will drive organic growth rates, almost 50% higher than -- approaching 4% annually.\nWhen factoring in our M&A strategy, we are targeting an overall compounded annual growth rate of over 10%.\nThe focus on the client experience through investments in customer-facing technology and innovation and a new retention strategy aim to improve our client retention rates to between 92% and 94%.\nWe believe these efforts, along with our strategic account management program, could double cross selling performance by the end of 2025.\nOur people initiatives you just heard about will yield lower cost per hire and reduce team member turnover, which translates to operating margin improvement.\nOur workforce management initiatives has one of the largest paybacks on our Elevate program, resulting in labor productivity, which will show up in higher operating profit at the industry group level.\nAnd the impact of the digital transformation will be felt across the entire firm.\nAs you saw, technology and data are key components of our growth strategy, people strategy and how we execute on workforce management.\nAll the improvements that we'll experience throughout Elevate will be supported in some way by the investments we're making in our digital transformation.\nLastly, we'll continue to lean on the protocols that we put in place during the onset of the pandemic.\nCOVID is here to stay in one form or another and the emergence of new variant could be the new normal.\nAt ABM, we are prepared to support our client's ability to stay open, stay safe and be productive.\nBefore we start our Q&A session, we want to share a few housekeeping items.\nSo hang in there and we'll kick things off shortly.\n Assistant:", "chosen": "q4 adjusted earnings per share $0.85 from continuing operations.\nq4 gaap earnings per share $0.50 from continuing operations.\nq4 revenue rose 14.2 percent to $1.7 billion.\nquarterly dividend increased by 2.6%.\n"}
{"prompt": "Human: Factors, to our Annual Report on Form 10-K for the year ended December 31, 2020.\nOn today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance.\nThese non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory findings from today, which are available on our website at abbott.com.\nToday, we reported results of another very strong quarter.\nOngoing earnings per share were $1.40, reflecting nearly 45% growth compared to last year and sales increased more than 22% on an organic basis.\nExcluding COVID testing-related sales, which totaled $1.9 billion in the quarter, organic sales increased 12% versus last year.\nAs we've seen since the start of the pandemic, our diversified mix of healthcare businesses continues to prove highly resilient.\nEven as COVID case rates surged in the US and other geographies during the third quarter, strong growth in our more consumer-facing businesses, nutritionals, established pharmaceuticals and diabetes care, mitigated the modest impacts we saw from the surges in certain areas of our hospital base businesses.\nThis has been a consistent theme throughout the pandemic, as evidenced by an increase in total company sales, excluding COVID tests, of 11% on an organic basis through the first nine months of this year compared to our 2019 pre-pandemic baseline, which highlights that our growth is real and not simply a function of easy comps versus last year.\nAs a result of our strong performance and outlook, today, we increased our full year adjusted earnings per share guidance range now at $5 to $5.10, which reflects nearly 40% growth compared to last year.\nI'll now summarize our third quarter results before turning the call over to Bob.\nAnd I'll start with Nutrition, where sales increased 9% compared to last year.\nStrong growth in the quarter was led by US pediatric and international adult nutrition.\nIn Pediatric Nutrition, sales grew over 8.5% in the quarter, led by strong growth in the US from continued share gains in our infant formula and toddler portfolio.\nSales of Pedialyte, our market-leading rehydration brand, once again grew strong double-digits, driven by market uptake of several recently launched new products as well as investments we're making in direct consumer promotion.\nIn Adult Nutrition, sales grew over 9% in the quarter, including mid-teens growth internationally, as we continue to see strong demand for our Ensure and Glucerna brands, including new users entering these categories and existing customers increasing their usage.\nSales increased more than 45% overall and 12.5%, excluding COVID testing-related sales.\nDuring the quarter, as the Delta variant spread and COVID cases surged, particularly in the US, demand for testing increased significantly, most notably for rapid tests.\nIn total, during the quarter, we sold more than 225 million COVID tests globally and have now shipped over 1 billion tests since the start of the pandemic.\nOver the of last several months, we've learned that COVID vaccines, while a powerful tool, are not the lone solution needed in our global fight against this virus.\nTesting, particularly rapid testing, which is fast, affordable, and easy to use, is an important companion to vaccines and therapeutics.\nAbbott has established a global leadership position in rapid testing, including a supply capacity of more than 100 million tests per month.\nMoving to Established Pharmaceuticals, where sales grew more than 15%, driven by strong execution and a steady cadence of new product introductions.\nStrong sales performance in the quarter was broad-based across several countries, including double-digit growth in China, Russia and India, which led to overall sales growth of 18% in our key emerging markets.\nAnd lastly, I'll cover Medical Devices, where sales grew 13% in the quarter compared to last year and more than 16% compared to pre-pandemic sales in the third quarter of 2019.\nStrong performance in the quarter was led by double-digit growth in Rhythm Management, Structural Heart, Heart Failure and Diabetes Care.\nIn Structural Heart, we continued to enhance our portfolio in large, fast growing markets with the recent US FDA approvals of Amulet, which closes the left atrial appendage in the heart to help reduce the risk of stroke in people with atrial fibrillation and Portico for transcatheter aortic valve replacement.\nIn Heart Failure, we announced results from the GUIDE-HF trial of our CardioMEMS System.\nAs with many other recent and ongoing clinical trials across the healthcare industry, a portion of the CardioMEMS trial overlapped with the COVID-19 pandemic.\nAfter adjusting for this impact, CardioMEMS demonstrated a 28% reduction in heart failure hospitalizations.\nAnd we filed with the US FDA for label expansion based on the trial data in the middle of this year.\nDuring the quarter, we also added an attractive growth platform to our vascular device portfolio with the acquisition of Walk Vascular, a commercial stage company with a minimally invasive thrombectomy system called JETi that removes peripheral blood clots.\nPeripheral thrombectomy is a large high growth area where we can leverage our existing commercial presence.\nAnd I'll wrap up with Diabetes Care, where strong growth was led by FreeStyle Libre sales of nearly $1 billion.\nDuring the quarter, we added over 200,000 new users, bringing the total global user base for Libre to well over 3.5 million users.\nSo in summary, we continued to achieve strong well-balanced growth across all of our major businesses, which is being fueled by strong execution and a steady cadence of new products.\nCOVID testing, particularly COVID testing, remains an important companion to vaccines and therapeutics and Abbott has established a strong leadership position in this area.\nAnd based on the strength of our performance and outlook, we're raising our earnings per share guidance for the year, which now reflects growth of nearly 40% compared to last year.\nI'll now turn over the call to Bob to discuss our results and outlook for the year in more detail.\nTurning to our results.\nSales for the third quarter increased 22.4% on an organic basis, which was led by strong performance across all of our businesses, you along with global COVID testing-related sales of $1.9 billion in the quarter.\nExcluding COVID testing-related sales, organic sales growth was 12.1% versus last year and 11.7% compared to the third quarter of 2019.\nForeign exchange had a favorable year-over-year impact of 1% on third quarter sales, resulting in total reported sales growth of 23.4% in the quarter.\nRegarding other aspects of the P&L for the quarter, the adjusted gross margin ratio was 58.8% of sales, adjusted R&D investment was 6% of sales and adjusted SG&A expense was 25% of sales.\nOur third quarter adjusted tax rate was 15.5%, which reflects an adjustment to align our year-to-date tax rate with our revised full year effective tax rate forecast of 15%.\nThe revised full year forecast is modestly higher than the estimate we provided in July due to a shift in the mix of our business and geographic income.\nTurning to the outlook for the fourth quarter.\nWe forecast $1 billion to $1.4 billion of COVID testing-related sales and forecast organic sales growth, excluding COVID testing-related sales, in the low double-digits versus last year.\nAnd based on current rates, we would expect exchange to have an unfavorable impact of around one-half of 1% on our fourth quarter reported sales.\n Assistant:", "chosen": "abbott sold more than 225 mln covid-19 tests globally in q3.\ncompname says company sold more than 225 million covid tests globally in third quarter.\ncompname says co has supply capacity of more than 100 million tests per month.\nabbott forecasts $1 billion to $1.4 billion of covid testing-related sales in q4.\n"}
{"prompt": "Human: References to margins and adjusted operating margins reflect the performance for the Americas and International segments.\nWe will refer to Net Service Revenue or NSR, which is defined as revenue excluding pass-through revenue.\nOur discussion of year-over-year NSR growth for the fourth quarter and full year is adjusted to exclude the benefit of the extra week to the prior year fourth quarter.\nAs a reminder, we sold the Management Services business in January of 2020 and we closed on the sale of the Power and Civil construction businesses in October 2020 and January 2021 respectively.\nThe financial results of these businesses are classified as discontinued operations in our financial statements.\nLara Poloni, our President will discuss key operational priorities and Gaurav Kapoor, our Chief Financial Officer will review our financial performance and outlook in greater detail.\nWe will conclude with a question-and-answer session.\nI want to begin by acknowledging our teams across the globe whose contributions made fiscal 2021 a tremendous success.\nOur people remain our greatest assets, and it's because of their commitment to our success that we are so well positioned for the future.\nI'm proud of our team's accomplishments, and I'm energized by the opportunity we see in 2022 and beyond.\nTurning to our results.\nWe exceeded our expectations on every key metric, highlighted by accelerating organic NSR growth, record operating margins, double-digit earnings growth and strong cash flow.\nIt really was a very successful year.\nOur NSR for the fourth quarter increased by 6.5%, which marked a third consecutive quarter of accelerating organic growth and included the strong contributions from both the Americas and International businesses.\nWe delivered a 14.8% segment adjusted operating margin in the fourth quarter and 13.8% for the full year.\nBoth results exceeded our expectations and extends our lead over the industry.\nTo put this performance in context, our margin in the fourth quarter is more than 600 basis points higher than in fiscal 2018.\nThis performance directly reflects the high value we provide to clients and the actions we have taken to create the best industry delivery platform.\nLooking back to February, at our Investor Day, we set margin targets at the time that we were very ambitious.\nToday, we are ahead of schedule on our plans, and we have even greater conviction in our 17% longer-term goal, which we now view as achievable rather than aspirational.\nImportantly, our strong margins afford us the opportunity to accelerate investments in our teams to drive organic growth and into our Digital AECOM capabilities, which I will discuss in greater detail in a moment.\nTurning to earnings, we delivered at the high end of our guidance ranges for both adjusted EBITDA and EPS.\nFull-year adjusted EBITDA was $830 million and adjusted earnings per share was $2.82, which marked an 11% and 31% increase respectively.\nFree cash flow was $583 million and was driven by our strong earnings and continued high cash flow conversion.\nOur cash flow result is a testament to the focus on efficiently converting our earnings to cash as well as the high quality lowest mix of our business.\nWe have repurchased more than $1 billion of stock since last September, or 13% of the Company.\nAnd we have $940 million remaining under our current authorization.\nWe remain committed to repurchasing stock with available cash and cash flow, which we believe is the best and highest returning use of our capital after our investments in growth.\nTurning to our wins and backlog.\nOur win rate remains high, and we continue to gain market share.\nWe delivered $3.7 billion of wins in the fourth quarter, including a 1.2 book-to-burn ratio in the design business.\nOur contracted backlog, which is a key indicator of revenue growth increased by 18% and included 4% growth in design business.\nOur pipeline of opportunities is up to double-digits in the Americas design business.\nAnd based on our clients' strengthening funding backdrop, including benefits from the $1.2 trillion infrastructure bill in the US, we expect our backlog to continue to grow.\nOverall, our performance demonstrates that we are outgrowing the industry organically and capturing market share.\nThere are two areas in particular that highlight our success and showcase the value we deliver to clients.\nFirst, we set as a key objective to substantially grow our Program Management business and we are delivering.\nThis is especially apparent in the Middle East where we had several recent successes on high priority and larger programs where a combination of technical leadership, global thinking and program management expertise were instrumental in our success.\nThis includes winning significantly expanded program management and design roles in transformational projects in Saudi Arabia, such as for AlUla City and a large transportation project in Qatar, where more than 100 employees have joined AECOM from the incumbent to support this work.\nSecond, we are demonstrating our leadership on ESG.\nOur investment at the Natural Capital Laboratory in UK is a great example.\nWe established this project in 2019 to study the environmental change and biodiversity impact with precision by leveraging drones, artificial intelligence, GIS Data and thermal imaging.\nThe ability to more exactly measure the impacts of decarbonization is a critical element of the global agenda to drive decarbonization and carbon sequestration.\nOur investment in our work at the NCL underscores how AECOM and our professionals are leading in the development of standards and methods to measure decarbonization which will be especially important for creating reliable markets for sustainability investments.\nLet's turn to the next slide.\nI mentioned earlier that our strong performance in fiscal 2021 has created the opportunity to accelerate investments and expand our advantages.\nWe break these investments into three categories: People, Clients and Digital.\nBeginning with our people.\nWe are a knowledge-based business and our diverse professionals serve as our greatest advantage.\nTherefore, it is critical that we have the right culture and programs in place to attract and retain the best talent in the industry.\nTo do this, we've implemented a flexible work model designed to facilitate optimal work life balance.\nIn addition, we've enhanced the benefit programs and increased our investment in technical and professional development.\nMost importantly, our people are winning and delivering the most challenging and iconic projects.\nAll of this culminates in a culture of high engagement, high satisfaction and low attrition.\nTurning to how we deliver for clients.\nWe are leading with our higher margin program management and advisory capabilities and investing across our key account programs to ensure our clients are benefiting from our best expertise globally.\nWe're also developing technology to automate and pre-populate certain elements of our designs, which capitalizes on our vast expertise, accelerates the design process and extends the capacity of our workforce.\nFinally, today we unveiled Digital AECOM which brings together all of our innovative digital capabilities.\nAfter more than a year of focused investment and the launch of many digital solutions, we are now formally rolling out our digital products.\nA great example of this is PlanEngage, a digital platform that reinvents the public engagement process for an infrastructure project by creating greater certainty on cost, time and stakeholder management.\nSuccessful community engagement is a critical step in a project, but this process is really digitized.\nPlanEngage simplifies this process by integrating all the key elements of a project into a digital tool, which allows our clients to capture information to make more informed decisions and advance projects more quickly.\nThis solution is years ahead of the competition by our estimation.\nAnd we see PlanEngage becoming the industry standard.\nWith the passage of the Infrastructure Act in the US, this tool will be even more valuable.\nAcross these focus areas, one theme is constant.\nOur investment will expand our advantage as demand grows and labor constraints challenges some in our industry.\nPlease turn to the next slide.\nLooking to fiscal 2022 and beyond, the spotlight on infrastructure has never been brighter.\nIn the US, the $1.2 trillion Infrastructure and Jobs Act marks a generational investment in America's infrastructure.\nThis bill provides much needed long-term funding certainty across our strongest end markets such as transit modernization, electrification, environmental remediation and climate resilience.\nImportantly, we are positioned to benefit from nearly every line item in this bill.\nWe anticipate this funding will increase our addressable market in our most profitable business by double-digits over the coming years.\nAnd we expect the most meaningful benefits in fiscal 2023 and beyond.\nIn addition to the strengthened federal funding environment, all of our state and local clients are on an equally strong footing.\nToday, state DOT [Phonetic] budgets are significantly above prior projections and the fiscal outlooks are stronger.\nOur public sector pipeline in US is up double-digits and with the strong funding backdrop now in place, we anticipate the pace of decisions will accelerate as well.\nOur international markets are equally strong.\nConditions in our largest markets have improved, and we're delivering strong growth across all major international markets in the fourth quarter.\nIn addition, we had strong backlog growth in each of our larger geographies.\nI'm especially pleased to see that our strategy with a focus on Program Management contributing to the success in places like the Middle East and in key transportation wins in the UK, where regaining market share has been a key priority.\nAs the number one ranked transportation facilities and environmental engineering firm as well as the number two ranked water design firm, we are uniquely positioned to benefit.\nTurning to our financial guidance.\nWe've initiated adjusted EBITDA and adjusted earnings per share guidance of between $880 million and $920 million and between $3.20 and $3.40.\nThis reflects 8% and 17% growth at the respective midpoints.\nUnderpinning this growth is an expectation for another year of accelerating organic NSR growth and at least 30 basis point increase in our margins to another record high of 14.1%.\nOur guidance incorporates all the planned growth investments we are making in our people, business development, client delivery and digital capabilities.\nI also want to comment on the 2024 financial projections we shared at our Investor Day in February.\nBased on our strong performance to date and the returns we expect on our investments, we are raising our long-term adjusted earnings per share guidance to at least $4.75 in fiscal 2024.\nThis represents a more than doubling of our fiscal 2020 earnings and a nearly 20% CAGR from 2021 to 2024.\nI am pleased with how well our teams have responded to our new strategy and their many accomplishments in fiscal 2021.\nIn particular, I'd like to highlight our success on some of our larger key pursuits, our global approach, technical leadership, program management capabilities, advisory expertise and multiyear investments are bearing fruit.\nA great example of this is in the Middle East where we prioritize as a long-term growth opportunity.\nWe have gained market share with wins from megacities, including NEOM and AlUla in Saudi Arabia.\nKey to these successes was the integration of global capabilities, including expertise from every region and market sector.\nOur culture of collaboration has truly distinguished us from competitors, particularly as our clients work to address multi-decade investment programs that require more holistic thinking.\nAnother great example is in the US where we were recently selected for a large program for a client who selected us based on our leadership capabilities in many verticals including in PFAS, even as PFAS expertise wasn't the main criteria in the pursuit.\nWe are continuing to prioritize our time and capital on the best opportunities, which has been instrumental in our high win rate over the past year and in our confidence in continued market share gains.\nLooking ahead, our clients continue to prioritize investments in ESG, and we are well positioned to capitalize on this trend.\nAt the COP26 Summit earlier this month, this commitment was front and center as the most prominent public and private sector voices spoke with unity on the challenge and the opportunity.\nIn demonstrating how we are leading in ESG alongside our clients, we published our Global ESG Report last week, which includes disclosures aligned with the SASB and TCFD frameworks.\nThis report is an important step in our ESG journey and underscores our commitment to regularly communicating our progress on our sustainable legacy strategies.\nFinally, Troy spoke about our focus on ensuring we attract and retain the industry's best and brightest.\nAnd I'm pleased to report we are operating from a strong position.\nTo that point, we conducted a global employee survey in September that revealed very strong levels of engagement, including the vast majority recommending AECOM as a great place to work.\nHigh employee engagement is also leading to the highest client satisfaction scores in our Company's history in fiscal 2021.\nWith our momentum, we are in an enviable position from which to deliver another strong year in fiscal 2022.\nPlease turn to the next slide.\nOur fourth quarter and full year results serve as clear evidence of the strength of our business and the benefit of our focused strategy.\nWe delivered: Accelerating NSR growth; the highest margins in our Company's history; another year of double-digit adjusted EBITDA growth; more than 30% adjusted earnings per share growth and; a seventh consecutive year of free cash flow at or above our guidance range.\nOur strong financial performance is creating increased opportunities to invest in organic growth while also bolstering our confidence in delivering on our long-term organic growth and financial goals.\nImportantly, all of this was achieved while making critical investments in people, teams and digital capabilities that will sustain our advantages in fiscal 2022 and beyond.\nPlease turn to the next slide.\nIn the Americas, NSR increased by 7% in the fourth quarter, including growth in both design and construction management businesses.\nContracted backlog increased by 21% to set a new record.\nThis included growth in the design business and a large construction management project that moved into contracted backlog and firmed up our outlook for the year.\nI should note that our awarded backlog was reduced by $1.3 billion as a result of this client only advancing the first phase of this project at this time.\nHowever, the economic impact of the shift is not material to our earnings outlook.\nAnd, our confidence in the growth outlook for the construction management business is higher than it ever has been in many years.\nThe fourth quarter adjusted operating margin was 19.8%, a 290 basis point increase from the prior year to a new all-time high and reflects strong execution.\nPlease turn to the next slide.\nTurning to the International segment.\nNSR increased by 6% in the fourth quarter, including growth across all of our largest regions, and backlog increased by 10%.\nThis is a result of our organic growth investments, market share gains, steadily improving market conditions.\nOur adjusted operating margin in the third quarter was 7.4%, an 80 basis point improvement from the prior year.\nWe continue to make progress on our margin improvement initiatives and remain confident in our goal of achieving double-digit International margins.\nPlease turn to the next slide.\nTurning to cash flow, liquidity and capital allocation.\nFourth quarter free cash flow of $299 million contributed to full year free cash flow of $583 million.\nOur performance reflects the benefit of our improved cash phasing throughout the year, which allowed us to accelerate our stock repurchases.\nWe have now repurchased nearly 20.5 million shares since September 2020, or approximately 13% of our starting share count at an average price of approximately $51.\nAs we look ahead, we will continue to make critical investments to build on our industry-leading organic growth.\nAs a result, we expect our capital expenditures in fiscal 2022 to include investment primarily relating to the advancement of our digital strategy as well as ongoing investments to reconfigure our real estate footprint and support our flexible work programs.\nThese investments will impact the conversion of our earnings to free cash flow in fiscal 2022.\nHowever, the underlying cash generation within the business is firmly intact.\nTo that point, we expect free cash flow of between $450 million and $650 million in fiscal 2022.\nImportantly, our investments in growth and innovation will continue to separate us from our peers, and we are progressing toward our 17% longer-term margin target.\nPlease turn to the next slide.\nFor fiscal 2022, we are guiding to adjusted EBITDA of between $880 million and $920 million or 8% growth at the midpoint and adjusted earnings per share of $3.20 and $3.40 or a 17% growth at the midpoint.\nThis guidance contemplates the improved market conditions we're experiencing today, our substantial backlog and pipeline and the benefits of our investment in our people, client and digital capabilities.\nTo be clear, this guidance does not reflect any expected benefit from the recently passed legislation in the US, which, as Troy mentioned, is expected to benefit us more materially in fiscal 2023 and beyond.\nWe expect our MSR growth to accelerate to approximately 6% in fiscal 2022.\nThis is all organic growth.\nIn addition, we project a further 30 basis points of margin expansion to 14.1% as we continue to expand our lead on the industry while investing in people, clients and innovation.\nI also want to emphasize that our adjusted earnings per share guidance only incorporates the benefit of our share repurchases completed to date, though we expect to continue to buy back stock in fiscal 2022 as part of our capital allocation program.\nAlso incorporated into our guidance is a 26% effective tax rate.\nWe expect to maintain this rate going forward, reflecting changes in our operating mix and structure.\nFinally, I should note that we expect our EBITDA track with our phasing in fiscal 2021.\nOur tax rate may be lower in the first quarter, and as a result, our earnings per share phasing may be more first half weighted than our seasonal pattern.\nWith our outperformance in fiscal 2021, our expectation for strong growth again in fiscal 2022 and the successful launch of our digital platform, we are also increasing our long-term financial targets for fiscal 2024.\nThis includes our expectation to now achieve adjusted earnings per share of at least $4.75 in fiscal 2024, which is 10% above our prior projection and is nearly 20% compounded annual growth rate from 2021 to 2024.\n Assistant:", "chosen": "q4 revenue fell 6 percent to $3.4 billion.\nexpects 2022 adjusted earnings per share of between $3.20 and $3.40 and adjusted ebitda of between $880 million and $920 million.\n"}
{"prompt": "Human: This is already above our full-year 2020 adjusted EPS.\nAdjusted segment operating profit was $1 billion, up 18% versus the third quarter of 2020 and our 8th consecutive quarter of year-over-year OP growth.\nOur trailing fourth quarter adjusted EBITDA was about $4.6 billion, almost a $1 billion more than a year ago.\nAnd our trailing fourth quarter average adjusted ROIC was 9.6%, significantly higher versus the year-ago period.\nI remain proud to lead a global team that is delivering robust returns and sustained growth in profit.\nOur strong quarter and our ongoing upward trajectory, our system into our team's execution and agility and the consistent implementation of our strategic plan.\nI'd like to take a moment now to highlight some of our accomplishments from the quarter.\nI'd like to start by talking about our approach to portfolio management.\nOur starting point, if they believe that in order to thrive and create value, a company needs to have a dynamic view office business portfolio.\nSo when we talked about the dramatic transformation of our portfolio over the last 10 years, it's not a discrete event.\nOf course, those opportunities may be the -- must be the right ones.\nThe enduring trends of food security, health and well-being and sustainability provide unique and stable opportunities for ADM to expand our existing capabilities, and we are focusing our efforts on identifying high growth on trend areas with attractive margins and which are adjacent to our existing capabilities, that focusing from the building of our global nutrition business.\nThe acquisition of WILD gave us entry into flavors and a global taste platform.\nWe then use bolt-on acquisitions to other adjacent capabilities and build a one-stop shop with an industry-leading pantry of ingredients and solutions for Human Nutrition.\nWe did the same for Animal Nutrition with the acquisition of Neovia and we continue to do the same today across our business.\nIn order to meet growing demand for sustainable solutions, we have announced a joint venture, an offtake agreement with Marathon Oil Company to support the production of renewable diesel.\nWe are continuing to invest in key nutrition categories as demand for alternative protein grows from $10 billion to $30 billion over the next decade.\nWe are further enhancing our capabilities with the acquisition of Sojaprotein.\nAnd with global demand for pet food grow into the $140 billion in the coming years.\nWe are continuing our growth with a 75% ownership stake in PetDine.\nIn the early of microbiome, we've signed an agreement with Vland Biotech to launch a joint venture that we perfectly positioned to help meet $1 billion in retail demand for probiotics in China.\nThese are just some examples of how we are dynamically positioned in our portfolio to continue driving growth for years to come.\nThere will be more to come.\nAnd you can expect an increased level of investments to support our sustainable earnings growth and sort of that expand our capacity and capabilities.\nAs part of our portfolio management approach, we're looking to evolve our Carbohydrate Solutions business, expanding our array of solutions to meet growing customer demand driven by the enduring trend of sustainability.\nWe've made significant progress recently focused on two areas.\nNew opportunities for our alcohol production, an ever growing volume solutions platform.\nLet me start with alcohol.\nLast Thursday, we announced that we reached an agreement, which we expect to close at the end of the month to sell our ethanol facility in Peoria.\nAnd yesterday, we announced a memorandum of understanding with Gevo to explore potential joint venture, one of which would include our Columbus and Cedar Rapids dry mills and our ethanol assets indicator transitioning 900 million gallons of ethanol production to support growing demand for low carbon sustainable aviation fuel.\nThese actions represent our commitment to a process that we began when we first analysis to tissue review of our dry mills.\nTaken together, they will allow us to significantly reduce our exposure to vehicle fuel ethanol while using our expertise and assets to capitalize on new opportunities.\nSAF is one of those opportunities.\nThe U.S. and EU have set goals that together with support almost 4 billion gallons of annual sustainable aviation fuel production by 2030 and more than 45 billion by 2050.\nThe other focus area for our Carbohydrate Solutions evolution were biosolutions growth platform.\nBiosolutions, which we launched a year ago, it's an effort focused on using our product streams to expand our participation in sustainable higher margin solutions for attractive end markets like pharmaceuticals and personal care.\nThis is an area of significant potential and our team is doing a great job identifying new and exciting opportunities.\nEarlier this fall, for example, we signed an MoU with LG Chem for the production of lactic and polylactic acids for bioplastics, another plant-based products.\nThese efforts and enable in biosolutions to deliver 10% annualized revenue growth including more than $80 million in new revenue wins in the first nine months of this year and we believe there are many new opportunities to come.\nSo from the transformation of our dry mills to our growing biosolutions platform, our work to evolve our work Carbohydrate Solutions capabilities is a perfect example of how we're managing our portfolio and delivering the smart strategic growth and one of the many reasons we remain convinced and our ability to deliver sustainable earnings growth in the years to come.\nI'll talk a little bit more about our business outlook at the end of our call.\nAnd of course, we'll be going into much more detail at our Global Investor Day on December 10th.\nThe Ag Services and royalties team continue their outstanding year with another quarter of substantial profit growth.\nIn Ag Services, we're proud to tell the team executed in a challenging environment, including a swift return to operation after Hurricane Ida.\nOverall results were significantly lower versus the prior year quarter, driven by approximately $50 million in that timing effects that should reverse in coming quarters, as well as $54 million in insurance settlement recorded in the prior year period, and lower export volumes caused by Hurricane Ida.\nGlobal trade continues its strong performance.\nThe Crushing team delivered substantially higher year-over-year results, executed well, delivering stronger margins in a dynamic environment that includes strong demand for vegetable oils to support our existing food customers as well as the increasing production of renewable diesel.\nResults were also driven by about $70 million in net positive timing effects in the quarter.\nRefined Products and Other results were significantly higher than prior year period, driven by positive timing effects of approximately $80 million, our expected to reverse in future quarters.\nStrong execution in EMEA and North American biodiesel and strong refining premiums due to demand for renewable diesel and foodservice recovery in North America also contributed to the results.\nEquity earnings from Wilmar were lower year-over-year.\nLooking ahead, we expect to see continued fundamental demand strength for Ag Services and Oilseeds products including from China, as well as solid global soybean crush margin environment in the fourth quarter, partially offset by some higher manufacturing costs.\nIn addition, RPO will be negatively impacted by timing reversals.\nAll told, we expect results in the fourth quarter to be significantly higher than the third quarter of this year.\nCarbohydrate Solutions results were lower year-over-year.\nThe Startches and Sweetener sub segment including ethanol production from our wet mills showed their agility by managing through dynamic market conditions and optimizing mix between sweeteners and ethanol production through the quarter.\nYear-over-year results were significantly lower, primarily due to higher input costs.\nVantage Corn Processors results were much higher versus the third quarter of 2020 supported by the resumption of production of at our two dry mills and improved fuel ethanol margins, particularly late in the quarter.\nLooking ahead to the fourth quarter, we expect the solid fundamentals from the end of the third quarter to continue for Carbohydrate Solutions with good ethanol margins extending through the quarter due to industry supply demand balance and solid demand for corn oil and starches offset by higher manufacturing costs, particularly in Europe as well as the absence of the pure dry mill.\nAlso fourth quarter results for the segment should be similar to the previous year fourth quarter.\nOn Slide 8, the Nutrition business remains on its solid growth trajectory was 17% higher revenues and 15% on a constant currency basis and 20% higher profits year-over-year and continued strong EBITDA margins.\nThe human nutrition team delivered revenue growth of 12% year-over-year on a constant currency basis, helping to drive 9% higher profit, higher volume improved pilot mix, particular strength in beverage drove strong flavor results in EMEA in North America, partially offset by lower results in APAC.\nSpecialty Ingredients continued to benefit from strong demand for alternative proteins, offset by some higher costs.\nHealth & Wellness results were higher on robust sales growth in bioactives and fiber.\nAninal Nutrition profits were nearly double the year-ago period and sales were up 19% on a constant currency basis, driven primarily by the strength in the mineral assets as well as feed additives and ingredients, partially offset by higher costs in LATAM and slower demand recovery in APAC.\nLooking ahead, we expect nutrition to continue on its impressive growth path with strength across the Human and Animal Nutrition leading to strong year-over-year earnings expansion in the fourth quarter and a 20% full year growth versus 2020.\nLet me finish up with few observations from the other segment as well as some of the corporate line items.\nOther business results were substantially lower than the prior year period, driven primarily by captive insurance underwriting losses, most of which were offset by corresponding recoveries in the other business segments.\nWe expect fourth quarter to have some additional insurance underwriting losses, resulting in a breakeven other business for the fourth quarter.\nAs expected, net interest expense for the quarter decreased year-over-year on lower interest rates and the favorable liability management actions taken in the prior year.\nIn the corporate lines, unallocated corporate costs of $230 million were driven primarily by higher IT offerings and project-related costs and transverse cost into the centralized centers of excellence in supply chain and operation.\nLooking at total corporate costs including net interest, corporate unallcoated and other corporate, we are still on track fourth calendar year to be overall similar to 2020.\nThe effective tax rate for the third quarter of 2021 was approximately 18%.\nWe anticipate our calendar year adjusted effective tax rate to be the upper end of our previously communicated range of 14% through 16% and potentially a bit higher depending upon the geographic mix in the fourth quarter.\nOur balance sheet remains solid with a net debt to total capital ratio of about 26% and available liquidity of about $11.5 billion.\nFrom consistent sustained profitable growth for the ongoing management of our business and product portfolio, our team has a lot to be positive.\nAnd there's one other thing we achieved last quarter that I want to mention.\nWe have many team members impacted when Hurricane Ida hit in late August.\nSo we provide temporary housing arrangements, portable generators, food and water and more.\nIn fact, many ADM colleagues travelled through the region and spend time helping repair their coworkers damaged homes.\nI put the rest of my close remarks those insured as we plan to go into our outlook in far more of this when our December 10 Global Investor Day.\nAs I look back at the third quarter and all of the last nine months, I continue to see a team and a company that are delivering on our goals and our purpose.\nWe are closing out 2021 with great momentum.\nWe are on track for a strong fourth quarter and the second consecutive year of record earnings per share.\nAnd as we look ahead to 2022, we see another strong year for ADM.\nRobust global demand environment will continue to go for opportunities for us to leverage our indispensable global origination, processing, and logistics capabilities.\nAnd nutrition will continue on its strong growth trajectory in line with our 15% per annum trend rate growth and on its way to $1 billion in operating profit in the coming years.\nOf course, there are things we continue to watch including energy costs and inflation more widely and much abilities to meet needs in the enduring trend areas of food security, health and wellbeing and sustainability and a truly unparallel team of nearly 40,000 colleagues around the world, we remain very optimistic in a strong year to come.\n Assistant:", "chosen": "on track for a strong q4.\n"}
{"prompt": "Human: There are many factors that may cause future results to differ materially from these statements, which are discussed in our most recent 10-K and 10-Q filed with the SEC.\nToday, I will discuss our progress to-date on a number of key strategic objectives before turning the call over to our CFO, Gustavo Pimenta to discuss our financial results in more detail.\nWe had an excellent second quarter with a 24% increase in adjusted earnings per share from the second quarter of 2020 and a record 1.8 gigawatts of renewables under long-term contracts added to our backlog bringing our total to 8.5 gigawatt.\nWe remain on track to achieve 7% to 9% average annual growth in adjusted earnings per share and parent-free cash flow through 2025.\nI will give more color on our accomplishments while covering the following three themes shown on slide 4.\nOne, the growth and transformation of our U.S. Utilities; two, our rapidly growing renewables business; and three, our strategic advantage from innovation.\nAs you may recall, during our Investor Day in March, we outlined our plan to invest $2.3 billion to transform our two U.S. Utilities, AES Ohio and AES Indiana.\nDuring the second quarter we concluded key outstanding regulatory proceedings at both of our U.S. Utilities, clearing the path for investment in the latest technologies, which will enable us to deliver a higher level of service and reduce carbon emissions.\nAt the core of our efforts is a focus and deep understanding of the digital tools that vastly improved customer experience and enable the integration and orchestration of diverse and distributed renewable resources.\nStarting with AES Ohio on slide 5 where we expect to nearly double the rate base by growing 12% annually through 2025.\nRecently, we made a substantial headway on outstanding regulatory filings.\nFirst, the Commission approved AES Ohio stipulation allowing predictable cash flows and investment in smart grid initiatives over the next four years.\nAnd second, AES Ohio also received approval for the FERC-regulated formulary allowing recovery of transmission investments.\nNow, moving on to AES Indiana on slide 6 where we're investing $1.5 billion over the next five years as part of our grid modernization program and our transition to more renewables-based generation.\nWe recently received regulatory approval for our 195 megawatt Hardy Hills Solar Project.\nAnd we announced an agreement to acquire the Petersburg Solar Project, which includes 250 megawatts of solar and a 100 megawatt hours of energy storage.\nWe expect to grow the rate base at AES Indiana by more than 7% annually.\nWith many of the key regulatory approvals behind us, we are now positioned to execute on our utility modernization and decarbonization programs, which have been years in the making.\nNow, turning to the second theme of renewables growth on slide 7; last year was a record-breaking year of renewable contracts for us with over 3 gigawatt signed.\nSo far this year, we have already signed almost 3 gigawatt of contracts for wind, solar, and energy storage nearly double the amount at the same time last year.\nMore than 90% of the new contracts are in the U.S. and we are well on our way toward achieving or exceeding our target of 4 gigawatts for 2021.\nAt the same time, more than 80% are with C&I customers negotiated on a bilateral basis.\nOur new projects will yield after-tax returns at the project level in line with our low teens average for the U.S. and mid to high teens internationally.\nOur progress so far this year includes our recent agreement to acquire 612 megawatts of operating wind assets in New York as shown on slide 8.\nNew York State's supportive renewables policies, combined with the scarcity of wind projects in the Northeast provides us with several pathways for long-term attractive cash flows to support repowering by 2025.\nThis wind acquisition complements our solar and energy storage pipeline providing us with another resource to offer diversified and differentiated products to our consumers.\nTurning to slide 9, we're particularly pleased with our ability to advance new clean energy products.\nThis year we announced the world's first ever large scale 24/7 carbon-free energy netted on an hourly basis supplying Google's Virginia data centers.\nWe see this concept of real-time renewable generation as opposed to the purchase of offsetting renewable credits as the new highest standard in Clean Energy.\nWe have since replicated similar structures with other large-scale customers helping them to achieve their sustainability targets while supporting our renewables growth goals or a total of 1.5 gigawatts of these Clean Energy products signed or awarded thus far this year.\nWe see these innovative carbon free energy products as examples of our unique advantages both in our technical and commercial ability as well as our culture of working together with customers to understand their specific needs.\nTurning to slide 10, with nearly 3 gigawatts of renewables and energy storage projects added this year we now have a backlog of 8.5 gigawatt including 2.5 gigawatts currently under construction.\nWe expect to bring 1.4 gigawatts online during the remainder of 2021.\nThe strength of our U.S. renewables growth in the rapidly expanding market will support achieving our goal of having 50% of our earnings from renewables and utilities and 50% of our earnings from the U.S. by 2025.\nWe also continue to aggressively grow our pipeline of early mid and late-stage development projects to support future growth.\nAs you can see on slide 11, we now have a pipeline of 37 gigawatts, among the largest in the world.\nMore than 60% of this pipeline is in the U.S. including 8 gigawatts in the hottest market in the country, California.\nNow to decarbonization on slide 12; last month, AES Andes announced that 1.1 gigawatts of coal-fired generation would be voluntarily retired as soon as January 2025 and will be replaced with 2.3 gigawatt of newly contracted renewable.\nSince 2017, we have announced the sale or retirement of almost 12 gigawatts of coal-fired generation, which is among the largest programs of any American company.\nI am pleased to report that these exits along with our substantial renewable additions reduce our generation from coal to approximately 20% of total generation on a pro forma basis, an additional reduction of 5 percentage points since last quarter.\nI would like to address two key concerns that we're hearing from investors related to growth in renewables, inflationary pressures and supply chain bottlenecks.\nAs one of the largest global renewable developers with a strong reputation we have a long history of successfully negotiating strategic supply agreements resulting in preferential access and pricing.\nFurthermore, we lock-in the hardware prices when we sign the PPA sheltering us from future price fluctuations.\nWith 90% of the equipment needed for our 8.5 gigawatt backlog already secured, we feel very comfortable in our ability to execute on our strong pipeline over the short- and medium-term.\nNow, turning to slide 13 and our third theme of innovation; as our entire sector continues to rapidly evolve, we increasingly find that there is a competitive advantage for those who are able to effectively incorporate new technologies and business models.\nFor example, we have benefited significantly from our Energy Storage business, which we started over 10 years ago and which now is one of the largest in the industry.\nThere are important synergies between our core businesses and technology ventures.\nFor example, this year, about half of our renewables energy PPA include an energy storage component.\nLast month, once again, we were awarded the highest honor in the Power and Utility sector, the Edison Award from the Edison Electric Institute for our work developing energy storage as a cost-effective alternative to new gas peaking plants.\nSpecifically, the award was for the AES Alamitos Battery Energy Storage System consisting of 400 megawatt hours of energy storage that can supply power to tens of thousands of homes in milliseconds.\nThis is our seventh Edison Award overall and third U.S. Edison Award over the last decade.\nI would like to note that we have won many more Edison Awards than any other company in recent years.\nTurning to slide 14, we also continue to build on our prior success in creating technology unicorns.\nFor example, we have previously mentioned our strategic investment in 5B, a prefabricated solar solution company that has patented technology allowing solar projects to be built in a third of the time and on half as much land while being resistant to hurricane force winds.\nWe continue to grow 5B's footprint across several markets including the U.S., Puerto Rico, Chile and Panama and they are now expanding into India where we are working with domestic partners to establish local manufacturing.\nWe hope India will enable 5B to reach much greater scale, much more quickly, which combined with our leading work in robotics construction will help us lower all-in solar costs as we advance on the learning curve.\nTurning to slide 15, similarly, we continue to benefit from our investment in Uplight, which provide cloud-based energy efficiency solutions to more than a 110 million households and businesses through its numerous utility customers, including AES Ohio in AES Indiana.\nIn July, we closed the previously announced transaction with Schneider Electric and a group of investors that valued Uplight at $1.5 billion.\nIn conclusion, we're very pleased with our progress to-date across all of our key strategic initiatives.\nNot only are we well-positioned to achieve all of our financial goals but we are on track to hit our transformational targets of more than 50% of our earnings from renewables and utilities and more than 50% from the U.S. while having less than 10% of our generation from coal by 2025.\nAs Andres mentioned, we are making excellent progress this year having already achieved significant milestones on our strategic and financial objectives.\nWe are pleased to see the continued economic recovery across our markets driven by the reopening of local economies.\nIn Latin America, many of our clients continue to benefit from record steel, copper and [Indecipherable] prices resulting in a significant improvement in electricity demand across our businesses.\nThis also reflects in our day sales outstanding, which remain at a historically low levels.\nTurning to our financial results for the second quarter on slide 17; adjusted earnings per share was up 24% to $0.31, primarily reflecting execution on our growth plan, demand recovery at our U.S. Utilities and parent interest savings.\nThese positive drivers were partially offset by lower contributions from Chile and Brazil and a slightly higher adjusted tax rate.\nTurning to slide 18, adjusted pre-tax contribution or PTC was $303 million for the quarter, an increase of $65 million versus the second quarter of 2020.\nI'll discuss the key drivers of our second quarter results in more detail beginning on slide 19.\nIn the U.S. & Utilities Strategic Business Unit or SBU, PTC was up $71 million driven primarily by the demand recovery at our utilities, higher contributions from about 1 gigawatt of new renewable assets, and the commencement of Power Purchase Agreements or PPAs at Southland Energy in California.\nTurning to slide 20, we are very encouraged to see material recovery, consistent demand at our U.S. Utilities.\nFor Q2 on a weather-normalized basis demand at AES Ohio is up 9% and demand at AES Indiana is up 4%.\nThe net combined volume in Ohio and Indiana is largely back to 2019 pre-COVID levels.\nThis recovery is mainly driven by higher load from commercial and industrial customers this year as a result of the reopening of local businesses.\nSeparately, in California, our 2.3 gigawatt Southland legacy units are well-positioned to contribute to the State's pressing energy needs and its transition to a more sustainable carbon free future.\nIn fact, the State Water Board is considering the California Energy Agencies' recommendation for our 876 megawatt Redondo Beach facility to be extended for two years through 2023 to align with our remaining legacy units.\nThis proposed extension would be an upside to expectations through 2025.\nNow, turning back to our quarterly results on slide 21; at our South America SBU lower PTC was mostly driven by recovery of expenses from customers in Chile in 2020, lower equity earnings from Guacolda also in Chile and drier hydrology in Brazil.\nThese impacts were partially offset by higher generation at the Chivor hydro plant in Colombia.\nHigher PTC at our Mexico Central America and the Caribbean or MCAC SBU primarily reflects better hydrology in Panama, which was partially offset by the sale of Itabo in the Dominican Republic.\nFinally, in Eurasia PTC remained relatively flat.\nThe impact from the sale of OPGC in India was largely offset by lower interest expense in Bulgaria.\nTurning to slide 24; with our first half results we are on track to achieve our full year 2021 adjusted earnings per share guidance of $1.50 to $1.58.\nAs we have discussed in the past, our typical quarterly earnings profile was more back-end weighted with roughly 40% of earnings occurring in the first half of the year.\nGrowth in the year-to-go will be primarily driven by 1.4 gigawatts of new renewables assets coming online in the remainder of the year, continued demand recovery across our markets, reduced interest expense and cost savings benefits.\nWe are also reaffirming our expected 7% to 9% average annual growth target through 2025.\nNow, turning to our credit profile on slide 25; strong credit metrics remain one of our top priorities.\nIn the last four years, we attained two to three notches of upgrades from the three credit rating agencies, including investment grade ratings from Fitch and S&P.\nWe are also very encouraged by the recent change in outlook to positive on our Ba1 rating at Moody's.\nThese actions validate the strength of our business model and our commitment to improving our credit metrics.\nWe expect the positive momentum in these metrics to continue enabling us to reach BBB ratios by 2025.\nNow to our 2021 parent capital allocation plan on slide 26; consistent with our prior disclosures, sources shown on the left hand side of this slide reflect approximately $2 billion of total discretionary cash.\nThis includes $800 million of parent-free cash flow, $100 million of proceeds received from the sale of Itabo in the Dominican Republic, and the successful issuance of the $1 billion of equity units in March.\nNow to uses on the right hand side, we'll be returning $450 million to shareholders this year consistent of our common share dividend and the coupon of the equity units.\nAnd we plan to invest approximately $1.4 to $1.5 billion in our subsidiaries, as we capitalize on attractive opportunities for growth.\nApproximately 60% of these investments are in global renewables reflecting our success in originations during 2020 and our expectations for 2021.\nAnd about 25% of these investments are in our U.S. Utilities to fund rate based growth with a continued focus on grid and fleet modernization.\nIn the first half of the year, we invested approximately $700 million primarily in renewables, which is roughly 50% of our expected investments for the year.\nIn summary, we are making significant progress on executing on the strategic and financial objectives we laid out in our Investor Day in March positioning AES as a leader in the energy transition while delivering superior returns to our shareholders.\nIn summary, the world has decided to seriously tackle climate change, and this is driving unprecedented and accelerating growth in demand for renewables and energy efficiency applications and services.\nIn relative terms, I don't believe anyone is better positioned than AES to capitalize on this once in the lifetime transformation of our sector.\nWe have a proven track record of success.\nWe have the most innovative new products and an 8.5 gigawatt backlog and a 37 gigawatt pipeline of projects.\nAll-in-all we are enthusiastic about our future and we feel confident about delivering on our 7% to 9% average annual growth rate.\nOur core Contracted Generation and Utilities businesses have shown great resilience in the face of global and regional effects of COVID.\nBeyond our robust growth rates in earnings and cash flow from our core businesses, we are creating very significant value for our shareholders through our technology joint ventures.\nThere has never been a better time for AES.\n Assistant:", "chosen": "aes achieves key strategic milestones and reaffirms guidance through 2025.\nq2 adjusted non-gaap earnings per share $0.31 including items.\nreaffirming 2021 adjusted earnings per share guidance range of $1.50 to $1.58.\n"}
{"prompt": "Human: These materials will be referenced during portions of today's call.\nA detailed description of these risks and uncertainties can be found in AFG's filings with the Securities and Exchange Commission, which are also available on our website.\nWe may include references to core net operating earnings, a non-GAAP financial measure in our remarks or responses to questions.\nThis was an outstanding quarter.\nWe're extremely pleased with the company's performance and continued strong market conditions.\nThird quarter pre-tax core operating earnings and AFG's Property and Casualty Insurance segment were 60% higher than the comparable prior year period, and each of our Specialty Property and Casualty groups reported healthy growth and excellent underwriting margins.\nResults in our portfolio of alternative investments continue to exceed our expectations and produced strong investment returns in the quarter.\nThis year, market conditions in the Property and Casualty business remain among the best I've seen in my 40 plus year career.\nWe believe that our disciplined, yet opportunistic operating philosophy, a lower net catastrophe exposure than our peers and a continued economic recovery contributed to these outstanding results.\nI'll now turn the discussion over to Craig to walk us through AFG's third quarter results, investment performance and our overall financial position at September 30th.\nAs you'll see on Slide 3, AFG reported core net operating earnings of $2.71 per share, an impressive 96% increase year-over-year.\nThe increase was primarily the result of substantially higher underwriting profit in our Specialty P&C insurance operations and significantly higher P&C net investment income due to the continued strong performance of AFG's $1.7 billion and alternative investments.\nAnnualized core operating return on equity in the third quarter was nearly 18%.\nTurning to Slide 4, you'll see the third quarter 2021 net earnings per share of $2.56 included non-core after-tax realized losses on securities of $0.15 per share, most of which pertain to fair value adjustments on securities that we continue to hold at the end of the quarter.\nNow I'd like to turn to an overview of AFG's investment performance, financial position and share a few comments about AFG's capital and liquidity.\nThe details surrounding our $16.4 billion investment portfolio are presented on Slides 5 and 6.\nPre-tax unrealized gains on AFG's fixed maturity portfolio were $225 million at the end of the third quarter.\nFor the nine months ended September 30, 2021, P&C net investment income was approximately 66% higher than the comparable 2020 period and included significantly higher earnings from alternative investments.\nWe're especially pleased with the performance of our alternative investments during the quarter.\nEarnings from these investments may vary from quarter-to-quarter based on reported results and valuation of the underlying investments and generally are reported on a quarter lag.\nThe annualized return on alternative investments reported in core operating earnings in the third quarter of 2021 was a very strong 20.3%.\nThe average annual return on these investments over the past five calendar years was approximately 10%.\nAlternative investments with underlying real estate exposures have been a key contributor to the performance of this portfolio.\nWe view our investments in real estate and real estate related entities is a core competency.\nIn addition to our portfolio of directly owned properties and mortgage loans, our real estate related investments include real estate funds and real estate partnerships accounted for by the equity method.\nWe found great success in investing in multifamily properties and desirable communities where we continue to achieve very strong occupancy and collection rates and steady rate increases.\nThese multifamily properties represented over half of our alternative investment portfolio on September 30, 2021.\nDue to the significant portion of our alternative assets that are tied to real estate relative to our peers, we also believe that this portfolio of investments has a lower correlation to broader market performance and has the potential to produce more consistent returns over time.\nExcluding the impact of alternative investments, P&C net investment income for the nine months ended September 30, 2021 decreased by 8% year-over-year, reflecting lower market interest rates.\nAs you can see on Slide 6, our investment portfolio continues to be high quality with 88% of our fixed maturity portfolio rated investment grade and 97% of our P&C group fixed maturities portfolio with an NAIC designation of 1 or 2, its highest two categories.\nOur excess capital was approximately $3 billion at September 30, 2021.\nThis number included parent company cash and investments of approximately $2.7 billion.\nReturning capital to our shareholders is an important component of our capital management strategy and reflects our strong financial position and our confidence in AFG's financial future.\nYear-to-date, AFG has declared $24 per share and special dividends.\nWhile all AFG's excess capital is available for internal growth and acquisitions, approximately $180 million of excess capital can be used for share repurchases and additional special dividends while staying within our most restrictive debt to capital guideline.\nThis figure is in addition to our regular quarterly dividend and a $4 per share special dividend declared and accrued in September and paid at the beginning of October, and the $4 per share special dividend declared yesterday.\nWe expect to continue to have significant excess capital and liquidity through the end of the year and beyond.\nOur excess capital affords us the financial flexibility to make opportunistic repurchases, pay additional special dividends, grow our Specialty P&C niche businesses organically and through acquisitions and start-ups that meet our target return thresholds.\nAnnualized growth and book value per share plus dividends was an outstanding 37% in the first nine months of 2021.\nBook value per share excluding unrealized gains related to fixed maturities was $59.70 at September 30, 2021 compared to $63.61 per share.\nAt the end of 2020 and reflects the $21.5 per share and dividends declared during the first nine months of 2021.\nResults during the quarter were excellent as you'll see on the overview on Slide 8.\nThird quarter pre-tax core operating earnings in AFG's Property and Casualty Insurance segment establish another record for the third time this year at $329 million.\nSpecialty Property and Casualty Insurance operations generated an underwriting profit of $169 million in the 2021 third quarter, an impressive 63% increase year-over-year, driven primarily by higher year-over-year underwriting profit in our Specialty Casualty Group and to a lesser extent our Specialty Financial Group.\nDespite the impact of Hurricane Ida and other natural disasters during the quarter, our catastrophe losses were very manageable at $31 million.\nEach of our Specialty Property and Casualty Groups reported strong premium growth, underwriting margins across our portfolio of businesses were excellent, and overall Specialty P&C combined ratio of 89%.\nThe third quarter 2021 combined ratio improved 3.1 points from the 92.1% reported in the comparable prior year period and included 2 points of catastrophe losses and 5.4 points of favorable prior year reserve development.\nTurning to pricing, we continue to see strong renewal rate momentum and we're continuing to achieve strong renewal rate increases in the vast majority of our businesses with exceptionally strong renewal pricing in our longer tail liability businesses outside of workers' comp.\nAverage renewal pricing across our entire Property and Casualty group was up approximately 11% for the quarter.\nExcluding our workers' comp business, renewal pricing was up approximately 13% in the third quarter.\nBoth measures are an improvement over the rate increases reported in the second quarter of 2021.\nThis quarter marked our 21st consecutive quarter of overall Specialty Property and Casualty rate increases, which continue to be meaning -- meaningful and excess of perspective estimated loss ratio trends.\nGross and net written premiums for the third quarter of 2021 were up 19% and 16% respectively when compared to the third quarter of last year.\nThe drivers of growth vary considerably across our portfolio of specialty property and casualty businesses.\nOverall, in the aggregate, year-over-year growth in gross written premium during the first nine months of 2021 excluding crop insurance was fairly evenly split, but just over half attributable to net net growth and change in exposures and just under half attributable to rate increases.\nProperty and Transportation Group reported an underwriting profit of $45 million in the third quarter of '21 compared to $47 million in the third quarter of 2020.\nHigher underwriting profits in our crop business in Singapore branch were more than offset by lower underwriting profit in our transportation, property and inland marine and non-crop agricultural businesses.\nWe continue to be pleased with the performance of our portfolio of transportation businesses, which has served us very well over time.\nThe diversity within this book, which includes specialty transportation niches like rigging and crane and ambulance and paratransit, home delivery, moving and storage, coverage for owner operators and workers' comp solutions tailored to the wheels industry has helped us deliver attractive margins and strong returns in this group of businesses.\nKnowing what we know at this point, we also expect to have an above average crop year from both the profitability and a growth standpoint with net written premiums projected to be up approximately 32% for this year.\nYields throughout much of the corn belt are average to well above average, offsetting below average drought related yields from the North Central States, freeze-related losses in Texas and drought-related losses in the Western United States.\nAbout 40% of our MPCI corn and soybean business is in the eastern corn belt, where growing conditions were more favorable.\nThe month of October serves as the discovery period for the majority of our corn and all of our soybean business.\nCorn and soybean harvest pricing settled at 17% percent and 4% higher respectively than spring discovery pricing, and was comfortably within desired ranges of volatility.\nThe third quarter 2021 gross and net written premiums in this group were 26% and 22% higher respectively than the comparable prior year period, with growth reported in all businesses in this group.\nThe growth came primarily from our crop insurance business, primarily a result of the impact of higher commodity futures pricing and projected volatility on rates.\nAnd also our transportation businesses, primarily the result of new accounts combined with strong renewals.\nOverall, renewal rates in the Property and Transportation Group increased 5% on average for the third quarter of '21.\nThe Specialty Casualty Group reported an underwriting profit of $110 million in the 2021 third quarter compared to $53 million last year.\nHigher profitability in our workers' compensation excess and surplus lines, excess liability and general liability businesses were key drivers of these results.\nThis Group reported a very strong 82 calendar year combined ratio for the third quarter, an impressive improvement of 8.7 points from the comparable period in 2020.\nUnderwriting profitability in our workers' comp businesses overall continues to be excellent.\nOur workers' compensation book is another area where the strength and diversity of our stand-alone worker's comp businesses has served us well.\nGross and net written premiums for the Specialty Casualty Group increased 15% and 14% respectively when compared to the same prior year period.\nNearly all of the businesses in this group achieved strong renewal pricing and reported premium growth during the third quarter.\nSignificant renewal rate increases and new business opportunities contributed to higher premiums in our excess and surplus lines business.\nRenewal rate increases, strong account retention and new business opportunities contributed to higher premiums in our targeted markets business.\nAnd our mergers and acquisitions liability and executive liability businesses also contributed meaningfully to the year-over-year growth.\nRenewal pricing for this group was up 13% in the third quarter and excluding workers' compensation businesses, renewal rates in this group were up approximately 18%.\nBoth measures are improvements from the rate increases achieved in the second quarter of 2021.\nNow the Specialty Financial Group reported an underwriting profit of $26 million in the third quarter of 2021 compared to an underwriting profit of $13 million in the third quarter of 2020.\nImproved results in our surety and financial institutions businesses contributed to the higher year-over-year underwriting profitability.\nThis group continued to achieve excellent underwriting margins and reported an 84.2 combined ratio for the third quarter.\nGross and net written premiums increased by 9% and 8% respectively in the 2021 third quarter when compared to the prior year period and nearly all businesses in this group reported growth, including our surety, fidelity and crime and lender services businesses.\nRenewal pricing in this group was up approximately 8% for the quarter, consistent with the results in the second quarter of 2021.\nAlthough the largest business in the special financial group is our financial institution services division, which generates about half of the group's gross written premium.\nThis group also includes a compelling mix of Specialty Property and Casualty businesses, offering coverages such as fidelity and crime, surety, trade credit and coverages tailored to lending and leasing institutions.\nFor more than 10 years, the average overall combined ratio of this group has consistently been below 90.\nNow turning to A&E reserves.\nDuring the third quarter of 2021, we did complete our annual ground-up review of our asbestos and environmental exposures relating to the run-off operations within the Property and Casualty group.\nThis was undertaken internally and reviewed all open accounts and considered any trends observed.\nGood news is we have identified no new trends and activity was within our expectations and consistent with the expectations from our 2020 external study.\nAs a result, the review resulted in no net change to the property and casualty group's A&E reserves.\nWe do continue to enjoy robust survival ratios, which are well above industry averages in which our one measure of the strength of our A&E reserves.\nBased on a relatively moderate payment patterns and the pace of new filings, we'll most likely continue to assess our reserves utilizing in-house resources next year.\nWe have also assessed the adequacy of our asbestos and environmental reserves for historic railroad and manufacturing operations.\nAsbestos liabilities continue to be adequate, though we are making a small adjustment to our environmental liabilities based on slightly revised projections at three environmental sites.\nBased on results for the first nine months of the year, we now expect AFG's core net operating earnings in 2021 to be in the range of $10.10 to $10.70, up significantly from our previous range of $8.40 to $9.20 per share.\nWe're obviously pleased once again to increase our 2021 core earnings per share guidance in a meaningful way.\nThis guidance reflects an assumed annualized return of approximately 10% on alternative investments in the fourth quarter of 2021, which would produce a return of approximately 20% on our $1.7 billion of alternative investments for the full year in 2021.\nAs we consider the outlook for our Specialty Property and Casualty operations based on results to the first nine months, we strengthened our guidance across the board, indicating higher expected 2021 net repayments and stronger underwriting profit.\nWe now expect the 2021 combined ratio for the Specialty Property and Casualty Group overall between 86% and 88%, an improvement of 2 points at the midpoint of the range of our previous estimate.\nNet written premiums are now expected to be 11% to 14% higher than the $5 billion reported last year.\nGrowth in net written premiums excluding workers' comp is now expected to be in the range of 13% to 17%, an increase from the range of 12% to 16% estimated previously.\nAnd then looking at each sub segment.\nWe now expect the Property and Transportation group combined ratio to be in a range of 86% to 88%.\nOur guidance assumes above average crop earnings for the year and we continue to expect growth in net written premiums for this group to be in the range of 15% to 19%.\nOur Specialty Casualty Group is now expected to produce a combined ratio in the range of 85% to 87%.\nOur guidance assumes continued strong renewal pricing in our E&S excess liability and several of our other longer-tail liability businesses.\nWe have raised our projection for growth in net written premiums to a range of 8% to 12% higher than 2020 results.\nPremium growth will be tempered by rate decreases in our workers' compensation book, which are result of favorable loss experience in this line of business.\nExcluding workers' comp, we now expect 2021 premiums in the Specialty and Casualty Group to grow in a range of 15% to 19%, an increase of 5 percentage points from the midpoint of our previous guidance.\nAnd we now expect the Specialty Financial Group combined ratio to be in a range of 84% to 86%, reflecting strong underwriting results for the first nine months of the year.\nWe continue to expect growth in net written premiums for this group to be between 10% and 14% based on projected premium growth in our fidelity and crime and surety businesses.\nAnd our expectations for overall renewal pricing are unchanged from last quarter, remaining in the range of 9% to 11% overall.\nAnd excluding workers' comp, we expect renewal rate increases to be in the range of 11% to 13%.\nCraig and are very pleased to report these exceptionally strong results and a significant increase in our earnings expectations for the full year.\nWe believe that our entrepreneurial opportunistic culture, combined with our strong balance sheet and financial flexibility position us very well as we close out the year and we look forward to the opportunities in 2022.\nWe'll now open the lines for the Q&A portion of today's call, and we'd all be happy to respond to any questions.\n Assistant:", "chosen": "q3 core operating earnings per share $2.71.\nq3 earnings per share $2.56.\namerican financial- sees fy 2021 core net operating earnings $10.10 - $10.70 per share, an increase from previous guidance of $8.40 - $9.20 per share.\n"}
{"prompt": "Human: As we all know COVID-19 pandemic as lasted in some of the most difficult times for so many people around the globe, and we continue to pray for all those affected.\nI'd like to share my appreciation for our employees and sales force in Japan and the United States for their tireless work in helping our policyholders and communities impacted by the pandemic.\nDuring this difficult time, it's important to note, that we remain focused on doing what we do best, that is providing protection products to help consumers when they need it most.\nFinancially, backlog continues to be impacted by the pandemic, but remain strong in terms of capital and liquidity.\nIn addition, our investments are high-quality diversified and they are among the highest return on capital and lowest cost of capital in the industry.\nAmid the challenges of COVID-19, this quarter was also significantly impacted by the release of favorable US tax regulations related to the utilization of foreign tax credits.\nYou'll recall that our Japanese subsidiary is taxed as a US domestic company for US tax purposes.\nIn the quarter, we recognized a cumulative year-to-date benefit from these regulations of $202 million or $0.28 per share compared to our previous run rate.\nMax will provide additional details.\nTurning to our operations starting with Aflac Japan, the effects of COVID-19 continues noticeably impacted our results, as seen in the third quarter, with sales decreasing 32%.\nWe continue to have around 50% of the workforce working from home in Japan and in September, traffic coming into the shops remained at 70% of pre-pandemic levels.\nWhile these sales results represent sequential improvements relative to the last quarter, the effects of the reduced face-to-face activities are evident and we continue to promote virtual sales.\n2020 as also ushered in a change on the Japanese political front.\nPrime Minister, Abe, was Japan's longest serving Prime Minister and a source of political stability with nearly eight years in office.\nMr. Suga, was a core member of Abe's administration leadership team, serving as the Chief Cabinet Secretary.\nWe believe Mr. Suga's administration will carry on skilled leader skill.\nThis will continue to promote a good business environment in Japan and emphasize policies and terms of the response to the COVID-19 and economic policies.\nPrime Minister Suga is accelerating efforts to move toward -- to move forward with regulatory reforms for a post-pandemic world, promoting digital transformation.\nIn that respect, I'm pleased that flagged Japan's paperless initiatives is well under way and Fred will share more.\nTurning to Aflac US.\nThe effects of COVID-19 continued to noticeably impact our results in this segment as well, largely due to the reduced face-to-face activity, third quarter sales were down 35.7%.\nIn the US, we continue to feel the impact of temporary business closures and lack of access to the work side, especially among our career agents who have historically relied upon face-to-face meetings to engage our small business owners and their employees.\nAt the same time, the fourth quarter, typically when we see strong results and the broker driven group market, which is generally been more resilient to face-to-face to not face-to-face conditions.\nAs a result, we remain cautiously optimistic for modest sequential sales improvement for Aflac US in the fourth quarter compared to the second and third quarter, contingent upon the pace of the economic recovery.\nWe are also on track to close our acquisition of Zurich Group business benefits soon, which allows us to extend our distribution reach and appeal to brokers and large employers, while having little effect on the fourth quarter, the acquisition positions us more expanded capacity as we look forward to 2021.\nTo place Aflac in a position of strength, we know that we must balance investing in growth with an eye toward reducing expenses in the long run.\nAs such, we took an opportunity to offer a very generous voluntary separation package to eligible employees who expressed an interest.\nAs a result we have achieved an approximate 9% reduction in our US and corporate workforce with expected one-time expenses of $45 million in the fourth quarter.\nYou'll recall that the US benefit ratio was significantly affected by policyholders limited visits to the doctor.\nWith this in mind, we lost the US initiatives early in the third quarter to remind policyholders of the value of their wellness benefits attached to their products.\nThe wellness benefits pays on certain routine doctor, dentist and hospitalizations visits.\nIn addition, we made sure that it pays a benefit for COVID-19 testing.\nThe wellness initiative has been a success.\nWe are glad we emphasized this important aspect of our policies as it reinforces how we are there for the policyholder when they need us most.\nThis wellness campaign and the voluntary separation programs are a couple of near term headwinds to the profit margin.\nHowever, we expect that they will serve us well as we enter 2021.\nTo conclude our operational discussion, as I've said before, we want to be where the people want to purchase insurance.\nThat applies to both Japan and the US.\nIn the past, this is meeting face-to-face with individuals to understand their situation, propose a solution and closed the sale.\nHowever, the pandemic clearly demonstrates the need for virtual means.\nIn other words, non-face-to-face sales to reach potential customers and provide them with the protection that they need.\nTherefore we have accelerated investments to enhance the tools available to our distribution in both countries.\nAs always, we are committed to prudent liquidity and capital management.\nThis includes maintaining strong capital ratios on behalf of the policyholders in both the US and Japan and a tactical approach to capital allocation.\nIt goes without saying that we treasure our record of dividend growth.\nWith the fourth quarter declaration 2020 will mark the 38th consecutive year of dividend increases.\nOur dividend track record is supported by the strength of our capital and cash flows.\nAt the same time we have remained tactical in our approach to share repurchase, buying back $400 million of our shares in the third quarter.\nWe have also focused on integrating the growth investments that we have made in our platform.\nBy doing so, we look to emerge from this period of continued position of strength and leadership.\nAs always, we are working to achieve our earnings per share objective, while also ensuring we deliver on our promise to our policyholders.\nWe look forward to going into greater detail on our strategic growth plans and efforts to drive efficiency at the Financial Analyst Briefing Conference Call in a few weeks.\nSo now, I'd like to turn the program over to Fred.\nI'm going to touch briefly on conditions in the third quarter, and how we're navigating the pandemic.\nI'll also provide an update on key initiatives in Japan and the US to include our approach to managing expenses.\nThere are currently approximately 97,000 COVID-19 cases and 1,730 deaths in all of Japan.\nThrough the third quarter Aflac Japan COVID-19 impact totaled 1,750 unique claimants with incurred claims totaling approximately JPY550 million in the quarter and JPY760 million year-to-date.\nIn short, we are tracking well below our stress assumptions with no measurable impact from COVID-19 claims.\nHowever, reduced sales and delaying the promotion of the new cancer rider and refreshed medical product are contributing to revenue pressure.\nThis pressure is offset somewhat by favorable persistency.\nCOVID related expenses in the quarter totaled JPY1.7 billion, which included the rollout of virtual distribution tools, employee teller working equipment and distribution support.\nIn the US, the dynamics are understandably more complex.\nCOVID-19 case levels in the US now exceed 8.5 million with deaths nearing 230,000.\nThrough the end of the third quarter, COVID-19 claimants in the US totaled 12,800 with incurred claims of approximately $23 million in the quarter and year-to-date approximately $57 million.\nWe are closely monitoring the recent surge in infections, but continue to see the rate of hospitalization, length of stay in the hospital and transition to ICU traveling below our expectations.\nWe believe this is attributed to advancements in treatment and the nature of the work site which is generally younger and healthier population of policyholders.\nAs Dan noted in his comments, we launched an initiative early in the third quarter to remain policyholders of their wellness benefits, which drove increased utilization.\nThis effort involved connecting with 2.7 million accident and hospital policyholders through a combination of email and direct mail in the month of August.\nThis impacted our benefit ratio in the period, but is designed to reinforce the value proposition of our products.\nWe have thus far seen limited impact persistency, however, we believe this is partially attributed to state executive orders requiring premium grace periods.\nThese executive orders are still in place in 13 states as of the end of the quarter.\nIn those states where the executive orders have expired, we have reduced pressure on lapse rates through proactive outreach to policyholders and employers, actively converting policyholders from payroll deduction to direct bill and notifying policyholders of the wellness benefits.\nTurning to key operating initiatives in both Japan and the US, we are balancing investments in growth, while addressing our expense structure.\nA material driver of elevated expense ratios in Japan and the US is weakness in revenue.\nThus, the need for a balanced approach.\nBeginning with Japan, we are set to promote a simplified cancer rider in the fourth quarter in launching our refreshed medical product in the first quarter of 2021.\nRolled out in late October, we have the technology in place to pivot from face-to-face to virtual sales and an entirely digital customer experience.\nWe continue with direct mail campaigns aided by data analytics that serve to enhance the close rate.\nWe expect the combination of product development, a recovery in pandemic conditions and our alliance with Japan Post to be important growth drivers as we make our way through 2021.\nWe view the pandemic as a call to action on accelerating investment in our digital roadmap and related process improvement.\nOn our second quarter call, I noted, our paperless initiative across all operations in Japan.\nThis is a three year, and roughly JPY10 billion investment with approximately JPY2 billion spent in the third quarter, along with another JPY3.6 billion estimated spend in the fourth quarter.\nWhile elevating our 2020 expenses, this effort will reduce the production and circulation of 80 million pieces of paper per year with run rate savings in the range of JPY3 billion annually.\nAs we move to the fourth quarter, we have budgeted an increase in general, administration expenses over our third quarter of approximately JPY6 billion.\nThis includes 50% of our 2020 annual advertising spend, concentrated in the quarter to raise new product awareness as well as a stepped up level of investment in the paperless initiative.\nWe are effectively accelerating investments in our digital platform into 2020 and 2021.\nTurning to the US, the build out of network, dental and vision remains on track.\nWe have successfully filed our new network products in 48 states with approvals received in 37 states.\nWe are up and running with sales in 10 states and expect to ramp this up as we move into 2021.\nOur consumer markets platform remains on track with hospital accident and cancer product filings expected to be completed in early 2021.\nWe also plan to include life insurance in 2021, recognizing that is a natural product to sell digitally empowered by the Aflac brand.\nFinally, we will soon close on our Zurich Benefits acquisition having successfully completed the required regulatory approvals, along with efforts to improve overall persistency, these are the three largest incremental drivers to earn premium growth in the coming years.\nAnticipating further pressure on near term earned premium as we move into 2021, we are addressing expenses in the US with a sense of urgency.\nWe are addressing expenses across two horizons.\nHorizon one is near term focused and includes a series of actions in 2020 designed to take out approximately $100 million of annualized run rate expenses as we enter 2021.\nThis includes both the US platform and corporate expenses.\nEarly in the fourth quarter, we completed a voluntary separation plan for eligible employees, which will result in a 9% reduction to our US workforce.\nWe expect to record a one-time separation expense of approximately $45 million in the fourth quarter and we will realize annualized run rate savings in the $45 million to $50 million range.\nHorizon two expense initiatives elevate near term expenses until such time the investment is complete.\nLegacy platforms are decommissioned and business processes are adjusted.\nThe most significant investment is in our group business in migration off an old administrative platform to a new platform.\nIn addition, we are completing a broader digital roadmap, which includes approximately $25 million of accelerated investment in 2020.\nMuch of that investment coming in the fourth quarter.\nAs I noted, we need to balance these expense initiatives with investment in growth.\nWe have adopted a buy-to-build acquisition strategy.\nWhile a tactical and prudent use of excess capital, this is not an inexpensive effort in the early years.\nThese build efforts include dental and vision, direct to consumer and Group benefits and taken together impacted our expense ratio in the third quarter by 110 basis points, and are expected to impact the fourth quarter by approximately 160 basis points.\nI'll conclude my comments with investment conditions.\nOur global investment team remains focused on asset quality, monitoring economic conditions and sourcing new investment opportunities in a low interest rate environment.\nOur firm view is that we will experience a check mark-shaped recovery, meaning a slow road to recovery with pockets of volatility along the way.\nOur actions prior to the pandemic tactically improved the risk profile of our portfolio combined with some additional derisking earlier this year has served us well with only modest losses on the sale of securities, impairments and loss reserve increases.\nThese actions have also positioned the portfolio defensively, should we see a second surge in the virus impact economic conditions.\nWe continue to watch closely our middle market loan and transitional real estate portfolios.\nWhile we have seen credit rating downgrades, our middle market loan portfolio is more resilient to consisting a first-lien loans to high quality borrowers backed by strong equity sponsors.\nIn the case of transitional real estate, our portfolio is also consisting of only first-lien positions and is diversified with strong loans to value.\nWe continue to explore ways to optimize currency hedging.\nOverall no material change, but we are further refining our approach to managing the unhedged dollars in Japan.\nThese unhedged dollars provide diversification and income benefits as well as lowering our enterprise exposure to the Yen.\nAs we look toward 2021, we will reset 2020 hedges on our floating rate portfolio and currency hedges at materially lower rates.\nWhile we do not see this impacting net investment income to any great degree, you will see line item impacts to Japan's net investment income, hedge costs and corporate investment income.\nWrapping up my comments, we are not backing off critical investments to drive long-term growth and efficiency in the face of what we believe to be temporary weakness in sales results and earned premium.\nWe will provide further detail around this when we meet for our Annual Financial Investor Conference in the coming weeks and we will talk about the details of investments and when we expect them to turn the corner to having a positive impact on growth in profits.\nI'll now pass on to Max to discuss financial performance in more detail.\nLet me begin my comments with a review of our third quarter performance with a focus on how our core capital and earnings drivers have developed.\nFor the third quarter adjusted earnings per share increased 19.8% to $1.39 with no significant impact from FX in the quarter.\nAdjusted book value per share including foreign currency translation gains and losses grew 17.4% and the adjusted ROE excluding foreign currency impact was a strong 16.8%, a material spread to our cost of capital.\nThis quarter was significantly impacted by the release of favorable US tax regulations related to the utilization of foreign tax credits.\nAs a reminder, our Japanese subsidiary is taxed as a US domestic company for US tax purposes.\nIn the quarter, we recognized a cumulative year-to-date benefit from these regulations, which lowered our tax rate on adjusted earnings for the quarter to 4.1%, a benefit of $0.28 versus our previous run rate.\nOur tax rate for the quarter further benefited from tax credits in our solar and historic rehabilitation investments which lowered our tax expense by approximately $20 million more than in a normal quarter.\nIn addition, variable investment income came in $6 million above our long-term return expectations and together these two items boosted current quarter earnings per share by about $0.03.\nWhen I go-forward basis, and under the current US corporate tax regime, we would expect our go-forward tax rate on adjusted earnings to be approximately 20%.\nTurning to our Japan segment.\nTotal earned premium for the quarter declined 3.3%, reflecting mainly first sector policies pay up impacts while earned premium put a third sector product was down 1.7%.\nJapan's revenue trends should be considered in light of impact on paid-up policies.\nFor example, year-over-year, earned premium was down 3.3% in the quarter while policies in force was down -- were down a little less than 1%.\nThis disconnect masks the strength of persistency, which has been rising during the pandemic.\nIn short, expenses related to managing our inforce tend to hold steady despite the drop in reported earned premium putting pressure on our expense ratio.\nJapan's total benefit ratio came in at 71.3% for the quarter, up 130 basis points year-over-year and the third sector benefit ratio was 61.7%, up 170 basis points year-over-year.\nThe main driver for the increase was lower lapses associated with policyholders updating their coverage.\nGiven the current lower new business activity, this naturally pushes up our benefit ratio due to lower reserve releases, decreases back amortization and improves reported persistency.\nWe did experience all of this in the third quarter, manifested by our persistency improving by 80 basis points year-over-year.\nThe IBNR was also less favorable this quarter.\nWe've seen a drop in paid claims during the pandemic, more so in our medical coverages.\nOur IBNR estimate has only partially reflected this drop given there is not much data to base an adjustment on.\nWe continue to monitor experience and we'll adjust our paid data as it gets more complete.\nIn addition, for our cancer claims that are more than three years old, we extended the completion of claims which led to a smaller release in IBNR compared to 2019.\nOur expense ratio in Japan was 21.7%, up 110 basis points year-over-year.\nOur paperless initiative kicked in at a higher gear as we digitize our operations and drive efficiencies throughout the value chain to a future state with significantly reduced paper usage.\nOverall, when considering COVID related spend, promotional spend and digital and paperless initiatives, we anticipate expense ratios in Japan to remain elevated in the 22% range for the remainder of 2020.\nNet investment income declined 0.2% in yen terms, despite the higher variable investment income, as our yen denominated portfolio generated lower yields, due to lower coal income in this quarter.\nThe pre-tax margin for Japan in the quarter was 19.4% impacted by both the higher benefit ratio as well as a higher expense ratio in the quarter.\nTurning to US results.\nEarned premium was down 2.6% due to weaker sales results.\nPremium persistency improved 80 basis points to 78.8% as our efforts to retain accounts in key premium in-force show early positive results.\nAs Fred mentioned, there are still 13 states with premium grace periods in place at the end of Q3.\nSo we are monitoring these developments closely.\nOur total benefit ratio came in at 48.3%, which was 80 basis points lower than Q3 2019.\nWe have seen a normalization of claims activity across our portfolio compared to the second quarter.\nIn order to improve customer experience and persistency, we conducted an extensive policyholder communication campaign highlighting the embedded wellness benefit in our accident product and we encouraged policyholders to utilize this benefit.\nWe estimate this initiative drove incremental claims of approximately $14 million and impacted our benefit ratio in the range of 100 basis points over what we would normally expect.\nBut we believe our efforts will add value for the customer and improve their experience along with improved long-term persistency.\nOur expense ratio in the US was 37.3%, up 130 basis points year-over-year.\nThe inclusion of Argus added 80 basis points in the quarter and a decline in revenues, roughly explains the residual year-over-year impact.\nThe impact from declining revenues has become more pronounced on our ratios in this quarter relative to prior quarters.\nWe anticipate expense ratios in the US to remain elevated in the 39% range for the full year 2020, driven by near term weakness in revenue, uptick in seasonal business activity and expected inclusion of the Zurich Group Benefits acquisition.\nNet investment income in the US was down 4.4%, due to a 14 basis points contraction in portfolio yield year-over-year.\nProfitability in the US segment remains healthy at 20.5% with a low benefit ratio as the core driver.\nIn our corporate segment, amortized hedge income contributed $22 million on a pre-tax basis to the quarter's earnings with an ending notional position of $5 billion.\nOur capital position remains strong and we ended the quarter with an SMR north of 900% in Japan and an RBC of approximately 700% in Aflac Columbus.\nOur RBC is temporarily boosted by delaying statutory subsidiary dividends to Q4.\nWe still expect to end the year with an RBC in the range of 550% to 600%.\nHolding company liquidity stood at $3.8 billion, $1.8 billion above our minimum balance.\nThis is down compared to earlier in the year, but reflects our decisions to delay regular Q3 subsidiary dividends to Q4.\nOn an annual basis we expect uninterrupted dividend flows to continue from our subsidiaries.\nLeverage improved to a comfortable 22.9% due to the increase in shareholders' equity driven by the release of the tax valuation allowance of $1.4 billion.\nWhile we remain cautious in terms of monitoring the pandemic, we have comfort in the strength of our capital ratios, excess capital, statutory earnings and dividend capacity and our ability to navigate any current and future stress brought on by the pandemic or associated economic conditions.\nIn the quarter, we repurchased $400 million of our own stock and paid dividends of $192 million.\nWe will continue to be flexible and tactical in how we manage the balance sheet and deploy capital in order to drive a strong risk adjusted return on equity with a meaningful spread to our cost of capital.\nBut first let me ask you to please limit yourself to one initial question followed by related follow-up question to allow other participants an opportunity to ask a question.\nAdrian we'll now take the first question.\n Assistant:", "chosen": "q3 adjusted earnings per share $1.39.\nin yen terms, aflac japan's net premium income was \u00a5336.5 billion for quarter, or 3.3% lower than a year ago.\naflac - expect run-rate annual savings in range of $45 to $50 million, will record one-time expense associated with separation plan of about $45 million in q4.\n"}
{"prompt": "Human: I appreciate you all joining us today to discuss our second quarter fiscal 2021 results.\nIn particular, more than two-thirds of our people are essential workers, and they have continued to come to work every day, enabling us to continue to deliver for our customers.\nI'm very proud of our entire team.\nRegarding the business, as we indicated last quarter, overall, we have seen our commercial volumes stabilize and continued strong performance out of our government business.\nWhile we remain in a difficult and uncertain environment, we are encouraged by the stabilization, as well as the positive developments regarding the vaccines, which not only will protect our people, but should also ultimately lead to more travel and a recovery in our commercial markets.\nWith that, turning to the quarter, our sales decreased 28% year-over-year from $561 million to $404 million, and our adjusted diluted earnings per share from continuing operations decreased 52% from $0.64 per share to $0.31 per share.\nOur sales to commercial customers decreased 48%, and our sales to government and defense customers increased 13%.\nFor the quarter, sales to government and defense customers were 52% of our total sales.\nOur Aviation Services segment grew 6% sequentially from our first quarter.\nThis was a result of increased volume in our MRO business, which is seasonally higher in Q1 over -- Q2 over Q1, as well as the continued strength of our government business.\nOur commercial parts volumes overall were relatively stable throughout the quarter and remained above the lows we saw in April and May.\nThat said, I am particularly encouraged by our margin improvement progress.\nOver the last several quarters, we have reduced our footprint across the enterprise, decreased our indirect and overhead spending, exited or restructured several underperforming contracts and divested a loss-making non-core business.\nYou are now starting to see the results of these actions in our adjusted operating margins, which improved meaningfully from 2.5% to 4% sequentially on stable revenue.\nWith respect to cash, we generated $28 million from operating activities from continuing operations and also reduced our accounts receivable financing program by nearly $7 million, further improving our already strong balance sheet position and putting our net leverage below 1 times EBITDA.\nWe also continue to add significant new business that positions us for growth going forward.\nOur CFM56 partnership with Fortress solidifies a source of supply to meet growing demand for used serviceable material on the -5B and the -7B engine variants.\nWe expect demand for USM to increase across the board as we emerge from the pandemic and to be particularly strong for these engine platforms.\nAlso, our follow-on contract from the Navy to support the C-40 aircraft recognizes our performance over the last five years and provides for an expanded statement of work over the next five years.\nIt's worth noting that this was the first time that this contract was awarded to an incumbent, which speaks to the high-quality of our service.\nAdditionally, our 10-year agreement with Honeywell to be its sole authorized service center for 737 MAX Electronic Bleed Air System components positions us to support MAX operators worldwide when that aircraft to return to service.\nThese new contracts, along with others we have announced over the last several months, such as the Unison expansion and extension, represent nearly $1.7 billion in total contract value captured so far this fiscal year.\nThis demonstrates the unique value of our Aviation Services offerings, and these business wins will help accelerate our recovery coming out of the downturn.\nOur sales in the quarter of $403.6 million were down 28% or $157.3 million year-over-year, driven by the impacts of the pandemic on commercial passenger flying activity.\nSequentially, Aviation Services sales were up 5.9% or $21.4 million, while sales in Expeditionary Services were down 50% or $18.6 million.\nThe sequential decline in Expeditionary Services was driven by two factors.\nFirst, the exit of the composites business was completed at the end of Q1, and this business generated $7 million of revenue in Q1 and zero in the current quarter.\nSecond, as previously discussed, mobility had a particularly strong Q1 due to elevated shipments of pallets.\nWithin Aviation Services, our government and defense business was up 19% or $30 million year-over-year, reflecting strong performance on existing contracts.\nIn the quarter, as well as in Q1, our program to deliver two C-40 aircraft to the U.S. Marine Corps generated strong revenue due to elevated activity on the program.\nGross profit margin in the quarter increased to 17.2% from 15.3% in the prior year quarter, driven by the CARES Act payroll support.\nOn a sequential basis, gross profit margin was up 12 -- was up from 12.1% in our first quarter, reflecting the actions we have taken to reduce our indirect costs and to exit underperforming contracts and product lines.\nSG&A expenses were $43.4 million for the quarter.\nOn an adjusted basis, SG&A was $38 million or 9.4% of sales, down $13 million from the prior year quarter, reflecting the reduction of our overhead cost structure.\nOf this improvement, approximately $3.2 million was the result of temporary reductions in compensation and benefits, which we restored beginning on December 1.\nAs an update on our previous disclosure, we have been in settlement discussions with the Department of Justice regarding an investigation of airlift under the False Claims Act.\nDuring the quarter, we recorded $6 million of additional accrual and discontinued operation, which brings our total reserve for this matter to $8 million based on our latest settlement offer.\nWe generated $27.6 million of cash in our operating activities from continuing operations for the quarter.\nThis is net of a use of cash of $6.8 million as we continue to reduce the size of our accounts receivable financing program.\nExcluding the accounts receivable financing program, cash flow provided by operating activities from continuing operations was $34.4 million.\nInventory decreased $12.7 million during the quarter.\nOur net debt at quarter end was $112.1 million, down $37 million from $149.3 million at the end of Q1.\nOur balance sheet and liquidity remain strong with net leverage of 0.95 times adjusted EBITDA, unrestricted cash of $110 million and unused capacity under our revolver of approximately $390 million.\nAs such, we're well positioned to fund what we expect to be unique opportunities to grow our business over the coming quarters.\nOverall, we are pleased with our results given the current environment and also pleased with the progress we have made in improving our operating efficiency.\nAs I mentioned, for many reasons, we are encouraged by the multiple vaccines coming to market and the plans for distribution.\nAs the vaccines are distributed and case numbers decline, we expect travel restrictions to be lifted and people to start flying again.\nUntil then, we expect to be in a relatively stable revenue environment, and we will continue to focus on driving cash flow, as well as continued margin improvement.\nWe will also remain focused on capturing new business, I am confident that our strong balance sheet, combined with the airlines' increasing desire for our lower-cost value-added services, will lead to even more growth opportunities.\n Assistant:", "chosen": "second quarter sales of $404 million, down 28% from the prior year reflecting the impact of covid-19.\nqtrly adjusted diluted earnings per share from continuing operations of $0.31, which excludes impact of cares act support, other items.\nq2 adjusted earnings per share $0.31 from continuing operations excluding items.\nq2 sales $404 million versus refinitiv ibes estimate of $409.4 million.\n"}
{"prompt": "Human: I appreciate you joining us today to discuss our third quarter fiscal year 2021 results.\nI would like to begin the call by once again recognizing our employees.\nTheir unwavering commitment, professionalism and flexibility have allowed us to continue to support our customers without interruption over the past year.\nTurning to the quarter.\nOur sales decreased 26% year-over-year from $553 million to $410 million and our adjusted diluted earnings per share from continuing operations decreased 45% from $0.57 per share to $0.37 per share.\nOur sales to commercial customers decreased 42% and our sales to government and defense customers increased 4%.\nFor the quarter sales and government -- to government and defense customers were 49% of our total sales.\nAs we mentioned on the last earnings call, we expected relatively stable revenue which is what we saw in this quarter with sales up 2% sequentially.\nIn MRO we did see a sequential increase in hangar activity due to increased demand supporting anticipated leisure travel.\nIn our commercial parts activities revenue was relatively stable but we were encouraged to see orders across a broader range of customers during the quarter than what we saw in Q2.\nOur government businesses, which have performed very well over the past year, continued their strong performance delivering another quarter of year-over-year growth.\nRegarding profitability, our adjusted diluted earnings per share from continuing operations were up 19% sequentially reflecting our continued margin improvement progress.\nOn an adjusted basis, which excludes the benefit of the CARES Act, our gross margin improved sequentially from 13.9% to 16.1% and our operating margin improved from 4% to 5%.\nWe have now more than doubled our adjusted operating margin over the past two quarters while operating in a stable revenue environment.\nWe are also proud to have fully reinstated salaries and 401(k) benefits at the beginning of the third quarter which had been a priority for us as we look to attract and retain top talent.\nEven with the compensation restoration, we were able to still deliver a full point of adjusted operating margin improvement.\nThat improvement reflects the operating leverage that we have created through cost reductions, efficiency gains and portfolio reshaping over the last year.\nTurning to cash, once again, we were cash flow positive in the quarter even while making investments in new business wins.\nWe generated $18 million from operating activities from continuing operations and remain in a strong balance sheet position with 1.1 times net debt to adjusted EBITDA.\nSpeaking of new business, we also continued to secure and execute new wins during the quarter.\nWe expanded our distribution relationship with GE subsidiary Unison on a five-year program from the US Air Force to provide and repair and overhaul of F-16 accessories and extended our support of the Navy's H-60 Seahawk platform for an additional seven years.\nWe also began operations on our previously announced Honeywell 737 MAX EBAS contract.\nOur sales in the quarter of $410.3 million were down 25.8% or $142.8 million year-over-year driven by the reduction in commercial passenger flying activity due to COVID-19.\nSequentially sales were up 1.7% with commercial sales up 7% driven by MRO volumes and government and defense sales down 3.3% driven by the scheduled reduction in activity and our program to deliver two C-40 aircraft to the US Marine Corps.\nGross profit margin in the quarter increased to 21% from 11.8% in the prior-year quarter driven primarily by the CARES Act payroll support.\nOn an adjusted basis, excluding the CARES Act support and other items, gross profit margin was 16.1% consistent with the 16% in the year-ago quarter despite the significant decline in sales.\nSequentially adjusted gross profit was up meaningfully from 13.9% to 16.1% reflecting the actions we have taken to reduce our indirect costs and drive efficiency.\nRegarding Expeditionary Services specifically.\nGross profit margin increased to 17% from 0.4% in the prior-year quarter, driven by the divestiture of the composites business and improved performance at the mobility operation.\nSG&A expenses were $44.9 million for the quarter.\nOn an adjusted basis, SG&A was $42.8 million or 10.4% of sales down $9 million from the prior-year quarter, reflecting the reduction of our overhead cost structure.\nWith respect to our accounting for the CARES Act payroll support, we have fully recognized our deferred credit in Q3 and we will no longer have income associated with the CARES Act support.\nWe have an $8.8 million promissory note associated with the CARES Act, which we expect to repay during the fourth quarter.\nAlso, we continue to have certain foreign subsidiaries that are eligible for stimulus provided by foreign governments.\nConsistent with prior quarters, government subsidies, including the CARES Act are reflected in our GAAP income primarily as a reduction in our cost of sales.\nHowever, we exclude these benefits from our adjusted results.\nOther adjustments during the quarter included $4 million of loss provision and exit costs for commercial programs contracts, $1.5 million of which reduced sales.\nIn addition, there was a gain of $4.3 million related to a legal settlement, which we have excluded from our adjusted results.\nAlso during the quarter, we reached a tentative agreement with the Department of Justice to settle the investigation of airlift under the False Claims Act for approximately $11.5 million.\nAs such, we recognized a charge in the quarter of $4.2 million in discontinued operations.\nAs a reminder, we completed the exit of our airlift business in the fourth quarter of last year.\nIn the quarter, we generated $17.6 million of cash in our operating activities from continuing operations.\nWe reduced inventories by $21 million from our second quarter as we continued to focus on working capital management.\nOur net debt at quarter-end was $108.4 million, down from $112.1 million at the end of Q2 and from $171.1 million at the end of Q3 of last year.\nIn addition, our accounts receivable financing program has decreased by $37.2 million over the last year from $85.6 million at the end of the year-ago quarter to $48.4 million.\nOur overall leverage and liquidity remain strong with net debt of 1.1 times adjusted EBITDA, unrestricted cash of $99.2 million and unused capacity under our revolver of over $400 million.\nOverall, we are encouraged by the widely reported recent increases in demand for domestic leisure travel and we remain optimistic about the broader commercial market recovery.\nWe expect modest sequential improvement in Q4 and continued improvement thereafter as the vaccine is distributed and current travel restrictions, which are impacting some of our larger international customers, are lifted.\nAs that occurs and our revenue recovers, we remain committed to leveraging our current cost structure to drive continued margin improvement.\nIn addition, our balance sheet puts us in a very strong position to be able to fund growth.\nWe expect to make investments in our USM and distribution activities as well as to continue to invest in our technology and digital initiatives.\nThese actions along with the continued strength of our government business and the early signs of a recovery in our commercial markets give us increasing confidence that we will emerge from the pandemic as an even stronger and more profitable company.\n Assistant:", "chosen": "compname posts q3 adjusted earnings per share $0.37 from continuing operations.\nq3 adjusted earnings per share $0.37 from continuing operations excluding items.\nq3 sales $410 million versus refinitiv ibes estimate of $412.4 million.\ncompname says q3 sales down 26% from prior year reflecting continued impact of covid-19.\n"}
{"prompt": "Human: Both of these documents are available in the Investor Relations section of applied.com.\nIn addition, the conference call will use non-GAAP financial measures, which are subject to the qualifications referenced in those documents.\nOn behalf of our entire team at Applied, we hope you and your families are healthy, safe and managing well.\nI'll start today with a business update, including how we continue to respond to the pandemic as well as progress with various internal initiatives and color on the external environment.\nDave will follow with a summary of our financials and some specifics on our first quarter and outlook, and then I'll close with some final thoughts.\nInto early fiscal 2021, we're seeing a modest recovery gain momentum and are executing well.\nI'm encouraged by the start to the year and believe we are in a solid position to build off this positive momentum as we move forward.\nOur operations are functioning productively.\nOur supply chain and inventory levels are in a good position and we are responding effectively to customers' increasing requirements as an initial demand recovery appears to be under way.\nThroughout the past several quarters, we have quickly adapted to the evolving environment, including implementing new processes and ways to support our customer needs.\nA key part of our message to all our stakeholders during these evolving times is how Applied is stronger today than in prior cycles.\nThis includes benefits from our expanded offerings, greater technical focus and a more diversified end market mix.\nWe've also strengthened our marketing and sales efforts to showcase our comprehensive and leading technical offering and to further develop our cross-selling opportunity.\nWe are increasingly critical to our customers as maintenance, production and efficiency requirements begin to ramp across their core operational infrastructure.\nThese elements are providing near-term sales support and leave us increasingly constructive on our growth potential going forward.\nIn addition, investments in systems, talent, analytics and operational processes in recent years are yielding additional benefits in the current environment.\nWe quickly aligned our cost structure and once again are demonstrating our operational discipline and the resilience of our operating model.\nThis is highlighted by better-than-expected decremental margins in the quarter as well as ongoing strengthening of our balance sheet following strong cash generation performance and a nearly 30% reduction in net debt levels over the prior year.\nOur capabilities and company-specific opportunities, combined with the improving outlook, positions us to be a growth leader with increasing earnings power entering the next phase of recovery in the industrial economy.\nThis is demonstrated by our recent tuck-in acquisition of Advanced Control Solutions earlier this month.\nACS represents the next step in expanding our automation offering, which is further differentiating our value proposition, diversifying our end market mix and enhancing our growth profile to include next-generation industrial solutions.\nAs it relates to the broader demand environment, underlying trends remain below prior year levels during our first quarter as business activity continued to adjust to the ongoing pandemic.\nThat said, customer order activity improved sequentially through the quarter, and we continue to gain traction with our internal growth initiatives.\nAs a result, the year-over-year organic sales decline of 13.4% in the quarter improved notably from the 18.4% decline last quarter.\nYear-over-year organic sales declines improved each month and sequential trends in daily sales rates seasonally strong.\nWe're starting to see greater maintenance activity and break/fix requirements with customers increasing access to their facilities and expanding equipment utilization as production gradually ramps back up, including at smaller local accounts.\nFeedback from our sales leaders suggest order sizes are increasing, customer inventory levels are being replenished and maintenance projects are getting authorized as businesses increase activity and new safety protocols support a productive path forward.\nIn addition, we saw several industry verticals return back to growth during the quarter with 10 of our top 30 verticals up year-over-year versus only two last quarter.\nAreas such as Food & Beverage, Aggregates, Technology, Chemicals and Transportation were all showing positive momentum.\nAnd while weakness remains greatest across heavy industries, such as Machinery, Metals and Oil & Gas.\nDemand within these verticals appears to be stabilizing and improving slightly.\nWe view these dynamics as a positive sign for the industrial economy and demand for our critical products and solutions.\nThat said, the pace of end market improvement remains gradual and at times inconsistent.\nOrganic sales through our first 18 business days of October are down by mid-teens percent over the prior year.\nWe saw some easing in sales early in the month following a strong end to our fiscal first quarter.\nSales trends have improved each week in October, with order momentum increasing sequentially across both our segments month-to-date.\nHowever, it's important to note that visibility remains limited ahead of the seasonally slower winter months as customers continue to manage through an uncertain macro and pandemic outlook near term.\nAdditionally, customer purchasing discipline can be more restrained around any given election cycle.\nAs we've shown in recent quarters, we know how to manage and execute in this still uncertain business environment and will remain prudent in our cost focus and capital deployment near-term while focusing on our self-help growth opportunities.\nOverall, we're seeing signs that reinforce our view that the worst is behind us, and a recovery is starting to gain traction.\nThis bodes well for when we enter the seasonally stronger second half of our fiscal year as comparisons become easier and we continue to execute on our internal growth initiatives.\nBefore I begin, I will remind everyone that a supplemental investor deck recapping key financial performance and discussion points is available on our investor site for your additional reference.\nTo provide more detail on our first quarter, consolidated sales decreased 12.7% over the prior year quarter.\nAcquisitions contributed 1.1% growth, partially offset by an unfavorable foreign currency impact of 0.4%.\nNetting these factors, sales decreased 13.4% on an organic basis with a like number of selling days year-over-year.\nTurning to sales performance by segment, as highlighted on slides six and seven.\nSales in our Service Center segment declined 14.9% year-over-year or 14.4% on organic basis.\nThe decline reflects the ongoing impact from COVID-19, including reduced industrial production activity and customer facility restrictions which continues to impact MRO demand across our service center network.\nHowever, the 14% organic decline year-over-year represents an improvement from the 21% decline during last quarter.\nIn addition, average daily sales rates were up more than 4% sequentially and above the normal seasonal progression.\nAs Neil highlighted, we saw greater maintenance activity in break/fix demand.\nMore customers are providing access into their facilities and releasing working capital spending following a slow pace during the summer months.\nYear-over-year declines remain greatest within Metals, Oil & Gas and Machinery end markets but were balanced by underlying improvement within Food & Beverage, Pulp & Paper, Aggregates, Forestry and Chemical Industries as well as ongoing growth in our Australian operations.\nWithin our Fluid Power & Flow Control segment, sales decreased 7.4% over the prior year quarter with our August 2019 acquisition of Olympus Controls, contributing 3.8 points of growth on roughly half a quarter of remaining inorganic contribution.\nOn an organic basis, segment sales declined 11.2%, reflecting lower demand across Industrial, Off-Highway Mobile and process-related end markets.\nThis was partially offset by sales growth within Technology, Life Sciences, Food & Beverage and Chemical end markets during the quarter as well as ongoing traction with our cross-selling initiatives and firm sales activity across our emerging automation platform.\nMoving to margin performance.\nAs highlighted on Page eight of the deck, gross margin of 28.9% declined approximately 50 basis points year-over-year or 40 basis points when excluding noncash LIFO expense of $1.1 million in the quarter and $0.4 million in the prior year quarter.\nYear-over-year declines primarily reflect unfavorable mix tied to sales declines across our local service center accounts, albeit more modest relative to last quarter as well as more subdued pricing opportunities given the softer demand environment.\nThat said, on a sequential basis, gross margins improved 13 basis points or 17 basis points when excluding LIFO expense, and we're slightly ahead of our expectations.\nWhile we expect some of the volume-driven year-over-year headwinds to persist near term, we remain focused on driving annual gross margin expansion as demand levels normalize, reflecting benefits from our systems investments, the positive contribution of expansionary products, strategic growth driven by our technical service-oriented solutions and initiatives to expand business across our local customer base.\nIn addition, we are starting to see a slightly greater level of supplier price increase announcements, which, combined with firming demand, could provide some positive momentum for pricing contribution and margin expansion into the second half of our fiscal year.\nTurning to our operating cost.\nSelling, distribution and administrative expenses declined 13.4% year-over-year or approximately 15% when excluding incremental operating costs associated with our Olympus Controls acquisition.\nBoth of these figures exclude $1.5 million of nonroutine cost in the prior year quarter.\nThe year-over-year decline reflects the ongoing benefit from various actions we've taken in recent quarters to align expenses with lower demand.\nThis includes a mix of both structural and temporary cost actions as we continue to assess the environment.\nAnd while we have begun to roll back some of the temporary actions, our team continues to demonstrate great discipline in controlling costs and identifying internal opportunities.\nCombined with improving sales trends during the quarter, we reported a 9.5% decremental margin on operating income during our recent fiscal first quarter, which exceeded our expectations and highlights the adaptability and durability of our operating model.\nGoing forward, we will remain prudent and disciplined in maintaining our cost structure as we continue to gradually roll off temporary cost actions to align with our recent performance, a more constructive outlook and our growth initiatives.\nEBITDA in the quarter was $67.6 million, down 13.6% compared to adjusted EBITDA of $78.2 million in the prior year quarter while EBITDA margin was 9%, down a modest 10 basis points over the prior year despite the double-digit sales decline.\nWe reported net income of $34.8 million or $0.89 per share, down from adjusted net income of $39.9 million or $1.02 per share in the prior year quarter.\nMoving to our cash flow performance and liquidity.\nDuring the first quarter, cash generated from operating activities was $81.8 million while free cash flow was $78.2 million or approximately 225% of net income.\nThis was up from $50 million and $45 million, respectively, as compared to the prior year quarter, and represents record first quarter cash generation.\nThe strong cash performance during the quarter reflects ongoing contribution from our working capital initiatives as well as the countercyclical cash profile of our business model.\nGiven the strong cash flow performance in the quarter, we ended September with over $271 million of cash on hand with approximately 75% of that unrestricted U.S. held cash.\nOf note, this is after utilizing $62 million of cash during the quarter to pay down debt.\nWe have now paid down over $200 million of debt since early 2018, including over $80 million the past year.\nOur net debt is down nearly 30% over the prior year, and net leverage stood at 2.1 times adjusted EBITDA at quarter end, below the prior year quarter level of 2.3 times and the prior year level of 2.6 times.\nAdditionally, our revolver remained undrawn with approximately $250 million of capacity and an additional $250 million Accordion option.\nCombined with incremental capacity on our uncommitted private shelf facility, our liquidity is ample and our balance sheet is strong entering what appears to be an emerging recovery.\nThis provides flexibility to fund incremental working capital requirements in coming quarters as customer demand continues to improve as well as opportunistically pursue strategic M&A aligned with our growth initiatives.\nOur M&A focus near-term remains on smaller bolt-on targets that align with our growth priorities, including additional automation and fluid power opportunities.\nTransitioning now to our outlook.\nVisibility remains limited on how customers will proceed with operations into the seasonally slower winter months.\nThat said, to provide some directional views near term based on month-to-day trends in October and assuming normal sequential patterns in daily sales rates for the balance of the quarter, we would expect fiscal second quarter 2021 sales to decline 13% to 14% organically on a year-over-year basis.\nThis includes an assumption of low-teen organic declines in both our Service Center segment and Fluid Power & Flow Control segment.\nAgain, this direction is meant to provide a starting framework on how second quarter sales could shape up if trends follow normal seasonality over the next two months.\nIf customers reduce underlying production activity, or extend these plant shutdowns, this could drive organic declines that are greater than the 13% to 14% assumption.\nOn the other hand, if we see ongoing improvement in underlying industrial activity and further traction with our internal growth initiatives, organic declines could be better than the 13% to 14% assumption.\nIn addition, we expect our recent acquisition of ACS to contribute approximately $6 million in sales during our fiscal second quarter.\nBased on the 13% to 14% organic sales decline, we believe a low double-digit to low-teen decremental margin is an appropriate benchmark to use for our second quarter.\nThis assumes gross margin to be relatively stable sequentially to first quarter levels as well as the ongoing gradual rollback of temporary cost actions.\nAs indicated, we will continue to take a mindful and balanced approach to our operating costs going forward, including ongoing focus on internal opportunities and margin initiatives, which we expect to provide balance into our cost trajectory moving forward.\nWe are encouraged by our cost and margin execution year-to-date which are providing the flexibility to further roll back temporary cost actions as we take an offensive approach to an emerging recovery and our strategic growth targets.\nWe also note an effective tax rate of 23% to 25% is still an appropriate assumption near term.\nLastly, from a cash flow perspective, we would expect moderation from first quarter levels sequentially for the balance of the year, given potential greater working capital requirements as we look to support growth and the recovery as the year plays out.\nWe remain confident in our cash generation potential over the cycle and reiterate our normalized annual free cash target of at least 100% of net income.\nOverall, I'm encouraged by how we started the year.\nOur entire team has shown tremendous resiliency over the past several quarters which is driving improved performance into early fiscal 2021 and positions us to respond and capitalize on the recovery as it continues to unfold.\nWe have proven the durability of our business model, strengthened our balance sheet and optimized our cost structure.\nWe are leveraging our unique and differentiated industry position to be an industrial growth leader into the emerging recovery and in years to come.\nAll of this is reflected in our first quarter results and provides further evidence of the positive path we're on.\nFrom our industry-leading technical MRO capabilities to our Engineered Solutions focus, multichannel cross-selling opportunity and expanding automation platform.\nWe have multiple catalysts to expand our market potential and accelerate share gains in coming years, all while driving additional margin expansion.\nThis is integrated into our long-term targets of $4.5 billion in sales and 11% EBITDA margins, which are well within our capability and provide the framework for accelerating earnings power and stakeholder returns long term.\n Assistant:", "chosen": "compname reports q1 earnings per share $0.89.\nq1 earnings per share $0.89.\napplied industrial technologies - due to ongoing uncertainty from covid-19 pandemic, continues to refrain from providing financial guidance for fy2021.\ncompname says project q2 sales to decline 13% to 14% year over year on organic basis.\n"}
{"prompt": "Human: I'd like to start by first congratulating Steve on being named ALLETE's CFO last week.\nSteve is a familiar face to you all, and he is an integral member of ALLETE's executive leadership team.\nWith his breadth of experience and strategic and technical expertise always founded on strong integrity, Steve is the perfect person for this next era as ALLETE continues to advance the nation's clean energy transformation.\nSteve succeeds Bob Adams as CFO.\nAs we announced earlier this year, Bob is retiring in June after more than 35 years at ALLETE.\nWe're all grateful Bob will be with us over the next several months.\nThese financial results were firmly within our 2021 earnings guidance range of $3 to $3.30 per share.\nI couldn't be more proud of our entire team for these results and all of our accomplishments in 2021.\nOur businesses had an incredibly strong fourth quarter, ending the year on a high note.\nWe delivered on many operational, positioning, and financial successes driven by ALLETE's amazing employees and strong culture, as together we advance sustainability in action.\nThese accomplishments are providing value to our customers and our shareholders today and will continue to do so for years to come.\nIn a few moments, Steve will provide details of the 2021 financial results and 2022 guidance, and Bob will provide his thoughts on our growth trajectory.\nBefore that, I would like to highlight just a few of the accomplishments we achieved during the year.\nWhile we serve our customers with excellence and provide exciting opportunities for our employees, we take great pride in creating value for our shareholders, and ALLETE soundly executed in 2021, hitting our earnings target and paying an attractive dividend while strategically positioning all of our businesses for sustainable growth well into the future.\nWe're committed to ALLETE's long-term five-year objective of achieving consolidated average annual earnings per share growth within a range of 5% to 7%, and I'm confident in our ability to achieve this for our investors.\nDuring 2021, a year we characterized early on as a transitional year for ALLETE.\nWe highlighted several initiatives we put in motion to improve returns on capital and to provide avenues for additional investments in clean energy infrastructure.\nI'm pleased with our success on these key strategic initiatives.\nFirst, regarding improving returns.\nIn late 2021, Minnesota Power received an interim rate order to begin charging new rates, which support the quality and reliability of electric services provided to our customers.\nThe interim rates were approved as filed and went into effect at the beginning of 2022.\nAlthough there's more to play out during the year, we view this as a very constructive outcome that supports Minnesota Power's financial health and ability to continue our clean energy transformation while delivering safe, resilient, reliable, and affordable service to our customers.\nSuperior water, light, and power is also preparing to file a rate case later in 2022.\nAnd this will support the company's ability to continue to upgrade infrastructure and maintain the resiliency, reliability, and high quality of services for its customers.\nOnto new clean energy investments driven by our sustainability in action strategy.\nWe're making significant progress on Minnesota Power's vision to provide 100% carbon free energy to customers by 2050.\nThis bold vision reflects our commitment to the climate, our customers, and our communities through Minnesota Power's Energy Forward strategy.\nMinnesota Power's clean energy transition, detailed in its Integrated Resource Plan, is moving forward in the process, including extensive engagement with a broad range of stakeholders, from customers to communities, to regulators, to employees, and many others, and we expect a decision in the second half of 2022.\nToday, we're pleased to provide updated information regarding our capital expenditure plans to effectuate this transition, and Bob will share some additional comments on all of that in a moment.\nAnd it has been great to see that Minnesota Power's taconite customers finished 2021 at full production of approximately 40 million tons.\nWe anticipate 2022 production to be closer to average at around 35 million tons as reflected in Minnesota Power's rate case.\nBut the ongoing investments by these customers in existing production and in product enhancements, including sustainability as well as the prospect of new customers, clearly support the long-term viability and attractiveness of the natural resource based economy of the region that Minnesota Power is privileged to serve.\nALLETE Clean Energy is also making significant progress in our sustainability in action strategy.\nALLETE's second largest business with operations that spanned from coast to coast is well positioned to drive additional clean energy sector growth.\nWith the recently completed 303 megawatt Caddo wind facility now in service, ALLETE Clean Energy's total wind capacity has increased to more than 1,300 megawatts.\nWe've also made significant progress in our work to expand ALLETE Clean Energy's focus beyond wind to provide additional growth engines in the clean energy space.\nWe've identified several promising opportunities for investment that would augment ALLETE's existing clean energy solutions and expand our capabilities into solar and storage.\nWe anticipate sharing more on this effort this year.\nAlong with creative solutions for our customers and great opportunities for our employees, ALLETE's mix of businesses offers differentiated value to investors with earnings growth, an attractive dividend, and strong positioning to thrive in the clean energy future.\nToday ALLETE reported 2021 earnings of $3.23 per share or net income of $169.2 million.\nEarnings for 2020 were $3.35 per share or net income of $174.2 million.\nAs Bethany mentioned, we finished the year well within our guidance range with both our regulated operations and ALLETE Clean Energy and corporate and other near the upper end of their respective original guidance range.\nA few significant highlights impacting the full year ended 2021.\nEarnings in 2021 reflected a $0.16 per share gain recorded in the fourth quarter for the sale of a portion of the Nemadji Trail Energy Center by South Shore Energy, ALLETE's non-rate regulated Wisconsin subsidiary.\nEarnings in 2021 reflected a $0.07 per share charge resulting from the Minnesota Public Utilities Commission decision to order refunds in Minnesota Power's fuel adjustment clause filing, covering the periods of July 2018 through December 2019.\nNet income in 2021 also included a $0.10 per share negative impact of ALLETE Clean Energy's Diamond Spring wind energy facility related to the extreme weather in the first quarter of 2021.\nTurning to the fourth quarter of 2021.\nOverall, ALLETE's consolidated results for the fourth quarter exceeded our expectations with earnings at $1.18 per share, compared to $0.90 per share for the same quarter in 2020.\nAt least regulated operations segment recorded net income of $29.7 million in the fourth quarter of 2021, as compared to $25.3 million in 2020.\nEarnings reflected higher net income at Minnesota Power, primarily due to higher megawatt hour sales to retail and municipal customers, including a 10% increase from taconite customers and positive income tax expense timing differences.\nThe fourth quarter did include a reserve for the Minnesota Public Utilities Commission decision to order refunds in Minnesota Power's fuel adjustment clause filing related to prior years.\nALLETE Clean Energy recorded fourth quarter 2021 net income of $14.6 million, compared to $13.1 million in 2020.\nAnd income in 2021 include a full quarter contribution from the Diamond Spring wind energy facility, which commenced operations in December of 2020, and earnings from the new Caddo wind energy facility, which was in service in December.\nOffsetting these increases was an anticipated loss on the Northern Wind power project due to higher than expected total estimated cost to complete this project.\nI will provide additional details on this in a moment.\nOur corporate and other businesses recorded net income of $17.6 million in 2021, compared to net income of $8.7 million in 2020.\n2021 included an $8.5 million after-tax gain from South Shore Energy sale of a portion of its interest in the Nemadji Trail Energy Center.\nAlso positively impacting 2021 results are higher earnings from our investment in the Nobles 2 energy facility, which commenced operations in December 2020, and higher net income from land sales at ALLETE properties.\nI'll now turn to our 2022 earnings guidance.\nToday, we initiated 2022 earnings guidance of $3.60 to $3.90 per share, a net income of $195 million to $210 million.\nThe midpoint of our guidance range represents a 16% increase over 2021 results and reflects our expectations of improving returns and positive momentum around our clean energy investments.\nThis guidance range is comprised of our regulated operations within a range of $2.60 to $2.80 per share in ALLETE Clean Energy and our Corp. and other businesses within a range of $1 to $1.10 per share.\nRecall in February 2021, we shared at a high level that 2021 was expected to be a transition year with continued economic impacts from the ongoing COVID-19 pandemic and preparations for a much-needed Minnesota Power rate case.\nTo provide visibility into 2022, ALLETE provided a preliminary estimated earnings guidance range of $3.70 to $4 per share.\nThe reason for the approximately $0.10 difference between our preliminary guidance estimate and our 2022 guidance issued today relates primarily to ALLETE Clean Energy's expectation of lower megawatt hour generation from its legacy wind energy facilities.\nAt a high level, our actual megawatt hour generation at these facilities has been lower than our recent projections.\nAnd to better reflect recent historical results and updated models, we have refined our estimates and expectations.\nA few comments on a regulated operations outlook for 2022.\nOur guidance reflects interim rates for the Minnesota Power retail rate case of approximately $87 million.\nInterim rates are subject to refund.\nOur guidance assumes we will achieve reasonable outcomes in regulatory proceedings.\nMinnesota Power's investor sales are expected to range between 6 million to 6.5 million megawatt hours, which reflects anticipated production from our taconite customers of approximately 35 million tons.\nOur taconite customers started the year with full production.\nHowever, recent customer announcements signaled some curtailments during the year, which would result in production in line with our estimates.\nAs you might recall, Minnesota Power has asked for a large power sales true-up mechanism in its recently filed rate case to fairly balance this type of variation in sales between customers and investors.\nA few highlights from ALLETE Clean Energy outlook for 2022.\nALLETE Clean Energy expects total wind generation of approximately 4 million megawatt hours this year, compared to 3 million megawatt hours last year with the expectation of normal wind resources.\nThe increase in megawatt hours is primarily related to the Caddo wind energy facility in service for the full year.\nOur guidance reflects the downward adjusted megawatt hour generation from ALLETE Clean Energy's legacy wind energy facilities, which is more in line with 2021 actual megawatt hour generation.\nFor our Corp. and other businesses, we expect slightly higher earnings from our investment in the Nobles 2 wind energy facility and earnings from a new Minnesota solar project expected to be completed later this year.\nEarnings per share reflects $50 million of additional equity issuances to fund the Caddo project and other growth initiatives.\nA further update on ALLETE Clean Energy projects, which is detailed on Slide 9.\nAs previously disclosed, we plan to repower and sell the now 100 megawatt Northern Wind project, which consists of the existing Chanarambie and Viking facilities to a subsidiary of Xcel Energy.\nThis transaction remains on track for completion in late 2022 and will provide a significant cash contribution for redeployment.\nALLETE Clean energy has experienced inflationary increases and significant cost pressures related to this project, and as a result, now anticipates a slight loss on the eventual sale of this project, which resulted in an approximately $2 million after-tax charge in the fourth quarter of 2021.\nWe will be working to maximize the value of this project and minimize costs as we further navigate supply chain options and work with vendors to make this project profitable.\nThe 20 megawatt Rock Aetna portion of this project is positioned to move forward in tandem with the Northern wind power as a shovel-ready project with attractive future profit potential.\nWe are finalizing development plans to begin and complete construction of the 92 megawatt Red Barn build-on transfer project, the closing expected in early 2023.\nThis project will utilize some of our safe harbor turbines while expanding our customer base and presence in another geographic region of the country.\nThe extension of this project, and a testament to our strong relationships with optionality to serve C&I customers or regional utilities, the 68 megawatt whitetail development project is also advancing with its advanced transmission Q position and landowner relationships for either a long-term PPA or build-on transfer project.\nLeveraging ALLETE Clean Energy safe harbor turbines, we continue to advance the 200 megawatt Ruso wind project in North Dakota and are working with various regulators on permitting and citing for this facility.\nFirst of all, I too would like to begin by congratulating Steve on his promotion to senior VP and CFO of ALLETE.\nI have worked with Steve for over 20 years, and I found him to be an individual of very high integrity and rock solid in terms of his financial expertise, leadership qualities, and strategic mindset.\nHe has worked closely with me in recent years on numerous major initiatives aimed at improving our overall returns, growth profile and competitiveness on behalf of our investors and customers alike.\nSteve is supported by one of the strongest teams in the industry, and I have no doubt that Bethany, Steve, and the rest of the management team will continue to succeed as the company prosecutes its clean energy vision and strategy.\nAs Steve just shared with you, 2021 was a highly successful year, evident not just by the strong financial results, but the advancement of many key sustainability-in-action initiatives on both the regulated and non-regulated parts of our business that will pay dividends in future years.\nThese results came even despite ongoing challenges from the pandemic, as well as significant volatility in weather and lower-than-expected wind production levels at ALLETE Clean Energy.\nWe begin 2022 with a strong balance sheet, conservative capital structure at approximately 40% total debt, and an excess of $260 million in operating cash flow.\nA notable achievement on the financing side was our ability to secure approximately $240 million in tax equity financing of the $450 million project under very competitive terms.\nOf the $200 million in total equity investment, $50 million will be raised through our ATM program, as Steve noted earlier in his 2022 guidance overview.\nAs Bethany stated, we are committed and confident in our ability to achieve ALLETE's longer-term average annual growth objective within a range of 5% to 7%.\nAs a reminder, this is comprised of 4% to 5% from the regulated utility businesses and at least 15% for the non-regulated businesses.\nThe favorable growth outlook is being fueled by historic clean energy transformation that we are leading regionally at our utility business, as well as our growing non-regulated clean energy platform, which is expanding both its geographic footprint and product service offerings.\nAs promised in recent quarters, we have updated our five year capital expenditure table in the 10-K, as well as provided -- the supporting schedules to provide added granularity to assist you with your financial modeling.\nAs promised, Slide 10 represents our traditional capex table, and Slide 12 is the financing and support of this $1.8 billion capex plan, highlighting significant clean energy investments in the next five years.\nIn conjunction with Minnesota Power's outstanding IRP process currently under consideration by the MPUC, our projected spend in this updated capex table is approximately $1.8 billion over the next five years and is predominantly for regulated or utility-like clean energy infrastructure, representing a 19% compounded annual growth rate over 2021 levels, and translate into rate base growth of over 5%.\nAs you can see, the primary driver of investment growth is further transformation to clean energy, particularly in the transmission area, to address large transmission constraints currently limiting Mysore region power movement on the grid.\nAs renewable generation continues to expand, our planned expansion of our 550 megawatt DC transmission line by 65% to -- or 900 megawatts is a key component in the solution to address this issue.\nOn Slide 11, you can see we have additional clean energy project opportunities also in the pipeline, and we expect that more will materialize into actionable projects as the IRP process plays out.\nMinnesota Power's mission to deliver 100% carpentry energy by 2050 will require significant investment in renewable generation and in transmission and distribution over the next decade or so.\nWe will continue to navigate this clean energy transition that we have, as we have in the past with customer rates and overall competitiveness in mind.\nOur non-regulated business segment, which is comprised primarily of ALLETE Clean Energy, is expected to continue to exceed our 15% growth objective in the foreseeable future.\nAnd we are confident that this highly successful platform will soon advance us into new, complementary, and higher returning segments of the clean energy market, such as solar and storage.\nAs I begin my transition into retirement, I want to pause and express my sincere gratitude to ALLETE, my team, and the investor community more broadly, for your support and confidence in me, especially over the past five-plus years as the CFO of the organization.\nI will surely miss our many conversations and proactive input as we navigated the challenges and opportunities facing the industry and our company.\nStepping back, I feel extremely proud in what the ALLETE team has accomplished thus far in terms of positioning the company for future success and have every confidence the company will continue to do well as it continues to be a leader in the exciting and historic clean energy transition.\nI will now hand it back to Bethany.\nWe're obviously very pleased with all that our team has accomplished in 2021, and we're already making significant strides here in the early weeks of 2022.\nThis is truly an exciting time for ALLETE, and we look forward to sharing more with you in the near future, and of course, delivering another year of value to our shareholders.\nDemands for cleaner energy are increasing, providing new and diverse opportunities for investment for ALLETE.\nWe believe ALLETE's reputation as a leader in this environment will continue to attract capital and we're committed to deliver value to our investors.\nOn Slide 13 is a list of ESG-related information you can find on our website at allete.com.\nI'm particularly proud of our internal team, who put together our Corporate Sustainability Report, which is well aligned with SASB and TCFD reporting requirements.\nWe'll evolve, expand, and improve on our CSR as we continue to execute our sustainability-in-action strategy.\nThe very foundation of ALLETE's growth strategy is sustainability in all of its forms, people, planet, and prosperity.\nAnd as always, we are committed to doing all of this in the absolutely right way.\nWe've taken significant steps already and will continue not only to mitigate climate change risks, but to build a clean energy future through just, equitable, and meaningful change, making a difference and doing our part to make the world a better place for everyone.\nALLETE's family of businesses is well positioned for an even brighter future.\n Assistant:", "chosen": "compname reports 2021 earnings of $3.23 per share.\ncompname reports 2021 earnings of $3.23 per share; initiates 2022 earnings guidance range of $3.60 to 3.90 per share.\nallete inc - qtrly earnings per share $1.18.\n"}
{"prompt": "Human: Please ensure that your lines are muted until the operator announces your turn to ask a question.\nLeading our call today will be Mike Jackson, our Chief Executive Officer; and Joe Lower, our Chief Financial Officer.\nI will be available by phone following the call to address any additional questions that you may have.\nToday, we reported all-time record quarter results with adjusted earnings per share from continuing operations of $2.79, an increase of 207% compared to last year.\nThese outstanding results were driven by strong performance in new, used and customer financial services and disciplined expense management.\nDemand continues to exceed supply for new vehicles, and we expect this to continue through 2021 in part due to the production disruption.\nMore importantly, low interest rates and consumer preference for vehicle ownership versus ridesharing and public transportation are supporting demand.\nWe expect our shipments from the manufacturers to double in the second quarter compared to the prior year.\nAutoNation same-store new vehicle units were up 22% year-over-year and up 12% compared to 2019.\nWe remain focused on our pre-owned vehicle procurement strategy, nearly 90% of our pre-owned vehicles retailed in the first quarter were self- sourced, meaning, we acquired through trade-in, switch returns.\nWe'll Buy Your Car or service loaners and avoided auctions.\nAcquiring vehicles at the right price, speed to the front line, a fair one price environment and leading digital capabilities are winning formula for our customers, which shows in our results.\nAutoNation same-store pre-owned units were up 28% year-over-year and 20% compared to 2019.\nWe continue to leverage our digital capabilities to drive cost reductions and increase efficiency.\nTools like Customer 360, which has over 10 million active customer records, enable us to provide a truly comprehensive and personal experience for our customers, which leads to higher close rates and increased vehicle sales.\nThese efforts allowed us to deliver adjusted SG&A as a percent of gross profit, a 62.7% in the first quarter of 2021 which represents a 1,120 basis point improvement compared to the first quarter of 2020.\nOur target is to operate at or below 65% SG&A as a percent of gross profit for '21.\nWe are committed to our business growth strategy through investment in our existing franchise business.\nExpansion of AutoNation USA and future acquisitions.\nWe are on track to open five new AutoNation USA stores in 2021 and 12 additional new stores in 2022.\nOur target is to have over 130 AutoNation USA stores in operation from coast to coast by the end of 2026.\nToday, we announced that we signed an agreement to acquire 11 stores and one collision center for Peacock Automotive Group in Hilton Head and Columbia, South Carolina and Savannah, Georgia, representing approximately $380 million in annual revenue.\nThe brands acquired are Porsche, Jag [Phonetic], Land Rover, Audi, Subaru, Chrysler, Dodge, Jeep, Ram, Volkswagen and Hyundai.\nThis acquisition will increase AutoNation's footprint from coast to coast to over 325 locations and it's set to close in the summer.\nWe have set the target to sell 1 million combined new and pre-owned vehicles annually.\nAutoNation remains committed to delivering value to our shareholders, which includes opportunistic share repurchase.\nDuring the quarter we bought back 3.8 million shares or 5% of our shares outstanding.\nToday we reported adjusted net income from continuing operations of $234 million or $2.79 per share versus $82 million or $0.91 per share during the first quarter of 2020.\nThis represents an all-time high quarterly earnings per share and a 207% increase year-over-year.\nDuring the quarter, we sold our remaining stake in Vroom for a gain of approximately $6 million after tax or $0.07 per share, which was excluded from our adjusted results.\nOur first quarter same-store revenue increased $1.3 billion or 27% compared to the prior year due to strong growth in new, used and customer financial services.\nWhile prior-year comparisons are impacted by the onset of the COVID-19 pandemic, we continue to see strong consumer demand exceed supply for new vehicles.\nGiven this backdrop, we remain focused on optimizing our business in the current environment.\nFor the quarter, same-store total variable gross profit increased 52% year-over-year, driven by an increase in total combined units of 25% and an increase in total variable PVR of $767 or 21%.\nOur customer care business continues to gradually improve with same-store customer care gross profit increasing 1% year-over-year.\nTaking together, our same-store total gross profit increased 27% compared to the prior year.\nFirst quarter SG&A as a percentage of gross profit was 62.7%, as Mike stated a 1,120 basis point improvement compared to the year-ago period.\nThis strong performance was driven by a combination of strict cost discipline, leverage of our digital capabilities and healthy vehicle margins.\nAs measured against gross profit, overhead decreased 590 basis points, compensation decreased 320 basis points and advertising decreased 210 basis points.\nBased on current business conditions, we project SG&A as a percentage of gross profit to be at or below 65% for the full year 2021.\nFloorplan interest expense decreased to $9 million in the first quarter of 2021 due to lower interest rates and lower average floorplan balances.\nThis, combined with lower non-vehicle interest expense, a lower effective tax rate and fewer shares outstanding generated record adjusted EPS.\nRegarding our balance sheet and liquidity, we have ample capacity to continue investing in our business, including our AutoNation USA expansion as well as opportunistic share repurchases and acquisitions.\nOur cash balance at quarter end was $350 million which combined with our additional borrowing capacity resulted in total liquidity of approximately $2.1 billion.\nOur covenant leverage ratio of debt to EBITDA declined to 1.3 times at the end of the first quarter, down from 1.8 times at the end of the fourth quarter.\nIncluding cash and used floorplan availability, our net leverage ratio was 1.1 times at the end of March.\nOur AutoNation USA expansion continues to provide a very attractive growth opportunity.\nDuring the first quarter, our five existing AutoNation US stores generated over $3 million in pre-tax profit.\nAs Mike referenced earlier, we plan to open five new stores by the end of this year and 12 new stores in 2022 and targeting over 130 total locations by the end of 2026.\nAnd we will continue to look for attractive acquisitions that complement our portfolio and we \u2013 and meet our return thresholds.\nDuring the first quarter, repurchased 3.8 million shares of common stock for an aggregate price of $306 million.\nWe have approximately $892 million of remaining Board authorization for share repurchases and approximately 80 million shares outstanding.\nLooking ahead, we will continue our disciplined capital allocation strategy, utilizing our strong balance sheet, robust cash flow generation and ample liquidity to invest in our business and drive long-term shareholder value.\nWe had another impressive and record-breaking quarter.\nWe remain focused on delivering a peerless customer experience with industry leading digital capabilities and outstanding associate interactions.\nOur commitment to the customer experience is why we're number 1 for the J.D. Power Dealer of Excellence Recognition Program for the third year in a row.\nLess than 2% of all US franchise dealers achieved this honor.\n78 AutoNation stores representing over 20% of our dealerships were recognized.\nOur associates did not let the pandemic interfere with their ability to provide a great experience.\nWe're in the stores and in the offices to meet the needs of our customers.\nWith that, I'm delighted to take any questions.\n Assistant:", "chosen": "qtrly adjusted earnings per share from continuing operations $2.79.\nqtrly revenue $5.90 billion, up 27%.\nqtrly same-store used vehicle unit sales increased 28%\u200d\u200b.\nto acquire 11 stores and 1 collision center.\ntargets selling 1 million combined new and pre-owned vehicles annually.\nqtrly same-store new vehicle unit sales increased 22%\u200d\u200b.\ntargeting to have over 130 autonation usa stores in operation by end of 2026.\n"}
{"prompt": "Human: Leading our call today will be Mike Jackson, our Chairman and Chief Executive Officer; and Joe Lower, our Chief Financial Officer.\nI will be available by phone following the call to address any additional questions that you may have.\nAutoNation's third quarter results were the best ever in the Company's history.\nWe reported an all-time record quarter adjusted earnings per share from continuing operations of $2.38, an increase of 102% compared to last year.\nIn the third quarter, we saw solid demand and a strong pricing environment due to low interest rates and increased interest in vehicle ownership from consumers.\nWith the higher demand and tight inventory, we adjusted pricing and we were able to improve our margins.\nNew vehicle inventory remains tight, and we expect it will remain tight into '21.\nFor the quarter, same store total variable gross profit per vehicle retailed increased $966 or 28% compared to the prior year.\nSame-store new vehicle gross profit per vehicle retailed increased $914 or 56%, and same-store used vehicle gross profit per vehicle retail increased $602 or 43% compared to prior year.\nWith our continue focused on our We will Buy Your Car initiative, we more than doubled the number of vehicles we source compared to last quarter.\nApproximately 75% of the pre-owned units retailed are acquired from customers.\nFor the third quarter, we acquired over 12,000 units, with We'll Buy Your Car, and we're currently sourcing over 4,000 units a month to both supplement our inventory as well as reduce our average used vehicle acquisition cost.\nDuring the third quarter, we continued to leverage our digital capabilities to drive cost reductions and increase efficiency for the business's long-term success.\nThese efforts, combined with our strong gross profit growth, drove significant SG&A leverage in the quarter.\nAdjusted SG&A as a percentage of gross profit was 64.4% in the third quarter of 2020, representing a 800 basis point improvement compared to the third quarter of 2019.\nWe are committed to operating below 68% SG&A as percent of gross profit on a long-term basis.\nOur AutoNation USA stores delivered another profitable quarter.\nThe continued growth and strong execution at these stores solidified our decision to move forward with the AutoNation USA expansion announced in the second quarter.\nWe plan to build over 100 AutoNation USA pre-owned stores, with over 50 completed by the end of 2025.\nOur plan includes five new AutoNation US stores to be opened by the end of '21.\nThe AutoNation USA expansion will include extending AutoNation's coast to coast footprint into new markets, with our first new stores to open in Austin and San Antonio in '21.\nThese stores will continue to leverage the AutoNation brand and its proven processes for competitive advantage.\nWith this expansion, we have set the long-term goal of selling over 1 million combined new and used retail units per year.\nAs Mike just highlighted, today we reported adjusted net income from continuing operations of $212 million or $2.38 per share versus $106 million or $1.18 per share during the third quarter of 2019.\nThis represents a 102% increase on a per share basis.\nThird quarter 2020 adjusted results exclude charges of $28 million after-tax or $0.31 per share associated with the previously announced exit of our aftermarket collision parts business and an unrealized loss of $2 million after-tax or $0.02 per share associated with our equity investment in Vroom.\nDuring the third quarter, same-store revenue was in line with the prior year as increases in used vehicle and customer financial services revenue were offset by declines in sales of new vehicles and customer care.\nHigh supply of new vehicles continued to limit sales volumes, and lower miles driven has limited the pace of customer care recovery.\nThat said, we continued to execute in an extremely high level during the quarter, with adjusted same store gross profit increasing 13% year-over-year.\nRecovering demand, coupled with limited new vehicle supply, drove strong margins, with same store total PVRs up $966 or 28% compared to the prior year.\nWe were also able to grow our same-store used unit sales, which were up 3% year-over-year as we successfully met strong demand with trade-in volume and inventory sourced through our We'll Buy Your Car program.\nLooking ahead, we expect the rebalancing of volume and vehicle margins as inventories recover next year.\nOur customer care business also continues to gradually improve.\nAdjusted same store customer care gross profit declined 2% in the quarter compared to the prior year.\nAnd, as Mike highlighted, adjusted SG&A as a percentage of gross profit was 64.4% for the third quarter, which represents an 800 basis point improvement compared to the year-ago period.\nThis impressive performance was driven by the combination of strong cost discipline, leverage of our digital capabilities and healthy vehicle margins.\nLooking ahead, we remain committed to maintaining expense discipline, and we continue to target operating below 68% SG&A as a percentage of gross profit.\nA decline in floor plan interest expense also benefited our results.\nFloor plan interest expense decreased to $11 million compared to $33 million in the third quarter of 2019 due to both lower interest rates and lower average floor plan balances.\nThis, combined with lower non-vehicle interest expense, a slightly lower effective tax rate and fewer shares outstanding, generated adjusted earnings per share from continuing operations of $2.38, up 102%.\nMoving to the balance sheet and liquidity.\nOur cash balance at quarter-end was $351 million, which, combined with our additional borrowing capacity, resulted in total liquidity of $2.4 billion at the end of September.\nOur covenant leverage ratio of debt to EBITDA declined to 2.0 times at the end of the third quarter, down from 2.3 times at the end of the second quarter.\nIncluding cash and used floor plan availability, our net leverage ratio was 1.4 times at quarter-end.\nLooking ahead, we will continue our disciplined capital allocation strategy, utilizing our strong balance sheet, robust cash flow generation and ample liquidity to invest in our business and drive long-term shareholder value.\nTo this end, today we are providing additional details regarding the expansion of our AutoNation USA footprint, leveraging our established brand and proven success to further penetrate the attractive used vehicle market.\nOur AutoNation USA stores require upfront capital investment of about $10 million to $11 million per store, and we expect to build at least 50 additional stores by the end of 2025.\nOur AutoNation USA expansion is an exciting growth driver, with each store expected to earn a pre-tax profit of almost $2.5 million annually, once running at initial run rate.\nIn addition, today we announced that our Board of Directors has increased our share repurchase authorization to $500 million.\nThroughout this pandemic, AutoNation has remained committed to our associates and communities we live and work in.\n2020 marks the fifth anniversary of our DRIVE PINK initiative.\nOur associates, our customers and our partners have helped AutoNation reach a tremendous milestone of raising and contributing over $25 million in the fight against cancer.\nI'm excited by the opportunities there are in front us.\nWe have built an industry-leading brand, and we're the largest and most recognized automotive retailer.\nWe will capitalize on our strategic advantages.\n Assistant:", "chosen": "qtrly earnings per share from continuing operations $2.05; qtrly adjusted earnings per share from continuing operations $2.38.\nqtrly revenue $5.40 billion, down 1%.\nqtrly same-store new vehicle gross profit per vehicle retailed was $2,535, up 56%.\nqtrly same-store used vehicle gross profit per vehicle retailed was $1,994, up 43%.\nqtrly same-store customer financial services gross profit per vehicle retailed was $2,154, up 11%.\nincreased share repurchase authorization to $500 million.\nplans to build over 100 autonation usa pre-owned vehicle stores, with over 50 completed by end of 2025.\nqtrly same-store total variable gross profit per vehicle retailed was up $966.\nqtrly adjusted sg&a as a percentage of gross profit was 64.4%, up 800 basis points.\n"}
{"prompt": "Human: This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO.\nThe Company closed the third quarter with record sales of $2,323 million and record GAAP and adjusted diluted earnings per share of $1.12 and $1.09 respectively.\nSales were up 11% in US dollars and up 10% in local currencies compared to the third quarter of 2019.\nSales in the third quarter increased by 9% organically.\nAnd sequentially, sales were up 17% in US dollars and 15% in local currencies and organically.\nBreaking down sales into our two segments, the interconnect business, which comprised 96% of our sales was up 11% in US dollars and 10% in local currencies compared to the third quarter of last year.\nOur cable business, which comprised 4% of our sales, was up 2% in US dollars and 5% in local currencies compared to the third quarter of last year.\nAdam will comment further on trends by market in a few minutes.\nOperating income was $476 million in the third quarter of 2020.\nOperating margins were 20.5%, which was up a very strong 250 basis points sequentially and up 80 basis points compared to the third quarter of 2019.\nThe strong sequential improvement in margins reflected a healthy conversion on the higher sales levels, as well as an expected significant reduction in the impact of COVID-related costs.\nThe year-over-year improvement in operating margin reflected a strong conversion on the higher sales levels.\nFrom a segment standpoint, in the interconnect segment, margins were 22.4% in the third quarter of 2020, which increased from 21.7% in the third quarter of 2019 and 20% in the third quarter -- sorry, in the second quarter of 2020.\nIn the cable segment, margins were 10.7%, which increased from 10.2% in the third quarter of 2019 and 9.4% in the second quarter of 2020.\nGiven the unprecedented challenges related to the COVID-19 pandemic, we are extremely proud of this quarter's performance.\nOur team's ability to manage through all of the impacts of this crisis is a direct result of the strength and commitment of the Company's entrepreneurial management team, which continues to foster a high performance action-oriented culture and which has enabled us to capitalize on opportunities and maximize profitability in an uncertain market environment.\nInterest expense for the quarter was $28 million, which was down from $30 million in the third quarter of last year.\nThe Company's GAAP effective tax rate for the third quarter of 2020, including excess tax benefit of $11 million associated with stock option exercises during the quarter, was 22.1% compared to 24.5% in the third quarter of 2019.\nExcluding the excess tax benefit just mentioned, the Company's adjusted effective tax rate was 24.5% for both the third quarter of 2020 and 2019.\nAdjusted net income of $336 million was 14% of sales in the third quarter of 2020, another confirmation of the strength of the Company's financial performance.\nOn a GAAP basis, diluted earnings per share increased by 22% to $1.12 in the third quarter of 2020 compared to $0.92 in the third quarter of 2019.\nAdjusted diluted earnings per share increased by 15% to $1.09 in the third quarter of 2020 from $0.95 in the third quarter of 2019.\nOrders for the quarter were $2,275 million, which was up 9% compared to the third quarter of 2019 and up 15% sequentially, resulting in a book-to-bill of 0.98 to 1.\nThe Company continues to be an excellent generator of cash.\nCash flow from operations was a strong $398 million in the third quarter or 119% of adjusted net income.\nOur free cash flow was $330 million or 98% of adjusted net income.\nFrom a working capital standpoint, inventory and accounts receivable and accounts payable were $1.4 billion, $1.9 billion and $1.1 billion respectively at the end of September.\nAnd inventory days, days sales outstanding and payable days were 79, 72 and 61 days respectively.\nAll improved from the second quarter levels and all within our normal range.\nDuring the third quarter, our cash flow from operations of $398 million, along with the proceeds from the exercise of stock options of $104 million, were used primarily to repurchase 1.9 million shares of the Company's stock for $202 million or an average price of $108, fund dividend payments of $75 million, fund net capital expenditures of $68 million, fund acquisitions of $50 million and fund net purchases of short-term investments of $9 million.\nThis increase is effective for payments beginning in January of 2021.\nAt September 30, cash and short-term investments were $1.5 billion, a majority of which is held outside of the US.\nTotal debt at September 30 was $3.8 billion with no maturities before the third quarter of 2021.\nAnd net debt at September 30 was $2.4 billion.\nTotal cash on hand plus the remaining availability under our credit facilities was $4 billion at the end of the quarter.\nAnd third quarter EBITDA was $568 million and our pro forma net leverage ratio was 1.2 times.\nAnd first and foremost, I hope that all of you on the call here today, together with your family, your friends and your colleagues, are staying safe and healthy throughout the pandemic.\nAs Craig mentioned, I'm going to highlight some of our achievements in the third quarter, and most importantly, discuss the trends and progress across our served markets.\nI'll then make a few comments on our outlook for the fourth quarter as well as for the full year of 2020.\nWith respect to the third quarter, amid what has been clearly an unprecedented and volatile year, I'm truly proud that we at Amphenol achieved record sales and adjusted earnings per share in the third quarter, realizing levels significantly above our guidance that we issued just 90 days ago.\nSales reached $2,323 million, an increase from prior year of 11% in US dollars, 10% in local currencies and 9% organically.\nThis strong growth was driven by increases in mobile devices, IT-datacom, industrial, military, broadband and the automotive markets, and was offset partially by declines in the commercial air and mobile networks markets.\nWe are particularly proud to have achieved a very robust 17% sequential growth from the second quarter, which was significantly higher than our original expectations.\nAs Craig mentioned, the Company booked $2,275 million in orders, and that represented a book-to-bill of 0.98 to 1.\nNow, despite experiencing some continued operational challenges related to the pandemic, we generated excellent operating margins of 20.5% in the third quarter, and this was a full 250 basis point increase from our second quarter levels.\nJust want to say that the Company's financial position remains extremely strong with our operating cash flow of $398 million, and that was particularly notable given the stronger-than-expected sequential growth from the second quarter.\nAnd we continue to leverage that financial strength to return capital to our shareholders, both through our repurchase last quarter of 1.9 million shares of the Company's stock as well as the Board of Directors' approval of a 16% increase in our quarterly dividend that we are announcing today.\nI'm extremely proud of the Amphenol team.\nNo question in my mind that the record results this quarter clearly demonstrate the true value of the agility, the discipline and the drive of our entrepreneurial organization.\nNow, turning to the trends across our served markets, I would just comment that as we've seen this year so far, Amphenol's balanced and broad end market diversification is a uniquely valuable asset, especially in times of heightened economic uncertainty.\nAs many of our markets began to recover in the third quarter, we were able to quickly capitalize on the growth opportunities in those markets, while still retaining our broad exposure to new opportunities and new technology developments across all areas of the electronics industry.\nThe military market represented 12% of our sales in the third quarter.\nSales in this market increased by 6% from prior year, driven in particular by growth in military vehicles, naval, space, communications and airframe applications.\nSequentially, our sales increased by a strong 30% as we recovered from the impact of production restrictions that hit certain of our facilities related to government measures implemented in the second quarter to control the COVID-19 pandemic.\nLooking into the fourth quarter, we expect sales to increase slightly from these levels.\nAnd for the full year 2020, we expect a low-single digit increase in sales from prior year.\nThis full year performance reflects our leading market position and strong execution, offset in part by the impact of the pandemic-related production restrictions we experienced in the first half of 2020.\nI'm very proud of our team working in the military market around the world.\nThey have maintained a singular focus on ensuring that our defense industry customers have uninterrupted access to our leading high technology interconnect products, which are critical to our customers' equipment.\nWe are encouraged both by the accelerating adoption of electronics in these systems, together with the overall favorable defense spending environment.\nThe investments that we've made over the last several years in both new technologies and the capabilities to produce them at volume have positioned us very strongly to be able to capitalize on these trends for many years to come.\nThe commercial aerospace market represented 2% of our sales in the third quarter.\nSales were down by 40%, a very significant level, as the commercial aircraft market once again experienced unprecedented declines in demand for new aircraft due to the pandemic-related disruptions to the global travel industry.\nSequentially, our sales were a bit better than expected, rising 4% from the second quarter.\nAs we look ahead, though, we expect the commercial air market to continue to be negatively impacted by the significant reduction in demand for air travel, which is occurring around the world.\nAccordingly, we expect an approximately 20% sequential reduction in our sales to this market in the fourth quarter.\nAnd for the full year 2020, we expect a roughly 35% decline from prior year due to the unprecedented demand disruptions that our customers are experiencing.\nIt's no question that these are difficult times for the entire travel industry and that that's having a serious impact on the market for commercial airplanes in the near term.\nNevertheless, our team remains committed to leveraging the Company's strong technology position across a wide array of aircraft platforms and next-generation systems integrated into those airplanes.\nAnd we remain well positioned when this market eventually does return to growth.\nThe industrial market represented 22% of our sales in the quarter.\nAnd our sales to the industrial market exceeded our expectations, increasing by 21% in US dollars and 18% organically, a very strong performance.\nThis robust growth was driven especially by the instrumentation, medical, industrial battery, heavy equipment, alternative energy and rail mass transit segments, really a broad base of growth that we saw in the industrial market.\nAlthough we had expected sales to be modestly lower than the second quarter, we actually realized 11% sequential growth here in the third quarter, a very strong performance.\nLooking into the fourth quarter, we expect a modest decline from these third quarter sales levels.\nNevertheless, for the full year 2020, we expect a low-double digit increase in sales from 2019 levels, an outstanding performance given the overall market environment.\nI'm truly proud of our team working in the industrial market.\nWhether enabling the growth in volumes of a wide array of medical equipment, managing through significant increases in demand for semiconductor capital equipment or executing on unprecedented demand for next-generation batteries, our global organization has reacted quickly to ensure that our customers around the world are fully supported, regardless of the many operational challenges that have arisen throughout the COVID-19 pandemic.\nAs we look toward the long term, I'm confident that our performance through this crisis has positioned us very strongly for the future.\nAnd importantly, we continue to drive our leading development of next-generation interconnect, sensor and antenna products in support of our customers in the industrial market, who in turn are accelerating their adoption of next-generation technologies.\nThe automotive market represented 17% of our sales in the third quarter.\nAfter a truly challenging second quarter during which the global automotive industry was deeply impacted by the COVID-19 pandemic, we were very pleased to have seen a very strong recovery here in the third quarter with results much better than we had originally anticipated coming into the quarter.\nOur team's outstanding execution led to an increase in sales from prior year by 4% in US dollars and 1% organically, well ahead of our expectations.\nSequentially, our sales increased by truly significant 78% from the second quarter as our team was able to execute quickly on a recovery in demand from automotive customers in all regions.\nLooking now into the fourth quarter, we expect automotive sales to further increase in the mid-single digits from these levels.\nFor the full year 2020, we expect a low-double digit reduction in sales, which does reflect the severe and sudden pandemic-related downturn in demand from automotive OEMs that we saw in the first half.\nI'm extremely proud of our team working in the automotive market, who has clearly demonstrated both agility and resiliency in realizing these strong sequential growth levels.\nIn fact, our performance through this crisis makes me even more confident in our long-term prospects in the automotive market.\nWe've continued to expand our range of interconnect, sensor and antenna products, both organically and through acquisitions, all with the goal of enabling a wide array of onboard electronics across a diversified range of vehicles made by auto manufacturers around the world.\nThis consistent strategy will no doubt continue to benefit us as the automotive market recovers.\nThe mobile devices market represented 16% of our sales in the quarter.\nAnd our sales to mobile device customers increased by a stronger-than-expected 25% from prior year, driven in particular by increased sales of products incorporated into laptops, tablets and wearables, and this was offset in part by slightly lower year-over-year sales to smartphones.\nSequentially, our sales increased by a much stronger-than-expected 37%.\nAnd this was driven by higher sales across all the products that we serve.\nLooking to the fourth quarter, we expect a slight increase from these already strong third quarter levels.\nAnd for the full year, we anticipate sales to grow in the low-double digits from 2019.\nAnd I would just note that this is well above our original expectations as we came into the year before we were hit with the pandemic.\nWhile mobile devices will always remain one of our most volatile markets, our outstanding agile team is poised as always to capture any opportunities for incremental sales that may arise here in the fourth quarter or beyond.\nOur leading array of antennas, interconnect products and mechanisms continues to enable a broad range of next-generation mobile devices, and this positions us well for the long term.\nThe mobile networks market represented 6% of our sales in the quarter.\nAnd sales decreased as we had expected from prior year by 19% in US dollars and 21% organically, driven by lower sales to wireless operators, as well as some continued impact from the US government restrictions on certain Chinese entities that we have previously discussed.\nLooking into the fourth quarter, we expect a further seasonal sales reduction of approximately 25% related to both OEMs and service providers.\nAnd for the full year, we expect a high-teens reduction in sales, which reflects the impact of the US government restrictions as well as the COVID-19 pandemic.\nRegardless of the near-term challenges in the mobile networks market, we're confident in the Company's long-term position in this important and exciting industry.\nOur team continues to work aggressively to expand our opportunity with next-generation equipment and networks.\nAs customers ramp up investment of these advanced systems, we look forward to benefiting from the increased potential that comes from our unique position with both equipment manufacturers and mobile service providers around the world.\nThe information technology and data communications market represented 21% of our sales in the quarter.\nSales in the third quarter were once again much better than we had anticipated, rising from prior year by a very strong 24% in US dollars and 21% organically.\nAnd this growth was really driven from increased demand for data traffic that continued to prompt both our OEM and service provider customers to increase their demand across virtually all segments of the IT-datacom market.\nSequentially, sales were down by less-than-expected 10% from our extremely strong second quarter.\nAs we look toward the fourth quarter, we expect a mid-teens sequential decline from these very strong third quarter levels.\nAnd for the full year 2020, we expect sales to increase in the low-teens, reflecting the significant upside in demand we experienced in both the second and third quarters, offset in part by the pandemic-related disruptions we saw in the first quarter.\nOur team working in support of the IT-datacom market has clearly distinguished themselves this year, reacting quickly to capitalize on unprecedented demand for our industry-leading high-speed and power products.\nAt the same time, we've not slowed down our efforts to further develop our broad range of industry-leading interconnect products in support of data communications networks around the world.\nIndeed, we remain very encouraged by the Company's strong technology position in the global IT-datacom market.\nOur customers continue to drive their equipment to ever-higher levels of performance in order to manage the dramatic increases in demand for bandwidth and processor power.\nIn turn, our team remains singularly focused on enabling this continuing revolution in IT-datacom.\nThe broadband market represented 4% of our sales in the quarter.\nSales increased by 5% from prior year, driven by stronger demand for home installation-related equipment from broadband operators.\nOn a sequential basis, sales increased by a stronger-than-expected 13% as our customers continued to upgrade their networks in support of the increased demand for high-speed data.\nWe expect sales in the fourth quarter to moderate from these levels on typical end-of-the-year seasonality.\nAnd for the full year 2020, we expect sales to be roughly flat with prior year.\nAnd this reflects the pandemic-related disruptions we experienced in certain geographies, offset by increased investments by our customers in support of higher bandwidth demand.\nNow, turning to our outlook for the future, while our performance in the third quarter was very strong, there still remain significant uncertainties in the global market related to the COVID-19 pandemic, which does appear to be worsening in some regions of the world.\nAssuming no new material disruptions from the pandemic, as well as constant exchange rates, for the 4th quarter, we expect sales in the range of $2,160 million to $2,200 million and adjusted diluted earnings per share in the range of $0.98 to $1.00.\nThis represents both sales and adjusted diluted earnings per share growth versus prior year of flat to up 2%.\nOur fourth quarter guidance also represents an expectation for full-year sales of $8,333 million to $8,373 million and full year adjusted diluted earnings per share of $3.59 to $3.61.\nThis outlook represents sales growth versus prior year of 1% to 2% and an adjusted diluted earnings per share decline of 3% to 4%.\nThe expected decline in our earnings relates directly to the significant cost and disruptions associated with the COVID-19 pandemic that the Company faced particularly during the first half of 2020.\nNow, let me just say that I'm extremely pleased by Amphenol's performance in the third quarter, especially our team's achievement of these new quarterly records in both sales and earnings.\nMost importantly, I remain very confident in the ability of our outstanding management team to adapt to the continued challenges in the marketplace and to capitalize on the many future opportunities to grow our market position and expand our profitability.\nI just want to assure you that our entire organization remains committed to fighting hard to secure the Company's financial performance, all while dedicating ourselves wholeheartedly to protecting the safety and health of each of our employees around the world.\nAnd with that, operator, we'd be very happy to take any questions.\n Assistant:", "chosen": "amphenol corp q3 adjusted earnings per share $1.09.\nthird quarter 2020 record results and dividend increase reported by amphenol corporation.\nq3 adjusted earnings per share $1.09 excluding items.\nq3 gaap earnings per share $1.12.\nfor q4 2020 expect adjusted diluted earnings per share in range of $0.98 to $1.00.\nfor full year 2020 expect adjusted diluted earnings per share to be in range of $3.59 to $3.61.\non oct 20, board approved 16% increase in co's quarterly dividend, from $0.25 to $0.29 per share to be first paid on jan 6, 2021.\n"}
{"prompt": "Human: armourreit.com, along with our Form 10-K and most recent company update.\nAlso our discussion today may include reference to certain non-GAAP measures.\nAn online replay of this conference call will be available on ARMOUR's website shortly and will continue for one year.\nU.S. financial markets continued to stabilize and improve during the fourth quarter, and ARMOUR continues to concentrate its portfolio activity in Agency MBS, which we will do for the foreseeable future.\nQuarter-end book value was $12.32 per common share, up $0.58 from Q3 2020.\nAs of the close of business last Friday, February 12, we estimate book value to be approximately $12.90 per common share ex dividend.\nARMOUR's Q4 comprehensive income was $60.2 million or $0.89 per common share.\nWe paid dividends of $0.10 per common share for each month in the fourth quarter for a total of $19.6 million.\nWe've also declared February and March common dividends at the rate of $0.10 per share and Series C preferred stock dividends for Q1 at the rate of $0.14583 per share.\nThe fourth quarter of 2020 provided favorable conditions for mortgage investors and ARMOUR REIT.\nA one-two punch of fiscal action from Washington and all-out commitment from the Fed to the U.S. Treasury and mortgage-backed securities markets created a wave of liquidity that drove asset spreads significantly tighter in the fourth quarter.\nThe trends have continued into the first quarter of 2021 as markets anticipate a new wave of fiscal stimulus from Congress in the near future.\nThe demand for yield from private investors, combined with the official QE purchases, delivered a strong MBS performance during a period when longer-term treasury yields rose significantly off their 2020 lows.\nEchoing the positive market sentiment, repo financing also improved over the quarter, dropping from 20 to 25 basis points in the third quarter for 30-day tenors, down to 15 to 20 basis points currently.\nThe flip side of all the good news is that historically low mortgage rates helped create the largest wave of home for loan refinancing since 2003.\nFaster prepayments at higher prices tampered down new yield opportunities in the market.\nThe TBA dollar roll market remains the most attractive proposition as the Fed's growing footprint in the sector generates significantly higher returns versus those on agency CMBS or specified MBS pools.\nAnd we expect the Fed's presence to persist at least for the first half of 2021, if not longer.\nWhile we do allocate approximately 36% of our portfolio to dollar rolls in 30-year and 15-year TBAs, 94% of the remaining portfolio are assets with favorable prepayment protection characteristics, including prepayment penalties, lower loan balances and seasoning.\nSuch pools held up very well as expected.\nThe average CPR in our portfolio was 17.3% as of the fourth quarter versus 16% in the third quarter, which were both significantly below the aggregate speeds on more generic MBS.\nYear-to-date, the portfolio is averaging 17.9% CPR.\nOur response to the tighter spread, higher prepayment mortgage environment has been to exercise caution.\nThis is reflected in our implied leverage ratio of 7.7 at the end of the fourth quarter and 6.9 implied leverage ratio currently.\nThese numbers are considerably lower than our historical leverage levels and provide two or more terms of that additional dry powder to take advantage of market opportunities.\nARMOUR's duration as of year-end was 0.62 and is currently 0.76.\nAs a result of our early investment in specified pools, the portfolio's convexity profile remains significantly more favorable than that of newly issued MBS.\nARMOUR continuously monitors its hedge book and manages the net duration gap within a tight range dictated by the team's outlook on the rates barker.\nIt should be noted that a significant portion of the portfolio's duration is in the key rate buckets of inside three years, where we expect yields to be pegged close to 0 for the foreseeable future.\nOur exposure to the long end of the curve is considerably less than our overall duration.\nWhile we accept the apparent market consensus that the Fed's presence and support for the market is here to stay for a prolonged period, we also have a keen appreciation for the unexpected.\nWe will continue to shape our portfolio to protect book value and will not reach for yield at the expense of much higher risk.\nThis means that metrics like core earnings may trend a bit lower, but should work to optimize total economic return.\nAs we've noted before, we set our dividend policy based on the medium-term outlook on our business.\nWe continue to see our dividend level as appropriate.\nWe'd be delighted to take any questions.\n Assistant:", "chosen": "compname reports q4 earnings per share of $0.89.\nq4 earnings per share $0.89.\n"}
{"prompt": "Human: Today's discussion is being broadcast on our website.\nParticipating in today's call are Bob Wetherbee, Board Chair, President and CEO; and Don Newman, Senior Vice President and CFO.\nBob and Don will focus on our second quarter highlights and key messages, but may refer to certain slides within their remarks.\nThese slides are available on our website.\nThey provide additional color and details on our results and outlook.\nHere we are over a year since the world went into lockdown as a result of the COVID-19 pandemic.\nSo much has changed in the last four quarters, and it's easy to focus on the more challenging aspects of this period.\nAt the same time, it's important to remember that we also changed some things, those within our control for the better.\nLike many, we quickly innovated within our digital technology infrastructure to thrive on remote collaboration.\nTechnology allowed us to streamline our processes and work more efficiently overall.\nWe'll continue to drive these improvements utilizing new skills and tools to provide more flexibility to our employees and create better connections with our customers, and we'll capture the associated structural cost savings.\nI'm pleased to see millions of people returning to the skies for the summer travel season.\nEvery day seems to bring another sign of recovery in airframe and jet engine demand.\nThe current economic reawakening and everything from travel to consumer goods to energy is real.\nDespite lingering pandemic-related uncertainties, I'm confident the desire to travel is significant and growing worldwide.\nUltimately, that drives the sustained lengthy backlog for any airliner programs.\nAt ATI, we're ready to produce what our customers need.\nWith that as a backdrop, we generated second quarter financial results that showcase the improving trends in our end markets.\nAt the same time, they reflect the negative impact of the recently concluded strike by the United Steelworkers at our Specialty Rolled Products or SRP business.\nExcluding the $40 million cost attributed to the strike and a small improvement in our restructuring reserves, we lost $0.12 per share in the second quarter.\nDespite the earnings loss, the aerospace recovery is readily apparent beneath the headline numbers.\nOur jet engine product revenues were up over 20% compared to the first quarter 2021.\nThe High Performance Materials & Components segment, or HPMC, saw its margins improve by more than 200 basis points sequentially and nearly 300 basis points year-over-year.\nVery good news that Don will cover in more depth in a few minutes.\nAs we discussed on the first quarter earnings call in April, we were incredibly disappointed that the union leadership chose to call a strike at our major SRP operating locations.\nOur robust continuity plans allowed us to maintain operations during the strike.\nThe new 4-year labor agreement was ratified on July 13.\nMany represented employees returned to their positions within a week of ratification.\nWe're safely and efficiently ramping up operations to their prior production levels.\nWe're on track and expect to be back to full production capabilities in September.\nI've been asked many times by many people inside and outside of ATI, some form of the question, was the strike worth it?\nClearly, we would have preferred to continue negotiating to reach an agreement without a work stoppage.\nA competitive cost structure for this business is imperative.\nLeft unresolved, we'd be facing rapidly escalating healthcare costs that were on a trajectory to double every seven years.\nProduct pricing can increase fast enough to offset that level of healthcare inflation.\nThe SRP business would have fallen behind its competition.\nWe were compelled to act now to find a solution.\nUnder this contract, annual healthcare cost inflation will be capped at 3.5%.\nThe represented employees are responsible to take any necessary actions required to cover annual overage amounts.\nThe SRP business is now appropriately focused on getting back to full speed, providing our customers with the materials and components they need.\nTo close out my comments related to the SRP business, I have two pieces of good news to share.\nFirst, the transformation initiative to exit standard stainless sheet products is on track and will be completed by year-end 2021 as planned.\nWe're making excellent progress on consolidating our footprint.\nSecond, we recently signed a long-term agreement with JSW Steel USA to toll convert a significant percentage of their Ohio-produced carbon steel slabs through our hot rolling and processing facility in Pennsylvania.\nThis multiyear agreement provides a meaningful opportunity to increase our asset utilization and cash flow.\nWe're happy to partner with JSW to bring the exceptional quality and gauge control of our world-class HRPF to their customers.\nWe're currently ramping up production.\nCongratulations to the operating team for setting a production record for carbon steel toll conversion volume in the month of June, even in the midst of the strike at this facility.\nSo what are we seeing in our key end markets?\nWell, for the first time in several quarters, the news is encouraging across most of our portfolio.\nThis removes the strike impact from the comparison.\nI believe this provides the most realistic view of our underlying performance and the true market demand.\nUsing that context, sales increased sequentially in each of our major end markets with the exception of electronics, which is being compared to record results in Q1.\nOn a year-to-year basis, we grew sales in most of our key end markets, most notably Energy, up 60%; and Defense, up 22%.\nWe continue to gain momentum in our largest key market, commercial jet engines.\nThis is principally driven by the recovery of narrowbody platforms, particularly engine programs used on the A320 and A321 aircraft families.\nAs we said on the last few calls, the demand recovery began in our Forgings business where lead times are six to nine months ahead of engine production.\nDue to the market recovery and our recent share gains, our Forgings revenue exceeded both the prior year and the prior quarter levels.\nWe expect this positive growth trend to continue and expand as increased production rates on the 737 MAX become a larger part of our order book.\nThe return to growth in Jet Engine Specialty Materials has lagged Forgings, largely due to pockets of stranded inventory throughout the supply chain.\nAs expected, this inventory is depleting, albeit at an uneven pace, according to customer and product form.\nIn the second quarter, sales of our Specialty Materials like Rene 65 for LEAP engines grew significantly compared to the first quarter, but were still below prior year.\nWe anticipate demand for materials to continue to increase for narrowbody engines, but lag for widebody engines.\nThis uneven pull, coupled with any remaining channel inventory will make for a somewhat choppy growth trajectory quarter-to-quarter for the balance of the year.\nRounding out commercial aerospace, the airframe market continues to be soft.\nThis is largely due to the much discussed sluggish demand for widebody aircraft due to subdued international travel and stranded supply chain inventory.\nWe expect this trend to continue throughout 2021 and possibly into early 2022 as the industry awaits the catalyst for increased widebody production rates.\nOur newly won European OEM Airframe business begins production in the second half of 2021, initially at low levels.\nThis will partially offset the anticipated destocking pressure at our primary domestic airframe customer.\nAs I mentioned earlier, Defense continues to be a growth market for ATI.\nOur broad materials portfolio serves customers with a wide range of demanding applications, ensuring we can be successful under almost any defense budget or economic backdrop.\nOur second quarter growth was driven by naval nuclear applications and rotorcraft products to support increased demand for U.S. navy ships and heavy-lift helicopters.\nWe expect our Defense business to continue to grow and are seeing titanium armor plate demand return in the second half of 2021, in support of a new U.K. armored vehicle program.\nTurning to the Energy markets.\nWe experienced significant growth, largely in our specialty energy portfolio.\nThese increases primarily supported land-based gas turbine production in Asia where energy demand is increasing.\nSales to civilian nuclear customers added to this growth.\nLooking ahead, we see continued improvements in Energy markets as the world slowly reopens from pandemic lockdowns and economic growth drives increasing energy needs.\nWrapping up the market's discussions, results were mixed in our two smaller differentiated markets.\nWe saw the expected return to growth in medical applications as hospitals perform more elective surgeries and diagnostic testing procedures.\nBoth our MRI and Implant Materials sales increased sequentially.\nWe expect demand to improve modestly over the coming quarters, led by MRI.\nIn the Electronics market, sales decreased from record levels in the first quarter of 2021, but grew year-over-year.\nSales of ATI's specialty alloy powders increased versus both prior periods.\nWe expect demand to remain strong for these products for the balance of 2021.\nI'd like to cover several areas, including our Q2 financial performance, our balance sheet and our outlook.\nOn a reported basis, ATI lost $0.39 per share in the second quarter.\nExcluding $40 million of costs associated with the strike and a small favorable true-up to our restructuring reserves, the company lost $0.12 per share in the second quarter.\nTo get a true sense of our performance, you have to go beyond the headlines.\nAs we told you on the last two earnings calls, the commercial aerospace recovery, particularly in jet engines, is gaining momentum and becoming more broad-based within our business.\nThis is readily apparent in our HPMC segment results where jet engines account for more than 40% of overall segment revenues.\nAs Bob shared, jet engine revenues increased by more than 20% sequentially for ATI as a whole and for HPMC.\nVolumes in our Forgings business continue to expand, building on growth in the prior two quarters.\nUnderlying demand for our Specialty Materials accelerated meaningfully for the first time since the pandemic began.\nIn addition to jet engines, revenues in each of HPMC's key end markets grew versus the first quarter, led by specialty energy, including materials for land-based gas turbines produced in Asia.\nAs a result of our profitable jet engine growth and increased asset utilization, HPMC EBITDA margins increased by 220 basis points compared to the first quarter and nearly 300 basis points versus the second quarter of 2020.\nWe anticipate third quarter growth across HPMC's key end markets, most notably jet engine and specialty energy and further utilization benefits from increasing production rates across our network.\nWe expect robust incremental margins over the coming quarters as profitable jet engine revenues increased and structural cost improvements executed throughout 2020 are maintained.\nQ2 financial results were clearly impacted by the 105-day strike in the SRP business.\nIt should be noted that while we removed strike-related costs from segment earnings, segment revenues also declined nearly $140 million versus the first quarter due to plant outages and resulting production declines.\nNo adjustments were made for these revenue headwinds.\nDespite the short-term impacts to 2021 performance, we achieved the needed long-term cost structure changes that will help SRP compete more effectively in the specialty materials marketplace.\nSticking with the AA&S segment, our Precision Rolled Strip business in Asia continues to operate at robust levels with revenues in line with its record-setting first quarter, well above prior year.\nEarnings from this business were below first quarter levels due to unfavorable mix.\nEarnings from our SA&C business were below the first quarter and prior year, largely due to unfavorable mix and the elevated production costs.\nLooking ahead in the AA&S segment, we expect the SRP business to begin to recover in August.\nAs a result of the strike continuing throughout most of July and the inefficiencies associated with the production reramp, we anticipate approximately $25 million of additional third quarter costs.\nWe expect the Asian Precision Rolled Strip business to produce solid results in what is generally its strongest seasonal quarter as device manufacturers prepare for the year-end holiday season.\nOur SA&C business will likely have marginally lower sequential earnings due to its traditional third quarter preventive maintenance outages.\nIt's worth noting that second quarter corporate costs and closed company expenses were elevated compared to prior year and prior quarter.\nCorporate costs were above prior year largely due to incentive compensation accruals and higher than the prior quarter, mainly due to foreign exchange losses.\nClosed company expenses were above first quarter and prior year, primarily due to nonrepeating benefits in both prior periods.\nAs we've discussed over the past several quarters, our decisive 2020 cost actions continue to benefit the business.\nThey serve to limit decremental margins while year-over-year revenues declined.\nWe fully expect them to benefit the bottom line when revenues return to year-over-year growth.\nThe HPMC segment's second quarter results offer a preview of what is expected in future quarters.\nWhile HPMC revenues were flat versus prior year, earnings grew 30%.\nWe achieved this earnings growth largely as a result of increasing production rates at many segment facilities coupled with streamlined cost structures.\nHowever, we still have room to improve.\nSome facilities such as our nickel powder operations at Bakers, North Carolina, continue to operate on limited schedules due to low demand levels.\nWhile others still produce large quantities of lower-margin transactional products as commercial aerospace markets recover.\nNow let's move to the balance sheet and liquidity.\nAs has been the case throughout the pandemic, we've taken actions to improve our debt profile and have prioritized our balance sheet to ensure an ample cushion to weather any storm.\nDespite the recent strike, we ended the quarter with roughly $830 million of total liquidity, including at least $475 million of cash.\nOur second quarter managed working capital levels increased, partially from elevated inventories in our SRP business due to strike-related inefficiencies.\nAccounts receivable and accounts payable balances also contributed to the second quarter's higher working capital levels.\nWe continue to focus on inventory velocity as we ramp production.\nWe expect working capital levels as a percent of sales to improve significantly in the second half of the year.\nLooking ahead, we anticipate contributing up to $50 million to our U.S. defined benefit pension plan in the third quarter to improve our funding status and long-term leverage profile.\nThe deposit is above and beyond minimum contribution requirements, but it is consistent with our intent to reduce our pension exposure.\nAdditionally, we'll continue to actively manage our debt maturity profile in the coming quarters.\nAs I said earlier, we expect our Jet Engine business to continue to improve, led by growth in Specialty Materials and our ongoing cost structure benefits.\nIn the AA&S segment, we anticipate higher sequential SRP volumes.\nWe'll also see increased maintenance and production costs due to a temporary production outage related to our transformation efforts.\nOur SA&C business will be negatively impacted sequentially by its traditional summer maintenance outages, creating lower revenues and higher expenses versus the second quarter.\nWe expect earnings from our Asian Precision Rolled Strip business to increase sequentially due to higher electronics volumes.\nAs a result of the new USW labor agreement, we reduced our contractual funding requirements for post-retirement medical benefits.\nThis will result in a onetime noncash pre-tax gain of approximately $65 million in our third quarter results.\nThis benefit and associated $15 million tax charge will be excluded from our adjusted earnings.\nIn aggregate, we expect third quarter adjusted earnings to be between breakeven and a loss of $0.08 per share, excluding strike-related costs and the $65 million post-retirement medical accounting gain.\nHPMC segment gains will likely be partially offset by AA&S segment maintenance outages and production expense headwinds.\nWhile we are not able to accurately predict fourth quarter results due to lingering uncertainties in the aerospace production ramp, we expect adjusted earnings to return to profitability in Q4 and continue to improve in 2022.\nFinally, due to the negative strike-related earnings impact, we now anticipate full year free cash flow to be at breakeven to slightly positive levels.\nWe'll work diligently to offset the strike cash impact, continuing to be disciplined on capital spending and aggressively seeking working capital improvements throughout the back half of the year.\nI'm confident we'll meet our goal of generating positive free cash flow in 2021.\nWe're excited to accelerate along this path of end market recovery and fully expect a leaner ATI to showcase its capabilities, expanding market shares and margins along the way.\nOur second quarter financial results showed solid sequential improvement.\nWe're seeing commercial aerospace recovery and our forward order load.\nWe feel momentum building at ATI, particularly within our HPMC segment.\nImproving aerospace market conditions will create an outsized benefit for ATI as we streamlined our cost structures and have higher shares of critical, high-growth customer programs.\nI'm confident that when these volumes return to pre-pandemic levels, we'll be an even stronger and more profitable company.\nThe AA&S segment will be well served by growth in defense, energy, medical and electronics.\nTransformation is on track in our Specialty Rolled Products business.\nWe've made significant and structural changes to rationalize our product portfolio, consolidate and upgrade our footprint and align our cost structure for future success.\nWe're building a leaner and more profitable SRP business that out earns its cost of capital, has substantial profitable growth opportunities and compete successfully for investment within the company.\nI'll close with three important points.\nATI is a growth-focused company with the cost structure we need for success.\nWe're well positioned in key markets to achieve higher than GDP growth over the long term.\nAnd transformation of our product portfolio is on track and will deliver significant benefits.\nWith a clear strategy and innovative team, we're accelerating our future.\n Assistant:", "chosen": "q2 loss per share $0.39.\nqtrly adjusted net loss attributable to ati was $0.12 per share.\nanticipate continued recovery in our jet engine market in q3 driven by increasing narrow body aircraft production rates.\nallegheny technologies - while we expect lingering effects on srp business, production will ramp back toward pre-strike levels across balance of q3.\n"}
{"prompt": "Human: A few orders of business before we proceed.\nWe are providing to the SEC our 10-Q report today.\nThere has been some delays on the part of the SEC.\nBut we will get that done today.\nThey deal with the quarter and they deal with our strategic growth initiatives.\nSo if you're all online, you will see them scrolling across your screen.\nIf you are on audio, telephone only, you can see such slides by going to our website.\nThere is an icon on the very front page that allows you to see those slides.\nOur usual cautionary reminder, which we will do before beginning.\nSuch factors include weather conditions, changes in regulatory policies, competitive pressures and other risks that are identified in the Company's SEC reports and filings.\nSuch information will not necessarily be updated by the Company.\nIn today's call, we will first be starting with our Chief Financial Officer.\nDavid Johnson, who will review the quarter and the nine months followed by Mr. Eric Wintemute, Chairman and CEO of the Company who will talk about our strategic growth initiatives.\nWe also have Mr. Bob Trogele present to answer any questions you may have.\nGoing forward, we intend to keep you apprised on how we are doing against these targets, just as I do with respect to matters that are key to investors, understanding our business performance such as inventory and borrowing capacity.\nWith regard to our public filing, as Bill mentioned, our 10-Q document for the three and nine months ended September 30th, 2020 is presently in queue to be filed today.\nI do understand that the agency that assists us with our filing has a large number of documents in the queue at this time.\nEverything I am covering here is included in more detail in that document.\nAs we have noted in previous calls, the Company is fortunate to participate in industries that are considered part of critical infrastructure in all countries in which we operate.\nAs a result, our customers and our suppliers have all operated more or less without disruption during the pandemic.\nThis has continued through the third quarter.\nHaving said that, the pandemic has impacted us in a few ways, including our ability to present new sales and marketing ideas such as new products face to face with customers in the field.\nWe have also seen customer buying patterns that appear to have been moderated in the face of pandemic-related uncertainties.\nOn the other hand, the same restrictions have caused us to spend less on operating expenses.\nThese marketplace changes have been challenging to manage.\nHowever, we have succeeded in maintaining a profitable performance throughout this difficult period.\nWith regard to our financial performance for the three months ended September 30th, 2020, the Company's net sales decreased by 6% to $117 million as compared to sales of $125 million this time last year.\nWithin that overall decline, our US sales were down about $7.5 million and our international sales were flat.\nInternational sales accounted for 43% of net -- of total net sales as compared to 41% of net sales this time last year.\nThe main factors driving our third quarter sales performance are as follows.\nIn our US crop market, sales were affected by reduced cotton acres, which according to USDA statistics, are down about 11% or 1.5 million acres in 2020.\nAcres were impacted by cotton commodity prices that are down, driving growers to plant alternative crops.\nOur market performance has also been impacted by extreme drought conditions in West Texas and frequent hurricanes in the Southeast USA, both affecting grower ability to apply our products.\nOn a plus note, we saw a stronger than expected demand for our fumigant products, which are sold into the potato markets.\nThe better than expected performance is attributed to cautious reopening on schools and restaurants across the United States.\nIn our domestic non-crop market, there were small quarter-over-quarter changes with some decline on our pest strip products which are used in bars and restaurants that were impacted by pandemic restrictions.\nWith regard to international sales, which were overall flat, there were really three factors.\nFirst, we had a very strong performance in Mexico, Central America and Australia.\nBy contrast, our Brazilian sales were down in real terms as a result of reduced insect pressure and challenges getting in front of customers because of pandemic restrictions.\nIn addition sales translated from local currency to US dollars were further negatively impacted by a decline in local currency exchange rates quarter-over-quarter.\nFinally, whereas we saw Mocap and Nemacur sales lower in Europe, both products recorded significant sales increases in other parts of the world.\nAs you can see from the table, the US crop market was where we recorded reduced sales.\nThis is pretty much in line with other market participants that have reported Q3 results.\nOur international business increased as a percentage of consolidated net sales and our comparatively low exposure to foreign currency rate movements was a strength for the quarter.\nWith regard to the nine-month performance, the various market dynamics described for the quarter are broadly the same.\nOur US crop business was impacted by reduced cotton acres and by growers making cautious decisions with regard to input as the pandemic gradually revealed its impacts.\nAs an offset, we have done a bit better than expected with fumigants as schools and restaurants reopened.\nAnd in addition, we've had the benefit of sales of products acquired in the fall of 2019.\nOur non-crop business in mosquito control has been a little lower than we hoped given the storm intensity impacting our main markets, mainly due to vector control districts using existing inventory.\nFinally, our international sales have performed well, given the challenges with currency devaluation in some of our key markets.\nMoving now to cover our gross profit performance.\nFor both the quarter and the year-to-date, the trends are fairly similar.\nIn our US crop business the drop in gross profit was driven by our lower sales of cotton products and partially offset by strong fumigant sales.\nIn non-crop, the impact of reduced sales of Dibrom and pest strips were negative for the quarter and was somewhat offset by strong sales in our horticultural business which has slightly lower margins.\nDuring the quarter, we also recorded higher royalty income on our Envance technology business.\nFor the international business, the decline in foreign exchange rates was offset entirely in the three-month period and to a lesser degree in the nine-month period by strong performances in Central America, Australia and Mexico.\nAs a result of these various dynamics, gross margin performance in the quarter reduced from 38% to 37% and for the nine-month period from 39% to 38%.\nFor the quarter, our manufacturing performance was strong with factory operating cost well controlled and activity improved as compared to 2019.\nGenerally speaking, over the long term our net factory costs amount to about 2.5% of net sales, reflecting some latent capacity in our plants should the need arise.\nThis kind of available capacity is necessary to help manage our production planning effectively.\nIn the third quarter our factories cost approximately 2.4% of sales as compared to 2% this time last year.\nThe third quarter is typically a strong manufacturing period for the Company.\nFor the first nine months, the net factory costs amounted to 1.6% as compared to 2.4% of net sales for the same period of 2019.\nFor the three months ended September 30th, 2020, our operating expenses decreased as compared to the same period of the prior year.\nThe underlying performance is greater than its parent from the published statements because in 2019 we benefited from an adjustment to earn out liabilities on past acquisition.\nThat benefit did not recur this year.\nOn the other hand, we did record a benefit of approximately $1 million during the third quarter because we completed an update to our environmental risk assessment related to the Brazilian business we acquired at the start of 2019 which led to a decrease in our liability in this regard.\nAs we have reported for prior periods this year, our operating expenses were reduced because travel and entertainment costs were lower as a result of pandemic restrictions in all jurisdictions in which we operate.\nOur costs were also reduced because of the translation effect caused by devaluation of currencies that are important for the Company, including the Mexican, Brazilian and Australian currencies.\nWith regard to the nine-month period ended September 30th, 2020 compared to the same period of 2019, our overall expenses have reduced.\nThe reported reduction actually understates the real improvement because in 2019 we benefited from adjustments to earn out liabilities related to past acquisitions in the amount of $3.5 million that did not recur this year.\nAs a result, our underlying costs are down approximately $5.5 million or 5% for the nine months.\nThe drivers of the reduced costs are similar to the quarter.\nWe have spent less on travel and entertainment because of pandemic restrictions.\nBoth short and long-term incentive compensation is tied to financial performance and has reduced in 2020 compared to 2019.\nFinally, operating expenses incurred in currencies other than the US dollar are reduced as a result of the devaluation of those currencies I have already mentioned.\nI've mentioned adverse exchange rate movements in three key currencies for the from the Company's perspective.\nI want to put some color on that comment.\nIf we had used the 2019 exchange rates for both the three and nine-month periods of 2020, our reported net sales would have increased for the three months by $3 million and for the nine months by $7 million.\nWhen looking at gross margin, we would have recorded additional gross margin of $700,000 in the three-month period and $1.7 million year-to-date.\nNotwithstanding these impacts we have been effective at putting in place some natural hedges.\nThat is that the majority of our operating expenses for the businesses in territory are also in local currency.\nThat mitigates the impact on sales and gross margin leaving relatively immaterial differences at the bottom line resulting from translation exposure.\nThe Company experienced some significant transactional related exposures during the first quarter of the year.\nThis has reduced as exchange rates have settled at new levels during the second and third quarters.\nDuring the third quarter, we recorded lower interest expense than this time last year.\nOur average debt was lower than the prior year and we got a benefit from reduced borrowing rates in the US.\nIn the nine-month period, our average debt was a little higher than the prior year, but we gained the benefit for the lower federal base rate resulting in significantly lower interest expense.\nFinally, our effective tax rate continues to decline in comparison to the prior year as we are having a stronger international performance in jurisdictions with lower rates this year as compared to last year.\nIn the three-month period, we earned $0.10 per share as compared to $0.11 per share in the same period of the prior year.\nFor the nine-month period, we earned $0.25 per diluted share as compared to $0.34 per share last year.\nFrom my perspective, the operating and financial focus of the Company remains as follows.\nWe continue to follow a disciplined approach in planning our factory activities balancing overhead recovery with demand forecasts and inventory levels.\nAt the end of September 2020, our inventories were at $176 million as compared to $186 million this time last year.\nDuring the intervening periods we have made acquisitions and added inventory as a result.\nThe underlying period-over-period improvement in our base inventory before the impact of recent acquisitions amounted to approximately $14 million or 7.5%.\nWe are highly focused on our balance sheet as we navigate through this pandemic period and having lower inventories at this point of the year is pleasing to report.\nAs we look at the final quarter of the year and our target for December 31st, 2020 inventory, Eric will comment in a moment about acquisitions that we closed in the first and second week of the final quarter of this year.\nAs a consequence, our inventory forecast will now be amended to incorporate these new businesses.\nIn previous conference calls, we expected to end in the region of $145 million.\nGiven our latest operations planning assessment, we are expecting that our underlying inventory will increase a little from our prior forecast.\nIn addition, the new acquisitions that Eric will mention in a moment are expected to add approximately $15 million at December 31st, 2020.\nAccordingly, our latest forecast is to end the year at approximately $160 million to $165 million, effectively flat with 2019, but including the addition of inventory from recent acquisitions.\nOur business has a distinct annual cycle and we continue to experience expansion -- and we routinely experience expansion in working capital in the first part of the year and a reversal in the second part.\nDuring 2020 we, like most businesses, have been highly focused on working capital and its impact on debt levels.\nDuring the period of the year when we typically expand working capital, we have contained the increase to only $5 million as compared to adding $49 million in the same period of 2019.\nThis careful management of working capital is driving the improved cash generated from our operating activities.\nIn the first nine months of 2020 we have generated $19 million from operations as compared to using $21 million in the first nine months of 2019.\nComparatively that amounts to a positive change of $40 million period-over-period.\nAt September 30th, 2020 net indebtedness ended at $149 million as compared to $165 million this time last year.\nDuring the last year, in addition to paying down $16 million in debt, we have funded more than $27 million in investments, including fixed assets, product acquisitions and technology investments from the cash generated from operations.\nThese investments are focused on developing our consolidated business for the future.\nWith regard to liquidity at the end of the third quarter, availability under our credit line was $45 million, which compares to $30 million at the same point in 2019.\nIn summary, for the third quarter and for the nine-month period though our sales were down, selling prices and gross margins in each territory remained good.\nWe are seeing a stronger international performance than this year and the mix of US sales, generally higher gross margin, and international sales, generally lower gross margin, is tending to bring the average down slightly.\nOur factory performance improved compared to 2019 and our expenses for operating costs, interest and tax are all lower in 2020 than in the comparable periods of the prior year.\nFrom a balance sheet and cash perspective, we are doing very well, managing working capital and our debt is lower than this time last year, notwithstanding our investments in long-term growth of our business.\nFinally, availability under our credit line has improved.\nWith that I will hand over to Eric.\nMany of our investors have expressed an interest in our strategic direction and longer-term prospects, particularly in light of our increased emphasis on technology innovation.\nIn that spirit then, rather than getting into the weeds on market conditions over the past reporting periods, I would like to look forward to where we hope to be in the next three to five years.\nWe have three primary growth platforms within our business, our core business, our green product lines, and our precision application technology led by SIMPAS.\nThere are synergies between these platforms.\nFor example, SIMPAS is a market access tool for both core products and green solutions such as Agrinos biologicals.\nAlso there is some overlap between these platforms.\nBut for directional purposes, it is useful to take each platform in order.\nOur core business consists largely of our synthetic chemistries.\nUsing 2019 numbers as a reference, let's build a model using a baseline of annual sales of $468 million.\nWe have grown our core business in three ways; first, organically, that is through additional market penetration; second through our new product pipeline, that is making new formulations or getting new users for what we already have; and third, through acquisitions.\nIf we were to grow at a rate of only 2% per year, we should be at $507 million by year three and $527 million by year five in organic growth.\nLet's add to that our new product pipeline.\nWe regularly introduce several new products per year.\nFor example, in 2020 alone, we launched five new formulations.\nAs these new products get traction and we continue adding new introductions, we expect that we will add another $37 million by year three and $109 million by year five.\nThe core business plus new pipeline products puts us at $544 million by year three and $636 million by year five.\nBut now let's add acquisitions.\nIt's hard to predict the acquisition market, but I can say that it is extremely active today.\nAs you may have read, we just completed two acquisitions; Agrinos, a biologicals company that I will talk about further in a moment and AgNova, an Australian company that gives us greater critical mass and market access in Australia and the surrounding region.\nIf out of conservatism, we cut that number in half to $20 million per year and extrapolate it forward, we find that our incremental acquisition growth that put us at $60 million by year three and $100 million by year five.\nThe core business plus new product pipeline acquisitions puts us at a three-year top line target of $604 million and a five-year target of $736 million.\nNow let's turn to our green solutions platform.\nBefore we get back to the model, I would like to bring you current on a recent acquisition.\nIn early October, we acquired the shares of Agrinos, Inc. and its sister companies at a very favorable price as they were being sold in an auction by the Norwegian parent in a liquidation process.\nAgrinos makes and markets unique blends of biological products into many markets and operates three factories.\nThe first located in Oregon ferments [Phonetic] a 22-species consortium of bacteria into an end-use product that enhances soil health and plant growth by, for example, increasing nitrogen update.\nThe second located in Mexico produces a microbially enhanced tightened base product that tightens a calciferous substance comes from shells of shrimps that are locally grown that has similar applications.\nThe third located in India producers biologicals for that region, including sales to the Government of India.\nWith this investment, we have created a biologicals team to manage these green product offering globally.\nThat effort will also include our management of the advanced TyraTech business.\nSo, let's get back to the model.\nNow, admittedly some of the green solution businesses are already included in our core business.\nFor purposes of this discussion, we will focus on the incremental addition.\nThrough the end of the third quarter of 2020, we had already been on track to sell approximately $22 million in green products this year, including biologicals, bio-nutritional products through both our domestic and international businesses and essential oil products through Envance which are the active ingredients in Procter & Gamble's Zevo line of consumer products.\nLet's use that number as a baseline for our green products platform.\nAnd as mentioned, we are already in the consumer pest control space through the P&G's Zevo product line and we are expanding our essential oil product line into other areas, including lawn and garden, crop and public and animal health.\nWe expect that with the addition of Agrinos, the growth of our other biologicals and the expansion of Envance/TyraTech we should see incremental revenues in year three of $48 million and in year five of $118 million.\nLet's take our prior graph of core, including product pipeline and acquisitions and now add green products.\nThat would take us to about $70 million in year three and $140 million in year five.\nNow for the third platform, namely precision application.\nWe have been reporting regularly about our SIMPAS technology which we believe is at leading edge of prescriptive application systems.\nWe know of no other system that enables a grower to take an agronomist's prescription for multiple crop inputs based upon field conditions and prior-yield results and apply those products variably in multiple rose automatically in one path.\nFurther with our Ultimus technology, we can trance product from factory to field and as important, we can measure precisely what was used in any given application.\nAnd now, we are enhancing this technology to permit seed treatment at time of plant.\nAfter seeing positive results from field trials by growers in many states, a number of our peers are performing their own tests with the goal of making their products available in smart cartridges through SIMPAS.\nThat said, some investors are asking that we give them a better idea of where SIMPAS could be in three to five years.\nIn order to answer the question, we will consider the following elements; first, revenues from our existing portfolio of products, and I'm talking about increased users which would be dramatically enhanced by applied prescriptively; second, revenues from the sale of active ingredients, licensed from other basic producers to be sold under RNA; third, royalties from third parties for marketing their products through our smart cartridges under their name; and fourth, a share in the growers' incremental yield benefit.\nUsing conservative estimates of market penetration and domestic markets only, we are targeting top line contribution on the order of $35 million in year three and $131 million in year five.\nIn addition, we are confident that SIMPAS will be well received outside the US and are already planning to host SIMPAS field trials in Brazil in 2021.\nAlso, these figures do not include the potential for additional revenues from our seed treatment innovation.\nIn other words, these are conservative, domestic, in-furrow SIMPAS targets only.\nLet's put all of the platforms together.\nIf we add Core plus Green plus SIMPAS we are in the neighborhood of $687 million in year three and $985 million in year five at the top line which is roughly double where we are today.\nThere are many moving parts of the equation.\nWe will continue to control the things that are within our control.\nFor example, exercising strict discipline on managing working capital and operating expenses.\nFurther, we are committed to maximizing our consolidated profit margin.\nWhile our expansion into distribution within international markets has tended to lower our gross margin percentage, we expect that the introduction of newer technologies across these markets will create an updraft on profitability.\nIn future calls,I will be updating you on how we are progressing against those targets.\nFinally, let me pull our focus to the present and the near term.\n2020 has been an unprecedented year for this industry.\nIn spite of the pandemic, weather effects and farm economy as David mentioned, we have kept pace with Q3 of 2019 in terms of profitability, even with modestly lower sales.\nLooking forward into the fourth quarter, we are already seeing greater optimism in the domestic agricultural sector, hurt in part by rising crop commodity prices for corn and soybeans and cotton which would tend to contribute to improved grower profitability.\nIn the Midwest with less crop rotation and more continuous corn over corn planting, we are beginning to see a resurgence of soil insect pressure.\nIn addition, demand for our soil fumigant products continues to rise.\nBased upon these trends and current sales activity, we are encouraged by our prospects for the balance of this year and into the 2021 season.\nWe'll now take any questions you may have.\n Assistant:", "chosen": "compname reports qtrly earnings per diluted share of $0.10.\namerican vanguard corp qtrly net sales of $117 million, compared with $125 million.\namerican vanguard corp qtrly earnings per diluted share of $0.10.\n"}
{"prompt": "Human: These beliefs are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those detailed in our periodic SEC filings.\nPlease note that the Company's actual results may differ materially from those anticipated and we undertake no obligation to update these statements.\nThere will be an opportunity for Q&A at the end of the call.\nFor those participating, please limit your remarks to one question and one follow-up if necessary.\nI'm pleased with our company's performance in the second quarter of fiscal 2021.\nWe have delivered solid results while continuing to make progress on our strategy.\nWe've improved the way in which we serve our customers, expanded margins, and allocated capital effectively.\nAs you know, the pandemic has created real challenges over the past several quarters and we have yet to return to a steady state.\nThe slowdown last year had a global impact on supply chains and logistics and we continue to feel the impact of this in the economy and in our operations.\nYet, we have continued to have consistent and strong performance during this time.\nAs we look forward, we are facing some new and existing challenges.\nAs demand begins to rebound, global logistics, for example, continues to encounter issues.\nNew challenges include the global chip shortages and the rising cost of some components.\nTo be clear, these are good problems to have.\nWe are managing these challenges aggressively and our entire team will work tirelessly to deliver the best possible outcomes for our customers and continued high quality results.\nSo moving on to the second quarter highlights, our team delivered great results this quarter.\nSales were down 5.8%.\nHowever, we saw gross profit margin of 43.4% expand 170 basis points and reported operating profit margin expand 180 basis points against the prior year.\nThe expansion was largely a result of product and productivity improvements throughout the business and we are very happy with the results.\nKaren will speak in more detail about this later in the call.\nFinally, in a message to our associates earlier this month, we announced that we were carbon neutral in our operations.\nI will talk more around this later in the call, but I'm delighted that we were able to announce this milestone as quickly as we did.\nI'd now like to update you on our ongoing transformation.\nI have been at Acuity Brands for a little over 12 months and what I continue to see every day is a team that is striving for success, that is not shy about changing and that believes in Acuity and where we are going.\nIt is no secret that I came to Acuity because I saw the opportunity for our company to be more than a lighting business.\nOur core lighting and lighting controls business was and is way more durable than the market gives it credit for, as evidenced by our performance over the past several quarters.\nAnd we will continue to transform our business and the broader industry.\nWe have the best go-to-market network in the industry and the broadest product lines that serve a wide variety of end markets.\nWe continue to improve the effectiveness of our products and the efficiency of our supply chain through the implementation of new technologies.\nWe have a valuable and growing business in Distech and in Atrius we have the potential to build a very valuable technology business.\nFinally, we have the ability to grow through acquisitions both in our current businesses as well as in new ones.\nIn our Lighting and Lighting Controls business we announced an exciting evolution in the leadership of that business.\nTrevor Palmer has taken over as President.\nMost recently, Trevor was leading our Controls business.\nHe joined the Company through the Distech acquisition nearly five years ago and he exemplified the talent that already exist within our organization.\nTrevor brings 27 years of industry experience to the role.\nI'm excited for what Trevor and his team will do with this business going forward.\nDuring the quarter, we continued to invest in product development.\nWe have introduced new lighting and controls products and improved and evolved parts of our product and solutions portfolio.\nIn our Contractor Select portfolio, we saw significant demand for the Compact Pro High Bay, a versatile high bay that has been in demand as a result of the increase in warehouse renovations, driven by the shift to online retail and the expansion of logistics networks across North America.\nThe CPHB is a breakthrough product that was designed to deliver improved performance in a smaller size to ensure ease in installation.\nThe product uses fewer inputs, is more efficient to transport, and is both globally sourced and manufactured in our facilities to ensure supply chain flexibility.\nWithin our GUV category, we introduced EvolAIR with UV technology -- with UV Angel technology, excuse me.\nThis product uses onboard 254-nanometer technology and circulation above the fixture to locally disinfect air in occupied and unoccupied spaces.\nWe have installed this product in multiple Acuity locations and have specifications being developed with this product in education, office, and healthcare applications.\nIt is worth pointing out that our controls capabilities are a key differentiator for successful GUV lighting solutions.\nOur Holophane product continued to win bids in infrastructure projects.\nWe were awarded the order for the relighting of the Big Dig project in Massachusetts that will begin in the second half of our fiscal year.\nPart of the scope of this mandate was to replace existing low cost fixtures that had been installed several years ago and were not performing as expected.\nHolophane is known for its quality, and durability and I am pleased we are the partner of choice to make the necessary improvements.\nThroughout the pandemic, we have continued to invest in product vitality.\nWe have maintained the pace and quality of product rollouts this year, which positions us well for the market recovery.\nI continue to be impressed by the agility of our team.\nTransitioning to go-to-market, we are committed to our independent sales network.\nThis quarter we announced the realignment in the Northeast that will benefit our customers in the region and nationwide.\nWe are creating a new agency through the consolidation of what were formerly the Acuity-owned agency in New York, the New Jersey territory and the independent agency in Philadelphia.\nThis transaction demonstrates our commitment to the independent sales network, which we believe to be the strongest in the industry.\nBy creating this new agency, we are better positioned to participate in designs and specifications that start in New York and travel around the country.\nWe are also better positioned to serve contractors who work in New York, New Jersey and Philadelphia.\nWe continue to make progress with Distech and Atrius.\nDistech is uniquely positioned in the building management space, built on open protocols and distributed through a network of independent systems integrators.\nIt has continued to grow throughout the COVID-19 pandemic.\nWe're also making progress around the product roadmap for Atrius.\nWe are recruiting best-in-class talent to drive the capabilities in that business.\nIn early January, Sandeep Modhvadia joined the business as Vice President of Product Development.\nSandeep comes to us from Google Cloud where he was responsible for the product development team building vertical solutions for the manufacturing, industrial, automotive, power and transportation industries.\nWe will continue to add talent to Atrius and make progress building unique and valuable technology solutions.\nNow, I would like to take a few minutes to highlight our progress on the ESG front.\nESG is directly aligned with our values and our business strategy.\nWe care about the environment, our people and our communities.\nOur company has been built on products, technologies and services that deliver sustainability and energy efficiency.\nOver the last year, we have focused on our own operations.\nOur recent accomplishment of achieving carbon neutrality across Scope 1 and 2 emissions in our operations is the result of this work and demonstrates our commitment to continually improving our communities.\nWe achieved carbon neutrality as a result of reducing environmental impacts in our facilities and through investing in carbon offsite projects.\nSome of the energy efficient improvements made in our facilities can be highlighted by our Crawfordsville, Indiana facility where we optimized air compressors, installed more efficient belts and added switches to reduce energy consumption and by our Conyers, Georgia and Des Plaines, Illinois facilities where we installed our new I-BEAM IBG and Holophane Phuzion high bay lights and used our Atrius building OS technology to conserve energy and improve the quality of light and space.\nAnd in our facility in New York, Ohio, in which we rebuilt the glass furnace to improve overall efficiency and which has now completely converted to renewable electricity, a win for the environment and the cost savings.\nOur priority is the reduction of energy usage in our facilities and for our customers.\nUntil we're able to realize the full impact of our energy efficiency improvements, we are supplementing with an offset program that is focused on helping the communities where we operate.\nWe are investing in a series of carbon offset projects in Mexico, Indiana and California, all communities where we have a presence.\nThese projects support energy efficiency and renewable energy options at colleges and universities, landfills and agricultural sites.\nThese programs allow us to remove carbon from the atmosphere and balance our carbon footprint from operations.\nWhile the focus of our recent accomplishments has been environmental, we are giving equal prominence to the S and the G parts of EFG.\nSimply stated, we want to be the place where the best people come to do their best work.\nTo do this, we are continuing to focus on improving the lives of our associates by strengthening our culture and removing the barriers to success.\nAcuity is proud to be an inclusive company where we all succeed together.\nFinally, we have addressed several issues of governance over the last year by, among other things, diversifying and restructuring our Board of Directors and overhauling our total rewards program including improving our long-term incentive plans.\nMoving on to capital allocation.\nAs I previously mentioned, we have now repurchased nearly 10% of our outstanding shares since May 2020.\nEffectively allocating capital is an important part of how we will create value for our company.\nTo reiterate, our capital allocation priorities are clear: first, to grow our current businesses; second, to grow our company through acquisitions; third, to maintain our dividend; and fourth to create value through share repurchases.\nWe were able to capitalize on the dislocation in our share price and have been very effective repurchasing shares over the last year.\nAs we look forward and barring another significant market dislocation, we do not anticipate maintaining this rate of share repurchases.\nWe will return to our priority of using capital to grow the business.\nAs we look ahead, we see improvements in the end markets we serve and we are cautiously optimistic about the outlook for the remainder of fiscal year '21.\nWe intend to use the breadth of our product portfolio and the strength of our go-to-market teams to deliver a solid top line performance.\nWhile there will be global challenges ramping back up, we are aggressively addressing them.\nWe will continue to invest in our business with the intention of becoming a larger, more dynamic company.\nI want to start by echoing Neil's initial comments regarding this quarter's performance.\nOur associates pulled together to deliver a solid performance and the fourth consecutive quarter of gross profit margin over 42%.\nI am proud of the changes and progress we continue to make.\nMoving to our second quarter results, net sales were $777 million, a decrease of 5.8% compared to the prior year, which we believe was a very good performance in this market.\nNotably, within our sales performance, our independent sales network and direct sales network were approximately flat with the prior year as we continued to see strength in medium to large projects, offsetting some of the pressure in the commercial office space, which continues to be impacted by the COVID-19 pandemic.\nRetail channel sales declined approximately 24% as compared to the prior year as a result of strong year-over-year pre-pandemic comparison.\nThis was exacerbated by one of our large customers carrying out an inventory rebalancing, which we believe to be a one-off impact.\nWe expect to see sequential growth in this channel in our fiscal third quarter of 2021.\nFinally, sales in corporate accounts declined just over 50% as compared to the prior year.\nWe continue to see large retailers differ renovation spend as a result of safety concerns resulted from the COVID-19 pandemic.\nIn the last few weeks, there have been indications that these concerns are slowly lifting and we expect to see continued sequential recovery through the balance of the year.\nMoving on to the rest of the income statement.\nGross profit margin was 43.4% for the second quarter of fiscal 2021, an increase of 170 basis points over the prior year.\nThis was an outstanding achievement.\nThis outperformance was the result of product and productivity improvements that yielded returns and we believe that this will position us well for any unforeseen challenges.\nGiven this gross profit margin improvement, we believe attaining a gross profit margin above 42% is reasonable on an annualized basis.\nReported operating profit margin was 11.7% of net sales for the second quarter of fiscal 2021, an increase of 180 basis points over the prior year.\nAdjusted operating profit margin was 14% of net sales for the second quarter of fiscal 2021, an increase of 170 basis points over the prior year.\nThe majority of this improvement was driven by the higher gross profit margin and continued cost containment efforts, particularly around travel expenses and sales and marketing costs resulting from less in-person activity due to the pandemic.\nAs we continue to demonstrate our ability to drive margins, we will begin to reassess our reinvestment strategy, prioritizing systems and software development as we focus on executing our digital transformation.\nAs the economy continues to open up, we expect to see travel and other marketing expenses increase throughout the balance of the year.\nWe are working with our associates to ensure that only essential travel and marketing expenses are being incurred and do not expect to return to pre-pandemic expense levels in fiscal 2021.\nAs previously discussed, this quarter, we were able to share with our associates that we achieved 100% carbon neutrality within our operations by prioritizing efficiency improvements in operations and some offsetting measures.\nThis is not just an initiative for the management team.\nBoth Neil and I believe this is the core to the ongoing success of the Company.\nAs part of the offsetting measures, we expect to see a modest SDA investment, but this will not be material.\nThe effective tax rate for the second quarter of fiscal 2021 was 23.5% compared with 23.4% in the prior year quarter.\nWe currently estimate that our blended effective income tax rate will be around 24% for the full year fiscal 2021.\nFinally, we saw significant improvement in diluted earnings per share for the second quarter of fiscal 2021.\nDiluted earnings per share of $1.74 increased $0.30 or 20.8% over the prior year and adjusted diluted earnings per share of $2.12 increased $0.28 or 15.2% over the prior year.\nMoving on to cash flow.\nNet cash from operating activities for the first half of fiscal 2021 was relatively flat at approximately $213 million compared to the prior year.\nWe invested $21 million or 1.4% of net sales in capital expenditures during the first half of fiscal 2021 and currently expect to invest approximately 1.5% of net sales in capital expenditures in the full year of fiscal 2021.\nOn February 28, 2021, we had cash and cash equivalent balance of $499 million.\nI am pleased with the continued solid cash generation.\nOver the last 12 months, we have been extremely judicious around our capital allocation decisions.\nWe continue to prioritize long-term growth and believe that reinvestment into the future of the Company is core to our success.\nWe have further committed to maintaining our dividend and being opportunistic around allocating capital to buybacks.\nAs a result, we have repurchased 3.2 million shares of common stock during the first half of fiscal 2021 for a total of $338.3 million, at an average price of $104 per share, with 4.4 million shares still remaining under our current Board authorization.\nGoing forward, I will spend a few minutes reviewing some of the most important conversations around our company and industry and offer insight into how we are thinking about them.\nThere are three discussions that have been top of mind.\nHow are we seeing the price increases play out?\nWhat is the potential impact of commodity price increases throughout the balance of the year?\nAnd what is our plan to deal with the electrical component shortage?\nPrice increases did not affect our fiscal second quarter earnings.\nWe had previously announced that price increases would go into effect March 15, 2021 across the portfolio which is the beginning of our third quarter with any potential effects not being felt until April.\nTo date, we do not anticipate any drop-off in demand as a result of the price increases.\nSimilarly, our fiscal second quarter was not impacted by escalating input pricing.\nOn our first quarter 2021 earnings call and throughout the second quarter, we have been deliberate about changing the conversation around the impact of price and cost.\nAs we highlighted last quarter, our prior discussion ignored that we as a company control several levers within our cost of goods sold structure.\nOur associates understand that it is our obligation to be in control of the relationship between our price and costs, separate from whether raw material prices go up or go down.\nThe continuous improvement in our gross profit margin demonstrates that the move away from the price/mix conversation as appropriate and that the discussion around operating the Company toward a gross profit margin target is the correct lens in which to view our margin performance.\nThe ongoing improvements have been a result of product and productivity improvements.\nEssentially, we are reengineering our products to meet the needs of our customers, while also meeting our margin obligations.\nWhether commodity prices increase or decline, we believe we can hold gross profit margin above 42% by controlling what we can control and through the ongoing improvements throughout our business.\nFinally, the electrical component shortage is starting to make its way through the supply chain, which will create challenges for the entire industry.\nWe have seen indications that some of our products may experience procurement issues and we are working diligently to service our customers.\nTo wrap up, we have seen encouraging signs of improvement in our end markets, although some challenges still remain and I continue to be proud of our dedicated team.\nWe are committed to instilling discipline across the organization to ensure the long-term stability and predictability of the Company and we are to-date satisfied with the progress we are making.\n Assistant:", "chosen": "compname posts q2 adjusted earnings per share $2.12.\nq2 adjusted earnings per share $2.12.\nq2 earnings per share $1.74.\n"}
{"prompt": "Human: My name is Kevin Maczka, I'm Belden's vice president of investor relations and treasurer.\nRoel will provide a strategic overview of our business and then Henk will provide a detailed review of our financial and operating results, followed by Q&A.\nAdditionally, during today's call, management will reference adjusted or non-GAAP financial information.\nAs a reminder, I'll be referring to adjusted results today.\nDemand trends improved in the fourth quarter, and I'm pleased to report that revenues, earnings and cash flow exceeded our initial expectations.\nFourth quarter revenues increased 5% sequentially to $498.5 million compared to our initial guidance range of $460 million to $485 million, and our revised guidance range of $494 million to $499 million.\nThe upside relative to our expectations was broad based, with contributions from both the Industrial Solutions and Enterprise Solutions segments.\nDuring the fourth quarter, our channel partners further reduced the inventory levels by approximately $22 million as expected, resulting in a reduction of approximately $70 million for the full year 2020.\nImportantly, this is not expected to recur in 2021.\nIncoming order rates were solid during the quarter, increasing 13% sequentially.\nThis resulted in a book-to-bill ratio of 1.10 times, including a robust 1.16 times in the Industrial Solutions segment.\nEPS increased 25% sequentially to $0.90, compared to our initial guidance range of $0.63 to $0.78, and our revised guidance range of $0.85 to $0.90.\nFree cash flow generation was $101 million in the quarter, which exceeded our expectations by approximately $11 million.\nAs a result, we exited the fourth quarter with cash on hand of $502 million, which provides ample flexibility as we pursue our strategic initiatives.\n2020 was a truly unprecedented year, with each of us facing significant challenges related to the global pandemic both personally and professionally.\nI'm extremely proud of the way our global workforce responded to these challenges and maintained a sharp focus on supporting our customers, then executing our strategic plans, while maintaining the safest possible working conditions.\nFor the full year 2020, we delivered revenues of $1.863 billion and earnings per share of $2.75.\nFree cash flow generation was $86 million compared to our expectation of approximately $75 million.\nBeyond the initial response to the pandemic, the year was highlighted by the bold steps we took to position the company for substantially improved organic growth and margins.\nThis includes streamlining our cost structure, funding our compelling growth initiatives, and significantly improving our portfolio of businesses.\nOn the cost side, we delivered on our commitments by successfully reducing SG&A costs by $40 million for the full year 2020.\nWe exited the year with a quarterly run rate savings of $15 million in the fourth quarter, so we are prepared to deliver the full $60 million in savings in 2021 as planned.\nThis represents approximately 300 basis points of incremental EBITDA margin expansion on an annual basis.\nThese are permanent cost reductions that will not return as conditions normalize.\nAs we executed these cost reduction plans, we continue to make strategic investments to accelerate growth and capitalize on the opportunities in our key markets.\nTo that end, R&D spending increased 14% to $107 million in 2020, with approximately 65% of this investment dedicated to software development.\nThis includes stand-alone software and embedded software within various hardware products.\nWe are making targeted investments to support growth and innovation in Industrial Automation and enhance our best-in-class cybersecurity cloud platform.\nThese innovations are important to our customers and our shareholders, as they will further strengthen our product offering and enhance our competitive advantage.\nWe also maintained capex spending of approximately $70 million for the year, to ensure that we have the capabilities and capacity to fully participate in the anticipated growth in our key markets.\nWe made significant portfolio moves during the year, including the sale of Grass Valley in July.\nDivesting this business simplified and improved our portfolio.\nIt also removed considerable drag on consolidated organic growth and declines in Grass Valley's business in prior years represented a substantial headwind.\nIn addition, we initiated a process to divest approximately $200 million in revenues associated with certain undifferentiated copper cable product lines.\nThese are primarily stand-alone product lines that are low growth and low margin, and we do not believe that they can meet our growth or margin goals in the future.\nMuch like Grass Valley, we believe that exiting these product lines will improve our end-market exposure.\nIn this case, we are exiting the oil and gas markets and reducing our exposure to certain smart buildings markets.\nWe expect to complete multiple transactions associated with these product line exits.\nWe are encouraged by the overall progress to date, and we remain on track to complete these divestitures in the first half of 2021 as previously communicated.\nFinally, subsequent to the end of the fourth quarter, we announced the Bolton acquisition of OTN Systems for $71 million.\nThe transaction closed on January 29.\nThis is our first Industrial Automation acquisition in years, and we are very excited to add this talented team and its innovative networking products and technologies to our portfolio.\nOTN Systems is a leading provider of easy-to-use and highly reliable network solutions tailored for specific applications in harsh, mission critical environments.\nIt's value-added technology allows customers to easily build, maintain, and monitor complex networks in growing industrial markets such as power transmission, mass transit and process.\nBelden and OTN systems have a commercial partnership dating back to 2017.\nSo we have a thorough understanding of the business and the value it will add to our product offering and our customers.\nThe company's primary brand and product line known as XTran consists of proven switching devices and network management software that is complementary to Belden's leading industrial network offering.\nWe expect the acquisition to contribute incremental revenue and earnings per share of approximately $36.11 million respectively during the 11 months of ownership in 2021.\nConsistent with our M&A strategy, this acquisition supports one of Belden's key strategic priorities related to the growing demand for Industrial Automation by adding proprietary technology and mission critical hardware and software products for more complete end-to-end solutions.\nIt also accelerates Belden's initiatives related to Customer Innovation Centers or CICs, with advanced solution selling and customer consulting capabilities.\nThis will allow us to bid on a wider array of projects.\nIt offers meaningful business synergies in the product, technology and commercial areas, and we see significant opportunities to leverage our global customer base to accelerate growth and further improve profitability.\nWe remain an acquisitive company.\nAnd we continue to pursue other strategic inorganic opportunities in Industrial Automation and fiber connectivity that would further enhance our product offering and growth potential.\nHowever, we are prioritizing de-levering in the near-term.\nAnd as a result, we expect our M&A activity to be modest in 2021.\nI will now ask Henk to provide additional insight into our fourth quarter financial performance.\nAfter 20 years with Belden, the last nine as our CFO, Henk has announced his departure next month following a transition of duties to Jeremy parks.\nHenk, your contributions to Belden are difficult to put into words.\nI'm proud of my role and leaving Belden through a substantial transformation on a regional cable company in the early 2000s, to the global network solutions company it is today, I'll leave the company with a strong balance sheet and capital structure and much improved portfolio, and I'm confident that Belden remains well positioned for future success.\nI will start my comments with results for the quarter followed by a review of our segment results and a discussion of the balance sheet and cash flow performance.\nAs a reminder, I will be referencing adjusted results today.\nRevenues were up $498.5 million in the quarter compared to $549.7 million in the fourth quarter of 2019.\nRevenues decreased 9.3% on a year-over-year basis and increased 4.8% sequentially.\nAfter adjusting for a $5.5 million favorable impact from acquisitions and a $14 million favorable impact on currency translation and higher copper prices, revenues declined 12.8% organically on a year-over-year basis.\nAfter further adjusting for changes in channel inventory levels, revenues decreased 6.1% organically from the prior year.\nOn a sequential basis, revenues increased 2.9% organically after adjusting for a $9.1 million favorable impact from currency translation and higher copper prices.\nAfter further adjusting for changes in channel inventory, revenues increased 9.6% organically on a sequential basis.\nIncoming orders were solid during the quarter, increasing 13% sequentially.\nThis resulted in a book-to-bill ratio of 1.10 times [Phonetic] including robust 1.16 in the Industrial Solutions segment, and a 1.04 in the Enterprise Solutions segment.\nGross profit margins in the quarter were 35.4% consistent with the third quarter.\nEBITDA was $74 million compared to $65.3 million in the prior quarter and $92.9 million in the prior year period.\nEBITDA margins were 14.8% compared to 13.7% in the prior quarter and 16.9% in the prior year period.\nAs Roel mentioned, we successfully executed our SG&A cost reduction program by delivering savings of $15 million in the fourth quarter and $40 million for the full year.\nWe expect to deliver the full $60 million in savings in 2021.\nAs we streamlined the cost structure, we are committed to our important initiatives.\nWe increased R&D investments by approximately 15% in the fourth quarter and the full year 2020.\nWe expect further increases in 2021 as we make additional targeted investments to drive innovation and growth in Industrial Automation and Cybersecurity.\nNet interest expense was approximately flat sequentially in the quarter.\nAt current foreign exchange rates, we expect interest expense to be approximately $61 million in 2021.\nOur effective tax rate was 13.5% in the fourth quarter and 16.4% for the full year, as we benefited from incremental discrete tax planning initiatives.\nFor financial planning and modeling purposes, we recommend using an effective tax rate of 20% throughout 2021.\nNet income in the quarter was $40.5 million compared to $32.2 million in the prior quarter and $54.9 million in the prior year period.\nEarnings per share was $0.90 in the fourth quarter compared to $1.20 in the year-ago period.\nEarnings per share increased 25% sequentially from $0.72 in the third quarter.\nI will begin with our Industrial Solutions segment.\nAs a reminder, our Industrial Solutions allow customers to transmit and secure audio, video, and data in harsh industrial environments.\nOur key markets include discrete manufacturing, process facilities, energy and mass-transit.\nThe Industrial Solutions segment generated revenues of $217.8 million in the quarter.\nCurrency translation and copper prices had a stable impact of $9.2 million year-over-year and $5.8 million sequentially.\nAfter adjusting for these factors, revenues decreased 14% organically on a year-over-year basis and increased 7% sequentially.\nAfter further adjusting for changes in channel inventory levels, revenues declined 8% year-over-year and increased 10% sequentially on an organic basis.\nWithin this segment, Industrial Automation revenues declined 8% year-over-year and increased 9% sequentially on an organic basis after adjusting for changes in channel inventory levels.\nNot surprisingly, the trends were relatively consistent across our market verticals in the quarter.\nCybersecurity revenues declined 14% in the fourth quarter on a year-over-year basis and increased 16% sequentially.\nWe continue to secure large strategic orders with new customers and significantly expand our engagements with existing customers.\nAs a result, nonrenewal bookings in the fourth quarter matched the highest quarterly level in five years.\nNotable bookings in the quarter included a Fortune 500 insurance company migrating from on-premise to-cloud based solutions, and a multinational financial services corporation expanding its coverage in preparation for expected future growth from acquisitions.\nWe remain very bullish on Industrial cybersecurity.\nNonrenewal bookings in this vertical increased 13% sequentially in the quarter and 31% for the full year.\nFurther, we continue to gain significant traction with our software as a service offerings.\nSaaS offerings represented approximately 25% of nonrenewal bookings in the quarter compared to 10% a year-ago.\nIndustrial Solutions segment EBITDA margins were 17.5% in the quarter compared to 15.6% in the prior quarter and 20.1% in the year-ago period.\nThe year-over-year decline primarily reflects lower volumes and increased R&D investments in Industrial Automation and Cybersecurity.\nTurning now to our Enterprise segment.\nAs a reminder, our Enterprise Solutions allow customers to transmit and secure audio, video and data across complex enterprise networks.\nOur key markets include Broadband, 5G, and Smart Buildings.\nOur Enterprise Solutions segment generated revenues of $227.7 million during the quarter.\nAfter adjusting for $5.5 million favorable impact from acquisitions and a $4.8 million favorable impact from currency translation and higher copper prices, revenues declined 12% organically on a year-over-year basis.\nRevenues declined 2% sequentially after adjusting for a $3.3 million favorable impact from currency translation and higher copper prices.\nAfter further adjusting for changes in channel and customer inventory levels, revenues declined 3% year-over-year and increased 9% sequentially on an organic basis.\nRevenues in Broadband and 5G increased 8% year-over-year and 5% sequentially after adjusting for changes in customer inventory levels.\nWe are encouraged by the solid share capture during the quarter.\nThe ever increasing demand for more bandwidth and faster speeds is driving increased investments in network infrastructure by our customers.\nThis supports continued robust growth in our fiber optics products, which increased 28% organically in 2020.\nRevenues in Smart Buildings market declined 12% year-over-year and increased 13% sequentially on an organic basis after adjusting for changes in channel inventory.\nEnterprise Solutions EBITDA margins were 11.5% in the quarter consistent with the prior quarter and compared to 13.7% in the prior year period.\nThe year-over-year decline primarily reflects lower volumes.\nOur cash and cash equivalents balance at the end of the fourth quarter was $502 million compared to $391 million in the prior quarter and $426 million in the prior year period.\nWe're very comfortable with our current liquidity position.\nWorking capital turns was 10.3 turns compared to 6.6 turns in the prior quarter and 8.9 turns in the prior year period.\nWe are extremely pleased with the DSO performance in the quarter.\nDays sales outstanding declined 8 days sequentially from 58 days in the prior quarter to 50 days.\nInventory turns was 5.2 turns compared to 5.0 turns in the prior quarter and 6.0 turns in the prior year.\nOur total debt principal at the end of the fourth quarter was $1.59 billion compared to $1.52 billion in the third quarter.\nThe sequential increase reflects current foreign exchange rates.\nNet leverage was 4.0 times net debt to EBITDA at the end of the quarter.\nThis is temporarily above our targeted range of 2 to 3 times and we expect to turn back to the targeted range as conditions normalize.\nTurning now to Slide 9, I will discuss our debt maturities and governance.\nAs a reminder, our debt is entirely fixed at an attractive average interest rate of 3.5%, with no maturities until 2025 to 2028.\nWe have no maintenance covenants on these debts, so are not a risk of a default in the unlikely event of significantly worsening economic conditions.\nAs I mentioned previously, we're comfortable with our liquidity position and the quality of our balance sheet.\nCash flow from operations in the fourth quarter was $134.7 million compared to $187.4 million in the prior year period.\nNet capital expenditures were $33.3 million for the quarter compared to $35.9 million in the prior period.\nFor the full year 2020, we generated cash flow from operations of $173.4 million compared to $276.9 million in 2019.\nThe decline primarily reflects lower EBITDA during the year that resulted from the global pandemic.\nThe full year net capital expenditures were $87.1 million compared to $110 million in 2019.\nThe difference is primarily related to the timing of the Grass Valley divestiture, which we completed in July of 2020.\nAs a result, we generated free cash flow of $86.3 million in 2020 compared to $166.9 million in 2019.\n2021 will be a year of recovery in most of our key markets.\nDuring the year, we expect to complete our transformative portfolio actions and turn the focus to accelerating organic growth.\nOur recent order rates are encouraging and I'm confident in our ability to achieve our financial goals and drive superior returns for our shareholders.\nWe anticipate first quarter 2021 revenues to be between $490 million and $505 million, and earnings per share of $0.60 to $0.70.\nFor the full year 2021, we expect revenues to be between $1.99 billion and $2.050 billion, and earnings per share of $2.90 to $3.30.\nFor financial modeling purposes, we recommend using interest expense of approximately $61 million for 2021, and then effective tax rate of 20% for each quarter and the full year.\nThis guidance includes the expected accretion from the OTN Systems acquisition.\nIt continues to include the contribution of our copper cable product lines that we are in the process of divesting, which contributed approximately $200 million in revenue and $0.20 in 0PS in 2020.\nWe will update our guidance accordingly as we complete these divestitures.\nWe expect current copper prices and foreign exchange rates to have a favorable impact on revenues of approximately $80 million in 2021, but a negligible impact on earnings.\nWe expect consolidated organic growth in the range of 1% to 4% or up to $70 million, with solid growth in our Industrial Solutions segment, partially offset by declines in the Smart Buildings markets within our Enterprise Solutions segment.\nWe anticipate an incremental $36 million in revenue and $0.11 in earnings per share from the OTN Systems acquisition.\nConsistent with our commitment, we expect to realize the incremental $20 million in savings under our SG&A cost reduction program.\nThese savings represent $0.36 in EPS.\nR&D investments are an important strategic initiative designed to drive growth in future periods.\nBut these investments will temporary pressure margins and earnings per share in 2021.\nFinally, a normalized effective tax rate of 20% along with modestly higher interest expense and share count represent an earnings per share headwind of approximately $0.20 for the year.\nFor the full year 2021, the high-end of our guidance implies total revenue and earnings per share growth of 10% and 20% respectively.\nBefore we conclude, I would like to reiterate our investment thesis.\nWe view Belden as a very compelling investment opportunity, as we are taking bold steps to drive substantially improved business performance.\nWe are significantly improving our portfolio and aligning them on favorable secular trends in our key strategic markets, including Industrial Automation, Cybersecurity, Broadband and 5G, and Smart Buildings.\nWe continue to invest in our business to position the company for accelerating organic growth and robust margin expansion.\nAs we successfully execute our strategic plans and deliver on our goals, we would expect this to drive superior returns for our shareholders.\n Assistant:", "chosen": "q4 adjusted earnings per share $0.90.\nq4 revenue $498.5 million versus refinitiv ibes estimate of $483.9 million.\nsees fy 2021 adjusted earnings per share $2.90 to $3.30.\nsees q1 adjusted earnings per share $0.60 to $0.70.\nsees q1 revenue $490 million to $505 million.\nsees fy 2021 revenue $1.99 billion to $2.05 billion.\ncfo henk derksen, will be leaving belden in march.\nderksen's successor will be jeremy parks.\n"}
{"prompt": "Human: We have a lot of exciting news to discuss today.\nThe first discusses our second quarter results of fiscal 2021.\nThe second announces our intention to spin-off our diabetes business into a separate public company.\nGiven the announcement of the spin-off of our diabetes business, we will also have Dev Kurdikar, our Worldwide President of Diabetes Care, who has been named CEO of NewCo to provide his early thoughts on the transaction.\nWe will also be discussing some non-GAAP financial measures with respect to our performance.\nUnless otherwise specified all comparisons will be on a year-over-year basis versus relevant period.\nTo avoid any confusion, when we refer to any given period, whether that's on a quarter or year basis, we will be referring to the period in fiscal terms, unless we specifically call it out as a calendar period.\nFinally, when we refer to NewCo, during today's call we are referring to the independent publicly traded diabetes company following the effective date of the spin, while RemainCo refers to BD post separation.\nToday we will provide an update on how we are executing on creating value for our stakeholders through our BD 2025 strategy.\nWe have a lot of exciting updates for you, so let's jump right in.\nOur second quarter results came in better than expected and we delivered strong revenue and earnings per share growth.\nWe are very pleased with the continued momentum in our core business, and therefore, based on our first half results and our projections for the second half we are reaffirming our fiscal 2021 guidance.\nWe are making steady progress on each of our growth initiatives, which include very purposely shifting our investments and portfolio into higher-growth categories and shifting our weighted average market growth rate over time.\nWe are advancing our product pipeline as well as our tuck-in M&A strategy, which now includes making selective investments in earlier stage and potentially disruptive technologies.\nWe see this planned spin as a significant value-creating opportunity for all stakeholders for our patients, customers, associates and shareholders.\nAs an independent public company, we believe the diabetes business can leverage its global leadership position and unleash its growth potential in this attractive market category through the more efficient allocation of its own capital.\nFor RemainCo BD, this transaction allows us to focus on our prioritized core businesses.\nWe expect this transaction to strengthen our mid single-digit revenue and double-digit total return growth profile.\nWe expect the spin to be completed in the first half of calendar year 2022 subject to customary closing conditions, including final approval by the BD Board of Directors and the SEC declaring our registration statement effective.\nWe are progressing well against our simplification initiatives, which are focused on reducing complexity, enhancing our product quality, refining our customer experience and improving cost efficiencies.\nOur recode initiatives are progressing on track to generate savings of $300 million by the end of FY FY '24.\nAnd these initiatives help unlock value and allow us the flexibility to reinvest back into our business to fuel future growth.\nChris will talk more about our capital allocation strategy later in the call, but we expect share repurchases to return as part of a more balanced capital allocation strategy, as our balance sheet position and cash flows have strengthened over the past year.\nWe also continue to be guided by our purpose of advancing the world of health and continue to make great progress on our ESG initiatives.\nOn Earth Day, we reaffirmed our climate change targets, which includes our pledge to be carbon neutral by 2040 across our direct operations.\nLast week as I was preparing for our Board meeting, I reflected on where we were a year ago where we are today and the progress we've made.\nFirst, we achieved my number one priority since taking over as CEO.\nLast week, we announced that we submitted our Alaris 510(k) premarket notification.\nThis is an important milestone in our commitment to our customers and our patients.\nThe Alaris pump is the leading infusion pump in the US market administering more than one million infusions each day.\nSecond, we've significantly strengthened our balance sheet and cash flows.\nOver the past year we've improved our net leverage ratio by a full turn from 3.4x to 2.4x and taken actions to meaningfully strengthen our cash flows.\nThird, we answered the call to action with COVID.\nWe developed a series of innovative COVID diagnostic tests and scaled these to diagnose patients and help control the spread.\nWe secured our global supply chain to ensure that our essential medical devices were available to treat COVID patients in ICUs around the world including BD devices used in the treatment of an estimated 90% of US ICU patients.\nAnd today we continue to add capacity and enable over 1 billion doses of COVID-19 vaccine to be delivered using our injection devices.\nI am very proud of our team's impact when it matters most.\nFourth, we reinvested in growth.\nWe set up the BD Innovation and Growth Fund and advanced impactful new innovation programs in each of our businesses.\nWe acquired 11 tuck-in acquisitions since the beginning of 2020 along with early stage investments and we're reinvesting some of BD Veritor profits back into the business and behind our BD 2025 strategy.\nFifth, we started to shift the BD culture to one of a growth mindset.\nWe've been systematically advancing our leadership capabilities and culture in this area which includes partnering with the Neuro Leadership Institute to embed an enhanced focus on innovation and growth across our culture and mindset and the progress we're making with shifting the culture is very real and tangible.\nAnd today, we are announcing our intention to spin-off the diabetes business.\nWe believe this spin-off will be another value-creating opportunity for our shareholders.\nBut what excites me most is not what we've done it's where we're going and what's to come over the next several years all of our future successes and milestones to come.\nThe BD 2025 value-creation story has only just begun.\nAnd later this year we are planning to host an Investor Day and we'll look forward to sharing greater insights into our 2025 strategy and pipeline.\nChris is going to run through our financial results in greater detail later on.\nBut just to highlight, we are very pleased with our second quarter results as the BD team continued to execute well.\nOur second quarter revenues totaled $4.9 billion, up 15.4% on a reported basis and up 12.2% on an FX-neutral basis.\nI was particularly pleased with the continued momentum of our core businesses which were above our expectations in all three business segments.\nTo call out a few, our market-leading BD Pharmaceutical Systems business continues to deliver robust revenue growth of nearly 10%.\nMedication Delivery Solutions business was up over 8%, as we continue to deliver on our COVID vaccine injection devices commitments and our results were also driven by higher patient acuity.\nOur Bioscience business turned in double-digit growth as research activity has rebounded and urology and critical care continued to perform well driven by PureWick and targeted temperature management.\nIn China, where we began to anniversary the impact of COVID-19 we saw a strong revenue growth of 62% and we continue to invest support our future growth including reinvesting some of the profits from our COVID diagnostics.\nOur R&D spending was up 18.7% year-over-year on a currency-neutral basis.\nAdjusted earnings per share was $3.19 representing year-over-year growth of 25.1% on a reported and 22.7% on a currency-neutral basis.\nThe performance of our business particularly our core, gives us comfort to reaffirm our fiscal 2021 guidance ranges which include currency-neutral revenue growth of 10% to 12% and adjusted earnings per share guidance of $12.75 to $12.85, up 25% to 26% on a year-over-year basis.\nTurning to slide 9.\nAs I discussed before, we are proud to play such an important role in the COVID-19 pandemic response, across the continuum of care, from diagnostics to treatment and now prevention.\nAs vaccination campaigns continue to progress, I am pleased to announce, that we now have cumulative commitments for over 1.7 billion injection devices to administer COVID vaccines globally.\nThese commitments will stretch through our fiscal 2022 period.\nAnd therefore, we now see higher demand in our MDS hypodermic business, as being durable into next year.\nWe also see potential opportunity for our prefilled business in the future, and are now working with several partners at various stages of formulation testing on possible pre-filled COVID-19 vaccines.\nTurning to slide 10.\nI will provide an update on our COVID-19 Diagnostic Testing business.\nWe recently announced several emergency use authorizations or EUAs from the FDA.\nWe received EUAs for our combination COVID flu assays for both BD Veritor and BD MAX and we believe combination tests are going to be important in the next flu season.\nNext, we extended our EUA for the BD Veritor COVID-19 test to include a claim for screening asymptomatic individuals by serial testing.\nSeveral peer-reviewed publications have supported the benefits of serial rapid antigen testing, and we are continuing to develop our BD Veritor at-home test.\nOur test is designed to deliver a clear, digitally displayed record of test results on a smartphone to eliminate the reading guess work, and we also designed it to allow the data to be digitally shared by the user to eliminate errors and report sharing.\nOur BD Veritor at-home antigen test is also expected to have some other features that we believe will further differentiate it versus others on the market.\nOur antigen tests will all be manufactured on the same production lines to leverage economies of scale and our capital investments.\nTurning to slide 11.\nGrowth through innovation is central to our BD 2025 strategy.\nWe are advancing our R&D pipeline across all three of our segments.\nAnd as you can see on this slide identified by the green circles, several products have launched or achieved clearance since the beginning of the year.\nI've already covered our regulatory clearances related to COVID Diagnostics, and I'm happy to share that we've made steady progress in our medical segment, with a healthy cadence of relevant portfolio expansions and extensions across the MDS portfolio, such as the broadening of our leading peripheral IV catheter position with the introduction of our first passive safety catheter in the United States, the BD Cathena IV safety catheter.\nWe launched a new catheter stabilization solution for peripheral IV catheters with the BD Secura stabilization device and further advanced the safety of the BD PhaSeal optimal product family with a locking injector.\nIn interventional, we're launching Sensica, a smart connected folly catheter, which can be an important tool for the ICU.\nIt provides weight-normalized urine output data that is one of the early parameters used by clinicians to help identify acute kidney injury.\nBD Sensica can wirelessly transmit this data to the hospital's electronic medical record.\nWe're also looking forward to launching Pristine later this quarter.\nPristine is our new long-term hemodialysis catheter with unique side hole-free symmetric wide tip distal lumen design.\nThe design of the product is intended to help minimize thrombus adhesion, facilitate blood clot aspiration prior to hemodialysis treatment and help minimize recirculation rates in both forward and reverse.\nTurning to slide 12.\nAs I have often said over the last year, Alaris was my number one priority and last week, we announced a very important milestone.\nWe submitted our 510(k) premarket notification to the FDA for our BD Alaris system.\nI am extremely proud of our MMS regulatory affairs, quality and R&D teams for their dedication and hard work, to ensure a comprehensive submission.\nWe're also very appreciative of the FDA's collaboration.\nWe recognize this is one important step and we look forward to working with them through the FDA review process to obtain clearance for the updated BD Alaris system.\nJust to give a sense of what is included in the submission and how comprehensive it is.\nThe 510(k) submission is intended to bring our file up to date for all changes to the pump, since the last 510(k) was cleared.\nWe are also implementing updated features and addressing open recall issues, including through a new version of the BD Alaris system software that will provide clinical, operational and cybersecurity updates.\nThese updates are part of our overall commitment to safeguard infusion programming.\nAnd included in the software will be updates to our BD Alaris Guardrail Suite and BD Alaris EMR interoperability, including cybersecurity updates, network security and advanced data encryption.\nFrom a hardware perspective, our submission includes updated PCU, LVP, syringe and EtCO2 modules, as well as our existing PCA module.\nWe plan to continue to advance the BD, Alaris system with future updates and subsequent submissions.\nWe filed a substantial amount of data to support the filing.\nThis is a complex and comprehensive submission.\nTherefore, we would expect that the FDA review process will take some time to complete.\nAnd while we're not intending to predict the FDA-specific time line, we certainly recognize that our stakeholders would like to have some input for modeling purposes and we believe it would be prudent to think about Alaris' clearance sometime during the second half of our fiscal year 2022.\nWe plan to update you if there are any significant developments.\nAnd for now, we expect to continue to ship to our customers who qualify under medical necessity.\nWe've learned a lot of valuable lessons and gained insights during this journey that we're applying to our ongoing next-generation pump platform programs as well as our quality and risk management systems.\nTurning to Slide 13.\nWe are making significant progress with our tuck-in M&A strategy.\nYear-to-date, we've closed five acquisitions and we have a robust funnel of opportunities at various stages.\nWe continue to exercise financial discipline, in addition to ensuring deals meet our strategic and operational criteria.\nThis includes them being accretive to our growth profile, supporting our key innovation themes, advancing our strategic positions, meeting our financial hurdles and creating shareholder value.\nAs part of building a more holistic approach to expanding our inorganic growth funnel, we also expanded our evaluation and selective investment in early stage strategic opportunities.\nOn Slide 14, we highlight our key innovation themes and with some of our tuck-in acquisitions and R&D products across our three business segments that align to these themes, some of which I've already highlighted.\nSo within this theme of applying smart devices, robotics, analytics and artificial intelligence to improve care processes, I've already discussed our Smart Foley catheter Sensica.\nWe also continue to develop new modules of Kiestra, our total lab automation system.\nKiestra as you know can improve standardization, significantly enhance lab efficiencies and staff productivity.\nWithin Medical, our health site platform is designed to continue to support enterprisewide medication management.\nWe continue to evolve our capabilities with health site diversions, which was originally launched in fiscal 2019 for Pyxis.\nWe have scaled tremendously over the last year in terms of our commercial sites and we have plans to expand into the OR, followed by integration of infusion data and central pharmacy.\nWithin this theme of enabling new care settings, you've seen us acquire Med Bank and GSL Solutions to expand our medication management offering into the faster-growth non-acute settings and strengthen our existing dispensing leadership position.\nOur PureWick dry dock urine collection system has been helping women with urinary incontinence outside of the acute setting and contributing to the strong growth in our UCC franchise.\nAnd I've already talked about how we're excited about the upcoming launch of our BD Veritor at-home COVID-19 test that enables the expansion of testing into everyday settings.\nLastly our third theme is improving diagnosis and treatment of chronic diseases.\nI already mentioned Pristine and I've talked about in the past our BD Oncology HPV assay, which offers extended genotyping that supports risk stratification.\nAnd we look forward to launching this assay on our BD core system in the United States later this year.\nOne other product that we haven't talked a lot about is our BD Libertas subcutaneous drug delivery system for the administration of viscous biologics.\nOur Pharmaceutical Systems business is excited to offer this option to our biopharmaceutical partners as a combination product.\nThese products not only add value to our customers, patients and healthcare system but they add to our confidence in a sustainable, durable, mid-single-digit growth profile.\nNow turning to Slide 15.\nAnd I'm really excited today to announce a bold step in our BD 2025 strategy.\nOur intention to spin-off our diabetes business to our shareholders which we believe is a value-creating transaction.\nOur Diabetes Care business generated $1.1 billion of revenue in fiscal 2020, is a global leader in insulin injection devices.\nConsistent with our continuing focus on delivering shareholder value, we undergo strategic reviews to identify ways to create value and determine that the strategic priorities of BD have diverged from those of our Diabetes Care business.\nWe believe a spin-off will position both companies for long-term growth and success by allowing both to focus on their respective core markets, innovations and customer outcomes.\nEach company will be able to more efficiently allocate its resources and capital, best positioning the respective companies for their success and value creation.\nWe see tremendous potential to create value for our Diabetes Care business ahead.\nWe see the spin-off as an operating catalyst for our Diabetes Care business.\nAs an independent public company, NewCo will be able to more effectively allocate its human, operational and financial resources to implement a refined growth strategy that will allow it to focus on innovation, and improving the care of patients living with diabetes.\nBeing a separate entity, will also better enable NewCo to attract and retain talent, align management and employee incentives, and have a stock currency that it can use for future acquisitions.\nFor RemainCo BD, we expect the spin-off to strengthen our mid-single-digit FX-neutral revenue growth.\nWe estimate the uplift to our revenue growth rate to be about 30 basis points.\nAnd see this as strengthening our double-digit total return growth profile.\nThe spin-off will allow RemainCo to focus on our R&D tuck-in M&A and customer growth strategies, simplify our overall focus and maintain financial flexibility.\nConsidering all of these benefits, we believe this transaction has the potential to create value for our shareholders, which will be owners of both companies.\nSlide 17, provides an overview of the relevant transaction details.\nAnd I've already covered many of these topics.\nThe spin-off is expected to be implemented by a means of a distribution of 100% of the shares of a newly traded -- publicly traded entity to BD shareholders, and is intended to be tax-free for U.S. federal income tax purposes.\nOver the next several months, we'll be filing our Form 10, which will include the carve-out financial statements.\nAgain, we expect the spin-off to be completed in the first half of fiscal year 2022, subject to market, regulatory and other conditions, including final approval by the Board of Directors and the effectiveness of a Form 10 registration statement that will be filed with the SEC.\nTurning to slide 18, NewCo will be led by an experienced management team.\nAnd I am very pleased to share that Dev Kurdikar, who joined us earlier this year, as the Worldwide President of Diabetes Care will be the CEO of NewCo.\nDev has a long history, in the medtech sector, most recently serving as the CEO of Cardiac Science.\nDev has been engaged with the business now for the last few months and will share some of his preliminary thoughts in a moment.\nI'm also very happy to announce that Jake Elguicze, the Former Treasurer and Vice President of Investor Relations of Teleflex, has joined BD and will be the CFO of NewCo upon spin.\nJake brings extensive experience, in treasury, financial planning, reporting and analysis and investor relations.\nWe're confident that Dev and Jake are the right team, to lead NewCo as they embark on this journey that we believe will create value for all stakeholders.\nI'm incredibly excited to embark on this journey.\nI see a tremendous opportunity to build shareholder value and advance care for patients who suffer from diabetes.\nI'm also very humbled, to be leading this amazing organization.\nThe Diabetes Care business has a long history of caring for patients living with the disease, dating back to BD's introduction of the world's first specialized insulin syringe, almost 100 years ago in 1924.\nSince then, BD has played a leading role in the delivery of insulin, including helping to drive the adoption of insulin pens, which utilize our pen needle technology, as a leading modality for insulin injection.\nOur Diabetes Care business now reaches more diabetic patients, than any other medical device company in the world today.\nWe manufacture eight billion devices per year and are the global leader in insulin injection devices.\nAs Tom mentioned earlier, the business generated nearly $1.1 billion in revenue in fiscal 2020, derived from the sale of insulin injection devices such as, pen needles and insulin syringes as well as other accessories.\nOne factor that attracted me to this opportunity was the global breadth of the business with 48% of the revenues generated outside the United States, including 17% in emerging markets.\nAnd why is this important?\nAs you can see on slide 21, diabetes is a growing chronic condition across the globe, with some of the higher prevalence rates expected to be in the emerging market regions.\nThe International Diabetes Federation estimates that the number of adults living with diabetes is expected to grow from 463 million in 2019 to 578 million in 2030 and 700 million by 2045.\nMost of these patients will likely continue to rely on traditional injection devices for their insulin needs.\nThe rapid growth of the disease will likely place a significant burden on healthcare systems around the world, as patients with diabetes are often afflicted with multiple co-morbidities like cardiovascular disease, hypertension, diabetic retinopathy and lower limb complications.\nWhile I've only been with the company for a few months now, I can assure you that my passion and vision for NewCo is one of growth.\nInjection devices like pen needle and syringes are likely to remain a key part of their treatment paradigm for people with diabetes on a global basis for the foreseeable future.\nWe will look to leverage our global footprint to capitalize on these demographic trends.\nHowever, we'll also look to invest in novel insulin delivery technologies, including our internal type 2 patch technologies.\nWe also plan to supplement our internal R&D product development efforts more broadly and accelerate our growth profile through strategic M&A to broaden our product offerings and enter adjacencies on new growth categories.\nLet me end by saying how excited and humbled I am to have this opportunity to lead NewCo.\nI am confident that our team will work tirelessly to advance care for our patients while building shareholder value.\nWe see this as a great opportunity for those BD associates that will be part of NewCo and we're happy to have you and Jake on board.\nTurning to slide 25.\nI'd like to provide an update on our ESG initiatives across BD.\nOver the past quarter, we continued to advance our companywide ESG initiatives, including our recent commitment to be carbon neutral across direct operations by 2040.\nWe also continue to make progress toward identifying our 2030 goals and we look forward to sharing more details behind our 2030 sustainability plan with you in future engagements.\nBefore turning it over to Chris, I want to say again how proud I am of the organization for the progress we've made in advancing the BD 2025 strategy.\nWe are purposely shifting our focus to growth opportunities.\nSimplifying the organization to remove complexity as I firmly believe complexity gets in the way of growth and we're empowering our associates with a growth mindset.\nWe are committed to doing the right things, the right way and fulfilling our purpose of advancing the world of health.\nI also want to reiterate how excited I am for what's ahead for both RemainCo BD and NewCo.\nBD's Board of Directors and management team believe our plans to spin-off the Diabetes Care business will create value for all stakeholders.\nAnd before I turn to the results, let me also share my enthusiasm for the spin-off of our Diabetes Care business.\nI see the transaction is a win-win for all stakeholders, our shareholders, our employees, our customers and our patients.\nI'm confident that we have the right leadership to navigate NewCo on this exciting journey ahead.\nNow let me turn to the second quarter financial results.\nSlide 27 summarizes our high-level revenue performance.\nOur revenues came in just over $4.9 billion, up 15.4% on a reported basis and up 12.2% on an FX-neutral basis.\nAs Tom mentioned, we were very pleased with our results.\nOur core segment results excluding COVID-19 diagnostic testings were ahead of our expectations across all segments.\nNow turning to slide 28.\nOur medical segment delivered 4.7% FX-neutral revenue growth led by our market leading BD Pharmaceutical Solutions Systems business, which continues to deliver robust revenue growth of nearly 10%.\nWe are proceeding with our capacity expansion to support the future growth of this business unit.\nMDS grew a solid 8.1%, which included $43 million from COVID-19 vaccination injection device revenues.\nWe also benefited from higher patient acuity and higher utilization internationally particularly in China where we anniversaried the impact of COVID-19.\nNow turning to slide 29.\nOur Life Science segment delivered revenue growth of nearly 38% on an FX neutral basis.\nOur COVID-19 diagnostic testing revenues totaled $480 million and are included in our Integrated Diagnostics Solutions business.\nWhile BD Veritor ASPs were as expected in the low to mid-teens, the market's overall demand for symptomatic COVID diagnostic testing was lower.\nLooking at our IDS business excluding COVID testing, our routine diagnostic testing has not yet fully recovered to pre-COVID-19 levels.\nThere was virtually no traditional flu this year, so we did not have our usual flu test revenues and this impacted our IDS growth rate by 540 basis points and our BD Life Sciences growth rate by 410 basis points.\nThe impact to our overall BD growth rate was 110 basis points.\nOur Biosciences business unit delivered strong growth of over 12% as research lab activity has recovered nicely.\nWe are seeing strong demand for research instruments and reagents as well as from biopharmaceutical companies for vaccine research and development.\nAs shown on slide 30, the BD Interventional segment was flat this quarter, which was better than expected given the COVID-19 resurgences.\nThe performance in surgery and PI reflected the early impact from the COVID resurgence.\nHowever, we did see recovery in elective procedures as the quarter progressed and this trend has continued into April.\nOur urology and critical care franchise continues to deliver solid growth led by our Purewick and targeted temperature management product lines.\nTurning to our results by geographic regions on slide 31.\nIn the United States, revenues were up 1.9%.\nAs we had discussed on our February earnings call, we did see some early impact from COVID-19 resurgence, which waned as the quarter progressed and we exited March with improved momentum and this continued in April.\nInternational revenues were up 25.7% on a currency-neutral basis as we begin to anniversary the initial impact of COVID-19, particularly in China where our revenues were up 62%.\nWe also benefited from our COVID-19 responses, our diagnostic testing and vaccine injection delivery device revenues.\nNow turning to the P&L on slide 32.\nAs expected our gross margin was sequentially lower as compared to our first quarter.\nOur gross margin was 53.8% driven mostly by the lower COVID diagnostic testing revenues.\nOn a year-over-year basis, the gross margin included a 70 basis point negative impact from foreign exchange and 70 basis points from reinvestment initiatives.\nFavorable impacts from our continuous improvement initiatives were offset by product quality-related expenses.\nOur SSG&A spending rose 9% year-over-year on an FX-neutral basis, including a 380 basis point impact from deferred compensation, which as you know is fully offset in other income expense.\nThe remaining increase in SSG&A is primarily related to higher shipping costs and investment spending as part of our BD Veritor profit reinvestments.\nOur R&D spending ramped sequentially as planned as we reinvested some of the BD Veritor profits behind new pipeline innovations.\nR&D increased 18.7% year-over-year on an FX-neutral basis to $295 million, representing 6% of our revenues.\nOur operating income grew 14.3% on a year-over-year reported basis and 13% on an FX-neutral basis.\nOur operating margin was 24.5%, up 20 basis points on an FX-neutral basis.\nDeferred compensation was an 80 basis point headwind.\nOur interest and other expenses totaled $111 million versus $170 million in the year ago period.\nThe reduction of interest other net on a year-over-year basis, primarily reflects a decrease in deferred compensation offsetting increases in SSG&A as previously mentioned.\nIt also reflects reduced interest expense due to debt repayment and refinancing activities and lower interest rates.\nOur tax rate was 12% lower than expected due to discrete tax items that occurred this quarter.\nOur adjusted earnings per share increased 25.1% over the prior year to $3.19 on a reported basis and were up 22.7% on an FX-neutral basis.\nThe average diluted share count used to calculate our earnings per share in the quarter was $293.6 million.\nNow turning to slide 33, I'd like to provide an update on our capital allocation priorities, but first I want to update you on the great progress we made with our cash flows and balance sheet on a year-to-date basis.\nFor the first half of the year, our cash flows from operations have more than doubled growing from $1.2 billion to $2.8 billion, driven by the improvement in our net income as well as working capital.\nWe ended the quarter with $3.7 billion in cash and equivalents and our net leverage ratio was 2.4 times, a full turn lower than a year ago.\nGoing forward our capital allocation strategy will be more balanced than it had been in the past as we were paying down our debt.\nNow more of our cash can be deployed to support our growth strategy, tuck-in M&A, maintaining a competitive dividend and returning capital to our shareholders through share repurchases.\nAs a reminder under the existing share repurchase authorization plan, we have just under 7.9 million shares or roughly $2 billion remaining.\nAlso note that we would expect BD's dividend to be unaffected by the diabetes spin-off and therefore would increase BD's payout ratio.\nNext I want to address our fiscal 2021 guidance and provide some general commentary on our overall outlook, which you can see on slide 34.\nFrom a reporting perspective, we will continue to report our diabetes business with our BD results until the spin-off of the diabetes business is complete.\nWe're very pleased with the results for the quarter how we are building momentum in our core, advancing our pipeline and achieving critical milestones.\nWe are also pleased with the early progress we see from BD Veritor profit reinvestments.\nWe believe these projects should begin to provide incremental growth beginning in late 2022.\nWe are reaffirming our fiscal 2021 financial guidance ranges.\nWe continue to expect reported revenue growth of 12% to 14% for the full year 2021.\nThis reflects FX-neutral revenue growth in the range of 10% to 12%.\nBD Veritor revenues toward the higher end of the $1 billion to $1.5 billion range and foreign currency adding approximately 200 basis points.\nWe also continue to expect adjusted earnings per share in the range of $12.75 to $12.85, which represents growth of 25% to 26% year-over-year.\nNow we wanted to give you some color as you consider your models for the back half of the year.\nWe continue to reinvest some of the Veritor profits to fund projects in line with our BD 2025 strategic pillars of growth simplify and power.\nOur investments continue to put temporary pressure on both our gross and operating margins in 2021.\nAs we mentioned last quarter, we continue to expect our operating margins in the second half of the year to be in the low 20s, reflecting our reinvestment initiatives as well as higher raw material costs.\nAs a reminder, we expect the reinvestment pressures that you're seeing on our margins to lift next year.\nAs you've seen in the past from time to time there can be some volatility in our tax rate.\nWe now expect our FY 2021 tax rate to be slightly lower than FY 2020's tax rate.\nThis helps to offset some gross margin pressure from the lower ASPs from Veritor as pricing is now approaching compared to our flu test price a bit faster than we originally anticipated.\nRegarding 2022 given the momentum we are seeing our progress with our R&D pipeline the reinvestments of our BD Veritor proceeds and our tuck-in acquisition strategy we have increased confidence in our core outlook.\nIn fiscal 2022, excluding COVID-19 testing and Alaris 510(k) clearance, we expect our revenues to grow solidly in the mid-single digits.\nAs you heard Tom mention, while we're not intending to predict the FDA's time line we recognize the desire to have some input for modeling purposes.\nWe believe it would be prudent to think about Alaris' 510(k) clearance sometime during the second half of our fiscal 2022.\nWe believe it would also be prudent to model both our revenues and our margins gradually ramping as we scale our selling and manufacturing efforts.\nIn conclusion, we are really pleased with our second quarter results and the momentum across our businesses.\nWe are excited about our plans to spin-off of the diabetes business and see this as an important opportunity to create value for our shareholders.\nWith that, Tom, Alberto, Simon, Dave and I are happy to take any questions you have.\nOperator, please open up the line for Q&A.\n Assistant:", "chosen": "compname reports q2 adjusted earnings per share $3.19.\nq2 adjusted earnings per share $3.19.\nq2 revenue $4.9 billion.\nbd - qtrly bd's covid-19 testing sales were $480 million.\n"}
{"prompt": "Human: Please note that the financial results to be presented in this commentary are preliminary.\nThese and other risks, uncertainties and other important factors are described in more detail in Franklin's recent filings with the Securities and Exchange Commission, including in the Risk Factors and the MD&A sections of Franklin's most recent Form 10-K and 10-Q filings.\nLexington's business provides us the exposure to a critical growth area in the alternative asset business, and we cannot be happier with this new partnership.\nWe will cover on this transaction in a few minutes.\nI'll start by reviewing this year's milestones.\nThen Matt will go through our financial results for the quarter and the fiscal year, as well as spend some time discussing today's important transaction in greater detail.\nThroughout Franklin Templeton history we have invested in our business to build a truly diversified and resilient organization that performs across market cycles with a commitment to serving our clients, employees and shareholders.\nThe results that we announced today represent the first full fiscal year since we closed the Legg Mason acquisition, a transformational transaction that created a more balanced business across asset classes, client mix and geographies.\nWe are pleased to report that the strategic and financial benefits from our acquisition of Legg Mason exceeded our goals, and we have added important growth opportunities.\nWe have maintained our culture while invigorating collaboration and innovation across the firm.\nThrough the hard work and dedication of our employees we've successfully brought two firms together to maximize our collective potential, one that successfully combines the attributes of global strength with boutique specialization.\nWe've made strong progress, and yet in so many ways, we're just getting started.\nTurning to investment performance, there's been an improvement in performance across a broad base of investment strategies.\nThrough September, 71%, 69%, 72% and 77% of strategy composites outperformed their respective benchmarks across the four key time periods.\nDuring the year, we focused on updating our global distribution efforts by enhancing our generalist, specialist model, reshaping client coverage and deepening relationships in each sales region, particularly with the largest global financial institutions.\nFiscal year long-term inflows doubled to $365 billion from the prior year, notably, the U.S., which is our largest sales region with over $1.1 trillion in AUM was net flow positive for the year.\nIn terms of notable organic growth, we saw positive net flows in our core growth areas, including alternatives, SMAs, wealth management and ESG-specific strategies.\nWe executed important acquisitions to further grow and diversify our business in alternative assets, customization and distribution of investment strategies.\nIn terms of other accomplishments, our alternative asset strategies, an important area of focus for us, generated positive net flows in each quarter during the year and grew by 19% from the prior year to $145 billion in AUM with contributions from a diverse group of strategies, including real estate infrastructure, private debt and hedge funds.\nSeveral years ago, we announced our intention to create a full suite of alternative strategies and we've been very deliberate in building our capabilities.\nIn 2018, the acquisition of Benefit Street Partners brought us a leading alternative credit manager.\nIn 2020, we added a world-class real estate manager with Clarion Partners.\nThis focus on alternative led us to today's announcement of the acquisition of Lexington Partners, a leader in secondary private equity and co-investments.\nWe now have top tier specialist investment managers in all of the key alternative categories, with Benefit Street Partners, Clarion Partners, Franklin Venture Partners, K2 and now Lexington Partners.\nSpecifically with the Lexington Partners transaction I'm excited that Franklin will be partnering with such an outstanding firm that is led by an experienced and talented team, immediately bringing a scale and capabilities in an interactive and growing global market.\nThere will be no changes to the team or its independent investment management process, and they will continue to operate autonomously as Lexington Partners.\nUpon the close of this transaction, we expect our alternative AUM to approach approximately $200 billion and over $1 billion in revenue, excluding performance fees.\nMatt will review the additional details of the transaction shortly.\nAnother core growth area is our separately managed account business.\nWe are a top three provider in SMAs with $125 billion in assets under management, which is one of the fastest growing segments in retail.\nOur SMA business grew by 22% in AUM year-over-year and generated positive net flows in each quarter during the fiscal year.\nOur recently announced acquisition of O'Shaughnessy Asset Management and its Custom Indexing Platform, Canvas, will take our existing strength in SMAs to the next level, enhancing our tax management factor-based and ESG customization capabilities.\nCanvas was launched in late 2019 and has seen strong growth since its inception and now represents $1.9 billion of the firm's total AUM of $6.3 billion as of September 30.\nThe transaction will bring compelling benefits to the clients that both companies serve across multiple channels.\nThere's no question that investors are more focused on ESG goals than ever before.\nIncreasingly, there are three dimensions to ESG that investors consider; ESG factors as understood risks in a portfolio, how ESG contributes to overall returns, and the overall impact of ESG considerations to society and the environment.\nAs an active manager approximately 95% of our AUM represents strategies that consider ESG factors as part of the investment process and ESG specific strategies representing over $200 billion in AUM were net flow positive in each quarter this fiscal year.\nAll this being said, none of our accomplishments this past year would be possible if it weren't for our employees.\nWe're extremely fortunate to have such dedicated colleagues who are focused on achieving investment excellence, fostering enduring relationships and delivering superior service to our broad range of investors around the globe.\nFourth quarter long-term net outflows were $9.9 million, which were partially offset by the acquisition of Diamond Hill's high yield focused U.S. corporate credit mutual funds, which added $3.5 billion in AUM and closed in July.\nThis quarter included the previously disclosed $5.4 billion 529 plan redemption, which included $4.7 billion of long-term assets and $2 billion fixed income, institutional redemption that have minimal impact to revenue and $800 million of fixed income outflows from the non-management fee, earning India credit funds that are in the process of liquidation.\nReinvested dividends were $2.3 billion in this quarter.\n1% higher average assets under the management of $1.55 trillion compared to the prior quarter, plus $69 million of performance fees generated $1.66 billion in adjusted revenue for the fourth quarter.\nInvestment management fees, excluding performance fees was 3% higher compared to the prior quarter.\nAdjusted operating expenses of $1.01 billion for the quarter were 3% lower due to lower compensation and lower G&A as a result of last quarter's upfront closed-end fund expenses.\nThis led to an 80% increase in adjusted operating income of $647 million and an adjusted operating margin of 39%.\nFourth quarter adjusted net income and adjusted diluted earnings per share increased 31% to $645 million, or $1.26 per share.\nThese results include favorable discrete tax items of $135 million or $0.30 per share for the quarter.\nTurning to 2021 fiscal year financial results, which benefited from favorable market conditions and a full year of Legg Mason versus two months last year.\nFor the full year, adjusted revenues were $6.32 billion and adjusted operating expenses were $3.94 billion, an increase of 63% and 65% respectively.\nThis led to fiscal year adjusted operating income of $2.38 billion, which was 60% higher compared to the prior year.\nOur adjusted operating margin was 37.7%.\nCompared to the prior year, fiscal year adjusted net income increased 46% to $1.92 billion and adjusted diluted earnings per share increased 43% to $3.74 per share, which included the impact of favorable discrete tax items of $175 million or $0.34 per share for the full year.\nAs planned, we have achieved a run rate of 85% of our targeted merger-related cost synergies of $300 million this year.\nWe anticipate that 100% of these synergies will be achieved by the end of fiscal year 2022.\nAs a reminder, none of these cost efficiencies involved our specialist investment managers or our investment teams.\nMoving on to capital management, we believe our strong balance sheet continues to provide us with financial and strategic flexibility to evolve our business.\nFor the fiscal year ended September 30, we returned $782 million to shareholders through dividends and share repurchases.\nDuring the year, we also pre-financed a large portion of legacy Legg Mason debt with lower cost of debt, reflecting our credit profile.\nSpecifically, we issued $850 million of 1.6% senior notes due 2030 and $350 million, 2.95% notes due 2051.\nWe redeemed $250 million of 6.38% Legg Mason Junior subordinated notes due 2056 on March 15, 2021, and $500 million of 5.45% Legg Mason Junior subordinated notes due 2056 on September 15 2021.\nWe ended the quarter with $6.93 billion of cash and investments.\nWe will continue to prioritize our dividend and intend to repurchase enough shares to at least offset our employee equity grants.\nThe remainder of our capacity will focus on continued investments in our business and acquisitions to further diversify and increase our sources of cash flow, while positioning our firm for new growth opportunities as the industry continues to evolve.\nAs outlined in the transaction summary document, Lexington Partners is a global leader in secondary private equity and co-investments with current fee based AUM of $34 billion.\nSince its founding in 1994, Lexington has raised over $55 billion in aggregate capital commitments and currently has a team of 135 employees across eight global offices.\nIt is expected to generate revenue of approximately $350 million and EBITDA of approximately $150 million in 2022.\nWith this acquisition, we now have strong and complementary capabilities in alternative credit, real estate, hedge fund solutions and PE related activities.\nGiven the overall size and growth of private equity and the likelihood of further private market expansion, having a specialist investment manager tied to this sector alternative assets is a logical step in the diversification of our business.\nFurthermore, providing access to diversified versions of high returning investments will continue to increase in importance to meet savings and retirement goals of our broad group of clients.\nThis could also be important in both our multi-asset solutions business and the continued development of our customization capabilities.\nAs Jenny mentioned earlier, this transaction takes us one important step further in creating a larger and more diversified alternative asset business that will result in pro forma fiscal year 2022 alternative asset AUM of approximately $200 billion, producing approximately $1 billion in annual management fee revenue, excluding performance fees at a margin of approximately 40%.\nWe intend to continue adding complementary business in both wealth management and asset management, including asset class and geographic expansion.\nThis will be both organic investment through allocating capital into our existing specialist investment managers and via acquisitions.\nGiven our global reach, financial flexibility, business model and experience in execution, we're able to attract highly talented teams and partnerships, looking for a combination of independence, support and collaboration on a global and local scale to create new growth opportunities in what is a very large and expanding segment of the asset management industry.\nTurning to financial terms of the transaction, we're acquiring 100% Lexington Partners for $1 billion in cash at closing plus a further $750 million in cash over the next three years.\nWe have also structured this transaction to ensure continuity and strong alignment of interest with Lexington's clients, partners and employees over the long-term.\nConsistent with this, we will be simultaneously issuing grants equal to 25% of Lexington to employees of Lexington, subject to five year vesting and establishing a performance based cash retention pool of $338 million to be paid over the next five years.\nThe transaction is expected to close by the end of our fiscal second quarter, subject to customary approvals.\n Assistant:", "chosen": "compname reports q4 adjusted earnings per share of $1.26.\nq4 adjusted earnings per share $1.26.\nqtrly total assets under management were $1,530.1 billion at september 30, 2021, down $22.0 billion during the quarter.\n"}
{"prompt": "Human: These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them.\nWe refer you to B&G Foods' most recent Annual Report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our company's future operating results and financial condition.\nBruce will then discuss our financial results for the third quarter, as well as expectations for 2021.\nThe company's performance in the third quarter was strong.\nBase business net sales, which excludes Crisco, grew at plus 9.2% versus the same period two years ago, accelerating from plus 7% in Q2.\nWith the addition of Crisco, our Q3 2021 net sales are ahead of last year's COVID period.\nBruce will talk categories and brands later, but we are generally seeing strength across the portfolio.\nMost of our key categories performed well when compared to 2019's pre-pandemic third quarter results.\nNet sales of Green Giant and spices & seasonings were up double digits compared to 2019.\nNet sales of Ortega and Las Palmas are two leading Mexican food brands, were up high single digits compared to 2019.\nOur baking brands also had a strong performance for the quarter compared to 2019, led by Crisco, Clabber Girl, Baker's Joy, etcetera.\nWhile demand was strong, resulting in elevated sales.\nWe are also managing through many of the same challenges to supply chain and costs that have plagued the industry.\nInflation in full year 2021 is in the mid single digits, with the second half increasing to a double digit increase across the portfolio.\nAs discussed last call, inflation on Crisco is significantly higher than the base portfolio, given the major increases in soybean and canola oil.\nWe have responded with significant price increases, where appropriate raising list prices and or optimizing trade to directly offset higher input costs.\nWhile we did accurately to identify and address inflationary pressures, the majority of our price increases are effective in the second half, with the largest increase on Crisco effective at the end of September.\nWe project continued inflationary pressure into first half 2022 and we'll price to recover year-over-year cost increases.\nAdditionally, we're driving aggressive cost optimization efforts to offset continued inflation.\nFrom a supply standpoint, we continue to deal with shortages in packaging materials, freight delays and contract manufacturing capacity.\nHowever, overall customer service levels are improving in recent weeks, aided by lifting allocations on Green Giant SKU with the new crop pack.\nOur goal is to manage our business to stable steady margins.\nFor the current portfolio, the goal is roughly an 18% adjusted EBITDA margin, with pricing and productivity actions recovering cost pressures on margins.\nLonger term, our goal is to improve to a 20% adjusted EBITDA margin with a creative M&A, efficiencies and some base business organic growth.\nIn the near term, inflation will make that more challenging, but we believe that is the right target for this business.\nDuring the third quarter, we successfully completed the integration of Crisco.\nAnd I want to congratulate our team for a smooth transition.\nCrisco is our second largest acquisition, and we are happy with the performance year to date under our ownership, despite some volatility in commodity prices.\nIn August, we also announced that we reached an agreement to sell our Portland, Maine manufacturing facility.\nWe expect the sale to close during Q1 2022.\nWhile shutting a factory is never an easy decision, it became clear the 100 year old Portland facility had reached the end of its useful life and was no longer cost competitive.\nThe site will become the future home of the Roux Institute at Northeastern University, which is a great outcome for the Portland community.\nWe also continue to make investments in our existing facilities, including a new high tech automated line in the Ankeny, Iowa spices and seasonings facility, as well as new lines that are Hurlock, Maryland and Yadkinville North Carolina facilities to increase our capacity for Ortega Taco Sauces and Taco Shells respectively.\nSo finally, after four months in the business, I wanted to share the key priorities and choices that we -- the B&G team are laser focused on.\nFirst, managing B&G Foods effectively through the current inflationary and pricing environment; second, improving organic growth performance beyond COVID recovery; third, focusing on brands and categories where we have the capabilities, scale and right to win in terms of both resources and structure; fourth, making disciplined acquisitions that are creative to our portfolio; and with our core expertise in centre store dry distribution;, and fifth, accelerating cost savings and productivity efforts to eliminate non value added costs and strengthen margins, so more to come on those in future calls and discussions, including specific plans and updates.\nAs Casey mentioned, we had a strong financial performance during our third quarter, despite a very challenging operating environment.\nNet sales continue to be elevated and are tracking closely to the initial set of assumptions that we used to create our annual budget for fiscal 2021.\nSimilar to our plan for the year, we are showing an acceleration in net sales growth, as we go through the year when compared to last year, and our pre pandemic 2019 numbers.\nAs we continue to work our way through the balance of the year, we are approaching a period that we expect to be more similar to last year still not quite normal, with more Americans eating at home more frequently than they did pre-pandemic, but also no longer laughing the height of the pantry loading that coincided with the early days of the pandemic.\nThe result is that, after adjusting for the impact of Crisco, and the impact of an extra week in last year's third quarter, we not only have a net sales increase compared to 2018.\nBut we also have sales trends that are much more similar to those during last year's COVID-19 enhanced third quarter.\nSeparately, but not entirely unrelated industrywide supply chain challenges, and input cost inflation has served to catch some of the upside that we would otherwise be seeing as a result of this robust demand.\nFor some of our brands, this means that sales could be higher, absent out of stocks for certain items.\nFor many of our brands, we have the sales, but margins are challenged relative to what we typically expect from a portfolio.\nInput cost across our portfolio generally continue to be up mid-single digits for most products with extreme cases for certain products like soybean, and canola oils, transportation, and napkins which are all up double digits.\nAnd like virtually everybody in the food manufacturing industry, we are aggressively increasing price where appropriate, plus cutting costs were possible to protect profitability and ensure the long term viability of our margin structure.\nNow, for the third quarter 2021 highlights.\nWe reported net sales of $515 million adjusted EBITDA before COVID-19 expenses of $96.4 million.\nAdjusted EBITDA of $96.2 million, and adjusted diluted earnings per share $0.55.\nAdjusted EBITDA both before and after COVID-19 expenses, as a percentage of net sales was 18.7%.\nNet sales of $550 million was up $19.2 million, or 3.9% from Q3 2020, up $108.7 million, or 26.7% from pre-pandemic 2019.\nCrisco which we acquired in December 2020 generated $71.2 million of net sales in Q3 2021 ahead of our forecast for the quarter, and well ahead of our understanding of 2018 net sales for the same time period under prior ownership.\nBased business net sales, which primarily excludes Crisco decreased by $52.1 million, or 10.5%, in the third quarter of 2021, when compared to the third quarter of 2020.\nAs a reminder, when comparing to our previous performance in our base portfolio Q3 2020 not only included COVID-19 enhanced sales, but also the benefit of an extra week due the timing of our 53rd week in 2020, which we estimate benefited net sales for the third quarter of 2020 by approximately $35 million.\nThe negative comparisons to 2020 are driven by a decline of $68.5 million in unit volume, which is offset in part by $14.5 million benefit from an increase net pricing, inclusive of list price increases trade spend optimization, and a little bit of mix.\nForeign exchange added $1.9 million of benefit.\nOn a year-to-date basis, the cumulative benefit of net pricing index is approximately $27.3 million.\nBase business net sales, which primarily excludes Crisco were up 9.2% compared to 2019, representing a two-year compound annual growth rate of 4.5% over our pre-pandemic net sales.\nOur base business net sales growth in the third quarter of this year represents continued sequential acceleration in growth versus 2019, relative to our performance in this year's first and second quarters.\nWe generated adjusted EBITDA of $96.2 million in the third quarter, a decrease of $8.4 million or 8.1% when compared to the prior year period, but an increase of $10 million, or 11.5% compared to 2019.\nThe decrease in adjusted EBITDA versus Q3 2020 was largely driven by the reduction in base business volumes coupled with increases in input costs, including materially higher costs for raw materials, factory labor and other costs, transportation and warehouse spending, and one fewer reporting week.\nThese costs were offset in part by locking in prices through short term supply chain contracts, advanced commodities purchase agreements, implementing cost savings initiatives, coupled with lowest price increases, trade spend optimization and the addition of Crisco to the portfolio.\nAdjusted diluted per share was $0.55 in Q3 2021 compared to $0.74 per share in Q3, 2020 and $0.54 per share in Q3 2019.\nThe majority of our key brands had declined the net sales when comparing Q3 2021 to Q3 2020.\nHowever, approximately two-thirds of the decline resulted from one fewer recording week of net sales in Q3 2021 versus Q3 2020.\nThe majority of our brands had substantial increases in net sales when comparing Q3 2021 to Q3 2019.\nIn some cases, for brands like Ortega, and our spices and seasonings business, which were up compared to 2019 the upside was kept by limitations on production.\nIn other cases, for brands like back to nature and New York style, supply chain constraints resulted in declines in net sales when compared to prior years.\nNet sales of Ortega were $37.6 million in the third quarter of 2021 represent an increase of $1.6 million or 4.2% compared to the third quarter of 2020 and an increase of $2.6 million or 7.3% when compared to the third quarter of 2019.\nIf we had unlimited manufacturing capacity, net sales growth for Ortega would have been even higher.\nDemand for Ortego taco sauce, taco shells, taco seasonings and salsa remain very strong.\nAnd as Casey said previously, this is a category and a brand that we will continue to invest in and where we believe that our recently added capacity for sauce, Shells and seasonings will lead to increased performance in 2022.\nNet sales of Las Palmas were $9.1 million in the third quarter of 2021, representing an increase of $2.5 million or 37.1%, when compared to the third quarter of 2020, and an increase of point $6 million, or 7.3%, when compared to the third quarter of 2019.\nLast year Las Palmas was an early harbinger of the industry wide supply chain lows that we continue to see today.\nAnd as you may recall, that last year at this time, we were unable to fully meet demand for a tomato sauces.\nOur Las Palmas issues have fortunately been resolved this year, which helps to account for the large increase versus Q3 2020.\nSpices & Seasonings continues to be one of the leading drivers of our portfolio.\nNet sales of our spices and seasonings including our legacy brands such as accent and Dash, and the brands that we acquired in 2016, such as Tones and Weber were approximately $92.9 million, a little bit less than 20% of our total company net sales for the quarter.\nNet sales of spices & seasonings were down by approximately $14 million or 13.1% compared to Q3 2020.\nThe shortfall is driven primarily by capacity constraints, as demand outran our supply and manufacturing capacity.\nWhile this phenomenon is getting better, and we expect will be alleviated in part by some additional capacity that we have coming on in the fourth quarter of this year or in early 2022, we are also lapping a massive quarter for spices & seasonings in last year's third quarter.\nWhen comparing Q3 2019, net sales of spices & seasonings were quite strong and increased by approximately $10.3 million or 12.5%.\nWe are now largely through the 2021 pack season, and fully caught off on supply for Green Giant.\nThe result is an acceleration of performance beginning in the second half of the third quarter and continuing today.\nGreen Giant generated net sales of $141.2 million in the third quarter of 2021, which well down $17 million or 10.7% when compared to Q3 2020 is up $20.9 million or 17.4% when compared to Q3 2019.\nAssuming a healthy holiday season in November and December, we expect continued strength for Green Giant net sales through the fourth quarter of this year.\nAmong our other large brands, Maple Grove Farms, which generated $20.2 million in net sales for the quarter was down $0.5 million or 2.4% compared to Q3 2020 and up $2.7 million or 15.3% compared to Q3 2019.\nSimilarly, Cream of Wheat, which generated $15.2 million in net sales for the quarter was down $1.2 million or 7.4% from Q3 2020, but up $1.2 million or 8.5% compared to Q3 2019.\nWe generated $105.7 million in gross profit for the third quarter of 2021 or 20.5% of net sales.\nExcluding the negative impact of a $14.1 million accrual for the estimated present value of a multi-employer pension plan withdrawal liability that we expect to incur upon the closing of our Portland manufacturing facility and $2.8 million of acquisition, divestiture related in non-recurring expenses, including cost of goods sold during the third quarter of 2021, gross profit would have been $122.6 million or 23.8% of net sales.\nGross profit was $136 million for the third quarter of 2020 or 27.4% of net sales, excluding the impact of $0.1 million of acquisition divestiture-related and non-recurring expenses, included in cost of goods sold during the third quarter of 2020, gross profit would have been $136.1 million or 27.5% of net sales.\nDuring the third quarter of 2021, gross profit was negatively impacted by higher than expected input cost inflation, including materially increased costs for raw materials, factory expenses and transportation.\nWe have attempted to mitigate the impact of inflation on gross profits by locking in prices for short-term supply contracts and advanced commodities purchases agreements, and by implementing cost savings measures.\nAs discussed earlier on the call, we also executed list price increases and reduced trade promotions for certain products.\nThe short term result is that margins have been pressed -- impressed relative.\nSo we expect business to generate in the short-term.\nAnd while this trend may continue into our fourth quarter and early 2022, we do expect our efforts to return to business to its historic margin profile over time.\nSelling general and administrative expenses were $46.4 million for the quarter or 9% of net sales.\nThis compares to $43.4 million, or 8.8% for the prior year, and $38.1 million or 9.4% in the third quarter of 2019.\nThe dollar increase in SG&A compared to a year ago levels is almost entirely driven by a $3.5 million increase in warehousing costs coupled with $3.3 million incremental acquisition related and non-recurring expenses, which primarily relate to the acquisition and integration of the Crisco brand and the sale of our Portland facility.\nThe increase in warehousing costs was primarily driven by the Crisco acquisition and customer finds relative to COVID-19 shortages and delays.\nAs I mentioned earlier, we generated $96.4 million in adjusted EBIT DA before COVID-19 expenses, and $96.2 million in adjusted EBITDA in the third quarter of 2021.\nThis compared to adjusted EBITDA of $104.6 million in Q3, 2020, and $86.2 million in Q3 2018.\nInterest expense for the quarter was $26.6 million, compared to $26.4 million in the third quarter last year.\nThe primary driver of the increase in interest expense was the acquisition of Crisco, which, as you may recall, was financed in its entirety with a combination of revolver draw and incremental term loans.\nThe revolver currently costs us a little less than 2% in interest, and the term loans a little less than two or three quarters percent.\nDepreciation and amortization are also up year-over-year driven primarily by Crisco.\nDepreciation expense was $15.3 million in the third quarter of 2021, compared to $10.9 million in last year's third quarter.\nAmortization expense was $5.4 million in the third quarter of 2021 compared to $4.7 million in last year's third quarter.\nWe are tracking to an effective tax rate of approximately 26% to 26.5% for the year, with taxes a little higher and this year's third quarter, due to some discrete tax items at an effective rate of 26.8% for the quarter compared to 24.7% in last year's third quarter.\nWe generated $0.55 in adjusted diluted earnings per share in the third quarter of 2021 compared to $0.74 per share in Q3, 2020 and $0.54 per share in Q3 2018.\nWe remain encouraged by these trends.\nAnd while adjusted EBITDA margins will remain challenge this year due to higher than expected input cost inflation, including increased cost of raw materials, factory costs, transportation and warehouse costs, we also expect to generate adjusted EBITDA of $358 million to $365 million for the year.\nAlso similar to what we discussed last quarter, we expect the following for full year 2021.\nInterest expense of $105 million to $110 million, including cash interest of $100 million to $105 million, depreciation expense of $60 million to $65 million, amortization expense of $21 million to $22 million, and an effective tax rate of approximately 26% to 26.5%.\nAs I said at the beginning of the call, we had a fairly strong quarter despite lapping elevated COVID-19 demand and an extra week in Q3 2020.\nWe remain on track to deliver the mid to high single digit growth against 2019 that we set as a target for the year, and we continue to implement pricing actions to offset inflation in the portfolio.\nThis concludes our remarks.\nAnd now we would like to begin the Q&A portion of our call.\n Assistant:", "chosen": "q3 adjusted earnings per share $0.55.\nq3 sales $515 million.\n"}
{"prompt": "Human: Before we get started, I want to let you know that we have slides to accompany our discussion.\nReconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are posted on our website as well.\nTurning to Slide three, you'll see the agenda for today's call.\nI'll start with some highlights of the first quarter before handing over to John, who will go into more detail on our performance.\nLet's start with an overview of the quarter, turning to Slide four.\nWe brought positive momentum into the quarter, and we continued to capture the opportunities in front of us, delivering our sixth consecutive quarter of increased earnings.\nOperationally, our team did a fantastic job maximizing our assets.\nWe reached a new high watermark for crush capacity utilization, and we continued to reduce unplanned downtime.\nWe also executed well in the marketplace through outstanding customer service, innovation, agility and partnership.\nOur strong results over the past few quarters reflect the value of working as a unified global company and the benefits of our integrated model delivers to our customers on both ends of the value chain, from farmers to customers to consumers.\nWe're committed to continuous improvement and managing risk effectively because while we're incredibly proud of what we have achieved, we recognize there's always more we can do, especially in an industry that doesn't always offer a straight-line path from quarter-to-quarter.\nThe dramatic swings in consumer and customer behavior during the COVID pandemic are case in point.\nCOVID is still very much a factor in most parts of the world, especially in Brazil and India, and our thoughts are with all of those who are still in the center of the battle with this pandemic.\nIn regions where restrictions are easing, we're seeing increased demand in pricing across the range of products as people begin to get back to regular life patterns.\nAnd regardless of those more encouraging trends, our top priority continues to be the safety of our team, their families and communities.\nTurning now to our segment performance.\nAs you saw last week, we changed our reporting to better align with our new value chain operating structure.\nJohn will go into more detail on that later in the call, but our new segments more closely reflect the way we manage our business.\nIn the first quarter, we delivered especially strong results in Agribusiness.\nEarnings were driven primarily by oilseed processing, particularly in softseeds, and our merchandising value chains.\nRefined and Specialty orders -- Oils had a record quarter, benefiting from tightening global supplies, improved demand, particularly in North America, and our continued focus on customers and innovation.\nAnd before handing the call over to John, you'll note that with our strong first quarter results and favorable outlook across a number of our markets, we raised our full year adjusted earnings per share forecast to approximately $7.50.\nI'll share some additional thoughts on the remainder of 2021 before opening the call for Q&A.\nIn -- you may have seen our announcement last week that we have changed our segment reporting to align with our new value chain model and to reflect how we manage the business and review financial information.\nWithin Agribusiness, we have realigned grains and oilseeds operations in the processing and merchandising.\nThe Fertilizer segment has been eliminated with those results now included in the processing component of Agribusiness.\nProcessing, in addition to fertilizer, is principally the oilseed operations plus the soy and softseed crush-related origination activities previously included in grains.\nLet's turn to earnings highlights on Slide five.\nOur reported first quarter earnings per share was $5.52 compared to a loss of $1.46 in the first quarter 2020.\nOur reported results include a net gain of $1.09 related to the previously announced sale of our Rotterdam oil refinery as well as our packaging plant in Mexico.\nReported results also include a mark-to-market timing difference of $1.30 per share.\nAdjusted earnings per share was $3.13 in the quarter versus $0.91 in the prior year.\nAdjusted core segment earnings before interest and taxes, or EBIT, were $737 million in the quarter versus $354 million in the prior year driven by strong performances in our Agribusiness and Refined and Specialty Oils segments.\nAs Greg noted, Agribusiness results in the quarter reflect outstanding execution by the team, managing our crush capacity and trade flows.\nIn processing, improved performance in the quarter was driven by higher results in all softseed and soy crush value chains, which included an increased contribution from U.S. soybean origination.\nIn addition, we achieved record Q1 soy and rapeseed crush volume capacity utilization, reflecting reduced unplanned downtime and excellent coordination between our commercial and industrial teams.\nThis improved crush output brings immediate financial benefits, especially in periods of strong margins like we have been experiencing.\nIn Merchandising, improved volumes and margins in our global oils, corn and wheat value chains were primarily driven by increased export demand, strong grain origination in North America and Australia and outstanding execution of logistics and risk management.\nResults in our Financial Services business were also higher.\nIn Refined and Specialty Oils, the strong performance reflected higher results in all regions driven by improved execution as well as favorable market trends.\nMargins in North America refining benefited from early stage recovery in foodservice and increased demand from the renewable diesel sector.\nHigher margins in South America and Europe more than offset lower volumes.\nAsia benefited from strong demand in India prior to the reimposition of restrictions due to the surge in new COVID cases.\nIn Milling, results were down in both North and South America primarily due to lower margins.\nAdditionally, volumes in Brazil were negatively impacted by the resurgence in COVID cases.\nThe increase in corporate expenses during the quarter was primarily related to the performance-based compensation accruals, a portion of which was not allocated out to the segment.\nThe decrease in Other was related to our captive insurance program.\nResults for our Sugar & Bioenergy joint venture benefited from higher sugar and ethanol volume and higher sugar prices in local currency.\nPrior year results reflect less favorable environment and were also negatively impacted by approximately $25 million in FX translation losses of the joint venture due to depreciation of Brazilian real.\nFor the quarter, income tax expense was $192 million as compared to an income tax benefit of $55 million for the prior year.\nThe increase in income tax expense was due to higher pre-tax income.\nAdjusted for notable items, the effective tax rate for the quarter was 21%.\nNet interest expense of $64 million was in line with our expectations.\nHere, you can see our positive earnings trend adjusted for notable items and timing differences over the past four years, along with the most recent trailing 12-month period.\nThis improved performance not only reflects a strong operating environment, but also the hard work of our global teams and the benefits of our new operating model that brings organizational alignment across the regions and, importantly, has shifted our culture to one of continuous improvement and capital discipline.\nSlide seven compares our first quarter SG&A to the prior year.\nWe achieved underlying addressable SG&A savings of $16 million, of which approximately 80% was related to indirect costs.\nCOVID-related restrictions continued to impact areas, such as travel, but we also realized lower employee and professional services costs.\nMoving to Slide 8.\nThe most recent trailing 12-month period, our cash generation, excluding notable items and mark-to-market timing differences, were strong at approximately $2.2 billion of adjusted funds from operations.\nThis cash flow generation enabled us to comfortably fund our cash obligations over the past year and retained approximately $1.4 billion to strengthen our balance sheet in support of our credit rating objective of BBB/Baa2.\nOn Slide nine details our capital allocation of adjusted funds from operations for the first quarter.\nAfter allocating $32 million of sustaining capex, which includes maintenance, environmental, health and safety and $8 million to preferred dividends, we had $493 million of discretionary cash flow available.\nOf this amount, we paid $71 million in common dividends to shareholders and invested $21 million in growth and productivity capex, leaving approximately $400 million of retained cash flow.\nMoving on to Slide 10.\nThe $400 million of retained cash flow and other cash sources, including proceeds from the sale of assets, more than offset our approximately $700 million of cash outflow this quarter for working capital.\nAs a result, net debt decreased by approximately $100 million.\nWe also took action to increase our availability under committed credit lines to $5.8 billion, leaving us with ample liquidity to support potentially higher working capital needs.\nAs you can see on Slide 11, we further strengthened our balance sheet during the quarter to a point where the entirety of our net debt funded 91% of our readily marketable inventory with the 90% balance of RMI being funded with equity.\nThe trailing 12 months adjusted ROIC was 18.7% or 12.1 percentage points over our RMI adjusted weighted average cost of capital of 6.6%.\nROIC was 13.4%, 7.4 percentage points over our weighted average cost of capital of 6% and well above our stated target of 9%.\nThe widening spread between these metrics reflects how we have been effectively using RMI in our operations as a tool to generate incremental profit.\nMoving to Slide 13.\nOur discretionary cash flow and cash flow yield have continued to increase, reflecting strong cash flow generation that is available for strengthening our balance sheet, investing in growth and returning to shareholders.\nFor the trailing 12 months, we produced a discretionary cash flow of almost $1.9 billion and a cash flow yield of nearly 29%.\nAs Greg mentioned in his remarks, taking into account our strong Q1 results, forward curves and market conditions, we've increased our full year adjusted earnings per share outlook from at least $6 per share to approximately $7.50 per share.\nThis is based on the following expectations.\nIn Agribusiness, full year results are expected to be up from our previous expectations, but down from 2020.\nIn Refined and Specialty Oils, we expect full year results to be up from our previous outlook and significantly higher compared to last year due to strong first quarter results and positive demand trends in North America.\nResults in Milling and Corporate and Other are expected to be generally in line with last year.\nIn noncore, full year results in our Sugar & Bioenergy joint venture are expected to be a positive contributor driven by improved sugar and Brazilian ethanol prices.\nAdditionally, the company expects the following for 2021: an adjusted annual effective tax rate in the range of 20% to 22%, net interest expense in the range of $230 million to $240 million, capital expenditures in the range of two -- $425 million to $475 million and depreciation and amortization of approximately $415 million.\nWith that, I'll turn things back over to Greg for some closing comments.\nBefore opening the call to Q&A, I want to provide some perspective on the balance of 2021.\nAs we noted, with our strong first quarter performance and what we see from the forward curves, we're forecasting full year earnings per share to be around $7.50.\nWhile we don't have full visibility in the back half of the year, the market and demand trends are favorable.\nWe expect higher volumes because of increased post-COVID foodservice demand in several countries as well as from the U.S. renewable diesel industry in the second half of the year.\nBecause of the work we've done, we now have the ability to pursue the type of projects that help us meet growing demand and continue to improve our platform.\nWe have a number of projects in various stages to enhance the efficiency of our core oilseeds business.\nWe're taking a thoughtful approach as we invest in our specialty fats and oils and our plant-based proteins businesses.\nAnd we're staying disciplined, but also recognize that the demand for sustainable products is providing us more opportunities than ever to grow our business as we continue to connect farmers to consumers.\nThe leadership team and I are incredibly proud of the entire Bunge team's continued focus on execution, and we're confident in our capabilities and the business model we have here at Bunge.\nWhile there's always more work to be done, we're making progress every day, and the results are evident.\n Assistant:", "chosen": "q1 gaap earnings per share $5.52.\nsees fy adjusted earnings per share about $7.50.\noptimistic that favorable demand environment in q1 will continue through 2021.\nincreasing full-year 2021 earnings per share outlook to reflect strong q1 and positive market trends.\nsees 2021 capital expenditures in range of $425 million to $475 million.\nqtrly adjusted net income per common share $3.13.\nin agribusiness, full-year results are expected to be higher than previous outlook, but still forecasted to be down from last year.\nbunge - in refined and specialty oils, full-year results expected to be up from previous outlook and significantly higher compared to last year.\n"}
{"prompt": "Human: Today, we will review the third quarter of 2020 and with me on the phone today are Norman Schwartz, our Chief Executive Officer; Ilan Daskal, Executive Vice President and Chief Financial Officer; Andy Last, Executive Vice President and Chief Operating Officer; Annette Tumolo, President of the Life Science Group; and Dara Wright, President of the Clinical Diagnostics Group.\nOur actual results may differ materially from these plans and expectations and the impact and duration of the COVID-19 pandemic is unknown.\nWe cannot be certain that Bio-Rad's responses to the pandemic will be successful that the demand for Bio-Rad's COVID-19-related products is sustainable or that Bio-Rad will be able to meet this demand.\nOur remarks today will also include references to non-GAAP net income and non-GAAP diluted income per share, which are financial measures that are not defined under Generally Accepted Accounting Principles.\nI'll now turn over the call back to Ilan Daskal, our Executive Vice President and Chief Financial Officer.\nNow, before I begin the detailed quarterly discussion, I would like to ask Andy Last, our Chief Operating Officer, to provide an update on Bio-Rad's operations in light of the current pandemic-related environment that we are experiencing globally.\nSo I'd like to take a few minutes to review our current state of operations around the world.\nBefore I begin, we would like to recognize our employees globally who have continued to work above and beyond to serve our customers during the pandemic.\nWe truly appreciate the hard work and dedication across our organization.\nAs a reminder, we have three key areas of focus as we continue to manage through this challenging period, the ongoing safety of our employees, continuing manufacturing operations to ensure product supply and support of our customers, and making sure we make progress on our core strategies.\nWe have now established routine practices around the world to improve employee safety.\nWe have adapted our policies and approaches to local conditions and requirements and are very pleased with the productivity we have been able to achieve.\nWork from home continues where required and for those in our facilities, we are continuing to implement broad safety procedures and we continue to experience minimized case numbers.\nIn the US, we have now implemented a fast turnaround testing solution for suspected cases using a Droplet Digital PCR test and can rapidly deliver results back to an employee.\nThis has enabled us to avoid significant work downtime, summing to over a full-year productivity equivalent so far.\nIn manufacturing, our operations teams continue to be flexible and meeting the demand shifts driven by the pandemic.\nWe have flexed well to meet the high demand for our PCR products which increased in Q3 and we have scaled back where needed, mainly for our Diagnostics products.\nWe are now past the majority of the initial scale-up issues we encountered with supply chain disruption early in the pandemic and believe we are well-positioned to meet future needs.\nLastly, we continue to work on our core initiatives and strategies, in particular in R&D, where we now have all our labs operational.\nNow I would like to review the results of the third quarter.\nNet sales for the third quarter of 2020 were $647.3 million, which is a 15.5% increase on a reported basis versus $560.6 million in Q3 of 2019.\nOn a currency neutral basis, sales increased 14.9%.\nOn a geographic basis, we experienced currency neutral growth across all three regions.\nWe saw a strong demand for products associated with COVID-19 testing and related research.\nHowever, we saw lower demand in the rest of our business.\nOverall in Q3, we have seen a gradual improvement in demand for both our Life Science and Diagnostics products in all regions as compared to Q2.\nGenerally, we are seeing most academic and Diagnostics Labs now running between 70% and 90% capacity and slowly continuing to improve.\nBiopharma labs are broadly running at a slightly higher capacity rate of 80% to 90% and we continue to monitor the situation closely.\nWe estimate that COVID-19-related sales were about $98 million in the quarter.\nSales of the Life Science Group in the third quarter of 2020 were $324 million compared to $215.7 million in Q3 of 2019, which is a 50.2% increase on a reported basis and a 48.8% increase on a currency neutral basis.\nThe majority of the year-over-year growth in the third quarter was driven by our core PCR products, Droplet Digital PCR, and Process Media.\nBoth core PCR and Droplet Digital PCR products revenue increases were largely COVID-19-related.\nProcess Media, which can fluctuate on a quarterly basis saw strong double-digit year-over-year growth in the quarter over the same quarter last year.\nExcluding Process Media sales, the Life Science business grew 53% on a currency neutral basis versus Q3 of 2019.\nGrowth in the overall Life Science segment was offset by continued softness in the academic research demand as these labs around the globe were operating below capacity.\nWe expect a continued gradual increase in lab utilization and are carefully monitoring the situation.\nOn a geographic basis, Life Science currency neutral year-over-year sales grew across all regions.\nWe continue to be encouraged by our Droplet Digital PCR business, which is becoming more broadly adopted in wastewater testing as the gold standard.\nDroplet Digital PCR is now being used at the Environmental Protection Agency, The Water Research Foundation and more than two dozen labs globally for wastewater testing, including the state of Michigan, which is establishing a standardized and co-ordinated network of COVID-19 monitoring systems across the states.\nIn addition, last month we launched two new PCR systems, the CFX Opus 96 and the CFX Opus 384, which strengthens our global response and contribution to the fight against the pandemic.\nWith the launch of the CFX Opus systems, Bio-Rad also introduced access to a cloud-based instrument connectivity, data management, and analysis platform.\nThese new PCR systems, along with our Droplet Digital PCR offering provides a complete solution for our customers.\nSales of Clinical Diagnostics products in the third quarter were $322.2 million compared to $341.8 million in Q3 of 2019, which is a 5.7% decline on a reported basis and a 5.9% decline on a currency neutral basis.\nOn a sequential basis, we experienced improved performance across all regions and product lines and we believe this reflects the recovery of routine testing trends.\nDuring the third quarter, strength in our quality controls products was offset by weakness across the rest of the Diagnostics portfolio.\nAlthough clinical labs have seen a significant negative impact by the pandemic, we are now experiencing a gradual recovery from the trough of Q2 and expect incremental recovery until the end of the year.\nWe will be closely monitoring the potential impact of the recent pandemic resurgence.\nOn a geographic basis, the Diagnostics Group posted declines across all regions.\nThe reported gross margin for the third quarter of 2020 was 56.7% on a GAAP basis and compares to 54.8% in Q3 of 2019.\nThe current gross margin benefited mainly from better product mix, higher manufacturing utilization, and lower service cost, tempered somewhat by higher logistics costs.\nAmortization related to prior acquisitions recorded in cost of goods sold was $4.8 million compared to $3.9 million in Q3 of 2019.\nSG&A expenses for Q3 of 2020 were $198.2 million or 30.6% of sales compared to $201.6 million or 36% in Q3 of 2019.\nWe continue with cost saving initiatives to reduce our SG&A.\nTotal amortization expense related to acquisitions recorded in SG&A for the quarter was $2.3 million versus $1.9 million in Q3 of 2019.\nResearch and development expense in Q3 was $59.5 million or 9.2% of sales compared to $47.9 million or 8.6% of sales in Q3 of 2019.\nQ3 operating income was $109.6 million or 16.9% of sales compared to $57.5 million or 10.2% of sales in Q3 of 2019.\nLooking below the operating line, the change in fair market value of equity securities holdings added $1,580 million of income to the reported results, and is substantially related to holdings of the shares of Sartorius AG.\nAlso during the quarter, interest and other income resulted in a net expense of $5.5 million compared to $2.1 million of expense last year.\nThe effective tax rate for the quarter was 21.9% compared to 22.8% in Q3 of 2019.\nReported net income for the third quarter was $1,315 million and diluted earnings per share were $43.64.\nThis is an increase from last year and is again substantially related to the changes in the valuation of Sartorius Holdings.\nMoving on to the non-GAAP results.\nLooking at the results on a non-GAAP basis, we have excluded certain atypical and unique items that impacted both the gross and operating margins as well as other income.\nLooking at the non-GAAP results for the third quarter, in cost of goods sold, we have excluded $4.8 million of amortization of purchased intangibles and a small restructuring benefits.\nThese exclusions moved the gross margin for the third quarter of 2020 to a non-GAAP gross margin of 57.5% versus 56% in Q3 of 2019.\nNon-GAAP SG&A in the third quarter of 2020 was 29.4% versus 35.5% in Q3 of 2019.\nIn SG&A, on a non-GAAP basis, we have excluded amortization of purchased intangibles of $2.3 million, legal related expenses of $6 million and restructuring and acquisition-related benefits of less than $1 million.\nNon-GAAP R&D expense in the third quarter of 2020 was 9.2% versus 8.5% in Q3 of 2019.\nIn R&D, on a non-GAAP basis, we have excluded negligible restructuring benefits.\nThe cumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from 16.9% on a GAAP basis to 18.8% on a non-GAAP basis.\nThese non-GAAP operating margin compares to a non-GAAP operating margin in Q3 of 2019 of 12%.\nWe have also excluded certain items below the operating line, which are the increase in value of the Sartorius Equity Holdings of 1,580 million and a small loss associated with venture investments.\nThe non-GAAP effective tax rate for the quarter was 22.5% compared to 25.5% in Q3 of 2019.\nThe lower rate this quarter was primarily driven by a change in our geographic mix of earnings and the taxation of our foreign earnings.\nWe now estimate the full year tax rate on a non-GAAP basis to be approximately 24%.\nAnd finally, non-GAAP net income for the third quarter of 2020 was $90.3 million or $3 diluted earnings per share compared to $48.6 million and $1.61 per share in Q3 of 2019.\nMoving on to the balance sheet.\nTotal cash and short-term investments at the end of Q3 were $1,160 million, an increase of $123 million from the end of Q2 of 2020.\nDuring the third quarter, our inventory increased by about $12 million from the second quarter of 2020.\nThe increase of inventory in Q3 of 2020 was driven by the continued expectation of higher demand for COVID-19 related products.\nWe expect inventory levels to come down over the next two quarters to three quarters.\nWe plan to use the cash on hand to repay the $425 million of outstanding senior notes in December.\nIn addition, the market value of our holdings in Sartorius AG has increased, which technically may deem us as an investment company under the 1940 Investment Company Act.\nWhile we are working on the resolution, our access to the capital markets may be restricted.\nWe feel that we have adequate resources to effectively run our business in the near term.\nDuring the third quarter, we did not purchase any shares of our stock, we had a total of $273 million available for potential share buybacks.\nFor the third quarter of 2020, net cash generated from operating activities was $135.7 million, which compares to $99.8 million in Q3 of 2019.\nThe adjusted EBITDA for the third quarter of 2020 was 22.9% of sales.\nThe adjusted EBITDA in Q3 of 2019 was 17%.\nNet capital expenditures for the third quarter of 2020 were $20 million and depreciation and amortization for the third quarter was $33.7 million.\nWe project that the full-year capex spend will likely be between $80 million and $90 million.\nMoving on to the guidance.\nWe continue to be uncertain about the duration and impact of the COVID-19 pandemic, although we do assume a gradual return to pre-pandemic activity levels and business mix.\nWith that in mind, we currently believe that the full year 2020 year-over-year currency-neutral sales to be up 5.9% to 6.3%.\nWe estimate 27% to 28% currency-neutral revenue growth for Life Science and estimate about 7% currency-neutral revenue decline for the Diagnostics Group in 2020.\nThis assumes that the fourth quarter will see a gradual improvement in non-COVID-19 related product sales and a smaller relative benefit of COVID-19 related product sales versus Q3.\nFull year non-GAAP gross margin is projected to be between 56.5% and 57%.\nR&D is around 9%.\nFull year GAAP operating margin between 16% and 16.5% and full-year adjusted EBITDA margin to be between 21% and 21.5%.\nOur significantly higher operating profit over the last year was driven by discretionary cost control measures and better product mix.\nAs our operations begin to return back to normal, we expect a gradual reversal of these benefits that we experienced in 2020.\nLastly, due to the uncertain nature of the current pandemic we will not host an Investor Day this year and instead look to host it in 2021 when business activity normalizes.\nWith that said, in December, we plan on updating you with our revenue growth and margin targets.\n Assistant:", "chosen": "q3 earnings per share $43.64.\nq3 sales $647.3 million versus refinitiv ibes estimate of $570.6 million.\nbio rad laboratories - currently believes full-year 2020 yoy currency-neutral sales may be up 5.9 to 6.3 percent.\n"}
{"prompt": "Human: We have posted a copy of that release as well as reconciliations of the non-GAAP measures used in today's call to the Investor Relations section of our website under the heading Financials and Filings.\nMike will focus his comments on Q3 performance as well as future catalysts and the outlook for our business, including Q4 full year 2021 guidance.\nDuring today's Q&A session, Mike and Dan will be joined by our Chief Medical Officers, Dr. Ian Meredith; and Dr. Ken Stein.\nBefore we begin, I'd like to remind everyone that on the call, operational revenue growth excludes the impact of foreign currency fluctuation and organic revenue growth further excludes acquisitions and divestitures for which there are less than a full period of comparable net sales.\nRelevant acquisitions for organic growth versus 2020 and 2019 include Preventice, Farapulse and Lumenis Surgical, which closed in March, August and September of 2021, respectively, as well as Vertiflex and BTG Interventional Medicines, which closed in May and mid-August of 2019, respectively.\nDivestitures include BTG Spec Pharma, which closed on March 1, 2021, and the global embolic microspheres portfolio and intrauterine health franchise, which were divested in August 2019 and second quarter of 2020 respectively.\nGuidance excludes the recently announced Devoro Medical and Baylis Medical acquisitions, which are expected to close in Q4 '21 and Q1 '22, respectively.\nFinally, growth goals of 6% to 8% ex-COVID represent comparisons between time periods in which results are not materially impacted by the COVID-19 pandemic.\nThey include, among other things, the impact of COVID-19 pandemic on the company's operations and financial results; statements about our growth and market share, new product approvals and launches, acquisitions, clinical trials, cost savings and growth opportunities, our cash flow and expected use, our financial performance, including sales, margins and earnings, as well as our tax rates, R&D spend and other expenses.\nFactors that may cause such differences include those described in the Risk Factors section of our most recent 10-K and subsequent 10-Qs filed with the SEC.\nThese statements speak only as of today's date, and we disclaim any intention or obligation to update them.\nI'm proud of our global team's execution despite the various challenges presented by the COVID surge in third quarter.\nThe third quarter was impacted by COVID more than we anticipated as the Delta variant surged globally and some electric procedures were deferred.\nWhile we aren't satisfied with this quarter's sales results, we delivered on our third quarter earnings per share and margin targets.\nAnd we're confident that as global vaccination rates continue to increase and COVID wanes, we are well positioned to achieve our long-term sales goals.\nWe continue to be excited and confident about the opportunities we laid out at our recent Investor Day, further enabled by our strategy of category leadership, entry into higher adjacent growth markets and tuck-in M&A.\nTotal company third quarter operational sales grew 10% versus 2020, while organic sales grew 11% versus '20 and 4% versus 2019, just below our guidance of 12% to 14% versus 2020 as Delta impacted procedure volume globally.\nDespite the temporary impact of procedure volumes, we saw strength in new product launches, generated robust clinical evidence and executed broadly across the portfolio.\nQ3 adjusted earnings per share of $0.41 grew 10.5% versus 2020 and 4% versus 2019, reaching the high end of our third quarter guidance range of $0.39 to $0.41.\nAdjusted operating margin at 25.6% continues to improve and was in line with our third quarter expectations.\nWe continue to be pleased with our cash flow with third quarter free cash flow generation of $360 million and adjusted free cash flow of $525 million.\nWe're updating our fourth quarter and our full year guidance ranges for both sales and EPS, which assumes some level of impact to procedures from COVID and staffing shortages.\nCompared to 2020, we target fourth quarter '21 organic revenue growth of 12% to 16% and full year growth of 18% to 19%.\nCompared to 2019, we target fourth quarter '21 organic revenue growth of 4% to 8% and for full year organic revenue growth of 5% to 6% versus 2019.\nOur fourth quarter adjusted earnings per share estimate is $0.43 to $0.45, and we're updating full year adjusted earnings per share to a revised range of $1.60 to $1.62.\nDan will provide more details on both sales and earnings per share performance and outlook, including the revenue contribution from our acquisitions this year.\nI'll now provide additional highlights in Q3 '21 results along with comments on our fourth quarter and '21 outlook.\nWithin the regions on an operational basis Q3 2020, the US grew 15%; Europe, Mid-East Africa grew 8%, Asia Pac grew 8% and the emerging market sales grew 18%.\nOperationally, despite the impact from Delta, EMEA delivered solid growth in third quarter across the majority of businesses and countries with notable strength in PI, EP and Endo, fueled by new and ongoing product launches like TheraSphere, POLARx and AXIOS.\nWe [Technical Issues] performance with strong utilization driving double-digit growth versus both '20 and 2019.\nAsia Pac was impacted by pandemic-related lockdowns in parts of the region, though growth in China remained very strong.\nWe're encouraged heading into fourth quarter in 2022 as countries within Asia Pac are reopening as vaccination rates increase and COVID cases decline.\nAlthough Japan was in a state of emergency throughout third quarter, we were able to advance new product launches, achieving Number 1 share position with our Ranger Drug-Coated Balloon as well as launching POLARx in October.\nChina continues to deliver excellent results and sales grew 14% versus 2020.\nWe continue to see momentum across the portfolio driven by complex PCI and imaging as well as new product launches like Eluvia and AXIOS.\nDigital tools are also playing a role, enabling virtual physician training and allowing us to expand our reach with differentiated products like IVUS.\nWe continue to expect double-digit full year 2021 growth from China versus both 2020 and 2019.\nI'll now provide some additional commentary on the business units.\nUrology and Pelvic Health sales grew 7% organically versus 2020.\nAnd the Lumenis acquisition closed in September, which expands the urology portfolio and stone offering to include the MOSES laser, which is complementary to the LithoVue single-use flexible ureteroscope in our broad portfolio of disposables that support kidney stone removal.\nThe prostate health franchise grew double digits with continued strength in our Rezum and SpaceOAR businesses, and we're excited to initiate two trials in this space within the quarter.\nThe global SABRE clinical trial, which will examine the effectiveness of SpaceOAR Vue in reducing late toxicity in patients receiving a stereotactic body radiotherapy treatment for prostate cancer; and the VAPEUR trial, which compares Rezum to dual drug therapy for BPH.\nOur elective procedures within the pelvic health portfolio were impacted by the third quarter surge in Delta but historical growth trends have shown a quicker recovery as COVID surges wane.\nIn Endoscopy, sales grew 11% organically versus 2020.\nOur market-leading global endoscopy portfolio continues to benefit from differentiated, innovative technology launches, including AXIOS, Resolution Ultra hemostasis clip, and single-use scopes.\nDuring the quarter, EXALT B received FDA clearance and is now available in both US and Europe, with physicians pleased with this image quality and suction capabilities.\nWe continue to make progress with EXALT-D and are launching the 1.5 enhanced EXALT-D design, which features improved physician ergonomics.\nAdditionally, we're pleased to now have approximately 40% of ERCP procedures qualify for additional reimbursement with NTAP approval as of October 1.\nIn Cardiac Rhythm Management, organic sales were flat versus 2020.\nS-ICD sales grew mid-single digits versus Q3 '19, supported by the launch of the enhanced electrode.\nWhile core CRM third quarter trends improved over first half '21 across both defib and pacer, we believe that growth likely lagged the market.\nLooking ahead, we anticipate stabilization in our core CRM growth exiting 2021 and to early 2022, supported by S-ICD and our differentiated HeartLogic offering.\nWithin our Diagnostics franchise, our LUX-Dx implantable cardiac monitor continues to gain share as physicians are pleased with the implant experience, technology and remote programming capability.\nOur Preventice business remains on track to deliver plus 20% growth for the full year versus 2020 on a pro forma basis, fueled by the broad and differentiated ambulatory ECG portfolio.\nElectrophysiology organic sales were up 10% versus 2020, driven by strong international sales in both Europe and Japan.\nInternational growth is well above market, driven by the innovative portfolio, including POLARx and STABLEPOINT.\nPOLARx was recently approved in Japan with the first cases occurring in October.\nIn addition, the FROZEN-AF trial completed enrollment, which represents an important step in bringing POLARx to the US with an expected launch in 2023.\nWe also closed our Farapulse acquisition in third quarter, which is the only commercially available PFA technology, and we are seeing strong early usage in a limited number of launched accounts in Europe.\nFinally, we announced our acquisition of Baylis Medical, further enabling our strategy of category leadership with a novel approach to left heart access.\nWithin the US, the Baylis platform is used in close to 40% of EP ablation procedures on the left side of the heart.\nFurthermore, it is used in left atrial appendage closure and mitral valve intervention.\nWe expect to close this acquisition in first quarter 2022.\nIn neuromodulation, organic revenue grew 2% versus 2020 as underlying procedure volumes was impacted by the Delta surge throughout much of the quarter.\nWithin our pain management franchise, we continue to see excitement for our WaveWriter Alpha SCS system and differentiated FAST algorithm as well as our Cognita digital solution.\nWithin deep brain stimulation, the majority of our accounts have transitioned to Vercise Genus, and we continue to drive new account openings as physicians are pleased with the integrated platform and personalized therapy.\nAnd last week, we received approval for our Essential Tremor indication and are excited to begin our limited launch in fourth quarter 2021, which expand our addressable market by $2 billion.\nIn Interventional Cardiology, organic sales grew 26% versus 2020, which includes a 1,200 basis point tailwind related to the WATCHMAN consignment sales return reserve taken in third quarter '20.\nOur WATCHMAN franchise had another strong quarter of double-digit growth as physicians continue to be pleased with the next-generation of FLX performance and differentiated clinical data.\nThis positive sentiment has been further supported by ongoing real-world clinical evidence presented at HRS demonstrating the high rates of effective LAA closure and low rates of complications post procedure.\nWe continue to innovate and are launching our Fixed Curve Sheath, offering greater deployment control and ability to reach an expanded range of anatomies.\nWe also anticipate enabling our US label to include DAPT to support physician and patient choice in patient implant care by year-end.\nIn TAVR, ACURATE neo2 continues to do well with physicians pleased with its clinical performance and ease of use, backed by strong real-world clinical data, resulting in approximately 20% market share in open accounts.\nMomentum continues with SENTINEL, our cerebral embolic protection device, which is exceeding 20% share in the US, where it's utilized.\nCoronary Therapies grew 8% versus 2020 as the China DES tender impact begins to annualize and our portfolio mix shift into higher growth markets continues to strengthen.\nWe continue to see excellent growth in complex PCI and imaging being driven by ROTAPRO and IVUS.\nWe also just received FDA clearance for AVVIGO II, our next-generation guidance platform.\nPeripheral Interventions consistently delivers with organic sales up 8% versus Q3 2020.\nTheraSphere was a standout once again and grew double digits in the quarter with continued momentum for the positive EPOCH trial, a first of its kind where TheraSphere was studied as second-line therapy where the primary endpoint of progression-free survival in patients with mCRC was met.\nAdditionally, we've begun patient enrollment in the MANDARIN trial, an important first step for bringing HCC treatment to China patients.\nIn arterial, our drug-eluting portfolio continues to perform well, growing double digits versus 2020 with positive late-breaking clinical data presented at VIVA earlier this month.\nEluvia, our drug-eluting stent exhibited superiority in the EMINENT trial compared to bare metal stents and 2-year data from the RANGER 2 trial demonstrated continued high rates, primary patency and significant reduction in reinterventions with our Ranger DCB.\nIn venous, we continue to push forward with our first patient enrolled in the HI-PEITHO trial.\nWe also had late-breaking clinical data from the KNOCKOUT PE registry presented at VIVA confirming the safety and efficacy of EKOS.\nBuilding our strategy of category leadership, we announced our acquisition of Devoro Medical in the WOLF Thrombectomy Platform, which is an innovative technology designed to rapidly capture and extract blood clots in arterial and venous systems while minimizing blood loss.\nWe look forward to closing this acquisition in fourth quarter '21.\nMore broadly, we're furthering our commitment to sustainability, and I'm proud to report that Boston Scientific is joining the United Nations Race to Zero campaign.\nAnd since 2017, we've reduced the BSC carbon footprint by 50% and are on track to meet our goal to be carbon neutral in all manufacturing and key distribution sites by 2030.\nWe're building on this foundation to establish ambitious science-based targets to set us on the path to net zero emissions across our entire value chain.\nWe are bullish about the future outlook of Boston Scientific.\nAt our recent Investor Day, we detailed our LRP plans for growth of 6% to 8% growth, operating margin expansion of 50 basis points or more each year and double-digit adjusted earnings per share growth.\nAnd I'll now turn things over to Dan.\nThird quarter consolidated revenue of $2.932 billion represents 10.3% reported revenue growth versus the third quarter of 2020 and reflects a $17 million tailwind from foreign exchange.\nOn an operational basis, revenue growth was 9.7% in the quarter.\nSales from the acquisitions of Preventice, Farapulse and Lumenis contributed 220 basis points more than offset by the divestiture of Specialty Pharmaceuticals, resulting in 10.6% organic revenue growth, slightly below our guidance range of 12% to 14% growth versus 2020.\nCompared to the third quarter 2019, organic growth was 4.1%, below our guidance range of 5% to 7%.\nThis 4.1% growth excludes $35 million in 2019 sales of divested intrauterine health, embolic beads and BTG Specialty Pharmaceuticals businesses as well as $117 million in 2021 sales of acquired businesses, which consists of half a quarter of BTG Interventional Medicines, a full quarter of Preventice and post-close revenue from Farapulse and Lumenis.\nSpend controls and a favorable tax rate drove Q3 adjusted earnings per share of $0.41, representing 10.5% growth versus 2020, 4% growth versus 2019 and achieving the high end of our guidance range of $0.39 to $0.41.\nAdjusted gross margin for the third quarter was 70.6%, in line with our expectations.\nWe expect slight sequential improvements to continue in Q4 as some headwinds remain, in particular, the transient cost of running plants with COVID-specific measures, increased freight costs and some price pressures on direct materials and wages.\nThird quarter adjusted operating margin was 25.6%, again, in line with our expectations, driven by spend control and lower travel offsetting the revenue headwinds.\nWe're pleased with our trajectory and continue to target adjusted operating margin to average 26% for the second half of this year.\nOn a GAAP basis, operating margin was 13.2% and includes a $128 million intangible asset impairment primarily related to VENITI, as we've made the decision to retire the VICI VENOUS STENT venous stent following our voluntary recall earlier this year.\nMoving to below the line.\nAdjusted interest and other expense totaled $104 million, again, in line with expectations.\nOur tax rate for the third quarter was 7.8% on an adjusted basis, favorable to our expectations, driven by the geographic mix of earnings.\nWe ended Q3 with 1,436 million fully diluted weighted average shares outstanding.\nAdjusted free cash flow for the quarter was $525 million, and free cash flow was $359 million with $465 million from operating activities, less $106 million net capital expenditures.\nOur goal remains to deliver adjusted free cash flow in line with 2020 approximately $2 billion as we continue to expect increased working capital investments in inventory and accounts receivable during the remainder of 2021.\nAs of September 30, 2021, we had cash on hand of $1.9 billion.\nWe continue to expect to close the acquisition of Devoro Medical in Q4 of this year and Baylis Medical Company in Q1 of 2022.\nOur top priority for capital remains tuck-in M&A, and we'll continue to assess additional opportunities in conjunction with our financial goals.\nI'll now walk through guidance for fourth quarter and full year 2021.\nFor the full year, we expect 2021 operational revenue growth to be in a range of 18% to 19% versus 2020, which includes an approximate net 30 basis point headwind from the divestiture of our intrauterine health franchise and Specialty Pharmaceuticals, partially offset by the acquisitions of Preventice, Farapulse and Lumenis.\nExcluding the impact of closed acquisitions and divestitures, we expect full year organic revenue growth to be in a range of 18% to 19% versus 2020 and 5% to 6% versus 2019.\nFor the organic comparison to 2019, full year 2019 sales exclude $50 million in sales of our embolic beads portfolio and intrauterine health franchise as well as $81 million in Specialty Pharmaceutical sales and at the midpoint of guidance, 2021 sales exclude approximately $530 million in sales from recent acquisitions, including [Technical Issues] BTG Interventional Medicines through mid-August, Preventice, Farapulse and Lumenis as well as $13 million of Specialty Pharmaceutical sales prior to divestiture.\nFor the fourth quarter 2021, we expect operational revenue growth to be in a range of 14% to 18% versus 2020, which includes an approximate net 180 basis point tailwind from the acquisitions of Preventice, Farapulse and Lumenis, partially offset by the divestiture of Specialty Pharmaceutical.\nExcluding the impact of acquisitions and divestitures, we expect Q4 organic revenue growth to be in a range of 12% to 16% versus 2020 and 4% to 8% growth versus 2019.\nFor the Q4 organic comparison to 2019, 2019 sales exclude $67 million in sales of our divested intrauterine health and Specialty Pharmaceuticals businesses.\nAnd at the midpoint of guidance, 2021 sales exclude $90 million -- approximately $90 million in sales from the acquisition of Preventice, Farapulse and Lumenis.\nWe continue to expect adjusted below-the-line expenses, which include interest payments, dilution from our VC portfolio and costs associated with our hedging program to be approximately $400 million to $425 million for the year.\nBased on year-to-date favorability, we now forecast our full year 2021 operational tax rate to be approximately 10% and our adjusted tax rate to be approximately 9%.\nWe expect fully diluted weighted average share count of approximately 1,439 million shares for Q4 2021 and 1,434 million shares for the full year 2021.\nWe are narrowing the range for full year 2021 adjusted earnings per share guidance to $1.60 to $1.62, which includes our update to sales guidance and considers Q3 performing at the high end of our guidance range.\nFor the fourth quarter, adjusted earnings per share is expected to be in a range of $0.43 to $0.45.\nPlease check our Investor Relations website for Q3 2021 financial and operational highlights, which outlines more detailed Q3 results.\nAndrew, let's open it up to questions for the next 35 minutes or so.\nIn order to enable us to take as many questions as possible, please limit yourself to one question and one related follow-up.\n Assistant:", "chosen": "q3 sales rose 10.3 percent to $2.932 billion.\nq3 adjusted earnings per share $0.41.\nsaw some softness this quarter.\nestimates net sales growth for q4, versus prior year period, to be in a range of about 13 to 17 percent on a reported basis.\nsees net sales growth for q4 of 2021, versus prior year period, to be in a range of about 13% to 17% on reported basis.\nsees q4 adjusted eps, excluding certain charges (credits), in range of $0.43 to $0.45.\n"}
{"prompt": "Human: We encourage you to consider the risk factors referenced there, along with our public filings with the SEC.\nPeabody had a very good third quarter with our results benefiting from current robust global coal market dynamics.\nStrong operational performance, coupled with increased seaborne pricing and global demand yielded quarterly results we have not seen since 2018.\nWe continue to advance actions to position the company to be resilient in all market cycles by expanding our margins, reducing our debt levels and removing obstacles to increase production.\nWe are excelling not only because of strong coal markets, but also due to the dedication and efforts of our talented workforce.\nAcross the globe, we are seeing record coal index prices in each market segment and demand returning to near pre-pandemic levels.\nThe near-term market outlook for all our operating segments is favorable, with strong market indicators and increased global demand, providing a compelling story for coal and Peabody.\nThe seaborne thermal and metallurgical coal markets are expected to remain tight in the near to medium-term as supplier response to elevated demand remains muted.\nHeavy rains in Indonesia, rail issues in Russia, production issues in Colombia and hampered domestic supply in China.\nAdditionally, gas supply constraints and low wind generation in Europe have all combined to exert positive pressure on the global thermal market, while the seaborne met market is being bolstered by robust steel production and decade-high steel margins and tight coal availability.\nFor 2022, with two million tons of incremental production expected at our met coal mines and thermal export production in line with 2021, we are well positioned and are looking forward to taking advantage of this demand and the margins that we anticipate will come with it.\nIn the U.S., thermal coal market indicators are also favorable with increased electricity demand and high natural gas prices leading to gas to coal switching and robust growth in coal generation as compared to prior year.\nOverall, electricity demand increased 3% over last year, with coal's share of electricity generation increasing to approximately 23% for the first nine months of 2021.\nNatural gas prices hit high levels this quarter that we have not seen since 2014, driving up coal generation demand.\nDuring the first nine months, utility consumption of PRB coal rose approximately 30% compared to prior year.\nHigh supply and demand balances are leading to high forward prices for natural gas.\nThose forward prices and strong coal export demand are supporting expectations of continued elevated coal prices in the near term.\ns PRB operations, we increased volumes and are trending toward the high end of our guidance range for 2021 and anticipate some incremental volumes next year.\nWe currently have some uncommitted tons for 2022.\nHowever, given current demand exceeds supply, we are only selling those uncommitted tons under multiyear contracts.\nAt our other U.S. thermal operations, we are ramping up volumes next year by approximately two million tons to meet increased customer demand.\nSo we only have a small portion left to be sold for 2022 and for 2023.\nNow turning to the quarter.\nOur operations were able to deliver projected volumes, offsetting the impacts of labor shortages and higher fuel costs.\nIn addition, we continue to invest in the future with increased equipment refurbishments and mine development.\nWithin our seaborne thermal segment, the Wilpinjong extension and the Wambo Open-Cut JV development projects continue to advance, with over $200 million of capital invested over the past three years.\nI'm happy to report the box cut development workloads completed at both projects in the third quarter, and we anticipate the Wambo JV to operate at full production run rates in Q4.\nOur seaborne thermal margins benefited from price increases of 66% in the quarter compared to the prior year, and the segment is on target to deliver higher export volumes in the fourth quarter as compared to prior quarters in 2021.\nOur seaborne met segment continues to deliver on efforts to expand margins through cost and productivity improvement initiatives as well as sales strategies.\nIn the quarter, the CMJV complex and Metropolitan delivered 36% higher volumes at 16% lower cost per ton as compared to the prior year.\nThe CMJV continued to realize productivity improvements at Metropolitan and Metropolitan reached planned longwall production rates.\nAt Metropolitan, we reached a long-term sales agreement that underpins the mine for the next three years with pricing linked to seaborne met coal pricing.\nAnd importantly, both Metropolitan and Shoal Creek completed renegotiated labor agreements.\nThe workforce has been back at Shoal Creek since early October, and we expect to restart production later this year.\nThe U.S. thermal mines delivered another solid quarter, generating significant EBITDA.\nAvailability of labor impacted production at several of our U.S. mines this quarter, but we see this improving through programs that we have put in place.\nAnd finally, robust U.S. coal market dynamics have allowed us to build a strong book of forward business.\nThe settlement of several long-term sales agreements and improved prices as compared to current levels.\nNotably, in addition to multiyear PRB contracts, we have reached agreements that will support the continued operation of our Twentymile Mine in Colorado for the next five years and assigned agreements in the Illinois Basin with increased pricing through 2025.\nOur globally diversified asset base, which makes us distinctly unique from any other U.S. coal company is allowing us to benefit from these market conditions.\nOur Q3 results were a confirmation of the value we can generate from our asset mix.\nDuring the quarter, we also continued to take actions to reduce our debt levels and raise cash to the issuance of common shares.\nTo date this year, we have reduced our debt levels by approximately $250 million.\nWe also took steps to reduce our closed mine and legacy liabilities through the sale of our Millennium and Wilkie Creek closed mines.\nThese actions are part of our commitment to enhance our platform to be resilient in all market cycles.\nWe are also progressing on multiple initiatives that will allow us to expand and improve near-term production.\nAs previously mentioned, Shoal Creek will be back in production later this quarter.\nAnd at Metropolitan, the longwall was producing at full run rates, resulting in significant year-over-year increases to our seaborne met export volumes.\nMoorvale South, which will result in improved quality and extended life at our CMJV is expected to be in production in the first half of 2022.\nAnd in the U.S., we are implementing plans to produce incremental volumes on our minds in the near-term, adding underground production units in the Illinois Basin and expanding development at our Wild Boar complex.\nIn addition, in the PRB, we are refurbishing and relocating equipment to enable increased production.\nOur long-term strategy remains to reweight investments toward seaborne markets, maximize U.S. thermal asset cash generation and enhanced financial strength through debt reduction.\nI'll now turn things over to Mark to cover the financials.\nThird quarter results demonstrated our ability to capture improved market conditions and generate substantial margins from our diverse asset portfolio.\nThe thermal segment, both U.S. and seaborne, as well as our improving seaborne met segment reported strong results.\nThird quarter sales were over $900 million; our highest in seven quarters, an increase by more than 30% from the prior year.\nReported revenue was $679 million, net of $238 million of unrealized mark-to-market losses.\nThose losses primarily related to economic coal hedges.\nAt September 30, we had hedges on 2.9 million metric tons, the majority of which were contracted in the first half of 2021 and relate to 2.1 million metric tons of expected production at our Wambo underground mine.\nThese tons are expected to be mined and settled at a rate of 1.4 million tons in 2022 and 0.7 million tons in 2023.\nThe hedge contracts support the profitability of the mine by securing average prices of $84 per metric ton through mid-2023 and are a key ingredient of a strategy to extend the expected life of the mine.\nThe remaining tons relate to brokered coal transactions and other blending and optimization activities, which will settle beginning in the fourth quarter and throughout 2022.\nNet loss attributable to common shareholders totaled $44 million, including recognition of the $238 million of unrealized mark-to-market losses.\nWe reported adjusted EBITDA of $289 million, more than double the $122 million reported in the second quarter and three times the prior year results of $95 million.\nImportantly, we took further action to enhance our financial strength, retiring an additional $93 million of senior secured debt in the quarter, resulting in a net gain from early debt extinguishment of $16 million.\nWe also retired an additional $30 million after September 30.\nThat brings debt retired this year to approximately $250 million, more than 16% of debt outstanding at January 1.\nIn the quarter, we raised net cash proceeds of $112 million by issuing nine million shares of common stock under the at-the-market equity program.\nSubsequent to September 30, we raised an additional $39 million and issued 2.8 million shares.\nOutstanding shares are now approximately 126 million, and we have about five million shares remaining available under the currently approved ATM program.\nAt September 30, we had $587 million of cash and cash equivalents, net of $240 million of cash margin posted related to the economic coal hedges previously discussed.\nWhen these tons are sold, we will realize either the currently higher spot price or cash margin will reverse as prices decline toward the hedged price.\nTurning now to the segment results.\nThe seaborne thermal segment generated EBITDA of $104 million and benefited from a $23 increase in average realized prices compared to the prior year.\nCosts per ton were higher than prior year due to lower production at Wilpinjong and the transition to the Wamba joint venture, in addition to unfavorable exchange rates, higher fuel and royalty costs.\nWilpinjong shipped 3.5 million tons in the quarter, including 1.6 million export tons at an average cost of $26 per ton.\nWilpinjong realized average sales price of $42, resulting in EBITDA margins of approximately 40%.\nWilpinjong recorded $56 million of adjusted EBITDA and had $145 million of cash at September 30.\nThe seaborne met segment generated EBITDA of $57 million with an average realized price of $120 per ton and costs of 82, resulting in 32% margins.\nThird quarter met shipments were approximately 400,000 tons higher than last year due to higher production at Metropolitan and the CMJV.\nTotal costs for the seaborne met segment were lower by more than $15 per ton compared to prior year due to elevated costs at Shoal Creek in 2020, and this despite higher royalties on favorable exchange rates and higher fuel prices in the current quarter.\nThe continued improvement in costs and recent rise in international coal prices demonstrate the value of our seaborne met segment to the company's diversified portfolio of mines.\nIn the U.S., our mines delivered $82 million of EBITDA despite challenges with labor availability and COVID related absenteeism impacting production at several operations.\nOur PRB mine shipped 22.7 million tons in the quarter at a 15% margin.\nThe other U.S. thermal mines shipped to combined 4.5 million tons and generated 24% EBITDA margins.\nBoth the PRB and other thermal segment costs increased due to higher levels of planned equipment maintenance and higher fuel prices.\nIn the PRB, higher overburden removal and weather events also impacted cost and production for the quarter.\nLooking ahead through the remainder of the year, we anticipate higher seaborne thermal volumes, including the three million to four million export tons, of which approximately 50% are un-priced.\nCosts are expected to be lower than the third quarter as the Wambo Open-Cut is at full production and Wilpinjong development is complete.\nWilpinjong volumes are expected to be approximately four million tons with two million export tons to finish the year with its strongest quarter.\nThe seaborne met segment is expected to ship one million to 1.5 million tons in the fourth quarter, with 75% of those tons on price.\nWe anticipate production at Shoal Creek to recommence in the second half of the fourth quarter, with ramp-up continuing through the first quarter of next year.\nWe are planning for PRB and other U.S. thermal volumes to be flat with third quarter levels and costs for both segments to be slightly higher in the fourth quarter due to mix.\nFourth quarter cash flows are expected to increase substantially over third quarter levels as we continue to see favorable pricing in each of our segments and the cash margin related to coal hedges begin to reverse.\nLastly, we will continue to be disciplined, taking advantage of strong markets, controlling costs and further reducing debt.\n Assistant:", "chosen": "q3 revenue $679 million.\nreached labor agreements at both our metropolitan and shoal creek mines which paves way for higher met coal production next year.\ncontinue to focus on long term with a disciplined approach to cost control, pricing strategies.\nshoal creek is anticipated to begin production in second half of q4, with ramp up through q1 of 2022.\n"}
{"prompt": "Human: Our discussion today includes certain non-GAAP financial measures, which provide additional information we believe is helpful to our investors.\nThese measures have been reconciled to the related GAAP measures in accordance with SEC regulations.\nPlease consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the SEC.\nBarnes Group delivered a very good quarter to begin 2021, with the recovery we had anticipated to occur later in the year starting a little earlier than expected.\nStrong order intake continuing sequential revenue growth now for the third consecutive quarter and better than expected earnings performance add confidence to our view that the second half of the year will show meaningful recovery progress.\nFor the first quarter, organic sales were down 10% compared to a year ago as a result of lower volumes at Aerospace.\nHowever, our Industrial segment generated high single-digit organic growth, which was better than our February expectation given solid orders and sales in March.\nWhile we previously envision business improving as the year progressed, now with the stronger momentum exiting the first quarter, we have increased our outlook for the year.\nEarnings per share were $0.38, down 46% from last year's adjusted $0.71, so firmly exceeding the high end of our February expectation.\nMoving now to a discussion of end market dynamics, beginning with Industrial.\nOur Industrial segment had a strong first quarter, with each of our SBUs generating year-over-year organic sales and revenue growth.\nFor the segment, orders were up 25% organically, with a book to bill of approximately 1.1 times.\nSequential orders were up 7% further exemplifying the momentum we're seeing.\nOn a macro level, manufacturing PMIs in the US and eurozone remain particularly robust.\nChina, while a bit softer, remains an expansion territory.\nAnd despite the semiconductor issue that's impacting automotive bills, IHS still predicts 2021 global production to be up 12% over last year.\nWithin the segment, our Molding Solutions business had strong orders across all brands, up 35% organically.\nOur larger end markets, automotive, medical, packaging and personal care, each saw in excess of 25% orders growth, some well above that.\nSequentially, orders improved high single digits, marking the fourth quarter in a row of sequential growth.\nOrganic sales were up mid-single digits, while sequential sales were up low single digits.\nBook-to-bill was approximately 1.1 times.\nBacklog, which is predominantly our longer cycle mold systems, grew by approximately 25% year-over-year and low double digits from the fourth quarter of 2020.\nThere is definitely a lot to like about the activity of Molding Solutions and the business has been recently adding more talent to the sales and marketing team with a clear focus on driving long-term growth and margin expansion.\nWhile near-term investments in such talent coupled with our innovation and digital initiatives, that I discussed last quarter, will hinder short-term margins.\nWe expect long-term performance to benefit [Phonetic].\nOur 2021 expectation for Molding Solutions has improved, as we now forecast organic sales growth to be in the low teens.\nMoving to Force & Motion Control.\nOrganic orders were up low double digits with organic sales up high single digits.\nFMC via sheet metal forming end market is seeing the benefit of its automotive customers push to electric and hybrid vehicles.\nYear-over-year orders are up across each of our primary geographic markets, North America, Europe and China.\nLikewise, we're seeing good demand in our general industrial end markets, particularly heavy-duty truck and industrial equipment.\nOur FMC sales growth expectation has likewise increased, as we now anticipate organic sales to be up in the mid-teens for 2021.\nEngineered Components generated organic orders growth in excess of 25% and organic revenue growth in the low double digits.\nSequentially, we saw a modest growth in orders and sales, constrained somewhat by the automotive semiconductor concern.\nAs a result of this issue, we estimate a first quarter impact of approximately $1 million, with the second quarter impact likely to be in the range of $4 million to $5 million before recovering in the second half.\nGeneral industrial markets remain very healthy.\nOur 2021 outlook has increased for this business as well with organic sales now forecast to be up mid-teens.\nMoving to Automation, we continue to see sequential performance in both orders and sales, up low teens and high-single digits, respectively.\nOn a year-over-year basis, organic sales were up high single digits and organic revenues up mid-teens.\nA very good quarter of growth and execution from the Automation team.\nDemand for our end-of-arm tooling solutions in automotive, medical and pharma and industrial automation applications remain good, as has been the trend now for a few quarters.\nWe now expect 2021 to deliver total growth of 20%, with organic growth in the mid-teens, again, better than our February expectation.\nOverall, for the Industrial segment, we see 2021 organic growth in the mid-teens, with operating margins of approximately 13%.\nMoving now to Aerospace.\nOur Aerospace business experienced continuing impact from the pandemic as OEM sales were down 32% from the prior year and aftermarket sales were down 48%, not surprising as commercial aviation remain significantly disrupted.\nHowever, we still believe that the bottom is behind us and that we're slowly recovering.\nCase in point for the third quarter in a row, we have seen total Aerospace sequential sales improve.\nIn the first quarter, the sequential improvement was driven by our MRO business.\nOur expectations for the Aerospace industry overall has not changed.\nWe continue to believe that OEM production levels for narrow bodies will show modest improvement, while wide bodies will remain pressured.\nWe did see a second consecutive quarter of good orders and OEM book-to-bill was approximately 1.5 times.\nIn the aftermarket, industry challenges of lower aircraft utilization, weakened airline profitability and government imposed travel restrictions all remain.\nRecovery will depend on the pace and effectiveness of vaccinations.\nDomestic travel activity will proceed any improvement in international travel.\nWe continue to expect aftermarket activity to gradually improve beginning in the second half of 2021.\nIn the meantime, the Aerospace team continues to execute on several items to best position our business for recovery.\nFor example, in the first few months of the year, we completed an extension of our West Chester, Ohio facility, expanding our capabilities, received supplier recognitions from Boeing and Rolls-Royce and announced a significant B-2 Bomber Exhaust System Contract award from Northrop Grumman.\nOur 2021 expectation as for OEM sales to be up mid-single digits over 2020 and spare parts down in the mid-teens, both are unchanged from our prior view.\nOur forecast for MRO is slightly improved, now down low single digits versus our prior view of been down mid-single digits.\nSegment operating margin is anticipated to be approximately 13%.\nJulie is a proven leader with significant experience, leading the financial operations of global businesses.\nHer extensive background and proven strategic leadership in corporate finance, financial planning and analysis, mergers and acquisitions, and risk management will help us advance our long-term profitable growth strategy.\nIn closing, we're off to a good start in 2021.\nFavorable macroeconomic indicators and our solid orders generation provide us with a high degree of confidence in our improved outlook for the year.\nHowever, that's not to say there aren't challenges that remain, so our teams are proactively implementing risk mitigation plans.\nAs we move forward, we'll continue to add the necessary talent and skill sets to enable us to drive growth and improve profitability.\nThose efforts will be supported by our organic investments in innovation, digitalization and strategic marketing.\nOur focus remains squarely on controlling our own destiny and positioning the Company to prosper as global markets recover.\nLet me begin with highlights of our first quarter results on Slide 4 of our supplement.\nFirst quarter sales were $302 million, down 9% from the prior year period with organic sales declining 10% as ongoing impacts from the pandemic offset our Aerospace end markets.\nThe divested Seeger business had a negative impact of 2% on sales, while FX had a positive impact of 3%.\nOperating income was $32.4 million versus $49.3 million a year ago.\nCompared to last year's adjusted operating income of $51.7 million, the first quarter was down 37% and operating margin of 10.7%, decreased 490 bps from last year's adjusted 15.6%.\nIt's important to keep in mind that this result was not unexpected.\nThe first quarter of last year saw Aerospace aftermarket performance -- saw record Aerospace aftermarket performance, which generated very strong margins.\nInterest expense was $3.9 million, a decrease of $400,000 as a result of lower average borrowings, offset in part by a higher average interest rate.\nFor the quarter, our effective tax rate was 28.1%, lower than last year's 31.5% tax rate.\nThe decrease is largely due to the absence of tax expense related to the completed sale of the Seeger business and the reduction of the statutory tax rate at one of our international operations, both of which occurred in the first quarter of 2020.\nOffsetting these items is the impact of the global intangible low taxed income tax or GILTI tax on foreign earnings in the first quarter of 2021.\nNet income was $19.4 million or $0.38 per diluted share, compared to $29.7 million or $0.58 per diluted share a year ago.\nOn an adjusted basis, net income per share was down 46% from last year's $0.71.\nLast year's first quarter adjusted net income per diluted share excluded $0.13 of Seeger divestiture adjustments.\nTurning to our segment performance, beginning with Industrial.\nFirst quarter sales were $220 million, up 10% from a year ago.\nOrganic sales increased 8%.\nThe foregone sales from the Seeger divestiture had a negative impact of 3%, while favorable FX primarily driven by the euro to US dollar exchange increased sales by 5%.\nRelative to the fourth quarter of 2020, sequential sales were up 5%.\nSo good news on the revenue front with three sequential quarters of improvement and a positive year-over-year result.\nIndustrial's operating profit for the first quarter was $21.3 million versus $17.9 million in the prior year period.\nOperating profit increased from the contribution of higher volumes and productivity improvements.\nThese were offset in part by higher personnel costs, including incentive compensation.\nLast year we saw a reduction in the quarter for incentive comp, while this year sees an uptick based on performance expectations for 2021.\nOn an adjusted basis, which excludes $2.4 million of Seeger divestiture adjustments last year, first quarter operating income was up 5% from last year's $20.3 million.\nCompared to a year ago, adjusted operating margin was down 50 bps from 10.2%.\nOne of the contributing factors is the additional investments being borne by the Industrial segment.\nAs Patrick mentioned, these investments squarely put a focus on our long-term growth strategy.\nWhile our end markets and businesses within Industrial showing -- are showing signs of the solid recovery, there are some supply chain concerns related to raw material availability and inflation, as well as increased freight costs.\nWith respect to raw materials, we've seen instances where certain customers have extended the time horizons of their order commitments, looking to ensure availability of supply and acknowledging the longer lead times required for some materials.\nIn the first quarter, we experienced approximately $1 million of combined freight and material inflation in the Industrial segment.\nFor the full year, we expect an impact of about $6 million, which is built into our outlook.\nOur teams are working on [Phonetic] these issues, looking to decrease the risk exposure and to take actions to offset the inflation where appropriate.\nMoving to Aerospace, sales were $82 million for the first quarter, down 38% from last year.\nOperating profit of $11.1 million was down 65%, primarily driven by the lower sales volume.\nOperating margin was 13.6%, versus a strong 23.9% a year ago.\nYou may recall, last year's margin was a high watermark, driven by the contributions of the aftermarket.\nAerospace OEM backlog ended the quarter at $600 million, up 5% from the fourth quarter and we expect to ship 45% of this backlog over the next 12 months.\nFirst quarter cash provided by operating activities was $36 million, a decrease of $12 million versus a year ago, free cash flow was $28 million, versus $35 million last year, and capital expenditures of $8 million were down about $4 million from a year ago.\nRegarding the balance sheet, our debt-to-EBITDA ratio, as defined by our credit agreement, was 3.1 times at quarter end, essentially flat to the prior quarter result.\nThe Company is in full compliance with all covenants of our credit agreements and maintains adequate liquidity to fund operations.\nWhile we anticipated the leverage ratio to peak with our first quarter 2021 results, we performed better than expected with the stronger financial results of the first quarter.\nWe see leverage further declining from this point absent any acquisition activity.\nOur first quarter average diluted shares outstanding was 51 million shares.\nWe now expect to resume some share repurchase activity to offset equity compensation dilution, with respect to incremental share repurchases that will depend on a number of factors related to capital deployment and growth opportunities that are available to us.\nTurning to Slide 5 of our supplement, let's discuss our updated financial outlook for 2021.\nWe now expect organic sales to be up 10% to 12% for the year, an increase from our prior view of up 6% to 8%, driven by stronger industrial growth.\nFX is expected to have a 2% favorable impact on sales, while divested revenue -- divested Seeger revenues will have a small negative impact.\nOperating margin is forecasted to be approximately 13%.\nAt this point, we're not anticipating significant residual restructuring charges to come through, so no forecasted adjustments to 2021 net income.\nEPS is expected to be in the range of $1.78 to $1.98, up 9% to 21% from 2020's adjusted earnings of $1.64, that expectation is an increase from our prior view of $1.65 to $1.90, and we expect the first half of the year to contribute approximately 43% of 2021's earnings.\nA few other outlook items.\nInterest expense is anticipated to be approximately $16 million, while other expense is forecasted at [Phonetic] $8 million, both a bit better than our prior view.\nWe now expect capex to be approximately $50 million, down $5 million, average diluted shares of 51 million and cash conversion of over 100% are consistent with our prior outlook.\nAnd lastly, we forecast a full year tax rate of approximately 30%.\nHowever, we continue to analyze potential tax planning strategies to manage and reduce our overall tax cost.\nTo close, a very good start to 2021, supported by healthy orders for both segments.\nWith our focus on driving growth across the organization, we'll continue to invest in the business through capital expenditures and the funding of key strategic initiatives.\nWe believe that these investments will help us accelerate the recovery in our financial performance.\nLeverage remains very manageable and should improve from this point, so the balance sheet can accommodate our approach.\n Assistant:", "chosen": "q1 gaap earnings per share $0.38.\nq1 sales fell 9 percent to $302 million.\n2021 earnings per share outlook increased to $1.78 to $1.98.\nnow expects 2021 organic sales to be up 10% to 12%.\ncompany forecasts 2021 capital expenditures of approximately $50 million.\n"}
{"prompt": "Human: While we are making those statements in good faith, we do not have any guarantee about the results we will achieve.\nDescriptions of the risk factors are included in the documents we filed with the SEC.\nAlso, we will be discussing some non-GAAP financial measures.\nReferences to adjusted items, including organic net sales, refer to measures that exclude items management believes impact the comparability for the period referenced.\nToday, Dave and I will discuss our strong fourth quarter and fiscal 2021 results, our expectations for fiscal 2022, and our perspective on how the Conagra Way playbook positions us for continued success in this dynamic environment.\nSlide 5 lays out the key points we're going to cover today.\nAs you saw in our release, we reported very strong results for fiscal 2021 and we could not have done so without our people executing the Conagra Way with excellence.\nTheir dedication enabled us to capitalize on an unprecedented time of consumer demand.\nOver the last year, we acquired and retained multiple years' worth of new consumers, and we grew share across categories, all while continuing to invest in the future.\nThis translated into strong growth across the portfolio.\nWe saw continued strength in frozen and snacks, as well as increased relevancy for our large staples business.\nThe work we've done modernizing and premiumizing our portfolio continues to pay off.\nWe believe our brands are healthier than ever and well-positioned to manage through the current inflationary challenges.\nBut I can tell you now that we're taking aggressive actions on a number of fronts.\nIt's also important to note that our plans provide for continued brand-building investments to drive consumer demand and further enhance brand health.\nOur business remains very strong, but we are revising our fiscal '22 guidance to reflect the lag effect associated with the aggressive mitigating actions we are taking.\nEssentially, we see fiscal '22 as a tale of two halves with the lag effect concentrated in the first half and particularly in Q1.\nWe expect many of our actions will start to flow through the P&L in Q2, setting up a second-half adjusted earnings per share in line with what was assumed for H2 within our prior guidance.\nGiven our resiliency over the last year and the compelling consumer trends we're continuing to track, we remain confident in the underlying strength of the business and the opportunities ahead for long-term value creation.\nFinally, we plan on hosting an investor meeting next spring to provide an update on our progress and discuss fiscal '23 and beyond.\nBe on the lookout for more information regarding the event.\nWe hope you can join us.\nSo with that as the backdrop, let's jump into the agenda for today's call.\nWe'll start with our business update and then cover our priorities and value-creation opportunities in fiscal 2022.\nAs you can see on Slide 7, we ended fiscal 2021 with a strong fourth quarter that was in line with our guidance.\nAs you know, our Q4 growth rates were impacted by the unprecedented demand we experienced in 2020 when at-home food consumption surged due to the onset of the pandemic and organic net sales increased 21.5%.\nAnd as you can see, on a two-year CAGR basis, organic net sales for the fourth quarter increased by more than 4% and our two-year adjusted earnings per share grew by more than 22%.\nOn a full-year basis, our organic net sales, adjusted operating margin, and adjusted earnings per share were all up materially versus fiscal 2020.\nContinued execution of the Conagra Way playbook served as the foundation for our strong fiscal 2021 performance.\nWithin our industry, success is defined by creating meaningful and lasting connections between consumers and brands.\nWe believe that our playbook is the most effective framework for delivering on that objective.\nOur modern approach to brand building is based on three tenets.\nFirst, it all starts with developing superior products through perpetual modernization.\nSecond, we ensure the physical availability of our items, both in-store and online.\nAnd third, we drive the mental availability of our products to ensure we remain salient and relevant with consumers.\nThe foundation of the Conagra Way to brand building is our people.\nOur exceptional results this past fiscal year reflect our team's dedication to executing the Conagra Way each and every day.\nI'm extremely proud of the team's resilience in responding to the volatile environment throughout the year.\nWe know our long-term performance is a function of the caliber and engagement of our team.\nThat's why we're continuing to invest in our current employees and keeping the door open to talented new additions.\nIn fiscal '21, our team's engagement was clearly evident in their intense focus on capturing opportunities.\nAs I mentioned earlier, the pandemic created a unique environment for new consumer acquisition, and we were able to capitalize by having modern products available when and where consumers wanted them.\nWe estimate that over the course of the last fiscal year, we gained the equivalent of more than four years' worth of incremental new buyers.\nCOVID effectively amplified new product trials at a level rarely seen in our industry.\nIn the chart on the left, on Slide 10, you can see the increase in household penetration across our portfolio during fiscal 2021, clear evidence of the magnitude of our new consumer acquisition.\nBut what's even more encouraging is the chart on the right.\nWe didn't just acquire new consumers.\nThe data shows that our new consumers discovered the tremendous value proposition our portfolio provides, and we're proud that our products are repeatedly appearing in pantries and freezers across America.\nImportantly, our performance over the last year was not only strong in the absolute, it was strong relative to the competition.\nWe performed better than our peers in terms of household penetration and repeat rates and we continued to gain share.\nKeep in mind that we delivered these results despite hitting an upper control limit on the amount of product we could produce in certain categories.\nIf we had additional capacity, these numbers would likely be even more impressive.\nOur disciplined approach to modernization and innovation across our product portfolio is key to our success.\nAs you can see on Slide 11, we delivered an impressive innovation slate in fiscal '21.\nOur performance on innovation launched and sold in fiscal '21 surpassed the record performance we set in fiscal '20.\nAnd importantly, our innovation outperformed the competition.\nThis strong outperformance is why even during the height of the pandemic, customers continued to ask for our new products.\nThis is a clear testament to the innovation engine at Conagra and the solid reputation we built with customers and consumers.\nSlide 12 highlights a handful of our important launches in fiscal '21.\nWe continued our successful Gardein co-branding strategy with the launch of Marie Callender's pot pie with Gardein protein.\nWe continued to modernize and premiumize Birds Eye with the launch of vegetable bakes that are as good as any side dish you can order from a Chicago steakhouse.\nWe began modernizing the Hungry-Man brand with the launch of the Double Meat platform that satisfies the hungriest of appetites.\nWe also continued to work on Duncan Hines with the Instagrammable EPIC line of baking kits along with our keto-friendly mixes.\nAnd we found even more ways to keep evolving our Healthy Choice Power Bowls with the launch of these vegetarian and vegan options.\nI'm particularly excited about the Birds Eye breaded vegetables platform we launched in fiscal '21.\nIt's already started to take off with three of the cauliflower wings products being among the best-selling SKUs in the frozen vegetable category this year.\nIf you haven't tried them, you're missing out.\nWe supported the launch with a robust advertising campaign to drive awareness and mental availability.\nThis campaign included digital, social, and TV advertising.\nIn addition to mental availability, we remain focused on the physical availability of our products in Q4, whether through brick-and-mortar or online.\nSlide 14 demonstrates how our ongoing investments in e-commerce have continued to yield results.\nGrowth in our $1 billion e-commerce business continued in fiscal 2021, both against our peers and as a percentage of our overall retail sales.\nWe consistently outpaced the entire total edible category in terms of e-commerce retail sales growth during the year.\nE-commerce sales now represent nearly 8% of our total retail sales.\nAnd importantly, our success in fiscal 2021 was broad-based.\nJust take a look at Slide 15.\nTotal Conagra retail sales grew an impressive 11.7% on a two-year basis in the fourth quarter with contributions from each of our retail domains.\nOn a two-year basis, we delivered double-digit growth rates in retail sales across our frozen and snacking domains and a solid 5.2% growth rate in staples.\nLet's dig into each domain a bit more, and let's start with frozen on Slide 16.\nOver the last two years, our frozen retail sales have surged across desserts, single-serve meals, and multi-serve meals.\nWe've also seen consistent growth in retail sales of frozen vegetables.\nAll in, our strategic frozen business grew 13.5% over the two-year period ending in fiscal 2021.\nAnd importantly, our buyers repeatedly returned to our frozen products.\nAs you can see on Slide 17, consumer repeat rates for our leading frozen brands have been stronger than for the competition.\nTurning to Slide 18.\nOur snacks business has seen similar success, delivering strong two-year retail sales growth of 21% in fiscal '21, led by increases of more than 25% across hot cocoa, microwave popcorn, ready-to-eat pudding, and meat snacks.\nAs with frozen, consumer repeat rates for a number of our leading snack brands beat those of competition during the fiscal year.\nStaples was also a meaningful contributor to our success.\nOn Slide 20, you can see the strength of our staples portfolio.\nStaples retail sales increased 5.2% over the past two years, spurred by steady growth across key staples categories.\nHaving increasingly rediscovered the joys of cooking last year, consumers reengaged with our staples products in a meaningful way.\nAs you can see on Slide 21, the solid performance from staples was not isolated.\nWe saw strong two-year growth rates across many of our largest staples brands.\nOverall, we're pleased by the performance across our retail business, both within the quarter and over the fiscal year.\nAnd as fiscal '22 begins, we believe our branded portfolio is stronger than ever.\nSo let's talk about what we see looking ahead.\nWe have a unique opportunity in fiscal '22 to leverage our current momentum and maximize long-term value-creation potential.\nNew behaviors and habits created during the pandemic resulted in an elevated and sustained level of at-home eating.\nShoppers are engaging or reengaging with our products now more than ever, creating a larger, high-quality consumer base.\nTo sustain this engagement, we plan to continue making investments in the physical and mental availability for our products.\nThis includes building additional capacity to fulfill consumer demand, making further strategic e-commerce investments, pursuing efficient and thoughtful marketing campaigns, and introducing a robust fiscal '22 innovation slate.\nAs we invest in our brands to create new and stronger connections with our consumers, we will also strategically navigate the inflationary environment that accelerated quickly during Q4 and continues today.\nWe're aggressively pulling on all our margin levers to minimize the inflation-related profit lag during the first half.\nRegardless of near-term cost challenges, we plan to stay focused on the long-term priorities of our business, including continued investments to further support our brands.\nOur objectives are ultimately focused on driving long-term value creation achieved by pursuing growth in frozen and snacks and maintaining our staples portfolio as a reliable contributor.\nLet's spend a few minutes on our fiscal '22 innovation plans for each of the domains.\nI'm excited to provide you a preview of what we have in store.\nStarting with frozen, once again, we have high expectations for our innovation slate.\nSlide 24 highlights some of the frozen products that will be rolled out during the year.\nHungry-Man has responded very well to recent innovations.\nWe're extending its new Double Meat platform with this Double Chicken Bowl, which is sure to satisfy any big, bold appetite.\nOur broad snacks portfolio also provides us with plenty of opportunities to innovate.\nAnd here is just a sample of our fiscal '22 slate.\nAmong the products on deck, household favorite Duncan Hines will soon be offering additional EPIC kits with versions of classic cookie mixes that combine many of the brand's delicious ingredients.\nOur highly relevant staples portfolio is also receiving a new slate of innovation as shown on Slide 26.\nNotably, our great P.F. Chang's brand is launching a variety of new restaurant-inspired products.\nAlso, as more consumers seek plant-based foods, Gardein continues to expand its portfolio with new offerings, including a new line of plant-based chili.\nOverall, we're confident that the investments we're making in product innovations across our portfolio will produce strong ROIs.\nUltimately, long-term brand health is dependent on the type of perpetual modernization that we're committed to here at Conagra.\nBefore I turn things over to Dave to walk you through the financials, I want to quickly touch on our thoughts around inflation and our updated guidance for fiscal 2022.\nDave will discuss the cost environment in more detail, but I want to reinforce that we are aggressively pulling on all of our levers to navigate the current inflationary environment.\nWe began executing our aggressive response plan in fiscal 2021, given the inflation we were already seeing and talking to you about in Q3.\nThe incremental inflation that arose as Q4 unfolded called for additional actions, and you can be assured that we've begun to respond accordingly.\nAs I've shared in my remarks, we're also not pulling back from investing in the business.\nWe remain squarely focused on long-term value creation.\nBut I also know that a more short-term focused question on all of your minds is, will Conagra take list pricing increases?\nAnd the short answer is yes.\nIn fact, we began implementing pricing actions on some of our products in the fourth quarter related to the initial inflation we experienced.\nThe very early read on the data from those actions is that our elasticities look good so far, and we have more pricing coming.\nBecause our pricing is being implemented strategically and thoughtfully, we're cautiously optimistic that our elasticities will remain strong as our full array of pricing enters the market in fiscal '22.\nThis timing mismatch is expected to be particularly impactful in H1 and more specifically in Q1.\nThe resulting pressure on our first-half margins impact our full-year profit.\nAnd as you saw in the release, we're updating our fiscal '22 guidance as a result.\nOrganic net sales growth is expected to be roughly flat to fiscal '21.\nThis results in a CAGR over the three years ending fiscal '22 of approximately 3.5%, compared to our original target of 1% to 2%.\nAdjusted operating margin is expected to be approximately 16%, and adjusted earnings per share is expected to be approximately $2.50.\nAlthough the substantial increase in inflation over the last few months has negatively impacted our profit guidance for the year, we remain confident in the underlying strength of the business.\nEven with the lag effect I've discussed, our full-year guidance delivers significant improvements compared to our fiscal '19 starting point.\nImportantly, we expect that the impacts of our aggressive mitigating actions will cause second-half adjusted earnings per share to rebound to be in line with what was assumed for H2 within our prior guidance.\nWe're excited about the path the business is on, and we're ready for another dynamic year ahead.\nDave, over to you.\nI'll start with some highlights from the quarter and full-year fiscal '21, which are shown on Slide 30.\nBefore we get into the details, a reminder that our year-over-year results for the fourth quarter reflect the lapping of the onset of the pandemic in March, April, and May of fiscal '20 and the unprecedented surge in consumer demand during that time.\nAdditionally, our Q4 fiscal '20 included a 53rd week, which also impacts comparisons to the year-ago period.\nOverall, we are pleased with our performance as our results for the quarter were in line with our expectations.\nWe delivered strong growth for the full fiscal year, including a 5.1% increase in organic net sales; adjusted operating profit of nearly $2 billion, up 7.4% versus fiscal '20; and operating margin of 17.5% for the year, an increase of more than 100 basis points versus fiscal '20; an adjusted EBITDA increase of 6.5%; and adjusted earnings per share growth of 15.8% for the year.\nTurning to Slide 31.\nYou can see the net sales bridge for the fourth quarter and the full year.\nOur 10.1% decrease in organic net sales during the quarter was driven by a 12.8% decline in volume due to the comparison to last year's demand surge.\nThe impact of the volume decline was partially offset by a 2.7% benefit from favorable mix and the initial pricing actions we took in response to the elevated inflationary environment, which I will describe in further detail shortly.\nDivestitures drove a 150-basis-point decline to net sales for the quarter, and we faced an additional headwind of 560 basis points from the lapping of last year's 53rd week.\nFinally, we experienced a 50 basis point benefit from foreign exchange during the quarter.\nCombined, these factors drove a 16.7% decline in net sales for the quarter compared to a year ago.\nThe bottom half of the slide highlights the drivers of our net sales growth for full-year fiscal '21 versus the prior year with an increase in organic net sales of over 5% driven by volume growth and favorable price mix actions.\nSlide 32 outlines our net sales summary by segment.\nIn the fourth quarter, net sales in our three retail segments declined on both a reported and organic basis due to lapping last year's surge in demand.\nConversely, our Foodservice segment grew considerably this quarter as restaurant traffic began to recover.\nFor the full fiscal year, the strong performance in our three retail segments during the first three quarters of the year more than offset the decline in Q4, while our Foodservice segment was negatively impacted by reduced demand for away-from-home eating for most of the year.\nSlide 33 shows the puts and takes of our fourth-quarter adjusted gross margin and adjusted operating margin.\nAs you can see, our team did a great job pulling on our margin levers in the quarter, including taking price increases in several retail categories driving favorable mix throughout the portfolio, capturing $20 million of synergies associated with the Pinnacle Foods acquisition, managing our COVID-19-related costs, which were $36 million in the quarter and continuing to drive strong supply chain productivity.\nDespite these efforts, however, we were unable to fully offset cost of goods sold inflation in the quarter.\nCOGS inflation continued to accelerate as the quarter progressed, ultimately landing at 8.6%, which was above the Q4 expectations we shared at the end of Q3.\nWe also increased our A&P by 27% in the quarter as we continue to identify opportunities for strong ROIs on these investments, particularly within e-commerce.\nFinally, SG&A was a slight margin headwind in the quarter as SG&A dollars decreased at a lower rate than our reported net sales.\nCost control and a disciplined approach to SG&A remain a hallmark of our culture here at Conagra.\nOn Slide 34, we detail the operating profit and margin for our segments for the quarter and the full year.\nEach of our three retail segments declined versus last year's fourth quarter, driven by the lapping of last year's surge in demand and 53rd week, as well as increased cost of goods sold inflation.\nHowever, each retail segment reported higher adjusted operating profit than the fourth quarter of fiscal '19, demonstrating the sustained progress we have made.\nAs I noted earlier, our adjusted earnings per share of $0.54 was in line with our expectations despite higher-than-expected inflation.\nThe decline in adjusted operating profit and the impact of last year's 53rd week affected our results by $0.23 and $0.05, respectively, shown here on Slide 35.\nThese headwinds were partially offset by strong performance from our Ardent Mills joint venture, lower net interest expense and a slightly lower average diluted share count resulting from our Q3 share repurchase.\nSlide 36 summarizes our net debt at fiscal year end and EBITDA and cash flow performance for the fiscal year.\nWe ended the year with a net debt to EBITDA ratio of 3.6 times, which is in line with our fiscal '21 target.\nWe took advantage of our strong balance sheet throughout the year to increase our investment in the business and return capital to shareholders.\nDuring fiscal '21, we increased CAPEX by more than $130 million compared to the prior year and funded important capacity and productivity projects.\nWe also repurchased nearly $300 million worth of shares and paid $475 million in dividends in fiscal '21.\nGiven the timing of the closure, this sale had a minimal impact on our Q4 results, but we expect there to be an annualized net sales impact of roughly $40 million going forward.\nThis will primarily be reflected in our refrigerated and frozen segment with small effects on our international and foodservice segments.\nWe estimate that the sale will have a total annualized impact on our earnings per share of approximately $0.01.\nAs Sean mentioned, we are pleased with our current position in the market and are confident in our ability to continue executing the Conagra Way to drive profitable growth as we look ahead.\nHowever, we have experienced an acceleration of inflation since Q3.\nAnd due to the timing lag between when this inflation hits our P&L and when the benefits of our pricing and productivity actions take effect, we do not expect to fully offset the impact of these cost increases in time to meet our prior fiscal '22 earnings per share projections.\nWe do expect, however, second-half fiscal '22 earnings per share to be in line with what we assumed for the second half in our prior guidance.\nWe are therefore updating our guidance as shown on Slide 37.\nFor fiscal '22, we now expect organic net sales growth approximately flat to fiscal '21, adjusted operating margin of approximately 16%, and adjusted earnings per share of approximately $2.50.\nWhile this guidance is our best estimate of how we will perform in fiscal '22, our ultimate performance will be highly dependent on four critical factors: first, how consumers purchase food as restaurants, offices, and schools continue to reopen; second, the level of inflation we ultimately experience; third, the elasticity impact as consumers respond to higher prices; and finally, the ability of our end-to-end supply chain to continue to operate effectively.\nSlide 38 shows the progression of our fiscal '22 inflation expectations, the continued acceleration being the biggest driver of the change in our guidance.\nWhen we initially gave our fiscal '22 targets at our Investor Day in April of 2019, our models assumed an annual inflation rate of around 3%.\nAt the time of our third-quarter call in April of 2021, we expected fiscal '22 inflation to come in at twice that level around 6%.\nImportantly, as of the Q3 call, we still saw a path to deliver our fiscal '22 targets.\nNot only is our brand health strong as evidenced by the strong consumer demand, we know how to pull on all margin levers.\nThat said, there is a limit to how much cost increase we can absorb in the short term given the timing lag that Sean and I have discussed.\nAnd as all of you know, inflation has continued to rise sharply since April.\nWe now currently expect fiscal '22 inflation to come in around 9%.\nThe difference between the 6% we expected a few months ago and the 9% we expect today equates to approximately $255 million in additional costs during fiscal '22.\nThe bulk of this inflation can be attributed to continued increases in the cost of edible fats and oils, proteins, packaging, and transportation since the timing of our Q3 call.\nWhile we are able to hedge some of our inputs, others, particularly certain proteins, are not easily hedged.\nAs Sean mentioned, we have various levers at our disposal that we are actively and strategically pulling to manage this inflation, but the profit lag effect is real.\nFor example, certain pricing actions can take 90 days to enact or a cost savings initiative may not be actionable until later in the year when a contract is up for review.\nSo while we anticipate being able to successfully manage inflation over time, the continued sharp increases to input costs we are currently experiencing will take some time to overcome.\nAnd given our disciplined approach to managing the business for the long term, we will not reduce investments to meet the guidance target at the expense of the long-term health of our business.\nSlide 40 lays out the change in our adjusted earnings per share expectations in a bit more detail.\nWe are updating our fiscal '22 adjusted earnings per share guidance for three items.\nFirst, consistent with our prior divestitures, we are removing $0.01 for the Egg Beaters divestiture that we announced today.\nSecond, the largest driver of the change is the significant $0.41 per share increase in inflation since Q3 that I just discussed.\nAnd finally, we have identified many ways to manage and offset this increased inflation, including additional productivity and cost savings initiatives, as well as substantial pricing actions that Sean and I have discussed.\nAgain, the bulk of these margin offsets will start to hit our P&L in the second quarter and continue to increase in the second half, which is why we expect second-half earnings per share to be in line with what we assumed for second-half earnings per share in our prior fiscal '22 guidance.\nSlide 41 lays out some of the key assumptions that underlie our fiscal '22 expectations.\nOn the top line, we expect organic net sales growth to be stronger in the second half of the year compared to the first.\nWe expect children to return to in-person schooling and more employees to start returning to in-office work in the fall.\nSo while we expect continued strong demand for our products, we also expect COVID-19-related volume benefits to start to slow at the end of our first quarter.\nAdditionally, we have good acceptance from customers on our pricing actions so far, but we expect the majority of our pricing to start hitting the market at the end of Q1.\nWe expect the timing of the scale-up to benefit the second half.\nWe also expect our second-half operating margins to be better than the first half.\nThis is driven by our expectation that Q1 will be the most pressured quarter of the year.\nQ1 is expected to have the highest inflation rate of the year and benefit the least from pricing.\nAt the same time, we have planned strong investments behind A&P and innovation for the first quarter.\nAs the year progresses, we expect margins to improve as the inflation rate decelerates and the impacts of our margin lever actions take hold.\nAs you heard Sean discussed, we also plan to continue maintaining strong brand-building support throughout the year to sustain the long-term health of the business.\nTurning to Slide 42.\nI think it's important to highlight that we expect the actions we are taking in fiscal '22 to create some tailwinds heading into fiscal '23.\nAs we mentioned, we expect our second-half earnings per share to be in line with what we assume for second-half earnings per share in our prior guidance.\nSo as we head into fiscal '23, we expect our profitability trend to be in line with our prior expectations.\nWe expect our brand building and innovation actions to help maintain retail demand above pre-COVID-19 levels.\nAt the same time, we expect to retain the consumers we have attracted during the pandemic while continuing to attract more.\nNext, the pricing and productivity actions we are taking will have year on year -- year-over-year benefits in fiscal '23 until we lap them.\nWe also plan to continue executing our realized productivity programs to benefit our longer-term margins.\nFinally, while we expect to have reductions in COVID-19-related costs in fiscal '22, we believe there will be additional opportunities to reduce these costs even further in fiscal '23.\nTurning to capital allocation.\nI'm pleased that our strong balance sheet and our confidence in the long-term health and profitability of the business have put us in a position to raise our quarterly dividend to $0.3125 or $1.25 on an annualized basis beginning in September.\nThis new dividend level represents a 50% payout ratio based on our fiscal '22 earnings per share guidance, which is in line with our longer-term targets.\nBefore I close, I also want to provide some brief color on our tax asset in the disclosure you will see in our upcoming 10-K filing.\nAs some of you remember, when we sold our private label business in 2016, we incurred a tax capital loss of approximately $4 billion that we could apply as a carryforward to offset capital gains generated through fiscal year-end '21.\nWe always held true to the principle that we would not divest assets solely because of the existence of the asset, but our team has repeatedly looked for opportunities to maximize the asset's use.\nSince 2016, we utilized approximately half of the asset as we divested businesses that either weren't a strategic fit with our portfolio or were valued in excess of our internal expectations by another party.\nWe also utilized a portion of the asset in connection with the Q4 fiscal '21 restructuring of our ownership in Ardent Mills.\nAnd before year end, when the carryforward expired, we took additional actions that we believe should allow us to utilize a portion of the remaining capital loss carryforward in future periods.\nWe are currently engaged with the IRS regarding these actions and plan to continue to update our disclosure on this matter as the process unfolds.\nIt's important to note that there is no guarantee that we will be successful in achieving this favorable treatment of the tax asset.\nHowever, if we are successful, we could have some additional opportunity for future tax efficiency as we continue to strategically manage our portfolio of brands and investments.\n Assistant:", "chosen": "q4 adjusted earnings per share $0.54.\nq4 sales $2.7 billion versus refinitiv ibes estimate of $2.71 billion.\n2022 organic net sales growth is expected to be approximately flat compared to fiscal 2021.\n2022 adjusted earnings per share is expected to be approximately $2.50.\nnow expect fiscal 2022 input cost inflation to be materially higher than we anticipated at end of fiscal q3.\n"}
{"prompt": "Human: Last night we released results for our fourth quarter of fiscal year 2020, copies of which are posted in the Investor Relations section of our website.\nIn order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results.\nAny non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by GAAP.\nErica McLaughlin will review the business segment and corporate financial details.\nI want to begin by recognizing our employees around the world for their continued commitment to the Company, to our customers, and to their community.\nManaging through this pandemic has challenged us on every front, and I have never been more proud of our team.\nAs we manage through this pandemic, we established a set of guiding principles here at Cabot to protect the house first and prepare ourselves to be ready to win as the recovery takes hold.\nI believe our performance to date reflects that balance.\nFor the quarter, total segment EBIT was $84 million, and adjusted earnings per share was $0.68, up $0.75 on a sequential basis.\nThis result was driven principally by improved results in Reinforcement Materials, which recovered nicely as demand in our key end markets increased sharply as compared to the third quarter.\nPerformance Chemicals results also improved in the quarter, as automotive-related demand began a recovery and our self-help initiatives took hold.\nIn Purification Solutions, we took another step forward in our transformation plan with the sale of our mine and the structuring of a long-term supply agreement for activated carbon with ADES, which better positions us to serve the mercury removal market.\nWe continued our intense focus on cash generation, delivering $99 million in operating cash flow in the quarter and $248 million for the second half, well ahead of our previously communicated expectation of $200 million of operating cash flow in the back half of the year.\nErica will go into more detail on the segment results a bit later in the call.\nI would first like to share my perspective on the full fiscal year 2020 results.\nThere is no doubt this fiscal 2020 was the year unlike any other we've experienced, as we battle the global public health crisis and the associated economic fallout.\nThe global pandemic severely affected demand from our key tire and automotive customers, especially in the third fiscal quarter and that impact was reflected in our full-year results.\nOn the performance front, we delivered adjusted earnings per share $2.08.\nWhile this result was well below prior levels and the earnings potential of the Company, I am very pleased with how we managed through the crisis and I believe the strength of Cabot was revealed.\nOur strong balance sheet and cash generation power and our experienced management team allowed us to navigate the pandemic, while remaining focused on our advancing the core strategy.\nAs you know, our strategy is built on three pillars: first, investing for growth in our core businesses; second, driving application innovation with our customers; and finally, generating strong cash flows through efficiency and optimization.\nIn the Reinforcement Materials segment, the team did a great job delivering necessary price increases in our calendar year 2020 customer agreements, implementing new commercial terms to manage feedstock volatility and delivering cost reductions to partially offset the pandemic-driven demand reduction.\nIn the Performance Chemicals segment, the team was focused on self-help measures and laying the groundwork to restore profitability to historical levels.\nIn the year, we successfully implemented price increases in specialty carbons to offset the impact of higher MARPOL-related feedstock costs.\nThe segment also executed on a number of strategic priorities during the year.\nWe closed on the acquisition of Shenzhen Sanshun Nano, a leading producer of carbon nanotubes and formulations for the high-growth lithium-ion battery market, and customer qualifications in inkjet packaging applications continue to build momentum.\nIn the Purification Solutions segment, we closed on the sale of our lignite mine in Marshall, Texas to ADES and entered into a long-term supply agreement for lignite-activated carbon.\nThis transaction improves our efficiency while also removing a significant hurdle to divestiture of the business.\nWhile the earnings environment was challenging, we remain intensely focused on cash flow generation and balance sheet strength.\nDuring the year, we delivered strong operating cash flow of $377 million and free cash flow of $177 million, largely through tight working capital management.\nThe strong cash flow generation allowed us to repay debt, maintain our dividend, fund the Sanshun acquisition along with our capex commitments and retain our investment-grade credit rating.\nAnd finally, ESG leadership has been a focus of ours for a long time and it is becoming ever more important to our stakeholders.\nWe recently launched our updated 2025 sustainability goals, which build on our existing leadership position.\nBy expanding our goals beyond a strict environmental focus to include areas such as product development, supplier sustainability, diversity and inclusion and community involvement, we believe all stakeholders will participate in our success.\nOverall, I'm extremely proud of our team, and I believe we are well positioned and ready to win as the recovery takes hold.\nNow, turning to an update on the current business environment.\nWe see underlying trends in both tire and automotive demand strengthening with month-on-month improvement continuing through October and into November.\nThe economic recovery is unquestionably linked to stabilizing the public health crisis and this remains the key to bringing consumer confidence and the economy back to its full potential.\nChina is a good example of where COVID transmission has remained low and the economy is strengthening with GDP up 5% year-over-year in the September quarter.\nLooking at our key end markets, the trend is positive.\nAutomotive production represents approximately 25% of our sales, ranging from tires on new cars to a host of applications in Performance Chemicals, such as structural adhesives, batteries, coatings and plastics.\nExternal forecasting firms report light vehicle auto production down 3% year-over-year globally in the September 2020 quarter, as compared to a decline of 43% in the June quarter.\nCurrent industry forecast calls for an 18% drop in global auto builds for the full year, including a small decrease of 3% for the December quarter.\nNow, moving to tire production.\nGlobal replacement tire industry sales are now expected to decline 12% for the full calendar year of 2020 based on estimates from LMC.\nLight vehicle replacement tire sales improved in all regions in the September quarter, down only 6% year-over-year, compared to a decline of 31% in the June quarter.\nAs with auto production, the December quarter is expected to approach 2019 levels with total replacement tire sales projected to be down 2% year-over-year according to LMC.\nBuilding on the V-shaped recovery in the September quarter, we continue to see consistent improvement in terms of mobility and miles driven, and this bodes well for the replacement demand of tires, both in terms of passenger vehicles, as well as truck and bus.\nAs a reminder, the replacement tire market has historically been more resilient compared to other parts of the broader transportation sector.\nI will start with discussing results in the Reinforcement Materials segment.\nGiven the global economic environment, the Reinforcement Materials segment delivered strong operating results with EBIT down $12 million, compared to the same quarter in fiscal 2019, but up $64 million sequentially, driven by improved global tire and automotive demand as compared to our third fiscal quarter.\nThe decrease in EBIT from the prior year was primarily due to lower volumes, partially offset by higher margins.\nGlobally, volumes declined by a 11% in the fourth quarter, as compared to the same period of the prior year, largely due to the impact of COVID and demand in Europe, the Americas, Japan and Southeast Asia.\nHigher margins were driven by improved China pricing and higher pricing outside of China in our calendar year 2020 tire customer contracts.\nLooking ahead to the first quarter of 2021, we expect an increase in EBIT due to our expectation for expanded unit margins.\nThis is driven by a continued sequential improvement from pricing in Asia as the market continues to recover.\nVolumes are expected to remain in line with fourth quarter levels, as strength from the recovery offsets normal seasonal patterns.\nNow, turning to Performance Chemicals.\nEBIT increased by $4 million, as compared to the third fiscal quarter, driven by higher demand in automotive-related applications.\nEBIT decreased by $16 million year-over-year, primarily due to 9% lower volumes in our Formulated Solutions business from the impact of COVID-19, a more competitive pricing environment in our fumed metal oxides product line, and a weaker product mix in our specialty carbons and fumed metal products -- metal oxides product lines from lower demand in automotive applications.\nIn the fourth quarter, volumes increased 2% year-over-year in Performance Additives, driven by increased volumes related to our recent energy materials acquisition.\nSequentially, Performance Additives volumes increased 3% and Formulated Solutions volumes increased by 1%, while we are pleased to see the sequential improvement in volumes, segment volumes continue to be impacted by the pandemic, particularly in demand for automotive and construction applications.\nWhile the infrastructure end market, including wire and cable and pipe applications continue to hold up well in all regions.\nLooking ahead to the first quarter of fiscal 2021, we expect a material sequential step up in EBIT, driven by higher volumes across the major product lines as our key end markets continue to recover and as we leverage the recovery in the automotive end market to drive product mix improvement in specialty carbons and compounds.\nWe also expect to see a price improvement as the segment benefits from actions to restore pricing in our fumed metal oxides business and as we execute higher prices in specialty carbons to offset rising environmental costs.\nMoving to Purification Solutions, EBIT in the fourth quarter of 2020 decreased by $3 million, compared to the fourth quarter of last year.\nThe decrease was driven by lower volumes in the mercury removal applications and the unfavorable impact from reducing inventory levels to drive improved cash flow results.\nLooking ahead to the first quarter, we expect to see a sequential volume decline driven by lower seasonal volumes in water and mercury removal applications and higher fixed costs due to a maintenance outage at one of our plants.\nThis is expected to be partially offset by lower depreciation and fixed costs due to the recently announced supply agreement and mine sale.\nI will now turn to corporate items.\nWe ended the quarter with a cash balance of $151 million and our liquidity position remains strong at $1.4 billion.\nDuring the fourth quarter of fiscal 2020, cash flow from operating activities were $99 million, including a decrease in net working capital of $7 million.\nCapital expenditures for the fourth quarter of fiscal 2020 were $38 million, an additional uses of cash during the fourth quarter included $20 million for dividends.\nDuring fiscal 2020 we generated $377 million of cash flow from operations, including a decrease in working capital of $185 million.\nCapital expenditures for fiscal year 2020 were $200 million, which included both our targeted growth investments and the spend related to the North American EPA compliance.\nAdditional uses of cash during the fiscal year included $80 million for dividends and $44 million for share repurchases.\nDuring the fourth quarter, the operating tax rate for fiscal year 2020 was 28% and we anticipate our operating tax rate for fiscal '21 to be in the range of 28% to 30%.\nWe expect capital expenditures to be between $175 million and $200 million in 2021 and this estimate includes continued EPA-related compliance spend and capital related to upgrading our new China carbon black plant to produce specialty products.\nAs we look ahead to 2021 I expect that it will be another dynamic year and we'll have to manage any future impacts from the pandemic in much the same way as we did in 2020.\nNotwithstanding the challenges of COVID-19, we remain focused on executing our strategy and I would like to share with you our priorities for the upcoming year.\nFirst, we will stay close with our customers to support their evolving needs and continue to differentiate Cabot through our product quality, service reliability and commitment to sustainability.\nSecond, we will continue to execute on our strategic growth initiatives, particularly energy materials, E2C and inkjet for packaging.\nWe are excited about the growth potential of these businesses and we have sustained our investment throughout this downturn so that we can capitalize on their full potential in the coming years.\nThird, we'll continue to drive efficiency and optimization across our operation.\nDuring fiscal year '20, we established a global business services organization to increase the efficiency and effectiveness of those processes that power our way of doing business.\nWe will further leverage this investment through the deployment of digital tools to simplify and automate our ways of working and I'm excited about the potential here to complement our strategic growth efforts.\nFourth, the role of bolt-on M&A in our existing businesses remains an important part of our growth story.\nOver the past few years, we have made very important strategic acquisitions in our core spaces, including extending our geographic presence in our specialty compounds business through acquisitions in Canada and Southeast Asia, and by expanding our product offering in energy materials to include CNTs through our acquisition of Sanshun.\nWe will continue to look for opportunities to build out our pipeline and execute on opportunities of these types.\nFinally, in an uncertain and dynamic environment, it will be critical that we keep tight control of costs and working capital in 2021.\nWe feel good about the momentum into fiscal year '21, but we must remain vigilant on cost and working capital.\nI hope this gives you some color on our 2021 priorities and how they will help Cabot to extend our leadership position.\nI will close out my prepared comments today by talking about our outlook as we start fiscal year '21.\nClearly, we are pleased with the momentum coming out of the fourth quarter of 2020 and we feel very good about how the first quarter is shaping up.\nAs Erica discussed, we expect a material step up in the Performance Chemicals segment and further strengthening in Reinforcement Materials, where performance is being driven by strong Asian spot pricing, the feedstock costs rise there and volume strength driven by stronger underlying demand and some level of inventory replenishments.\nBased on this, we expect adjusted earnings per share in the first quarter to be in the range of $0.80 to $0.90.\nOn the cash side, we anticipate that operating cash flow will be strong as year-over-year earnings levels improve in fiscal '21, even though absolute net working capital levels will increase aligned with higher volumes.\nLooking to the full-year of fiscal '21, there is still uncertainty related to the COVID-19 pandemic that impacts our longer-term visibility.\nOur results will be influenced by the sustainability of the economic recovery, the outcome of our tire customer agreements, the pace of costs returning to the business to support the recovery and how we manage pricing in this dynamic environment.\nAs the year unfolds, we will be managing these factors carefully to match the dynamic environment.\nOverall, I feel very good about the way the team has performed and the progress we have made in this unprecedented environment.\nI'm optimistic about the first quarter and remain confident that the team will respond to any challenges we may face throughout the year.\nThe long-term fundamentals of our businesses are robust, our market positions in global presence is unmatched, and our balance sheet and liquidity provide strength and flexibility.\nI am confident in our growth opportunities ahead and our ability to deliver on our strategic objectives.\n Assistant:", "chosen": "compname reports q4 adjusted earnings per share $0.68.\ncompname reports fourth quarter diluted loss per share of ($4.81) and adjusted earnings per share of $0.68.\nq4 adjusted earnings per share $0.68.\nsees q1 adjusted earnings per share $0.80 to $0.90.\nencouraged by pace of recovery in automotive and tire markets.\nexpect both yoy and sequential ebit improvement in q1.\nnot providing fiscal 2021 full-year earnings guidance at this time.\n"}
{"prompt": "Human: Actual results could vary materially from such statements.\nEarnings for the quarter were $0.95 per share compared to $0.94 in the prior year quarter.\nAdjusted earnings per share increased to $2.14 in the quarter compared to $1.33 in 2020.\nNet sales in the quarter were up 34% from the prior year primarily due to increased volumes across all segments, favorable foreign currency translation, and the pass-through of higher material cost.\nSegment income improved to $395 million in the quarter compared to $250 million in the prior year primarily due to higher sales unit volumes including recovery in many locations affected by COVID in last year's second quarter.\nAs outlined in the release, we currently estimate third quarter 2021 adjusted earnings of between $1.90 and $2 per share.\nThis estimate includes the results of the European Tinplate operations through August 31st.\nWe are increasing the midpoint of our full year adjusted earnings guidance from $6.70 per share to $7.35 per share again assuming the sale of the Europe Tinplate business closes at the end of August.\nOur expected adjusted tax rate for the full year remains at 24% to 25%.\nDemand remained strong across all product lines, and geographies, and importantly the company continues to convert this growth into record earnings.\nAverage segment income from continuing operations over the last four quarters, or last 12 months June 2021 is approximately $100 million per quarter higher than the average of the four preceding quarters or LTM June 2020, with approximately $60 million of that income growth found in the Americas Beverage segment, clearly a step change in our earnings outlook.\nWe look forward to commercializing significant new capacity in the second half of this year into next to take the next step change up.\nThe results of the European Tinplate operations are now shown as discontinued.\nHad the business been included in continuing operations, LTM June EBITDA would have approximated $2.1 billion.\nBefore reviewing the operating segments, we remind you that delivered aluminum in North America is approximately 65% higher today than at this time last year.\nLME and delivery premium are contractual pass-throughs, so reported beverage revenues reflected both the volume increase, and the higher aluminum cost.\nAs last year's second quarter was the so called COVID quarter, we will also provide beverage growth percentages for the first half of 2021 versus the first half of 2019 to give a bit more information perhaps relevance related to our beverage can unit volume growth.\nIn Americas Beverage demand remained strong across all the markets we serve with overall segment volumes up 18% compared to the second quarter of 2020.\nFirst half '21 versus first half '19 volumes advanced 19%.\nAs described previously, we expect demand will continue to outweigh supply for the foreseeable future.\nCommercial shipments from the first line of the company's new beverage can plant in Bowling Green, Kentucky commenced in June with shipments from the second line scheduled to begin in September.\nThe third line in Olympia, Washington and the second line in Rio Verde, Brazil are now scheduled for an early fourth quarter start-up.\nAs previously announced, the company will commercialize five new can lines in 2022.\nNew two line beverage can plants are being constructed in both Uberaba, Brazil; and Martinsville, Virginia along with a second can line being installed in Monterrey, Mexico.\nAdditionally the company announces today that it will construct a new two-line beverage can plant in the Southwestern United States with commercial shipments commencing late second quarter of 2023.\nCustomer commitments have already been secured for the plants' production capacity.\nUnit volumes in European Beverage advanced 28% over the prior year second quarter, and 14% for the first half compared to the first half of 2019.\nIncome reflects contribution from the volume growth, which was recorded throughout the segment.\nAsia-Pacific recorded 15% volume growth in the quarter, and 8% for the first half versus the first half of 2019, as most operations across Southeast Asia were able to grow despite numerous COVID lockdowns and movement control orders.\nWe do expect both Crown and customer operations to be subject to various and intermittent COVID lockdown measures throughout the balance of the year.\nCommissioning will commence at the new plant in Vung Tau, Vietnam in September with customer shipments beginning in October.\nResults in Transit Packaging were significantly higher than last year, and in line with our expectations, as strong demand for transit products and solutions mirrored the surge in overall industrial activity.\nThe business did well to navigate transportation delays, cost increases, and supply shortages, and is well-positioned for continued earnings growth as these conditions gradually ease.\nWe expect earnings growth in the back half of the year to approximately approximate first half growth.\nDemand remained firm across North American food and aerosols along with the beverage can equipment making businesses.\nIn summary, a record first half for the company.\nNew capacity was commercialized during the quarter, and significant new capacity will be commissioned over the back half of the year.\nImportantly, we continue to convert growth into expanded earnings and cash flow.\nSegment income, and adjusted earnings in the first half up 50% to 60% over the prior year, and leverage at 3.6 times after repurchasing $300 million of company common stock is ahead of plan.\nAs Tom discussed, we have raised full year guidance, and the expected closing of the Tinplate sale still remains in the third quarter.\nAnd with that Harley, we are now ready to take questions.\n Assistant:", "chosen": "compname reports q2 earnings per share $0.95.\nq2 adjusted earnings per share $2.14.\nq2 earnings per share $0.95.\nsees q3 adjusted earnings per share $1.90 to $2.00.\n"}
{"prompt": "Human: Before we begin, I'd like to recognize all Church & Dwight employees around the world for their continued dedication to keeping our Company going during the pandemic, especially our supply chain and R&D teams as we overcame raw material shortages in Q1 as a result of the Texas freeze.\nNow, let's talk about the results.\nQ1 was another exceptional quarter.\nReported sales growth was 6.3%, and adjusted earnings per share was $0.83, and that's $0.03 better than our outlook.\nOrganic sales grew 4.9%, driven by higher consumption.\nE-commerce shows no signs of slowing.\nIn Q1, our online sales increased by 54% year-over-year and as a percentage of total sales were 14.8% in Q1 compared to 10.2% in Q1 of 2020.\nWe continue to expect online sales for the full year to be 15% as a percentage of total sales.\nVaccinations will significantly influence consumer behavior.\nThe U.S. is slowly opening up, which means consumers are more mobile.\n60% of vaccinated consumers are optimistic that they will return to a normal or new normal as we are seeing the first signs that consumers are willing to spend more time in stores based on a study by IRI.\nIn contrast, many countries outside the U.S. continue to experience lockdowns.\nAs described in the release, we have been facing shortages of raw materials due to the Texas freeze.\nRaw material and transportation costs spiked higher in February and were exacerbated by the Texas freeze.\nWe expect the tight supply and higher input cost to continue for the balance of the year.\nTo mitigate the cost increases, we have announced price increases in laundry and across our international portfolio, and we have reduced couponing and promotional spending.\nRick will discuss this further in a couple of minutes.\nAt our Analyst Day in January, we outlined which categories and brands we expected to stay elevated throughout 2021, recover from COVID lows, decline from COVID highs and which ones would remain steady.\nOverall, our full-year thinking has not changed.\nTo name a few categories, demand for vitamins, laundry additives and cat litter are expected to remain elevated in 2021.\nCondoms, dry shampoo, power flossers and women's grooming are expected to deliver year-over-year growth as society opens up and consumers have greater mobility.\nBaking soda, pregnancy test kits and oral analgesics are expected to decline from COVID highs.\nOf the 16 categories in which we compete, 8 grew consumption in Q1, in some cases, on top of big consumption gains in Q1 of 2020.\nOf those 8 categories, 5 saw a double-digit growth, gummy vitamins, toothache, battery-powered toothbrush, pregnancy test kits and women's electric grooming.\nHousehold categories, such as laundry detergent and baking soda were down in the quarter and unable to comp the huge COVID-19 sales spikes seen in Q1 2020.\nLooking at market shares in Q1, 8 out of our 13 power brands met or gained share within our U.S. Consumer Domestic business, which grew organic sales 5.1%.\nI'll comment on a few of the brands right now.\nConsumers have made health and wellness a priority.\nVITAFUSION and L'IL CRITTERS gummy vitamins saw great consumption growth in Q1, up 24% with the help of the new launches described in the release.\nIt appears that new consumers are coming into the category and they're staying.\nOne survey showed that consumers who are new to the category had a 90% repeat rate.\nWATERPIK grew consumption 15% in Q1 as it continues to recover from COVID lows and benefit from the heightened consumer focus on health and wellness.\nWATERPIK is also benefiting from dental offices returning to pre-COVID patient levels.\nWe expect the frequency of our lunch 'n learn program to return to normal levels in the second half of this year.\nWhile BATISTE remains impacted by social distancing, consumption was up 6%, and we achieved a record high quarterly balance share of 39%, behind our International Women's Day campaign.\nNow, I want to talk about the International division.\nDespite European lockdowns, our International business came through with 3.2% organic growth in the quarter, primarily driven by strong growth in our Global Markets Group.\nAsia continues to be a strong growth engine for us.\nWATERPIK, FEMFRESH and ARM & HAMMER led the growth for the International division in the quarter.\nOur Specialty Products business delivered a positive quarter with 6% growth, primarily due to higher pricing.\nMilk prices were stable in Q1 and are projected to increase later in the year due to higher demand.\nNow, turning to New Products.\nInnovative new products will continue to attract consumers.\nIn the household products portfolio, we are introducing OXICLEAN Laundry and Home Sanitizer.\nIt is the first and only sanitizing laundry additives that boost stain fighting and eliminates 99.9% of bacteria and viruses.\nThe product is also designed for cleaning throughout the house and on a variety of surfaces.\nIn the personal care portfolio, VITAFUSION launched Elderberry gummies, Super Immune gummies and POWER ZINC gummies to capitalize on increased consumer interest in immunity.\nWATERPIK launched WATERPIK ION, a water flosser which is 30% smaller and contains a long-lasting lithium ion battery and is specifically designed for smaller bathroom spaces.\nTo capitalize on its earlier success, WATERPIK SONIC-FUSION, the world's first flossing toothbrush, was upgraded to SONIC-FUSION 2.0 with two brush head sizes and two brush speeds.\nAnd finally, FLAWLESS is taking advantage of the at-home beauty and self-care trends with a facial cleanser system, a shower wand for a full-body spa-like experience and at-home manicure and pedicure solutions.\nNow, let's turn to the outlook.\nWe're off to a good start in Q1.\nWe continue to expect full year adjusted earnings per share growth of 6% to 8%, which is in line with our Evergreen target, despite the heightened input cost.\nGiven our expectations, for consumer consumption, we have raised our full year outlook for reported sales growth from 4.5% to now 5% to 6%.\nOrganic sales growth expectations were raised from 3% to 4% to 5%.\nAnd if you look at consumption trends through the middle of April, 14 of our 16 categories were up in consumption year-over-year.\nNow, in conclusion, I'd like to remind everyone of the many reasons to have confidence in Church & Dwight.\nOur track record shows that we are positioned to do well in both good and bad times and in uncertain economic times such as now.\nCategories in which we play are essential to consumers.\nWe have a balance sheet of value and -- pardon me, we have a balance of value and premium products.\nOur power brands are number one or number two in their categories.\nAnd we have low exposure to private label.\nAnd with a strong balance sheet, we continue to be open to acquiring TSR-accretive businesses.\nNext up is Rick to give us details on Q1.\nWe'll start with EPS.\nFirst quarter adjusted EPS, which excludes the positive earn-out adjustment, was $0.83, flat to prior year.\nAnd as we discussed in previous calls, the quarterly earn-out adjustment will continue until Q4, which is the conclusion of the earn-out period.\n$0.83 was better than our $0.80 outlook, primarily due to continued increase in consumer demand for many of our products.\nReported revenue was up 6.3%.\nOrganic sales were up 4.9%, driven by a volume increase of 3.1% and a positive price mix of 1.8%.\nNow, let's review the segments.\nOrganic sales increased by 5.1% due to the higher volume and positive price mix.\nOverall, growth was led VITAFUSION, L'IL CRITTERS gummy vitamins, WATERPIK oral care products, FLAWLESS beauty products, ARM & HAMMER clumping cat litter and KABOOM bathroom cleaners as well as VIVISCAL hair thinning products.\nConsumer International delivered 3.2% organic growth due to higher volume, partially offset by lower price and product mix.\nThis was a great result despite European writedowns.\nFor our SPD business, organic sales increased 6% due to higher pricing, partially offset by lower volume.\nMilk prices have remained stable month-to-month and are projected to rise as 2021 moves forward.\nNow turning to gross margin.\nOur first quarter gross margin was 44.5%, a 120 basis-point decrease from a year ago.\nGross margin drag was impacted by 350 basis points of higher manufacturing costs, primarily related to commodities, distribution, tariffs and COVID impacts.\nCommodities, which were exacerbated due to the Texas freeze were a 90 basis-point drag on margin.\nTariff costs negatively impacted gross margin by 40 basis points.\nThese costs were partially offset by a plus 190 basis points from price/volume mix and a positive 170 basis points from productivity programs as well as a 10 basis-point positive impact from favorable currency.\nAs a reminder, our outlook for the quarter on gross margin was down 50 basis points.\nThe entire variance was related to the spike in commodities and tight transportation market.\nThe good news is for the back half of the year, we expect margin expansion behind the pricing and promotional actions we laid out in the release as well as we start to lap some of the higher inflation and tariffs that we experienced in the back half of 2020.\nMarketing was up $2.3 million year-over-year as we invested behind our brand.\nMarketing expense as a percentage of net sales decreased 30 basis points to 8%.\nFor SG&A, Q1 adjusted SG&A increased 60 basis points year-over-year, primarily due to acquisition-related intangible amortization.\nWe also had higher investments within IT and R&D as well as some transition costs from the ZICAM acquisition.\nOther expense all-in was $11.6 million, a $3.6 million decline due to lower interest expense from lower interest rates.\nAnd for income tax, our effective rate for the quarter was 24.2% compared to 23.2% in 2020, an increase of 100 basis points, primarily driven by lower stock option exercises.\nAnd now to cash.\nFor the first three months of 2021, cash from operating activities decreased 57% to $100 million due to higher cash earnings, which was offset by an increase in working capital.\nInventory is higher to support increase in sales as we continue to improve customer fill levels.\nAccounts payable and accrued expenses decreased due to the timing of payments.\nAs of March 31st, cash on hand was $128 million.\nOur full year capex plan continues to be approximately $180 million as we continue to expand manufacturing and distribution capacity, primarily focused on laundry, litter and vitamins.\nFor Q2, we expect reported sales growth of approximately 4.5%, organic sales growth of approximately 4% and gross margin contraction of 350 basis points as higher input costs continue and we lap artificially low promotional levels from a year ago.\nAdjusted earnings per share is expected to be $0.69 per share, a 10% decrease from last year's adjusted Q2 EPS.\nAs you read in the release, we did a voluntary recall of selected products within our vitamin business.\nWe expect the earnings per share impact in Q2 to be approximately $0.04 for the quarter and we are seeking reimbursement by insurance.\nAnd now for the full year outlook.\nWe now expect full year 2021 reported sales growth to be 5% to 6%, which is above our previous 4.5% outlook.\nWe're also raising our full year organic sales growth to approximately 4% to 5%, up from the previous outlook of 3%.\nTurning to gross margin.\nWe now expect full year gross margin to be flat for the year, primarily due to the impact of higher raw material and transportation costs and the Texas freeze in March.\nWe had previously expected gross margin expansion of 50 basis points for the year.\nAnd recently, we have seen a large increase in raw materials and transportation costs.\nWe're absorbing $90 million of incremental costs for the full year.\nHigher sales, reductions in promotions and price increases across all three of our divisions represented about one-third of our portfolio, offset a large part of the cost increases.\nAs a reminder, we price to protect gross profit dollars, not necessarily margin.\nOur full year tax rate expectations are now 22%, higher versus our last expectations due to lower stock option exercises.\nThis is a $0.02 headwind versus our previous full year outlook.\nAdjusted earnings per share expectations continue to be in the range of $0.03 to $3.06, a 6% to 8% increase year-over-year.\nOur cash from operations outlook continues to be $1 billion, while we continue to pursue accretive acquisitions.\nAs you heard from Matt, the Company is off to a great start, and we expect 2021 to be another strong year.\nAnd with that, Matt and I would be happy to take any questions.\n Assistant:", "chosen": "church & dwight co q1 adjusted earnings per share $0.83 excluding items.\nq1 adjusted earnings per share $0.83 excluding items.\nsees q2 adjusted earnings per share $0.69.\nsees fy adjusted earnings per share $3.00 to $3.06.\nsees fy sales up 5 to 6 percent.\nsees q2 sales up about 4.5 percent.\nsees fy organic sales growth to be 4-5%.\n"}
{"prompt": "Human: They will be joined by Scott Oaksmith, Senior Vice President, Real Estate & Finance.\nWe're glad you could join us and hope you are all well.\nOur company, like the hotel industry overall, continues to be significantly impacted by the COVID-19 pandemic, which is far from over.\nThe response of our franchisees, their hotel staff and Choice associates has been remarkable.\nDespite the pandemic, I'm pleased to report that Choice Hotels has continued to drive results that significantly outperform the industry in the third quarter.\nSystemwide domestic RevPAR outperformed the industry by nearly 20 percentage points, declining only 28.8% from the third quarter of 2019.\nAll of our limited service brands had significant RevPAR index gains against their local competitors.\nWe continued to grow our effective royalty rate, a reflection of the continuously improving value proposition to our franchisees.\nAnd we grew our total system size, especially in our more revenue intense, upscale, mid-scale and extended-stay segments.\nWe attribute this success to Choice's key differentiators, including our diversified brand portfolio, the geographic footprint of our domestic system, the profile of our core customer and our franchise-focused business model.\nThese core strengths have positioned us well to capture the shifts in consumer demand that occurred over the last eight months.\nWe believe that the strategy of growing our limited service brands in the right segments and the right locations will allow us to continue to increase our share of travel demand over the long term.\nAnd now that we're entering the ninth month of the pandemic, we are beginning to see trends emerge that are likely to have a long-term impact on the travel industry.\nLet me begin with the trend of remote work and virtual learning.\nThe significant investment in remote access technology by businesses, schools and consumers is creating more options in where and when traditional activities take place.\nIn a post-pandemic world, this may afford Americans even more flexibility in their schedules to travel for leisure.\nFor the last several years, we've seen a trend in leisure travel demand spreading more evenly throughout the month of the year, which we attribute in part to school schedules shifting over the years as well as the increase in baby boomers retiring and having more time and disposable income to travel.\nMore employees can now work from anywhere with an Internet connection, while their children attend virtual schooling.\nFor the past two months, we saw continued leisure demand extending into weekdays.\nA second trend is the increase in road trips.\nwhich we're benefiting from with our high concentration of hotels in drive-to markets.\nConsumers' appetite for road trips has only accelerated since the onset of the pandemic as Americans are showing a clear preference for trips that are closer to home.\nDestinations that may have been overlooked before the onset of COVID-19 are getting fresh consideration.\nWith over 4,000 domestic hotels located within a mile of an interstate exit, our hotels are well positioned to serve travelers as they hit the open road.\nAnd with over 2,000 domestic hotels near beaches and national parks, our hotels are also located in the right markets to capture growing demand from travelers who increasingly are looking to rediscover the great American outdoors.\nAnother emerging trend is the economic disruption brought on by the pandemic and its effect on consumers as the recovery takes place.\nWe believe that in uncertain times, as in previous down cycles, consumers will be looking for more moderately priced limited service hotel offerings, presenting an opportunity for our portfolio to capture this demand.\nAnother anticipated economic effect of the pandemic is higher relocation rates.\nAs people shift jobs and industries, demand for longer-term hotel stays rises, a trend we believe will benefit our brands, particularly those in the moderately priced extended-stay segment.\nAnd finally, there are signs that consumers' risk tolerance is climbing, even before a vaccine is available.\nAccording to a recent survey, the perception of travel safety is up, and Americans likelihood to take a domestic leisure trip and stay in a hotel during the next six months is the highest since mid-March.\nAs a result of these trends, we've seen a rise in our weekday occupancy quarter-over-quarter, on top of the existing base of weekend leisure demand we've historically enjoyed.\nIn fact, our weekday RevPAR index is up eight percentage points year-over-year in the third quarter.\nOur year-over-year RevPAR change continued to improve month-over-month in the third quarter.\nAt this time, we remain optimistic that we will see sequential month-over-month improvements related to our year-over-year RevPAR change.\nOur loyalty program has remained a key driver of our business throughout the pandemic enhancing our ability to drive franchisees top line revenue.\nWe particularly benefited from Choice Privileges Diamond Elite members, our best customers, who contributed an even higher percentage of overall revenue year-to-date versus last year.\nWe expect this bedrock of loyalty business to deliver even higher value going forward as more Americans return to travel and enrollments in our award-winning Choice Privileges loyalty program continues to climb.\nOur long-term strategy of growing the right brands in the right segments in the right markets allow Choice brand hotels to continue to outperform the competition.\nThroughout the third quarter, we generated significant month-over-month increases in our proprietary revenue contribution to our hotels.\nMore specifically, our website contribution increased by 400 basis points and our loyalty contribution increased by 120 basis points quarter-over-quarter.\nThis has helped drive RevPAR index share gains versus our local competitors across all location types as reported by STR.\nFor the past 34 weeks through October 31, we observed significant RevPAR share gains against the competition.\nIn the third quarter, all of our select service brands achieved material RevPAR index gains versus their local competitors, with each of our upscale and extended-stay brands experiencing share gains of over 10 percentage points.\nI'll now provide a brief update on our segments.\nOur upscale portfolio once again achieved impressive year-over-year growth in the third quarter, where we increased our domestic upscale room count by 33%.\nThe Ascend Hotel Collection is the industry's first and largest soft brand.\nNow with nearly 300 hotels around the globe and fast approaching its 200th domestic location, Ascend Hotels achieved the following performance in the third quarter: RevPAR change outperformance by over 26 percentage points versus the upscale segment; RevPAR share gains against local competitors of nearly 19 percentage points; and average daily rate index gains of approximately nine percentage points.\nIn fact, for the past six months, Ascend has significantly outperformed the upscale soft brands as well as the segment as a whole in terms of year-over-year RevPAR change.\nOur extended-stay hotels are purpose-built for long-term guests.\nChoice Hotels brands in this cycle-resilient segment continue to outperform in this unprecedented environment, and our portfolio of over 420 extended-stay hotels grew 6% year-over-year in the third quarter.\nOur WoodSpring Suites brand achieved an average occupancy rate of 77% in the third quarter, and the brand's monthly occupancy levels have remained north of 75% since the last week of June.\nOur Suburban extended-stay brand experienced year-over-year occupancy gains in the third quarter, further enhancing the brand's attractiveness to developers looking for a smart, extended-stay conversion opportunity.\nAt the same time, our MainStay Suites mid-scale extended-stay brand gained more than 16 percentage points in RevPAR index versus its local competitors in the third quarter.\nWe remain optimistic about the growth potential of our extended-stay portfolio whose pipeline increased by 9% year-over-year in the third quarter.\nYear-to-date through September, Choice has awarded over 40 extended-stay franchise agreements, demonstrating sustained interest in both new construction and conversion opportunities during a challenging time for the industry.\nI'd now like to turn to our mid-scale segment, whose brands represent 2/3 of our total domestic portfolio and over half of the franchise agreements executed year-to-date.\nAll of our select-service mid-scale brands achieved year-over-year RevPAR index and average daily rate index gains versus their local competitors through the third quarter.\nThe Comfort brand captured RevPAR share gains of over seven percentage points versus local competitors in the third quarter.\nAnd Clarion Pointe, a conversion brand extension of Clarion that launched less than two years ago, recently opened its 20th hotel in the U.S. and now has over 50 hotels open or in the pipeline, demonstrating its strong growth as the brand continues its coast-to-coast expansion.\nDemand for Choice's brands continues despite the challenging environment, aided by our strong value proposition and recent outperformance.\nDevelopers choose our brands as they seek to boost the value of their hotels.\nWe have a conversion brand to fit most developers' price points which has driven our development growth through past downturns.\nYear-to-date, through the end of September, we have awarded over 230 new domestic franchise agreements, nearly 70% of which were for conversion hotels.\nIn the third quarter alone, we executed over 80 domestic agreements, of which nearly 3/4 were for conversions and over 40% of which were executed in the month of September.\nWe have a long history of enhancing the diversity of our ownership base through our one-of-a-kind emerging markets development team, which helps underrepresented individuals such as minority and veteran entrepreneurs enter the rewarding business of hotel franchising.\nNearly 70% of our hotels have minority ownership.\nDespite the pandemic, we have awarded and financially supported 17 franchise contracts with black and Hispanic entrepreneurs year-to-date.\nMost recently, we entered into the largest minority-owned multiunit franchise agreement in the program's history.\nOur long-standing commitment to diversity and further details regarding our efforts to improve the communities we serve will be outlined in our forthcoming ESG report.\nWhile this year's challenges have been unique, the cyclical nature of our industry is known.\nIt's something our experienced and disciplined management team, many of whom have led the company through previous down cycles, planned for.\nOur resilient franchisee base also has deep experience leading their small businesses through down cycles, and they are at the center of everything we do.\nOver the course of the pandemic, we have supported our franchisees in a number of ways.\nFirst, by reducing costs through extending brand program deadlines, implementing cost savings, operational initiatives, reducing certain fixed fees, implementing a tailored fee deferral program and modifying brand standards.\nSecond, by capturing business through our global sales efforts aimed at first responders and other essential travel; a multichannel, multi-brand marketing campaign; and tailored promotional programs.\nFinally, by leveraging hygiene and infection prevention experts like Ecolab in launching our Commitment to Clean initiative, helping to make sure their hotels are clean and safe.\nWe also have been advocating and will continue to advocate with policymakers for additional relief measures aimed at assisting small businesses to provide targeted help for the travel industry.\nSpecifically, we've been urging enactment of a second draw loan program for existing Paycheck Protection Program borrowers, greater accommodation and more streamlining for borrowers to obtain forgiveness and liability protections for hotel owners who comply with health and safety protocols during the pandemic.\nWe've also called for additional stimulus to support American discretionary spending, including in areas such as travel.\nIn closing, Choice Hotels is positioned to emerge from these trying times stronger just as we have before in our 80-year history.\nOur proven portfolio of well-segmented brands, geographic footprint, and asset-light business model position us well to benefit from current consumer trends as they continue to evolve.\nI'll now invite our CFO to provide his update.\nI hope that you and your families are well and healthy.\nToday, I'd like to provide additional insights around our third quarter performance, update you on our balance sheet and liquidity, as well as our approach to capital allocation, and finally, share our thoughts on the outlook for the road ahead.\nLet's now take a closer look at our results.\nFor the third quarter of 2020, total revenues, excluding marketing and reservation system fees, were $103.6 million.\nAdjusted EBITDA totaled $74.9 million representing an adjusted EBITDA margin of over 72% and adjusted earnings per share were $0.66.\nOur domestic systemwide RevPAR for the third quarter outperformed the overall industry by nearly 20 percentage points, declining only 28.8% from the same quarter of 2019.\nIn addition, our results exceeded the primary chain scale segments in which we compete as reported by STR by six percentage points.\nWe've long focused our brand strategy on driving growth across the higher value and more revenue intense upscale, extended-stay and mid-scale segments, and it's paying off.\nIn the third quarter, all three segments achieved year-over-year RevPAR outperformance against their respective industry chain scales and gains versus their local competitors.\nSpecifically, the RevPAR change of our upscale portfolio exceeded that of the overall segment by 14 percentage points, and our upscale portfolio outperformed its local competitive set by over nine percentage points.\nWith average domestic systemwide occupancy rates of 74%, our extended-stay portfolio outperformed the industry's RevPAR change by an impressive 40 percentage points beating its local competitive set by 14 percentage points.\nAnd finally, RevPAR change for our mid-scale portfolio exceeded the segment by nearly eight percentage points.\nThis RevPAR outperformance is the result of both continued occupancy gains and our franchisees' ability to maintain rate.\nOur domestic systemwide occupancy rate has seen improvements since the trough of 28% that occurred back in early April.\nSince the week of June 21 through late October, our average weekly occupancy rates have consistently exceeded 50%.\nIn addition, we continue to see gains in our average daily rate index, which was up 1.7 percentage points against local competitors in the third quarter.\nThese experts have been advising our franchisees on the best use of tools to maximize their pricing strategies and provide sophisticated market intelligence and channel management.\nDespite the challenging environment, we expanded our system size, growing the number of domestic hotels by 0.7% and rooms by 1.9% year-over-year.\nAcross our more revenue intense brands in the upscale, extended-stay and mid-scale segments, we experienced even greater growth, increasing the number of hotels by 2.1% and rooms by 3.4% year-over-year.\nWe're especially pleased that Comfort, our flagship brand, continue to experience positive unit and rooms growth in the third quarter following its brand transformation.\nComfort's development success, amid unprecedented circumstances, is perhaps the clearest endorsement of the brand's value proposition.\nComfort now represents nearly 1/3 of our total domestic pipeline, which will fuel revenue intense growth for years to come.\nIn addition, the brand's conversion pipeline increased by nearly 50% in the third quarter year-over-year.\nWe are particularly pleased with the company's performance-related to our effective royalty rate, which is driven by the attractive value proposition we provide to our franchisees, their continued desire to be affiliated with our strong brands and our current pipeline.\nOur royalty rate remains a significant driver of our revenue growth.\nThe company's domestic effective royalty rate increased seven basis points year-over-year to 4.91% in the third quarter and has increased nine basis points year-to-date compared to the prior year.\nWe expect to observe continued growth of this lever for the remainder of the year as owners seek a shelter of a large proven franchisor that delivers strong top line results to their hotels and helps them maximize their return on investment.\nI'd now like to say a few words about our balance sheet and capital allocation strategy.\nThroughout the third quarter, we continue to focus on reducing discretionary costs, exercising discipline around capital allocation and effectively allocating resources to drive top line outperformance, all of which allowed us to improve our cash position and further bolster our liquidity.\nIn fact, we reduced our net debt by approximately $50 million during the third quarter and are proud to report cash flow from operations of $70 million for the nine months ended September 30, over $68 million of which was generated in the third quarter alone.\nOur cash and liquidity profile remains exceptionally strong.\nAt the end of the third quarter, the company had over $790 million in cash and available borrowing capacity through our revolving credit facility.\nWe remain on track to achieve our previously announced SG&A cost savings of nearly 25% in 2020 and expect to maintain a run rate of SG&A cost savings of approximately 15% in 2021 and beyond.\nThe decisions we have made to better align our cost structure in the post-pandemic environment position us well to capitalize on opportunities as travel demand recovers, while allowing us to continue to invest for the long term.\nOur capital allocation approach, defined by prudence and discipline, remains key to our success.\nChoice's first priority in this area has always been to increase organic growth by strategically investing back into the business, and that won't change.\nWe are confident that our capacity and cash flows will allow us to not only weather the storm but also increase the organic growth of our business by strategically investing in growing our brands and system size, executing our technology road map and delivering proprietary franchisee-facing tools that help drive top line revenues.\nBased on our demonstrated track record of success in organic growth, we believe these internal investments will drive attractive returns for years to come.\nWe will continue to evaluate other investments in capital return opportunities in the context of developing market conditions and our overall capital allocation strategy on a go-forward basis.\nBefore closing, I'd like to offer some thoughts on what lies ahead.\nThe ultimate and precise impact of the pandemic on our business for the remainder of 2020 and beyond remains largely unknown, as is the exact trajectory of our industry's recovery.\nWhile we are not issuing formal guidance today, we currently expect that the impact of COVID-19 on the company's year-over-year RevPAR change will be less significant for the fourth quarter versus the third quarter of this year.\nOur sentiment is based on the following.\nFirst, we are observing continued resilience of leisure demand and continue to drive relative outperformance versus the industry.\nSecond, despite entering fall when demand is historically lower, we are pleased that our fourth quarter domestic RevPAR change has continued the pattern of sequential quarterly improvement through the week of October 24.\nIn fact, we expect our October 2020 RevPAR to decline by approximately 25% from the same period of 2019.\nThe final reason we are optimistic is the nature of the current environment.\nUnlike the Great Recession, which was caused by underlying fundamental economic problems, the current economic downturn is tied to the course of the COVID-19 pandemic, which we believe could contribute to a faster recovery.\nWe will continue to evaluate the impact of COVID-19 across the business, and we'll provide further updates in February during our next earnings call.\nIn closing, we are optimistic that Choice Hotels is well positioned to succeed for the remainder of 2020 and beyond.\nWe continue to benefit from our resilient, primarily asset-light, franchise-focused business model, which has historically delivered stable returns throughout economic cycles and provided a degree of cushion from market risks.\nWhile we are not immune to the pressures faced by the industry, we believe that our long-term focus and prudent, disciplined capital allocation strategy will allow us to continue to capitalize on opportunities during the recovery.\nAt this time, Pat and I would be happy to answer any questions.\n Assistant:", "chosen": "choice hotels international q3 adjusted earnings per share $0.66.\nq3 adjusted earnings per share $0.66.\ndomestic systemwide revpar decreased 28.8% for q3 2020 compared to q3 2019.\nnot providing formal guidance for 2020 at this time.\ncurrently expects impact of covid-19 on its year-over-year revpar change will be less significant for q4 than q3.\n"}
{"prompt": "Human: They will be joined by Scott Oaksmith, Senior Vice President, Real Estate & Finance.\nWe appreciate you taking the time to join us and hope you are all well.\nThis week we lost a leader who had a major impact on our industry and on the lives of many who call the travel industry their home.\nOn behalf of all of us at Choice Hotels, I'd like to express our deepest condolences to Arne Sorenson's family and to the many people across our industry who are inspired by his personal and professional leadership.\nWe will all miss him.\nAs we look back, 2020 was a year unlike any other, a year that challenged leaders and companies around the globe and Choice Hotels was no exception.\nBut it was the collective response, dedication and resilience of our franchise owners, their hotel staff and Choice associates that made all the difference for our Company and franchise system.\nDuring a year of significant challenges brought upon the industry by the pandemic, Choice Hotels achieved a number of key milestones that demonstrate our long-term strategy of growing our presence in more revenue-intense segments and locations is working.\n2020 was the year that our flagship Comfort brand returned to unit growth after its successful transformation, increasing its domestic system size by 2%.\nAs we celebrate Comfort's 40th anniversary this year, the success of the brand is proof positive that we invest for the long term.\nAnd as you can see by both unit growth and impressive RevPAR performance, those investments are paying off and position the brand for growth into the future.\n2020 was also the year our extended stay segment rapidly expanded by 44 units to nearly 450 domestic hotels and the domestic pipeline for that segment alone reached over 315 hotels.\nThe segment now represents nearly 8% of our total domestic portfolio and strong developer interest reaffirms that our strategic commitment and continued investments in this highly cycle-resilient segment are driving a competitive advantage.\nAnd finally, 2020 was a year of continued growth for our upscale portfolio, highlighted by an 8% growth of Cambria Hotels.\nThe brand now has a pipeline of nearly 80 hotels and is expected to accelerate its unit growth in 2021.\nConsumer confidence in our upscale products drove the brand's outperformance versus their local competitors and is a proof point to current and prospective owners of Choice Hotels' value proposition in the upscale segment.\nThe results we achieved confirm our strategic focus to grow in these segments, which will further fuel the long-term revenue intensity of our system.\nI'm also pleased to report that we have continued to drive RevPAR results that significantly outperformed the industry in the fourth quarter and 2020 as a whole.\nOur domestic, systemwide year-over-year RevPAR change surpassed the industry by nearly 17 percentage points for the full year, declining 30.7% from 2019.\nSince the onset of the pandemic in mid-March, our performance has achieved sequential quarter-over-quarter improvement with our fourth quarter domestic systemwide RevPAR declining 25.1% from the same quarter of 2019.\nOur results continued to outpace the overall industry and our chain scales segments.\nIn fact our outperformance expanded in the fourth quarter.\nIn 2020 Choice Hotels grew RevPAR faster than our local competitors, increasing RevPAR index by over 5 percentage points through notable lifts in weekday and weekend RevPAR index.\nOur RevPAR index growth strengthened in the fourth quarter of 2020 and continued to improve through year-end.\nThroughout 2020 we also continued to grow our effective royalty rate, a reflection of the improving value proposition we deliver to our franchise owners.\nOur success is highlighted by Choice Hotels' key differentiators, including the strength of our proven and well-distributed brands, our customer profile and the continued resilience of leisure travel demand, our powerful reservations delivery system and loyalty program and our franchise-focused business model.\nThese four attributes, along with our relative outperformance versus the industry, reaffirmed our confidence in our strategy.\nTherefore, in the fourth quarter we decided to accelerate certain strategic investments in our product portfolio and value proposition capabilities to position the Company for continued success in the future.\nConsumer and developer demand for our products encouraged us to invest in new prototype development and brand initiatives in our key strategic segments.\nWe also advanced our pricing optimization and merchandising capabilities to further enable our owners to reach their target customers and effectively drive top line revenue to their hotels.\nTurning to 2021, we expect our momentum to continue into the first quarter, allowing Choice Hotels to further outperform the industry in the current environment.\nWe recognize that a high degree of uncertainty remains and our Company, like the hotel industry overall, continues to be significantly affected by the pandemic.\nNevertheless, we are observing positive signs that give us confidence for 2021 and beyond.\nFirst, given the vaccine rollout we believe consumers are beginning to feel more optimistic about future travel prospects.\nIn fact, we've observed that our customers are beginning to plan their travel further in advance as noted by improvements in our 31-day-plus bookings since November.\nFurthermore, we expect the trend of American vacationing domestically and taking road trips will continue.\nSecond stimulus checks from the December federal relief package, the prospect of additional government aid this year and high household savings point to a continued recovery for our small business owners and middle class consumers, our core customers.\nFinally, and as discussed on our last call, we believe that long-term consumer trends such as remote work and virtual learning will likely continue to provide Americans flexibility in where and when they travel for leisure.\nWe feel confident that our core strengths, combined with the tactics we deployed in response to the pandemic, have positioned us well to continue to capture and increase our share of travel demand over the long term.\nOur long-term strategy of growing the right brands in the right segments in the right locations, while enhancing our distribution capabilities, continues to pay off.\nIn the fourth quarter, we generated significant quarter-over-quarter growth in our proprietary revenue contribution mix which drove our full-year results to match our prior year's strong performance.\nMore specifically, our website contribution increased by 150 basis points, ending the year with the three strongest months in 2020 while our loyalty program increased its contribution by 280 basis points quarter-over-quarter.\nIn addition, we continued to benefit from our most loyal customers Choice Privileges Diamond Elite members who contributed an even higher percentage of overall revenue for full year 2020 as compared to the prior year.\nThese results have helped drive RevPAR index share gains of over 600 basis points in the fourth quarter versus our local competitors, up significantly across all location types as reported by STR.\nIn the past 46 consecutive weeks through mid-February, we've observed significant RevPAR share gains against the competition, giving us further optimism about our future revenue trajectory.\nI'll now provide a brief update on our key brand segments.\nOur mid-scale brands represent two-thirds of our domestic portfolio, nearly half of the franchise agreements executed last year and over half of the total domestic pipeline.\nAll of our select service mid-scale brands achieved year-over-year RevPAR index gains driven by occupancy and average daily rate index gains versus their local competitors through the fourth quarter and full year.\nWe're especially pleased with the performance of our Comfort portfolio where our efforts to transform the brand have led to RevPAR index gains versus its local competitors of nearly 9 percentage points and a RevPAR change that was over 10 percentage points more favorable than the upper mid-scale chain scale in the fourth quarter.\nAt the same time, we continue to add new construction hotels to the Comfort pipeline and attract high quality franchise conversion agreements to the brand that will fuel revenue intense growth in the near term.\nAnd finally, Clarion Pointe, a relatively new conversion brand extension to our Clarion portfolio, ended the year by opening the doors of its 25th hotel in the US, a fourfold increase of its portfolio since the prior year.\nThe brand now has over 50 domestic hotels open or in the pipeline.\nMoving onto our extended stay segment where we nearly quadrupled the size of the portfolio during the last five years.\nOnce again, our purpose-built brands tailored for long-term guests outperformed the competition in this cycle-resilient segment.\nOur WoodSpring Suites brand achieved an average occupancy rate of 72% for full year 2020 and experienced year-over-year RevPAR growth of 2% in the month of December, a truly remarkable achievement given the current environment.\nThe brand's pipeline continues to expand and reached 150 domestic hotels at the end of 2020.\nAt the same time our Suburban extended stay brand experienced year-over-year occupancy gains in the fourth quarter and an over 40% increase in franchise agreements activity for the full year.\nOur MainStay Suites mid-scale extended stay brand captured more than 20 percentage points in RevPAR index gains versus its local competitors both in the fourth quarter and full year and developer interest is growing.\nMost recently we signed and on-boarded the largest multi-unit transaction in MainStay's history, 15 units which significantly increased the brand's presence in the segment.\nLast year alone, the brand's portfolio expanded to 90 domestic hotels open and over 20% increase year-over-year and its pipeline has swelled to more than 140 domestic properties.\nFor full year 2020 Choice Hotels awarded nearly 110 extended stay franchise agreements, validating our strategic focus on this segment for both new construction and conversion opportunities.\nGiven these results, we remain optimistic about the growth potential of our extended stay portfolio.\nI'd now like to turn to our upscale portfolio whose choicehotels.com contribution increased by nearly 500 basis points year-over-year in the fourth quarter and marked the strongest quarterly revenue share in 2020.\nOur upscale Cambria Hotels brand continues its ongoing momentum, growing its portfolio size by 8% and its pipeline to nearly 80 domestic hotels, 19 of which were already under construction at year-end.\nDeveloper interest in the brand remains high with 16 franchise agreements executed for the full year, including one-third of those awarded in the fourth quarter.\nThe Ascend Hotel Collection continues to lead the industry as the first and largest soft brand.\nWith nearly 300 hotels open around the globe Ascend Hotels outperformed the upscale segment in year-over-year fourth quarter RevPAR change by over 20 percentage points.\nThe brand also achieved RevPAR index gains of nearly 13 percentage points against its local competitors for the full year, further enhancing the brand's attractiveness to developers looking for a smart conversion opportunity.\nChoice Hotels brands remain in demand despite the challenging environment aided by our strong value proposition and continued outperformance.\nDevelopers continue to choose our brands as they seek to improve their operations and boost the long-term value of their hotels.\nFor full year 2020 we awarded 427 new domestic franchise agreements of which over 70% were for conversion hotels.\nDemand continued to accelerate throughout the year with over one quarter of the total agreements executed in the month of December.\nIn the fourth quarter alone, we executed 195 domestic agreements, of which over 70% were for conversions.\nAdditionally, our developers remain optimistic about the long-term fundamentals of lodging industry.\nIn fact, nearly 30% of total domestic franchise agreements we awarded in 2020 were for new construction contracts.\nOur emerging markets development team, which is dedicated to driving diverse ownership of Choice franchised hotels among underrepresented minority owners awarded two dozen franchise contracts in 2020 including the largest minority owned multi-unit franchise agreement in the program's history.\nThese results and critical initiatives are major drivers for our optimism in the years ahead.\nWe're also committed to enhancing our value proposition by growing our platform business.\nWe recently announced the further expansion of our attractive upscale platform with the addition of 22 Penn National Gaming casino resort properties, representing nearly 7,000 rooms joining our Ascend Hotel Collection.\nThis strategic agreement will offer more than 47 million Choice Privileges members the opportunity to earn and redeem points at these Penn properties by booking their stay directly on choicehotels.com.\nOur focus remains centered on franchisee profitability through reducing the cost of ownership at the hotel level and driving top line outperformance versus competitors.\nOur franchisees are at the core of everything we do and we are committed to helping them along the road to economic recovery.\nThroughout 2020 we conducted 49,000 individual consultations with hotel owners and operators that helped our franchisees remain open and continue serving guests.\nWe've also rolled out offerings like grab-and-go breakfast, housekeeping on-demand and contactless check in that further lowered franchisees' total cost of ownership, while ensuring appropriate safety precautions for our owners, hotel staff and guests.\nWe are particularly pleased that legislation we advocated for became law in December, providing additional relief and stimulus to small businesses like our franchisees.\nSpecifically, we supported the establishment of a second draw loan program for existing Paycheck Protection Program borrowers that were hit hard by the pandemic, the extension and improvement of the program itself and increased flexibility for lenders.\nWe will continue to advocate with the new Congress and administration for additional relief measures aimed at assisting small businesses and providing targeted help for the travel industry.\nIn closing, I'm confident that these trying times have made us even more resilient and agile as a company.\nLooking beyond the crisis, I am convinced we will emerge even stronger over the long term.\nOur long-term view, resilient business model, proven brands and strong balance sheet will help us to further capitalize on growth opportunities in 2021 and beyond.\nWith that, I'll hand it over to our CFO.\nI hope that you and your families are all well and healthy.\nToday, I'd like to provide additional color around our fourth quarter and full year results and share updates regarding our balance sheet, liquidity and approach to capital allocation.\nI'll close with our thoughts on the outlook for the road ahead.\nTaking a closer look at our results, for full year 2020 total revenues, excluding marketing and reservation system fees, were $371.5 million, $88 million of which was generated in the fourth quarter and adjusted EBITDA totaled $241.1 million, $54.7 million of which was generated in the fourth quarter.\nAnd our adjusted EBITDA margin for full year 2020 was 65%.\nAs a result, our adjusted earnings per share were $2.22 and $0.51 for full year 2020 and the fourth quarter respectively.\nLet me now dive into our three key revenue levers, beginning with RevPAR.\nOur domestic systemwide RevPAR outperformed the overall industry by nearly 17 percentage points for the full year, declining 30.7% from the prior year.\nOur fourth quarter 2020 domestic systemwide RevPAR surpassed the industry by nearly 26 percentage points, declining 25.1% from the same period of the prior year and improved by 370 basis points from the third quarter.\nIn addition, our results exceeded the primary chain scale segments in which we compete as reported by STR by over 5 percentage points for full year 2020 and nearly 8 percentage points for the fourth quarter.\nWe've long focused our brand strategy on driving growth across the higher value and more revenue intense upscale, extended stay and mid-scale segments and the investments we've made are paying off.\nIn the fourth quarter these strategic segments helped us achieve material year-over-year RevPAR outperformance against our respective industry chain scales and drove gains versus our local competitors.\nSpecifically, our upscale portfolio increased relative to its local competitive set by over 12 percentage points.\nOur extended stay portfolio outperformed the industry's RevPAR change by an impressive 49 percentage points and grew versus its local competitive sets by 14 percentage points.\nAnd finally the RevPAR change for our mid-scale and upper mid-scale portfolio exceeded these segments by 10 percentage points.\nFor full-year 2020 all of our select service brands achieved significant RevPAR index gains versus their local competitors with each of our upscale and extended stay brands experiencing share gains of more than 10 percentage points.\nIn fact, we were able to increase our overall RevPAR index against local competitors by over 600 basis points in the fourth quarter through notable lifts in both continued occupancy gains and our franchisees' ability to maintain rate integrity.\nMore specifically, our average daily rate index increased 2.4 percentage points.\nWe expect that our recent investments in these capabilities will further enhance revenue management for our franchisees.\nDespite the unprecedented circumstances, we experienced positive unit and room growth year-over-year.\nAcross our more revenue intense brands in the upscale, extended stay and mid-scale segments we observed stronger unit growth, increasing the number of hotels by 1.8% year-over-year.\nWe expect our unit growth rate of these key segments to accelerate beyond 2020's growth rate.\nWe're especially pleased to report that following the completion of its brand transformation the Comfort brand family returned to growth in 2020, increasing the number of domestic units by 2% year-over-year.\nThe brand reached over 260 hotels in its domestic pipeline one quarter of which are hotels awaiting conversion, which we believe will fuel the brand's growth in the near term.\nDemand for our conversion brands has only increased, aided by our strong value proposition and recent outperformance.\nIn fact, the number of our conversion agreements executed and opened in 2020 was more favorable than we previously projected when accounting for the impact of the pandemic.\nAnd additionally we awarded a higher number of conversion agreements in the month of December than previously expected.\nThese trends give us further optimism for continued growth in 2021 and beyond.\nOur royalty rate remains a significant source of our revenue growth, which is driven by the attractive value proposition we provide to our franchisees, their continued desire to be affiliated with our proven brands and our pipeline.\nThe Company's domestic effective royalty rate increased 7 basis points year-over-year to 4.98% in the fourth quarter and grew 8 basis points for full year 2020 compared to the prior year.\nWe expect to maintain the historical growth trajectory of this lever in 2021 as owners seek Choice Hotels proven capabilities of delivering strong top line revenues to their hotels while helping them maximize return on investment.\nI'd now like to turn to our balance sheet and our capital allocation strategy.\nThroughout 2020, we transformed our cost structure, exercised prudent discipline around capital allocation and effectively allocated resources to drive top line outperformance, all of which allowed us to improve our cash position and further bolster our liquidity.\nWe successfully navigated the impact of the pandemic without having to renegotiate debt covenants.\nWe refinanced a portion of debt to extend our debt maturity profile and capitalized on favorable credit markets to significantly reduce the effective cost of our borrowings.\nIn fact, we reduced our net debt by approximately $50 million during the fourth quarter and are pleased to report cash flow from operations of over $115 million for 2020, over $45 million of which was generated in the fourth quarter alone despite the historically lower seasonal demand environment.\nOur cash and liquidity profile continued to be strong.\nAt the end of last year, the Company had approximately $835 million in cash and available borrowing capacity through its revolving credit facility.\nOur strong results relative to the industry and the chain scales in which we compete since the onset of the pandemic as well as our adjusted SG&A cost savings of 21% realized throughout 2020 gave us confidence to make certain investments in the fourth quarter to position the Company for success in 2021 and beyond.\nWe will maintain our disciplined approach to managing operating expenses while investing for the long term and capitalizing on opportunities as travel demand recovers.\nOur capital allocation philosophy remains unchanged, meaning we will continue to be disciplined stewards of capital and take steps that we believe maximize value for our shareholders.\nChoice's primary objective has always been to increase organic growth by strategically investing back into the business.\nIn particular, our capacity and strong cash flows will allow us to strategically invest in capabilities to further strengthen our presence in more revenue-intense segments, enhance our franchisee value proposition and drive top line revenue through value-added programs and services we offer to our franchisees, guests and other travel partners.\nWe put a premium on balance sheet flexibility and we expect to continue to utilize our strong leverage position to invest in these growth opportunities.\nBased on our demonstrated track record of success in our organic growth, we believe these internal investments will drive attractive returns for years to come.\nWe will continue to monitor the environment and evaluate capital returns to shareholders in the context of other investment opportunities, our leverage levels, market conditions and our overall capital allocation strategy.\nThe ultimate and precise impact of the pandemic on our business for 2021 and beyond remains largely unknown as is the exact trajectory of our industry's recovery.\nWhile we are not issuing formal guidance today, we currently expect to see a sequential quarter-over-quarter improvement in RevPAR change in the first quarter 2021 versus both 2020 and 2019.\nOur view is based on the following.\nFirst, we are observing continued resilience of leisure demand, especially in drive-to locations and the Company continues to experience stronger year-over-year RevPAR change performance versus the industry and the chain scales in which we compete.\nSecond, despite entering an historically lower demand season, we are pleased that our first quarter domestic RevPAR change has continued the pattern of sequential quarterly improvement through mid-February.\nIn fact, our year-to-date 2021 RevPAR has declined by approximately 18% from the same period of 2020.\nFinally, to date, we have seen little correlation between the rising COVID-19 cases in the fourth quarter and RevPAR change trajectory for our Company.\nThis along with optimism and consumer sentiment reflected by our 31-day-plus booking trends even before vaccines were widely distributed signals that consumers' desire to travel is climbing.\nWe will continue to evaluate the impact of COVID-19 across the business and we'll provide further updates in May during our next earnings call.\nIn closing, we remain optimistic that Choice Hotels is well positioned to succeed in 2021 and beyond and are confident in how we are managing the Company for the long term.\nWe continue to benefit from our resilient, primarily asset-light franchise-focused business model, which has historically delivered stable returns throughout economic cycles and provided a degree of cushion from market risks.\nWhile we are not immune to the pressures faced by the industry, we believe that our long-term view, disciplined capital allocation strategy and strong balance sheet will allow us to continue to capitalize on opportunities during the recovery and drive outsized returns for years to come.\nAt this time, Pat and I would be happy to answer any questions.\n Assistant:", "chosen": "q4 adjusted earnings per share $0.51.\ndomestic systemwide revpar decreased 25.1% for q4 2020.\nnot providing formal guidance for q1 or full year 2021 at this time.\nchoice hotels international - expects to see a sequential q-o-q improvement in revpar change for quarter ending march 31, 2021.\n"}
{"prompt": "Human: Slides for today's call are posted on our website, and we invite you to follow along.\nParticipants are cautioned not to place undue reliance on these statements, which reflect management's opinions only as of today, April 29, 2020.\nInformation on potential factors and risks that could affect our actual results of operations is included in our SEC filings.\nThe company undertakes no obligation to revise or publicly release the results of any revisions to the statements made in today's call other than through filings made concerning this reporting period.\nIn addition, today's discussion will include references to non-GAAP measures.\nClean Harbors believes that such information provides an additional measurement and consistent historical comparison of its performance.\nStarting on Slide 3.\nBefore discussing our Q1 results, I'd like to address the coronavirus pandemic and how we're responding to it.\nObviously, the outbreak has created a healthcare crisis and caused economic disruption around the globe, and I hope that all of you and your families are staying safe.\nHere at Clean Harbors, the safety of our employees is part of our culture and the top priority during this pandemic.\nAs an essential services provider with teams on the frontlines of the COVID-19 crisis, we have instituted rigorous safety protocols and work closely with suppliers to make certain we have the necessary equipment to protect our employees.\nDuring the crisis, our workforce has remained out in the field and at our plants, supporting our customers' needs across North America.\nThe workforce representing critical administrative functions has supported our field teams from home, and the strength of our systems has allowed that transition to be virtually seamless.\nWe expect the virus to impede our business in the second quarter, particularly within Safety-Kleen.\nIn addition to limited driving and business activity across North America, Safety-Kleen also had been affected by the sharp downturn and the value of base oil.\nIn short, we are faced with some difficult near-term market conditions, and we are making -- taking significant actions in response.\nLet me touch on some of those actions.\nStarting with alignment of our cost structure with the demand environment, we are rightsizing our workforce through furloughs and other reductions and implemented a nonbillable hiring and wage freeze, and we restricted all travel.\nWe've also gone back to many of our vendors and suppliers to negotiate for savings or improved payment terms.\nIn addition, we've temporarily shutted half of our rerefining capacity to reflect the current demand for base oil as well as the likelihood of less available used motor oil in Q2 and beyond.\nFrom a liquidity perspective, we drew down $150 million on our revolver to strengthen our balance sheet in the event that crisis worsens.\nWe have reset our net CapEx spend plans for 2020, and we've lowered our expected spend by more than $50 million to preserve capital and support our free cash flow for the year.\nThat said, I believe our strong balance sheet leaves us well-positioned to succeed.\nTurning to Q1 financials on Slide 4.\nRevenues rose 10% from a year ago as both operating segments recorded solid growth.\nAt the same time, our adjusted EBITDA increased to a record $122.6 million, driven by our mix of high-value waste streams and high utilization, augmented by projects and emergency response work.\nOur adjusted EBITDA margin increased 130 basis points to 14.3%.\nLooking at our segment results, beginning on Slide 5.\nEnvironmental Services revenue grew 11% based by contributions from our facilities network and Field Services group and aided by warmer weather nearly all quarter.\nAdjusted EBITDA growth of 22% was driven by business mix, disposal volumes, and emergency response revenue.\nEmergency response work totaled $21 million, representing COVID-19 de-con work and a cleanup of a chemical plant fire.\nOur disposal facilities saw impressive volumes this quarter as incinerator utilization increased to 86% and landfill tonnage grew 39%.\nOur average price per pound for incineration in Q1 was up 11%, reflecting the record level of high-margin direct burn streams that we gathered.\nOverall, another terrific quarter for our Environmental Service segment.\nMoving to Slide 6.\nSafety-Kleen revenue was up 8%, primarily by growth in the SK Oil business.\nAdjusted EBITDA and margin improved on lower SK Oil transportation costs and higher rerefining production compared with a year ago when volumes were disrupted by frozen rivers and flooding.\nWithin the SK branch business, core services performed well.\nWhile parts washer services were flat with the prior year, waste ore collection was up slightly to 55 million gallons, blended products accounted for 25% of volume in the quarter, and our direct volume was 7%.\nThe first quarter began with positive signs that IMO 2020 was going to enable us to expand our refining spread as high sulfur fuel oil values had fallen, and base oil prices were up in early January.\nBut the oil shock sparked by the global outbreak of the coronavirus, IMO 2020 has largely been sidelined, and base oil has fallen by $1 a gallon.\nWe entered Q2 with significant pressure on our rerefining spread.\nAnd in this environment, the value of used motor oil is in a charge-for-oil state.\nIn response to the current market conditions, we've significantly raised our charge-for-oil program.\nDriving in the U.S. and Canada needs to normalize before our spread and lubricant demand can rebound.\nAnd we see conditions -- when we see conditions improve, we'll consider reopening our closed rerefineries.\nTurning to Slide 7.\nGiven the current environment, our capital allocation strategy is critical as ever.\nAs I mentioned earlier, we are reducing our planned net CapEx by more than $50 million.\nWe divested two businesses in Western Canada in the first quarter as we continued to steadily shrink our direct exposure to energy.\nSince we began executing our divestiture program several years ago, we've sold seven businesses for approximately $120 million in proceeds.\nIn terms of M&A, we're not likely to be active near term.\nLong term, we believe we'll emerge from this market downturn stronger, both financially and operationally than some of our peers, which will allow us to be opportunistic.\nFor our buyback program, we will likely hold off until we are certain that the domestic economy is on a clear path to recovery.\nIn addition, we'll look to repay the $150 million on the revolver as soon as this crisis shows signs of nearing an end.\nLooking ahead to our segments, although we have seen some cancellations and project delays due to COVID-19, we expect our Environmental Service segment to weather the current downturn well.\nWe expect our decontamination work and growing volumes of infection waste to help offset what would certainly be a larger decline.\nWithin Safety-Kleen, we expect both our branch business and our SK Oil to be hit fairly hard, particularly here in Q2 as stay at home orders greatly reduce vehicle travel and generate less used motor oil.\nOur SK branch business should rebound as shelter-in-place mandates are lifted and low gasoline prices encourage a rebound in driving.\nIn SK Oil, our rerefining spread has contracted with a drop in crude, and we have aggressively increased our charge-for-oil pricing, but volumes are off and near-term demand for base oil has fallen.\nIn summary, our Q1 results demonstrated the strength of our business model, the value of our assets and our frontline role in emergency response.\nOur market leadership, financial liquidity and positive free cash flow will enable us to navigate this global crisis.\nLet me echo Alan's comments about the outstanding work of our team and everyone on the front lines of the crisis.\nThrough the unprecedented events we've experienced in just a few weeks, I think we all have a deeper appreciation for the professionals, especially healthcare workers, who put themselves at risk every day to help those in need.\nTurning to Slide 9 and our income statement.\nAs Alan indicated, we delivered record first quarter results.\nRevenue grew nearly $78 million, while adjusted EBITDA grew by nearly $21 million.\nThis reflects the mix of business we achieved in the quarter, project work and favorable weather.\nFrom a gross profit perspective, we saw a sharp increase in both absolute dollars and on a percentage basis due to higher utilization, pricing, and a favorable comp with prior year.\nOur gross margin increased by 160 basis points from a year ago.\nSG&A expenses were up $14.5 million in the quarter due to the higher revenue, investments in our employees, and some onetime expenses from last year -- onetime items from last year.\nAs we move forward, we are focusing much of our cost reduction efforts in this area to bring expenses in line with our revenue.\nDepreciation and amortization in Q1 was down slightly to $47.5 million.\nWe completed two small bolt-on acquisitions in 2019, while also divesting several businesses.\nFor 2020, we expect depreciation and amortization in the range of $285 million to $295 million, which is a little lower than last year.\nIncome from operations increased 92% to $45.5 million, a first-quarter record, reflecting the combination of our revenue growth and improved gross profit.\nOn a GAAP basis, earnings per share was $0.21 in Q1 versus $0.02 a year ago.\nOur adjusted earnings per share was $0.28.\nTurning to the balance sheet on Slide 10.\nAs Alan mentioned, we drew $150 million on our revolver during the first quarter which increased our cash and short-term marketable securities to $494.3 million at quarter end.\nWe saw reasonable AR collection late in March, which led to a healthy cash balance.\nOur strong liquidity position further protects our company and adds financial flexibility should we need it.\nOur balance sheet remains in good shape.\nCurrent and long-term debt obligations at quarter end rose to $1.7 billion, reflecting the drawdown on our revolver.\nOur weighted average cost of debt is now 4.3% with a healthy mix of fixed and variable debt.\nLeverage on a net debt basis was 2.2x for the trailing 12 months ended March 31.\nLooking at our most recent cash balance from yesterday, our cash remains essentially flat from where we ended Q1.\nThe team has done a nice job maintaining its focus on collections and managing our spend.\nTurning to cash flows on Slide 11.\nCash from operations in Q1 was up slightly at -- to $33.7 million.\nCapEx, net of disposals and the purchase of our headquarters, was $59.9 million, up from a year ago, resulting in adjusted free cash flow in the quarter of a negative $26.2 million, which is consistent with prior year and our expectations.\nFor the year, we are now targeting CapEx, net of disposals and purchase of our headquarters in a range of $140 million to $160 million.\nDuring the quarter, we repurchased approximately 300,000 shares of our stock at an average price of $57.41 a share for a total of $17.3 million.\nAs Alan mentioned, we'll be cautious in our approach to buybacks until we see evidence that markets are well into their recovery stage.\nAs Alan also noted, given the uncertain market environment, we would -- we are withdrawing our 2020 guidance.\nWe're hopeful we'll be able to reinstate guidance with our Q2 earnings announcement, provided markets have stabilized.\nIn summary, Q1 was a strong quarter, highlighted by several financial records, including adjusted EBITDA.\nIf it were not for COVID-19, our Q1 results would have positioned us for the fourth straight year of profitable growth.\nWe have taken significant actions in response to the pandemic and are prepared to take additional steps in the event of a prolonged recovery.\nWe are focused on things we can control, carefully -- including carefully managing our costs, and pursuing new waste streams to feed our landfills and incinerators.\n Assistant:", "chosen": "compname posts q1 earnings per share of $0.21.\nq1 earnings per share $0.21.\nq1 adjusted earnings per share $0.28.\nwithdraws 2020 adjusted ebitda and adjusted free cash flow guidance.\ndownsizing its workforce through furloughs and other actions.\nlowering its expected 2020 net capex spend by more than $50 million.\ndrawing down $150 million on its revolving credit facility.\n"}
{"prompt": "Human: Slides for today's call are posted on our website, and we invite you to follow along.\nParticipants are cautioned not to place undue reliance on these statements which reflect management's opinions only as of today, May 5, 2021.\nInformation on potential factors and risks that could affect our actual results of operations is included in our SEC filings.\nThe company undertakes no obligation to revise or publicly release the results of any revision to the statements made in today's call other than through filings made concerning this reporting period.\nIn addition, today's discussion will include references to non-GAAP measures.\nClean Harbors believes that such information provides an additional measurement and consistent historical comparison of its performance.\nStarting on Slide 3.\nI want to start today with a focus on safety, which is a key component of our corporate strategy and culture.\nThere's nothing more critical to the success of our company than making sure that every night, every employee goes home to their family uninjured.\nSafety is important not only for the well-being of our workforce and the costs associated with industries -- injuries and lost time, but it's a competitive differentiator and a critical selling point with our customers.\nYou can see on this slide the tremendous progress we have made as an organization over the past two decades, reducing our total recordable incident rate, or TRIR, by 74% since 2002.\nIt's a metric we take a lot of pride in.\nAs part of our continuous improvement approach to safety, we relaunched our highly successful Safety Starts with Me: Live It 3-6-5 program this year.\nThe program really personalizes safety for every employee and includes each employee's five personal reasons why they choose to be safe at work, on the road and at home.\nAnd we believe this relaunch will allow us to sustain this successful journey on safety.\nMoving to Slide 4.\nAfter a detailed planning process, we took a new approach to our Safety-Kleen organization that we believe will be beneficial to the company and our shareholders alike.\nThis approach is based on two critical changes.\nFirst, we consolidated the core Environmental Services of our Safety-Kleen branches into the legacy Environmental Services sales and service regions.\nWe expect this change to strengthen our allocation of resources, whether that is people, trucks or equipment.\nWe also expect this to reduce third-party spend, generate even greater cross-selling opportunities across all our environmental lines of business and it also enables efficiency gains in routing and network consolidation.\nThe second change we made was to combine all the pieces of our sustainable lubricants business.\nOur newly formed Safety-Kleen Sustainability Solutions segment, or SKSS, consists of both sides of the spread we manage in our Re-refining business.\nIt will be focused on providing the best, most environmentally friendly and sustainable lubricant products to our customers.\nThe collection of services for waste oil, used oil filters, waste antifreeze and other related items will all be tightly managed under a stand-alone organization.\nThis should enable us to collect more used motor oil and supply our rerefineries with the best available feedstock.\nOverall, we believe this new structure better aligns the legacy Safety-Kleen operations within our company and will enable us to maximize the value of those assets.\nTurning to Q1 performance.\nWe kicked off 2021 with a strong start as our results exceeded our expectations.\nOur Environmental Services segment, after a difficult February due to the deep freeze in the South, rebounded with an outstanding March, driven by greater volumes of high-value waste streams and the ongoing recovery in many of our service businesses.\nOur newly formed SKSS segment delivered better-than-expected profitability due to ongoing base oil pricing gains driven by market conditions.\nAdjusted EBITDA in Q1 was $129.5 million, which included $5.4 million in benefits from government assistance programs.\nOur margin grew by an impressive 130 basis points to 16%, reflecting the benefits of our cost controls, along with productivity and pricing initiatives.\nWe also generated strong adjusted free cash flow of more than $62 million.\nTurning to our segment results, beginning with Environmental Services on Slide 5.\nRevenue was down year-over-year due to the lingering effects of the pandemic both on project work and certain service offerings as well as the effect of the February storm, but we closed Q1 with revenues on an upward trajectory.\nAdjusted EBITDA was down 4% from a year ago, mostly due to the lower revenue.\nEven so, our margins were up 70 basis points and this was driven by a combination of pricing, cost savings, revenue mix and $4.5 million in government assistance.\nRevenue from our COVID-19 decon work totaled $28 million in Q1, which was higher than we anticipated.\nWe've now completed well over 17,000 total COVID responses since the program began a little over a year ago.\nIn Q1, our incineration utilization dipped to 80%, entirely due to the lost days in February at both our Deer Park and El Dorado incinerator as a result of the storm.\nAt the same time, we continue to gather a lot of high-value waste streams and record number of drums, which pushed our average price up 8% from a year ago.\nThe adverse weather and strong volumes drove our deferred revenue to the highest level in our history at $83.2 million, providing us with a terrific backlog heading into Q2.\nLandfill volumes were down 29% due to less projects, while average pricing rose 24%, which helped to offset a portion of that volume decline.\nThe pace of parts washer services picked up nicely in the quarter, growing 6% from Q4 to 235,000 services.\nIn Q1, we saw most of the Safety-Kleen Environmental branch core offerings in the U.S. trending up from a year-end as people began driving more with the rollout of vaccines and SK's nonautomotive service customers also beginning to rebound.\nMoving to Slide 6.\nRevenue for Safety-Kleen Sustainability Solutions was essentially flat with the prior year as higher base oil pricing and charge for oil rates were offset by slightly lower volumes, particularly on the waste oil collection side.\nOn a sequential basis, SKSS revenue increased 19% from Q4, fueled by stronger demand and higher pricing.\nAdjusted EBITDA in this segment climbed 31% to go along with a 480 basis point margin improvement, which reflects the widening of our rerefining spread.\nThe SKSS margin was driven higher by the productivity and cost initiatives we implemented as part of our organizational changes over the past year.\nGovernment programs accounted for $800,000 of contribution in Q1 in this segment.\nWaste oil collections were modest at 47 million gallons.\nOur percentages of blended products and direct volumes came in as expected in Q1 and consistent with the prior year.\nGiven the market environment, we prioritized opportunities to move larger volumes of base oil at higher than normal margins.\nTurning to Slide 7.\nGiven our cash balance, low leverage and 2021 cash flow, we remain in excellent position from a capital allocation standpoint.\nWe expect to focus on internal growth capital on our plants and other assets that will generate the best returns.\nOur M&A pipeline is robust.\nAnd as the U.S. emerges from the pandemic, we see more acquisition candidates are coming to market.\nWe intend to be active on this front.\nWe also will continue to -- with our share repurchases program as we believe our stock represents a great value at the current levels.\nOur focus in recent years has been on increasing our return on invested capital.\nOur adjusted ROIC has more than doubled since 2016.\nEvery year since then, we've grown our annual EBITDA, while also acquiring companies that support our core businesses and pruning our portfolio by divesting some energy-related assets.\nOur adjusted ROIC today exceeds our cost of capital.\nIn summary, we are excited about our prospects for this year.\nWe see a promising environment as North America reopens from the pandemic.\nWe believe both our segments have favorable outlooks for the remainder of the year.\nWithin Environmental Services, we began Q2 with a substantial backlog of waste at our plants and significant waste stream opportunities for us to pursue.\nWe would expect our incinerators, landfills, TSDFs and other permitted disposal and recycling facilities to deliver strong performance in 2021.\nIn the quarters ahead, we also expect many of our service offerings, including industrial, technical and field services, along with the SK Environmental branches to grow from last year.\nGiven our Q1 results, we now expect $30 million to $40 million in COVID-related revenues for the full year 2021.\nWithin SKSS, we intend to capitalize on the positive market conditions, particularly as demand in the base oil market returns to more normalized levels.\nWe expect our rerefining production levels to remain strong over the next several quarters, and we will continue to actively manage our spread.\nWe intend to grow our used motor oil gallons collected in the months ahead, in conjunction with the ongoing vaccine rollout and the pent-up travel demand.\nOverall, we expect a year of profitable growth in 2021, generating healthy free cash flow to support our capital allocation strategy.\nTurning to our income statement on Slide 9.\nAs Alan detailed, we began 2021 with the same upward trajectory we saw in the back half of 2020.\nIn fact, we concluded the quarter with the best March performance in our history in terms of both revenue and adjusted EBITDA.\nOur Q1 adjusted EBITDA results exceeded the guidance we provided on our last call.\nAs expected, revenue declined 6% year-over-year, but was up sharply in March versus the same month last year.\nAdjusted EBITDA grew 3% to $129.5 million.\nWe recorded our 13th consecutive quarter of year-over-year margin improvement.\nOur cost reduction programs, productivity initiatives and mix of revenue, combined with $5.4 million of government program assistance, resulted in 130 basis points improvement in gross margin.\nIf you back out the government monies, our EBITDA margin improved a healthy 60 basis points.\nSG&A costs declined year-over-year in the quarter, reflecting our lower revenue and were flat on a margin basis due to our effective cost control measures.\nFor the first -- for the full year, using the midpoint of our guidance range, we would expect SG&A to be up in absolute dollars from the prior year and essentially flat on a percentage basis.\nDepreciation and amortization in Q1 declined to $72.2 million, in line with our expectations.\nFor 2021, we continue to anticipate depreciation and amortization in the range of $280 million to $290 million.\nIncome from operations increased by 12%, reflecting our cost controls and revenue mix in the quarter.\nTurning to Slide 10.\nOur balance sheet remains in excellent shape.\nCash and short-term marketable securities at March 31 were $570.7 million, flat with year-end and up more than $76 million from the same quarter a year ago.\nOur debt was $1.56 billion at quarter end, with leverage on a net debt basis at 1.8 times.\nOur weighted average cost of debt is 4.2% with no debt maturities until 2024.\nOur strong balance sheet puts us in an enviable position to execute on our growth strategy.\nTurning to cash flows on Slide 11.\nCash from operations in Q1 was extremely strong at $103 million.\nOne of the drivers behind this performance was improved working capital management from stronger accounts receivable collections and lower AP expenditures driven by cost initiatives.\ncapex, net of disposals, was down year-over-year at $40.7 million, which was slightly below our expectation, mainly due to timing of some projects.\nThe result of these two items, along with some other smaller factors, was a record Q1 adjusted free cash flow of $62.3 million.\nFor 2021, we continue to expect net capex in the range of $185 million to $205 million, which is higher than 2020.\nDuring the quarter, we bought back 300,000 shares at a total cost of $26.5 million.\nOf our $600 million authorization, we now just -- we now have just over $180 million remaining.\nWe remain committed to our repurchase program.\nMoving to Slide 12.\nBased on our strong Q1 results and current market conditions, we are raising our 2021 guidance.\nWe now expect adjusted EBITDA in the range of $560 million to $600 million with a midpoint of $580 million.\nLooking at guidance from a quarterly perspective, we expect Q2 adjusted EBITDA to be 15% to 20% above prior year levels based on the positive momentum we are experiencing in our business and the pandemic-related slowdown in Q2 a year ago.\nAt the midpoint of that range, our adjusted EBITDA would be 6% higher than Q2 of 2019.\nHere is how our full year 2021 adjusted EBITDA guidance translates to our new segments.\nIn Environmental Services, we expect adjusted EBITDA to decline in the mid-single digits on a percentage basis from 2020.\nWe expect to benefit from the growth and profitability within incineration, a rebound in the SK branches and other service businesses and our comprehensive cost measures.\nHowever, these benefits will not offset the decline in high-margin decontamination work, and more significantly, the large contribution from government assistance programs in 2020 that totaled $35.6 million in this segment.\nFor Safety-Kleen Sustainability Solutions, we anticipate adjusted EBITDA to increase in the range of 50% to 60% from 2020.\nWe expect our refinery -- our Re-refinery business to have an outstanding year as the spread we manage in that business is extremely wide due to supply driven price increases in base oil and blended products.\nAs miles driven and lube demand rises in the second half of this year, we expect that spread to begin to normalize.\nAt the same time, however, our ability to collect more waste oil and cross-sell our other products to those same customers should increase.\nThese improvements in the SKSS segment in 2021 will more than offset the $3.7 million in government assistance that SKSS received in 2020.\nIn our Corporate segment, we now expect negative adjusted EBITDA to be up low to mid-single digits from 2020 due to higher incentive comp.\nFor 2021, our adjusted EBITDA guidance now assumes receiving a total of $7 million to $9 million of government program assistance, primarily from Canada.\nBased on our current EBITDA guidance and working capital assumptions, we now expect 2021 adjusted free cash flow in the range of $230 million to $270 million or a midpoint of $250 million.\nTurning to Slide 13.\nAs we emerge from the pandemic and start a new year in 2021, we thought it would be a good time to formalize some longer-term targets for the company.\nWe review long-term strategic plans and 5-year outlooks with the Board on an annual basis.\nWe'd like to share some of those longer-term objectives with you today based on our current view of opportunities within our markets.\nFirst, we expect our organic growth each year to be one to two percentage points better than the U.S. GDP.\nSecond, we expect to improve our adjusted EBITDA margins between 30 to 50 basis points annually, excluding extraordinary items such as government assistance programs.\nThird, we are targeting more than $300 million of adjusted free cash flow by 2025.\nThis 5-year outlook excludes any future acquisitions or divestitures and is based on current market conditions.\nIn closing, we're off to a great start to the year.\nWe see a clear path to continued positive momentum through the remainder of 2021 and also see macro trends that should support further profitable growth in the years ahead.\nWe're excited about the bright future of Clean Harbors, both near and long term.\n Assistant:", "chosen": "q1 revenue fell 6 percent to $808.1 million.\nsees adjusted ebitda in range of $560 million to $600 million for fy 2021.\nsees adjusted free cash flow in range of $230 million to $270 million for fy 2021.\nfor q2 of 2021, expects adjusted ebitda to increase 15 to 20% from prior-year period.\n"}
{"prompt": "Human: Joining me on the call today are Arsen Kitch, President and Chief Executive Officer; and Mike Murphy, Chief Financial Officer.\nFinancial results for the fourth quarter of 2020 were released shortly after today's market close.\nOn a consolidated basis, the company reported net sales for the fourth quarter of $453 million and adjusted EBITDA of $72 million.\nWhich represents growth of approximately 4% and 38%, respectively, over the fourth quarter of last year.\nA few business highlights to mention.\nOur tissue business drove results with both higher sales and production volumes year-over-year to meet volatile demand, which exceeded our expectations.\nOur production in the quarter was similar to our sales.\nOur paperboard business delivered strong performance as well.\nOur backlogs are robust, which contributed to our decision to announce a price increase of $50 per ton across our SBS portfolio, starting on February 2.\nIn the fourth quarter, we used the free cash flows generated to reduce net debt by an additional $58 million.\nOn slide four, as I noted over the previous quarters, we remain focused on our top priorities during COVID, the health and safety of our people and safely operating our assets to service our customers.\nOur efforts and risk mitigation strategies are making a difference in helping to reduce the risk of COVID at our sites.\nOur human resources and manufacturing leadership teams are doing an exceptional job of proactively monitoring the health of our workforce and ensuring that we have the proper staffing levels in place.\nOur people's diligence to date has been key to our success and will continue to be so.\nAs a recognition of the work by our entire team during this challenging time, we paid out a onetime discretionary bonus of $1,000 in November to over 2,800 of our people.\nWe're also strongly encouraging all our people to get the COVID vaccine with a $200 incentive.\nI would like to express my deepest gratitude to our entire team for their extraordinary efforts and perseverance through this challenging time.\nAs we start to see the benefits from a broader vaccine rollout, I want to encourage maintaining high levels of vigilance until COVID is under control and behind us.\nI will now share what we saw for both the tissue and paperboard businesses in the fourth quarter.\nLet's start with our Consumer Products division on slide five.\nAs we had previously noted, at home tissue demand was volatile during the quarter.\nNew waves of the pandemic caused significant spikes in demand mid-November through mid-December.\nWhile we originally anticipated demand at or below levels that we saw in the fourth quarter of 2019, we were reminded of how unpredictable demand can be for essential products during this time.\nMike will expand further on demand patterns in the fourth quarter during his comments.\nOur team and customers are doing a great job working through this volatility, and we benefited from higher-than-anticipated sales and production volumes in the fourth quarter.\nOur industry view remains largely the same, which I'll summarize in a few key points to provide some context.\nFirst, recall that the market for tissue in the U.S. is traditionally 2/3 at-home and 1/3 away-from-home, with limited manufacturing production capability to swing between the 2.\nAs consumers have been more homebound, there has been a shift toward at-home consumption.\nDemand swings have and will continue to be driven by consumer behavior.\nOur expectation is that as COVID vaccines are administered and infection rates decrease, that we will see a shift back to away-from-home consumption, which we expect will negatively impact us as we're primarily focused on the at-home market.\nWith that said, it is unclear if there will be a lasting impact on consumer behavior in a post COVID environment.\nSecond, while it is too early to discern private branded share trends, we continue to note that paper towel demand is tracking ahead of the overall tissue category, while facial demand is lagging.\nPrivate brands have had a good track record of gaining share relative to branded products over the past decade, a trend that we would expect to continue.\nWe will continue to monitor these trends in the coming months and quarters due to the continued uncertainty in consumer demand associated with COVID.\nThird, as we noted in previous quarters, SKU rationalization has occurred, aiding additional production.\nWe believe that lower SKU counts benefit both retailers and manufacturers like us.\nWhile we have seen some customers desiring a recovery of SKUs, we do not anticipate SKU counts to go back to pre-COVID levels in the near to medium term.\nOur tissue results in the fourth quarter were robust.\nWe shipped 13.9 million cases, which was up around 5.3% compared to the fourth quarter of 2019.\nSales were down 4.2% relative to the third quarter of 2020.\nAs we mentioned on our third quarter earnings call, we exited several customers to reduce complexity and improve our network, which impacted the fourth quarter results and is expected to impact first quarter 2021 results as well.\nWe are encouraged by our pipeline of sales for the remainder of 2021.\nAs you recall, we estimate that approximately 2/3 of paperboard demand is derived from products that are more recession-resilient and 1/3 is driven by economically -- by more economically sensitive or discretionary products.\nOur folding carton customers, especially those with concentrations in food or healthcare packaging, continue to see strong demand and our food service customers, especially those with concentrations in quick service restaurants and away-from-home dining, continue to see weaker demand.\nWe are pleased with the market reception of our sustainability focused brands of Nuvo Cup and ReMagine folding carton.\nBoth are playing a meaningful role in our favorable market position.\nWe're encouraged by our solid performance in the quarter and continued strong demand for our products.\nWe made an announcement last week about the natural gas curtailment in Arkansas that caused us to temporarily suspend production in Cypress Bend.\nNatural gas deliveries were curtailed to the point where we could no longer operate.\nWe estimate that the costs associated with the weather event across our paperboard system, including loss production, repairs and spikes in natural gas prices, could impact us in the first quarter by approximately $6 million to $8 million.\nWe continue to experience the same fundamental supply and demand dynamics that led us to announce a $50 per ton price increase in January.\nDemand remains robust and our backlogs have grown since beginning of the year.\nPrice increase implementation has begun, and we expect that it will take several more months to fully implement the increase.\nThe consolidated company summary income statement shows fourth quarter as well as the full year 2020 and 2019.\nIn the fourth quarter, diluted net income per share was $1.34 per share and adjusted EBITDA was $71.6 million and full year diluted net income per share was $4.61 per share, and adjusted EBITDA was $283.2 million.\nThese represent significant increases over the prior periods, which were driven by tissue demand due in large part by consumer COVID-related behavior as well as the benefits from our Shelby investment, favorable raw material pricing and the lack of a major planned outage in our paperboard division.\nThe corresponding segment results are on slide eight.\nOur paperboard business continued its strong adjusted EBITDA performance, while consumer products benefited from significant sales growth and fixed cost leverage associated with production growth and favorable input costs.\nBefore we speak in more detail about our divisional performance, I want to note changes in how we portray our financial bridges.\nPreviously, we have shown the impact of production volume changes and associated fixed cost leverage impact in our cost category.\nWe have modified that approach and are including production volume changes in our volume category.\nWe believe that this change will enable investors to better understand sales changes as we expect to produce similar quantities of product that we sell, which will all be in the volume category.\nThe cost category will better reflect the changes in raw material input pricing and inflation.\nThis sheeting is a service that distorts our sales price of our base paperboard products.\nAdditionally, we have decided to make some accounting changes that will impact our financials starting in 2021, but we want to note them for you today.\nYou can also review these changes and the pro forma impact in our 8-K filing.\nOur bail pulp sales from our Lewiston mill to third parties have been recorded in our tissue business.\nThese sales will now be recorded in our paperboard business.\nBail pulp sales from Lewiston to our tissue operations will be transferred at market price going forward as opposed to cost.\nWe believe this change will better reflect the economics associated with the business.\nWe will still transfer pulp from the Lewiston pulp mill to the Lewiston tissue operations at cost given the located nature of these assets.\nAs a reminder, in the second quarter of 2019, we started our new Shelby, North Carolina paper machine and incurred, as anticipated, start-up costs related to lower production throughput, higher waste and other costs which persisted during the remainder of 2019.\nWe achieved the targeted production rate of our new paper machine in the second quarter of 2020 and we're continuing to capture the benefits associated with the project, including ramping our converting lines, realizing supply chain savings and achieving sales wins and mix improvements.\nWhile we are not providing a specific dollar amount for these costs and benefits, the continued realization of the Shelby investment is an important factor in our performance improvement.\nOur mix continues to improve as Shelby has come online, more than offsetting some year-over-year price impacts.\nWe're benefiting from the volume increases related to the production ramp, which helped to meet elevated demand.\nOverall, lower input costs, improved mix and fixed cost leverage from increased production possibly impacted our tissue business in the fourth quarter of 2020 relative to the fourth quarter of 2019.\nYou can also review a comparison of our fourth quarter 2020 performance relative to third quarter 2020 on slide 17 of the appendix.\nslide 10 contains some additional context on tissue related to the volatility of demand and its impact on our financial performance.\nThe IRI panel data, which is a snapshot of retail sales of tissue measured in dollars depicts what our customers and we have observed from consumer demand patterns, with the line showing changes on a year-over-year basis, while the data in the box shows a quarterly review versus last year.\nAs we exited the third quarter, we anticipated an elevated but stable demand pattern.\nBased on that demand profile, ample inventory levels at our customers, and slowing demand from our customers in October, we expect to see softness in our fourth quarter sales.\nBut the consumer-driven demand spike in mid-November into December, that changed rapidly.\nThis period of volatility, both the October pullback, which we noted on our third quarter earnings call, and strong orders in November and December, are a good reminder that we may not return to a stable order pattern until after COVID-related volatility is behind us, impacting our ability to forecast the business.\nWe added an additional slide in the appendix of the supplemental materials that details the weekly volatility in IRI panel data that our customers and supply chain have experienced.\nOur sales in the fourth quarter were 13.9 million cases, representing a unit decline of 4.2% versus the third quarter and unit growth of 5.3% versus prior year.\nOur production in the quarter was $13.9 million cases or down 9% versus the third quarter and up 2.4% versus prior year.\nProduction levels have benefited from the Shelby ramp and SKU rationalization.\nThe cost leverage from the significant increase in production, along with improved costs in freight and logistics, led to continued strong results year-over-year.\nSlide 11 is a year-over-year adjusted EBITDA comparison for our paperboard business.\nLower pricing, which RISI reported in February 2020, was partly offset by favorable mix.\nThe absence of a planned major outage at our Cypress Bend mill was also a driver of year-over-year improvement.\nOverall, our team ran our operations well in the quarter and continued to deliver strong results.\nYou can review a comparison of our fourth quarter 2020 performance relative to third quarter 2020 performance on slide 18 in the appendix.\nSlide 12 provides a perspective on our first quarter outlook and some other key drivers for full year 2021.\nAs previously discussed, tissue outlook is largely a function of sales demand.\nTissue shipments in January were 4.6 million cases, and our shipments in February are trending to below four million cases.\nAt this pace, we are expecting first quarter shipments to be below levels experienced in the first quarter of 2020, when COVID initially impacted consumer buying patterns, and down versus the fourth quarter of 2020.\nAs we mentioned previously, our paperboard business announced a price increase of $50 a ton across our SBS grades effective February 2.\nGiven the nature of our agreements and discussions with customers, we expect that the benefit of this will be reflected in the next couple of quarters with limited benefit expected in Q1.\nThe unexpected weather-related outage at our Arkansas mill, which caused loss production and repairs as well as natural gas price increases across our paperboard system, is expected to negatively impact the quarter by approximately $6 million to $8 million.\nIf our assumptions are correct, we would anticipate the first quarter adjusted EBITDA to be in the range of $51 million to $59 million.\nThis range also assumes that we continue to operate our assets without significant COVID-related disruptions.\nWhile we are not prepared to provide specific annual guidance for 2021 and there are several drivers, assumptions and variables that we would like to address.\nWe are expecting a positive impact from the previously announced SBS price increases.\nWe are anticipating tissue volumes to drop high single to low double-digit percentages.\nThis assumes continued normalization of consumer buying patterns, but is highly dependent upon the course of the pandemic.\nWe are encouraged by our sales pipeline, which we anticipate will have a positive impact on the second part of the year.\nPaperboard volumes are expected to be largely stable.\nWe are expecting higher input costs, including pulp, packaging, energy and freight.\nWhile these variables are difficult to predict today, raw material inputs in total could be a $40 million to $50 million headwind this year, with more than half the total coming from pulp.\nIn our paperboard business, planned major maintenance outages are expected to reduce our earnings for 2021 compared to 2020 by $25 million to $30 million.\nWe have updated this guidance on slide 23, where we broke out the timing by quarter, which reflects our current plan.\nIn light of the Cypress Bend weather event, we're evaluating timing of our outage schedule and may update you in the coming quarters.\nFor the full year 2021, we're also anticipating the following: interest expense between $38 million and $40 million.\nDepreciation is expected to be between $106 million and $110 million.\nCapital expenditures are expected to be between $60 million and $65 million, which is closer to historical trends as we expect to execute against some projects that were delayed in 2020.\nAnd our effective tax rate is expected to be 25% to 26%, and we expect to utilize some of our current tax attributes which amount to $60 million to reduce cash taxes.\nSlide 13 outlines our capital structure.\nWe utilized approximately $50 million of free cash flow to reduce our net debt, including making voluntary prepayments on our term loan, and our liquidity was $250 million at the end of the year.\nWe continue to make strides in reducing our net debt and increasing our financial flexibility as we target a net debt to adjusted EBITDA ratio of 2.5 times, assuming adjusted EBITDA after COVID benefits and with a normal amount of outages.\nBefore wrapping up with our value proposition, I wanted to reflect on some of our key accomplishments in 2020 on slide 14.\nOur team did an outstanding job managing through COVID.\nWe mitigated risks in our facilities with a focus on health and safety and continue to run our assets and serve our customers.\nWe rapidly adjusted to demand volatility to build stronger relationships with customers.\nWe ramped our new Shelby paper machine and are on track to fully ramp the overall site by the end of this year.\nWe delivered outstanding financial results, reduced net debt by $200 million, refinanced our near-term debt maturities and strengthen our balance sheet.\nAt the same time, we went through several leadership transitions, including my promotion to CEO, a hiring of a new CFO and a new leader of our CPD business.\nIt was certainly an interesting year to say the least, and I'm proud that we make this many changes and perform at the levels that we did.\nWe believe we're well positioned heading into 2021 to continue driving an improvement in our business and focusing on our near-term strategy of paying down debt while deleverage -- while developing options for long-term capital allocation.\nI would like to reiterate our value proposition, which we discussed on our previous earnings call and mentioned to investors throughout the quarter.\nWe believe Clearwater Paper is very well positioned across two attractive and complementary businesses.\nOur Consumer Products division is a leader within the growing private branded tissue market.\nFrom our vantage point, we believe the key strengths of this business are the following: first, we have a national footprint with an ability to supply a wide range of product categories and quality tiers.\nWhich is an attractive sales proposition to our customers.\nOur expertise in manufacturing, supply chain and transportation is a key differentiator, especially during challenging times like today.\nSecond, there are long-term trends away from branded products to private brands.\nThese have typically been amplified during recessions.\nPrivate brand tissue share in the U.S. rose to over 30% in 2019, up from 18% in 2011.\nWhile these trends are impressive, we're still a long way from where many European countries are where private brands represent over half of total tissue share.\nLastly, tissue is an economically resilient and a need-based product.\nHistorically, demand has not been negatively impacted by economic uncertainty.\nTurning to our paperboard division.\nWe believe that the key strengths of this business are the following: first, we operated well invested assets with a geographic footprint, enabling us to efficiently service customers on both coasts.\nWe have a diverse customer base, which serves end markets that have largely stable demand.\nSecond, not being vertically integrated enables us to focus on independent customers with unparalleled service and quality commitments.\nThird, we believe the business is well positioned to take advantage of trends toward more sustainable packaging and food service products.\nLastly, our paperboard business has demonstrated an ability to generate good margins and solid cash flows.\nOverall, our large capital investments are behind us, and we're prioritizing cash flows to reduce debt.\nAs we demonstrated in the fourth quarter, with a net debt reduction of approximately $58 million, bringing our net reduction in 2020 to over $200 million.\nWe intend to continue to deleverage by delivering benefits from our Shelby investment, continuing operational improvements, aggressively managing working capital and prudently allocating capital.\nWhile we expect to have lower tissue shipments in the first part of the year, we're making sound strategic moves to support our customers and their success and continue to position our business for success in the long term.\nWe believe that this strategy is the best way to create shareholder value.\nWith an adjusted EBITDA impacted by normal outages and reduced COVID benefits, we do not anticipate achieving our 2.5 leverage target this year.\nWe continually engage with our Board on future capital allocations.\nBeyond deleveraging, we expect to explore a variety of means of creating shareholder value, including: first, internal investments in our operation that improve competitiveness.\nSecond, external investments that deliver synergies and improve our market position; and third, returning capital to our shareholders.\n Assistant:", "chosen": "q4 earnings per share $1.34.\nq4 sales $453 million versus refinitiv ibes estimate of $449.3 million.\n"}
{"prompt": "Human: This is John Faucher, Chief Investor Relations Officer.\nActual results could differ materially from these statements.\nI will provide commentary on our Q4 and full-year performance as well as our 2021 guidance before turning it over to Noel for his thoughts on how we are planning to sustain our growth momentum into 2021.\nWe will then open it up for Q&A.\nAs usual, we request that you limit yourself to one question so that as many people as possible get to ask a question.\nWe finished 2020 in very strong fashion with our highest level of quarterly organic sales growth in over 10 years and our highest annual organic sales growth since the depths of the financial crisis.\nImportantly, we continue to deliver balanced growth, which we think is the key to sustainable strong performance.\nFor both the quarter and the year, we delivered both volume and pricing growth, organic growth in all four of our categories: oral care, personal care, home care, and pet nutrition, and organic sales growth in every division with both emerging markets and developed markets performing well.\nOur strategy to deliver more impactful premium innovation is still in its early stages, but we believe the results are beginning to show.\nImportantly, this growth is driving our income statement.\nWe delivered strong gross margin expansion for both the quarter and the year, which allowed us to deliver profitable growth despite significant investments for future growth and the headwinds from foreign exchange.\nOur net sales grew 7.5% in the quarter.\nOrganic sales growth of 8.5% was driven by 5% organic volume growth and a 3.5% increase in prices.\nThe impact of acquisitions added an additional 100 basis points to volume growth, while foreign exchange was a 2% headwind.\nIn the fourth quarter, our gross profit margin was 61.1% on both a GAAP basis where we were up 100 basis points year over year and a base business basis where we were up 90 basis points.\nFor the fourth quarter, pricing was 130 basis points favorable to gross margin while raw materials were a 320 basis-point headwind driven by increases in the cost of raw materials like fats and oils and the transactional impact from foreign exchange.\nProductivity was a 280 basis-point benefit.\nOn a GAAP basis, our SG&A was up 260 basis points as a percent of sales for the fourth quarter and 100 basis points for the full year.\nOn the base business basis, in the fourth quarter, our SG&A was up 310 basis points on a percent of sales basis.\nThis was primarily driven by a 210 basis-point increase in advertising to sales as we drove strong activation on brand building, innovation, and e-commerce.\nOur SG&A ratio was also impacted by increased logistics costs, primarily in the U.S., and investments behind growth and innovation.\nFor the full year on a base business basis, our SG&A ratio was up 150 basis points driven primarily by a 100 basis-point increase in advertising to sales and increased logistics cost.\nFor the fourth quarter on a GAAP basis, our operating profit was up 4% year over year, while it was up 3% on a base business basis.\nOur earnings per share was flat on a GAAP basis and up 5% on a base business basis.\nFor the full year, our earnings per share growth was 14% on a GAAP basis and 8% on a base business basis.\nWe delivered 18% growth in free cash flow for the full year.\nAs we discussed at the beginning of 2020, we used some of the free cash flow to pay down debt primarily related to the Filorga transaction with the balance used for dividends and share repurchases.\nA few comments on our divisional performance.\nNorth America delivered 10% net sales and 8.5% organic sales growth in the quarter, driven by premium innovation and increased consumption in categories impacted by the COVID pandemic.\nWe also benefited from a rebound in performance by our skin health businesses in the quarter.\nOur e-commerce business in North America finished the year strongly with sales in the fourth quarter more than double last year's sales.\nNorth America saw significant increases in brand support behind the hum by Colgate Electric Brush, the Colgate Optic White Overnight Teeth Whitening pen, our toothpaste business, and Irish Spring.\nLatin American net sales were down low single-digit as double-digit organic sales growth was more than offset by the negative impact of foreign exchange.\nThe strong organic sales growth performance was broad-based as we delivered organic sales growth in every hub for both the quarter and the year.\nOral care innovation has been a key growth driver with Colgate Tartar Control, Luminous White Charcoal, and our Natural Extracts line, all driving incremental growth.\nEurope delivered double-digit net sales growth in the quarter.\nOrganic sales growth of 4.5% was driven by volume growth across all three segments; oral care, personal care, and home care, and in every hub.\nStrong oral care volume growth on the Colgate and elmex brands was accompanied by significant brand-building investment in traditional media and digital.\nWe were also encouraged by a return to organic growth for Filorga where a strong China growth more than offset weakness in the travel retail channel.\nWe delivered 7% net sales and 5% organic sales growth in Asia Pacific led by volume growth across our biggest hubs; Greater China, India, the Philippines, and South Pacific.\nIn India and China, our growth strategies are driving improved toothpaste performance through Colgate Miracle Repair in China, Colgate Vedshakti in India, and our relaunched Colgate Anticavity business across the division.\nOur personal care and home care businesses also benefited from COVID-related demand in the South Pacific region.\nAfrica/Eurasia net sales declined 1.5% due to significant foreign exchange headwinds as the division delivered organic sales growth across all three categories and in every hub.\nToothpaste organic sales growth was led by Colgate Herbal, Colgate Maxfresh, and Colgate Total.\nMeridol also delivered strong growth as we look to gain share in the pharmacy channel.\nHill's finished the year with another quarter of strong net sales and organic sales growth despite continued difficult comparisons.\nOrganic sales growth was again led by the US with e-commerce up significantly.\nBut Europe also delivered double-digit growth.\nEncouragingly, we are seeing a reacceleration in our Prescription Diet business as vet channel traffic continues to improve.\nAnd now for guidance.\nWe expect organic sales growth to be within our 3% to 5% long-term target range.\nUsing current spot rates, we expect foreign exchange to be a low-single-digit benefit for the year, although we expect currencies to remain volatile.\nWe expect net sales to be up 4% to 7%.\nWe expect our gross profit margin to be up year over year in 2021 despite difficult comparisons given our performance in 2020, increases in raw materials, and the continuing uncertainty associated with COVID.\nAdvertising is also expected to be up on a percent of sales basis, although less so than in 2020.\nOur tax rate is expected to be between 23.5% to 24.5% on both the GAAP and base business basis.\nWe point out that our guidance range does not account for any changes in the U.S. corporate tax rates given the recent change in administration.\nOn a GAAP basis, we expect earnings-per-share growth in the low-to-mid single digits.\nOn a base business basis, we expect earnings-per-share growth in the mid-to-high single digits.\nObviously, this is a wider range than what we normally provide, which we think is prudent given what we consider to be a heightened level of uncertainty as we plan out the year.\nThere are several factors that could impact where we fall within this wider range.\nIn the categories where consumption has risen during the pandemic, primarily liquid hand soap, dish soap, and cleaners, we are expecting lower rates of growth or even declines year over year in 2021 depending on the market.\nHowever, we expect overall consumption in these categories to remain elevated versus 2019 levels.\nAlso, particularly in emerging markets, movements in foreign exchange could impact our ability to take pricing.\nWe are optimistic about our pricing plans for 2021 and believe they are appropriate given recent raw material trends, the competitive environment, and foreign exchange.\nRaw materials, we have budgeted for increased raw material costs, but we do highlight that many raw material prices are accelerating faster than anticipated.\nIf this continues, it could put pressure on gross margin expansion depending on our ability to take pricing or drive additional productivity.\nWe've seen a further rise in logistics costs over the past few quarters, particularly in the U.S., but also related to shipping containers in Asia.\nWe expect these costs to remain elevated in the near term but to moderate later in the year.\nLike me, I hope you and your families are safe and healthy and you share some sense of optimism that we can return to a more normal existence over the course of this year.\nStan joined us back in November, as we announced, and obviously, we're deeply excited to have him here.\nHe has hit the ground running already.\nAs I reflected on 2020, I'm so proud of the Colgate people around the world and what they've accomplished.\nOn our first quarter call I discussed three topics related to how we plan to manage through the crisis.\nThese three topics were: staying true to our values and purpose in helping us navigate a very difficult environment; adapting our strategies where necessary and executing with agility; and importantly, managing through the crisis with an eye toward the future.\nOn the first topic, we've implemented programs to keep our employees safe and healthy, while keeping our supply chain and our laboratories up and running and delivering record output from our facilities and our R&D organization.\nNothing is more important than the safety and health of Colgate people, and we will continue in 2021 to keep them as our first priority.\nWe worked with the World Health Organization this year and local hospitals to distribute free health and hygiene products to people all over the world to help stop the spread of COVID and enable people to live healthier lives, programs that Colgate people are deeply proud of.\nIn the second area, we continue to execute on our growth mindset strategy to drive sustainable, profitable growth through more impactful premium innovation, which you'll hear more about at CAGNY, increasing our brand building globally, and executing against our digital transformation.\nAnd as John laid out, we did this all while delivering strong and balanced growth in organic net sales, net sales, operating profit, earnings per share, and free cash flow.\nWe were able to achieve those results despite many operating challenges we confronted and a sizable negative impact from foreign exchange.\nBut most importantly, while we've been delivering on 2020 results, we have been very focused on positioning ourselves for growth in 2021 and beyond by taking advantage of our momentum, ad that was the third topic, managing through this crisis with an eye toward the future.\nSo now I'll provide some thoughts on why I believe what we did last year leaves us well positioned to continue our growth journey in 2021 and beyond.\nThere are three reasons: the first is that as an organization, we have truly changed how we think about growth.\nAs a company with leading brands, we have to be focused on driving category growth, and we can drive this growth in many ways.\nOf course, we can increase the number of people buying our products, we can increase the price that people are willing to pay for our products, and we can increase the frequency of how often people use our products.\nSo we have strengthened existing tools and, importantly, built new capabilities to drive this growth.\nFor example, on Hill's, we're reaching a much larger group of consumers through increased advertising to broaden our reach and improving our digital targeting so we can raise brand awareness and household penetration on what is truly a differentiated brand.\nThink about this as finding the right person with the right message at the right time.\nIt's not just spending more, but spending smarter.\nIn Latin America, we have used revenue growth management tools to drive value with price/mix improvement in a very difficult operating environment.\nFor instance, our share of the premium segment in toothpaste in Brazil has expanded by three points in the last two years, all driven by tactful and strategic revenue growth management.\nAs I discussed at the Barclays Conference, we have disrupted our innovation processes to focus on breakthrough and transformational innovation, which will enable us to increase the frequency of how people use our products and purchase our products.\nSuperior performance, new forms, delivery systems, and innovation for new channels, all allow us to expand our availability to the consumer so they can choose our products more frequently.\nAnd given that Colgate brand has the highest household penetration of any consumer brand in the world, we have a unique ability to leverage our presence into faster growth.\nThe second reason is that we're developing a balanced view of how we deliver profitable growth.\nWe know that in order to deliver a TSR that is in the top tier of our peer group, we can't just grow the top line.\nWe need to deliver profitable growth.\nYou can see this in our 2020 results where we delivered 8% earnings-per-share growth despite negative foreign exchange, while increasing brand building and investing in capabilities across the entire organization.\nWe're doing this by pulling on all the levers: premium innovation, revenue growth management, funding the growth, discipline on overheads, and laser focus on all cost elements throughout the income statement.\nLooking forward, we have to do more than offset the expected increases in raw material costs and logistics and in other areas so that we can continue to invest in the transformation capabilities that we're deploying and that will rely on pairing growth and productivity more effectively.\nThe third reason is that we're making the necessary transformation to our culture to unleash the true potential of Colgate people.\nAs anyone who has come here from the outside can tell you, the desire of Colgate people to win is unmatched.\nIn 2020, we took several steps to accelerate the rate of change to build an organization for future growth.\nTo that end, we made real progress on e-commerce where we have brought in more external talent while upskilling existing talent across the enterprise, launched more online-specific innovation, like the Optic White pen, the Miracle Repair serum, and invested broadly behind enhanced digital capabilities.\nAnd all this paid off in more than 50% online growth in the fourth quarter and we'll exit the year with e-commerce at a double-digit run rate as a percentage of total sales.\nAnd lastly, it's building out the right team.\nYou need to provide the right tools to them, the right technology to digitally transform the organization.\nWe continue to invest in systems to enable this transformation.\nLike our transition SAP S/4HANA that's giving us better system speed, far better reporting, streamlined processes, and simplified transactions.\nWe've developed our cloud capabilities, which is giving us far more agility, speed, and capability building our ability now to develop applications must faster and realize the value of those applications much faster; and with our partners, building support for our data and our analytics journey ahead.\nWe also recently rolled out a new global system with our Colgate Business Planning process.\nYou will remember that was called CBP that will significantly reduce the process time required by providing greater opportunity for our teams to do analytics, particularly in the commercial area and particularly around revenue growth management.\nSo to sum it up, when I look back at 2020 as a year where our company battled through uncertainty to deliver really strong results, I will also look back at a year where we elevated our performance and capabilities and positioned ourselves to deliver sustainable, profitable growth into the future.\n Assistant:", "chosen": "providing financial guidance for full year 2021.\nexpects fy net sales to be up 4% to 7% including a low-single-digit benefit from foreign exchange.\nexpects 2021 organic sales to be up within its long-term targeted range of 3% to 5%.\nas we enter 2021, expect volatility in raw material and logistics costs and foreign exchange.\n"}
{"prompt": "Human: I will begin the call with brief remarks regarding our third-quarter performance before offering some perspective on the current market environment.\nI will also provide an update on CMC's key strategic growth initiatives.\nI'm pleased to report that CMC's third-quarter fiscal 2021 financial results were the best in our company's 106-year history.\nEarnings from continuing operations were $130.4 million or $1.07 per diluted share on net sales of $1.8 billion.\nExcluding the impact of a gain on the sale of a small rail reclamation business, adjusted earnings from continuing operations were $127.1 million or $1.04 per diluted share.\nCMC reported a core EBITDA of $230.5 million, generating an annualized return on invested capital of 18%.\nThis level of performance underscores CMC's enhanced earnings capability following our multi-year strategic repositioning.\nThird-quarter volumes were exceptionally strong in North America and Europe, and the ability of our commercial operational logistics and support teams to respond to the rise in customer demand generated our strong financial performance.\nand Poland set monthly shipment production records during the quarter, enabling us to capitalize on market conditions.\nDuring the quarter, we also continued to execute on our previously discussed in-flight strategic initiatives and growth projects.\nWe are expanding our capability to serve the merchant bar market.\nCustomers appreciate CMC's expanded product range and service capabilities, and we're seeing our recent investments in handling and storage capacity pay off in increased volumes.\nWe expect more growth in the future, especially once our state-of-the-art Arizona 2 micro mill starts up in early 2023.\nWe continue to execute on our network optimization efforts.\nAnd with recent actions firmly entrenched in our financial performance, CMC is roughly halfway to our longer-term goal of $50 million in annual cost efficiencies.\nYou can see the benefit of these efforts in our controllable cost performance on a per-ton basis.\nDespite well-publicized inflationary pressures across the global economy, we were able to reduce this metric modestly on a year-over-year basis.\nIn April, we received the required air permit for Arizona 2, CMC's planned state-of-the-art micro mill at our Mesa, Arizona site.\nThis was an important milestone, enabling us to begin construction and we continue to anticipate an early 2023 start-up.\nAs a reminder, this plant will be the first micro mill in the world capable of producing merchant bar as well as rebar.\nIt will also be the first in North America with the capability to connect directly to an onsite renewable energy source.\nThese capabilities, combined with a micro mill's inherent low-cost and low-carbon footprint will define a new level of operational and environmental excellence in long products steelmaking.\nIn May, our team in Europe began hot commissioning their plant's third rolling line.\nThe start-up process is going very well, and we expect to begin commercial production late in the fourth quarter.\nThis project was delivered on time and under budget, a testament to our Polish team's ability to execute.\nWe will be ramping operations within a very strong market environment, which will help shorten the time to achieve our targeted annual run rate incremental EBITDA of $20 million.\nI'd now like to provide an update on market conditions.\nThe encouraging trends we discussed during our second-quarter call continued and strengthened in the third quarter.\nAs I will detail, project owners have grown more confident as the economy has recovered and states have reopened, and they are now more willing to contract new work.\nThis view is supported by the strong level of new awards booked in the quarter.\nThe strength and new project opportunities is occurring in both the private and public sectors.\nOn the private side, CMC is seeing work related to the hardening of supply chains, as well as the trend toward investments in e-commerce infrastructure.\nThe ongoing global semiconductor shortage has spurred several very large investments within CMC's core geographical markets.\nAt the same time, public demand is solid, and we are experiencing good activity for highways, bridges, and other infrastructure-related applications.\nActivity in residential markets also continues to be strong.\nCMC is growing our participation in this area and our mills have capitalized on the increased demand.\nThe benefit to CMC of new housing investment and community formation is twofold.\nThe first phase is under way, and we are currently benefiting from direct demand from the residential sector.\nWe believe the next phase will include local infrastructure and commercial centers that support new communities.\nHistorically, the lag between new residential activity and the inflow of supporting non-residential investment has been 9 to 24 months.\nFinally, domestic demand for merchant product continues to benefit from the ongoing recovery of industrial production, as well as a lean service center supply chain.\nLooking further ahead at our markets, we see several positive long-term developments.\nOver the last year, the population migration to the Southern States has accelerated with metro areas in our core Sunbelt geographies being the primary beneficiaries.\nVarious discussions regarding a potential long-term infrastructure package are also encouraging.\nSeveral proposals are under consideration, any of which would provide a meaningful increase to annual federal infrastructure funding relative to current levels.\nBased on our analysis, we believe the annual percentage increase to funding ranges from 30% to 60% across the various proposals.\nTurning to Europe, demand for CMC's long products remained robust during the third quarter.\nLike the U.S., construction activity in Poland is healthy and supporting strong volumes of rebar.\nThe residential market is an important driver of demand in the Polish market.\nAnd new housing permits and units under construction are growing by double digits on a year-over-year basis.\nIndustrial activity continues to recover in Central Europe, driving consumption of CMC's merchant bar and wire rod products.\nGermany's manufacturing PMI in May was among the strongest globally, while Poland's reading reached a new all-time high.\nWe will soon publish our latest corporate sustainability report, featuring greatly enhanced disclosures around three key pillars of environmental, social, and governance.\nYou will see that as CMC has improved its operational and financial performance, we have also improved our already industry-leading environmental performance.\nThat's what we mean when we say that good business and good environmental stewardship go hand in hand.\nWe will also be setting ambitious environmental goals in line with science-based targets.\nI hope that once you read our upcoming report, you'll have a better understanding of the value we place and steps we've taken to serve our people, customers, communities, and environment.\nThe dividend will be paid on July 14, 2021.\nThis represents CMC's 227th consecutive quarterly dividend.\nAnd with that as an overview, I will now turn the discussion over to Paul Lawrence, vice president and chief financial officer, to provide some more comments on the results for the quarter.\nI am pleased to review with you the outstanding third-quarter results.\nAs Barbara noted, we reported record earnings from continuing operations of $130.4 million, or $1.07 per diluted share, roughly double the prior-year levels of $64.2 million and $0.53 per diluted share.\nResults this quarter include a net after-tax benefit of $3.3 million related to the sale of a small rail reclamation business.\nExcluding the impact of this, adjusted earnings from continuing operations were $127.1 million or $1.04 per diluted share.\nCore EBITDA from continuing operations was $230.5 million for the third quarter of 2021, up 49% from the year-ago period and 35% on a sequential basis.\nBoth our North America and Europe segments contributed significantly to year-over-year earnings growth, while core EBITDA per ton of finished steel reached a record level of $144 per ton.\nThe third quarter marked the ninth consecutive quarter in which CMC generated an annualized return on invested capital at or above 10%, which is well above our cost of capital.\nThis translates into meaningful value created for our shareholders.\nNow, I will review the results of our third quarter of fiscal 2021.\nThe North America segment recorded adjusted EBITDA of $207.3 million for the quarter, an all-time high, compared to adjusted EBITDA of $159.4 million in the same period last year.\nThe largest drivers of this 30% improvement were a significant increase in margins on steel products, strong volume growth, and expanded margins on sales of raw materials.\nAnd continued management of controllable costs also allowed us to fully capitalize on the robust market conditions during the quarter.\nThese factors more than offset the impact of lower margin over scrap on downstream products.\nSelling prices for steel products from our mills increased by $170 per ton on a year-over-year basis and $99 per ton sequentially.\nSince bottoming in August 2020, our average monthly selling price has rebounded roughly $220 per ton.\nMargin over scrap on steel products increased $40 per ton from a year ago and $74 per ton sequentially.\nThe average selling price of downstream products of $963 per ton shipped was essentially flat compared to the prior-year third quarter.\nA flat selling price, coupled with higher underlying scrap costs, resulted in lower margins on downstream products.\nIn a period of elevated ferrous and nonferrous price -- scrap pricing, we realized higher margins on sales of raw materials, which as a result of our vertically integrated network of operations helped provide earnings stability to our consolidated results.\nShipments of finished product in the third quarter increased 9% from a year ago.\nBoth rebar and merchant bar volumes out of our mills reached record levels, increasing 8% and 28% respectively compared to the third quarter of fiscal 2020.\nAs Barbara noted, we experienced good activity in both public and private construction.\nCMC also continued growing its president -- presence in residential construction, which added meaningfully to the year-over-year increase in rebar shipments.\nDownstream product shipments were impacted by a reduced backlog and weather challenges in certain geographies, resulting in a 4% reduction in year-over-year volume decline.\nThe recent trend in North American margins, volumes, and cost performance can be seen on Slide 8.\nOur continued focus on operational performance allowed us to achieve record North American financial results.\nOur team was able to generate a modest reduction in controllable costs per ton of finished steel shipped compared to a year ago despite inflationary pressures in freight and certain other costs.\nA quick glance at recent producer price index or manufacturing ISM reports should underscore the strength of this accomplishment.\nThe most significant benefit came from volume-driven efficiencies at our steel mills and recycling yards, as well as the impact of closing the former Steel California rolling operations.\nTurning to Slide 9.\nOur Europe segment generated adjusted EBITDA of $50 million in -- for the third quarter of 2021, compared to adjusted EBITDA of $14.3 million in the same period of the prior year.\nThe improvement was driven by expanded margins over scrap and strong volumes across all ranges of products.\nMargins over scrap increased $90 per ton on a year-over-year basis and were up $84 per ton from the prior quarter.\nTight market conditions provided the backdrop to achieve the segment's higher -- highest average selling price in nine years, reaching $664 per ton during the third quarter.\nThis level represented an increase of $227 per ton compared to a year ago and $132 per ton sequentially.\nEurope volumes increased 8% compared to the prior year and reached their highest third-quarter total in a decade.\nThe strength was driven primarily from the market for rebar.\nVolumes of merchant and other products also grew on a year-over-year basis, supported by goods demand from industrial customers in Central Europe, as well as some opportunistic billet sales.\nAs Barbara mentioned, the demand environment during the quarter was robust, with indications that conditions should remain favorable in the near term.\nTurning to our balance sheet and liquidity.\nAs of May 31, 2021, cash and cash equivalents totaled $443 million.\nIn addition, we had approximately $639 million of availability under our credit and accounts receivable programs.\nIn March, we upsized our revolving credit facility to $400 million from $350 million and extended the maturity till 2026.\nDuring the quarter, we generated $94 million of cash from operating activities despite a $79 million increase in working capital.\nThe rise in working capital was driven by the significant increase in both scrap input costs and average selling prices.\nWe expect working capital balances to increase modestly heading into the end of the fiscal year.\nOur leverage metrics remain attractive, and we have improved significantly over the last two fiscal years.\nAs can be seen on Slide 12, our net debt-to-EBITDA ratio now sits at 1.0 times, while our net debt to capitalization is just 20%.\nWe believe our robust balance sheet and overall financial strength provides us the flexibility to fund our strategic growth projects, navigate economic uncertainties, and pursue an opportunistic M&A.\nCMC's effective tax rate for the quarter was 22.6%, which was both below our full-year effective rate forecast to be around 25%.\nLastly, I would like to provide that our current outlook for capital expenditures in fiscal 2021 remains between 200 million and 225 million of which roughly 100 million will be used for the new micro mill.\nFor comparison purposes, we have previously stated that our typical capital spend averages around 150 million annually.\nWe expect a strong finish to fiscal 2021.\nThe summer construction season is under way, and demand is robust across each of our major product lines in both North America and Europe.\nWe anticipate margins over scrap on steel products in both segments to be consistent or up modestly compared to the third quarter.\nOur internal indicators such as bidding activity and backlog level support continued strength.\nThe recent recovery of leading national construction indicators such as the Architectural Billing Index dodged momentum index and the Portland Cement Association forecast each mirror our view.\nThese external measures also point to good conditions in the calendar year 2022.\nAnd at this time, we will now open the call to questions.\n Assistant:", "chosen": "q3 adjusted earnings per share $1.04 from continuing operations excluding items.\nq3 earnings per share $1.07 from continuing operations.\nq3 sales $1.8 billion versus refinitiv ibes estimate of $1.7 billion.\n"}
{"prompt": "Human: Joining me are our chief executive officer, Bob Steers; our president, Joe Harvey; and our chief financial officer, Matt Stadler.\nFurther, none of our statements constitute an offer to sell or the solicitation of an offer to buy the securities of any fund.\nThese non-GAAP financial measures should be read in conjunction with our GAAP results.\nMy remarks will focus on our as-adjusted results.\nYesterday, we reported record earnings of $1.24 per share compared with $0.76 in the prior year's quarter and $1.06 sequentially.\nThe fourth quarter of 2021 included cumulative adjustments to compensation and benefits and income taxes that lowered our compensation-to-revenue ratio and effective tax rate, respectively.\nRevenue was a record $159.7 million for the quarter compared with $116.6 million in the prior year's quarter and $154.3 million sequentially.\nThe increase in revenue from the third quarter was primarily attributable to higher average assets under management and open-end funds and higher performance fees from certain institutional accounts when compared with the third quarter.\nOur implied effective fee rate was 58.1 basis points in the fourth quarter compared with 57.5 basis points in the third quarter.\nExcluding performance fees, our fourth quarter implied effective fee rate would have been 57 basis points, and our third quarter implied effective fee rate would have been 57.3 basis points.\nOperating income was a record $82.6 million in the quarter compared with $49.4 million in the prior year's quarter and $70.4 million sequentially.\nOur operating margin increased to a record 51.7% from 45.6% last quarter, primarily due to the cumulative adjustment mentioned a moment ago, which reduced compensation and benefits to reflect actual amounts to be paid.\nExpenses decreased 8.1% when compared with the third quarter as lower compensation and benefits was partially offset by higher G&A.\nThe compensation-to-revenue ratio, which included the cumulative adjustment was 26.16% for the quarter.\nFor the year, the compensation-to-revenue ratio was 32.22%.\nThe increase in G&A was primarily due to higher travel and entertainment, increased hosted and sponsored conferences, and higher recruitment fees.\nAnd the increase in distribution and service fee expense was primarily due to higher average assets under management in U.S. open-end funds.\nOur effective tax rate, which was 25.36% for the quarter, included a cumulative adjustment to bring the rate to 26.15% for the year.\nThe reduction in the effective tax rate was primarily due to a decrease in a nondeductible portion of executive compensation on a higher than previously forecasted pre-tax base.\nOur firm liquidity totaled $248.2 million at quarter-end, compared with $241 million last quarter.\nFirm liquidity as of December 31 reflected the payment of a special cash dividend in December of $60.3 million or $1.25 per share.\nOver the past 12 years, we have paid a total of $15.25 per share in special dividends, and we continue to be debt-free.\nAssets under management totaled a record $106.6 billion at December 31, an increase of $9.4 billion or 10% from September 30.\nThe increase was due to net inflows of $1.8 billion and market appreciation of $9.1 billion, partially offset by distributions of $1.6 billion.\nThis marks the 10th consecutive quarter that we have recorded net inflows.\nBob Steers will be providing an update on our flows and institutional pipeline of awarded unfunded mandates.\nAnd now, I'd like to briefly discuss a few items as we begin the new year.\nFirst, regarding our expected compensation-to-revenue ratio.\nWe intend to balance anticipated revenue growth from year-end assets under management that exceeded our full-year assets under management by about 13%.\nWith a disciplined approach toward adding human capital, in addition to the full-year impact from the new hires we made last year, we plan on making controlled investments in order to broaden our product offerings, expand our public and private distribution efforts, and most importantly, to maintain our industry-leading investment performance.\nAs a result, we expect that our compensation-to-revenue ratio will increase to 33.75% and from the 32.22% recorded in 2021.\nContinuing with the theme of investing in our business, we expect G&A to increase 10% to 15% from the $47.2 million we recorded in 2021.\nWe intend to make incremental investments this year in technology, including the implementation of new systems that will add efficiencies and expand our capabilities, cloud migration, and upgrades to our infrastructure and security.\nWe will also make investments in global marketing, focused on hosting virtual and in-person conferences, as well as expanding our digital footprint.\nAnd we expect that travel and entertainment costs will increase as global conditions begin to return to normal.\nWe expect that our effective tax rate will remain at 26.15% in 2022.\nAnd finally, you will recall that a year ago, we noted that we were anticipating the redemption of $1 billion global real estate institutional account in 2021.\nI am pleased to inform you that not only do we continue to manage this account, but the client has also added assets to it, and therefore, we no longer consider this account to be at risk.\nToday, I will review our investment performance, and discuss the macro environment and its impacts on our asset classes.\nFour weeks into January, the fourth quarter of last year seems far away, but it was very strong for equities.\n2021 closed with momentum and expectations for post-pandemic economic recovery, earnings growth, stimulus, and appetite for risk-taking.\nOur largest asset class, U.S. REITs, was the best performing sector in the S&P, returning over 16% in the quarter.\nFor the full year, our asset classes performed well, with U.S. REITs up 41%, global real estate up 26%, listed infrastructure up 15%, resource equities up 24%, and preferred is up nearly 3%.\nWith the new year, however, the market has finally focused on rising inflation, which, as we shared our views with you last year, will likely persist.\nWith the last reading at 7%, CPI is currently at the largest gap to the federal funds rate in our professional lifetimes.\nReversion of that gap will come by way of both monetary tightening, as well as from inflation normalizing at a lower rate.\nWe believe inflation could stabilize in the high 2% ZIP code or 100 basis points higher than the pre-pandemic trend line.\nThe interest rate and adjustment process will reshuffle the deck of winning and losing asset classes and sectors while exposing vulnerabilities from risk-seeking borrowers.\nWe believe that the U.S. economy will continue to enjoy above-trend growth, supported by a prolonged and oscillating recovery as the pandemic ebbs and flows.\nEarnings sensitivity to inflation should be a key differentiator in performance to counteract the impending interest rate adjustment.\nLooking at our performance scorecard.\nIn the fourth quarter, eight of nine core strategies outperformed or equaled their benchmarks.\nFor the last 12 months, nine of nine core strategies outperformed.\nMeasured by AUM, 99% of our portfolios are outperforming benchmarks on a one-year basis compared with 79% last quarter.\nThe improvement was attributable primarily to global real estate, which improved from 25% outperforming in the third quarter to 95% outperforming as of year-end.\nFor both three and five years, 100% of AUM are outperforming.\nCredit goes to our investment leaders, John Cheigh, our CIO; and Chris Parliman, chief administrative officer, in guiding our teams to these outstanding results.\nIn light of the inflation situation, I'll kick off our asset class review by highlighting our multi-strategy real assets portfolio, the benchmark for which returned 21% in 2021.\nThis portfolio is designed to provide equity-like returns, inflation sensitivity, and diversification.\nWe outperformed the benchmark by 340 basis points for the year, which included outperformance in all five asset class sleeves, as well as asset allocation alpha by our portfolio manager, Vince Childers.\nThis portfolio is designed to perform best in environments of rising or unexpected inflation.\nCommodities and resource equities provided the most inflation sensitivity while real estate is driven more by economic growth and infrastructure tends to be an all-weather performer.\nValuations of these listed real assets are as cheap as they've been to equities in 20 years.\nMeantime, the beta to equities is just 0.6 times.\nWe recently published a white paper on this strategy and its constituent asset classes and is available on our website.\nOur three core real estate strategies: U.S., global and international outperformed in both the quarter and year.\nAs mentioned, global real estate returned 26% with significant dispersion by region.\nThe U.S. returned 41%, Europe returned 9% and Asia returned 4%.\nTo address the inflation and interest rate question on prospective performance, earnings sensitivity and replacement cost dynamics should help listed real estate.\nGlobally, these companies' cash flows should accelerate to an average of 12% over the next few years compared with their long-term growth rate of 5%.\nU.S. REIT returns have averaged 10.8% during periods of rising bond yields accompanied by rising growth, while in periods of rising yields with declining growth, returns have been flat.\nComparatively, private real estate unleveraged returns have averaged 10.7% in high-inflation environments versus 6.5% in low-inflation environments.\nThe asset class returned 15% in 2021, compared with 22% for global equities lagging for the second year.\nWe outperformed our benchmark for the quarter and year.\nSector dispersion was wide with over 40 percentage points best to worst.\nWhile certain pandemic-challenged sectors, namely passenger rails, toll roads, and airports, restrained performance, the ongoing economic recovery should provide tailwinds for these sectors going forward.\nReflecting the income and stable cash flow growth profile of infrastructure, I'd characterize infrastructure generally as steady Eddie.\nThat is -- it provides solid returns in most market regimes, while not at the top of the charts nor at the bottom.\nIn part due to President Biden's now passed infrastructure spending legislation, we are seeing broadening allocations in institutional portfolios and increased flows in wealth.\nPreferred securities portfolios had modest negative returns in the fourth quarter but performed well versus fixed income for the full year.\nFor the quarter and the year, we outperformed benchmarks in both our core and low-duration strategies.\nThis year, likely we'll test fixed-income performance generally based on our review for rising bond yields.\nOur portfolios are positioned defensively against increases in interest rates with duration of 2.4 years in our low-duration strategy and 4.0 years in our core preferred strategy.\nAfter high yield, preferreds offer the second-highest yields in fixed income and offer meaningful tax advantages for the taxable investor due to the high percentage of qualified dividend income that they produce.\nIn terms of our private real estate initiative, we have commenced our investment process and have closed on several property acquisitions for both our income strategy and our opportunistic or capital appreciation strategy.\nThis year, we will look to add a real estate investment strategist as part of our expansion of multi-strategy capabilities to help our teams and clients allocate between listed and private real estate and execute thematic and strategic research.\nWe look forward to sharing our progress on this initiative in the future.\nIn closing, we are very positive about the allocation trends we are seeing for our asset classes.\nIn the institutional channel, we see a greater need to allocate to real assets.\nBy example, in the private market, dry powder and private equity funds is at $390 billion for real estate and $300 billion for infrastructure.\nInvestors are becoming more comfortable with listed allocations to complement private, despite greater measured volatility.\nSome investors want real assets with liquidity, particularly in the endowment and foundation and Healthcare segments where some plans liquidity has been challenged.\nIn our early stage pipeline, we have some sovereign wealth opportunities where the plan sponsors are making initial allocations to listed real estate and infrastructure.\nWe would expect those initial small allocations to grow meaningfully to make it worthwhile for those plan sponsors to research the asset classes and oversee additional managers.\nIn the wealth channel, we are seeing earlier-stage adoption of private real asset allocations.\nAs we've seen in other markets, this will help drive listed allocations over time.\nWe believe the inflation environment will help provide additional support for these trends.\nFinally, manager consolidation and conversions from passive to active are trends also in our favor as our performance continues to be excellent.\n2021 was a record-breaking year in myriad ways for Cohen & Steers.\nIt marked our 35th anniversary and 17 years as a public company.\nFor the quarter and year, we achieved a record number of records, driven by improving fundamentals, a rebounding economy, accompanied by the return of meaningful inflation.\nAnd for the first time in over a decade, the prospect of sustained Fed tightening.\nAs Matt discussed, assets under management increased to a record $106 billion at year-end, driven by our 10th consecutive quarter of firmwide net inflows.\nBoth open-end fund and advisory channels ended the quarter with record assets under management.\nFor the full year, we also achieved record gross and net inflows.\nOpen-end fund and advisory gross sales increased 11% and 13% to $19.5 billion and $4.9 billion, respectively.\nMost notably, open-end fund net inflows rose 62% year over year to a record $8.8 billion, while the advisory channel also registered a record $1.9 billion of net inflows.\nFirmwide organic growth was 12% for the year.\nThe seemingly sudden rise of inflation and the expectation from multiple rounds of Fed tightening have put into stark relief the importance and value of portfolio allocations to actively managed real asset strategies across client portfolios to enhance returns and provide diversification.\nThe wealth channel was by far our strongest business segment and achieved multiple milestones in the quarter.\nNet inflows in that channel were a record $2.5 billion for a 22% organic growth rate and represented our 12th consecutive quarter of positive net flows.\nImportantly, net flows in the quarter were not just strong but also diverse, with meaningful contributions from each of the wirehouse, regional brokerage, and RIA segments.\nIn addition, DCIO open-end fund net inflows were a record $476 million and marked the 14th consecutive quarter of net inflows.\nDCIO assets in our open-end funds ended the year at a record $6 billion.\nOur non-U.S. open-end funds registered net inflows of $45 million in the quarter and a record $202 million for the full year.\nWe will continue to invest to support growth in this important channel, and we expect that flows will continue on an upward trajectory.\nFor the year, the powerful combination of strong absolute and relative performance derived from our unique and diversifying asset classes resulted in 25% organic growth in wealth and industry-leading market share as well.\nOur U.S. global real estate and preferred securities funds achieved market share records of 33%, 12%, and 46%, respectively, against other comparable actively managed funds.\n2021 was a record year for the institutional advisory channel as well with $1.9 billion of net inflows.\nHowever, 2021 was also a year in which we reorganized our sales leadership and converted to a regional approach to our institutional sales coverage.\nWe enter 2022 fully staffed and prepared to go higher and deeper into the global institutional marketplace.\nIn the quarter, the advisory channel had net outflows of $456 million.\nThese outflows were driven by a single and unexpected client termination of $400 million.\nHowever, not included in the headline advisory flow results was $564 million of net new mandates from institutional clients, which were invested into our open-end funds.\nOther full-year achievements for the advisory channel include positive net flows from each of the U.S., EMEA, and Asian markets.\nAdditionally, all of our core strategies, U.S. real estate, global real estate, global listed infrastructure, and preferred securities registered net inflows.\nThe pipeline of awarded but unfunded mandates has increased dramatically $900 million in September to $2.1 billion, another new record.\nNew awards in the quarter totaled $1.3 billion and included our first relationship in Africa, a $300 million global listed infrastructure mandate.\nSub-advisory flows in the quarter were subdued.\nNet outflows in Japan were $242 million and distributions totaled $276 million.\nSub-advisory net outflows ex Japan in the quarter were a modest $56 million.\nAt the risk of sounding overly optimistic, we believe our current momentum and growth prospects have never been brighter, driven as always, by our industry-leading investment results.\nIt bears repeating that virtually 100% of our AUMs are outperforming their benchmarks for the one-, three-, five- and 10-year time periods, a truly remarkable accomplishment.\nLooking ahead, the combination of industry-leading investment performance, rising demand for real asset strategies and our plans for new product introductions designed to meet this demand has us poised for continued organic growth.\nIn addition to our open-end fund organic growth, next month, we plan to market the first new listed real estate securities closed-end fund in over nine years, supported by an exceptionally strong and deep syndicate.\nAnd as I've discussed, the institutional advisory channel entered this year with a record pipeline, fully staffed, and the reorganization behind them.\nAlso under new leadership, our EMEA wholesale business is also poised to deliver meaningful organic growth.\nTo capitalize on all of this momentum, this year, we plan to launch multiple new initiatives which will seek to position Cohen & Steers at the intersection of public and private real estate markets through the introduction of vehicles tailored to the unique requirements of both the institutional and wealth marketplaces.\nThese initiatives are designed to take us higher and deeper into real assets and position us for continued future growth.\n Assistant:", "chosen": "cohen & steers inc - qtrly adjusted earnings per share $1.24.\ncohen & steers inc- \u2022 ending aum of $106.6 billion for q4.\n"}
{"prompt": "Human: To access the call on the Internet, please log on to Capital One's website at capitalone.com and follow the links from there.\nIn the first quarter, Capital One earned $3.3 billion or $7.03 per diluted common share.\nPre-provision earnings increased 1% in the quarter to $3.4 billion, and we recorded a provision benefit of $823 million.\nAfter recognizing $535 million of gains during 2021 on our Snowflake investment, we had a loss on our position in the first quarter of $75 million or $0.12 per share.\nWe've now fully exited our position with a cumulative gain of $460 million.\nTurning to Slide 4, I will cover the quarterly allowance moves in more detail.\nIn the first quarter, we released $1.6 billion of allowance.\nThe release was driven by strong credit performance across all of our businesses and a more favorable economic outlook that includes the $1.9 trillion stimulus package passed in March.\nOur allowance continues to assume that the relationship between economic metrics and credit performance reverts to historical patterns.\nAnd despite the strong credit performance and more favorable economic outlook, we continue to hold significant qualitative factors to account for a number of remaining uncertainties.\nTurning to Slide 5, I'll provide some detail on the allowance coverage by segment.\nAfter the impact of the $1.6 billion allowance release, our coverage levels declined modestly across all segments from the prior quarter and remain well above pre-pandemic levels.\nOur domestic card coverage is now 10.5%, down from 10.8% last quarter.\nOur branded card coverage is 12.1%.\nRecall that the difference between branded and domestic coverage is driven by the law-sharing agreement in our partnership portfolio.\nCoverage in our consumer business declined 38 basis points to 3.6%.\nAnd coverage in our commercial banking business fell 23 basis points to 2%.\nMoving to Slide 6, I'll discuss liquidity.\nYou can see our preliminary average liquidity coverage ratio during the first quarter was 139%, well above the 100% regulatory requirement.\nOur liquidity reserves from cash, securities, and federal home loan bank capacity ended the quarter at approximately $151 billion.\nThe $7 billion increase in total liquidity is largely attributable to strong inflows of consumer and commercial deposits in the last few weeks of the quarter.\nTurning to Slide 7, I'll discuss our net interest margin.\nNIM declined six basis points in the linked quarter due to a 14-basis-point headwind from having two less days in the quarter, as well as a higher mix of cash.\nThese factors were partially offset by the full quarter effect of deposit pricing actions we took in the fourth quarter and a modest increase in loan yields.\nLastly, turning to Slide 8, I will cover our capital position.\nOur common equity Tier 1 capital ratio was 14.6% at the end of the first quarter, up 90 basis points from the fourth quarter and 260 basis points higher than a year ago.\nWe continue to estimate that our CET1 capital need is around 11%.\nRecall that in January, our board of directors authorized a repurchase plan of up to $7.5 billion of the company's common stock.\nIn the first quarter, we repurchased $400 million of -- $490 million of common stock at an average price of approximately $114 per share.\nBased on the Fed's extension of the trailing four-quarter average earnings rule, our share repurchase capacity will be limited to approximately $1.7 billion in the second quarter.\nThe timing and amount of all future stock repurchase activity will be a function of any regulatory restrictions, stock trading volumes, and our holistic view of our capital position.\nI'll begin on Slide 10 with our credit card business.\nYear over year, credit card loan balances and revenue declined in the first quarter driven by the continuing impacts of the pandemic.\nPurchase volume rebounded compared to the first quarter of 2020.\nAnd the biggest driver of quarterly results was the provision for credit losses, which improved significantly.\nCredit card segment results are largely a function of our domestic card results and trends, which we show on Slide 11.\nFor the third consecutive quarter, the story of our domestic card business continues to be two sides of the same coin.\nHistorically, high payment rates amplified by the effects of government stimulus continue to put pressure on loan balances.\nAnd on the flip side, the same factors are driving exceptional credit performance.\nLooking first at growth.\nWe continued to see purchase volume rebound from the sharp declines early in the pandemic.\nDomestic card purchase volume for the first quarter was up 8.4% year over year, with growth accelerating in March.\nCompared to the first quarter of 2019, purchase volume is up 17%.\nMost spend categories are now exceeding the pre-pandemic levels we saw in 2019.\nT&E spend is still lagging pre-pandemic levels, but it's catching up.\nT&E purchase volume is growing faster than overall purchase volume.\nThe payment rate, which has risen to a historically high level, continues to put pressure on loan balances, even with the pickup in consumer spending.\nAt the end of the first quarter, domestic card ending loan balances were down $18.5 billion or about 17% year over year.\nExcluding the impact of a partnership portfolio moved to held-for-sale last year, first-quarter ending loans declined about 15% year over year.\nThe year-over-year percentage change in ending loan balances this quarter was approximately the same as it was last quarter.\nStrikingly strong credit was the biggest driver of domestic card financial results in the quarter, just as it has been for the prior two quarters.\nThe domestic card charge-off rate for the quarter was 2.54%, a 214-basis-point improvement year over year.\nThe 30-plus delinquency rate at quarter end was 2.24%, 145 basis points better than the prior year.\nFirst-quarter provision for credit losses improved by nearly $4 billion year over year.\nWe had a large allowance release in the first quarter of this year versus a large allowance build in the first quarter last year.\nStrong credit and purchase volume growth were also key drivers of domestic card revenue margin, which was up 229 basis points year over year to 17.2%.\nTotal company marketing was up modestly compared to the first quarter of 2020.\nOur choices in card marketing are the biggest driver of total company marketing trends.\nIn the midst of the pandemic, we're finding opportunities to continue to build the business, and we continue to lean into marketing.\nPulling up, our domestic card business is delivering significant value and building momentum.\nSlide 12 summarizes first-quarter results for our consumer banking business.\nAuto growth continued strength in retail deposits and exceptional auto credit are the main themes in the first-quarter consumer banking results.\nDriven by auto, first-quarter ending loans increased 10% year over year in the consumer banking business.\nAverage loans grew 9%.\nAuto originations were up 16% year over year, and up 20% from the linked quarter.\nWe've seen competitive intensity increase through the second half of 2020 and in the first quarter of 2021.\nAnd with most competitors holding excess deposits, we expect that competitive intensity will continue to increase going forward.\nFirst-quarter ending deposits in the consumer banking were up $36.4 billion, or 17% year over year.\nAverage deposits were up 16%.\nOn a linked-quarter basis, ending deposits were up 2% and average deposits were flat.\nElevated consumer savings rates, fueled by continuing government stimulus, are driving year-over-year deposit growth.\nFirst-quarter consumer banking revenue increased 22% from the prior-year quarter, driven by growth in auto loans and retail deposits.\nFirst-quarter provision for credit losses improved by $986 million year over year, driven by an allowance release and lower charge-offs in our auto business.\nCredit results in our auto business are strikingly strong and continue to benefit from historically high auction values and government stimulus.\nYear over year, the first-quarter charge-off rate improved 104 basis points to 0.47%, and the delinquency rate improved 217 basis points to 3.12%.\nA sharp uptick in used car values, coupled with a stimulus-driven surge in customer payments, resulted in a negative net charge-off rate in March.\nWe expect the auto charge-off rate to increase from its unusually low level as auction prices normalize and stimulus impact play out.\nThe consumer banking business continues to deliver resilient growth in auto loans and retail deposits.\nMoving to Slide 13.\nI'll discuss our commercial banking business.\nFirst-quarter ending loan balances were down 9% year over year.\nAverage loans were down 3%.\nIn C&I, we've seen a reduction in commercial line utilization, which peaked early in the pandemic as customers facing elevated uncertainty drew down their lines.\nThat behavior has since diminished.\nIn our commercial real estate business, originations were down, and pay downs increased compared to the first quarter of 2020.\nQuarterly average deposits increased 24% from the first quarter of 2020 and 4% from the linked quarter as middle market and government customers continued to hold elevated levels of liquidity.\nFirst-quarter revenue was up 4% from the prior-year quarter.\nHigher loan and deposit spreads and growth in average deposits were partially offset by lower average loan balances.\nProvision for credit losses improved significantly compared to the first quarter of 2020, driven by a swing from an allowance build to an allowance release and lower net charge-offs.\nFor the first quarter, the commercial banking annualized charge-off rate was nine basis points.\nThe criticized performing loan rate was 9.2%, and the criticized nonperforming loan rate was 0.9%.\nOur commercial banking business is delivering solid performance as we continue to navigate the pandemic and build our commercial capabilities.\nI'll close tonight with some thoughts on our results and our strategic positioning.\nThree key themes are evident in our first-quarter results.\nHigh payment rates continue to put near-term pressure on loan balances and revenue growth, particularly in our domestic card business.\nOn the flip side, strikingly strong credit drove a third consecutive quarter of record earnings per share.\nAnd our investments to transform our technology and transform how we work are paying off.\nOur modern technology is powering our response to the pandemic and putting us in a strong position for opportunities that emerge as sweeping digital change transforms banking.\nPulling way up, we continue to focus on the things that create enduring value when delivered and sustained over the long term, continuing to transform our technology from the ground up, capitalizing on our transformation to drive innovation and growth, generating positive operating leverage, and improving efficiency over time, and managing capital efficiently and effectively, including significant planned capital distribution.\nWe'll now start the Q&A session.\nAs a courtesy to other investors and analysts who may wish to ask a question, please limit yourself to one question plus a single follow-up.\nAnd if you have follow-up questions after the Q&A session, the investor relations team will be available after the call.\nKeith, please start the Q&A.\n Assistant:", "chosen": "compname reports q1 2021 net income of $3.3 bln, or $7.03 per share.\ncompname reports first quarter 2021 net income of $3.3 billion, or $7.03 per share.\nq1 revenue fell 3 percent to $7.1 billion.\nqtrly earnings per share $7.03.\ncommon equity tier 1 capital ratio under basel iii standardized approach of 14.6 percent at march 31, 2021.\nqtrly benefit for credit losses $823 million versus provision for credit losses of $5,423 million.\nqtrly net interest income $5,822 million, down 3%.\ncapital one financial qtrly earnings per share $7.03.\nq1 revenue fell 3% to $7.1 billion versus q4 2020 .\n"}
{"prompt": "Human: To access the call on the internet, please log on to Capital One's website at capitalone.com and follow the links from there.\nIn the third quarter, Capital One earned $3.1 billion or $6.78 per diluted common share.\nIncluded in our results for the quarter was a $45 million legal reserve build.\nNet of this adjusting item, earnings per share in the quarter were $6.86.\nOn a GAAP basis, pre-provision earnings were $3.6 billion, an increase of 7 percent relative to a quarter ago.\nPeriod and loans held for investment grew $11.8 billion or 5 percent as we had strong loan growth across all of our businesses.\nRecall that we moved $4.1 billion of loans to held-for-sale late in the second quarter, so average loans in the third quarter grew more modestly at 3 percent.\nRevenue increased 6 percent in the linked quarter, largely driven by the loan growth I just described, coupled with margin expansion in our card business.\nOperating expenses grew 3 percent in the quarter with total non-interest expense increasing 6 percent.\nIn addition to strong pre-provision earnings, the P and L was aided by a provision benefit in the quarter as record-low charge-offs were more than offset by an allowance release.\nTurning to Slide 4, I will cover the changes in our allowance in greater detail.\nWe released $770 million of allowance in the third quarter as the effects of continued actual strong credit performance and a reduction in qualitative factors drove a decline in allowance balance, which was partially offset by loan growth in the quarter.\nTurning to Slide 5, you can see our allowance coverage ratios continue to decline across all of our segments, driven by the factors I just described.\nTurning to Page 6, I'll now discuss liquidity.\nYou can see our preliminary average liquidity coverage ratio during the third quarter was 143 percent.\nThe LCR remains stable and continues to be well above the 100 percent regulatory requirement.\nOur liquidity reserves from cash, securities, and Federal Home Loan Bank capacity ended the quarter at approximately $124 billion, down $13 billion from the prior quarter as we continue to run off excess liquidity built during the pandemic.\nThe nine percent decline in total liquidity was driven by a modest reduction in the size of our investment portfolio and $8 billion in lower-ending cash balances, which were used to fund loan growth and share repurchases.\nThe decline in cash balances had an impact on our NIM, which I will discuss in more detail on Page 7.\nYou can see that our third-quarter net interest margin was 6.35 percent, 46 basis points higher than Q2 and 67 basis points higher than the year-ago quarter.\nThe linked-quarter increase in NIM was largely driven by four factors.\nFirst, the decline in average cash balances I just described.\nSecond, margin expansion in our domestic card business.\nThird, loan growth in our domestic card business.\nAnd lastly, the benefit of one additional day in the quarter.\nTurning to Slide 8, I will end by covering our capital position.\nOur common equity Tier 1 capital ratio was 13.8 percent at the end of the third quarter, down 70 basis points from the prior quarter.\nNet income in the quarter was more than offset by an increase in risk-weighted assets and share repurchases.\nWe repurchased $2.7 billion of common stock in the third quarter and have approximately $2.6 billion remaining of our current board authorization of $7.5 billion.\nAt the beginning of the third quarter, we began operating under the Federal Reserve's stress capital buffer framework, resulting in a minimum CET1 capital requirement of seven percent as of October 1st.\nHowever, based on our internal modeling, we continue to estimate that our CET1 capital need is around 11 percent.\nOn October 18th, we announced our intention to redeem our outstanding preferred stock Series G and Series H in early December.\nAs a result of the full quarter of recent issuances and a partial quarter of the planned redemptions, we expect fourth-quarter preferred dividends to remain elevated at around $74 million.\nLooking ahead to Q1, we expect the run rate for preferred dividends to decline to approximately $57 million per quarter, barring additional activity.\nI'll begin on Slide 10 with our credit card business.\nStrong year-over-year purchase volume growth and strong revenue margin drove an increase in revenue compared to the third quarter of 2020 and provision for credit losses improved significantly.\nCredit card segment results are largely a function of our domestic card results and trends, which are shown on Slide 11.\nAs you can see on Slide 11, third-quarter domestic card revenue grew 14 percent year over year.\nPurchase volume for the third quarter was up 28 percent year over year and up 27 percent compared to the third quarter of 2019.\nAnd the rebound in loan growth continued with ending loan balances, up $3.7 billion or about four percent year over year.\nEnding loans also grew four percent from the sequential quarter, ahead of typical seasonal growth of around one percent.\nEnding loan growth was the result of strong growth in purchase volume, as well as the traction we're getting with new account originations and line increases, partially offset by continued high payment rates.\nPayment rates leveled off in the third quarter but remain near historic highs.\nThe flip side of high payment rates is strong credit and credit results remain strikingly strong.\nThe domestic card charge-off rate for the quarter was 1.36 percent, a 228-basis-point improvement year over year.\nThe 30-plus delinquency rate at quarter-end was 1.93 percent, a 28-basis-point improvement over the prior year.\nThe pace of year-over-year improvement is slowing particularly for the delinquency rate.\nDomestic card revenue margin was up 218 basis points year over year to 18.4 percent.\nTwo factors drove most of the increase.\nRevenue margin benefited from spend velocity, which is purchase volume growth and net interchange outpacing loan growth.\nAnd favorable current credit performance enabled us to recognize a higher proportion of finance charges and fees in third-quarter revenue as well.\nThis credit-driven revenue impact generally tracks domestic card credit trends.\nTotal company marketing expense was $751 million in the quarter, including marketing in card, auto, and retail banking.\nOur choices in card marketing are the biggest driver of total company marketing trends.\nWe continue to see attractive opportunities to grow our domestic card business.\nOur loan -- our -- well, our growth opportunities are enhanced by our technology transformation.\nTurning opportunities into actual growth requires investment.\nAnd once again, we're leaning further into marketing to drive growth and to build our franchise.\nAt the same time, we're keeping a watchful eye on the competitive environment, which is intensifying.\nLooking ahead, we expect a sequential increase in total company marketing in the fourth quarter that's consistent with typical historical patterns.\nPulling up, our domestic card business continues to deliver significant value as we invest to build our franchise.\nSlide 12 summarizes third-quarter results for our consumer banking business.\nConsistent auto growth and strong auto credit are the main themes in the third-quarter consumer banking results.\nOur digital capabilities and deep dealer relationship strategy continue to drive strong growth in our auto business.\nDriven by auto, third-quarter ending loans increased 12 percent year over year in the consumer banking business.\nAverage loans also grew 12 percent.\nAuto originations were up 29 percent year over year.\nOn a linked quarter basis, auto originations were down 11 percent from the exceptionally high level in the second quarter.\nAs we discussed last quarter, pent-up demand and high auto prices have driven a second-quarter surge in originations across the auto marketplace.\nThird-quarter ending deposits in the consumer bank were up $2.7 billion or one percent year over year.\nAverage deposits were also up one percent year over year.\nConsumer banking revenue increased 14 percent from the prior-year quarter, driven by growth in auto loans.\nThird-quarter provision for credit losses improved by $48 million year over year, driven by an allowance release in our auto business.\nCredit results in our auto business remain strong.\nYear over year, the third-quarter charge-off rate improved five basis points to 0.18 percent and the delinquency rate improved 11 basis points to 3.65 percent.\nLooking at sequential-quarter trends, the charge-off rate increased from the unprecedented negative charge-off rate in the second quarter and the 30-plus delinquency rate was up 39 basis points from the second quarter, consistent with historical seasonal patterns.\nMoving to Slide 13, I'll discuss our commercial banking business.\nThird-quarter ending loan balances were up four percent year over year, driven by growth in selected industry specialties.\nAverage loans were down two percent.\nEnding deposits grew 18 percent from the third quarter of 2020 as middle market and government customers continued to hold elevated levels of liquidity.\nQuarterly average deposits also increased 18 percent year over year.\nThird-quarter revenue was up 17 percent from the prior-year quarter and 23 percent from the linked quarter.\nRecall that revenue in the second quarter was unusually low due to the impact of moving $1.5 billion in commercial real estate loans to held-for-sale.\nCommercial credit performance remains strong.\nIn the third quarter, the commercial banking annualized charge-off rate was five basis points.\nThe criticized performing loan rate was 6.9 percent and the criticized non-performing loan rate was 0.8 percent.\nOur commercial banking business is delivering solid performance as we continue to build our commercial capabilities.\nI'll close tonight with some thoughts on our results and our strategic positioning.\nIn the third quarter, we drove strong growth in domestic card revenue, purchase volume, and new accounts.\nAnd loan growth is picking up.\nCredit remains strikingly strong across our businesses and we continue to return capital to our shareholders.\nIn the marketplace, the pandemic has clearly accelerated digital adoption.\nThe game is changing from new and permanent shifts in virtual and hybrid work to more digital products and exceptional customer experiences to new fintech innovation and business models.\nThe common thread throughout all of this is technology and the stakes are rising faster than ever before.\nCompetitors are embracing the realization that technology capabilities may be an existential issue.\nThe investment flowing into fintechs is breathtaking and it's growing.\nWe can see investors voting with their feet in stunning fintech valuations and the war for tech talent continues to escalate, which will drive up tech labor costs even before any headcount increases.\nAll these developments underscore the size of the opportunity for players who lead the way in transforming how banking works, and Capital One is very well-positioned to do just that.\nWe are in the ninth year of our technology transformation from the bottom of the tech stack up.\nWe were an original fintech and we have built modern technology capabilities at scale.\nBut what is also clear in the marketplace is that the time frames for investment and innovation are compressing.\nThe imperative to invest is now.\nWe have been on a long journey to drive down operating efficiency ratio, powered by revenue growth and digital productivity gains.\nOur journey will need to incorporate the investment imperative of the rapidly changing marketplace and it is likely to pressure operating efficiency ratio along the way.\nPulling way up, we're living through an extraordinary time of accelerating digital change.\nOur modern technology stack is powering our performance and our opportunity.\nIt's setting us up to capitalize on the accelerating digital revolution in banking and it's the engine that drives enduring value creation over the long term.\nWe'll now start the Q and A session.\nAs a courtesy to other investors and analysts who may want to ask a question, please limit yourself to one question plus a single follow-up question.\nAnd if you have any follow-up questions after the Q and A session, the Investor Relations team will be available after the call.\n Assistant:", "chosen": "compname reports third quarter adj earnings per share $6.86.\ncompname reports third quarter 2021 net income of $3.1 billion, or $6.78 per share.\nq3 revenue rose 6 percent to $7.8 billion.\nq3 adjusted earnings per share $6.86 excluding items.\ncommon equity tier 1 capital ratio under basel iii standardized approach of 13.8 percent at september 30, 2021.\nqtrly total net revenue increased 6 percent to $7.8 billion versus q2 2021.\nqtrly net interest margin of 6.35 percent, an increase of 46 basis points versus q2 2021.\n"}
{"prompt": "Human: Before I turn to our business, let me say the escalation of the devastating crisis in Ukraine is top of mind.\nThe event caused great concern for everyone in that region, including our employees, partners and their families.\nOur thoughts are with everyone who is being affected, and we certainly hope peace prevails soon.\nMoving to our business.\nI'm pleased to report a strong start to the fiscal year, led by a fantastic quarter at CooperVision and another solid quarter at CooperSurgical.\nWithin vision, our daily silicone hydrogel and myopia management portfolios continued posting strong results, leading to share gains around the world.\nWithin surgical, our fertility business posted great numbers and the integration of Generate Life Sciences is going really well with that business off to a fast start as part of Cooper.\nWe also recently announced the pending acquisition of Cook Medical's reproductive health business, which will be a great addition to our surgical franchise.\nRegarding first quarter financial results, consolidated revenues were $787 million, with CooperVision at $561 million, up 11%, and CooperSurgical reaching a new all-time high of $226 million, up 30%.\nNon-GAAP earnings per share were $3.24.\nMoving to the details and reporting all percentages on an organic basis.\nOur CooperVision growth of 14% was strong and diversified.\nWe grew nicely in all product categories, spheres, torics and multifocals, and all three regions posted great results, with the Americas up 8%, EMEA up 17% and Asia Pac up 19%.\nThis resulted in nice share gains, and we remain well positioned to capitalize on the reopening of economies around the world as COVID subsides.\nAll of this is driven by our multifaceted commercial strategy that we began deploying years ago, which has proven to be extremely successful.\nThis includes a consistent cadence of launching new products and product extensions around the world, providing customers with market-leading flexibility through our customized solutions, executing on key account relationships and delivering fantastic customer service.\nWe're continuing these efforts while also enhancing our business through sales force expansions and targeted marketing and infrastructure investments.\nRegarding products, our daily silicone hydrogel lenses, MyDay, and clariti, posted strong results, growing 25%.\nDaily silicones continue to lead the market, and we offer the broadest portfolio of products to meet customers' needs.\nThis includes MyDay, our premium offering, which is available in a sphere, toric and, most recently, a multifocal.\nAnd speaking of the multifocal, the launch is going incredibly well.\nThe feedback from eye care practitioners regarding use of our breakthrough binocular progressive fitting system that simplifies the fit process while providing optimal visual acuity at all levels has been fantastic.\nAnd we're continuing to receive feedback from patients that MyDay provides the best multifocal they've ever worn for exceptional near, intermediate and distant vision.\nThis success is having a nice halo effect on our already successful MyDay torics and spheres, so we remain very optimistic about this brand.\nThe other brand in our daily silicone hydrogel portfolio is clariti.\nThis lens is also available as a sphere, toric and multifocal and is sold as more of a mass market product.\nWe've seen nice growth with this brand, especially in our Asia Pac region, where we just posted an extremely strong quarter.\nFor our FRPs, we reported another solid quarter of 10% growth for Avaira and Biofinity, our silicone hydrogel two-week and monthly lenses.\nThis was led by improved product availability and our unique offerings such as Biofinity toric multifocal and Energys, the most innovative product in the monthly space.\nTo finish on products, we're continuing to see nice strength in torics and multifocals as we expand parameter ranges and increase availability around the world.\nWhen you combine this with the success we're having in key accounts, it's resulting in nice share gains, and we expect that to continue.\nMoving to myopia management.\nWe posted revenues of $20 million.\nAnd within this, MiSight grew 172%.\nThis growth rate was an acceleration from Q4, which is impressive, given the general market challenges around new fits.\nOverall, as a global leader in the myopia management space, our portfolio is the broadest in the industry, comprised of MiSight, the only FDA-approved myopia control product, a broad range of market-leading ortho-k lenses, and our innovative SightGlass Vision glasses.\nFor MiSight, we're continuing to make progress around the world, including in China, where we're preparing for a broader launch with our partner, Essilor.\nOur team in China is strong, and our advisory board of key opinion leaders that are affiliated with hospitals representing over 50% of myopia management contact lens volume in China has us positioned for success in a market where childhood myopia rates are estimated to be over 80%, and we're reducing myopia as a priority for the government.\nLastly, on MiSight, our industry-leading seven-year clinical data has been getting a lot of exposure as it highlights that MiSight works for nearly all myopic children.\nIt cuts myopia progression by roughly 59% on average.\nIt works at any age a child starts treatment.\nIt works for as long as the child wears it.\nAnd there's no rebound if treatment is stopped.\nMoving to SightGlass myopia management glasses.\nFollowing our co-launch in the Netherlands with Essilor in November, we started early launches in additional markets, including the U.K. and Canada.\nWithin Canada, we've launched the product under the MiSight name, which is an exciting step in combining our myopia management glasses and contact lenses under one brand name.\nWe've also accelerated activity in China and plan to launch the product later this fiscal year.\nTo conclude on myopia management, our momentum is strong, and we're still targeting roughly $100 million in sales for this fiscal year.\nTo wrap up on CooperVision, for calendar Q4, we estimate the global contact lens market grew 10%, with CooperVision growing 16%.\nWithin this, COVID-related challenges did negatively impact optometry offices around the world and combining this with heightened patient demand as myopia rates continue to rise is resulting in many eye care offices having full calendars of appointments.\nThis demand is great, but it's still impacting fit activities such as in the U.S. where new fits are still roughly 8% below pre-COVID levels.\nHaving said that, progress is being made, and we expect to continue seeing positive trends as COVID subsides and economies around the world reopen with people returning to the office and becoming more active in social settings.\nMeanwhile, long-term macro growth trends remain intact with roughly one-third of the world being myopic today and that's expected to increase to 50% by 2050.\nFor CooperVision, we have a robust product portfolio, ongoing product launches, a fast-growing myopia management business and our fit data remains strong.\nSo we remain very bullish on our business.\nWe're extremely busy integrating Generate, which we just closed in mid-December.\nIn the meantime, we had another strong quarter with organic growth of 9%.\nBefore getting into the details, let's cover Generate.\nWe recognized roughly $34 million of revenues in the quarter as this was a stub period with only roughly one and a half months of revenue.\nOf this, $23 million was in stem cell storage and $11 million in fertility.\nIt's tough to get exact growth rates for a stub period, but growth for the business for the full equivalent fiscal quarter was 10%.\nMoving to our fertility business.\nWe posted sales of $97 million, up a very healthy 27% when excluding Generate and the small acquisition of Embryo Options from last January.\nStrength was seen on a global basis and throughout our product portfolio, including from consumables, capital equipment and genomics.\nWithin our office and surgical unit, we posted sales of $129 million, up 24% as reported, but down 3% when excluding Generate and other acquisitions.\nThis was due to the negative impact of COVID on sales of PARAGARD, as well as certain surgical products.\nHaving said that, we did see growth in many areas such as our laparoscopic surgery closure products, and our acquired businesses grew nicely, especially Fetal Pillow in our labor and delivery area, which grew 160%.\nBased on current trends, we expect office and surgical sales to improve and show organic growth in Q2.\nTo wrap up on CooperSurgical, let me touch on some market information.\nFor fertility, we're largely back to pre-COVID levels.\nare stronger, while others outside the U.S. are still dealing with COVID-related challenges.\nBut net-net, the market is in a good place.\nThis industry continues to grow nicely, and we estimate our addressable market is approaching $2 billion with 5% to 10% long-term annual growth.\nIt's estimated that one in eight couples has trouble getting pregnant due to a variety of factors such as increasing maternal age and that more than 100 million individuals worldwide suffer from infertility.\nGiven the improving access to treatments, increasing patient awareness, greater comfort discussing IVF and increasing global disposable income, we expect this industry to grow nicely for many years to come.\nWithin office and surgical, as mentioned earlier, we expect growth to return in Q2 as the market fundamentals are improving.\nTo summarize, this was a really strong start to our fiscal year.\nCooperVision posted a great quarter, and we're well positioned to continue delivering success with the best team in the industry and the broadest product portfolio in the market.\nOur fertility business is growing nicely and taking share, and the Generate business is integrating really well with some exciting potential as we incorporate stem cell storage into our labor and delivery product portfolio.\nMost of my commentary will be on a non-GAAP basis.\nFirst quarter consolidated revenues were $787 million, up 16% and up 13% organically.\nConsolidated gross margin decreased year over year by 90 basis points to 66.9%, driven primarily by currency, but also lower sales of PARAGARD, partially offset by lower manufacturing costs at CooperVision.\nOperating expenses grew 19% to 42.3% of revenues with the addition of Generate and higher investment activity.\nConsolidated operating margins were 24.6%, down from 26.9% last year due to the negative impact of FX and higher investing.\nIn addition, we did see higher freight, secondary handling and distribution costs within cost of goods and opex and expect this to continue, although price increases are helping to offset the impact.\nInterest expense was $6.6 million on higher average debt, partially offset by lower interest rates.\nThe effective tax rate was 13.3%, higher primarily due to the Generate acquisition.\nNon-GAAP earnings per share was $3.24 with roughly 49.9 million average shares outstanding.\nFX negatively impacted us by $0.37 in the quarter, which was $0.02 worse than we forecasted at the time of our last earnings call.\nFree cash flow was solid at $109 million, comprised of $166 million of operating cash flow, offset by $57 million of capex.\nNet debt decreased by $1.6 billion to $3 billion, driven by the acquisition of Generate.\nAnd our adjusted leverage ratio increased to 2.71 times.\nDuring the quarter, we repurchased roughly 191,200 shares of the company's common stock for $78.5 million at an average purchase price of $410.41 per share, that's $410.41.\nRoughly $256 million remains authorized for repurchase under our program.\nWe've updated our numbers to reflect our outperformance in Q1, the addition of Generate, new currency rates and the assumption of a 25-basis-point rate increase by the Fed next week.\nPrior to the Russian invasion of Ukraine, this would have meant the midpoint for earnings per share would have been roughly $14.35, but currency has moved significantly against us over the past week.\nWe're increasing prices to offset the negative impact, and hopefully, the currency moves are temporary, but we're taking a conservative approach and fully incorporating negative currency into our guidance, noting that the scope, degree and duration of the crisis on the global economy is an evolving risk.\nWith this, the new consolidated revenue range is $3.261 billion to $3.329 billion, up 6.5% to 8.5% organically.\nWithin this, CooperVision revenue guidance is $2.221 billion to $2.264 billion, up 7% to 9% organically.\nCooperSurgical revenues are expected to be between $1.04 billion and $1.065 billion, up 35% to 38% as reported or 5% to 7% organically.\nNon-GAAP earnings per share is expected to be in the range of $13.70 to $14.20.\nWe estimate interest expense around $42 million, which assumes a 25-basis-point rate increase, remembering that $1 billion of our debt is fixed -- is at fixed rates.\nWe estimate the full year tax rate to be around 14%.\nRegarding currency, on a year-over-year basis, the negative FX headwind is now roughly 3.5% to revenues and roughly 10% negative impact to EPS.\nNote this guidance does not include our pending Cook Medical reproductive health acquisition as the transaction has not yet closed.\nRegarding Cook, we announced this acquisition on February 7 for $875 million.\nThis is a really nice strategic fit as they manufacture and sell minimally invasive medical devices focused on their fertility and gynecology markets.\nWith this acquisition, we'll be improving our international fertility footprint, especially within the Asia Pac region and will be adding highly synergistic and respected labor and delivery medical devices.\nFrom a financial perspective, this business had roughly $158 million in sales in calendar 2021, and we expect long-term growth in the range of 5% to 9%.\nAdditionally, we expect year one non-GAAP earnings per share accretion of roughly $0.60.\nIn summary, we're pleased with this quarter's performance and believe our momentum will continue, driven by strategic investments in both businesses that will support share gains and durable long-term revenue and earnings growth.\n Assistant:", "chosen": "q1 non-gaap earnings per share $3.24.\nq1 revenue rose 16 percent to $787.2 million.\nsees fiscal 2022 non-gaap diluted earnings per share $13.70 - $14.20.\n"}
{"prompt": "Human: I'm happy to report that CooperVision and CooperSurgical both posted all-time record quarterly revenues, which drove record quarterly earnings.\nOur businesses have rebounded nicely from the COVID lows with silicone hydrogel lenses and myopia management leading CooperVision and fertility and PARAGARD driving CooperSurgical.\nFor the quarter and reporting all percentages on a constant-currency basis, consolidated revenues were $720 million, with CooperVision at $523 million, up 25%; and CooperSurgical at $197 million, up 58%.\nNon-GAAP earnings per share were $3.38.\nFor CooperVision, the Americas grew 38% with clariti, MyDay, and Biofinity leading the way.\nwas the strongest part of the region, and it allowed us to rebound quickly and strongly, offsetting challenges from markets such as Canada, which are still facing significant COVID restrictions.\nWe're still seeing nice momentum in the U.S., and we're looking forward to the back-to-school season.\nEMEA grew 15% in the quarter, led by strength in MyDay and Biofinity.\n1 contact lens company in EMEA, so we're obviously over-indexed in this region and the impact from COVID did temper the market's performance.\nBut we're executing at a very high level and taking share, which is offsetting the challenges.\nThis is a region where we've been a leader for quite some time, and we're getting stronger due to success with key accounts, so we're really looking forward to a rebound in consumer activity as that will definitely benefit us.\nLastly, Asia Pac was up 19%, led by strength in clariti and MyDay.\nAsia Pac is making progress rebounding from COVID, but it's slow in many countries, including Japan, where we have a strong presence.\nNevertheless, similar to EMEA, our teams are executing at a very high level and taking share, which is helping offset the market challenges.\nOverall, given our geographic mix, I'm extremely happy with our performance and expect it to remain healthy as vaccines roll out around the world and consumer activity improves.\nMoving to some details, silicone hydrogel dailies grew 31% with MyDay and clariti both posting strong results.\nMyDay, in particular, is taking share, led by improving availability, especially for MyDay Toric.\nFrom a market perspective, there's still roughly $2.4 billion in annual global sales of older daily hydrogels that we expect to be traded up to silicones in the coming years.\nThis tailwind is a significant positive for us as we're under-indexed in dailies but are seeing great performance from clariti and MyDay.\nMoving to our FRP portfolio, we saw solid growth around the world led by Biofinity.\nIn particular, Biofinity Energys, our unique and innovative lens that uses digital zone optics to help alleviate eye fatigue from excessive screen time, and our market-leading Biofinity Toric Multifocal posted extremely strong results.\nWe also just announced that we've doubled the number of prescription options for Biofinity Toric and to provide context on how significant this is, Biofinity Toric is the most prescribed toric lens in the world and is now available at over 33,000 prescriptions.\nThat's more options than all other monthly silicone hydrogel toric lenses combined.\nRegarding product launches, we remain incredibly active.\nclariti and the MyDay second base curve sphere are being rolled out in Japan and MyDay Toric, Biofinity Toric Multifocal and our extended toric ranges for clariti and Biofinity continue rolling out around the world.\nAnd I'm happy to now add MyDay Multifocal to this launch list.\nWe'll start seeding select countries in the coming months with a full launch planned for late this calendar year.\nAs part of our prelaunch activity, we completed product testing in eight countries with thousands of patients and I'm excited to say the responses have been absolutely fantastic.\nThat's not a huge surprise given the extremely strong clinical data and the success of MyDay Sphere and Toric, but it's still great to see.\nThe multifocal category is roughly 10% of the $8.5 billion global contact lens market and roughly half of that is in dailies.\nGiven we're currently under-indexed in the daily segment at roughly a 16% share, we believe the MyDay Multifocal will be very successful.\nMoving to myopia management, our portfolio grew 122% this quarter to $14 million.\nWithin this, MiSight grew 152% to $4 million, and Ortho K grew 112% to $10 million.\nAs a global leader in the myopia management space, our portfolio is the broadest in the industry, comprised of MiSight, the only FDA-approved myopia control product; a broad range of market-leading ortho-k lenses; and our innovative SightGlass Vision spectacles.\nGiven the strength we're seeing, we now expect this portfolio to reach $65 million in sales this year and exceed $100 million next year.\nRegarding MiSight, we've made fantastic progress with our key accounts and have entered into multiple new pilot programs with retailers and buying groups around the world.\nOur momentum has been accelerating, including in the U.S., where sales grew sequentially from 100,000 to 700,000, and we're about to launch in South Korea, which should be a great market.\nThe only thing holding us back from growing MiSight even faster is COVID restrictions in several important countries such as Canada, Spain, Taiwan, and Singapore.\nRegardless, we're making tremendous progress and expect very strong growth moving forward.\nFrom a fitting perspective, the average age of a new MiSight wearer remains 11, compared to a regular new contact lens wearer of 17, showing this treatment is bringing kids into contact lenses at a much younger age.\nAdditionally, multiple professional associations are now recommending myopia management as standard of care, including the World Council of Optometry and more universities are adding educational training courses to their curriculum.\nRegarding Ortho K, we had a great quarter driven by our broad product portfolio and from the halo effect we started seeing from MiSight.\nAs the myopia management market develops, we're seeing the value of offering multiple options to eye care professionals and this is helping our Ortho K franchise.\nWe also believe it will benefit our SightGlass myopia management spectacles, which are scheduled to be launched in multiple European markets prior to calendar year-end.\nWith respect to SightGlass, we just received two-year clinical data and are in the process of submitting it to the FDA for approval as a myopia management treatment.\nIt took three-year data to get MiSight approval, but we're hoping to receive approval faster for SightGlass given the strong data and that these are glasses rather than contact lenses.\nIn the meantime, we're finishing the legal and regulatory work to close our joint venture with Essilor Luxottica and remain very excited about the potential of that partnership.\nTo wrap up on myopia management, we're actively investing in sales and marketing, new launches, regulatory approvals, and R&D to keep driving success.\nOur focus remains on leading with clinical data and providing the best and broadest portfolio on the market.\nTo conclude on vision, the rollout of vaccines is definitely benefiting us, given the consumer nature of our business.\nOn a longer-term basis, the macro growth trends remain solid, with roughly one-third of the world being myopic today, and that number is expected to increase to 50% by 2050.\nGiven our robust portfolio, new product launches, momentum with myopia management, and strong new fit data, we're in great shape for long-term sustainable growth.\nMoving to CooperSurgical, this was an outstanding quarter, with record revenues of $197 million in all three focus areas: fertility, PARAGARD, and office and surgical medical devices outperforming.\nStarting with fertility, revenues grew 53% year over year to $84 million, easily becoming the best fertility quarter we've ever had.\nStrength was seen around the world and throughout the product portfolio.\nWe're taking share, and we're well-positioned for future gains with improving traction in several markets.\nOur key account strategy is creating opportunities, capitalizing on our market-leading portfolio of products and services, which cover this full spectrum of clinics needs outside of pharma offerings.\nWe're seeing strong growth from consumable products like media and RI Witness, our proprietary automated lab management system that clinics implement to maximize safety and security by optimizing their lab practices.\nAnd we're benefiting from increased utilization of our artificial intelligence-based genetic testing platform which increases the doctor's ability to select the best embryos for transfer and also from our capital equipment business with growth in products like incubators.\nFrom a market perspective, COVID is still negatively impacting patient flow in many countries, but the combination of share gains and healthy patient flow in the U.S. and parts of Europe is driving our results.\nOverall, increasing vaccination activity will continue supporting the recovery of the IVF industry as more patients are able to return to clinics.\nAnd increasing maternal age and better access to IVF treatments are trends that will continue supporting strong growth for many years to come.\nWithin our office and surgical unit, we grew 62%, with PARAGARD up 103% and office and surgical medical devices up 41%.\nPARAGARD performed really well as positive health and wellness trends continue driving patient activity.\nAs the only 100% hormone-free IUD in the U.S. market, the product offers fantastic, long-lasting birth control that addresses the needs and interests of women looking for a healthy alternative.\nWithin Medical Devices, several products performed well, including EndoSee Advance, our direct visualization system for evaluation of the endometrium, and our portfolio of uterine manipulators.\nTo conclude our CooperSurgical, this was an excellent quarter.\nSome of it was tied to reopening activity and capital equipment sales, which are tough to forecast, but you'll note in our guidance that we expect to continue delivering strong results.\nSimilar to Vision, we have powerful macro trends supporting our growth and our exposure to consumer activity is benefiting us as economies around the world reopen.\nTo finish, let me add that we'll be releasing our new ESG report in a few weeks.\nFor those of you like me who are passionate about environmental sustainability, social responsibility, and good governance, you'll see a great summary of where we stand today and insights into our future efforts.\nWe're in an excellent ESG position, and I look forward to continuing advancements and providing additional updates in the future.\nOur second-quarter consolidated revenues increased 37% year over year or 32% in constant currency to $720 million.\nConsolidated gross margin increased year over year to 68.1%, up from 65.8%.\nImprovement was driven by strength in our higher-margin CooperSurgical business led by PARAGARD and a nice improvement in our fertility margins where we're seeing the positive impact of transferring a significant amount of production to Costa Rica.\nCooperVision also posted improving margins driven by currency and product mix.\nMoving forward, we're in excellent shape to continue delivering solid gross margins.\nWe've completed the largest parts of our capital expansion projects at both CooperVision and CooperSurgical and expect to receive the benefits of this over time as capacity utilization increases.\nOpex was up 17% year over year as expenses naturally increased with the rebound in revenues, along with higher sales and marketing expenses associated with investments in areas such as myopia management.\nHaving said that, expenses were kept under control, resulting in consolidated operating margins of 26.8%, up from 17.4% last year.\nInterest expense was $6.1 million due to lower interest rates and lower average debt levels and the effective tax rate was 9.6%, driven by a 2.1% benefit from options exercises.\nNon-GAAP earnings per share was $3.38 with roughly 49.7 million average shares outstanding.\nFree cash flow was very solid at $143 million, comprised of $193 million of operating cash flow, offset by $50 million of capex.\nNet debt decreased to $1.6 billion, and our adjusted leverage ratio decreased from 2.1 to 1.8 times, driven by lower debt and improving EBITDA.\nBefore moving to guidance, it's worth noting we acquired two businesses since we last reported earnings.\nThe first was No7 Contact Lens, a U.K.-based contact lens manufacturer primarily focused on specialty lenses, including Ortho K, that had annual revenue of roughly $4.4 million, which we purchased for roughly $12 million.\nThe second was OBP Medical, a U.S.-based medical device company that develops and markets a suite of differentiated women's health medical devices with integrated LED illumination.\nOBP Medical had roughly $10 million in annual revenues, and we purchased them for $60 million.\nBoth deals are highly strategic and fit perfectly into CooperVision and CooperSurgical, respectively.\nMoving to guidance, we continue to monitor and evaluate the scope, duration, and impact of the ongoing COVID-19 pandemic on our operations and financial results.\nWhile we still view this as a risk factor, our visibility is sufficient to allow us to provide the following update to our fiscal 2021 guidance.\nConsolidated revenues are expected to range from $2.855 billion to $2.885 billion, up 14% to 15% in constant currency, with CooperVision revenues between $2.11 billion and $2.13 billion, up 11% to 12% in constant currency; and CooperSurgical revenues between $745 million and $755 million, up 25% to 27% in constant currency.\nNon-GAAP earnings per share is expected to range from $13.20 to $13.40.\nTo provide color on this earnings per share range, our gross margin expectations are unchanged as we expect CooperVision's improved manufacturing efficiencies to be offset by moderate margin pressure from growing dailies and surgical continuing to post strong results.\nWe expect opex as a percent of revenues to track higher than the first half of the year, led by sales and marketing investments to support reopening activity and for the ongoing support of myopia management.\nGiven the lower tax rate in Q2, we now expect our full-year tax rate to be around 11%.\nLastly, FX has moved against us primarily due to the yen, but we expect the tax improvement to offset this negative impact.\nAnd to wrap up on guidance, our business continues to strengthen, and we now expect free cash flow to exceed $500 million this year.\n Assistant:", "chosen": "q2 non-gaap earnings per share $3.38.\nsees fiscal 2021 non-gaap diluted earnings per share $13.20 - $13.40.\n"}
{"prompt": "Human: I'm pleased to report another strong quarter led by record revenues at CooperVision, where we exceeded the high end of expectations for the quarter.\nOur daily silicone hydrogel and myopia management portfolios posted strong results, and our key account strategy generated share gains in markets around the world.\nWithin CooperSurgical, our fertility business continued to perform extremely well, and we recently announced an exciting agreement to acquire Generate Life Sciences, a great strategic fit with our fertility and labor and delivery offerings.\nFor the full fiscal year 2021, I'm proud to report record revenues at both CooperVision and CooperSurgical, record non-GAAP earnings and record free cash flow.\nAs we enter fiscal 2022, we have strong momentum and expect another record-setting year.\nRegarding fourth quarter results and reporting all percentages on a constant currency basis, consolidated revenues were $759 million, with CooperVision at $565 million, up 11%; and CooperSurgical at $194 million, up 11%.\nNon-GAAP earnings per share were $3.28.\nFor CooperVision, our daily silicone hydrogel portfolio led the way, growing 19%.\nAll three regions reported strength in this product category, with our premium product, MyDay, and our mass market product, clariti, both performing really well.\nBiofinity also had a solid quarter, supported by strength in toric multifocal.\nFor the regions, the Americas grew 6%, led by our daily silicone hydrogel lenses, with particular strength in MyDay, where we continue seeing strong fit activity.\nEMEA grew a healthy 15%, with improving consumer activity and strength in our key accounts driving growth and share gains.\nWithin this region, we posted broad-based growth from our daily silicones and Biofinity.\nAsia Pac grew 14%, led by a steady improvement in consumer activity and success with several new product launches.\nThis region remains a very important growth driver for us, and we're investing accordingly as we're outperforming the market and taking share.\nFor our FRP portfolio, Biofinity posted solid results, driving growth in markets around the world with its broad offerings, including the toric multifocal and Energys, the most innovative product in the monthly space.\nRegarding product launches, we remain incredibly active.\nI've highlighted in the past the many products and range extensions we've been launching around the world for MyDay, clarity, and Biofinity, and all that activity continued.\nThis has driven consistent share gains, and we expect that to continue.\nOne recent launch that I want to highlight this quarter is our new MyDay multifocal.\nWe've launched the product in the U.S. and several major European markets, and the feedback and results are absolutely fantastic.\nWe're consistently hearing from eye care practitioners that the new binocular progressive fitting system is a breakthrough approach that simplifies fit and provides optimal visual acuity at all levels.\nAnd we're hearing that from patients who are touting it as the best multifocal they've ever worn for exceptional near, intermediate, and distant vision.\nWe expect this launch to continue performing extremely well and to provide a nice halo effect, supporting the already successful MyDay brand of torics and spheres.\nMoving to myopia management.\nOur portfolio grew 63% to $21 million, with MiSight up 165% to $7 million and Ortho K products up 40%.\nWe reached our goal of $65 million for the year, up 76% year over year, and our momentum is strong.\nAs a global leader in the myopia management space, our portfolio is the broadest in the industry, comprised of MiSight, the only FDA-approved myopia control product; our broad range of market-leading Ortho K lenses; and our innovative SightGlass Vision glasses.\nRegarding MiSight, we didn't quite reach our target this quarter, but we did reach $19 million in sales for the full year, up a very impressive 149% year over year.\nWe're making great progress with independent optometrists, buying groups, and retailers around the world, and we're seeing momentum in all these channels.\nWe're also making great progress in China, where we signed an exclusive distribution agreement with Essilor.\nEssilor is now actively promoting MiSight following a soft launch last month at one of the largest ophthalmic trade shows, and we're on target for a full launch in fiscal Q2.\nWe've also assembled an advisory board of key opinion leaders, whose affiliated hospitals represent over 50% of myopia management contact lens volume in China.\nThis team of experts is providing fantastic insight into our MiSight positioning and how we can grow Ortho K even faster and how SightGlass will successfully fit in.\nAs a reminder, childhood myopia rates in China are estimated at over 80%, and reducing myopia is a priority for the Chinese government, so the opportunity is significant.\nLastly, we recently presented our industry-leading seven-year clinical study of MiSight, confirming the product works for nearly all myopic children.\nIt cuts myopia progression by roughly 59% on average.\nIt works at any age a child starts treatment.\nIt works for as long as the child wears it.\nAnd there's no rebound if treatment is stopped.\nThese are the drivers that will continue supporting short- and long-term growth.\nRegarding our other myopia management products, our Ortho K portfolio performed really well, led by success in China.\nAnd in November, we commercially co-launched our SightGlass myopia management glasses in Europe with Essilor, and we'll be partnering with them on several additional launches coming soon.\nOverall, on myopia management, our momentum is strong, and we're still targeting constant currency growth of over 50% in fiscal 2022, to roughly $100 million in sales.\nTo conclude on Vision, we estimate the overall contact lens market grew 7% in calendar Q3, while CooperVision grew 8% even as new fits remain below pre-COVID levels.\ndata, roughly 64% of eye care practitioners stated they had capacity to serve more patients but cannot, mostly due to staffing challenges.\nHaving said that, trends are positive, and we expect the market to grow in the 4% to 6% range this coming year, supported by improving fit activity in the U.S. and EMEA and reopening activity in Asia Pac.\nMeanwhile, the long-term macro growth trends remain solid, with roughly one-third of the world being myopic today and that expected to increase to 50% by 2050.\nFor CooperVision, we closed this fiscal year on a really strong note, exceeding the high end of our expectations, and we've entered fiscal 2022 with a robust product portfolio, new product launches, a fast-growing myopia management business, and strong fit data.\nTo ensure we're seizing the growth opportunities in front of us, we've increased our sales force investments, and we'll continue with our successful myopia management investment strategy.\nWe have strong momentum.\nWe're growing faster than the market, and we expect that to continue.\nOur fertility business performed exceptionally well, growing 24% year over year to $82 million.\nStrength was seen around the world and throughout our product portfolio, including from consumables, capital equipment, and genomics.\nOne particular area of continued strength was our RI Witness platform.\nThis is our proprietary automated lab management system that clinics implement to maximize safety and security by optimizing their lab practices.\nA system like this is especially important in today's world to improve quality control and workflow management, to enable social distancing and prevent mistakes such as embryo mismatches, which you unfortunately occasionally hear about.\nRegarding the broader fertility industry, our addressable market is approaching $2 billion, with 5% to 10% long-term growth expected.\nIt's estimated that one in eight couples has trouble getting pregnant due to a variety of factors, such as increasing maternal age, and that more than 100 million individuals worldwide suffer from infertility.\nGiven the improving access to treatments, increasing patient awareness, greater comfort discussing IVF, and increasing global disposable income, this industry should grow nicely for many years to come.\nWithin our office and surgical unit, we grew 3%.\nMedical devices performed well, growing 20%, led by our portfolio of uterine manipulators, several of our surgical devices and our next-generation EndoSee Advance product line.\nMeanwhile, PARAGARD declined 17%, largely as forecasted due to buy-in activity from last quarter's price increase.\nHaving said that, similar to what we've seen from the general IUD market, the performance was soft, likely due to COVID staffing challenges.\nLastly, for CooperSurgical, we recently announced an agreement to acquire Generate Life Sciences for $1.6 billion.\nMany of you may know this company as a cord blood storage business, but they've done a phenomenal job expanding over the years, and this business is now a great strategic fit for CooperSurgical as they're a leader in donor egg and sperm and cryopreservation services for fertility treatments, as well as being a leader in cord blood and cord tissue storage, which is an excellent fit with our labor and delivery group.\nRoughly one-third of the business is in fertility, which we estimate will grow 5% to 10% long-term, supported by general industry growth.\nMeanwhile, combining Generate's offerings with our existing portfolio allows us to leverage our infrastructure, launch new products and go international to accelerate growth beyond this range.\nTwo-thirds of the business is in cord blood and cord tissue storage, which we expect to grow 3% to 5% long term.\nThis is driven by increasing demand for cord tissue stem cells due to optimism around the significant number of clinical trials using these stem cells for regenerative medicine.\nConsolidated, this business offers long-term sustainable growth of 4% to 6%, and we believe there are opportunities to push that range higher with potential revenue synergies as we leverage our expertise.\nTo finish, let me make a few comments on fiscal 2022.\nIntroducing annual guidance in today's world is a challenge given COVID uncertainties.\nRegardless, our organic revenue growth is strong, and we expect that to continue.\nWe're investing in product launches, and we're doing that intelligently by leveraging our operations to ensure we receive strong returns.\nI believe CooperVision is the most innovative company in the contact lens space today, with leading products in myopia management and the broadest product offerings in the market, and CooperSurgical is in an extremely exciting position, led by our fertility business.\nAs a company, we remain on a steady upward trend, and we see that continuing for fiscal 2022 and many years beyond.\nFourth quarter consolidated revenues increased 11% year over year and also 11% in constant currency to $759 million.\nConsolidated gross margin decreased year over year by 20 basis points to 67.5% driven primarily by currency, partially offset by lower manufacturing costs at CooperVision.\nOperating expenses grew 16% as strategic investments in sales and marketing to support myopia management and fertility continued.\nWithin this, we did see slightly higher than initially forecasted investments for SightGlass Vision and MiSight in China, along with elevated distribution costs tied to higher demand of direct shipments.\nConsolidated operating margins were 24.9%, down from 26.8% last year.\nInterest expense was $5 million on lower average debt, and the effective tax rate was 10.3%, helped by stock option exercises in the quarter.\nNon-GAAP earnings per share was $3.28, with roughly 49.9 million average shares outstanding.\nFX negatively impacted us and was roughly $0.05 worse than expected when we gave guidance last quarter.\nFree cash flow was solid at $110 million, comprised of $175 million of operating cash flow, offset by $65 million of capex.\nNet debt decreased to $1.4 billion, and our adjusted leverage ratio improved to 1.38 times.\nMoving to 2022 guidance and excluding the recently announced Generate Life Sciences acquisition, consolidated revenues are expected to be in the range of $3.032 billion to $3.090 billion, up 6% to 8% in constant currency, with CooperVision revenues between $2.225 billion and $2.267 billion, up 6% to 8% in constant currency, and CooperSurgical revenues between $807 million and $823 million, up 6% to 8% in constant currency.\nNon-GAAP earnings per share is expected to range from $13.60 to $14, up 9.5% to 12.5% in constant currency.\nAnd the tax rate is expected to be around 13%.\nAt the midpoint of guidance, this equates to constant currency revenue growth of roughly 7% and constant currency earnings per share growth of roughly 11%.\nRegarding currency on a year-over-year basis, we're expecting an FX headwind of roughly 2.5% on revenues and 7% on EPS.\nThis impact will be most detrimental in Q1, where we're expecting earnings per share in the $3 to $3.10 range.\nBefore opening the call to questions, let me touch on the Generate Life Sciences acquisition that we announced on November 10.\nAs of today, we're optimistic we'll close in the next couple of weeks, which would give us roughly 10.5 months of their operations in our fiscal 2022.\nHaving said that, we're still waiting for final regulatory approvals, so we're not providing specific guidance today.\nIn the meantime, let me walk you through the deal accretion that we expect.\nAs previously announced, Generate has roughly $250 million in trailing 12-month revenue.\nGross margins are expected to be roughly 70%.\nAnd opex is expected to be elevated in year one as synergies are expected to be minimal as we integrate and invest in the business.\nAs we are now closer to securing permanent financing for this transaction, we are updating our year one non-GAAP earnings per share accretion estimate to around $0.50 and would add that we expect this accretion to improve in year two with synergies.\nIn summary, we're pleased with how we closed this fiscal year.\nAnd we look forward -- and as we look forward into 2022 and beyond, we continue to believe our strategic investments will drive top-line momentum, supporting share gains in both businesses and long-term sustainable earnings growth.\n Assistant:", "chosen": "q4 non-gaap earnings per share $3.28.\nq4 revenue rose 11 percent to $759.1 million.\ninitiating fiscal year 2022 guidance.\nsees fiscal 2022 non-gaap diluted earnings per share $13.60 - $14.00.\nfiscal year 2022 guidance does not include generate life sciences acquisition.\n"}
{"prompt": "Human: Joining us today are Pedro Heilbron, CEO of Copa Holdings; and Jose Montero, our CFO.\nFirst, Pedro will start by going over our third quarter highlights, followed by Jose, who will discuss our financial results.\nCopa Holdings' financial reports have been prepared in accordance with International Financial Reporting Standards.\nIn today's call, we will discuss non-IFRS financial measures.\nMany of these are discussed in our annual report filed with the SEC.\nTo them, as always, my utmost respect and admiration.\nThe increasing vaccination rates and reduced travel restrictions in Latin America are positively affecting air travel demand in the region, enabling us to grow capacity quarter-over-quarter, while improving load factors.\nSince restarting operations in Q3 2020, we have increased flight from almost zero to nearly 70% of our pre-pandemic capacity in Q3 2021.\nGoing forward, we expect further relaxation of travel restrictions and a continued demand recovery, which should allow us to deploy additional capacity in the fourth quarter and 2022.\nBut of course, COVID has not gone away and we've seen in other parts of the world, additional waves of the virus could affect demand in the future.\nSo, we will remain focused and flexible in terms of capacity, adjusting our plans as needed.\nNow, I'll highlight some of our third quarter results.\nIn terms of capacity, we reached almost 70% of third quarter 2019 ASMs compared to 48% of 2019 capacity in the second quarter.\nLoad factor came in at 79%, an improvement of two percentage points compared to the second quarter on an almost 50% quarter-over-quarter ASM growth.\nRevenues increased by 46% over the previous quarter to $445 million.\nOur ex-fuel CASM decreased from $0.76 in Q2 to $0.62 in Q3, reaching 2019 unit cost levels at 70% of 2019 capacity.\nWe reported an operating profit of $59 million and an operating margin of 13.3% in the quarter.\nExcluding a $10.4 million passenger revenue adjustments, that Company would have reported an operating profit of $48.6 million and an operating margin of 11.2%.\nWe had a cash buildup of $54 million and ended the quarter with a cash balance of $1.3 billion and a total liquidity of over $1.6 billion.\nOn the operational front, the Company delivered an untimed performance of 89.4% and that completion factor of 99.8%, ONCE again among the best in the industry.\nThis results a true testament to our employees' continuous commitment to delivering a world-class product to our passengers.\nWith regards to our network, we're excited to start our first new destination since the beginning of the pandemic.\nBeginning in December, we will offer service to three new cities, Armenia and Cucuta in Colombia and Atlanta in the US.\nBy the end of the year, Copa will provide service to 72 destinations in North, Central, South America, and the Caribbean.\nAnd we expect to recover service to the rest of our pre-pandemic network during 2022, strengthening our position at the most complete and convenient hub in Latin America.\nDuring the quarter, we agreed with Boeing to accelerate the delivery of 12 737 MAX 9 that were originally intended to be delivered starting in 2025.\nWe will receive two of these aircraft in 2022 for a total of seven MAX 9 deliveries next year and the other 10 aircrafts will be added to Copa's deliveries from 2023 through 2025.\nAs to Boeing, during the fourth quarter, it expects to receive two aircrafts from the Copa fleet to end the year with a total of eight 737-800.\nIn closing, I'd like to reaffirm that we have a proven and strong business model, which is based on operating the best and most convenient network for inter-Latin America travel from our hub of the America leveraging Panamax advantageous geographic position, with the region's lowest unit cost for a full service carrier, best on-time performance and strongest balance sheet.\nGoing forward, the Company expects that at top of the Americas will be an even more valuable source of strategic advantage.\nHope you're doing well.\nI'd like to join Pedro and acknowledging our great corporate team for all their efforts and great spirit during these many months of the pandemic.\nI will start by going over our third quarter results.\nOur capacity came in at 4.4 billion available seat miles, which amounts to 69% of the capacity operated per quarter of 2019.\nLoad factor came in at an average of 79% for the quarter, an increase compared to Q2 while operating 49% more ASMs. We reported a net profit of $8.2 million or $0.19 per share.\nExcluding special items, we would have reported a net profit of $29.9 million or $0.70 per share.\nSpecial items for the quarter are comprised mainly of an unrealized mark-to-market loss of $32.1 million related to the Company's convertible notes issued in 2020 and $10.4 million in revenues related to unredeemed tickets, which we are not included in our underlying results as they correspond to sales made during 2019 and early in 2020.\nWe reported a quarterly operating profit which came in at $59 million.\nExcluding the $10.4 million in unredeemed ticket revenues, we had an adjusted operating profit of $48.6 million for the quarter.\nOur operating margin was 13.3%.\nExcluding the passenger revenue adjustments, we would have reported an operating margin of 11.2%.\nUnit cost excluding fuel were better than in the second quarter at $0.062 per ASM, driven by a quarter-over-quarter capacity growth of 49%.\nWe continue with our cost savings initiatives and we are now targeting to achieve the unit cost below $0.06 once we reach above 90% of our pre-COVID-19 capacity.\nDuring the third quarter, we had a cash buildup of approximately $54 million, driven mainly by increased sales during the period.\nAs a reminder, for our cash build of measure, we exclude all extraordinary proceeds from asset sales, but include capex and the payment of our leases and other financial obligations.\nI want to spend some time out discussing the balance sheet and liquidity.\nAs of the end of the third quarter, we had assets of close to $4.2 billion and our cash short and long-term investments ended at $1.3 billion.\nWe also ended the quarter with an aggregate amount of $345 million in unutilized committed credit facilities, which added to our cash, brought our total liquidity to more than $1.6 billion.\nIn terms of debt, we ended the quarter with $1.6 billion in debt and lease liabilities at similar levels to the ones reported for the end of the second quarter.\nTurning now for fleet.\nIn July, we finalized the sale and delivery of our last Embraer 190 and during the quarter, we delivered two Boeing 737-700s to their new owner, the end of the third quarter with 87 aircraft; 68 737-800 70%, 13 737 MAX 9s, and six 737-700.\nThese figures, we include aircraft currently in temporary storage that we plan to reactivate in the upcoming months.\nDuring the fourth quarter, we expect to receive two more 737 MAX 9s to end the year with a total of 89 aircraft.\nAs the remainder of the year, based on the current state of the demand environment and air travel restrictions, we can provide the following outlook for the fourth quarter of 2021.\nWe expect capacity to be approximately 83% of Q4 2019 levels at about 5.1 billion ASMs and we expect our operating margin to be approximately 4%.\nOur Q4 2021 outlook is based on the following assumptions; revenues of approximately 80% of Q4 2019 levels at about $545 million, CASM ex-fuel of approximately $0.61, and oil price of $2.50 per gallon, an increment of approximately 17% quarter-over-quarter.\nGiven the uncertainty, it is still premature to give a full year 2022 guidance.\nHowever, for the first half of the year, we preliminarily expect our capacity measuring ASMs to be approximately 92% of the capacity operated during the first half of 2019.\nAnd with that, we'll open the call to some questions.\n Assistant:", "chosen": "compname reports q3 earnings per share of $0.19.\nq3 earnings per share $0.19.\nq3 earnings per share $0.70 excluding items.\ncopa holdings - in quarter agreed with boeing to accelerate delivery of 12 boeing 737 max 9s from current order, two in 2022 & other 10 between 2023 & 2025.\n"}
{"prompt": "Human: As always, we appreciate your interest in Central Pacific Financial Corp. In the first quarter of 2021, Central Pacific completed several key milestones.\nWe completed our RISE2020 initiative, which included the revitalization of our Central Pacific Plaza lobby, digital banking enhancement and other revenue and efficiency initiatives.\nAdditionally, as we continue our commitment to best-in-class digital banking technology in the first quarter, we implemented further upgrades and enhancements to our consumer online and mobile banking system.\nAnd we launched our new small business online banking system.\nFurther, this quarter, we launched a new online platform for opening consumer deposit account and consumer term loan.\nDuring the first quarter, Central Pacific stepped up again to support our small business community by originating over 3,600 PPP loans, totaling over $290 million.\nWe are proud of our hard working team of employees that have enabled us to accomplish these milestones and results.\nWe continue to be highly focused on building upon the successes and achieving our financial targets.\nOur financial results for the first quarter were very strong with a highest quarterly pre-tax income since 2007.\nWe also continue to have solid asset quality, liquidity and capital.\nBased on our strong results and financial position, our Board of Directors increased our quarterly cash dividend to $0.24 per share.\nThe state of Hawaii is making progress toward economic recovery.\nOur unemployment rate declined to 9% in March, and while so elevated, is significantly down from its peak of 22% in April last year.\nOur tourism industry is returning with our Safe Travel program running well and the potential for a vaccine passport program starting in the late summer.\nVisitor arrivals have recently been averaging nearly 20,000 per day or about two third of pre-pandemic levels.\nReal estate in Hawaii continues to be extremely strong with the medium price for a single-family home in Oahu hitting our record high of $950,000 in March.\nThe state of Hawaii continues to have a very low COVID infection rate with the lowest case rate in the nation on a per capita basis.\nOur vaccination progress is also quite good with over 30% of our residents fully vaccinated, currently putting us the eighth high state in the nation.\nWith these strong stats, the states continue to safely reopen.\nAt Central Pacific, we are deemed in essential service and therefore our employees were given access to the COVID vaccination starting in March, and many are fully vaccinated at this point.\nIn the first quarter, our total loan portfolio increased by $174 million, primarily due to the new round of PPP loan originations.\nNet of PPP loan originations, we grew our commercial construction, commercial mortgage and home equity portfolios, which was offset by declines in our commercial, industrial, residential mortgage and consumer loan portfolios.\nThe new round of PPP loan origination in Q1 required us to shift resources and attention to supporting our business customers with their second draw of PPP application.\nIn Q1, we processed over 3,600 PPP loans totaling over $290 million, which represented over 50% of the loans we funded in 2020.\nConcurrently, our team continue to assist our existing PPP borrowers to apply for forgiveness from the SBA, resulting in approximately $100 million in paydowns in Q1.\nTo date, inclusive of forgiveness applications processed in 2020 and through March 31st, we have processed over 3,600 forgiveness applications, resulting in $234 million in PPP loan paydowns.\nOur team continues to engage and support our small business customers to help meet their needs with our broader banking product and service offerings.\nTo date, we have expanded banking relationships with approximately 20% of the new to CPBs small business customers.\nTotal deposits during the first quarter increased by $410 million or about 8% sequential quarter, which was supported by PPP loan fundings and other government stimulus.\nAdditionally, our cost of total deposits declined by 3 basis points from the prior quarter and is now down just to 6 basis points.\nAs the economic recovery in Hawaii gains traction, our bankers will continue to engage and support our customers until a healthy pipeline of new business for the bank.\nAt March 31st, the loan portfolio totaled $5.1 billion with 53% consumer and 47% commercial.\nApproximately 78% of the total loan portfolio, excluding PPP balances is real estate secured.\nAt quarter end, the total balance of loans on payment deferrals declined significantly by $80.7 million sequential quarter to $39.5 million or 0.9% of the total loan portfolio, excluding PPP balances.\nAdditional payment deferral were provided on residential loans and consumer loans.\nWe anticipate continuing to provide assistance through repayment plans and loan modifications over the next several months.\nWe had no payment deferrals in our commercial real estate and commercial and industrial loan portfolios at quarter end.\nTotal loans on payment deferrals further declined to $32.5 million as of April 21st.\nDuring the quarter, criticized loans declined by $10.5 million sequential quarter to $181.7 million or 4% of the total loan portfolio, excluding PPP balances.\nSpecial mentioned loans declined by $14.7 million to $127.8 million or 2.8% of the total loan portfolio, excluding PPP balances, and classified loans increased by $4.2 million to $53.9 million or 1.2% of the total loan portfolio, excluding PPP balances.\nThe decrease in special mentioned loans are primarily due to loans being upgraded as a result of improvements in our borrowers operating performance.\nThe increase in classified loans are primarily due to residential and consumer loans.\nWe continue to monitor our borrowers in the high-risk industries of food service and accommodation or $44 million is rated special mentioned, an $8 million is rated classified.\nApproximately 27% of total special mentioned balances and 8% of total classified balances also received PPP loan.\nAdditional details on our high-risk industry loans and loans rated special mention and classified can be found on Slides 11, 13 and 14.\nOverall, our asset quality remained strong and we expect to see continued improvement in our loan portfolio.\nNet income for the first quarter was $18 million or $0.64 per diluted share.\nReturn on average assets in the first quarter was 1.07% and return on average equity was 13.07%.\nNet interest income for the first quarter was $49.8 million, which decreased from the prior quarter, primarily due to less recognition of PPP fee income due to lower forgiveness.\nNet interest income included $5.2 million in PPP net interest income and net loan fees compared to $6.3 million in the prior quarter.\nAt March 31, unearned net PPP fees for rounds one and two was $5.8 million and net fees for round three was $14.5 billion.\nThe net interest margin decreased to 3.19% in the first quarter compared to 3.32% in the prior quarter.\nThe decrease was due to the lower PPP fee income recognition as well as lower loan yields.\nThe net interest margin normalized for PPP was 3.12% in the first quarter compared to 3.17% in the prior quarter.\nFirst quarter other operating income totaled $10.7 million compared to 14.1 million in the prior quarter.\nThe increase was primarily due to lower mortgage banking income of $2.5 million and lower income from bank-owned life insurance of $0.4 million.\nOther operating expense for the first quarter was $37.8 million, which was a decrease of $6.8 million from carried through the prior quarter.\nThe prior quarter included one-time expenses totaling $5.9 million.\nAdditionally, in the current quarter, $0.8 million in PPP loan origination cost were deferred from salaries and benefits.\nThe efficiency ratio decreased to 62.5% in the first quarter compared to 68.2% in the prior quarter, primarily due to the one-time expenses in the prior quarter.\nNet charge-offs in the first quarter totaled $0.7 million compared to net charge-offs of $1.8 million in the prior quarter.\nAt March 31st, our allowance for credit losses was $81.6 million or 1.80% of outstanding loans excluding the PPP loans.\nThis compares to 1.83% as of the prior quarter end.\nIn the first quarter, we reported a $0.8 million credit to the provision for credit losses due to improvements in the economic forecast utilized in our CECL methodology.\nThe effective tax rate was 23.2% in the first quarter, a slight decline from the prior quarter as we recognized the benefit for capital loss carry-backs.\nGoing forward, we expect the effective tax rate to be in the 24% to 26% range.\nOur liquidity and capital positions remain strong and we continue to perform robust stress testing.\nFinally, as Paul noted earlier, our Board of Directors declared a quarterly cash dividend of $0.24 per share, which was an increase from the $0.23 in the prior quarter.\nIn summary, Central Pacific has a solid financial credit liquidity and capital position, and we continue to make positive forward progress on our strategies.\nFurther, we remain committed to providing support to our employees, customers and the community as we progress through the economic recovery.\nAt this time, we'll be happy to address any questions you may have.\n Assistant:", "chosen": "q1 earnings per share $0.64.\nquarterly net interest income $49.8 million, compared to $47.8 million.\n"}
{"prompt": "Human: We appreciate you joining us today to review our first quarter 2021 results.\nWe announced our financial results for the quarter yesterday.\nAs you saw, our strong financial results indicate we continued growing and operating effectively, serving our customers, identifying and finalizing new investment projects and keeping our employees as safe as possible.\nAs shown on Slide 2, participating with me on the call today are Jeff Householder, President and Chief Executive Officer; and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer.\nWe also have other members of our management team joining us virtually.\nWe've had a very strong start to 2021 with continued profitable growth initiatives across our business units.\nAs shown on Slide 4, earnings per share from continuing operations was $1.96, an increase of $0.19 or 10.7% compared to our first quarter 2020 earnings per share of $1.77.\nGross margin increased more than $17 million over the first quarter of 2020.\nOur results were driven by growth across the Company.\nWe also experienced increased consumer consumption resulting from weather that more closely resembled normal temperatures.\nSome of the key margin drivers included: pipeline expansion projects; the Hurricane Michael regulatory settlement; organic natural gas distribution customer growth; contributions from Elkton Gas and Western Natural Gas; increased retail propane margins per gallon; and increased business in Marlin Gas Services.\nAs our General Counsel, Jim Moriarty, is fond of saying, we are the beneficiaries of geography.\nWe're fortunate to provide energy delivery services to communities that are experiencing significant growth.\n[Technical Issues] initiatives that signal support for continued expansion of our systems in Florida.\nIn all of our service areas, the demand for natural gas, propane and electricity has never been higher.\nWe continued to see customer additions at a rate that's more than twice the national average.\nIn the past year, our utility distribution and customer count increased by 7.4%.\nGrowth opportunities to serve new customers was the primary driver of our capital investment in the first quarter.\nWe projected capital investments for 2021 at approximately $200 million, and we're on track to achieve that target.\nOur first quarter capital investment totaled just under $49 million.\nEarlier today, our Board of Directors have approved an annualized dividend payment of $1.92 per share, a $0.16 per share or 9.1% dividend increase.\nThe $0.16 per share increase in the annualized dividend closely aligns our five-year earnings growth rate of 9.4% through December 31, 2020, with our five-year dividend growth rate of 9.5%, as shown on Slide 5, including this most recent increase.\nThe Board's decision to raise the dividend reflects the Company's ongoing commitment to dividend growth that is supported by earnings growth, while maintaining a payout ratio that enables our healthy reinvestment of earnings for growth and ensures liquidity to fund operations.\nChesapeake Utilities has paid dividends to its shareholders without interruption for 60 years and has increased its annualized dividend every year since 2004.\nI will add more about our continued growth initiatives and capital investment projects across our business units in just a few minutes.\nTurning to Slide 6, net income from continuing operations for the quarter was $34.5 million compared to $29 million for the same quarter of last year.\nThis represents a growth in net income of $5.5 million or approximately 19%.\nAs I'm sure you all recall, during the fourth quarter of 2019, we exited the natural gas marketing business and recognized gains on the sales associated with that exit.\nThere were some minor lingering impact associated with the sales of this business both in 2020 and also the first quarter of 2021.\nAs a result, I will focus our discussion today largely on continuing operation.\nEPS from continuing operations for the first quarter compared to the first quarter last year grew by $0.19 to $1.96 per share from $1.77, representing growth of just under 11%.\nGrowth initiatives and customer consumption drove the growth rate in net income by 19%, while the earnings per share growth rate of 11% is a result of the significant amount of equity we successfully issued in the third and fourth quarters of 2020 via the ATM program and our various stock plans.\nHigher income was the result of increased performance across the enterprise, as Jeff mentioned earlier, coupled with continued expense management, business efficiencies, and standardization and collaboration across the Company.\nGross margin increased 17.1% compared to the first quarter last year, while operating income grew, because of these impacts, by 22.5%.\nAs Slide 7 also highlights, the growth in operating income was fairly split between the two segments, Regulated Energy and Unregulated Energy, for the quarter.\nThe key drivers of gross margin and expenses for quarter one compared to quarter one of last year are highlighted on Slide 8.\nGross margin net of specific expense attributes grew $0.65 per share after tax.\nHigher earnings for the quarter reflect increased earnings across the business from: first, customer consumption, as Jeff mentioned primarily weather focused, was $0.26 per share; pipeline expansion projects another $0.11 per share; higher retail propane margins per gallon increased margin by $0.06 per share; organic growth in our natural gas distribution operations added $0.04 per share; contributions from recent acquisitions, including Elkton Gas and Western Natural Gas added $0.04 per share; the Hurricane Michael regulatory settlement also added $0.04 per share after associated depreciation and amortization of associated regulatory assets; and margin from Marlin increased by $0.03 per share; lastly, from our Florida GRIP Reliability and Infrastructure Program, we added $0.02 per share.\nThese increases were offset by the absence of property sales that occurred in the first quarter of last year, which represented $0.14 per share and the increased shares we added, that I just referred to, another $0.12 per share.\nGiven our opportunistic equity issuances over the past 12 months to take advantage of our strong equity market position.\nFinally, depreciation, payroll and facilities expenses basically drove our earnings per share down by $0.20 per share because of the growth in our business.\nI would like to spend a few minutes highlighting our capital spending thus far in 2021.\nAs you can see though first on Slide 9, the forecast for 2021 capital expenditures remains at our previously announced guidance of $175 million to $200 million.\nAgain, the investment is concentrated with approximately 80% budgeted in new regulated energy assets.\nYear-to-date, as Jeff mentioned, we've invested just under $49 million in new capital investments.\nSo, what are some of the key 2021 projects?\nThey include our Delmarva Natural Gas Distribution expansion into Somerset County; Eastern Shore's Del-Mar Energy Pathway project, which is well under way; Florida's Western Palm Beach County; Florida expansion; our Florida GRIP program; and other natural gas distribution and transmission system projects.\nIn addition, we have expenditures for natural gas and electric system infrastructure improvement activities, Marlin Gas Services expansion of their CNG transport and their expansion into RNG and LNG, and technology system in support of our business transformation and other strategic initiatives and investments.\nTo support the growth we have experienced and ensure we have the capital capacity to fuel our future growth, we maintain a strong balance sheet with access to sufficient competitively priced capital.\nAs you can see on Slide 10, as of the end of March, total capitalization was $1.4 billion, comprised of: approximately 52% stockholders' equity, which is now $726 million; we had 37% in long-term debt at an average fixed rate of 3.62%; and $156 million in short-term debt under our revolver at an average interest rate of 1.2%.\nOur recent equity issuance moved this further along within our target equity to total capitalization range.\nWe continue to utilize our traditional equity plans this year to issue stock and increase equity beyond our earnings retained and reinvest it in the business.\nChesapeake Utilities current market capitalization is approximately $2 billion.\nAs Beth noted, our capital capacity and the strength of our balance sheet continues to support growth.\nWe're very comfortable that our previously updated capital guidance remains on target.\nSlide 11 is a reminder from earlier earnings calls of the key strategic initiatives that focus our project development and transaction interest.\nAs I noted a moment ago, we continue to experience significant demand for the energy services, provided by our existing business units.\nLet me highlight a few of our major initiatives on Slide 12.\nA significant portion of projected capital investment is devoted to expanding our existing core businesses.\nWe also have several relatively small-scale transmission pipeline projects under development that will potentially increase investment in this area.\nOur propane business continues to grow and we will keep looking for acquisition opportunities in the Mid-Atlantic and Southeast.\nAnd we see growth at Marlin Gas Services and in the rapidly developing renewable natural gas market that I'll discuss in greater detail in a few moments.\nI'm running [Phonetic] this margin table showing key projects and initiatives, as shown on Slide 13, including pipeline expansion, CNG, RNG transportation, acquisitions and regulatory initiatives.\nKey projects are expected to generate approximately $60 million and $67 million in gross margin for the years 2021 and 2022, respectively.\nPipeline expansions are expected to generate $6.7 million in incremental margin in 2021.\nThe Hurricane Michael proceeding settlement will again generate $11 million in gross margin in 2021, it remains at that level in 2022.\nWe're particularly pleased with the full integration of margin estimates of $5.8 million and $6.1 million for 2021 and 2022, respectively, from the acquisitions of Elkton Gas and Western Natural Gas.\nIn total, the incremental margin growth from these key projects and initiatives represents approximately $14.1 million for 2021 and $7.5 million for 2022.\nAs a reminder, we only include definitive projects in this table once they reach maturity, and do not include organic margin growth from our traditional distribution, customer additions, rate adjustments in our unregulated businesses, etc.\nAccordingly, the RNG transportation margin, for example, will be adjusted as new projects are definitive and announced.\nI realized that we've included a $1 million placeholder for RNG transportation on the slide for a couple of quarters, and have not yet disclosed the extent of anticipated RNG production-related investments.\nThese projects take considerable time to develop, especially related to securing full project financing.\nThat reminds me of the early days of solar and wind project financing.\nHowever, there is positive movement on RNG project financing as interest increases among both financial and strategic participants, and we're hopeful that more details of the projects we're involved in can be made public over the next several weeks.\nAs a final note, the Auburndale Pipeline, $679,000 and Boulden acquisition $3.9 million became fully in service in 2020, so these ongoing mature projects have been removed from this table.\nOver the past several quarters, we've outlined a number of renewable natural gas initiatives.\nTo begin, Slide 14 outlines the types of projects and ownership structures that we are actively assessing.\nLet me provide an update on our progress for several of these initiatives.\nWe continue to work with CleanBay renewables on two utility scale poultry waste, RNG and organic fertilizer production facilities on the Delmarva Peninsula.\nWe previously described our existing agreement with CleanBay to own the gas processing equipment at the Westover Maryland facility, with an option to convert the equipment investment to equity in the total plant.\nLast month, our Board Investment Committee authorized management to negotiate economic and governance terms with CleanBay with Chesapeake's equity participation in the project.\nWe hope to finalize an agreement with CleanBay and other equity providers over the coming weeks, and ensure that the anticipated project in-service date of Q4 2023 remains viable.\nIn addition to the Westover RNG facility, we're in discussions with CleanBay and other potential investors on a second Delmarva RNG facility, which is under development in Sussex County, Delaware.\nSimilar to the Westover plant, the Sussex facility will produce RNG at a utility scale along with organic fertilizer.\nThe property for the Sussex plant has been acquired and most land use permits have been approved.\nUpon completion, the Westover and Sussex plants will be among the largest RNG facilities in the country.\nAs you may recall, we have several additional investments either under contract or in final negotiations associated with the Westover plant.\nThe Marlin Gas Transport agreement is in place, an interconnect agreement with our Eastern Shore Natural Gas transmission pipeline has been finalized, and the interconnect scheduled for construction in conjunction with the in-service date of the Westover plant.\nOur Delmarva distribution business has finalized an agreement for off-take the [Indecipherable] RNG from Westover to purchase non-frac non-fossil RNG molecules for distributions to our -- distribution, excuse me, to our customers.\nIn addition to purchasing RNG from Westover's production, our Delmarva distribution operations will provide conventional gas supply service to Westover to support driving the organic fertilizer produced by the plant.\nIt's a lot of fertilizer and a lot of natural gas.\nWestover will likely become our largest Maryland gas distribution customer.\nEastern Shore Natural Gas Del-Mar Energy Pathway expansion project currently under construction and our related distribution system expansion will bring our pipelines to within 1.5 mile of the Westover plant, and we will extend the distribution system to provide service.\nWe anticipate providing similar Marlin and conventional gas distribution services to the CleanBay Sussex site.\nChesapeake is exploring opportunities to develop renewable electric micro-grids at both the Westover and Sussex RNG sites.\nWe're working with a third party to potentially develop solar photovoltaic generation systems to serve the electric needs of the RNG facilities.\nProperty suitable for solar PV installation is owned respectively by the third party in close proximity to the Westover site, and similarly by Chesapeake close to the Sussex site.\nChesapeake has engaged Southern Company Energy Services and Southern's PowerSecure Company to assist in preliminary design and engineering of the solar PV systems, battery storage, protection protocols for the plants and related facilities to support in renewable electric micro-grid at each facility.\nOn Delmarva, we continue to work with the Bioenergy DevCo Company as they also move forward on development of a poultry waste RNG facility in Sussex County, Delaware.\nThe County Commission has recently approved the Bioenergy DevCo conditional land use permit.\nChesapeake will own and operate the gas processing equipment at the plant site.\nWe've ordered the processor from [Indecipherable], retained an EPC contractor and are in the process of finalizing design on various other components.\nOur investment in the project is estimated at approximately $12 million, with in-service anticipated in late 2022.\nConstruction of our Savannah public compressed natural gas vehicle fueling and Marlin staging [Phonetic] facility continues to proceed on schedule for an October 2021 in service.\nThe station will be the larger CNG fueling facility on the East Coast, with capacity to fuel approximately 185 semi-trucks per day.\nWe've recently held a meeting with representatives of several Georgia-based trucking firms where interest in CNG was high and interest in the potential of providing renewable CNG at that facility was even higher.\nWe're working on several RNG marketers along with exploring opportunities to develop regional CNG production to serve the Savannah station.\nSpeaking of Marlin, we're just wrapping up an eight-month deployment to serve the City of Miami transit bus fleet.\nAt peak, we were fueling 160 CNG buses a day before the permanent pipeline and CNG fueling facilities were put in place.\nMarlin CNG Service enabled early delivery of the buses and an earlier than anticipated significant reduction in diesel emissions.\nMarlin has also taken delivery of its new four-stage compressor unit.\nThe compressor enables Marlin to offer a methane capture service to pipelines and utilities that need to remove a pipeline segment from service to provide maintenance or system integrity work.\nRather than releasing the methane to the atmosphere, Marlin can receive the gas at almost any line pressure, compress it to CNG pressures, and transfer it to a tanker.\nThe gas can then be reintroduced into another point on the pipeline system.\nMarlin also taken delivery of its first four LNG tankers.\nThe increased capacity of LNG transport provides an expanded array of services for customers requiring larger gas quantities.\nAnd finally, we're continuing our fleet conversion at Marlin on diesel fuel to compressed natural gas.\nEight new CNG tractor cabs will be delivered in July.\nI mentioned in our fourth quarter call that we were supporting a hydrogen research project proposed to the Department of Energy by Solar Turbines.\nWe've offered our Eight Flags CHP turbine on Amelia Island as a test site and we're also working with several of our existing industrial customers to identify opportunities for hydrogen blends at their facilities.\nWe're just at the beginning stages of gaining a better understanding of hydrogen use from a safety operations impact, measurement, availability and the effects on downstream customer equipment.\nIt is great to be with you today.\nI would like to begin by providing an update on certain legislative actions in Florida.\nAs shown on Slide 15, the energy pre-emption bill is key legislation that maintains consumer choice toward the ongoing availability and use of natural gas as an affordable, reliable and resilient energy resource.\nNatural gas will be available to meet increasing customer demand.\nIn addition, we sponsored a renewable energy bill, which is cleared both chambers of the Florida Legislature, and is before the governor for signature.\nThis bill defines biogas, renewable natural gas.\nIt supports RNG's use in transportation, electric generation, and injection into gas distribution systems.\nThe bill also authorizes the PSC to approve cost recovery for RNG contracts that exceed market rates under certain conditions.\nWhen signed by the governor, Florida will join a dozen other states that have endorsed the vibrant role of natural gas in meeting the growing energy needs of this nation.\nWe are proud of our governmental affairs team for driving and supporting such important legislation within the state of Florida to ensure natural gas is available to meet customer demand first and foremost, and to provide a mechanism for renewable natural gas via viable part of the natural gas portfolio throughout the state.\nWe're also at various stages in regards to working on similar legislation in our other jurisdictions, and we'll keep you apprised of future activities.\nAs shown on Slide 16, Chesapeake Utilities continues to build on our bedrock commitment to ESG, a focus on environmental stewardship, dedication to social justice, and sound governance principles.\nOur recognition as a top workplace for the ninth consecutive year in the areas we serve, as well as our recognition in the top workplace inaugural awards, speaks volumes about our diverse and inclusive culture, one which continues to promote the growth and development of our employees and the active engagement of our communities.\nStrong corporate governance has been essential to creating long-term value and safeguarding our commitments to all stakeholders.\nOur Board and its committees have adopted guidelines and other policies that have provided a framework for ongoing effective governance.\nActive and informed engagement, which is embedded in our people, beginning with our Board of Directors and extending throughout the Company, could not be more important as we continue together to chart the road ahead.\nStrong corporate governance also includes listening to our stockholders and monitoring the vote results annually.\nBased on this year's results, over 90% of the shares voted were in favor of the proposals presented before them.\nThis demonstrates our stockholders' continuing strong support of the performance of the Company and our future strategy.\nOur responsibility to operate in a safe and environmentally friendly manner furthers our stewardship and facilitates sustainable practices across our organization.\nOur team, with input from the Board of Directors, discusses key risks and mitigating factors identified as part of our comprehensive Enterprise Risk Management program.\nEmbedded within our ERM program, our ESG-related focus areas and emerging risks.\nTurning to Slide 17, in regards to safety, we are committed to providing a safe workplace for employees and to making safety a priority in our interactions with each other, our customers, and the communities we serve.\nThe achievement of superior safety performance is an important strategic initiative, both in the short term and the long term.\nSafety is not only our top priority and our first strategic objective, it is at the center of who we are.\nOne of our latest accomplishments in this regard is the completion of our safety town facility in Dover, Delaware, to provide both hands-on and classroom training for our operations technicians.\nWe are also diligently working on our inaugural Corporate Responsibility and Sustainability report, which will be made available during 2021.\nThere, we will be providing additional information and insights on our long-standing ESG stewardship.\nWe are committed to providing a work environment that values diversity and background, experiences, and skillset of all our employees as highlighted on Slide 18.\nIn continuing our bedrock commitment to equity, diversity and inclusion, our Equity, Diversity and Inclusion, or EDI Council, supports all our employees, embracing and sharing their diverse experiences and backgrounds with the mission to help improve the communities we serve and to make us a better company.\nThe EDI Council is central to who we are and who we want to be, and we will further enhance the collaboration around our workplace culture that is the engine driving our business.\nThe EDI Council was extremely busy in 2020, fostering the rollout of five employee resource groups throughout the Company, as shown on Slide 18.\nWe are excited about what these teams have done in just a short amount of time and look forward to their increasing role as well as the creation of other ERGs.\nThe talent, skills and ideas that these groups have brought to the forefront have been inspiring and provide channels for our employees to feel inclusive and supported by the Company.\nWe work hard every day to also ensure that the communities we serve continue receiving the value and benefits of clean, plentiful, affordable and resilient energy delivery services, so that no one is left behind.\nWe continue to undertake various internal actions to reduce greenhouse gas emissions, including completion of our pipeline replacement program and improved detection technology at our compressor stations.\nWe are also working with our suppliers and contractors to encourage their environmental efforts.\nWe are also excited about the projects under way by our diverse and engaged teams to reduce the carbon footprint of the communities we serve, including conservation programs that promote high efficiency appliances and technical assistance for large volume customers to identify emission reduction opportunities.\nOur commitment remains steadfast to take the steps necessary to deliver energy where and when it is needed while continuing to advance our environmental stewardship.\nOur announced projects in RNG are just the beginning.\nThey are a very clear example of the lowering of the carbon footprint and also ensuring we do our best to ensure a more sustainable future for our local communities.\nWhile we're beginning fiscal year of 2021 with very positive financial performance, as indicated by our earnings-per-share growth, capital investments, key projects and initiatives, and our dividend growth, as you can see on Slides 19 and 20, we're affirming our five-year capital guidance for the period of 2021 to 2025 at $750 million to $1 billion.\nI'm excited that our latest strategic plan update gives us a high degree of confidence that we have significant investment opportunities ahead of us.\nThat confidence in our growth opportunities has enabled us to extend and expand our capital guidance.\nOur 2025 earnings per share guidance range of $6.05 to $6.25 per share represents an average earnings per share growth of approximately 10% from our initiation of guidance at the end of 2017.\nWe believe natural gas is a key component to the country's long-term energy strategy.\nWe also believe that the markets we serve value the energy services we deliver; whether natural gas or propane or electricity, our customers have spoken loudly in this regard.\nAt the same time, we have opportunities given our business mix expertise and strategic approach to capitalize on new renewable energy opportunities that advance us toward a more sustainable future.\nWe're committed to our growth strategy.\nFocused on delivering top quartile performance, including shareholder return, which has exceeded 16% compound annual growth for each period, one, three, five, 10 and 20 years through April 30, 2021.\nOur investment proposition is based upon a commitment to superior performance and we outlined that on Slide 21.\nOur foundation, our financial objectives and targets, as well as the initiatives and strategies we pursue are in support of achieving this level of performance.\nWe take great pride in the work done on the front lines and our ongoing commitment to identifying and delivering innovative solutions for the delivery of clean, reliable and safe energy to our customers.\nAnd we can now address any questions you may have.\n Assistant:", "chosen": "q1 earnings per share $1.96 from continuing operations.\n"}
{"prompt": "Human: The theme for our precall music today was Camden Cares.\nFor many years, our Camden Cares initiatives have provided assistance to people in need among Camden's family or Camden residents as well as the communities where we live and work.\nOur music today included a song by the late rate Bill Withers with this great wisdom.\n\"lean on me, when you're not strong, I'll be your friend.\nI'll help you carry on, for it won't be long till I'm going to need somebody to lean on\".\nThese words capture the spirit of all that our Camden associates do for others in need under our Camden Cares banner.\nCamden's why, our purpose is to improve the lives of our teammates, customers and our shareholders one experience at a time.\nAt the outset of the pandemic, it was clear that the disruption from COVID-19 was going to be massive and leave millions needing someone to lean on.\nWe encouraged our teams to view the widespread chaos as an opportunity to go big on our pledge to improve people's lives, one experience at a time.\nAnd not surprisingly, team Camden responded in truly extraordinary ways that we captured in this brief video.\nWe are pleased to report another very strong quarter of results and another raise to our 2021 earnings guidance.\nWe are seeing high levels of rent growth along with sustained occupancy levels over 97% for our portfolio which bodes well for the remainder of the year.\nCamden is always focused on operating in markets with high employment and population growth and strong migration patterns, and this strategy has clearly paid off as evidenced by the ULI PwC report that was issued for 2021 real estate trends at the ULI Fall Conference in Chicago last week.\nCamden's markets -- eight of Camden's markets ranked in the top 10 for 2022 investor demand.\nWe're very fortunate today to be in a really strong apartment market and in the right markets.\nSo at this point, I will go ahead and turn over the call to Keith Oden.\nSame property revenue growth exceeded expectations yet again at 5.1% for the quarter and was positive in all markets, both year-over-year and sequentially.\nWe posted double-digit growth in Phoenix and South Florida, both at 10.1%, followed by Tampa at 9.5%.\nYear-to-date, same-property revenue growth is 2.9%, and we expect strong performance in the fourth quarter across our portfolio, resulting in our revised 2021 guidance range of 4% to 4.5% for full year revenue growth.\nNew lease and renewal gains are still strong with double-digit growth posted in both categories.\nFor 3Q '21, signed new leases were 19.8% and renewals were 12.1% for a blended rate of 16% flat.\nFor leases, which were signed earlier and became effective during the third quarter, new lease growth was 16.6% with renewals at 8.5% for a blended rate of 12.2%.\nOctober 2021 remained strong with signed new leases trending at 18.3%, renewals at 13.8% and a blended rate of 16.5%.\nRenewal offers for November and December were sent out with an average increase of 15% to 16%.\nOccupancy has also been very strong and was 97.3% for the third quarter of '21 and is still holding at 97.3% for October to date.\nNet turnover remains low at 47% for the third quarter of '21 versus 49% in the third quarter of last year.\nAnd move-outs to home purchases moderated from 17.7% in the second quarter of '21 to 15% in the third quarter of '21, trending below our long-term average of about 18%.\nIt's worth noting that these strong results have continued into what has historically been a seasonally weaker period for our portfolio.\nThis marks our third straight quarter in which we increased our same-property NOI and FFO per share guidance.\nOur team is focused on finishing the year strong, which will position us for another solid year in 2022.\nBefore I move on to our financial results and guidance, a brief update on our recent real estate activities.\nDuring the third quarter of 2021, we purchased Camden Central, a recently constructed 368 unit, 15-story community in St. Petersburg, Florida.\nAnd subsequent to quarter end, we purchased Camden Greenville, a recently constructed 558 unit mid-rise community in Dallas.\nThe combined purchase price for these two acquisitions is approximately $342 million and both assets were purchased at just under a 4% yield.\nAlso during the quarter, we stabilized Camden Downtown, a 271 unit, $132 million new development in Houston.\nAnd subsequent to quarter end, we stabilized ahead of schedule Camden North End II, a 343-unit, $79 million new development in Phoenix.\nAdditionally, during the quarter, we completed construction on Camden Lake Eola, a $125 million new development in Orlando.\nSubsequent to quarter end, we purchased five acres of land in Denver for future development purposes.\nOn the financing side, during the quarter, we issued approximately $222 million of shares under our existing ATM program.\nWe used the proceeds of the issuance to fund in part the previously discussed acquisitions.\nTurning to financial results.\nLast night, we reported funds from operations for the third quarter of 2021 of $142.2 million or $1.36 per share, exceeding the midpoint of our guidance range by $0.03 per share, which resulted primarily from approximately $0.01 in higher same-store NOI, resulting from $0.02 of higher revenue driven by higher rental rates, higher occupancy and lower bad debt, partially offset by $0.01 of higher operating expenses entirely driven by higher-than-anticipated amounts of self-insured expenses.\n-- approximately $0.015 and better-than-anticipated results from our non-same-store development and acquisition communities and approximately $0.01 from the timing of our third quarter acquisition.\nThis $0.035 aggregate outperformance was partially offset by $0.005 impact from our higher share count resulting from our recent ATM activity.\nLast night, based upon our year-to-date operating performance and our expectations for the remainder of the year, we also updated and revised our 2021 full year same-store guidance.\nTaking into consideration our continued significant improvement in new leases, renewals and occupancy and our resulting expectations for the remainder of the year, we have increased the midpoint of our full year same-store revenue guidance from 3.75% to 4.25%.\nAnd we have increased the midpoint of our full year same-store NOI guidance from 3.75% to 4.5%.\nWe are maintaining the midpoint of our same-store expense guidance at 3.75% as the higher-than-expected third quarter insurance expenses are anticipated to be entirely offset by lower-than-expected property tax expenses in the fourth quarter.\nWe are now anticipating that our full year property tax growth rate will be approximately 1.6%, which includes $1.8 million of property tax refunds anticipated in the fourth quarter.\nOur 4.25% same-store revenue growth assumption is based upon occupancy averaging approximately 97% for the remainder of the year with the blend of new lease and renewals averaging approximately 16%.\nLast night, we also increased the midpoint of our full year 2021 FFO guidance by $0.10 per share.\nOur new 2021 FFO guidance is $5.34 to $5.40 with the midpoint of $5.37 per share.\nThis $0.10 per share increase results from -- are anticipated 75 basis points or approximately $0.05 increase in 2021 same-store operating results, $0.01 of this increase already occurred in the third quarter, an approximate $0.05 increase from our non-same-store development and acquisition communities, of which $0.025 already occurred in the third quarter and an approximate $0.02 increase in FFO from later and lower-than-anticipated fourth quarter disposition activities.\nWe now anticipate approximately $110 million of dispositions in early November and approximately $220 million of dispositions in early December as compared to our previous expectations of $450 million of dispositions, all occurring in early November.\nThis $0.12 aggregate increase in FFO is partially offset by an approximate $0.02 impact from our third quarter ATM activity.\nLast night, we also provided earnings guidance for the fourth quarter of 2021.\nWe expect FFO per share for the fourth quarter to be within the range of $1.46 to $1.52.\nThe midpoint of $1.49 represents $0.13 per share improvement from the third quarter, which is anticipated to result from an $0.11 per share or approximate 7.5% expected sequential increase in same-store NOI, driven by both a 2.5% or $0.055 per share sequential increase in same-store revenue, resulting primarily from higher rental rates and a 6.5% decrease in sequential same-store expenses driven primarily by $0.025 fourth quarter decrease in property taxes, combined with a fourth quarter, $0.015 decrease in property insurance expenses and $0.015 third to fourth quarter seasonal decrease in utility, repair and maintenance, unit turnover and personnel expenses, a $0.03 per share increase in NOI from our development communities in lease-up and our nonsame-store communities and $0.02 per share increase in FFO resulting from the full quarter contribution of our recent acquisitions.\nThis aggregate $0.16 increase is partially offset by $0.015 decrease in NOI from our planned fourth quarter disposition activities and $0.015 per share incremental impact from our third quarter ATM activity.\nOur balance sheet remains strong with net debt-to-EBITDA at 4.4 times and a total fixed charge coverage ratio at 5.8 times.\nAs of today, we have approximately $1.1 billion of liquidity, comprised of approximately $200 million in cash and cash equivalents and no amounts outstanding under our $900 million unsecured credit facility.\nAt quarter end, we had $242 million left to spend over the next three years under our existing development pipeline.\nAt this time, we will open the call up to questions.\n Assistant:", "chosen": "qtrly ffo per share $1.36.\nsees q4 ffo per share $1.46 - $1.52.\n"}
{"prompt": "Human: Carter's is making good progress, recovering from the market disruption caused by the pandemic.\nWe achieved a record gross profit margin in the quarter with improved price realization and fewer and better promotions.\nWe reduced our spending and inventories below prior year levels.\nWe also strengthened cash flow and liquidity in the quarter and gained market share.\nWith respect to business trends, we got off to a good start in July with sales running more than 90% of prior year sales.\nWe had substantially all of our stores opened heading into the 4th of July weekend and retail sales over that holiday shopping period comped up 7%.\nIn August, we saw sales trend to about 87% of prior year sales as schools delayed reopening.\nWith children starting their school year learning virtually at home, there was less of a need to shop for back-to-school outfits.\nSeptember was the largest month so far this year in sales and earnings contribution.\nSeptember sales ramped up to 95% of prior year sales.\nThat's the best performance we've seen since the pandemic began to impact us in March.\nOur Labor Day holiday sales were the strongest in the past three years, with comparable retail sales up 15% during that shopping period.\nAnd in October, sales are trending over 90% of prior year sales.\nWith respect to product performance, we continue to see good demand for our baby apparel and sleepwear product offerings.\nOur baby apparel and sleepwear contributed about 70% of our total apparel sales.\nWe own five times the share of our nearest competitors in each of these product markets.\nOur playwear sales improved in July as families prepared for the beginning of a new school year.\nSales dipped in August when it became clear that schools would not reopen and then rebounded in September as consumers shopped for cooler weather outfitting.\nWe launched our Little Baby Basics product offering in late June to coincide with the store reopenings.\nThis is the core of our baby product offerings and the best-selling newborn apparel in the United States.\nIt's a high-margin replenishment program and one of our strongest performing launches in recent years.\nReplenishment trends since the launch are much better than last year.\nIn the third quarter, our retail sales improved to 97% of third quarter sales last year.\nThat's the strongest recovery in sales relative to our Wholesale and International segments.\nUnderstandably, the pandemic has accelerated the shift to online purchases.\nWith fewer store visits, we reduced our hours of store operations by over 20% in the quarter.\nOn a per hour basis, our store sales were better than last year.\nThough store traffic was lower, we saw higher conversion rates and higher units purchased per transaction.\nWe believe those better metrics reflect the strength of our product offerings, our compelling value proposition and a high service level provided by our store associates.\nOur stores that historically benefited from tourism, including international guests, saw the largest decline in traffic.\nThese stores only represent about 11% of our U.S. stores, but drove about 40% of the decline in comparable sales in the quarter.\nUntil tourism and cross-border travel resume to pre-pandemic levels, these stores will likely underperform our other stores.\nGiven the mix and level of eCommerce inventories, we were less promotional than last year.\nAnd as a result, we significantly improved price realization and eCommerce profitability in the quarter.\nSimilar to our store experience, online demand from international customers continues to trend lower than last year.\nThe biggest declines in demand were from Brazil, Argentina and Europe.\nHistorically, these were three of our best sources of international demand on our U.S. websites.\nThese markets were particularly hard hit by the pandemic and stronger dollar.\nWe continue to benefit from significant investments made in recent years in our online shopping experience.\nIn the third quarter, our stores fulfilled 24% of our eCommerce orders.\nWe've invested in technology that helps us optimize the profitability and speed of delivering those purchases.\nTo improve the convenience of shopping with us, we now offer same-day pickup and curbside pickup services in over 600 of our stores in the United States.\nThese new omni-channel services are margin accretive relative to shipping from our distribution center to the consumer's home.\nOur omni-channel customers, those who enjoy both the online and in-store experience, are our highest value customers with annual spending more than twice that of our single-channel customer.\nGoing forward, we expect our stores will play an important role supporting our eCommerce customers.\nCurrently, about 85% of our stores in the United States are located in open air centers, which we believe gives us an advantage relative to our mall-based competitors.\nOpen Air centers provide a better, more convenient experience for same-day pickup and curbside pickup of online purchases.\nWe plan to continue opening stores located in more densely populated areas and plan to close stores in more remote and declining centers.\nWe currently plan to open less than 100 co-branded stores over the next five years.\nWe also plan to close about 25% of our stores as leases expire.\nNearly 60% of those closures may occur by the end of next year.\n80% of those closures are planned by the end of 2022.\nThese are generally older, lower margin stores in declining centers and less likely to support our focus on high-value omni-channel customers.\nCarter's is an attractive tenant.\nOur brands are viewed as traffic drivers and bring families with young children into the shopping centers.\nAs other retailers struggle and downsize, new and more attractive real estate opportunities become available to us.\nIt's a buyer's market, and we plan to pursue those better opportunities in better centers that provide convenience for our consumers and a high-return on investment for our shareholders.\nOur Wholesale business also showed good progress recovering from store closures earlier this year.\nSales in the third quarter were about 86% of prior year sales.\nThe operating margin on those sales was better than last year.\nIn the third quarter, we had growth with three of our top-five wholesale customers.\nWe continue to see good growth with our exclusive brands with sales collectively up 10%.\nE-commerce demand for our brands through our wholesale customers was up over 40% in the third quarter, including triple-digit growth rates with some of our exclusive brands.\nThe trend in online demand improved each month in the quarter.\nTogether with our wholesale customers, the online purchases of our brands is up over 50% year-to-date.\nWithin the next few weeks, we expect to achieve a new milestone for our company with annual online purchases of our brands exceeding $1 billion this year.\nOur Carter's brand wholesale sales were down about 25% in the quarter, driven by retailers cautiously planning for second half sales and our decision earlier this year to curtail fall and holiday inventory commitments.\nGenerally speaking, most of our wholesale customers are lean on inventories, seeing better sell-throughs, higher margins and in a chase mode, given better-than-expected demand for our brands.\nGiven the pandemic-related uncertainty in consumer demand, we believe operating with leaner inventories is a better strategy through the balance of this year, even if it comes at the expense of fewer sales.\nOur decision to run lean around inventories may impact second half wholesale sales by as much as $50 million or less than 3% of our total second half sales.\nOne benefit of running leaner on inventories this year is fewer low-margin sales to off-price retailers.\nOur sales to off-price retailers were down 18% in the quarter and down over 50% year-to-date.\nWe use our stores and websites in the United States and Canada to sell through excess inventories which were caused by store closures and related wholesale order cancellations earlier this year.\nAs a result, we offer consumers a compelling value through our stores and websites and avoided losses that would have been incurred, selling the excess inventory to off-price retailers.\nInternational sales in the quarter were about 90% of last year's sales and contributed over 13% of our total company sales, which is comparable to last year.\nThe strength of our International segment is in our direct-to-consumer business, which represented over two-thirds of our international sales in the quarter.\nWe saw high single-digit growth in our retail sales, driven by a nearly 70% increase in eCommerce sales in Canada and Mexico.\nMany of our international wholesale relationships are with several smaller retailers, representing our brands throughout the world.\nThese retailers have historically been a good source of sales and profitability.\nThey've been particularly hard hit by the pandemic, stronger dollar and other local market challenges.\nWe currently expect that sales to these wholesale customers will be the slowest to recover from the global pandemic.\nJust for context, these customers contributed less than 2% of our company's annual sales in 2019.\nWe expect a better recovery with our multinational retailers, including Walmart, Costco and Amazon.\nAmazon is seeing good performance from its expansion of our Simple Joys brand in Europe this past year.\nThat should be a good source of growth for us in the years ahead.\nWith respect to our supply chain, our team did an excellent job working with our suppliers to reduce our exposure to excess inventories.\nInventories at the end of September were down over 10% compared to last year.\nAs we shared with you in July, we're seeing delays in the receipt of products from Asia.\nWe believe those delays were caused by reduced capacity by carriers earlier this year when demand slowed due to store closures.\nThe delays also reflect inadequate capacity to support the surge in demand when stores reopened this summer and the precautions being taken to keep manufacturing and transportation workers protected from the coronavirus.\nThey have been very supportive and recognize that the delays are a function of the market disruption.\nAs we head into the holidays, the flow of products has improved, and we do not expect shipping delays to have a material impact on fourth quarter sales.\nWe're also managing the exposure to freight surcharges imposed by inbound and outbound carriers due to the surge in eCommerce sales and constrained capacity.\nOur best analysis suggests these surcharges may impact fourth quarter earnings by about $2 million.\nWith lower input costs and excess manufacturing capacity in Asia, our supply chain team has negotiated lower product costs for spring 2021.\nDemand for that product offering is planned comparable to last year, and the related shipments began later this quarter.\nIn summary, we're making good progress recovering from the disruption caused by the pandemic.\nWe've endured a historically challenging market this past year with the unprecedented scope and duration of store closures, record unemployment and a highly contagious and deadly virus.\nWe expect the road ahead will be bumpy.\nThat said, we believe we have a strong product offering and good marketing plans as we head into the final weeks of the year.\nNo one knows how long the market disruption will last.\nWhat we do know is that the fundamental strength of our brands and business model should help us continue to weather the storm.\nWe own the largest share of the young children's apparel markets in the United States and Canada with twice the share of our nearest competitors.\nChildren's apparel is a less discretionary purchase.\nWe focus on essential core products bought in multiple quantities on a frequent basis in those early years of a child's life.\nOur average price points are less than $10, providing a great value to consumers in a weaker economic environment.\nWe are the largest supplier of children's apparel to the largest retailers in the United States.\nWe are also the largest young children's apparel specialty retailer with one of the strongest and most profitable eCommerce platforms in children's apparel.\nI'm grateful for their commitment to strengthen our brands and to serve the needs of families with young children.\nOver the next few months, we will refresh our growth plans based on our experiences this year.\nBased on our current estimates, we are planning good growth in sales and earnings next year.\nI'll begin on Page 2 with our GAAP income statement for the third quarter.\nAs Mike noted, our third quarter results were meaningfully better than we had planned.\nNet sales in the quarter were $865 million, down 8% from last year.\nReported operating income was $114 million, an increase of 35%.\nAnd reported earnings per share was $1.85 compared to $1.34 a year ago, representing growth of 38%.\nOur third quarter and year-to-date results for both 2020 and 2019 contained unusual items, which we've detailed on Page 3.\nWe've treated these items as non-GAAP adjustments to our reported results to enable greater comparability.\nMy remarks today will speak to our results on an adjusted basis, which excludes these unusual items.\nMoving to Page 4 and our adjusted P&L for the third quarter.\nNet sales declined 8% to $865 million, which is a meaningful improvement over the 30% decline we saw in the second quarter.\nWe continue to see strong demand online with our U.S. eCommerce business achieving a 17% comp and eCommerce comps in Canada up nearly 60%.\nWhile gross profit dollars declined 5% due to lower sales, gross margin rate improved by 180 basis points versus last year to 44.4%.\nThis represented record quarterly gross margin and was driven by improved price realization and continued progress in reducing excess inventory.\nRoyalty income was roughly comparable to last year at $9 million.\nSpending was very well managed during the quarter.\nAdjusted SG&A declined to $24 million or 8% across a broad range of expense categories.\nAdjusted operating income grew 4% to $120 million and adjusted operating margin expanded 160 basis points to 13.8%, driven by our strong gross margin performance and management of spending.\nBelow line, we had higher net interest expense than last year due to the $500 million in new senior notes which we issued earlier this year.\nWe had other income of approximately $3 million in the quarter, largely foreign currency gains.\nAnd our effective tax rate was about 19% in the quarter, up from about 18% last year.\nAverage share count declined 2%, driven by share repurchases in 2019.\nRecall that we suspended share repurchases earlier this year as part of our liquidity improvement initiatives.\nSo, on the bottom line, adjusted earnings per share grew 5% to $1.96, up from $1.87 last year.\nTurning to Page 5 with some balance sheet and cash flow highlights.\nOur balance sheet and liquidity remained very strong.\nTotal liquidity at the end of the third quarter was nearly $1.6 billion, with over $800 million of cash on hand and virtually all of the borrowing capacity under our $750 million credit facility available to us.\nWith all of the uncertainty of the current environment, we believe that having substantial liquidity, as we clearly do, is a strategic advantage for Carter's.\nAs Mike said, we ended the quarter with inventories 11% lower than the year ago.\nWe believe the quality of our inventory is high overall.\nWe've made good progress in reducing excess inventory, although we're still working through some excess spring product, particularly in our stores.\nWe're currently planning net inventories at the end of the year to be roughly comparable with a year ago.\nOur Q3 accounts receivable balance declined 10% compared to last year, which reflects lower wholesale sales.\nAccounts payable were $473 million at quarter-end compared to $206 million a year ago.\nThis increase reflects the successful extension of payment terms and rent deferrals.\nWe continue to receive strong support from our vendors and landlords as we collectively manage through the disruptions caused by the pandemic.\nLong-term debt was $1 billion, up from $770 million in the third quarter of last year, which reflects our successful senior notes financing transaction in May and lower revolver borrowings.\nIn the third quarter, we repaid $244 million, which represented all of the outstanding borrowings under our credit facility.\nWhen considering our meaningful cash position, net debt at the end of the third quarter was $158 million compared to over $600 million at the end of Q3 last years.\nBased on our current outlook, we believe we will have ample liquidity for the foreseeable future as our business continues to recover from the pandemic.\nDespite year-to-date net income, which is lower than last year, our operating cash flow was very strong at $320 million compared to $73 million last year.\nThis increase reflects improved working capital, including lower inventory and the successful extension of vendor payment terms, which I've described.\nTurning to Page 7 with a summary of our business segment results for the third quarter.\nWhile sales were down, profitability in each of our business segments improved in the third quarter, and our consolidated adjusted operating margin expanded by 160 basis points over last year.\nTurning to Page 8, with third quarter results for our U.S. retail segment.\nTotal segment sales declined 3% compared to last year.\nAs Mike mentioned, we saw good demand over the Fourth of July and Labor Day holiday selling periods.\nFor the quarter, total retail comparable sales declined 3.5%, reflecting strong eCommerce growth of 17% and lower store sales.\nSeptember, which is the largest month of the year in our business, had particularly strong performance, with comparable store sales down only slightly versus last year.\nStore traffic continued to be a challenge for us and the broader industry.\nConsumers are understandably cautious, especially as we see virus counts rising again in many areas of the country.\nOur store traffic in the third quarter exceeded the industry benchmark, which we follow.\nWhile traffic was down, we saw improved conversion and higher transaction values in our stores in the third quarter.\nThe adjusted operating margin of our retail segment improved by 50 basis points to 11.4%, driven by improved price realization, especially online, and our improved inventory position and good control of spending.\nTurning to Page 9.\nConsumers continued to take advantage of our omni-channel capabilities in the third quarter.\nWe've worked to optimize our stores to make it convenient for customers to arrive and quickly pick up their online orders.\nMany customers are also taking advantage of curbside pickup, which is a new capability for us.\nOverall, the synergy and integration between our eCommerce business and our nationwide network of convenient and easy to shop stores continue to grow.\nOn Page 10, all of our recent marketing efforts continue to be highly integrated with our presence on social media.\nIn the third quarter, we built on our leadership position by adding more followers on Instagram and Facebook than our largest peers in children's apparel combined.\nOn Page 11, we had particularly high engagement in September with two specific promotional events.\nWith the pandemic, many families weren't able to take their usual end of summer vacation, around Labor Day.\nRecognizing this, we held the promotion to give away staycation packages to families.\nThis promotion generated the highest ever social engagement for the Carter's brand.\nWe also held a special celebration of the 125th birthday of the OshKosh B'gosh brand, which included the release of Special Limited-edition vintage overalls, in sizes for the entire family.\nThis promotion proved very productive as we sold out of the kid sizes of these special overalls within a few weeks.\nTurning to Page 12.\nAnother family tradition which has gone virtual, is the announcement that a new baby is on the way.\nDuring our Baby Love event in September, we gave away 10,000 Carter's body suits with the message -- \"2021, Looking Bright\", to celebrate the happy news of a new baby set to arrive in 2021.\nMoving to Page 13.\nSince the pandemic began, we've been providing families with ideas for activities, while they spend more time at home.\nWe recently initiated a twice a week email series for parents with toddlers and babies, with new ideas and tips for fall.\nThese communications have continued to deepen our relationships with our customers and reinforce that no brand understands parenthood better than Carter's.\nOn the next page, it seems clear that we will all be living with the reality of social distancing for a while longer.\nLike so many other things, the tradition of kids visiting Santa will be different this year, realizing that we've collaborated with the innovative and popular Cameo platform, in order to deliver personalized virtual messages from Santa to thousands of children for Christmas.\nOn the next several pages, we've included examples of some of our marketing for the holidays.\nMaybe this year, more than most families are looking forward to being together and celebrating the holidays.\nOn Page 15, we've seen strong demand for our holiday products.\nOn Page 16, Carter's is known for our pajamas, especially Christmas PJs, with sizes for everyone in the family.\nOn Page 17, we also have extensive offerings for special outfitting, for dress applications for the holidays.\nAnd this year, on Page 18, we have toys from Skip Hop and Carter's.\nIn the majority of our stores we will introduce special Santa's toy shops for the holiday season.\nMoving to Page 19, with a recap of U.S. wholesale results for the third quarter.\nWhile net sales were lower than last year, our sales were meaningfully better than we had expected.\nThe upside to our forecast was due to several factors.\nWe saw some earlier demand for fall product from several retailers, replenishment demand for Little Baby Basics was strong and the impact of the delay in the arrival of product, which we mentioned on our last call, was less severe than we had forecasted.\nAll of our wholesale customers are investing in and growing their online businesses, which has translated into strong demand for our brands.\nDemand for our exclusive brands at Target, Walmart and Amazon was strong in the third quarter, with combined sales growing 10% over last year.\nOur Skip Hop brand grew nicely in the wholesale channel this quarter.\nWith consumer spending more time at home, Skip Hop's Home Gear, Playtime and Bath Time products have proven very popular.\nAs Mike said, sales of the Carter's brand were down in the quarter, in part due to the fact that in the early days of the pandemic, we proactively canceled a good amount of fall and winter inventory commitments, and given that many customers have understandably chosen to run leaner on inventory in the current environment.\nShipments to the off-price channel declined meaningfully in the third quarter, as we're more effectively using our own retail channels to clear excess inventory.\nU.S. Wholesale adjusted segment income was $67 million in the third quarter compared to $73 million a year ago.\nAdjusted segment margin improved by 140 basis points to 22.3%, reflecting lower inventory-related charges which were partially offset by higher bad debt expense.\nOn Page 20, we launched our core Little Baby Basics collection annually.\nThis year, we did so in late June, which is somewhat later than normal.\nThese products are the everyday essentials that every parent of a newborn needs.\nWe're seeing very strong performance of Little Baby Basics this year.\nWe sell these signature products in multiple channels, including at some of our largest wholesale accounts, such as Kohl's and Macy's.\nPerformance in our own stores on carters.com and in our International business has also been strong.\nBeginning on Page 21, we've included a few slides that highlight our exclusive brands, which are available at Target, Walmart and Amazon.\nThe Just One You brand continues to enjoy good momentum.\nTarget has invested in several digital campaigns highlighting Just One You.\nThese campaigns have increased awareness of the brand among new and existing guests at Target.\nSleepwear for infant and toddlers has been a particularly productive category with plans for continued momentum in the fourth quarter with Christmas pajamas and a broad assortment of sibling dressing products.\nOn Page 22, on the Child of Mine brand at Walmart.\nIn the third quarter, eCommerce sales of Child of Mine more than doubled over last year.\nHere too, investments in brand marketing have driven good productivity and momentum in Child of Mine, which we expect will continue into the holiday selling period.\nFinally, on Page 23, our Simple Joys brand continues to resonate with consumers.\nWe have a strong partnership with Amazon and Simple Joys and Simple Joys has grown to be one of our largest brands.\nWe participated in another successful Prime Day recently, where we posted a significant increase in sales.\nThe Simple Joys assortment has expanded over the past few years and now includes Baby, Toddler and Pajamas up to size-eight as well as shoes and accessories.\nMoving to Page 24 and third quarter results for our International segment.\nInternational net sales declined 10% to $114 million.\nThis decrease was principally driven by lower wholesale shipments to markets outside of North America due in part to the stronger U.S. dollar as well as the disruptions caused by the global pandemic.\nCanada delivered a very good quarter overall, with retail comparable sales growing 7%.\nOnline demand continued to be strong with eCommerce comps up 58%.\nStore comps in Canada were down a bit, but the arrival of colder weather and good back-to-school demand helped boost sales.\nNet sales in our Mexico business were down year-over-year, reflecting a weaker peso and lower wholesale sales.\nWe're making good progress in the retail portion of the business in Mexico.\nOur new larger co-branded stores are performing well; and eCommerce, which we launched late last year, continues to post strong growth.\nInternational adjusted operating margin expanded 270 basis points to 15.8%, driven by strong performance in Canada that was partially offset by a lower contribution from our partners business.\nOn Page 25, we've included a photo of one of our newest stores in Mexico.\nThe store is our sixth larger format co-branded store.\nInitial consumer reaction has been very positive.\nIn Q3, this store has quickly become one of our best-performing locations in Mexico.\nOn Page 26, we've included pictures from the first three stand-alone Carter's stores in Brazil, two in Sao Paulo and one in Rio de Janeiro.\nThese stores are operated by Riachuelo, our exclusive partner in Brazil.\nAs many of you know, we've had a strong following by Brazilian consumers shopping with us in the United States over the years, so establishing a direct presence in this important market is a good step forward.\nEarly reaction from consumers to these new stores has been very positive.\nTurning to Page 27 with our outlook for the balance of the year.\nAs with last quarter and given the ongoing market disruption caused by the pandemic, we're not providing sales and earnings guidance today.\nWe expect that COVID-19 will continue to have a significant impact on our operations in the fourth quarter.\nWe're assuming that store traffic will continue to be lower than last year, and we're mindful of the risk of the resurgence of COVID-19 in key markets in North America.\nWe expect that online demand will continue to be strong in the fourth quarter, and we're planning for continued gross margin expansion.\nWe're tracking several other risks over the balance of the fourth quarter, including the broader macroeconomic environment, including unemployment and consumer confidence, as well as developments related to possible additional economic stimulus, and the upcoming elections.\n Assistant:", "chosen": "compname reports q3 earnings per share of $1.85.\nq3 adjusted non-gaap earnings per share $1.96.\nq3 earnings per share $1.85.\nq3 sales $865 million versus refinitiv ibes estimate of $878.5 million.\nqtrly u.s. retail comparable sales down 3.5%.\nnot providing fiscal 2020 sales and earnings guidance at this time.\n$1.6 billion in liquidity at quarter end.\ncontinues to believe has sufficient liquidity for foreseeable future.\n"}
{"prompt": "Human: carlisle.com in the Investor Relations section.\nToday's call will begin with Chris discussing business trends experienced during the fourth quarter of 2020, views of what's to come in 2021 and context around our continued confidence in achieving Vision 2025.\nBob will discuss Carlisle's fourth quarter performance and current financial position.\nThose considering investing in Carlisle should read these statements carefully and review reports we file with the SEC before making an investment decision.\nEntering what is now the second year of operating in this COVID-19 pandemic, I hope everyone is healthy and staying safe.\nI'd like to open by saying how proud I am of the global Carlisle team for their perseverance and ability to execute in these uncertain times.\nOur COVID statistics reflect the strong compliance to the CDC guidelines and safety measures all Carlisle employees have followed.\nIn 2020, we suffered 470 infections, 15 hospitalizations and sadly, three deaths.\nWe continue to do our part to combat the spread of the virus in combination with further progress on the vaccination rollout.\nWe anticipate that we will continue to show our safety measures are working because at Carisle maintaining health and safety is always our first priority.\nVision 2025 provided clear direction and consistency of mission during a tumultuous 2020 and will continue to guide our efforts as we accelerate into the recovery.\nAs we passed the mid-year mark and entered the third quarter, we continued to build on the momentum started in late Q2 when our employees, customers and supply chain partners increasingly were able to work safely and efficiently and began to get back to contributing to economic growth.\nAs the global community returned to work, strong underlying deferred demand became more evident, especially in our building products business.\nWhile we expect this momentum to continue as vaccines help decrease risk, the construction industry is still contending with uneven regional disruptions due to COVID restrictions, severe weather in certain areas and tight labor dynamics, which is resulting in deferred demand continuing to build the backlog of work.\nTurning to Slide 4.\n2020 demonstrated yet again the exceptional and sustainable earnings power of the Carlisle business model.\nOver the past several decades, Carlisle has been categorized as a diversified industrial company and rightly so as evidenced by our portfolio contact -- or content multiple acquisitions in a variety of segments ranging from fluid handling to medical technologies and our legacy strategic goals.\nHowever, since CCM introduced the first single-ply EPDM roofing membranes to the market in the early 1960s.\nCarlisle's growth and earnings have increasingly been powered by our construction materials business.\nWith over a half century of outstanding performance, CCM's influence on our overall performance has consistently expanded despite our diversification efforts peaking in 2020 when it accounted for over 70% of revenues and over 90% of earnings.\nIn the past three years, CCM has accelerated their world-class performance leveraging consistent organic growth focused on providing the ultimate customer service, the Carlisle Experience, and instituting greater price discipline, developing sophisticated sourcing and purchasing capabilities and maintaining a continuous improvement culture, all aiming to drive increased profitability and shareholder value.\nIn 2017, when we first contemplated Vision 2025, we turned a critical eye to our capital deployment efforts and started to pivot to a more disciplined ROI focus.\nIt was that critical assessment and objective view of value creation that drove our focus under Vision 2025 to apply a greater investment spotlight on the CCM.\nA consistent 30% plus returns business, CCM's performance warranted and earn the right to share the majority of investment dollars that were allocated to portfolio diversification.\nAt that time, a key strategy of Carlisle's legacy approach of building out higher growth and presumably higher margin platforms as a path to sustainable value creation.\nWith the official rollout of Vision 2025 in February of 2018, our evolution was actualized evidenced by our recent extensive M&A and capital investments at CCM.\nAs shown on Slide 5, CCM has continued to evolve from its roots, the early 1960s of a simple, single-ply roofing membrane division to today where we deliver innovative easy to install and energy-efficient solutions throughout -- through the Carlisle Experience for customers who are creating the sustainable building for the future.\nWith our extensive line of building envelope products CCM offers complete set of solutions and systems to aid in the design of efficient building envelope efficient projects backed by industry leading warranties and a focus on green principles.\nOn Slide 6, you can see how this building envelope concept can deliver substantial energy savings for building owners.\nCCM products provide a substantial offset to the estimated 40% of greenhouse gases globally generated from the construction and maintenance of buildings and our teams are focused on continuing to support the growing efforts in global energy efficiency.\nIt is because of this history of innovation, investment and continuous improvement that we have more conviction than ever that CCM's future success is secure.\nWe believe the extensive planning of Vision 2025 identified the strengths of CCM's core markets, demonstrated a consistent reroofing revenue stream and elevated the power of CCM's sustainable business model.\n2020 only served to crystallize our confidence.\nTurning to Slide 7.\nI'd like to spend a few minutes talking in more detail about CCM's future and what drives our confidence in the CCM business model.\nFirst, as you've heard us speak about it like CCM's core business is predominantly driven by replacement roofing demand.\nNon-residential buildings built 10 to 20 years ago make up over 25% of current infrastructure and those roofs will need replacing in the next decade.\nAs a reminder, roof replacements are not discretionary.\nAided by the Carlisle experience and our market position, CCM should continue to capture placement of installed roofing systems and grow share with new energy-efficient, labor reducing and cost-effective product and solutions in the $6 billion and growing market.\nWhile the majority of our core CCM business revenue comes from reroofing, past construction cycles evidenced residential construction as a strong leading indicator of new commercial construction, which augments core CCM growth.\nGrowing residential construction demand, which accelerated in 2020 coinciding with urban relocation due to COVID will require increased commercial infrastructure, including big-box retailers, hospitals, warehouses and educational buildings to support a growing population of suburban families and workers.\nSecond, as shown on Slide 8, the recent addition of our Polyurethane platform to CCM included spray foam insulation, which is a sustainable high single-digit growth market.\nOur top performing formulations provide unmatched energy efficiency in both residential and non-residential applications.\nDriven by our industry-first concept of the combined material and equipment solution, which we call IntelliSpray, it was developed and introduced with engineering support from Carlisle Fluid Technologies.\nCarlisle's CCM is uniquely positioned to grow at above market levels in spray Polyurethane foam insulation.\nThis innovative new system will allow us to provide the contractor, builder and homeowner with greater application efficiency and control, savings from application efficiency improvements and ultimately a better foam insulation product.\nThird, like Polyurethane, Architectural Metals is an exciting new platform for CCM, it's a $1 billion market growing at approximately 2 times GBP provides an attractive opportunity to diversify into the sloped roof market with a highly sustainable product.\nOur metals platform is seeing healthy organic growth as it offers a lasting high ROI system solution to building owners, generating solid pull through sales of CCM insulation and other layman products.\nTo support our regional growth strategy, we are expanding our metals footprint in 2021 by opening three new locations in the U.S. Metal roofing systems also complement our drive to deliver solutions that support the construction of an efficient building envelope.\nMetal roofs are 100% recyclable, increase energy efficiency of the building up to 20% versus traditional materials and reduce waste in the manufacturing process.\nFourth, we are committed to accelerating growth in Europe, a $10 billion -- or EUR10 billion addressable market.\nTo drive this growth, we recently changed leadership in the region and announced the investment of over $25 million to expand capacity in our German manufacturing facility.\nIncreasing demand and regulations for improved thermal performance along with integrated roofing systems are driving a shift to single-ply membranes in Europe.\nCCM's leading environmental energy-efficient solutions lend themselves well to trends in the European market.\nRecent industry dynamics reinforce our ability, the new ownership of the recently acquired competitor and it announced management addition at another competitor, shows the widespread belief of the strong prospects for the non-residential building product space.\nThe industry dynamics also support our strategy to accelerate growth in Europe.\nAnd finally, as it was widely discussed after the recent acquisition, our increased focus on delivering the Carlisle Experience for the sustainable building of the future is in line with macro industry trends.\nBefore moving to our three other businesses, I want to reiterate how remarkable our CCM business and the team performed in 2020.\nCCM was largely the story for Carlisle in 2020 and we expect that to continue into 2021 and beyond.\nRegarding our other three businesses, on Slide 9, 2020 was obviously a difficult year due to the pandemic.\nIn the face of significant declines, the teams did a commendable job managing through the crisis, taking actions to reduce costs and position their businesses for the future, including leveraging COS, investing in new product development and rightsizing footprints.\nWhile the results did not meet our expectations, these remain good -- very good businesses with solid management teams committed to weathering the current macroeconomic challenges.\nWe are optimistic that the actions taken in 2020 to improve CIT, CFT and CBF will position these businesses for a solid recovery, especially in 2021 for CFT and CBF where markets have signaled the bottom.\nWhile we believe CIT will recover over a longer timeline, we are confident that there will be a recovery.\nWith higher inoculation rates from rapid vaccine rollouts, easing of COVID travel restrictions and an improved outlook for both aerospace and hospital capital spending, CIT will drive exceptional leverage with the resumption of growth.\nBefore Bob gives the financial details of the quarter, I'd like to touch on a few other notable achievements in 2020.\nWe've generated $2.5 billion of free cash flow over the last six years and recently accelerating significantly with almost half of that was generated in 2019 and 2020.\nThis track record of success supports our confidence and this team's ability to execute on our capital allocation strategy and to create value.\nWhile 2020 was a subdued year for M&A, we are managing an active pipeline for accretive and synergistic acquisitions to rapidly scale our high returning businesses.\nAs always, our financial strength and cash flow generating capabilities afford us flexibility and we intend to remain opportunistic.\nNotably, and as we've discussed in the past, when acquisition activity is subdued, we remain committed to returning capital to shareholders.\nThis is evidenced by our deployment of more of than $380 million of share repurchases in 2020, totaling approximately $1.5 billion in share repurchases since 2017.\nAnd at our latest Board meeting, our Board approved an incremental $5 million share repurchase authorization for Carlisle.\nWe also returned over $112 million to shareholders in the form of dividends in 2020, raising our dividend in August for the 44th consecutive year.\nAn finally, we spent $96 million of capex in 2020 and that plans to significantly increase that in 2021.\nOn Slide 11, we touch on our continued and expanded actions around ESG where Carlisle remains steadfast in our commitment.\nSupported by COS, we are continually examining ways to improve the design and manufacturing of our products, seeking to better engage our employees and communities and improve an already strong regulatory framework.\nIn 2020, we also made progress in diversity and inclusion exiting 2020 with 50% of our Board of Directors identifying as gender, racially or ethnically diverse and meeting our 2020 target for percent of females in senior leadership positions.\nAnd as we've stated many times before, ESG is part of Carlisle's culture of continuous improvement and we look forward to sharing more progress with you in the future.\nWe also encourage you to read more about Carlisle's ESG efforts on the Sustainability pages of our website.\nIn 2020, COS delivered savings of 1.3% of sales, well within our Vision 2025 annual target of 1% to 2%, a remarkable feat considering 2020's challenging conditions and proving that Carlisle employees truly embody and live our continuous improvement culture every day.\nAnother major milestone in 2020 was the launch of the Path to Zero, which represents our commitment to creating the safest possible work environment and features the goal of zero accidents and zero injuries.\nCOS will continue to be a unifying cultural imperative for our businesses to rely on as they seek new opportunities to make our operations and business processes more efficient.\nBob will now provide operational and financial details about our fourth quarter and review our balance sheet and cash flow.\nRevenue decreased 7% to $1.1 billion in the fourth quarter.\nOrganic revenue declined 9%.\nAcquisitions contributed 1.4% of sales growth for the quarter and FX was a 60 basis point tailwind.\nTurning to our margin bridge on Slide 14.\nQ4 operating margin declined 180 basis points, pricing and volume headwinds combined for a 320 basis point decline and acquisitions were a 40 basis point tailwind.\nOffsetting these declines, freight, labor, raw material, other operating costs netted to a 60 basis point improvement.\nCOS benefits added 120 basis points.\nOn Slide 15, we have provided an earnings per share bridge where you can see the fourth quarter diluted earnings per share from continuing operations was $1.57, which compares to $1.81 last year.\nVolume, price and mix combined were a $0.74 year-over-year decrease.\nPartially offsetting, interest and tax contributed $0.09 and raw material, freight and labor costs netted to a $0.16 benefit.\nShare repurchases contributed $0.09, COS contributed $0.19, and finally, operating expenses were a $0.03 headwind.\nWhile COVID-related volume declines clearly represented the most significant headwind during the quarter, our teams around the world did a commendable job managing costs, leveraging COS-improved efficiencies and taking actions to both position Carlisle for the recovery while mitigating the pandemic impact on earnings.\nAt CCM, the team again delivered outstanding results with revenues increasing 1% driven by volume and 30 basis points of foreign currency translation tailwind.\nCCM continued to exhibit its resilience with solid U.S. commercial roofing performance despite the continued COVID-related restrictions in some areas restraining the recovery.\nOur newer platforms of Architectural Metals and Polyurethanes were solid contributors to the quarter's revenue performance.\nOperating margin at CCM was a record 20.4% for the fourth quarter, a 350 base improvement over the last year driven by CCM team's superb cost management and COS partially offset by wage inflation.\nCCM executed well in delivering approximately $15 million of net price cost realization in the quarter.\nCIT's revenue declined 35.4% in the fourth quarter.\nAs well publicized, this decline was driven by the crisis in commercial aerospace markets.\nWhile the recovery in aerospace could be prolonged, we are confident that there will be a resumption of growth with the continued rollout of the COVID vaccines and airlines returning to profitability.\nIn other positive recent news, the 737 MAX 8 has been cleared for returned flights in the U.S., Europe and South America, while TSA, the early checkpoint data continues to improve.\nIn our medical platform, sales continued to be impacted by COVID-related delays in the hospital capex and postponed elective surgeries.\nHowever, our project pipeline is robust and the long term trends remain attractive, including increasing preference to minimally invasive surgeries and OEM strategies, consolidated by surgery partners.\nCIT's operating margin declined significantly year-over-year to a negative 8.6% driven by commercial aerospace volume declines and accelerated restructuring actions.\nThese declines were partially offset by savings from CLS, lower SG&A and price increases.\nWhile the actions taken by CIT in 2020 to rightsize our footprint and reduce our workforce were difficult, we are positioned to deliver improved operating income performance when the volumes return.\nTurning now to Slide 18.\nCFT sales declined 8.3% year-over-year.\nOrganic revenue declined 16.1% and additionally, acquisitions added 5% in the quarter.\nFX contributed 280 basis points.\nStabilization in key end markets driven by an improved industrial capital spending outlook in 2021, coupled with recent management additions, new product introductions, pricing resolve and CFT's efforts to upgrade the customer experience and positioned CFT well as we enter 2021.\nOperating income of 4.5% was an 820 basis point decline year-on-year.\nThis decline was driven by lower volumes, restructuring and raw material costs, partially offset by price and efficiencies from core CLS and lower SG&A.\nTurning to CBF on Slide 19.\nCBF's fourth quarter organic revenue grew 2.8% and FX had a positive 2.6% impact driving CBF growth of 5.4% in the quarter.\nDemand for agriculture and construction equipment were the primary drivers, while orders in all regions improved throughout the second half of 2020.\nOperating income was $8 million or 1.1% operating margin.\nFlat for the fourth quarter of 2019, driven primarily by unfavorable mix in aerospace markets, wage inflation, offset by COS efficiencies, increased volumes and tight cost controls.\nOn slides 20 and 21, we show selected balance sheet metrics.\nOur balance sheet remains strong.\nWe ended the quarter with $902 million of cash on hand and $1 billion of availability under our revolving credit line.\nWe continue to approach capital deployment in a balanced and disciplined manner.\nInvesting organic growth in capex and opportunistically repurchasing shares while also actively seeking strategic and synergistic acquisitions.\nFree cash flow for 2020 was an exceptional $601 million consistent with '19 results on the lower sales volumes.\nTurning to Slide 21, you can see the outlook for 2021 on items affecting comparability in corporate items.\nCorporate expense is expected to be approximately $105 million for the year.\nWe expect depreciation and amortization expense to be approximately $225 million.\nFor the full year, we will continue to invest in our businesses and now expect capital expenditures of $100 million to $175 million.\nNet interest expense is approximately -- expected to be approximately $75 million for the year and we expect our tax rate to be approximately 25%.\nWithout you, we could not have weathered and overcome the significant challenges of 2020.\nEntering 2021, we are cautiously optimistic about the outlook for Carlisle.\nWe will continue to benefit from the strength in the Carlisle business model and enhance our strong earnings power by investing in our high returning businesses.\nWe'll continue to deploy capital into strategic acquisitions, share repurchases and dividends, all the while maintaining our commitment to delivering returns on invested capital in excess of 15% and ultimately driving the $15 of earnings per share.\nWhile there are clearly many uncertainties around the pandemic, including the effectiveness of the rollout of the vaccines, we want to keep investors informed on our views of our businesses and markets.\nAs such, we offer 2021 guidance based upon where we are today, while fully acknowledging that we are in uncertain and turbulent times.\nFor full year 2021, we anticipate the following.\nAt CCM, supported by reroofing project deferrals that occurred in 2020, positive momentum in our newer businesses of Architectural Metals, Polyurethanes, expansion of our European businesses and a decrease in complexity to complete jobs as COVID restrictions ease, we anticipate revenue growth of high-single digits in 2021.\nAt CIT, we believe that rapid COVID inoculation will drive an improvement in business and leisure travel exiting 2021.\nAircraft manufacturers are indicating production rates will rise toward the end of 2021.\nThese trends are coupled with an improved order book for medical products and solutions as hospital capital investments and elective surgeries resume.\nThat said, we anticipate pressures remain near term and given a different -- very difficult year-over-year comparison in the first quarter, we expect CIT revenue will decline in the mid-to-high single digit range in full year 2021.\nWith the order book strengthening for both CFT and CBF and end markets stabilizing, we anticipate low double-digit growth for both businesses.\n Assistant:", "chosen": "compname reports fourth quarter earnings per share of $1.57.\ncompname reports fourth quarter diluted earnings per share of $1.57.\nq4 earnings per share $1.57.\nq4 revenue $1.1 billion versus refinitiv ibes estimate of $1.07 billion.\n"}
{"prompt": "Human: I'll begin by sharing a few thoughts on our business performance and our operations.\nAs mentioned on our last earnings call, we expected sales to improve in the third quarter.\nSales were $113.8 million in the quarter, down 2% in the third quarter of 2019 and up 35% sequentially.\nThird quarter gross margin was 32.4% compared to 32% in the same period in 2019, up 40 basis points and up 80 basis points sequentially from the second quarter of this year.\nThird quarter adjusted earnings per share was $0.34, up 17% from $0.29 in the third quarter of last year and up from $0.18 in the second quarter of 2020.\nWe delivered an EBITDA -- an adjusted EBITDA margin of 19%, up 230 basis points from 16.7% in the second quarter of 2020.\nNew business wins were $127 million in the third quarter, and we added seven new customers.\nWe ended the quarter with $132 million in cash and $106 million in debt.\nOperationally, all our plants are running.\nWe continue to experience challenges at our Mexico locations.\nSince last quarter, those facilities have improved from approximately 60% capacity to more in the range of 90%.\nWe are monitoring local changes to COVID-19 restrictions at one of those facilities and at our Ostrava facility in Czech Republic.\nAshish Agrawal is with me for today's call and will take us through the safe harbor statement.\nTo the extent that today's discussion refers to any non-GAAP measures under Regulation G, the required explanations and reconciliations are available in the Investors section of the CTS website.\nI will now turn the discussion back over to our CEO, Kieran O'Sullivan.\nAs we navigate to COVID-19, our employees are supporting and helping the less fortunate in our local communities, something we're very proud of.\nOur employees also continue to demonstrate flexibility and responsiveness throughout our operations to support all customers.\nOur first focus continues to be the safety of our employees and compliance with state and local regulations.\nWe are adapting our business and processes to focus on our priorities, driving profitable growth, strengthening our go-to-market, enhancing our operational capabilities and advancing our leadership talent and culture.\nThe restructuring plan we announced on the last earnings call is progressing to plan and is expected to deliver an annualized earnings per share improvement of $0.22 to $0.26 by the second half of 2022.\nMore importantly, we are focused on returning to growth, targeting 10%, in line with our strategic plan, 5% organic and 5% through strategic acquisitions.\nWe remain focused on our strategic growth investments as part of our planning for 2025.\nGrowing our business and expanding our range of products that sense, connect and move is the priority.\nNew business awards were $127 million for the quarter, the best quarterly performance this year.\nWe added seven new customers in the quarter, four in industrial and one each in defense, medical and telecom.\nIn transportation, we were awarded a large passive safety sensor award for an electric vehicle application in the China market.\nWe also secured multiple OEM accelerated awards with customers in Asia, Europe and a global platform win with a North American OEM.\nThese recent wins are leveraging our inductive technology, which is a key enabler for growth to meet mid- and high-end product requirements.\nWe secured an additional ride height sensing award with the same customer.\nCumulative, EV and hybrid wins this year are approximately $75 million, and we expect further gains.\nLast quarter, we reported our first win with current sensing.\nWe aim to expand this application in other regions.\nIn defense, we were awarded contracts with several Tier one customers for sonar applications.\nMore recently, we developed and secured a new sample order for an ordinance application.\nIn Europe, we seek to gain share by building relationships with new customers.\nWe are leveraging our footprint and capabilities in Denmark and the Czech Republic, where we recently received sample orders with two new defense Tier one customers.\nWith temperature sensing, we secured a small initial order for an application in electric vehicles.\nThe sensor is part of the charging circuit for the battery management system.\nIn the precision frequency product line, we were selected for a design win in a 5G small cell application for systems in multiple countries, and also secured the distribution order.\nWe secured a multiyear design award for a low-power crystal product in a defense application.\nWe continue to advance product innovations.\nOur focus in the transportation market, as we have stated previously, is to develop sensor solutions that are agnostic to the underlying propulsion technology, strengthening our growth in the next decade as hybrid and electric vehicle penetration grows.\nEVs are expected to be less expensive than internal combustion engines in the 2025 time frame as battery costs decline.\n15 countries and two U.S. states have announced phase outs of internal combustion engines in the 2030 to 2040 time period, with Norway aiming for 2025.\nWe expect EV penetration to reach 9% by 2025 and 22% by 2030.\nOur innovations are in the areas of electronic braking, new accelerator interfaces and high-performance temperature applications.\nWe continue to research new material formulations as we target growth in defense, industrial and medical markets.\nIn defense, our primary focus is on the solar market for forward and towed arrays.\nIn industrial, we target in-jet printing, flow and position as well as nondestructive testing.\nIn medical, the primary focus is medical ultrasound, intravascular medical ultrasound, ultrasonic therapy and scalpel applications.\nWe continue to advance our traditional position sensing for industrial applications and new encoder product for medical equipment.\nThe developments for ultra-low life high frequency TCXOs and OCXOs for millimeter wave and sub-6 gigahertz systems are progressing as we continue to gain design awards through a major telecom OEM.\nWhile the M&A environment has become a little more challenging due to COVID and associated travel restrictions, we are adapting and continue to strengthen our pipeline of opportunities.\nWe seek to expand our range of technologies, products, customers and geographic reach.\nWe continue to make progress on our foundry operations and expect to have completed the improvements this year.\nThe team is making steady progress on process controls into subsequent efficiencies.\nThe Focus 2025 initiative has an important emphasis on building stronger customer relationships.\nAs part of this initiative, we are improving our go-to-market capabilities, skills and sales incentive plans to place a stronger focus on profitable growth.\nWe are working to improve the quality of the sales funnel, optimize our end market approach, target new accounts and align our functional areas to be more responsive and solution-oriented in line with our core values.\nAs part of our realignment on profitable growth, we are evaluating the product portfolio for longer-term growth and margin expansion.\nWe have moved from a period of sharp decline in the second quarter to a time of uncertainty as the inventory levels are rebalanced and the market responds to high unemployment and other economic challenges.\nIn the U.S., the seasonally adjusted growth rate for 2020 is closer to 13 million units, down 21% for last year.\nWe expect next year to be in the 14 million unit range.\nOn-hand days of supply are now at 55 days, down from 65 days of supply in the third quarter of 2019.\nEuropean sales are forecasted to decline 24% from last year, and we expect 18.7 million unit levels in 2021.\nThe China market continues to be more robust, with volumes predicted to be down 9%, in the 21 million to 22 million range for this year and up to 24 million units next year.\nThere are signs, the commercial vehicle market may be on an improving trend as freight fundamentals continue to improve.\nIt's a little early to say how sustainable this improvement will be.\nWe continue to see stronger growth in industrial and defense markets.\nWe remain cautious on market conditions in the next several quarters.\nWe expect to resume annual guidance for fiscal year 2021 in February.\nOur liquidity remains solid.\nWe view this challenging time period as an opportunity to strengthen our capabilities.\nNow Ashish will walk us through our financial performance in more detail.\nThird quarter sales were $113.8 million, down 2% compared to last year.\nSequentially, sales rebounded strongly, up 35% from the second quarter.\nSales to transportation customers decreased by 9% year-over-year.\nHowever, sequentially, we grew by 71%.\nSales to other end markets increased by 10% versus Q3 of 2019 and 5%, sequentially.\nOur temperature sensing acquisition had solid growth and added $6.6 million.\nOrganic sales to non-transportation customers were up 4% versus last year.\nWe experienced double-digit growth in sales to both the defense and industrial end markets.\nAs expected, the medical end market was soft.\nOur gross margin was 32.4% for the third quarter, up 80 basis points compared to last quarter and up 40 basis points compared to last year.\nConditions remain uncertain due to the impact of COVID.\nAnd we are maintaining a focus on cost efficiency and capability to ramp production up or down.\nAs a result of improved revenue and careful cost management, adjusted operating earnings were 13%, up 170 basis points from last year and up 450 basis points sequentially.\nAs Kieran mentioned, we are making progress on the restructuring plan we initiated a few months ago.\nWe will update you on the improvements as we complete various parts of the plan in the coming quarters.\nOur year-to-date tax rate was approximately 24%, and we expect the full year rate to be in the range of 23% to 25%, excluding discrete items.\nThird quarter 2020 earnings were $0.34 per diluted share.\nAdjusted earnings per diluted share were also $0.34 compared to $0.16 last quarter and $0.29 in the third quarter of 2019.\nFocusing on the balance sheet.\nOur working capital -- our controllable working capital as a percentage of sales was 15.6% at the end of the third quarter.\nThis represents a significant improvement from 21.2% last quarter, and the team recognizes that we still have much work ahead of us to further improve our working capital performance.\nWe generated $25.6 million in operating cash flow in the third quarter.\nYear-to-date, we have generated $49 million in operating cash flow, up 21% compared to 2019.\nThe strong cash performance in the third quarter enabled us to reduce debt by $35 million.\ncapex was $3.2 million.\nFor the full year, we are expecting capital expenditures to be below 4% of sales.\nOn liquidity, our net cash position was $25 million, an improvement of approximately $20 million from the second quarter.\nWe have access to an additional $192 million through our revolving credit facility.\nAnd at this time, we expect to remain well within our debt covenants.\nWe are continuing to implement SAP.\nAs we communicated earlier, more than 80% of our revenues come from sites that are running on SAP.\nWe are expecting to complete the implementation around the middle of 2021.\nHowever, COVID-related travel limitations could cause some delays.\nThis concludes our prepared comments.\n Assistant:", "chosen": "compname reports q3 earnings per share $0.34.\nq3 adjusted earnings per share $0.34.\nq3 earnings per share $0.34.\nq3 sales $113.8 million versus refinitiv ibes estimate of $104.1 million.\nmanagement is not providing revenue or earnings guidance.\n"}
{"prompt": "Human: I'm Susie Lisa, senior vice president of investor relations for CVS Health.\nToday's call is being broadcast on our website where it will be archived for one year.\nCVS Health has delivered another strong quarter and exceeded expectations.\nFor the third quarter in a row, we are raising adjusted earnings per share guidance.\nThroughout 2021, we have made progress executing our strategy to deliver an integrated healthcare experience centered around the consumer.\nWe sustained strong revenue growth in each of our core businesses helped improve health outcomes and reduce costs by broadening access to quality care.\nWe help fight the pandemic and reach millions of consumers with convenient, accessible care in communities across America.\nDuring the third quarter, we delivered revenue growth of 10%.\nThis double-digit growth was led by membership gains in both healthcare benefits and pharmacy services, as well as higher volume in retail.\nWe grew adjusted operating income by 12.5%.\nWe generated adjusted earnings per share of $1.97 and strong cash flow from operations of $5.5 billion.\nGiven these results and our outlook, we are raising our adjusted earnings per share guidance to $7.90 to $8.\nThis higher guidance reflects the quarter's outperformance and continued positive momentum, which Shawn will discuss shortly.\nThird quarter results again demonstrate that our customers value how we bring together our unique portfolio of assets our deep healthcare expertise and vast consumer touchpoints to meet health needs.\nThere is strong demand for our integrated solutions across the healthcare continuum, including health management programs for chronic conditions, mental health support, pharmacy services, and health and wellness products.\nWe added over 1.3 million new integrated pharmacy and medical members through the 2021 and 2022 selling season.\nMore customers are seeking complementary health services that work together, such as virtual care.\nEarlier this year, CVS Health launched the first national Virtual Primary Care program.\nThis market-leading solution offers a national network of physicians virtually and access to convenient face-to-face care in our MinuteClinic locations when needed, often with 0 co-pay.\nOur program has grown to 30 customer accounts with over 750,000 eligible members as of January 1, 2022.\nThis is an indication of our ability to scale nationally and bring innovative products to the marketplace.\nOur customers recognize the importance of CVS Health Care Solutions and the ease of access we now provide in the community, the home, and virtually.\nOur high customer retention rates and new business wins are a testament to the strength of our business model.\nHealthcare benefits revenue increased 9.5% year over year.\nStrength in government services helped drive an adjusted operating income increase of 2.4% versus prior year despite higher costs related to COVID-19, net of deferred care primarily within our commercial book.\nWe generated sequential membership growth across all three product lines in the quarter: commercial, Medicare, and Medicaid.\nOur medical benefit ratio of 85.8% was above our expectations, driven by COVID-related costs, primarily driven by commercial.\nUnderlying non-COVID costs emerged in line with our expectations.\nWe believe aggregate medical costs will slightly exceed baseline levels for the full year.\nWe produced strong results in our Medicare business and grew membership both sequentially and year over year across all Medicare products.\nThis reflects our strong product portfolio, Stars performance, and reputation for service excellence.\nYear to date, Medicare Advantage membership has grown 9.2%.\nIn 2022, we anticipate we will achieve double-digit growth in individual Medicare and generate strong momentum in dual eligibles.\nOur strong performance in Stars continues, as you saw for 2022, with 87% of our members in Star plans rated four and higher, up from 83% in 2021.\nIn our commercial business, we expect moderate growth in 2022 for national accounts, driven by both increased sales, which are up approximately 50% year over year, and a 95% client retention rate.\nAs we mentioned earlier this year, we are reentering the individual exchanges in eight states as of January 2022.\nEnrollment began on Monday, and we anticipate our co-branded CVS Aetna offering and benefit design focused on consumer choice will result in gains of at least 100,000 new members in 2022.\nTurning to pharmacy services.\nWe delivered third quarter revenue growth of 9.3% and adjusted operating income growth of 9.5% year over year.\nFor the 2022 selling season, we achieved a 98% retention rate.\nWe drove $10.4 billion of growth new business, resulting in $8.9 billion of net new business wins, providing evidence of our market-leading trend management, transparency customer service, and integrated offerings.\nWe continue to be a leader in specialty pharmacy with programs that drive value in the marketplace provide substantive savings to customers and differentiate us as we pay our programs with digital assets.\nWe maintained a strong momentum this quarter with specialty revenue up 8.7% versus prior year.\nOur service excellence and top-tier execution are key areas of differentiation.\nOur retail segment continues to play a critical role as a local health destination for millions of Americans.\nRetail outperformed both expectations and the industry in the third quarter.\nWe delivered 10% revenue growth and 22% adjusted operating income growth year over year.\nPharmacy sales and prescriptions filled both increased 8% year over year, largely driven by COVID-19 vaccine administration and core pharmacy services.\nOur patient satisfaction scores remain high with approximately 90% satisfied with their experience in our CVS Health locations.\nWe continue to support millions of Americans for COVID-19 testing and vaccine administration.\nWe administered 11.6 million COVID-19 vaccines and 8.5 million COVID-19 tests in the quarter.\nSince our program began, we have administered 43 million vaccines and approximately 38 million tests.\nWe also expanded our digital capabilities to provide universal access to CVS Health vaccination records to the millions of adults we have vaccinated.\nThis new capability has driven over 1 million visits per month to vaccination records on cvs.com.\nThis provides another opportunity for us to build deeper engagement with our customers while simplifying and connecting their health experience.\nFront store sales momentum also continued with revenue growth of 13% versus prior year.\nFront store sales were led by consumer demand for COVID-19 home testing kits, as well as cough and cold products, with year-over-year volume increases across most front store categories.\nOur CVS Health retail presence consistently serves as a strong channel for capturing new lives.\nIn fact, this year, 12.5% of new COVID-19 testing customers chose to fill new prescriptions or receive a COVID-19 vaccination with CVS Health.\nFinally, we anticipate a benefit from administering boosters and pediatric doses to eligible consumers will occur largely in the fourth quarter of this year.\nWe continue to make measurable progress with our strategy to deliver a superior customer experience and address the total cost of care.\nWe have focused on several important areas.\nFirst, with our unique portfolio of businesses, we continue to expand our role in care delivery designed around the customer.\nWe are taking a proactive approach to meeting the emerging needs of customers, clients, and communities.\nWe are improving access, lowering costs, and combining local points of care to simplify the consumer health experience.\nWe have one of the country's largest network of physician extenders and are able to deliver care locally with our national footprint.\nWe will continue to drive higher engagement with customers as we evolve the format of select CVS locations, creating community health destinations, and shifting into three distinct models: sites dedicated to offering primary care services, an enhanced version of health hubs with products and services designed for everyday health and wellness needs.\nOur traditional CVS Pharmacy store model that provides prescription services and health and wellness and other convenient retail offerings.\nOur unique combination of businesses and our presence in communities nationwide enable us to meet consumers where they are to enhance their well-being and to be a bigger part of their wellness.\nNext, we are further strengthening the consumer experience through the expansion of digital services and platforms that connect to health services and in-person channels for our more than 35 million unique digital customers.\nFor example, more than 70% of CVS Pharmacy customers are enrolled in our text messaging programs today.\nWithin that group this quarter, adherence outreach drove 10% growth in prescriptions filled.\nGreater adherence leads to improved health outcomes and lower costs.\nIn today's hyper-connected digital consumer-driven world, the demand for omnichannel pharmacy is greater than ever.\nWe continue to modernize our operating systems and enhance the integration of pharmacy model simplifying consumer interactions and driving further engagement with our customers.\nFinally, we continue to invest in our employees as part of our workforce strategy.\nLast quarter, we announced the phased increase in the minimum wage to $15 an hour by July 2022.\nWe invested in modernizing our training programs and technology for our frontline and clinical colleagues.\nDespite the tight labor market and anticipation of the higher demand for health services, we strengthened our workforce in every business.\nWe hired a record number of people in the third quarter to advance open enrollment and customer service, as well as enhance technology and clinical capabilities.\nNearly 20,000 pharmacists, pharmacy technicians, and nurses recently joined the CVS Health team supporting flu season, as well as COVID-19 vaccinations and testing.\nOur pharmacists and pharmacy technicians are an integral part of our overall workforce strategy.\nWe are committed to investing in our pharmacists, awarding immunization bonuses in the second half of this year.\nWe look forward to sharing more about our strategy to improve access, quality, and customer engagement in investor day on December 9.\nOur commitment to shareholders, customers, and communities remain steadfast.\nHealth equity is critical as the pandemic continues to disproportionately impact certain communities.\nIn addition to targeted vaccine and booster education efforts, we provided 31 million meals this year to people suffering from food insecurity and invested in 2,800 affordable housing units in 30 cities.\nBy helping address the social determinants of health, permanent housing can reduce healthcare costs by 59%.\nJoneigh Khaldun, to build upon our efforts to advance health equity and better support underserved communities, and our increased wages and bonuses support our employees, their families, and their communities.\nFor the third quarter in a row, we executed on and exceeded our plan and raised adjusted earnings per share guidance.\nWe continue to enhance our diverse portfolio of assets to serve the customer.\nWe are guiding to a strong year end, all possible due to the leadership and commitment of our over 300,000 CVS Health colleagues that bring their heart to every moment of our customers' health.\nOur third quarter results reflect a continuation of the strong performance observed in the first half of 2021 and as we exceeded our expectations from both a revenue, cash flow, and adjusted earnings per share basis.\nThese results ensue from our differentiated portfolio of capabilities and keen focus on operational execution.\nThis momentum in our performance enables us once again to raise our outlook for 2021.\nStarting with the enterprise as a whole.\nTotal revenues of $73.8 billion increased 10% year over year with robust growth in all three segments.\nWe reported adjusted operating income of $4.1 billion, a 12.5% increase versus the prior year.\nThis growth in adjusted operating income was also reflected in the strong cash flow generation in the third quarter.\nwith year-to-date cash flow from operations now exceeding $14 billion.\nAdjusted earnings per share of $1.97 represent a nearly 19% year-over-year increase, generated by our adjusted operating income growth and lower interest expense resulting from our ongoing deleveraging efforts.\nMoving to the segments.\nHealthcare benefits revenue increased by 9.5% year over year, driven by sustained growth in our Government Services business, slightly offset by the repeal of the health insurance fee.\nIn the third quarter, we saw Medicaid membership grow sequentially by 67,000 members across multiple geographies.\nMedicare Advantage membership also continued to grow in the quarter, increasing by 42,000 members sequentially and representing year-over-year growth of 9.8%.\nOur Medicare Advantage franchise continues to be a powerful growth engine with Medicare Advantage membership more than doubling since the third quarter of 2015, representing a 15% compound annual growth rate.\nOur attention has now turned to ensuring a successful 2022 annual enrollment period for Medicare, which began on October 1.\nWhile still quite early in that process, we are pleased with what we have seen to date.\nHealthcare benefits adjusted operating income grew modestly year over year but fell below our expectations for the quarter due to higher-than-expected COVID-related medical costs in our commercial business.\nWith the surge in nationwide COVID cases emanating from the Delta variant, we experienced higher-than-expected COVID-related medical costs in August and September.\nThree key factors drove this difference versus our expectations.\nFirst, commercial COVID inpatient admissions in August and September.\nWere in line with the peak levels experienced in January 2021 and were nearly three times the average of the second quarter of 2021.\nSecond, COVID testing costs, which we had expected to moderate during the third quarter, also approached January 2021 levels and were more than 1.5 times the average we experienced in the second quarter.\nIt is critical to recognize the outsized impact of COVID testing on overall claim costs as testing costs represented approximately 35% of gross COVID costs in the quarter.\nAnd finally, while non-COVID deferred care was better than we had forecast, it was not enough to entirely offset these higher COVID costs in commercial.\nThe resultant medical benefit ratio for the quarter of 85.8% was above our forecast and driven almost entirely by the higher-than-expected commercial COVID testing and treatment costs.\nThere are two important aspects of HCB's third quarter performance to note.\nOne, absent these COVID dynamics, underlying performance in our commercial book of business continues to be in line with our expectations.\nTwo, in our government services business, we also saw an increase in COVID treatment and testing costs, but far less pronounced than in commercial.\nThis lower level of increase was fully offset by better-than-expected deferred care.\nAs a result, the overall performance of our Government Services business was in line with expectations.\nWrapping up HCB -- We experienced favorable prior period development in the quarter on both commercial and government products.\nDays claims payable of 51 at the end of the third quarter is three days higher sequentially and two days above prior year.\nWhile influenced by many factors with the anticipated abatement and COVID-related claims in the fourth quarter, we would expect DCP to return to a more typical results in Q4.\nOverall, we remain comfortable with the adequacy of our reserves.\nTurning to pharmacy services.\nOur ability to deliver sustainable, profitable growth remains clear.\n2021 is expected to be the second year of adjusted operating income growth in excess of 10%.\nThis sustained growth has been driven by our track record of delivering industry-leading drug trend on behalf of our clients, our proven industry-leading capabilities, particularly in the specialty pharmacy arena our outstanding customer service, as reflected by our over 98% renewal rate for 2022.\nDuring the third quarter, pharmacy revenues increased by 9.3% year over year, driven by increased pharmacy claims volume, growth in specialty pharmacy, and brand inflation.\nTotal pharmacy membership increased by 1.6 million lives sequentially, primarily reflecting growth in government programs.\nTotal pharmacy claims processed grew nearly 7% above the prior year.\nNearly half of this growth was attributable to net new 2021 business with COVID vaccine administration and new therapy prescriptions also contributing to the year-over-year growth.\nNote that new therapy prescriptions were adversely impacted in the third quarter 2020 due to the pandemic.\nPharmacy adjusted operating income exceeded expectations in the quarter, up more than $150 million or 9.5% year over year.\nThe three major drivers of this increase remain consistent with the second quarter.\nImproved purchasing economics reflecting the products and services of our group purchasing organization launched in the second quarter of 2020; continued strength in our specialty pharmacy business driven by 340B administration and increased pharmacy claims volumes, both of which were partially tempered by ongoing but stable client pricing pressure.\nOur retail business delivered strong results this quarter, again exceeding expectations.\nTotal revenue of just under $25 billion increased by $2.3 billion or 10% year over year.\nThere are two main components to this increase.\nApproximately half or $1.2 billion is attributable to the contributions from the more than 11 million COVID vaccines and over 8 million COVID tests we administered combined with strong front store sales driven by demand for over-the-counter COVID test kits and related treatment categories.\nWith this quarter's results, we are now on pace to deliver about 44 million to 49 million COVID vaccines and 28 million to 33 million COVID tests for full year 2021.\nThe remaining half or 1.1 billion was driven by a combination of sustained pharmacy growth and broad strength in front store trends across a range of categories, partially offset by continued pharmacy reimbursement pressure.\nThis strong revenue growth, combined with a 70-basis-point improvement in adjusted operating margin, produced adjusted operating income that exceeded our forecast and drove a year-over-year increase of $300 million.\nThis adjusted operating income growth driven by COVID testing vaccines and front store sales was partially tempered by continued pharmacy reimbursement pressure, business investments, including the minimum wage increase and other performance incentives, and increased staffing to provide expanded levels of service.\nTurning to cash flows and the balance sheet.\nOur liquidity and capital position remained excellent at the end of the third quarter with cash from operations of $5.5 billion for the quarter and $14.3 billion year to date.\nThrough our proactive liability management transaction in August, we paid down $1.1 billion in net long-term debt in the quarter.\nAs of the end of the third quarter 2021, we have repaid a net total of $18.7 billion in long-term debt since the close of the Aetna transaction.\nIn addition, we returned over $650 million to shareholders through our quarterly dividend.\nLet me now discuss our updated 2021 guidance.\nThis increase reflects the strong performance in pharmacy services and retail, partially offset by expected COVID pressure in our healthcare benefits business, specifically in the commercial block.\nWe are raising our total revenue outlook to $286.5 billion to $290.3 billion and adjusted operating income outlook to $16.4 billion to $16.6 billion.\nWe are also increasing expected full year cash flow from operations to a range of $13 billion to $13.5 billion.\nNote that this increased cash flow forecast is actually lower than our September year-to-date figure, reflecting expected payments in the fourth quarter that were accrued in 2020, including FICA taxes and increased minimum loss ratio rebates, as well as the timing of receipts and payments between the third and fourth quarters.\nI'll now highlight some key items related to the segments and full year guidance.\nFor the healthcare benefits segment, we are lowering our full year adjusted operating income guidance from $5.25 billion to $5.35 billion to $4.9 billion to $5 billion.\nWe expect the full year medical benefit ratio to be in a range of 84.4% to 85.6% or an increase of 30 basis points from our prior range.\nThis reflects the higher-than-expected commercial COVID medical costs observed in the third quarter and our expectation that these will continue, although at a lower level into the fourth quarter.\nEmerging October operational data indicate that COVID inpatient admissions are tracking at approximately half the levels of September.\nAgain, it is important to remember the degree to which testing costs are driving expenses.\nSo while we expect Q4 testing expenses to be lower than Q3, we do not anticipate they will decline as much as inpatient expense.\nFinally, recall the normal seasonality of the healthcare benefits segment with fourth quarter operating income typically the lowest of the year driven by deductible satisfaction producing the highest quarterly medical costs.\nFor pharmacy services, given the continued strength in the quarter and our visibility to the remainder of the year, we are increasing full year 2021 adjusted operating income guidance to $6.85 billion to $6.94 billion, representing year-over-year growth of 20.5% to 22%.\nWe anticipate that the strength in third quarter pharmacy services results will largely continue into the fourth quarter.\nIn the retail/long-term care segment, we are also increasing our full year 2021 adjusted operating income guidance to $6.98 billion to $7.07 billion.\nAs you consider the fourth quarter, I would note that we currently expect vaccinations to continue, although at a lower rate than the third quarter.\nWe have also contemplated the impact of the CDC's COVID booster recommendations, as well as a modest impact from pediatric vaccinations.\nWe expect testing to decline modestly in comparison with the levels experienced during the third quarter.\nGiven retail's Q3 outperformance and Q4 outlook, we now expect the full year 2021 COVID impact to be neutral.\nThis compares to our prior guidance in August for an overall modest negative net impact.\nAs we closed the third quarter, we are very pleased with the performance of our businesses, which provides us with a strong foundation as we now look ahead to 2022.\nWhile we plan to share more details with you at our upcoming investor day in early December in New York, I want to update you on our thoughts regarding the 2022 outlook.\nWhile there are still many factors to play out, we believe that current analyst estimates for 2022 adjusted earnings per share of approximately $8.20 are within our anticipated initial guidance range.\nAs we discussed last quarter, there are some significant moving pieces to keep in mind in determining an appropriate baseline for 2021.\nSecond, in 2022, we will incur a full year of expense related to our minimum wage increase announced last quarter.\nWe estimate these factors combined represent approximately $0.40 per share.\nUsing the midpoint of our updated 2021 adjusted earnings per share guidance range, which is $7.95, these adjustments create a 2021 baseline of $7.55.\nThe other significant factor in considering 2022 performance is the effect that COVID will have on our retail and healthcare benefits businesses.\nFor retail, we expect that COVID-19 vaccine and testing volume, which is expected to generate over $3 billion of revenue in 2021, will decline significantly in 2022 to 30% to 40% of the volume we administered in 2021.\nIn addition, we expect COVID-driven front store sales to decline in 2022.\nFor HCB, we expect to see a significant improvement in results in 2022, as treatment and testing costs decline with COVID cost estimates and improved risk-adjusted revenue reflected in our pricing.\nOverall, we estimate the COVID-driven impact in HCB will largely be offset by the expected decline in COVID-related retail performance.\nIt is important to note that forecasts of future COVID impacts to our business remain extremely difficult and are subject to change as circumstances dictate.\nBeyond these considerations, Other factors affecting our growth for 2022 remain consistent with the commentary we provided last quarter regarding headwinds and tailwinds.\nWith all of this in mind, the current consensus of analyst estimates of approximately $8.20 for adjusted earnings per share would represent about an 8% increase over the 2021 baseline.\nTo conclude, the strong performance of CVS Health in the first half of 2021 continued in the third quarter, producing strong revenue, adjusted operating income, and cash flow results, and we are pleased to again raise our full year 2021 adjusted earnings per share guidance.\nDuring the pandemic, we have solidified our opportunity to become a national leader in healthcare delivery, which at its core, starts and ends with lowering the cost of care, improving access and convenience, ultimately enabling people to live healthier and more fulfilling lives.\nDuring our investor day in a few weeks, we look forward to sharing with you more about our path over the coming years to deliver on this ambition and to position CVS Health to generate sustainable, low double-digit adjusted earnings per share growth.\n Assistant:", "chosen": "compname posts q3 adjusted earnings per share $1.97.\nq3 adjusted earnings per share $1.97 .\nsees fy adjusted earnings per share $7.90 to $8.00.\nqtrly total revenues increased to $73.8 billion, up 10.0% compared to prior year.\nraised 2021 cash flow from operations guidance range to $13.0 billion to $13.5 billion from $12.5 billion to $13.0 billion.\nqtrly adjusted operating income increased 12.5% primarily due to administration of covid-19 vaccinations and diagnostic testing.\nadministered more than 8 million covid-19 tests and more than 11 million covid-19 vaccines nationwide in q3.\n"}
{"prompt": "Human: As a reminder, before we begin, the Company has a slide deck to accompany the earnings call this quarter.\nBecause these statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the Company's current expectations.\nI'm going to pass it over to Tom to begin.\nJust as a preface, I think most of you who're on the call are aware that the major factor for the Company in this quarter is the -- really the same as it was in the first quarter and that is that we have not received either a proposed decision or a decision on our California General Rate Case, which was expected prior to January 1st of 2020.\nI'm going to begin the results discussion on Slide 8 of the deck and talk a little bit about the quarter, and then on the year-to-date basis and then go on from there.\nFor the second quarter, I'll start at Slide 8, our net income decreased by $11.7 million to $5.3 million and that is a difference from a $0.35 gain in the second quarter of 2019 to an $0.11 gain in the second quarter of 2020, is that we had no rate relief from the California Commission.\nAnd we estimate that if the rate relief would come in, there is two big factors here and it's the same two factors we talked about on the first quarter call.\nThere is a total of $29.1 million that we believe would have been achieved versus additional pre-tax income if the Commission has rendered a decision on a favorable basis to the Company.\nAnd of that, for the second quarter, $10.9 million represents the pure delay of -- resulting from the settlement agreement that the Company filed with the consumer advocate back in October of 2019.\nAnd so that is being tracked in an interim rate memorandum account for future recovery.\nAnd then $18.2 million, which represents income from our disputed cost recovery regulatory mechanisms and those, remember, are mechanisms that we've had for many years, first of all, to decouple our sales from revenue.\nWe'll talk quite a bit more about that later in the call.\nAnd then secondly, our regulatory mechanism for the pension and healthcare balancing accounts.\nBecause those are in dispute in the case, we didn't record them as we would normally have.\nAnd had we recorded them in the quarter, we estimate an additional revenue of -- would have been $18.2 million.\nThose regulatory mechanisms match up to some cost increases that we had in the quarter.\nWe had $6.5 million of increased water production expenses, of which $5.7 million would have been offset by those regulatory mechanisms and we had $2.1 million of increased pension benefit expenses which also would have been offset by those regulatory mechanisms, had they have been in place.\nOther factors for the quarter, we saw a rebound in our unrealized benefit plan investment performance that was $3 million higher than in the second quarter of 2019.\nAnd other things that happened which would be typical of a utility company in our situation, our depreciation expense went up very similar to the first quarter.\nSo it was up $2.2 million in the second quarter and that's related to increased plant investments in 2019, and we did have an increase in our maintenance costs of about $1 million.\nTurning to Slide 9, on a year-to-date basis, very similar story and very similar explanation.\nThe numbers are different, but the explanation is the same.\nSo, our net income decreased by $24.4 million to a loss of $15 million on a year-to-date basis.\nIn terms of earnings per share, we have a loss of $0.31 per year to date as compared to a gain of $0.19 in 2019.\nBut, again, the two factors related to the rate case, we believe that had a rate case been adopted and it was favorable to the Company on these matters, the $19.8 million representing the delay of the settlement agreement amounts and $26 million related to our regulatory balancing accounts that we've been discussing.\nFor the year-to-date basis, our unrealized benefit plan investment performance was $4 million lower than in the first half of 2019 and that's really due to a comparatively strong market conditions in the first quarter of 2019.\nAnd other impacts on a year-to-date basis, again, very similar.\nWe see depreciation expense increase $4.3 million and maintenance expense increase $1.6 million.\nOn Slide 10, this is a very similar slide to what we gave you in the first quarter earnings deck.\nOur opinion of the estimated benefit from -- on a full year basis, from the California GRC has not changed.\nAs shown in the table on that chart, we believe the benefit is between $38.9 million at $42.2 million on an annual basis.\nAnd so we continue to expect that when we get a decision in the case that that will be the benefit to the Company.\nOur 2020 sales forecast, as we mentioned in last quarter, are about 7% lower than the 2019 adopted sales.\nSo in discussion of the WRAM and the MCBA, we believe that we're much more likely to be closer to adopted sales than we were in 2019.\nAnd, as I mentioned earlier, we would have been allowed to record additional revenue of $5.6 million to $10.9 million in the second quarter if the settlement had have been adopted, with the low end of the revenue range linked with $5.2 million reduction in depreciation expense.\nSo, getting a little bit more granular on Slide 11 on the disputed GRC items.\nI just wanted to point out that -- the two things that are the WRAM and the MCBA, we believe that on the -- in the second quarter, that's about $14.9 million that would have been recorded in those balancing accounts and the pension and medical cost balancing accounts, we believe, would have been $3.3 million.\nAnd again, we're highly confident that past amounts that are recorded in those accounts are recoverable, regardless of the Commission's decision on a go-forward basis in our current General Rate Case.\nAnd the other disputed items in the rate case, we don't believe are major factors in either the second quarter or the year-to-date results.\nIt certainly has been an interesting second quarter dealing with the COVID-19 pandemic as, I think most people know, utility workers are considered essential workers, and therefore, most of our employees, 90%-plus of our employees have been at work, in the field every day.\nAccordingly, that makes protecting those employees as well as protecting our customers very, very important.\nWe are complying with all local regulations in our service areas, as well as we were an early mandator of mask and other PPE for all of our employees.\nAs you've probably seen in the press, California, and specifically, Southern California, LA counties and Kern counties have seen a surge in cases and we have seen increasing caseloads and hospitalizations in the past few weeks, as well as we've seen a handful of employees also contract the virus outside of work.\nSo in cases like that, we've been able to minimize any disruption of service.\nObviously, we isolate any employee that has any type of exposure, in order to keep them from getting other employees sick and we've have been successful in doing so.\nOur Customer Centers in all four states have remain closed and will remain closed until further notice.\nAnd we have suspended all collection activities in an effort to keep people supplied with water.\nIn addition, we've offered additional help through a direct grant program.\nAs you may recall, the Company allocated $0.5 million for charitable contributions.\nSome of that went to work in local food banks and local food pantries throughout their service areas.\nAnother part of that grant went to what we called a direct aid or direct grant for customers who were struggling to pay their bills.\nAnd so that's proven to be, I think, beneficial, and more importantly, I've received a lot of letters from customers who appreciate the fact that we were helping them out.\nTo date, we've had no disruption of service despite COVID-19 in addition to some of the rioting and stuff that we saw in Southern California at the end of May and in early June and so we have continued on track doing what we do best, which is providing clean drinking water for our customers.\nTommy, do you want to go through the business impacts of the pandemic?\nSo we have seen increased customer account aging.\nAnd remember, this is due in part to the increased unemployment rate and also in part to the regulatory commissions telling us that we can't have collection activity.\nThe Company, I think as Marty may have noted last quarter, we voluntarily suspended collection activity before our state regulatory commissions required us to do that.\nBut nevertheless, there are now regulatory mandate to suspend collection activity.\nAnd in California, that mandate, at this point, goes through April of 2021.\nSo it's going to be a long-term suspension of collection activity.\nOur bills that are outstanding more than 90 days and those are the bills that would normally have been sent to collection, those bills increased to $3.4 million.\nAnd in the past, when we've had those bills sent to collection only a portion of those amounts are typically uncollectible.\nSo we've raised our estimate on the balance sheet.\nThis is the bad debt reserve balance for doubtful accounts from $0.8 million to $1.6 million as of the end of the second quarter.\nOur water sales have continued strong, particularly on the residential side.\nThat is offsetting a drag on sales in business, industrial, and public authority sales.\nThat last bit, I think, was school closures, for example, in the late spring.\nWe do see in resort areas in Hawaii, in particular, a decline in sales that we're observing there.\nThe California utility Cal Water, as we mentioned in the first quarter, activated the catastrophic event memorandum account that allows us to track costs associated with COVID.\nAnd in the second quarter, we recorded approximately $600,000 of incremental operating expenses to the memorandum account.\nThose are amounts that we will seek to recover in a later filing from the commission.\nMemorandum account, as you'll recall, is not something that we typically book the revenue from until there is an authorization to recover that revenue.\nIn addition to the $600,000 of incremental operating expenses, when we do have bad debts and those do go to collection at the end of this period that will be included in our request to the Commission for recovery.\nHawaii has a very similar mechanism that we're working to put in place.\nThere has been a filing with the Hawaii Public Utilities Commission as well there.\nOur liquidity is strong.\nAt the end of June, at the end of the quarter, we had $114 million in cash and additional current capacity on our lines of credit of more than $170 million.\nMarty, you want to talk to us about all the fun stuff in California?\nBoy, there is a lot going on in California.\nStarting off with, some of you may have seen the CPUC, the California Public Utilities Commission extended its deadline for considering and concluding on our 2018 General Rate Case to September 30th.\nThat means, in order to meet that deadline, the Commission must issue a proposed decision no later than August 25th.\nSo we continue to monitor that and hopes that we can get that wrapped up.\nAs Tom pointed out earlier, we're feeling the financial consequences of not having rate relief and it gets pretty confusing each quarter to talk about our results with and without rate relief.\nSo we hope to get that wrapped up in the third quarter.\nPerhaps more importantly, from a policy perspective, on June -- excuse me July 3rd, the CPUC issued an unexpected proposal in an unrelated case and I want to read to you the full name of this OIR and I'll come back and talk about it.\nThe full name is called, Evaluating the Commission's 2010 Water Action Plan Objective of Achieving Consistency between Class A Water Utilities' Low-Income Rate Assistance Programs, Providing Rate Assistance to All Low Income Customers of Investor-Owned Water Utilities, and Affordability.\nSo it was an OIR looking at the consistency and the goals of achieving consistency of low income in rate assistance programs.\nSo this July 3rd proposed decision that kind of came out of [Indecipherable], if adopted would require Cal Water and other water utilities that are regulated by the CPUC to propose removing it's decoupling mechanism in the next General Rate Case.\nThis decision is troubling for a number of reasons.\nFirst and foremost, it draws conclusions on a very, very limited set of data and evidence.\nIn fact we don't even know what was used to construct the data tables used by the Commission to draw these conclusions.\nSo we're very much involved and talking to the Commission last week and this week about this proposed decision and find it going in the wrong direction of the State's policy in support of conservation and the conservation goals of the state.\nJust to remind everyone, California has Ag business that's over $60 billion.\nIt's the largest Ag state in the Union and we're growing in population from almost 40 million to 45 million over the next decade.\nSo the idea of getting rid of decoupling and basically implementing what's in this OIR essentially increases rates for most of the customers, including low income customers.\nSo we are just flat out against it and we're lobbying against it.\nIt's also unclear what the effect of this policy [Phonetic] decision could have on the current proposed decision that we're waiting for.\nSo legally, it should push into the next rate case cycle.\nBut we're looking into that and digging into that right now.\nSo, there'll be more to come on this -- on this PD that was issued here in early August.\nWe have a lot of efforts focused on basically asking for a halt to get more evidence on the record and to have a full examination of all the data that's available for the last 12 years of decoupling.\nAnd we believe that the Commission would get to a different conclusion if they had all the evidence on the table.\nLooking at the capital investments for the quarter, and this, frankly, was a highlight with everything going on that's been kind of negative news, it's nice to see that our capital program was up 9.5% compared to the same period last year.\nSo we had $133.5 million invested in the first half of 2020.\nThe Company previously estimated it would spend between $260 million and $290 million in capital during 2020.\nWhile the Company has experienced some individual project slowdowns, we've seen other things like our main replacement program, being able to accelerate.\nAnd so, overall, we have remained on track at least as of right now mid-year 2020.\nOf course, that could change depending on how things go with the virus and if there is any more pending shutdowns that could affect our overall ability to get capital invested and put into the ground.\nIn addition, we've added an incremental $5 million in capital investment for our Rainier View acquisition that closed during the second quarter.\nAnd if you turn the page, I want to talk about business development, which includes Rainier View.\nThe Washington Water Service Company and the Washington UTC, which is the Commission in Washington, approved our acquisition and we closed on that acquisition in June, which now makes Washington Water Service Company the largest investor-owned rate-regulated utility by the UTC in the state of Washington.\nIn addition, we have filed applications in Hawaii with the regulators for approval of our Kalaeloa system in O'ahu and our Kapalua system in Maui for the change in control and we anticipate those closing, hopefully, by the end of the first quarter 2021.\nYou'll see -- you see in the slides that Rainier View added approximately 18,500 customers, the Kalaeloa system will add about 200 customers, and per the history of us [Phonetic], that's the -- a former Barbers Point air base on O'ahu that's going to be redeveloped into residential and commercial properties.\nAnd in the Kapalua Water & Wastewater System, which is just north of our Ka'anapali system on the island of Maui, which has a couple of large hotels, golf courses and developments.\nSo, you add those up, closing out the two in Hawaii, that would add just under 4% to our total customer connection count for the year of 2020 which we think is very healthy, given all we've been dealing with the pandemic and everything else.\nSo our business development team has continue to be busy and continue to do good work.\nTom, you want to go through the next couple of slides?\nSo on the capital investment history slide, which is Slide 19, we did update our 2021 projection to include an additional $5 million of investment in former Rainier View Water.\nSo you'll see a little bit of a bump there.\nAnd if you flip to Slide 20, which is our regulated rate base.\nWe have now included the estimated increased rate base in 2020 as well as capital investments in 2021 for Rainier View.\nAnd so those numbers have gone up just a little bit.\nObviously that's much smaller than our California operations and it doesn't change the shape of those curves, but we have updated those numbers.\nAs you can see, we continue to be on track, as Marty mentioned, and our expectation is that these are still the numbers, assuming the settlement gets adopted by the Commission.\nI will add and apologies that it's not in the deck, but you'll notice on Slide 20, we have -- the third row is called advice letters included in the settlement of about $150 million that's the California settlement.\nYesterday, the Company filed with the Commission an advice letter to begin the recovery process on its Palos Verdes Water Reliability Project.\nThis is a 96 point -- I think it's a $96 million authorized advice letter for that very large project -- the largest project in the Company's history, and we did make that advice letter filings.\nIt is subject to a review process and we don't anticipate that that advice letter will be approved anytime soon.\nWe're targeting early 2021 for the approval of that advice letter, but for -- just for those of you who are looking at the rate base, and that the light green area, if you will, on that chart, the good news is that most of that has already now been filed for.\nWell, you should get the sense there's probably three or four main things we're focused on in the third quarter.\nFirst, the PD, the proposed decision on affordability and low-income assistance, staying focused on that, as well as our efforts to conclude on our 2018 General Rate Case.\nThis is one of the longest delayed rate cases, I think, we probably had in at least the last decades.\nSo we're anxious to get that wrapped up with the Commission and get put to bed.\nAdditionally, the COVID response, it seems to change every day and CDC requirements keep moving around, and we have to show up to work every day.\nWe're not a company that has a lot of employees sheltering in place.\nWe have to show up and continue to produce and provide water for our customers.\nSo making sure we continue to take every step possible to protect our employees and our customers as we deal with COVID and we go into the fall season, which includes going into the flu season.\nAnd lastly, and this may become one of the more important items as we move later into the third quarter, we're moving into wildfire season and the real possibility of continued public safety power shut downs, and as we know, the power may go out, but people still need water.\nAnd so the operations team has done a very good job preparing for wildfire and the PSPS season and we are well ready to handle any challenges that come our way.\nSo Q3 looks to be a very busy quarter for us and we look forward to sharing our results with you as we wrap up the quarter and report our results at the end of October.\n Assistant:", "chosen": "compname posts q2 earnings per share $0.11.\nq2 earnings per share $0.11.\ndue to an expected decrease in customer collections, has increased its estimate for future credit losses.\n"}
{"prompt": "Human: I will provide comments on the strong start that we had to 2021, including the advancement of a number of strategic priorities to make DuPont a premier multi-industrial company, equipped for growth and value creation.\nThe health and well-being of our people remains our top priority.\nThe principles and protocols we've implemented globally and locally to help to protect our people and ensure business continuity as countries face multiple waves of infection and lockdowns.\nAs an innovation-led company, we believe in science and we're encouraging all employees to get vaccinated.\nAnd where possible, we're working with public health authorities to facilitate access and distribution.\nStarting on Slide 2, I will note that one of our priorities for generating value is consistent operating performance and financial results.\nLori will take you through the details in a moment.\nBut I'd like to highlight the 7% organic revenue growth that we reported, reflecting broad and strong demand in key markets such as semiconductors, smartphones, water, residential construction and automotive.\nThis revenue growth, along with continued cost discipline, led to strong operating leverage and EBITDA margin expansion in the quarter.\nOur first-quarter financial results reflect the agility of our teams to navigate through a challenging environment while facing escalating raw material and logistics costs, as well as global supply constraints of key raw materials, most notably in our M&M segment.\nWith strong order trend continuing and confidence in our team's ability to navigate the supply chain challenges, we are raising our full-year guidance for net sales, operating EBITDA and adjusted EPS.\nI will provide more details regarding this increase shortly.\nIn addition to our financial results, we advanced a number of our strategic priorities during the quarter.\nFirst, as previously announced, we completed the merger of our nutrition and biosciences business with IFF, creating an industry-leading company in the food and beverage, home and personal care and health and wellness markets.\nAs you know, this transaction also unlocks significant value for DuPont and our shareholders.\nAs part of the transaction, we received 7.3 billion cash from IFF and retired slightly more than 197 million coupon shares, or about 27% of our outstanding shares at the time with no cash outlay.\nWe strengthened our balance sheet during the quarter by paying down our $3 billion term loan, and we will redeem $2 billion of our long-term debt later this month.\nAs a reminder, our next debt maturity will not be due until the fourth quarter of 2023.\nIn line with our balanced approach, we returned about 660 million of capital to shareholders during the first quarter through share repurchases and dividends.\nUnder our existing share buyback program, we executed 500 million in share repurchases during the first quarter.\nAs a reminder, we have about 500 million of repurchase authorization remaining under that program, which we intend to utilize by June 1 of this year.\nEarlier this quarter, we also announced that our board of directors authorized a new 1.5 billion share buyback program, which expires on June 30, 2022.\nWe plan to be opportunistic under the new program as we move throughout the year.\nWith respect to dividends, we returned about 160 million in cash to shareholders during the quarter.\nAs we previously mentioned, going forward, we will target a payout ratio between 35 and 45%.\nAnd we intend to work with our board to increase our dividend annually as we grow our earnings.\nIn March, we announced a definitive agreement to acquire Laird Performance Materials for $2.3 billion.\nWhen completed, a planned acquisition of Laird advances DuPont's strategy of growing as a global innovation leader and strengthens our leadership position in advanced electronic materials.\nThe Laird business will complement our interconnect solutions business within E&I, and it will add critical capabilities and market-leading offerings in thermal management and electromagnetic shielding, which are essential to emerging electronic applications.\nOur E&I team, along with our customers, are excited for this opportunity.\nWe recently received regulatory approval for the transaction in Germany and Brazil and cleared HSR in the U.S. last month.\nAs previously indicated, we expect the transaction will close in the third quarter of this year.\nFinally, we announced previously that we have signed definitive agreements to sell our Biomaterials, Clean Technologies and Solamet businesses.\nWe anticipate receiving more than 900 million in gross proceeds from those divestitures, and we expect those transactions to close in the second half of this year.\nBefore turning it over to Lori to go through the details of the first quarter, I'd like to take a moment to provide some context regarding what we saw during the quarter in our key end markets that we serve.\nCombined, the electronics and automotive markets account for nearly half of our revenues.\nElectronics continues to perform very well, and auto is recovering nicely from its 2020 lows.\nWithin electronics, demand continues to be broad-based as the ramp-up of advanced technology nodes and a need for more memory to servers and data centers has accelerated.\nThe server market, which is a large consumer of semiconductor chips and circuit board chemistries, continues to show strength and is expected to remain robust as Internet network traffic continues to grow.\nFurthermore, the deployment of 5G infrastructure by leading telecom companies in preparation for the next generation of ultra high-speed data transmission should help sustain demand for premium smartphones, which is further enhanced by our favorable content play.\nWith respect to the automotive end market, demand is well above the lows of 2020 but not yet back to 2019 levels, which sold 22.9 million vehicles produced in the first quarter and nearly 90 million units for the year.\nThe lack of stable supply of critical components, mainly semiconductors, impacted the ability of the auto OEMs to produce more vehicles and rebuild inventories during the quarter.\nEven where we participate in the value chain within M&M, I think it's important to note that our first quarter engineering polymers volumes were not materially affected by the chip shortages as our demand from the Tier 1 and Tier 2 suppliers was not lessened as a result of the chip shortage.\nHowever, our ability to supply customers was affected by supply constraints of key raw materials, predominantly in our nylon and polyester product lines.\nThis supply situation is gradually improving while we anticipate several critical products will continue to constrain our production through the end of the second quarter.\nWe expect that annual sales as a result of raw material constraints will be captured in the second half of the year.\nAdditionally, we believe that the automotive market will remain strong for the balance of the year as OEMs look to meet robust demand, as well as replenish global inventories, which are currently below historical averages.\nMoving on to the water and construction end markets.\nCollectively, these two markets account for approximately 20% of our total company sales.\nVersus first quarter of 2019, demand for advanced water filtration and purification has strengthened, driven by solid growth in Asia Pacific.\nStrength in residential and commercial water markets, as well as industrial and desalination segments has shown growth.\nFor construction, North America residential and do-it-yourself markets are up versus first quarter 2019.\nAnd while demand within the commercial construction segment has improved from the lows experienced in 2020, it is not back to 2019 levels.\nLastly, demand within our industrial end markets versus 2019 levels is mixed.\nWithin the electrical infrastructure and Tyvek protective garment markets, demand is at or above 2019 levels.\nHowever, demand in end markets such as aerospace and oil and gas is still below 2019 levels, but it's improved since the lows of the second and third quarter of last year.\nSequentially, our sales in the aero and oil and gas were up over 40%.\nOur diversified portfolio of products and technologies will serve us as the global economy continues to recover from the pandemic.\nWe are continuing to invest at competitive levels in R&D and innovation to further solidify our strong market positions and maintain our position as the partner of choice for our customers in 2021 and beyond.\nLet me cover our first-quarter financial results on Slide 4.\nNet sales of 4 billion were up 8% versus the first quarter of 2020, up 7% on an organic basis.\nOverall sales growth was driven by strong volume, up 7% versus first quarter of last year, with volume increases in all three reporting segments.\nCurrency provided a 3% tailwind in the quarter led by the euro.\nPortfolio was a 2% headwind, primarily due to the sale of the trichlorosilane business last year.\nSales were up in all three segments, with E&I, M&M and W&P reflecting organic growth of 14%, 8% and 1%, respectively.\nOn a regional basis, organic sales were up 20% in Asia Pacific, our largest region from a sales perspective, with strong results in all three reporting segments.\nPartially offsetting gains in Asia Pacific were organic sales decline in the U.S. and Canada and EMEA of 4 and 2%, respectively.\nand Canada and EMEA were driven by softness for aramid fibers, specifically continued softness in aerospace and timing delays in defense, as well as auto builds, which were down in these regions.\nI'll provide more color on our segment top line results on the next slide.\nFrom an earnings perspective, we delivered operating EBITDA of 1.05 billion and adjusted earnings per share of $0.91 per share, up 15 and 90%, respectively.\nVolume gains, as well as benefit from prior-year cost initiatives and currency drove 160 basis points of operating EBITDA margin expansion and 1.9 times operating leverage.\nIncremental margins for the quarter were 46%.\nI will walk you through the earnings per share later call in a moment.\nOur total company gross margin for the quarter was 36.8%, flat on a year-over-year basis.\nGross margin improvement in E&I and M&M on higher volume and manufacturing productivity was offset by a margin decline in W&P, resulting from higher unit rates versus the prior year, driven primarily by lower production volumes of aramid fibers.\nGross margin expanded about 280 basis points sequentially, with margin improvement in all three segments.\nFrom a segment perspective, E&I delivered operating EBITDA margin of 33.5% and 420 basis points of margin expansion versus the year-ago period on strong volume growth and a onetime discrete gain related to an asset sale.\nExcluding the benefit of the asset sale, operating EBITDA margin would have been 31.7%, a year-over-year improvement of 240 basis points.\nM&M delivered operating EBITDA margins of 22.9% and 320 basis points of margin expansion versus the year ago period on higher volumes and savings from productivity actions.\nIn W&P, operating EBITDA was flat versus the year ago period as sales gains and cost productivity actions were offset by higher manufacturing costs, primarily higher unit rates, driven by lower production of aramid fibers and increased supply chain costs.\nFor the quarter, cash flow from operating activities and free cash flow were 378 million and 95 million, respectively.\nThese amounts include one month of cash flow from our N&B business compared to three months of N&B cash burn in the prior year.\nIn addition, cash flow and free cash flow conversion was negatively impacted by a working capital headwind of about 300 million, led by higher accounts receivable balances, which were up in line with sales.\nFor the year, we continue to target free cash flow conversion of greater than 90%.\nSlide 5 provides more details on the year-over-year changes in net sales.\nLeading the way for the quarter was E&I with 15% volume growth, which had a record quarter.\nVolume gains were led by double-digit growth on robust demand for semiconductors across Asia.\nHigh fabrication utilization rates, driven by demand for new technologies and advanced nodes, along with the ongoing shift in digital transformation drove strong top line growth.\nIn addition, share gains from recent wins for CMP slurry and lithography materials improved results.\nIn interconnect solutions, double-digit growth was driven by higher material content in premium next-generation smartphones partially resulting from timing shifts that select OEM demand shifted earlier in the year this year, along with broader printed circuit board market recovery.\nWithin industrial solutions, double-digit volume gains in display materials due to new time launches more than offset continued weakness in aerospace.\nThe end markets within W&P were generally consistent with our expectations.\nSales gains were led by water solutions with double-digit volume growth, reflecting strong demand for our reverse osmosis and ultrafiltration technology, led by Asia.\nShelter solutions had low single-digit organic growth versus the year ago period, reflecting high single-digit organic growth in residential construction and retail channels for do-it-yourself application, offset partially by softness in commercial construction market.\nWithin safety solutions, pricing gains, favorable currency and strengthening demand for aramid fibers in industrial and automotive end market was more than offset by continued weakness in aerospace and year-over-year volume declines for Tyvek.\nLower Tyvek production volumes were a result of higher planned downtime in the quarter.\nAlso contributing to strong first-quarter top line growth was continued recovery of the global automotive market, which represents about 60% of our M&M segment from an end market perspective.\nThe most recent estimate of 1Q global auto builds were about 20.3 million units toward the quarter, up approximately 14% versus the first quarter of last year.\nAs a result, volume in our performance resins business was up over 20% versus the year-ago period.\nAnother bright spot in M&M was improved demand for microcircuit materials, which we aligned to the M&M segment earlier this year.\nThese specialized materials, along with adhesive growth, helped drive over 20% organic growth in advanced solutions growth in the year ago period.\nDemand in our engineering polymers business was strong.\nHowever, global supply constraints for key raw materials resulted in low single-digit volume decline.\nOur teams are experienced in navigating trading challenges and have worked diligently with our customers and suppliers to help mitigate the impact incurred as a result.\nAdditionally, we expect to recover volume lost in the quarter due to these disruptions and raw material constraints as part of this unit.\nTurning to Slide 6.\nI mentioned that adjusted earnings per share for the quarter of $0.91 was up 90% versus the prior year.\nThe largest driver of our year-over-year growth was a significantly lower share count, mainly resulting from the N&B exchange offer.\nThe lower share count provided a $0.16 benefit versus the prior year.\nExcluding the lower share count, adjusted earnings per share growth was still significant, up 56% versus the prior year.\nHigher segment earnings provided a $0.13 tailwind in the quarter versus the prior year, along with benefits this year with a lower base tax rate and reduced interest expense.\nOur base tax rate for the quarter of 19.4% was lower than forecasted as a result of a few discrete tax benefits in the quarter.\nOur tax rate in the quarter was significantly lower than last year, resulting from the absence of certain discrete tax headwinds incurred in the prior year.\nFor the full-year 2021, we now expect our base tax rate to be in the range of 21 to 22%, down slightly from the 21 to 23% that we previously estimated at the beginning of the year.\nTurning to Slide 7.\nI will provide some commentary on our balance sheet and cash position.\nI mentioned earlier that net working capital provided headwinds in free cash flow in the quarter.\nHowever, I would like to point out that net working capital productivity gains of about 600 million that we have made in the first quarter of last year, decreasing net working capital for about 3.5 billion at March 2020 to 2.9 billion at March of 2021.\nBoth of these were driving down past due receivables and inventory.\nFrom a debt perspective, we have stated that we are committed to maintaining our current strong investment-grade credit profile.\nWe started the year with $15.6 billion in current debt.\nAnd as Ed mentioned, we paid down our $3 billion term loan in February, and we will pay down $2 billion of debt later this month.\nMoving on to cash.\nOur cash generated from operations last year put us in a strong cash position coming into this year, and that balance grew with a $7.3 billion special cash payment from the transaction with IFF.\nIn addition, we expect to receive over 900 million in gross proceeds this year from the previously announced sale of the non-core businesses.\nOur current deployment plan for 2021 includes a balanced capital allocation approach.\nAlong with our plan for internal investment this year, we plan to grow through targeted M&A in areas of secular growth and will fund the $2.3 billion planned acquisition of Laird performance materials with cash on hand.\nWe intend to continue to return cash to shareholders.\nAlong with our dividend policy, we completed 500 million of share repurchases in the first quarter at an average price of about $73 per share and will remain opportunistic with our remaining share repurchase authorization throughout the rest of the year.\nOn a go-forward basis, our target run and maintain cash balance is about $1.5 billion.\nAnd from a leverage perspective, our net debt-to-EBITDA target remains at 2.75 times.\nLet me close with our financial outlook on Slide 8, which includes our view of the second quarter and full-year 2021.\nWe are raising our full-year guidance range for net sales, operating EBITDA and adjusted EPS.\nAt the midpoint of the range provided, we now expect net sales for the year to be about $15.8 billion, which reflects year-over-year growth of 10%, up from our previous estimate of 8% growth.\nWe expect to improve leverage and now expect operating EBITDA for the year to be about 4.03 billion, at the midpoint of the range provided, a year-over-year increase of 17%.\nThese revised estimates reflect our solid start to the year and confidence in our team's ability to continue to navigate global supply key challenges.\nWe are also raising our adjusted earnings per share range for the full year by $0.30 per share and now expect adjusted earnings per share of $3.67 per share, at the midpoint of the range provided.\nIn addition to the strong operating performance of our businesses, the share repurchases we are completing under our existing programs and the narrowing of our estimated tax range [Inaudible] while contributing to the revised [Inaudible].\nFor the second-quarter 2021, we expect net sales to be about 3.975 billion, and we expect the operating EBITDA to be about $1 billion, both at the midpoints of the ranges provided and both well above results in the second quarter last year.\nAt the midpoint of the range provided, we expect adjusted earnings per share for the second quarter of 2021 of $0.94 per share, which now reflects the full reduction in shares resulting from the N&B exchange offer and our weighted average shares.\n[Operator Instructions] Operator, please provide the Q&A instructions.\n Assistant:", "chosen": "qtrly earnings per share from continuing operations $0.89; qtrly adjusted earnings per share $0.91.\nqtrly net sales $3.98 billion versus $3.67 billion.\nraises full year 2021 guidance for net sales, operating ebitda and adjusted eps.\non a regional basis, organic sales growth in quarter was led by asia pacific more than offsetting declines in us & canada and emea.\nelectronics & industrial reported a record quarter with net sales of $1.3 billion, up 17%.\nexpect similar top-line trends continuing from q1 into q2 coupled with slight escalation in raw materials and logistics costs.\n"}
{"prompt": "Human: dollargeneral.com under News & Events.\nWe also may reference certain financial measures that have not been derived in accordance with GAAP.\ndollargeneral.com under News & Events.\nDespite the challenging operating environment, our team remains steadfast in their dedication to fulfilling our mission of serving others by providing affordable, convenient and close to home access to everyday essentials, and I could not be more proud of their efforts.\nThroughout the pandemic, our priority has been the health and safety of our employees and customers, while meeting the critical needs of the communities we serve as an essential retailer.\nProtective equipment dedicated certain store hours for the most vulnerable members of our communities and, most recently, removed barriers for our frontline associates to receive the vaccine.\nIn total, we invested approximately $248 million in response to the pandemic in 2020, including about $167 million in appreciation bonuses for eligible front-line employees to demonstrate our appreciation for their exceptional performance during an incredibly challenging year.\nAt Dollar General, we remain committed to being part of the solution, and believe we are uniquely positioned to continue supporting our customers through our network of more than 17,000 stores located within five miles of approximately 75% of U.S. population.\nAt the same time, we remain focused on advancing our operating priorities and strategic initiatives as we continue to meet the evolving needs of our customers and further position Dollar General for long-term sustainable growth.\nTo that end, we are excited to share an update on some of our plans for 2021.\nFirst, we plan to further the rollout of several value-creating initiatives, including our non-consumables initiative, Fast Track and the completion of our initial rollout of DG Fresh.\nIn addition, while still early, we are very pleased with the results of our pOpshelf stores, which have far exceeded our initial expectations for both sales and gross margin.\nAs a result, we plan to accelerate our pace of new store openings for pOpshelf in 2021 and expect to incorporate this concept into a number of our larger format Dollar General locations as we look to capitalize on the significant growth opportunity we see for this differentiated concept.\nWe are also pleased to highlight key changes to our development strategy, including plans to build on the success of our Dollar General Plus Store or DGP, and the introduction of two new store formats, which we began testing in 2020.\nSimilar to our larger footprint, DGP concept, the first new format has selling space of approximately 8,500 square feet, which compares to about 7,300 square feet of selling space for our traditional store.\nBeginning later this year, this new format along with our DGP concept will become our base prototype for nearly all new stores, replacing both our traditional and higher, cooler count DGTP format, allowing for a more optimized assortment and room to accommodate future growth.\nOur second new format is even larger with approximately 9,500 square selling feet, and will be deployed opportunistically across new store relocation and remodel opportunities.\nNotably, on average, our DGP and new store formats are outperforming the chain on a comp sales basis and have considerably higher sales volumes compared to both the traditional and DGTP store, which bodes well for the future as we look to increase their unit counts in the years ahead.\nFinally, we are pleased to provide an update on a number of our new small box store opportunities we see available in the Continental United States, which represents an increase compared to our prior estimate.\nJeff will discuss these updates in more detail later in the call.\nBut first, let's recap some of the highlights for the fourth quarter and full year.\nThe quarter was once again highlighted by strong growth on both the top and bottom lines.\nWe're pleased that, for the quarter, our three non-consumable categories once again delivered a combined comp sales increase well in excess of our consumable business.\nOf note, this represents our 11th consecutive quarter of year-over-year comp sales growth in our combined non-consumable categories, which we believe speaks to the strong and sustained momentum in these product categories.\nFrom a monthly cadence perspective, comp sales in December increased in the high-single digit range with similar mid-teens growth in both November and January.\nIn total, fourth quarter net sales increased 17.6% to $8.4 billion, primarily driven by comp sales growth of 12.7%.\nThese results include significant growth in average basket size and units in particular, partially offset by decline in customer traffic.\nAnd while customers continue to consolidate trips, on average, they are spending more with us compared to last year.\nOnce again, this quarter, we increased our market share in highly consumable product sales, as measured by syndicated data, driven by a meaningful increase in both units and dollars.\nImportantly, our data suggests an increase in new customers this quarter as compared to Q4 of 2019.\nThese new customers continue to skew younger, higher income and more ethnically diverse, underscoring the broadening appeal of our value and convenience proposition.\nWe continue to be encouraged by the retention rates of new customers and we are working to drive even higher levels of engagement with more personalized marketing and continued execution of our key initiatives.\nWe're particularly pleased that we delivered significant operating margin expansion, which contributed the fourth quarter diluted earnings per share of $2.62, an increase of 24.8% over the prior year.\nFor the full year, net sales increased 21.6% to $33.7 billion, including net sales growth of 28.1% in our combined non-consumable categories.\nComp sales for the year increased 16.3%, representing our 31st consecutive year of same-store sales growth.\nIn 2020, we celebrated the opening of our 17,000 store and the launch of our newest store concept pOpshelf.\nIn total, we completed a record 2,780 real estate projects during the year, exceeding our initial target of 2,580 projects as we continue to build and strengthen the foundation for future growth.\nFrom a position of strength, we also made targeted investments in other key areas, including the acceleration of certain strategic initiatives to strengthen our competitive position and further differentiate and distance Dollar General from the rest of the discount retail landscape.\nCollectively, our fourth quarter and full year results reflect strong and disciplined execution across many fronts and further validate our belief that we are pursuing the right strategies to enable sustainable growth while creating meaningful long-term shareholder value.\nAs a mature retailer in growth mode, we are also laying the groundwork for future initiatives, which we believe will unlock additional growth opportunities as we move forward.\nWe operate in one of the most attractive sectors in retail.\nAnd in an environment where customers continue to seek safe and convenient experiences, we believe our unique store footprint, further enhanced through our multiyear initiatives, provides a distinct competitive advantage and positions us well for continued success.\nOverall, I am proud of our associates and all that we've achieved over the past year.\nWe feel very good about the underlying business and I'm excited about the opportunities that lie ahead.\nNow that Todd has taken you through a few highlights of the quarter and full year, let me take you through some of its important financial details.\nUnless we specifically note otherwise, all comparisons are year-over-year.\nAll references to earnings per share refer to diluted earnings per share and all years noted refer to the corresponding fiscal year.\nAs Todd already discussed sales, I will start with gross profit, which was positively impacted in the quarter by a significant increase in sales, including the impact of COVID-19.\nGross profit as a percentage of sales was 32.5% in the fourth quarter, an increase of 77 basis points, which represents our seventh consecutive quarter of year-over-year gross margin rate expansion.\nThis increase was primarily attributable to: a reduction in markdowns as a percentage of sales, higher initial markups on inventory purchases, a greater proportion of sales coming from non-consumable categories and a reduction in shrink as a percentage of sales.\nThese factors were partially offset by: increased transportation and distribution costs, which were impacted by increased volume, some of which is attributable to the COVID-19 pandemic as well as higher transportation rates and discretionary employee bonus expense for our distribution center and private fleet employees.\nSG&A as a percentage of sales was 22.2%, an increase of 48 basis points.\nThis increase was primarily driven by incremental costs related to COVID-19, including appreciation bonuses paid to our frontline retail employees and health and safety-related expenses as well as increased incentive compensation expense and hurricane-related expenses.\nThese items were partially offset by certain expenses, which were lower as a percentage of sales, including occupancy costs, retail labor and depreciation and amortization.\nMoving down the income statement.\nOperating profit for the fourth quarter increased 21% to $872 million.\nAs a percent of sales, operating profit was 10.4%, an increase of 30 basis points.\nOperating profit in the fourth quarter was positively impacted by COVID-19, primarily through higher sales.\nThe benefit from higher sales was partially offset by approximately $96 million or 110 basis points of incremental investments that we made in response to the pandemic, including approximately $69 million in appreciation bonuses for eligible frontline employees and additional measures taken to further protect our employees and customers.\nOur effective tax rate for the quarter was 22.7% and compares to 23% in the fourth quarter last year.\nFinally, as Todd noted earlier, earnings per share for the fourth quarter increased 24.8% to $2.62, which contributed to full year earnings per share of $10.62, an increase of 59.9%.\nTurning now to our balance sheet and cash flow, which remain strong and provide us the financial flexibility to further support our customers and employees during these unprecedented times while continuing to invest for the long term and provide meaningful returns to shareholders.\nMerchandise inventories were $5.2 billion at the end of the year, an increase of 12.2% overall and 6.3% on a per-store basis.\nWhile a lot of stocks remain higher than we would like for certain high-demand products, we continue to make good progress with improving our in-stock position and are pleased with our overall inventory levels.\nIn 2020, we generated significant cash flow from operations totaling $3.9 billion, an increase of $1.6 billion or 73.2%.\nTotal capital expenditures for the year were $1 billion and included our planned investments in new stores, remodels and relocations, distribution and transportation projects and spending related to our strategic initiatives.\nDuring the quarter, we repurchased 4.3 million shares of our common stock for $900 million and paid a quarterly dividend of $0.36 per common share outstanding at a total cost of $87 million.\nWith today's announcement of an incremental share repurchase authorization, we have remaining authorization of approximately $2.4 billion under the repurchase program.\nOur capital allocation priorities continue to serve us well and remain unchanged.\nOur first priority is investing in high-return growth opportunities, including new store expansion and our strategic initiatives.\nWe also remain committed to returning significant cash to shareholders through anticipated share repurchases and quarterly dividend payments, all while maintaining our current investment-grade credit rating and managing to a leverage ratio of approximately 3 times adjusted debt to EBITDA.\nMoving to our financial outlook for 2021.\nWe continue to operate in a time of uncertainty regarding the severity and duration of the COVID-19 pandemic, including its impact on the economy, consumer behavior and our business.\nDespite continued uncertainty, we are providing select annual guidance in an effort to provide the best view we reasonably can, based on what we currently know.\nThat said, there could be a number of potential headwinds and tailwinds this year, which are not incorporated into our guidance as the timing, degree and potential impacts on our business are currently unclear, including, but not limited to: the recently approved government stimulus package; other unknown external factors related to the ongoing health crisis, including its impact on consumer behavior and additional changes to minimum wage rates.\nWith this in mind, we currently expect the following for 2021: net sales in the range of a 2% decline to flat; a same-store sales decline of 4% to 6% but which reflects growth of approximately 10% to 12% on a two-year stack basis; and earnings per share in the range of $8.80 to $9.50, which reflects a compound annual growth rate between 15% and 20% or between 14% and 19% on an adjusted basis over a two-year period, which is well above our long-term goal of delivering at least 10% annual earnings per share growth on an adjusted basis.\nOur earnings per share guidance assumes an effective tax rate in the range of 22% to 23%.\nCapital spending is expected to be in the range of $1.05 billion to $1.15 billion as we continue to invest in our strategic initiatives and core business to support and drive future growth.\nWe also plan to repurchase a total of approximately $1.8 billion of our common stock this year, reflecting our strong liquidity position and confidence about the long-term growth opportunity for our business.\nLet me now provide some additional context as it relates to our expectations.\nGiven the unusual situation, I will elaborate on our comp sales trends thus far in Q1.\nDespite approximately 8,400 lost store operating days as a result of closures due to winter weather across the country, same-store sales for the month of February increased 5.7%, reflecting a healthy comp sales increase of 11.2% on a two-year stack basis.\nFrom the end of February through March 16, comp sales decreased approximately 16% as we are in the midst of lapping our most difficult monthly comp sales comparison of the year.\nAs a reminder, comp sales growth for the month of March in 2020 was 34.5%.\nLooking ahead, we remain cautious in our 2021 sales outlook, given the continued significant uncertainty that still exists as well as the unique comparisons against last year.\nThat said, as you think about the sales cadence of 2021, our performance is expected to be stronger in the second half, given a more difficult sales comparison in the first half and particularly in Q1.\nTurning to gross margin.\nIn 2020, gross margins benefited from a greater proportion of sales coming from our higher-margin non-consumable categories, driven by a full year net sales percentage increase of these categories well in excess of our consumables business.\nWe expect our sales mix will ultimately shift toward our consumables categories in 2021, resulting in pressure on our rate.\nHowever, the timing of when this dynamic may occur and its corresponding impact to gross margin are currently uncertain.\nGross margins in 2020 also benefited from a reduction in markdowns, including the benefit of higher sell-through rates as a result of significant customer demand in seasonal and other clearance-sensitive non-consumable categories.\nIn 2021, we expect our markdown rates will increase somewhat from the abnormally low levels we saw in 2020, which likely will create some gross margin pressure compared to last year.\nIn addition, while we continue to see the effect of higher carrier rates and fuel costs, our ongoing efforts to improve efficiencies and reduce expenses, including further expansion of our private fleet, are expected to help partially mitigate these cost pressures in 2021.\nAlso, please keep in mind that the second and third quarters represent the most challenging laps of the year from a gross profit rate perspective, following improvements of 167 basis points in Q2 2020 and 178 basis points in Q3 2020.\nIn terms of SG&A, while we expect to incur ongoing expenses related to the pandemic in 2021, overall, we anticipate a meaningful reduction in COVID-19-related costs compared to last year.\nHowever, the leverage from these reduced costs is expected to be offset by deleverage associated with lower comp sales and approximately $60 million to $70 million in incremental year-over-year investments related to our strategic initiatives as we further their rollouts.\nWith regard to our strategic initiatives, in aggregate, we anticipate they will positively contribute to operating profit and margin in 2021, driven by NCI and DG Fresh as we expect the benefits to gross margin from our initiatives will more than offset the associated expense.\nFinally, we estimate operating profit will be negatively impacted by approximately $35 million to $40 million in Q1 as a result of lost sales from storage closures and expenses related to the widespread winter weather that we experienced in February.\nIn closing, we are very proud of the team's execution and performance, which resulted in exceptional fourth quarter and full year results.\nAs always, we continue to be disciplined in how we manage expenses and capital, with the goal of delivering consistent, strong financial performance while strategically investing for the long term.\nWe remain confident in our business model and our ongoing financial priorities to drive profitable same-store sales growth, healthy new store returns, strong free cash flow and long-term shareholder value.\nLet me take the next few minutes to update you on our operating priorities, including our strategic initiatives and plans for 2021.\nOur first operating priority is driving profitable sales growth.\nThe team did a fantastic job in 2020.\n[Technical Issues] NCI consists of a new and expanded product offering in key non-consumable categories.\nThe NCI offering was available in more than 5,800 stores at the end of 2020, including nearly 400 stores in our light version.\nThis compares to our prior expectation of more than 5,600 stores at year-end.\nGiven our strong performance to-date, we plan to expand this offering to about 5,700 additional stores this year, bringing the total number of NCI stores to more than 11,000 by year-end.\nThis total includes over 2,100 stores in our light version, which incorporates a vast majority of the NCI assortment but through a more streamlined approach.\nMoving to our newest concept, pOpshelf, which further builds on our success in learnings with NCI.\npOpshelf aims to engage customers by offering a fun, affordable and differentiated treasure hunt experience delivered through continually refreshed merchandise, a differentiated in-store experience and exceptional value with about 95% of our items priced at $5 or less.\nWe opened our first five locations in 2020.\nAnd as Todd mentioned, given our strong results to date, we plan to accelerate the rollout of pOpshelf in 2021.\nIn fact, we are now targeting to have a total of up to 50 pOpshelf stores opened by year-end compared to our previous goal of about 30 total locations.\nIn addition to these stores, we also plan to incorporate this concept in up to 25 Dollar General stores in 2021.\nIn terms of our store-within-a-store concept, a smaller footprint pOpshelf shop will be prominently positioned in the center of the store, and we will display both Dollar General and pOpshelf branding on exterior entrances to build and maximize awareness.\nFrom these initial stores, our goal is to test, learn and ultimately expand to more locations over time as we look to leverage the unique strengths of these complementary formats and build on our early success with pOpshelf by making it more available to a broader range of customers.\nTurning now to DG Fresh, which is a strategic, multiphase shift to self-distribution of frozen and refrigerated goods.\nThe primary objective of DG Fresh is to reduce product costs on our frozen and refrigerated items, and we continue to be very pleased with the product cost savings we are seeing.\nIn fact, DG Fresh continues to be the largest contributor to the gross margin benefit we are realizing from higher initial markups on inventory purchases, and we expect this benefit to grow as we continue to scale this transformational initiative.\nAnother important goal of DG Fresh is to increase sales in these categories.\nWe are pleased with the success we are seeing on this front, driven by higher overall in-stock levels and the introduction of new products in select stores being serviced by DG Fresh.\nGiven our success to-date, we are further accelerating the rollout of additional offerings with the recent introduction of even more products, including both national and private brands as we look to further optimize our assortment while increasing our relevance with customers.\nAnd while produce is not included in our initial rollout plans, we believe DG Fresh provides a potential path forward to expanding our produce offering to more than 10,000 stores over time as we look to further capitalize on our extensive self-distribution capabilities.\nIn total, we were self-distributing to more than 16,000 stores from 10 facilities at the end of 2020.\nThis compares to our previous expectation of over 14,000 stores at year-end.\nOverall, we remain well on-track to complete our initial rollout across the chain in 2021.\nMoving to our cooler expansion program, which continues to be our most impactful merchandising initiative.\nDuring 2020, we added more than 62,000 cooler doors across our store base.\nIn total, we expect to install more than 65,000 cooler doors in 2021 as we continue to build on our multiyear track record for growth in cooler doors and associated sales.\nAs a reminder, in 2019, we began incorporating high-capacity coolers into the majority of our new, remodeled and relocated stores, creating additional opportunities to drive higher on-shelf availability and deliver a wider product selection, all enabled by DG Fresh.\nNext, a quick update on our FedEx relationship.\nThis convenient customer package pickup and dropoff service is now available in over 8,500 stores, with plans to be in a total of over 9,500 stores by year-end, further advancing our long track record of serving rural communities.\nIn addition to the gross margin benefits associated with NCI and DG Fresh, we continue to pursue additional opportunities to enhance gross margin, including improvements in private brand sales, global sourcing and supply chain efficiencies.\nWith regards to our supply chain, our plans for 2021 include further expansion of our private fleet, which accounted for more than 20% of our outbound fleet at the end of 2020.\nReducing stem miles is also an important contributor to these efforts, and the recent opening of our Walton, Kentucky dry distribution center is expected to drive additional efficiencies as we move ahead.\nWe also plan to open two additional DG Fresh facilities in 2021 as we look to further optimize our fresh network and support future growth.\nIn addition, we anticipate our combination DG Fresh and dry distribution center in Blair, Nebraska will be completed in late [Technical Issues] contribute to a further reduction in stem miles over time.\nFinally, while we are very pleased with our progress in 2020, shrink reduction remains an important area of opportunity.\nWe continue to build on our success with electronic article surveillance by increasing the number of items tagged while further leveraging technology to drive even higher levels of in-store execution.\nOur second priority is capturing growth opportunities.\nOur proven high-return, low-risk real estate model continues to be a core strength of our business.\nIn 2020, we completed a total of 2,780 real estate projects, including 1,000 new stores, 1,670 remodels and 110 relocations.\nAdditionally, we now have produce in more than 1,100 stores.\nFor 2021, we expect to open 1,050 new stores, remodel 1,750 stores and relocate 100 stores, representing 2,900 real estate projects in total.\nWe also plan to add produce in approximately 700 stores, bringing the total number of stores that carry produce to more than 1,800.\nIn addition, as Todd noted earlier, we continue to advance the evolution of our store base with plans to build on the success of our DGP format, including the introduction of two new format types.\nWith about 8,500 square feet of selling space, both our first new format and DGP concept allow for expanded higher capacity cooler counts, an extended queue line and a broader product assortment, including NCI, a larger health and beauty section and produce in select stores.\nIn total, we expect more than 550 of our overall real estate projects this year to be in one of these format types as we look to further enhance our value and convenience proposition, particularly in rural America.\nThe second new format consists of about 9,500 square feet of selling space.\nIn addition to an extended queue line and broader assortment, this larger layout also includes nearly 50 high-capacity coolers and expanded produce offering, fresh meat and additional checkout lanes, including a self-checkout bullpen with multiple stations.\nWe believe this even larger format better positions us to meet the growing needs of our customers, particularly in highly underserved markets, and we are targeting more than 100 locations by year-end.\nOverall, these larger formats allow us to incorporate our best and most impactful initiatives and are designed to expand high-growth, traffic-building categories in a more customer-friendly format all while continuing to drive strong returns.\nMoving to an update on the number of new store opportunities.\nThrough a combination of our growing relevance with customers, format innovation, an evolving retail landscape and leveraging new technologies, we estimate there are now approximately 13,000 additional small-box store opportunities in the Continental U.S. which are available for a Dollar General store.\nThis compares to our prior estimate of nearly 12,000 opportunities and is inclusive of our 2021 new unit pipeline.\nAlthough these opportunities are available to all small-box retailers, as a leader in small-box retail, combined with our proven track record of new unit development and format innovation, we believe we are well positioned to capture a disproportionate share as we move ahead.\nAnd while we continue to evaluate, we currently estimate pOpshelf could add approximately 3,000 additional store opportunities in the Continental U.S., with about another 1,000 additional opportunities available for our smaller footprint DGX format.\nWhen taken together, we estimate there are a total of approximately 17,000 new store opportunities available across our format types which we believe represents a long runway for new unit growth.\nOverall, our real estate pipeline remains robust, and we are excited about the significant new store opportunities ahead.\nNext, our digital initiative, which is an important complement to our brick-and-mortar footprint as we continue to deploy and leverage technology to further enhance the customer in-store experience.\nOverall, our strategy consists of building a digital ecosystem that is specifically tailored to provide our customers with an even more convenient, frictionless and personalized shopping experience.\nWe made significant progress in 2020, highlighted by the accelerated rollout of DG Pickup, our Buy Online Pick Up In-store offering to more than 17,000 stores providing another convenient access point for those seeking a more contactless shopping experience.\nDuring the year, we also saw continued growth in customer engagement across our digital ecosystem, including our digital coupon offering, shopping list feature, cart calculator shopping and budgeting tool, eCommerce site, DG Go!\nmobile checkout and our mobile app, which ended the year with nearly 4 million monthly active users.\nLooking ahead, our plans include providing more relevant, meaningful and personalized offerings with the goal of driving even higher levels of customer engagement and loyalty.\nOur third operating priority is to leverage and reinforce our position as a low-cost operator.\nOver the years, we've established a clear and defined process to control spending, which governs our disciplined approach to spending decisions.\nThis zero-based budgeting approach, internally branded as Save to Serve, keeps the customer at the center of all we do, while reinforcing our cost control mindset.\nOur Fast Track initiative is a great example of this approach, where our goals include: increasing labor productivity in our stores, enhancing customer convenience and further improving on-shelf availability.\nWe continue to be pleased with the labor productivity improvements we are seeing as a result of our efforts around both rolltainer and case pack optimization, which have led to the more efficient stocking of our stores.\nThe second component of Fast Track is self-checkout, which provides customers with another flexible and convenient checkout solution while also driving greater efficiencies for our store associates.\nSelf-checkout was available in more than 1,600 stores at the end of 2020, with plans for an aggressive expansion as we move ahead.\nIn fact, we expect to introduce this offering into the vast majority of our stores by the end of 2022.\nOur underlying principles are to keep the business simple but move quickly to capture growth opportunities while controlling expenses and always seeking to be a low-cost operator.\nOur fourth operating priority is investing in our diverse teams through development, empowerment and inclusion.\nAs a growing retailer, we continue to create new jobs in the communities we serve.\nAnd for those associates already on our team, this growth is resulting in numerous opportunities for career advancement.\nIn fact, more than 12,000 of our current store managers are internal promotes, and we continue to innovate on the development opportunities we can offer our teams, including continued expansion of our private fleet and those associated with DG Fresh as well as pOpshelf.\nIn addition, we transitioned to a virtual learning environment in 2020, resulting in the continued development of our people, including nearly 3 million training hours for our employees, all supported by our award-winning training and development programs.\nImportantly, we believe these efforts continue to yield positive results across our store base, as evidenced by continued record low store manager turnover, record staffing levels, healthy applicant flows and a robust internal promotion pipeline.\nWe believe the opportunity to start and develop a career with a growing and purpose-driven company is a unique competitive advantage and remains our greatest currency in attracting and retaining talent.\nOverall, we are making great progress against our operating priorities and strategic initiatives.\nWe have a robust set of initiatives in place for 2021 and are confident in our plans to drive long-term sustainable growth while creating meaningful value for our shareholders.\nIn closing, I am proud of our team's performance and our 2020 results, which further demonstrate our unique combination of value and convenience, continues to resonate with customers and positions us well going forward.\nI look forward to all that we can accomplish together in the year ahead.\n Assistant:", "chosen": "q4 earnings per share $2.62.\nq4 same store sales rose 12.7 percent.\nq4 sales $8.4 billion versus refinitiv ibes estimate of $8.28 billion.\nboard of directors increases share repurchase program authorization.\nas of january 29, 2021, total merchandise inventories, at cost, were $5.2 billion compared to $4.7 billion as of january 31, 2020.\nsees fiscal year 2021 net sales in range of a 2% decline to flat.\nsees fy 2021 earnings per share $8.80 to $9.50.\nsees fiscal year 2021 share repurchases of approximately $1.8 billion.\nsees fiscal year 2021 capital expenditures in range of $1.05 billion to $1.15 billion.\nreiterating its plans to execute 2,900 real estate projects in fiscal year 2021.\ndollar general - from jan 30, 2021 through feb 26, 2021 same-store sales increased about 5.7% versus first accounting period of fiscal year 2020.\nbelieves consumer behavior driven by covid-19 had significant positive effect on qtrly net sales and same-store sales.\ndollar general - from feb 27, 2021 through march 16, 2021, same-store sales decreased about 16% versus comparable timeframe in 2020 fiscal year.\n"}
{"prompt": "Human: This release is available on the company's website at dhigroupinc.com.\nLastly, during today's call, management will refer to specific financial measures, including adjusted EBITDA, adjusted EBITDA margin, and net debt that are not prepared in accordance with U.S. GAAP.\nWe appreciate your interest in DHI.\nI want to begin by saying a few words about the impact of COVID-19 and our response to this global pandemic.\nFirst, I want to express our heartfelt concern to all of those who have been impacted.\nAnd to everyone listening today, I hope you and your family and friends are staying safe and healthy.\nIn the past several weeks, DHI has jumped into action to aid our community by launching COVID-19 Resource Centers on each of our brand sites, assisting both clients and candidates alike with information relevant to their needs in these challenging times.\nAnd just last week, we launched a campaign to provide free recruitment services to U.S. hospitals to help them find technologists in fields like electronic medical records, healthcare administration, and computer system processing.\nAs the COVID-19 pandemic continues to unfold, our foremost concern at DHI is to ensure the health and safety of our employees, their families, and our worldwide community.\nAs such, we have taken extraordinary measures to maintain continuity of our operations and to continue to safely operate at full capacity while complying with the local, state, and country-mandated protection directives.\nAll of our employees are working from their residences using the best possible remote communication and collaboration tools.\nAnd our team members, including sales and support, marketing and R&D, continue to be highly effective.\nDHI has had a video meeting culture for many years, given the global nature of our team.\nAnd as a technology company, we have significant experience operating in a remote work environment.\nWell before this pandemic, 95% of our employees were utilizing company laptops with the ability to work from home.\nThe vast majority of our sales team routinely meets with clients remotely versus in-person.\nAnd our R&D team uses online dev ops tools to promote code to production.\nAnd as a result, we delivered two of our most significant product releases this year while our employees were working from home.\nWhile the current environment is certainly challenging the way that we all live and work, DHI's business model gives us some level of protection and stability in these uncertain times, as 90% of our revenues are generated through annual subscription-based contracts.\nAdditionally, our business has a seasonality that has benefited us, with our largest two quarters for bookings being the fourth quarter and first quarter of each year.\nAs a result, as of March 31, we had already booked over 2/3 of our total revenue for fiscal 2020.\nDespite this difficult environment, DHI was able to exceed its target of a 20% adjusted EBITDA margin in the first quarter.\nWe also took the precautionary step to ensure sufficient liquidity by drawing down an additional $25 million on our credit facility in early March while still maintaining a significant cushion to our covenants.\nAs we continue to work through these unprecedented times, with some of our competitors announcing layoffs, I want to emphasize that the strengths of our business model put us in a very different category and much stronger position than many of these other companies.\nDHI is a specialist, not a generalist.\nWe match clients with technologists and their unique skill sets.\nDHI is a subscription model, not pay-as-you-go.\nDHI provides permanent hires, not hourly workers.\nAnd DHI focuses on the enterprise market, less on the SMB space.\nWe believe our unique business model positions us well to weather this storm.\nAdditionally, over the past several weeks, we've seen a stable number of tech job postings as enterprises look to accelerate the use of technology in their business.\nNow more than ever, businesses realize they need an online business model, a way of delivering services without being face-to-face, and a way to manage their remote employees effectively.\nAs a result, we continue to see a number of businesses looking for technologists to help accelerate these efforts.\nEvery week, we review a report that details the total number of new tech job postings as compiled by scraping the career pages for U.S. corporate websites each night.\nOver the past several weeks, the total number of job postings has remained in line with the trailing 12-month trend.\nThe types of skills requested have shifted, with cybersecurity and systems engineering seeing an increased demand, but the overall volume of postings has remained relatively consistent.\nOver the longer-term, if you look at the U.S. Bureau of Labor Statistics trend line for tech jobs over the past 20 years, including through the dotcom bubble and Great Recession, there has been a constant increase in technologist positions in this country.\nThe market for technologists was at close to zero unemployment level before the pandemic, and we expect this high level of demand for these skill sets to continue.\nAnd DHI is well-positioned for this opportunity even in this challenging environment as a result of the significant progress we made over the past year in building the leading marketplace for matching technologists with our clients.\nIn 2019, we delivered over 20 marquee product releases and dozens of minor releases.\nDuring the first quarter, we continued to deliver a high pace of product innovation, including integrating IntelliSearch with our Dice Job Management Console.\nThis marquee release demonstrates the value of our patent-pending technology skills data model.\nWhen a client posts a new tech job, IntelliSearch automatically generates a list of qualified candidates from our database.\nThe technologist recruitment process is all about gaining access to the right skill sets, and this powerful tool allows our clients to save time in their search process.\nWe also moved 100% of our audience to a new Dice home page that includes a modern layout and navigation scheme.\nAdditionally, we added a private email feature, which enables Dice candidates to protect their personal email address and only share it with recruiters when they choose.\nOn our path to transform Dice into an indispensable career marketplace, trust is a cornerstone of that experience.\nDice private email encourages candidates to make their profiles visible and up-to-date, increasing the breadth of talent visible to our clients.\nThe complete makeover of the Dice client experience over the past year, including IntelliSearch, Candidate Match, Job Management, Job Search, Job Alerts, Multi Location Search, and now our new Dice Home Page and Private E-mail, are delivering more value every day.\nWe also launched job alerts on eFC in the first quarter.\nWith this release, eFC and Dice are now on a common DHI job search and alerts platform, illustrating our code once, deploy many strategy across our brands.\nHelping candidates find jobs that fit their skills and interests is the top priority of our job search engineering team.\nThe new job alerts release is a significant step forward toward our objective of having a best-in-class search experience for our candidates.\nFinally, we also launched CJ Favorites in the quarter.\nThis feature allows clearance jobs clients to keep tabs on top candidate prospects, receive alerts when they are active on the site, and engage when they are receptive to contact.\nCJ continues to be our testbed for key market-leading features.\nLooking ahead, we have a clear product roadmap in front of us for each one of our platforms.\nWe are working now to add recruiter profile and remote jobs to Dice, and IntelliSearch and Candidate Match to eFinancial Careers.\nThere is no question that the importance of defining and searching for remote jobs has surged in popularity over the past few weeks, and I'm grateful that our team has accelerated the delivery of the remote jobs feature.\nSimultaneously, we are working on delivering significant workflow automation features in ClearanceJobs.\nWe expect these additional features to be live in this second quarter.\nSpeaking of ClearanceJobs, I would like to update you on our progress in pursuing direct government contracts, one of our key growth initiatives we launched last year.\nClearanceJobs has done an excellent job growing year-over-year in the cleared professional market.\nHowever, less than 1% of its revenue historically has come from direct contracts with government agencies.\nLast year, we launched an initiative to identify U.S. government agencies we could be working with and understand more about their hiring needs for technology professionals.\nAs you'd suspect, these government organizations have just as much demand for technologists as the government contractors we serve today.\nAs such, we put together a plan targeting the agencies we wanted to approach first, and we've seen some early success.\nWe're making excellent headway, and I'm very proud of the effort of the ClearanceJobs team as they take on this entirely new customer segment.\nWe expect more government agencies to sign on as customers throughout 2020.\nWe are proud to announce that the Department of Defense has recently designated ClearanceJobs as an essential supplier, which they define as an essential service needed to ensure the continuing operation of government agencies.\nNow, let me briefly touch on the progress we continue to make improving our go-to-market strategy and execution.\nAs I mentioned on our last call, during the fourth quarter, our new Chief Revenue Officer, Arie Kanofsky, added top-notch sales leadership to his team, and we created brand-new Dice Commercial sales teams in both Denver and New York.\nThese teams grew their pipelines very successfully, and we signed on many new clients based on their efforts for the first 10 weeks of the quarter.\nObviously, the state of the U.S. economy changed dramatically in mid-March, and these teams, which are 100% dedicated to building new business relationships, have seen what we believe is a temporary slowdown in their efforts as a result.\nThe insights we've gained in the first 10 weeks of the quarter, and the momentum we saw in signing new customers, gives us great confidence that our focus on commercial accounts will be the cornerstone for our growth as the business environment normalizes.\nAs I conclude my remarks, I want to reiterate that, as a specialist, we have built a better tool than our competitors for companies looking to hire technologists.\nWith our improved product offering and go-to-market strategy, we believe we can grow our revenue at or above the market growth rate over the longer-term.\nWhile this growth won't happen overnight, and COVID-19 presents uncertainty, we are confident in our business plan and the continued progress we are making toward achieving our goal.\nWe remain incredibly excited about the market opportunity in front of us.\nWe believe the investments we made in 2019 and will continue to make in 2020, are positioning DHI as the industry leader in matching technologists with employers.\nLet's jump right into the quarterly results.\nFor the first quarter, we reported total revenues, $6.6 million, which was down 3% from the fourth quarter and down 1% year-over-year when you exclude the impact of foreign exchange.\nDice revenue was $22.5 million in the first quarter, down 3% sequentially and down 3% year-over-year.\nWe ended the first quarter with 5,850 Dice recruitment package customers, which is down 3% sequentially and 4% year-over-year.\nWe continue to see an increase in our average monthly revenue per recruitment package customer, which was up 2% year-over-year to $1,153, or approximately $13,840 on an annual basis.\nThis is important, as over 90% of Dice revenue is recurring and comes from recruitment package customers.\nOur Dice customer renewal rate was 67% for the first quarter, down 1 percentage point year-over-year, and our revenue renewal rate was 80%, which was also down 1 percentage point when compared to the same period last year.\nAs we look at our Dice customers, our strategy is to focus on these larger relationships, which creates a more stable customer base.\nBy moving upstream in terms of our marketing efforts, sales activities, and go-to-market approach, we believe we are putting ourselves in the best position for stability and growth.\nAs an example, currently 15% of our customers generate 50% of our recruitment package revenue, though no customer makes up even 1% of revenue.\nWe think this is a good balance of a strong, stable revenue base without having customer concentration risk.\nFirst quarter revenue for eFinancial Careers was $7.2 million, down 6% from the fourth quarter and 10% year-over-year when excluding the impact of foreign exchange rates.\nAs expected, COVID-19 negatively impacted our performance for eFinancial Careers during the quarter.\nIn the APAC region, eFC's second largest geography, we experienced difficulties at the beginning of the quarter as the Coronavirus hit both Singapore and Hong Kong in the second week of January.\nIn the U.K. and European financial industry, we saw the slowdown toward the latter half of the quarter.\nClearanceJobs' first quarter revenue was $6.9 million, increase of 4% sequentially and 19% year-over-year.\nThis continued solid double-digit revenue growth year-over-year is reflective of its strong innovative products and competitive differentiation.\nTurning to operating expenses, first quarter operating expenses were $41.9 million, which includes an impairment of the Dice trade name of $7.2 million, which I will address in a moment.\nExcluding the impairment, operating expenses were $34.7 million, representing an increase of $1.2 million, or 3% year-over-year.\nThis increase in operating expenses was primarily driven by the current ramp-up of our sales and engineering capabilities.\nAs Art mentioned, we added several new sales reps to our commercial accounts team during the fourth quarter, which drove an increase in sales expense this quarter.\nWe also added additional engineering talent in the fourth quarter to accelerate the deployment of new product features, which drove increases in both product expense and capital expenditures.\nIn light of the current environment, we have reviewed our entire cost structure and have begun reducing non-headcount-related expenses, both operating expenses and capital expenditures.\nThis includes such areas as contractor and consulting spend, marketing spend, future headcount growth, and third-party vendor spend.\nAs an example, we have found several opportunities to extend critical vendor agreements prior to their expiration at lower per-month or per-user rates.\nWith regards to marketing, we believe we can still achieve our candidate and client engagement metrics with lower spend as overall digital advertising rates have come down.\nWe will continue to evaluate our cost structure and are confident in our ability to match our expenses with any revenue changes that might occur.\nWe had a tax benefit for the first quarter of approximately $900,000, resulting in an effective tax rate of 12%, which includes the impacts of the impairment losses and certain discreet tax items related to stock-based compensation.\nAs I mentioned, during the first quarter, we recorded an impairment charge of $7.2 million related to the Dice trade name.\nThis impairment charge was primarily driven by an increase to the weighted average cost of capital and a decline to the royalty rate used in valuing the Dice trade name, both assumptions resulting from the impacts of COVID-19.\nAlso, during the quarter, we recorded an impairment charge of $2 million due to liquidity concerns for a minority equity investment made in 2016 and 2017.\nThis brings the investment's value to zero.\nWe recognized a net loss for the first quarter of $6.6 million, or $0.13 per diluted share compared to net income of $1.6 million, or $0.03 per diluted share a year ago.\nThis quarter's earnings per share had a $0.16 detriment as a result of the impairment of intangible assets and equity investments, as well as certain discreet tax and other items.\nLast year's earnings had a $0.04 detriment from disposition-related and discreet tax items.\nExcluding those items, on a normalized basis, earnings per share for the quarter was $0.03 versus $0.07 last year.\nAdjusted EBITDA margin for the first quarter was 21%, down from 23% in the same quarter last year.\nWe generated $2.9 million of operating cash flow in the first quarter compared to $3.2 million in the prior year quarter.\nFrom a liquidity perspective, at year-end we had approximately $5 million of net debt and $10 million drawn on a $90 million revolver.\nDuring the quarter, we drew down $27 million from our revolver, which puts us at 1.1 times leverage, which is well within our covenant of 2.5 times leverage.\nWe added cash to our balance sheet to ensure we can manage through these economic fluctuations.\nAt the end of the quarter, our total debt was $37 million.\nWe had $27.8 million of cash resulting in net debt of $9.2 million.\nEven with this incremental borrowing, we still have sufficient borrowing capacity available to us under the facility.\nDeferred revenue at the end of the quarter was $55.5 million, down 9% from a year ago.\nThis is due to more contracts having monthly or quarterly payment terms.\nWhen we add the unbilled portion of our contracts to deferred revenue, our committed contract backlog at the end of the quarter was down 1% from the end of the first quarter last year.\nAs part of our share buyback program, we repurchased approximately 660,000 shares during first quarter for $1.6 million, or $2.49 per share.\nThis left roughly $3.3 million remaining of the current $7 million buyback program, which runs through May of this year.\nI would like to note that DHI's Board of Directors has approved a new $5 million share buyback program, which will begin following the expiration of our current program and run through May of 2021.\nWe believe this approval is a recognition of the strength and the long-term prospects of our business.\nConsistent with our previous programs, we will continue to evaluate investment opportunities in the business against buying back shares while also using it as an opportunity to offset the impacts of our employee equity incentive programs.\nAs we look ahead at the Dice brand, we are still signing large deals even in the current environment.\nAs Art mentioned, while it's still early in trying to understand what effect COVID-19 will have on our market, we've seen a stable number of tech job postings in the past few weeks as companies look to accelerate the use of technology in their business model.\nFor eFinancial Careers, while it operates in multiple geographies, we are seeing encouraging signs in several regions.\nWith eFC, we tend to have larger relationships.\nAs an example, approximately 75% of the global 50 banks are customers.\nThis provides more stability in the current environment.\nIn fact, in the last few weeks, we have signed or renewed many of those large customers, including Black Rock, Wells Fargo, and Deutsche Bank.\nWith regards to ClearanceJobs, they grew through the dot-com implosion of 2001 and the Great Recession of 2008 because their success is correlated to the U.S. Department of Defense budget which is, relatively speaking, immune to the environment we find ourselves in.\nLooking forward, we will operate the business in a manner that balances costs with the revenue opportunity, maintains our employee base, and allows us to continue investing in our business to drive long-term growth and to support our customers in these challenging times.\nAs such, we're not providing specific guidance at this point.\nWe continue to manage the business to margins in the 20% range.\nLet me sum up by saying that, while we find ourselves in extremely challenging times, we feel our business model provides us with some protection and predictability, and we are confident in the investments we have made in innovation and sales.\nWe remain focused on the continued execution of our business plan and look forward to reporting on our progress throughout the rest of 2020.\nIt is a pleasure to be part of such a great team.\n Assistant:", "chosen": "compname says q1 revenue fell 1 percent to $36.6 million.\nq1 revenue fell 1 percent to $36.6 million.\nq1 loss per share $0.13.\nas of march 31st, we had already booked over two-thirds of total revenue for fiscal 2020.\n"}
{"prompt": "Human: This release is available on the company's website at dhigroupinc.com.\nLastly, during today's call, management will be referring to specific financial measures including adjusted EBITDA, adjusted EBITDA margin and net debt that are not prepared in accordance with U.S. GAAP.\nAs always, we appreciate your interest in DHI.\nLet me first start with quick update on our operation status as it relates to the COVID-19 pandemic.\nOur foremost concern at DHI is to ensure the health and safety of our DHI community.\nAs such, the majority of our employees continued to work from home during the quarter, using the best possible remote communication and collaboration tools.\nAnd our team members, including sales and support, marketing and product development continued to be highly effective.\nWe currently have several offices open, though we have made the return to office optional for all our employees.\nWe are looking forward to having more of our employees back in the office when it's safe.\nBut rest assured, we are taking significant precautions to make sure we maintain the safety of our employees, whether they are in the office or working from home.\nNow let's jump into a review of the quarter.\nWhile the pandemic continues to challenge the way we all live and work, we actually saw job postings stabilize during the summer, although they were lower in total than the year before.\nThe sentiment is that many companies paused their hiring during this time as they reformulated their hiring plans based on their view of the economic recovery to come.\nHowever, in September, we saw the sentiment change for the better, as evidenced by a notable uptick in job posting as well as an increase in our bookings.\nBased on our Burning Glass feed, there are over 2,200 companies that have more than 20 open tech job postings right now.\nCompanies like Amazon, Microsoft and J.P. Morgan Chase have over 1,000 active tech jobs posted today.\nBoth the Staffing Industry Analysts and TechServe Alliance, industry research firms that focus on tech centric staffing and recruiting firms, are forecasting a bounce back in the IT staffing market in 2021 to almost pre-pandemic levels.\nThe SIA is forecasting year-over-year market growth of 7%, which would get the market back to 98% of 2019 IT staffing revenue levels, representing an almost complete rebound.\nAs I mentioned last quarter, a report released by Microsoft in July predicts that the worldwide digital jobs will grow from 41 million in 2020 to 190 million in 2025.\nOf the 149 million new digital jobs to be created, 98 million are forecast to be in software development.\nIt's clear that our collective future will be more online and businesses will accelerate their efforts to digitize.\nThese efforts will, of course, require technologists.\nAs we continue to execute on our plan to create the best tech focused career marketplaces using our technology skills data model, we stand ready to capitalize on these trends.\nNow let me provide some detail regarding our product development efforts during the quarter.\nOur product development team continued to deliver its usual high pace of product innovation.\nWith the release of Dice IntelliSearch Based Job Alerts, job alerts are automatically generated based on the specific skillset and location found in the candidate's profile.\nThis creates a virtuous circle that encourages candidates to register and keep their profiles up-to-date.\nDice recruiter profile which we delivered last quarter, experienced the fastest adoption rate the company has ever seen from any of its product releases in the past two years.\nDuring the third quarter, one-third of all Dice recruiters completed their new Dice Recruiter Profile.\nDice Recruiter Profile allows our clients to enrich their profiles with photos, personal information, details about corporate brand and culture, news and latest hires, upcoming events and future hiring needs, all of which create more transparency and personalize the recruiter behind the role.\nDice Recruiter Profile was the first major release in Dice's transformation from a job board to a full-scale career marketplace.\nWith Dice marketplace, we are creating a trusted environment where recruiters and candidates can learn much more about each other to facilitate more effective career discussions.\nDuring the quarter, we also launched ClearanceJobs Client Team Dashboard, which allows clients to have a full view of their recruitment team activity on the site, linking activities to successful hiring patterns.\nClearanceJobs continues to be DHI's test bed for key market-leading features.\nWe also launched new features on eFinancialCareers called Follow, Voice and Video.\nThe Follow feature allows candidates to follow recruiters and get a news feed of their content on a weekly basis.\nVoice and Video allow finance and tech professionals and recruiters to connect virtually with video and voice calling, as well as instant messaging through the eFC platform, all of which are highly relevant in the work from home environment.\nThese capabilities were delivered as we announced the completion of the first iteration of the fully functional eFC marketplace, a huge milestone for the company.\neFC follows CJ as the second brand to complete the transformation from job board to full-scale career marketplace.\nWe have many new product releases planned for the fourth quarter.\nDice is completing the design for its own messaging system with an expected launch at year-end.\nRecruiters and candidates will be able the message each other within the platform in the same pattern as Facebook Messenger.\nThis is the second critical ingredient for full marketplace capability and creates in-platform engagement and stickiness.\nProtecting our clients and candidate's information is incredibly important to us.\nTherefore, in the fourth quarter, Dice has already released a new authentication and authorization system which move it to an industry-standard secure login protocol.\nThis feature is a stepping stone to multifactor authentication in early 2021.\nWe are also working on delivering calendar and schedule integration for ClearanceJobs, which will allow for recruiters and candidates to seamlessly schedule meetings and communicate in general from a system built into the platform and will connect to users' native email application.\nLastly, eFC has already release IntelliSearch based job alerts in the fourth quarter, similar to what I just described for Dice.\nAs I have said before, I believe we were experiencing a checkmark shaped recovery versus a V-shaped recovery.\nAs I mentioned earlier, we saw a notable uptick in sentiment in bookings in September.\nWe had several sales teams reach or exceed their pre-pandemic bookings production for the quarter as a result of the rebound, including both CJ's new business and account management teams, as well as Dice's staffing and recruiting new business team.\nRenewal rates for all account management teams improved during the month.\nDice commercial accounts continues to be affected by the current environment due to the uncertainty around hiring plans.\nAs an example, we have worked with one very large enterprise that has dramatically changed their hiring plan four times in the past four months.\nThe good news is that our sales team's pipeline of deal activity has continued to grow despite sales cycles lengthening.\nWe continue to see increased engagement from candidates in the current work from home environment.\nIn addition, on the client side, we saw an increase in marketing qualified leads through the contract me form fills on our Dice site which is a leading indicator of pipeline growth.\nThe rebound in Dice's staffing and recruiting new business highlights that Dice is a necessity for staffing and recruiting firms focused on tech.\nAnd as I mentioned before, the need for technologists is expected to grow strongly in the new post-pandemic economy.\nDue to the success that we are seeing in CJ and Dice's staffing and recruiting new business teams, we have shifted several sales reps from Dice's commercial accounts team to these two teams with the mantra sell of those who are buying now.\nClearanceJobs has been relatively unaffected by the pandemic, as its performance is generally correlated to the U.S. Department of Defense budget, which remains relatively predictable.\nWe continue to work hard on expanding CJ's addressable market through direct sales to U.S. government agencies and expect ClearanceJobs to add more government customers as we close out the remainder of this year.\nFinally, eFinancialCareers remains our most challenged brand.\nIt is still being affected by the protests in Hong Kong, uncertainty around the hard Brexit and its largest market, the U.K. and the expected longer recession for the global banking industry as credit quality remains uncertain and under continuous reassessment.\nThere is no question that the uncertainty in the banking industry has weighed down eFC's performance to-date and will continue to do so for the foreseeable future.\nAs I conclude my remarks, I want to reiterate that we are successfully executing on our plan to build career marketplaces for matching tech professionals with employers.\nAnd we are doing so, while exceeding our adjusted EBITDA targets.\nWe believe we have created a better online platform than our competitors for matching companies with the highest quality tech professionals and believe we can capitalize on the millions of new technologist jobs expected over the next five years.\nWhile this growth won't happen overnight and COVID-19 certainly presents uncertainty, we are confident in our business plan and the continued progress we are making toward achieving our goal of returning to growth.\nI will start by going through the financial results, then add a few comments about the business.\nFor the third quarter, we reported total revenues of $33.3 million, which was down 2% from the second quarter and 11% year-over-year.\nDice revenue was $19.8 million in the third quarter, down 3% sequentially and 13% year-over-year.\nWe ended the third quarter with 5,300 Dice recruitment package customers, which is down 3% sequentially and 13% year-over-year.\nOur average monthly revenue per Dice recruitment package customer was down 1% versus the year ago quarter to $1,122 or $13,464 on an annual basis.\nOver 90% of our Dice revenue is recurring and comes from recruitment package customers.\nOur Dice customer renewal rate was 63% for the third quarter, up from 57% last quarter, but down three percentage points year-over-year.\nOur Dice revenue renewal rate was 66%, up five percentage points from last quarter, but down 10 percentage points when compared to the same period last year.\nWhile we did see lower in-period renewal rates, that is customers renewing prior to or at contract termination, we are maintaining an ongoing dialog with these non-renewal customers with the expectation that they will resign when there is further recovery in the economy.\nAs we mentioned last quarter, we hired a new leader for our client success organization, who has implemented new processes around onboarding and ongoing touch points that we believe should have a positive impact on both customer and revenue renewal rates.\nAs we look at Dice, our strategy continues to be on larger customer relationships.\nWe believe this will put us in the best position for stability and growth.\nCurrently, approximately 13% of our customers generate 50% of our recruitment package revenue, though no one customer makes up 1% of revenue.\nWe think this is a good balance of a strong stable revenue base without having a significant customer concentration risk.\nClearanceJobs third quarter revenue was $7.3 million, an increase of 3% sequentially and 16% year-over-year.\nThis continued solid double-digit revenue growth year-over-year is reflective of ClearanceJobs' strong innovative products and competitive differentiation as well as the somewhat insulated market it serves.\nThird quarter revenue for eFinancialCareers was $6.1 million, which was down 1% sequentially and down 25% year-over-year when excluding the impact of foreign exchange rates.\nAs expected, COVID negatively impacted our performance for eFC during the quarter.\nIn the U.K., which is our largest geography by revenue for eFC, we were impacted by the COVID shutdown as well as the U.K. furloughs which were extended through October of this year.\nIn the APAC region, eFC's second largest geography, we continued to experience difficulties primarily due to the impact of the Coronavirus pandemic.\nTurning to operating expenses.\nThird quarter operating expenses were $61.8 million, which includes non-cash impairment charges of both the Dice trade name of $8 million and goodwill of $23.6 million, both of which I will address in a moment.\nExcluding the impairment charges, operating expenses were $30.2 million, representing a decrease of $1.7 million or 5% year-over-year.\nThis decrease in operating expenses was primarily the result of the comprehensive cost management exercise which began in late March and continues currently as well as more efficient third-party marketing spend.\nIncome tax benefit for the third quarter was $1.5 million, resulting in an effective tax rate of 5%, which includes the impact of the non-cash impairment charges.\nThis rate is lower than our expected statutory rate of 25% due to nondeductible impairment charges and the allocation of loss between jurisdictions.\nAs I mentioned, during the third quarter, we recorded a non-cash impairment charges related to the Dice trade name of $8 million and goodwill of $23.6 million.\nThe impairment charge for the trade name was primarily driven by a decline to the royalty rate used in valuing the Dice trade name, an assumption driven by the impact of COVID-19.\nThe $23.6 million goodwill impairment is the result of the impact of the pandemic and the expectation that a broader recovery will extend into 2021, whereas previously we expected the recovery toward the end of 2020.\nIncluding these non-cash impairment charges, we recorded a net loss for the third quarter of $27.3 million, a loss of $0.57 per diluted share, compared to net income of $4.4 million or $0.08 per diluted share a year ago.\nThis quarter's net loss was negatively impacted by $29.3 million of charges substantially from the non-cash impairments of goodwill and intangible assets.\nLast year's net income was positively impacted by $500,000 from discrete tax items.\nAdjusted diluted earnings per share for the quarter was $0.04 versus $0.07 last year.\nAdjusted EBITDA for the third quarter was $7.6 million, a margin of 23%, which was consistent with the second quarter of this year and the third quarter of last year.\nAs we stated on our last call, our goal is to manage the business to approximately 20% adjusted EBITDA margins.\nWe continue to focus on supporting our customers as well as investing in sales, marketing and product while also being equally mindful of the overall cost structure of the business.\nWith this, our current cost structure has become our new normal for how we think about headcount, marketing and other third-party spend.\nWe generated $4.4 million of operating cash flow in the third quarter, compared to $4.6 million in the prior year quarter.\nFrom a liquidity perspective, at the end of the quarter, our total debt was $37 million.\nWe had $26.8 million of cash resulting in net debt of $10.2 million.\nEven with the incremental borrowing we did in the first quarter, we still have significant borrowing capacity available to us under our credit facility.\nWe do expect to begin reducing our debt outstanding in the coming quarters as we have better visibility into cash flow, notably around customer payments.\nDeferred revenue at the end of the quarter was $41.9 million, compared to $47.2 million in the second quarter and $51.1 million in the year ago quarter.\nThis is due to the impacts of COVID-19, more contracts having monthly or quarterly payment terms and the normal seasonality of bookings.\nWhen we add the unbilled portion of our contracts to deferred revenue, our committed contract backlog at the end of the quarter was down 12% from the end of the third quarter last year.\nDuring the quarter, we repurchased approximately 349,000 shares for $854,000 or $2.45 per share.\nIn total, we have used approximately $1.4 million of the current $5 million buyback program which runs through May of 2021.\nWe continue to believe that buyback is a recognition of the strength and the long term prospects of our business.\nConsistent with our previous programs, we will continue to evaluate investment opportunities in the business against buying back shares.\nAs you know, we also use the buyback program as an opportunity to offset the impacts of our employee equity incentive plan.\nAs we look ahead, bookings are improving for the company as a whole.\nAs Art mentioned, for Dice we saw a notable uptick in job postings and bookings in September as companies increased their use of technology in this environment.\nWe are seeing strength in our staffing and recruiting business as these firms realize they need our technology to effectively do their job.\nWith regards to ClearanceJobs, we expect them to continue to grow because their success is correlated to the U.S. Department of Defense budget, which, relatively speaking, has been immune to the environment we find ourselves in.\nFor eFinancialCareers, we continue to expect significant headwinds as our two largest regions, the U.K. and APAC continue to be impacted by COVID, the ongoing geopolitical issues in Hong Kong as well as a potential impact to hiring in the banking sector.\nLooking forward, we believe we have the right ongoing cost structure in place to operate the business and to support our customers while at the same time continuing to invest in our business to drive long term revenue growth.\nWhile not providing specific guidance, we continue to manage the business to margins in the 20% range.\nLet me sum up by saying that while we continue to find ourselves in very challenging times, we feel our business model provides us some protection and predictability and we are confident in the investments we have made in innovation and sales.\nWe remain focused on the continued execution of our business plan and look forward to reporting on our progress as we finish 2020 and enter into 2021.\nIt is a pleasure to be part of such a great team.\n Assistant:", "chosen": "q3 adjusted earnings per share $0.04.\nq3 revenue fell 11 percent to $33.3 million.\nqtrly loss per share $0.57.\n"}
{"prompt": "Human: In particular, the extent of the continued impact of COVID-19 on our business remains uncertain at this time.\nDuring today's call, we will discuss GAAP and non-GAAP financial measures.\nAs for the content of today's call, Kevin will start with a discussion of the business, and Lewis will follow with a recap of Dolby's financial results and provide our third quarter and second half fiscal 2021 outlook.\nWith another strong performance in licensing revenues this quarter, we are off to a solid start to our fiscal year.\nOur first half fiscal 2021 revenues have grown about 10% compared to the first half of fiscal 2020, and earnings have grown at an even higher rate.\nOur financial results reflect the strength of Dolby's business model and the broad adoption of Dolby Technologies across the devices and services that consumers are seeking to enjoy their content.\nBefore Lewis takes you through the numbers, I wanted to highlight some of the areas of our progress and the recent examples of how Dolby is enabling a broader range of content.\nWith a growing number of content experiences becoming Dolby experiences, we add to our value proposition for deeper adoption in existing device categories, and we address the use cases for adoption in new device categories, which together drive our opportunities for growth.\nWith Dolby Atmos for music, we are enabling a significant step forward in how people can enjoy their favorite songs, which is creating new opportunities to expand the adoption of Dolby Atmos to a broader range of devices and services.\nLucid Motors announced that they will be bringing the first automobile to market that will include Dolby Atmos.\nThe Lucid Air will enable the Dolby Atmos for music experience for the car and is the first example of a significant opportunity to address the primary entertainment use case within automotive.\nLucid is just one example of how we are creating more ways for consumers to enjoy a growing library of music in Dolby Atmos.\nWe have strong engagement with top artists around the world as more songs and albums are being made available in Dolby Atmos, including many recent Grammy-nominated artists like Taylor Swift, Lady Gaga and Megan Thee Stallion.\nThis quarter, Hungama, a top music streaming service in India began supporting Dolby Atmos.\nThey joined TIDAL, Amazon Music and Anghami who are currently streaming music in Dolby Atmos.\nAs we continue to build on the momentum for Dolby Atmos for music, we see opportunities for more services to adopt Dolby Atmos, and to deepen our adoption across mobile, PCs, automotive and headphones.\nGaming is another area where we see much of the opportunity ahead of us, to bring Dolby Vision and Dolby Atmos to a growing number of experiences.\nMicrosoft Xbox will be the first gaming console to support the combined Dolby experience for games.\nXbox gamers will have more ways to enjoy the Dolby experience with new gaming headsets released this quarter from Microsoft and Bang and Olufsen that highlight support for Dolby Atmos.\nLenovo recently launched a new mobile phone designed to support gaming content, the Legion Phone Duel two that highlights support for Dolby Atmos.\nWe also saw the first eSports event in Dolby Vision and Dolby Atmos this quarter.\nAs part of Blizzard Entertainment's BlizzConline, we enabled an event that showcased Overwatch matches to be viewed in the combined Dolby experience through PCs and gaming consoles.\neSports gives us unique opportunities to engage gamers by bringing Dolby Vision and Dolby Atmos to the experiences that they are passionate about.\nAs we grow the number of Dolby experiences within games, we add to our existing value proposition and drive more reasons for adoption on gaming consoles, PCs and mobile phones.\nBy expanding our presence in music and gaming, we addressed two of the primary use cases on a mobile device.\nAt the same time, we see more ways for Dolby to enable the highest quality experiences across more of the content enjoyed on mobile devices.\nOver the past few quarters, we've highlighted how we are enabling new experiences in mobile, like being able to record in Dolby Vision with the iPhone 12 or being able to enjoy live sports content in Dolby Atmos through a mobile app.\nThis quarter, Earshot, a leading podcast service in India became the first podcast app to support Dolby Atmos.\nThey will be making Dolby Atmos content available across different genres of podcasts and in multiple languages.\nAs we continue to expand the relevance of Dolby Vision and Dolby Atmos across a broader range of content, we address more of the use cases for mobile devices, driving the reasons for deeper adoption with our partners.\nThis quarter, Xiaomi launched their first mobile phones that support Dolby Vision and Dolby Atmos.\nThis adds to the growing number of partners that support the Dolby experience within mobile, which is highlighted by the Apple iPhone 12 lineup that features the combined Dolby Vision and Dolby Atmos experience.\nIn addition, Samsung, OPPO and Sony continue to highlight Dolby Atmos with the recent launch of their latest flagship models.\nAll of this progress adds to our strong position within movie and TV content, which continues to drive more device adoption within the living room.\nThis quarter, Samsung released their Q7 sound bar, highlighting support for Dolby Atmos.\nWithin TVs, our partners around the world, including Xiaomi, Changhong and Skyworth, released new models that support the combined experience.\nIn addition to supporting Dolby Atmos, TCL and Hisense also highlighted support for Dolby Vision IQ within their recent TV launches.\nWith this momentum, we still see a significant opportunity ahead to reach higher levels of adoption with Dolby Vision and Dolby Atmos in the living room, similar to the broad presence of our core audio technologies.\nThe adoption of Dolby Vision and Dolby Atmos on devices is driven by a consistent flow of new titles that are being enabled in the combined Dolby experience.\nOur streaming partners, like Netflix, Disney+, Apple TV+ and HBO Max, continue to make a broad range of titles available in Dolby, and the combined experience is consistently highlighted with the release of their latest tentpole titles.\nLet me shift to cinema.\nAs consumers begin to return to the movies, they are seeking out premium experiences and Dolby Cinema is the best way to enjoy a movie.\nWe now have about 90% of our Dolby Cinemas opened globally to certain capacity restrictions.\nOur engagement with exhibitor partners remain strong as we recently added a new Dolby Cinema partner in China, and we also had four new Dolby Cinema locations open during the quarter.\nWe also see initial signs of strong box office performance from titles like Godzilla vs.\nKong and successful local content in China, including Detective Chinatown three and Hi, Mom that were all available in Dolby Cinema.\nWe look ahead to anticipated titles later this year, including Top Gun: Maverick, A Quiet Place II and Black Widow that will all be available in Dolby Cinema.\nDuring the last year, we have started to bring the Dolby magic that powers the best movie, TV and music experiences to a much broader range of content and interactions with Dolby.io, our developer platform.\nOur focus is on deepening our engagement with the developer community, growing the number of developers on the platform and building their engagement with our APIs.\nJust last week, we completed an integration with Box.com and Dolby.io.\nCompanies that use Box can now enable their users to easily improve the quality of their audio directly from where their files are stored within Box, powered by Dolby Media APIs.\nWe are excited to bring unique solutions to Box's broad range of customers and the opportunity to drive more people to engage with Dolby.io.\nOur interactivity APIs are supporting a wide range of use cases, and we see new customers across multiple industries from online learning to enabling influencers to connect with fans, or even in one case, supporting an application that enables live streaming for medical teams.\nAs we look ahead, we also see opportunities where real-time interactions come together with recorded media and we can uniquely provide comprehensive solutions by embedding both our interactivity and media APIs.\nWith a growing number of new experiences being enabled by Dolby.io, we are learning from our engagement with developers and evolving our offerings to best support the use cases where we see significant opportunities to bring higher quality media and best-in-class real-time interactions.\nSo to wrap up, we have growing momentum in enabling Dolby Vision and Dolby Atmos experiences in more forms of content like music and gaming.\nAs we enable our technologies to address a broader range of content, we build upon our strong position within movies and TV and create more reasons for adoption across devices and services.\nWith Dolby.io, our technologies are beginning to address a much larger world of content experiences and interactions.\nAll of this gives us confidence in our ability to drive revenue and earnings growth into the future.\nAnd with that, I'm going to hand it over to Lewis to take us through the financials.\nAnd of course, May the fourth be with you.\nAs Kevin said, our financial results were very solid this quarter.\nRevenue and earnings both coming in higher than we previously guided.\nSo let me go through a few details for everyone.\nSecond quarter revenue of $320 million was above our guidance range of $280 million to $310 million, as the volumes that we had were higher-than-expected in several of our end markets.\nAnd then we also benefited from a true-up of about $15 million in the quarter for Q1 shipments reported that were above our estimate.\nOn a year-over-year basis, second quarter revenue was down from last year's $352 million due to lower recoveries and lower revenue from cinema-related business partially offset by higher adoption of Dolby Technologies and higher market volume in areas like PC and TV.\nOn a sequential basis, total revenue was down from Q1 due to lower recoveries and lower seasonality, and both of these were anticipated when we gave our guidance at the beginning of the quarter.\nSo the Q2 revenue was comprised of $304 million in licensing and $16 million in products and services.\nSo let's go through the trends in licensing revenue by end market, starting with broadcast.\nBroadcast represented about 35% of total licensing in the second quarter.\nBroadcast revenues decreased by about 19% year-over-year, and that was driven by lower recoveries offset partially by higher market volume along with higher adoption of Dolby.\nOn a sequential basis, broadcast decreased by about 25%, due primarily to lower seasonality along with lower recoveries.\nMobile represented approximately 22% of total licensing in Q2.\nMobile decreased by about 12% from last year, that was due to a shift in timing of certain contracts, and that was offset partially by higher adoption of our technologies.\nOn a sequential basis, mobile was down about 38%, due primarily to lower recoveries and timing of revenue under contracts.\nPC represented about 17% of total licensing in the second quarter.\nPC was higher than last year by about 12% due to higher market volume, along with increased adoption of Dolby Vision and Dolby Atmos.\nAnd that was offset partially by declining ASP because of mix of our disc versus non-disc units.\nSequentially, PC was up by about 56%, driven by timing of revenue under contracts, along with seasonally higher activity from patent programs.\nConsumer electronics represented about 16% of total licensing in Q2.\nOn a year-over-year basis, consumer electronics was lower by about 2% due to a shift in timing of certain contracts offset partially by higher volume in devices like sound bars and DMAs, as well as higher adoption of Dolby Vision and Dolby Atmos.\nOn a sequential basis, CE decreased by about 7% due mainly to lower seasonality and timing of revenue under contracts.\nOther markets represented about 10% of total licensing in the second quarter.\nThey were up about 14% year-over-year, driven by higher revenue from gaming and automotive, and that was offset partially by lower Dolby cinema revenues.\nOn a sequential basis, other markets decreased by about 22%, driven by lower seasonality in gaming and lower admin fees from Via.\nBeyond licensing, our products and services revenue was $16 million in Q2 compared to $16.9 million in Q1 and $23 million in last year's Q2.\nAnd the year-over-year decrease was attributable to lower demand in the cinema industry because of the pandemic.\nSo now I'd like to discuss Q2 margins and operating expenses.\nTotal gross margin in the second quarter was 89.9% on a GAAP basis and 90.5% on a non-GAAP basis.\nProducts and services gross margin -- products and services gross margin on a GAAP basis was minus $345,000 in Q2 compared to minus $5.5 million in the first quarter.\nProducts and services gross margin on a non-GAAP basis was a positive $1.1 million in Q2 compared to a negative $3.9 million in the first quarter.\nAs I mentioned when I gave guidance, we took steps to reduce the cost structure in manufacturing, and that's helping our product gross margins return to positive territory.\nOperating expenses in the second quarter on a GAAP basis were $204 million compared to $189.8 million in Q1.\nThe annual salary increases for our employee base went into effect at the beginning of Q2.\nAnd also, Q1 operating expenses benefited from a gain on sale of our facility in Brisbane.\nOperating expenses in the second quarter on a non-GAAP basis were $178.4 million compared to $167.1 million in the first quarter.\nNon-GAAP operating expenses were pretty much in line with the guidance that we gave.\nOperating income in the second quarter was $83.2 million on a GAAP basis or 26% of revenue compared to $105.9 million or 30.1% of revenue in Q2 of last year.\nOperating income in the second quarter on a non-GAAP basis was $110.9 million or 34.7% of revenue compared to $129 million or 36.7% of revenue in Q2 of last year.\nIncome tax in Q2 was 10.6% on a GAAP basis and 16% on a non-GAAP basis.\nNet income on a GAAP basis in the second quarter was $76.2 million or $0.73 per diluted share, and that compares to $88.5 million or $0.86 per diluted share in last year's Q2.\nAnd net income on a non-GAAP basis in the second quarter was $94.8 million or $0.91 per diluted share, that compares to $106.6 million or $1.04 per diluted share in Q2 of last year.\nFor both GAAP and non-GAAP, net income in the second quarter was above the guidance that we gave and that was due to the revenue coming in higher than what we had expected.\nDuring the second quarter, we generated about $83 million in cash from operations which compares to the $66 million generated in last year's second quarter, and we ended the second quarter this year with about $1.2 billion in cash and investments.\nDuring the second quarter, we bought back about 760,000 shares of our common stock and ended the quarter with about $76 million of stock repurchase authorization still available.\nWe also announced today a cash dividend of $0.22 per share.\nThe dividend will be payable on May 25, 2021, to shareholders of record on May 17, 2021.\nSo now let's talk about the forward outlook.\nthree months ago, when I went through the outlook for Q2, I said then based on a variety of factors and assumptions, that we could see a scenario for second half revenues in the mid- to high 500s.\nNow with Q2 behind us, our updated scenario is for second half revenue ranging from $560 million to $600 million.\nAnd if I focus more specifically on Q3, we anticipate that third quarter total revenue could range from $260 million to $290 million.\nWithin that, licensing could range from $250 million to $275 million, while products and services revenue could range from $13 million to $18 million.\nIn terms of the assumptions we've made about market conditions, industry analyst reports indicate that PC TAMs in the second half could be higher on a year-over-year basis.\nHowever, for TVs and other consumer devices, industry reports continue to indicate that TAMs could be down in the second half because of an uptick in demand that happened last year in the middle of the pandemic, but might not repeat this year.\nAt the same time, we are expecting organic growth in the second half, and that's on a year-over-year basis.\nDriven by broader adoption of our Dolby technologies broadly across various markets.\nAnd we also anticipate higher revenue from our cinema-related businesses in the second half as that industry starts to recover compared to where it was last year.\nSo let me move on to the rest of the P&L outlook for Q3.\nQ3 gross margin on a GAAP basis is estimated to range from 88% to 89%, and the non-GAAP gross margin is estimated to range from 89% to 90%.\nWithin that, products and services gross margin is estimated to range from about breakeven to $1 million positive on a GAAP basis and from $1 million to $2 million positive on a non-GAAP basis.\nOperating expenses in Q3 on a GAAP basis are estimated to range from $210 million to $220 million; and operating expenses in Q3 on a non-GAAP basis, are estimated to range from $185 million to $195 million.\nNow the increase in operating expenses from Q2 to Q3 is being driven mainly by our marketing programs that from a timing standpoint, have more of their activities taking place in the second half this year, which also means that at this point, Q4 expenses could be at least as much as what we spend in Q3.\nBut I'd like to point out that for the year as a whole, the marketing expenses at the high end of our opex range would be similar to what they were last year, just timed differently.\nWe'll give you an update on this when we report our Q3 results.\nSo let's finish up the Q3 outlook.\nOther income is projected to range from $1 million to $2 million for the third quarter, and that's $1 million to $2 million for the third quarter.\nAnd our effective tax rate for Q3 is projected to range from 20% to 21% on both a GAAP and non-GAAP basis.\nBased on a combination of the factors I just covered, we estimate that Q3 diluted earnings per share could range from $0.15 to $0.30 on a GAAP basis and from $0.37 to $0.52 on a non-GAAP basis.\nSo with that, I'll kick it back over to Mr. Yeaman.\nAs I'm sure most of you or all of you saw, we also announced today that Lewis has made a decision to retire later this year.\nOver the last nine years, Lewis has played an integral role in building our strong financial position, navigating new business models, and just overall supporting the expansion of Dolby experiences.\nHe's built a very strong team.\nHe's mentored countless employees, both within and beyond the finance organization.\nAnd Lewis is going to be working closely with me to ensure a smooth transition as we work to identify our next Chief Financial Officer.\nSo we've still got Lewis.\nWe're going to enjoy that for now.\nAnd then we'll be happy to -- that Lewis will have more time to focus on his family.\nSo Kevin, is it true that when I first told you, you said good riddance?\nI think you might have misinterpreted that.\nI can't believe now that they actually have books out there called Dad Jokes because I think all my jokes probably fit into that category, but it has definitely been a privilege to serve as the company's Chief Financial Officer and lot of great memories.\nAnd since we're all about the experience, I can definitely say that I've had my own unique Dolby experience here.\nSo I look forward to a smooth transition as we move on to the next phase.\nCompany is in great shape.\nGreat shape, great promise ahead.\nSo I will happily watch from sidelines.\nWell, Lewis, I haven't heard anyone disagree with you yet when you talk about the quality of your humor.\nAnd we are going to make sure and get the most out of your remaining transition time.\nAnd with that, I'm sure our audience is eager to get to questions.\nWe've covered a lot of ground.\n Assistant:", "chosen": "q2 non-gaap earnings per share $0.91.\nq2 gaap earnings per share $0.73.\nsees q3 gaap earnings per share $0.15 to $0.30.\nsees q3 revenue $260 million to $290 million.\nsees q3 2021 non-gaap earnings per share $0.37 to $0.52.\n"}
{"prompt": "Human: In particular, we are currently in the midst of the COVID-19 pandemic.\nThe extent of its continued impact on our business will depend on several factors, including the severity, duration and extent of the pandemic, as well as actions taken by governments, businesses and consumers in response to the pandemic.\nAll of which continue to evolve and remain uncertain at this time.\nAs for the content of today's call Lewis will begin with a recap of Dolby's financial results and provide our fiscal 2020 outlook and Kevin will finish with a discussion of the business.\nAnd I hope you're all staying safe out there.\nI'm glad to report that Q3 revenues came in at the high-end of the scenario that we provided three months ago and our earnings were above the range as we had a large tax benefit in the quarter to go along with some lower than projected operating expenses.\nWhile we did do better than Q3 outlook, its worth noting that the numbers were lower than the original forecast from the start of the year before COVID-19 came into the picture.\nSo here the numbers.\nThird quarter revenue was $247 million, compared to $352 million in Q2, and $302 million in Q3 of last year.\nOur Q3 revenue guidance coming into the quarter was a range of $225 million to $250 million.\nNow if I compare that to what we assumed in our guidance, revenues from TVs, PC and mobile were at the higher end, while consumer electronics and set-top boxes were at the lower end of our scenario.\nProducts and services were at the high-end of the range, but remember that we had lowered our expectations by 70% to 80%, because of the significant impact of COVID-19 shutdowns on the cinema industry.\nNow looking at total company quarter-over-quarter, revenue was down by about $105 million from Q2, roughly half of that was driven by timing of revenue under contracts, as well as lower recoveries, and roughly the other half of that was attributable to the impact from COVID-19, which includes lower royalties from unit shipments across a variety of devices, lower sales of cinema products and services and lower revenue from box office share at Dolby Cinemas.\nNow looking at total company year-over-year, revenue was down by about $55 million versus last year's Q3, and that was predominantly attributable to COVID-19, and similar to what I said a minute ago, lower unit shipments, lower products and services and lower Dolby Cinema revenue.\nThe composition of Q3 revenue was $235 million in licensing; and $12 million in products and services.\nSo, let's go through a breakdown of licensing revenue by end market, starting with Broadcast.\nBroadcast represented about 38% of total licensing in the third quarter.\nBroadcast revenues were down about 34% year-over-year, and that was driven by lower recoveries and lower unit volume due to the pandemic, despite the fact that adoption of Dolby Vision and Dolby Atmos into TVs and set-top boxes is higher than last year.\nOn a sequential basis, Broadcast was down by about 31% due to lower recoveries and lower unit volume.\nMobile represented approximately 33% of total licensing in Q3.\nMobile was up by about 65% over last year, due to higher recoveries and revenues from our patent programs, offset partially by unit volume impact from the pandemic.\nOn a sequential basis, Mobile was up by about 3%, driven by recoveries offset partially by unit volume impact from the pandemic.\nPC represented about 10% of total licensing in the third quarter.\nPC was down by about 4% year-over-year, due to lower recoveries and lower unit volume, although, its worth noting that adoption of Dolby Vision and Dolby Atmos of the PCs has increased since last year.\nAnd sequentially PC was down nearly 50%, due to timing of revenue under contracts and also lower recoveries.\nConsumer electronics represented about 9% of total licensing in the third quarter and on a year-over-year basis CE licensing was down by about 29%, driven by lower volume and lower recoveries.\nOn a sequential basis, CE was down by nearly 60%, due to timing of revenue under contracts, as well as lower unit volume.\nOther markets represented about 10% of total licensing in the third quarter.\nThey were down by about 34% year-over-year due to significantly lower revenues from Dolby Cinema, because nearly all of those screens were closed for the quarter and lower revenues from gaming due to console life cycles.\nOn a sequential basis, Other Markets was down by about 16% driven by lower revenue from Dolby Cinema and from via admin fees and those are the fees in the patent pool program that we administer.\nAnd this was offset partially by higher recoveries in automotive and gaming.\nBeyond licensing our products and services revenue was $11.8 million in Q3, compared to $23 million in Q2, and $30.3 million in last year's Q3.\nWe had anticipated a big drop-off in sales in this category, as most of this revenue comes from equipment that we sell to cinema exhibitors.\nAnd these customers in general, continue to be negatively affected by the pandemic.\nNow let's cover margins and operating expenses for Q3.\nTotal gross margin in the third quarter was 87.9% on a GAAP basis, and 89% on a non-GAAP basis.\nProducts and services gross margin on a GAAP basis was minus $5.5 million in the third quarter, due to fixed cost not fully covered by the lower volume that we ran.\nAnd as a reminder, the guidance I gave at the beginning of the quarter was for GAAP gross product margin to range from minus $6 million to minus $9 million.\nProducts and services gross margin on a non-GAAP basis was minus $3.5 million in the third quarter for the same reasons as I just went over in the GAAP discussion, and there as a reminder, our guidance for non-GAAP product gross margin was minus $5 million to minus $8 million.\nOperating expenses in the third quarter on a GAAP basis were $182.9 million, compared to $209 million in Q2.\nOperating expenses in Q3 were about $8 million less than the low end of the range we've guided, mostly driven by timing of certain marketing programs that were pushed into Q4, lower legal expenses and lower travel and outside services.\nOperating expenses in the third quarter on a non-GAAP basis were $159.2 million, compared to $188.4 million in the second quarter.\nAnd the Q3 non-GAAP total was also below the range we projected and for the same reasons that I discussed in the GAAP expenses.\nOperating income in the third quarter was $34.1 million on a GAAP basis, or 13.8% of revenue, compared to $34.3 million or 11.3% of revenue in Q3 of last year.\nAnd last year's Q3 included a $30 million charge for restructuring mostly associated with an early exit from a leased facility.\nOperating income in the third quarter on a non-GAAP basis was $60.5 million, or 24.5% of revenue, compared to $85.9 million or 28.4% of revenue in Q3 of last year.\nIncome tax was a $27.4 million benefit in Q3 on a GAAP basis, and a $21.2 million benefit on the non-GAAP basis.\nThe Q3 income tax amounts include approximately $36 million of discrete benefits for a specific item that were resolved during the quarter.\nNet income on a GAAP basis in the third quarter was $67.3 million, or $0.66 per diluted share, compared to $39.6 million or $0.38 per diluted share in last year's Q3.\nNet income on a non-GAAP basis in the third quarter was $87.5 million or $0.86 per diluted share, compared to $79.3 million, or $0.76 per diluted share in Q3 of last year.\nFor both GAAP and non-GAAP net income in Q3 was above our original guidance, due to revenue being at the higher end of our range, operating expenses at the lower range and the favorable income tax that I discussed.\nDuring the third quarter, we generated about $134 million in cash from operations, which compares to about $91 million generated in last year's third quarter, and we ended the third quarter with a little over $1.1 billion in cash and investments.\nDuring Q3, we bought back about 500,000 shares of our common stock and ended the quarter with about $230 million of stock repurchase authorization still available.\nWe also announced today a cash dividend of $0.22 per share, which will be payable on August 26, 2020 to shareholders of record on August 17th, 2020.\nNow let's cover the outlook for Q4.\nThree months ago, when I went over the guidance for Q3, I highlighted the challenges that we are facing in the environment.\nConsumer demand was dropping, visibility was much more limited than usual, and industry data reports were not consistent or current.\nFast forward to now, we have updated TAM data for some of our end markets, but not all of them.\nCustomer visibility is still very limited and remember we won't have actual shipment data for the June quarter until all our customers send us the reports over the next few months and the economy is still pretty uncertain.\nSo with that as a backdrop, here's our current scenario for Q4, along with some key assumptions that we've embedded into the outlook.\nLet's start with products and services revenue, most of which goes into the cinema industry.\nThe screens are opening more slowly than we thought last quarter, so we are assuming that there will not be any significant uptick in equipment, purchasing activity from exhibitors in Q4.\nWe estimate that products and services revenue in Q4 could range from $10 million to $15 million.\nLet's talk about licensing.\nWe estimate that licensing revenue in Q4 could range from $215 million to $240 million, that's in comparison to the $235 million that we had in Q3.\nAs I look at the transition from Q3 actual to the Q4 outlook scenario, there is downward movement from timing of revenue under customer contracts.\nThis is not unusual, and I think of it as Dolby seasonality.\nIn other words, within the course of our fiscal year, we tend to have higher revenue in our Q2 and our Q3, and lower amount in our Q1 and Q4, and a lot of this is because of timing of revenue under various contracts.\nPartially offsetting it this year is an assumption that total unit shipments could increase modestly in Q4 over Q3 as consumer spending starts to improve.\nOur Q4 scenario assumes that there will roughly be a 5% improvement in unit shipments plus or minus blended across all device categories.\nFor Q4, we're also assuming very little revenue from Dolby Cinema box office share.\nSo to summarize, our scenario for total revenue in Q4 is a range of $225 million to $255 million.\nIf I compare that to last year's Q4 actual revenue of $299 million, the majority of the potential decline would be attributable to the economic ripple effect of the pandemic, and the remainder would largely be due to lower recoveries.\nGross margin for Q4 on a GAAP basis is estimated to range from 85% to 86%; and non-GAAP gross margin is estimated to be about 1 percentage point higher than the GAAP number.\nProducts and services gross margin will remain a negative territory in Q4, mainly because of fixed costs that are not fully covered at the lower revenue levels.\nAt the revenue range in the outlook I provided, products and services gross margin on a GAAP basis could range from minus $6 million to minus $9 million in Q4; and on a non-GAAP basis, it could range from minus $5 million to minus $8 million.\nOperating expenses in Q4 are estimated to range from $187 million to $197 million on a GAAP basis; and from $167 million to $177 million on a non-GAAP basis.\nOther income is projected to range from $2 million to $3 million for the quarter; and our income tax rate for the fourth quarter is projected to range from 19% to 21% on both the GAAP and non-GAAP basis.\nBased on a combination of the factors I just reviewed, we estimate the Q4 diluted earnings per share on the GAAP basis could range from five -- from about $0.05 to about $0.20; and then on a non-GAAP basis, we estimate, it would range from about $0.22 to $0.37.\nAnd as for the full-year, if you do the math, that would mean that our FY '20 revenue for the full-year could range from $1,115 million to $1,145 million; GAAP diluted earnings per share could range from $2.04 to $2.19; and non-GAAP diluted earnings per share could range from $2.76 to $2.91.\nWith the strength of our financial model, balance sheet and value proposition, Dolby continues to be well positioned to navigate through these challenging times.\nOur people continue to bring their creativity and passion to enable more Dolby experiences to more people around the world.\nWhile our Q3 revenues came in at the high-end of our scenarios, there is still a lot of uncertainty across many of the markets in which we operate.\nIn addition to lower consumer spending the pandemic has resulted in some shifts in the timing of new customer wins and revenues.\nAt the same time, our partners remain deeply engaged with enabling new Dolby Vision and Dolby Atmos experiences.\nAs consumer spending does return, we are confident that with our strong positioning across a broad range of devices and services, we will return to our path of driving revenue and earnings growth.\nOur formula for growth has always started with increasing the amount of compelling content available at Dolby.\nThe Dolby Vision and Dolby Atmos experience in movie and TV content has led to growing adoption across a broad range of devices.\nWe are also expanding the Dolby experience in areas such as gaming and music that broaden our value proposition and create more opportunities in device categories like mobile, PC and automotive.\nIn addition, we are beginning to address a growing population of content beyond premium entertainment, most recently with the launch of our development platform Dolby.io.\nAll of these gives us confidence in our ability to drive long-term growth.\nLet's turn to some of the highlights this quarter.\nAs people are watching a growing amount of streamed content, Dolby Vision and Dolby Atmos continues to be highlighted within the content that matters most to people.\nThe highly anticipated releases of Hamilton on Disney Plus and Greyhound on Apple TV Plus are both available in Dolby.\nThis quarter, we began to see the first titles in Dolby Vision on Google Play.\nAnd Hotstar, the largest streaming service in India, began to support Dolby Vision for Disney Plus content.\nThis quarter, we saw several partners adopt Dolby Vision and Dolby Atmos within their products.\nApple, which supports Dolby Vision and Dolby Atmos across most of their devices, announced that AirPods Pro will support Dolby Atmos with the release of iOS 14.\nSonos launched the Sonos Arc, their first soundbar that supports Dolby Atmos.\nFree, one of the largest Internet service providers in France, launched their first set-top box to support Dolby Vision and Dolby Atmos.\nAnd last month, Xiaomi launched their first TV supporting the combined experience.\nAdoption of both Dolby Vision and Dolby Atmos within TV is continuing to expand globally, most notably in India.\nThis quarter TCL, Sony, OnePlus and Nokia all announced new TV models in India supporting the combined experience.\nAlso, Panasonic expanded their adoption of Dolby Vision IQ to additional models in this quarter.\nIn FY '19, Dolby Vision was included on about 10% of 4K TV shipments, and we are on track to materially increase that adoption rate for fiscal '20 with a significant growth opportunity still ahead of us.\nOur strong presence in movie and TV content has enabled the initial option of Dolby Vision and Dolby Atmos within PC and mobile devices.\nBeyond that, we see a significant opportunity to accelerate the adoption by enabling more experiences on these devices, including gaming and music.\nRecently, title significantly expanded the number of devices that support Dolby Atmos music to include Dolby Atmos enabled sound bars and home theater equipment.\nWe are also seeing examples of how Dolby Atmos can create unique experiences across a wide range of music genres.\nThis quarter, we saw examples of classical music from John Williams, and recordings from the London Philharmonic Orchestra mixed in Dolby Atmos.\nEmpire, an independent label, began releasing music in Dolby Atmos from artists like Fat Joe and Remy Ma.\nThe music in Dolby experience elevates our engagement with partners and strengthen the value proposition for Dolby Atmos in existing device categories; such as mobile phones and creates new opportunities for us in areas such as automotive and smart speakers.\nLet me shift to Cinema.\nDuring the quarter, most cinemas remained closed with a few regions slowly beginning to reopen.\nThe closure of cinemas around the world has significantly reduced demand for our cinema products.\nWe believe that when Cinemas do begin to reopen, exhibitors will look to highlight their premium offerings and consumers will seek out the best experience.\nAnd there is none better than Dolby Cinema.\nLast month, the first Dolby Cinema in South Korea was opened with our partner Megabox.\nWe have also added our second partner that will bring Dolby Cinemas to Saudi Arabia, where we saw our first site opened just last week.\nAs we look ahead, we are excited by the unique opportunity to significantly broaden the content experience we addressed with Dolby technologies.\nDuring the quarter, we launched our developer platform Dolby.io.\nDolby.io enables developers to access Dolby technology to raise the bar on the quality of the media and communications experiences within their apps and services using our APIs.\nAmong our initial customers, we have seen the application across a wide range of use cases, including podcast, e-learning and telehealth.\nBeginning a few weeks ago, artists can optimize the quality of their music recordings with mastering on SoundCloud powered by Dolby's platform.\nWe are excited by the initial reception of Dolby.io, and by the potential to bring Dolby to the growing amount of media and communications content, it is part of our daily lives.\nTo wrap up, Dolby has a solid foundation with a strong business model and more than ever, people want immersive entertainment and communications experiences.\nThe quality of these experiences matter.\nWe continue to focus on growing the number of devices that support Dolby Vision and Atmos.\nWe will accelerate adoption and broaden the device categories that support the Dolby experience by enabling new forms of content like music and gaming.\nAnd we are excited by the opportunity to enable an even broader range of Dolby experiences most recently with the launch of Dolby.io.\nAll of these reinforces our belief in the opportunities that are still ahead of us and give us confidence in our ability to drive revenue and earnings growth.\n Assistant:", "chosen": "dolby laboratories q3 non-gaap earnings per share $0.86.\nq3 non-gaap earnings per share $0.86.\nq3 gaap earnings per share $0.66.\nsees q4 2020 revenue $225 million to $255 million.\nsees q4 2020 gaap earnings per share about $0.05 to $0.20.\nq4 diluted earnings per share is anticipated to range from about $0.22 to $0.37 on a non-gaap basis.\nfy diluted earnings per share is anticipated to range from $2.76 to $2.91 on a non-gaap basis.\n"}
{"prompt": "Human: I'm Pankaj Gupta, Dow investor relations vice president.\nAnd joining me on the call today are Jim Fitterling, Dow's chairman and chief executive officer; and Howard Ungerleider, president and chief financial officer.\nDow's Forms 10-Q and 10-K include detailed discussions of principal risks and uncertainties which may cause such differences.\nUnless otherwise specified, all financials, where applicable, exclude significant items.\nWe will also refer to non-GAAP measures.\nOn Slide 2, you will see our agenda for the call.\nJim will begin by reviewing our third-quarter highlights and operating segment performance.\nHoward will share our modeling guidance and outlook, and then Jim will recap our strategy for disciplined value growth that we outlined at our investor day earlier this month and why Dow continues to be a compelling investment opportunity.\nStarting on Slide 3.\nIn the third quarter, Dow achieved top and bottom-line growth, both year over year and sequentially.\nOur proactive storm preparations enabled us to maintain the safety of our team and community and recover quickly.\nWe delivered a 53% sales increase year over year with double-digit gains in every segment, business, and region.\nWe also recorded a 7% increase in sales over the prior quarter.\nWe captured strong price momentum, driven by tight supply demand balances across our key value chains, and we achieved volume growth of 2% both year over year and sequentially, supported by continued strong end-market demand despite supply and logistics constraints.\nWe increased operating EBIT by more than $2.1 billion year over year with improvements in all segments and businesses and $58 million higher sequentially.\nKey contributors included year-over-year margin expansion of 1,170 basis points, driven by price momentum and demand growth, and increased equity earnings, up $189 million, for margin expansion at our Sadara and Kuwait joint ventures.\nOur continued focus on cash generation and our balanced disciplined capital allocation enabled us to deliver cash flow from operations of $2.7 billion, up $958 million year over year, driven by margin expansion from price momentum in key value chains.\nWe returned a total of $918 million to shareholders through our industry-leading dividend of $518 million, plus $400 million in share repurchases.\nAnd we also reduced gross debt by more than $1.1 billion in the quarter.\nOur proactive liability management actions to tender existing notes have resulted in no long-term debt maturities due until 2026, and we've reduced annual interest expense by more than $60 million.\nOverall, Dow continues to deliver on its priorities, and we see further strength ahead as we benefit from a favorable macro backdrop and execute our disciplined strategy to decarbonize our footprint and grow earnings, driving significant value for all stakeholders.\nMoving to our segment performance on Slide 4.\nIn the packaging and specialty plastics segment, operating EBIT was $2 billion, compared to $647 million in the year-ago period.\nSequentially, operating EBIT was down $60 million.\nPrice gains in both businesses and in all regions led to margin improvement in the core business and increased equity earnings.\nOn a sequential basis, operating EBIT margins declined by 300 basis points on higher feedstock and energy costs.\nThe packaging and specialty plastics business reported a net sales increase year over year, led by local price gains in industrial and consumer packaging and flexible food and beverage packaging applications.\nVolumes declined year over year due to lower polyethylene supply as a result of planned maintenance turnarounds and weather-related outages in the quarter.\nCompared to the prior quarter, the business delivered price and volume gains on strong demand in industrial and consumer packaging applications, which were partly offset by hurricane-related outages.\nMoving to the industrial intermediates and infrastructure segment.\nOperating EBIT was $713 million, up $609 million year over year, primarily due to continued tight supply and demand in both businesses.\nSequentially, operating EBIT was up $65 million, and operating EBIT margins expanded by 50 basis points on volume and price gains in both businesses.\nThe polyurethanes and construction chemicals business increased net sales compared to the year-ago period with price gains in all regions on tight supply demand balances.\nVolume declines year over year primarily reflected the planned transition of a low-margin coproducer contract, as well as weather-related outages and third-party supply constraints.\nSequentially, the business delivered sales growth due to increased local price and volume from additional supply availability to meet resilient demand.\nThe industrial solutions business delivered a net sales improvement compared to the year-ago period with local price gains in all regions.\nVolume increased year over year on strong demand for materials in industrial manufacturing and energy applications.\nNet sales also increased sequentially, driven by volume growth, primarily in coatings and industrial applications from increased supply and local price gains in all regions.\nAnd finally, the performance materials and coatings segment reported operating EBIT of $284 million, up $209 million versus the same quarter last year as margins increased 750 basis points due to strong price momentum and robust demand recovery for silicones and industrial coatings offerings.\nSequentially, operating EBIT was up $59 million on price gains, leading to margin expansion of 210 basis points.\nThe consumer solutions business achieved higher net sales year over year with price gains in all regions.\nVolume increased over the prior year on stronger consumer demand for personal care, mobility and electronics offerings.\nSequentially, sales were down as price increases in all regions were more than offset by volume declines as a result of planned maintenance and third-party supply and logistics constraints.\nThe coatings and performance monomers business delivered increased net sales year over year as higher raw material costs and tight supply/demand balances led to price gains in all regions.\nVolumes were down year over year as demand recovery for industrial coatings was more than offset by weather-related outages and third-party supply and logistics constraints.\nSequentially, the business delivered local price gains in all regions, supported by increased volume due to continued strong demand for acrylic monomers and architectural coatings and increased supply availability.\nTurning to Slide 5.\nIn the fourth quarter, we see a continuation of robust demand growth across our packaging infrastructure, consumer, and mobility end markets.\nBrand owner inventory levels remain low.\nAnd as a result, we anticipate higher seasonal demand continuing into the holiday season this year.\nIn packaging and specialty plastics, we continue to see resilient demand for packaging applications and for our differentiated functional polymers.\nGlobal polyethylene supply remains constrained as the industry completes higher turnaround activity and supply chains recover from weather events on the U.S. Gulf Coast.\nWe exited the third quarter experiencing higher raw material and energy costs which we anticipate will likely persist through the fourth quarter.\nWe expect these costs to be an approximately $350 million headwind sequentially.\nDow will continue to utilize our broad geographic footprint and best-in-class feedstock flexibility to help mitigate these impacts.\nWe also anticipate a $175 million tailwind from turnarounds in the quarter as we completed our planned maintenance at our cracker in Canada.\nIn industrial intermediates and infrastructure, continued consumer demand for furniture and bedding, appliances, pharma, and home care are expected to keep supply tight in our key value chains.\nDue to the weather-related outages in the third quarter, some of our planned turnaround activity was moved to the fourth quarter.\nSadara will also start a turnaround at its isocyanate facility in the fourth quarter as well.\nAltogether, we anticipate $100 million in this segment from turnaround impacts.\nShort-term increased energy costs in the U.S. Gulf Coast and Europe are expected to be an additional $100 million headwind in the quarter.\nWe continue to see sequential recovery in industrial activity, particularly for energy applications.\nWe anticipate this recovery will continue at least through the fourth quarter as industrial production continues to ramp up from very low inventory levels to meet demand.\nIn performance materials and coatings, demand for electronics, mobility, building, and construction continues to outpace supply.\nDemand for architectural coatings is also expected to remain elevated due to persistently low inventory levels across the value chain.\nGlobal production for silicones has been impacted by the recent dual control policy enforcement actions in China, with silicone metal prices almost three times their previous highs.\nWe intend to pull forward a scheduled turnaround at a siloxane facility in Zhangjiagang in China to coincide with government actions to curtail power usage.\nOur current estimate for the quarter includes $125 million from increased raw material costs and turnaround impacts.\nWe'll continue to work on mitigating the impacts of rising raw material costs through our integrated position in both businesses.\nDespite higher raw material and energy costs in the fourth quarter, Dow will continue to leverage its advantaged global footprint, structural cost, and feedstock advantages, as well as our broad suite of differentiated products, to meet growing demand.\nOn Slide 6, as we look ahead, we expect robust economic growth to continue.\nWith the Delta variant slowing the reopening of economies around the world, there remains significant pent-up demand globally, particularly across our industrial and consumer end markets.\nMany industries continue to see elevated order backlogs, coupled with low inventory levels, as supply chain struggled to keep up with robust demand.\nThese supply chain disruptions are expected to persist, which will certainly prolong the ability to restock inventories across most value chains.\nAs a result, we expect tighter-than-forecasted market conditions to continue, a view strengthened by China's recent dual control policy that has impacted both cold olefins and methanol to olefins-based capacity, which represent more than 30% of China's total polyethylene production.\n2022 GDP growth forecasts are well above historical averages in most areas of the world as industries ramp up to match the robust consumer demand with further upside as global chip shortages continue to extend the recovery in manufacturing.\nCollectively, G7 countries have not yet fully recovered to pre-pandemic GDP.\nThis points to additional upside as economies return to more normalized consumption levels with degree of vaccination increasing, particularly in Asia, where levels remain low relative to the rest of the world.\nMoving to Slide 7.\nAt our investor day earlier this month, we outlined how our differentiated portfolio and our focus on sustainability-driven innovation will enable more than $3 billion in underlying EBITDA improvement across the cycle.\nOur restructuring program and digital investments will yield $600 million in increased EBITDA.\nBoth are in progress, and our restructuring program is on track to achieve its $300 million run rate by year end.\nWe also have a suite of higher return, lower risk, and faster payback capital and operating investments that will enable an additional $2 billion in EBITDA in the near term.\nAnd our investments to decarbonize and grow at our Fort Saskatchewan site in Alberta, Canada are also expected to deliver approximately $1 billion in increased EBITDA.\nAnd as we've already shared, we're executing against a favorable macro backdrop that we expect will continue to support constructive market fundamentals for our key value chains.\nTurning to Slide 8.\nYou'll see the detailed list of these low-risk growth investments.\nOur capital investments are expected to generate $1 billion in EBITDA through incremental capacity expansions, debottlenecking, and enhanced feedstock flexibility across our operating segments.\nWe're already making good progress.\nFor example, in packaging and specialty plastics, our Fort Saskatchewan expansion to add ethylene capacity of 65,000 metric tons per year to support growing polyethylene demand is now complete and will ramp by the end of the fourth quarter.\nOur FCDH pilot plant in Louisiana will start up in 2022, featuring 20% to 40% lower capex and 5% to 7% lower opex while reducing CO2 emissions by up to 20% compared to other PDH technologies.\nIn industrial intermediates and infrastructure, our debottlenecking project to add 60,000 metric tons per year of aniline will be fully online by year end.\nAnd earlier this year, we signed an MOU for a new South China hub to advance local supply and formulating capabilities to serve the fast-growing Asia-Pacific market.\nIn performance materials and coatings, we recently completed a capacity expansion at one of our silicone polymer plants.\nAnd by year end, we will complete a new silicone sealant compounding unit to enable sustainable solutions for high-performance building and infrastructure applications.\nAnd we are progressing our 50 kt methacrylate investment on the U.S. Gulf Coast to support global end markets, such as inks, resins, and packaging materials, which is scheduled to come online in the first half of next year.\nIn addition, our operating investments are also expected to generate another $1 billion in EBITDA as we improve our production capabilities and shift our product mix to higher growth and higher value markets.\nFor example, in industrial intermediates and infrastructure, we're increasing capabilities and shifting our mix toward higher-margin polyurethane systems for mobility and consumer applications.\nOur industrial solutions business is increasing capabilities to supply differentiated materials into the textile market.\nOur ECOFAST collaboration with Ralph Lauren lowers energy usage by 40% and water usage by 50% in the fabric dying process.\nAnd by 2025, the brand aims to incorporate this technology in more than 80% of its solid cotton products.\nIn performance materials and coatings, we're expanding our ability to formulate differentiated silicones for a number of attractive markets, including silicone adhesives for foldable displays in consumer electronics, thermal conducted silicone solutions for electric vehicles, and silicone solutions for 5G where the market is expected to more than double over the next 10 years.\nAnd we recently partnered with customers on high-value innovations like paper barrier coating applications that use our award-winning Rhobarr polyolefin dispersion technology and Callaway's Supersoft golf balls, which feature a new hybrid cover made with Dow's paraloid-impact modifier.\nIn packaging and specialty plastics, we're enhancing our extensive conversion and testing capabilities to commercialize residents through packaging design, speeding the innovation process, and expanding the addressable market for higher margin and more sustainable products.\nFor example, we're already benefiting from the nine-layer blown film extrusion line project completed this year.\nWe're also making investments to improve asset reliability, which will increase output and expand margins.\nAnd we're using digital technology for customer trials and process automation to accelerate catalyst development for new resins and processes like FCDH where we can typically be 100x more efficient than conventional experimentation.\nCollectively, our slate of near-term investments will generate an increase of approximately $2 billion in underlying EBITDA, and we intend to deliver this growth with a disciplined and balanced approach, maintaining our top quartile performance in cash flow, cost structure, debt reduction, and shareholder remuneration.\nTurning to Slide 9.\nThe strategy we outlined at our investor day builds on our long history of industry leadership.\nOur plan enables us to capture demand from sustainability drivers, achieve zero Scope 1 and 2 carbon emissions, and deliver meaningful underlying earnings and cash flow growth for years to come.\nOur path to decarbonize our footprint and grow earnings is a phased site-by-site approach that both retrofits and replaces end-of-life assets with low-carbon-emission facilities while also expanding our capacity.\nThis plan will deliver a 30% reduction in our CO2 emissions between 2005 and 2030 through a disciplined approach that manages timing based on affordability, macro and regulatory drivers around the world.\nOur Texas 9 cracker proves that we can do this and do it well.\nTexas-9 is 60% lower-carbon intensity than any asset in our fleet, and that's without any specific design for carbon capture or hydrogen.\nThe project was delivered with 20% better capital efficiency and 12 months faster than any other crackers built in that wave.\nOverall, the project has a 65% lower conversion cost, is running consistently at more than 110% of nameplate capacity, and has delivered greater than 15% return on invested capital since start-up.\nWe will leverage key learnings from Texas-9 as we plan to build the world's first-ever net-zero carbon emissions ethylene cracker and derivatives complex in Fort Saskatchewan, Alberta, delivering approximately $1 billion in EBITDA, as Howard outlined earlier.\nThis project will more than triple our ethylene and downstream derivative capacity at the site while decarbonizing emissions for 20% of our global ethylene capacity.\nWe selected this site due to the availability of carbon capture, infrastructure, advantaged feedstocks, and supportive government policies and incentives.\nOn Slide 10, as we capture these attractive growth opportunities, we will maintain our balanced and disciplined financial approach since spin.\nWe are committed to keeping capex at or below D&A, well below pre-spin levels while targeting return on invested capital above 13% across the economic cycle.\nWe will continue to align our capital spend to the macroeconomic environment, our affordability, and return targets.\nOur investments align to three categories: First, we'll maintain our foundation and maximize the return of our existing assets while ensuring safe and reliable operations.\nSecond, we'll execute our pipeline of faster payback, lower-risk incremental growth projects for downstream and sustainability-driven applications growing faster than GDP.\nAnd we'll invest approximately $1 billion per year to decarbonize our footprint and grow earnings.\nThese investments enable us to capture increasing demand for low carbon footprint products while derisking the enterprise with lower emissions assets.\nIn closing, on Slide 11, Dow is well-positioned to deliver significant long-term value for shareholders.\nWe have actions in place to both decarbonize our footprint and grow the enterprise as we achieve an additional $3 billion in underlying EBITDA, maintain industry-leading cash flow generation, and drive toward zero Scope 1 and 2 carbon emissions.\nOur balanced capital allocation approach targets more than 13% return on invested capital, keeps capex within D&A, and return 65% of net income to shareholders across the economic cycle.\nAll of this is underpinned by our industry-leading portfolio, cost position, and strong track record of innovation that enables us to deliver differentiated products and solutions for our customers and a more sustainable world.\nOperator, please provide the Q&A instructions.\n Assistant:", "chosen": "continue to see robust end-market demand that is expected to extend into 2022.\n"}
{"prompt": "Human: As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ materially from those implied by our comments today.\nThe third quarter was a strong one for DiamondRock.\nHotel profits hit their highest levels since the inception of the pandemic.\nIn fact, hotel RevPAR was within 20% of the comparable quarter in 2019 with 12 of our 31 hotels actually exceeding the comparable quarter results in 2019, and five hotels setting all-time highs.\nThe strength of these results exceeded our internal expectations.\nOur portfolio benefited from its geographic footprint and a concerted effort by our team to maximize the benefits from the resurgence in travel demand.\nOur portfolio took nearly 1,300 basis points of RevPAR index from our competitors in the third quarter.\nMoreover, having the industry's highest percentage of full service hotels, with short-term management agreements, also play to our advantage in managing cost and driving profit flow-through.\nIn total, this powerful combination enabled DiamondRock to generate a healthy $38.9 million of adjusted EBITDA and $0.10 of positive adjusted FFO per share.\nIn the quarter, we saw travel demand increase in all travel segments with leisure leading the way.\nAdditionally, group and business transient also showed meaningful acceleration.\nThere were some real positives for business travel trends in the quarter.\nWe saw BT revenue jumped to 84% of the comparable 2019 levels with occupancy up 26 percentage points over the second quarter.\nEncouragingly, business transient ADR was just 1% below Q3 2019 levels.\nThe outlook for group is equally encouraging.\nLead generation in the third quarter grew to over 12,400 leads, representing over 2.1 million future room nights.\nJuly was the best month for lead volume with over 750,000 room nights.\nWile the Delta variant that emerged late summer led to a drop off in activity in August, meeting plans appear to have shrugged off the headlines as production snapped back close to July pace by September.\nIn addition to strong operating trends, which Jeff will discuss in a moment, DiamondRock continues to make tremendous progress on internal and external growth initiatives to drive outsized cash flow growth in 2022.\nLet me highlight a few of the bigger ROI projects.\nOur Vail Resort accessioned $40 million repositioning.\nBy the end of this month, the resort will be relaunched as The Hythe Vail Resort and Spa, a Luxury Collection Hotel.\nThe repositioned resort is expected to generate several million dollars of incremental EBITDA.\nOur Barbary Beach Key West Resort will also complete its conversion in November.\nIt will be relaunched as the only Margaritaville Resort in the Florida Keys.\nWe expect the repositioning to allow us to push average rate by $15 and to generate several million dollars of incremental retail and bar sales.\nThe last ROI project I'll highlight is in Denver, where we are underway with the upbranding of the JW Marriott to a Luxury Collection Hotel to be named The Clio.\nThis one should be completed in the first quarter of 2022.\nThese ROI repositionings are expected to deliver IRRs north of 30%.\nAs you might have guessed, we are big believers in these type of projects, and our past success gives us great confidence.\nAs a testament to DiamondRock's track record, I'm proud to announce that The Gwen was named in Conde Nast Travelers 2021 Readers Choice Awards as the number 1 hotel in Chicago, and number 8 in the world.\nThe highest ranking of any REIT owned hotel.\nIn addition to The Gwen, Conde Nast also recognized several of our other outstanding hotels, including Cavallo Point in Sausalito, both of our hotels in Key West and L'Auberge's Resort in Sedona, Arizona.\nAs a final comment on ROI repositionings, I'll just mention that we are working on several other upbranding opportunities within the portfolio.\nWe hope to share those with you in coming months.\nLet's turn to acquisitions and dispositions.\nWe have been active in upgrading and focusing the portfolio.\nIn the third quarter, we successfully recycled proceeds from our second quarter dispositions.\nOur two new acquisitions are the Bourbon Hotel in the French Quarter of New Orleans and the Henderson Park Inn, a beach front resort in Destin, Florida.\nThese acquisitions align with our strategy to focus on hotels that resonate with today's traveler as they are experiential and leisure-oriented lifestyle hotels.\nI am pleased to announce that both hotels are forecasted to exceed our underwriting for 2021.\nIn fact, the Destin Beach Resort, that deal is now tracking to be an 8.8% cap rate on 2021 NOI.\nWhile this is great, we are not resting on our success.\nWe are actively pursuing several unique hotel investment opportunities that are located in attractive lifestyle markets.\nI'll start by highlighting DiamondRock's excellent liquidity, we finished the quarter with $538 million of total liquidity, comprised of $67 million of corporate cash, $71 million of hotel-level cash and $400 million of capacity on our revolver.\nLeverage is conservative with only $1 billion of total debt outstanding against roughly $3.5 billion in hotels and resorts.\nOverall, the balance sheet remains very strong.\nAs Mark mentioned, we expect to remain an active but disciplined acquirer of on-strategy properties.\nWe have over $300 million of investment capacity today while operating within our long-term leverage targets.\nLet me share a few success stories in our portfolio this quarter.\nMidweek occupancy at our urban hotels was up 26 percentage points over the second quarter.\nThe upbranding of The Lodge at Sonoma to the Autograph Collection has been very well received.\nSince completion early in the third quarter, total RevPAR is nearly $460 a night with ADR up over $100 a night from the second quarter.\nThird quarter ADR is 22% higher than 2019, whereas prior to renovation, ADR was 4% below 2019.\nPerformance has exceeded our expectation and The Lodge is expected to meaningfully exceed our budget for 2021.\nThe Hilton Burlington generated one of the three biggest upsides to budget during the quarter on strong RevPAR and margin gains.\nAverage daily rate was over $300 per night and among the 10 best in the portfolio.\nFor those who have never been, Burlington is a terrific college town that has quietly evolved into a foody destination anchored by some of the highest-rated craft breweries in the United States.\nOur pair hotels in Key West continued to deliver strong performance with third quarter EBITDA margins 3,000 basis points above 2019 levels.\nI must recognize the Henderson Park Inn, our newest acquisition for beating our underwriting with the third highest total RevPAR in the quarter, $777 a night, $777s.\nThird quarter would have been even better, if not for the impact of wildfires in Northern California, which forced a six-week closure at The Landing at Lake Tahoe and resulted in $1.8 million of lost profit.\nThe resort is fine and back open now.\nWe filed an insurance claim and hope to collect lost profits in coming months.\nAs for our Bourbon Hotel, I should note that while Hurricane Ida did impact New Orleans, we were fortunate not to have any material damage.\nIn fact, our team quickly restored power to the Bourbon Hotel, one of the first hotels back online in New Orleans, allowing us to opportunistically book first responders.\nWe expect to beat original underwriting here for 2021.\nLet's talk about profit flow-through and labor costs.\nThird quarter wages and benefits were 30.4% of revenue, just 50 basis points higher than 2019 owing to a 2% improvement in man hours per occupied room.\nDespite slightly higher overall labor costs, our asset management team and operators were able to develop several creative offsets to maximize overall profitability by optimizing revenue management for the labor environment.\nThis is how we held gross operating profit flow-through at a constant 45% in the third quarter versus the second quarter and why comparable third quarter hotel EBITDA margins were up over 300 basis points from the second quarter.\nWe think this is a great result in this environment.\nTurning to Group, our geographic footprint is a real advantage for Group trends in 2022 and beyond.\nGroup revenue on the books for 2022 increased 14% from the second quarter, an acceleration from 8% in Q2.\nGroup revenue on the books for 2022 is now nearly 50% above the forecast for 2021.\nGroup rates for 2022 are $50 a night higher than 2021 year-to-date, owing to the fact many of DiamondRock's key group markets like Boston, Chicago, San Diego and Phoenix have strong convention calendars next year.\nAcross the entire portfolio, citywide room nights for 2022 increased 7% from the second quarter.\nAnd compared to 2019, citywide room nights for Boston, Chicago and San Diego collectively are up 3% in 2022 and up 5% in 2023.\nWith that, let me turn the floor back to Mark for concluding remarks.\nRecently, DiamondRock was again named the hotel sector leader by GRESB and number one among all lodging repeers.\nBeing a good corporate citizen and aligning these objectives with our business is a high priority for DiamondRock.\nLet's turn to DiamondRock's setup for 2022 and beyond.\nWe think DiamondRock has four major competitive advantages over many of the peers.\nFirst, our portfolio market exposure is uniquely favorable in three ways.\nWe have numerous resorts, benefiting from the boom in leisure travel, our well-located urban properties are poised to expand on group and business transient trends as the second leg of the recovery kicks in, and our Group recovery should be above industry average because of our geographic footprint with the convention calendars in our most important group markets all very strong through 2023.\nThe second advantage we have is the multiyear benefit from our hotels that have recently completed repositionings, such as The Lodge at Sonoma, The Hythe Vail, Margaritaville Key West and The Clio, Denver.\nThe third advantage is our industry-leading percentage of third-party terminable operating agreements.\nThis gives us more control and ability to manage costs in many of our peers.\nThis benefit is amplified by last year's conversion of nearly 20% of our portfolio from Marriott brand management, which should add over 50 basis points of portfolio margin expansion alone.\nThe last advantage I'll point out is our best-in-class asset management team's ability to implement strategies to gain market share.\nThere is no better evidence than stealing nearly 1300 basis points of share last quarter.\n Assistant:", "chosen": "compname reports q3 adj ffo per share of $0.10.\nq3 adjusted ffo per share $0.10.\n"}
{"prompt": "Human: Also joining me on the call today are Rick Muncrief, our president, and CEO; Clay Gaspar, our chief operating officer; Jeff Ritenour, our chief financial officer; and a few other members of our senior management team.\nWe appreciate everyone taking the time to join us on the call today.\nFor Devon Energy, 2021, as a transformational year that can best be defined by our willingness to be a first mover and pursue bold strategic consolidation.\nOur operational excellence and unyielding commitment to capital discipline, and the groundbreaking deployment of our industry-leading cash return business model, underpinned by our fixed plus variable dividend.\nThis transaction was perfectly timed at the very bottom of the cycle and set the groundwork for Devon's significant value creation during the year.\nWith this Advantage platform, we executed on her Delaware focused operating plan and captured cost synergies that resulted in $600 million of annual cash flow improvements.\nThese margin expansion efforts, combined with a disciplined capital allocation framework that prioritize value over volumes, resulted in Devon generating the highest level of free cash flow in our prestigious 50-year history.\nWith this powerful stream of free cash flow, we delivered on exactly what our shareholder-friendly business model was designed for, and that is to leave the industry in cash returns.\nAs you can see on the graphic, we rewarded shareholders with outsized dividends, opportunistic share buybacks, and we took meaningful steps to strengthen our investment-grade balance sheet.\nThis disciplined execution was rewarded by the market, with our share price achieving the highest return of any stock in the entire S&P 500 index during 2021.\nI am so very proud of what we accomplished, and I want to extend my sincerest gratitude to everyone involved.\nOur team comprehensively executed on the tenets of our strategy while responsibly providing our nation with a low-cost and reliable energy source, that is the lifeblood of our a modern economy.\nNow turning to slide six, while 2021 was a record-setting year for Devon, the setup for 2022 is even better.\nWith the operational momentum we've established, we have designed a capital program to efficiently sustain production at a ultra-low WTI breakeven funding level of around $30 a barrel.\nCombined with the full benefit of merger-related costs synergies and a vastly improved hedge book, we're positioned to deliver free cash flow growth of more than 70% compared to 2021.\nAs you can see on the graph, the strong outlook translates into a free cash flow yield of 14%, assuming an $85 WTI price.\nPlay will run through the details of our operating plan later but simply put, we expect 2022 to be another great year for Devon.\nTurning your attention to slide seven, with this significant stream of free cash flow, the top priority for our free cash flow is the funding of our fixed plus variable dividend.\nThis cash return strategy is a staple of our capital allocation process, allowing us to return meaningful and appropriate amounts of cash to shareholders across a variety of market conditions.\nWith this differentiated framework, we've increased Devon's dividend payout for five consecutive quarters, and in aggregate, we paid out $1.3 billion of dividends in 2021, which is a per share increase of roughly two times that of 2020.\nImportantly, we expect our dividend growth story to only strengthen in 2022.\nAs you can see on the bar chart, we're on pace to essentially double our dividend again in the upcoming year, which equates to around 8%.\nI would like to highlight that this attractive yield includes a substantial increase to our fixed dividend that we announced last night.\nThere's 45% increase in the fixed dividend reflects the confidence we have in our underlying business and financial performance as we head into 2022.\nNow Slide nine, I want to briefly showcase how our unique dividend policy offers a quite compelling alternative for yield-seeking investors.\nTo demonstrate this point, we've included a simple comparison of our estimated dividend yield in 2022 compared to other commonly referenced yields in financial markets.\nAs you can see, Devon's yield of 8% is approximately six times higher than the S&P 500 index, and well in excess of the prevailing interest rate you can get from a 10-year treasury.\nOn Slide 10, in addition to our market-leading dividend payout, we're also excited to announce that we are increasing our share repurchase authorization by 60% to $1.6 billion.\nAt a multiple of less than five times cash flow, we believe our business trades at a substantial discount to the intrinsic value, especially given the structural improvements we've made to expand margins and returns.\nGiven this favorable setup, we put our money where our mouth is by aggressively repurchasing $589 million of shares just in the fourth quarter alone.\nWith the board expanding the capacity of our repurchase program, we will continue to be opportunistic buyers of our stock throughout the upcoming year.\nAnd lastly, the diagram on Slide 12, I believe, does a great job of summarizing what we've created here at Devon.\nWe've assembled a high-quality asset portfolio, and a team that has worked incredibly hard to deliver on our commitment to expand margins, and deliver growth, and free cash flow, accelerate our cash returns with our market leading dividend payout, enhance per share growth with opportunistic buybacks, and take consistent and meaningful steps to further enhance our financial strength.\nWhile 2021 was a record year, we're only getting started.\nAt Devon, we have the right mix of assets, proven management, the right team, and a shareholder-friendly business model designed to continue to lead the energy industry and capital discipline, and cash returns.\nAnd with that, I'll now turn it to Clay for the call to continue and provide an overview of our recent operational results and upcoming capital plan.\nAs Rick touched on, 2021 was a pivotal year for Devon, that demonstrated the power of our asset portfolio and the capabilities of our talented organization.\nAcross the portfolio, our team delivered results that exceeded production and capital efficiency targets, while continuing to drive down per-unit operating costs and improving margins.\nResults matter, and while I don't take any of these accomplishments lightly, I'm equally proud of the way that we were able to accomplish these financial metrics.\nOvercoming the challenges of the merger, pandemic, and supply chain issues we built a unified culture took many best practices from both legacy companies, and we're now poised for further leverage of those collective wins.\nThe first key point that is there is no change to the upstream capital budget of $1.9 to $2.2 billion as we disclosed last quarter.\nWhile inflation is an absolute reality, our teams have done a good job of working with our service companies, mitigating escalations where we can, and quantifying the remaining impact or forecast.\nThe great thing about a cyclical business is that if you're paying attention, you should have a pretty good idea of what the most critical thing is to focus on in anticipation of the next phase.\nAt this point in the cycle, we're focused on listening to our service company partners and helping them help us be successful.\nIn this very tight supply chain market, the key phrase we hear is predictable and reliable.\nYou'll notice that our 22 program looks quite a bit like our 21 program.\nThis is what has allowed us to telegraph to our service companies, midstream partners, and other key stakeholders to expect more of the same.\nThat predictability allows them to plan their own supply chain work, and the reliability allows them to know that we're going to do what we say we're going to do.\nRelationships are one of our core values at Devon, and this listening and working with our critical partners is an example of that value in action.\nThe relatively steady level of activity in 22 is projected to sustain our production throughout the year, ranging from 570,000 to 600,000 Boe per day.\nDuring 2021, we had great success with our capital program that resulted in production growth rate of 34% compared to our first quarter 21.\nIt's high margin growth was driven by consistent execution and outstanding well productivity that was headlined by several memorable projects such as Danger Noodle, Boundary Raider, and Fiscal Cobra, to name a few.\nEach of these prolific projects eclipse 30-day rates of more than 5,000 Boe per day on a plural basis, exhibiting the world class reservoir potential that resides in the Delaware Basin.\nIt's important to note, the strong volume performance in 2021 was paired with excellent capital efficiency and substantial additions to our approved reserves.\nWhile I would never point to a single year of reserves booking as the measure of success with consistent and reasonable conservative booking processes, which we have, it can provide insight into the quality of the underlying assets.\nAt year-end, our proved reserves in the Delaware increased 18% on a Pro Forma basis, and these reserve additions replaced more than 200% of what we produce during the year.\nI find it especially impressive that our team added these reserves and an ultra-low F&D cost of only $5 per Boe.\nThis result is just another example how advantaged and sustainable our resources in the Delaware Basin.\nTurning your attention to the map on the right, you can expect more of the same for us in 2022.\nYou have a great slate of projects lined up to execute on, and once again, most of our program will consist of the high impact opportunities focused on developing Upper Wolfcamp and Bone Spring Zones, and to a lesser degree, the wolf is going to be Avalon targets as well.\nTo execute on this plan, we expect to run 14 rigs in 4 [inaudible] during the year.\nThis capital activity will be diversified across our acreage footprint with sweet spots in Southern Lea and Eddy County, and state line receiving most of the funding.\nNot only with this level of activity continuing to grow Delaware production in 22, but the benefits of our operating scale and best practices from the merger integration, we are well-positioned to continue to improve our execution capabilities.\nAs you can see on the slide, with the efficiencies captured in the Delaware, the team has essentially doubled the productivity of our rig and frac equipment compared to just a few years ago.\nThe operational improvements have also meaningfully reduced our cost over time to about $550 per lateral foot in 2021, which competes very well with anyone out there.\nAs I look ahead to 22, I expect our operational performance to continue to improve.\nOur team consistently is identifying new ways to leverage technology, operational breakthroughs, and industry best practices.\nInflationary pressure and supply chain disruptions are reality.\nBased on today's industry activity and commodity price projections, we've baked in around 15% higher costs than we saw in 2021.\nWe have been, and continue to be focused on consistency, planning, and staying out in front ahead of these in reacting to any unforeseen issues.\nThis work will be even more critical as the market continues to tighten.\nOn Slide 17, the next area I want to showcase is the momentum we're building in the Anadarko Basin, where we have a concentrated 300,000 net acre position in the liquids rig window of the play.\nWith the benefits of our $100 billion Dow JV Kerry, we drilled over 30 wells in 2021 and commenced the first production on 16 of those wells during the year.\nAs you can see on the charts, on the right, the initial capital efficiency is excellent.\nWith the benefit of state-of-the-art completion designs, and appropriately up spaced developments, per well capital cost of decrease by 25% versus legacy activity and well productivity to date has exceeded the type curve expectations by 35%.\nWith the strong execution, the carried returns we're seeing from this activity will compete for capital with any asset in our portfolio.\nGiven the success, we've elected to step up activity in the Anadarko Basin to 3 rigs and 22.\nThis program will result in around 40 new wells coming online in 2022, allowing us to maintain steady production profile throughout the year and harvest significant amounts of free cash flow.\nCollectively, these assets generated more than a billion dollars of free cash flow in 2021, and we're on pace to produce a similar amount of free cash flow in 22.\nWe also remain some of the best returns in our portfolio.\nThe team has continued to unlock additional locations and has leveraged company best practices to significantly improve our ESG footprint.\nOur Eagle Ford Asset continues to deliver solid returns.\nThe team is doing some very exciting work to unlock additional locations and a very significant refract potential.\nThe Powder, is a basin with the most upside yet to unlock.\nOur team is making great progress in that regard by driving laterals longer to three miles and rebooting the stimulation design, we're seeing very encouraging results.\nI'm proud of what these assets are delivering, and I appreciate the team's hard work and effort that goes into fulfilling this important role within our portfolio.\nAs many of you are aware, we set aggressive emissions reductions targets last year that covered a myriad of near, mid, and long-term priorities.\nIn addition, to ensure our organizational alignment, we directly tied progress on these targets to our annual compensation program.\nWe've also dedicated a board committee to engage in our ESG goal-setting process, performance, and reporting.\nSince the announcement of these environmental targets, we've taken immediate action and delivered results.\nWe do not have finalized figures yet for this past year, but I can tell you our scope 1 & 2 GHG emissions will improve roughly by 20% in 2021 versus our 19 baseline, well ahead of that, stated the stated goals from this past summer.\nTwo of the key successes on reducing overall emissions is reducing methane emissions, and reducing flaring.\nIn 2020, we reduced methane emissions by 47% and we reduce flaring by 33%.\nI expect this positive rate of change to continue.\nLooking specifically at 22, we have many visible catalysts that will drive important results, such as advancing advancements and leak detection technologies, improved facility design, facility retrofits, wide-scale deployment of air-driven pneumatic controllers, and electrification of select field operations.\nI believe that it's also important to point out that these efforts are focused on changes that will not only improve our ESG metrics, but will also improve our overall operations.\nBy focusing on these operational wins, we further align our organizational focus and excitement around ESG improvement.\nMy comments today will be focused on the key drivers of our financial results in 2021, and also provide some insights into our 2022 outlook.\nBeginning with production, our total volumes in the fourth quarter averaged 611,000 Boe per day, exceeding the midpoint of our guidance by 3%.\nThis production B was across all products, with the most significant outperformance coming from NGLs, where processing and economics were exceptionally strong during the quarter.\nIn the upcoming quarter, we expect production to approximate 570,000 Boes' per day.\nWe expect this to be our lowest production quarter of the year due to winter weather downtime that reduced volumes by about 15,000 Boe per day.\nAll winter-related curtailments are back online, and we expect no impact to our full-year production estimates.\nMoving to expenses, our lease operating GP&T costs exceeded 2021 at a rate of $7.25 per barrel.\nThis result represents a 1%t decline compared to where we started the year, but with slightly elevated compared to our forecast.\nAs you might expect, we experienced moderate pricing pressures across several service and supply cost categories in the quarter, and we are also incurred a non-recurring charge to GP&T expense in the Eagle Ford.\nAnother key variance was higher work-over activity, which contributed to our strong production results in the quarter.\nOverall, our exposure to higher-value production, coupled with the low-cost structure, expanded Devon's field level cash margin to $42.37 per barrel, a 14% increase from last quarter.\nJumping to corporate cost, we did a great job of improving this expense category in 2021.\nIn aggregate, G&A and financing costs declined 31% year over year on a pro forma basis due to lower personnel cost and the company's ongoing debt reduction program.\nThese structural improvements will carry over into 2022 and act as an ongoing annuity for years to come.\nCutting to the bottom line, Devon's core earnings increase for the sixth quarter in a row to a $1.39 per share.\nThis level of earnings momentum translated into operating cash flow of $1.6 billion in the fourth quarter.\nafter funding our disciplined maintenance capital program, we generated $1.1 billion of free cash flow in the quarter.\nThis represents growth in free cash flow of more than 400% compared to where we started the year after closing the WPX merger.\nThe top priority of our free cash flow is the funding of our dividend.\nAs Rick covered earlier, in conjunction with our earnings report, we announced a fixed plus variable dividend of $1 per share that is payable in March and includes the benefit of our 45% raise to the fixed dividend.\nThis payout represents the highest quarterly payout in Devon's history.\nAnother avenue that we're returning cash to shareholders through is the execution of our share repurchase program.\nSince we initiated the program in November, we're off to a great start by repurchasing $14 million shares at a total cost of $589 million.\nThis equates to an average price of $42 per share, which is around a 25% discount to our current trading levels.\nWith the board expanding our share repurchase program to $1.6 billion, we now have roughly $1 billion remaining on this authorization, and we expect to continue to opportunistically buy back stock in 2022.\nWe also have returned value to shareholders through our efforts to reduce debt and improve the balance sheet.\nIn 2021, we made significant progress strengthening Devon's financial position by retiring more than $1.2 billion of outstanding notes, and we achieved our net debt to EBITDA target ahead of plan, exiting the year at less than a turn of leverage.\nAt today's pricing, we expect our leverage to trend even lower in 2022 pushing toward a zero net debt balance by year-end.\nAnd lastly, I do want to highlight that our disciplined strategy is also resulting in excellent returns on capital employed.\nIn 2021, we achieved a 20% return on capital employed, and we are positioned for this measure to substantially increase in 2022.\nThe strong rate of change we are delivering with ROCE, combined with our cash return framework, further differentiates Devon versus other opportunities in the market today.\nIn summary, 2021 was a banner year for Devon.\nWe delivered on exactly everything we promised and then some.\nNow, as we shift our focus to the upcoming year, I want to be clear that there is no change to our cash return playbook.\nIt will be more of the same.\nWe will be relentlessly focused on delivering high returns with capital employed, margin expansion, accelerating free cash flow growth, and returning excess cash to shareholders.\nOur talented team here at Devon take great pride in leading the industry in this discipline operating framework, and when coupled with the development and deployment of two net of new technologies.\nSimply put, we are very energized and ready to roll in 2022.\nI sincerely hope you can now appreciate how we've delivered on the vision that Dave Hager and I, along with our respective teams, had when we announced our merger in September of 2020.\nWe wanted to create something truly special and we feel that we've done just that.\nWe'll now open the call to Q&A.\nPlease limit yourself to one question and a follow-up.\nWith that operator, we'll take our first question.\n Assistant:", "chosen": "qtrly adjusted core earnings per share $1.39.\ndevon\u2019s total production averaged 611,000 oil-equivalent barrels (boe) per day in the fourth quarter.\nproduction in q1 of 2022 is estimated to be reduced by 3 percent or 15,000 boe per day due to the impact of severe winter weather.\nexpects production to approximate 570,000 boe per day in the first quarter.\n"}
{"prompt": "Human: I'm pleased that you're joining us for DXC Technology's second quarter FY '22 earnings call.\nOur speakers on the call today will be Mike Salvino, our president and CEO; and Ken Sharp, our executive vice president and CFO.\nIn accordance with SEC rules, we provide a reconciliation of these measures to their respective and most comparable GAAP measures.\nA discussion of these risks and uncertainties is included in our annual report on Form 10-K and other SEC filings.\nToday's agenda will begin with an update on our Q2 performance, which shows hard evidence that we are delivering on our transformation journey and building the foundation to make DXC operationally efficient, sustainable and ultimately grow.\nNext, I will provide you with additional insights as to the operational work we are performing as we execute our transformation journey.\nThen I will hand the call over to Ken to share our Q2 financials, guidance and more details of the financial results driven by our strong operational execution.\nRegarding our Q2 performance, our revenues were $4.03 billion.\nOur organic revenue growth continued to show progress as we improved from minus 3.7% in Q1 to minus 2.4% in Q2.\nAlso, I was very pleased to see that the GBS business segment grew for the second quarter in a row from positive 2% in Q1 to positive 3.4% in Q2.\nWe also continue to improve the organic revenue of the GIS business segment from minus 9.1% in Q1 to minus 8% in Q2.\nNow all of these results show our organic revenue is on the right trajectory.\nOur adjusted EBIT margin was 8.6% and was driven by the operational work that we are doing to optimize our business.\nThis is the third straight quarter of both improving organic revenue growth and sequential margin expansion, and we expect both trends to continue in Q3.\nBook-to-bill for the quarter was 0.91, which came in below our goal of one due to the timing of a couple of deals.\nI'm happy to report that both deals are hybrid cloud/ITO deals and are now closed.\nWe continue to track to a book-to-bill over one year to date, and we expect to be back above 1.0 in Q3.\nOur non-GAAP earnings per share was $0.90 in the quarter, which is up $0.41, as compared to $0.64 a year ago.\nFinally, we are encouraged by the strength of our Q2 free cash flow, which moved us into positive territory.\nOn a year-to-date basis, we have now produced roughly $100 million in cash.\nNow let me turn to the progress we are making on our transformation journey.\nThe first step is inspire and take care of our colleagues.\nWe are executing a people-first strategy, and attracting and retaining talent is fundamental to enable our growth.\nWe know our strategy is working.\nWe saw a higher percentage of our employees complete our September employee engagement survey, and we are showing improved and stable engagement scores.\nThese engagement scores give us confidence that we have a motivated workforce, and we will be able to manage attrition, which we've seen an uptick.\nTo offset this increase in attrition and demand, we hired and onboarded more colleagues than any other quarter since I became CEO.\nKey advantage to our hiring efforts is that we have implemented and are running a virtual-first model.\nHiring has been a focus for us and will continue.\nWhile hiring improved, we left some open demand and project work unconverted.\nAnd we are focused on capturing this moving forward.\nFocus on the customers is the second step of our transformation journey and continues to be the primary driver of our success in improving our organic revenue growth.\nA key metric that we measure is our Net Promoter Score, and we are seeing continued improvement.\nThe last time we gave you our NPS score was during the Investor Day in June, and it was 18, almost within the industry best practice range of 20 to 30.\nCurrently, our 12-month rolling NPS score is at the midpoint of the best practice range.\nThis is the most positive our customers have been since I arrived.\nThis improvement is due to our strong service delivery and gives us the ability to sell up the enterprise technology stack from our GIS business to our GBS business.\nNow let me remind you that the way we will get to grow is to deliver the GIS services that are critical for our customers and build trusted relationships.\nOnce these trusted relationships are built, we can move our customers up the enterprise technology stack toward the services of our GBS business.\nThis is exactly what we are doing.\nAnd the organic revenue trajectory of GIS, GBS and the overall business is great evidence that this strategy is working.\nNow let me turn to our cost optimization program.\nWe continue to make progress in optimizing our cost and delivering for our customers without disruption.\nI've already commented on some of the operational work we are doing like motivating our colleagues, hiring new talent and implementing a virtual-first model.\nIn addition to this work, we are also improving the efficiency of our service delivery, implementing better IT tools and actively managing our real estate footprint.\nLet me provide you with some additional color considering the operational work we are doing with real estate.\nThis quarter, we closed our Tysons facility and are moving to a much smaller footprint in the D.C. area, where our colleagues that need to come into a facility will share a space versus having dedicated space.\nThis work emphasizes our commitment to a virtual-first model, reduce our carbon footprint and represents our desire to maintain a much smaller real estate footprint.\nJim will detail out the financial results of all of these operational work that, simply put, this work is allowing us to improve margins from 8% in Q1 to 8.6% in Q2 and gives us the confidence to increase our margin and earnings per share guidance for FY '22.\nNext, seize the market is where we are focused on cross-selling for our existing customers and winning new work.\nAs I previously mentioned, we had two significant deals slip into Q3 and are now signed.\nThe great news about these deals is they were both hybrid cloud/ITO deals with long-standing customers.\nSpecifically, we are helping these customers modernize their existing IP estate and building new private cloud capability to run their mission-critical applications.\nIn Q2, 59% of our bookings were new work and 41% were renewals.\nThe new work continues to increase due to the focus on another piece of our strategy, which is our platinum customer channel.\nTaking our offerings through this channel is another key foundation piece for growth.\nWe are now starting to see evidence that we are being successful taking Luxoft, which drives our Analytics and Engineering services through our platinum customer channel.\nThe evidence is that Analytics and Engineering grew 17.3% in Q2, which is clearly helping us create growth in our GBS business segment.\nNow let me give you an example of what the Platinum customer of the future looks like at DXC.\nWe have a 14-year relationship with one of the world's largest specialty retailers.\nNow before I arrived and implemented the strategy, our revenues were roughly $80 million per year, split a third GBS and two-thirds GIS.\nBy continuing to deliver our GIS services for this customer, we are offering the opportunity to sell our GBS services.\nThe result is we have increased the total revenue on this account by 13%, and the mix between GBS and GIS is now split 50-50 as we are now providing them Analytics and Engineering services.\nWe're in the early innings of this strategy, but we feel confident that we can implement this approach to our other Platinum customers, successfully delivering GIS services and growing GBS services to have the same or more revenue at better margins.\nTurning to our quarterly financial performance on Slide 11.\nAs you can see, our progress continues.\nOur organic revenue improved to a decline of 2.4% or a 130 basis point improvement from Q1.\nThis represents our third consecutive quarterly improvement.\nAs you can see, we have come a long way from double-digit organic revenue declines in Q1 FY '21 to low single-digit declines in FY '22.\nOur adjusted EBIT margin continues to improve as well, delivering 8.6% in Q2, up 60 basis points as compared to the first quarter.\nYear over year, our adjusted EBIT margins have expanded 240 basis points or 460 basis points, excluding the disposed businesses.\nOur book-to-bill for Q2 was 0.91, below our goal of one due to timing and remains over one year to date.\nFurther, we expect to deliver a book-to-bill of over one for Q3 and for the full year.\nNon-GAAP diluted earnings per share was $0.90, up $0.06 from Q1 and a healthy 41% increase as compared to the prior year.\nOur earnings per share expanded due to increased margins, lower interest expense and a lower tax rate.\nMoving to our segment results on Slide 12.\nOur GBS segment continued its strong growth performance, posting its second quarter of positive organic revenue growth of 3.4%, an improvement from 2% in the first quarter.\nThe GBS growth is a positive sign as we continue to deliver higher value for our customers.\nOur GBS business has higher margins and lower capital intensity.\nSo as we grow this business, it has a more positive impact on margins and cash flow.\nOur GBS margin was 15.9%, up 150 basis points compared to the first quarter and up 180 basis points compared to prior year.\nOur GIS segment organic revenue declined 8%, a full 110 basis point improvement compared to the first quarter and improved 380 basis points compared to the decline from prior year.\nGIS margins were 5.5%, an improvement of 390 basis points compared to prior year.\nTurning to the enterprise technology stack.\nAnalytics and Engineering revenue was $520 million, up 17.3%.\nAnalytics and Engineering book-to-bill was 0.95 and 1.13 year to date.\nWe continue to see high demand in this area.\nThe Applications layer was up 1.5%, book-to-bill was 0.94 and 1.13 year to date.\nBPS, our smallest layer of the enterprise technology stack, at $118 million of revenue, was down 13.7%.\nBook-to-bill was 0.69 and 0.91 year to date.\nCloud and security revenue was $521 million, down 1.5%.\nBook-to-bill was at 0.8 in the quarter and 0.82 year to date.\nIT Outsourcing revenue was $1.05 billion, down 9.6%.\nITO book-to-bill was 0.81 and 0.92 year to date.\nWe expect our ITO decline to continue to gradually moderate as we move through FY '22.\nThe two deals Mike mentioned earlier that slipped out of Q2 that were subsequently closed were in the ITO and Cloud and Security layers of our technology stack and would have boosted our GIS book-to-bill for the quarter to over 1.1.\nLastly, Modern Workplace revenues were $581 million, down 10.9% as compared to prior year.\nThis is an improvement from last quarter when Modern Workplace was down 19.7% year over year.\nBook-to-bill was 1.2 and 1.1 year to date.\nNext up, let me touch on our efforts to build our financial foundation.\nThis quarter, we made particularly strong progress on strengthening our balance sheet and solidifying our financial position, cash generation and reducing restructuring and TSI expense.\nAs Mike pointed out earlier, we've made measurable improvements driving our business to improve our financial foundation that will ultimately allow us to increase our deployable cash affording us more opportunities to create value.\nWe reduced our debt from $12 billion to $5.1 billion.\nThe refinancing of all of our high rate bonds during the quarter culminates our collective efforts to transform the business, improve its trajectory and strengthen our balance sheet.\nThere is no similar and clear way of seeing the impact that Mike and his team have made improving the operations of the business than what was accomplished with our debt over the last year.\nNet interest expense has been reduced from $83 million in the first quarter of FY '21 to $45 million this quarter.\nWith the full benefit of our refinancing, we anticipate interest expense to be reduced to approximately $33 million in Q3.\nWe also continue to deliver on reducing restructuring and TSI expense while increasing our margins.\nThis not only improves our cash flow, it also narrows the difference between GAAP and non-GAAP earnings.\nFinally, capital lease and asset financing is an area that was overused.\nIn the last year or so, we've significantly curtailed new capital lease originations from $1.1 billion in FY '20 and are on track to reduce originations to approximately $500 million this year.\nThese efforts to better manage this form of financing allowed us to reduce our debt and ultimately our capital lease cash outflows from $245 million in Q1 FY '21 to $177 million this quarter.\nWe expect further reductions in our quarterly cash outflows to around $150 million per quarter at the end of FY '22 and further below that level going forward.\nWe delivered these reductions while also better managing capital expenditures.\nOur capital expenditures were reduced from $225 million in Q1 FY '21 to $159 million Q2 FY '22.\nBased on our reductions to capital lease originations, a more meaningful metric to demonstrate our progress is capex spend and capital lease originations as a percent of revenue.\nCapex and capital lease originations as a percent of revenue were 10.2% for FY '20, 8% for FY '21 and now down to 5.3% for Q2 FY '22.\nDelivering 5.3% is a good step forward related to better managing our capital spend as it gets us in the peer range, albeit at the top end and is a proof point of our improved operational rigor.\nReturning to our debt on Slide 16, I want to spend a minute on our recent refinancing.\nThis chart shows how the refinancing further solidifies our financial position.\nBy extending maturities, we now have no bond maturities before FY '26, lowering maturity towers and reducing annual interest expense and cash outflows by about $50 million a year.\nFrom our improved balance sheet, let's move to cash flow.\nCash flow from operations totaled an inflow of $563 million.\nFree cash flow for the quarter was $404 million, up 33% compared to prior year and moves us to positive free cash flow for the first half of FY '22 of $100 million.\nThe second quarter was impacted by previously disclosed cash tax payments related to business disposals, accelerated interest payments due to our refinancing and a payment related to restructuring a vendor relationship to take greater control over our delivery.\nFurther, as part of our strategy to focus on customers, we were able to better manage working capital in the quarter.\nAs we look to the second half, we expect the fourth quarter free cash flow to be stronger.\nOur third quarter has two discrete nonrecurring cash payments, including a $60 million payment associated with a legacy vendor that has a take-or-pay agreement and a $90 million payment associated with COVID relief legislation where we deferred certain tax payments and now have opted to accelerate the tax payments to utilize the tax deduction.\nSlide 18 shows our trended free cash flow profile.\nThe negative cash flow over the last three quarters was due in large part to absorbing a number of nonrecurring cash outflows of over $1.7 billion to put the business on a better trajectory, building our foundation.\nstate and local health and human services business for sale; $114 million to end an AR securitization program; $88 million to end a value-destructive take-or-pay agreement; the $1.7 billion headwinds put into perspective; the $749 million trailing four quarters negative free cash flow.\nA key driver of improving cash flow is to continue to reduce our restructuring and TSI spend.\nOur restructuring and TSI efforts are highly focused, and we believe are a prudent investment in the business addressing our outsized cost structure in certain countries and to reduce our facilities footprint to align to our virtual model.\nWe remain on track to reduce restructuring in TSI from an average of $900 million per year over the last four years to $550 million in FY '22 and about $100 million in FY '24.\nI would like to take a moment to update our capital deployment expectations from Investor Day.\nThe Investor Day chart called for 55% of our free cash flow to be used to pay debt and capital lease obligations.\nAs a result of our progress, our cash outflows for debt and capital lease financing are now expected to be about 20% of our free cash flow.\nThat leaves 80% of our expected free cash flow to invest in our business and/or repurchase our stock.\nI should note, we like the business we have and believe that we have the right level of investment in GBS and GIS.\nWe believe our technology stack has critical mass and capability at each layer.\nWe believe we will create more value by continuing to focus on driving the transformation journey across our business, improving the fundamentals and continuing to build organic growth up the stack, ultimately delivering 1% to 3% organic growth in FY '24.\nRelated to acquisitions, our focus is to ensure our platinum channel strategy will be fully vetted and proven out.\nSo eventually, when we are acquisitive with tuck-in sized acquisitions, we will have a clear path to deliver value.\nRelated to our debt, we have a clear line of sight to achieving our targeted debt level of $5 billion near term as we have scheduled debt repayments via our capital lease financing and commercial paper.\nOur preference is to maintain approximately $2.5 billion of cash on hand to fund an appropriate level of working capital.\nWhen we have cash in excess of $2.5 billion, we will determine how best to deploy the cash as we do not expect to leave significant levels of excess cash, generating no meaningful returns on our balance sheet for an extended period of time.\nAt this point in our journey, we favor share repurchases as our valuation is attractive.\nIn Q2, we repurchased $83 million of our common stock, bringing the FY '22 year-to-date repurchases to $150 million or 3.9 million shares.\nOur share repurchases are a disciplined approach to capital allocation and are expected to be self-funding using a rather simple formulaic approach of deploying cash in excess of $2.5 billion when we are at our target debt level of approximately $5 billion.\nWe remain very focused on our investment-grade credit profile.\nTurning to our third quarter guidance.\nWe expect revenue between $4.08 billion and $4.13 billion.\nIf exchange rates were at the same level as when we gave guidance last quarter, our third quarter revenue guidance range would be $90 million higher.\nOrganic revenue decline improved to down 1% to down 2.5%; adjusted EBIT margin of 8.6% to 8.9%.\nNon-GAAP diluted earnings per share is expected to be in the range of $0.88 to $0.93 per share.\nWe are pleased by our progress as we look to the second half of FY '22.\nI would like to update our current fiscal year guidance.\ndollar, our revenues are expected to be negatively impacted by approximately $200 million, which has been reflected in our revised guidance range of $16.4 billion to $16.6 billion; reaffirming organic revenue growth at down 1% to down 2%; increasing adjusted EBIT to a range of 8.5% to 8.9%; increasing non-GAAP diluted earnings per share to $3.52 to $3.72 per share; and reaffirming free cash flow guidance of $500 million.\nWe are reaffirming our guidance for FY '24.\nThis reflects our strong execution in driving forward on our transformation journey.\nWe are clear-eyed on the value we are driving with the transformation journey.\nWe feel strongly there is more opportunity in front of us to continue to improve the business and the underlying economics.\nLet me leave you with the following key takeaways.\nWe are building the foundation to make DXC operationally efficient, sustainable and ultimately grow.\nBy focusing on the operational work of motivating our colleagues and hiring new talent, moving to a virtual-first model, making service delivery more efficient and implementing better IT tools and reducing real estate, we're able to deliver better for our customers and gives us the ability to sell up the enterprise technology stack to GBS.\nThe good news is the financial results that Ken just took us through reduced debt, shrinking restructuring and TSI costs, increased margin and earnings per share and stronger free cash flow are all sustainable and a result of the operational work we are doing.\nThis gives us confidence that we will achieve our FY '24 double-digit margin guidance.\nOn growth, Q2 confirms that we're on the right trajectory for growth.\nOur focus on delivering and fixing the GIS business develop trusted relationships with our Platinum customers.\nWe're then taking our GBS offerings to our Platinum customers, selling up the enterprise technology stack.\nThe evidence that this is working is in our organic revenue results of GIS, GBS and the overall company.\nThis also gives us confidence that we will achieve our FY '24 guidance of 1% to 3% growth.\nIn closing, I'm confident that by staying focused on our transformation journey of building the foundation, we will continue to deliver in the short term and ultimately deliver our long-term financial targets of margin, growth and free cash flow.\n Assistant:", "chosen": "q2 non-gaap earnings per share $0.90.\nq2 revenue fell 11.6 percent to $4.03 billion.\nreducing fy22 revenue guidance range due to foreign exchange fluctuations.\nincreasing fy22 non-gaap diluted earnings per share and increasing fy22 adjusted ebit margin guidance ranges.\nsees q3 revenues $4.08 billion to $4.13 billion.\nsees q3 non-gaap diluted earnings per share $0.88 - $0.93.\nsees fy 2022 revenues $16.4 billion to $16.6 billion.\nsees fy 2022 non-gaap diluted earnings per share $3.52 - $3.72.\nreaffirmed its longer-term guidance.\n"}
{"prompt": "Human: Joining me on the call is Byron Boston, Chief Executive Officer and Co-Chief Investment Officer; Smriti Popenoe, President and Co-Chief Investment Officer; and Steve Benedetti, Executive Vice President, Chief Financial Officer and Chief Operating Officer.\nAs many of you know, who have followed us for a long time, we manage our shareholders' capital for the long term.\nOne of our core strengths is understanding the environment in which we operate, positioning board and adjusting that position as the environment changes.\nWe believe the beginning of this decade marked a major change in the global economy and capital markets environment.\nIt has been a great environment for Dynex to build on our solid track record of industry-leading performance as you can see on Slide 12, including the 21% cumulative shareholder total return since December 2019.\nAs we finished the third quarter, we continue to be excited about how we have performed during this period and how we have positioned our balance sheet for the future.\nWe're in a unique moment in history, and we believe every asset management team around the globe will be challenged by unforeseen surprises as we have already continually witnessed over the past 22 months.\nAt Dynex, we believe this environment calls for patience, discipline, and flexibility.\nWe also believe this is a great environment for our stakeholders as we expect to see attractive opportunities to deploy capital.\nOur experienced management team has proven time and again that they have a flexible mindset to successfully navigate any operating environment and to generate above-average cash dividends and a solid economic return for our shareholders.\nFor the third quarter, we reported comprehensive income of $0.09 per common share and a total economic return of $0.06 per common share or 0.3% for the quarter.\nWe also reported earnings available for distribution of $0.54 per common share, a 6% increase over last quarter and well in excess of our $0.39 quarterly common stock dividend.\nOn a year-to-date basis, through the third quarter, we have paid $1.17 in dividends.\nBook value per common share declined modestly to $18.42 from $18.75 or 1.8%, primarily from economic losses on the investment portfolio, principally in lower coupons relative to our hedge position.\nAs Smriti will discuss later in her comments, we've recovered this decline post quarter end with the curve steepening, which has occurred since then.\nBeginning this quarter, consistent with others in our industry, we have renamed our non-GAAP earnings measure to earnings available for distribution from coordinate operating income.\nAll prior quarters have been relabelled to earnings available for distribution.\nThere have been no changes to the calculation of the non-GAAP measures and the adjustments made to reconcile the comprehensive income, the earnings available for distribution are identical to those previously used to reconcile the coordinate operating income.\nWe believe that the caption earnings available for distribution more accurately reflects the principle purpose of the measure and will serve as a useful indicator, but not the only indicator in evaluating the Company's performance and its ability to pay dividends to common shareholders.\nOther factors that are considered in the dividends to common shareholders include our taxable income, total economic return, gains and losses including carry-forwards for tax purposes, and our outlook for future performance.\nTurning back to the discussion of the performance, the increase in earnings available for distribution was driven by multiple factors.\nFirst, our earning asset yields improved 3 basis points while overall repo borrowing costs were down another 3 basis points.\nThe improvement in asset yields was largely attributable to slower prepayment speeds during the quarter, as we benefited from adjustments to the overall prepayment profile of the pass-through portfolios or asset purchases.\nAgency RMBS prepayment fees were 11.3 CPR versus 19 flat CPR in the second quarter.\nSecondly, TBA dropped income contribution improved by 5 basis points primarily from continued dollar roll specialness during the quarter.\nThe funding cost benefit on dollar rolls versus repo and RMBS was approximately 60 basis points during the third quarter versus 49 basis points last quarter.\nAnd third, average earning assets increased as we deployed equity capital proceeds raised in both -- raised in both second and third quarters.\nTogether, these items drove 4 basis point increase in our adjusted net interest spread to 2.1% for the quarter.\nOffsetting these items was an increase in G&A expense of approximately $800,000.\nThe majority of the increase related to legal fees related to a contingent matter that we have previously disclosed in our SEC filings and which is now has been fully briefed for the court.\nWe do not expect these costs to repeat going forward.\nFrom a portfolio perspective, from quarter to quarter, we reduced our investment portfolio, including TBAs by approximately $500 million, mostly through reducing our investment in TBA, 2.5 [Phonetic].\nThis occurred toward the end of the quarter and resulted in adjusted leverage declining by nearly a full turn to 5.9 times at the end of the quarter.\nAs noted on Slide 23, our investment portfolio is approximately $4.8 billion at September 30, with $4.3 billion invested in agency RMBS and TBAs.\nFrom a hedging perspective, we reduced the notional balance of our hedges by a similar amount.\nThe overall notional balance of our hedges at September 30 was $4.3 billion as indicated on Slide 19 with the bulk of the hedges protecting book value from increases in rates in the long end of the curve.\nOverall, total shareholders capital grew approximately $18 million during the quarter, which includes approximately $28 million in new common equity raise at the market offerings in the quarter.\nYear-to-date, we have raised approximately $224 million in new capital at a gross price before commissions of $18.80.\nOur market capitalization adjusted for all shares outstanding is $650 million today versus $420 million at the beginning of the year, substantially increasing the liquidity of our stock for our shareholders while at the same time, unlocking the operating leverage in our business.\nOur stock price is virtually unchanged year-to-date and our total shareholder return for 2021 is 6.9% through yesterday.\nThat concludes my remarks.\nI'll briefly discuss performance drivers for the quarter and then turn to our macroeconomic outlook and portfolio construction.\nWe communicated last quarter that the risk of a whipsaw in rates was substantial.\nDuring the quarter, the 10-year treasury yield touched a low of 1.13% twice and ended the quarter virtually unchanged at 1.46% with a 44 basis point intra-quarter trading range.\nWe also indicated during the quarter that we had maintained a portfolio structure, a hedge with the long end of the yield curve through July and we continue to hold that hedge position through today.\nBook value on September 30 was at $18.42 and thus far as of October 22nd, book value is up between 2% to 2.5%.\nOur trading discipline and top-down macroeconomic-centric approach continue to serve us well and remain the cornerstone of our decision-making framework.\nLeverage at the end of the quarter stood at 5.9 times, down from 6.4 times at the beginning of the quarter.\nAs Steve mentioned, we decreased our exposure to convexity by selling TBA [Indecipherable], and to add to dry powder, to make future investments.\nWith the recovery in book value quarter to date, leverage stands at 5.6 times and the liquidity position is over $500 million.\nAt this current level of the balance sheet, we expect earnings available for distribution to continue to meet or modestly exceed the current level of the dividend in the fourth quarter with any excess returns providing a cushion to capital.\nBook value will continue to fluctuate with the level of interest rates and mortgage spreads.\nFuture book value volatility is mitigated by our low leverage, substantial levels of liquidity, and the dry powder that we have to deploy capital opportunistically.\nTurning now to our macroeconomic outlook that is the foundation for our positioning.\nThe global economy is in a period of transition to a post-pandemic environment.\nAnd as such, we expect to see new risks and new opportunities develop over the next few quarters.\nIn the very short term, we are focused on specific risk events on the horizon, including the announcement of the taper, resolution of the debt ceiling, passage of any fiscal stimulus, a possible leadership transition at the fed, the composition of the new fed and international risks such as the Japanese elections and spiking fuel prices to name a few factors.\nIn the intermediate-term, the speed of reopening adjusting to living with COVID, inflation pressures from supply imbalances, labor shortages, fuel costs spikes are all having different impacts across economies.\nGlobal central banks are adjusting their post-pandemic strategies as inflation and growth trajectories are uneven and disparate across the globe.\nWhile most global bank policy remains highly accommodated, several have begun raising interest rates and have moved to hawkish language as inflation has accelerated.\nIn the near tone, US data points to stronger growth, higher inflation, and a tighter labor market, but the durability of these trends remains very difficult to parse out.\nOn the strength of this information, it is very clear that the fed is planning to taper later this month, that looks very likely to happen.\nIn our assessment, it is still too early to arrive at conclusions on long-term trends for inflation, labor market, and growth.\nAnd for this reason, the timing, the pace, and the number of fed hikes is less clear.\nI must point out that the levels of inflation that we are experiencing and inflation expectations are among the highest in the last 20 years.\nAnd we are truly entering uncharted territory as global central banks attempt to exit their emergency interventions in the financial markets, trying to balance growth and maintain their inflation-fighting credibility.\nOur team at Dynex is navigating the coming months by preparing for elevated uncertainty, higher volatility, and the increased probability of surprise factors.\nWe are also preparing for the impact of a more complex, turbulent, and evolving domestic and international political situation.\nThese factors lead us to maintain an up and credit up and liquidity position to position most of our hedges on the long end of the yield curve and to hold significant amounts of dry powder for investment during bouts of volatility and most importantly, to hold a very flexible portfolio and to have a flexible mindset to respond to evolving conditions.\nLet me now discuss our market outlook and portfolio construction.\nThe portfolio today is constructed with lower leverage that reflects the uncharted territory we are in.\nOur hedges remain focused on the 7-year to 10-year part of the curve, reflecting the interest rate risk on our longer-duration asset portfolio.\nWe have selectively added hedges through the year and the five-year part of the curve and options remain a core holding.\nFrom a financing perspective, we expect that front-end rates will remain low, close to zero through most of 2022, providing a solid base from which to generate returns.\nHowever, we're not taking this for granted.\nWe are selectively and strategically locking in lower financing levels by taking longer-term repo.\nOn Slide 20, our weighted average contractual days to maturity of our repo book was about 169 days at September 30, as we targeted longer tenure for our roles between three months and 12 months.\nRoughly 50% of the book had a contractual maturity that fell in the six to 12-month range.\nWe continue to target longer-term roles at opportunistic levels.\nTurning now to agency MBS spreads, it's really a mixed story between fundamentals and technicals, and we believe spread volatility will be driven by macroeconomic events versus factors specific to the MBS market.\nThe fundamentals for agency RMBS are still challenging as we see many factors that will keep refinancing levels higher and net supply elevated.\nThe structure of the mortgage finance industry is drastically different today.\nThere are more public non-bank mortgage companies, subject to quarterly profit metrics now than any other time in the last 20 years.\nThis will be a major factor in driving competition to keep mortgage rates low, despite higher nominal treasury yields.\nAnd this will keep the pressure up on net supply.\nGovernment policy also favors broader access to refinancing with potential modifications from the GSEs to loan level pricing adjustments, therefore lowering the mortgage rate that's available to consumers once again, meaning that higher coupons remain vulnerable to prepayments and lower coupons susceptible to supply.\nThe technicals for RMBS are also challenging as the fed begins to exit and it is unclear whether bank demand will continue at the same level as early on 2021.\nMarket psychology and agency MBS spreads is bearish with many investors holding underweights and strategists recommending neutral or underweight positioning.\nWith this backdrop, we believe agency RMBS spreads could wipe up to 10 basis points to 20 basis points as the taper begins to be implemented, but we think this is more likely to happen during bouts of volatility.\nWe also expect agency RMBS spreads to be more volatile and directional widening and rallies and tightening and sell offs.\nWe do expect to increase leverage in these situations, and we are always looking for a good window to make this adjustment.\nWe expect to make an initial adjustment in leverage back up to eight times and when appropriate up to 10 times.\nLonger term, we believe there will be good support for MBS spreads.\nThe Fed's balance sheet will create a powerful stock effect that will limit spread widening.\nDemand from money managers as MBS becomes a high-quality alternative to corporate bonds and lower net supply from potentially higher rates will also provide an additional buffer against wider spreads.\nWe believe that holding a flexible liquid high credit quality position, even as spreads widen, we can manage both sides of our balance sheet to position for solid long-term return generation.\nSo to wrap up, the steep yield curve and low financing costs support our opportunities to generate solid returns for our business.\nWe expect this to continue well into 2022.\nBook value is higher versus quarter end by 2% to 2.5%.\nThe portfolio is well-positioned for returns to cover or exceed the current level of the dividend today.\nThe low leverage that cushions book value and dry powder to drive forward earnings growth provide a solid foundation for return generation.\nSpecifically, we are entering the next few months with over $500 million in liquidity, almost an all-time high for Dynex relatively low leverage of 5.6 times that puts us in a solid position to navigate the environment and limits the risk to the existing portfolio.\nWe have dry powder for at least three turns and up to five turns of leverage each turn of leverage invested at 11% return adds roughly 1% or $0.24 per share incremental return annually.\nThis is a significant upside to the 9% dividend yield on our common shares that are trading somewhere between 94% and 95% of book value today.\nThe most important principles for the environment we're in right now, and this is how we're operating our discipline and patience while continuously assessing the environment as it will take time for the economic picture to become clear.\nWe stand prepared for the risks and we're ready for investment opportunities as they arise.\nLet me wrap up with a couple of comments.\nDynex Capital is the oldest REIT focused solely on financing real estate assets in the United States.\nWe've encountered and navigated every market environment for 33 years.\nToday, we are building a resilient organization to last the next 33 years and beyond.\nWe're making investments in people, processes, and technology that will allow us to rapidly adjust to a world that is destined to change.\nWe're also focused intensely on maintaining your trust by how we manage our risk, how we treat our employees, and how we positively impact our community at large.\nWe are positioned for this environment and we're excited about our opportunities.\nThrough our years of experience, we have learned that the best opportunities can appear at the most uncertain moments in the capital markets.\n Assistant:", "chosen": "q3 earnings per share $0.09.\n"}
{"prompt": "Human: This is Alison Griffin, Vice President, Investor Relations.\nWith me on the call I have Byron Boston, Chief Executive Officer; Smriti Popenoe, President and Chief Investment Officer; and Steve Benedetti, Executive Vice President, Chief Financial Officer and Chief Operating Officer.\nAnd with that, I now have the pleasure of turning the call over to our CEO, Byron Boston.\nAs CEO of Dynex, I'm very proud to report that in 2020 we delivered a 15.2% total economic return and a 17% total shareholder return.\nI've been at Dynex for 13 years and no other year has demanded as much active decision making as 2020.\nWe stuck with our discipline and excelled.\nWe didn't just protect shareholders money.\nWe made money for our shareholders in 2020.\nOur book value increased and we delivered a solid dividend.\nThis performance stands in contrast to most other mortgage REIT and many other investment alternatives for investors seeking income.\nNow as you can see on Slide 5, Dynex has now delivered industry leading performance on a one-year, three-year and five-year basis.\nAnd when you look at our long-term chart on Page 17, you can see that we have delivered solid returns through multiple market cycles during my tenure at Dynex Capital.\nThis performance reflects my distinct philosophy of how to manage a mortgage REIT for the long term and that same philosophy is guiding our investment approach today.\nWe believe in risk management first, followed by disciplined capital allocation.\nAs experienced and skilled investors, we have been cautious about leveraging lower credit illiquid assets since 2016.\nWhen spreads are tight, this strategy looks attractive during short term, but ultimately crumbles when liquidity dissipates in a crisis.\nThis is what happened last year when the prices of illiquid assets dropped dramatically as COVID-19 intensified and creditors demanded more cash or margin in response.\nThe takeaway here is that, it was no surprise that the market reacted the way it did.\nWe witnessed the same reaction in every major crisis in recent memory.\nThe Dynex management team has successfully managed through these intensified risk events throughout our careers and we were prepared.\n2020 was a challenging year, but in our opinion, not a black swan event.\nAs we indicated at the beginning of 2020, we saw the global risk environment intensifying.\nSo, we were prepared for increased volatility.\nWhile it is impossible to predict the timing of specific events, we foresaw a higher risk profile building in the global financial markets.\nOur experience and insight gave us the edge to actively manage our portfolio to provide our shareholders strong returns.\nWe managed our book exactly as we told investors we would.\nFor years, we have emphasized liquidity and diversity in our portfolio, and this discipline served us well in 2020.\nOur 2020 performance was not a coincidence or good luck, but rather years of thoughtful planning around our portfolio and a team of talented people ready to actively manage the book of business in volatile times.\nAs a CEO and coach, I could not be prouder.\nNow from a human capital perspective, we have a world-class team with unmatched skills and experience.\nAnd 2020 was the year when the management team mattered more than anything.\nOur team has weathered significant crises in the past and long-term capital management to the Great Recession.\nAnd as we have learned again this past year, nothing surpasses experience.\nWe have the institutional knowledge to address many market disruptions and to identify new opportunities that may come along.\nOur team is diverse, which is critical to our strategy.\nRisks do not stay within borders, and our teams worldwide perspective is invaluable when dealing with a global crisis.\nNow, COVID-19 disrupted many work environments, but we already had the advantage of enabling our people to work remotely long before it became a necessity.\nJust as risk is border-less, so is talent.\nOur employees were accustomed to working outside the office.\nSo, we remained calm, focused during the quarantine, filtered out the noise to actively manage our risk, and effectively maintained key relationships and the confidence with lenders, regulators and investors.\nSo in the past 12 months we have taken a strategic view on both sides of the balance sheet with the goal of being able to grow and scale the Company efficiently, and in a stakeholder-friendly manner.\nWe made several moves.\nWe retired two of our higher cost preferred stock issues and we replaced them with our new Dynex Capital Preferred C. And during the last two weeks, we issued approximately $56 million in common equity in line with our long-term strategy to grow our capital base.\nIt's very important to note the return environment is conducive for absorbing any costs associated with our capital activities.\nOur ultimate goal is to increase our stock's liquidity and offer investors the opportunity to invest in Dynex via multiple products, including our fixed dividend C Preferred, and our higher yielding common stock.\nWe've been in business for 30 years and we are fully committed to delivering solid cash flow, and attractive total returns to our shareholders well into the future.\nNow as a company, our greater purpose is to support two of our main stakeholders and constituencies, the individual savers and the communities across America.\nWe are building this company for the long term, because we believe in America, and our role in helping individual savers achieve a respectable return on their savings from financing of real estate assets.\nThe capital that we bring to the table is critical for housing and the real estate community.\nAs long as savers need cash income and housing and real estate finance exist in America, our business model will remain relevant and critical.\nMost importantly, we are deeply committed to the highest ethical standards because savers need management teams with integrity as stewards of the capital.\nOur management team operates with integrity and an unwavering commitment to our values and to supporting our community.\nWe take our fiduciary responsibility very seriously and strive to be good stewards of capital, transparent in our actions and good corporate citizen.\nAt Dynex, we are building a diverse and multi-generational organization with a 30-year vision that we believe will create enormous value for shareholders, stand the test of time and prepare us for the future.\nI feel fantastic about 2020, and I'm very positive about 2021 and beyond.\nBefore I turn over the call, I want to highlight that we have promoted Smriti Popenoe to President of our Company.\nAnd this is another reason that I'm excited as the CEO and a coach.\nAll of our stakeholders should be elated about her promotion, and what this means for the future of Dynex.\nAs I said earlier, we have a 30-year vision that include getting the right people in the right places with the right skill sets and experience.\nThe fourth quarter continued the excellent performance for the Company for 2020.\nFor the quarter on a per common share basis we recorded comprehensive income of $1.23, total economic return of $1.22 or 6.7% based on the beginning book value per share of $18.25 and core net operating income of $0.45.\nFor the year on a per common share basis, we reported comprehensive income of $2.88, total economic return of $2.73 and core net operating income of $1.94.\n2020 performance was highlighted by active portfolio and risk management and dynamic capital allocation, which enabled us to take advantage of improving asset valuations over the year, and declining funding costs.\nRealized and unrealized investment in TBA gains, net of hedges, were approximately $1.83 per common share, driving a large part of the comprehensive income and total economic return for the year.\nFor the fourth quarter, both comprehensive income and total economic return were bolstered by the strong performance of lower coupon RMBS during the quarter, particularly in TBA securities relative to associated hedges and to a lesser extent increasing value on CMBS IO securities.\nCore net operating income sequentially declined from $0.61 last quarter to $0.45 this quarter, principally as a result of the smaller average balance of interest-earning assets and modestly declining asset yields.\nIn addition, general and administrative expenses increased $2.1 million during the fourth quarter from year end incentive compensation accruals reflecting a catch-up adjustment for accrued bonus expense for management's achievements of its corporate goals and objectives this year.\nNet interest spread and adjusted net interest spread, both slightly declined by 2 basis points respectively quarter-over-quarter.\nPrepayments increased, but were well within expected ranges.\nAgency RMBS prepayment speeds were 17.1 CPR for the quarter.\nWhile overall portfolio CPRs including the CMBS portfolio were approximately 15.1 CPR.\nAdjusted net interest spread continues to benefit from the favorable TBA dollar roll conditions versus on balance sheet repo.\nAs a reminder, the Company utilizes the perspective method for amortizing investment premiums, and as such, our results fully reflect the actual realized prepayments during the quarter and do not include cumulative catch up amortization adjustments that are based on long-term assumptions and could potentially distort near-term results.\nAs it relates to book value, the driver of the $0.83 per share increase during the fourth quarter was net gains from continued spread tightening on investment assets, particularly in both lower coupon TBAs and pools.\nTreasury future hedges also helped to offset the impact on investment valuations from the sell-off in interest rates during the quarter.\nWe estimate that book value per common share at the end of January is up approximately 1%, inclusive of the impact of the capital raise announced last week.\nWe ended the year with investment assets, including TBA securities of $4.2 billion and leverage at 6.3 times shareholders equity similar to the end of the third quarter.\nOverall investment assets, including TBA securities were down on an average basis by approximately 7% as compared to last quarter.\nThis quarter we added 15-year agency RMBS investments through TBA positions and overall the portfolio composition is approximately 84% RMBS investments, including TBA securities and approximately 16% invested in CMBS and CMBS IO.\nLet me also mention that the tax character of the dividends on the Company's equity capital.\nFor 2020, dividends in both the preferred stock and common stock were a 100% capital gain income.\nLet me start by saying that I appreciate the confidence that the Board and Byron has placed in me.\nI'm honored and delighted to serve the Company's shareholders in my new role as the President.\nI'm going to briefly cover our 2020 performance and then shift to our outlook for 2021.\nIn extreme volatility events like March 2020, there can be a lot of risk and with that comes opportunity.\nWith thorough planning and expecting the probability of such events, we were positioned with higher levels of liquidity.\nWe successfully managed the portfolio rapidly in February before conditions deteriorated, positioned ourselves to weather the extraordinary market events of March, and rebalanced our investments in April to take advantage of the remarkable recovery in asset prices through year end.\nOur annual total economic return of 15% is only the third best in Dynex's history since 2008, but it is remarkable in that it was earned in an outlier year like 2020.\nMoving on to 2021.\nI'll start with a summary of our macroeconomic view.\nTo deal with the pandemic and its after effects, central banks have implemented highly accommodative policies, designed to increase employment, increase inflation and put the economy on a growing trajectory.\nA flood of unprecedented liquidity has raised the price of financial assets globally.\nGovernments around the world are also implementing debt financed fiscal policy to close the gap on lost GDP from the pandemic and to drive future growth.\nThis is likely going to lead to a period of massive deficits.\nAgainst this backdrop of unprecedented monetary and fiscal stimulus, we have the health crisis that much of the globe is still dealing with.\nIn the near term, we expect to see a period where there is a tug-of-war between the negative impacts of the pandemic and the positive impacts of the vaccine.\nIn the medium term, the stimulus plus the impacts of more vaccination could eventually lead to a period of higher growth, as more of our services-driven economy is able to come back online.\nThe Fed also remains committed to a broad recovery in employment, and an overshoot of inflation over 2%.\nIn the long term, we believe the world has been permanently reshaped by the pandemic and its impact will continue for many years to come across broad segment of our economy and many aspects of our daily lives.\nThis will continue to be a focus for Dynex in our macroeconomic process.\nRight now, our macroeconomic view leads us to prepare for a somewhat bumpy transition to a steeper yield curve as one of the more probable scenarios for 2021.\nWe believe this is also a more favorable environment for higher returns.\nTurning now to our current positioning and economic return outlook.\nOur goal is always to manage the balance sheet to generate a total economic returns to meet or exceed the dividend.\nRather than think solely about core earnings versus the dividend, we are focused on capital preservation and generating returns over the long term.\nOur experience shows that this focus results in higher total shareholder returns and creates long-term value for shareholders.\nWe believe the broader investment environment remains favorable with financing costs anchored well into 2022 and beyond.\nFirst, financing costs are anchored well into '22 and beyond, agency MBS are liquid, lower risk assets.\nAnd third, we believe the market will evolve to a steeper curve environment that is ideal for earning wider net interest spreads.\nWe expect returns to move into the 10% to 12% range and could offer mid-teens returns if spreads widen.\nWe are entering this period with solid performance quarter-to-date.\nBook value since year-end is up about 1% net of the equity rate.\nWe have a strong liquidity position of $375 million and tremendous upside earnings power on the balance sheet.\nLeverage stands slightly over 6 times today and we still believe a liquid strategy is appropriate for the environment.\nLet me explain why we believe a steeper curve is possible.\nWhile financing costs are expected to stay close to zero through 2023, the back end of the yield curve will face pressure from treasury issuance, possible increases in realized inflation and expectations for inflation, as the economy begins a path to recovery and gains traction in the second half of 2021.\nThis will likely result in higher long-term treasury yields.\nA steeper yield curve is a very positive factor for net interest spread expansion as it offers a chance to invest at higher yields, especially as prepayments slow.\nIn steeper yield curve environments, agency RMBS spreads also tend to widen because they now have to compete with other assets, including treasuries that offer higher yields.\nAnd realized volatility in steeper yield curve environment is usually higher.\nThis has the potential to further add to returns.\nIf you go back to 2012, 2015, 2018, all periods were tight MBS spreads to start the year.\nThe curve steepened, and MBS widened.\nIn 2012, it happened even with the Fed doing QE.\nSo, we're not predicting this will happen, we think there is a path for the scenario.\nAnd if it happens, it will be one where we can invest capital at higher return.\nWe also see a scenario where the low volatility environment keep spreads range bound and book value stable.\nAt this point, we're seeing a massive revision to net supply number for 2021, not just because of refinancings and low mortgage rates, but also because of new household formation, a migration out of cities, home prices appreciation, all of which are causing MBS supply to balloon much higher than expected.\nWe believe this will afford us the opportunity to also invest at better returns.\nFinally, if rates decline and the curve flattens, given the current tightness and high dollar prices of MBS, we feel that spreads will move wider in a lower rate environment.\nAnd we have the capital and liquidity to invest in that scenario.\nWhile they may not occur as exclusively as I've described, my point is that we believe all of these scenarios offer us the opportunity to manage and invest our capital accretively.\nOur core portfolio is also positioned to benefit in a steeper curve.\nThis has been the market scenario so far this year.\nWe currently have an RMBS portfolio allocation of 20% to 15 years, which outperform in a steepener relative to 30s [Phonetic].\nWe've increased our allocation to long-term option based hedges to better insulate the portfolio from rising long-term rates.\nYou can see on Page 10 of the slide deck that the portfolio performs relatively well across several types of rate shocks, both parallel and non-parallel.\nI want to reemphasize that we have tremendous earnings power on the balance sheet.\nA one times increase in leverage, invested at 8% total economic return, adds $0.19 per share per year in economic return.\nAt 10%, that's $0.24, at 12% it's $0.29.\nWe think we have the room to take our total leverage up at least 2 times from today's levels at the right time and possibly higher if the return environment is better.\nHere is what I'd like to leave you with.\nThe favorable investment environment is supported by low and stable financing costs well into 2022 and beyond.\nWe expect to be able to opportunistically invest our capital at more accretive levels as the market evolves over the year.\nThere is tremendous earnings power in the balance sheet and we're comfortable with our ability to generate returns to cover or exceed the dividend over the year.\nLet me reiterate and summarize real quick.\nWe believe this is a favorable investment environment that has the potential to improve as the year evolves.\nHaving our financing costs low and stable for some time into the future is an enormous benefit for our shareholders.\nNonetheless, we continue to maintain our discipline of scenario planning to ensure we are prepared for future economic or market surprises.\nNow, please take a look at the long-term chart on Slide 17 again.\nAnd let me emphasize, for those of you who have listened to us over the years and you're long-term investors, we always close with this chart.\nYou'll see the difference on the chart.\nWe've used the Russell 2000 value index and the shift is mainly because of the unusual attraction and performance returns of this tech sector.\nSo we tried to create something that is a little more comparable, but we could have created charts with 10-year charts.\nWe could have created with numerous of other different types of vehicles, and the picture looks very similar.\nThis displays the power of above-average dividends, the power of a long-term risk management strategy and the power of successfully managing through major credit market corrections.\nWe have proven time and again in my 13-year tenure, that our philosophy, disciplined process and long-term thinking leads to superior returns, achieving over this time period what many of us could not.\nThe management team, our Board of Directors and I are delighted to invest alongside of our current investors because we believe in our future.\nNow, there are many other investors out there who should have Dynex in their portfolio.\nSo, we invite you to join us.\n Assistant:", "chosen": "compname says qtrly core net operating income per share of $0.45.\nqtrly core net operating income per share of $0.45 .\n"}
{"prompt": "Human: During our call, management may discuss certain items which are not based entirely on historical facts.\nAnd of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations.\nJoe and I will share highlights of our fourth-quarter performance and what we're seeing quarter to date.\nAnd by now, you've heard most others in our space.\nAnd despite the volatility we're all facing, it's good to see the category and the industry moving in the right direction.\nYou'll hear some of the same themes from us, like progressive improvements throughout the quarter as dining rooms reopened, growth in off-premise and digital expansion.\nThe biggest difference you'll hear is in our level of performance.\nBy staying true to our strategy and making aggressive moves to grow the business, our team has navigated this pandemic very well.\nChili's generated significant top-line progress throughout the quarter.\nAnd with our operators' disciplined margin management, we delivered positive cash flow for the quarter, which we used to pay down debt.\nOur debt load is now below our pre-pandemic level.\nWe continued this momentum into July, ending the month with Chili's down just 10.9%.\nAnd in the 84% of our company-owned restaurants with open dining rooms were down just 3.8%, and 36% of our company-owned Chili's restaurants ran positive comp sales for the month.\nIt wasn't our quick reaction to the crisis that enabled us to deliver these results.\nIt was our choice to stay true to the strategy we've been working for more than two years.\nWe had already made significant progress in the areas required to thrive in this environment; off-premise, digital, value and scale.\nWe didn't have to scramble in the pandemic hit.\nWe walked into it with seven solid quarters of performance.\nAll we had to do is stay focused and push the accelerator a little harder.\nAs a result, we set the bar in casual dining, landing the top spot in sales and traffic for three straight months according to KNAPP-TRACK, and we're poised for continued future success.\nYou've heard how many restaurant companies are leaning into digital to manage through this crisis.\nAnd while Chili's is no exception, we were leading the way in the digital space long before the pandemic.\nOver the past decade, we've made significant investments to build our digital infrastructure, foster connections with guests and enabling us to quickly respond to their evolving dining needs.\nIncreasing convenience is a big component of how we leverage our digital capability.\nWe can lean into our 8 million member loyalty database, gain check-level purchasing insight from our tabletop devices and continue to improve our five-Star app with features like one-tap reorder of our guests most frequent-ordered items.\nAnd last year, we integrated DoorDash into our POS system and our e-commerce experience, making it possible to shift our marketing focus from national TV spots to our digital platform, where we continuously test and learn to increase e-commerce conversions.\nAnd as a result, our digital sales of off-premise meals have grown from low teens to more than 50% in the fourth quarter with only a slight dip as dining rooms reopen.\nWe have also driven frequency -- increased frequency through our takeout and delivery channels at a fraction of the marketing expense.\nThat's the beauty of a digital strategy that makes dining easier and more convenient for guests.\nBecause we can meet them where they are, guests use us more.\nFinally, here's something you haven't heard from anyone else in our space.\nDuring the last fiscal week or last week of fiscal 2020, we accomplished something no other restaurant company has ever done.\nIn a single day, we launched It's Just Wings, our first virtual brand, in 1,050 Chili's and Maggiano's across the country.\nSales continue to build every week, and we clearly see the potential to exceed $150 million in the brand's first year, which would secure It's Just wings a spot in the top 200 restaurant brands.\nOver the years, casual dinings has been deemed for being overbuilt.\nWe believe this is our opportunity to prove that maybe it isn't overbuilt, it's just underutilized.\nIt's Just Wings leverages existing buildings, equipment and labor.\nEven after aggressive pricing and marketing, buying quality ingredients and packaging and paying our last-mile logistics partner, we're generating strong flow-through.\nThe brand's guests are highly incremental to Brinker concepts, and their feedback is extremely positive.\nSatisfaction ratings are among the top restaurant brands on DoorDash and [Inaudible] is high, and we're just getting started.\nWe created this business in six months and launched it overnight with minimal investment in a consumer channel where demand is growing by more than 100% annually.\nTaking into account our scale, the capacity of our kitchens, our exclusive partnership with DoorDash, we believe our ability to win in this space is unmatched.\nSo we're testing additional virtual concepts and learning how to drive visibility among the millions of DoorDash guests looking for food delivery options and how to continually improve our operations to meet consumer demand for speed, food quality and value.\nWe are pleased to have not one but two brands that rank among the most popular on the DoorDash platform, and we're excited about the potential that lies ahead.\nObviously, things aren't back to normal for any of us yet, but we see a bright future for all the Brinker brands.\nWe promised you last quarter that no matter what came our way, we would do two things; put the safety of our guests and team members first and continue to perform and take share.\nI couldn't be more proud of how our operators and our support teams have delivered on both of those promises and how we're creatively and boldly building our future together.\nNo matter what lies ahead, with the talent on our team, the power of our brands and the scale at our disposal, we start from a position of strength.\nRegardless of the descriptor you put on the operating environment to the most recent quarter and a number of less complementary ones come to mind, our operators quickly adjusted course to the realities of the pandemic and rose to the challenge to exceed expectations with the results delivered.\nFor the fourth quarter of FY '20, Brinker reported consolidated net comp sales of negative 36.7%, although comp sales recorded material improvement as the quarter progressed with the June period consolidated results down 19%.\nBoth brands generated a positive progression of performance through the quarter with Chili's leading the casual dining sector from a comp sales perspective.\nWhile the reported quarterly net comp sales for the brand was a negative 32.2%, performance progressed from down 51% in April at the height of the dining room closures to down only 13% for the June period.\nChili's outpaced the competition throughout the quarter with comp sales positive the casual dining sector by approximately 13% and traffic positive to the sector by approximately 18%.\nMore than 25% of our corporate Chili's restaurants reported positive comp sales for the June period, a percentage, as Wyman earlier stated, that increased to 36% in July.\nOur P&L highlights for the quarter were total revenues of $563 million, a restaurant operating margin of 6.4% and an adjusted loss per diluted share of $0.88.\nIncluded in the $0.88 loss is a burden of approximately $0.18 due to the timing of recording expenses related to annual and long-term incentive compensation plans beyond what would typically be recorded in the fourth quarter in our G&A expense.\nThroughout this crisis, our team has done an exceptional job of taking care of our guests and team members and has proven an equal ability to effectively manage expenses in the face of meaningful sales decreases.\nOur managers have been efficient in utilizing our scheduling tools to optimize labor hours to fit the current business environment.\nHourly labor and payroll tax have a good degree of variability and were favorable year over year, although total labor, including restaurant management, was unfavorable in the quarter by 260 basis points driven by sales deleverage.\nRestaurant expense margin for the quarter increased by 6.2%, again primarily due to sales deleverage.\nDespite our operators reducing year-over-year spend in this area by more than $29 million, we recorded meaningful savings in advertising spend, repair and maintenance and supplies related to on-premise dining, a portion of which we believe will be ongoing.\nAs to cost of sales, we were positive 30 basis points versus prior year, primarily due to favorable menu mix.\nBy earlier commented, our restaurant operating margin from the quarter was 6.4%.\nHowever, in conjunction with the progress we made, top line, our operating margin improved through the quarter, increasing to 12.2% for the June period.\nAssuming an improving operating environment, we believe we are set up for additional margin improvement as we carry forward identified efficiencies, further open dining room capacity and leverage sales from our virtual brand, It's Just Wings.\nStrengthening the balance sheet is an important part of our financial strategy moving forward, and we are currently focusing free cash flow toward debt reduction and liquidity enhancement.\nTo further enhance our liquidity position, we executed an equity offering in the quarter, raising approximately $139 million, which was used to pay down revolving credit debt.\nOur overall total debt balance at fiscal year end was approximately $1.2 billion, a reduction of just over $220 million from the end of the third quarter as revolving credit borrowings decreased from $700 million to less than $473 million.\nOur liquidity, which we consider to be cash balances and revolving credit availability, now exceeds $575 million.\nIn addition, we recently completed a 15-month extension of our revolving credit facility now maturing in December 2022.\nAs sales and cash flows improved, we resumed new restaurant development activity that have been temporarily halted early in the quarter.\nWe plan to open or relocate four new Chili's restaurants during this current quarter.\nNow as to operating guidance, while in past years, we would typically provide annual guidance for Brinker during this earnings call, potential volatility and unknowns of the current operating environment makes that exercise difficult.\nInstead, we are providing some limited guidance as to our consolidated performance for the current first quarter and anticipate providing quarterly insights as we move through the year.\nFor Brinker in the first quarter, we expect consolidated comp store sales to be down in the low to mid-teens range.\nAdjusted earnings per diluted share are currently estimated to be a loss in the range of $0.25 to $0.40.\nWe anticipate positive operating cash flow, and weighted average shares is estimated to be 45 million to 46 million shares.\nI would also like to remind everyone that fiscal year 2021 includes a 53rd week, which takes place during the fourth quarter.\nDespite the difficulties experienced from this pandemic, our team has risen to the challenge.\nOur strategy of focusing on value, convenience and safety has proven to be well received by our guests has given us the ability to outperform our competition and leaves us very well-positioned to continue to take market share as we move through the fiscal year.\nI greatly appreciate the hard work and commitment from our team members, especially those on the front line serving our guests each and every day.\nI have every confidence we will continue to demonstrate our ability to sustain our progress and return to growth on the top and bottom line for the long term.\n Assistant:", "chosen": "chili's total comparable restaurant sales decreased 10.9% in fiscal 2021 q1-to-date.\nsees q1 adjusted net loss per diluted share to be in range of $0.40 to $0.25.\ncomparable restaurant sales are expected to be down low to mid-teens in q1.\noperating cash flow is expected to be positive in q1.\nbrinker international - during q1 of fiscal 2021 chili's and maggiano's continue to operate with reduced dining room capacities.\nqtrly adjusted loss per share $0.88.\n"}
{"prompt": "Human: Today, you'll hear from Endeavor's CEO, Ari Emanuel; and CFO, Jason Lublin.\nOur president, Mark Shapiro, will join us for the Q&A session.\nThe purpose of the call is to provide you with information regarding our second-quarter 2021 performance in addition to our financial outlook for the balance of the year.\nOur commentary today will also include non-GAAP financial measures, which we believe provide an additional tool for investors to use in evaluating ongoing operating results and trends.\nThese measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.\nWith that, I'll hand it over to Ari.\nDue to the positive momentum and our continued positive outlook for the balance of the year, we have increased our annual guidance.\nJason will discuss this in more detail when he walks you through our financial results for the quarter.\nBut first, I want to spend a few minutes on how our role as owner, operator, and representative of premium sports and entertainment IP and content and talent has enabled us to get in front of industry trends and lead new markets, creating new revenue opportunities across the company.\nLet's start with the underlying trends in sports media and the incremental opportunities we have to drive growth.\nData shows that the U.S. remains the most valuable sports rights market in the world with an estimated $19.5 billion of annualized rights value last year.\nMedia companies looking to acquire large D2C audiences continue to aggressively compete for rights, driving fees up to record levels, with some also having to maintain or grow their linear presence.\nIn the second quarter, we renewed our Wimbledon U.S. media rights agreement with ESPN and its tennis channel until 2035 for a significant increase over the prior term.\nAnd internationally, we guided Football Australia through a landmark domestic media rights deal with ViacomCBS and Paramount+ in Australia, marking the first time the national team and the FFA Cup rights were sold separately from the league.\nWe're also seeing record media rights deals for the UFC in countries like China and France.\nOur last five renewals have yielded, on average, over 100% increases.\nOur strength as a curator and distributor of premium sports media rights also allows us to capitalize on new enterprises and consumer businesses, including sports betting and NFTs.\nThe pandemic further accelerates online betting adoption, which has helped fuel IMG Arena's growth beyond video and data streaming into online betting apps for UFC and golf.\nMeanwhile, we continue to sign top-tier operators like BetMGM while adding marquee properties and events like the Ryder Cup to our offerings.\nSports wagering is now legal in 21 states and growing fast.\nInternationally, the Netherlands and Germany have reregulated or are in the process of effecting new frameworks that we believe will pave the way for betting markets to open there as early as the fourth quarter of this year.\nAs it relates to NFTs, we've made a deal with Dapper Labs, who we invested in three years ago when we saw the NFT trend happening to create a UFC NFT platform.\nWe also closed a deal for UFC and Panini to create NFT trading cards, the first release of which sold out in less than 24 hours.\nAnd now, we're closing countless NFT deals on behalf of clients from Wimbledon to Wayne Gretzky.\nNow, turning to television and film content.\nThe first half of 2021 saw median telecom M&A has reached their highest level in years, $83 billion.\nWhether it's Discovery and Warner Brothers Media or Amazon and MGM, they become super competitors alongside the likes of Netflix and Disney, all making big bets on a D2C strategy.\nThey have deep pockets and need to differentiate their platforms to drive subscriber growth.\nThe competition for content and talent is at its highest level I've seen in 26 years.\nThe number of original series and movies commissioned by streaming platforms grew 48% for the past four quarters as compared to prior four quarters.\nNetflix alone revealed it will spend $17 billion on content in 2021, up 44%, compared to 2020.\nAnd remember, we remain platform-agnostic and one of the largest representatives of talented independent suppliers of content to the biggest streamers.\nJordan with Amazon or a multi-project deal for Charlize Theron with Netflix and Ryan Reynolds with Paramount.\nIt also demonstrates the potential of marquee talent to emerge as lifestyle brands, building commercial ecosystems around communities of fans.\nWe're seeing this more than ever in our equity deals we're closing for our talent ventures group.\nWe work with talent to monetize their brands through our own channels and elsewhere.\nThe pandemic has also spurred the growth of new distribution models while creating lasting shifts in consumer behavior, including a surge in demand performance like podcasts, video games, social and marketplace apps.\nOur flexible business model allows us to opportunistically expand into and capitalize on these burgeoning growth verticals.\nFor example, this past quarter alone, we've closed new podcast deals for 40 clients, while four client shows hit No.\n1 on the Apple charts.\nAnd now, I want to provide just a few business highlights.\nFirst, we announced during our last earnings call that we expected to pay down $600 million of debt in the third quarter, part of our continued commitment to reduce leverage.\nWe actually paid that amount down in the second quarter.\nWe also shared news of two now closed acquisitions: Next College Student Athletes or NCSA, a leading college recruiting business; and FlightScope, a European-based data collection, AV production, and tracking technology specialists.\nBoth acquisitions bolstered our capabilities while creating large moats around our IMG Academy and IMG Arena businesses.\nIn July, we announced a series of acquisitions that will further expand our capabilities while opening opportunities in new geographies.\nThese were Mailman Group, a leading digital agency for sports brands and rights holders.\nMailman will integrate with our IMG Media and 160over90 businesses while bringing new top-tier clients into the fold; ticket software company, Qcue, to elevate our suite of offerings on, On Location, our experiential business.\nThe addition of the dynamic pricing capabilities will enable us to generate more ticketed revenue across our experiential events.\nAnd finally, 20too, a boutique licensing agency in the Middle East, a region that presents incredible growth opportunity for IMG licensing.\nExpanding our reach in this growing region opens the door for further expansions down the road.\nWith that, I'll hand it over to Jason.\nI'll start by walking you through our financial results for the quarter and provide you some additional color around what we're seeing in each of our segments, and then I'll briefly discuss revised guidance for this year.\nPlease note that all comparisons are to the prior-year period, which was impacted by COVID.\nFor the quarter ended June 30, 2021, we generated approximately $1.1 billion in revenue, up $648 million or 140%.\nAdjusted EBITDA for the quarter was approximately $168 million, up $122 million.\nOur Owned Sports Properties segment continued to perform very well, with revenues of $258.9 million, an increase of $106.6 million or 70%.\nThe increase was primarily driven by higher media rights fees due in part to contractual escalators in our media rights agreements, higher sponsorship fees from the renegotiations of existing deals, coupled with new deals and increased event output.\nAdjusted EBITDA for the quarter was $132.3 million, double that of the same period in 2020, primarily driven from the higher revenues I just mentioned.\nUFC had a huge second quarter, helping power UFC's biggest first-half ever in terms of revenue and adjusted EBITDA.\nThe quarter benefited from three incremental live events inclusive of one pay-per-view.\nAll three pay-per-view events in the quarter were at full capacity and broke local gate records.\nMore recently, our July UFC 264 event in Las Vegas finished at the second-highest gate in T-Mobile Arena history and the third-highest gate among UFC events of all time.\nThe event had more than 20,000 fans, the highest attendance ever recorded at a sporting event in T-Mobile.\nBeyond ticket sales for these events, we also saw increases in other event-related revenue streams like international and commercial pay-per-view.\nUFC continues to have one of the most international, youngest and most engaged fan bases in all of sports, making it highly attractive to partners.\nYear over year, we've seen nearly 30% growth in the 18 to 24 demographic, and we're currently ranked third behind the NFL and NBA among millennials.\nIn addition to what Ari shared on the partnership front, we recently closed new deals with Crypto.com and Jose Cuervo while renewing and expanding our relationship with Monster.\nPartnership revenues is up over 25% versus 2020.\nLastly, as relates to viewership, UFC events, which are simulcast across the ESPN family, reached 18.3 million viewers on ESPN TV networks alone in the first half of this year, up 10% over last year.\nMeanwhile, in this segment, PBR is on track to have its best year ever across key categories, including media rates fees, sponsorship, merchandise sales, and licensing.\nNow, turning to our events, experience and rights segment.\nThis segment recorded revenue of $528.7 million, an increase of $408.8 million.\nMedia rights and production revenues increased in the quarter due to the return of a full schedule of European soccer matches and the resumption of other events like the Miami Open in addition to newly secured business.\nAdjusted EBITDA for the quarter was $36.8 million, up $79.5 million compared to Q2 2020, where we recorded a loss.\nThis was primarily due to the increased revenue, partially offset by direct operating costs to support increased business activity, as well as costs associated with our continued investment in the business.\nTo give you a little color about what we're seeing in this segment, college football and NFL ticket packages for the upcoming season are experiencing double-digit retail price increases versus 2019.\nHyde Park Winter Wonderland, our month-long winter festival that starts in November in London, had its highest-grossing revenue week in its history when tickets went on sale earlier this month.\nLastly, at IMG Academy, it's been a record summer in terms of number of campers.\nAnd at this moment, we have more students enrolled for the fall semester than any prior school year.\nRevenue was $328.2 million, an increase of $135.4 million or just over 70%.\nThis growth was primarily driven by an increase in client commissions and project deliveries at Endeavor Content, including episodes of Season 2 of Truth Be Told for Apple TV, The Wall in NBC and Netflix film Blue Miracle.\nWhile we saw higher year-over-year deliveries from Endeavor Content, some deliveries we have forecasted to occur in the second quarter have either now been delivered or will be in Q3.\nThat slight timing delay, predominantly from three shows, negatively impacted our revenues in the quarter by approximately $90 million.\nAdjusted EBITDA for the quarter was $61.7 million, an increase of $9.6 million or just over 18% as we realized a higher percentage of revenue growth from Endeavor Content versus clients in the quarter.\nWe also had higher operating expenses as we diligently managed the pace at which we brought back some costs to support increased business activity.\nAs Ari mentioned, we're pacing ahead as it relates to WME bookings for the second half of the year, and we're booking clients for dates much further into the future.\nWe're also seeing the beginning of a rebound in live music and country is leading the way, with sold our tours for clients like Garth Brooks and Eric Church.\nOn the brand side, 160over90 is gaining steam as companies are doubling down and getting back in front of consumers.\nWe've significantly increased our scope of work with clients, including T-Mobile, Capital One, Visa, Lowe's, Audi, Amazon, and AT&T, while continuing to sign new clients.\nI mentioned Endeavor Content had a strong performance in the quarter.\nI also want to note that we recently began the sale process for that business.\nAlthough we're in the early stages, we've already received a lot of incoming interest.\nWe plan to divest the required portion of the restricted business and retain the nonrestricted businesses.\nWhen we have more to share, we'll let you know.\nMeanwhile, the updated guidance I'll share shortly assumes Endeavor Content is status quo for the balance of the year.\nFinally, corporate adjusted EBITDA for the quarter was a loss of $62.7 million, reflecting an increase in costs brought on to support increased activity and investment in the business, as well as those costs associated with being a new public company.\nBefore I get to annual guidance, I want to briefly discuss our recent debt paydown that Ari mentioned.\nWe paid down $600 million of our outstanding debt in Q2, which consisted of the repayment of approximately $163 million under the WME IMG revolving credit facility, which now carries a zero balance; $257 million, representing the entirety of the WME IMG term loan issued in May 2020, which was the highest cost paper in our capital structure; and $180 million of the first lien term loan under the UFC facilities.\nBecause of these moves, we will realize $35 million in annual interest savings going forward.\nOn to our updated guidance for the full-year 2021.\nAs Ari mentioned earlier, we have experienced a recovery in our business happening slightly faster than we had originally anticipated.\nAnd although we continue to closely monitor the Delta variant, bookings, ticket sales and other indicators remain positive for the balance of the year.\nWe are, therefore, raising our revenue guidance from a prior range of $4.76 billion and $4.83 billion to now between $4.8 billion and $4.85 billion.\nAnd on adjusted EBITDA, we're raising the range from $735 million to $745 million to between $765 million and $775 million.\nIn sum, even though we recognize most activity levels are not yet at historical levels, we are very encouraged with business trends and look forward to what's to come for the balance of 2021 and a more normalized level of activity in 2022.\n Assistant:", "chosen": "endeavor releases second quarter 2021 results.\nq2 revenue $1.1 billion versus refinitiv ibes estimate of $1.14 billion.\n2021 revenue is expected to be between $4.8 and $4.85 billion.\n2021 adjusted ebitda is expected to be between $765 and $775 million.\n"}
{"prompt": "Human: Presenting today on the call will be Kathy Antonello, our Chief Executive Officer; and Mike Paquette, our Chief Financial Officer.\nThese statements are made in reliance on the safe harbor provision of the Private Securities Litigation Reform Act of 1995.\nAll remarks made during the call are current only at the time of the call and will not be updated to reflect subsequent developments.\nThe company also uses its website as a means of disclosing material nonpublic information and for complying with disclosure obligation under the SEC's regulation FD.\nSuch disclosures will be included in the Investors section of the company's website.\nEmployers has performed well throughout the COVID-19 pandemic and the first quarter of 2021 was no exception.\nWhile our top line was adversely impacted early in the first quarter by a meaningful year-over-year decrease in new business premium, we are very encouraged by the strength of our writings in March and April, including those of Cerity.\nThe recent improvement in submissions, quotes and binds, is directly correlated with increased hiring and expanded reopenings across most states.\nWith respect to our renewal book, our policy retention rate remained very strong at 94% for the quarter.\nThis was offset to some degree by lower average policy sizes and modest rate decreases.\nAnd overall, our renewal premium was down 11% on a year-over-year basis.\nWe closed the quarter with another record number of policies in force, which demonstrates that our policyholders are enduring the pandemic, and small businesses are shopping for workers' compensation coverage.\nAs widespread vaccination continues and the labor market improves, we are optimistic that rising payrolls will serve to increase premium.\nIn support of this anticipated recovery, we have continued to pursue and advance the significant investments we've made in delivering a superior customer experience for our agents.\nDue to declines in both frequency and severity for lost time claims, we've lowered our current accident year loss and LAE ratio on voluntary business to 63.6% 63.9%, down from 65.5% a year ago and 64.3% at year-end.\nIn addition, we continue to experience favorable loss reserve development in nearly every prior accident year.\nRegarding our expenses, several first quarter events are worth noting.\nWe underwent a reduction in force, which impacted approximately 7% of our workforce.\nWe also said fond farewells to a few of our executives, including our former CEO, and subsequently realigned the organization to increase efficiency and generate cost savings.\nAs a result, our first quarter underwriting and general and administrative expenses of $46.6 million will be the high watermark for 2021, and you will see immediate and significant expense reductions for the remainder of the year.\nWith that, Mike will now provide a further discussion of our financial results, and then I will return to provide my closing remarks.\nDuring the quarter, we delivered a 4.8% annualized return on adjusted equity and a combined ratio of 93.9% within our largest operating segment employers.\nHowever, these favorable operating results were somewhat muted by our lower top line and net unrealized investment losses on our fixed maturity investments.\nOur net premiums earned were $134 million, a decrease of 20% year-over-year.\nThe decrease was due to lower written premiums, as Kathy mentioned, as well as a reduction in our estimated final audit accruals to reflect the premium that we expect to return to our policyholders as a result of lower payrolls.\nOur losses and loss adjustment expenses were $70 million, a decrease of 33%.\nThe company recognized $13 million of favorable prior year loss reserve development on its voluntary business during the quarter, which related primarily to accident years 2017 and prior versus $3 million of favorable prior year loss reserve development a year ago.\nCommission expenses were $17 million, a decrease of 21%.\nThat decrease was primarily due to lower earned premiums.\nUnderwriting and general and administrative expenses were $47 million, largely unchanged from a year ago.\nDuring the first quarter, we recognized a onetime $2.3 million acceleration in share-based compensation in connection with the retirement of our former CEO, Doug Dirks, Also, as Kathy mentioned previously, future quarters will reflect an immediate reduction in expenses from actions taken and completed during the first quarter.\nOur other expenses were $2.9 million, representing employee severance costs associated with our first quarter 2021 reduction in force.\nThis action was taken to better align our expenses with our current levels of revenue.\nFrom a reporting segment perspective, our Employers segment had underwriting income of $8 million for the quarter versus $1 million a year ago, and its combined ratios were 93.9% and 99.5%, respectively.\nOur Cerity segment had an underwriting loss of $4 million for the quarter, consistent with its underwriting loss a year ago.\nHowever, Cerity's premium writings have increased in recent months, which Kathy will address in her final remarks.\nOur net investment income was $18 million for the quarter, down 8%.\nThe decrease was primarily due to lower interest rates year-over-year, which impacted bond yields.\nAt quarter end, our fixed maturities had a duration of 3.8 and an average credit quality of A+, and our equity securities and other investments represented 10% of our total investment portfolio.\nOur net income this quarter was favorably impacted by $8 million of after-tax unrealized gains from equity securities and other investments, which are reflected on our income statement.\nConversely, our shareholders' equity and book value per share this quarter were each unfavorably impacted by $36 million of after-tax unrealized losses from fixed maturity securities, which are reflected on our balance sheet.\nAnd finally, during the quarter, we repurchased $10 million of our common stock at an average price of $32.21 per share, and our remaining share repurchase authority currently stands at just under $19 million.\nAs Mike mentioned, our Cerity operating segment, which offers digital workers' compensation insurance solutions directly to consumers, is gaining traction and has written $0.5 million in premium thus far in 2021.\nWhile the low- to medium-hazard direct-to-consumer market is relatively immature, and Cerity is an early entrant in this space, we believe that its technological and intellectual capabilities will support our future growth initiatives and provide immediate access to workers' compensation insurance for those customers seeking an online experience.\nI am excited and proud to lead this remarkable organization.\nAnd my primary goal for the company in 2021 remains unchanged.\nAs we prepare to fully capitalize on the upcoming labor market improvement, we will continue to maintain underwriting discipline and actively manage our expenses.\nOur balance sheet and capital position are very strong and are highly supportive of these initiatives.\nEmployers is in a unique spot.\nAs a monoline workers' compensation rider specializing in America's small businesses, we can react to these trends appropriately and efficiently and are confident that we are well positioned for continued success.\nAnd with that, operator, we will now take questions.\n Assistant:", "chosen": "qtrly net premiums earned of $133.9 million, down 20% year-over-year.\n"}
{"prompt": "Human: I'm Patrick Burke, the company's head of investor relations.\nArtie Starrs, Topgolf's CEO; William Davenport, Topgolf's CFO; and Jennifer Thomas, Callaway's chief accounting officer, are also in the room today for Q&A.\ngenerally accepted accounting principles.\nResults for the second quarter were nothing short of outstanding, and I'm extremely proud of our entire global team for the work they have put in to build this business to the powerhouse that it is today.\nAs you will hear throughout the call today, we are experiencing strong momentum across all of our business segments and are delivering exceptional operating results despite a challenging environment.\nRevenue for the quarter was up 208% to $914 million and up over 112% to approximately $1.6 billion for the first half of 2021, both new records for our business.\nProfitability also reached new highs, with adjusted EBITDA of $164 million for the quarter and $292 million for the first six months of the year.\nWhile headwinds from COVID persist, we have strong conviction in both the long-term strategic position and impressive earnings growth prospects of this unique business.\nBefore shifting gears to talk specifically about each area of our business, I want to give a personal shout-out to our tour team who's having an exceptional year as well.\nCongrats to Phil and John for their wins at the PGA Championship in the U.S. Open earlier this season; to Xander for his gold medal performance in Tokyo; and to Annika for her dominant victory at the U.S. Senior Women's Open.\nWhat a summer for Callaway Golf's tour staff.\nI can't tell you how excited I get seeing our players representing Callaway, along with our other brands, including TravisMathew and Topgolf, on the game's biggest stages.\nFrom a business perspective, I'm confident this exposure is very good for our brands and will help us deliver long-term shareholder value.\nLooking first at our golf equipment business.\nDemand for clubs and balls remains very high as the sport continues to gain interest from both new entrants, which are driving continued unprecedented growth in package sets, junior clubs, and women's clubs, along with core golfers who are playing more than ever and showing strong enthusiasm for the game.\nAccording to Golf Datatech, rounds played in June remained at an all-time high, and retail demand remains elevated.\nDatatech's hardgoods sell-through in Q2 was up an impressive 40% versus 2019, and retail inventory levels remain extremely low, with only 2.2 months on hand at the end of June as industry supply chain strained to keep up with the last 12 months of unprecedented demand.\nWith more options for activities opened this spring and summer compared to last year, we were cautious that there could have been a potential slowdown in golf participation and/or demand.\nHowever, thus far, we're pleased to report that we're not seeing this from our seat in the market.\nWe are also monitoring supply chain disruption due to the resurgence of the coronavirus Delta variant.\nThe resurgence has not had any negative demand implications yet, but it has caused further supply disruptions from factories based in and around Southeast Asia, primarily Vietnam.\nThe safety of the people working in these regions is top priority, and we're working with suppliers to make sure operating conditions are and remain as safe as possible.\nAlso, we have become accustomed to adapting to these circumstances over the last 18 months, and thus, we're able to shift some portion of our production to other less-impacted factories.\nStill, given how lean inventories are already, the fact that nearly all our factories are running at 100% capacity, and that we'll need to shift production shortly toward next year's launches to protect that supply, these shutdowns will have an estimated $55 million negative impact on second-half revenues, primarily in our golf equipment segment and primarily in Q3.\nAlthough disappointing, I view this disruption as a short-term issue, not one that will have a long-term impact on value for strategy.\nOn the positive side, and I recognize this is a glass-half-full view, we now believe field inventory levels will almost certainly stay lower than expected through this year, in many ways, a healthy market dynamic that bodes well for 2022.\nAll in all, we are very pleased with the strength of this category and our position in it.\nWe expect to deliver record performance for our golf equipment segment this year, and perhaps most importantly, we continue to believe the outlook for the golf equipment category is highly positive, with both a larger total market and a higher embedded growth rate.\nTurning now to our apparel and soft goods segment.\nThe business put up another strong quarter, exceeding our expectations as retail locations reopened across the world and our brands remain top of mind for consumers.\nThis business strongly overperformed during the quarter and continues to see incredible growth as we move into the back half of the year.\nTo contextualize, year over year for the second quarter, we saw more than 30% comp store growth in our own retail stores versus 2019, the last period of unaffected by COVID as well as strong growth in sell-through at wholesale accounts and e-commerce.\nAnother fun fact is that we are not just seeing brand momentum in the target male audience buying for themselves, as approximately 30% of the direct-to-consumer sales that we track are her buying for him.\nI'm no expert here, but when women are picking the brand for their men, I think it's a very good sign.\nJack Wolfskin was a strong performer as well this quarter.\nThe business has faced additional challenges given the longer COVID shutdowns in Europe than here in the U.S., but the team has worked through the issues brilliantly and is on track for a strong year.\nAs our owned stores in Europe reopened during the quarter, retail picked up nicely, almost reaching 2019 levels of revenue.\nMost importantly, we experienced strong sell-through of the spring/summer 2021 line, as well as strong, prebooks for the spring/summer '22 line, two very important indicators for the health of the brand.\nOur stores in China also continued to perform well as the brand maintains strong awareness and positioning within the outdoor apparel market there.\nThe team at Jack Wolfskin has done a fantastic job of revitalizing this business and putting us in a strong position to grow on the top and bottom line as COVID restrictions abate in the brand's key markets of Europe and China and as the brand grows and strengthen appeal.\nLastly, our Callaway-branded soft goods business showed strength as well, particularly in Japan, as popularity for the sport drove consumer spending.\nAdditionally, toward the end of the quarter, we took back the Korea apparel business, which was being licensed to a third party for several years.\nAlthough that business is just starting up, we are very excited about the long-term opportunity it will provide to our soft goods segment, and the team did an excellent job managing this transition given the COVID travel restrictions and challenges.\nWith demand levels high across this business segment, we expect to enter 2022 with low retail inventory across all of our soft good brands.\nIn summary, we are fortunate to be in excellent categories and are on our path to deliver a good 2021 in this segment as well as future growth.\nNow on to Topgolf.\nQ2 marked the first full quarter of Callaway results with Topgolf included in our numbers, and they delivered beyond our expectations.\nWhile COVID concerns remain a challenging variable for venue operations, the team put up outstanding numbers even as other options for consumers became available.\nWe continue to be invigorated by the momentum of this business brought to both Callaway's portfolio and to the game of golf.\nSame venue sales percentage versus 2019 levels continued encouraging trend of recovery, with Q2 results in the low 90s, up substantially from the low 80s in Q1 of this year.\nResults were driven by a mix of strong walk-in sales and continued recovery in the event business.\nLooking forward, and this assumes no major restrictions from COVID upticks, we feel same venue sales for Q3 will be above Q2 results, while we expect Q4 sales to be slightly slower than Q2 due to the corporate events mixed in that quarter and that the full year should end at approximately 90%.\nTo put this in context, this is considerably above our expectations for the year and, we believe, a strong performance.\nDomestic venue expansion continued as planned during the quarter, with four new venues opening.\nAnother venue, Holtsville, Long Island, opened recently, and yet another, Colorado Springs will open later this week.\nWe then expect to open one more venue in Q4 for a total of nine new domestic venues this year.\nAt the end of the year, we will have 67 domestic venues in operation across three owned UPA venues for a total of 70 owned venues in operation.\nInternationally, our U.K. venues had an excellent quarter as they reopened strongly after COVID induced shutdowns in Q1, and our franchise international venue business continues to build capability and momentum despite various COVID challenges.\nOverall, the venue business is very healthy, with profitability exceeding our expectations.\nThe Toptracer business had a successful quarter as well, with over 2,000 bays installed in Q2, setting a new record as we continue to see strong demand and excellent customer feedback.\nWhile some challenges remain on the installation front due to COVID, we expect to meet or exceed our target of 8,000 new bays for the year.\nOne of the highlights for the quarter was the successful installation of Toptracer into what we believe is the world's largest driving range, Golf Club Daiju located outside Nagoya in Central Japan.\nLastly, Topgolf's unique position in the market as a gateway to golf is continuing to introduce new players in the sport, and we see excellent long-term potential through our preferential ability to market to these new entrants and drive synergies across a growing consumer base, both on and off course.\nLooking ahead to the second half of the year and beyond, I remain excited about the opportunity ahead of us.\nWe operate in great categories with a unique portfolio of businesses that are all exceeding our expectations.\nThere are, of course, macroeconomic hurdles that we and many companies are facing, including supply chain constraints, freight costs, staffing challenges, and inflationary pressure, but at the demand level, we are experiencing and expect to experience in the foreseeable future we see these as manageable and expect to still deliver excellent financial results.\nOn the supply chain side, our guidance assumes an estimated $55 million negative impact to our top-line growth, primarily in Q3, to account for current disruptions.\nOn the inflationary side, we have already started taking some price and believe we'll largely have the ability to take price as needed.\nGiven the various moving parts for the remainder of the year, we are providing both third quarter and full-year guidance.\nI'll let Brian discuss the numbers in more detail, but the headline is that we expect our full-year 2021 sales to be over $1.3 billion higher than 2019 and adjusted EBITDA to be between $134 million and $149 million higher than 2019.\nOur EBITDA for 2021 will be very close to the number we guided to for 2022 when we provided longer-term guidance in the fall of last year.\nWe are essentially a year ahead of plan.\nAs Chip mentioned, we are very pleased with our second quarter and first-half results.\nEach of our operating segments performed above our expectations, leading to record results despite a challenging operating environment.\nThere are some continuing challenges from the pandemic that will have effect on our business in the short term, including supply chain constraints, increased freight costs, staffing challenges, and inflationary pressures.\nHowever, we believe that current demand levels, along with actions we can take, will mitigate the impact of these factors, and we expect to have strong financial results for the year and the foreseeable future.\nWe are energized by the opportunities ahead of us, and we believe we are well situated to handle the prolonged pandemic.\nMore specifically, each of our operating segments support an outdoor, active and healthy way of life that is compatible with the world of social distancing, and we have a strong liquidity position.\nAs of June 30, 2021, our available liquidity, which is comprised of cash on hand and availability under our credit facilities, was $877 million, compared to $483 million at June 30, 2020.\nIn evaluating our results for the second quarter and first half, you should keep in mind the following: First, our non-GAAP results exclude non-cash amortization expense of intangible assets acquired in acquisitions, including fair value adjustments to Topgolf's leases and debt; noncash depreciation expense from the fair value step-up of Topgolf assets; transaction and transition costs from the acquisitions; noncash amortization of the debt discount on the notes issued during the second quarter of 2020; the $174 million pre-tax non-cash impairment charge in the second quarter of 2020 related to the Jack Wolfskin goodwill and trade name; a $253 million non-cash gain related to the write-up of our premerger Topgolf investment; a $33 million benefit in the second quarter of 2021 from the reversal of a portion of the noncash valuation allowance related to certain of our deferred tax assets and certain other nonrecurring items.\nWe have provided in the tables to this release a reconciliation detailing the impact of these items on second quarter and first-half GAAP results.\nSecond, this is a reminder that our first-half financial results include Topgolf for four months only as the merger was completed on March 8, 2021.\nWith those factors in mind, I will now discuss our financial results.\nLooking at Slides 10 and 11.\nFollowing record revenues in the first quarter, our revenues continued to be very strong in the second quarter of 2021, setting another record for the company.\nThe second-quarter 2021 revenues benefited from incremental revenue from the Topgolf merger, and second-quarter 2020 revenues were significantly impacted as much of the company's business in golf retail will shut down then due to the pandemic.\nDuring the second quarter of 2021, sales in all product segments and in all major regions increased compared to both 2020 and 2019.\nWith that said, consolidated second quarter 2020 revenues were $914 million, compared to $297 million for the same period in 2020, an increase of $617 million or 208%.\nThis increase was led by a 98% increase in the golf equipment and soft goods businesses as well as an incremental $325 million from the Topgolf business.\nChanges in foreign currency rates had an $18 million favorable impact on second-quarter 2021 revenues.\nConsolidated second-quarter 2020 revenues also increased $467 million or 105% compared to the same period in 2019, including a 37% increase in golf equipment and 21% increase in our soft goods business.\nAs a result, consolidated revenue for the first half of 2021 increased $826 million or 112% compared to 2020 and increased $602 million or 63% compared to the same period in 2019.\nTotal cost and expenses were $806 million in the second quarter of 2021, compared to $474 million in the second quarter of 2020.\nOn a non-GAAP basis, which excludes, among other things, the $174 million non-cash impairment charge in the second quarter of 2020, our total costs and expenses increased $503 million to $796 million for the second quarter of 2021, compared to $293 million in the second quarter of 2020.\nTopgolf added $301 million of total costs and expenses.\nThe remainder includes increased variable expense, the restoration of some expenses that were reduced during the pandemic in 2020, planned investment in the business, increased corporate costs to support a larger organization, and increased freight and inflationary pressures, including labor and commodity prices.\nTo date, the overperformance of the company's business has generally allowed us to outpace the cost increases.\nWe are also reporting for the second quarter of 2021 operating income of $107 million, an increase of $285 million, compared to a loss of $177 million for the same period in 2020.\nOn a non-GAAP basis, which excludes the impairment charge in 2020, operating income for the second quarter of 2021 was $118 million, a $114 million increase, compared to $4 million for the same period in 2020.\nThe increase in second-quarter non-GAAP operating income was led by a $96 million increase in segment operating income from our golf equipment and soft goods businesses as well as an incremental $24 million from the Topgolf business.\nNon-GAAP operating income for the first half of 2021 increased $167 million to $215 million, compared to $47 million for the first half of 2020.\nOther expense was $31 million in the second quarter of 2021, compared to other income of $2 million in the same period of the prior year.\nOn a non-GAAP basis, other expense was $27 million in the second quarter of 2021, compared to other income of $3 million for the comparable period in 2020.\nThe $30 million decrease was primarily related to $14 million of higher interest expense related to the Topgolf business in the second quarter of 2021 and an $11 million gain from the settlement of a cross-currency swap arrangement in the second quarter of 2020.\nNon-GAAP other expense for the first half of 2021, which excludes, among other things, the $253 million non-cash gain related to the write-up of the company's premerger investment in Topgolf, was $33 million of expense, compared to $1 million of income in the first half of 2020.\nEarnings per share was $0.47 on approximately 194 million shares in the second quarter of 2021, compared to a loss per share of $1.78 on approximately 94 million shares in the second quarter of 2020.\nNon-GAAP earnings per share was $0.36 in the second quarter of 2021, compared to earnings per share of $0.06 for the second quarter of 2020.\nNon-GAAP fully diluted shares were 194 million in the second quarter of 2021, compared to 95 million shares for the same period in 2020.\nThe share increase is primarily related to the issuance of additional shares in connection with the Topgolf merger.\nFull-year estimated diluted shares is approximately 178 million shares, which includes the weighted average shares issued in connection with the merger over approximately a 10-month period.\nAs of June 2021, we had approximately 186 million shares that were issued and outstanding.\nAdjusted EBITDA was $164 million in the second quarter of 2021 compared to $29 million in the second quarter of 2020 and $66 million in the second quarter of 2019.\nTopgolf contributed adjusted EBITDA of $57 million.\nFor the first half of 2021, adjusted EBITDA was $292 million compared to $89 million in the first half of 2020 and $159 million in the first half of 2019.\nTopgolf contributed adjusted EBITDA of $17 million for the four months.\nTurning now to Slide 12.\nI will now cover certain key balance sheet and other items.\nAs of June 30, 2021, available liquidity, which represents availability under our credit facilities, plus cash on hand, was $877 million compared to $483 million at the end of the second quarter of 2020.\nThis additional liquidity reflects overperformance in all of our business segments and improved liquidity from working capital.\nAt June 30, 2021, we had total net debt of $1.1 billion, including $652 million of Topgolf-related net debt.\nThe Topgolf debt includes demand -- I mean, deemed landlord financing of $263 million related to financing of its venue businesses.\nOur leverage ratios have improved significantly period over period, and on a funded debt basis, are now under three times.\nOur consolidated net accounts receivable was $325 million, an increase of 52% compared to $214 million at the end of the second quarter of 2020.\nThe legacy business sales outstanding decreased to 58 days on June 30, 2020, compared to 79 days as of June 30, 2020.\nThe increase in net accounts receivable is primarily attributable to the increase in second-quarter revenue but also includes an incremental $9 million of Topgolf accounts receivable.\nWe continue to remain very comfortable with the overall quality of our accounts receivable at this time.\nAlso displayed on Slide 12, our inventory balance decreased by 12% to $335 million at the end of the second quarter of 2021 compared to $379 million at the end of the second quarter of the prior year.\nThis $44 million decrease was due to the high demand we were experiencing in the golf equipment business and better-than-expected performance in our soft goods business.\nTopgolf added approximately $14 million of inventory this quarter.\nCapital expenditures for the first six months of 2021 were $96 million, net of expected REIT reimbursements.\nThis includes $66 million related to Topgolf.\nFrom the full-year 2021 forecast perspective, the golf equipment and soft goods business forecast is $65 million, consistent with our previous forecast.\nThe 2021 full-year forecast for Callaway and Topgolf is approximately $243 million, net of reimbursements, primarily related to the new venue openings.\nThe foregoing does not include approximately $33 million in capital expenditures for Topgolf in January and February premerger.\nDepreciation and amortization expense was $43 million in the second quarter of 2021.\nNon-GAAP depreciation and amortization expense was $36 million in the second quarter of 2021, compared to $8 million in 2020.\nThis includes $27 million of non-GAAP depreciation and amortization related to Topgolf.\nFor the full year in 2021, we expect non-GAAP depreciation and amortization expense to be approximately $133 million, which includes $95 million for the Topgolf business.\nThe foregoing does not include approximately $18 million of Topgolf non-GAAP depreciation and amortization for January and February in the aggregate.\nI am now on Slide 13.\nAs Chip mentioned, we are providing revenue and adjusted EBITDA guidance for the full year and third quarter of 2021.\nPlease note this guidance only includes the post-merger Topgolf results for 10 months of 2021.\nFor the full year, we expect revenue to range from $3.025 billion and $3.055 billion.\nThat compares to $1.590 billion in 2020 and $1.701 billion in 2019.\nThe company's full-year 2021 net sales estimate assumes continued positive demand fundamentals for our golf equipment and soft goods segment; no further business, supply chain, and retail shutdowns due to COVID; and the Topgolf's 10 months of segment sales approach 2019 full year levels of $1.06 billion.\nThe outlook also assumes $55 million of supply chain risk due to the current Southeast Asia COVID shutdowns, almost all of which is expected to occur in the third-quarter 2021.\nFrom a cost perspective, full-year 2021 non-GAAP operating expenses for our golf equipment and soft goods businesses are estimated to be approximately $100 million higher than full-year 2019 non-GAAP operating expenses.\nThis is $20 million to $30 million higher than we previously guided at the beginning of the year, and the increase is related primarily to variable costs associated with the strong performance of the business this year, accelerated investments in the TravisMathew brand to support its faster-than-expected growth and additional corporate infrastructure costs to support a larger organization.\nInvestors should also note that approximately 85% of the incremental $100 million in expense is expected to be incurred in the second half of 2021 due in part to the Callaway apparel business in Korea that we took over from our licensee in July and a more normalized level of spend in the second half of 2021 to support all of our businesses.\nIn addition, we are expecting continued cost pressure from increased freight costs and inflationary pressures, including labor and commodity pricing, at least through the first half of 2022.\nTo date, positive volume variances have outpaced the majority of these increased costs, but they will continue to have some impact.\nFull-year adjusted EBITDA is projected to be between $345 million and $360 million.\nThe company's full-year 2021 adjusted EBITDA estimate assumes the Topgolf segment will deliver over $100 million in adjusted EBITDA for the 10 months beginning March 8, 2021.\nThis estimate assumes a previously mentioned supply chain revenue risk and continued elevated freight and other cost pressures, which are expected to have an overall greater impact than we originally anticipated for the balance of the year.\nFrom a third-quarter perspective, we expect revenue to range from $775 million to $790 million versus 2020 revenue of $476 million and 2019 revenue of $426 million.\nWe expect adjusted EBITDA for the third-quarter 2021 to be between $51 million to $58 million versus 2020 of $87 million and 2019 of $57 million.\nThis projected revenue growth represents the addition of Topgolf revenue as well as growth in the soft goods segment.\nBecause of the previously mentioned supply constraints in the extraordinary second half the golf equipment business had in the second half of 2020, as interest in golf surge following the relaxation of COVID restrictions, we are forecasting third-quarter revenue for the golf equipment segment to be below 2020 levels but above 2019.\nWhile not optimal, the third quarter supply constraints are not currently forecasted to affect the fourth quarter of 2021 or even 2022 to any significant degree.\nIn closing, I would like to emphasize a couple of points.\nI know we have spent some time today discussing the short-term headwinds from COVID, particularly on the forecasted supply chain constraints in the third quarter.\nAlthough annoying, the short-term disruption will not have a long-term impact on our value or strategy.\nInvestors should not lose sight of the fact we are having a tremendous year.\nAnd yes, without those headwinds, we would be having an even better year, but this is still a great year.\nWe're hitting our financial goals essentially a year ahead of what we had planned despite a challenging operating environment.\nEach of our segments are performing well.\nThe Topgolf merger has been wildly successful, and we feel well-positioned for the future, both in a COVID operating environment and after.\nWe also remain very excited about the opportunities and growth prospects ahead of us.\nOperator, over to you.\n Assistant:", "chosen": "q2 2021 consolidated net revenue increased $617 million (+208%) to $914 million.\nqtrly earnings per share $0.47.\nqtrly adjusted earnings per share $0.36.\nsees q3 net revenue $775 million - $790 million.\n"}
{"prompt": "Human: Before we begin, I'll cover two items.\nActual events or results could differ materially.\nReconciliations to the most directly comparable GAAP financial measures and other associated disclosures, including a description of the excluded and adjusted items, are available in the first quarter 2021 financial results news release, which is available on our website.\nWe're off with an excellent start to 2021, and I'm proud of the many accomplishments we've achieved in just a few short months.\nWe've been building momentum, and the strong operational execution of our teams is paying off as the global economy improves.\nThere are several highlights I want to cover.\nFirst, strong demand from the end of 2020 continued through the first quarter.\nIn many markets, demand is returning to or exceeding 2019 levels.\nWe reported 20% higher adjusted earnings per share over '19 and 5% over a very strong first quarter last year before we felt the full impact of the COVID-19 pandemic.\nConsistent with our track record of strong free cash flow, we also delivered record free cash flow of $125 million in the first quarter, which was up substantially from a very strong performance a year ago.\nWe achieved these solid results despite operational logistical headwinds from winter storm Uri.\nI'm incredibly proud of our team in Texas who took proactive steps ahead of the storm to avoid a hard shutdown to any of our assets.\nThen they worked tirelessly to repair and restart our facilities, which helped ensure supply for our customers.\nWe had half of our Texas manufacturing facility operational within one week of the storm, and we were more than 95% operational within three weeks.\nMoving to other highlights, we've made significant progress with our circular economy efforts, which I'll talk more about in a moment.\nAnd our progress hasn't gone unnoticed with Barron's adding Eastman to its list of the 100 Most Sustainable Companies for 2021, a true honor for us.\nAnd we issued our inclusion and diversity report, which you can find on our website.\nAt Eastman, we take our environmental, social and governance commitment seriously, and transparency is of the utmost importance.\nWe also continue to allocate our capital with returns to stockholders in mind.\nTo that end, we recently completed a small bolt-on acquisition of 3F Feed & Food, a leading animal health and nutrition company with accelerated growth in the animal nutrition business.\nAnd finally, we think the favorable trends in the economy, coupled with our innovation investments and continued disciplined cost management sets us up for strong earnings per share and free cash flow growth this year and next.\nOn our January call, we gave you an update on the progress we're making to become a leader in the circular economy.\nWe announced that we're building one of the world's largest plastic-to-plastic molecular recycling facilities at our site in Kingsport, Tennessee.\nSince then, we've broken ground on the facility and continue to target mechanical completion by the end of '22.\nEven more impressive is the amount of momentum we're building with customers in many different markets around the world.\nThe demand for our new branded products include Eastman Tritan Renew, Eastman Cristal Renew, is strong.\nAt this point, demand for our specialty products and the circular economy offerings has been better than we anticipated.\nAnd specific to the new facility we announced, we're ahead of schedule in terms of customer demand for the capacity.\nWe have a robust pipeline for additional announcements throughout the year and look forward to sharing those with you.\nTurning to our outlook.\nAs we entered the second quarter with strong demand and mix momentum, we also expect to benefit from cost discipline, including lower operating costs from our operational transformation program.\nHowever, there are specific headwinds we face, including maintenance turnaround, supplier reliability and some slowdown in auto production.\nIn addition, we have price increases that are continuing to catch up to higher raw material, energy and distribution costs in some products.\nDespite these headwinds, we expect a sequential increase in EPS, with second quarter adjusted earnings per share expected to be at or above second quarter of 2018 adjusted earnings per share of $2.22.\nMoving the full year, we expect strong market growth and product mix improvement to continue.\nOur innovation-driven growth model will enable us to grow faster than the underlying market recovery, and we expect a number of markets will be rebuilding inventory.\nWe also expect much of the capacity constraints, supplier reliability and logistics headwinds to lessen alongside a potential moderation in tight commodity markets.\nWe expect to continue to benefit from about $100 million of full year tailwind for improved capacity utilization compared to last year when we aggressively managed inventory well below the decline in demand with our focus on cash.\nAnd we're on track to keep our cost structure flat compared with 2020 and well below 2019 and '18 levels.\nWe, therefore, expect adjusted earnings per share will be about -- be between $8.25 and $8.75 for the full year of '21.\nOn cash, we expect free cash flow to approach $1.1 billion, which is consistent with our expectations for stronger adjusted EBITDA.\nWe expect 2021 will be our fifth consecutive year of free cash flow greater than $1 billion, and we will work to grow free cash flow from here.\nPutting it all together.\nThese outstanding results remind me about what gives Eastman this incredible resiliency and strategic advantage.\nFirst and foremost, it's the people at Eastman who continue to persevere and help us win as we saw in Uri and a time of crisis, and this is what we see every day from this good team.\nAnd as I reflect on how we position our company through the global trade disruptions of 2019 and then COVID in '20, I feel confident in our ability to grow earnings per share and cash off this new level of earnings.\nDespite a challenging macroeconomic backdrop over the last several years, we have not sacrificed our efforts to innovate and invest in our specialty portfolio and expect those investments to continue to pay off as we finish off '21 and move into '22.\nIn the meantime, we'll continue to focus on what we can control and remain committed to long-term attractive earnings growth and sustainable value creation for our owners and all our stakeholders.\n Assistant:", "chosen": "now expect 2021 adjusted earnings per share to be between $8.25 and $8.75.\nexpect 2021 free cash flow to approach $1.1 billion.\n"}
{"prompt": "Human: Today, I am joined by President and Chief Executive Officer, Lal Karsanbhai; Chief Financial Officer, Frank Dellaquila; and Chief Operating Officer, Ram Krishnan.\nColleen joins us from the Automation Solutions finance organization and will be your main point of contact going forward as I transition to a new role in the operating business units.\nI certainly wish you health and success.\nPlease join me on slide two.\nI certainly have big shoes to fill.\nAs Pete mentioned, I'm coming into this role from our Automation Solutions finance organization, and I've been with Emerson for over 13 years.\nI'm certainly excited and humbled to be joining the Investor Relations team during this dynamic time for our organization.\nI look forward to speaking with all our investors and partners very soon.\nNow I would like to take a moment to highlight two areas of real ESG impact within Emerson.\nFirst, on slide three, in keeping with environmental sustainability framework of greening of, by and with Emerson that we introduced in February, our first topic is about greening by Emerson.\nIt is a great example of how Emerson solutions are relevant in enabling our customers' sustainability initiatives.\nEmerson recently signed a multiyear agreement with PureCycle Technologies, which has a novel technology and process for fully recycling plastic number five polypropylene back to a clear pellet.\nAs some of you may know, polypropylene is a common form of plastic that has not had great recycling options.\nEmerson is serving as their born digital automation partner going forward with initial plant projects in Ohio, Georgia and a remote operation center in Florida.\nNow please join me on slide number four.\nOur second topic is the greening with Emerson example.\nLeveraging our Helix Innovation Center in Dayton, Ohio, Emerson has collaborated with the Department of Energy and their Oak Ridge National Laboratory to advance next-generation HVACR technology.\nExpanding the applicability of heat pump technologies, redesigning refrigeration architectures to maximize efficiency in food retail and working to minimize energy use and leaks in commercial HVAC applications are just a few of the exciting areas of cooperation.\nWe have a number of collaborations with the Department of Energy and their labs.\nWe look forward to continuing to build these relationships and support the development of novel solutions and real sustainability road maps going forward.\nGod speed and have a good luck in your new opportunity.\nGreat to have you here.\nColleen and I had the opportunity to spend couple of years together in Automation Solutions, and we're very blessed to have her join our Investor Relations team.\nAnd we have a lot of energy and momentum behind us, which was very exciting to see as we executed through the last three months.\nI had the opportunity over the last six months to meet many of you, and I look forward to meeting more of you as I go through the next part of the year.\nBut I appreciate your continued confidence, your challenges and of course, your investment.\nA few things just that are not financially related that I want to mention to the team here.\nFirst of all, our cultural work is well underway.\nWe will be announcing our new Chief People Officer later this month.\nWe're all very excited about the selection process.\nIt will be an outside hire and somebody who fundamentally will have the opportunity to come in here and really help us as we navigate some of the challenges and create many of the pathways that we have as we evolve the culture of Emerson into the future.\nSecondly, our portfolio work is complete.\nWe have -- we are now getting ready to review it with the Board, which will occur at the October Board meeting.\nWe discussed briefly with the Board yesterday.\nAnd essentially, what we have defined is multiple paths for our business to drive higher underlying sales growth and diversification of the portfolio.\nWe're all very excited about the process that we underwent.\nIt was very exhaustive, and we have turned over a lot of different stones, defining broad markets with high growth and lots of optionality in terms of M&A and organic activity.\nI'll mention on the M&A side that industrial software continues to be critical as we think about share of wallet, as we think about the potential for underlying growth acceleration and our many pathways there.\nOur SI acquisition is performing incredibly well and ahead of our internal synergy board plans.\nSo that's been very, very well done.\nBut what stands out to me most above all is the execution by the team.\nYes, there were market tailwinds, and we'll talk about those, particularly as they accelerated in Automation Solutions and continued across our Commercial & Residential businesses and they are relevant, but the execution was absolutely phenomenal.\nThere were a lot of hurdles to overcome through the quarter, material inflation, material availability.\nWe did a lot of expediting.\nWe had to get very creative in qualifying suppliers, logistics and management of cargo around the world and of course, labor availability in the United States.\nBut the team just did a great job.\nAnd we're seeing, despite these operational headwinds, the value of that work being reflected in the incrementals of the company.\nThe operating leverage -- profit leverage at 34% was very strong and now most importantly, has given us the room to accelerate investment in differentiating technologies and further -- that will further, I think, drive relevance -- increased relevance at our customer base.\nSo very exciting headroom that's created, and we started those investments.\nAnd I'll share a number of those with you, and we'll talk about that more as we go through the year.\nWe're especially pleased with the results in the quarter, especially in light of the operations challenges that Lal just described and Ram will talk about a little later in the call.\nIf you please go to slide six.\nSo a continued recovery in our end markets, combined with the benefits of the cost reset actions, and it drove strong operating performance and financial results in the third quarter.\nAdjusted earnings per share was $1.09, up 36% from the prior year.\nDemand continues to strengthen with sales coming in ahead of our expectations with underlying growth of 15%, and June trailing 3-month orders were at 26%.\nAutomation Solutions notably turned positive this quarter in both sales and orders, up 9% in sales and 17% on an underlying basis.\nCommercial & Residential Solutions continues to experience robust demand across the business and geographies with 29% sales growth and 43% orders growth on an underlying basis.\nThe cost reset benefits continued to be realized as planned reading through to the margins.\nAnd along with the additional volume and leverage, they drove adjusted segment EBIT growth of 40%, 280 basis points of increased margin to 19.6%.\nCash flow continues to be very strong with operating and free cash flow up approximately 30% year-over-year and free cash flow conversion exceeding 150% of net earnings.\nWe're continuing to implement the remaining elements of the cost reset program.\nIn this quarter, we initiated $32 million of restructuring actions.\nThe program is on schedule and delivering the projected savings as we've planned.\nThis is a bridge of the earnings per share increase from the prior year.\nThe operational performance was very strong.\nSo the noteworthy thing on this chart is the green bar.\nOperations added 33% to adjusted EPS, and it was balanced between the platforms.\nThey both delivered strong profit leverage on the strength of volume increases and cost reduction benefits, as Lal mentioned.\nLeverage was 34% across the enterprise.\nTax, currency, pension, stock comp netted to a $0.05 headwind, and there was a minor favorable impact from share repurchase.\nAgain, in total, adjusted earnings per share was $1.09, up 36%.\nPlease go to the next chart, Chart number eight.\nSo as I mentioned, underlying sales is up 15%.\nGross profit increased 90 basis points to 42.4%, driven mainly by the benefits of the cost reduction actions and then the leverage on the volume across the enterprise.\nWe did offset the impact of price/cost headwinds, which we are beginning to see intensify and which we will see in the next couple of quarters and we will talk about a little later in the call.\nAdjusted EBIT margin was 18.4%, up 310 basis points.\nEffective tax rate was 19.2% versus 11% in the prior year.\nLast year, we had several favorable discrete items, mostly around R&D credits that we described at the time.\nThis was a $0.10 headwind year-over-year that we overcame.\nAdjusted EPS, as mentioned, was $1.09 versus $0.80 last year.\nIf you go to slide nine, please, we'll talk about earnings and cash flow.\nAdjusted segment EBIT again increased 40%, margin up 280 basis points.\nThe leverage on volume and cost reset benefits offset material cost headwinds in the Climate Technologies business.\nAdjusted pre-tax earnings increased 350 basis points to 17.6%.\nOperating cash flow was very strong, up 31% at $1.1 billion.\nFree cash flow was $977 million, also up a little over 30%, driven by strong earnings growth and effective working capital management.\nLastly, the trade working capital ratio improved to 15.4% of sales.\nTurning to slide 10, we'll look at Automation Solutions.\nUnderlying sales turned positive this quarter at 8%.\nTrailing 3-month orders accelerated to 17%.\nThe improvement in the Americas is particularly encouraging and notable with continued momentum in life sciences, food and beverage and medical markets and a return to growth more broadly across the traditional process automation markets and sustainability-related business.\nWe're seeing increasing KOB three activity across our process automation customer base mainly driven by shutdown turnaround and outage activity and opex spend.\nMRO spend is returning to pre-pandemic levels from pent-up demand and delayed STOs.\ncapex spending is recovering at a slower rate with tailwinds from site-based emissions and optimization projects.\nThe platform continues to implement the comprehensive restructuring actions that have been ongoing, and the benefits are flowing through to the financial results.\nAdjusted EBIT margin increased 320 basis points and 310 basis points at adjusted EBITDA, driven mainly by the flow-through of the cost reset savings and by the volume leverage.\nThe integration of OSI continues to go very well.\nWe're very pleased with the acquisition and the results to date, and we have increasing confidence in the synergy plan that we have.\nBacklog increased to $5.5 billion.\nIt is up 17% year-to-date.\nWe'll talk a bit about the project funnel and other opportunities later in the call.\nTurning to slide 11, we'll review Commercial & Residential Solutions.\nSales were up on an underlying basis 29% versus the prior year.\nOrders continue to be strong and very broad-based in their strength.\nThe June trailing 3-month underlying orders were up 43%, and it was very balanced across both Climate Technologies and Tools & Home products.\nAll our businesses and geographies showed strong double-digit growth.\nResidential markets continue to be strong and growth has accelerated in Cold Chain and Professional Tools.\nThe Americas were up 29% with continued strength across all end markets.\nEurope was up 37%, driven by continued heat pump demand and increasing sales of professional tools.\nAsia, Middle East and Africa was up 25%, driven by Cold Chain and various heating technologies.\nMargins improved by 170 basis points of adjusted EBIT and 120 basis points of adjusted EBITDA driven by the strong volume leverage and the cost reset savings, which more than offset the price/cost headwinds that we are seeing in the business.\nI'm going to pass this over to Ram, and he's going to talk a bit about operations, what we've done in the quarter to deliver the results and some of the challenges that we face.\nClearly, as you can see, our operating environment remains very challenging as commodity inflation, electronic supply and labor availability continues to impact our global operations.\nSteel prices are at record highs with 11 months of consecutive increases and in our estimation, have not peaked yet.\nPlastic resin prices remain elevated as our global teams have maneuvered expeditiously defined alternatives to maintain supply.\nAnd while copper pricing has receded off record highs, it is still up over $1.40 a pound year-over-year.\nOur hedge positions lessened the impact to 2021, but the inflation impact in terms of copper will carry over into most of 2022.\nElectronics shortages are proliferating in most of our businesses, impacting both platforms, and supply is expected to remain constrained well into 2022.\nVery little component inventory on microprocessors, controllers, linear integrated circuits are available in the open market, and the number of shortages faced by our EMS suppliers is growing, severely impacting lead times.\nAnd finally, labor availability continues to be an issue across many industries in the U.S., and our businesses are impacted as well.\nOur V-shaped demand recovery in many of our Commercial & Residential Solutions businesses, local competition driven by tight labor markets in many cities and rolling labor constraints as waves of COVID disruptions impact our sites has added a new level of complexity to our operational plans.\nIt is important to note that price/cost remains at an unfavorable $75 million as we estimated last quarter.\nNo change, but we expect the maximum impact of the commodity inflation to be felt in the next two quarters.\nNow despite these challenges, turning to slide 13, I'd like to highlight some of the outstanding work by our global supply chain and operations teams to combat these challenges and help deliver phenomenal operational results to date as they remain flexible, creative and nimble in a dynamic environment to serve the needs of our customers.\nOur supply chain teams have worked tirelessly in this environment to ensure continuity of material supply to our global plants.\nAs you can see on the chart, many creative solutions are being implemented on a real-time basis quickly and effectively.\nOur regional footprint, both on the manufacturing side as well as supply chain that we spent many years developing, has certainly been an advantage for us in these challenging times.\nMany of our global plants are producing at record levels while ramping up capacity to meet surge demand and in many cases, in-sourcing critical elements of the supply chain to address sudden disruptions.\nLet's turn now to slide 15.\nWe are improving our sales outlook for the year based on the continued strength in our orders, the pace of business and the year-to-date profit performance.\nWe now expect underlying sales growth to be near the top of our May guidance of approximately 5% to 6%, Commercial Residential above their range in May at 15% to 16% and Automation Solutions closer to the top of that range at 0% to 1%.\nThe strong volume and improved cost base will flow through to margins.\nOur estimates are now 50 basis points above the previous guidance, increasing adjusted EBIT margin and adjusted EBITDA by 0.5% to approximately 18% and 23%, respectively.\nThere's no change to the restructuring, tax rate, capital spend or dividend.\nStrong profitability and working capital performance enabled an increase in our operating cash flow and free cash flow estimates, both of which increased by $300 million.\nWe are also raising our adjusted earnings per share guidance to $4.07, plus or minus $0.01.\nOur price/cost headwind for 2021 currently remains as estimated in Q2 and Ram covered at $75 million despite the current challenges that were highlighted.\nWe continue to manage this through containment, selective price actions, but the recent market developments that Ram described will be challenged through the next two quarters as we navigate them.\nStock compensation impact increases to $125 million.\nSo now we'll go over to Chart 16, and I'll just frame the order environment that we've experienced through the last three months.\nEmerson's trailing 3-month orders continue to be very strong and have momentum from the last update we gave you in the second quarter, with Commercial & Residential Solutions continuing to climb higher in their order run rates and Automation Solutions turned sharply positive to the high teens in June.\nCommercial & Residential Solutions continues to see strength in Residential, Cold Chain and the Professional Tools business, and all three very near to that average band of 43%.\nDiscrete and hybrid end markets in Automation Solutions continue to be very strong, while we see recovery in later cycle process automation markets, especially in North America.\nKOB three and KOB two are driving most of the recovery, but we are beginning to see some KOB one activity materialize, particularly in chemicals, power and biofuels.\nThe Americas really strengthened, up 29% as deferred maintenance demand and site access drove momentum.\nFinally, as we have commented in the past quarters, life sciences momentum continues to be extremely strong.\nLet's now turn to Chart 17, and I'll review the underlying sales growth outlook.\nQ3 underlying sales were up 15% versus prior year, exceeding our management expectations, driven by the strength in Commercial & Residential Solutions as well as the North America recovery just discussed.\nFull year expectations on underlying sales are between 5% and 6%, at the top end of our prior guidance of 3% to 6% and sales of approximately $18.4 billion.\nThe fourth quarter is expected to land in the high single digits to low double-digit range.\nFor the remainder of the year, we expect to see the North America business continue to recover in Automation Solutions as well as continued broad strength in commercial residential solutions.\nHowever, the impact of supply chain and labor issues will be a challenge.\nAs Frank mentioned, for the full year, we are expecting Automation Solutions sales to be flat to 1% and Commercial & Residential Solutions to be between 15% and 16%, driving us to our overall 5% to 6% underlying sales expectations.\nSo starting off in the Americas.\nQuarter four is expected to be strong in Automation Solutions at approximately 20% growth, broad-based recovery across all industries, led by continued strength in discrete and increasing strength in hybrid.\nProcess is showing some recovery, although uneven with some strength from returning domestic oil demand, offset by reduced midstream investment and continued fiscal restraint in upstream.\nFor KOB 3, we expect to see continued spend for deferred maintenance and increasing spend for site access that has been pent-up from the pandemic with an expectation that we will see a strong fall shutdown turnaround season.\nIn Latin America, strength in mining industries particularly are expected to continue.\nOn the Commercial & Residential side of the business, ongoing momentum in the residential markets, driven by do-it-yourself trends, home starts and HVAC seasonality as well as strength in Professional Tools and Cold Chain are expected to continue.\nEurope will continue to see demand in life sciences and biofuels on the automation side.\nProject wins in power, midstream, downstream and sustainability will drive low to mid-single-digit growth in Q4.\nCommercial & Residential will see robust demand for heat pumps and professional tools as well as the continuation of the refrigeration market recovery in Q4.\nTurning to Asia, Middle East and Africa.\nOur Asia automation business is seeing healthy project activity in marine, nuclear, life sciences and semiconductors and a positive trend for site-level spending in the Middle East.\nOn the Commercial & Residential side, we are seeing the commercial recovery across the region, specifically with commercial AC and cold chain solutions.\nOngoing COVID restrictions continue to be a challenge across the organization, particularly in this part of the world.\nLet's now turn to Chart 19, and we'll review the business funnel for Automation Solutions.\nSo back in February, we commented that our traditional large project funnel was $6.4 billion, and this should be something that is very familiar to those of you who watch this carefully.\nSince February, we have booked approximately $80 million of projects, some LNG and one most notably in Mexico.\nNew projects added include clean fuels, hydrogen, renewable diesels, lithium mining and LNG projects, while projects removed from the funnel since February were mostly oil and gas and downstream refining projects.\nThe August 2021 funnel is now valued at $6.3 billion in approximately 180 projects.\nAnd below in the donut pies, you can see the industry mix of our traditional funnel.\nWe have identified new decarbonization opportunities.\nAnd though generally smaller than our traditional definition of projects for our funnel classifications, these projects are increasingly relevant to our business.\nThey're being added into this view because they have the potential to grow in nature over time.\nToday, as depicted on the chart, these opportunities are worth $400 million in approximately 120 projects.\nThe combination of our traditional project funnel and the new sustainability funnel is now valued at $6.7 billion.\nAnd below is the combined industry mix where we are working to diversify our funnel.\nOn the right side of the chart, we are introducing the business opportunities with our recent OSI acquisition, which gave us an important foothold into the transmission and distribution automation space.\nThese opportunities have slightly different characteristics from our traditional project funnel definition, and therefore, we are keeping it separate for our discussion purposes today.\nGenerally, these opportunities are smaller and more numerous compared to our large traditional project funnel, but they are clearly strategically important.\nThe value of these opportunities is $1.5 billion and are made up of 530 projects.\nTo give you some perspective on the scale and how differentiated it is, approximately 15% of that $1.5 billion has a value of greater than $5 million, and 50% of it is between $1 million and $5 million.\nThe funnel is global, although approximately $1 billion of it is in North America and Europe.\nOverall, we have strong opportunities ahead, and I'm bullish on overall project outlook as we diversify and expand into new spaces.\nNow let's turn to Chart 20.\nThis is a very important chart.\nAnd as Frank mentioned in our financial results showcase, our robust cost reset plan is being incredibly well executed across the enterprise.\nAs a reminder, this comprehensive plan began in late 2019 and will be fully realized by 2023.\nIt involves over $600 million in spend and approximately $650 million in savings.\nIn February, we also introduced our midrange targets of 24% adjusted EBITDA margins and $4.75 to $5 in adjusted EPS.\nWe are very much on track to reach those targets by 2023.\nImportantly, however, the recent outperformance and momentum through the end of 2021 is creating some headroom for critical investments.\nAnd I'm particularly excited about this, particularly as I think about key technologies that will enable our business to outperform over the long term.\nAs you can see, revenues, margins and cash flow are all better than February expectations and are enabling this acceleration in technology investments.\nI've outlined four examples below and will come out over the next months and in depth in February as to how we're managing and thinking about these very significant investments.\nExamples outlined are the Copeland K7 scroll, which is the largest new product investment in the history of our air conditioning business.\nThis thing drives obviously increased performance and meets the 2023 efficiency regulations and is optimized for 2025 refrigerants.\nThe Greenlee remote cutters, an award-winning tool on the right-hand side of the chart, which enhances safety for cutting underground cables.\nThe Gemini, which is our next-generation pressure and temperature device being developed in our Measurement Solutions business, which will have next-generation electronics, unmatched safety and process insight.\nAnd lastly, our Plantweb Optics, our integrated operational performance platform, which unifies data, people and systems to drive operational performance.\n Assistant:", "chosen": "compname reports q3 adjusted earnings per share of $1.09.\nq3 adjusted earnings per share $1.09.\nqtrly net sales were $4.7 billion up 20 percent from year prior.\nsees 2021 net sales growth 9% - 10%.\nsees 2021 gaap earnings per share $3.79 +/- $0.01.\nsees 2021 adjusted earnings per share $4.07.\nexpect overall continued improvement in industrial and commercial demand over remainder of 2021.\nexpect operational, supply chain, and materials inflation environment to remain challenging through remainder of fiscal year.\n"}
{"prompt": "Human: In addition, we will also be presenting certain non-GAAP financial measures.\nConsistent with our last call, we generated strong results during the period due to rapidly growing demand for our products and services.\nWe reported fourth quarter fiscal 2021 adjusted earnings of $1.30 per diluted share, a 17% increase over the fourth quarter of last year.\nOur Motive Power business saw another quarter of solid revenue and earnings improvement and our Specialty segment continued its positive momentum, bolstered by strong demand for our transportation products.\nEnergy Systems benefited from telecom driven 5G growth in the Americas, delivering solid revenue, but following short on earnings, which I will soon address.\nCash flow was again strong this quarter, producing a record year and leaving us on very solid financial footing.\nAlthough the world has begun returning to some sense of normalcy, we continue to confront ongoing headwinds created by the COVID-19 pandemic.\nWe have seen continued availability constraints in recruiting new employees and select raw material shortages, particularly in resins and electronic components.\nPrices have been sticky, but always lag rapid cost increases.\nOur team is responding to the near-term shortages and hiring challenges and expect steady improvement as the supply chain settles down and the rest of the world accelerate.\nI'd now like to provide a little bit more color on some of our key markets.\nLet's start with our largest segment, Energy Systems, which faced several input cost pressures during the period, including higher tariffs, increased commodity prices, and expedited freight costs.\nIn addition, our customers continue to struggle with chip and labor shortages that have slowed their build rates, but we expect improvements from these broad upstream and downstream supply chain issues in the back half of the calendar year.\nEnerSys is participating in the mid-spectrum wireless U.S. build-out with batteries and outdoor DC power systems.\nWhile we remain -- while we maintain our strong market position, we believe our results will further accelerate when customers rotate to higher spectrum small cell 5G build-outs and can benefit from our next-generation line powering products.\nWe are also very excited about U.S. broadband MSOs building out portions of their own wireless networks with their own HFC networks.\nToday, these MSOs primarily wholesale lease and voice data minute from other network wireless providers.\nWe have a full suite of DOCSIS 3.1 gateway products that help the MSOs deploy their wireless networks much faster at a lower total cost.\nRecently enacted extended MSO backup power requirements in California for public safety grid shutdown resilience provide an excellent near-term opportunity for EnerSys as well.\nIf all sites currently identified are deployed, the opportunity is well in excess of $50 million.\nIn addition to telecom, we are seeing favorable industrial-utility trends as infrastructure improvements, reliability and resiliency are expected to provide another growth driver for Energy Systems.\nRenewable markets continue to expand with the legislative and regulatory push for energy storage applications for residential solar plus storage, monetization of distributed energy resources and numerous global climate initiatives aimed at vehicle electrification and renewable generation.\nWe will capitalize more in this area as our next generation renewable inverters and batteries are released.\nWe have also made substantial progress on our own battery energy storage system plus DC fast-charging initiative for electric vehicles, which I will speak more about shortly.\nData center markets are also improving as areas lift more COVID-related site access restrictions.\nAll in all, global mega trends continue to be favorable to Energy Systems growth.\nOur Motive Power business performed very well in the quarter.\nWe are now the only battery producer to offer both lithium and TPPL in maintenance free, along with our traditional flooded products.\nThis segment generated strong operating earnings from continued market demand recovery, growing maintenance fee revenues and continued opex discipline.\nIn addition, our Richmond, Kentucky facility has returned to full capacity and efficiency, while our Hagen, Germany, restructuring savings are starting to be realized.\nWe launched our lithium platform with our four variance this quarter and all of our Motive Power Products passed the internal UO tests.\nThis month we will be launching two additional variance.\nAnd we continue to collaborate with multiple material handling manufacturers.\nWhile we're only in the early stages of our launch, our customers continue to find this chemistry as best suited for the toughest duty and are actively trialing our offering with excellent results.\nThe third segment of our business, Specialty, reported another strong quarter despite the ongoing impact of COVID on our capacity ramp.\nOur transportation business is performing well as the OEM Class 8 vehicle market recovers.\nHowever, we along with many of our competitors have been dealing with hiring challenges and supply constraints, causing our backlog to remain stubbornly high as demand continues to grow faster than we can supply.\nAs a result, our focus remains on expanding TPPL production, particularly in our three Missouri factories.\nOur Springfield ramp is behind schedule due to COVID, but we added a second shift to the high-speed line and increased oxide and pasting capacity.\nHigh-speed line production doubled in the last three months and continues to improve.\nOur Warrensburg facility made a significant improvement from the last two years performance as well.\nLastly, our aerospace and defense team had another great quarter executing on submarine, tactical vehicles and munitions projects.\nWe won several space contracts with a variety of customers and programs.\nI am pleased that we officially kicked off our battery energy storage system plus DC fast charge initiatives during the quarter and we are moving fast.\nEarly momentum has been driven by two commercial real estate partners and our engineering team has exceeded my expectation by delivering a 285-kilowatt hour prototype, up and running on our tech center, here at corporate in just a few months.\nOur launch real estate partner has identified over $1 billion of multi-year revenue opportunity starting early calendar year ''22 if we hit the reasonable cost and performance targets.\nOur goal is to deliver EV charger that charges any electric passenger car as fast as the car can handle, often changing hours into minutes.\nBy using a large storage battery to quickly charge EVs, we can dramatically reduce system installation costs at many sites, including the size of the AC transformer and high voltage cable from the utility interconnect.\nThe energy system can also reduce operating costs by lowering peak demand from vehicle charging.\nIn addition to fast-charging EV's, the bidirectional energy system can also help the host site use electricity more cost effectively for its commercial operations and can provide emergency backup power, down power outages.\nThe system is solar compatible and largely made from existing EnerSys lithium battery modules in charge and technology.\nOur goal from the beginning of our lithium program is to use standardized modular products and use these product -- use these building blocks across all of our lines of business.\nThis drives the economies of scale and accelerate our time to market.\nWe are lining up software partners for artificial intelligence and cloud services and reviewed preliminary business plan with our Board last week.\nWe will provide more color on this excited opportunity over the summer.\nWith fiscal year 2021 behind us, I wanted to lay out what we're seeing in the market and the opportunities ahead of us.\nDespite the challenges of the past year, many caused by the global pandemic, we are well positioned for long-term success.\nWe are on the precipice of a massive 5G build-out that will provide a strong long-term tailwind for our business.\nRecent commentary by the largest telecoms and equipment manufacturers has been unanimous.\n5G is gearing up and we should begin seeing the accelerated ramp in the second half of calendar year 2021, with the build-out continuing for five years or many more thereafter.\nThe factors leading to this 5G growth include T-Mobile's acceleration postpaid [Phonetic], universal and competitive 5G deployments for all carriers, including AT&T, which is expected to spend $24 billion a year on its network.\nThis gives entry into the marketplace with an FCC requirement to deploy 70% of the U.S. population by June 2023.\nAnd finally, government spending or government sponsored rural fiber broadband initiatives being rolled out at the federal and state levels throughout the U.S. There are some potential hurdles that could slow the ramp-up, including the success of the C-band auction completed in February for more than $81 billion, which could limit some carriers financial resources to deploy it.\nThe second hurdle relates to supply chain shortages discussed by the 5G manufacturers, particularly a lack of semiconductors.\nWe will keep a close eye on these developments with the U.S. leading Europe, but remain confident we're at the door of a major 5G expansion in the quarters and years ahead.\nIn addition, the Biden administration has proposed nearly $2 trillion dollar bill, which includes upgrades to traditional infrastructure like U.S. highways and bridges, and we'll also made significant investments in non-traditional areas that should benefit EnerSys directly, such as the electric grid, EV charging and high-speed broadband.\nWhile it is far from a done deal, there is bipartisan support for several areas of the build that we are prepared to act on.\nOur strategic initiatives outlined in our Investor Day nearly two years ago are worth repeating.\nOne, to accelerate higher margin maintenance free Motive Power sales with NexSys iON and NexSys PURE; two, to grow the portfolio of products in our Energy Systems business, particularly in telecom, with fully integrated DC power systems and small cell site powering solutions which will accelerate our growth from 5G; third, to increase TPPL capacity, particularly for transportation market share and our Specialty business and finally, to reduce waste through the continued rollout of the EnerSys Operating System.\nIn addition, we are now adding our Energy System plus fast-charging to the above initiatives.\nWe feel it is a core competency from decades of experience charging electric forklifts, and we believe it represents an immense opportunity.\nWe will work hard executing each of these areas and to deliver a long-term value our customers and shareholders deserve.\nWith that, I'll now ask Mike to provide further information on our fourth quarter results and go-forward guidance.\nI am starting with Slide 10.\nOur fourth quarter net sales increased 4% over the prior year to $814 million due to a 4% increase from volume and 2% from currency gains net of the 2% decrease in pricing.\nOn a line of business basis, our fourth quarter net sales in Energy Systems were up 11% to $349 million and Specialty was up 16% to $132 million, while Motive Power revenues were down 6% to $333 million.\nMotive Power suffered an 8% decline in volume along with a 1% decrease in pricing, net of a 3% increase in FX.\nThe prior year, Motive Power fourth quarter revenues benefited from our recovery of the September 2019 fire in our Richmond, Kentucky facility.\nEnergy Systems had a 12% increase from volume and a 2% improvement from currency net of a 3% decrease in pricing.\nSpecialty had 16% in volume improvements along with 2% offsetting impacts from positive currency and lower pricing.\nWe had no impact from acquisitions in this quarter.\nOn a geographical basis, our net sales for the Americas were up 4% year-over-year to $557 million, with a 6% more volume and 2% less pricing.\nEMEA was up 2% to $203 million despite 3% volume and pricing declines due to an 8% improvement in currency.\nWhile Asia was up 19% at $55 million on 9% volume and 10% currency improvements.\nPlease now refer to Slide 11.\nOn a sequential basis, fourth quarter net sales were up 8% compared to the third quarter, driven by 9% volume improvements, net of a 1% price decline.\nOn a line of business basis, Specialty increased 21% with our TPPL continuing to provide more capacity for transportation sales, while Motive Power was up 9% as rebounds from the pandemic and Energy Systems was up 3%.\nNow a few comments about our adjusted consolidated earnings performance.\nAs you know, we utilized certain non-GAAP measures in analyzing our company's operating performance, specifically excluding highlighted items.\nAccordingly, my following comments concerning operating earnings, my later comments concerning diluted earnings per share exclude all highlighted items.\nOn a year-over-year basis, adjusted consolidated operating earnings in the fourth quarter increased approximately $7 million to $78 million, with the operating margin up 50 basis points.\nOn a sequential basis, our fourth quarter operating earnings dollars were flat at $78 million, while our OE margin dropped 80 basis points to 9.6%, primarily due to Energy Systems results, which I will address shortly.\nOperating expenses when excluding highlighted items were at 14.6% of sales for the quarter compared to 16.4% in the prior year as we reduced our spending by $9 million year-over-year and by 10 basis points sequentially.\nExcluded from operating expenses recorded on a GAAP basis in Q4 are pre-tax charges of $27 million, primarily related to $6 million in Alpha and NorthStar amortization, and $21 million in restructuring charges for the previously announced closure of our flooded Motive Power factory in Hagen, Germany.\nExcluding those highlighted charges, our Motive Power business generated operating earnings of 15.6% or 300 basis points higher than the 12.6% in the fourth quarter of last year, due primarily to improvements in manufacturing costs and lower operating expenses.\nOE dollars for Motive Power increased over $7 million from the prior year.\nOn a sequential basis, Motive Power's fourth quarter OE decreased 230 basis points from the 13.3 -- excuse me, increased 230 basis points from the 13.3% margin posted in the third quarter, again due primarily to improved manufacturing and operating costs along with better price mix.\nEnergy Systems operating earnings percentage of 2.6% was down from last year's 4.1% and from last quarter's 7.4%.\nOE dollars decreased $4 million from the prior year and decreased $16 million from the prior quarter despite slightly higher volume on lower margins and higher input costs.\nThese costs range from higher tariffs, freight, materials and manufacturing costs.\nSpecialty operating earnings percentage of 13.2% was up from last year's 11.7% and up from last quarter's 11.9%.\nOE dollars increased over $4 million from both the prior year and prior quarter on higher volume and lower operating expenses.\nPlease move to Slide 13.\nAs previously reflected on Slide 12, our fourth quarter adjusted consolidated operating earnings of $78 million was a increase of $7 million or 10% from the prior year.\nOur adjusted consolidated net earnings of $56.5 million was $9 million higher than the prior year.\nThe improvement in adjusted net earnings reflects primarily the rise in operating earnings along with lower interest expense.\nOur adjusted effective income tax rate of 19% for the fourth quarter was slightly higher than the prior year's rate of 18% and higher than the prior quarter's rate of 17%.\nDiscrete tax items caused most of these variations.\nFiscal 2021 tax rate of 18% was consistent with that of the prior year.\nFourth quarter earnings per share increased 17% to $1.30, which was near the top of our guidance range.\nWe expect our weighted average shares for the first fiscal quarter of 2022 to remain relatively constant to be approximate $43.5 million of the fourth quarter.\nAs a reminder, we now have over $75 million of share buybacks authorized and we have made modest purchases recently.\nLast week, we announced our quarterly dividend, which remains unchanged from prior levels.\nWe have included our year-to-date results on Slides 14 and 15 for your information, but I do not intend to cover these details.\nOur balance sheet remains strong and positions us well to navigate the current economic environment.\nWe have $452 million of cash on hand and our credit agreements leverage ratio was 1.7 times, which allows over $600 million in additional borrowing capacity.\nWe expect our leverage to remain below 2.0 times in fiscal 2022.\nWe generated a record $288 million of free cash flow in fiscal 2021.\nCapital expenditures of $70 million were in line with our prior guidance.\nOur capex expectation for fiscal 2022 is $100 million and reflects major investment programs in lithium, battery development, and continued expansion of our TPPL capacity, including the NorthStar integration.\nEven with these investments, we have also retained the agility to flex our manufacturing footprint as needed.\nOur decision announced last November to close our Hagen, Germany facility has progressed better than our expectation in terms of speed and the cost.\nThe expected $20 million in annual savings are starting to be felt already with the full benefit arriving by our fourth fiscal quarter of this year.\nWe anticipate our gross profit rate to remain near 24% in Q1 of fiscal 2022, and we expect expanding margins thereafter.\nAs Dave just described, we believe all three of our lines of business are well positioned and their diversity provides us with a stable earnings platform.\nDespite some concerns over the potential for late arising shortages, we feel we have enough visibility to provide guidance in the range of $1.15 to $1.25 in our first fiscal quarter of year 2022.\nLashana, we will now open the line for any questions.\n Assistant:", "chosen": "adjusted net earnings per diluted share for q4 of fiscal 2021, on a non-gaap basis, were $1.30.\n"}
{"prompt": "Human: This conference call also contains certain non-GAAP financial measures.\nDefinitions and reconciliations schedules for those non-GAAP measures can be found on the EOG's website.\nSome of the reserve estimates on this conference call may include estimated potential reserves and estimated resource potential not necessarily calculated in accordance with the SEC's reserve reporting guidelines.\n2021 was a record-setting year for EOG.\nWe earned record net income of $4.7 billion, generated a record $5.5 billion of free cash flow, which funded record cash return of $2.7 billion to shareholders.\nWe doubled our regular dividend rate and paid two special dividends, paying out about 30% of cash from operations.\nAnd we are continuing to deliver on our free cash flow priorities this year with an additional special dividend announced yesterday of $1 per share.\nThe last time we set an earnings record was in 2014.\nWe earned $5.32 per share while oil averaged $93.\nLast year, we shattered that record earning $7.09 per share with $68 oil.\nThat's 50% higher earnings with a 27% lower oil price.\nThe catalyst for that improvement was our shift to premium six years ago.\nPremium is our internal investment hurdle rate that uses low fixed commodity prices to calculate the returns that drive our capital allocation decisions, $40 and $2.50 natural gas for the life of the well.\nWhile our premium strategy ensures high well-level returns and quick payouts in any given year, the more significant and durable impact is to our full-cycle development cost.\nThe benefit of making investment decisions using fixed low commodity prices has the enduring impact of steadily improving corporate level operating and cash margins over time.\nThat impact is now directly observable on the face of our financial statements.\nAnd last year, we raised the bar again to double premium.\nOur hurdle rate increased from 30% to a minimum of 60% direct after-tax rate of return using the same low fixed prices of $40 oil and $2.50 natural gas.\nThe switch promises to further improve financial performance in the years ahead and is what gives us great confidence in our ability to continue delivering shareholder value through commodity price cycles.\nWe expect to look back on 2021 like we do on 2016 as the year we made a permanent increase to our return hurdle that drove another step change in the financial performance of EOG.\nWe also delivered as we promised operationally in 2021 with production volumes, capex and operating costs in line or better than target set at the beginning of the year.\nWe were able to successfully offset emerging inflationary pressures during the year to lower well costs by 7%.\n2021 was also a big year for ESG performance.\nWe reduced our methane emissions percentage and injury rates and increased water reuse.\nWe announced our 2040 net-zero ambition and added our goal to eliminate routine flaring by 2025 to our existing near-term targets for greenhouse gas and methane emissions rates.\nWe continue to develop creative solutions, leveraging existing technology to make progress on our path toward our net-zero ambition.\nThere's growing recognition that oil and gas will have a role to play in the long-term energy solution.\nWe know that to be part of that solution, we not only have to produce low-cost, high-return barrels, we also have to do it with one of the lowest environmental footprints.\nAs we look into 2022, the global oil market is in a position to rebalance during the year.\nOur disciplined capital plan aims to increase long-term shareholder value through high-return reinvestment that optimizes both near-term and long-term free cash flow.\nThe plan also funds exploration and infrastructure projects to improve the future cost structure of the business.\nWith the improvements we made in the business last year, combined with a higher commodity price environment, EOG is positioned to once again generate significant free cash flow.\nWe continue to follow through on our free cash flow priorities.\nOur stellar fourth quarter performance allowed us to further strengthen the balance sheet, and we are returning cash to shareholders with the $1 per share special dividend declared yesterday.\nCombined with our $3 per share regular dividend, we have already committed to return $2.3 billion of cash to shareholders in 2022.\nWe remain firmly committed to our long-standing free cash flow and cash return priorities, and you can expect EOG to continue to deliver on them as the year unfolds.\nEOG has exited the downturn a much better company than when we entered it.\nHigher returns with the shift to double premium, a lower cost structure, more free cash flow, a smaller environmental footprint and a culture strengthened by the challenges we have overcome together.\nOur culture is the No.\n1 value driver of EOG's success.\nBy remaining humble and intellectually honest, we sustained the cycle of constant improvement that drives our technology leadership.\nOf all the fundamentals that consistently create long-term value, none of them matter without the commitment, resiliency and execution from our employees.\nNow, here's Tim to review our financial position.\nEOG generated record financial results in the fourth quarter with adjusted earnings of $1.8 billion and free cash flow of $2 billion.\nCapital expenditures of $1.1 billion were right in line with our forecast while production volumes finished above target.\nFor the full year, adjusted earnings were a record $5 billion or $8.61 per share.\nThis yielded return on capital employed of 23%, while oil prices for the year averaged $68 per barrel.\nPerhaps most important than setting records is what drove our outperformance.\n2021 illustrated EOG's success at driving down our cost structure.\nROCE would have been 10% or better at oil prices as low as $44.\nKeep in mind that back in 2016, when the premium investment standard was introduced, the oil price required for 10% ROCE was in excess of $80 per barrel.\nThe dramatic improvements we have made to the profitability of our business reflect the benefits of using the highest investment threshold in the industry.\nThe bottom line financial impact of double premium is just beginning to show up.\nBut like our original switch to premium, it will grow over the coming years.\nOur goal is to position the company to earn economic returns at the bottom of the cycle, less than $40 oil and generate returns that are better than the broader market on a full cycle basis.\nFree cash flow in 2021 was a record $5.5 billion, and we deployed this cash consistent with our long-standing free cash flow priorities.\nWe doubled the regular dividend rate, which now stands at an annual $3 per share and represents a 2.7% yield at the current share price.\nWe are confident in the sustainability of our high-return low-cost business model to support a dividend that has never been cut or suspended in its more than 20-year history.\nWe solidified our financial position, finishing the year with effectively zero net debt.\nWe were also able to address additional cash return priorities.\nWe paid two special dividends for a combined $3 per share.\nWe also refreshed our buyback authorization, which now stands at $5 billion.\nWe will look to utilize this on an opportunistic basis.\nIn total, EOG returned $2.7 billion of cash to shareholders in 2021.\nThis represents 28% of discretionary cash flow and 49% of free cash flow, putting EOG among E&P industry leaders for cash returned in 2021.\nLooking ahead to 2022, our disciplined capital plan and regular dividend can be funded at $44 oil.\nAt $80 oil, we expect to generate about $11 billion of cash flow from operations before working capital.\nThe $4.5 billion capital plan represents about a 40% reinvestment ratio, resulting in more than $6 billion in free cash flow.\nThis, of course, is on an after-tax basis, as we expect to be a nearly full cash taxpayer in 2022 as we were last year.\nWe are in an excellent position to continue to deliver on our free cash flow priorities in 2022.\nEOG declared a $0.75 regular dividend yesterday, which is our highest priority for returning cash to shareholders.\nThe size of the regular dividend is evaluated every quarter.\nAs the financial performance and cost structure of EOG continues to improve, we expect that will be reflected in continued growth of the dividend.\nTurning to our second priority.\nThis period of high oil prices allows us to further bolster the balance sheet.\nTo support our renewed $5 billion buyback authorization and prepare to take advantage of other countercyclical opportunities, we plan to build and carry a higher cash balance going forward.\nWe expect there will be opportunities in the future to create significant shareholder value by deploying a strong balance sheet and ample liquidity at the right time.\nFinally, we also announced an additional cash return to shareholders yesterday with a $1 per share special dividend to be paid in March.\nAlong with the regular dividend, EOG has already committed to return $2.3 billion of cash to shareholders in 2022.\nWe are fully committed to continuing to deliver on all of our free cash flow priorities.\nI'm especially proud of their safety performance.\nIn addition to outstanding operations and financial improvements, we achieved a record low injury rate.\n2021 was another year of execution.\nThroughout the year, we consistently exceeded our oil production targets, primarily due to strong well results.\nOur operations teams continue to innovate and find opportunities to increase efficiencies and lowered the average well cost by 7%, beating the 5% target we set at the start of the year.\nOur drilling teams are achieving targeted depths faster with lower cost by focusing on reliability of the tools and technical procedures that drive daily performance.\nFor example, in our Delaware Basin Wolfcamp play, our teams have improved days to drill by 42% since 2018.\nIn our Eagle Ford oil play, after drilling several thousand wells, our teams continue to refine the drilling operation to drive consistent performance from our rig fleet, resulting in a 21% reduction in the drilling costs since 2018.\nAnd with our decentralized organization and collaborative teamwork across operational areas, we continue to generate ideas for improvement through our innovative approach to areas such as improved bit design and drilling motor performance and share them throughout the company.\nOn the completion side, we made great starts to expand the use of our super zipper or simo-frac technique to about one-third of our wells completed last year.\nCompletion costs also benefited from reduced sand and water cost through our integrated self-sourcing efforts and water reuse infrastructure.\nUtilizing local sand and water pipelines includes the added benefit of removing trucks from the row of contributing to a safer oilfield with lower emissions.\nCash operating costs were in line with forecast.\nAnd while delivering a higher level of total production, they were nearly equivalent to our cash operating cost pre-pandemic in 2019.\nThe savings are a result of a focus on reducing workover expenses and improvements in produced water management.\nThese efforts will expand in 2022 to help offset additional inflationary pressure.\nWe also had another great year improving our ESG performance metrics.\nPreliminary calculations indicate that we reduced our methane emissions percentage by about 25% and our total recordable incident rate by 10%.\nWe also achieved a 99.8% target for wellhead gas capture and increased water resource from reuse to 55%.\nAgain, these are preliminary results as our final metrics will be published in our sustainability report later this year.\nAs we enter 2022, EOG is not immune to the inflation that we're seeing across our industry.\nBut we have line of sight to offset these inflationary pressures through innovation and technical advances, contracting for services, supply chain management and self-sourcing and materials.\nOver 90% of our drilling fleet and over 50% of our frac fleets needed to execute this year's program are covered under existing term agreements with multiple providers.\nOur vendor partnerships provide EOG the ability to secure longer-term high-performing teams at favorable prices while providing the vendors a predictable and reliable source of activity to run their business.\nEOG's technical teams take ownership of various aspects of the drilling and completion operations to drive performance, improvements and eliminate downtime.\nAs a result, we will -- we still see opportunities to sustainably improve our performance.\nSome of the largest efficiency gains will be in our completion operations this year.\nFor example, we expect to utilize our Super Zipper technique on about 60% of our wells, increasing the amount of treated lateral per day.\nWe're also enhancing our self-sourced local sand efforts, which we expect to not only secure the material needed for the year, but also offset the effects of inflation.\nWe continue to expand our water reuse capabilities that will assist in offsetting inflation in both our capital program and lease operating expense.\nWe remain confident that we'll be able to keep well cost at least flat in 2022.\nEOG's capital efficiency continues to improve as a result of EOG's culture of continuous improvement.\n2022 looks to be a year of challenges and inflationary headwinds.\nAnd I'm excited about the opportunity to bring our talented employees to further improve our business through innovation and improved operational execution.\nHere's Ken to review the year-end reserves and provide an inventory update.\nLast year, we replaced more than two times what we produced and reduced our finding and development costs by 17%.\nOur permanent shift to premium drilling and focus on efficiencies driven by innovation and our unique culture keys as to why our capital efficiency continues to improve, and our corporate finding costs and DD&A rate continue to decline.\nOur 2021 reserve replacement was 208% for a finding and development cost of just $5.81 per barrel of oil equivalent, excluding revisions due to commodity price changes.\nSince 2014, prior to the last downturn and the implementation of our premium strategy, we have reduced finding and development cost by more than 55%.\nWith our double premium standard and the high grading of our future development schedule, we grew our reserve base in 2021 by over 500 million barrels of oil equivalent for total booked reserves of over 3.7 billion barrels of oil equivalent.\nThis represents a 16% increase in reserves year over year.\nIn terms of future well locations, we added over 700 net double premium locations across multiple basins to our inventory in 2021, replacing the 410 drilled last year by 170%.\nOur double premium inventory is growing faster than we drill it and the quality of the locations we are adding to the inventory is improving.\nInnovation continues to drive sustainable cost improvements and operational efficiencies.\nAnd when you combine that with our focus on developing higher quality rock, we further improve the median return of the portfolio.\nWe don't need more inventory.\nWe are focused on improving our inventory quality.\nWith this in mind, our double premium inventory now accounts for 6,000 of the 11,500 total premium locations in our inventory, representing more than 11 years of drilling at the current pace.\nIn conclusion, I'd like to note the following important takeaways.\nFirst, investment decisions based on a low commodity price puts the emphasis on full cycle cost of development and demands efficient use of capital.\nWhile the benefits of such discipline are realized immediately, the larger impact builds over time.\nThe seed to our stellar results in 2021 was the premium strategy established six years ago, and we have set the stage for the next step change in financial performance by instituting double premium last year.\nSecond, we are confident EOG's innovative and technology-driven culture can offset inflationary pressures this year.\nOur disciplined capital plan is focused on high return reinvestment to continue improving our margins in not only 2022 but in future years as well.\nThird, we are committed to returning cash to shareholders.\nWe demonstrated this through the return of nearly 50% of free cash flow last year, and this quarter's special dividend, our third in less than a year, doubling our regular dividend rate indicates our confidence in the durability of our future performance.\nThe regular dividend is our preferred method to return cash to shareholders and as we continue to increase the capital efficiency of EOG through low-cost operations and improved well performance, growth of the regular dividend will remain a priority.\nWe truly believe the best is yet to come.\nGoing forward as a company and an industry with a financial profile more competitive than ever with the broader market and a growing recognition of the value we bring to society, EOG has never been better positioned to generate significant long-term shareholder value.\nNow, we'll go to Q&A.\n Assistant:", "chosen": "sees 2022 capital plan of $4.3 to $4.7 billion.\n"}
{"prompt": "Human: I hope everyone is staying healthy and safe.\nJoining me on the call today is Walter Ulloa, chairman and chief executive officer; and Chris Young, chief financial officer.\nWe appreciate you joining us today for Entravision's fourth-quarter and 2020 earnings call.\nEntravision had a very strong fourth quarter.\nAs a result, we are well positioned for growth in the first quarter and full-year 2021.\nBeginning with the top line, revenues for the quarter totaled $171.7 million, up 142% year over year and 173% sequentially.\nOn a pro forma basis, including Cisneros Interactive, revenues improved 51% over the fourth quarter of 2019.\nOur digital segment performed well due in large part to our acquisition of Cisneros Interactive.\nWhile I will speak to the digital segment in further detail shortly, we are particularly pleased with our performance of Cisneros Interactive led by Victor Kong.\nCisneros Interactive continues to be additive to our cash flow and EBITDA, and we have the utmost confidence that they will successfully execute their business plan in 2021.\nAs highlighted last quarter, political ad sales were all a strong driver of our fourth-quarter revenues.\nIn total, political advertising revenue for the fourth quarter was $14.2 million, surpassing our prior record set in the fourth quarter of 2012.\nExcluding political ad sales, and including Cisneros Interactive on a pro forma basis, revenue increased by 39% in the quarter.\nAdjusted EBITDA totaled $32.6 million for the fourth quarter of 2020, an increase of 195% compared to $11.1 million in the prior year period.\nOn a pro forma basis, EBITDA increased 159% in 2020 versus 2019.\nMoving beyond the fourth quarter and turning to the full-year results.\nFor 2020, revenues totaled $344 million, up 26% over 2019.\nAdjusted EBITDA totaled $60.4 million for full-year 2020 as compared to $41.2 million in 2019 or a 47% EBITDA growth in 2020 versus 2019.\nWe entered 2021 primed for growth.\nWith the onset of COVID-19, we made a number of expense cuts in anticipation of a prolonged economic impact from the virus.\nFortunately, due in part to these proactive reductions in our SG&A, our business continued to grow quarter over quarter.\nAs a result, we were able to reinstate certain expenses back in the business, namely employee salaries.\nI could not be prouder of the team we have assembled at Entravision.\nTheir commitment to both our clients and our company this past year never wavered.\nI was pleased to be able to reinstate our well-deserved employee salaries to the pre-COVID-19 levels.\nEven though salary expenses have been reinstated, the rest of our expense cuts remain in place, and we will continue to operate as a leaner, more efficient business, with strong free cash flow generation.\nAs Chris Young, our CFO, will discuss shortly, in Q4, we more than doubled our prior record of free cash flow set in the second quarter of 2006.\nThis strong cash flow generation should help offset some of the revenue loss from the lack of political ad sales in the first quarter of 2021.\nWith that as a background, let's turn to our three operating segments in further detail.\nOur television division generated revenues of $50.5 million for the quarter, up 37% compared to the prior year and up 34% sequentially.\nBreaking this down further, television advertising and multicast revenue was up 48% over the prior year fourth quarter, while retransmission consent revenues were up 1% year over year.\nExcluding political spend, our core television revenues increased by 10%, with television political revenues totaling $11.1 million in the quarter versus the nonmaterial amount of political revenue in the fourth quarter of 2019.\nExcluding political revenue, national advertising revenues were up 20% driven mainly by Tier 2 automotive and healthcare, while local advertising revenues, excluding political, were up 2% driven by legal services and healthcare.\nOn a full-year basis, television revenues totaled $154.5 million, up 3% year over year.\nExcluding political ad sales, core television revenues for 2020 were $131.9 million, a decrease of 12% over full-year 2019.\nTurning to our top 10 television ad categories.\nAlthough several advertising categories did see year-over-year revenue declines, many experienced improvements sequentially, another indication that our business continues on an upward trend.\nAuto, our largest television ad category, increased 3% year over year, but improved 28% from Q3 2020.\nServices, our second largest advertising category, was up 17% compared to the prior year period.\nHealth care, our third largest category, was up 26% over the prior year and also improved 102% sequentially.\nMedia was up 22% year over year and up 26% sequentially.\nRetail, while still down 21% year over year, posted a strong gain sequentially of 60%.\nNext, let's discuss our television ratings performance for the quarter.\nOur Univision television affiliates built upon their market leadership in November 2020.\nFor adults 18 to 49 in early local news, our Univision television stations finished ahead of or tied their Telemundo competitor in 11 of 17 markets where we have head-to-head competition.\nIn late local news, we finished ahead of or tied Telemundo competitors in 10 markets among the 17 markets where we have head-to-head competition.\nAdditionally, our early local news ranked No.\n1 or 2 against English and Spanish language television competitors in nine markets, and we built up audience levels from the 15-minute lead-in in eight markets.\nOur late local newscasts ranked No.\n1 or 2 against English and Spanish language television competitors in six markets.\nOur local news teams reported the latest on the COVID-19 pandemic and an unprecedented election year.\nDuring the full week, our Univision and UniM\u00e1s television stations combined have a cumulative audience of 3.8 million persons of two plus in our markets combined compared to Telemundo's 3.1 million persons two plus.\nWe have 22% more viewers than Telemundo in our television footprint.\nDuring weekday primetime, when comparing to all stations in total, we had a higher ratings than at least one of the big four networks in nine markets among adults 18 to 49 and 10 markets among adults 18 to 34.\nTelecast for Univision's Latin GRAMMY Awards show on November 19 was among the top 10 broadcast television primetime programs for the night among adults 18 to 49 and adults 25 to 54 in 13 markets.\nAmong adults 18 to 34, the show ranked among the top 10 in 15 markets.\nOur sales teams did a remarkable job selling the Latin GRAMMYS, setting a revenue record for this signature TV special, with revenues up 25% over 2019.\nNow, let's turn to our audio operating segment.\nAudio revenues for the fourth quarter totaled $16.2 million, an increase of 17% over the prior year period and up 41% sequentially.\nLocal audio revenues decreased 3% over the prior year fourth quarter, while national revenues were up 51% over prior year, largely bolstered by political ad sales.\nExcluding political spend, core radio revenues declined 5% versus the prior year fourth quarter, with political revenues totaling $3 million in the quarter versus a nonmaterial amount of political revenue in the fourth quarter of 2019.\nExcluding political spend, national advertising revenues were up 8% driven by the service category, while local advertising revenues were down 11% in our audio unit as a result of the continued impact of the COVID-19 pandemic.\nOn a full-year basis, audio revenues totaled $46.3 million, down 16% year over year.\nExcluding political ad sales, core audio revenues for 2020 were down 26% over full-year 2019.\nThe 12 markets where we subscribe to Miller Kaplan data, we outperformed the market by 34.6 points in total revenue combined.\nWe outperformed the total market in 11 out of the 12 markets where we subscribe to Miller Kaplan.\nTurning to radio advertising categories.\nServices, our largest category, representing 26% of our total audio revenue, improved 31% over the prior year fourth-quarter period.\nLegal services, including those related to immigration as well as government messaging regarding COVID-19 safety, continue to represent a large portion of the services add in this past quarter.\nAuto, our second largest advertising category, declined 28% for the fourth quarter as compared to the fourth quarter of '19, but was up 49% sequentially.\nAuto repair advertising was up a healthy 34% year over year as was grocery store advertising, which improved 3% over the prior year period.\nWe also saw increases in the product brand and paid programming categories.\nThe remaining top 10 advertising categories were all down year over year in the fourth quarter, with the exception of political ads, where revenues totaled $3 million in the fourth quarter compared to an immaterial amount in the prior year period.\nOf particular note, during the quarter, we announced the launch of our new streaming destination, El Bot\u00f3n.\nListeners can now stream their favorite Entravision radio shows and stations directly on their mobile phones or desktops.\nWe are positioning El Bot\u00f3n as a hub to direct our audiences across different genres, while also aggregating content to provide our listeners a seamless search and discovery experience.\nThe addition of digitally streaming content to our radio offering fits with Entravision's overall positioning as an omnichannel audio solutions expert.\nThe firm deployment of our podcast offering, mobile app presence and first-party data subscription services are also part of Entravision's vision.\nOn this front, it is important to note that our recent investment in the digital space includes the acquisition of a controlling stake of Audio.\nAd, the strongest audio network and digital audio publisher platform in Latin America.\nThis investment enhances our proprietary Audio.\nAd network AudioEngage, currently serving the U.S. Latino market.\nIn addition, with the Super Bowl just a month ago, Entravision has now completed its fifth season as the NFL's exclusive nationwide Spanish language radio broadcaster.\nThe NFL has been an exceptional partner, and we look forward to continuing to share their programming with our radio listenership.\nLooking at our audio division ratings performance for fall 2020, among the Spanish language radio stations, the Erazno y La Chokolata show is ranked No.\n1 in nine out of 14 markets, including Los Angeles, released for fall among Hispanic adults 18 to 49, including ties; and No.\n1 in 11 markets, including Los Angeles, among Hispanic adults 25 to 54.\nAcross our 14 O&O radio stations, the Erazno y La Chokolata show reached more than 608,000 Hispanics 18 to 49 in the fall 2020 survey.\nFor fall 2020, Piolin ranked as the No.\n1 or 2 Spanish language midday show, including Los Angeles, in 10 out of our 13 markets released among Hispanic adults 18 to 49, including ties.\nEl Show de El Genio Lucas was No.\n1 or 2 among Spanish language radio stations in eight out of our 11 El Genio markets among Hispanic adults 18 to 49 and Hispanic adults 25 to 54.\nIn Entravision's audio markets, the Hispanic list is recovering at a faster rate than the total market average.\nAll 2020 Hispanic adults 18 to 49 weekly reach was at 95% of 2019 levels, while fall 2020 reach for total adults 18 to 49 was at 91% of 2019 levels.\nNow, moving on to digital.\nOur third and final operating segment is digital.\nDigital revenues totaled $105 million for the fourth-quarter 2020, a substantial increase of 424% as compared to the prior year period.\nSequentially, digital revenues improved 669%.\nOn a pro forma basis for Cisneros Interactive, digital revenue increased 67% compared to the prior year period.\nOn a quarterly basis, digital revenues surpassed that of our television segment.\nOn a full-year basis, digital revenues totaled $143.3 million, an increase of 108% compared to 2019.\nThroughout the past year, we made a number of strategic moves aimed at furthering Entravision's digital segment by building a portfolio of exceptional digital service offerings with creative and programmatic capabilities that meet our clients' needs around the globe.\nFirst, in May, we brought our digital capabilities together through the launch of Entravision Interactive, which provides advertisers and agencies a single source to engage consumers globally.\nThen in October, we announced our strategic majority investment in Cisneros Interactive.\nThrough our majority investment in Cisneros Interactive, we represent the strongest global audience in ad tech platforms such as Facebook, Spotify and LinkedIn across Latin America.\nLast, but not least, in November, we announced the appointment of Juan Saldivar as our new chief digital strategy and accountability officer.\nJuan has over two decades of experience in media, marketing, technology, venture capital and e-commerce industries as a result of working for Bertelsmann in Germany, Spain and Mexico and as Executive Director of Televisa's digital interactive for 7 years.\nJuan has been a member of our board since 2014, and he and his team were instrumental in the acquisition of Cisneros Interactive and its integration into Entravision.\nPrior to Juan's appointment, we did not have a single leader running all of our digital business units.\nWith Juan, a fluent Spanish speaker at the helm of our U.S. and global digital businesses, we expect to be able to grow our solutions, technology and talent pool that serve today more than 4,000 clients in 21 countries.\nEntravision believes it is critical to understand, participate and build technology to serve the programmatic advertising space.\nOn this front, Smadex, our Barcelona-based machine learning DSP platform with proprietary technology has continued to grow and serve the most demanding clients in the gaming, mobile performance and app space by matching the strongest transparency, contextual demographic features and performance standards.\nDue to the impact of COVID-19, digital platform usage has increasingly increased all over the world and specifically in Latin America, where it has accelerated Internet adoption and penetration.\nDigital video is also a core pillar within our digital and interactive strategy.\nOur video network continues to expand and close exclusive connections with Tier 1 publishers.\nIn 2021, Entravision will continue exploring the most prominent growth markets around the globe as it deploys its digital services and considers strategic and complementary investments and acquisitions.\nOverall, while 2020 was a challenging year, our business reemerged, in the fourth quarter, exceeding our expectations and demonstrating the strength of Entravision's business model.\nOne last thing I would like to comment on before handing it over to Chris is our political performance in 2020.\nAs we discussed earlier, 2020 was a record for Entravision in terms of political revenue.\nWe generated over $28 million in political revenue in 2020, which is an incredible 65% increase over our prior year record of $17 million in 2012.\nAccording to a recently published UCLA Latino study of the 2020 presidential election turnout, approximately 16.6 million Latinos cast votes in the 2020 election.\nThis represents a 31% increase and nearly double the nationwide growth of 16% in ballots cast between 2016 and 2020.\nLatino voters supported Joe Biden by a margin across the country, consistent with margins that Obama won in both 2008 and 2012.\nThat said, without the Latino vote, president Biden probably would not have been able to win Arizona, Nevada and New Mexico.\nWe expected the outcome of the Latino vote in 2020 to be strong, but it went beyond our estimates.\nI believe that, going forward, the Latino voter is only going to become more important, and you're going to see much more investment in the Latino vote, particularly in the markets where we operate: California, Nevada, Arizona, New Mexico, Colorado, Texas and certainly, Florida, Virginia and Massachusetts.\nSo I'm very bullish about the future and the continuing important role Latinos will play in U.S. politics.\nAs Walter has discussed, revenue for the fourth-quarter 2020 totaled $171.7 million, an increase of 142% from the fourth quarter of 2019 and up 173% sequentially.\nWhen comparing on a pro forma basis and including Cisneros Interactive's revenue in our 2019 results, revenues increased 51% year over year.\nFor our TV division, ad revenues totaled $41.8 million, up 48% year over year.\nRetransmission revenue totaled $8.8 million and was up 1% year over year.\nFor our audio division, revenues totaled $16.2 million, up 17% over the prior year period.\nLastly, digital revenues totaled $105 million, up 424% year over year.\nWhen comparing on a pro forma basis and including Cisneros Interactive's revenue in our 2019 results, digital revenues increased 67% year over year.\nAs Walter spoke to earlier in today's call, over the past few quarters, we've taken strategic steps to limit our expenses due to market conditions.\nThroughout this process, it has become apparent to us that we maintain most of these cuts in 2021 while still running the business at an optimal level.\nSG&A expenses were $14 million for the quarter, a decrease of 1% compared to $14.1 million in the year ago period.\nExcluding the Cisneros acquisition, SG&A expenses were down 23%.\nDirect operating expenses totaled $31.9 million for Q4 of 2020, an increase of 6% compared to Q4 of 2019.\nExcluding the Cisneros acquisition, direct operating expenses were down 2%.\nFinally, corporate expenses for the fourth quarter increased 18%, totaling $9.3 million compared to $7.9 million in the same quarter of last year.\nThe primary driver of corporate expense was salary expense as we retroactively restored salary cuts executed earlier in the year, along with bonus expense.\nDuring the fourth quarter, our share buyback program remained on hold.\nWe also maintained a dividend of $0.025 per share and continued to eliminate expenses at the operating and corporate levels deemed secondary to serving our core media business.\nWe will continue to evaluate our buyback and dividend each quarter, which will be at the discretion of our board of directors.\nExpense-wise, we expect that our operating expenses, excluding digital cost of goods sold and corporate, will be roughly flat in the first quarter as compared to the prior year period.\nExcluding expenses related to Cisneros, operating expenses are expected to be down approximately 13%.\nConsolidated adjusted EBITDA totaled $32.6 million for the fourth quarter, up 195% compared to the fourth quarter of last year.\nOn a pro forma basis, accounting for the Cisneros Interactive acquisition, adjusted EBITDA was up 159% year over year.\nThis was a record quarter for EBITDA generation due in part to the 2020 presidential election cycle and the contribution of Cisneros Interactive.\nEntravision's 51% portion of Cisneros Interactive adjusted EBITDA was $3.6 million for the fourth quarter.\nSimilar to adjusted EBITDA, the fourth quarter of 2020 also represented a record quarter for Entravision's free cash flow generation.\nStrong free cash flow has been the cornerstone of Entravision's business and supported our ability to grow both organically and through acquisitions without the need to take on significant leverage.\nWe expect this high free cash flow conversion rate to continue for the foreseeable future.\nEarnings per share for the fourth-quarter 2020 were $0.24 compared to $0.09 per share in the same quarter of last year.\nNet cash interest expense was $1.3 million for the fourth quarter compared to $2.2 million in the same quarter of last year.\nCash capital expenditures for fourth quarter totaled $1.3 million compared to $4.1 million in the prior year.\nThis brought us to $9.1 million in cash capital expenditures for the full year of 2020.\nTurning to our balance sheet, which remains very strong.\nCash and marketable securities as of December 31, 2020 totaled $147.2 million.\nTotal debt was $215 million.\nNet of $75 million of cash and marketable securities on the books, our total leverage, as defined in our credit agreement, was 2.3 times as of the end of the fourth quarter.\nNet of total accessible cash and marketable securities, our total net leverage was 1.3 times.\nTurning now to our pacings for the first quarter of 2021.\nAs of today, our TV advertising business is presently pacing a minus 14%, with core TV, excluding political, pacing at a minus 4%.\nOur audio business is pacing a minus 8%, with core audio, excluding political again, pacing at a minus 6%.\nAnd our digital business, including revenue from Cisneros Interactive, is pacing plus 500%.\nFactoring in Cisneros revenue generated in Q1 of last year of approximately $42.2 million, our digital business on a pro forma basis is currently pacing at a plus 65%.\nAs part of our expanding business operations and geographic footprint, Entravision acquired a majority interest in Cisneros Interactive during the fourth quarter of 2020.\nAs a result, we anticipate that we won't be in the position to file our 10-K by the standard SEC filing deadline of next Tuesday, March 16.\nIf that's the case, we will file a notice with the SEC to extend our 10-K filing deadline for an additional 15 days.\nOur auditors have informed us that they anticipate completing their audit procedures by the end of March, and we expect to file the 10-K as soon as practical.\nAll this said, we believe Cisneros Interactive has been an excellent addition to our digital business.\nWe're excited about the future of Cisneros Interactive and how this business has enhanced our product portfolio and service offerings and aligns with our mission and sales operations.\nAs is evident from our fourth-quarter performance, Entravision enters 2021 at a very strong revenue run rate.\nEven without political revenues this year, with a leaner cost structure, we expect higher profitability from each of our operating segments.\nAs Chris noted, our free cash flow generation remains high and our balance sheet is strong.\nAs a result, our leverage is very low, which leaves us with a lot of dry powder to continue to make acquisitions while still investing in our organic growth.\nIn addition to growing our digital business organically, we also look to grow our digital efforts through acquisitions, including acquiring complementary businesses in similar geographic regions as Cisneros Interactive.\nWe plan to target companies with similar multiples to that of Cisneros Interactive and that are accretive to earnings.\nIt is clear there is a solid runway ahead for Entravision.\nAnd while this past year was challenging, we learned to operate our business units more efficiently and have positioned our company for continued success.\n Assistant:", "chosen": "entravision communications corp - expects to file form 12b-25 for extension of filing deadline for 2020 form 10-k.\nentravision communications corp - qtrly net revenue increased to $171.7 million from $70.8 million.\nentravision communications corp - qtrly earnings per share $0.24.\n"}
{"prompt": "Human: I'm Hallie Miller, Evercore's Head of Investor Relations.\nThese factors include, but are not limited to, those discussed in Evercore's filings with the SEC, including our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.\nWe continue to believe that it's important to evaluate Evercore's performance on an annual basis.\nAs we have noted previously, our results for any particular quarter are influenced by the timing of transaction closings.\nLet me begin by expressing my affection and respect for Ralph.\nHe's been an outstanding leader, partner, and friend.\nI will have a lot more to say about Ralph at the end of our comments.\nBut first, let's talk about the quarter.\nThe positive environment for M&A and capital raising experience during the first half of the year extended into the third quarter.\nOur results reflect this momentum and the success of our strategic initiatives aimed at broadening and diversifying our platform.\nThe strength and depth of our talented teams, coupled with our broad and expanding platform of capabilities, provides us with the tools and the intellectual capital to advise our clients on their most important strategic capital and financial needs.\nDollar volume of announced M&A globally was more than $1.5 trillion in the third quarter, representing a 9% sequential increase.\nIt was also the fifth straight quarter that announced M&A activity surpassed $1 trillion.\nStrong economic conditions and thematic trends around growth and technological disruption continue to drive activity.\nThe ongoing high level of activity has positively affected our results, and it has sustained our backlogs as well.\nActivist activity remains high with a 23% year-over-year increase in the number of new activist positions in the last 12 months.\nEquity issuance continues to outpace historical levels with a greater total amount raised year-to-date than any year other than 2020 and larger than 2019 and 2018 combined.\nLevels have stabilized somewhat from earlier in the year when SPAC underwriting activity was substantial.\nIn the private capital advisory space, momentum in capital raising for financial sponsors continues, and secondary market activity remains high, particularly activity related to single-asset structures.\nThe strong availability of credit and the pace of economic recovery has limited the need for traditional restructuring work.\nThe leverage remains elevated.\nThere continue to be opportunities for bespoke financings and assignments with financial sponsors and creditors.\nIn equities, despite the usual third quarter seasonality, we benefited from heightened volatility at the end of the quarter and our expanded offering set for clients.\nIn summary, with the backdrop of a strong economic environment.\nOur business continues to perform exceptionally well.\nOur teams are busy helping clients, and we are pleased to have the majority of our workforce back in the office in some form.\nWe did not see anything that would indicate an imminent pullback in the momentum, but we continue to monitor inflation, Fed actions, interest rates, the regulatory environment, supply chain disruption, and COVID's impact on the reopening process.\nOf course, our results are always affected by the timing of deal closings.\nWith that, let me turn to key business highlights from the quarter.\nWe ranked number 1 in the Refinitiv League Tables for dollar volume of announced M&A, both globally and in the U.S. among independent firms for the latest 12-month period, and we rank 7 among all firms in the U.S. for the same period.\nCeleste will discuss our financials in more detail later in the call.\nHowever, I would like to highlight that we achieved a fourth straight quarter of Advisory revenues greater than $500 million, and our year-to-date advisory revenues of $1.78 billion are more than all of 2020, which was a record year for us.\nBased on current consensus estimates and actual results, we expect to maintain our number 4 ranking based on advisory fees among all publicly traded investment banking firms over the last 12 months and to grow our market share relative to these same firms.\nWe are working on several of the top 25 announced global M&A transactions this year, including advising GE Capital Aviation on its pending $30 billion sale to AerCap Holdings, advising the board of directors of Canadian Pacific on its pending $29 billion acquisition of Kansas City Southern, serving as the lead advisor to Grab on its $40 billion SPAC merger, serving as the sole advisor to Nuance on a pending $19.7 billion sale to Microsoft, and advising MGM Growth Properties on its $17.2 billion sale to VICI Properties.\nOur underwriting business had another solid quarter booking more than $50 million in revenues and the pipeline for activity remained strong.\nIt's clear that further investment on our ECM business, including building out our sector coverage and enhancing our capabilities with convertibles, is contributing meaningfully to the growth of this business and the firm overall.\nWe continue to achieve increasingly better leadership positions in the ECM transactions in which we participate.\nWe served as active bookrunner on, approximately, 60% of the 24 equity deals and equity-linked deals we completed during the quarter.\nWe continue to diversify the mix of our revenues.\nWhile healthcare still makes up the bulk of our underwriting revenues, we are seeing more variety within healthcare sector beyond biotech, as well as greater contribution from sectors such as TMT, industrials, and consumer, which in aggregate, more than tripled their share of ECM revenues in the third quarter compared to this time last year.\nA few notable transactions from the quarter include: in pharma, active book runner on Ascendis Pharmacy's $450 million follow-on offering; in consumer, passive bookrunner on Olaplex's $1.8 billion IPO; in TMT, passive bookrunner on Bumble's $1.1 billion follow-on offering; in consumer, we were financial advisor to Warby Parker for its direct listing.\nEven with the slowdown in the market for SPAC underwriting, we completed five during the quarter, including three as lead-left bookrunner.\nWe once again ranked in the top 20 for underwriting revenue as estimated by Dealogic for the latest 12-month period for deals listed on the U.S. exchanges, excluding bought deals and ATMs. We remain focused on working our way toward the top 10 for the market share.\nOur work with financial sponsors in our private capital advisory groups, our secondary [Phonetic] advisory business and our primary fundraising business continue at a strong pace.\nThese businesses continue to show significant momentum, and their impact on our results continues to grow.\nOur success here is driven by three things: first, our strong client relationships; second, our strong track record; and third, our comprehensive coverage approach, which includes the sale of assets, LP positions, and GP stakes and our capability in raising capital.\nAs I commented, our momentum continues to build as many of our clients are repeat clients and our reputation attracts more opportunities.\nThe breadth and interconnectivity of our platforms means that we can work with financial sponsors on the fundraising side, then work with them on the advisory side as they deploy capital which can then lead to the next fund raise.\nIn restructuring, the strong economic recovery and access to capital is enabling companies to restructure out of court.\nOur team continues to work through prior assignments.\nliability management engagements and creditor assignments and continues to partner with our debt advisory team in private financing activity.\nIn equities, we remain engaged with our clients and focused on producing and delivering high-quality research and service for them.\nClients continue to use our excellent research and value the service we provide them through our core product.\nIndependent third-party data indicates that while the market wallet declined in the second quarter both sequentially and year-over-year, we successfully increased our market share versus both prior periods.\nIn fact, we were the largest share gainer of any firm globally transacting in U.S. cash equities.\nWe are extremely proud that Evercore ISI was once again highly ranked in Institutional Investor's All-America Research survey.\nHighlights include top-ranked independent research firm for the eighth straight year; number 2 ranked firm among all firms for analysts; record 43 individual positions and 40 team positions; and Ed Hyman and was awarded the number 1 position in economics for the 41st time.\nThe convertibles business that we added a year ago continues to gain momentum as we build out the team and integrate it with our capabilities in research and sales.\nFinally, AUM and our Wealth Management business finished the quarter at $11.3 billion as long-term performance remains solid and new business continues to be positive.\nJohn and I will remain in our current roles until then, at which time he will become the sole Chairman and CEO of Evercore, and I will become Chairman Emeritus.\nI will have more to say about my almost 13 years here on my last earnings call in early February, but I want to say that John and I have been partners in running Evercore for the last five years, for the first 3.5 years with John as Executive Chairman and I as CEO, and for the last 15 months as Co-Chairman of the Board and Co-CEOs.\nIt has been a great partnership.\nWhen I convinced John to un-retire five years ago, and it took me 18 months to convince him, it was my deep hope that he would succeed me as CEO.\nToday that hope has been fulfilled.\nHe is beyond ready to take on this role.\nHe is excited about taking on this role, and I couldn't be more optimistic about the future of the firm under his leadership.\nI'm also very proud that we have put in place a next generation of leadership in almost every part of the firm.\nOf the four leaders of U.S. advisory, three are in their 40s.\nOf our two leaders of our advisory business in Europe, one is in his early 50s.\nOur CEO of Evercore ISI is in his early 50s.\nOur new see FFO and our General Counsel are in their 40s.\nOur new Head of ECM is in her early 40s, and our new head of Evercore Wealth Management is in his early 50s.\nWith these extraordinarily capable young men and women in leadership positions, our firm is in a great position for the next decade or two.\nI'm also proud of the incredible strength of our culture, which truly has allowed us to thrive over the last 20 months and the last 12.5 years.\nOur core values of clients first, excellence, integrity, teamwork, respect for each other, investment in our talent, and diversity, equity, and inclusion have sustained us during this very challenging period, and they will allow us to continue to gain market share in the coming years.\nHe often jokes about our founder, Howard Evercore, who of course never existed.\nBut from the beginning, he simply wanted the firm to provide high-quality honest advice to clients and to maintain the highest standards of integrity.\nRoger and I have worked together in four different places, and this is the first time that we've worked closely together.\nAnd like my partnership with John, it has been a great partnership.\nRoger's a very modest man, but I don't think he would mind me saying that he is today the single best person on the planet at what he does, and he has been a great partner to me over the last 12.5 years.\nLet me now talk about our growth aspirations and our return of capital approach.\nOur growth aspirations have evolved over the years from our goal of achieving $1 billion in advisory revenues to becoming the largest independent investment banking advisory firm in the world and the fourth largest in advisory fees among all firms, a goal that we first achieved in 2018 and have achieved every year since.\nAnd our goal lately is to steadily gain market share and to narrow the gap between Evercore and the top 3 global firms by advisory revenues, all of whom, of course, are universal banking firms.\nThe breadth and diversity of our capabilities and, of course, a strong environment for M&A and capital raising have supported our growth trajectory and our industry-leading advisory SMD productivity.\nBut we believe that we certainly have meaningful growth opportunities in both revenues and market share gains in the future.\nWe have many opportunities to seize, but let me highlight three: first, we are highly focused on filling sector and geographic white space, both in North America and in Europe in our advisory business; and on continuing our client coverage initiatives focused on financial sponsors and large multinational corporations.\nSecond, we are deepening and broadening our product capabilities, particularly in ECM and debt advisory, including the addition of SPAC expertise and convertibles capability so that we have more fee opportunities with each of our clients and can increase our share of fees paid by our clients.\nAnd third, we are investing heavily in advisory capabilities that serve the fastest growing segments of the economy, including the four techs: FinTech, Biotech, Cleantech, and traditional tech, particularly software.\nHiring A-plus talent and developing strong talent from within is critical to continuing to grow, and we have made notable progress on our hiring objectives this year.\nTwo new advisory SMDs joined us earlier this year, Kristy Grippi as our new Head of ECM and Juan Pedro Cozar as our Head of Iberia, and they already are having significant and positive impact on our business.\nThree additional Advisory SMDs, Brad Wolff covering Biotech, Brad David covering financial sponsors, and Adi Jayaraman covering FinTech have joined us, and we expect them to begin to have an impact soon.\nThree additional Advisory SMDs have left their firms and will join Evercore later this year covering the power and renewable space and basic materials.\nThese SMD additions in 2021 put us at the top end of our historical range of four to eight Advisory SMD recruits per year, and we continue to have meaningful and ongoing conversations with other potential recruits in areas of strategic significance.\nAdd to that the two Advisory SMDs who were promoted earlier this year, and we have 10 new SMDs in Advisory that are ramping up in areas of strategic importance to us.\nIn addition to hiring at the most senior levels, we are adding talent at all levels of seniority to continue to enhance our coverage, to meet the needs of our clients, and to support the elevated pace of activity that John described.\nIf we can continue to hire strong talent at all levels and offer more capabilities to serve clients, we will be able to enhance our already-strong and industry-leading Advisory SMD productivity levels and continue to grow the firm.\nAnd, of course, there is additional inherent growth potential from the 30-plus Senior Managing Directors, including the 10 from this year, that have joined or have been promoted over the past three years and are still ramping up to full productivity.\nAnd finally, we continue to add world-class senior research analyst like Mark Mahaney, the I.I.-ranked Internet analyst who joined us earlier this year.\nNow let me discuss our capital return approach.\nOur goal has always been to return to our shareholders all of our earnings not invested in the business in the form of dividends and share repurchases.\nWe achieved this goal in aggregate over a multi-year period through 2019.\nAnd during the period 2015 to 2020, we reduced our adjusted weighted share count by 9%, or a little over 2% a year.\n2020, of course, was an anomalous year.\nWe took several actions in 2020 to build a fortress balance sheet for our business.\nFirst, in the early days of the pandemic, when there was heightened uncertainty about the length and depth of the economic slowdown, we became more conservative in our capital return policy, temporarily suspending discretionary buybacks and keeping our dividend flat for two quarters.\nThis resulted in increased cash holdings, particularly as our business recovered toward the end of the year.\nSecond, we decided to become more conservative in our long-term capital management approach.\nIn addition to what we historically held cash for, minimum working capital requirements, including capital to support our underwriting activities, accrued cash bonuses and a portion of upcoming and a historical deferred compensation, we decided to prefund all of our awarded deferred cash compensation obligations, thus building a truly fortress balance sheet for our business.\nThis catch-up was a one-time event.\nFinally, we meaningfully increased the capital levels of our U.S. broker-dealer in the third quarter of 2020 to support our significantly expanded underwriting business, which as you may recall, had two very large transactions in the second quarter and is operating at a considerably higher level with a broader array of products than it has prior to 2020.\nUltimately, because of our surprise in the fourth quarter, we ended 2020 with an excess cash position even when considering the funding of all of these capital requirements for the underwriting business and fully funding our awarded deferred compensation obligations.\nWe also ended the first quarter of 2021 with an excess cash position.\nAnd while we have been working down our excess cash position, we still have more cash than we need to meet our fortress balance sheet requirements.\nSo far this year we have returned $631.5 million to shareholders through dividends and share repurchases.\nWe intend from this point forward to continue our pre-2020 practice of returning to shareholders all of our earnings not invested in the business, and also to work down opportunistically over time our excess cash position.\nThis will in turn shrink our adjusted diluted weighted average share count over time as we did from 2015 until now, although going forward at a more accelerated pace than the 2-plus percentage shrinkage over the last five years.\nIt also will drive meaningful earnings per share growth.\nOf the first 12 years that I have been doing Evercore earnings calls, in 11 of those 12 years, we have had record revenues and earnings per share.\nSo here we go.\nSitting where we are today, with year-to-date revenues roughly $100 million below last year's full-year record and nine month earnings per share about $0.80 above last year's full-year record, let me guide all of you by saying that 2021 will be another record year in revenues and earnings for Evercore.\nBy the way, I got permission from our General Counsel to say that.\nAnd it's really a pleasure to be here doing my first earnings call with you and John as Evercore's CFO.\nFor the third quarter of 2021, net revenues, net income, and earnings per share on a GAAP basis were $824 million, $160 million, and $3.74, respectively.\nYear-to-date, net revenues, net income, and earnings per share on a GAAP basis were $2.17 billion, $444 million, and $10.19, respectively.\nMy comments from here will focus on non-GAAP measures, which we believe are useful when evaluating our results.\nThird quarter adjusted net revenues of $832 million grew 104% year-over-year.\nYear-to-date adjusted net revenues of $2.19 billion increased 62% compared to the prior year period.\nThis represents our best third quarter ever, our second-best quarter ever overall, and the first time adjusted net revenue surpassed $2 billion in the first nine months of the year.\nThird quarter Advisory fees of $709 million grew 161% year-over-year.\nYear-to-date advisory fees of $1.78 billion increased 84% versus the prior year period.\nOur advisory fees include, approximately, $93 million of revenue from transactions that closed in early October.\nAs a reminder, in accordance with relevant accounting principles, we recognize revenue for deals that close early in the following quarter and certain closing conditions were satisfied at quarter-end.\nTo compare, we recognized $59 million in the second quarter of 2021 and $20 million in the third quarter of 2020.\nThird quarter underwriting fees of $54 million reflected a decline of 18% year-over-year.\nThis compares favorably to the overall market for U.S. equity and equity-linked issuance which declined nearly 25% year-over-year as SPAC activity slowed dramatically.\nWe have been selective in SPAC underwriting activity, which helps protect our revenues from experiencing volatility associated with this market.\nYear-to-date underwriting fees of $182 million are essentially flat versus the prior-year period, which as a reminder, included two sizable transactions in the second quarter of 2020 that totaled nearly $45 million in revenues.\nThird quarter commissions and related revenue of $47 million increased 6% year-over-year even as market volumes and volatility declined.\nCheck collections, which are driven by research votes, were strong.\nConvertible securities, which we began trading in January, continued to contribute positively.\nYear-to-date commissions and related revenue of $151 million declined 2% versus the prior year period as market volatility declined significantly.\nThird quarter asset management and administration fees of $20 million increased 21% year over year on higher AUM.\nYear-to-date asset management and administration fees of $57 million increased 21% versus the prior year period.\nOur adjusted compensation ratio for the third quarter is 58.5%, which brings our year-to-date comp ratio to 58.8%.\nThis reflects our current best estimate on compensation for the full year.\nAs John indicated, our backlog is strong, but as always, our revenue in a given period depends on the timing of deal closings and that is even more so this year than in others.\nAdditionally, as has been widely reported, market pressures on compensation levels for junior and mid-level bankers remains high and hiring has been strong.\nAs we always do, we will continue to evaluate the key drivers of our compensation as the year progresses and make adjustments in the fourth quarter if appropriate.\nThird quarter non-compensation costs of $83 million increased 17% year over year driven by higher professional fees due to higher activity levels and strong recruiting efforts, higher T&E due to both increased travel and entertainment, and higher occupancy expense due to more space as we grow as well as expenses relating to our return to the office.\nOn a sequential basis, non-compensation expenses increased 14% driven by higher professional fees which reflected the aforementioned recruiting costs, higher other operating expenses, and higher T&E.\nWithin other operating expenses, the increase was a result of higher bad debt expense.\nAs many other firms have likely experienced, T&E has not rebounded as quickly as we anticipated earlier in the year.\nWe expect non-comp expenses, including T&E, to continue to increase as we evolve toward more normal operations and T&E will naturally also tick up as we add SMDs and teams over time.\nIn 2019, of our T&E expense, 83% was related to travel.\nYear-to-date travel is running at about 20% of 2019 levels, and we expect that to settle at 70% to 80% of pre-pandemic levels.\nWe expect other T&E expenses to return to those experienced before the pandemics.\nThird quarter adjusted operating income and adjusted net income of $262 million and $188 million increased 237% and 258%, respectively.\nYear-to-date adjusted operating income and adjusted net income of $674 million and $505 million increased 156% and 177%, respectively, versus the prior year period.\nWe delivered a third quarter adjusted operating margin of 31.5%, while third quarter adjusted earnings per share of $3.96 increased 257% year over year.\nOur year-to-date adjusted margin is 30.7%.\nAdjusted earnings per share of $10.41 increased 170% versus the prior year period.\nTurning to our balance sheet, as of September 30th, we held $479 million in cash and equivalents and $1.3 billion in investment securities.\nAs Ralph mentioned earlier, even with our strong return of capital, our balance sheet grows throughout the year as we accrue for annual bonus compensation that is paid in the first quarter.\nOur balance sheet also reflects the minimum levels of cash for operating our business, including capital to support our underwriting activities, commitments related to deferred cash compensation previously awarded, and cash needs for anticipated deferred compensation to be awarded in the first quarter, plus earnings that we recorded in the third quarter that have not yet been returned.\nYear-to-date we have bought back 4.1 million shares in total; approximately, half of which is in excess of what we bought back to offset dilution from RSU grants.\nRalph has led this firm over the last 13 years guiding us with vision, extraordinary leadership, and management skills, building a firm of broad and deep capability with the highest quality talent on the street.\nOver the last five years, I've had the great good fortune to partner with Ralph and Roger to work together to continue our journey of growth, supported by the same underpinning of principles on which Roger founded the firm 25 years ago.\nI've loved being Ralph's partner and friend.\nBeyond being an extraordinary business leader, he is an extraordinary person.\nI will miss his active involvement in the running of the firm but plan to continue to call upon his sound counsel and judgment.\nAs I consider the current state of the firm, I feel both pride and optimism, proud of what we've accomplished, our expanded client base, a platform of broad, diverse, and growing capabilities and the quality of our people who deliver each day for our clients and our shareholders and an optimistic about what is ahead.\nWe have the right strategy to build upon our successes to date, and I along with all of our business leaders intend to stay focused on long-term growth.\nAs we look ahead, I believe the prospects for Evercore are clear and exciting.\nWith that, I'm pleased for us to answer questions.\n Assistant:", "chosen": "compname posts quarterly adjusted earnings per share $3.96.\nqtrly diluted earnings per share $3.74.\nqtrly adjusted earnings per share $3.96.\n"}
{"prompt": "Human: Well, we had an exciting quarter.\nI'm not sure how else to describe it.\nAmong other accomplishments, we celebrated the addition of store #2000 to our portfolio.\nWe were recognized by Inside Self-Storage as the Best Third-Party Management company in the industry, and we achieved some of the strongest operating results in our company's history.\nSame-store occupancy once again reached a new all-time high during the quarter at over 97%, with vacates continuing at lower-than-historic levels.\nOur strong occupancy resulted in exceptional pricing power.\nAchieved rates to new customers in the quarter were 43% higher than 2020 levels and 41% greater than 2019 levels.\nIn addition to the benefit from new customer rates, we have continued to bring existing customers closer to current street rates as state of emergency rate restrictions continued to be lifted throughout the country.\nOther income improved significantly year-over-year, primarily due to increased late fees contributing 30 basis points to revenue growth in the quarter.\nWe had modestly higher discounts due to higher street rates, but their impact was offset by lower bad debt.\nThese drivers produced same-store revenue growth of 18.4%, a 480 basis point acceleration from Q2.\nAnd same-store NOI growth of 27.8%, an acceleration of 760 basis points.\nIn addition, our external growth initiatives produced steady returns outside of the same-store pool, resulting in FFO growth of 41.2%.\nTurning to external growth.\nThe acquisition market remains very active but expensive in our view.\nOur investment team has never been busier, and we have found the most success acquiring lease-up properties and/or acquiring stores with the joint venture partner.\nWhile most of our transactions have been in relatively small bites, the total is adding up, allowing us to increase our investment guidance to $700 million for the year.\nAlso, our approach has resulted in better-than-market average yields.\nBut we are much more focused on FFO per share accretion than total acquisition volume, and we plan to continue to be selective in the current environment.\nWe continue to look at all material transactions in the market and we have plenty of capital to invest when we find opportunities that create long-term value for our shareholders.\nWe had an incredibly strong quarter on the third-party management front, adding 96 stores.\nOur growth was partially offset by dispositions where owners sold their properties.\nIt is worth mentioning that oftentimes, we are the buyer of these properties, and they are simply moving from one ownership category to another.\nIn the quarter, we purchased 11 of our managed stores in the REIT or in a joint venture for a total of 30 stores purchased from our third-party platform through September.\nFundamentals have remained even stronger than our already positive outlook, allowing us to raise our annual FFO guidance by $0.28 at the midpoint.\nWhile we still assume a seasonal occupancy moderation, it has been less than our initial estimate of 300 basis points from this summer's peak.\nOur revised guidance now assumes a 200 basis point moderation which would result in 2021 year-end occupancy generally similar to that of 2020.\nWe expect continued strong growth in the fourth quarter to cap off what has been an incredible year for Extra Space Storage.\nI would now like to turn the time over to Scott.\nAs Joe mentioned, we had an excellent quarter with accelerating same-store revenue growth, driven by all-time high occupancy and strong rental rate growth to new and existing customers.\nCore FFO for the quarter was $1.85 per share, a year-over-year increase of 41.2%.\nProperty performance was the primary driver of the beat with additional contribution from growth in tenant insurance income and management fees.\nAs a result of our strong FFO growth, our Board of Directors raised our third quarter dividend an additional 25% after already raising it 11% earlier this year, a total increase of 38.9% over the third quarter 2020 dividend.\nWe delivered a reduction in same-store expenses in the quarter, including a 3% savings in payroll, 42% savings in marketing and a 4% decrease in property taxes due to some successful appeals.\nDespite the payroll savings we've enjoyed this year, like most companies, we've felt material wage pressure across all markets, including our corporate office.\nSome of the payroll reduction has been the result of higher turnover and longer time to fill -- and longer time required to fill vacant positions.\nWe will experience continued payroll pressure in 2022 as we have raised wages to retain and recruit the best team in the storage industry.\nThis will also impact our G&A expense.\nIn the second quarter, we completed our inaugural investment-grade public bond offering.\nAnd we completed a successful second offering in the third quarter, issuing another $600 million 10-year bond at a rate of 2.35%.\nWe also refiled our ATM in the quarter, and we have $800 million in availability.\nOur access to capital has never been stronger.\nAnd between net operating income and disposition proceeds, our leverage continues to be reduced.\nOur quarter end net debt to EBITDA was 4.5 times, giving us significant dry powder for investment opportunities while maintaining our credit ratings.\nLast night, we revised our 2021 guidance and annual assumptions.\nWe raised our same-store revenue range to 12.5% to 13.5%.\nSame-store expense growth was reduced to negative 1% to 0%, resulting in same-store NOI growth range of 18% to 19.5%.\nThese improvements in our same-store expectations are due to better-than-expected rates, higher occupancy and lower payroll and marketing expense.\nWe raised our full year core FFO range to be $6.75 to $6.85 per share.\nDue to stronger lease-up performance, we dropped our anticipated dilution from value-add acquisitions and C of O stores from $0.12 to $0.11, even after adding a number of additional lease-up properties to our acquisition pipeline.\nWe are excited by our strong performance year-to-date and the success of our team driving our growth strategies across our highly diversified portfolio.\nAs we often say, it's a great time to be in storage.\n Assistant:", "chosen": "compname reports q3 ffo per share $1.85 excluding items.\nq3 ffo per share $1.85 excluding items.\nsees 2021 ffo per share to be $6.75 - $6.85.\nextra space storage - increased same-store revenue by 18.4% and same-store net operating income by 27.8% in quarter compared to same period in 2020.\n"}
{"prompt": "Human: Joining us today on the call will be our Chief Executive Officer, Dennis Gilmore; our President, Ken DeGiorgio; and Mark Seaton, Executive Vice President and Chief Financial Officer.\nFirst American has again delivered outstanding financial results.\nAll of our core businesses continue to perform well, and we've made progress on a number of strategic initiatives.\nToday, I'll discuss a few of those initiatives, and then Ken will provide an update on our current order trends and business outlook.\nAnd Mark will conclude by providing details on our third quarter results.\nAs I said before and it's worth repeating, First American is laser-focused on innovation.\nAs real estate transactions become increasingly digital, we are leveraging our unique data assets and technology to enhance the customer experience and to make the settlement process more efficient for all parties.\nOne of our largest initiatives was the launch of Endpoint in 2018.\nWhile Endpoint is wholly owned by First American, it is by design also a native digital start-up committed to reimagining the closing experience for buyers, sellers and real estate professionals.\nEndpoint has captured a 3% market share in its initial market of Seattle, and currently operates in 11 additional markets across California, Texas and Arizona, and we plan to add more markets in the near future.\nA major factor in Endpoint's success has been its ability to track world-class tech talent.\nEndpoint has approximately 100 product managers, engineers and designers and plans on doubling the team over the next 12 months.\nFully embracing the tech ethic of continuous improvement, Endpoint often releases enhancements to its technology designed to further improve efficiency.\nAs a result, Endpoint is increasingly becoming the first choice of digital-forward companies, including those in the PropTech ecosystem.\nGiven this track record earlier this week, we announced an additional $150 million commitment to Endpoint.\nEndpoint will use these funds to continue to hire the best tech professionals, further improve the digital closing experience and expand its capabilities for PropTech companies and digitally forward real estate professionals.\nWe are about to close on our previously announced acquisition of ServiceMac, an innovative mortgage subservicer with unique solutions.\nFounded in 2017, ServiceMac will complement our title and closing operations and over to nine will add assets to our Trust Bank and will enhance our ability to provide additional offerings to lenders and servicers.\nTurning to our venture portfolio.\nWe continue to believe our investment strategy is creating both value strategically and financially.\nWe've made direct investments in 16 companies in the PropTech ecosystem.\nThrough these investments, we have gained valuable insights to these companies, many of which have become strategic partners.\nFinancially, our investments generated $278 million of gains this quarter led by OfferPad, which went public via SPAC in September.\nBased on the strength of the real estate markets and our strategic position as an innovator in the title and settlement space, in August, we announced an 11% increase in our dividend, and our Board also approved an additional $300 million share repurchase authorization.\nAs you mentioned, our business continues to perform well.\nAnd with a strong real estate market, we expect these trends to continue.\nSo far in October, commercial orders are up 14% over prior year.\nAnd while our residential purchase orders at 2,000 per day are down 7% compared to an unusually strong October 2020, they are up 11% compared to October of 2019.\nAs expected, due to the recent uptick in mortgage rates, refinance orders have fallen from 1,700 per day in September to 1,500 per day in October.\nThat said, our outlook for the remainder of this year and into the next is positive.\nThe housing market remains healthy and although home price appreciation is expected to moderate, which will impact the growth in average revenue per order we've experienced recently.\nWe expect purchase volumes to continue to grow as demand remains strong and more supply comes on to the market.\nOur commercial business continues to experience an elevated amount of activity as deals that were delayed in 2020 due to the pandemic are now closing, and we believe uncertainty around tax law changes could be pulling certain deals forward into this year.\nDespite these tax uncertainties, we expect that a favorable economic backdrop and relatively low interest rates will deliver another strong year in commercial in 2022.\nWhile we expect residential refinance volumes to continue to decline as mortgage rates increase, we believe we will be able to offset this decline with increased investment income generated by our bank and from escrow deposits.\nDuring the last cycle, growth in investment income more than offset the decline in refinance revenue.\nWe're pleased to report excellent results this quarter.\nWe earned $4 per diluted share.\nIncluded in this quarter's results were $1.85 of net realized investment gains.\nExcluding these gains, we earned $2.15 per diluted share.\nI'll start with our title business.\nRevenue in our title segment was $2.1 billion, up 21% compared with the same quarter of 2020 due to the strength of the purchase in commercial markets.\nPurchase revenue was up 9%, driven by a 12% increase in the average revenue per order.\nCommercial revenue was a record $262 million, an 84% increase over last year.\nLarge deals are up as we closed 89 transactions in the U.S. with premium greater than $250,000, up from 31 last year.\nWe continue to expect a record year in our commercial business.\nRefinance revenue declined 36% relative to last year as mortgage rates have risen since the beginning of the year.\nIn the agency business, revenue was a record $999 million, up 38% from last year.\nGiven the reporting lag in agent revenues of approximately one quarter, we are experiencing a surge in remittances related to Q2 economic activity.\nOur information and other revenues were $308 million, up 9% relative to last year.\nRevenue growth was primarily due to higher demand for the company's title information and loss mitigation products.\nInvestment income within the Title Insurance and Services segment was $50 million, up 11%, primarily due to higher average balances in the company's investment portfolio.\nIn our title segment, pre-tax margin was 16.4%.\nTurning to the Specialty Insurance segment.\nRevenue in our home warranty business totaled $108 million, up 7% compared with last year.\nPretax income in home warranty was $9 million, up from $4 million in the prior year.\nThe loss rate in home warranty has fallen from 64% to 57% as we believe many of the factors that triggered elevated claims at the onset of the pandemic are reversing.\nOur property and casualty business had a pre-tax loss of $11 million this quarter.\nAt the end of the third quarter, our policies-in-force have declined by 40% since the beginning of the year, and we expect a 70% decline by year-end.\nThe full wind down of the property and casualty business is on track to be completed in the third quarter of 2022.\nThe effective tax rate for the quarter was 25.3%, higher than our normalized tax rate of 24% due to higher state taxes related to investment gains realized in the quarter.\nAs Dennis mentioned in his remarks, we've made direct investments in 16 venture-backed companies in the PropTech industry.\nThe $292 million of capital we've invested into this effort had a market value of $669 million as of September 30.\nThis quarter, we recorded $278 million of gains related to our venture investments.\nThe largest gain was from our investment in OfferPad, an iBuyer that recently merged with the SPAC.\nDuring the quarter, we recognized a $195 million gain related to OfferPad.\nThis investment is subject to a high degree of market volatility, and we expect -- that we expect to impact our quarterly results.\nIn addition to OfferPad, we also realized a combined $79 million of gains related to our investments in Orchard, a company simplifying home buying and selling; Sundae, a real estate marketplace for sellers of dated or damaged property; and Pacaso, a platform enabling people to buy and coal in the second home.\nBeginning this quarter, we have moved all our venture-related activity to our corporate segment.\nPrior to the third quarter, realized investment gains from our venture portfolio were recorded in the Title Insurance segment.\nIn the third quarter, we increased our share repurchase authorization by $300 million and had $463 million remaining on our authorization as of September 30.\nDuring the quarter, we repurchased 208,700 shares for a total of $14 million at an average price of $67.37.\nCash flow from operations was $399 million in the third quarter, up 27% from the prior year.\nIn addition, we raised $650 million of a 10-year senior notes at a 2.4% interest rate.\nWe expect to use our cash on hand to fund acquisitions in our core title and settlement business in adjacent markets, invest in innovative solutions such as Endpoint and return capital to shareholders.\nOur debt-to-capital ratio as of September 30 was 28.5% or 22.7%, excluding secured financings payable, slightly higher than our target ratio of 18% to 20%.\n Assistant:", "chosen": "q3 earnings per share $2.15 excluding items.\n"}
{"prompt": "Human: During the call, we will discuss certain non-GAAP financial measures such as total segment operating income, adjusted EBITDA, total adjusted segment EBITDA, adjusted earnings per diluted share, adjusted net income, adjusted EBITDA margin, and free cash flow.\nWith these formalities out of the way, I'm joined today by Steven Gunby, our president and chief executive officer; and Ajay Sabherwal, our chief financial officer.\nI hope everyone and your families continue to be well.\nI know we all can see light at the end of the tunnel regarding the pandemic but I also know that in no place around the world, no place around the world are we yet fully in that light so I'm hoping everybody remains safe.\nI'm also hoping that we are -- is there a binging in the background there?\nWell, I'm in a new place doing the call.\nSo unfortunately, we might have a little background noise.\nSo, look, I'm hoping everybody stays safe.\nI'm also hoping that we all are getting a chance to reconnect with our loved ones and our colleagues in a somewhat deeper way.\nOver the last several weeks, like this week, I've had the pleasure of starting to see clients in person and traveling to just some of our offices to see our people.\nAnd I hope you have begun to have the equivalent.\nFor me, it has been wonderful to get the chance to see people, person-in-person again.\nObviously, technology is incredibly terrific about connecting us.\nIt changes our ability to feel connected when we're apart.\nNow some technologies are better than others.\nI think letter writing from my youth wasn't that great, notwithstanding the fact that my parents then celebrated the fact that I sent them a postcard from summer camp.\nAnd telegrams, except for emergencies, weren't much better but telephones obviously helped, right?\nThey were real time.\nThey allowed you to talk with somebody and stay connected.\nAnd Zoom and Teams are incredibly better.\nThey also give us eye contact.\nThey give us the ability to see authenticity in somebody's face.\nIt's a powerful thing.\nBut when we get back out in the world, I, for one, am rediscovering the fact that, even today, even today, nothing is better than getting a chance to see someone in person and maybe giving that person a hug.\nTurning to our results.\nI'm going to let Ajay give you all the details of this, yet again terrific quarter.\nIt is a terrific quarter, and there's lots of details but I'm going to leave that to him.\nWhat I'd like to do, with your permission, is share a bit of a longer-term perspective.\nOn these earnings calls, we often are talking about market forces.\nThe forces that are external to our firm.\nLast year, for example, we talked about the courts being closed and travel restrictions and the impact of each of those.\nIn other times, we've talked now about the restructuring markets either being up or down or whether the transaction market is booming or not.\nObviously, those discussions are important.\nWe wouldn't be talking about them if they weren't.\nMarkets do affect our individual businesses, and they can affect them sharply over any short period of time.\nWhat is also true, and to me far more powerful, is how little the markets determine our performance over an extended period of time.\nHow much -- when you look back over two years, four years, six years, seven years of our history, how much of our business is not driven by quarters or by market factors but is driven by us, by what our teams do.\nIt's about what -- our ability over any extended period of time to not get driven by quarterly market forces but rather for us to control our destiny.\nNow I know there's some longtime observers of our company on the call, and some of you have suggested that at one point this company was never up unless the restructuring business was up, and the restructuring business was not up unless the restructuring market was up.\nAnd as a consequence, at one point we were also seen by some as a cork that floats up and down with the restructuring wave.\nI don't know whether that was ever fully true but I believe our track record over the last two, four, five-plus years suggests it is not the case today.\nOur teams have been, and are, building businesses that are global, diverse but, most important, powerful.\nEach 10, as we've seen, be whipsawed by markets in just the short term.\nBut over the last years, we have shown that if we do the right things over any extended period of time, we are not corks on the wave but rather folks who determine our future.\nBy now, I believe that you can see examples of this in every one of our businesses and every one of our regions.\nFor example, our technology business.\nThis quarter is being helped by the strong M&A markets.\nHaving said that, by far, the more fundamental change in our trajectory in this business wasn't driven by markets.\nIt was driven by the teams driving strategic changes that they engineered four years ago.\nAt that point, some of you might remember, the business was headed in the wrong direction even with solid markets.\nThe strategic changes the team drove reversed that.\nOur business started to move up even before the M&A boom.\nAnd as a consequence, I believe, we have been the fastest-growing major player -- at least organically, in the e-discovery business over the last few years, not because of the market but because of what our teams have done.\nSimilarly, in E-con -- yes, the M&A and the antitrust clearance markets are hot.\nIf you look underneath that, you see the cornerstone of our multiyear growth that we have driven is actions taken by teams that support and add to the fabulous positions we have in the U.S. and extend those clear positions abroad, not market phenomena but the phenomenon of great people attracting other great people.\nFLC, obviously, saw the market's effects last year due to the halted court activities and travel.\nAs a consequence, as I think many of you remember, the business operated at a loss at some point last year.\nAs you know, we remain convinced that we have a very good business in FLC with terrific professionals and we hired even in the face of that downturn.\nA side note, look, in my experience, you can hurt a business seriously by overreacting to short-term headwinds.\nFor example, by failing to hire great people or getting rid of good people.\nBut my experience also is that if you don't make those steps, if instead you support great people in a downturn, you see ultimately that the short-term headwinds dissipate and the powerful underlying strength and potential for that great group of people emerges, and we are seeing that this year with FLC.\nIn strat coms, you saw our teams beginning six years ago and since, drive a set of strategic changes that turned the business from one what was once a declining business into a terrific growth engine.\nA business that's really growing its brand, in revenue and capability, not on every dimension perfectly every quarter, but robustly and powerfully over any extended period of time, including this year.\nI saved corp fin for last.\nSome, I suspect, worry that corp fin is a counterexample.\nSince at least this year, the market forces seem to be trumping everything.\nI would argue that corp fin, in fact, fully reinforces the overall point.\nYes, this restructuring market is down a huge amount.\nAnd we are, therefore, down in restructuring substantially versus last year.\nBut it's worth noting that our restructuring business, in the face of this terrible market, is still up substantially from six years ago.\nFor example, my first year here, reflecting the team's strengthening of that business, strengthening an already strong creditor rights business we had in the U.S., expanding substantially our U.S. company-site business and demanding -- dramatically strengthening our restructuring positions abroad in multiple markets.\nAnd the CF results today also reflect the efforts of our team made over the same period to build business transformation and transactions business that today are soaring.\nThe result is if you look out over multiple years, not just this year versus last year, you look through the ups and downs of the market, we have been able to develop and attract great professionals in the U.S. and around the world.\nAnd as a result, though the CF results are down year on year, they are not over an extended period of time.\nFor example, the profits in the first half of this year, even with the hit to the market, the restructuring, are still at a run rate that is essentially triple my first year here.\nSo are we affected by markets?\nBut are we determined by those markets?\nI don't think the data suggests that.\nI think the data explicitly suggests otherwise.\nMarket forces affect us sometimes that's dramatically over short periods of time in our individual businesses.\nThey cause zig and zag.\nBut we have also seen that if we don't overreact to the zigs and zags, if instead we assess our businesses and when we find that we have confidence in those businesses and in the teams driving them and we commit to investing in those businesses even in a slow period, even if it hurts those financials in that slow period, as we did back in FLC and are fully willing to do so in CF, our experience is over any longer period of time, we get rewarded powerfully.\nWe end up building businesses that great people want to stay in and help build, that great people want to be part of.\nBusinesses that attract great people, that support their ambitions and their development and allows them to build businesses they're proud of and client relationships that make an impact.\nAnd when you have great people doing great work and feeling supported, you end up with people who are developing this themselves, feeling good about themselves, and great people outside your firm who want to be part of that.\nYou create businesses that through the zigs and zags, become sustainable, powerful, durable, resilient and exciting growth engine.\nThat is what our teams through the zigs and zags, to me, have demonstrated.\nAnd together, I believe we will continue to do so.\nBeginning with our second-quarter results.\nRevenue growth more than offset increased costs, primarily from our investments in both organic head count growth and in acquisition.\nEarnings per share were further boosted by lower weighted average shares outstanding, or WASO, and from a lower tax rate, resulting in a 39.4% increase in GAAP earnings per share and a 31.8% increase in adjusted EPS.\nThe strength in our M&A and litigation-driven businesses that more than offset the impact of lower demand for restructuring globally.\nOverall, we are pleased with these results, which give us even greater confidence in our increased guidance ranges for the year.\nRevenues of $711.5 million were up $103.6 million, compared to revenues of $607.9 million in the prior-year quarter.\nGAAP earnings per share of $1.77 in 2Q '21, compared to $1.27 in 2Q '20.\nAdjusted earnings per share for the quarter were $1.74, which compared to $1.32 in the prior-year quarter.\nThe difference between our GAAP and adjusted earnings per share in 2Q '21 reflects $3.1 million in a fair value remeasurement of acquisition-related contingent consideration, which increased GAAP earnings per share by $0.09, and a $2.4 million of noncash interest expense related to our convertible notes, which reduced GAAP earnings per share by $0.06.\nNet income of $62.8 million, compared to $48.2 million in the prior-year quarter.\nThe year-over-year increase was primarily due to high operating profits in our Forensic and Litigation Consulting or FLC segment, as well as our technology and economic consulting segments, which was only partially offset by lower operating profits in our Corporate Finance & Restructuring segment compared to the prior-year quarter.\nSG&A of $133.9 million were 18.8% of revenues.\nThis compares to SG&A of $126.9 million or 20.9% of revenues in the second year -- in the second quarter of 2020.\nThe dollar increase in SG&A was primarily due to an unfavorable impact related to foreign currency translation, or FX, increased compensation primarily related to nonbillable head count growth, and the higher rent, which was partially offset by lower bad debt and the previously mentioned fair value remeasurement.\nSecond-quarter 2021 adjusted EBITDA of $92.3 million or 13% of revenues, compared to $75.8 million or 12.5% of revenues in the prior-year quarter.\nOur second-quarter effective tax rate of 19.3%, compared to 23.1% in the prior-year quarter.\nOur tax rate for the quarter was favorably impacted by a discrete tax adjustment from the remeasurement of our deferred tax asset in the U.K., following the proposed U.K. tax rate increase that's effective April 2023.\nWithout this change, our second-quarter '21 effective tax rate would have been 23.3%.\nFor the balance of '21, we expect our effective tax rate to be between 22% and 25%.\nFully diluted WASO for Q2 of 35.4 million shares declined 2.5 million shares, compared to 37.9 million shares in 2Q '20.\nOur convertible notes had a potential diluted impact on earnings per share of approximately 872,000 shares for the quarter.\nIncluded in WASO, as our average share price of $140.72 this past quarter was above the $101.38 conversion threshold rate.\nBillable head count increased by 470 professionals or 10.1% that's compared to the prior-year quarter.\nNoteworthy, in May, we closed on our acquisition of The Rhodes Group, welcoming 38 billable professionals to our construction solutions practice within our FLC segment.\nAnd in July last year, we acquired Delta Consulting, adding 151 billable professionals.\nSequentially, billable head count decreased by 27 professionals or half of 1%.\nNow I will share some insights at the segment level.\nIn Corporate Finance & Restructuring, revenues of $231 million decreased 6.1% compared to the prior-year quarter.\nThe decrease in revenue was driven by lower demand for restructuring services globally, which was partially offset by higher demand for our transactions and business transformation services in North America.\nAdjusted segment EBITDA of $40.2 million or 17.4% of segment revenues, compared to $76.3 million or 31% of segment revenues in the prior-year quarter.\nAdjusted segment EBITDA was negatively impacted by the continued downturn in restructuring activity compared to the record demand that saw in 2Q '20 in the initial wake of COVID as well as higher compensation, primarily related to a 19.8% increase in billable head count.\nOn a sequential basis, revenue increased $4.8 million or 2.1%, a strong growth in both our business transformation and transactions businesses and related success fees more than offset the continued decline in demand for our restructuring services.\nRevenues of $150.7 million increased 41.7% compared to the prior-year quarter.\nThe increase in revenues was primarily due to higher demand for our investigations and dispute services.\nAdjusted segment EBITDA of $18 million or 11.9% of segment revenues, compared to a loss of $9 million in the prior year quarter.\nAs a reminder, the second quarter of 2020 was when COVID-19-related lockdowns particularly affected FLC, resulting in many matters being deferred due to travel restrictions, foreclosures, and delays.\nThe year-over-year increase in adjusted segment EBITDA was primarily due to higher revenues and a 14 percentage point increase in utilization, which was partially offset by higher variable compensation and a 5.5% increase in the billable head count.\nSequentially, revenues were flat but adjusted segment EBITDA decreased $11.4 million, primarily due to increased compensation, acquisition-related costs, and certain revenue deferrals.\nOur economic consulting segment's record revenues of $183.3 million increased 21% compared to the prior-year quarter.\nThe increase was primarily due to higher demand for non-M&A-related antitrust and financial economic services, which was partially offset by lower realized rates and demand for our M&A-related antitrust services compared to the prior-year quarter.\nOur adjusted segment EBITDA of $30.7 million or 16.7% of segment revenues, compared to $21.7 million or 14.3% of segment revenues in the prior-year quarter.\nThe increase in adjusted segment EBITDA was due to higher revenues, which was partially offset by higher variable compensation and a 9.1% growth in billable head count.\nSequentially, revenues increased $14 million or 8.3%, which was primarily driven by increased demand for financial economics and M&A-related antitrust services.\nThe adjusted segment EBITDA improved $4.1 million.\nIn technology, revenues of about $78.6 million increased 67% compared to the prior-year quarter.\nThe increase in revenues was primarily due to higher demand for cross-border investigations, litigation and M&A-related second request services.\nAdjusted segment EBITDA of $18.5 million or 23.5% of segment revenues, compared to $6.4 million or 13.7% of segment revenues in the prior-year quarter.\nThe increase in adjusted segment EBITDA was due to higher revenues, which was partially offset by an increase in compensation and higher SG&A expense.\nSequentially, revenues were slightly lower compared to record revenues in the first quarter as decreased demand for M&A-related second request services was nearly offset by the higher demand for litigation and cross-border investigation services.\nAdjusted segment EBITDA declined $3.1 million sequentially, which was largely due to an increase in SG&A expense.\nRevenues in the strategic communications segment of $67.8 million increased 19.2% compared to the prior-year quarter.\nThe increase in revenues was primarily due to a higher demand for corporate reputation, and public affairs services.\nAdjusted segment EBITDA of $13.5 million or 19.9% of segment revenues, compared to $10 million or 17.6% of segment revenues in the prior-year quarter.\nThe increase in adjusted segment EBITDA was due to higher revenues, which was partially offset by an increase in compensation and higher SG&A expense.\nSequentially, revenues increased $7.3 million, primarily due to higher demand for corporate reputation and public affairs services.\nAdjusted segment EBITDA increased $3.1 million.\nLet me now discuss key cash flow and balance sheet items.\nWe generated net cash from operating activities of $125.6 million, which decreased by $27.4 million, compared to $153 million in the second quarter of 2020.\nThe year-over-year decrease was largely due to an increase in salaries, primarily related to head count growth, which was also partially offset by the higher cash collection.\nWe generated free cash flow of $105.8 million in the quarter.\nTotal debt, net of cash, decreased $93.5 million sequentially from $252.8 million on March 31, 2021, to $159.4 million on June 30, 2021.\nThe sequential decrease was primarily due to repayment of borrowings under our senior secured bank revolving credit facility.\nTurning to our guidance.\nWe are raising our full-year 2021 guidance ranges for revenues and GAAP EPS.\nWe are also raising the lower end of our full-year 2021 adjusted earnings per share guidance range.\nThese changes primarily reflect our strong performance in the first half of 2021.\nWe now expect revenues will range between $2.7 billion and $2.8 billion, up from our prior range of between $2.575 billion and $2.7 billion.\nGAAP earnings per share is now expected to range between $5.89 and $6.39, up from a prior range of between $5.60 and $6.30.\nWe now expect adjusted earnings per share to range between $6 and $6.50, up from our prior range of between $5.80 and $6.50.\nThe $0.11 per share variance between earnings per share and adjusted earnings per share guidance for full-year 2021 includes the estimated tax-affected impact of noncash interest expense of $0.20 per share that's related to our 2023 convertible notes and the second-quarter 2021 $0.09 per share gain related to some fair value remeasurement.\nOur updated guidance for full-year 2021 is shaped by four key considerations: First, restructuring activity remains subdued due to government support and extended moratoriums, low interest rates and the strengthening in certain industry verticals.\nAnd our restructuring business could weaken further as large matters from 2020 roll off.\nSecond, global M&A activity, which drives demand in our economic consulting and technology segments as well as our transactions practice in Corporate Finance & Restructuring is at just record levels.\nThere is no certainty that M&A activity will continue at this pace.\nThird, typically fourth quarter is a weaker quarter for us because of both an increase in time off during the holidays for our employees and a seasonal business slowdown.\nFourth, COVID-19 is still with us with different parts of the world being impacted at varying degrees.\nBefore I close, I want to reiterate a few key themes that underscore the strength of our company.\nFirst, we have conviction in our world-leading businesses.\nAnd this quarter's results reflect both the benefits of sustained investing even when facing short-term volatility and the diversity of our businesses.\nSecond, not only are we deepening our core capabilities, but also we are then expanding in adjacencies, such as non-M&A-related antitrust, business transformation, cybersecurity, public affairs, and environmental, social, and governance-related services.\nThird, the bedrock of our success remains the strength of our people and their client relationships, combining with creating a culture that has year after year allowed FTI to be ranked as a best place to work by Forbes, Consulting Magazine and the Washington Post, among others.\nAnd finally, our balance sheet is enviable.\nAnd so we have demonstrated the ability to boost shareholder value through share buybacks, debt reduction, organic growth, and acquisitions when we see the right one.\n Assistant:", "chosen": "compname reports q2 earnings per share of $1.77.\nq2 adjusted earnings per share $1.74.\nq2 earnings per share $1.77.\nq2 revenue $711.5 million versus refinitiv ibes estimate of $642.7 million.\nsees 2021 earnings per share will range between $5.89 and $6.39.\nsees 2021 adjusted earnings per share will range between $6.00 and $6.50.\n"}
{"prompt": "Human: A replay of today's call will be available via phone and on our website.\nTo be fair to everyone, please limit yourself to one question, plus one follow-up.\nBefore we get started, I want to let you all know that we are planning an Investor Day in early April, and we will be sharing more information soon.\nWith that, I will turn the discussion over to Phil Snow.\nBefore I begin, let me start by welcoming Kendra, who recently became FactSet's, Head of Investor Relations.\nKendra has worked at FactSet for more than two decades, most recently, serving as my Chief of Staff.\nShe brings a deep knowledge of the Company and industry expertise to her new role.\nI look forward to working with Kendra to continued growing our Investor Relations program.\nWe are excited to have her here and have already begun leveraging her deep financial and operational expertise, as we continue to execute our growth strategy.\nTurning to our performance.\nFactSet is off to a strong start to fiscal 2022, and I'm pleased to share that this quarter, had the highest Q1 incremental ASV on record.\nBuilding on the momentum from Q4, we grew organic ASV plus professional services by 9% year-over-year in Q1.\nThe strong performance of our sales and client-facing teams carry forward from Q4, increasing the pace of our go-to-market strategy.\nThese teams continue to drive increased retention and expansion rates among our existing clients, while achieving a high number of new business wins.\nThe biggest contributor to this quarter's growth were institutional asset management clients, as we continue to see strength in our workstation and accelerating growth in our analytics workflow solutions.\nThe last two years of accelerated investment in content and technology continue to drive top line growth.\nWe are seeing increased demand for differentiated content and workflow solutions.\nFactSet's leading open content and analytics platform is allowing us to meet this demand and capture more share of wallet with our clients.\nBy client type, wins were broad-based.\nWe saw a double-digit ASV growth rates from our banking, wealth, hedge fund and corporate clients, as well as private equity and venture capital funds and partners.\nOur investments in content and technology including deep sector, wealth and analytics solutions continue to support client retention rates and renewals across the board.\nOverall, we are pleased that our performance resulted in a 13% increase in adjusted earnings per share from the prior year period.\nOur adjusted operating margin of 33.6% exceeds our guidance.\nLinda will walk you through the details in a few minutes.\nWe are now in the final year of our multiyear investment plan, and we remain on track to achieve our goals.\nOur focus is on our digital platform scaling our content refinery and creating hyper personalized workflow solutions.\nWithin our content refinery, ESG, data for wealth, private markets and deep sector are all fueling workstation growth.\nWe continue to grow our deep sector data launching real estate and technology media and telecom in November.\nDeep sector and our investments in private markets have translated into growth and high retention within sell-side firms.\nAnd our recent acquisition of Cobalt further advances, our private market strategy by connecting differentiated data with tracking and portfolio monitoring providing value to our private equity and venture capital clients.\nOur workflow solutions, which deliver efficiencies across the front, middle and back office continue to add meaningful ASV.\nOur analytics APIs are resonating with our clients, and we are increasingly integrating with cloud-based platforms.\nEarlier this month, we launched over 90 datasets and a number of APIs on Amazon Data Exchange, the first major data and analytics provider to do so.\nOur trading business continues to grow, bolstered by the recent addition of fixed income support for trade execution.\nThis enables our clients to surface new insights and trade across asset classes with greater speed and efficiency and was a significant contributor to the growth of our analytics and trading business during the quarter.\nOur product teams are focused on identifying, developing and implementing made for client workflow solutions for each of our client types.\nThis has been incredibly successful within wealth, as our Advisor Dashboard maintains a healthy pipeline and solid client engagement for FY22.\nWe see this hyper personalization as a key differentiator and are committed to working with our clients to evolve our offerings.\nLooking across our regions, we saw continued strength in ASV growth across all our markets.\nThe Americas was the biggest contributor, as organic ASV growth accelerated to 9% supported by broad-based strength across our businesses.\nThis was driven by strong retention and expansion among asset managers and asset owners.\nThe region also benefited from capturing higher price increases.\nIn EMEA, growth accelerated to 7% consistently improving over the past three quarters.\nResearch and advisory had a particularly positive impact, driven by improved retention among asset managers and wealth clients and strong workstation sales to new customers.\nAsia Pacific had another robust quarter with growth accelerating to 14% driven primarily by CTS.\nWe again saw wins across many countries with hedge funds, asset managers and asset owners driving ASV growth.\nIn summary, I am proud of the FactSet team for delivering such strong results to the start of the year.\nThe first quarter, as you know is historically a slower start to the fiscal year and not necessarily an indication of our performance for the rest of the year.\nHowever, our momentum from Q4 has continued, and we are well positioned to deliver on our targets for the year.\nAs such, we are reaffirming our fiscal 2022 guidance, and we remain confident in our pipeline and then the value we are delivering to our clients.\nLooking ahead, we continue to focus on the three strategic priorities, scaling up our content refinery, enhancing the client experience through hyper personalized solutions, and delivering next generation workflow solutions for clients.\nAnd we believe that our people, culture and performance-driven mindset will enable us to execute on these priorities, as we accelerate the pace of change.\nWe are committed to investing in and developing the talent experience and the skills of our team, as we build the industry's leading open content and analytics platform.\nFinally, an important milestone in our Company's history occurred earlier this week when FactSet became part of the S&P 500 Index.\nOur addition was in fact predicted by our S&P 500 constituents prediction signal on October 1st.\nOur inclusion is a proud moment for FactSet and a testament to our tremendous growth and our efforts to help our clients do their best work.\nOur team's creativity, dedication and collaborative spirit make us a trusted partner, and I'm tremendously proud of their drive to create smarter, more innovative solutions for our clients.\nI'm really pleased to be here today as part of the FactSet team.\nI've been at FactSet for just a few months, but in that short time it's become clear that the Company has been performing really well, from accelerating top line growth and strong free cash flow generation to its long history of consistent and growing shareholder returns, and there is still a lot of runway ahead of us, as the investments made over the past two years are paying off and driving growth.\nThere is undeniably a great deal of talent across the organization.\nI look forward to working with the team to build on FactSet's history of outstanding performance, while generating meaningful value for shareholders.\nI'll now share more details on our first quarter performance.\nFirst on ASV, we grew organic ASV plus professional services by 9%.\nAs Phil noted previously, we typically see a seasonal deceleration in Q1.\nOur performance reflects increased demand for our content and product, higher retention, and our ability to realize higher pricing.\nThe marketplace has been supportive with solid workstation growth in banking and greater demands for our portfolio analytics solutions, as market conditions continue to evolve, our subscription-based ASV will continue to support value-based pricing.\nGAAP revenue increased by 9% to $425 million, while organic revenue, which excludes any impact from foreign exchange and acquisitions increased 9% to $423 million, growth was driven primarily by analytics and trading and research and advisory.\nAll regions experienced notable year-over-year growth.\nFor our geographic segments, on an organic basis, Americas revenue grew 9%, EMEA also came in at 9% and Asia Pac revenues grew at 14%.\nThe main drivers in the region were analytics, CTS and workstation growth.\nTurning now to expenses.\nGAAP operating expenses grew 13% in the first quarter to $302 million, impacted by anticipated changes incurred during the period.\nWe recorded a restructuring charge of $9 million to drive a more efficient and empowered organizational structure.\nOngoing savings from this realignment will primarily be used for product reinvestment and key talent retention.\nIn addition, we recognized $4 million of expense related to vacating certain office space in New York City.\nWe recently pulled our employees on optimal work arrangements and consistent with what we see in the market, a vast majority prefer a hybrid or remote working model.\nGiven this preference, we are reassessing our real estate footprint to better reflect our new work arrangements.\nAlso, in Q1, we incorporated the FactSet Charitable Foundation to facilitate our corporate social responsibility goals.\nCompared to the previous year, our GAAP operating margin decreased by 230 basis points to 29% and our adjusted operating margin decreased by 70 basis points to 34%.\nAs stated before this exceeds our guidance on this measure.\nOur increased expenses were partially offset by lower compensation expense.\nAs a percentage of revenue, our cost of sales was 32 basis points higher than last year on a GAAP basis and 72 basis points lower on an adjusted basis.\nThis reflects increased data and infrastructure costs and higher compensation expense for our existing employee base.\nThese expenses also include our ongoing shift to the public cloud, as part of our digital transformation and multiyear investment plan.\nLower personnel expenses, partially offset these increases.\nWhen expressed on a percentage basis of revenue, SG&A was 198 basis points higher year-over-year on a GAAP basis and 145 basis points higher on an adjusted basis.\nThe primary drivers include increased employee compensation, higher bonus accrual and real estate exit costs.\nThis was partially offset by lower stock compensation year-over-year.\nTurning now to taxes, our tax rate for the quarter was 10% compared to last year's rate of 16%.\nThis lower rate was due to a tax benefit from the exercise of stock options, as a result of our record stock price.\nThis caused the annual estimated benefit to be higher than expected.\nThe lower annual rate was partially offset by higher-than-expected U.S. income.\nGAAP earnings per share increased 7% to $2.79 this quarter versus $2.62 in the prior year.\nAdjusted diluted earnings per share grew 13% to $3.25 driven higher -- by higher revenues and a lower tax rate.\nFree cash flow, which we defined as cash generated from operations, less capital spending was $64 million for the quarter, a decrease of 9% over the same period last year.\nThis was primarily due to the timing of tax payments, higher year-over-year employee bonus payments, and a reduction in capital expenditures related to facilities build outs.\nOur ASV retention remained at -- greater than 95%.\nWe grew the total number of clients by 14% compared to the prior year, which continues to be driven by the addition of more wealth and corporate clients.\nOur client retention improved to 92% year-over-year, which speaks to the success of our products and investments and the efforts of our sales teams.\nFor the first quarter, we repurchased 46,200 shares of our common stock for a total of $19 million at an average per share price of $403.\nWe remain disciplined in our buyback program and committed to returning long-term value to our shareholders.\nWe are reaffirming our guidance for 2022, and as we often say our business is a tale of two halves.\nWhile it is clear that our momentum from Q4 has continued and we believe that we are well positioned to deliver on our targets, it's still early in the fiscal year.\nWe remain focused on developing our content, technology and people and delivering value for our shareholders.\n Assistant:", "chosen": "qtrly diluted gaap earnings per share of $2.79.\nqtrly adjusted diluted earnings per share of $3.25.\nreaffirms its annual outlook for fiscal 2022 as provided in september 2021.\n"}
{"prompt": "Human: To kick things off, our CEO, Bryan Jordan and CFO, BJ Losch will provide an overview of our results and then we're going to open things up for question.\nWe're really pleased to have Susan Springfield, our Chief Credit Officer with us to help with that effort.\nOur statements reflect our views today and we aren't obligated to update them.\nAnd with that, I'm going to hand it over to Bryan.\nThis has been a very significant quarter for us.\nWe closed our merger of equals with IBERIABANK, we acquired the 30 branches from SunTrust Truist, really excited about that.\nThat integration was done in mid-July.\nWe've made significant progress during the quarter.\nWe are very pleased with the performance of the organization, the great work that our associates did to serve their customers and their communities in what has been a challenging and trying time.\nWe see good momentum in our business, we proved out again the counter cyclical benefit of our businesses, mortgage, mortgage warehouse lending and our fixed income business.\nOur balance sheet continues to perform well.\nAnd as we've talked about over the last ten years or 12 years, we have really significantly restructured the balance sheet and the focus is more on C&I.\nWe had net charge-offs of 44 basis points during the quarter and we saw a slight tick up in nonperforming assets, but we ended the period with about $1.3 billion of capacity for loss taking.\nSo very strong balance sheet.\nWe had a good quarter in terms of deposit activity.\nWe had good customer inflows and the balance sheet feels good and we saw some progress made in adjusting our pricing to compensate for the lower interest rate environment.\nAlso during the quarter, we made good progress on our expenses.\nWe captured another $8 million of run rate, excuse me of run rate in our quest for $170 million plus in expense savings.\nWe feel very good about our progress in controlling costs and are planning for the integration.\nThere is a couple of good slides in the investor deck, which you can reference that lay out the expectations around expense efficiencies over the next couple of quarters and year.\nOur capital base continues to be strong.\nVery, very pleased with the positioning.\nWe came in with a CET1 ratio of 9.15%.\nOur tangible book value dilution was very slight from the acquisition of the branches and the completion of the merger, largely offset by our earnings during the quarter.\nOur planning around the integration continues to go well, we expect that the significant integration work will be completed by the fall, early fall of 2021.\nWe are on target and on track for completing that integration.\nWe have a lot of work to do between now and then.\nWe have associates all over the organization who are working to make sure that we do it in a seamless fashion and minimize, absolutely minimize adverse impact on our customers and our communities.\nClearly, the progress of the PPP programs, of fiscal stimulus has been positive to date on the economy, but there is still uncertainty.\nI feel like we're well positioned in terms of a strong balance sheet, strong while taking capacity, strong capital and also positioned with a tailwind in the sense that we have our non -- our counter-cyclical businesses and we also have the ability to realize a significant amount of cost savings over the next 18 months to 24 months.\nSo with that, I will stop.\nWe think it's important to note that the impact of merger accounting on our financials are overall in line with the estimates we provided you during the second quarter call and in the pro forma released during the quarter.\nWe've provided the detail on the marks and other impacts related to the merger in the appendix for your review.\nOn Slide 6, we provide a summary of our adjusted financials for the quarter compared with FHN stand-alone adjusted results in the prior quarters.\nSo obviously, the trends here largely reflect the net impact of the IBERIA merger and the branch acquisition.\nMoving on to Slide 7 for a look at net interest income and net interest margin.\nWe generated net interest income of $532 million in the quarter, up $227 million linked quarter, driven by the impact of the merger.\nNII remains fairly stable with second quarter combined levels, despite the impact of the challenging rate environment.\nThird quarter results included a $44 million benefit from accretion or about 12 basis points on the NIM which was modestly higher than we originally expected given higher prepayments.\nReported NIM came in at 2.84% in the quarter, down 6 basis points, reflecting the impact of low rates and continued elevated levels of liquidity, somewhat offset by accretion.\nWe also continue to take action to improve our deposit pricing profile.\nOur deposit rate paid was down again this quarter with interest bearing deposit costs down to 36 basis points.\nOur goal is to manage down interest bearing deposit cost toward the levels we saw in a prior zero interest rate cycle back in 2015 of around 24 basis points.\nIn this quarter, we plan to align our deposit pricing across the expanded franchise, which should provide additional benefit as we enter 2021.\nOur NIM also continues to reflect the impact of much higher levels of liquidity.\nWe estimate excess cash to lower the third quarter margin approximately 12 basis points.\nWe averaged about $3 billion of excess cash, which grew to $4.5 billion at quarter end.\nAs you know, while this excess cash position lowers the margin, it does not impact our net interest income.\nWe continue to look opportunistically for more attractive reinvestment alternatives going forward and expect to put more of that money to work over time.\nIn the fourth quarter, we expect to see additional margin pressure likely in the high single-digit to low double-digit range, but expect that level to represent the bottom for NIM going forward.\nMoving on to Slide 8 and 9, I would note that here, we have provided our results versus prior period combined results for FHN and IBERIA.\nWe delivered solid performance in fee income again in the third quarter with relatively stable results on a linked quarter basis and a 23% year-over-year increase as the benefit of our counter-cyclical businesses in fixed income and mortgage banking helped to mitigate COVID related pressure in some of our more traditional banking fee income streams.\nFixed income results came in as expected with relatively stable results linked quarter and a $33 million increase year-over-year given average daily revenues of $1.5 million.\nMortgage banking again delivered standout results with a $13 million increase linked quarter and almost $40 million year-over-year.\nSecondary originations of $1.2 billion were up 3% from strong second quarter levels while gain on sale margins expanded over 100 basis points to 3.93%.\nAs we look into the fourth quarter, while we expect a seasonal slowdown in volumes for both of these businesses, we do expect overall market conditions to remain favorable for both -- for the foreseeable future.\nAs you can see on Slide 9, we continue on our commitment to expense discipline.\nLinked quarter expenses were down $15 million as the reduction in personnel expense and other non-interest expense was partially offset by an expected increase in intangibles, amortization from the Merger and Branch acquisition.\nSalaries and benefits increased $7 million, driven by the alignment of benefits across the combined platform, the addition of personnel from the 30 acquired branches and an increase in healthcare costs following the pandemic driven slowdown.\nThis increase was more than offset by a reduction in revenue based incentives and commissions as well as lower deferred comp costs.\nOur results this quarter also reflect the benefit of $8 million in net merger cost saves, giving us a year-to-date total of $18 million.\nWe understand the importance of remaining incredibly focused on utilizing cost control as a lever in this environment.\nWe have unique advantages to be able to do so given our merger and we'll continue to look for further expense reductions beyond our targeted merger savings.\nTurning to Slide 13 and 14, you see a review of our loan growth and funding profiles relative to combined First Horizon, IBERIA results.\nAs expected, period end loan growth was modest as customer demand remains muted, pay-offs continue and utilization rates have returned to more normal levels.\nBright spot in the quarter was continued strong mortgage warehouse demand, which drove loans to mortgage companies up $1.6 billion on a spot basis and approximately $430 million on average.\nSimilar to fixed income and mortgage banking originations, the loans to mortgage companies functioned as a counter-cyclical, high return specialty business for us and we expect continued strong performance.\nOn the liability side, period-end deposits were up $2.3 billion, driven by the branch acquisition primarily as well as continued strong customer inflows, which enabled us to run off higher cost non customer balances.\nGiven current levels of excess liquidity and our enhanced market presence, we expect to continue to move our interest bearing deposit costs lower, particularly as we move to align our pricing strategies across the footprint.\nWe also further improved our funding profile with a $1.2 billion reduction in borrowings from 2Q combined levels as we leveraged our excess liquidity to pay down legacy IBERIA that Federal [Phonetic] Home Loan Bank advances.\nTurning on Slide 12, we'll cover asset quality over the next few slides.\nClearly, our results this quarter reflect the impact of the merger with a lot of moving parts.\nBut if we step back, broadly speaking, overall asset quality continues to remain fairly benign so far outside of energy despite the impacts of COVID-19.\nNet charge-offs came in at 44 basis points, up from 20 basis points for legacy FHN driven by energy-related losses and we saw a relatively modest 6 basis point increase in NPLs to 75 basis points of total loans, despite the impact of the merger.\nOn Slide 13, you see, we continue to add reserves this quarter as the impact of the merger and branch acquisition added $475 million to the allowance for credit losses.\nOutside of merger math, we also built reserves by a modest $13 million.\nTherefore, we ended the quarter with reserves of $1.1 billion, which is equivalent to 2.15% of the loan portfolio, excluding the low risk PPP and loans to mortgage companies portfolios and about four times annualized net charge-offs.\nWhen you also factor in the unrecognized discount on acquired loans, we have total loss absorbing capacity of $1.3 billion or over 2% of total loans.\nOn Slide 14, we provide an update of our view around the portfolios that investors have been most focused on in terms of impacts from the pandemic.\nWe continue to do very detailed portfolio reviews of industries currently affected and in the quarter, we reviewed in detail $9 billion of loans in the commercial portfolio across these various sectors.\nAs a result of that, as well as other broader portfolio reviews, we believe that just under 11% of our total loans should be and are subject to a heightened level of monitoring.\nWe've shown the sub sectors of the portfolio that may be more stressed such as real estate lending, energy, retail, trade and the non-fast food portion of our accommodation foodservice portfolio.\nIt's important to note that other sectors such as essential services, recreational goods, manufacturing and home improvement are continuing to perform well, and additionally our higher quality consumer portfolio is performing well as well with a weighted average FICO score of 750 on a refreshed basis.\nAs we've mentioned to date, customers are proving to be more resilient than originally feared and overall stress appears to be declining.\nWe've provided data in the appendix on the reserve coverage across our portfolio, as well as on deferrals which have now declined meaningfully to around 2.4% of federal loan balances from a peak of almost 13%.\nOverall, we continue to feel very comfortable with our risk profile and reserve levels, particularly after going through the very detailed process of marking the IBERIA loan book, which represents about 45% of the portfolio.\nMoving on to capital and tangible book value per share on Slide 15, as we mentioned, TBV per share of $9.92 remained relatively stable to second quarter as strong earnings were offset by the impact of the IBERIA merger and the Truist branch acquisition and the CET1 ratio ended the quarter at $9.15.\nNear term, we expect to continue targeting a CET1 ratio in the 9% to 9.25% range.\nTurning to Slide 16 for Merger Integration Update, we continue to be very energized as Bryan said by the opportunities ahead of us in connection with our merger of equals.\nIn the year since we announced the deal, we've established a strong merger integration framework to help ensure that we capitalize on the opportunities in a highly efficient manner even in the face of the pandemic.\nWe've already done a great deal to align our cultures, processes and systems to ensure a successful integration.\nWe've completed much of HR related integration by identifying leadership and converting payroll systems.\nAnd on the customer side, we've built out our go-to-market and organizational models, as well as finalizing our customer experience dashboard.\nWe're on track to convert various other platforms and are currently planning for the full systems conversion to occur in the fall of 2021.\nAgain as Bryan said, in the third quarter, we delivered $8 million of cost savings, bringing the year-to-date total to $18 million.\nAnd in the table on the right, we provided a modestly updated view of our expected saves over time.\nWe continue to be highly confident in our ability to deliver at least $170 million of annualized savings in 2022, but the path of the save got shifted by a quarter or so.\nThis largely reflects the fact that we now believe it's prudent to target a September-October system conversion versus the previous year of the late second quarter conversion.\nIn the table on the right as well we've provided the estimated timing of our merger savings on an annualized basis.\nIn third quarter 2020, our annualized expense base excluding incentives and commissions totaled about $1.52 billion, and based on our expectations for the timing of the merger sales, we believe that our 2021 expenses excluding incentives and commissions should reflect a low single-digit decrease.\nWrapping up on Slide 17, we believe we're well positioned to capitalize on the benefits of our more diversified business model over time and through our IBERIA merger and the branch acquisition, we now have an expanded franchise across some of the most attractive markets in the south.\nAs we've demonstrated this quarter, we have a revenue mix that helps us offset NII pressure from the low rate environment.\nWe also have the advantage of merger cost saves and through prior acquisitions and efficiency initiatives, we've proven our commitment to expense controls.\nOur prudent approach to risk management should help us mitigate credit losses going forward, and we have the benefit of the marked loan book and significant loss absorption capacity.\nWhile the economic environment remains challenging and loan demand is needed, it gives us the ability to focus on merger integration for the next year, and we believe our business model will result in outperformance and shareholder value creation in the quarters and years ahead.\nSince I know they're listening, I want to give a quick shout out to all those on our various teams across IR, accounting, finance, credit and technology in particular that have done an extraordinary work and have spent long hours getting us to this point.\nThis is my 47th quarterly earnings call with First Horizon and I've seen a lot over the years, but the complexity and the uniqueness of this quarter and the year take the cake.\nWe believe our strong balance sheet capital and liquidity will serve us well in this difficult operating environment.\nWe've maintained strong underwriting standards and built a diversified portfolio focused on profitability and performance in a downturn.\nDespite the economic headwinds, we are uniquely positioned to capture merger opportunities with enhanced scale, better efficiency and improved earning power to create significant shareholder value.\nWe are incredibly committed to continuing to assist our associates, communities and customers in efforts to overcome the impact of COVID-19 and revitalize the economy.\nAgain, we are very well positioned.\nI'm very, very excited about the combination of IBERIABANK and First Horizon, and we think we have unprecedented opportunities ahead of us.\nWith that operator, we'll be happy to take any questions.\n Assistant:", "chosen": "first horizon national corp - qtrly net interest income $532 million versus $301 million.\nfirst horizon national corp - three-year strategic plan to be finalized in q4 2020.\n"}
{"prompt": "Human: There is an inherent risk that actual results and experience could differ materially.\nYou can find a discussion of our risk factors, which could potentially contribute to such differences in our 2020 10-K and in our Form 10-Q, which was filed earlier today.\nBob was the great grandson of our founder and worked at Fluor for 42 years before retiring in 2009.\nFor 27 years, he led the Fluor Foundation, our charitable and community involvement organization that was established by his father and his uncle Si Fluor in 1952.\nThroughout his career, Bob brought meaning and value to the active giving back, inspiring thousands of employees across the company and across the globe, to commit time and resources to bettering their communities.\nThe company will continue to build on Bob's legacy of supporting stronger, more sustainable communities around the world.\nIn a few minutes, Joe will walk through the financials of our business in each of our segments.\nSo let me first provide a high-level overview of what we are seeing in each of our major end markets.\nStarting with Urban Solutions.\nIn mining, work is tracking broadly to our expectations for the next 18 months.\nWe have seen a few large projects shift to the right as detailed estimate reviews and scrutiny of projects by our clients prior to an investment decision being taken is higher than we have seen in quite some time.\nIn addition to those projects, we have a steady slate of feed and limited notice to proceed work, where we have a high level of confidence in conversion to full project awards in the next couple of years.\nOur prospect list is incredibly diverse, and we are not dependent on any one region or any one commodity to see significant growth in this business.\nBacklog for mining declined by approximately $1 billion in the quarter.\nThat was due to the cancellation of a steel project in North America.\nMoving to Infrastructure on slide four.\nThe bipartisan bill continues to gain momentum, and we are optimistic that it will focus on more traditional infrastructure projects, including roads and bridges, which we believe will provide some upside to Fluor and more importantly, funding certainty to our clients in the coming years.\nImportantly, we are starting to see shifts in contract structures and collaborative models are being applied to the infrastructure sector as well as other sectors that allow contractors to compete on capabilities and qualifications instead of solely on price.\nThis is a positive development, and we are encouraged by this approach to risk mitigation.\nOn a particularly promising note, we are seeing advisory institutions acknowledging the challenges encountered in executing public works projects.\nThis has led to the development of more collaborative procurement models to support their public sector clients.\nLast week, we were notified by TxDOT that our co-lead joint venture was selected to design, construct and maintain the 6.5-mile long I-35E Phase two project here in Dallas.\nOur portion of the work will be booked in the third quarter.\nWe're excited about this project and look forward to supporting TxDOT on this and other capital programs in the future.\nRegarding our legacy infrastructure portfolio, I want to provide an update on the Gordie Howe Bridge Project and the $138 million charge we announced today.\nThe project is experiencing significant COVID-related delays as well as overruns due to procurement and subcontractor cost growth.\nThis charge includes additional reserves for delays and disruptions in the schedule.\nFluor is not the lead operating partner on this contract.\nIt's important to note that these cost growth factors may be at least partially recoverable under the contract.\nWe expect that it will require several quarters to analyze recoverability and negotiate with our clients before the accounting standards allow us to recognize incremental revenue for these amounts.\nWhile we are disappointed in the performance of the project, we believe we have a solid estimate on the cost at this point.\nDesign is essentially complete, and we have procured approximately 85% of the materials required.\nWe have been revising the forecast along the way, and this contract was previously included in our 0 margin projects in backlog.\nAs a noncontrolling partner in this JV, we continue to work with our partners to help them get this project into the best possible position.\nWe have just under $1 billion in backlog remaining for this project and anticipate substantial completion by the end of 2024.\nOur other infrastructure projects continue to make solid progress, including the LAX people mover, which crossed a significant milestone in early July when the joint venture placed the first forward trusses for the elevated pedestrian walkway.\nTurning to slide five.\nIn advanced technologies and life sciences, we are successfully wrapping up some of our large data center projects in Europe.\nWe also see opportunities for semiconductor manufacturing facilities, both domestically and internationally.\nThese projects are a mix of brownfield and greenfield, and provide a lot of opportunity for add-on work as these facilities grow.\nIn life sciences, we continue to see a good list of opportunities, as our world-class technology capabilities support our strategy of getting front-end work.\nWe have been awarded a few front-end projects this quarter with the goal of converting them into EPCM contracts.\nOverall, we still see the ATLS end markets as an area for growth in our business, and we are focused on deploying our teams on to projects where we can grow our market share with contract terms and conditions that we find favorable.\nIn Mission Solutions, we experienced strong margins this quarter due to increased execution activity on DOE projects, higher-than-forecasted performance-based fees and the release of COVID-19 cost reserves.\nThis strong performance was somewhat offset by a decline in execution activity on army logistics and life support programs in Afghanistan and Africa.\nIn June, we fully demobilized our people and successfully completed our assignment in Afghanistan after 13 years.\nAt its peak, Fluor had 26,000 employees from 65 countries, speaking 39 languages at 76 sites and supporting over 100,000 troops.\nThis included 191,000 meals prepared per day and the establishment of the first-ever biodiesel program for the U.S. military deployed overseas.\nUnder this program, we produced over 0.5 million gallons of fuels for the bases.\nWe are now continuing to support the Army through our LOGCAP V task order award in Africa.\nNext, please note that on the RAPID project, we have moved into the warranty period.\nThis project is now essentially complete.\nOur major pursuits for the second half of this year in this group include the Savannah River Management & Operations contract extension and the Y12/Pantex Management & Operations contract in Tennessee and Texas.\nMoving to Energy Solutions on slide seven.\nWe had a particularly strong quarter due to certain favorable events driving up our gross margin.\nThis reflects the negotiations of change orders, scope increases and cost improvements across numerous projects.\nFurthermore, margins also benefited from the release of credit loss reserves after we received payment on a significant long-standing past due receivable.\nThese positive segment margin results were partially offset by a $20 million loss recognized on an embedded derivative, which is excluded from our adjusted earnings per share numbers.\nTurning to slide eight.\nWe remain pleased with the progress on our LNG Canada project in Kitimat.\nDuring the quarter, we saw a significant easing of public health orders that had slowed progress earlier this year, and we are now fully staffed onsite per our plan.\nIn the second quarter, we achieved several major milestones.\nFirst, we drove the last of the Phase one plant piles.\nThis program started in January 2020 and included the installation of nearly 6,500 piles.\nIf laid end to end, the piles would extend 130 miles.\nSecondly, the project's material offloading facility is now operational, receiving and unloading the first three major pieces of process equipment shipped via oceangoing vessel.\nThese pieces of equipment for Train one include the 345 ton, 50-meter-long main cryogenic heat exchanger and two precooler units, each weighing over 280 tons.\nWe are scheduled to direct these pieces this fall.\nThe site has gone vertical with the steel erection of the non-process building, including the central control and administration buildings.\nDuring the quarter, we completed the LNG storage tank wall pours.\nThe LNG tank group and suspended deck raising is scheduled for next week.\nModule fabrication has commenced for all facets of the project across the Asia and European module fabrication centers.\nPreparation and planning have commenced for the first module delivery major, which are on target for Q4 2021.\nWe have formalized the term sheet with our client, which outlines principles of cost and schedule relief related to delays, including COVID, engineering and procurement impacts through February 26, 2021.\nWe are targeting finalization of a formal variation this month.\nWe continue to enhance our Energy Transition portfolio and believe that Fluor will be a vital contributor to a lower carbon future.\nWe are seeing success in several markets, such as renewable fuels, carbon capture, clean hydrogen, battery chemicals and asset decarbonization.\nFirst, in the renewables fuel market, Fluor is focused on brownfield or revamp capabilities with a geographic focus in North America, where low carbon fuel standard credits are available, demand for liquid fuels continue and feedstock selection is broadly based.\nNext, in the carbon capture market.\nFluor can perform projects with any technology globally.\nThis includes our own proprietary technology for both pre-combustion and post-combustion, Fluor Solvent and Econamine FG+, respectively.\nWe are also seeing further opportunities for carbon capture on new and existing LNG facilities.\nOur clean hydrogen efforts include both green hydrogen and blue hydrogen.\nFluor is relying on its 50 years at the forefront of the gasification industry and has executed more than 30 pre-FEED and FEED projects.\nFluor can differentiate in this market with our ability to act as integrator and OSBL contractor.\nAnother Energy Transition market we are exploring is battery chemicals.\nWe are expanding our lithium capabilities and are pursuing the growing market of electric vehicle battery production.\nIn asset decarbonization, Fluor is leveraging our design experience for refineries and petrochemical facilities, including steam and electrical systems.\nWe have global execution capabilities for conceptual front-end design through EPC for both electrification and energy efficiency projects.\nAside from these markets, we are also pursuing projects in green ammonia, chemical recycling, bio-based chemicals, long duration energy storage, waste-to-energy conversion and bio LNG.\nMost of our energy transition work is in the United States and Europe.\nAnd based on our differentiated technical position, we continue to view growth in this area as a driver for increased revenue and earnings in the coming years.\nNow let's turn to NuScale, a related energy transition offering on slide 10.\nFor the first seven months of this year, NuScale has received $192 million in outside investments from JGC and GS Energy, Doosan, Samsung and IHI, among others.\nThese infusions not only eliminate the need for Fluor to provide additional funding, but also accelerate NuScale's path to commercialization and demonstrates third-party investor interest in NuScale's business prospects.\nAdditionally, we continue to have positive and productive conversations around nuclear power as a necessary baseload clean energy source, both in North America and abroad.\nWe believe that our new scale product will become a vital part of a cleaner energy future.\nBefore handing the call over to Joe, on slide 11, I want to share a few observations as we head into the second half of the year.\nFirst, we expect to see some inconsistency or lumpiness in new awards as the optimism in post-pandemic capital spending from clients is partially offset by concerns about cost growth for labor and materials.\nWe're also keeping a close eye on the impacts of the Delta variant of COVID as it relates to our exposure to global supply chains.\nWhile these dynamics may shift certain projects out in time somewhat and impact the near term, there are longer-term trends in our business that I view as very positive.\nFirst, as mentioned in my infrastructure remarks, we are starting to see a better balance of risks sharing in contract structures.\nProjects are increasingly structured as predevelopment agreements where clients and contractors work together to identify and mitigate risks before bids are finalized.\nThese collaborative models are being considered because clients are seeing contractors declining to bid on large projects as terms and conditions have shifted risk allocation too far away from the owner.\nAlso, we continue to see a robust pipeline of study, pre-FEED and FEED work to support future growth.\nWe are currently working on or have recently completed pre-EPC work that represents over $150 billion in total installed costs.\nAdditionally, we are pursuing another 200 study in FEED projects, representing almost $200 billion in TIC over the next several years.\nSo while we are seeing some near-term headwinds in 2021 with new word lumpiness, we have considerable opportunity to capture projects that are in the pipeline, and they're well suited for Fluor.\nFinally, regarding our cost savings initiative, we are making solid progress and have identified significant opportunities to improve processes and reduce costs and create an organization that is competitive and fit for growth.\nOur various work streams are taking specific actions to ensure that our resources are tailored to what we need today.\nAnd we are establishing new protocols so we can efficiently scale as our markets ebb and flow.\nFor the second quarter of 2021, we are reporting a diluted adjusted earnings per share amount of $0.32.\nOur diluted share count was $156 million for the quarter, up from $140 million in the first quarter.\nThis includes the additional shares from the convertible preferred offering we completed in May.\nIn the third quarter, we expect our diluted share count to be approximately $170 million, as the effects of the issuance will be for a full quarter.\nFor the quarter and the year-to-date, the offering is anti-dilutive under GAAP due to the net loss.\nSo common earnings per share and diluted earnings per share results are the same.\nHowever, in terms of guidance and results, we will discuss EPS, including the aforementioned adjustments as well as using the larger diluted share count going forward for comparison purposes.\nOur financial statements will continue to conform to GAAP, and we will provide the required reconciliation.\nBut we will use the larger dilutive share count for all periods as appropriate.\nI will walk you through that a little more clearly when we talk about guidance.\nTurning to slide 13.\nSpecific to our convertible preferred offering, we saw it as a necessary and positive step toward reinforcing financial discipline for the company.\nThis offering allowed us to make a significant change in our net debt profile and not have to wait for proceeds from outstanding transactions that do not have an established closing date.\nWith the expected debt retirement, our debt to total capitalization ratio will decline to below 40% by year-end, fulfilling the goal that we set on Strategy Day.\nThe positive feedback we've received from the credit rating agencies and the credit provider shows that they are supportive of our efforts to drive Fluor to its historical leverage profile.\nThis ensures we have the capital strength to maintain our position to bid and win the projects to support the growth within our stated strategy.\nSince completing the offer, we have retired $26 million in debt, to date, and anticipate additional substantial retirements by the end of 2021.\nOur overall segment profit for the quarter was $67 million or 2.1%, and included the $20 million charge for embedded derivatives in Energy Solutions and quarterly new scale expenses of $19 million.\nExcluding these expenses and the effect of the embedded derivative, improves our total segment profit margin to 3.3%, in line with our guidance for the year.\nOur ending cash balance was $2.7 billion, and includes the unutilized proceeds from the convertible offering and the completion of a P3 sale in North America.\nCash flow from operations was $77 million for the quarter, and we expect cash flow generation to be positive for the second half of this year.\nOperating cash flow improved from the first quarter due to decreased funding for COVID costs on projects, lower cash requirements for G&A and tax payments as well as a decline in working capital.\nWe also completed the sale of AMECO North America in the second quarter and received cash proceeds of $71 million.\nWe have shifted our focus to the divestiture of AMECO South America and Stork and have confidence we will transact these divestitures prior to Q1 of 2022.\nWe continue to consider small M&A opportunities, as previously discussed.\nBut given current valuations in the market, we remain extremely selective.\nOur G&A expense was $31 million compared to $66 million last quarter.\nThe decrease is due to the impact of stock price on our incentive compensation in the second quarter.\nBefore I provide details about our outlook for the balance of the year, I want to provide a bit of insight into our current portfolio.\nAt the end of the quarter, our backlog contained $1.2 billion in projects that are in a 0 margin or loss position.\nOutside of the Gordie Howe project, we have just over $200 million in backlog remaining for projects in a loss position, virtually all of which will complete by the end of 2022.\nAll new awards since we tightened our bidding criteria, two years ago, remained profitable.\nFurthermore, looking at this slate of more recently awarded projects, project gross margin in all three segments is about 40 basis points higher than as sold gross margin, which shows there more disciplined approach to bidding is resulting in more predictable and profitable results.\nOur previous adjusted earnings per share guidance of $0.50 to $0.80 per share was based on a share count of 140 million shares and thus, implied net income of $71 million to $113 million for 2021.\nBased on the performance we see in the businesses and considering the additional shares related to the convertible preferred offering, we are raising our adjusted earnings per share guidance to a range of $0.60 to $0.80, which correlates to an adjusted net income of $94 million to $128 million for the full year.\nHitting this target is dependent on many of the currently identified projects being awarded in a timely fashion and our ability to convert them into revenue in the next two quarters.\nAs David mentioned, some projects may be delayed by owners until there is more certainty regarding near-term concerns around cost growth for labor and materials.\nWe continue to monitor these headwinds through our supply chain group and we are making sure the team remains aligned with our bidding process.\nDespite the anti-dilutive nature of the offering at this time, we will continue to report adjusted EPS, assuming a fully diluted share count for measurability and will provide reconciliations as necessary.\nWe are also adjusting our segment level guidance for the second half of the year and expect segment margins to be approximately 3% to 4% in Energy Solutions, which excludes any fluctuation from the embedded foreign currency derivative, 3% to 4% in Urban Solutions, and 2.5% to 3% in Mission Solutions.\nThese margins also underpin Q3 and Q4 performance to support the updated diluted and adjusted earnings per share range of $0.60 to $0.80.\nOn our Strategy Day in January, we provided long-term 2024 earnings per share guidance of $3 to $3.50.\nThis range was provided using our 2020 share count of 140 million shares.\nAdjusting for a diluted share count of 170 million shares in 2024, we are updating our long-term earnings per share guidance to a range of $2.50 to $2.90.\nTo reinforce, we are not changing our income assumptions, just adding to the denominator.\nOperator, we are now ready for our first question.\n Assistant:", "chosen": "compname posts sees fy adjusted earnings per share $0.60 to $0.80.\nsees fy adjusted earnings per share $0.60 to $0.80.\nfy adjusted earnings per share guidance excludes nuscale-related expenses and other adjustments.\nfor second half of 2021, we see some headwinds and inconsistency in new awards.\n"}
{"prompt": "Human: We appreciate you participating in our conference call today to discuss Flowserve's 2020 third quarter financial results.\nThese statements are based on forecasts, expectations and other information available to management as of November 6, 2020, and they involve risks and uncertainties, many of which are beyond the Company's control.\nWe are pleased with how Flowserve is responding to the dramatic and unprecedented change in 2020.\nCOVID-19 continues to impact our lives on a global scale, which is impacting Flowserve's end markets and changing the way we run our Company on a day-to-day basis.\nConsidering the current environment, I truly appreciate the dedication and commitment demonstrated by Flowserve's leaders and associates, and especially those in the frontline working at our manufacturing facilities and QRCs who continue to fully support our customers each and every day.\nWhile we have had associates directly impacted by COVID, our strict adherence to the operating policies and procedures we implemented earlier in the year prevented any Flowserve to Flowserve transmission from occurring in our facilities during the quarter.\nWe are pleased with this outcome, and we remain committed to the safety of our associates.\nDespite our best efforts in investment to ensure the health and safety of our employees and customers, COVID continues to cause sporadic disruptions within our facilities.\nIn the third quarter, our Indian and Mexican operations were the most challenged regions, where we have several large manufacturing facilities.\nHowever, today, all of our locations are operational and providing support to our customers.\nThe recent rise in COVID-related cases in Europe and the United States is concerning.\nWe're doing everything possible to keep these facilities open and operational throughout the fourth quarter and beyond, and we believe our system and processes will continue to keep our associates safe and productive.\nBefore Amy covers our financials in detail, I would like to address our results at a high level.\nOverall, we are pleased with our execution during the quarter.\nFlowserve delivered adjusted earnings per share of $0.50, in line with our expectations.\nThese solid earnings also reflect the significant cost actions we have implemented this year.\nIn the quarter, adjusted SG&A decreased $30.8 million year-over-year to $193 million.\nWe continue to track ahead of our $100 million cost-out program for full-year 2020, compared to last year's cost structure.\nAs we communicated previously, these savings are about half from discretionary measures and half from structural actions we have taken.\nIn addition to the SG&A savings, we are working hard to reduce our product cost through supply chain savings and to maintain higher levels of productivity in our manufacturing locations.\nOur Flowserve 2.0 Transformation program continued to deliver solid operational execution, limiting the decline in our adjusted operating margin to 60 basis points on a $71.4 million revenue decrease versus third quarter 2019, resulting in decremental margins of 19.5% in the quarter.\nWe are confident, as additional Flowserve 2.0 process improvement initiatives are implemented within the organization, we will capture more margin enhancement opportunities through further cost actions, manufacturing productivity and product cost reductions.\nLet me now turn to our segment level performance in the third quarter.\nFPD's bookings decreased 22.6%, while sales decreased 1.8% as we executed on its strong backlog.\nThe bookings decline was driven by original equipment down 37%, while aftermarket bookings were more resilient at a decline of 12%.\nOil and gas bookings were down 45% year-over-year, primarily due to a nearly $60 million decline in project awards.\nFPD's adjusted margins were in line with expectations, including the 110 basis point improvement in adjusted operating margin to 14.1%.\nDespite the modest revenue decline, adjusted operating income increased approximately 6.8% to $94.5 million, demonstrating solid operating performance, which more than offset the headwind of a 400 basis point mix shift toward original equipment.\nAggressive cost actions drove a $22 million decrease in adjusted SG&A and a 280 basis point decrease in adjusted SG&A as a percentage of sales to 18.7%.\nFCD's bookings and sales were down 16% and 18.7%, respectively.\nOil and gas, power and general industries were both primary drivers or were the primary drivers, down 30%, 20% and 12%, respectively.\nAdditionally, within general industries, the North American distribution channel continues to be challenged as spending has been impacted by COVID and commodity price declines.\nFCD's adjusted gross and operating margins were 30.3% and 12.2%, respectively.\nWhile these are not the results we typically expect from the business, I am confident that our focus on execution, cost reduction, backlog conversion and inventory reduction will drive fourth quarter margins above their second and third quarter levels.\nTurning now to bookings.\nAs expected, our third quarter bookings of $806 million was generally in line with second quarter levels and represented a 21% decline year-over-year.\nAs you may recall, last year's third quarter included strong oil and gas project activity in the Middle East and Asia Pacific, as well as the number of smaller projects awards, which together totaled roughly $140 million.\nBy contrast, the largest award we received in the 2020 third quarter was $12 million and when combined with our other small- to medium-sized project awards, the sum represented less than $60 million of project awards.\nOn a positive note, we didn't have any material cancellations in backlog in the quarter.\nThird quarter aftermarket activity remained relatively stable with bookings up $424 million, down 32.5%, modestly better -- modestly below our expectations.\nWhile customers continued to spend to meet safety and regulatory requirements, upgrade and productivity investment remained muted and larger-scale turnaround and maintenance activity continued to face COVID-related headwinds with limitations due to site access.\nOriginal equipment bookings in the quarter were $381 million, down 28% versus prior year and up about 4% sequentially.\nLarge projects, which typically accounts for 10% to 15% of our business, remain the most challenged.\nThe majority of these projects have been delayed and are currently being reevaluated.\nOur customers' project spending decisions will largely depend on the status of the COVID environment.\nThe bookings level over the last two quarters accurately represents the current market environment, and we expect bookings in the fourth quarter, and likely the first quarter of 2021, to be similar to this year's second and third quarter.\nGiven what we know today, I am increasingly optimistic that we'd begin return to bookings growth next year, as the world moves beyond the COVID crisis.\nWe should see it first in our aftermarket bookings ahead of an inflection in project bookings, but we expect both to be better in the back half of 2021.\nOn the aftermarket side, we feel there is pent-up demand building for parts and services and expect that growth in this area to incur earlier than the project business.\nWe are beginning to see signs of increased aftermarket spending in 2021 as operators are planning for maintenance and turnaround events.\nLet me now address our served end markets.\nOur oil and gas markets continue to be the most impacted due to the COVID-related declines in energy demand.\nThird quarter bookings declined 42% year-over-year and were roughly flat sequentially.\nLast year's third quarter presented a challenging compare figure due to the strong project environment at that time, which included several larger awards related to IMO 2020 upgrade activity.\n2019 third quarter included over $90 million of project awards.\nThis quarter, our largest project award in oil and gas was just $12 million.\nThird quarter chemical bookings were down 21.6% in the quarter, primarily driven by FPD's 31% decline, while FCD's bookings were down only 5%.\nThe quarter included one small award of $4 million in Asia Pacific.\nOur integrated customers continued to delay petrochemical investment while specialty chemical demand presents growing opportunities.\nWhile the power market continues to be challenged, it has not declined as much as oil and gas or the chemical markets.\nThird quarter and year-to-date bookings are down just 7.5% and 9.2%, respectively.\nThe quarter includes a few small nuclear awards totaling $9 million and a $4 million fossil fuel award in Asia.\nThe general industries market, which includes a significant level of distribution and was our most challenging market in 2019, continued to show signs of recovery in the third quarter with bookings up 18.6% and up 5.9% year-to-date.\nFPD's 31% increase was partially offset by FCD's 11.5% decline, driven by the continued MRO slowdown in North America.\nFPD's growth was driven by distribution in food and beverage growth.\nFinally, representing our smallest market, water bookings decreased $41 million or 66%.\nLast year's third quarter was particularly strong, including over $20 million in awards for a large Middle East desalination project.\nWhile the 2020 third quarter included only one project award of $6 million in North America, we continue to expect investment opportunities from desalination, flood control and municipal water markets.\nRegionally, our largest dollar decline was in North America, which has seen a significant impact from COVID as well as the related downturn in energy demand.\nOnly Latin America has delivered constant-currency bookings growth in 2020, up 6% and 9% in the third quarter and year-to-date, respectively.\nWe incurred double-digit year-over-year bookings declines in all other regions.\nWe're seeing the most potential in the Asian markets, as mobility has returned to near-normal levels, demand for processing-based product has recovered and infrastructure spending continues.\nWith limited and highly competitive project opportunities, we continue to focus on improving our position for winning available work, driving our cost structure lower to offset pricing pressure and maintaining a quality backlog to increase our installed base and create aftermarket opportunities.\nWe believe our markets have stabilized and expect fourth quarter bookings to be in line with what we saw in the second and third quarters of this year.\nLooking at Flowserve's third quarter financial results in greater detail, our reported earnings per share of $0.39 included realignment and transformation expenses, as well as below the line FX charges totaling $0.11.\nAdjusted earnings per share of $0.50 was solid, considering we continued to experience ongoing COVID-related headwinds.\nThird quarter revenues of $924 million were flat sequentially and down 7.2% versus the prior year.\nFPD's revenue declined 1.8% on reduced aftermarket activity, which more than offset strong original equipment sales growth of 10% through backlog execution.\nConsolidated OE revenues of $479 million were down 5.6%, where FCD's 21% year-over-year decrease more than offset FPD strength.\nAftermarket revenue of $445 million was down 8.8%, with both segments down in that general range.\nIn addition to limitations accessing our customer sites, many of the planned refinery and chemical plant turnarounds that were expected for this fall were further delayed and the active Gulf Coast hurricane season also caused temporary closures and disruptions at several of our QRCs, as well as our customers' facilities.\nThird quarter adjusted gross margin decreased 230 basis points to 31.5%, including declines of 180 basis points and 240 basis points at FPD and FCD, respectively.\nIn addition to the previously mentioned cost increases related to COVID and the associated disruption with our sites, margins were also negatively impacted by a 100 basis point mix shift toward original equipment revenues as a percentage of our total sales, driven by FPD's 400 basis point mix shift.\nOn a reported basis, Flowserve's third quarter gross margins decreased 250 basis points to 30.9%, again due to COVID disruptions and mix headwinds, and a $2 million increase in realignment expenses versus last year's third quarter.\nThird quarter adjusted SG&A decreased $30.8 million or 13.8%, demonstrating our cost control and the aggressive cost actions we took in the first half of the year.\nThese measures brought our $193 million of adjusted SG&A down 160 basis points as a percentage of sales to 20.9% versus prior year, which was flat sequentially.\nOn a reported basis, SG&A as a percentage of sales decreased 140 basis points, primarily due to the cost actions we implemented considering our adjusted items were relatively flat with prior year.\nThird quarter adjusted operating margin decreased 60 basis points versus last year's 10.9%.\nWith third quarter adjusted operating income of $100.6 million and a $71.4 million year-over-year revenue decline, it represents an adjusted decremental margin of approximately 19.5%.\nFPD's solid operating performance delivered adjusted operating income growth at the segment level, even as its revenues declined modestly.\nAs a result, FPD drove 110 basis points increase in its adjusted operating margin to 14.1%.\nFCD's adjusted operating margin of 12.2% was below our expectations, driven by a higher mix of lower margin project work.\nWith clear visibility and line of sight, we fully expect FCD's margins to return to around the mid-teen levels in the fourth quarter.\nReported third quarter operating margin decreased 110 basis points to 9.4%, driven primarily by a loss of leverage on lower revenues and included the benefit of modestly lower adjusted items.\nTurning to cash flow and liquidity.\nAs many of you know, Flowserve's results are traditionally seasonal and most of our full-year cash flow is delivered in the second half of the year, especially in the fourth quarter.\nWhile our cash flow statement will be published in a few days with our 10-Q, I can say we feel good -- we feel very good about our cash generation during the quarter.\nBased on our operating cash flow of $70 million to $75 million and quarterly capex spending, free cash flow for the quarter will be about $57 million.\nThis performance as well as the $300 million of net proceeds after our note issuance and tender offer, brought Flowserve's cash and cash equivalents balance at September 30 to over $921 million.\nEven absent the net proceeds of the bond issuance, Flowserve increased its cash position $59 million in the quarter.\nIn future periods, we intend to use some of this excess cash to retire outstanding debt, considering we have maturities in 2022 and 2023.\nHowever, primary working capital as a percent of sales grew to 30%, as inventory, including contract assets and liabilities, increased roughly $100 million versus the prior year.\nThis increase in inventory primarily relates to the strong OE project backlog we built as well as an increase in shipping and manufacturing delays due to COVID-related disruptions in a few of our larger facilities.\nAs a result, COVID had a greater negative impact on working capital than our revenues might reflect.\nOver the last few years, Flowserve has delivered meaningful improvement in the working capital to sales metrics through our transformation initiatives.\nAnd despite this quarter's blip, we are confident we are on the right track and that our performance in the fourth quarter will be much improved.\nIn particular, we are actively managing and taking discrete measures to reduce the inventory levels to reflect current demand, and we also have solid visibility to upcoming shipments.\nIt is critical for us to stringently manage inventory more intensely during challenging points in the cycle [Indecipherable] high growth.\nAnd our teams are incentivized accordingly.\nAccounts receivable has demonstrated somewhat better consistencies in inventory.\nDSO was 73 days in the quarter versus 74 in each of the first two quarters of 2020, although we still see opportunities for improvement.\nDespite some COVID-driven slow pay impacted this year, we have made significant improvement in the last three years when DSO was 87 days in the third quarter of 2017, and we expect our transformation initiatives will enable us to reach our target of below 70 days, which given the competitive environment for payment terms in certain of our end markets would represent strong performance.\nIn addition to the $500 million note issuance and tender offer during the third quarter, we also amended our $800 million senior credit facility to provide Flowserve increased flexibility and ample access to this source of liquidity.\nWe value these relationships and look forward to our ongoing work together.\nIn total, our quarter-end liquidity position increased roughly $370 million sequentially to $1.7 billion, which includes our cash balance as well as nearly $750 million of available capacity under our amended credit facility which remains undrawn.\nWith the continued progress on our $100 million cost reduction program, combined with the anticipated working capital improvements, disciplined capital spending, and discretionary cost management, we expect to deliver significant cash from operations in the seasonally strong fourth quarter.\nOur expected major cash usages in 2020 remain consistent with our prior guidance, including funding our structural cost-out actions and the realignment and transformation programs.\nWe continue to expect full-year capital expenditures in the $60 million range and annual dividends of roughly $100 million.\nFirst, the revision is not the result of a view of increased risk related to asbestos litigation or any change to our expectations for future cash flow.\nAs part of our third quarter post-procedures, we became aware that our accounting for potential future exposure to asbestos liabilities related to certain heritage brands deviated from others with similar liabilities.\nSpecifically, as previously disclosed, we were reporting liabilities only for those claims that were known versus using an actuary to forecast claims that were possibly incurred but not reported to the company.\nAs a result, we increased our liability by $74 million to $101 million in total.\nThis liability is partially offset by $87 million of insurance coverage booked as a receivable.\nCash from insurance proceeds is received as agreements are reached with carriers.\nOur revised financial statements in the filings reflect this incurred but not reported liability on the balance sheet, as well as the correction of other immaterial timing items.\nAs I said earlier, we are pleased with our performance in this unprecedented year.\nWe are managing through the COVID pandemic, and our operational efforts with Flowserve 2.0 are positively impacting our downturn performance.\nThe Flowserve 2.0 work is not done and we continue to remain committed to our transformational program.\nWe have reprioritized certain work streams due to the pandemic-driven downturn, and we continued to make steady progress on further cost reduction plans and preparing for a return to growth.\nIn fact, the speed with which we reduced our cost structure by $100 million versus 2019 was possible because of our success over the last few years, creating a more flexible Flowserve 2.0 operating model.\nMost of the structural cost initiatives we implemented mid-year were comprised of measures previously planned as part of the Flowserve 2.0 program that we accelerated.\nIn addition to managing COVID and executing our downturn playbook, we are making progress on our long-term strategy and our growth initiatives.\nOver the last 18 months, we've put a lot of effort in analyzing our end markets and evaluating our overall product portfolio.\nOur product teams have made significant progress in our efforts to have a differentiated offering in attractive markets that have growth potential for years to come.\nThis year, we have launched five new products, introduced 10 product upgrades and put six existing products through the design-to-value process.\nIn the third quarter alone, we launched all of the new products and expect several more before the end of the year.\nIncluded in the new product introductions is the SIHI-branded, two-stage, liquid ring compressor designed for a variety of gases and vapors.\nOur proven technology enables this product to operate under the most severe conditions, where safety, reliability and special processes are critical.\nThis compressor will be part of the FPD segment.\nWe also added new capabilities within the FCD segment.\nDuring the third quarter, we launched a Valtek Compressor Anti-Surge Valve, which is a revolutionary solution to anti-surge control in LNG processing, refinery gas compression, natural gas stations and chemical plants using natural gas as a feedstock.\nThis product will provide operators with an innovative anti-surge design that combines precise control and fast responsiveness.\nAdditionally, we expanded our Limitorque actuator line with the new MX Series B smart electric actuator.\nThis IoT-enabled flow control solution provides trouble-free commissioning, improved process control from advanced diagnostic capabilities and reliable operation in multiple industries and applications.\nFlowserve has historically been an innovative leader in the flow control industry.\nWith increased confidence in our new product development process, we will continue to increase our investment in products and technology.\nWhile we very much believe that oil and gas is a long-term future in the energy mix, we do recognize the advances in alternative energy technologies.\nToday, oil and gas represents about 60% of the global energy mix.\nWith significant investment in renewables through 2040, most still expect oil and gas to provide more than 50% of the global energy mix.\nNevertheless, we are excited about the increasing investment toward energy transition, reduced emissions and safer living conditions.\nAnd virtually every major industrial process involving liquids or gases, pumps, valves, seals and services are vital to that infrastructure.\nOur products and services are currently using applications throughout the world to address key environmental issues, such as flare gas recovery, which reduces methane emissions and increases process energy efficiency; hydrogen production in the downstream sector; carbon capture and storage to reduce industrial carbon intensity; process maintenance and services to maximize service life, improve efficiency and employ local workers; concentrated solar and hydro power; seawater desalination plants for cost effective access to fresh water; and flood control to protect coast lines and cities from rising seas.\nAnd as technology advances and considering Flowserve's innovative leadership in the flow control industry, we fully expect to participate in helping make the world a better place for everyone.\nI would now like to spend a minute on our environmental, social and government efforts or ESG.\nFlowserve continues to improve as a corporation, and we take our ESG program very seriously.\nOur commitment to ESG began almost a decade ago when we released our first sustainability report.\nThe vision for our program starts at the top of our organization with our Board of Directors and senior management.\nWe have worked together to evolve and develop a comprehensive ESG program focused on three pillars, planet, people and operational excellence.\nWhile we believe our proactive approach to governance has been and continues to be aligned with our shareholders' best interest, as evidenced by our implementation of best practices like de-classifying our Board of Directors, improving gender and racial diversity, enacting proxy access and most recently, implementing the ability for our shareholders to act by less than unanimous written consent.\nToday, I'd like to focus more specifically on our environmental initiatives within our ESG program.\nEarlier this week, we published our 2020 sustainability report in which we discussed our commitment to becoming continuously improving organization.\nWe also specifically announced a new target for reducing global CO2 emissions intensity by 40% by 2030 using 2015 as a baseline.\nIn addition to setting an ambitious target to reduce our own emissions, we intend to utilize both our existing portfolio as well as developing new products that will help our customers reduce their CO2 emissions and also further participating cleaner sources of energy like hydrogen, solar and hydro electric.\nLet me close with our fourth quarter outlook.\nWe expect fourth quarter bookings to be in line with the second and third quarter levels, while anticipating an upward bookings inflection to occur in mid-to-late 2021.\nWe expect to make significant progress converting our $2 billion backlog in the fourth quarter and deliver our largest revenue quarter of this year.\nAs we have the last two quarters, we plan to deliver strong operating margin decrementals as we effectively manage our cost structure.\nFourth quarter decrementals should be around the 20% level.\nFinally, we are forecasting to finish the last quarter of the year with free cash flow generation of at least $100 million, as we reduce primary working capital from the third quarter levels.\nFlowserve's results are traditionally very seasonal during the year with the best performance for revenues, adjusted earnings and cash flow occurring in the fourth quarter of the year.\nWe expect the 2020 fourth quarter to largely reflect that trend, absent of any COVID-related issues.\nI remain confident that our transformation progress will continue to position Flowserve to execute through cycles at a higher level than previous downturns and capture growth with market recovery, driving long-term value for our associates, customers and our shareholders.\n Assistant:", "chosen": "compname reports third quarter earnings per share $0.39.\nq3 adjusted earnings per share $0.50.\nq3 earnings per share $0.39.\ncan expect a return to growth in 2021.\nexpect a return to growth in 2021 as world recovers from covid pandemic.\nexpect 2020 q4 to largely follow usual trend.\n"}
{"prompt": "Human: Mark will review our third quarter performance and provide an outlook for the rest of the year as well as an initial view of 2022.\nAndrew will provide an overview of select financial results.\nInformation presented represents our best judgment based on today's understanding.\nActual results may vary based upon these risks and uncertainties.\nToday's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, adjusted cash from operations, free cash flow and organic revenue growth, all of which are non-GAAP financial measures.\nPlease note that as used in today's discussion, earnings means adjusted earnings and EBITDA means adjusted EBITDA.\nA reconciliation and definition of these terms as well as other non-GAAP financial terms to which we may refer during today's conference call are provided on our website.\nFMC delivered record third quarter results.\nWe grew our revenue by 10%, EBITDA by 12%, earnings per share by 17% and importantly, expanded our EBITDA margins despite continuing cost pressures.\nPerformance in the quarter was driven by broad based volume growth and price increases.\nNew products introduced in the last 12 months continue to gain momentum, and we are now forecasting sales from these products to account for more than 1/3 of our revenue growth this year.\nIn addition, FMC's Plant Health business had an excellent quarter with 40% year over year growth led by biologicals.\nLooking ahead, we continue to expect a strong finish to the year, driven by high margin volume gains and accelerated pricing actions as well as a robust global market backdrop.\nThe supply chain and logistics challenges highlighted in our last earnings call continued to disrupt ag chem and other industries around the world.\nFMC was able to meet the strong grower demand for our products in a timely manner.\nLet me also briefly comment on COVID-19's impact on FMC.\nAll our manufacturing facilities and distribution warehouses remain operational and properly staffed.\nOur research laboratories and greenhouses continue to be fully active, and we have resumed in office operation in many parts of the world.\nFMC continues to follow all guidance given by local authorities.\nTurning to our Q3 results on slide three.\nWe reported $1.2 billion in third quarter revenue, which reflects a 10% increase on a reported basis and a 9% increase organically.\nGrowth was broad-based with 11 of our top 20 countries posting double digit growth in the quarter.\nWe had strong growth in all product categories, led by greater than 20% growth in herbicides.\nThis was partially offset by registration losses in EMEA and Latin America.\nAdjusted EBITDA was $293 million, an increase of 12% compared to the prior year period and $18 million above the midpoint of our guidance range.\nEBITDA margins were 24.6%, an increase of 40 basis points compared to the prior year, driven by mix improvement as well as operational discipline and price increases in all regions.\nAdjusted earnings were $1.43 per diluted share in the quarter, an increase of 17% versus Q3 2020.\nThe year over year increase was primarily driven by an increase in EBITDA with the benefit of share repurchases and lower interest expenses, largely offset by other factors.\nRelative to our Q3 guidance, the $0.12 beat was driven almost entirely by EBITDA.\nMoving now to slide four.\nSales in Asia increased 20% year over year and 19% organically, driven by strong diamide sales across the region as well as pricing actions.\nIn Australia, we had a successful launch of Vantacor insect control, which is the new higher concentration formulation of Rynaxypyr active.\nVantacor is applied to specialty crops such as chickpeas.\nThe Australian market also benefited from positive grower sentiment, favorable weather conditions and strong insect pressure.\nIndia had another growth quarter despite an erratic monsoon, which resulted in drive spells in parts of the country.\nIndia's growth was driven by diamide sales in rice as well as continued expansion of the rest of our portfolio, leveraging our strong market presence.\nIn Latin America, sales increased 11% year over year and 9% organically, driven by double digit growth of insecticides in Brazil and Argentina as well as pricing actions across the region.\nCorn, soy and cotton were the key crops driving growth in the quarter.\nThis is a direct result of our strategy to improve market access and increase penetration of our technologies, particularly in the Brazilian soybean market.\nChile is another good example of this as sales nearly doubled compared to this time last year as we leveraged our enhanced market presence.\nPlant Health products grew approximately 50% in the region led by biologicals and seed treatment.\nLatin America was impacted partially by registration cancellations and rationalizations of products in the quarter.\nEMEA grew revenue 12% and 10% organically, driven by strong demand for our herbicides and diamides across the whole region despite headwinds from registration cancellations.\nAmong others, Russia, France, Germany and the U.K. grew double digits in the quarter.\nDemand was especially strong for herbicide applications in cereals and oilsee rape.\nSouth Africa double digit sales in the period compared to the previous year, driven by the continued penetration of diamides, mainly on citrus and top roots.\nThis is a great demonstration of the untapped potential in new markets for our diamides.\nOur U.S. and Canada branded business grew greater than 20%, driven by strong demand for our diamides and four herbicide applications as well as pricing actions.\nVantacor had a successful introduction in the U.S., where it is used to target pest in a range of crops, including soybean, corn and cotton.\nOverall, North America sales decreased 6% year over year and 6% organically due to the continued shift of diamide global partner sales in the quarter from North America to other regions as we have described in previous calls.\nMoving to slide five.\nDespite continuing supply issues across the industry, FMC's third quarter revenue increased by 10% versus prior year, driven by a 9% contribution from volume.\nGross prices increased 1% in the quarter as our most recent pricing actions went into effect.\nEBITDA in the third quarter was up 12% year over year, primarily due to broad based volume gains.\nWe also had a $12 million contribution in the quarter from price increases as invoiced to customers.\nThe benefit of our pricing action was masked in the quarter by some favorable rebate and other adjustments in the prior year period that did not repeat this quarter.\nCosts continue to be a headwind.\nHowever, the total amount incurred in the third quarter was less pronounced than previously projected, mainly due to timing.\nWe still expect second half cost to be consistent with previous guidance and FX was a $10 million tailwind in the quarter.\nTurning to slide six.\nBefore I review FMC's full year 2021 and Q4 earnings outlook, let me share our view of the overall market conditions.\nWe continue to expect the global crop protection market will be up mid single digits this year on a U.S. dollar basis.\nBreaking this down by region, we continue to anticipate high single digit growth in the Latin American market, mid single digit growth in the EMEA market, low to mid single digit growth in the Asian market and low single digit growth in the North American market.\nWe are raising FMC's full year 2021 earnings guidance to the range of $6.59 to $6.99 per diluted share, a year over year increase of 10% at the midpoint, reflecting the impact of share repurchases completed year to date.\nOur 2021 revenue forecast remains in the range of $4.9 billion to $5.1 billion, an increase of 8% at the midpoint versus 2020.\nEBITDA remains in the range of $1.29 billion to $1.35 billion, representing 6% year over year growth at the midpoint.\nGuidance for Q4 implies year over year revenue growth of 19% at the midpoint on a reported basis with no FX impact anticipated.\nWe forecast EBITDA growth of 29% at the midpoint versus Q4 2020 and earnings per share is forecasted to be up 41% year over year.\nApproximately 3/4 of the EBITDA growth is driven by the return of business missed in Q4 2020 due to supply chain disruptions in North America and weather impact in Latin America.\nTurning to Slide seven and full year EBITDA and revenue drivers.\nRevenue is expected to benefit from 6% volume growth, a 1% price contribution from higher prices and a 1% benefit from FX.\nWe anticipate continued strong volume growth led by Latin America, North America and Asia.\nWe have increased our forecast again for revenue from products launched in 2021.\nThese sales are now expected to contribute $140 million in year over year growth, up from our last forecast of $130 million and our initial view of $100 million.\nPricing actions in Q3 will continue to accelerate in Q4.\nWe will continue to raise prices across all regions going into next year.\nDespite the shift of costs from Q3 to Q4, estimates of full year cost headwinds have not changed since our detailed comments on the last call.\nThis is why our full year outlook remains unchanged.\nMoving to slide eight and our fourth quarter drivers.\nRevenue is expected to benefit from strong volume gains.\nIn Brazil, the strength of soft commodity prices, projected increases in planted areas as well as good weather conditions are all leading to a good cadence of incoming orders and give us confidence in our expectations for a strong fourth quarter.\nIn the U.S., channel inventories are normal for this time of year.\nour new product launches are gaining significant traction and market sentiment supports our expectations for a robust fourth quarter.\nAs I noted earlier, we've also moved on price increases with higher prices already in effect in the Brazilian and U.S. markets.\nSimilar actions are underway in other countries across the globe, such as Australia, Russia, France, Mexico and Argentina, and you should expect us to continue raising prices through the year end and well into next year.\nCost increases are consistent with our guidance for the second half.\nWe continue to pursue cost improvement opportunities and remain vigilant with our cost controls, all without impacting our R&D pipeline or growth trajectory.\nFX was a modest tailwind to revenue growth in the quarter as expected.\nWith the U.S. dollar weaker against many key currencies, most significantly in Latin America with the strengthening of the Brazilian real and the Mexican peso.\nInterest expense for the quarter was $33.1 million, down $2.4 million from the prior year period, driven by the benefit of lower debt balances and lower LIBOR rates.\nWe continue to expect interest expense to be between $130 million and $135 million for the full year.\nOur effective tax rate on adjusted earnings for the third quarter was 13.5% as anticipated and in line with our expectation for a full year tax rate between 13% and 14%.\nMoving next to the balance sheet and liquidity.\nGross debt at quarter end was $3.4 billion, down roughly $400 million from the prior quarter.\nGross debt to trailing 12-month EBITDA was 2.7 times at the end of the third quarter while net debt to EBITDA was 2.5 times.\nBoth metrics improved sequentially.\nThough still slightly above our targeted full year average leverage levels, we expect to be at target leverage levels at year end.\nMoving on to slide nine in cash flow and cash deployment.\nFree cash flow for the third quarter was $300 million.\nAdjusted cash from operations was lower than the prior year period, largely due to our decision to build inventory to help manage continued supply chain volatility and to be prepared to fulfill strong demand in the fourth quarter and in early 2022.\nCapital additions were somewhat higher as we continue to ramp up spending following the deferral of projects last year due to COVID.\nNearly 50% of this year's capital addition support capacity expansion.\nLegacy and transformation spending was down substantially with the benefit of the completion of our SAP program and lower legacy spending.\nWe are maintaining our expectation for free cash flow in a range of $480 million to $570 million, with continued expectations for seasonally strong cash flow in the fourth quarter.\nWe returned $262 million to shareholders in the quarter via $62 million in dividends and $200 million of share repurchases, buying back 2.1 million shares in the quarter at an average price of $95.26 per share.\nWe have now repurchased just over three million shares this year, reducing our share count by nearly 2.5% since the beginning of the year.\nYear to date, we've returned $486 million to shareholders through dividends and repurchases.\nFor the full year, we continue to anticipate paying dividends of roughly $250 million and to repurchase $350 million to $450 million of FMC shares.\nTurning to slide 10.\nI want to provide an early look at the key dynamics underpinning our planning process for next year.\nWe view 2022 as another year with a good macro environment.\nObviously, notwithstanding the impact weather can have on any single quarter.\nWe expect that soft commodity pricing momentum will carry into next year with global demand for crops remaining healthy.\nAs a result, we are assuming the overall crop protection market will grow in the low to mid single digit range next year on a U.S. dollar basis.\nFMC's growth will be driven by broad based volume gains across our portfolio.\nPricing actions reflective of cost increases, continued expansion of diamide volumes in existing and new markets and further penetration of new products and expansion of our market access in underserved geographies.\nWe expect cost pressures this year will persist well into 2022 as the industry grapples with global supply demand imbalances, structural changes in China's industrial policy and energy supply, tight ocean freight capacity and labor cost inflation.\nTaking all this into consideration, our current early thinking would suggest year over year revenue growth of 5% to 7%, EBITDA growth of 7% to 9% and earnings per share growth at over 10%, in line with our long range plan.\nWe will share more detailed guidance for 2022 in our February call.\nWe executed very well in the quarter, not only from an external perspective in driving demand and pricing across all regions, but also importantly, internally by fulfilling that demand with product in a timely manner under challenging supply chain conditions.\nThe only change in the second half is a timing shift of costs, and hence, we're not changing our full year guidance.\nThe overall crop protection market fundamentals are positive, and we remain confident in our ability to deliver our fourth quarter forecast.\n Assistant:", "chosen": "fmc corp confirms 2021 guidance.\nsees q4 revenue up 19 percent.\nsees fy revenue up 8 percent.\nsees fy revenue $4.9 billion to $5.1 billion.\nq3 adjusted earnings per share $1.43.\nq3 revenue rose 10 percent to $1.19 billion.\nsees fy 2021 adjusted earnings per share $6.59 to $6.99.\n"}
{"prompt": "Human: With me on the call today are Seamus Grady, chief executive officer; and TS Ng, chief financial officer.\nWe delivered a strong performance in the first quarter with revenue and earnings that were above our guidance.\nDemand trends appear to be stabilizing in most of the end markets we serve, and we're optimistic that we are positioned to deliver strong results in the second quarter.\nRevenue in the first quarter was $399 million, a slight decrease from the record fourth quarter as expected with a 6% increase from a year ago.\nNon-GAAP net income was $0.86 per share, exceeding the high end of guidance as gross margins improved to 12% in the quarter.\nLooking at our business by end markets.\nOptical communications revenue of $302 million was up about $2 million from the fourth quarter and represented 76% of total revenue.\nWithin optical communications, telecom revenue of $230 million increased 7% from the fourth quarter and represented 76% of optical revenue.\nThis growth is particularly notable considering we had expected telecom revenue to be flat at best.\nFurther, we expect this momentum to continue in Q2.\nDatacom revenue was $73 million in the quarter, an expected decrease from Q4, of 15%.\nDatacom represented 24% of optical communications revenue.\nWe believe this decline is primarily the result of broader industry trends and not due to execution or competitive issues.\nIn fact, based on anticipated near-term demand, we believe datacom trends could be nearing the bottom and we expect datacom revenue to be roughly flat in Q2.\nBy technology, silicon photonics based optical communications revenue decreased from the fourth quarter to $77 million and represented 25% of optical communications revenue.\nRevenue from QSFP28 and QSFP56 transceivers was $45 million, down slightly from fourth quarter.\nBy data rate, 100-gig programs continued to represent nearly half of optical communications' revenue at $147 million.\nAnd products rated at speeds of 400 gig and above were up strongly from the fourth quarter of $38 million or 13% of optical communications revenue.\nLooking at our nonoptical communications business.\nRevenue moderated sequentially as expected to $97 million from $105 million in Q4.\nAs anticipated, revenue from industrial lasers declined from the fourth quarter and was $41 million compared to $53 million in Q4.\nThese same demand trends seem to be persisting, so we anticipated industrial laser revenue to be roughly flat in Q2.\nLonger term, we remain optimistic about our potential to further penetrate the industrial laser market as more manufacturers inevitably turn to outsourcing to better compete in this global market that is, in fact, larger than the optical communications market.\nAutomotive and sensor revenue were both stable at $24 million and $3.5 million, respectively.\nFinally, revenue generated from other nonoptical applications grew 15% sequentially to $28 million, mainly from Fabrinet West.\nFabrinet West has been a great success for winning business for our offshore volume manufacturing sites.\nWe have seen numerous programs migrate from early prototyping in Fabrinet West to volume production in Thailand.\nAt the same time, Fabrinet West has been an enabler for us to win business in new markets and with new customers that might have otherwise gone to competitors.\nAs such, we have been focused on establishing a similar model to Fabrinet West in Israel.\nWe already have a number of customers there, and we believe we have the opportunity to grow our business with these customers as well as attract new ones.\nWe have signed a lease for a building in [Inaudible] which is a former semiconductor manufacturing facility.\nIt is already equipped with most of the infrastructure we need for a new product introduction center.\nWe are currently in the process of setting up SMT lines advance packaging and a failure analysis lab similar to what we have to support NPI in our Bangkok facilities.\nWe have hired a general manager for Fabrinet Israel and we are targeting to be up and running early next year.\nIn summary, we believe we are off to a good start to the fiscal year with revenue and earnings that meet our guidance ranges and return to gross margins that were within our target range.\nWe're optimistic that our telecom strength will continue and the datacom trends appear to be bottoming.\nIn addition, we're excited to have achieved important milestones toward establishing a second new product introduction facility at Fabrinet Israel.\nCombined with our continued leadership as a contract manufacturer for the most complex products, we are very excited about our future.\nI will provide you with more details on our performance by end market and our financial results for Q1 as well as our guidance for Q2 for fiscal year 2020.\nTotal revenue in the first quarter of fiscal year 2020 was $399.3 million and above the upper end of our guidance range.\nNon-GAAP net income was $0.86 per share and was also above our guidance range even after a foreign exchange headwind of $1.9 million and the mark-to-market loss on interest rate swap contracts of $1.7 million.\nThese losses accounted for approximately $0.09 per share.\nNow turning to the details of our P&L.\nWe were pleased to see non-GAAP gross margin in the first quarter improve to 12%, a 20-basis-point increase from the fourth quarter as efficiency more than offset the impact of merit increases.\nNon-GAAP operating expense was $11.6 million in the first quarter.\nAs a result, non-GAAP operating income was $36.2 million and non-GAAP operating margin was 9.1%, flat with the fourth quarter.\nTaxes in the quarter were $2.2 million, and our normalized effective tax rate was less than 5%.\nWe expect our effective tax rate to be 5% to 6% for the full year.\nNon-GAAP net income was above our guidance range at $32.2 million in the first quarter or $0.86 per diluted share as I indicated earlier.\nOn a GAAP basis, which includes share-based compensation expenses and amortizations of debt issuing costs, net income for the first quarter was $25.9 million or $0.69 per diluted share, also above the high end of our guidance.\nTurning to the balance sheet and cash flow statement.\nAt the end of the first quarter, cash, restricted cash and investments were $436.4 million compared to $444.7 million at the end of the fourth quarter.\nOperating cash flow in the quarter was $2.6 million and with capex of $6.3 million, free cash flow was an outflow of $3.7 million in the first quarter.\nDuring the quarter, our working capital increased to higher than normal level in support of major new program transfer.\nThis will begin to self-correct in the second quarter as we start to consume the transfer inventory and collect receivables.\nWe did not repurchase any shares during the first quarter.\nAs such, $62.2 million remain in our share repurchase program and we will continue to evaluate market condition to opportunistically repurchase shares when possible.\nI would now like to turn to our guidance for the second quarter of fiscal year 2020.\nAs Seamus described, we expect a strong second quarter and anticipate that revenue will be between $408 million and $416 million.\nFrom a margin perspective, we are optimistic that we will see efficiency continue to drive incremental improvements in non-GAAP gross margin within our target range of 12% to 12.5%.\nFrom an earnings per share perspective, we anticipate non-GAAP net income per share in the second quarter to be in the range of $0.91 to $0.94 and GAAP net income per share of $0.74 to $0.77 based on approximately $37.7 million fully diluted shares outstanding.\nIn conclusion, we are excited with our strong performance in the quarter.\nWe remain very positive about our long-term prospects for continued leadership in the marketplace.\n Assistant:", "chosen": "fabrinet q1 earnings per share $0.69.\nq1 non-gaap earnings per share $0.86.\nq1 gaap earnings per share $0.69.\nsees q2 revenue $408 million to $416 million.\nq1 revenue $399.3 million versus refinitiv ibes estimate of $390.3 million.\nsees q2 2020 non-gaap earnings per share $0.91 to $0.94.\nsees q2 2020 gaap earnings per share $0.74 to $0.77.\n"}
{"prompt": "Human: With me on the call today are Seamus Grady, Chief Executive Officer; and Csaba Sverha, Chief Financial Officer.\nWe had an excellent fourth quarter to finish a strong fiscal year with robust demand trends continuing across our business combined with excellent execution by our team, we delivered a number of records in the quarter.\nRevenue was well above our guidance range and for the first time exceeded $0.5 billion at $509.6 million.\nIn addition to record revenue, we also delivered record non-GAAP operating margins of 9.9%, resulting in an all-time high non-GAAP earnings per share of $1.31 in the fourth quarter.\nFor the full fiscal year, we produced record revenue of $1.88 billion, representing industry-leading growth of 14% from the prior year.\nNon-GAAP net income was $4.67 per share.\nTotal operating cash flow for the year was $118.7 million and free cash flow was $76.1 million.\nLooking at some of the highlights of the fourth quarter.\nOptical communications revenue reached another new record, driven by strong telecom demand.\nNon-optical communications revenue also reached another record in Q4.\nLooking ahead, we remain encouraged by healthy demand trends across all lines of business as we continue to successfully navigate and manage component supplies.\nWe estimate that the supply constraints we are experiencing impacted our fourth quarter revenue by approximately $25 million to $30 million, and we expect to see a similar impact in Q1.\nDespite this headwind, we anticipate that revenue will continue to grow sequentially to a new record in Q1 as Csaba will outline in a moment.\nWe are also optimistic from a profitability standpoint.\nThat said, in Q1, we anticipate a small non-recurring headwinds to net income.\nAs you may have heard, Thailand, along with other countries in Southeast Asia has recently seen a rapidly growing number of COVID-19 cases.\nIn response, lockdowns and other measures have been imposed, which primarily impact social gatherings.\nOur manufacturing facilities are fully operational, but we have implemented additional safeguards beyond what we have been doing for the past 1.5 years in order to protect our staff.\nThis includes increased testing and sending people home with pay, if they test positive for COVID-19.\nIn addition, we have been granted permission by the Thai government to vaccinate our employees and have been carrying out this initiative for the past several weeks at our expense.\nWe are very pleased that at this time the vast majority of our employees have already received their second doses, such that by the end of this month, approximately 90% of our employees in Thailand will be considered fully vaccinated.\nWe are proud to be able to carry out this effort that has both a very positive social impact, while also being good for our business, and we believe it will further enhance our very favorable reputation as an excellent employer in Thailand.\nAs we communicated earlier this year, we have broken ground on a new 1 million square foot building at our Chonburi campus.\nConstruction is progressing and we expect the building to be complete in about one year.\nWe also previously discussed our intention to add approximately 100,000 square feet of manufacturing space at our Pinehurst campus.\nJust after the end of the fourth quarter, we completed the acquisition of 15 acres of land that had become available adjacent to our Pinehurst facility.\nThis size will enable us to relocate some non-manufacturing activities from the current campus, which will allow us to increase our manufacturing footprint within our existing buildings.\nAs a result, we are confident that we will continue to have ample capacity to satisfy the growing customer demand we are experiencing.\nIn summary, we had a very strong finish to a record year.\nWe are optimistic about demand trends from all the markets we serve and we are well positioned to continue to deliver excellent results over the longer term.\nWe had a strong finish to a record year with record revenue and non-GAAP earnings.\nRevenue of $509.6 million, up 6% from Q3 and 26% from a year ago, and was above our guidance range.\nWe also executed very well, hit our highest gross margin in four years, and record operating margins to produce non-GAAP earnings of $1.31 per share, which also exceeded our guidance.\nLooking at revenue in more detail.\nOptical communications was $387.8 million or 76% of total revenue, up 7% from Q3.\nNon-optical communications revenue was $121.7 million or 24% of total revenue, and increased 4% from Q3.\nWithin optical communications, telecom revenue was $310.7 million, up 10% from last quarter.\nDatacom revenue was $77.1 million, down very modestly from Q3.\nBy technology, silicon photonics products made up 22% of total revenue or $110.2 million, up 5% from Q3.\nRevenue from products rated at speeds of 400 gig or higher was $133.3 million, up 27% from the prior quarter.\nThis more than offset a 4% sequential decline of 100 gig products to $133.6 million in the fourth quarter.\nIn Q1, we expect the optical communications growth trend to continue.\nLooking at our non-optical communications business.\nAutomotive revenue was $48.6 million, a slight decline from our record third quarter results.\nIndustrial laser revenue more than offset this at $41.1 million, up 14% from the third quarter.\nSensor revenue was $3.6 million and other non-optical communications revenue was up 14% to $28.2 million [Phonetic].\nNow turning to the details of our P&L.\nGross margin of 12.3%, up 10 basis points from Q3 and was at the highest level in four years.\nOperating expenses in the quarter were $12 million or 2.4% of revenue, reflecting our operating leverage, resulting in operating income of $50.5 million or 9.9% of revenue, a record for the Company.\nDuring the fourth quarter, we have recorded a tax benefit of $2.1 million.\nThis is primarily due to the reversal of evaluation allowance related to certain subsidiaries as a result of better operating performance and effective control of operating expenses.\nWe anticipate that our effective tax rate in fiscal year 2022 will be approximately 4%.\nNon-GAAP net income was a record at $49.4 million or $1.39 per diluted share.\nOn a GAAP basis, net income was also a record at $42.4 million or $1.13 per diluted share.\nFor the full year, revenue was $1.88 billion, an increase of 14% from the prior year.\nNon-GAAP gross margin was 12.1% and operating margins were 9.5% of revenue.\nNon-GAAP earnings per share for the year was $4.67, up a strong 25% from fiscal year 2020.\nWe report 10% customers annually and in fiscal year 2021, we had three 10% customers.\nCisco and Lumentum both represented 14% of revenue and the Infinera represented 12% of revenue for the year.\nNote that the Cisco revenue contribution includes a partial year impact from Cisco's acquisition of Acacia.\nExcluding the impact of the acquisition, Acacia would also have been a 10% customer in fiscal year 2021.\nOur Top 10 customers represented 78% of revenue, compared to 79% in fiscal year 2020.\nTurning to the balance sheet and cash flow statement.\nAt the end of the fourth quarter, cash, restricted cash and investments were $548.1 million, an increase of $39.2 million from the end of the third quarter.\nOperating cash flow was $43.5 million with capex of $13.5 million; free cash flow was $30 million in the quarter.\nIn addition to expenses related to construction at our Chonburi campus, the recently purchased 15 acres of land, adjacent to our Pinehurst campus that will facilitate the manufacturing expansion we have in progress at that campus.\nOf the $13.2 million purchase price, 10% was paid during the fourth quarter and the remainder was paid in the first quarter of fiscal 2022.\nWe remain active in our share repurchase plan, and during the fourth quarter, we repurchased approximately 123,000 [Phonetic] shares at an average price of $85.88 for a total cash outlay of $10.5 million.\nApproximately $81.2 million remains in our buyback authorization.\nNow, I would like to turn to our guidance for the first quarter of fiscal year 2022.\nWe are entering the year from a position of strength and remain optimistic about the markets we serve, and our ability to execute.\nFor the first quarter, we anticipate revenue in the range of $510-530 million, which will represent another record quarter for Fabrinet.\nFrom a profitability perspective, we anticipate non-GAAP net income to be in the range of $1.29 to $1.36 per diluted share.\nI'd like to point out that this guidance includes the impact of our customary annual merit increases as well as approximately a $0.04 to $0.05 impact from the cost we are incurring in order to safeguard our employees through the vaccination program that Seamus described.\nWe believe this employee safety costs are non-reoccurring, and that this program benefits our employees and their families, as well as the continued operational success of our business.\nIf not for these non-recurring costs, our non-GAAP net income guidance for Q1 would have represented another quarterly record for the Company.\nIn summary, we are proud of our record fourth quarter and fiscal 2021 performances.\nWe are excited about the prospects ahead and look forward to continued success for all our stakeholders.\n Assistant:", "chosen": "sees q1 revenue $510 million to $530 million.\nq4 revenue $509.6 million versus refinitiv ibes estimate of $487.5 million.\nq4 non-gaap earnings per share $1.31.\nq4 gaap earnings per share $1.13.\nsees q1 non-gaap net income per diluted share to be in range of $1.29 to $1.36.\n"}
{"prompt": "Human: These statements are based on management's expectations, plans and estimates of our prospects.\nToday's statements may be time-sensitive and accurate only as of today's date, Thursday, April 23, 2020.\nWe assume no obligation to update our statements or the other information we provide.\nAlso on the call today are Jojo Yap, our Chief Investment Officer; Peter Schultz, Executive Vice President; Chris Schneider, Senior Vice President of Operations; and Bob Walter, Senior Vice President of Capital Markets and Asset Management.\nSo we apologize in advance for any slight gaps or delays we may experience, particularly when we get to the Q&A segment of our call.\nI'd like to begin my remarks today by saying that the entire First Industrial team hope that you, your families and loved ones have maintained your health, while we all do what's necessary to get through COVID-19 together, hopefully sooner rather than later.\nWith respect to measuring the eventual economic impact of COVID-19 and related stay-at-home orders in the US, it's still early.\nOver the coming months, as stay-at-home orders are reduced and eventually lifted, we will gain a wealth of knowledge about how our actions impacted outcomes.\nWhile it is still early, we are extremely pleased about not only our strong Q1 results, but especially about how our team has performed during the past six weeks.\nDue to the shelter-in-place orders in most of the country, the virus has significantly impacted commerce.\nUnemployment has increased at an alarming rate in a short period of time, and the second quarter is likely to show a significant reduction in GDP.\nPrior to the shelter-in-place orders, the vast majority of our tenants' businesses were doing well.\nSo we're hopeful that the overall economy and their businesses will bounce back as the social distancing restrictions are reduced or removed, whenever that may be.\nMoving now to our recent rent collection experience, I'll start by saying we value our tenants and our relationships with them.\nIn an effort to get ahead of these conversations, in late March, we contacted a number of our tenants to make sure they were knowledgeable about the available financial relief programs from the government.\nIn cases where our customers may not have had firmly established financial relationships, we referred them to one of our bank resources willing to assist them in the process.\nWe also made an internal resource available to walk them through the loan application process.\nThrough the end of March, we collected about 97% of our March billings, which was in line with what we experienced before COVID-19.\nFor April billings, as of April 22, we have collected about 93%, which includes Pier 1.\nFor April billings for which we have yet to receive payment, approximately two-thirds are in jurisdictions which currently have moratoriums on evictions or evictions aren't being enforced, which is negatively impacting collection.\nBecause we're in the early phases of experiencing the economic impact of COVID-19, it's prudent to include in our updated guidance an additional $1 million of reserves for bad debt, which Scott will walk through shortly.\nMoving now to rent relief requests from our tenants, including those requests from clearly well capitalized tenants, total requests for rent relief in the form of rent deferral or abatement represented approximately 19% of our April billings.\nExcluding the well capitalized tenants and only including tenants that ask for specific terms, this represents 8% of our April billings, of which approximately 85% have paid April rent.\nThis subset occupies an average of 48,000 square feet and represent a broad range of industries.\nAt this time, we've not granted rent relief, and it's not clear how many tenants will legitimately require rent relief.\nWe hope the range of information we provided gives you an idea of what we are experiencing today.\nNeedless to say, this is a point in time picture.\nWe won't try to predict when infection rates will begin to decline and when or how the phase-out of the shelter-in-place restrictions will flow through to our tenants' businesses and financial health.\nMoving now to general activity in the leasing markets, prior to COVID-19, there were a substantial number of new requirements across our markets, led by e-commerce and food related businesses, but representing a broad range of uses.\nIn our portfolio, as of April 22, we have signed 72% of our 2020 lease expirations, which is consistent with our experience in the past several years.\nThese signings have a cash rental rate increase of 8.4%.\nOver the past few weeks, we have seen leasing activity on most of our vacancies, but the pace around some of those conversations has slowed or paused.\nAs a result, as part of our revised guidance, we have pushed out the leasing assumptions for two of our developments to the end of the year, which Scott will walk through shortly.\nWe feel very good about the long-term prospects for our business.\nThe COVID-19 virus has accelerated the adoption of e-commerce for many consumers for necessities as well as routine needs, which should boost future demand.\nWe also expect an increase in inventories to provide cushion against product shortages due to supply chain shocks such as we are experiencing now.\nAll in all, in the long run, these factors should drive incremental demand for industrial space.\nMoving to dispositions, we closed on $13 million of sales in addition to the Tampa portfolio we closed in early February.\nThrough today, we've closed on $40 million of sales this year, on our way to meeting our 2020 sales guidance range of $125 million to $175 million.\nAs we noted on our last call, we expect sales to be back-end loaded in the year.\nNote that our sales guidance excludes the expected $55 million Phoenix sale in the third quarter, in which the tenant exercised its purchase option in 2019.\nAs always, our sales process is focused on maximizing value for shareholders, while improving our cash flow growth profile.\nAs we think about new investment opportunities, at this point in time, we will continue to be judicious with our capital with a near-term emphasis on maintaining liquidity.\nWe are proceeding with all of our developments in process, which totaled 1.5 million square feet and a total investment of $154 million at March 31.\nAt this time, we are not targeting any new speculative development starts.\nThis includes the postponement of our planned summer start at First Park Miami, where we will continue to monitor the market.\nDue to the impact of COVID-19, we are seeing some delays in certain of our projects as contractors and suppliers deal with shutdown orders, social distancing requirements, slower approval and permitting, and other restrictions.\nOf this group, only our 100,000 square foot Philadelphia development has been halted entirely due to statewide restrictions on construction deemed non-essential, although those restrictions will be lifted as of May 8, subject to forthcoming guidelines.\nAs a result of these delays, you will see in our supplemental Page 22 that we've adjusted some of our estimated completion dates accordingly.\nLet me recap some recent investment activity.\nIn February, we were pleased to acquire Nottingham Ridge Logistics Center, a two-building development forward totaling 751,000 square feet in the Greater Baltimore industrial market, where the submarket vacancy is under 4%.\nThe park has I-95 frontage and is located just 12 miles north of the Port of Baltimore at the intersection of Route 43.\nToday, it is 15% pre-leased, and we are seeing good interest on the remainder of the space.\nOur total investment is estimated to be $82 million with an expected cash yield of 5.7%.\nIn the first quarter and second quarter to date, we also completed the acquisition of two buildings in the East Bay market of Northern California for a total purchase price of $14 [Phonetic] million at a weighted average yield of 5.2%.\nThe first property is a 39,000 square footer in Fremont, and the other is a 23,000 square foot building in Hayward.\nBoth are in the I-880 corridor.\nThe buildings are 58% occupied.\nWe also acquired a 24,000 square foot building in Los Angeles in the South Bay that we plan to redevelop.\nThe purchase price was $14.4 million.\nIn the first quarter, in addition to the First Park Miami land, we also acquired a 9-acre site in Southern California in the Inland Empire East for $2 million that is developable to 189,000 square feet.\nOn the development front, we placed in service our Ferrero build-to-suit development at PV303 totaling 644,000 square feet with a total investment of $53 million and a stabilized yield of 7.9%.\nLet's start with our earnings per share and FFO for the first quarter.\nDiluted earnings per share was $0.32 versus $0.19 one year ago.\nNAREIT funds from operations were $0.45 per fully diluted share compared to $0.41 per share in 1Q 2019.\nFirst quarter 2020 FFO includes our previously disclosed restructuring charge related to the closure of our Indianapolis office and costs related to the vesting of equity awards for retirement eligible employees we talked about on our last call.\nThis was offset by income related to the final settlement of one of our two outstanding insurance claims for damaged properties that we previously disclosed.\nExcluding these items, FFO remains unchanged at $0.45 per share.\nFirst quarter FFO also includes an approximately $800,000 non-cash write-off of a deferred rent receivable related to our lease with Pier 1 in Baltimore.\nWe have received April's rents, but due to the economic uncertainty caused by the COVID-19 virus, we feel this write-off is prudent.\nWe now -- we are now assuming Pier 1 will pay rent through June and vacate the building, the impact of which I will walk through shortly when I discuss our revised 2020 FFO and portfolio guidance.\nOur occupancy was strong at 97.1%, down 50 basis points from the prior quarter and down 20 basis points from a year ago.\nAs for leasing volume during the quarter, we commenced approximately 2.6 million square feet of leases.\n459,000 square feet were new, 1.3 million were renewals, and 925,000 square feet were for developments and acquisitions with lease-up.\nTenant retention by square footage was 68.9%.\nSame-store NOI growth on a cash basis, excluding termination fees, was 8.4%.\nLower free rent on developments accounted for about half of that growth.\nThe remainder is attributable to rental rate bumps and increases in rental rates on new and renewal leasing, which was partially offset by a slight decrease in average occupancy.\nCash rental rates were up 10.8% overall with renewals up 8.9% and new leasing 16.1%.\nAnd on a straight-line basis, overall rental rates were up 26.5%, with renewals increasing 27.\n1% and new leasing up 24.8%.\nNow, moving on to the balance sheet, at March 31, our net debt plus preferred stock to EBITDA was 5.2 times.\nToday, we have approximately $70 million of cash and $400 million of availability on our line of credit, for total liquidity of $470 million.\nFrom a debt maturity standpoint, we have very little coming due in thousand 2020 and 2021.\nIn 2020, we recently paid off a $15 million mortgage loan and have no other debt maturities in the remainder of the year.\nIn 2021, we have a couple of debt maturities.\nFirst, we have a $200 million term loan that matures in January at an interest rate of 3.39% with a handful of banks with which we have relationships spanning many years.\nWe contemplate renewing this term loan inside of the expiring interest rate.\nAfter that, we have our line of credit coming due in October, but note that the maturity date for the line is extendable for one year at our option, which enables us to push this maturity to October 2022.\nLastly, in 2021, we have $63 million of mortgage debt coming due in October that we can pay off using the availability in our line of credit if the debt capital markets are cooperative.\nOn uses of capital, we anticipate development spend of approximately $100 million for the remainder of 2020 and $35 million for 2021 for a total of $135 million.\nThese capital needs will be funded with property sales and excess cash flow after payment of our dividend, given our AFFO payout ratio, as calculated in our supplemental, of 66%, which is one of the lowest in the REIT world.\nOur NAREIT FFO and FFO before one-times item guidance are both $1.73 to $1.83 per share with a midpoint of $1.78.\nThis is a $0.05 per share decrease compared to the midpoint of our FFO before one-times items guidance we discussed on our fourth quarter earnings call, primarily due to a decrease in forecasted NOI due to the following.\nWe are now assuming that Pier 1 pays rent through June 30 and vacates.\nAt this time, we expect no income from this building after June for the remainder of the year.\nThis, plus the impact of the write-off of the non-cash deferred rent receivable, is about $0.02 per share.\nWe have also reduced our assumption for average quarter-end occupancy by 100 basis points to a midpoint of 96.5%.\nThis reflects the pushback of our leasing including Pier 1, as I just discussed, and the lease-up of our remaining vacancies to the fourth quarter at First Joliet in Chicago and Building B of First Logistics Center at 78/81 in Pennsylvania.\nExcluding the FFO impact of Pier 1, this change in leasing assumption represents an additional $0.02 per share.\nLastly, we are increasing our bad debt expense assumption from $500,000 per quarter to $900,000 per quarter for the remainder of the year, which is $0.01 a share.\nIncluding the $300,000 of bad debt expense we recognized in the first quarter, our bad debt expense assumption for 2020 is now $3 million, an increase of $1 million from our prior guidance.\nPlease note, that guidance does not reflect any potential non-cash write-offs of deferred rent receivables related to tenants that are having financial difficulties.\nOther key assumptions for guidance are as follows: same-store NOI growth on a cash basis before termination fees of 2.75% to 4.25%, a decrease of 125 basis points at the midpoint due to our updated occupancy and bad debt assumptions.\nOur G&A guidance remains at $31 million to $32 million.\nAnd guidance also includes the anticipated 2020 costs related to our completed and under construction developments at March 31.\nIn total, for the full year of 2020, we expect to capitalize about $0.04 per share of interest related to our developments.\nWe, like all of you, look forward to getting back to normal soon.\nAs a company, we've built our business to perform through the cycle and particularly for unexpected times like these.\nThrough disciplined risk management in our investments and operations, top-rated customer service, a high-quality infill portfolio and a strong balance sheet, we are well positioned to succeed in this turbulent environment.\nLastly, we are focused on serving and working closely with our customers for as long as it takes and to find the optimal outcome for all involved.\nWith that, we will now move to the question-and-answer portion of our call.\n Assistant:", "chosen": "q1 ffo per share $0.45.\nissued revised guidance related to business impact of covid-19 pandemic.\nsees 2020 nareit ffo of $ 1.73 to $1.83 per share.\n"}
{"prompt": "Human: I'm Ian Hudson, the Company's Chief Financial Officer.\nAlso with me on the call today is Jennifer Sherman, our President and Chief Executive Officer.\nThese documents are available on our website.\nIn addition, we will file our Form 10-Q later today.\nI'm going to begin today by providing some detail on our first quarter results, before turning the call over to Jennifer to provide her perspective on current market conditions, our progress against strategic initiatives, and our outlook for the remainder of the year.\nIn summary, we delivered another strong quarter with record orders and operating results, exceeding our expectations despite ongoing pandemic related disruptions.\nWe also had to navigate through the February ice storms in the south, which caused us to temporarily close our facilities in Texas, Alabama and Mississippi.\nFortunately, we did not experience any significant damage, but we did lose several days of production.\nDespite these challenges, the teams recovered well with both groups delivering adjusted EBITDA margins at or above levels achieved in the first quarter of last year.\nThat feed is even more impressive, given the strength of the prior year quarter, which included record production at our largest facility and minimal impact from the pandemic.\nTurning now to the numbers where consolidated net sales for the quarter were $279 million compared to $286 million last year.\nConsolidated operating income for the quarter was $27.8 million compared to $32.3 million last year.\nConsolidated adjusted EBITDA for the quarter was $41.2 million compared to $43.9 million last year.\nThat translates to a margin of 14.8% in Q1 this year compared to 15.3% last year.\nNet income for the quarter was $22.2 million compared to $23.4 million last year.\nThat equates to GAAP earnings per share for the quarter of $0.36 per share compared to $0.38 per share last year.\nOn an adjusted basis, earnings per share for the quarter was $0.38 per share, compared to $0.39 per share last year.\nOrder intake for the quarter was outstanding with orders of $384 million represent -- representing our highest quarterly orders on record and an increase of $80 million or 26% compared to Q1 last year.\nConsolidated backlog at the end of the quarter also set a new company record at $410 million that represents an increase of $9 million compared to Q1 last year and an increase of $106 million or 35% from the end of 2020.\nIn terms of our group results, ESG net sales for the quarter were $228 million compared to $233 million last year.\nESG's operating income for the quarter was $27.1 million compared to $29.4 million last year.\nESG's adjusted EBITDA for the quarter was $39.3 million compared to $40 million in the prior year.\nThat translates to an adjusted EBITDA margin of 17.2% in line with last year.\nEFC reported orders of $324 million in Q1 this year, an improvement of $87 million or 37% compared to last year.\nSSG's net sales for the quarter were $51 million this year compared to $53 million last year.\nOperating income for the quarter was $7.2 million dollars compared to $7.4 million last year.\nSSG's adjusted EBITDA for the quarter was consistent with the prior year at around $8.2 million while its adjusted EBITDA margin for the quarter improved to 16.2% of 80 basis points from Q1 last year.\nSSG's orders for the quarter was $60 million compared to $66 million last year.\nCorporate operating expenses for the quarter was $6.5 million, up from $4.5 million last year.\nThe increase was primarily due to an unfavorable year-over-year variance of $2.6 million associated with changes in mark-to-market adjustments of post-retirement reserves.\nThese market based adjustments benefited our earnings in Q1 last year by approximately $0.02 per share but were unfavorable in Q1 this year.\nTurning now to the consolidated income statement where the decrease in sales contributed to a $6 million reduction in gross profit.\nConsolidated gross margin for the quarter was 24.7% compared to 26.1% last year.\nAs a percentage of sales, our selling, engineering, general and administrative expenses for the quarter were down 20 basis points from Q1 last year, despite the unfavorable mark-to-market variance I just mentioned.\nOther items affecting the quarterly results include a $700,000 increase in other income and a $400,000 decrease in interest expense.\nTax expense for the quarter was down $2.2 million dollars, largely due to lower pre-tax income levels and higher excess tax benefits from stock compensation activity.\nOur effective tax rate for the quarter with 18.4% compared to 23.5% last year.\nThe lower tax rate in Q1 of this year was in line with our expectations after we had included an estimate of excess tax benefits.\nAt this time, we continue to expect our full year effective tax rate to be approximately 24%.\nOn an overall GAAP basis, we therefore earned $0.36 per share in Q1 this year compared with $0.38 per share in Q1 last year.\nTo facilitate earnings comparisons, we typically adjust our GAAP earnings per share for unusual items recorded in the current or prior year quarters.\nIn the current year quarter, we made adjustments to GAAP earnings per share to exclude acquisition related expenses, coronavirus-related expenses and purchase accounting expense effects.\nOn this basis, our adjusted earnings for the quarter were $0.38 per share compared with $0.39 per share last year.\nLooking now at cash flow where we generated $26 million of cash from operations during the quarter, an improvement of $21 million over Q1 last year.\nWe ended the quarter with $168 million of net debt and availability under our credit facility of $270 million.\nOur current net debt leverage ratio remains low even after funding the acquisition of OSW during the quarter for approximately $53 million.\nOur strong financial position allows us to continue to invest in organic growth initiatives and pursue strategic acquisitions like OSW.\nAt the same time, we remain committed to pursuing strategic acquisitions and returning cash to stockholders through dividends and opportunistic share repurchases.\nOn that note, we paid dividends of $5.5 million during the quarter, reflecting an increased dividend of $0.09 per share.\nAnd we recently announced a similar dividend for the second quarter.\nIt's been over a year now, since the pandemic began.\nAnd while there have been many challenges along the way, I remain in awe of how our teams have responded modifying our work practices to keep employees safe, exercising flexibility in handling uncertain market conditions, and finding new ways to serve our customers.\n[Technical Issues] continues to experience some ongoing COVID related disruptions, but conditions are improving.\nOur companywide efforts to raise awareness about vaccines, assist our employees in gaining access to vaccines and encourage participation levels, are paying off and we are pleased to report that our domestic employee vaccination rates are ahead of the national average.\nIn fact, in Illinois, where we have three of our largest facilities and the corporate office, over 60% of our employees are now fully vaccinated.\nWith that, we've seen an uptick in our sales, resources, traveling, reinforcing our customer-centric value proposition and contributing to greater order intake.\nAs in the last two quarters, we again saw improved demand for our products with our first-quarter order intake setting a new record for the company, surpassing the previous high by over $50 million.\nOur first quarter orders reflect strength in most of our end markets and growing confidence in a post-pandemic recovery, which seems to be further solidified by recent economic stimulus.\nThat sentiment seems to be shared widely by our dealer partners and customers across most of our businesses.\nDemand for sewer cleaners remains strong, with first quarter orders up 30% year-over-year, and almost double the amount recorded last quarter.\nSafe digging is also continuing to gain acceptance.\nOver the last couple of years, approximately 70% of our sewer cleaners orders have included an optional safe-digging package, which allows our sewer cleaners to also be used for hydro or vacuum excavation purposes.\nWe saw similar trends this quarter with customer appreciation for the safety and efficiency benefits of safe digging gaining momentum.\nAt MRL, our road marking and line removal business, first quarter orders were the highest quarterly levels since we acquired the business in 2019.\nAnd with its planned expansion now complete, we are well positioned to benefit from potential infrastructure investment.\nOur road marking services business, Highmark also won an $8 million striping contract during the quarter.\nSince the 4th quarter of last year, we've also seen an uptick in our industrial end markets with improved orders for our Guzzler and JetStream products heading into the spring-cleaning season.\nIn addition, our dump bodies and trailer businesses reported strong organic order growth of 28% across our end markets, achieving record backlog.\nWhile our backlog is at a record high, there are a few factors that may limit us from realizing the full benefits from the operating leverage that we typically experience with backlog at these levels.\nThe first factor that many of you will be aware of is the impact of the global semiconductor shortage on chassis availability.\nWe started to see some supply tightness late last year and our teams were proactive in securing additional chassis and recommending to our customers and dealer partners that they do the same for those orders were they supply the chassis.\nAs a reminder, that is about 50% of the time for our ESG businesses, excluding TBEI, where the customer almost always supplies the chassis.\nWe were recently notified by one of our chassis suppliers that they are temporarily suspending production of certain chassis for up to 90 days in light of the semiconductor shortage.\nThe issue primarily impacts our sewer cleaners, safe digging trucks, and certain street sweeper models.\nThe situation remains fluid and the teams have been working hard to mitigate the impact of the short-term disruption.\nBased on the data we have received, we expect the situation will be resolved during the 3rd quarter with production expected to ramp back quickly thereafter.\nBecause we do not rely on any one single TSC manufacturer, and with the proactive actions we took, we have been able to pivot quickly to minimize the financial impact.\nFor example, at Elgin, our team was able to adjust production schedules, so that we build a higher concentration of the three-wheel Pelican sweepers during the period of the expected impact.\nAs a reminder, for that product line, we actually manufacture the chassis ourselves.\nAt our Streator facility, where we make sewer cleaners and Safe digging trucks, we have had an ongoing effort to secure additional chassis from other manufacturers.\nHowever, because of lead times on certain chassis, there is a period of approximately two weeks where we have a shortage at Vactor.\nWith the goal of optimizing efficiency, the teams have worked diligently to manage the schedule, so that this brief pause will occur over the July 4 holiday.\nWith the additional chassis supply that we have secured, we are expecting a ramp up in production thereafter.\nLike most companies, we are also experiencing rising commodity costs.\nAs our teams have done in the past, we took proactive measures such as locking in pricing and securing availability of steel based on forecasted needs.\nOur teams are working diligently to mitigate the impacts of rising commodity costs by implementing price increases and surcharges where possible.\nAs it relates to labor availability, our ongoing commitment to environmental social and governance continues to benefit our company.\nInvestment in our employees differentiates us and our ability to attract labor at the majority of our facilities.\nI now want to take a few minutes to provide an update on our strategic growth initiatives.\nWe remain bullish about Safe digging prospects, and with noted industrial end market recoveries and infrastructure spend optimism throughout the channel, we are confident Safe digging trends will continue to improve.\nOur TRUVAC safe digging product line portfolio includes a complete range of truck mounted safe digging equipment with applications across a number of end markets.\nWe were pleased to see that TRUVAC product demonstrations for the quarter were up 70% from last year.\nAs I just mentioned, these education efforts are also having a positive impact in sewer cleaners demand with the inclusion of the optional safe digging package, turning our sewer cleaners into a multi-purpose vehicle.\nWe also continue to make progress with our aftermarket initiative with aftermarket revenues for the quarter improving by 6% and representing a higher share of ESG's revenues for the quarter at around 27%.\nWe continue to closely monitor rental fleet utilization and remain disciplined in making decisions about the size and composition of our fleet.\nAs part of that process, we have seen healthy used equipment sales in recent months and an uptick in rentals.\nWe are monitoring the current COVID situation in Canada with Ontario and many other provinces being subject to some of the most extreme stay-at-home measures since the start of the pandemic.\nWhile we have not experienced any significant financial impact to date, we may see some impact in our Canadian markets over the next few months, which is typically a seasonally strong period for equipment rentals and part sales.\nOn the organic growth front, we have several new product launches in the pipeline, a few of which I'll touch on today.\nWithin ESG, street sweeper electrification remains a key area of investment.\nWe have previously talked about our first orders for hybrid electric broom bear street sweeper, which are currently expected to ship later this year.\nThis hybrid model, uses both battery energy and either CNG or diesel power for sweeping, with performance designed to meet or exceed current sweeper performance.\nThe hybrid broom bear is now being demonstrated by our dealer channel, primarily on the West Coast and then moving to the Southeast, and the feedback to date has been encouraging.\nIn addition, development of a hybrid version of our most popular line of street sweepers, the Pelican, is under way.\nThe plug-in hybrid electric Pelican sweeper is assembled and undergoing testing with product demonstrations plan for the second half of this year.\nWithin our dump body and trailer product portfolio, we are also realizing benefits from new product introductions.\nDuring the quarter, products launched over the last year equated to organic growth of about 4%.\nWithin SSG, based on the nature of its product portfolio, our innovation pipeline typically includes a higher volume new product introductions and enhancements, that while individually may not have a significant financial impact, collectively aggregate to meaningful organic growth.\nFor example, we launched production of our MicroPulse line during the quarter.\nThe MicroPulse is a low profile, high performance LED lighting product for both first responders and work truck vehicle.\nThe line includes production of both new product models and those that were previously outsourced.\nIn sourcing this line, which leverages automated laser technology, is estimated to improve the related margins and drive annual savings of over $1 million.\nIn addition, we are currently on track to launch a low cost light [Phonetic] power in the second quarter.\nIn addition to these organic growth initiatives, M&A will continue to contribute meaningfully to our future growth.\nDuring the quarter, we completed the acquisition of OSW, a leading manufacturer of dump bodies and a customer upfitter of truck equipment and trailers.\nThe acquisition provides considerable opportunity for long-term value creation through the application of our 80/20 improvement principle, organic growth initiatives and additional bolt-on acquisitions.\nLast week, we held an initial 80/20 improvement training session at OSW, which was well received by the teams.\nIntegration is well under way, and while it is still early days, OSW was off to a solid start in the first quarter.\nOur M&A pipeline has been active to say the least.\nAnd it's been exciting to be back on the road visiting potential targets.\nAs Ian noted in his comments, our financial position and liquidity are strong, enabling us to pursue strategic acquisitions and there are a number of M&A opportunities our teams are currently reviewing.\nWe have also continued to make significant investments in our existing plans to add capacity to support our long-term growth and to gain operational efficiencies through automation.\nAs we continue to optimize our manufacturing footprint, we are evaluating our long-term strategy with respect to our Elgin and University Park production facilities in Illinois.\nBoth properties are currently leased at above market rates with lease terms ending in 2023.\nWe are currently looking at opportunities and alternative facilities in the surrounding areas as we proactively plan for a potential move.\nThe American rescue plan, COVID release package, includes approximately 1.9 trillion of economic stimulus with approximately $350 billion going to state, local and territorial governments with the goal of keeping frontline workers employed, distributing the vaccine, increasing testing, reopening schools, and maintaining essential services.\nWe are actively educating our dealer channel about the stimulus program and have distributed the latest estimate allocation of the $350 billion of state and local government support by jurisdiction to our dealer channel to share with its customer base.\nAs a provider of equipment for -- used for essential services like sewer kitting and street sweeping, Federal Signal stands to benefit meaningfully from additional aid that may be provided to state local sources for these purposes.\nAs was evident with our first-quarter order intake, our dealer partners remain optimistic about market conditions in 2021, noting that both corporate and sales tax collections appear to have held up better than originally anticipated, which should add stability to their revenue sources.\nWe expect that our long-term infrastructure bill will provide visibility for project planning and could see capital equipment demand increases in areas such as roads, bridges, broadband, Clean Energy and public transportation buildup.\nWe anticipate that this will provide benefits for the majority of our product offerings, including equipment sales and rentals of dump trucks and trailers, Safe digging trucks, road marking equipment, sewer cleaners and street sweepers.\nWe have positioned Federal Signal in a manner in which we fully participate in the post-pandemic recovery by increasing capacity within our facilities, reducing lead times to a level where we can better respond to customer needs, investing in new product development and gaining market share.\nTurning now to our outlook for the rest of the year.\nOrders thus far this year have exceeded our expectations, fueled by a combination of new product launches ongoing execution against our strategic initiatives and strong recovery in our end markets.\nWith certain chassis manufacturers temporarily impacted by the global semiconductor shortage, we are currently encountering some short-term production challenges at our largest facility.\nOur teams are working diligently to navigate through this disruption as they have in the past when faced with similar situation.\nAfter factoring in the impact expected over the next couple of months, at this time, we are maintaining our adjusted earnings per share outlook for the year of $1.73 to $1.85.\nWith our recently completed capacity expansion at several facilities, we are well positioned once the current chassis uncertainty eases.\nDemand for our products is at an all-time high, with the recent federal stimulus, and the possibility of infrastructure investment offering potential for further momentum, which we have not factored into our current outlook.\n Assistant:", "chosen": "compname reports q1 revenue $228 mln.\nq1 adjusted earnings per share $0.38.\nq1 gaap earnings per share $0.36.\nq1 revenue $228 million.\ncompname says maintaining adjusted earnings per share outlook for fy 2021 $1.73 to $1.85.\ncompname reports q1 gaap earnings per share of $0.36.\n"}
{"prompt": "Human: Information required by SEC Regulation G relating to these non-GAAP financial measures are available on the Investors section of our website, www.\nfortive.com, under the heading Investors Quarterly Results.\nWe completed the separation of our Industrial Technologies segment through the spin-off of Vontier Corporation on October 9, 2020, and have accordingly included the results of the Industrial Technologies segment as discontinued operations.\nAll references to period-to-period increases or decreases and financial metrics are year-over-year on a continuing operations basis.\nStarting on slide three.\nOur first quarter performance continued to highlight the benefits of our efforts to enhance the growth and resilience of our portfolio, significantly expanding our positions in software and healthcare and adding substantial sources of higher growth recurring revenue.\nAs a result, our portfolio has been well positioned to drive rapid sequential improvement over the past few quarters as markets have begun to reopen.\nIn Q1, we continue to see significant improvement, not only across our short-cycle businesses, primarily Fluke Instruments and Tektronix, but also at many of the businesses that have faced COVID-related headwinds, such as Advanced Sterilization Products.\nTurning to the results in the quarter.\nWe generated total revenue growth of 13.6% and core revenue growth of 9.1%, above the high-end of our guidance.\nAdjusted earnings per share was $0.63, representing an increase of 37% year-over-year.\nThe combined outperformance on core growth and earnings helped drive another strong quarter of free cash flow.\nOur SaaS offerings at Accruent, Intelex, Censis, eMaint and Gordian continue to perform well, generating double-digit growth in the quarter, with the current Gordian seeing better top line momentum overall.\nThese software offerings are an important part of our strategy to leverage leading hardware positions to provide broader software-enabled solutions to address pain points in our customers' critical workflows and their ongoing digital transformation priorities.\nDespite the challenges of a COVID environment, we continue to leverage FBS tools to drive performance improvements across the portfolio.\nASP is advancing the implementation of the Fortive Business System more broadly, driving strong improvements in working capital turns as well as progress accelerating commercial efforts, as it delivered its fifth consecutive quarter of growth in its global installed base.\nIntelex also continues to see success from the application of FBS tools to improve its sales process, driving better lead generation, improved customer win rates and stronger sales pipeline creation.\nWhile these are just a couple of examples, we are highly focused on building FBS capability across our newer businesses, in order to deliver accelerated growth, innovation and market share gains.\nRelative to organic growth, we continue to invest in strategic initiatives across our operating companies as well as build additional capacity to drive future innovation.\nWith the FORT, we are continuing to scale our data analytics capabilities, providing leverage to our operating companies to pursue key AI and machine learning applications.\nIn 2020, we more than doubled the number of projects conducted and expect to do the same this year, targeting more than $250 million of potential revenue opportunity.\nOur acquisition of ehsAI significantly expanded our machine learning expertise to help grow our position within EHS workflows as well as generate learnings that can be applied more broadly within Fortive.\nWe've also made a number of additional investments to expand our partnership with Pioneer Square Labs, with three start-up opportunities currently in different phases of incubation.\nWith these investments, we are enhancing our ability to generate disruptive innovation that will deepen our competitive advantage and increase our customer value proposition.\nIn terms of performance across the major geographies, core growth was led by low 20% growth in Asia.\nThis included approximately 30% growth in China and low double-digit growth in Japan.\nElsewhere, our core revenue grew by low double-digits in Western Europe and by low single-digits in North America.\nTaking a closer look at performance in the segments on slide seven, Intelligent Operating Solutions posted a total revenue increase of 9.5%, with core revenue increase of 5.5%.\nThis included high-teens growth in China, high single-digit growth in Western Europe and a flat top-line in North America.\nFluke's core revenue continued to improve in the first quarter, increasing by high single-digits.\nThis performance was highlighted by low double-digit growth at Fluke Industrial and high-teens growth at Fluke Calibration.\nFluke's growth included the launch of the 377 and 378 Fluke Connect, plant meters for non-contact voltage testing.\nThese introductions incorporate Fluke's FieldSense technology and extend its leadership position in safer non-contact measurement tools.\nAt Fluke Industrial, point-of-sale in North America turned positive in the first quarter, increasing by low single digits.\nMeanwhile, point-of-sale in both Western Europe and China continue to improve, rising by mid-single digits and mid-teens, respectively.\nStrong performance at Fluke Digital Systems continued this quarter, increasing by mid-single digits as eMaint saw strong demand with mid-teens growth in SaaS bookings.\nIndustrial Scientific declined single-digits in the first quarter, as a result of continued weakness in instrument sales.\nThe company's iNet offering continued to demonstrate its resilience, increasing by low single-digits.\niNet also registered an 18% increase in bookings, while driving a more than 500 basis point improvement in net retention.\nStub's strong bookings growth in ISC's rental business provided a signal of improving stability in its end-markets with customers beginning to restart maintenance project activity.\nAt the same time, we are seeing continued success from the application of FBS growth tools at Intelex to accelerate sales pipeline creation, driving a record revenue quarter with low double-digit growth.\nThe integration of ehsAI continues to go well.\nWhile the revenue contribution remains small, product integration is on schedule, and the Intelex team has started to accelerate new customer acquisition.\nAccruent grew by low single-digits in the first quarter, highlighted by high single-digit growth in SaaS.\nAccruent continue to see good momentum in its Industrial and Life Science segments.\nThis included a recent win at BioMarin, which included Accruent's Meridian solution as a critical tool for management of their pharmaceutical manufacturing facilities, including communication with contractors and support for FDA validation.\nAccruent is also seeing growing demand across a range of end markets for its facility planning and resource scheduling solutions with customers beginning to prepare their facilities for the future needs of their workforce as they emerged from the pandemic.\nAccruent's growth in the quarter was aided by the resumption of some on-site service, implementation and project-related activities with further improvement expected as the year continues.\nAfter facing headwinds during the second half of 2020, Gordian's top-line improved to flat in the first quarter.\nGordian's job order contracting procurement business grew by low single digits and is expected to accelerate as the ramp-up of recovery from COVID continues.\nThe company's estimating business continued to perform well, increasing by high single-digits and seeing strong renewal momentum and conversion rates for the SaaS version of its RSMeans product line.\nGordian saw signs of improvement during the first quarter regarding site access issues.\nWe expect this improvement will continue in the coming quarters.\nThe Precision Technology segment posted a total revenue increase of 14.3% with a 12.1% increase in core revenue.\nThis included mid-30s percent growth in China, mid-teens growth in Western Europe and mid single-digit growth in North America.\nTektronix generated high-teens growth, driven by strength in its general industrial and semiconductor markets.\nPoint-of-sale continue to accelerate, up greater than 40% in China, greater than 20% in Western Europe, while North America turned positive with a mid single-digit increase in the quarter.\nTektronix has seen strong demand in China as economic recovery continues, driven by government investment in 5G, electric vehicles and IoT solutions.\nLooking across the product lines at Tektronix, mainstream oscilloscope in Keithley both had an excellent first quarter.\nMainstream oscilloscope posted high 30% growth, driven by strong demand trends across most of its key product segments, particularly our six series and four series scopes.\nKeithley grew mid-teens, while the Tektronix service business continued to show stability, reporting mid single-digit growth in the first quarter.\nTektronix also saw outperformance across a range of recent new product introductions, including its new ISO view probe solution for semiconductor and automotive market applications.\nSensing Technologies grew by low double-digits, driven by broad strengthening across end markets, including industrial and electronics customers.\nSensing saw accelerating demand in China as it delivered a number of key wins with strong momentum among factory automation OEM customers.\nSensing also generated strong growth from its critical environment products, etc, with mid-30% growth for the quarter.\nPacific Scientific EMC returned to growth, increasing by low single-digits in the first quarter.\nThe business continued to see good order trends with a book-to-bill of 1.2 over the trailing 12 months and has a strong backlog that we expect to support improving growth in the coming quarters.\nMoving to Advanced Healthcare Solutions.\nTotal revenue increased 20.3% with a 10.9% increase in core revenue.\nThis included low 40% growth in China, low 20% growth in Western Europe and low single-digit growth in North America.\nASP returned to growth in the first quarter, increasing by mid single-digits.\nGrowth at ASP was driven by a greater than 40% increase in capital equipment sales as it continued to grow its global installed base.\nThis momentum in capital sales more than offset the fact that electric procedures were 91% of pre-COVID levels globally and continue to weigh on ASP's consumable revenue.\nStronger capital sales are an indication of the progress ASP is making in its FBS journey by driving better sales execution and improved funnel management at priority independent delivery network accounts.\nASP continued to perform well in Western Europe with its fifth consecutive quarter of growth.\nASP was also recently named the Preferred Supplier by the National Health Service in the UK and a large multiyear tender for terminal sterilization capital and services.\nCensis also had a strong first quarter, growing by low-teens with low-double-digit growth in its CensiTrac SaaS offering.\nCensis has seen improved upselling momentum across its business and is also seeing evidence of US hospitals moving to post-COVID operations and faster purchasing decisions.\nFluke Health Solutions increased by low-teens in the first quarter, with broad strength across its product lines.\nFHS continues to have success deploying FBS to drive to growth and margin improvements at LANDAUER leveraging global go-to-market scale and accelerating cross-selling and products and services.\nLandauer is now seeing an approximate 2.5 times improvement in its operating margins since acquisition.\nFinally, Invetech reported mid-40% growth as it delivers against a strong backlog of 2020 orders for its diagnostic offerings.\nWith that, I'll pass it over to Chuck, who will take you through additional details on our margins and free cash flow for the quarter.\nSolid execution across the portfolio enabled us to deliver strong margin performance in Q1.\nAdjusted gross margins were 57% in the first quarter, up 90 basis points, driven by the fall-through on the strong growth at Fluke and Tektronix as well as the year-over-year gross margin improvement at ASP coming off the transition service agreements.\nIt also reflected solid execution with FBS throughout the portfolio, including continued price realization of 90 basis points in the quarter.\nOur Q1 adjusted operating profit margin was 22.7%, a bit higher than we had guided, helped in part by the stronger volume we saw in the quarter.\nWe generated 40% of adjusted incremental operating margins and 240 basis points of core operating margin expansion and also generated more than 200 basis points of core operating margin expansion in each of our three segments.\nDuring the first quarter, we generated $144 million of free cash flow, representing an increase of 50% year-over-year.\nWe continue to be pleased with the consistent growth in free cash flow and have delivered -- that we've delivered over the past year, with the first quarter taking our trailing 12 months free cash flow to $950 million.\nAlong with significant growth in earnings, disciplined working capital management at ASP, Fluke and Tektronix contributed to this free cash flow performance.\nEarly in Q1, we executed the tax-efficient monetization of our remaining 19.9% stake in Vontier, generating approximately $1.1 billion in proceeds which we used for debt repayment.\nOn the basis of that transaction and our free cash flow from Q1, we ended up the first quarter with a net leverage ratio of 1.2 times.\nSupported by our continued strong free cash flow and significant balance sheet capacity, we are well positioned to pursue our key capital allocation priorities and are maintaining an active pipeline of deal cultivation efforts.\nWe continue to see a broad range of opportunities to deploy capital to build on our core hardware and instrumentation positions as we also leverage deep domain and workflow expertise into adjacent high value software data-driven opportunities.\nTurning now to the guide on slide 11.\nAs a result of the strong first quarter performance and given some improvement in our outlook for the rest of the year, we are raising our 2021 guidance.\nFor the full year, we now expect adjusted diluted net earnings per share to be $2.50 to $2.60, representing year-over-year growth of 20% to 24% on a continuing operations basis.\nThis assumes total revenue growth of 10% to 13%, core revenue growth of 7% to 10%, adjusted operating profit margins of 22% to 23% and an effective tax rate of approximately 14%.\nIt also assumes core revenue growth of 5% to 7% in the second half of 2021.\nWe also continue to expect free cash flow conversion to be approximately 105% of adjusted net income for the year.\nWe are initiating second quarter adjusted diluted net earnings per share guidance of $0.56 to $0.60, representing year-over-year growth of 30% to 40%.\nThis assumes total revenue growth of 20% to 23%, core revenue growth of 16% to 19%, adjusted operating profit margins of 19.5% to 20.5% and an effective tax rate of approximately 14%.\nFor the second quarter, we expect free cash flow conversion to be approximately 85% of adjusted net income.\nThe full year guidance incorporates $35 million of additional investments that we are making to drive innovation and enhance our capabilities to support higher growth in the years ahead with $15 million in the second quarter.\nThis includes funding for the FORT to expand our analytic capabilities and talent base as well as to accelerate the development of AI machine learning offerings for our customers.\nIt also includes funding for investments in our partnership with Pioneer Square Labs, where we have seen good early progress thus far.\nWith that, I'll pass it back to Jim for some closing remarks.\nBefore we move to questions on slide 13, I wanted to highlight the continued progress we're making with respect to our key sustainability goals.\nIn Q1, we completed an updated materiality analysis, yielding valuable insights that we use to define the new pillars of our sustainability strategy, which will guide our efforts going forward.\nWe've also made significant progress implementing the Intelex sustainability performance indicators platform across the portfolio, which we used to complete the collection of 2020 emissions data with new, more aggressive carbon emissions targets.\nWe look forward to discussing our progress and our evolving sustainability goals at our upcoming Investor Day.\nThe results that we announced today are a testament to the depth and dedication of our teams and the relentless focus on the continuous improvement principles that power our culture.\nAs we look forward, we are excited about the strength of our portfolio, the quality of the market opportunities we address and the significant organic and inorganic growth opportunities ahead of us.\nAs macro indicators continue to recover from the COVID-19 pandemic, our focus will remain on driving strong core growth, margin expansion and free cash flow generation, while investing in innovation and deploying our capital to acquisitions that accelerate our strategy and increase the value we bring to customers.\nWe are also excited to share more details with you about our road ahead when we speak on May 19 at our Investor Day.\nIn the almost five years since our spin, we have positioned the portfolio to be higher growth, more profitable and a more powerful generator of free cash flow.\nThis sets us up well for accelerated compounding across our businesses, which we look forward to discussing with you.\nThat concludes our formal comments.\n Assistant:", "chosen": "sees fy adjusted earnings per share $2.50 to $2.60 from continuing operations.\nsees q2 adjusted earnings per share $0.56 to $0.60 from continuing operations.\nqtrly adjusted diluted net earnings per share from continuing operations were $0.63.\nqtrly revenues from continuing operations increased 13.6% year-over-year to $1.3 billion.\n"}
{"prompt": "Human: Information required by SEC Regulation G relating to these non-GAAP financial measures are available on the Investors section of our website, www.\nfortive.com, under the heading Financial Information.\nWe completed the divestiture of the automation and specialty business on October 1, 2018, and accordingly have included the results of the A&S business as discontinued operations for historical periods.\nAll references to period-to-period increases or decreases and financial metrics are year-over-year on a continuing operations basis.\nWe are pleased with our third quarter results as strong execution across the portfolio delivered a top line performance that was significantly better than our initial guidance as well as a return to year-over-year growth in adjusted operating profit and adjusted earnings per share.\nFor the quarter, we reported adjusted diluted net earnings per share of $0.94, an 8% increase year-over-year.\nWhile the operating environment remained challenging in Q3, we continued to successfully navigate the near-term headwinds by leveraging the Fortive Business System.\nWe increased core operating margins by 160 basis points and generated another quarter of strong free cash flow while prioritizing growth investments across our portfolio to drive continued share gains.\nOn October 9, we completed the successful spin-off of Vontier Corporation, a global industrial technology company focused on mobility infrastructure.\nI'm extremely proud of the effort and the focus shown by our team throughout the year leading up to the separation, and I am very excited about the future opportunities that lie ahead for both companies.\nThe ability to maintain our readiness and execute this complex transaction despite the obvious challenges presented by the COVID-19 pandemic is a testament to the resilience and adaptability of our people and the power of FBS.\nAs separate companies, Fortive and Vontier are both well positioned to execute against their strategic priorities to generate increasing value for all our stakeholders.\nWith the spin-off of Vontier complete, Fortive is well positioned as a provider of essential technologies for connected workflow solutions across a range of attractive end markets.\nWe have strong established positions with leading brands that benefit from long-term secular growth drivers and have opportunities to increase recurring revenue.\nWe have a long track record of disciplined capital allocation, significant balance sheet capacity and free cash flow and substantial opportunities for both organic investment and strategic M&A across the portfolio.\nMost importantly, we have the Fortive Business System, the cornerstone of our culture, and an enduring source of competitive advantage that underpins our commitment to continuous improvement.\nSince Vontier was part of Fortive throughout the third quarter, the financial results that we will discuss today include the Vontier businesses.\nAlso, the guidance that we provide today will be for Fortive's continuing operations only.\nWith that, let's turn to the details of the quarter.\nAdjusted net earnings were $338.5 million, up 8.8% from the prior year, and adjusted diluted net earnings per share were $0.94.\nTotal sales increased 2.3% to $1.9 billion, with core revenue essentially flat, reflecting significant sequential improvement from the prior quarter.\nAcquisitions contributed 220 basis points of growth, and favorable foreign currency exchange rates increased growth by 20 basis points.\nAdjusted gross margins were 51.8% in the third quarter, increasing 50 basis points year-over-year.\nGross margins benefited from 50 basis points of price, the growing contribution of our higher-margin software businesses and disciplined supply chain execution.\nWe also generated 160 basis points of core operating margin expansion, resulting in an adjusted operating profit margin of 22.7% for the quarter.\nOur ability to drive strong core OMX, despite the significant ongoing challenges posed by the pandemic reflected the solid execution of our teams and the disciplined application of FBS.\nWe continue to effectively manage the business through this uncertain environment, flexing cost actions as needed while also investing in our strategic product development and innovation priorities to position us well for the future.\nDuring the third quarter, we generated $455 million of free cash flow, representing conversion of 134% of adjusted net earnings and an increase of 31% year-over-year.\nThis performance took our year-to-date free cash flow up to approximately $1.1 billion, representing a year-over-year increase of approximately 48%.\nDespite a challenging environment over the past few quarters, our operating companies continue to use FBS to manage their working capital effectively in the short term, increasing inventory turns and limiting the headwinds from the sequentially improving top line.\nTurning to our segments.\nProfessional Instrumentation posted a total revenue increase of 0.9% despite a 3.5% decline in core revenue.\nAcquisitions contributed 370 basis points, while favorable foreign exchange rates increased growth by 70 basis points.\nCore operating margin increased 90 basis points, resulting in segment-level adjusted operating margin of 22.8%.\nIndustrial Technologies performed well in Q3 driven in particular by the North American businesses of both Gilbarco Veeder-Root and Matco.\nTotal revenue increased 4.5%, including a 5.5% increase in core revenue.\nCore operating margin increased 290 basis points, resulting in segment-level adjusted operating margin of 25.9%.\nNote that the growth rates shown on the slide reflect consolidated Fortive Q3 growth, which includes the results of the Vontier businesses.\nThat said, we will focus our operating company color primarily on the businesses that remain with Fortive.\nIn Asia, core revenue declined low single digits despite mid-single-digit growth in China.\nStrength in China was broad based, highlighted by mid-teens year-over-year growth at Fluke, double-digit growth at Advanced Sterilization Products and greater than 20% growth in Sensing.\nWestern Europe core revenue declined mid-single digits in Q3, highlighted by low double-digit growth at ASP.\nASP has reported year-over-year growth in each quarter of 2020 thus far, driven by solid sales execution.\nAccruent also delivered a strong quarter in Western Europe led by Meridian, its engineering information management solution, reflecting the momentum the company has built in the region.\nWhile point-of-sale remained negative for both Fluke and Tektronix, the point-of-sale trend improved throughout the quarter, and revenue at these businesses increased mid-teens versus the prior quarter.\nNorth America core revenue grew low single digits in Q3, showing broad-based sequential improvement versus Q2.\nGrowth in North America was led by a strong quarter for the Vontier businesses.\nAt new Fortive, a number of the software businesses continue to perform well with growth across Intelex, eMaint and Censis; Industrial Scientific's iNet business; and Qualitrol also performed well.\nAs in Western Europe, Fluke and Tektronix saw improving point-of-sale trends, though still negative as we turn the corner into Q4.\nIn recent quarters, we have laid out a framework for analyzing our portfolio with businesses organized into groups based on the relative sensitivity to pandemic-driven disruption and resulting deterioration in end market demand.\nAs shown on Slide 11, the relative performance of these groups largely played out as expected in the quarter.\nGroup I, which represented approximately 20% of new Fortive revenue in Q3, continued to show significant resilience, posting low single-digit growth.\nThe group's performance again reflected a solid contribution from the software businesses, highlighted by high single-digit growth at Intelex, which is seeing continued robust growth in North America and is benefiting from the successful execution of the company's expansion into Western Europe.\nElsewhere, Censis posted low-single-digit growth, underpinned by the momentum of its SaaS offerings.\nAccruent also benefited from the resilience of its SaaS business, which increased slightly in the quarter with continued growth in annual recurring revenue based on improving churn and increased net retention.\nFluke Industrial Imaging had another strong quarter, although its growth moderated as some of the initial COVID-related demand began to level off.\nGordian saw slowing in project work among state and local governments and higher education customers, leading to a low single-digit decline for the quarter.\nMeanwhile, despite continued strong order flow, EMC registered a mid-teens decline due to certain COVID-related supply chain issues and some customer delays.\nGroup II, which represented approximately 32% of new Fortive revenue in Q3, recorded a low single-digit decline.\nISC's iNet subscription business posted a high single-digit growth, while Fluke Health Solutions showed mid-single-digit growth driven by ventilator tester tailwinds and support from Landauer's high recurring revenue business model.\nASP reported a mid-single-digit decline due to a mid-single-digit decline in North America and pressure in Japan, which saw a resurgence of COVID cases and an associated reduction in elective procedures.\nHowever, we are very pleased to see this partially offset by strong growth in both China and Western Europe in the quarter.\nWe now estimate that elective procedures in the U.S. are back to approximately 90% of pre-COVID levels and are back to approximately 95% in both China and Europe.\nGroup III, which represented approximately 12% of new Fortive in Q3, saw a high single-digit decline in the quarter.\nWhile the Sensing portfolio declined by mid-single digits, this represented sequential improvement versus the second quarter.\nSemiconductors and electronics continue to be a bright spot for Sensing, which also benefited from COVID-related tailwinds in medical end markets.\nElsewhere in Group III, Accruent's professional services and licenses business lines saw an ongoing negative impact from continued delays in accessing customer sites.\nGroup IV, which represented approximately 36% of new Fortive Q3 revenue, declined by high single digits in the quarter but saw a meaningful sequential improvement and performed ahead of our forecast.\nBoth Fluke Industrial and the Tektronix Instruments business saw broad-based sequential improvement.\nFluke Industrial decreased by low single digits, paced by Fluke Calibration, which registered mid-single-digit growth.\nThe performance of the Tek Instruments business was highlighted by Keithley, which recorded mid-single-digit year-over-year growth.\nThe business also saw improved order activity as the quarter progressed, including initial orders for the new six and eight-channel versions of the six Series oscilloscope.\nWhile we are encouraged by what we saw at both Fluke Industrial and the Tektronix Instruments business in the third quarter, we remain watchful of key macro trends as we continue to work our way toward a return to year-over-year growth in both businesses.\nSince the end of the second quarter, we have continued to reduce our net debt with our strong free cash flow and the proceeds received from the Vontier separation.\nIncluding the recent proceeds from Vontier, our net debt is now approximately $2.8 billion, down from over $5.1 billion at the end of 2019.\nAs we look ahead, we expect to continue to generate solid free cash flow, which will enable us to reduce our net debt further.\nWe also expect to monetize our remaining 19.9% stake in Vontier in a tax-efficient manner, with timing subject to market conditions.\nWhile Q3 saw a continuation of the better operating performance that started as the economic lockdowns lifted back in the spring, we remain watchful of macro conditions in light of the continued fight against the COVID-19 pandemic.\nIn Q4, we expect the total revenue will increase zero to 3% on a year-over-year basis.\nWe also expect to deliver incremental margins of approximately 35%.\nFinally, we are planning to execute approximately $30 million of strategic productivity initiatives before the end of the year, in line with our prior expectation that some of the temporary actions we executed early in the year would be made permanent as we turn the corner into 2021.\nThe resegmentation highlights the strong position we have assembled to provide essential technologies for connected workflow solutions across a range of attractive end markets.\nThis view also helps to frame how we think about our portfolio from the perspective of both organic and inorganic opportunities.\nDetails on the segments are as follows.\nThe Intelligent Operating Solutions segment includes Fluke, Industrial Scientific, Intelex, Accruent and Gordian and represents approximately 40% of new Fortive total revenue.\nThis segment provides solutions to accelerate field and facility safety, reliability and productivity as well as operating intelligence to a range of end users and addresses a total available market of greater than $15 billion.\nPrecision Technologies segment includes Tektronix, Pacific Scientific EMC and the Sensing businesses, which will now also include Qualitrol and represent approximately 35% of new Fortive total revenue.\nThis segment provides mission-critical technologies that enable our customers to accelerate the development of innovative products and solutions and addresses a total available market of greater than $10 billion.\nThe Advanced Health Care Solutions segment includes Advanced Sterilization Products, Fluke Health Solutions, Censis and Invetech and represents approximately 25% of new Fortive total revenue.\nThis segment provides solutions that enhance patient safety, prevent hospital infections, deliver operating efficiencies and accelerate healthcare system innovation and addresses a total available market of greater than $5 billion.\nImportantly, we will report on this basis from the fourth quarter onward and plan to issue supplemental financial information in the coming weeks that aligns with this resegmented view of the portfolio so that you can rebase your models.\nBefore we wrap up, I want to quickly express my appreciation to the Fortive and Vontier teams for their continued effort and strong execution in 2020.\nThis has undoubtedly been an extremely difficult year, but our performance in the third quarter highlighted once again how our continued -- our team continues to rise and meet the challenge.\nWith the strong support of FBS, we managed to complete our final preparations for the spin-off of Vontier while also navigating the challenging macro environment to deliver improved top line performance and another quarter of strong free cash flow.\nWhile we face an uncertain environment in the near term, we will continue to benefit from the increasingly resilient portfolio that we have established through our efforts to continue to transform the portfolio over the last four years.\nWith our consistent free cash flow, strong M&A pipeline and an expanding set of organic innovation capabilities, we are well positioned to capitalize on the many opportunities ahead of us.\nThat concludes our formal comments.\n Assistant:", "chosen": "compname posts qtrly rev from continuing oper up 2.3% to $1.9 bln.\nqtrly diluted net earnings per share from continuing operations $0.61; qtrly revenue from continuing operations up 2.3% to $1.9 billion.\n"}
{"prompt": "Human: Our speakers are Jim Owens, H.B. Fuller, President and Chief Executive Officer; and John Corkrean, Executive Vice President and Chief Financial Officer.\nFirst, a reminder that our comments today will include references to organic revenue, which excludes the impact of foreign currency translation on our revenues and the impact of acquisitions or divestitures.\nWe believe that discussion of these measures is useful to investors to assist their understanding of our operating performance and how our results compare with other companies.\nUnless otherwise specified, discussion of sales and revenue refers to organic revenue, and discussion of EPS, margins or EBITDA refers to adjusted non-GAAP measures.\nMany of these risks and uncertainties are, and will be exacerbated by COVID-19 and the resulting impact on the global business and economic environment.\nLast evening, we reported another quarter of strong revenue and earnings growth.\nOrganic revenues in the second quarter were up 19% year-over-year, adjusted EBITDA was up 21% and adjusted earnings per share of $0.94 increased 38% versus last year.\nWe overcame significant supply chain disruptions and moved quickly to raise prices in the quarter.\nWe achieved an all-time record quarter in revenue as we met increasing customer demand and gained market share.\nThroughout the quarter, H.B. Fuller experienced raw material and container shortages, but because of strong support and global collaboration with key suppliers and the ingenuity of our technical and supply chain teams, we made certain to keep our customers supplied.\nH.B. Fuller's ability to assure supply of critical adhesives and provide innovative solutions that customers need remains a competitive differentiator for our company, which is evident in our top-line growth.\nH.B. Fuller's revenue growth was broad-based across segments and geographies.\nOrganic revenues increased in each segment versus the second quarter of 2020, including strong double-digit growth in both Engineering and Construction Adhesives segments, and very solid growth in Hygiene, Health and Consumable Adhesives against a very strong second quarter of 2020.\nRevenues also grew in each geography, including organic growth of 19% in the Americas, 27% in the EMEA and 9% in the Asia-Pacific region.\nImportantly, our revenues are also up from pre-COVID levels.\nTotal organic revenues increased by 9.5% versus the second quarter of 2019, which had no COVID-19-related impacts with double-digit growth in HHC and Engineering Adhesives and mid single-digit growth in Construction Adhesives.\nStrong volume leverage in the quarter, coupled with pricing benefits and operational efficiencies we're driving in the business offset significantly higher raw material costs and drove a 21% increase in EBITDA dollars year-over-year.\nRaw material input cost increased in the second quarter by about 10% from the end of 2020 with some raw materials increasing more rapidly than we forecasted.\nWe have implemented $150 million of annualized price adjustments to date and we'll implement an additional $75 million in the third quarter.\nWe're prepared to do more as necessary.\nThese price adjustments will offset the impact of raw material increases in this fiscal year.\nSuppliers have made good progress in restoring capacity for the commodity and specialty chemicals we purchase.\nHowever, the rate of recovery going forward will likely be uneven until inventory levels are rebuilt to fully meet demand.\nOur planning assumptions anticipate that the current supply volatility will lessen and pricing will begin to stabilize in the fourth quarter.\nWe now expect the year-on-year raw material inflation to be over 10% and expect that our pricing will fully offset raw material increases by the end of the third quarter.\nWe expect gross margin headwinds in the third quarter, which is seasonally slower for volumes, and we will see additional pricing and margin benefit in the fourth quarter, which is typically our strongest volume quarter.\nOur global sourcing expertise, our innovative chemistries and our operational agility were more critical than ever this quarter, and continue to provide competitive differentiation.\nAnd the actions we have taken on price and to drive efficiencies across our business enabled us to seamlessly serve our customers and achieve our profit targets in the quarter, while at the same time increasing our debt paydown over last year's level, in line with our target for $200 million of debt reduction in 2021.\nNow, let me move on to discuss performance in each of our segments in the second quarter on Slide 4.\nHygiene, Health and Consumable Adhesives' second quarter organic sales increased 3.3% year-over-year, which is an outstanding result considering the comparison to a very strong quarter last year when the business grew 7% organically.\nSales increased versus last year across the majority of our HHC markets with strong growth across our packaging applications, beverage labeling, multiwall bags and tape and label.\nHHCs segment EBITDA increased by 11%, significantly more than the top-line growth and EBITDA margin was strong at 14.7%, up 70 basis points versus last year.\nMargin improved driven by strong volume leverage, restructuring benefits and good expense management.\nConstruction Adhesives' organic revenue was up 23% versus last year with strong growth in both flooring and commercial roofing as share gains and improving demand drove significantly improved top-line performance versus 2020.\nEven compared to a strong non-COVID impacted second quarter of 2019, organic revenue was up 4%.\nContributions from the pricing adjustments we have implemented in this segment were under-represented in the second quarter as we fulfilled prior Construction Adhesives orders in backlog following the temporary disruption from the effects of Storm Uri.\nWe have already begun to see increased pricing roll through in the first few weeks of the third quarter and expect additional pricing realization in the P&L over the rest of the year.\nConstruction Adhesives EBITDA increased 4% versus last year as strong volumes were offset by higher raw material costs, unfavorable mix and some temporary manufacturing costs that were required to return to normal service levels after the extreme weather event in the first quarter.\nEngineering Adhesives' results were extremely strong with organic revenue up nearly 40% versus last year, reflecting share gains and improving end market demand.\nSales increased versus last year in all 14 of our Engineering Adhesives end markets with exceptional growth in adhesives for automotive, recreational vehicles, woodworking, electronics and insulating glass.\nAnd looking back to the non-COVID impacted second quarter of 2019, organic revenues were up 11%.\nWe expect continued strength and double-digit full year growth in this segment.\nEngineering Adhesives' second quarter EBITDA grew 42% year-on-year, driven by exceptional volume performance.\nWe expect EBITDA margins to improve in the coming quarters as pricing actions are fully implemented and offset the impact of raw material cost increases.\nLooking ahead at our full year results, our planning assumptions are that economies will continue to open up as vaccines are rolled out around the world.\nRaw materials will be tight through most of the year and pricing will remain elevated as supply chains begin to normalize and demand continues to be strong.\nWe anticipate continued strong demand and share gains in each of our business units to drive strong volume growth in 2021 versus 2020.\nRevenue in most of our end markets will exceed 2019 levels.\nOverall, when considering our strategic pricing actions, coupled with the solid volume growth in HHC, continued improving performance in Construction Adhesives and strong demand in Engineering Adhesives, we now expect full-year double-digit revenue growth versus 2020.\nI'll begin on Slide 5 with some additional financial details on the second quarter.\nNet revenue was up 22.7% versus the same period last year.\nCurrency had a positive impact of 3.9%.\nAdjusting for currency, organic revenue was up 18.8%, with volume up 17.4% and pricing up 1.4%, with most of that pricing realized in the second half of the quarter.\nAll three GBUs had strong growth versus 2020, as well as compared to the non-COVID impacted second quarter of 2019, which we believe validates the strength of our top-line performance.\nWhen compared to Q2 2019, organic revenue increased 9.5% for the total company with strong organic growth for all three GBUs.\nAdjusted gross profit was up 17.4% year-on-year, and gross profit margin was down 120 basis points as volume growth and pricing gains were offset by higher raw material costs.\nAdjusted selling, general and administrative expense was down 130 basis points as a percentage of revenue, reflecting volume leverage, savings associated with our business reorganization, and general cost controls, offset by higher variable compensation than last year.\nIn total, adjusted operating income margin improved by 20 basis points year-over-year.\nNet interest expense declined by $1.3 million, reflecting lower debt balances.\nThe adjusted effective income tax rate in the quarter was 26.8% compared to 27.6% in the same period last year.\nAdjusted EBITDA for the quarter of $122 million was up 21% versus the same period last year, driven by strong volume growth, pricing gains and restructuring savings, partially offset by higher raw material costs and higher variable compensation.\nAdjusted earnings per share were $0.94, up 38% versus the second quarter of last year, reflecting strong income growth and lower interest expense associated with our debt reduction.\nCash flow from operations in the first half of the year of $80 million compares to $108 million in the same period last year, reflecting working capital requirements to support strong top-line performance, as well as higher raw material costs.\nWe continue to reduce debt, paying down $62 million in the first half of 2021 compared to $51 million during the same period last year and keeping us on track for our full-year debt paydown plan of $200 million.\nRegarding our outlook, based on what we know today, we now expect full-year revenue growth to be in the low double-digits.\nAs you will recall, we increased our adjusted EBITDA guidance range last quarter to $455 million to $475 million and this guidance remains unchanged, given our expectations for the continued strong volume growth and accelerating pricing offsetting raw material cost increases that we now expect to exceed 10% for the fiscal year.\nBased on the seasonality of our business and the timing of raw material and price increases, we expect revenues in the third quarter to be up about 15% versus the third quarter of 2020 as we continue to deliver strong top-line growth.\nEBITDA margin in the third quarter is expected to be about 100 basis points lower than the second quarter on a sequential basis.\nAs pricing actions are fully implemented, margins will improve in the fourth quarter, which is also our strongest quarter from a volume standpoint.\nWe expect cash flow to be strong for the rest of the year, allowing us to maintain our target to pay down approximately $200 million of debt during 2021.\nDuring our last conference call, I outlined the three critical priorities we set for 2021 in the current supply constrained inflationary COVID recovery environment.\nThese three priorities are volume growth, price and greater productivity, and we executed well against each of these key imperatives in the second quarter.\nOur first priority is to drive volume growth by supporting our customers in the current high-demand and supply constrained environment.\nVolume growth and share gains are our foundation for creating durable shareholder value.\nOur 19% second quarter organic revenue growth is even more significant than it appears, considering our HHC business had a very strong quarter of 7% organic growth in the second quarter last year.\nAnd our business, overall, grew 9.5% compared to pre-COVID levels in the second quarter of 2019.\nOur second imperative is to strategically manage pricing, aligned to the value we deliver, in this inflationary environment.\nWe implemented $150 million in price increases, effective from March 1 through July 15, and we're planning an additional $75 million in price increases later in Q3.\nWe are also delivering on our third priority to release greater productivity and capacity through our operational excellence programs.\nIn the second quarter, we out-delivered competitors and supported customers and our factory labor and overhead, as a percentage of revenue in the second quarter, decreased versus the second quarter last year.\nCOVID-19 has changed how businesses operate and supply constraints and pricing volatility are challenges that are impacting our industry today.\nIn this environment, H.B Fuller's strategic priority, the benefits of our robust global operations and supply chain, our culture of collaboration and market-based innovation and the speed and agility we have developed across our company is delivering results for our customers and for our shareholders.\nWe will continue to navigate the challenges of a constrained supply environment, grow our business and build on our rising leadership position in the global adhesive industry and we will continue to deliver strong results for our customers and for our shareholders.\nOperator, please open up the call so we can take some questions.\n Assistant:", "chosen": "q2 adjusted earnings per share $0.94.\nfull year 2021 revenue growth is anticipated to be in low double-digits versus 2020.\nfull year adjusted ebitda in range of $455 million to $475 million remains unchanged.\nexpects 2021 raw material cost increases to exceed 10% on a full year basis versus 2020.\n"}
{"prompt": "Human: Today, I am joined by Bill Furman, Greenbrier's executive chairman; Lorie Tekorius, CEO and president; Brian Comstock, executive vice president and chief commercial and leasing officer; and Adrian Downes, senior vice president and CFO.\nThis past month has been an eventful time in the world and at Greenbrier.\nOn March 1, Lorie Tekorius assume the role of Greenbrier's CEO.\nLast week, our board of directors appointed Lorie as our newest director.\nAs we begin today's call, I want to first congratulate Lorie on the new positions at Greenbrier.\nAnd we're proud of the board's development of Greenbrier, how we have managed this very important transition.\nI'm pleased that I now serve as executive chairman through the remainder of our fiscal year and as a board member and investor until 2024.\nWith Lorie's appointment, we've expanded our board's gender diversity, four of our 11 directors are female.\nFurther, three of the directors identify as people of color.\nOmicron is still a factor in our operations, as you will hear today, but things are getting much better.\nJust so those impacts begin to add, the war in Ukraine has impacted the economies everywhere we operate.\nWe are witnessing a true tragedy and I pray for a swift end to the conflict and to all of the human suffering.\nWhile the war creates challenges for everybody in the near term, it also provides opportunities for major shifts in freight corridors and transportation roads that will enhance Greenbrier's business as the world enters a reordered state.\nHistory demonstrates the integral role of railroads to support civilian life and economies and a heightened manner during wartime.\nThe current war in Europe has created direct pressure on the availability and cost of commodities ranging from minerals to food, to fertilizer, to crude oil as well as coal and natural gas.\nRailroads and railway suppliers will help meet the challenge of keeping civilian life and economies functioning during the crisis.\nThe commodity markets are traditionally leading indicators for expansion in rail freight.\nMost commodities shipped by rail are experiencing upward pricing pressure from demand constraints due to either sanctions on Russia or reduced production from Russia and in the Ukraine.\nWe expect rising global commodity prices and shifting trade patterns to elevate railcar demand in North America and Brazil and elsewhere in the world.\nAlready changing energy policies in North America and Western Europe are creating opportunities for rail transport of oil, ethanol and other products.\nThe impact will be similar in fertilizers and other items needed to produce food.\nFinally, the rising cost of diesel creates a distinct opportunity for model shift from road to rail.\nFreight rail is one of the most sustainable and fuel-efficient modes of surface transportation.\nU.S. freight railroads with diesel-electric power generation are three to four times more fuel efficient than trucks.\nThink about that for just a moment.\nOne ton of freight can be moved by rail almost 500 miles per gallon of fuel.\nAdditionally, moving freight by train instead of trucks reduces greenhouse gas emissions by up to 75% per tonne travel and it reduces congestion on wear and tear on bridges and byways.\nAs more freight ships to rail, in many cases, this will induce longer railcar dwell tough times and lowered railroad velocity.\nIn turn, railroad congestion causes the need for more railcars to make railroad service more efficient, notwithstanding the increase in demand we expect in major commodities like fertilizer, food steps, and other products.\nWe recognize the role and responsibility our industry must play in times of crisis and as the geopolitical landscape shifts.\nThe cruel irony is this war in Ukraine is that there will be ultimately beneficiaries.\nNow we can't choose the exogenous factors that affect our business, but we have almost always have to be ready to meet the challenges and opportunities that come with them.\nGreenbrier has proven the ability to thrive on adversity and seize opportunities.\nI'm sure this legacy will continue for years to come under Lorie's leadership.\nWith that, I'll hand the call over to Lorie to discuss our strong performance during the quarter.\nBefore I discuss our results for the quarter, I'd like to express my gratitude to Bill and the rest of the Greenbrier Board for the opportunity to serve as CEO.\nWe have an outstanding team at Greenbrier who works hard and smart every day.\nWhile it's difficult to predict the specific opportunities or challenges that may arise, I know that Greenbrier team has the experience, knowledge, and tenacity to make the most of any situation with a focus on increasing shareholder value.\nGreenbrier posted strong results this second quarter.\nAnd while not all of our operating segments performed as expected, our business is highly diverse and in the aggregate, performed very well.\nIn the quarter, we delivered 4,800 railcar units, a 17% increase from the prior quarter, driven by our core North American market.\nOur lease fleet utilization increased to 98% and our leasing team generated robust cash proceeds and gains through regular lease fleet optimization and monetization transactions.\nOur leasing business is operating ahead of our expectations as we achieve growth at scale.\nOur strong quarterly performance was achieved as the omicron variance of COVID-19 reached peak levels in the United States.\nSadly, in February, Charles Wallace, a longtime employee in our maintenance services group passed away due to COVID.\nCharles is survived by a son and four sisters.\nWe send them our condolences for their loss.\nFurther, we experienced significant absence here another quarter as approximately 12% of our workforce contracted the virus.\nRecently, the infection rates have declined, and we're hopeful the worst of the pandemic is now behind us.\nOur manufacturing gross margin percentage was below our expectations in the quarter, impacted by supply chain and labor issues.\nOur global sourcing team continues to do an exceptional job of mitigating severe disruptions to support increasing production rates and simultaneously minimizing production delays.\nWe have avoided any line shutdowns across our network due to material availability.\nAdditional expenses were incurred in connection with sourcing spot materials and expediting delivery.\nOperating momentum is increasing, and we expect improved performance in the coming quarters due to improved pricing and overhead absorption on higher production.\nIn Europe, the situation is fluid.\nThe period leading up to and the subsequent war in Ukraine has created a highly disruptive environment for many European manufacturers.\nOur operations have been impacted by rapidly rising energy costs and now finished steel and components in our supply chain.\nUkraine and Russia are among the biggest suppliers of iron ore, finished steel, and wheelsets to European mines and welders.\nAs Bill mentioned, railroads are integral to supporting the economy during wartime.\nOur management team is working together with our customers and suppliers to maintain production and ensure the best outcomes for all parties.\nOur maintenance service business continued to be impacted by higher material costs and labor shortages during the quarter with the omicron variant having an outsized impact on the network of smaller workforces.\nWe are beginning to see improving financial results on the action plan implemented to mitigate these headwinds in Q1.\nWe expect to sustain our momentum in the second half of the year as we remain focused on executing our plans while also looking for additional opportunities to reduce costs and improve margins.\nOur leasing and management services group had another strong quarter, driven by increased fleet utilization and regular asset optimization and monetization transactions.\nOur owned fleet has grown by over 25% from the end of fiscal 2021 to around 11,000 units.\nAnd in addition to managing our lease fleet, our management services, or GMS group, continues to provide creative railcar solutions for over 25% of the North American rail freight fleet.\nWithin GMS, we're launching an initiative to redevelop the service platform used to manage equipment and data.\nOne of the goals with this important initiative is to ensure scalable support for our leasing and syndication business as well as our external customers as we continue to execute on our leasing strategy.\nLooking ahead, we see strong operating momentum continuing throughout fiscal 2022 and beyond.\nWe've been able to maintain our market-leading positions through disciplined execution and by maintaining our strong liquidity position.\nThese were hallmarks of our management team's plans at the start of the pandemic and they continue to service well.\nThere is no doubt that the market backdrop will remain dynamic, particularly with the war in Europe.\nInflation, supply chain issues, and the continuing human impact of pandemic will persist for some time.\nWe are managing the business accordingly and maintain our optimistic market outlook.\nWe expect our operating metrics to continue to improve as we move through the next several quarters and beyond.\nAs we've said before, the market recoveries won't follow a straight line, and there will be challenges along the way.\nWe're managing our business to get ahead of these challenges wherever we can to continue to provide solutions to our customers and ultimately, deliver value to our shareholders.\nAs I said before, our leadership team has the experience, knowledge, and tenacity to make the most of any situation.\nAnd with that, I'll hand the call over to Brian Comstock to provide an update on current railcar demand environment and our leasing activity.\nGreenbrier's secured new railcar orders of 8,500 units valued at $930 million.\nWith deliveries of 4,800 units in the quarter, the book-to-bill increased to 1.8 times.\nOrders through the first half of the year are already over 85% of fiscal 2021 activity.\nNew railcar backlog of 32,100 units has a market value of $3.6 billion and provides multiyear visibility.\nThis is Greenbrier's largest backlog in six years.\nHistorically, when our backlog reaches this level, it includes several multiyear orders.\nIn this case, there are a few multiyear orders, which illustrates the strength of the overall demand environment.\nFrom an operations perspective, this means that a greater portion of our backlog is scheduled to enter production in the short term and translate to revenue sooner.\nAlso, as production space becomes more valuable, we expect multiyear orders to follow and pricing could continue improvement.\nAs a reminder, our new railcar backlog does not reflect 3,200 units valued at $180 million that are part of Greenbrier's refurbishment program.\nBecause of the large scale and nature of this activity, this work occurs at our manufacturing facility that absorbs production capacity while contributing to overhead absorption.\nOur refurbishment program is an important part of ensuring rail remaining the most environmentally friendly lot of surface transport.\nI'm excited about this growing partnership with our customers to sustainably repurpose North America's aging railcar fleet.\nFleet utilization ended the quarter at 98%.\nLease pricing and terms continue to improve sequentially, and we are seeing strong demand for new and used leased equipment.\nAs part of our enhanced leasing strategy, GBX Leasing, closed our inaugural asset-backed securitization by using -- by issuing $323 million in investment-grade rated notes with a blended coupon rate of 2.9% and an anticipated repayment date of January 2029.\nOur capital markets team executed well this quarter and syndicated 1,400 units, the highest level of activity in nearly two years.\nSyndication is an important source of liquidity and profitability, and we expect to continue strong syndication activity in the second half of the year.\nAs many of you know, syndication and asset disposition are important activities for leasing that will continue to grow into the future.\nLooking ahead, I remain optimistic about the momentum that has been building, especially in light of the strong demand environment in North America.\nGreenbrier is well-positioned for a period of strong growth.\nI believe the combination of market forces, the ability of our focused management, and experienced management team to capitalize on them will deliver results in its early phase of this railcar cycle, which is substantially better than we've seen in previous cycles.\nToday, I will discuss highlights from the quarter, and we're also affirming guidance for fiscal year 2022.\nSecond-quarter highlights include revenue of $683 million, deliveries of 4,800 units, which includes 400 units from our unconsolidated joint venture in Brazil.\nAggregate gross margins of 8% reflects continued effects from ramping of new railcar production, the impact of the omicron variant, mitigation of supply chain, labor shortages, and an additional warranty accrual for certain older railcars.\nSelling and administrative expense of about $55 million was higher sequentially, reflecting increased employee-related costs, consulting, travel, and legal expense from higher levels of business activity.\nNet gain on disposition of equipment was $25 million.\nThis activity was part of our ongoing optimization and monetization of our leasing portfolio.\nNon-controlling interest provides a benefit of $1.6 million, primarily resulting from the impact of line changeovers and production ramping at our Mexico joint venture.\nThis improved sequentially, and we expect our Mexican JV to be profitable in the second half of the year.\nNet earnings attributable to Greenbrier of approximately $13 million or $0.38 per diluted share, and EBITDA of about $52 million or 7.6% of revenue.\nIn the quarter, we recognized $2.1 million of gross costs, specifically related to COVID-19 employee and facility safety.\nThis expense increased almost 75% sequentially and was our highest level in the last 12 months.\nGreenbrier's liquidity increased to $804 million at the end of Q2, consisting of cash of $587 million and available borrowings of $217 million.\nBecause of the strength of our balance sheet, we are well-positioned to navigate any market dynamics.\nWe expect to receive a large portion of our $106 million tax receivable in fiscal Q4, reflecting delays in processing with the IRS.\nThis refund will be in addition to Greenbrier's available cash and borrowing capacity.\nIn the quarter and shortly after the quarter, Greenbrier entered additional interest rate swaps to fix long-term floating rate debt for the next several years, reducing the risk of increasing interest expense and a rising interest rate environment.\nAt the end of the second quarter, effectively all of our outstanding leasing debt was at fixed interest rates and approximately 90% of our corporate non-leasing long-term debt was fixed.\nTogether with executing on over $2 billion of new and refinanced borrowing facilities over the past year, including the ABS lease financing completed in Q2, this positions Greenbrier quite well as we move forward.\nOn March 31, Greenbrier's board of directors declared a dividend of $0.27 per share, our 32nd consecutive dividend.\nBased on yesterday's closing price, our annual dividend represents a dividend yield of approximately 2.3%.\nSince reinstating the dividend in 2014, Greenbrier's returned nearly $380 million of capital to shareholders through dividends and share repurchases.\nBased on current business trends and production schedules, we're affirming Greenbrier's fiscal year 2022 outlook to reflect the following: deliveries of 17,500 to 19,500 units, which includes approximately 1,500 units from Greenbrier-Maxion in Brazil.\nAs a reminder, in fiscal 2022, approximately 1,400 units are expected to be built and capitalized into our lease fleet.\nThese units are not reflected in the delivery guidance provided.\nWe consider a railcar delivered when it leaves Greenbrier's balance sheet and is owned by an external third party.\nSelling and administrative expense guidance is unchanged and expected to be approximately $200 million to $210 million.\nGross capital expenditures of approximately $275 million in leasing and management services, $55 million in manufacturing, and $10 million in maintenance services.\nNet of proceeds on equipment sales of $150 million, leasing capex is expected to be $125 million.\nGross margin percent is expected to increase sequentially in Q3 and Q4 with Q4 margins between low double digits and low teens.\nTo close, I want to add that I shared with you as expressed by our colleagues earlier.\nSpecifically, Greenbrier will successfully navigate the challenges we face in the second half of the fiscal year.\nGreenbrier's highest backlog in more than half a decade, ample liquidity, and a strong balance sheet make this possible.\nDespite delivering effects of the multiyear pandemic and the impacts of war on a stressed global supply chain, we are better positioned than at any point in time to achieve our ambitious goals.\n Assistant:", "chosen": "q2 earnings per share $0.38.\nq2 revenue $683 million.\nsees 2022 deliveries of 17,500 - 19,500 units including about 1,500 units in greenbrier-maxion.\n"}
{"prompt": "Human: My name is Matt Eichmann.\nI'm joined by Pete Watson, Greif's president and chief executive officer; Larry Hilsheimer, Greif's chief financial officer; and Ole Rosgaard, Greif's chief operating officer.\nWe will take questions at the end of today's call.\nIn accordance with Regulation Fair Disclosure, please ask questions regarding issues you consider important because we're prohibited from discussing material nonpublic information with you on an individual basis.\nPlease limit yourself to one question and one follow-up question before returning to the queue.\nActual results could differ materially from those discussed.\nAs always, we appreciate your interest in Greif.\nThe team delivered excellent results despite a challenging operating environment that was complicated by the pandemic, supply chain disruptions, and inflationary pressures beyond our control.\nFiscal 2021 was an exceptional year with record financial results.\nWe significantly de-levered our balance sheet, improved our shareholder returns, achieved top decile colleague engagement, and were recognized as a leading workplace in the United States.\nLooking ahead, these accomplishments have us positioned for an even stronger future as our fiscal 2022 guidance points to performance in line with the commitments we established in 2019.\nFinally, in this past year, we made meaningful enhancements to our already strong sustainability performance and have embedded ESG deeper into our business strategies.\nI'd like to ask Ole Rosgaard, our chief operating officer, to make a few comments regarding ESG that's on Slide 4.\nI hope you and your families are well.\nIn my mind, sustainability is not an afterthought or corporate function, rather it's a leadership focus that creates business value by reducing risk and costs and bringing new market opportunities to growth.\nWe achieved several notable ESG accomplishments in 2021.\nFor example, we diverted a minimum of 90% of waste from landfills at more than 140 of our global facilities, increasing our global diversion rate to roughly 85% from about 70% last year.\nEven more impressive, at year end, 50 of our global facilities had achieved zero waste to landfill status.\nWe launched our fourth Colleague Resource Group to provide professional development opportunities and further foster a more representative and inclusive culture across Greif.\nAnd finally, we linked ESG KPIs to the Greif business system, improving our performance management capability to further drive this critical work.\nThe takeaway here is that Greif's strong ESG focus is core to our plans for sustainable value creation.\nI look forward to sharing additional highlights with you in the future.\nAnd now, back over to Pete to discuss our business results on Slide 5.\nThe global industrial packaging business delivered an outstanding fourth quarter result.\nOur overall global primary product line was strong and benefited sales by almost 3% versus the prior year.\nand EMEA and ongoing recovery in our industrial end markets.\nGlobal steel drum volume fell by 1.5% per day versus the prior year.\nThe biggest shortfall was in APAC, reflective of our decision to implement strategic pricing actions and supply chain disruptions that negatively impacted our customers' operations.\nFourth quarter global steel drum volume was also impacted by performance in EMEA where volumes, where steady through most of the quarter but did slow in October as customers in this region faced their own set of supply chain disruptions.\nThe Americas region recorded strong mid-single-digit growth during the quarter.\nGenerally speaking, our industrial end markets remain healthy.\nCustomers report solid order backlogs and strong underlying demand, but they do face external supply chain disruptions.\nAcross GIP, we see little indication of customers building inventory, but some are carrying more stock than normal due to supply chain disruptions, impacting their ability to ship to their customers.\nGIP's generally stronger volumes and higher average selling prices resulted in significantly higher segment sales and gross profit year over year.\nGIP's fourth quarter adjusted EBITDA rose by roughly $47 million due to higher sales, partially offset by higher raw material, manufacturing, and transportation costs.\nThe business also benefited from a $3 million dollar FX tailwind.\nLooking ahead, we expect GIP's fiscal 2022 profits to be lower year over year, while we do anticipate volume growth, contribution from new capex projects, and beneficial efficiency gains.\nProfits will be lower as the unprecedented run-up in steel costs provided a roughly $100 million tailwind to GIP's fiscal 2021 results that will not recur.\nWe anticipate GIP's normal profit cadence through the year to persist.\nPaper packaging's fourth quarter sales rose by roughly $120 million versus the prior year due to stronger volumes and higher published containerboard and boxboard prices.\nAdjusted EBITDA rose by roughly $10 million versus the prior year due to higher sales that were substantially offset by higher raw material, manufacturing, and transportation costs, including a significant $50 million -- $51 million drag from higher OCC index cost and an $8 million natural gas cost spike not contemplated in our guidance.\nThe business benefited from a $4 million legal settlement tailwind reported in SG&A that will not recur.\nVolume demand across our paper business remains strong that our combined mill backlogs exceed eight weeks.\nFourth quarter volumes in our CorrChoice sheet feeder system were up 2.4% today versus the prior year.\nThe demand for durables, e-commerce growth, and the OEMs auto supply chain all remained very solid, and we see no slowdown on the horizon.\nFourth quarter tube and core volumes were up 7% per day versus the prior year.\nDemand was strong in most key end markets, including film, paper cores, textiles, and protective packaging.\nLooking ahead into fiscal 2022, we expect significantly higher profits in paper packaging due to strong demand and continued flow through published price increases.\nBig picture, our team delivered excellent fourth quarter results despite significant external challenges.\nFourth quarter net sales, excluding the impact of foreign exchange, rose 35% versus the prior year quarter due to stronger volumes and higher selling prices.\nAdjusted EBITDA rose by 57 million, including a 7 million combined tailwind from FX and a one-time legal settlement.\nKeep in mind our adjusted EBITDA result overcame an OCC index headwind of 51 million and roughly 40 million of non volume related transportation and manufacturing inflation, including an $8 million unforecasted natural gas cost spike.\nInterest expense fell by 9 million versus the prior-year quarter due to lower debt balances.\nWe also benefited by reaching a lower interest rate tier in our credit facility as a result of our substantial debt repayments.\nOur fourth quarter GAAP and non-GAAP tax rate were both roughly 11%.\nFourth quarter adjusted Class A earnings per share more than doubled to $1.93 a share.\nFor fiscal '21, we delivered adjusted Class A earnings per share of $5.60 a share, a 74% improvement versus the prior year and a significant beat relative to our Q3 guidance.\nPart of the earnings improvement came from a lower-than-anticipated non-GAAP tax rate of 18.1%, which benefited from reserve releases due to audit settlements, and statute of limitation expirations.\nWe estimate the lower tax rate relative to the guidance we shared at $0.15 at -- to fiscal '21 results.\nThe lion's share of our year-over-year earnings improvement came from disciplined operational execution.\nFourth quarter adjusted free cash fell roughly $79 million versus the prior year.\nWhile profits improved significantly, capex rose and working capital dragged on cash flow primarily due to higher raw material costs than we anticipated in our forecast.\nWorking capital was also negatively impacted by lower-than-anticipated October volumes outside the U.S. while customers struggled with external challenges and ordered fewer drums.\nThat said, our team is controlling what it can with strong results and trailing 12-month average working capital as a percentage of sales, improved by a significant 140 basis points to a -- year over year to 10.8%.\nOur core capital priorities are clear and remain consistent: reinvest in the business as needed to create value and support growth, return excess cash to shareholders via an attractive and growing dividend, and de-lever our balance sheet and maintain a compliance leverage ratio between two to two-and-a-half turns.\nOur balance sheet is in great shape.\nWe anticipate spending between 150 million and 170 million in capital expenditures in fiscal '22 and target growing our dividend in '22 as mentioned in previous calls.\nWe are in the midst of our strategic planning process to determine the focus and extent of growth activities going forward to prudently leverage our strong balance sheet for the benefit of our shareholders.\nWe are pleased to introduce fiscal '22 guidance, excuse me, that delivers on the commitments we made more than two years ago.\nOur guidance reflects the considerable improvement we've made in the base business over the last several years, including the successful Caraustar integration and synergy capture, and demonstrates Greif's resilience in overcoming the unforeseen and considerable external challenges presented by COVID and dramatic inflationary headwinds well beyond our control.\nAt the midpoint, we anticipate generating $6.15 of adjusted Class A earnings per share in '22.\nOverall, we expect lower profits in GIP in fiscal '22 to be more than offset by higher profitability and EPS, highlighting once again the benefit of our diversified portfolio.\nInterest expense will be significantly lower in fiscal '22 as a result of our aggressive de-leveraging, and we expect it to evolve further when we move to refinance our 6.5% 27 senior notes sometime in the first half of calendar '22.\nWe anticipate '22 adjusted free cash flow between 400 million and 460 million.\nIn addition to increased capital expenditures, we anticipate significantly higher cash tax in fiscal '21, mainly due to additional pre-tax income.\nWe anticipate working capital revert to a cash source.\nIt was a $222 million use in '21 as raw material cost inflation accelerated.\nNow, a few reflective comments for your consideration.\nFrom my perspective, the Greif of today is a far different company than the Greif of six years ago.\nOur margin profile has stabilized and grown, profits have increased significantly, and our transparency and communication has improved and been applauded.\nOur capital allocation strategy has been steady, disciplined, and predictable.\nWe have delivered on what we promised, and we continue to derive even greater value for our shareholders.\nDespite these improvements, we continue to trade at a discount to our historical metrics in the broader market.\nAs an example, assuming a historic free cash flow of 11% in the midpoint of our '22 free cash flow guidance would imply a combined market cap of roughly $3.9 billion, or an increase of roughly 30%.\nSo, while we don't get to vote when it comes to our valuation, our opinion is that we deserve a closer look, given the discount present in our stock today.\nNow, I'm going to take a minute and go off-script.\nAs most of, if not all of you are aware, today is Pete Watson's last earnings call.\nPete embodies the leadership and has a personal connection with many of Greif's colleagues that developed through personal contact.\nHe is a humble and respected leader who leans on his athletic coaching background for the skills in building a cohesive team.\nAs he took leadership at Greif, many things were broken.\nSince taking the helm in November of 2015, the results have been extraordinary.\nIn safety, steady improvement, in colleague engagement, we improved dramatically to be a top decile in gallops industrial sector.\nThose engaged colleagues have delivered outstanding customer service and driven incredible improvement in doubling our NPS scores over that period.\nThat focus on virtuous service profit chain has lead to financial improvement that has been exceptional.\nFrom 2015 to 2021, [Inaudible] and EBITDA have essentially doubled.\nAdjusted EBITDA earnings per share has gone from $2.18 to $5.60 with no stock repurchases.\nAnd adjusted free cash flow, which was $70 million in 2015 has averaged nearly $30 million in the last three years and will exceed $400 million in '22.\nPete has worked diligently to ensure this succession plan and left Greif in good leadership hands going forward to secure his legacy as an outstanding leader.\nYou certainly did go off-script and much appreciated.\nAnd again Larry, I appreciate your comments and thoughts.\nYou are a good man.\nAs Larry talked about, today is my final earnings call as president and chief executive officer of Greif.\nYou know, it's a great company.\nIt's been my distinct honor to serve our global Greif team.\nAnd I'm extremely proud, as Larry talked about, of what we've all accomplished together over the last six years.\nI'm incredibly grateful to all our colleagues for their passion and dedication to excellence and also for their commitment to our team and our customers.\nAnd while fiscal 2021 is a record year for our company, I'm even more excited for what lies ahead.\nWe are well-positioned to benefit from ongoing strength and improving trends at our key end markets and our extensive global portfolio, our differentiated service capability, and our sharp focus on operational execution allows us to best serve our customers' needs and generate significant shareholder value.\nI, along with the rest of the board, are confident in Ole Rosgaard's ability to lead Greif going forward.\nHis operational background, strategic mindset, and passion for team building and serving customers will be advantageous to Greif's future.\nI look forward to the company thriving under his leadership.\nIt has certainly been a pleasure working with all of you, and we certainly appreciate your interest in Greif.\n Assistant:", "chosen": "q4 earnings per share $1.93 excluding items.\nsees fy 2022 adjusted free cash flow $400 million - $460 million.\n"}
{"prompt": "Human: Our conference call slides have been posted on our website and provide additional information that may be helpful.\nSales totaled $367 million this quarter, a decrease of 14% from the second quarter last year.\nAcquisitions added two percentage points of growth this quarter, while changes in currency translation rates decreased sales by approximately one percentage point.\nNet earnings totaled $29 million for the quarter or $0.17 per diluted share, including $30 million or $0.20 related to the impairment charges associated with selling the Alco business.\nAfter adjusting for the impairment and other tax adjustments, net earnings totaled $62 million or $0.37 per diluted share.\nDuring the second quarter, we entered into negotiations to divest the U.K. valve business, Alco, which has significant exposure to oil and gas natural gas markets.\nAlco operations contributed $7 million of sales and $2 million of operating losses year-to-date, which have been included within the Process segment.\nBased on the negotiations to sell, our investment in Alco was revalued in the second quarter, and we recorded noncash impairment charges of $34 million after tax, including $24 million of previously unrecognized foreign currency translation losses recorded in accumulated other comprehensive income.\nThe $24 million loss reserve for previously unrecognized foreign currency translation is recorded in other current liability at the end of the second quarter and will be cleared through accumulated other comprehensive income in the third quarter, as the divestiture was finalized in early July.\nOur gross margin rate was 49.8% for the second quarter, approximately three percentage points below the second quarter last year.\nPrimarily due to the effect of product and channel mix, as sales in the Contractor segment increased, while sales in the Industrial and Process segments declined double digits and also due to lower factory volumes and changes in currency translation rates.\nRealized pricing was favorable.\nWithout recovery in sales volumes, unabsorbed factory costs will continue to weigh on gross margin rates in the second half, so strong realized pricing partially offsets the favorable effect.\nChanges in product and channel mix can affect gross margin rates.\nOur global procurement team has been working closely with our supply chain to keep our lines running throughout the quarter.\nGiven the growth in certain products in the Contractor segment, particularly products for the home center channel, the supply chain for some components is stretched and we are monitoring the situation closely.\nOperating expenses, excluding the effect of the impairment, decreased by $12 million from the second quarter last year, as reductions in volume and earnings based expenses more than offset higher product development costs.\nThe reported income tax rate was 31% for the quarter, 13 percentage points higher than the second quarter last year, primarily due to nondeductible impairment charges.\nAfter adjusting for the effect of the impairment and excess tax benefits from stock option exercises and other nonrecurring tax benefits, our tax rate was 19% for the quarter or one percentage point lower than last year.\nCash flows from operations totaled $143 million year-to-date as compared to $164 million last year as a result of lower revenues.\nCapital expenditures totaled $33 million year-to-date as we continue to invest in manufacturing capabilities as well as the expansion of several locations.\nCash dividends totaled $58 million year-to-date.\nWe also completed an acquisition for $27 million in the second quarter, which will be a part of the Process segment.\nFor the full year 2020 capital expenditures are expected to be approximately $80 million, including approximately $50 million for facility expansion projects.\nWe completed share repurchases of $17 million net of share issuances during the quarter, bringing our total share repurchases net of issuances to $62 million for the year.\nWe may make further opportunistic share repurchases going forward.\nA few final comments, looking forward to the rest of the year.\nOn Page 11 of our slide deck, we note our six-week booking average by segment.\nThese are the six-week average bookings through last week, July 17.\nBased on current exchange rates and the same volume and mix of products and sales by currency as last year, the effective exchange is currently expected to be negligible on sales and a headwind of approximately one percentage on earnings in 2020.\nUnallocated corporate expenses are expected to be approximately $30 million for the full year 2020 and can vary by quarter.\nThe effective tax rate is expected to be approximately 20% to 21% for the full year, excluding the effect of onetime items and any impact from excess tax benefits related to stock option exercises.\nAnd given the wild environment in the second quarter, I'll focus my commentary on our operational status, our strategic focus, sales trends as we progress through the quarter and make a few observations on end markets.\nOur major factories and distribution centers remained fully operational during the second quarter.\nHigh-risk employees remained at home, and we've dealt with the positive COVID-19 cases that we have experienced at various facilities without disruption.\nBy reducing our use of temporary labor in certain factories and flexing our workforce to areas of greater need, we've largely been able to survive the quarter without resorting to lay offs or pay reductions.\nWe had enough work in all of our major factories to keep our full-time people productive.\nOverall, I'm very pleased with the resolve our employees have shown and continue to show throughout this pandemic.\nConsistent with what we told you during the first quarter call, we've continued full speed on our growth initiatives.\nAny expense reductions in the second quarter were the result of variable expenses, such as rebates and incentives as well as reduced spending on travel and prudent discretionary expense management.\nSpending on our initiatives for 2021 and beyond have continued as usual.\nThis may put pressure on our short-term financial results, but will position us to capitalize when market conditions normalize.\nConsolidated order trends improved sequentially throughout the quarter.\nHowever, the improvement has not been consistent between the segments.\nAfter a terrible April, our Contractor business rebounded with a very strong June, resulting in low single-digit growth for the quarter.\nProfessional paint channel improved, as paint stores opened up to foot traffic.\nAnd the Home Center business has been on fire for most of the quarter, resulting in operational challenges to meet the demand spike.\nThe outlook for the Contractor business is positive for the second half of the year.\nOur Industrial business, on the other hand, experienced marginal improvement after the business tanked in April.\nAccess to customer facilities is slowly improving and quoting activity has increased in many sectors or we're yet to see a significant bounce back in orders.\nAutomotive is weak globally, industrial production is down, oil and gas is weak, and uncertainty continues to weigh in to weigh on the capital equipment appetite of most end users.\nThe outlook for Industrial remains cloudy, and I'm not overly optimistic about the second half.\nOur Process business didn't drop as severely in April.\nAnd despite being down double digits for the quarter, we've seen some positive end market trends.\nWithin this business, we have stronger end markets such as semiconductor and environmental and weaker end markets such as our lubrication business, which has performed comparably to our Industrial segment.\nWith a wide range of end market exposures, our outlook for the second half remains uncertain.\nI'm comfortable that our approach of continuing to invest in our growth strategies, such as new product and new market development, will position us nicely to drive strong results once things normalize.\nWe used a similar approach during the 2008, 2009 crisis and our investors were subsequently rewarded and we look to repeat this again.\n Assistant:", "chosen": "qtrly earnings per share $0.17.\nqtrly adjusted earnings per share $0.37.\n"}
{"prompt": "Human: I'm Patrick Suehnholz, Greenhill's head of investor relations.\nJoining me on the call today is Scott Bok, our chairman and chief executive officer.\nThese statements are based on our current expectations regarding future events that, by their nature, are outside of the firm's control and are subject to known and unknown risks, uncertainties and assumptions.\nFor a discussion of some of the risks and factors that could affect the firm's future results, please see our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.\nWe reported fourth-quarter revenue of $106.7 million, an operating margin of 39% and net income of $1.05 per share.\nFor the full year, we had revenue of $301 million, an operating margin of 15% and net income of $0.45 per share.\nOur quarterly revenue was up 20%, and earnings per share was up 133% from the same period last year.\nFor the full year, our revenue was down 14%, and earnings per share was down 68%.\nIn sum, we had a strong finish to the year, resulting in respectable full-year results on the top and bottom line, all consistent with our commentary on the past couple of quarterly investor calls.\nWhile industry data shows a decline in global transaction activity versus the prior year, and almost all of our competitors have reported declines in advisory revenue, the primary driver in our reduced revenue for the year was that lower revenue in Europe more than offset increases in revenue in North America, Australia and the rest of the world.\nBy type of advice, we benefited from significant improvement in restructuring advisory revenue relative to recent years as our recently enlarged team gained increasing traction throughout the year.\nOur capital advisory team had another strong performance though fell short of the prior year's record revenue level.\nAnd in M&A, results were relatively strong nearly everywhere other than in Europe.\nBy industry sector, we had good results in consumer products, financial services and media, offset by weaker results in energy, healthcare and technology.\nWith respect to costs, our compensation ratio for the year was 59%, slightly above our target level as a result of lower revenue for the year.\nFor the quarter, the compensation ratio was an unusually low 42% in order to offset unusually high ratios in the first two quarters of the year.\nOur management objective, as always, is to achieve a reasonable compensation ratio on a full-year basis while also ensuring that our team is appropriately compensated at competitive levels relative to their individual performance.\nOur non-compensation operating expenses for the quarter were $21 million, which was $3.7 million higher than the same period last year due to some foreign currency-related losses compared to gains the prior year along with a charge for an uncollectible account receivable from a client in financial difficulty.\nFor the year, our non-compensation operating costs were very similar to last year as the above-mentioned unusual costs were in aggregate about the same size of the unusual cost the prior year when we incurred an accounting charge related to the earnout on our acquisition of Cogent.\nWe continue to monitor non-compensation expenses closely and are hopeful to achieve a lower annual level in dollar terms in 2020.\nOur interest expense for the quarter was somewhat lower than for the same period last year as the incremental cost of an increased level of borrowing was more than offset by the impact of lower market interest rate and a lower coupon premium on our debt following our favorable refinancing early in 2019.\nWe expect our interest expense to continue to decline going forward.\nOur effective tax rate was 33% for the quarter and 40% for the year.\nOur tax rates for both periods were negatively impacted by the fact that we had a significantly lower than typical portion of our revenue and profit in lower tax rate jurisdictions, particularly the U.K., and a higher than typical portion of our revenue and profit in higher tax jurisdictions, particularly Australia and Brazil.\nOur rate for the year was also negatively impacted by an unfavorable difference between the grant price and market price on vesting restricted stock units.\nWe continue to expect a rate generally in the mid-20% range going forward.\nIn terms of capital returns, we've continued to aggressively repurchase shares given our view that the market is underestimating our earnings potential as well as the fact that our stock trades at a valuation multiple below that of our peers and far below its typical historic valuation multiple level.\nDuring the quarter, we purchased 1.5 million shares and share equivalents at an average price of $15.98 per share.\nFor the full year, we purchased 3.8 million shares and share equivalents at an average price of $18.04 per share.\nFor 2020, our Board has authorized $60 million in purchases of shares and share equivalents, which compares to $69 million we spent for such purchases during 2019.\nIn the quarter to date, we have repurchased 345,723 shares of common stock at an average price of $16.47 per share for $5.7 million in total, meaning we have repurchase authority of $54.3 million left for the remainder of the year.\nWe also declared a quarterly dividend for the quarter of $0.05 per share.\nWe ended the year with cash of $114 million and debt of $365.6 million, meaning we had net debt of $251.6 million.\nAs of yesterday, our cash balance was up to $133.9 million despite the incremental share repurchases in January with the debt amount unchanged.\nOur required principal payment obligations are modest until maturity of our debt in 2024.\nBut based on our business outlook, as described below, we are aiming for significant deleveraging during 2020 alongside the additional share repurchases referred to above.\nWe enter 2020 with a favorable outlook across all of our businesses.\nThe environment for M&A activity currently feels positive across the regions that performed well for us in 2019, and our current book of assignments in Europe indicates the potential for a very substantial rebound in revenue there this year.\nIn restructuring advisory, we ended 2019 with a much improved level of monthly retainer fees and a much larger backlog of assignments that should get to completion during 2020.\nRecent tightening of credit availability and increasing cost for borrowers with weaker credit ratings should also be a positive factor for this business.\nIn capital advisory, the continued growth of pools of private equity capital and the increased market liquidity available to chief investment officers that are invested in those funds should result in a continuing favorable operating environment for that business as well.\nI'll close with a few words on our strategy.\nWe remain focused on building a business with increasingly diversified revenue streams and greater aggregate revenue.\nThat was the purpose of our acquisition of capital advisory specialist Cogent Partners almost five years ago, that was the purpose of the recent expansion of our restructuring advisory team, that was the purpose of last year's expansion in Singapore and France, and that is the purpose of our continuing recruitment of M&A specialists across various industry sectors.\nRecruiting will continue to be key to our growth plans as well the continued development of talent internally.\nIn the past year, we added a net five client-facing managing directors, such that we have 79 today, and we increased our total professional headcount by 11%.\nWe have all the tools needed to continue to successfully implement our strategy.\nOur culture makes our firm a great place to work, leading to both recruiting success and very high retention rates for strong performers.\nOur brand for high-quality and independent advice has been built over decades of client service, and our team collectively owns 48% of the economic value of our firm through common stock and restricted stock and is, thereby, highly incentivized to generate strong results and create value for all shareholders.\nNow I'm happy to take any questions.\n Assistant:", "chosen": "compname reports q4 earnings per share of $1.05.\ncompname reports fourth quarter earnings per share of $1.05 and full year earnings per share of $0.45.\nq4 revenue $106.7 million versus refinitiv ibes estimate of $86.9 million.\nboard authorized up to $60 million of purchases of shares and share equivalents in 2020.\nqtrly earnings per share $1.05.\n"}
{"prompt": "Human: We certainly appreciate your time today and your interest in Graham Corporation.\nJoining me on the call are Dan Thoren, our president and CEO; and Jeff Glajch, our chief financial officer.\nYou should have a copy of the third quarter fiscal 2022 financial results, which just released a few minutes ago.\nIf not, you can access the release as well as the other slides that will accompany our conversation today at our website, grahammanufacturing.com, and I also want to point out that we also have now ir.\ngrahamcorp.com to access the investor information.\nThese documents can be found on our website or at sec.gov.\nDuring today's call, we will also discuss some non-GAAP financial measures.\nWe believe these will be useful in evaluating our performance.\nWe have provided reconciliation of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release and the slides for your information.\nI am starting on Page 3.\nAs you might imagine, having just assumed the role of CEO in September, reporting this fiscal third year -- third quarter's results is a little bit rough.\nRevenue has increased to $28.8 million, but we had a loss of $0.35 per share.\nThe loss was driven by Navy project cost overruns in our Batavia operations as a result of decisions we made during the quarter to ensure timely execution of our high-profile submarine and carrier projects.\nThe multiple decisions that led to the loss were for long-term gain over short-term pain and were not made lightly.\nOur Navy business is very important for our future.\nWe had to protect this business and ensure our customers knew we were committed to hitting their need dates, even though we took a significant financial hit in the quarter and over our fiscal year 2022.\nJeff and I will provide more detail on subsequent slides.\nAs a result of the quarter loss, we were out of compliance on our financial covenants, which required suspending our dividend.\nJeff will talk more about the waiver we obtained and the coming amendment of our credit facility.\nWhile this was a disappointing quarter and has been a very challenging year, we are deeply committed to our strategy to diversify beyond refining at petrochem with our defense work.\nThe pivot toward defense has been successful, as indicated by bookings and revenue.\nOur defense revenue is now over half our total revenue.\nWe had a huge bookings quarter at $68 million.\nOver half of these bookings were at Barber-Nichols.\nNow that we have the bookings, we have to execute this work profitably.\nFinal point on this page is that Barber-Nichols' performance is exceeding our expectations.\nThey are building a larger backlog and delivering strong margins.\nJeff will provide more detail in the financial discussion.\nBut first, I'd like to provide more detail on our Navy challenges in Batavia.\nWe'll move to Slide 4.\nSo let me first address what led up to our third quarter performance.\nTo date, Graham manufacturing has been very successful in winning the trust and confidence of the U.S. Navy and its prime shipbuilders with its high-quality heat exchange and vacuum products used in the nuclear Navy power plants.\nNavy orders and backlog continue to climb and have now significantly exceeded our commercial backlog and will soon exceed our commercial revenue.\nAs of December 31, 2021, our Navy backlog in Batavia was over $100 million.\nThose orders come with big expectations.\nAs we have worked over the last two years to continue to win new business and meet those expectations, a perfect storm brewed in our third quarter.\nThere were several events that led to our need to readjust in Q3.\nAfter getting started on Colombia, there was a Navy wide reset of quality requirements that caused delays with welder and quality recertification.\nThis was followed by the impact of COVID-19, the ongoing limited skilled workforce in the welding trades, and the sheer magnitude of work running through our shop combined with first article learning curve, all of these items caused us to get behind on our Navy jobs.\nWe do continue to have first article challenges.\nThis is quite typical with defense projects, and we would have expected this on the Columbia project.\nWe've reviewed this with you in the past.\nNow while the CVN-80 work is not a true first article job for us, the lack of process documentation from the previous work combined with severe labor challenges and use of contract welders new to the equipment caused challenges on the carrier work as well.\nEven as we work to catch up on hours, our equipment became the pacing item associated with our nation's most strategic ship and submarine build schedules.\nThe pressure to expedite was extreme.\nLet's turn to Page 5.\nThe chart on Page 5 shows our labor plan with blue bars, our actual labor, application in gray bars, and the resulting deficit of hours caused by actual being less than our planned hourly expenditure.\nThe depth of our deficit occurred around May of 2021.\nIn past calls, we talked about redirecting commercial welders to Navy and hiring contract welders to address this deficit.\nIn third quarter, we redirected even more commercial welders, outsourced more commercial work, hired more contract welders and even added some of our new welders that completed our training programs.\nThese actions help to reverse the Navy labor deficit, but they came at additional costs.\nOutsourcing commercial work results in less margin.\nWe also realized less third quarter revenue as the outsourced suppliers were not able to ramp up quickly.\nThe contract welder costs were high, the specialized training required by the Navy took a long time and retention of the contract welders was poor.\nUltimately, we've been able to reduce our Navy program labor deficit by doubling our Navy workforce, mitigating the schedule slips and keeping our customer relationship strong.\nThe deficit should be erased in the first half of fiscal '23, but we expect to start reducing high-cost contract welders as we enter the next fiscal year.\nIn the end, the actions we took to stay on track in the last quarter resulted in revising estimates on labor hours and material, and we booked loss conversion costs that were recorded in the quarter and impacted our results as well.\nJeff will cover that detail in the financial briefing.\nCertainly, we've learned a lot from this experience and have or will institute corrective and preventative actions to ensure that we continue to grow our Navy business and can deliver quality products in a timely fashion and earn a fair return for our efforts.\nOur customers have been very appreciative of our efforts and we do not see any negative consequences if we hold current deliveries.\nThis equipment is built into the bowels of these ships, and they will never come out.\nThus, quality is paramount and Graham has not disappointed.\nAs we catch up on these programs and reduce our labor deficit, we can reclaim margins by eliminating contract welders, reassigning our commercial welders back to our commercial product and reduce the outsourcing that we're doing today.\nOur people pipeline continues to be critical, and our welder training program will be continued.\nLooking back, we could have done a better job in predicting and mitigating the situation with better developed FP&A, financial planning and analysis, and project management skills.\nWe are adding new talent with defense expertise in Batavia to better manage these processes.\nIn fact, we're adding a new position and Batavia will have a Navy business leader beginning February 28.\nAs we look forward, our processes need to advance to enable our ability to document and optimize all of our fabrication processes to prevent a recurrence of this first article issues that we've seen.\nWe see opportunities to increase future profits with investment in time-saving automated welding, and we're evaluating current contract margins and revisiting pricing on future production opportunities.\nIn summary, our Batavia defense business was hit by a perfect storm at a very inopportune time.\nWe made decisions to protect our strategic Navy business.\nIt cost us in the short term, but proved our dedication to our customers for the long term.\nAs Dan mentioned, our third quarter performance was quite disappointing.\nSales were $28.8 million, up $1.6 million over last year's third quarter.\nBarber-Nichols contributed $12 million in sales in the quarter, helping to offset the weak sales quarter of our legacy Graham manufacturing business.\nOur Batavia operations were impacted because of its need to focus on catching up and executing the two large Navy projects.\nThose projects will both require more labor and material costs to complete that were projected at the start of the quarter.\nThe additional labor hours to complete the projects impacted the quarter's revenue since we did not move the projects as far along as expected.\nThe added labor and material costs, including the use of higher cost contract laborers required us to record increased reserves.\nThe sum of all these items impacted both revenue and gross margin.\nThe impact of the cost increases and required fully burdened contract costs in the quarter were $2 million.\nIn addition, the delayed revenue was approximately $6 million, and the delayed operating profit is approximately $750,000.\nFurthermore, to get back on schedule with the Navy projects, we reallocated our commercial labor to Navy work, which resulted in increases in cost estimates for those jobs, which have now been outsourced.\nAll of the above items contributed to an adjusted EBITDA of negative $2.6 million in the quarter and an adjusted net loss of $0.27 per share.\nOn the positive front, with the addition of Barber-Nichols, we had 58% of our sales to the defense industry, as well as 5% or $1.5 million to the space industry.\nIf we can move on to Slide 7.\nThe impact of the third quarter results on top of a challenging first half of the year have yielded an unacceptable loss even as sales increased 16% or $11.3 million to $83.1 million.\nThere is a bright light within the results, and this has been the contributions of Barber-Nichols, which we acquired on June 1.\nIn the seven months since the acquisition, BN has contributed $31.9 million in sales, offsetting significant declines in refining and petrochemical markets.\nIn fact, our diversification into defense, which is less cyclical than our commercial business, has resulted in 52% of our year-to-date revenue coming from that industry.\nThe shortfall in commercial sales in the first nine months of the fiscal year reflects the very low order levels, which we saw in the second half of fiscal 2021.\nThe two Navy projects in our Batavia operations will continue to convert over the next three quarters, and we expect this to be behind us by mid fiscal 2023.\nAs of December 31, we recorded all known expected costs on these large projects.\nWe are also implementing expanded processes within our project management group to better review all of Batavia's major projects.\nThe year-to-date impact of increased cost on these two jobs is approximately $4.5 million.\nIn addition, the delayed revenue was approximately $12 million and the delayed operating profit is an additional $1.5 million.\nThese latter amounts will be recognized over the next three quarters as the jobs are completed.\nWe've had to outsource more commercial work and have also had cost challenges on a couple of projects.\nThis, too, has impacted financial results.\nThe increased cost of outsourcing and higher costs has impacted the commercial business by $3 million.\nAll of the above items contributed to an adjusted EBITDA of negative $5.4 million year-to-date, and a year-to-date net loss of $0.70 a share and an adjusted loss of $0.60 per share.\nBarber-Nichols again, is a strong positive in the first three quarters.\nIn the seven months since the acquisition, BN sales are on track at $31.9 million, and EBITDA margins are well ahead of expectations.\nI have noted in previous calls, that we were expecting $45 million to $48 million in sales and low double-digit EBITDA margins.\nThe sales number is on target, and we are now seeing mid-teen EBITDA.\nIn fact, through seven months since the acquisition, BN has achieved our targeted EBITDA for the full fiscal year.\nSo its Q4 EBITDA will represent overachievement compared with our expectation.\nMoving on to Slide 8.\nAnd given the weak financial performance in the first three quarters, we have failed to meet our debt covenant related to debt-to-EBITDA and fixed cost charges.\nThis miss was due to the EBITDA loss.\nWe were given a waiver by our lender for Q3 and are proactively in negotiations to amend our existing bank agreement.\nBecause of the covenant misses, it was necessary to suspend our dividend.\nAnd as part of the waiver agreement, we have agreed not to utilize more than $15 million of our revolver.\nI want to be clear that the issues we are seeing are P&L profit issues and not liquidity issues.\nWe have sufficient liquidity from cash we are generating from operations to work through our challenges.\nIn fact, in January alone, lowered our revolver debt from $9.75 million to $6 million.\nWe expect to lower it further between now and the end of March.\nConversations with our lender have been very positive.\nI've been pleased with the bank's willingness to understand the details and not overreact to the numbers.\nThey understand the near-term challenges are primarily related to profitability and delayed revenue.\nWhile there are certainly some significant cost -- cash cost increases, the costs booked in Q3 and the elongation of project revenue and profit recognition into future quarters have doubled down the impact on our year-to-date P&L.\nThe bank and I both expect the lending amendment to be completed by the end of Q4.\nOnto Slide 9, some very good news on the order front.\nAs Dan noted, orders in Q3 were $68 million.\nJust over half of this came from Barber-Nichols, which most of their orders coming from key defense projects.\nThey also continue to bring in a nice level and variety of space orders.\nOn the commercial side, Graham manufacturing saw another strong quarter of aftermarket and short-cycle orders.\nThose are promising since historically, an increase in those areas has often been a precursor to a recovery in capital investment by our customers.\nWe also booked a significant refinery order in China.\nOur backlog at the end of Q3 is a record $272.6 million, with both Barber-Nichols and the legacy Graham business having a nice step-up in their respective backlogs during the quarter.\nDefense represents 77% of total backlog.\nThis defense backlog extends over the next 6 years, though much of it converts in the next three to four years.\nAdditionally, we are seeing growth in our commercial backlog.\nThe commercial backlog was quite low entering the fiscal year.\nIt has grown from $33 million at the end of March to $63 million now.\nAbout one-fourth of that increase occurred when we added BN, the rest was due to orders received in the first nine months of the year.\nAnother positive feature of the commercial backlog and its growth is that it has a much shorter conversion cycle than the defense backlog generally 12 to 18 months.\nWe've had a rough fiscal 2022, but the future looks far better.\nMoving on to Slide 10.\nWe have lowered our guidance for fiscal 2022.\nOur revenue guidance is now $120 million to $125 million, which implies $37 million to $42 million in Q4.\nWe expect a breakeven adjusted EBITDA in Q4.\nWhile this is below our prior expectations, it's far better than Q3 results, and we believe we have turned the corner on many of the challenges we have faced this fiscal year.\nI will now pass the call back to Dan to talk about our strategy going forward.\nWe are now on Slide 11.\nAt a high level, we have been talking about a strategic pivot toward defense for many years, and we have been making good progress.\nThe long-term visibility of strategic naval programs provide stability and an ability to invest intelligently in our business, and it offsets the cyclicality and challenges of our refining and petrochemical markets.\nThe acquisition of Barber-Nichols strengthened the strategy and brought additional market experience to our company.\nAs with any new venture, we have had some lessons learned and opportunities to further strengthen our strategy.\nI'd now like to give you some insight on how our strategy is evolving going forward.\nLet's turn to Page 12.\nGraham Corporation is a related group of mission-critical engineered product companies that win on superior quality, performance and customer trust.\nOur corporate role is to strengthen our member companies with best practices, leader rotation and board expertise while providing value-enhancing services and core in any collaboration to win large programs.\nIn fact, we are filling out critical leadership positions in upgrading talent for what the future of Graham Corporation requires.\nOur board took on this requirement themselves last year after the BN acquisition, and they began a search for director candidates with strong defense experience.\nOur Batavia operations, which we are referring to as Graham manufacturing, will continue to serve the Navy refining and petrochem markets with high-quality, highly engineered heat transfer and vacuum systems.\nIt is expanding into new energy and we'll now put more focus on aftermarket opportunities to be a life cycle partner with our customers.\nInternally, we are restructuring for significant Navy growth and we'll be leveraging our large installed base for growth capital.\nOur strengths will help us realize our goals.\nIn Batavia, we want to realize strong margin in all of our markets, improve our operational effectiveness and develop capabilities to provide more value to our customers.\nWe need to establish roles and responsibilities to align with the structure designed to be responsive analytical and forward thinking.\nAnd we need to create an organization that is accountable and that can diagnose problems, evaluate alternatives, improve, develop, reshape and quickly redirect as required.\nImportantly, we need to make sure our people are provided the tools, materials and information they need to do their jobs well.\nBarber-Nichols continues on its path of intelligent full life cycle turbomachinery systems in identified high-growth potential markets.\nBN has structured people, technology and customer relationships mostly in place.\nThey are moving to the next level in teams, processes and improvement to optimize business performance, while working even closer with customers developing new product to ensure year-over-year growth.\nOur future opportunities will be the result of proper execution of our plans that will get us beyond these short-term issues.\nWe believe this is the inflection point.\nWe have no doubt hit bottom.\nSo I am confident we can go up from here.\nI realize that we have to prove to you that we can drive earnings and generate cash.\nAs Jeff noted, we already have in the first month of 2022 -- in the first month of 2022, I'm sorry.\nAs we look to our future, we see the BN acquisition as a model that we will look to repeat.\nThere were several novel approaches utilized that we believe can entice the best and the brightest, small independent companies to join us.\nWe are an organization in the midst of dynamic change.\nWe serve great markets.\nWe have the confidence of the customer.\nWe have the orders and the backlog to prove it.\nWe have been challenged on execution, but have identified the issues and put corrective actions in place.\nWe have a plan for growth.\nWe believe we have a strong business model with excellent earnings, power and cash generation.\nWhile we have several quarters of work to get these projects out the door, we are on the upward trend of the curve.\nAnd then Jeff and I will answer questions from the audience.\n Assistant:", "chosen": "compname reports q3 loss per share $0.35.\nq3 loss per share $0.35.\nsees q4 revenue $37 million to $42 million.\nqtrly revenue of $28.8 million, up 6% over prior-year period.\n"}
{"prompt": "Human: Those risks include, but are not limited to, risks associated with pricing, volume, conditions of markets, adverse developments in the global economy as well as the public health crisis related to COVID-19 and resulting impacts on demand for new and used vehicles and related services.\nUncertainty regarding the duration and the severity of COVID-19 and its impact on U.S. and international authorities to ease current restrictions on various commercial and economic activities.\nUncertainty regarding the timing, pace and extent of an economic recovery in the U.S. and elsewhere from the unknown current and future impacts of COVID-19 and unknown future impacts of oil producers and the effects of such can have on travel, transportation, oil prices, which, in turn, will likely adversely affect demand for our vehicles and service.\nAlso, our ability to obtain an inventory desire for new and used vehicles and the impact of supply change disruptions, which may occur from time to time.\nAlso, our ability to maintain vehicle margins and implement and maintain expense controls and maintain sufficient liquidity to operate.\nThose risks and other risks are described in the company's filings with the Securities and Exchange Commission over the last 12 months.\nCopies of these filings are available from both the SEC and the company.\nAs required by applicable SEC rules, the company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website.\nI'd now like to take the time -- to take -- hand the call over to Earl.\nI'm pleased to report that for the quarter, Group one generated adjusted net income of $103 million.\nThis equates to adjusted earnings per share of $5.57 per diluted share, an increase of 236% over the prior year and an increase of 170% over the pre-pandemic first quarter of 2019.\nOur adjusted net income results exclude noncore items of $1.7 million of after-tax disaster pay provided to employees who couldn't work during our February Texas store closures partially offset by an $800,000 after-tax benefit from legal settlements and a $200,000 after-tax net gain on dealership and real estate transactions.\nThese profit results were particularly impressive given the fact that our Texas operations, which typically represent around 40% of our total revenues, were severely impacted due to a record-setting February winter weather event.\nOur stores effectively lost about the equivalent of a full week of business.\nIt is likely that vehicle sales were largely deferred into subsequent months, but the available service shop hours were permanently lost.\nAlso the U.K. remained under lockdown throughout the entire first quarter.\nWith so many restrictions in all our markets in 2020, it was difficult to generate revenue growth.\nThis improvement was driven by new and used vehicle revenue increases in the U.S., of well over 20% in the first quarter.\nOf course, we should remember that the pandemic did start to negatively impact traffic and sales during the second half of March last year.\nBut the important fact is that consumer demand for vehicles in the U.S. remains extremely strong and hit an even higher year in March.\nIt is true that sales have and will be hampered to a certain degree by low inventory levels.\nBut this continues to support above-average margin levels.\nDaryl will speak more about our inventory situation shortly.\nOur aftersales business has suffered throughout the pandemic from less driving and a variety of lockdown conditions in all our markets.\nIn particular, our U.S. business started 2021 very slowly in January and February, but exploded in March.\nAgain, Daryl, will provide more detail, but this gives us great confidence that we will enjoy very strong parts and service business this spring and summer in both the U.S. and also likely the U.K. as those facilities are now completely open.\nIn the U.S., we are especially pleased that our service results have now returned to pre-pandemic levels.\nOn a same-store basis, our U.S. total aftersales gross profit increased 3% versus the first quarter of 2019, and customer paid gross profit increased 14% over that same pre-pandemic time period.\nThese are very encouraging signs for continued aftersales improvement in 2021.\nDaryl will provide more detail on our U.S. results in a moment.\nRelative to the U.K., mandatory lockdowns began on November 5, 2020, and lasted through the entire first quarter.\nThey have since been lifted as of April 12.\nLike the U.S., our U.K. operations have shifted heavily to online selling via our Acceleride platform since our showrooms have been closed for five months.\nDespite not having the benefit of physical sales departments, or the ability to conduct test drives, we were able to deliver over 13,000 new and used vehicles during the quarter.\nLimited new vehicle availability increased our same-store new vehicle margins by 160 basis points to 5.6% during the first quarter.\nOur aftersales margin increased by almost 400 basis points to 58.4% as most service work at our dealerships was heavy repair work as customers chose to defer routine maintenance until after the lockdown.\nThe strong new vehicle and aftersales margins combined with strong cost discipline, evidenced by an 1,800 basis point same-store SG&A improvement over last year, enabled us to generate a meaningful level of profit in the U.K. despite closed showrooms.\nAs we were permitted to open showrooms again on April 12, we've seen very strong sales and service traffic levels back in our dealerships.\nThis gives us a high level of confidence in our U.K. business during the remainder of 2021.\nA number of factors contributed to our outstanding U.S. first quarter results, namely, new and used vehicle sales growth, aftersales growth and continued strong cost discipline, all of which are a continuation of the trends from the second half of 2020.\nCompared to the pre-pandemic first quarter of 2019, our same-store new and used unit sales increased by 11% and 5%, respectively.\nThis 11% increase in new outperformed the retail industry.\nU.S. new vehicle inventory levels finished the quarter at 14,500 units, of 34 days supply.\nWe anticipate inventories remaining tight and we'll continue to adjust our operations as necessary.\nOur same-store used vehicle unit sales improved sequentially by 14%, along with a 5% growth over the first quarter of 2019.\nUsed inventories remain constrained as well.\nHowever, we've made a number of changes in our merchandising, sourcing, reconditioning and acquisition processes that have resulted in higher velocity and better inventory return.\nAlthough we are around record high monthly levels of 90 units sold core rooftop, in the quarter, we continue to believe there is a great deal of opportunity in used vehicles in our dealerships going forward.\nThe second and most encouraging profit driver was our aftersales performance.\nWarranty and collision sales were still very depressed in January and February, but we saw improvement in March.\nOur customer pay business is very strong.\nAs Earl mentioned, our same-store CP customer pay gross profit was up 14% versus the first quarter of 2019.\nThis allowed us to grow total aftersales gross profit by 3% versus pre-pandemic levels, despite the significant headwinds in warranty and collision, both of which will reverse in time.\nWe saw a significant expansion in gross profit per repair order in the quarter, offsetting RO declines.\nIn March, traffic counts increased and our same-store customer pay RO count grew 23% versus March of 2020.\nWe foresee aftersales continuing to ramp-up in the near term.\nThe third major factor driving our outstanding profit performance was continued cost discipline.\nOur first quarter adjusted SG&A as a percentage of gross profit was 63%, down from 74% in the pre-pandemic first quarter of 2019.\nPart of the decline is certainly due to higher vehicle margins, which we don't believe to be fully permanent, but a material part of the improvement is due to productivity gains.\nFor example, because of tools like Acceleride, our salespeople are more productive.\nBecause of our mix, the higher mix of flat rate techs, our techs are more productive.\nThese examples of permanent productivity gains will allow for us a significant ongoing reduction in our cost structure.\nI would like to provide another quarterly update on Acceleride, our digital retailing platform.\nWe continued our upward trajectory in the first quarter by selling a record 4,000 vehicles through Acceleride, an increase of 124% over the prior year and 7% of total retail units sold.\nCustomers choosing Acceleride continue to close at a much higher rate than our other sources.\nAdditionally, I would like to share with you a number of enhancements we have made or will make soon to the Acceleride platform.\nFirst, we've integrated real-time loan payoff quotes within the platform.\nSecond, we launched an Android App in addition to our existing Apple App.\nThird, customers now have the ability to toggle between English and Spanish.\nAnd fourth, in addition to be able to reserve a vehicle with a credit card, customers also now have the ability to process down payments for any amount directly through the app.\nAnd fifth, over the next couple of months, we will introduce dynamic delivery fees live within the customer workflow.\nThis will introduce delivery fees earlier in the process and include them in the monthly payment calculation based on the customer's delivery address.\nWe're also working through numerous other enhancements and will provide future updates as appropriate.\nWe believe our digital retailing process is second to none in the industry, and we continue making improvements to remain at the forefront of this transformative technology.\nTurning quickly to Brazil.\nDespite a 7% decline in new vehicle industry sales driven by tight inventories and additional COVID lockdowns, our team did a tremendous job of growing margins and aggressively thinning the cost structure in order to realize a very strong quarterly profit in what is seasonally the weakest quarter of the year.\nWe easily set a record for the most profitable first quarter over the entire eight years of Group 1's ownership and are well positioned to benefit from a sales rebound coming out of the pandemic.\nAs of March 31, we had $83 million of cash on hand and another $245 million invested in our floorplan offset accounts bringing total cash liquidity to $328 million.\nThere was also another $283 million of additional borrowing capacity on our U.S. syndicated acquisition line bringing total immediate liquidity to over $600 million.\nWe also generated $157 million of adjusted operating cash flow in the first quarter and $134 million of free cash flow after backing out capex.\nOur rent adjusted leverage ratio as defined by our U.S. syndicated credit facility which reduced to two times at the end of March, leaving plenty of flexibility for capital deployment.\nOn a net basis, which considers all U.S. cash on hand, our leverage was 1.6 times as of March 31.\nFinally, related to interest expense.\nOur quarterly floorplan interest of $7.6 million was a decrease of $5.3 million or 41% from the first quarter of 2020.\nThis decline was primarily driven by lower inventory levels and related borrowings.\nNon-floorplan interest expense decreased by $4.3 million or 24% from prior year, primarily due to the last year's bond debt refinancing.\nAs a reminder, we continue to manage our interest risk conservatively.\nWe have floorplan swaps averaging $550 million in place through 2026.\nWe also considering our mortgage swaps on bond debt, over 75% of our debt is at fixed rates.\nAs a result, a 100-basis point increase in interest rates would only have an approximate $0.20 negative impact on our annual EPS.\nOur balance sheet and liquidity position have never been stronger, and we look forward to growing the company through M&A.\nWe are seeing a strong flow of potential deals and anticipate closing or entering into contracts to acquire additional dealerships this year.\nRelated to our corporate development efforts, we previously announced the March acquisition of two Toyota franchises on Cape Cod that increased our new England platform to 10 stores and will contribute $120 million in incremental annual revenues.\nWe also previously announced the January dispositions of the Cadillac franchise in the Dallas-Fort Worth market area and a mini franchise in the El Paso market.\nWe've also since completed the termination of the U.K. Ford franchise in March and the disposition of a Mississippi Kia franchise in April.\nAs Daniel mentioned, we continue to prioritize external growth in our capital allocation process and we're optimistic that we will have beneficial opportunities as the year progresses.\n Assistant:", "chosen": "compname announces record first quarter 2021 financial results.\nq1 adjusted non-gaap earnings per share $5.57.\ncompname says q1 revenue increase driven by u.s. new and used vehicle revenue growth of more than 20 percent.\nquarterly new vehicle revenue increased 15.0 percent, on a 4.3 percent increase in unit sales.\n"}
{"prompt": "Human: These risks are discussed in Halliburton's Form 10-K for the year ended December 31, 2020, Form 10-Q for the quarter ended June 30, 2021, recent current reports on Form 8-K, and other Securities and Exchange Commission filings.\nOur comments today also include non-GAAP financial measures that exclude the impact of special items.\nLast quarter, we discussed a longer view of a recovering market and our confidence in a multi-year upcycle.\nI am pleased that the steady march of activity and Halliburton's performance in the third quarter internationally and in North America, all reinforce our enthusiasm today and for what we expect in 2022 and beyond.\nOur results demonstrate the effectiveness of both our strategy and our execution as the market recovery accelerates.\nHere are some highlights.\nTotal company revenue increased 4% sequentially, with top-line improvements across all regions, while adjusted operating income grew 6% with solid margin performance in both divisions.\nOur completion and production division revenue grew 4%, driven by increased global activity.\nOperating margin was essentially flat in the third quarter as we made operational choices to prepare for higher demand for our services in 2022.\nOur drilling and evaluation division revenue grew 4%, with increased activity across multiple regions.\nOperating margin of 11% was about flat sequentially.\nNorth America revenue increased 3% as growth in US land was partially offset by a decline in our Gulf of Mexico business due to Hurricane Ito.\nInternational revenue grew 5% sequentially, in line with the international rig count growth.\nOur year-to-date free cash flow generation of almost $900 million puts us solidly on track to deliver our full-year free cash flow objective.\nFinally, we retired $500 million of our long-term debt and ended the quarter with $2.6 billion of cash on hand.\nAs this upcycle unfolds in both the international and North America markets, Halliburton is executing on our strategy to deliver profitable growth and generate industry-leading returns.\nIn the international markets, third-quarter activity momentum continued, and I believe it will accelerate into year end and support mid-teens second-half revenue growth compared to the second half of last year.\nThis expected outcome is better than we anticipated a quarter ago.\nIn the third quarter, we started long-term projects across all regions in spite of COVID-19 interruptions.\nWhile mobility restrictions and daily precautions remain in place, business activity around the world has adjusted and continues to improve.\nIn the Middle East, countries relaxed border restrictions and OPEC members prepared for activity increases.\nWe started to work on several rigs, offshore UAE, mobilized a workover project in Bahrain and completed multiple ESP installations on our artificial lift contract in Kuwait.\nWe expect the Middle East to exit the year with solid activity momentum.\nIn Asia Pacific, we launched operations on an integrated project offshore Malaysia, with full implementation of Halliburton's digital well construction capabilities.\nWe also ramped up for an increase in our Indonesia drilling operations, where the local NOC plans to boost production from its assets.\nIn Europe/Africa/CIS region, the start of operations on a 23-well offshore integrated development campaign for Woodside and Senegal marked a new country entry for Halliburton.\nIn Russia, we are mobilizing for a multi-year IOC-operated project on Sakhalin Island.\nIn the UK sector of the North Sea, work continues on several new development drilling and workover projects for local independent operators.\nFinally, Latin America delivered its best quarterly performance since 2015.\nWe spudded the first well on a three-year integrated project in Brazil, deployed our new drilling technologies on multiple wells in Argentina and prepared to mobilize for new work in Ecuador and Colombia.\nIn addition to contract start-ups, our pipeline of new tenders continues to grow.\nWhile large Middle East tenders and Latin America projects receive most of the headlines, Customers in Africa, Russia, and Southeast Asia, among others, are also issuing tenders for new work.\nAll of this points to increasing international customer urgency and demand for our services.\nLet me describe what I am seeing that gives me this conviction.\nGlobal supply and demand balance continues to tighten, resulting in a strong commodity price environment.\nIn response, asset owners are eager to reverse baseline production declines caused by multiple years of underinvestment.\nWe expect that NOCs and other operators with short-cycle production opportunities will commit additional capital and gain share to meet future oil demand.\nAdditionally, new fields are smaller and more complex where customers work harder to produce more barrels.\nFinally, as mature assets change hands, new owners move quickly to revitalize the assets they acquire and unlock remaining reserves.\nThey require service partners who can deliver proven technology and decades of experience.\nAll of these things have one thing in common: they require higher service intensity, more dollars spent on the wellbore rather than on infrastructure.\nAs the international recovery accelerates, we remain committed to a clear strategic priority, deliver profitable growth.\nAnd we had unique competitive advantages to deliver on this priority.\nWe have the established footprint, geographic presence, and customer and supplier relationships to capitalize on growth.\nWe have a strong presence in all major international markets.\nThe substantial majority of our workforce is local.\nAnd within the regions where we operate, our supply chain spend is primarily with local suppliers.\nWe have proven capabilities to ramp up our services as customers enter new markets.\nWe demonstrated this in Guyana, Suriname and, most recently, in Senegal.\nThe Halliburton team mobilized personnel and built a multifunctional operational base to support Woodside as we embark together on a development campaign offshore Senegal.\nWe also engineer innovative solutions both digital and hardware to meet the complex reservoir challenges faced by our international customers.\nFor example, in well construction, this quarter, we introduced the iStar comprehensive measurement platform.\nThis next-generation intelligent platform provides multiple logging and drilling measurements that enabled reservoir evaluation, faster drilling, and consistent well delivery.\nFor multiple customers in the Middle East and North Sea, the iStar platform provides insight into the impact of drilling parameters on wellbore conditions and optimizes the drilling process in real time.\nIn completions, we are the global leader in downhole completion solutions.\nAs our customers increase their activity, our e-completions ecosystem integrates manufacturing, digital twins, and technology development processes to increase our speed to market for these long lead complex systems.\nIn many regions, as customers drive for better performance in the face of increasing operational challenges, I expect adoption of integrated and bundled contracts will continue to grow.\nHalliburton has strong project management capabilities and a proven track record that deliver efficiencies and reduce total customer cost of ownership.\nOur digital innovations reframe customer project economics through greater efficiencies and improved decision-making.\nFor example, in the third quarter, we deployed our Well Construction 4.0 digital solution to deliver further operational efficiencies for our customer in the Middle East.\nFinally, our customers calling us for collaboration from an IOC looking to reduce emissions on its operations in Mexico to a European independent working to remotely monitor and control all of its global drilling operations.\nHalliburton's value proposition to collaborate and engineer solutions to maximize asset value for our customers is working for both our customers and Halliburton.\nNow turning to North America.\nThe bifurcation between public and private company activity continued in the third quarter.\nPublic E&Ps remain committed to their spending plans for 2021 while private operators continue to take advantage of a strong commodity price environment.\nAs expected, completions growth moderated in the third quarter as operators shifted their focus from completions to drilling activity.\nJust like in the international markets, customer urgency and demand for our services keep growing in North America.\nDrilled but uncompleted well counts reached the lowest level since 2013 as operators depleted the surplus of DUCs accumulated in 2020.\nWe expect customers to drill and complete more new wells to offset steep base decline rates and deliver production into an anticipated attractive market next year.\nCompletions equipment availability is tightening.\nCustomers have responded by starting the 2022 tender process earlier in an attempt to lock in access to quality services for next year's programs.\nPrivate companies now operate about 60% of the US land rig count, and current commodity prices provide a strong incentive for their activity to expand.\nOur market-leading position in North America is rooted in the groundbreaking technologies we put to work in this market.\nWe are the only fully integrated service provider in North America, and this gives us a unique competitive advantage.\nWe combine the full breadth of our technology disciplines, geosciences, physics, chemistry, material science, and mechanical, electrical, and software engineering to deliver innovative solutions at scale around the world and uniquely in North America to maximize production and minimize costs.\nOur SmartFleet intelligent fracturing service has transitioned from pilot to campaign mode.\nSeveral large operators today have SmartFleet working on multi-pad completion programs.\nSmartFleet, for the first time, allows operators to measure treatment placement in real time, which, among other things, has demonstrated up to 30% improvement in cluster uniformity.\nIn the third quarter, we introduced the IsoBond Cement System and pumped it for multiple customers in the DJ Basin and in the Marcellus Shale.\nBy removing liquid additives, this dry blended cement provides significant operational efficiencies and lowers capital requirements for land operations.\nTaking advantage of the increasing demand for our services require strategic execution on many fronts, particularly in the current environment of stretched supply chains, tight labor, and inflationary pressures.\nAgainst that reality, I believe that Halliburton is best prepared to provide reliable execution for our customers.\nOur sophisticated supply chain organization translates Halliburton's size and scale into real savings for us and our customers.\nWe are seeing that in action as our supply chain delivers what our customers require for their projects.\nThe labor market is tight today.\nWe have seen this situation before, and our human resources team knows how to navigate it.\nOver the last few years, we compressed our onboarding time, strengthened our national recruiting network and use digital solutions to significantly reduce our field personnel requirements.\nDespite real challenges, we have the scale, speed, and systems to recruit talent nationally and quickly deploy it for our customers.\nIn logistics, we have ready access to a fleet of drivers to make deliveries to the job site.\nWe expanded our collaboration with Vorto, an artificial intelligence supply chain platform.\nOur early adoption of Vorto's platform that connects drivers, asset owners, and maintenance yards, allows us to effectively manage trucking inflation and availability constraints.\nNow let me spend a few minutes on our activity and pricing outlook for 2022.\nFirst, in the international markets and then in North America.\nNext year, we expect international activity momentum to accelerate an international leading-edge pricing to move upward in pockets as a result of higher activity.\nThis is what we are seeing today.\nLarge tenders remain competitive, but we are already seeing modest price increases on discrete work in underserved markets.\nWe see increasing customer demand for Halliburton's high-end technology and a recognition of its value.\nFinally, as a result of lower spending by service companies for more than half a decade, international markets face tightening equipment supply.\nTo meet these demands, we are strategically reallocating assets to drive improved utilization and returns.\nLet me be clear.\nHalliburton prioritizes profitable growth internationally, and this will drive our capital allocation decisions to the best returning product lines, geographies, and contracts.\nIn North America, we expect customer spending to increase in and around 20% next year, including solid net pricing gains.\nMany factors drive that spending and pricing, including customer urgency, equipment tightness, and the desire to align with a reliable and differentiated service provider like Halliburton.\nLast quarter, we highlighted the pricing traction that exists for low emission equipment.\nToday, as we tender for 2022 work, we're seeing price increases for the rest of our fracturing fleet as well.\nNet pricing has also increased across different nonfrac product service lines: drilling, cementing, drill bits, and artificial lift.\nTo generate the highest returns as this market grows, we are taking steps to maximize the value of our North America business.\nSpecifically, we are repositioning our fracturing fleets to customers in areas where we can maximize returns in 2022, securing longer-term premium pricing contracts for our existing and planned electric fleets and accelerating fleet maintenance and deployment of the next-generation fluid end technology, which extends the life of our equipment.\nHalliburton is committed to North America, and I expect we will benefit more than others as activity and pricing momentum accelerates across the board.\nNext, let me turn to how we are executing on our strategic priority to advance a sustainable energy future.\nAs we are witnessing now and saw in the third quarter, the world requires a greater supply of oil and gas.\nAs an oilfield services company, we have the core competency to help our customers to deliver the supply in the most efficient and technologically advanced ways possible.\nWith our customers, we are bringing our technical expertise and over a century of industry experience to actively participate in the transition to a cleaner economy.\nOne of the most meaningful contributions we can make today to this transition is to help our customers reduce emissions from their existing production base.\nEmissions reduction is a critical part of our technology development process, and our innovative low-carbon solutions are helping oil and gas operators reduce their carbon footprint.\nHalliburton's electric fracturing solution delivers results now for our customers.\nIn the third quarter, Halliburton completed an all-electric pad operation on a multi-year contract with Chesapeake Energy in the Marcellus Shale.\nWe deployed our electric fracturing spread with electric blending, wireline and ancillary equipment and an advanced power generation system from VoltaGrid.\nThis high-performing solution reduced Chesapeake's emission using over 25 megawatts of lower-carbon power generation from Chesapeake's local field gas.\nWe are collaborating with an IOC in Mexico on their total carbon footprint reduction because we provide both well construction services and logistics services on this contract.\nWe changed supply boat fueling mechanisms and optimized usage to achieve emissions reductions in the first year of operations.\nWe are now using a similar contract structure to collaborate with this IOC on its other projects in Latin America.\nWe are also advancing renewable energy solutions through Halliburton Labs, our clean energy accelerator.\nIn the third quarter, we doubled our size by increasing the number of Halliburton Labs companies from four to eight, welcoming Alumina Energy from California, Ionada from Ontario and Parasanti and SurgePower Materials from Texas.\nWe help these companies scale their exciting technologies from innovative energy storage solutions to modular carbon capture systems.\nIn September, Halliburton Labs hosted its third finalist pitch day featuring nine early stage companies and an audience of several hundred entrepreneurs, investors, academics, and other professionals looking to engage with companies that advance cleaner, affordable energy.\nThe Halliburton Labs participants are achieving results.\nEnexor Bioenergy completed a $10 million Series A round of financing.\nEnexor's patented modular system uses locally sourced organic or plastic waste to generate clean on-site energy even in the most remote and inaccessible location.\nOther accelerator participants achieved important scaling milestones in the third quarter.\nWith both current and expected demand increases, Halliburton remains committed to the priorities we set in 2020.\nWe prioritized profitable growth and returns, remain focused on capital efficiency and are keeping our overall capital investment in the range of 5% to 6% of revenue.\nI'm excited about the multi-year upcycle we see in front of us.\nI believe our value proposition, technology differentiation, digital adoption, and capital efficiency will allow us to deliver profitable growth internationally and maximize value in North America.\nHalliburton will continue to execute our key strategic priorities to deliver industry-leading returns and strong free cash flow for our shareholders.\nLet me begin with a summary of our third-quarter results compared to the second quarter of 2021.\nTotal company revenue for the quarter was $3.9 billion and adjusted operating income was $458 million, an increase of 4% and 6%, respectively.\nDuring the third quarter, Halliburton closed the structured transaction for our North America real estate assets that I described earlier this year, which resulted in a $74 million gain.\nWe also discontinued the proposed sale of our pipeline and process services business leading to a depreciation catch-up related to these assets previously classified as assets held for sale.\nAs a result, among these and other items, we recognized a $12 million pre-tax charge.\nNow let me take a moment to discuss our division results in more detail.\nStarting with our completion and production division, revenue was $2.1 billion, an increase of 4%, while operating income was $322 million or an increase of 2%.\nThese results were driven by increased activity across multiple product service lines in the Western Hemisphere, higher cementing activity in the Middle East/Asia region as well as increased well intervention services in the Europe/Africa/CIS region.\nThese improvements were partially offset by reduced completion tool sales in the Eastern Hemisphere, lower stimulation activity in the Middle East/Asia region, and accelerated maintenance expenses for our stimulation business in North America, which related to upgrading our fluid end technology in preparation for the anticipated market acceleration that Jeff described earlier.\nIn our drilling and evaluation division, revenue was $1.7 billion or an increase of 4%, while operating income was $186 million or an increase of 6%.\nThese results were due to improved drilling-related services internationally and in North America land, additional testing services, and wireline activity across Latin America, along with increased project management activity in Mexico and Ecuador.\nPartially offsetting these increases were reduced drilling-related services in Norway and the Gulf of Mexico.\nMoving on to our geographic results.\nIn North America, revenue increased 3%.\nThis increase was driven primarily by higher well construction, artificial lift and wireline activity in North America land, increased completion tool sales in the Gulf of Mexico and additional stimulation and drilling activity in Canada.\nPartially offsetting these increases were reduced drilling-related, wireline, and stimulation activity in the Gulf of Mexico as a result of the impact from Hurricane IDA.\nTurning to Latin America.\nRevenue increased 17% sequentially.\nThis improvement was driven by increased activity in multiple product service lines in Argentina, Mexico, and Brazil as well as higher well construction services in Colombia and improved project management activity in Ecuador.\nThese increases were partially offset by reduced fluid services in the Caribbean.\nIn Europe/Africa/CIS, revenue was essentially flat sequentially.\nThese results were driven by higher well intervention services across the region, increased well construction services and completion tool sales in Nigeria, additional pipeline and fluid services in Russia and increased activity across multiple product service lines in Senegal.\nThese improvements were offset by decreased activity across multiple product service lines in the North Sea and Algeria and lower completion tool sales in Angola.\nIn the Middle East/Asia region, revenue increased 2%, resulting from improved well construction activity in the Middle East and Australia.\nThese improvements were partially offset by lower completion tool sales across the region, along with reduced wireline and stimulation activity in Saudi Arabia, lower project management activity in India and lower stimulation activity in Malaysia.\nIn the third quarter, our corporate and other expense totaled $50 million.\nFor the fourth quarter, we expect our corporate expense to moderately increase.\nNet interest expense for the quarter was $116 million.\nIn the third quarter, we retired $500 million of 2021 senior notes using cash on hand.\nAs a result, our net interest expense in the fourth quarter should decline modestly.\nOur effective tax rate for the third quarter came in at approximately 24%.\nBased on our anticipated geographic earnings mix, we expect our fourth quarter effective tax rate to be approximately 22%.\nCapital expenditures for the quarter were approximately $190 million.\nIn response to higher demand for our services in both international and North America markets, we are pulling forward spending on long lead time items for our premium equipment and now expect our full-year capital expenditures to be closer to $800 million for the full year.\nTurning to cash flow.\nWe generated approximately $620 million of cash from operations and almost $470 million of free cash flow during the third quarter.\nI am very pleased with our working capital performance this quarter as we delivered net cash proceeds from working capital despite our revenue growth.\nNow let me describe our near-term outlook.\nIn North America, we expect moderate pricing and activity improvements in drilling and completions to drive sequential growth.\nIn the international markets, we expect continued improvement in rig counts, the pace of which will vary across regions.\nAs a result, for our completion and production division, we anticipate mid-single-digit revenue growth sequentially, with operating margins expected to expand by approximately 50 basis points.\nThe higher year-end completion tool sales will be partially offset by seasonal North America land activity impacted by the holidays and lower efficiency levels typically experienced in the winter months.\nIn our drilling and evaluation division, we anticipate sequential revenue growth of 5% to 7% and a margin increase of 150 to 200 basis points due to seasonal software sales and higher overall global activity.\nTo summarize our discussion today, Halliburton is on track to deliver strong results and our financial commitments for this year.\nWe see customer urgency and demand for our services increasing internationally and in North America.\nWe expect to benefit from the accelerating recovery and deliver profitable growth in the international markets and maximize value in North America.\nWe prioritize our investments to the highest returns opportunities and are committed to capital efficiency.\nAs our forward outlook unfolds, we expect to deliver strong free cash flow and industry-leading returns for our shareholders.\n Assistant:", "chosen": "q3 revenue $3.9 billion versus refinitiv ibes estimate of $3.92 billion.\ncompletion and production revenue in q3 of 2021 was $2.1 billion, an increase of $88 million, or 4%, when compared to q2 of 2021.\ndrilling and evaluation revenue in q3 of 2021 was $1.7 billion, an increase of $65 million, or 4%, when compared to q2 of 2021.\nnorth america revenue in q3 of 2021 was $1.6 billion, a 3% increase when compared to q2 of 2021.\ninternational revenue in q3 of 2021 was $2.2 billion, a 5% increase when compared to q2.\n"}
{"prompt": "Human: Last night, we reported results and posted all of the earnings-related materials on our website.\nFor the call today, our speakers are Chris Swift, Chairman and CEO of The Hartford; Beth Costello, Chief Financial Officer; and Doug Elliot, President.\nJust a few final comments before Chris begins.\nThese statements are not guarantees of future performance, and actual results could be materially different.\nA detailed description of those risks and uncertainties can be found in our SEC filings.\nOur commentary today include non-GAAP financial measures.\nExplanations and reconciliations of these measures to the comparable GAAP measure are included in our SEC filings as well as the news release and financial supplement.\nFinally, please note that no portion of this conference call may be reproduced or rebroadcast in any form without The Hartford's prior written consent.\nLast quarter, I shared that I had never been more excited about the future of The Hartford.\nOur second quarter results support that optimism.\nAll the components of our strategy are coming together to deliver growth, margin expansion and operating efficiencies.\nIn the second quarter, we reported core earnings of $836 million or $2.33 per diluted share; 8% growth in year-over-year diluted book value per share, excluding AOCI; and a trailing 12-month core earnings ROE of 13.1%.\nIn addition, we returned $694 million to shareholders in the quarter from share repurchases and common dividends.\nThe outstanding financial performance of The Hartford reflects strong execution and success of our strategy to focus on high-return businesses where we have market leadership and sustainable competitive advantages.\nEconomic growth, as measured by GDP, reached a record level in the second quarter.\nAnd while moderation is expected, the overall trend will remain elevated through 2021.\nThis economic expansion will grow the premium base of our employment-centric businesses and other lines as they benefit from job creation and new business formations.\nMeanwhile, we are closely monitoring the recent elevated inflation data and remain confident that our loss ratio assumptions are sufficient against this backdrop in 2021.\nAt the same time, we are considering pricing actions as we gauge inflation trends going forward.\nFinally, our investment portfolio is well diversified and positioned for the evolving macroeconomic environment.\nAs we enter the second half of '21, while watching developments with COVID-19 and inflation, I am very confident that The Hartford franchise has never been better positioned to continue to generate industry-leading returns and enhance value for all our stakeholders.\nLet me now make some high-level comments about the results within the business.\nIn Property & Casualty, improved results were driven by higher investment income and a very strong contribution from Commercial Lines with double-digit top line growth, underlying margin expansion and reduced COVID impact.\nFor nearly 40 years, we have been a leader in the small commercial market and have consistently generated highly profitable margins.\nResults continue to be exceptional.\nOur differentiated products and digital capabilities are driving a superior customer experience, which contribute to higher written premium levels as we capture more profitable market share.\nFor the second consecutive quarter, our next-gen Spectrum, new sales reached record levels.\nIn Middle & Large Commercial, our team has done a tremendous job improving margins while growing the top line, as demonstrated by new sales and written premium levels.\nAs the country invests in new infrastructure over the next decade, our specialized verticals are well positioned as a go-to-market for risk products and services.\nIn Global Specialty, we are growing in targeted lines that provide very attractive risk-adjusted returns.\nCross-selling within The Hartford's retail distribution has been very successful, and the feedback from our distribution partners has been exceptional regarding product breadth and teamwork.\nAs Doug will discuss further, we expect to exceed our cross-sell targets a year ahead of plan.\nI am extremely pleased with what the team has accomplished in a short period of time since the strategic transaction of Navigators closed.\nThe timing was ideal given the growth in this market segment and the robust pricing environment.\nJust two years ago, this business was generating combined ratios above 110%.\nWe thoughtfully developed a plan to improve the financial performance and the results are self-evident, and we believe there is more improvement to come.\nWe have nearly $2.5 billion of annual premium in Global Specialty, and I am very optimistic about the future as we realize the full potential of the products and capabilities of this business.\nAcross Commercial Lines, our technology investments have improved the speed and effectiveness of the underwriting process.\nWe continue to further leverage data and analytics to make more informed underwriting decisions and respond to the needs of our distribution partners and our customers.\nOverall, our Commercial Lines businesses are well positioned to compete and win in the marketplace.\nTurning to Personal Lines.\nWe are the fifth largest direct writer of personal auto through our partnership with AARP, one of the largest affinity groups in America.\nOver the next decade, this mature market demographic is estimated to grow three times as fast as the rest of the U.S. population.\nTo capitalize on this growing segment, we are modernizing our products in both home and auto and further enhancing our already strong digital capabilities.\nThis transformation provides greater ability to grow in the 50-plus demographic that has become more reliant on digital technologies in the way they live and work.\nBefore turning to Group Benefits, I would like to briefly comment on the bankruptcy of the Boy Scouts.\nEarlier this month, the Boy Scouts filed an amended plan, which included a request to be released from its settlement agreement with The Hartford.\nWe are vigorously contesting this request and have filed strong opposition with the bankruptcy court.\nThat said and consistent with our policy regarding active litigation, I am not going to comment further on this matter.\nTurning to Group Benefits.\nWe posted solid results for the quarter, driven by excellent investment returns as well as continued favorable disability trends, offset by elevated excess mortality.\nHigher year-over-year earned premiums, excluding buyouts, reflect expanding payrolls as well as new sales and strong persistency.\nThe group life industry has been impacted by excess mortality over the past five quarters.\nDuring the second quarter, our excess mortality losses have dropped significantly versus the first quarter.\nU.S. COVID-19 deaths have declined rapidly since peaking in January, but continue to drive elevated mortality in our book of business and across the industry.\nConsistent with U.S. trends, the average age of our COVID-19 life claimant has decreased.\nSince younger age cohorts tend to carry higher face amounts, the average claim severity has increased relative to earlier periods in the pandemic.\nWe are optimistic about the efficacy of vaccines.\nHowever, we are closely monitoring variant strains and the slowing rate of vaccinations, particularly among the younger age cohorts.\nThat said, we do expect lower excess mortality in the second half of '21 compared to the first half of this year.\nWe are a top three carrier in the group benefits industry with strong market share, a diverse product portfolio and capabilities across customer segments from small business to national accounts.\nWe continue to invest in our technology platform to extend our service offerings, including digital access for employers and employees to improve the overall customer experience.\nThe workplace remains an important access point for many people to obtain desired protection products, and we see that relationship growing stronger in the years ahead.\nIn addition, the pandemic created new focus on the products and services we provide.\nWe are confident that our innovative mindset positions us well to maintain our competitive advantages and grow in Group Benefits.\nTo conclude, we are executing with confidence and precision.\nOur top line is benefiting from strong macroeconomic tailwinds.\nMargins are expanding with a positive renewal rate environment, and excess mortality losses are expected to decline.\nWith enhanced underwriting capabilities, broad product offerings and strong distribution partnerships, we are positioned to grow and capture more profitable market share.\nLast quarter, we shared our target of a core earnings ROE of 13% to 14% in 2022 and into 2023 driven by top line growth across the businesses, margin improvement with strong earned pricing trends in excess of loss costs, operating efficiencies and proactive and prudent capital management.\nI am optimistic and confident we will continue to deliver on our financial objectives and enhance value for all stakeholders.\nOverall, we are very pleased with the results for the quarter and our progress on our priorities to enhance value creation for shareholders.\nSecond quarter core earnings were $836 million or $2.33 per diluted share and up 91% from last year.\nWe had strong performance across all our businesses, excellent investment results and significantly lower COVID losses as compared to the prior year period.\nIn P&C, the combined ratio of 88.5 improved 8.4 points from the second quarter of 2020, including improvements in both the loss and expense ratios.\nThe expense ratio in the quarter improved by 220 basis points to 31%, reflecting earned premium growth as well as cost savings from Hartford Next and a lower provision for doubtful accounts.\nIn Commercial Lines, we produced an excellent underlying combined ratio of 89.4, which included ex COVID loss ratio improvement in Middle & Large Commercial and in Global Specialty and expense ratio improvement across all businesses.\nResults in Commercial Lines also improved year-over-year due to lower direct COVID losses of $3 million compared to $213 million or 9.9 points in second quarter 2020.\nWritten premium was up 15% with growth in all lines of business, including the effect of higher audit and endorsement premiums reflecting the economic rebound.\nPersonal Lines generated an underwriting gain of $96 million and an underlying combined ratio of 88.2%.\nResults were down from second quarter 2020 as last year benefited from significantly lower auto frequency due to the pandemic.\nAcross Property & Casualty, catastrophes were $128 million in the quarter, $120 million lower than second quarter 2020, which included $110 million for civil unrest.\nP&C prior accident year reserve development within core earnings was a net favorable $188 million, including an $82 million reduction in catastrophe reserves as well as decreases in workers' compensation, personal auto liability, package business and bond.\nThis compared to $322 million of net favorable reserve development in second quarter 2020, which included a $400 million decrease in catastrophe reserves, including the subrogation benefit from PG&E.\nIn second quarter 2021, we ceded an additional $39 million of unfavorable Navigators reserve development to the adverse development cover primarily related to U.S. financial lines.\nAlthough these losses are economically ceded, the reserve development resulted in a deferred gain, representing a charge against net income in the quarter.\nGroup Benefits core earnings were $149 million, up 46% over prior year.\nEarnings for the quarter reflect strong investment results, the lessening effect of excess mortality related to COVID-19 and an increase in fully insured ongoing premium as our customers emerge from the pandemic.\nSales were nearly $100 million in the quarter, and we experienced a continuation of strong persistency at 91.1%.\nAll-cause excess mortality in the quarter was $25 million, which includes $88 million for second quarter death dates, offset by $63 million of favorable development for prior period excess mortality estimates, predominantly related to the first quarter.\nThrough the first six months of the year, our results include excess mortality of $210 million.\nAs Chris mentioned, although we were encouraged by the trend of declining excess mortality from first quarter to second quarter, we continue to watch a variety of factors, including vaccination rates and the impact of variants.\nWhile uncertainty remains, we would expect excess mortality trends in the second half of 2021 to improve significantly.\nDisability loss trend for the quarter remained favorable, though up slightly from the prior year quarter.\nThe disability loss ratio for the quarter was 64.2%, up 1.6 points as the prior year benefited from favorable short-term disability claim frequency due to the deferral of elective medical procedures at the beginning of the pandemic.\nLong-term disability claim incidence was favorable to prior year.\nAnd claim recoveries, although down from the prior year, remain strong.\nAt Hartford Funds, core earnings for the quarter were $51 million compared with $33 million for the prior year period, reflecting the impact of daily average AUM increasing 36%.\nMutual Fund net flows were very strong at $2.4 billion of net inflows for the quarter.\nThe Corporate core loss was higher at $52 million in second quarter 2021 compared to a loss of $6 million in the prior year quarter due to income from our investment in Talcott in the second quarter of 2020 of $68 million before tax.\nOn June 30, 2021, we received $217 million from the sale of our ownership interest in Talcott, resulting in a realized capital gain of $46 million before tax in the quarter.\nAs a reminder, within core earnings, the Corporate category primarily includes interest expense on debt and investment management fees and expenses related to managing third-party business, including management of the invested assets of Talcott.\nNet investment income was $581 million for the quarter, up 71% from the prior year quarter, benefiting from very strong annualized limited partnership return of 33%, driven by higher valuations and sales of underlying investments within private equity funds.\nThe total annualized portfolio yield, excluding limited partnerships, was 3.1% before tax compared to 3.4% in the second quarter of 2020.\nThe portfolio credit quality remains strong with no credit losses on fixed maturities in the quarter and a $10 million gain from the partial reduction of the valuation allowance for credit losses on mortgage loans due to improved economic scenarios.\nNet unrealized gains on fixed maturities before tax were $2.8 billion at June 30, up from $2.3 billion at March 31 due to lower interest rates and tighter credit spreads.\nImproving operating efficiencies and a lower expense ratio from Hartford Next have been a contributor to margin expansion.\nThe program delivered $195 million in pre-tax expense savings in the six months ended June 30, 2021, compared to the six-months period in 2019.\nWe continue to expect full year pre-tax savings of approximately $540 million in 2022 and $625 million in 2023.\nBook value per diluted share, excluding AOCI, rose 8% since June 30, 2020, to $49.01.\nAnd our trailing 12-month core earnings ROE was 13.1%.\nDuring the quarter, The Hartford returned $694 million to shareholders, including $568 million of share repurchases and $126 million in common dividends paid.\nFor the 6-month period, we returned $933 million with $691 million of share repurchases and $242 million in common dividends paid.\nFrom July one to July 27, we repurchased 1.9 million shares for $116 million.\nThere remains $1.7 billion available under our $2.5 billion authorization through 2022.\nResources at the holding company as of June 30 included a total of $1.7 billion in cash and investments.\nDuring the quarter, we received $337 million in dividends from subsidiaries and expect approximately $725 million to $900 million over the second half of 2021.\nAll in all, we had very strong results for the second quarter, which puts us well on our way to achieving the financial goals we shared with you in April.\nSix months into the year, I couldn't be prouder of our performance.\nWithin Property & Casualty, we're meeting or exceeding expectations on nearly all our key financial metrics.\nIn the second quarter, Property & Casualty produced an outstanding underlying combined ratio of 89.2.\nPremium growth accelerated in commercial.\nPricing remains [Technical Issues] The yield on bindable business is particularly strong, and the efficiency leverage is equally important.\nThe sophistication of our proprietary pricing model gives us confidence in the quality of our bindable business and is reflected in Small Commercial's underlying profitability.\nMiddle & Large Commercial accelerated into the second quarter, producing superior written premium growth of 20%.\nMiddle Market new business of $147 million, up 48%, was at its highest level in two years.\nI'm particularly pleased we achieved this result while maintaining underwriting discipline as measured by our pricing metrics and risk scores.\nPolicy retention in Middle Market increased four points to 82% while maintaining disciplined risk-by-risk underwriting decisions using our increasingly refined segmentation tools.\nLike Small Commercial, increased payroll and rising wages contributed to the second quarter Middle & Large Commercial written premium growth of 20%.\nGlobal Specialty produced another strong quarter with written premium growth of 16%.\nNew business growth of 27% was equally impressive, and retention is up significantly from prior year.\nIn the quarter, the breadth of our written premium growth was led by 25% in wholesale and 18% in U.S. financial lines.\nGlobal Reinsurance also had an excellent quarter with written premium growth of 26%.\nAs I've mentioned previously, cross-sell activities are an important component of our growth strategy.\nDuring the quarter, cross-sell new business premium between Global Specialty and Middle Market was $28 million or 11% of related new business sold by these segments.\nSince the Navigators acquisition, this effort has delivered $185 million in new business and is on pace to eclipse our initial goal of $200 million a year early.\nWe now have close to 2,500 accounts with policies that record premium in both Middle Market and Global Specialty.\nWe're also particularly encouraged by the success of our industry specialization strategy built both organically and through the Navigators acquisition.\nFor example, the acquired retail excess and U.S. financial lines are significant contributors to our cross-sell execution.\nThe combined new business growth from these two lines has increased more than 50% since the acquisition.\nAfter years of development, we view our product breadth as a competitive strength.\nLet's move on to pricing metrics.\nU.S. standard lines and Global Specialty commercial pricing, excluding workers' compensation, was 9.2% in the quarter.\nMiddle Market ex workers' compensation price change of 8.2%, although down 1.1 points, continues to exceed loss cost trend and reflects improved profitability performance.\nIn the workers' compensation, renewal repricing was 1% in the quarter.\nA key indicator of future pricing includes the impact of the 2020 pandemic trends on 2022 bureau loss cost filings.\nWe will be closely monitoring these filings in the coming months on a state-by-state basis.\nGlobal Specialty renewal written price remained strong in the U.S. at 11% and international at 24%.\nAll in, I'm very pleased with our pricing this quarter.\nTurning to commercial loss trends, the second quarter current accident year loss ratio was largely in line with expectations.\nWe are intensely watching inflation and have been particularly dialed in to recent building repair costs and rising wage trends.\nWithin Large Commercial property, Small Commercial recorded a few large fire losses in the quarter.\nAnd in Global Specialty international, we incurred a large offshore energy loss.\nBoth were within a normal range of expected volatility.\nOverall, Middle Market property loss ratios were slightly favorable to expectations in the quarter.\nFavorable claim frequency was partially offset by an increase in severity related to labor and material costs.\nWhile we believe property severity trends may be slightly elevated for the rest of the year, we remain confident in our initial full year Middle Market property loss ratio expectation.\nShifting to workers' compensation, the economic recovery is driving wage growth for our worker population.\nThis wage growth translates into higher premiums and wage replacement benefits.\nGenerally speaking, the net impact is a minor improvement in the workers' compensation loss ratio.\nCombining earned pricing and loss trends, I'm pleased with the continued strong current accident year performance.\nIn the quarter, the Commercial Lines underlying ex COVID loss ratio was 57%, 1.3 points better than Q2 of last year.\nLet's now turn to Personal Lines.\nAs expected, the second quarter underlying combined ratio rose 7.5 points to 88.2.\nAuto frequency is elevating with increasing vehicle trips and miles traveled, but our book is still favorable to pre-pandemic levels.\nAs expected, home losses were higher versus a very strong prior year.\nOverall, we had favorable claims frequency in the quarter, which was offset by higher claim severity, driven by modestly higher-than-expected large ex CAT fire losses and a provision for elevated building material and labor costs.\nWritten premium declined 5% after adjusting for both the second quarter 2020 extended billing grace period and the $80 million -- $81 million refund.\nAccording to J.D. Power, auto shopping rates among the 50-plus age segment are down approximately 5% from third quarter 2020 when they first initiated the survey.\nPersistency of the shopping trend may continue to pressure new business growth for our customer base.\nHowever, increased marketing spend in the quarter drove June new business premium above expectations, and policy retention was up one point as compared to prior year.\nWe're also encouraged by the early results from the launch of our new contemporary Personal Lines auto and home product, Prevail.\nThrough the second quarter, yield, average issued premium and policy counts all met or exceeded expectations.\nBoth products are now available in Arizona and Illinois.\nSeven additional states, along with advanced capabilities, will be online by year-end.\nAnd we remain confident in our long-term growth plan for Personal Lines.\nProperty & Casualty achieved another outstanding quarter.\nOur top line outperformed, providing confidence we will achieve our Commercial Lines 4% to 5% multiyear CAGR guidance.\nStrong pricing is earning into the book driving lower current accident year loss ratios, and the expense ratio continues to benefit from our ongoing Hartford Next initiatives.\nWe are seeing the positive results of our multiyear road map with deeper and broader products, improved risk selection and outstanding execution.\nI'm thrilled with our continued progress and look forward to updating you in 90 days.\nOperator, we'll take questions now.\n Assistant:", "chosen": "continue to expect full year pre-tax savings of approximately $540 million in 2022 and $625 million in 2023.\n"}
{"prompt": "Human: These reconciliations, together with additional supplemental information, are available at the Investor Relations section of our website, herbalife.com.\nAdditionally, when management makes reference to volumes during this conference call, they are referring to volume points.\n2021 was another record year for Herbalife Nutrition.\nEven during this period of continued global uncertainty due to the pandemic, our entrepreneurial direct sales channel helped consumers around the world pursue their nutrition and wellness goals by giving them access to our high-quality nutrition products.\nFor the full year, demand for our nutrition products resulted in net sales of $5.8 billion, an increase of 5% compared to the prior year and an annual record for the company.\nOur three largest regions, Asia Pacific, North America, and EMEA, along with 37 individual markets, set annual net sales records.\nFull-year 2021 reported diluted earnings per share of $4.13 and adjusted diluted earnings per share of $4.79 was an increase of 49% and 29%, respectively, compared to the full year 2020.\nFull-year 2021 reported net income of $447 million and adjusted EBITDA of $874 million were both annual records for the company.\nFor the full year, we averaged over 500,000 active sales leaders per month, a record for the company and an increase of 9% compared to 2020.\nWe brought in 2.9 million new distributors and preferred customers, which was down just 1% compared to 2020 and actually up 31% compared to the more normalized 2019 year.\nWe continue to broaden our reach and attract new audiences in 2021, with two-thirds of our new distributor and preferred customers identifying as millennials or Gen Z. This younger demographic drives a high level of business activity by engaging with the business in new ways, including innovative nutrition club models and increased utilization of social media and digital tools.\nToday, we also announced sales leader retention results for the last 12-month requalification period ending in January of 2022.\nThis year, a record 68.9% of our sales leaders were retained, up from last year's prior record of 67.9%.\nWe believe this result reflects the ongoing sustainability of our business and the attractive opportunity that we offer to our distributors.\nTurning to the fourth quarter, our net sales of $1.3 billion decreased 7% compared to the fourth quarter of 2020.\nThe Q4 year-over-year trend was impacted by a challenging comparison period.\nOn a two-year stack basis, we saw growth of 8% compared to the fourth quarter of 2019.\nThe Asia Pacific region had another quarter of growth, up 5% compared to the prior year.\nThe region was led by continued strength in India, which grew 33%.\nIndia is supported by strong underlying metrics, including 35% year-over-year growth in new distributors and in preferred members, as well as a 32% increase in active sales leaders.\nWe're making investments in India to further support the market with a newly opened 150,000-plus square foot state-of-the-art center in a suburb of Bangalore.\nThe new facility will allow us to accommodate planned growth in India as we go from the current level of 900 jobs to approximately 1,500 employees over the next five years.\nThe space will be home to a new local product research and development facility designed to accelerate new product launches.\nIt will also contain a state-of-the-art quality control lab, a distributor meeting facility, and a global business services center.\nLooking at North America, we saw a decline in net sales of 3% in the quarter.\nThis decline is up against a challenging prior-year comparison period.\nHowever, the two-year stacked growth rate in the region increased by approximately 29% compared to Q4 of 2019.\nOne area of continued strength in North America is our U.S. nutrition club business.\nWe ended the year with over 12,000 nutrition club locations, an increase of more than 30% compared to the end of 2020.\nWe are excited to see our sales force is energized by the return of in-person distributor events across the North America region, which began in October and continued with 36 separate in-person events so far in 2022.\nAlthough several Q4 events were disrupted by the Omicron variant, attendance has been high for these events.\nAnd we believe the interactive discussions, the face-to-face team building, and the social elements that are characteristic of our in-person events are all an important source of ideation, motivation, and inspiration for our distributors.\nAdditionally, in North America, we're pleased to share that we recently acquired intellectual property that will serve as the basis of our first-ever vegan product line in the region.\nIt's expected to launch in early 2023.\nWe believe this line will allow us to reach a brand-new market of savvy vegan consumers who are looking for certified vegan and organic nutrition products and dietary supplements.\nEMEA experienced a challenging year-over-year comparison, resulting in a 7% decline.\nHowever, in the region, we actually saw a 9% year-over-year increase in the number of active sales leaders, which reflects the continued strength and the solid foundation of the EMEA business.\nLooking at the two-year stack in the region, EMEA grew 21% compared to the fourth quarter of 2019.\nAlthough the combined new distributor and preferred customer numbers are lower than Q4 of 2020, we saw growth of 23% compared to the more normalized 2019 comparison period.\nWe're in the early stages of a new project in the region designed to rearchitect our distributors' e-retail and ordering platform.\nThe goal of this initiative is ultimately to completely overhaul and modernize all our current ordering platforms with growth in mind.\nAnd we're currently in the vendor selection phase for this project and expect a new platform will be available for our distributors in the region in 2023.\nThe softness in our China business continued in Q4 as net sales declined 31% compared to the fourth quarter of 2020.\nPandemic-related disruption contributed to challenges in attracting, training, and retaining new entrants in the market.\nWe remain confident that our strategic initiatives aimed at enhancing digital capabilities and daily consumption at nutrition clubs is going to end up benefiting our sales performance over time.\nIn Mexico, sales declined 5% in the quarter following three quarters of growth as the market was adversely impacted by intermittent pandemic-related disruption.\nAlthough our business wasn't directly impacted by any government pandemic-related restrictions, we do believe that a high case number during the quarter impacted attendance at our nutrition clubs.\nBeginning this year in Mexico, we initiated a new weekly commission payment system that enables distributors to receive their commissions on a weekly basis instead of a monthly basis.\nThis is a first-of-its-kind payment system for Herbalife Nutrition, and it's an exciting opportunity for our sales force to receive their earnings more frequently and expedite their cash flow patterns.\nWe will be analyzing this program's success, including its impact on distributor metrics, and evaluate the possibility of extending it to additional markets in the future.\nFor the South and Central American region, the fourth quarter declined 14% year over year.\nThe region was negatively impacted in markets such as Brazil and Colombia, where government restrictions related to COVID-19 persisted throughout the quarter and impacted our nutrition club activity.\nMore broadly in the region, the pandemic has contributed to macroeconomic challenges, which have impacted consumer spending.\nTurning to our 2022 outlook, we're initiating net sales guidance to be in the range of flat to 6% growth for the year.\nWe expect the progression of year-over-year comparisons in 2022 will shape the cadence of our quarter-to-quarter performance.\nWe estimate first-quarter net sales to decline in the range of down 10% to down 4%.\nHowever, we anticipate that the decline will improve in the second quarter.\nAnd as previously stated, we expect to return to year-over-year growth in the back half of the year.\nLike many other companies, we expect the bottom line in 2022 to be impacted by unique inflationary pressures being felt across many markets.\nWe are currently observing higher-than-usual cost increases in our supply chain with respect to raw materials, shipping costs, and labor at our manufacturing facilities.\nThis pressure, as well as cost increases expected due to a return to normalized levels of in-person distributor events and activities, are resulting in expected declines for adjusted earnings per share and adjusted EBITDA versus 2021.\nWe anticipate, however, that we can partially offset cost increases in our supply chain by executing on our pricing strategy, which is to increase prices in a way that keeps up with local CPI in each of our markets.\nIn 2022, we don't expect pricing will fully offset all cost increases, which will result in a net headwind to gross profit of approximately 100 basis points for the full year.\nOur efforts to improve margins through productivity and efficiency improvements within our business operations are also anticipated to help offset the near-term margin pressure that we face.\nOne specific opportunity to achieve this is through our transformation program, first referenced on last quarter's call.\nThis program is a structural realignment of both the front and back office with the goal of ensuring our infrastructure processes and organizations are efficient and scalable to support our business growth.\nOnce fully executed, we expect the first phase of our transformation program will result in ongoing incremental savings in SG&A of $10 million to $15 million per year.\nWe're also assessing a second phase of the program, which we're preliminarily planning for 2023, and anticipate that it will result in annualized savings in the same magnitude as Phase 1.\nAlex will provide more details on our transformation program, as well as our annual and Q1 guidance in just a moment.\nWe continue to execute on our long-term growth strategy, including product innovation.\nAnd in 2021, regional product launches contributed to over 400 new SKUs in the company's portfolio.\nApproximately 100 of these new SKUs have been part of our fast-growing energy, sports, and fitness category, which continued to lead our core product categories with an increase of 26% for the full year.\nOur commitment to product is one of the factors that led us to be recently named by Euromonitor as the no.\n1 brand in active and lifestyle nutrition, as well as the world's no.\nThe success of our company is rooted in the work and the dedication of not only our distributors but also our employees.\nAnd I'm honored that Herbalife Nutrition was selected as one of America's best midsize employers and one of the top 10 employers in our industry in the 2022 Forbes rankings.\nEach member of the Herbalife Nutrition team is valued, and their contributions are helping us expand access to good nutrition and economic opportunities all around the world.\nI'm confident that these positive impacts will only continue to grow in 2022 and beyond.\nAs John mentioned, 2021 was a record year for Herbalife Nutrition across a number of metrics.\nNet sales, net income, adjusted EBITDA, active sales leaders, and the global retention of sales leaders are a few of the records set in 2021.\nHowever, we exited the fourth quarter with a net sales decrease of 7% compared to the fourth quarter in 2020.\nThis was in line with our expectations for the quarter as we continue to comp 2020 results that benefited from the surge in demand for our nutrition products.\nHowever, comparing to the fourth quarter of 2019 prior to the pandemic, it represented an 8% increase on a two-year stack.\nCurrency was a headwind to net sales in the quarter, representing a drag of approximately 110 basis points.\nNormalizing for currency, there was sequential improvement in the fourth quarter growth with local currency net sales declining 5.5% versus 7.6% year-over-year decline in the third quarter.\nThis was driven by sequential improvement in volume growth of 5.7% year-over-year decline in the fourth quarter versus the 8.3% year-over-year decline in the third quarter.\nAnd on a two-year stack basis, local currency net sales grew by 10.3% versus Q4 of 2019.\nReported gross margin for the fourth quarter of 77.5% decreased by approximately 60 basis points compared to the prior year.\nThe decrease was largely driven by increased costs in our supply chain, as well as unfavorable impact of country mix.\nThe decreases were partially offset by the impact of price increases.\nFourth-quarter 2021 reported and adjusted SG&A as a percentage of net sales were 38.9% and 37.5%, respectively.\nExcluding China member payments, adjusted SG&A as a percentage of net sales was 32.1%, approximately 290 basis points unfavorable compared to the fourth quarter 2020.\nDuring the fourth quarter of 2021, prior to the impact of Omnicron, there was a significant increase in sales events and promotion costs versus the same period in 2020 as we began to return to in-person events.\nThis increase in nominal spend against lower net sales largely explains the variance in adjusted SG&A ex China member payments for the fourth quarter of 2021.\nFor the fourth quarter, we reported net income of approximately $38.2 million or $0.37 per diluted share.\nAdjusted earnings per share of $0.57 and adjusted EBITDA of $132 million were both within our expectations for the quarter.\nCurrency was a tailwind of $0.02 in the quarter versus the prior year.\nOur adjusted diluted earnings per share and EBITDA figures continue to exclude items we consider to be outside of normal company operations.\nThis quarter, you will notice, we had a $12.5 million carve-out accrual related to the Rogers lawsuit as the two parties have agreed on principal terms of a settlement.\nNow briefly touching on the full year 2021 results, reported net sales of $5.8 billion increased approximately 5% on a reported basis.\nCurrency was an approximately 190 basis points tailwind for the full year, excluding Venezuela.\n2021 reported diluted earnings per share of $4.13 and adjusted diluted earnings per share of $4.79 both benefited by approximately $0.09 per share from foreign currency fluctuation.\nOn a constant-currency basis, adjusted earnings per share grew approximately 26% compared to full-year 2020.\nOur full-year adjusted tax rate of 19.4% improved approximately 330 basis points from our 2020 adjusted tax rate of 22.7%, primarily due to geographic mix of income.\nTurning to our guidance for the full year and first quarter 2022.\nWe expect the current trend of sequential top-line improvement observed in the fourth quarter of 2021 to continue as we progress through 2022.\nThe first quarter of 2022 top-line comparison is anticipated to be more challenging than the fourth quarter of 2021, given the modest reacceleration in the first quarter of 2021 of the pandemic surge that began in mid-2020.\nWe expect to return to growth in the second half of 2022, resulting in projected net sales of flat to 6% growth for the full year on a reported basis, which includes an approximate 160-basis-points headwind due to currency.\nOur gross profit and adjusted EBITDA margins for 2022 are expected to be pressured from currency, negative manufacturing variances, and the ongoing cost of the shift to home delivery experienced at the onset of the pandemic.\nFurther, we have seen significant increases in input costs consistent with the news headlines related to raw materials, labor, and freight costs.\nTo partially offset these margin pressures in the near term, we will continue to leverage our pricing power.\nWe are also actively engaged in productivity improvement programs for both our front and back-office operations through the transformation program John referenced earlier.\nThis program involves the realignment of infrastructure to more effectively leverage our global shared service centers, investment in new technologies to increase efficiencies internally, as well as better support distributors and customers, and repositioning of certain strategic functions closer to the regions and markets they serve to better affect local initiatives.\nWe expect the first phase of this initiative will incur total pre-tax charges in SG&A in the range of $25 million to $30 million.\nWe carved out approximately $13 million of these charges in 2021, with most remaining expenses to be incurred throughout 2022.\nWe expect this first phase will result in annual incremental savings in the range of $10 million to $15 million with some savings beginning in 2022 increasing through 2023, with the full impact of the savings expected to begin in 2024.\nWe are also assessing a second phase of the program to begin in 2023 with expected ongoing annualized savings of the same magnitude as Phase 1.\nAs a result, for the full year, we are projecting our adjusted diluted earnings per share to be in the range of $4.25 to $4.75.\nThis includes an approximate $0.17 currency headwind.\nWe are also providing full-year adjusted EBITDA guidance in the range of $785 million to $845 million, which includes an approximate $21 million headwind due to currency.\nOur 2022 guidance includes the assumption of $50 million in share repurchase per quarter, which reflects the minimum buyback amount we anticipate completing on a quarterly basis.\nWe continue to project reliable cash flow from our business model.\nWe believe there is value in guiding for a base level of consistent share repurchase while leaving room for potential incremental opportunistic share repurchases to take place over the course of the year.\nWe have demonstrated this pattern of consistency during 2021 by repurchasing approximately $100 million, $160 million, and $100 million in the second, third and fourth quarter, respectively.\nWe anticipate this pattern of consistency to continue in 2022.\nFor the first quarter, we estimate net sales to decline in the range of down 10% to down 4%, which includes an approximate 240-basis-points currency headwind versus the prior year.\nWe expect the progression of the year-over-year comparisons will lead to a decline in net sales for the first half of the year, followed by growth in the back half.\nFirst-quarter adjusted diluted earnings per share is expected to be in the range of $0.80 to $1, which includes a projected currency headwind of $0.03 compared to the first quarter of 2021.\nAdjusted EBITDA is expected to be in the range of $165 million to $185 million.\nTurning to cash flow, capital structure, and our share repurchase activity.\nOur business continues to generate substantial cash flow.\nOperating cash flow of $460 million for full-year 2021 was down from 2020, primarily due to the impact of several unfavorable accounts related to year-over-year net sales declines.\nFor 2022, we expect this to turn around in the second half of the year when the business returns to growth.\nAfter completing just under $1 billion in share repurchases during the year, at the end of 2021, we had just over $600 million of cash on hand.\nAs I mentioned earlier, we have included a minimum of $50 million in share repurchases per quarter in our guidance for the year, which will cut into the approximately $1.1 billion remaining on our three-year share repurchase authorization.\n Assistant:", "chosen": "q4 earnings per share $0.37.\nq4 sales fell 6.6 percent to $1.3 billion.\nq4 adjusted earnings per share $0.57.\ninitiating fy 2022 net sales guidance range of 0% - 6% growth.\n2022 adjusted diluted earnings per share guidance range of $4.25 - $4.75.\nsees q1 adjusted diluted earnings per share $0.80 - $1.00.\n"}
{"prompt": "Human: We undertake no obligation to publicly update or revise these statements.\nKevin Jacobs, our Chief Financial Officer and President, Global Development, will then review our third quarter results.\nWe are pleased to report another quarter of very solid results that demonstrate continued recovery and the resiliency of our business model.\nIncreases in vaccination rates and consumer spending, coupled with improving business activity, continued to drive solid travel demand throughout the summer and into the fall.\nAs global borders reopen and the travel environment recovers, we remain extremely encouraged by people's desire to travel and connect more than ever before.\nIn the third quarter, systemwide RevPAR grew 99% year-over-year.\nCompared to 2019, RevPAR was down roughly 19%, improving 17 percentage points versus the second quarter, with systemwide rates down just 2.5% versus 2019.\nAdjusted EBITDA totaled approximately $519 million, up 132% year-over-year and down 14% versus 2019.\nPerformance was primarily driven by strong leisure trends with leisure room nights roughly in line with 2019 level, with leisure rates exceeding 2019 levels.\nBusiness travel continued to gain momentum with midweek occupancy and rates improving meaningfully versus the second quarter.\nIn the quarter, business transient room nights were roughly 75% of prior peak levels.\nGroup continued to lag but showed significant sequential improvement versus the second quarter, boosted by strength in social events.\nFor the quarter, group RevPAR was approximately 60% of 2019 levels, improving 21 percentage points from the second quarter.\nOverall systemwide RevPAR versus 2019 peaked in July at 85% with rates just shy of prior peaks.\nAs expected, recovery slowed modestly later in the quarter due to typical seasonality and customer mix shift, but overall trends remained solid.\nBoth August and September RevPAR achieved roughly 80% of 2019 levels, driven by continued strength in leisure and upticks in business travel post-Labor Day as offices and schools reopen.\nThese trends improved modestly into October with month-to-date RevPAR at approximately 84% of 2019 levels and rates in the U.S. nearly back to prior peaks.\nRoughly 40% of systemwide hotels have exceeded 2019 RevPAR levels in October month-to-date.\nAdditionally, bookings for all future periods are just 8% below 2019.\nWith loosening travel restrictions and strong nonresidential fixed investment forecast, we remain optimistic for future travel demand.\nTSA reported third quarter travel numbers were nearly 80% of 2019 with demand picking up further following the announcements of the U.S. border reopening and the lift of the international travel ban for vaccinated travelers.\nAdditionally, studies show that nearly 70% of U.S. businesses are back on the road, up 28 points from the end of the second quarter.\nWith roughly 80% of our typical corporate mix coming from small- and medium-sized businesses and with the lagging recovery of larger corporate travel, we've taken the opportunity to continue our work from before COVID to further increase our focus on this segment of demand.\nThis demand is higher rated, the more resilient -- resilient, which has helped us recover more quickly in business transient and should drive rate compression in the future as larger corporate travel picks up.\nOn the group side, our position for the rest of the year remains fairly steady with forward booking sentiment improving as variant concerns taper.\nAdditionally, the recent reopenings of some of our large urban properties, like the New York Hilton Midtown, increased our confidence in our positioning as group recovers.\nWe added nearly 100 hotels and 15,000 rooms across all major regions and delivered strong net unit growth of 6.6% in the third quarter.\nConversions represented roughly 1/3 of openings.\nYear-to-date, we've added more than 42,000 net rooms globally, higher than all our major branded competitors.\nOur performance reflects the success of our disciplined growth strategy, the strength of our brands, network effect and commercial engines across the world.\nIt also illustrates our increasing confidence in a strong recovery in global tourism in the months and years to come.\nDuring the quarter, we launched our large-scale franchise model in China, enabling independent owners to explore franchising opportunities with our Hilton Garden Inn brand with a prototype developed specifically for the Chinese market.\nTo date, we have signed more than 100 deals to develop Hilton Garden properties in China, strengthening our confidence in the long-term growth of our focused service brands and our ability to cater to a growing middle class.\nFollowing our recently announced exclusive license agreement with Country Garden, we were thrilled to open our first Home2 Suites in China with plans to grow to more than 1,000 properties.\nWe look forward to leveraging our partnership to capture the rapidly growing demand for mid-scale hotels in China.\nWe also celebrated the opening of our 500th Home2 Suites following the brand's launch just 10 years ago, making it one of the fastest-growing brands in industry history and boasting the industry's largest pipeline in North America with more than 400 hotels in development.\nOur luxury and lifestyle footprints also continued to expand globally with the debut of the Canopy by Hilton in Spain and the highly anticipated opening of the Mango House LXR in the Seychelles.\nMarking another important milestone in its global expansion, LXR celebrated its debut in Asia Pacific with the opening of the ROKU KYOTO.\nIn the quarter, we signed nearly 24,000 rooms, up approximately 40% year-over-year, driven by strength in the Americas and Asia Pacific regions.\nDriving our positive momentum in luxury, we announced the signing of the Conrad Los Angeles, the brand's first property in California.\nThe 300-room hotel is expected to open in 2022 as part of The Grand LA mixed-use development.\nWith approximately 404,000 rooms in development, more than half of which are under construction, we expect positive development trends to continue, driven by both new development and conversion opportunities.\nFor the full year, we expect net unit growth in the 5% to 5.5% range, and we continue to expect mid-single-digit growth for the next several years.\nFor our guests, flexibility has always been important, but the pandemic has made choice and control even more critical.\nWe were excited to launch several new commercial programs and loyalty extensions, including the launch of Digital Key Share, a first for a major hospitality company.\nThis feature allows more than one guest to have access to their room's digital key.\nAdditional technology enhancements have enabled our elite Honors members to begin enjoying automatic room upgrades.\nGold and Diamond members may be notified of a complementary upgrade prior to arrival, enabling guests to choose their upgraded room directly by using the Hilton Honors app.\nWe continue to focus on new opportunities to further engage our 123 million Honors members and are thrilled to see engagement is nearly back to 2019 levels.\nIn the quarter, membership grew 11% year-over-year.\nHonors members accounted for 59% of occupancy with the U.S. at 66%, just two points below 2019 levels.\nDuring the pandemic, approximately 23 million U.S. households brought home a new pet, including my own.\nAnd like so many others, my family loves traveling with our new dog, Miller.\nIn the coming months, Homewood Suites will join Home2 in becoming 100% pet-friendly in the U.S. with plans for all limited service brands to be pet-friendly by the first quarter of next year.\nOur guests are eager to travel with their furry little friends.\nAnd by making that simpler, we're able to capture demand and bring new business into the system.\nAs the global travel environment improves, I continue to be impressed by our team members' dedication to providing exceptional experiences to our guests.\nThat's why I am particularly proud that, last week, we were named the number three World's Best Workplace by Fortune and Great Place to Work.\nAfter six consecutive years of being ranked, Hilton was the only hospitality company on the list.\nWe truly believe that Hilton continues to be an engine of opportunity for all of our stakeholders around the world and are very optimistic for the future.\nDuring the quarter, systemwide RevPAR grew 98.7% versus the prior year on a comparable and currency-neutral basis as the recovery continued to accelerate, driven by strong leisure demand, particularly in the U.S. and across Europe.\nPerformance was driven by both occupancy and rate growth.\nAs Chris mentioned, systemwide RevPAR was down 18.8% compared to 2019.\nAdjusted EBITDA was $519 million in the third quarter, up 132% year-over-year.\nResults reflect the broader recovery in travel demand.\nManagement and franchise fees grew 93%, driven by strong RevPAR improvement and Honors license fees.\nAdditionally, results were helped by continued cost control at both the corporate and property levels.\nOur ownership portfolio performed better than expected in the third quarter, driven by the accelerating recovery in Europe, the Tokyo Olympics and ongoing cost controls.\nFor the quarter, diluted earnings per share, adjusted for special items, was $0.78.\nTurning to our regional performance.\nThird quarter comparable U.S. RevPAR grew 105% year-over-year and was down 14% versus 2019.\nRobust leisure demand and improving business transient trends drove strong performance in July.\nTrends modestly slowed later in the quarter due to seasonality.\nU.S. occupancy averaged nearly 70% for the quarter with overall rate largely in line with 2019 levels.\nIn the Americas outside the U.S., third quarter RevPAR increased 168% year-over-year and was down 30% versus 2019.\nThe region benefited from easing travel restrictions and strong leisure demand over the summer period.\nCanada also saw a noticeable step-up in demand in August after reopening their borders to vaccinated Americans.\nIn Europe, RevPAR grew 142% year-over-year and was down 35% versus 2019.\nTravel demand accelerated across the region in the third quarter as vaccination rates increased and international travel restrictions loosened.\nIn the Middle East and Africa region, RevPAR increased 110% year-over-year and was down 29% versus 2019.\nPerformance benefited from strong domestic leisure demand and international inbound travel from Europe.\nIn the Asia Pacific region, third quarter RevPAR grew 5% year-over-year and was down 41% versus 2019.\nRevPAR in China was down 25% as compared to 2019 as a rise in COVID cases led to reimposed restrictions and lockdowns across the country.\nChina has recovered steadily into October with occupancy nearing 60% for the month.\nIn the rest of the Asia Pacific region, prolonged lockdowns in Australia and New Zealand offset upside from the Tokyo Olympics.\nAs Chris mentioned, in the third quarter, we grew net unit 6.6%.\nOur pipeline grew sequentially, totaling 404,000 rooms at the end of the quarter with 62% of pipeline rooms located outside the U.S. Development activity continues to gain momentum across the globe as the recovery progresses, a testament to the confidence owners and developers have in our strong commercial engines and industry-leading brands.\nFor the full year, we now expect signings to increase in the mid- to high teens range year-over-year and expect net unit growth of 5% to 5.5%.\nTurning to the balance sheet.\nWe ended the quarter with $8.9 billion of long-term debt and $1.4 billion in total cash and cash equivalents.\nWe're proud of the financial flexibility we demonstrated over the past 18 months.\nAnd looking ahead, we remain confident in our balance sheet management as we continue to progress through the recovery and move closer toward our target leverage.\nWe would now like to open the line for any questions you may have.\n[Operator Instructions] Chad, can we have our first question, please?\n Assistant:", "chosen": "q3 adjusted earnings per share $0.78.\nfor three months ended september 30, 2021, system-wide comparable revpar increased 98.7%.\n"}
{"prompt": "Human: I'm Vice President, Investor Relations and Corporate Development for HNI Corporation.\nActual results could differ materially.\nIn the second quarter, our members executed at a high level, delivering substantial year-over-year profit improvement.\nThe post pandemic recovery continues to provide reasons to be encouraged about both the general environment and our opportunities at HNI.\nHowever, the macro backdrop along with our strong growth also presented new challenges in the quarter related to labor availabilities, supply chain capacity and inflation.\nOur teams managed through those challenges to deliver strong results.\nOur two differentiated business segments are well positioned to benefit from the recovery of the cycle, multiple secular trends and numerous HNI specific growth initiatives.\nWe have a track record of effectively deploying capital, driving annual productivity and cost savings and managing through macro and operational challenges.\nFirst, non-GAAP earnings per share doubled year-over-year, despite increasing pressure from inflation and returning costs.\nSecond, our Residential Building Products segment delivered exceptional performance.\nThird, demand in Workplace Furnishings is recovering.\nI will start by providing some detail on those highlights.\nMarshall will then cover our third quarter outlook.\nI will conclude with some general comments.\nOur first highlight for the quarter.\nWe doubled non-GAAP earnings per share versus the prior year, despite increasing pressures in returning costs.\nNon-GAAP earnings per share of $0.40 was up 100% from the $0.20 reported in second quarter 2020.\nIn the quarter, we overcame greater than expected pressures related to material inflation, labor availability and supply chain capacity.\nWe generated 22% sales growth and our network ramps up to meet that demand.\nIn addition, as we discussed last quarter, some of the costs related to temporary measures taken in the second quarter of 2020 returned.\nDespite these pressures, we grow strong margin expansion and profit growth.\nOverall, the second quarter shows the power of our diversified revenue streams, our ability to react quickly to changing market dynamics and our overall operational capability associated with our member owner culture.\nOur second highlight for the quarter, we delivered exceptional revenue and profit growth in our Residential Building Products segment.\nOn a year-over-year basis, total revenue growth exceeded 50% in the quarter and operating profit more than doubled, with operating margins expanding more than 500 basis points from second quarter 2020 levels.\nFrom a channel perspective, new construction revenue was up more than 30% from year ago levels and remodel retrofit sales increased nearly 90% versus the prior year quarter.\nOrders were equally strong in the quarter, growing 53% year-over-year.\nAs the quarter progressed the comps became more difficult, order growth moderated but remained at high levels.\nOur value propositions, growth initiatives and supply chain strength continue to resonate with homeowners, homebuyers and builders.\nAs we look forward, we remain optimistic about the prospects for both remodel retrofit and new construction.\nLong-term demographic trends and a persisting housing supply demand and balance will continue to support a prolong housing cycle and elevated remodeling activity.\nNesting and deurbanization trends also provide secular support.\nAnd we have an outstanding opportunity to grow the category in both new construction and remodel retrofit.\nAs a reminder in new construction two-thirds of homebuyers see having a fireplace is a must-have feature of the home, but less than 40% buy one.\nAnd on the remodel retrofit side, we estimate that only about 3% of all remodeling projects involve a fireplace.\nTo take advantage of these opportunities, we are driving a better connection with the homebuyer and homeowner and we'll continue to make investments and launch tools that will assist and influence homebuyers and homeowners in their purchase in remodeling journeys.\nAn example of our investment in our model home is our model home virtual tour capability, where we content -- where our content and messaging seamlessly plugs into the builders virtual experience.\nThis allows us to reach the homebuyer early in the decision process with consistent and effective content.\nWe have strong competitive positions in both new construction and R&R, our vertically integrated business model, unmatched product depth and pricing breadth, strong builder relationships and regional distribution infrastructure, all provide differentiation for this business.\nAs a result, we have significant opportunities ahead of us to grow revenue in the Building Products business.\nThe third highlight for the quarter.\nOur Workplace Furnishings segment is recovering.\nOn an organic basis, net sales in this segment increased 9% and orders grew 32% versus the prior year period.\nSecond quarter non-GAAP operating income grew 21% year-over-year despite the pressures discussed earlier.\nOur small-to-mid sized customers continue to outperform as does demand in the public sector with orders in our businesses focused on these markets increasing 55% year-over-year in the second quarter, putting us back to pre-pandemic levels.\nIn addition, the North American contracting market continues to recover with orders in our contract businesses up more than 23% in the second quarter year-over-year.\nAnd in the past five weeks, contract orders were up approximately 30% versus the prior year period.\nLooking to the back half, we believe Workplace Furnishings has turned the corner and expect to drive revenue growth through the remainder of the year.\nRecent order patterns are encouraging and are indicative of our agility, our competitive position and improving demand trends.\nMarket demand signals indicate activity will continue to ramp in the back half.\nAs a result, we continue to expect year-over-year revenue growth in our Workplace Furnishings segment to accelerate as the recovery in our contract business gains momentum.\nOur Workplace Furnishings businesses have unmatched price point breadth, channel access and market reach and we are investing in multiple strategic initiatives aimed at driving continued outperformance.\nA few examples of our growth initiatives include, the December 2020 acquisition of Design Public Group.\nWe are seeing strong momentum with DPG.\nYear-to-date orders are up over 40% with record bookings in May and June.\nDPG is also giving us more access in greater insight into the work-from-home segment and e-commerce possibilities.\nAnother example, is our recently launched ESR app.\nThis is a mobile app we built to drive engagement with dealer sales reps and currently provides quick access to marketing content, product information, digitalization and order status updates, all from a single mobile enabled platform.\nOver 600 dealer sales reps are already using the app.\nWe expect that number to grow as we add more capability.\nAdditionally, we are investing to make our contract dealers more efficient and effective.\nThis includes technology to streamline the design and selling processes and platforms to make the back-office more efficient.\nThese investments along with our existing competitive differentiators position us well to benefit from office reentry, work-from-home and deurbanization trends.\nLet's start with our outlook for consolidated revenue growth.\nWe expect third quarter revenue to grow in the mid 20% range compared to the prior year quarter.\nBecause of our seasonality, this outlook implies third quarter volume will be substantially above second quarter levels, the sequential growth in the mid 20% range.\nThat level of growth when combined with the general labor and sourcing environment is presenting new challenges.\nOur staffing levels and overall supply chain capacity are ramping up, but not as fast as demand.\nAs a result, we expect labor and supply chain constraints will limit third quarter revenue growth versus the prior year quarter by 4 to 6 percentage points.\nThat headwind is included in our outlook.\nThis is a timing impact.\nWe can solve these constraints over time, we are capturing demand and expect that 4 to 6 percentage points of growth to flow to subsequent quarters.\nLet's move to our third quarter outlook for the Residential Building Products segment.\nRecent order trends, new home construction activity, the outlook for remodel and retrofit demand and expected benefits tied to our multiple growth initiatives combine to suggest that revenue growth rate in the mid to high 20% range compared to the prior year quarter.\nWe see continued momentum of both remodel retrofit and new construction.\nNow let's shift to our outlook for Workplace Furnishings.\nStrong second quarter order trends, our growing backlog and a low prior year comparable adjusted growth rate including acquisition impacts in the low to mid 20% range on a year-over-year basis.\nLet's shift to third quarter profitability.\nCompared to the prior year quarter, we expect the impact of strong volume growth to be mostly offset by cost challenges related to inflationary pressures, increased growth investments and return of costs associated with temporary actions taken in the prior year or expect operating income to be modestly higher than the third quarter of 2020, operating margins will likely compress in a year-over-year basis.\nWe do expect margin expansions return post the third quarter, as our recent price actions take hold and we anniversary the temporary cost actions taken during the pandemic.\nFinally some comments on our cash flow and balance sheet expectations.\nQuarter ending debt levels were approximately $179 million, modestly higher than last quarter and down slightly from the second quarter of last year.\nThe gross leverage ratio at the end of the second quarter of 2021 was approximately 0.9, unchanged from last quarter.\nOn sequential basis, while our leverage ratio was unchanged, cash increased by more than $24 million.\nWe expect free cash flow to ramp up in the second half consistent with normal seasonality and our projected cash flow provide ample capacity for continued growth investment, dividend payments and opportunistic M&A and buyback activity.\nLet me wrap up by stating that as we look to the rest of 2021 and into 2022, we remain optimistic about our businesses and our markets.\nWe continue to gain momentum in Workplace Furnishings, where our winning customer experiences, the multiple strategic investments discussed earlier and our operational excellence will combine to provide a competitive advantage as the market recovers.\nRecall our focus in our Workplace Furnishings segment is a combination of driving revenue growth and expanding margins.\nWe are increasingly confident in the recovery of the Workplace Furnishings market as order strength is broadening across customer groups, project sizes and geographically.\nOur improving order growth in the quarter and over the past five weeks is encouraging.\nOur unique industry leading Residential Building Products platform is positioned for sustained long-term revenue growth.\nOur growth strategies in this segment continue to gain traction and we see strong demand supported by demographics and low housing inventories.\nAs a reminder, our focus in our Building Products segment is on maintaining our strong margins, while continuing to drive strong revenue growth.\nAs we move to the next stage of the recovery, we do so position to grow revenue, expand margins and increase cash flow.\n Assistant:", "chosen": "q2 non-gaap earnings per share $0.40.\nexpects q3 consolidated revenue to grow in mid-20 percent range compared to prior-year quarter.\n"}
{"prompt": "Human: On the call today are Jeff Jones, our President and CEO, and Tony Bowen, our CFO.\nSome of the figures that we'll discuss today are presented on a non-GAAP basis.\nSuch statements are based on current information and management's expectations as of this date and are not guarantees of future performance.\nAs a result, our actual outcomes and results could differ materially.\nYou can learn more about these risks in our Form 10-K for fiscal 2020 and our other SEC filings.\nDuring Q&A, we ask that participants limit themselves to one question with a follow-up, after which they may choose to jump back into the queue.\nWe hope that you and your families are staying safe and healthy in these unprecedented times.\nWe're also saddened by the senseless acts of racial injustice which continue to plague our country and has tragically taken lives.\nWe are committed to continue building a culture of belonging at H&R Block and doing our part in our communities to help bring about needed change.\nFirst, I'll discuss how we've responded since the start of the pandemic.\nI'll then provide our perspective on the industry in our results followed by thoughts on how we are executing the remainder of the tax season.\nI'll next discuss Wave, including an exciting new product that began rolling out to more small business owners last week.\nFinally, I'll share perspectives on our future and Tony will review our fiscal '20 results, capital allocation and thoughts on fiscal '21.\nThe pandemic has created business challenges beyond anything we've experienced.\nOur financial results have been impacted.\nWe've drawn our full line of credit and we've demonstrated agility and innovation, quickly making dramatic changes to our operating model to continue to serve clients.\nAnd in doing so, we've accelerated our efforts to transform H&R Block.\nNever has our purpose been more important as we help consumers gain access to their much needed refunds and assist small business owners as they navigate the financial uncertainty caused by the pandemic.\nIn mid-March, as the spread of the virus began to impact our business, we quickly turned to our crisis playbook, which enabled us to effectively and efficiently react to an extremely challenging situation.\nIn our retail locations, virtually every state pursued lockdown policies that both affected our ability to operate and prevented people from leaving home to be served the way they want it.\nAt the peak, nearly 20% of our office network was closed to the public.\nFor those offices that remained open, we made dramatic changes by limiting in-person service including requiring drop-off in nearly half the network and increasing the use of our virtual capabilities.\nIn short, our obligation to follow local orders is subject to far greater scrutiny than local independents.\nRegardless of how we operated, one of our top priorities has been providing for the health and safety of our associates, franchisees and clients, while helping clients access their refunds.\nThe teams worked diligently to keep our offices clean, followed social distancing protocols and complied with ever-changing city and state guidelines.\nBecause of these changes, bringing digital solutions to our clients became more important than ever.\nAs you may recall, coming into this year, our primary objective was to digitally enable every aspect of our business to deliver our expertise to consumers in new and exciting ways.\nThese efforts have been instrumental in allowing us to meet the needs of our clients using methods we didn't have in the past.\nWe have seen a dramatic increase in returns, leveraging our digital capabilities, including Tax Pro Go, Tax Pro Review and Approve Online feature.\nApprove Online allows filers to review their returns, approve it and pay their fees off from their mobile device.\nWith a significant portion of our clients historically visiting offices more than once to complete their returns, this capability provides tremendous convenience, especially during these uncertain times.\nWe also enhanced our digital capabilities for our tax pros because many of them couldn't serve clients from our offices.\nWithin two weeks, we stood up a work-from-home model, allowing thousands of tax pros to prepare returns without having to come into the office.\nThis capability will be invaluable moving forward.\nOur efforts during this crisis to continue to meet the needs of clients, digitally enable our business, and serve our clients however they want, has led to strong feedback with service quality scores improving 2 points in Assisted and 5 points in DIY building on significant increases in both areas in fiscal '19.\nBeyond taking care of our clients, we also took significant measures to take care of our associates.\nOur tax pros are our greatest asset and I'm proud of the investment we made to create a leading benefit program for our seasonal associates if they were directly impacted.\nAnd finally, I'm also proud of how we've responded in our continuing commitment to our communities.\nWe joined the American Express 'Stand for Small' coalition in support of small businesses.\nAt Wave, we provided instant payouts to all of our payments customers for free to give them instant access to their money.\nAnd we offered free tax preparation to frontline workers through Tax Pro Go in May and June, which received overwhelmingly positive feedback.\nWith this context on our operations, I'd like to spend a minute on what we're seeing in the industry as a result of the pandemic, as well as our results.\nIndustry returned volume has been unusual due to the filing extension as well as the stimulus package.\nThrough June 5, the IRS reported total filings down 6%.\nThe IRS's volume includes millions of returns completed by those who typically don't file.\nThey did so this year to receive stimulus payments.\nWe believe the vast majority of these returns were completed through the IRS's fillable form site, which is inflating the number of DIY returns in the market.\nExcluding these returns, we estimate DIY e-files are down approximately 4% compared to Assisted e-files, down 15% through June 5.\nWe expect this gap to moderate toward the end of the tax season and we'll provide more thoughts during our Q1 call.\nWith respect to our volumes in DIY, we've maintained relatively flat shares through early June.\nIn Assisted, we had share gains through the end of April, but are seeing that moderate in this extended filing season.\nIt's important to recognize that an extension like this has never happened in U.S. history.\nSo there is no precedent for forecasting consumer behavior.\nDespite states beginning to reopen, there is no business as usual.\nWe have more offices open and have expanded our hours of operation compared to a typical first quarter but a substantial portion of these locations are not serving clients in the office.\nInstead, we continue to interact with our clients either virtually or through drop-off.\nAnd while we have more tax pros working than normal this time of year, it is far less than the number we would have at the end of a typical tax season in April.\nFor these reasons, client volumes may be impacted.\nAs such, we've updated our marketing plans for the quarter to make sure consumers know we're open and to help them understand the variety of drop-off and digital options we have available.\nWe're doing this through multiple channels to make sure we appropriately target those who haven't filed.\nIn addition to the help we're providing consumers, we're also doing everything we can to help small business owners during this difficult time.\nWe've added a free Small Business Resource Center on our website to provide regular updates on government assistance programs.\nAdditionally, in May, we launched our recovery action plan service, which helps entrepreneurs navigate the CARES Act, including loan programs and tax credits.\nThis is another great example of leveraging our human advantage.\nTurning to Wave, after posting strong results of over 40% revenue growth through mid-March, we've seen flat revenues in April and May as small businesses were impacted by the pandemic.\nWe've taken measures to ensure we are limiting operating losses at Wave without sacrificing key investments in the business.\nDespite these actions, we expect the near term performance and resulting valuation of the business to be negatively impacted similar to many other businesses during this pandemic.\nAs such, we have recorded a non-cash impairment of goodwill which Tony will talk about later.\nWhile there has been a short term impact on the business, we remain confident in the long term viability and future growth of Wave.\nOne reason for this confidence is Wave's innovation and the pipeline of valuable products and services we are working on for the future.\nA great example of this is Wave Money, which was expanded to more customers last week.\nWave Money is a business bank account that does what others can't, manage all aspects of bookkeeping automatically, giving entrepreneurs more time to focus on their business.\nThis is the first to market, software-powered small business bank account, which provide several unique benefits to Wave customers including no monthly fees or minimums, seamless integration to Wave's accounting platform for expense categorization and tax readiness and instant access to funds via Wave payments.\nWe are excited about this product as we continue to innovate to simplify the lives of small business owners.\nIn summary, as we navigate this new normal, we haven't lost sight of what we've accomplished this year making significant progress toward our strategic objectives in ways we couldn't have anticipated.\nWe are taking this opportunity to thoroughly and objectively evaluate our progress, determine what we can do better and to reinforce our sense of urgency in these efforts.\nWe remain committed to continuing the transformation of our business.\nWe're in the process of evaluating and reprioritizing our strategic imperatives, while simultaneously, examining our expense structure to identify areas where we can save to help fund the future.\nThis work is ongoing and will remain fluid given our current operating environment.\nWe'll be providing more detail later this year.\nWith that, I'll hand the call over to Tony.\nThe last time we spoke, we were on track to deliver on our outlook for the tax season in the fiscal year.\nHowever, like most companies, the pandemic has negatively impacted our business and financial performance.\nBecause of the timing of the pandemic aligned with the time in our fiscal year in which we recognize the majority of our revenue, we withdrew our fiscal year '20 financial outlook.\nAs such, I won't be detailing our performance against those expectations as I normally would.\nI will, however, provide insights regarding our fiscal year '20 financial results, how we see the remainder of the tax season impact in our financial performance in fiscal '21 and actions we're taking to enable continued investment for future growth.\nIn fiscal '20, we recognized revenues of $2.6 billion, representing a 14.7% decline from the prior year, driven by lower tax return volumes as a result of the extension of the federal tax filing deadline, partially offset by the contribution of Wave.\nRegarding expenses, total operating expenses increased 3.4%, driven entirely by the impairment of Wave goodwill and Wave's operating expenses.\nExcluding Wave, our total operating expenses would have declined, though at a lower percentage than the decline in revenue due to legal fees, COVID-19 related benefits, and planned investments in technology.\nWe recorded a $106 million non-cash goodwill impairment at Wave due to the pandemic and its impact on small businesses.\nAs Jeff mentioned, we've been pleased with Wave's performance since the acquisition with solid growth through mid-March.\nHowever, revenue growth has slowed during the pandemic, which has impacted the invoicing and payments volume of small businesses.\nWe remain confident in Wave's future and in our ability to continue to deliver tremendous value to small business owners through Wave's innovative platform.\nTurning to the rest of the income statement, interest expense increased by $9 million.\nApproximately half of this increase was due to higher draws on our line of credit during the normal course of the business through our fiscal third quarter, while the other half was due to additional interest associated with the $2 billion draw in late March.\nThe changes in revenue and expenses resulted in a pre-tax loss from continuing operations of $3 million.\nGAAP earnings per share was positive at $0.03 due to favorable discrete tax items.\nAdjusted earnings per share, which excludes the impact of the impairment and amortization of intangibles related to Wave and tax office acquisitions, was $0.84.\nIn discontinued operations, there were no changes to accrued contingent liabilities related to Sand Canyon during the year.\nI'll now turn to capital allocation and the balance sheet.\nDespite the unique circumstances related to COVID-19, our capital allocation priorities remain the same.\nAt the top of the list is maintaining adequate liquidity for our operational needs.\nOur current liquidity position remains strong as we ended the year with $2.7 billion in cash, which includes the full $2 billion drawn on our line of credit.\nAs we announced in late March, we believe we have sufficient funds to support the business at the start of tax season '21.\nOur line of credit is subject to various conditions including a covenant, which requires us to maintain a debt to EBITDA ratio of 3.5 times on April 30.\nBased on our fiscal year '20 financial results, we did not meet this covenant, but we have secured a waiver with our lenders with no changes to the terms of our line of credit.\nAfter ensuring adequate liquidity, we then made strategic investments back into the business that we believe will drive sustainable growth, ultimately benefiting our shareholders.\nAs Jeff mentioned, given the pandemic's impact to our business, we have undertaken a review of our expense structure to eliminate any unnecessary spend in order to continue funding the initiatives that will fuel future growth.\nI'll talk about these expense measures in a moment.\nThe last step of our capital allocation process is to deploy excess capital through quarterly dividends and share repurchases.\nI'm pleased to announce that despite the financial impact of COVID-19 and the extended tax season, our Board of Directors has declared a $0.26 per share dividend payable July 1.\nWe've never missed a dividend payment since going public in 1962.\nWe remain committed to performing an annual review of the dividend after each fiscal year.\nWith respect to share repurchases, in fiscal '20, we repurchased a total of 10.1 million shares for $247 million at an average price of $24.36.\nWe made no share repurchases in the fourth quarter.\nFor the past two years, we have committed to, at a minimum, repurchasing shares to offset dilution from equity grants and opportunistic share repurchases thereafter.\nGiven the uncertainty created by COVID-19, we have not yet determined our share repurchase approach for fiscal '21.\nI'll now discuss our thoughts on -- regarding fiscal '21.\nAs a reminder, last year, we provided our fiscal year financial outlook on our Q4 call.\nGiven, we haven't yet completed the current tax season and there remains uncertainty due to the pandemic, we will not be providing a financial outlook at this time.\nInstead, we plan to provide a tax season recap on our first quarter call in September and our full financial outlook for fiscal '21 on our second quarter call in December.\nLet me provide some high-level thoughts on how we expect to close out the tax season and our efforts to mitigate cost increases as a result of the extension.\nFirst, while it's natural to expect all volume loss in Q4 of fiscal '20 to shift into the first quarter of fiscal '21, that may not necessarily be the case.\nAs Jeff mentioned, during this quarter, we are still operating under a modified model.\nWhile we have more offices open than usual, we are still operating with just half of our total network and a substantial portion unable to serve clients face to face.\nThis may impact our ability to retain clients and attract new clients to the brand.\nRegarding expenses, due to the extension of the tax season, we anticipate additional cost during the first quarter.\nWe expect an increase of approximately $10 million in marketing expense and approximately $10 million in interest expense.\nAdditionally, we expect variable expenses related to compensation benefits and bad debt to be approximately 40% of incremental Assisted revenues generated.\nWe are actively evaluating ways to mitigate any additional cost by taking a detailed look at all spend categories and making prudent reductions across our business.\nWe're still in the process of finalizing these plans but I can offer a few areas of focus, including renegotiating rents with landlords across our retail footprint, implementing a hiring freeze, eliminating merit increases for fiscal '21, examining vendor spend to renegotiate existing contracts, and reducing capital expenditures to only what is necessary.\nIn addition to these savings, we have entered into a non-binding letter of intent with MetaBank to be the provider of our financial products, including Refund Transfer, Refund Advance, Emerald Advance and Emerald Card, which will result in savings.\nMetaBank is a leader in providing financial solutions to consumers and have significant experience in the tax preparation industry.\nWe're excited to partner with them to continue providing valuable products to our clients.\nIn summary, we've taken prudent steps to adjust to the pandemic, including our modified operating model, line of credit draw, and cost reduction efforts.\nThese measures will allow us to operate effectively, while enabling continued investments in our future.\nWe've been challenged during the last few months unlike any other time in our history.\nThe resilience and dedication of our team, our strong financial foundation, and our ability to adjust our operating model has enabled us to continue delivering tremendous value to our clients at a time when they need us most.\nI am confident we'll come out of this crisis stronger than ever as we continue the work to transform our business.\nI look forward to speaking with you in September.\n Assistant:", "chosen": "announced a quarterly dividend of $0.26 per share.\nh & r block - have adequate liquidity to meet anticipated operating cash needs through start of tax season 2021.\nevaluated wave's goodwill during q4, which resulted in an impairment of $106 million.\n"}
{"prompt": "Human: Neil, you may begin.\nWe understand it's a busy last few days of the earnings season, and everyone is quite familiar with the environment, so we will jump right in.\nDuring the first weeks of this pandemic, we took decisive action and focused on capital pricing through several critical steps.\nWe suspended dividend distributions on both our common and preferred securities, preserving approximately $72.5 million, and we deferred all planned capital expenditures for the balance of the year, saving approximately $20 million.\nAdditionally, at the corporate level, we reduced our SG&A run rate by 25% for 2020.\nWhile at our properties, we suspended operations at 21 of our 48 hotels, which led to a reduction in operating expenses, approximating 80% on a go-forward basis.\nThese were difficult but necessary moves, and we undertook these actions to ensure we had sufficient flexibility through this pandemic.\nEarly in the quarter, we amended our credit facility to access our senior revolving credit facility and received a full financial covenant holiday for five quarters with the next covenant test on June 30, 2021.\nWe've had a decade-long relationship with the lead banks in our bank group, and we appreciate their partnership during this unique time.\nWe have spent most of the most of the second quarter reopening hotels.\nEach of them adapted to a highly efficient operating model, provided anticipatory service from behind plexiglass and engaged a completely new guest profile.\nAnd they did so safely, graciously and effectively.\nThe lion's share of the 27 hotels that were opened in April and May consisted of our limited service drive-to resort offerings that were able to drive rate and occupancy, exceeding our internal forecasts.\nEarly April is when we saw the trough for our open portfolio, bottoming out around 19% occupancy but incrementally growing through the balance of the quarter, ending June at 39% occupancy.\nMost of the 27 hotels that have remained open throughout the pandemic and the seven hotels that have opened since June one are able to run with a marginally sized staff, allowing for lower breakeven levels and the ability to generate gross operating profit with occupancies around 25% to 30% or a 60% to 70% RevPAR decline for EBITDA level breakeven at properties.\nOur focused service portfolio, whether branded or independent, offer significantly more flexibility as it relates to staffing levels and job sharing opportunities, minimizing costs and ultimately allowing us to either profitably maintain operations or reopen assets more expeditiously.\nAs we've discussed on past calls, our franchise model and close alignment with HHM and our operating teams also allows us to adapt our staffing and operating models in real time.\nThis close relationship, coupled with our cluster strategy to maximize revenues and generate marketing advantage and economies of scale for cost efficiencies and sales, has yielded consistent market share outperformance versus our comp set prior to the pandemic.\nThis relationship has proven to be critically beneficial over the past five months in determining which hotels to open, consolidating demand to optimize breakeven and driving local decisions.\nThis will continue to drive outperformance throughout the recovery phase.\nWe expect to have substantially all of our hotels operating by the end of September.\nAnd now more than ever, our ability to stay nimble and leverage our flexible operating model in close connection with our independent franchise operator, allows us to reopen and operate our hotels in a cost-efficient manner, gives us the opportunity to reduce our cash burn rates and breakeven levels meaningfully and sets up our portfolio to generate cash flow as we navigate this recovery.\nDrive-to resorts have been our strongest performers.\nLocal regulations and travel bans dictated our opening of these hotels.\nBut with each month of performance, we are seeing meaningful growth in occupancy and strong rate integrity.\nWe expect a longer leisure season this year with disrupted schools, work-from-home employees, low gas prices and continued stimulus.\nOur Sanctuary Beach resort was the best-performing asset during the second quarter, ending the period at 71% occupancy with a $340 ADR, and success continued in July with RevPAR growth of 12.4% for the month.\nThe ramp began in mid-April and extended throughout the quarter as travelers became more comfortable leaving their homes and socially distancing on the California coast.\nWe opened Hotel Milo in Santa Barbara more recently, but it is ramping up quickly, particularly around the weekends, where ADR is close to prior years.\nOn the East Coast, the Annapolis Waterfront hotel on the Chesapeake and the Mystic Marriott, which opened in mid-June, are delivering operating profits this summer.\nSouth Florida has been more choppy.\nGovernment-mandated closures impacted our portfolio as Key West was closed to visitors and nonessential personnel, and Miami Beach hotels were mandated to close to prohibit the spread of the virus.\nRestrictions at both municipalities were lifted on June 1, and this led us to reopening our Parrot Key hotel in Key West and two of our Miami Beach hotels, the Winter Haven and the Cadillac.\nEarly results in both locations were promising, but notably at the Parrot Key, which saw travelers arrive from the Southeast and even from the Northeast and Midwest.\nBut the recent rise in case counts across the Sunbelt led to the closure of Miami Beach and restrictions at bars and restaurants in Key West over the July four weekend, which hampered the rapid ramp-up we were seeing in these markets.\nWe believe occupancies at these hotels will reaccelerate in conjunction with decreasing case counts and easing restrictions across the southern states, but the third quarter may still be challenged with weather or headlines in Miami Beach.\nBut judging from the number of New Yorkers still coming to Miami in even these conditions, we expect a seasonally high fourth and first quarters to be robust once again in Miami Beach.\nOur urban gateway markets have been hard at work.\nThe headlines surrounding corporate travel, international travel and events remain bleak.\nBut fortunately, the domestic travel restrictions and quarantines instituted by major coastal cities should ease in the coming weeks and months on a city-by-city basis and should open us up for more leisure travel.\nOur operating model alignment with the teams at each of our hotels provides the speed of decision-making on innovative ways to drive operating profits from each of our locations.\nWe've been able to open hotels as we source new business in each of our clusters, and our limited service business model allows us to staff very efficiently during this low demand period.\nOur sales and marketing teams have stayed nimble throughout the pandemic, remaining cognizant of travelers' increased selectivity as it pertains to authentic and relevant experiences, but also proactively staying connected with local demand generators.\nThis approach was very productive during the second quarter as our team secured contracts with local hospitals and frontline personnel across our portfolio, with perhaps the biggest success in New York City.\nWe housed government groups and medical staff at our JFK assets, police and fire department crews in Brooklyn and at our Hilton Garden Inns in Tribeca and Midtown East, and lastly, contracted with a leading medical institution in lower Manhattan at our Hampton Inn in the Seaport.\nAll of this led to 61% occupancy for our seven open New York City hotels during the second quarter.\nOur sales team has since pivoted from first responder business to more normal business.\nDespite the bleak headlines on corporate travel among the largest companies, some parts of the economy are beginning to travel.\nOur sales in our local property teams directly have had success sourcing new business to our hotels.\nIn Philadelphia, the team secured Major League Baseball and the NFL to build a base for transient compression; in New York, baseball and hockey teams for shorter stays.\nIn each of our markets, we have sourced significant design and construction business.\nThere are a lot of buildings to prepare for a post-COVID build-out or projects under development.\nIn Boston, we contracted a buyout for the Boxer to a local university to house their students from September through May.\nFor universities and even a hybrid model, travel demand will increase relative to the spring or summer.\nWe have secured business with TV broadcasters and news organizations in Washington, D.C. Content production and studios are beginning to mobilize in Southern California near our Courtyard West side, and Netflix and other producers are producing on the East Coast cities as well.\nAll of our submarkets are seeing a more general purpose healthcare business, patients and family for elective surgeries, but also medical equipment and other technology vendors.\nConsulting and financial services has been slower to get on the road, but we hear of the first banks beginning to travel or consider buyouts for meetings or allocating inventory hotel inventory for employees to avoid commutes or simply arranging daywork rooms.\nEarly results from July are promising, with ADR only down 25% across the portfolio year-over-year as occupancy showed some signs of growth, especially in our urban markets outside of New York.\nA few more thoughts on New York.\nPrior to COVID-19, New York was one of the toughest markets in the U.S. to achieve rate growth despite record visitation year-over-year as the city was seeing new supply increasing approximately 4% each year over the last several years.\nWe have already seen the headlines of big-box hotels in New York closing their doors forever as many as 5,000 rooms among them so far, and we think of this as the tip of the iceberg in terms of hotel closures.\nIndustry researchers have estimated that 20% of New York's total room count, about 25,000 keys, could permanently close.\nNew York City is dominating the headlines as it pertains to hotel closures, but there are corners of every market filled with distressed assets that were troubled to produce margin even before the pandemic.\nThey are now obsolete and will improve the supply picture.\nThe pandemic is also bringing about a decline in short-term rental demand as seen in recent data showing the top 25 markets experiencing significant year-over-year decline in inventory available.\nFive of the top MSAs, including Boston, New York and Los Angeles, are seeing year-over-year declines from 25% to 40%.\nTravelers are choosing the proven cleanliness of hotels versus the unknown of short-term rentals, and cities and landlords are finally enforcing current regulations and forcing transparency.\nThe pandemic will fundamentally change the models of these platforms as we've already seen in Airbnb strategy's shift to longer duration stays versus short-term offerings, and these changes will be materially positive for hotel portfolios with urban gateway market exposure like Hersha's.\nHersha has been a developer, owner and operator in New York for over 20 years.\nPost 9/11, we increased our development pipeline in Manhattan.\nPost GFC, we acquired troubled developers hotels under construction.\nThis time, we have sufficient exposure to Manhattan, but expect to enjoy a strong recovery in New York in the next 12 to 24 months.\nAfter 9/11 and after the GFC, New York rebounded with the highest growth rates in the country for the early years of the recovery.\nAfter 9/11, there were significant deletions from supply.\nSo after a steep recovery in 2003 and 2004, the market continued to produce double-digit RevPAR for three more years.\nPost 2009, New York rebounded quickly in 2010 and continue to grow in mid-single digits for three to four more years, but new supply made the rest of the cycle a bit more choppy, although values continue to reach new highs.\nThis time, as demand returns, the supply story will be very different.\nMore permanent hotel closures, no construction financing, zoning restrictions for hotel development,etc.\nAnd we expect our category killing select service portfolio in New York can meaningfully outperform.\nBefore transitioning to Ash to discuss our expense savings and burn rate reductions, I want to update you on our pending asset sales.\nAs a quick reminder, we announced accretive binding sales agreements on four assets in our portfolio: the Duane Street Hotel in New York City; the Blue Moon hotel on Miami Beach; and the exit of the 50% ownership in two South Boston Hotel, two hotels: The Courtyard South Boston, the Holiday and Express South Boston.\nSince our last earnings call, we've had follow-up discussions with each of the buyers who have asked for additional time to close on the individual transactions.\nIn conjunction with these requests, we negotiated the right to sweep the deposits on each of the consolidated asset dispositions and a buy sell right for our JV.\nAlong with the extensions, we have provided a reduction in purchase price for the buyers at each of these assets, resulting in total expected net proceeds of $70 million.\nWe remain cautiously optimistic that these transactions will close as the buyers are not reliant on material financing, but we now anticipate these agreements will close in the fourth quarter or in early 2021.\nIn addition to these four asset sales, we have multiple levers to pull should the impact to the travel industry remain at depressed levels into the second half of next year, and we continue to explore various strategies to fortify our balance sheet.\nSome investors have asked if we would raise additional common equity.\nIt's hard to see a scenario where that level of dilution would make sense.\nWe are more likely to sell additional hotels as a private debt market emerges in 2021.\nWe are encouraged by a thawing, at least in the transaction markets that should gain momentum in the coming three to four months.\nOur hotels are differentiated in the acquisitions market.\nNearly all of our hotels are unencumbered of ground leases, management and often brand.\nThey are newly built or recently repositioned with very little capex required for the foreseeable future.\nThey are high-quality and well-located in prominent innovation-oriented submarkets in the leading gateway markets of the U.S. Difficult times like these demonstrate the hustle and the accountability of our team.\nWe have visited most of our hotels across the last few months and are grateful for the quality and character of our team at our hotels and our offices.\nIt's a tighter group today, but it reminds us that small groups of committed people can do great things.\nFor Jay, Ash and I, this is our 21st year in the public markets.\nWe have navigated three cycles and nearly a dozen major demand troughs together.\nPast demand troughs have proven that cities and economies rebound and America grows.\nDomestic and international travelers get comfortable getting back on planes, trains and automobiles to visit the cities that make up this great nation.\nThe last several weeks have showed that the recovery for lodging is unlikely to be linear, and near-term forecast indicated it's difficult to pinpoint how business travel will resume after Labor Day.\nBut the steps we have taken to date and our highly adaptable and flexible operating model will sustain us until we achieve a more stable environment that can showcase the value of our exceptional portfolio.\nI'll focus the majority of my time today and the actions we've taken to date from a liquidity preservation perspective, most specifically as it pertains to newly implemented asset management initiatives that have allowed us to minimize our cash burn rate and breakeven levels as we navigate the pandemic.\nOur top priorities at the beginning of this outbreak were amending our credit facility and attaining a covenant holiday, which we were able to do in short order and before our peers, but we also focused on cost-saving measures to preserve our liquidity profile and to minimize operational losses.\nOur franchise model and close relationship with our third-party independent operators leads to significant flexibility as it relates to executing cost savings initiatives at our hotel, and our ability to make these changes in real-time has led to and will continue to lead to substantial savings for our portfolio.\nIn our 33 currently operating hotels, we've not only rightsized our on-site staff, but have also employed various asset management initiatives to lower our cost per occupied room, which resulted in a declining monthly cash burn rate through the balance of the second quarter.\nOur operational strategy allows us to run our hotels with very lean labor models until demand achieves levels warranting additional staffing, typically between 30% and 40% occupancy.\nWe're able to do this by applying various cost-cutting strategies such as cross-utilizing management personnel, outsourcing and job sharing within the hotel and across our clusters to lower our overall expense base.\nOur franchise model has also allowed us to minimize our property level severance cost through this pandemic.\nAt the end of the first quarter, we accrued less than $1 million for these costs, and we did not record any further severance costs during the second quarter and would not anticipate any further costs for the remainder of the year.\nWe've also zero-based budgeted our hotels and rightsized labor models with expectations to save 300 to 500 basis points when lodging returns to more stabilized levels.\nAs demand begins to pick back up and occupancy levels start to materialize from these low levels, we will begin to phase back in staffing levels as necessary.\nWe anticipate that the availability of labor will increase dramatically over the next few years with anticipated closures in restaurants, retail and other service industries, alleviating some of the increases in labor costs that we have witnessed during the past three to four years.\nWe've also focused on revised cleaning protocols, decluttering and scaling back in-room amenities, such as bedding accessories, and other nonessential amenities, pens, bill pads, paper menus,etc.\nAnd we forecast this reduction should generate substantial savings on a guest supplies for occupied room moving forward.\nPrior to the pandemic, many of our limited service offerings included a complementary breakfast buffet for our guests, which we have eliminated for safety reasons.\nAt these hotels, we have turned to a more informal grab-and-go style option, which has not only been well received by our guests, but has significantly brought down our cost per occupied room for this category.\nIn conjunction with our Earthview Sustainability Team, we've been implementing additional cost-cutting and efficiency measures to curb energy expenses, which will continue creating savings and margin improvements even after the impact of COVID-19.\nWe're reducing utility costs through operational and energy-saving initiatives, such as lowering heating and cooling set point for rooms and public spaces while also working closely with our engineering teams on preventative maintenance procedures.\nAll of these measures allowed us to reduce our operating expenses by 77% during the quarter.\nAnd on a long-term basis, we expect many of our newly applied expense mitigation practices to extend beyond the pandemic.\nIn addition to expense savings measures, we have leveraged our Earthview platform to generate new revenue opportunities, such as a green and wellness strategy that provides various sustainable meeting room options and wellness rooms.\nSo all of these operating strategies have also positively impacted our breakeven levels.\nDuring the second quarter for the 21 comparable hotels that remained open throughout the period, we were able to effectively breakeven on an EBITDA basis even with severely depressed operational levels as these 21 hotels had a RevPAR decline of 78% and approximately 34% occupancy.\nBased on this history, we are comfortable that on a property level basis, our entire portfolio breaks even with a 65% to 70% RevPAR decline with occupancies approaching 40% and a 25% to 30% ADR decrease.\nAt the corporate level, our RevPAR breakeven occurs at 40% to 50% decline, factoring in 50% to 55% occupancies at a 15% to 20% ADR discount.\nWith our current operating model, we were able to generate gross operating profit at 80% of our open hotels during June and would anticipate that nearly all of our open hotels can generate positive GOP during the third quarter.\nAs I mentioned, with the execution of the aforementioned expense savings initiative, we're able to breakeven at below 40% at our open hotel, and we're forecasting that our next 25% to 35% occupancy gains should flow through at approximately 80% to the GOP line.\nOn our prior earnings call, we outlined our cash burn rate forecast, which was originally projected to be $11 million per month, including all hotel operating expenses, corporate SG&A and debt service expenses.\nDuring April, which we would deem to be the trough of the industry with our comparable portfolio ending the month at 14% occupancy, our corporate cash burn rate actualized at $10.5 million.\nOur burn rate sequentially decreased through the balance of the quarter, reducing to $8.6 million for the month of May and closing the quarter at $7.8 million for June.\nOur cash burn rate for the second quarter totaled $26.9 million, 18% below our downside scenario and 13% below our internal forecast at the beginning of the period.\nDuring the second quarter, we spent $5.4 million on capital projects, bringing our year-to-date spend to $16.4 million.\nWe anticipate a significantly reduced capex load for the back half of the year with estimated spend for 2020 at approximately $20 million, half of what we had planned to spend at the beginning of the year.\nSince 2017, we've allocated close to $200 million for product upgrades and ROI-generating capital projects across approximately 50% of our total room count.\nThis puts our portfolio in great shape coming out of this crisis in terms of capital allocation needs and market share gains, and most of our hotels will not need substantial capital infusion for the foreseeable future.\nLast quarter, discussions with our lending group resulted in a 5-quarter covenant holiday with our next covenant test set to occur on June 20 June 30, 2021.\nParameters around the covenant tests are yet to be set, and we'll continue to have an active dialogue with our bank group as we move through the balance of the year and into 2021 as to what these tests will look like.\nAs of June 30, we have drawn $95 million on our $250 million senior credit facility and ended the second quarter with $23.2 million in cash on hand.\nDuring the second quarter, we also took advantage of the low rate environment and entered into a new interest rate swap on the debt at the Courtyard L.A. West side at 3.425%.\nAs demand scenarios remain unpredictable, we continue to fortify our balance sheet through liquidity enhancing and cost savings measures to navigate this crisis.\nUntil then, our sales and marketing teams will remain acutely focused on driving incremental revenue through unique opportunities, while our asset management and sustainability teams will continue implementing strategic initiatives to significantly reduce our cost structure, which will lead to a resumption of our industry-leading portfolio free cash flow generation as the recovery progresses across the coming quarters.\nSo that concludes my portion of the call.\nWe can now proceed to Q&A, where Jay, Neil and I are happy to address any questions that you may have.\n Assistant:", "chosen": "suspended its full-year 2020 guidance.\n"}
{"prompt": "Human: Neil, you may begin.\nBefore turning it over to Ash to provide some further details on our recent capital raise, the newly amended credit facility and what we are seeing in our portfolio year-to-date and through the first quarter.\nThe conclusion of the fourth quarter closes the most challenging year in Hersha's history.\nAnd our above property team members, many here in our offices today, enabled us to remain nimble, make prudent decisions and execute multiple levers to provide financial flexibility for the foreseeable future.\nJay, Ash and I stand it out on our team shoulders as we share some good news today.\nWe begin 2021 with optimism toward the recovery as the rollout of vaccinations gains momentum and more and more people choose to travel.\nJanuary started off stronger than we anticipated for our portfolio returning to greater than $60 RevPAR with South Florida and Washington DC offsetting lock downs on the West Coast and the Northeast.\nWe had our first month of hotel level positive EBITDA in January, and we are encouraged with February performance to date.\nThe booking pace for President's Day weekend across the portfolio was the strongest since the pandemic one year ago.\nWe agree that leisure demand aided by continued government stimulus will again come first, but with significantly more pent-up demand than was actualized last summer.\nWe are also encouraged by data from the airlines.\nMost corporate accounts anticipate returning to at least 50% of pre-COVID travel by the end of 2021 and more than 40% of these accounts expect a full recovery in corporate travel by 2022.\nThe return of leisure travel will kick-start this year's recovery to be sure, but the industry should see meaningful acceleration with the return of business travel, which we believe could begin as early as the second quarter and ramp up through the back half of the year.\nDrive-to resorts have been our strongest performers since the inception of the pandemic.\nThis portfolio of hotels is about 25% of our pre-pandemic EBITDA, had a weighted average occupancy nearing 40% and realized ADR growth of 2% for the full year 2020.\nGovernment mandated shutdowns in California impacted performance in December and January for our coastal California properties, but we are seeing immediate improvement in February with the lifting of these restrictions.\nNot only have leisure travelers returned, but we are also seeing early signs of business and small group activity.\nNew corporate accounts for near-term projects and deposits for spring and fall weddings are building a base at the Sanctuary Beach Resort and Hotel Milo.\nAcross the country in Key West the Parrot Key Hotel and Villas was our best performing asset during the fourth quarter, generating 55% occupancy and 8.4% year-over-year ADR growth to $306 for the period.\nThe holiday weeks were especially strong, most notably the period between Christmas and New Year's which had greater than 90% occupancy and saw ADR exceed 2019 levels at the hotel.\nWe are expecting several strong quarters ahead at this exceptionally positioned resort.\nOur largest asset the Cadillac Hotel and Beach Club on Miami Beach is seeing increased demand on weekends entering special events, generating occupancies approximating 90% with rate on pace to improve incrementally throughout the balance of the quarter.\nMomentum has been has been building year-to-date in Miami from leisure demand, and recent announcements around major corporate relocations highlight the tremendous draw to the region, which leaves us optimistic for this year's recovery and substantial market growth for years to come.\nUrban destinations were essentially shut down from March to September of last year and then again from November through January.\nWe believe that the reopening of museums, national parks, theaters, sports venues and more bars and restaurants in the coming months will lead to a pickup in both pent up leisure and business demand to our great cities.\nAs travel begins to resume, which we have already seen in warmer climates such as South Florida and even at our lifestyle hotels up north over President's Day weekend, our unique portfolio provides us multiple levers to capture market share while continuing to operate in a cost-efficient manner as occupancy builds toward normalization.\nWashington DC has been a very strong performing market, despite the significantly abbreviated inauguration activity.\nAlthough the public was unable to attend the event the St Gregory Hotel contracted with media outlets including CBS, BBC and Al Jazeera.\nThe Hilton Garden Inn, M Street and the Hampton Inn Mason serve the men and women of the National Guard who were deployed to the city leading up to and through the event.\nThe Ritz Carlton Georgetown was able to hold a $1,000 ADR for the peak nights for the few leisure guests in town.\nWashington has begun 2021 on strong footing ending January with portfolio revenues more than double our expectations at the beginning of the month.\nThe new presidential administration is expected to lead through a pickup in activity among the lobbying, federal government and diplomatic segments, and we are also looking forward to the upcoming Cherry Blossom Festival in the coming quarter.\nOne of our better performing markets during the fourth quarter from our forecast perspective was our New York City portfolio, finishing the quarter with close to 40% occupancy, which came in spite of having few leisure oriented attractions open in the city.\nWe continue to see strong performance from our JFK submarket, but also saw an uptick in first responder business at our Brooklyn and lower Manhattan asset.\nThese customers, the New York Fire and Police Departments and a few medical groups continue to get rest at the new hotel Brooklyn and the Hampton Inn Seaport resulting in January occupancy of 97% and 51% respectively.\nAlthough this business is transitory and related to the ongoing COVID-19 spread we are grateful that these frontline workers are able to utilize our hotels to stay safe and guide us through this homestretch of this pandemic.\nUrban market recovery is not only driven by vaccine distribution and the return of business and international travel, but as meaningfully enhanced with reductions or deterioration of supply.\nIn markets around the country aging hotels are being rendered obsolete the Wardman Park in D.C, the Embassy Suites in Philadelphia, the Buckminster in Boston.\nNew York more than anywhere else consultants of forecasted an array of figures regarding the permanent supply reduction in New York.\nIt may not actualize as high as 25% as some of predicted, but the confirmed closures in 2020 alone provide a concrete realism that the supply will contract.\nAdding to this is the newly announced proposal requiring special permits for new hotels and expansions in zoning districts throughout the city by the Department of Planning.\nPublic hearings on this proposal have commenced, and if passed will materially impact hotel construction across the five boroughs and provide a significant tailwind for hotel owners for years to come.\nBefore Ash takes a deeper dive into our balance sheet and burn rates, I want to spend a few minutes on our capital allocation strategy and sources of additional liquidity.\nAs we've outlined on our previous earnings calls, dispositions represented the lowest cost of capital as we considered alternatives to raise liquidity and increase our financial flexibility.\nWe ran wide and robust marketing processes with multiple brokers beginning this fall.\nOur strong locations in major gateway markets attracted tremendous interest from private equity firms, family offices and residential developers.\nThese were fee-simple hotels that have remained open throughout the pandemic unencumbered of management and onerous labor contracts, many were unencumbered of brand, all of which made the bidding process quite competitive.\nOur goal is to generate $150 million to $200 million in proceeds from asset sales to pay down our senior credit facility.\nThe 6 recently announced asset sales will generate net proceeds of approximately $191 million.\nThe Sheraton Wilmington closed in December while the Courtyard San Diego closed last week.\nThe residents in Coconut Grove, Capitol Hill Hotel Washington and Holiday Inn Express Cambridge are all expected to close by the end of the first quarter, while the sale of the Duane Street Hotel is slated to close in early Q2.\nMany of these hotels represented those with capital intensive projects on the horizon and the successful completion of these sales will lower our capex budget by approximately $20 million over the coming years.\nAs part of a long-term capital recycling strategy, the dispositions achieve liquidity and flexibility at a reasonable cost.\nWe transacted at a discount to pre-COVID value, but we focused our sales on mature hotels, hotels that we don't for nearly 10 years, hotels that would require additional capital investment during the recovery, and the slowest growth hotel in each of our geographic clusters.\nThe successful sale of these hotels marginally improves the absolute RevPAR and EBITDA per key of the remaining portfolio, but meaningfully enhance this portfolio quality, EBITDA growth rate and reduces capex spending and disruption at these assets in the recovery.\nWe were also pleased to announce last week and fund just yesterday our strategic financial commitment with affiliates of Goldman Sachs Merchant Bank providing a $150 million unsecured term loan, which can be expanded to $200 million.\nThis capital infusion in conjunction with asset sales led to the successful amendment of our credit facility, extending our covenant waiver until June 2022 and eliminating term loan maturities in 2021.\nWe are pleased to have cleared the runway and provided the financial flexibility to focus on the ramp up of our portfolio in the coming year.\nAs we've discussed on prior calls and in investor meetings, we've been steadfast in our approach to capital allocation.\nConsidering the cash flow profile and liquidity of our assets and the upcoming recovery and travel and lodging, we were loads to pursue a transaction that would be unnecessarily dilutive to shareholders or constrain our strategic alternatives in the future.\nFor this capital raise, we ran a fulsome process.\nWe were delighted with the depth and quality of investors interested in financing our portfolio and look forward to future transactions with many of them.\nUltimately, the Goldman Merchant Bank offered the prepayment flexibility to draw and pick features and importantly the potential for future partnership in the coming cycle.\nAs we navigate through the tail end of the crisis and into the recovery we remain bullish on our portfolio positions in the markets where we operate, innovation oriented urban gateway markets and regional resorts, a short drive away from them.\n2020 showcase the allure of drive-to resorts for all segments of the traveler, and we believe this trend will not go away soon, but we remind investors that innovation markets provided strong results prior to the pandemic, and these markets have the most to recover with the rollout of the vaccine.\nSince the pandemic Facebook and Google have expanded office space near our hotels on Manhattan's West side and our Tribeca, Union Square and Midtown East hotels will all have major new office developments opening in the coming years.\nAmazon announcing the addition of 3,000 jobs in the Boston Seaport, walking distance from our Envoy Hotel.\nOur Courtyard LA is well positioned in Culver City for the booming tech and studio related office growth [Indecipherable].\nPhiladelphia has attracted several new life science and pharma companies downtown in state-of-the-art new space.\nEven our locations in Miami are attracting new Class A office space, in Coconut Grove and on Miami Beach as there is increasing momentum from Northeastern asset management firms and West Coast technology firms.\nAll of this proving out the corporate expansion remains intact and will add to the already robust demand generators in our gateway markets, particularly for our carefully assembled submarkets and locations.\nOur disposition announcements this year should also reinforce the high quality nature of our portfolio.\nOur hotels are precisely the kind of hotel sophisticated investors seek.\nOur hotels have a high absolute RevPAR, while still producing sector-leading margins.\nThe hotels are young and purpose-built for today's traveler with minimal capex requirements for the foreseeable future.\nOur hotels are fee simple and have prepayable financing and have few management or brand encumbrances all located in the most valuable markets in the United States.\nOur portfolio has proven to be attractive to a vast buyer pool and still offers incredible operational and financial leverage to this recovery.\nAnd with the increased financial flexibility from our capital infusion and no near-term encumbrances following our credit facility amendment, we are able to focus on capturing market share and operating our hotels in a cost-efficient manner to drive cash flow.\nAs Neil mentioned, I'm going to do a deeper dive on our recently announced capital transactions, bank amendment, and their impact on our balance sheet and interest expense before closing with an update on our operating results and current outlook.\nLast week, we announced a strategic financing commitment with affiliates of Goldman Sachs Merchant Bank to provide a $150 million in unsecured notes, which can be upsized to $200 million at any point on or before September 30th of this year with a maturity date on the notes of February of 2026.\nWe successfully closed on this financing yesterday and look forward to furthering our partnership with GS's Merchant Bank.\nWhen we began our capital raising process earlier this year to provide us additional liquidity and optionality we prioritize two items, capital that was not dilutive to our equity and significant prepayment flexibility, and this bespoke solutions satisfied both of these key criteria and several others that we had prioritized.\nThis capital is unsecured and fully subordinated to our bank facility and allows us to defer cash interest on 50% of our financing for the first year, creating substantial near-term cash savings and providing us additional runway during this period of recovery.\nThis capital does not prohibit supplementary junior capital and allows us additional unsecured debt as long as we maintain compliance with certain incurrence test.\nThese unsecured notes do not place any further restrictions on our ability to operate the business or enter into strategic ventures that may be available to us.\nLast week, we also highlighted that we went under contract to sell two additional hotels, bringing our year-to-date total asset value of disposition to $178.5 million.\nThe successful closing closing of these sales in addition to the Sheraton Wilmington, which closed in December and the Duane Street Hotel, which is expected to close during the second quarter will generate total proceeds of $216 million, and following the repayment of the $25 million mortgage loan on the Capitol Hill Hotel net proceeds from these dispositions will amount to approximately $191 million, which we will utilize in tandem with the proceeds from our unsecured notes to pay off our 2021 term loan and reduce our overall debt by approximately $150 million.\nWith the resulting reduction of overall leverage and the payment in current feature of our unsecured notes we estimate that our cash interest expense will decrease by approximately $4 million in 2021, and that our total interest expense including the deferred interest from the notes will remain similar to our 2020 interest expense.\nWe completed these asset sales and closed on the unsecured notes placement contemporaneously with the amendment of our revolving credit facility, and we're very pleased with the continued support from our consortium of over 15 Bank group members.\nThe amendment eliminates all term loan maturities until August of 2022 and extends our covenant-waiver holiday with our next financial covenant test occurring on June 30th of 2022.\nThe first test will be applied to the annualized second quarter performance with the third quarter test annualizing the second and third quarter results and so on.\nThe amendment allows us to pay off the accrual of our preferred dividends and maintain quarterly preferred dividend distributions moving forward.\nAt this time, we anticipate clearing our accrual on the preferred dividends by the end of the first quarter.\nThe completion of these capital transactions allows us to continue to focus on our operational performance, and accretive opportunity that may emerge in the recovery.\nResults at our properties of incrementally improved over the past 6 weeks and ultimately led to the validation of our breakeven forecast during January, in what is seasonally the slowest month of the year our properties generated positive property-level cash flow during the month of January on 40% occupancy with RevPAR levels 60% below January of 2020.\nIn January, 20 of our 36 operational hotels broke even on the GOP line with 14 achieving EBITDA breakeven level.\nThese results represent a 75% increase and 40% increase in properties that broke even on the EBITDA line compared to November and December respectively.\nBased on January's results and our forecast for the first quarter, we are comfortable with our previous estimates that the entire portfolio breaks even at property level with GOP with a 60% RevPAR decline.\nAt the corporate level, our RevPAR breakeven occurs at a 40% decline.\nOur franchise operating strategy allows us to run our hotels in very lean labor models until improved demand warrants additional staffing.\nApplying various cost cutting strategies such as cross-utilizing management personnel and outsourcing and job-sharing within the hotel and across our clusters lowers our overall cost.\nThe model affords flexibility to continue to operate in current staffing levels at our breakeven occupancies approximating 30% up to 55% to 60% at some of the hotels.\nAs occupancies increased at our hotels we are seeing flow throughs as high as 70% on the GOP line, and as we push both rate and occupancy we anticipate maintaining them for the remainder of the year.\nThe flexibility of the model and the resulting cost efficiencies economically justified continuing operations at our urban independent resort destinations throughout the pandemic mitigating cash burn over the course of 2020.\nOur total property-level cash burn for the fourth quarter was $5.9 million and in January the property generated property-level cash flow for the first time since March of last year.\nCorporate cash burn of $4.3 million in January represents a 60% reduction compared to April of 2020 at the depths of the crisis.\nWe expect our February performance to be in line with January with March operating results projected to surpass that of January and February as the pace of vaccination distribution, using government restrictions, spring break travel and warm weather along the Northeast should yield increased bookings across the portfolio.\nBefore I close with comments regarding our balance sheet, a quick update on Hersha's relationship with our New York City joint venture partner Cindat Capital Management.\nAs you may recall, following our 2016 transaction where we sold a majority of this portfolio and in which we netted a gain of $213 million, we retained a subordinated minority interest in the portfolio, which was junior to thin debt to equity position.\nEarlier this month, the equity interest of that portfolio were transferred and we have no remaining equity interests or economic or legal commitments to the joint venture.\nWe removed these 7 hotels from our portfolio count and they will no longer be part of our operating results after the first quarter.\nWe ended the 4th quarter with $23.6 million in cash and cash equivalents and deposits.\nDuring the quarter we received $8.1 million dollars in business interruption proceeds from Hurricane Irma's impact on our South Florida portfolio, and these receivables had a positive impact on our AFFO performance in the quarter.\nWe spent $4.3 million on capital projects last quarter, bringing our 2020 spend to $26 million, approximately $15 million below our forecast at the beginning of the year.\nOur 2021 capex load will be primarily focused on maintenance capex and life safety renovation, and we anticipate it will be roughly 35% below our 2020 spent.\nAs we have very minimal capex moving forward after the $200 million we have spent on capital projects since 2017 and the recent disposition of lower growth, higher cost hotels our portfolio will experience very little disruption or capital spend for the coming years.\nThe unsecured note facility from Goldman Sachs Merchant Bank combined with the announced asset sale will be utilized to reduce our leverage, provide liquidity and pay off the accrual on our preferred dividends.\nThese actions increased our weighted average debt maturity to 3.6 years and resulted more than 88% of our debt being either fixed or swapped.\nOver the past year, we've taken aggressive and swift action to minimize our operational losses.\nWe successfully zero-based budgeting our hotels allowing for margin improvement well into the recovery.\nWe reopened all of our wholly owned hotels and we incrementally reduced our cash burn rate to the lowest it has been since the onset of the pandemic, all are a testament to our aggressive asset management and nimble franchise operating model.\nFollowing the strategic transactions announced last week we have right-sized the balance sheet and turned our focus to operational performance of the portfolio as demand reemerges and accretive opportunities become available across the recovery.\nThis concludes my portion of the call.\nWe can now proceed to Q&A, where we are happy to address any questions that you may have.\n Assistant:", "chosen": "will forego providing full-year 2021 guidance at this time.\ncompleted full year and q4 2020 with approximately $23.6 million of cash & cash equivalents and deposits.\n"}
{"prompt": "Human: The slides that accompany today's call are also available on our website.\nWe'll refer to those slides by number throughout the call today.\nThis cautionary note is also included in more detail for your review in our filings with the Securities and Exchange Commission.\nWe also have other company representatives available for a Q&A session after Lisa and Steve provide updates.\nslide four shows our quarterly financial results.\nIDACORP's 2021 second quarter earnings per diluted share were $1.38, an increase of $0.19 per share from last year's second quarter.\nEarnings per diluted share over the first six months of 2021 were $2.27, which were $0.33 above the same period last year.\nBoth the second quarter and year-to-date earnings are the highest in the history of the company.\nToday, we also increased our full year 2021 IDACORP earnings guidance estimate to be in the range of $4.70 to $4.90 per diluted share, with our expectation that Idaho Power will not need to utilize in 2021, any of the additional tax credits that are available to support earnings under its Idaho of regulatory settlement stipulation.\nThese are our estimates as of today, and they assume normal weather conditions over the last six months of the year and assume a continued return to more normal economic conditions over the balance of 2021.\nI'd like to begin my remarks by highlighting the continued robust customer growth we are experiencing across Idaho Power service area.\nYou'll see on Slide five that the growth remained strong in the second quarter, increasing 2.9% since June 2020.\nThe influx of businesses and residential customers continues to benefit our company, while we believe the reliable, affordable, clean energy we provide remains one of the drivers for attracting new customers to Idaho.\nIt has been remarkable to see this trend not only sustain but accelerate over the past several years.\nWe are also seeing a return-to-normal operations for many of our commercial and industrial customers as our service area rebounds from the impact of the COVID-19 pandemic.\nAs of the end of June, unemployment in our service area was 3.5% compared with 6% in June 2020 and the current mark of 5.9% nationally.\nTotal employment in our service area has increased 6% over the past 12 months.\nMoody's forecasted GDP calls for very strong economic growth of 7.6% in 2021 and 6.9% in 2022.\nAs we speak, like many employers in our area, Idaho Power is in the midst of the return-to-workplace process for many of our office employees.\nI'm happy to see more people at our offices and thrilled that safely bringing our employees back reflects a significant step forward to our new normal that is taking place across our service area.\nIdaho Power service area continues to experience significant interest from commercial and industrial projects in food processing, manufacturing and distribution.\nMultiple developers, both local and national, are moving forward with the construction of commercial sized pac-shelf facilities, to better accommodate the speed to market of prospective projects.\nIdaho Power is also -- has also been actively working with Gervan Mining, which announced in early July, it will proceed with final construction of its Idaho Cobalt operations mine in Central Idaho.\nAnd just this past week, Lamb Weston announced a $415 million investment in the planned construction of a new French fries processing line at its existing facility in American Fall with expected capacity to produce more than 350 million pounds of frozen French fries and other potato products annually by mid-2023.\nThis expansion is expected to add approximately 130 jobs.\nIn addition to serving more customers than ever, we've experienced very hot dry weather during the second quarter with our service area experiencing several very high temperature days in late June and July.\nslide six shows the recent outlook of precipitation and weather from the National Oceanic and Atmospheric Administration.\nCurrent weather projections for August through October shows 50% to 60% chance of above-normal temperatures and a 33% to 50% chance of below-normal precipitation in Idaho Power service area.\nIf the warm and dry weather continues, we expect to see continued strong sales during the third quarter, particularly for residential and irrigation customers.\nAt the same time, dry conditions and overall lower reservoir storage levels have decreased our forecasted hydro generation for the remainder of the year, which Steve will address later on.\nBut it continues to appear, irrigators in most parts of our service area should have enough water to get them through the current growing season.\nThe combination of customer growth and hot dry conditions has created high demand for energy across our regions, as noted on slide seven.\nIdaho Power hit a new all-time peak load of 3,751 megawatts on June 30, and we have exceeded the previous 2017 peak demand of 3,422 megawatts, more than 60 separate hours on 12 different days so far this summer.\nThe recent heat wave has once again demonstrated the skill and dedication of our employees and the resilience of both our employees and our system.\nThe Jackpot Solar 120-megawatt project in Southern Idaho is scheduled to come online by the end of next year.\nAnd our company also recently issued a request for proposal to add another 80 megawatts of a capacity resource to meet peak energy needs by summer 2023.\nSeparately, early modeling in the 2021 IRP suggests that, subject to the timing of coal unit exits, additional capacity may be needed in future years.\nThe recent spike in energy use and prices also emphasizes the importance of the Boardman to Hemingway transmission line, or B2H, which we plan to bring online as soon as 2026.\nB2H will allow Idaho Power to import up to 500 megawatts, which will help meet customers' peak summer demand and increased reliability for our system as well as the region.\nRecord heat waves don't last forever, but we believe periods of higher demand in the summer months are here to stay.\nIdaho Power continues to evaluate its options regarding BPA's interest.\nI have a couple of notable Idaho regulatory updates to share.\nThe first is a recent filing Idaho Power made to accelerate the recovery of depreciation expenses at the Jim Bridger coal-fired plant, which is noted on slide eight.\nOur Idaho rates currently reflect a recovery time line through 2034, but preliminary analysis indicate the potential exit of all four units at the plant sooner than the current time line.\nIf our filing with the Idaho Commission is approved as filed, rates would increase $30.8 million in December of this year.\nThis would result in a near-term rate increase for our customers but our study shows the potential for customer savings in the long term.\nExiting the Jim Bridger plant early also aligns with our goal to provide 100% clean energy by 2045.\nSecondly, as seen on slide nine, the Idaho Commission recently approved Idaho Power's request to defer incremental costs associated with our enhanced wildfire mitigation plan.\nThis positive regulatory outcome will allow us to defer associated incremental costs to be included in a future rate proceeding.\nOur company is working hard to strengthen our grid and keep our customers safe during wildfire events.\nOn our last earnings call, I stated Idaho Power did not plan to make -- do not plan to file a general rate case in Idaho or Oregon in the next 12 months.\nThat remains true today.\nSteady customer growth, constructive regulatory outcomes, effective cost management and economic conditions, all play significant roles as we look at the need and timing of a future general rate case.\nI also commend them for their resilience over the past 17 months as we navigate the challenges of the pandemic together.\nLet's now move to slide 10, where you'll see our second quarter 2021 financial results as compared to the same period in 2020.\nOverall, we have experienced a very solid first half of the year, with strong customer growth, positive impacts from transmission services and higher revenues resulting from the heat wave that affected much of the Western U.S. Because of these factors, IDACORP's second quarter net income was substantially higher than last year.\nOn the table of quarter-over-quarter changes, you'll see our continuing customer growth added $3.9 million to operating income.\nAlso, increased usage per customer drove operating income higher by $22.9 million.\nCooling degree days were nearly double last year's second quarter and the hot and dry conditions led to significantly higher usage across all customer classes.\nIrrigation and residential per customer usage increased 25% and 10%, respectively.\nA return to more normal economic conditions combined with the hot weather also drove a respective 12% and 8% increase in usage per customer in the commercial and industrial classes.\nContinuing down the table, the higher usage for residential and small general service customers was partially offset by $5.1 million lower revenues from the PCA -- or the FCA mechanism.\nThe FCA mechanism has tempered the effect of the higher usage for these customer classes and could do so again in the third quarter if customer usage continues strong.\nNext, you'll see a decrease in operating income of $6.8 million that relates to the change in the per megawatt hour revenue, net of power supply costs and power cost adjustment impacts quarter-to-quarter.\nThe primary driver of this decrease relates to the amount of net power supply expenses that were not deferred to Idaho Power's power cost adjustment mechanisms.\nRecall that Idaho customers generally bear 95% of power supply cost fluctuations.\nAnd those costs were higher as the heatwave impacted wholesale energy prices at a time of increased energy usage by our customers.\nThe heatwave also affected transmission wheeling-related revenues, which increased operating income by $3.9 million.\nWheeling volumes increased as utilities work to serve high demand by moving energy across our system throughout the region during the quarter.\nIn addition, wheeling customers paid 10% more for Idaho Power's open access transmission tariff rate that increased last October to reflect higher transmission costs.\nNext on the table, other operating and maintenance expenses increased by $5.3 million.\nThis was primarily due to last year's temporary deferral of certain maintenance projects at Idaho Power's jointly owned thermal generation plant as well as higher accruals of performance-based incentives.\nWe continue to see decreases in employee travel and training costs related to COVID-19, while our allowance for bad debt remains above historic levels and it's taking longer to collect.\nOur net COVID-19 recovery deferral impact, however, continue to remain nominal.\nFinally, our higher pre-tax earnings led to an increase in income tax expense of $4.2 million this quarter.\nThe changes collectively resulted in a net increase to Idaho Power's net income of $9.6 million, or $0.19 per share.\nIDACORP and Idaho Power continue to maintain strong balance sheets, including investment-grade credit ratings and sound liquidity, which enable us to fund ongoing capital expenditures and distribute dividends to share owners.\nIDACORP's operating cash flows, along with our liquidity positions as of the end of June 2021 are included on slide 11.\nCash flows from operations were about $39 million higher than the first six months of last year.\nThe increase was mostly related to working capital fluctuations and the timing of net collections of regulatory assets and liabilities.\nThe liquidity available under IDACORP's and Idaho Power's credit facilities is shown on the middle of slide 11.\nAt this time, we still do not anticipate raising any equity capital in 2021.\nOur combined liquidity, along with expected regulatory support from our annual adjustment mechanisms, is a substantial backstop to our expected capital and operating needs.\nslide 12 shows our raised full year earnings guidance and our current key financial and operating metrics estimates.\nWe now expect IDACORP's 2021 earnings to be in the range of $4.70 to $4.90 per diluted share.\nThis guidance assumes normal weather and operating conditions for the second half of the year, and assumes economic impacts from the pandemic will continue to normalize.\nOur guidance still assumes Idaho Power will use no additional tax credits in 2021.\nWhile we do not currently expect to record sharing of excess revenues with Idaho customers this year, the upper end of our range approaches that level and the final jurisdictional allocation can adjust on that through year-end.\nRecall that above a 10% return on equity in the Idaho jurisdiction, Idaho customers would receive 80% of any excess earnings.\nOur expected full year O&M expense guidance remains in the range of $345 million to $355 million.\nIt's fair to say this goal to keep O&M relatively flat for the ninth straight year is being challenged by the amount of customer and load growth we are experiencing.\nWe also reaffirm our capex forecast for this year in the range of $320 million to $300 million -- $330 million, excuse me.\nOur expectation of hydropower generation has decreased somewhat given the weather conditions least represented and is now expected to be in the tightened range of five million to six million-megawatt hours.\n Assistant:", "chosen": "idacorp qtrly earnings per share $1.38.\nidacorp inc increases fy earnings per share view $4.70 to $4.90.\nq2 earnings per share $1.38.\nsees 2021 idacorp earnings guidance (per share) $ 4.70 \u2013 $4.90.\n"}
{"prompt": "Human: We hope you are all well.\nWe will also refer to certain non-GAAP measures.\nWe believe that these measures provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance.\nAt this point, it is my pleasure to turn things over to Philippe Krakowsky.\nI'll start with a high-level view of our performance in the quarter.\nEllen will then provide additional details.\nThen I'll conclude with updates on the highlights at our agencies, to be followed by Q&A.\nFirst and foremost, as Jerry said, I hope that you and your families are keeping well.\nAs we all know, around the world, the pandemic is still with us to a significant degree.\nWith all that entails, it bears mention that our people continue to navigate the many challenges, both personal and professional, presented by the health crisis.\nTheir extraordinary resilience and capacity for innovation, as well as their care for one another and their commitment to our clients, are inspiring.\nAgainst business conditions that continue to be demanding, our people have driven the solid growth and the high level of first quarter profitability that we are reporting today.\nTurning to those results, beginning with revenue, we are pleased with our start to the year.\nFirst quarter organic net revenue growth was 1.9%.\nThat reflects solid performance in the U.S., an organic decrease of 20 basis points, and strong international growth of 6.3%, with increases in every world region.\nIn the U.S., you'll recall that we are comparing to very strong underlying performance in the first quarter of 2020 when we faced headwinds of nearly 4% due to certain 2019 client losses that we previously identified.\nDomestically, during this year's first quarter, we saw increases in areas such as media, data services and technology and our healthcare specialist agencies.\nOur international performance was paced by 12.4% growth in Continental Europe, where we had a strong start to the year by our media, data and tech offerings as well as McCann Worldgroup.\nWorldwide, our healthcare and retail client sectors, which were consistent outperformers last year, were again our growth leaders in the first quarter.\nFrom the standpoint of our operating segments, Our IAN segment grew 3.2% organically, led by media, data and technology and by the healthcare specialty agencies.\nAs expected, in comparison to last year's largely pre-pandemic first quarter, global conditions in Q1 continued to weigh most heavily on the events and sports marketing disciplines and on certain project-driven businesses in both IAN and DXTRA.\nNonetheless, while the environment understandably retained a strong note of caution across our offerings and client sectors, the lows were generally not as low.\nClients are finding their footing amid a global economy that's increasingly showing signs of recovery.\nAs better days ahead begin to come into focus, conversations with clients have generally become more positive and constructive.\nTurning to operating expense and profitability.\nOur teams once again demonstrated outstanding discipline.\nGiven the uncertainty that prevailed in 2020, we made decisions and took a series of actions during the year, necessary, but in many cases, no less difficult, to ensure the long-term health of the overall business.\nOur expenses in the quarter reflect much of the benefits of the strategic restructuring executed over the course of last year, most notably, in our expenses for base payroll and occupancy.\nWe continue to be highly confident that, over time, we are well positioned to realize the full level of permanent operating expense savings that we've talked about previously, which, as a reminder, annualized at $160 million.\nAlong with a return to growth and the benefits of our restructuring actions, our Q1 results were further helped by variable expense categories that continue to run at very low level, given that many of our activities are still restricted by the pandemic.\nThese include significantly lower expenses for business travel and meetings as well as their associated costs.\nOur first quarter net income as reported was $92 million, which includes the expense of certain nonoperating items.\nOur adjusted EBITA was $266 million, a level which is approximately 2.5 times the first quarters of recent years.\nOur adjusted EBITA margin was 13.1%.\nDiluted earnings per share was $0.23 as reported and was $0.45 as adjusted mainly for our loss on the early extinguishment of debt, the disposition of certain small nonstrategic agencies, both of which are nonoperating expenses, and our expense for the amortization of acquired intangibles.\nDuring the quarter, we refinanced a portion of our outstanding debt on very favorable terms, while extending our debt maturity profile.\nThis level of financial flexibility positions us well in the event there is volatility as the global economy moves through a recovery.\nWe're pleased to be able to share with you these strong set of results, which build on our company's long-term record of industry outperformance and consistent margin expansion.\nIt bears mention that we continue to invest in our people and our capabilities and, as a result, to further differentiate our offerings in the areas of strongest opportunity and growth.\nThis has been particularly relevant since we are seeing growing client demand for technology and data services and amid accelerating transformational change in marketing and media.\nOur ability to create marketing and media solutions that bring together creativity, technology and data in order to solve for higher order client opportunities are what drove growth in the first quarter.\nGiven the complexity of the media and consumer landscape, marketers are looking for partners who can help them build their businesses through more precise, personalized and accountable engagements with individuals.\nWith the deprecation of third-party cookies, all businesses are increasingly focused on realizing value from their first-party data, who are finding partners with whom they can pool data assets.\nAs important, this needs to be done in a way that's respectful of people's privacy and anticipates likely regulatory development.\nWe remain well positioned to benefit from those opportunities.\nOf course, our first quarter is seasonally our smallest, and most of the year still remains ahead of us.\nWe also appreciate the heightened degree of business uncertainty as part of the current reality facing all companies until a business like ours translates into more challenging visibility to the full year.\nAs a result, we're staying very close to our people and our clients, asking our teams for frequent financial updates and continuing to carefully manage expenses.\nTo date, we're seeing cautious optimism from clients, and the tone of business has firmed in the last few months.\nReopenings, fiscal stimulus and vaccination programs in a number of our largest markets are providing a tangible lift to economic activity and marketing demand.\nAs we mentioned to you on our last call, we remain confident in those areas we can control, namely the strength and competitiveness of our offerings and the people and talent within our group.\nWe are seeing that the most contemporary services we provide are growing in terms of the receptivity from clients and prospects.\nGiven our strong start to the year, and based on the assumption that there'll continue to be a reasonably steady course of public health and global economic recovery, we believe that we can deliver organic growth for the full year in the range of 5% to 6%.\nWith that level of growth, we would expect to achieve 2021 adjusted EBITA margin of approximately 15.5%.\nAs such, we see this as another year of strong value creation for all our stakeholders.\nWe will, of course, keep you apprised of our progress as the year develops.\nOn that note, I'll hand the call over to Ellen for a more in-depth view on our results.\nI hope that everyone is safe and healthy.\nI would like to join Philippe in recognition and, candidly, admiration of our people for their terrific accomplishments under very difficult circumstances.\nFirst quarter adjusted EBITDA, before a small restructuring adjustment, was $265.9 million and margin was 13.1%.\nThese are levels that compare very favorably against any previous first quarter.\nWe returned to growth with variable expenses that are lagging the recovery in revenue, and we are additionally seeing the structural benefits of last year's restructuring program.\nDiluted earnings per share was $0.23 as reported and $0.45 as adjusted.\nThe adjustments exclude the after-tax impacts of the amortization of acquired intangibles, a small restructuring refinement, nonoperating losses on sales of certain small nonstrategic businesses and the nonoperating loss on the early extinguishment of debt.\nDuring the quarter, we refinanced $1 billion of senior notes that had been scheduled to mature over the next few years.\nWe placed the $1 billion in new notes maturing in 10- and 20-year tranches.\nThe timing of those transactions initiated in mid-February was favorable in light of the subsequent rise in market rates.\nWe appreciate and value the support and the reception that we received.\nAs you may have seen in late March, we also received upgrades to our outlook from both S&P and Fitch.\nTurning to slide three, you'll see our P&L for the quarter.\nI'll cover revenue and operating expenses in detail in the slides that follow.\nTurning to Q1 revenue on slide four.\nOur net revenue in the quarter was $2.03 billion, an increase of $55.6 million.\nCompared to Q1 2020, the impact of the change in exchange rates was positive 1.5%, with the dollar weaker against currencies in most of our largest markets.\nNet divestitures were negative 60 basis points.\nOur organic net revenue increase was 1.9%.\nAt the bottom of this slide, we break out segment revenue in the quarter.\nOur IAN segment was -- grew 3.2% organically, a terrific result against last year, largely non-COVID first quarter.\nWe saw solid growth by our offerings in media, data and tech at FCB and at McCann Worldgroup.\nAt IPG DXTRA, the organic change in the quarter was negative 4.8%, which reflects the weight of live events and sports marketing within the segment, the disciplines that have been most significantly impacted by the pandemic.\nWith that, DXTRA's performance was a sharp sequential improvement from the fourth quarter, especially in the public relations disciplines.\nMoving on to slide five, which is a look at our organic revenue change by region.\nIn the U.S., which was 65% of net revenue in the quarter, our organic decrease was 20 basis points against the challenging comparisons underlying our headline number from a year ago.\nCompared to Q1 2020, we did see continued pressure on events and sports as well as certain project work, as has been the case throughout the pandemic.\nInternational markets were 35% of our net revenue in the quarter and increased 6.3% organically.\nWe grew in every international region, which is a notable improvement from Q4.\nContinental Europe grew 12.4%, with increases in every major national markets, including Spain, Germany, Italy and France, driven by increased spend from existing clients.\nWith double-digit growth, there are a number of operating highlights in the region, including strong increases at media and tech and at McCann.\nThe U.K. increased 3.5% organically and, again, this is net of continuing headwinds in the events discipline We had solid growth at McCann at our media, data and tech offerings and at MullenLowe.\nAsia Pac grew 3.4% organically.\nAmong our largest regional markets, we had strong gains in Australia and Singapore, while China and India's revenues declined.\nOur organic growth in LatAm was 5%, with particularly strong results across Mexico, Colombia, Argentina and Chile.\nOur Other Markets group grew 7.3%, with notably strong performance in the Middle East.\nMoving on to slide six and operating expenses in the quarter.\nOur net operating expenses, excluding billable expenses and the amortization of acquired intangibles, decreased 6% from a year ago and to 2.8% growth of our net revenue.\nThe result was first quarter margin expansion to 13.1% from 4.9% a year ago.\nWe have significant year-on-year expense savings in a number of different categories, most notably our restructuring savings in payroll and occupancy and a sharp decrease in certain variable operating expenses.\nIn the latter category, I would call out specifically the sharply lower travel and related expenses, for the obvious reasons, and significantly reduced bad debt expense, which was at an increased level in the first quarter of 2020.\nAs you can see on this slide, our ratio of total salaries and related expense as a percentage of net revenue improved by 340 basis points to 68.7% compared with 72.1% a year ago.\nUnderneath that, we drove very strong leverage on our expense for base payroll, benefits and tax, which improved by 360 basis points.\nWe had a lower severance expense ratio, which was only 30 basis points of net revenue compared to 120 basis points in Q1 2020.\nAt quarter end, total worldwide headcount was approximate 51,200, a decrease of 6.1% from a year ago as a result of our restructuring and regular severance actions taken over the course of last year as well as our business dispositions.\nAlso on this slide, our office and other direct expense decreased as a percentage of net revenue by 480 basis points to 14.4%.\nWe continue to have significant decreases in our expenses for occupancy, driving year-on-year leverage of 110 basis points.\nWe leveraged all other office and other direct expense by 370 basis points, which includes the decreased expense for travel and bad debt.\nOur SG&A expense was 1.4% of net revenue, an increase of 30 basis points.\nOn slide seven, we present detail on adjustments to our reported first quarter results in order to provide better transparency and a picture of comparable performance.\nThis begins on the left-hand side with our reported results and steps through to adjusted EBITDA and our adjusted diluted EPS.\nOur expense for the amortization of acquired intangibles in the second column was $21.6 million.\nThe restructuring charges were $1.3 million.\nTo be clear, these are small adjustments to estimates related to our 2020 restructuring program that we concluded at the end of last year.\nBelow operating expenses, in column 3, we had a pre-tax loss in the quarter of $12.5 million in other expenses due to the disposition of a few small nonstrategic businesses.\nTo the right of that, our pre-tax loss due to the early extinguishment of debt was $74 million, which relates to the refinancing and extending the maturities of $1 billion of our senior notes.\nAt the front of the slide, you can see the after-tax impact per diluted share of each of these adjustments, which bridges our diluted earnings per share as reported at $0.23 to adjusted earnings of $0.45 per diluted share.\nOn slide eight, we turn to cash flow in the quarter.\nCash used in operations was $249.8 million compared with the use of $277.1 million in Q1 2020.\nAs a reminder, our operating cash flow is highly seasonal.\nWe typically generate significant cash from working capital in the fourth quarter and use cash in the first quarter.\nDuring this year's first quarter, cash used in working capital was $496.9 million and follows our fourth quarter of last year, where we generated over $1 billion from working capital.\nIn our investing activities, we used $28 million for capex in the quarter, which was essentially offset by the net proceeds from the sales of investments.\nOur financing activities in the quarter is $212.7 million, which reflects the redemption and issuance of long-term debt and our common stock dividends.\nOur net decrease in cash for the quarter was $492.7 million.\nSlide nine shows the current portion of our balance sheet.\nWe ended the quarter with $2.02 billion of cash and equivalents compared with $1.55 billion a year ago.\nUnder current liabilities, the current portion of long-term debt refer to our $500 million, 3.75% senior notes, which matures in October of this year.\nWe plan on repaying these notes from cash on hand.\nSlide 10 depicts the maturities of our outstanding debt and our diversified and extended maturity schedule following our activity in the first quarter.\nAgain, we have the maturity in October this year and then only $250 million due in April 2024.\nThereafter, our next maturity is not until 2028.\nIn summary, on slide 11, our teams continue to execute at a high level in an unprecedented environment.\nAnd I would like to reiterate our pride in, and gratitude for, the efforts of our people.\nThe strength of our balance sheet and liquidity means that we remain well positioned, both financially and commercially.\nIt's worth repeating that Q1 is our smallest seasonal quarter, but nonetheless, we are pleased by our start to the year.\nThe return to organic revenue growth is a sign that our clients have begun to pivot to an investment mindset as they look to build their brands and grow their businesses in line with the broader economic recovery.\nOur performance is also a reflection of the strength of our people, our offerings and our long-term strategies that have helped us drive consistently strong performance over time.\nWe all know that the pandemic has accelerated a range of underlying trends, whether in business or society at large.\nAs a result, many of our clients are undertaking meaningful transformation of their companies.\nThis means adopting new ways in which they go to market in order to keep pace with rapid digitization of consumer behavior and economic activity.\nIn a world that's more cluttered than ever with messages and channel all vying for our attention, the most critical challenge is to combine great ideas that come from the human storytelling side of our business with strategies and insights that can be generated by our technology and data capabilities.\nWe've increasingly seen the amounts of time people spend online, picking out content that's engaging, informative, entertaining, or some combination of all 3.\nContent is undoubtedly more important than ever, and that's what makes the creative side of our business so vital.\nEqually important is getting those messages to people in ways that are relevant, respectful of their privacy and ultimately connect with them in meaningful ways.\nIt's also key to take the information flow that results from all those digital interactions and apply it at every step along the process, from audience definition to creative ideation, in order to better understand the impact that our clients' communications are having on their businesses.\nOur differentiated capabilities include a range of data-driven offerings that can do this both at scale and at speed.\nAs you know, we've been developing a data and tech infrastructure that underpins the full portfolio of our agencies and deliver solutions to a broad range of business problems through what we call the Open Architecture model.\nAll of our major clients are seeing the benefits of this integrated approach as our prospective clients.\nDuring the quarter, it was gratifying to see that the Kinesso behavioral sciences teams are engaging with more of our advertising and marketing services agencies than at any time since we launched those offerings.\nDespite the challenging external circumstances that we continue to deal with in the quarter, certain key elements of our business remain constant.\nWe will always succeed by adapting rapidly in our ways of working and how we are meeting the needs of clients.\nSince the start of the year, we onboarded or promoted top talents across the organization, once again received high levels of industry recognition and saw solid new business performance, where we remain net positive for the past 12 months.\nAs you've seen in our results, growth in the quarter was driven by contemporary offerings in which we've consistently invested, including media, data and tech, healthcare and digital user experience.\nAnother area where IPG has invested significant resources is in our environmental, social and governance programs.\nFor some time, we focused on building a culture of high ethical standards by adhering to a set of values centered around respect for every individual.\nAs a company responsible for creating some of the world's most well-known marketing campaign, we have an obligation to ensure that the work we do as well as how we deliver it supports the long-term well-being of our communities.\nThis quarter, IPG released its sixth annual sustainability report using the Global Reporting Initiative Standards framework.\nThe report can be found on our website, and it represents another step forward for us in our commitment to ESG.\nIn terms of climate action, we track IPG's global energy usage and greenhouse gas emissions across our entire portfolio.\nNext month, we plan to announce several strategic priorities focused on tackling climate change, including a science-based target for reducing our emissions globally.\nThe report also aligns with the UN Global Compact and focuses on human capital disclosures.\nFurther, we make clear that we operate with a core expectation that individuals deserve control over their data, and that we are responsible for promoting high ethical standards in terms of data privacy and security.\nEquity and inclusion also remain areas of focus for us.\nOur agencies are attuned to this priority, and they are held accountable because we have to show further progress when it comes to diversity in our ranks.\nIPG's latest MSCI ESG Ratings report, which is a key ESG data provider for our various stakeholders, saw an increase in our company's score to an A rating.\nOur improvement was the result of increased disclosure when it comes to human capital management, our position and capabilities related to data privacy and certain governance enhancements.\nMore recently, we joined Civic Alliance, as well as many of our clients, in calling for the protection of voting access here in the United States.\nWe continue to be committed to promoting democracy, and we'll work to support safe, accessible and fair elections, as well as to encourage our employees to participate in civic life.\nAs a business in which attracting top talent and advising clients is crucial to our success, a robust approach to ESG is a key part of our long-term strategy and important to all stakeholders.\nTurning now to highlights from our portfolio.\nDuring the quarter, we issued our second Media Responsibility Audit, addressing in a structured and consistent manner one of the most topical issues in the digital media ecosystem.\nThis framework and the principle it sets forth continue to be well received by clients as well as key industry groups.\nMediabrands' MAGNA unit also hosted a first-of-its-kind equity upfront, a week-long event intended to raise visibility and receptivity for black-owned media and media that serves black audiences.\nIn addition, the network announced that it would be joining forces with TikTok for a creator and content accelerator.\nTwo of our most dynamic units were in the media space, where we continue to leverage our deep data resources and capabilities.\nWe're seeing strong growth in Matterkind, which is customizing addressable media activation at scale for more of our clients.\nAt Reprise commerce, we have rapidly scaled operations on a global basis as we address growing needs in e-commerce, particularly for insight, content and analytics.\nFollowing on a series of new business wins, Initiative elevated its U.S. leader to global CEO, where we believe she will have an even greater impact on the network's success.\nAt UM during the quarter, we added a global rental car client as well as an auto OEM in EMEA and HBO Max in LatAm.\nUM was also named an outstanding company for working mothers, and three of its executives were named Adweek Media All-Stars, a distinction that was also earned by leaders of Reprise and Mediahub.\nAt our creative integrated global agencies, both McCann Worldgroup and FCB were named to the top five most awarded networks of 2020 in The Drum's World Creative Rankings.\nBoth also had work in the Super Bowl that was well received in a number of viewer polls and rankings.\nFollowing the implementation of our succession plan, at the end of 2020, McCann Worldgroup posted a solid first quarter.\nAlong with most awarded networks of 2020 in the Drum rankings, McCann New York came in at number four on that list in terms of the top 100 agencies worldwide.\nAt MRM, the agency was again named a leader in Gartner's 2021 Magic Quadrant for global marketing agencies based on their ability to serve as key strategic business partners for clients and to execute on critical marketing priorities.\nHuge and R/GA also featured on that list.\nThe health operations at McCann and FCB performed strongly in the quarter and continue to take share in the marketplace.\nThe notable program I'd like to call out was FCB Health's launch of the trial for number clinicalequality to shine a light on racial bias in clinical oncology trial.\nIn MullenLowe Group, Mediahub continued on its new business streak with the addition of global wins in Slack and Telly as well as New Balance in the U.K. Mediahub also introduced its inaugural Diversity-Owned Media Day and revamped its U.S. leadership team with a series of internal promotions.\nThe MullenLowe advertising network continues to be a leader in purpose-driven work.\nPartnering with several independent casting agencies, the agency recently launched a campaign for Unilever's Dove to promote inclusivity in commercial casting.\nIn the U.K., the agency has continued to do important work on behalf of the government to inform and educate the British public concerning the pandemic.\nIn the campaign U.S. Agency of the Year awards, the Martin Agency was recognized with multiple honors.\nAnd the agency also teamed with Mediahub for an integrated win of Terminix in Q1.\nHuge posted strong results during the quarter and saw two big wins, adding Coppertone and Wakefern to its client roster.\nThe agency also announced the return of its Huge XD School, with a renewed equity-centered purpose that seeks to use education to increase the participation of underrepresented identities in the design industry.\nAnd in R/GA, the agency's Venture Studio program announced the launch of a new Coalition Venture Studio with a mission to support Black start-up founders.\nIPG DXTRA companies continue to deliver specialized capabilities and integrated solutions for clients in our evolving world.\nCone was once again a standout in new business arena.\nWeber Shandwick was named PR Agency of the Year of the Campaign U.S. Awards.\nAnd the agency also launched the Plan Vx open playbook, a communications program that draws on extensive vaccination and public health communications expertise to help companies play a role in getting America vaccinated.\nAt Octagon, leader in sports marketing, we recently promoted a longtime executive to the role of CEO.\nPerformance at Acxiom was consistent with our expectations and in line for a year of solid growth in 2021.\nThe company continues to carve out a position as an authority in the integration of marketing and advertising technology.\nDuring the quarter, Acxiom expanded its partnership to better manage and measure campaign execution through the cloud in order to provide tangible improvements in campaign efficiency and speed.\nAcxiom is also accelerating its development in client verticals where it sees opportunities.\nRecently, Fortune named Acxiom one of 2021's Best Workplaces in Technology.\nWorking closely with the Acxiom data teams, Kinesso deployed its enhanced identity solution with half a dozen large clients.\nThis has already driven double-digit lifts in campaign efficiency.\nKinesso also expanded its range of direct data integrations with prominent platforms and ad tech companies.\nAs I mentioned earlier, we are pleased to see the Kinesso API connecting data and analytics capabilities across more of the IPG portfolio, since we see this as a growth driver for our business and a source of potential new revenue streams.\nAcxiom, Kinesso and Matterkind, are working together to bring end-to-end data and identity solutions to clients, in collaboration with a number of IPG agencies.\nWe've seen the impact of this recently in new wins and expanded assignments in the telecom, auto, healthcare and financial services sectors.\nLooking forward, we will stay focused on unlocking the enormous opportunities that exist due to the changes and disruptions that have accelerated during these past 12 months.\nWe worked over the years to embed digital capabilities throughout our organization and build a foundational layer of tech and data infrastructure that informs all our work.\nAs a result, we have a deep understanding of audiences at the individual level based on the strong legacy of ethical data practices.\nPersonalization, privacy and accountability are only going to grow in importance and value going forward.\nOur vision is, therefore, for IPG to become a key partner in ensuring that clients businesses thrive in the digital economy.\nAs you'd expect, we are focused on supporting their physical and mental well-being and listening to them in planning a return to office.\nThat's likely is to begin to a meaningful degree in September, dependent on continued progress on matters related to resolving the public health crisis.\nIt will be a gradual and iterative process in which we obviously were going to have to test and learn as we go.\nAs such, on the cost drivers that go hand-in-hand with live collaboration with colleagues as well as calling on clients in person, which have, of course, been reduced as a result of lockdowns, we'll begin to work their way back into our ways of working as well as our operating results.\nWe've already shared with you our perspective on the balance of the year, which is based on the assumption that there will continue to be a reasonably steady course of macro recovery.\nAs is clear, we view our current performance and long-term strategy as significant factors that will continue to enhance shareholder value.\nAs always, we're committed to sound financial fundamentals, including debt reduction as well as continuing to grow our dividend.\nWe also remain focused on getting back to our share repurchase program, when appropriate.\nWe will, of course, keep you apprised on progress as the year develops.\n Assistant:", "chosen": "compname reports q1 earnings per share of $0.23.\nq1 adjusted earnings per share $0.45.\nq1 earnings per share $0.23.\ncompname says reported net revenue of $2.03 billion, an increase of 2.8% from a year ago.\ninterpublic group of companies - positioned to deliver fy 2021 organic growth of 5.0% to 6.0% and adjusted ebita margin of about 15.5%.\n"}
{"prompt": "Human: We hope you are all well.\nWe will also refer to certain non-GAAP measures.\nWe believe that these measures provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance.\nAt this point, it is my pleasure to turn things over to Philippe Krakowsky.\nAs always, I'll start with a high level view of our performance in the quarter.\nEllen will then provide additional details, and I'll conclude with updates on key developments at our agencies to be followed by Q&A.\nThese include the transition to work from home, and now are planning for return to office in many parts of the world, as well as the significant personal difficulties presented by the long course of the pandemic.\nIt's due to the efforts of our people, their commitment to their craft, our clients and to each other that we can share with you today these very strong results.\nPerformance that demonstrates our resilience represents a remarkable rebound from the impact of the pandemic, and is also the largest second quarter in our company's history.\nOur strong results in the quarter build on IPG's consistent record of industry outperformance and margin expansion.\nOur growth across regions, disciplines and client sectors speaks to more than a recovering global economy.\nIt underscores the elevated value that marketing and media partners can deliver in the integration of creativity, technology and data at scale made the significantly increased velocity of digital transformation.\nAt Interpublic, we're confident that we are attuned to the powerful currents that are transforming consumer behavior and are required for business relevance.\nAnd then we are increasingly delivering differentiated and higher-end solutions that help our clients win in a world of accelerated technological and societal change.\nThat takes creativity and precision, data and accountability, all of which we're able to bring together in customized teams that drive talent from across our portfolio.\nUltimately, our growth speaks to our ability to drive outstanding business results for our clients.\nOur net organic revenue growth in the second quarter was 19.8%.\nThat's against the second quarter of 2020 when as you will recall our organic change was negative 9.9%, which while well ahead of our peer group did mark our steepest decrease of the recession.\nIt's also important to note that our 7.9% organic increase this quarter relative to the pre-pandemic second quarter of 2019.\nCompared to last year, our organic growth was at double-digit rates around the world.\nIn the US, it was 17.4%, growth in our international markets ranged from 14% in the Asia-Pacific region to 49% in Latin America.\nWe also had a very broad contribution from our operating segments and disciplines.\nOur IAN segment grew 20.5% organically with increases led by media, data and technology and with solid contributions from our global integrated networks.\nThere was also strength across most of our disciplines led by healthcare.\nAt our DXTRA segment, organic growth was 15.1% with strong increases from last year's heavily impacted Q2 across Octagon's sports and entertainment and Jack Morton's experiential offerings.\nLooking at client sectors, the picture is also one of comprehensive acceleration.\nEach of our eight major sectors had double-digit increases from a year ago.\nThe auto, retail and other sectors were up more than 20%, consumer goods, tech and telecom and healthcare increased in the mid to high teens, food and beverage and financial services were up in the low double-digit range.\nTurning to operating expense and profitability.\nOur teams once again demonstrated outstanding discipline.\nAnd while remaining focused on appropriate cost control, we're also continuing to invest to support accelerating growth.\nWe continue to see the benefits of cost improvements from strategic restructuring actions taken last year, notably in our payroll expense and our expense for occupancy.\nWe also continue to see the benefits of low variable expenses as a result of the highly restrictive global travel environment and from the cost efficiencies of a largely remote workforce.\nAs we look ahead to post-pandemic work life, it's worth noting that we can, of course, expect that expenses for travel, meetings, office utilities and alike will begin to return in the second half of this year, most notably in Q4 and of course into next year.\nOur second quarter net income was $263.3 million as reported.\nAdjusted EBITDA was $405.8 million and adjusted EBITDA margin on net revenue was 17.9%.\nOur results reflect significant operating leverage compared to both last year and the 2019 period on our expense for base payroll and our office and other expenses.\nWe delevered on our expense accrual for our performance based incentive compensation plans, but our operating performance is tracking well ahead of planned target.\nDiluted earnings per share was $0.66 as reported and was $0.70 as adjusted for the after tax expense of the amortization of acquired intangibles.\nAs we look to the balance of the year, you'll recall that in April, we shared a full year 2021 performance outlook based on the assumption that there will continue to be a reasonably steady course of public health and global economic recovery.\nAt that time, we outlined our view toward full year organic growth of 5% to 6% and adjusted EBITDA margin of approximately 15.5%.\nIn light of our very strong second quarter and also having recently refreshed our bottom-up outlook for the second half of the year based on conversations with our clients and operating teams, we believe it's appropriate at the mid-point of this quite unusual year, unprecedented, in fact, to upgrade those expectations.\nOf course, we do sadly need to recognize that the COVID pandemic and the related risks to the macro environment are not yet behind us.\nIn particular, as we look ahead, we all understand that lagging vaccination rates in many parts of the world and the emergence of new variants may entail a higher COVID risk.\nThat's something we'll watch closely as we enter the second half of the year, especially our seasonally important fourth quarter.\nWith predicated on the continued progress and public health issues, we believe that we can deliver organic growth for the full year of 9% to 10%.\nAnd with that level of growth, we would expect to achieve 2021 adjusted EBITDA margin of approximately 16%.\nAs such, we see this as another year of strong value creation for all of our stakeholders.\nWe'll of course keep you apprised of progress as the year develops and we look forward to those conversations.\nOn that note, I'd like to hand over the call to Ellen now for more in-depth view of our results.\nI hope that everyone is safe and healthy.\nAdjusted EBITDA, before a small restructuring adjustment, was $405.8 million, and margin was 17.9%.\nThese are levels that compare very favorably against any previous second quarter.\nWith growth having accelerated, certain variable expenses continue to lag and we are additionally seeing the structural benefits of last year's restructuring program.\nDiluted earnings per share were $0.66 as reported and $0.70 as adjusted before the after-tax impact of the amortization of acquired intangibles.\nTurning to slide three, you'll see our P&L for the quarter.\nI'll cover revenue and operating expenses in detail in the slides that follow.\nTurning to second quarter revenue on slide four.\nOur net revenue in the quarter was $2.27 billion, an increase of $416.2 million from a year ago.\nCompared to Q2 2020, the impact of the change in exchange rates was positive 3.1% with the US dollar weaker against currencies in most of our largest markets.\nNet divestitures were negative 40 basis points.\nOur organic net revenue increase was 19.8%, which brings us to 10.6% organic growth for the six months.\nAt the bottom of this slide, we breakup segment revenue in the quarter.\nOur IAN segment grew 20.5% organically.\nWe had notably strong growth across our offerings in media, data and tech, McCann, FCBs with healthcare, a significant driver, MullenLowe, Huge and R/GA.\nAt IPG DXTRA, organic growth was 15.1%, which reflects some recovery of the events and sports marketing offerings within the segment, the disciplines that have been most significantly impacted by the pandemic.\nOur public relations offerings also had solid growth in the quarter.\nMoving on to slide five, which is a look at our organic revenue change by region.\nIn the US, which was 63% of net revenue in the quarter, organic growth was 17.4%.\nRevenue decreased a year ago in the same period by 8%.\nYear-on-year performance was very strong across media, data and tech, FCB driven by healthcare, IPG DXTRA, McCann, MullenLowe and Huge.\nInternational markets were 37% of our net revenue in the quarter and increased 24.4% organically.\nYou'll recall that the same market decreased 13.1% a year ago in the second quarter which ranged by region between negative 10% and negative 15%.\nContinental Europe grew 27.9% with notably strong growth in Germany, Spain and France.\nThere were a number of operating highlights in the region led by media, data and tech, McCann, R/GA and DXTRA.\nThe UK increased 18.7% organically, led by McCann, DXTRA, media, data and tech and R/GA.\nAsia-Pac grew 14% organically.\nOur organic growth was paced by Australia, the Philippines, Singapore, Thailand and India, while China and Japan decreased.\nOur organic growth in LatAm was 49% with exceptional results across the region, including Brazil, Mexico and Argentina.\nOur other markets group grew 29.2% with notably strong performance in the Middle East and Canada.\nMoving on to slide six, and operating expenses in the quarter.\nOur operating expenses excluding billable expenses, the amortization of acquired intangibles and restructuring charges increased only 11% from a year ago and to 22.5% growth of net revenue.\nThe result was second quarter margin expansion to 17.9% from 9.4% a year ago.\nWe continue to see efficiencies in a number of different expense categories as we had in this year's first quarter and these were both structural and variable.\nIn the structural category, we are seeing the benefit of the strategic restructuring actions, which we initiated in the second quarter of last year and continued to execute over the second half.\nAs a reminder, these actions involve the elimination of certain positions, and resulting headcount reduction that will not return with revenue growth.\nWe also reduced our real estate footprint by 15% last year.\nWe are currently seeing the benefit of most of these actions and at a full run rate they will generate $160 million in annual cost savings.\nWe've also had over the course of the pandemic a sharp decrease in certain variable operating expenses.\nI would call out specifically lower travel and related expenses, which was the case in the second quarter of 2020 and that's continued through Q2 2021.\nAs you can see on this slide, a ratio of total salaries and related expense, as a percentage of net revenue was 65.4%, which has significantly improved from the second quarter of 2020 when revenue had decreased sharply.\nUnderneath that, we drove very strong leverage on our expense for base payroll, benefits and tax, which was 53% of net revenue in the quarter.\nThat reflects the benefit of last year's restructuring and the fact that the pace of new hiring lags our significant revenue growth, as was in the case in past business cycles.\nOur severance expense ratio also decreased sharply to only 40 basis points of net revenue, compared to 3% in Q2 2020, which was at an elevated level due to the impact of the recession.\nGoing the other way, our expense for performance-based incentive compensation increased to 6.4%, consistent with our very strong operating results.\nExpense for temporary labor also increased, as a percentage of net revenue to 4.5%, as a result of servicing the top line's quick acceleration.\nAt quarter-end, total worldwide headcount was approximately 53,000, a 1.4% increase from a year ago and up 5.2% from the beginning of this year, with hiring to support our growth.\nAlso on this slide, our office and other direct expense decreased as a percentage of net revenue by 380 basis points to 13.3%.\nOur occupancy expense decreased to 5% of net revenue, mainly due to the restructuring of our real estate, as well as leverage on our revenue growth.\nWe leveraged all other office and other direct expense by 220 basis points, which reflects lower expense for bad debt and acquisition costs and leverage as a result of our revenue growth.\nOur SG&A expense was 1.3% of net revenue, with the increase from a year ago due to the higher unallocated performance-based incentive expense and increased employee insurance expense, which was at a very low level a year ago.\nOn slide seven, we present detail on adjustments to our reported second quarter results, in order to provide greater clarity and a picture of comparable performance.\nThis begins on the left-hand side with the reported results and steps through to adjusted EBITDA and our adjusted diluted EPS.\nOur expense for the amortization of acquired intangibles in the second column was $21.6 million.\nThe restructuring refinement in the quarter is a benefit of $200,000.\nTo be clear, this is a small adjustment to estimate of the 2020 restructuring program.\nBelow operating expenses in column four, we had a pre-tax loss in the quarter of $1.7 million in other expenses due to the disposition of small non-strategic businesses.\nAt the foot of the slide, you can see the after-tax impact per diluted share of these adjustments was $0.04 per share, which bridges our diluted earnings per share as reported at $0.66 to adjusted earnings of $0.70 per diluted share.\nOn slide eight, we turn to cash flow in the quarter.\nCash from operations was $468.2 million, compared with the use of $87.1 million a year ago.\nWe generated $101.6 million from working capital compared to a use of $264.9 million last year.\nInvesting activities was $43.3 million in the quarter, mainly for capex of $34 million.\nFinancing activities used $101.8 million, mainly for our dividend.\nOur net increase in cash for the quarter was $325.6 million.\nSlide nine is the current portion of our balance sheet.\nWe ended the quarter with $2.34 billion of cash and equivalents.\nUnder current liabilities, the current portion of long-term debt refers to our $500 million, 3.75% senior note which matures in October of this year.\nWe plan to repay these notes from cash on hand.\nSlide 10 depicts the maturities of our outstanding debt.\nAgain, we have the maturity in October of this year, and then only $250 million due in April 2024.\nThereafter, our next maturity is not until 2028.\nIn summary, on slide 11, our teams continue to execute at a high level in an unprecedented environment.\nI would like to reiterate our pride in and gratitude for the efforts of our people.\nThe strength of our balance sheet and liquidity means that we remain well positioned, both financially and commercially.\nWhile we remain very pleased with our results, it's worth reiterating as Ellen just said that this is an unusual, in fact, unprecedented environment in which we're operating.\nNow importantly, it bears noting that when compared to our non-pandemic results in 2019, Q2 results show our company is performing at a very high level.\nWe continue to feel this is the result of strategic decisions that we've taken over a number of years to position our company for the future, investments and actions that have created a sustainable advantage for our organization.\nToday's IPG delivers addressable and accountable digital marketing programs, combined with our world-class creative storytelling capabilities, these solutions make us higher value partners to our clients.\nOne of our many priorities over the years has been the creation and implementation of open architecture solutions, where we bring the best of IPG together in collaborative teams that are customized to client-specific business needs and increasingly a key element of this approach, Open Architecture 2.0, as it were, is Acxiom whose data management expertise and data assets play a role in an increasingly broad range of our offerings.\nIn addition, Kinesso powers many of our applications and services that provide clients with a deep understanding of audiences in order to provide insights and then form creative work, segments for media delivery and line of sight to the effectiveness of the work that we're doing together.\nWe saw this model come to life in the quarter with a Cigna count win, which combined talent from McCann Worldgroup Initiative and R/GA powered by Kinesso and Acxiom.\nThis is a continuation of several years of strong performance in integrated pitches, especially those that include creative and media, as well as media and data.\nAnother another key decision that's contributed to our success has been our continued investment in strong agency brands, which helps us attract and retain top talent and deliver breakthrough creative ideas across a range of marketing disciplines.\nAs a result of this strategy, IPG companies across our portfolio earned a number of important accolades during the quarter.\nMost notably, we had an impressive showing at the 2021 Cannes International Festival of Creativity.\nIPG agencies took home eight Grand Prix, the festival's highest honor.\nWins across the network represented a broad range of clients, categories, agencies, disciplines and geographies.\nFCB's performance was a standout, as the agency took home four Grand Prix and was named Global Network of the Year.\nThe agency's creative community and its leadership deserved credit for this terrific accomplishment.\nFCB Health was also named Healthcare Network of the Year and AREA 23 and FCB Health Agency was named Healthcare Agency of the Year.\nMcCann client, Microsoft was named Marketer of the Year at the festival, which is another major honor.\nAnd the agency also won a Grand Prix in brand experience and activation for its remarkable true name work for Mastercard, which empowers transgender and non-binary cardholders to use their true name when using their credit card.\nIn PR, McCann Paris earned a Grand Prix, partnering with Weber Shandwick for a campaign that ran across the Middle East, which teaches women in a culturally sensitive way to perform self-checks for early breast cancer detection.\nFCB Chicago and Weber Shandwick teamed to earn a Grand Prix for work for AB InBev.\nAnd R/GA continues to be recognized for its ability to humanize technology, winning a Grand Prix in social and influencer marketing for disruptive work it did for Reddit on the Super Bowl.\nOn Ad Age's annual A-List and Creativity Awards, both Deutsch LA and The Martin Agency were named to the prestigious A-list.\nInitiative was named Media Agency of the Year and FCB Health's CEO was recognized as our industry's Executive of the Year.\nAt the holding company level, we made a number of announcements that position us for further success.\nChief among them was our launch of IPG Health earlier this month.\nThe move will align our top performing companies, FCB Health and McCann Health under a new global network, IPG Health, led by a dynamic and proven CEO and a skilled executive leadership team.\nIn this new operating structure, the distinct agency brands within FCB Health and McCann Health will remain active and continue to go to market independently.\nThey will also benefit from access to additional specialty services, knowledge sharing, proactive career management, shared investment in new capabilities and skill-sets, highly complimentary geographic coverage, as well as an even higher level of collaboration.\nAround the world, healthcare and well-being are areas of growing importance for our clients and society at large.\nAs an industry sector, healthcare represents an increasingly vital part of the economy, and one where innovation is becoming an ever more important driver of success.\nSo the alignment of IPG's fully dedicated healthcare networks under the banner of IPG Health strengthens our leadership position in this dynamic sector.\nThe scale, reach and most importantly, quality of our people and our work makes for an exciting combination.\nAnd it's why we think this new offering will continue to deliver great things in the years to come.\nThis month, we also added to our strong roster of marketing technology and e-commerce providers with a launch of Performance Art, a data-led creative CRM agency, whose leadership team is known for delivering platform level creative ideas that are at home in a client's e-retail flow as they are in a 30-second spot.\nTurning to performance at our agencies, growth at IAN in the quarter was once again highlighted by media, data and tech and FCB led by healthcare.\nUM saw significant wins in the quarter with Enterprise Holdings, Behr Paint and most recently, NYC & Company, New York City's official marketing and tourism organization.\nUM also saw an important account retention for the Australian government.\nAt the Campaign Agency of the Year Awards, UM earned Global Media Agency of the Year honors and UM APAC was named Best Media Network in that region.\nAt Initiative, the agency was named 2020's Most Competitive Network Globally in Media Pitches and saw a major win in the UK with banking and insurance company, NatWest Group.\nWe also continue to see terrific momentum at Reprise, especially as it relates to their growing e-commerce capabilities.\nAcxiom, Kinesso, and Matterkind are also performing well and they're key to how we help clients thrive in the addressable media market, which requires flexibility, given the quickly shifting landscape.\nAt Acxiom, we continue to invest behind innovative new products and services, such as customer data platforms, and identity resolution, with which we are seeing increased client adoption.\nAnother important development saw Acxiom deploy their latest customer intelligence platform on the cloud with a key financial services client.\nAt our creative integrated networks, FCB, McCann and MullenLowe Group were named the ACT Responsible 2020 Good Report, a unique ranking of the world's best use of creative communications to promote sustainability and social responsibility.\nOn top of its exceptional showing at Cannes, at FCB Global, the network continues to invest in talent and new offerings, hiring a head of data science and connections to expand its expertise in commerce, data and technology fueled creativity.\nMcCann also continues to prove a creative powerhouse.\nAs we saw, the network was recently named Webby Network of the Year and McCann New York was named Webby Agency of the Year.\nMRM continues to leverage its Martek expertise and is seeing strong growth with its MRM commerce division, which help marketers drive engagement, interaction and conversion on commerce platforms.\nAt MullenLowe Group, Mediahub continues its strong new business momentum and during the quarter, added Hallmark's parent company, Crown Media, as well as Tally Financial.\nMullenLowe is also a global leader in purpose driven work.\nAnd we saw that as it continued to partner with governments in a number of countries around the world to inform people the benefits of being vaccinated against COVID-19.\nAt R/GA, campaign named the London office as the UK's Digital Agency of the Year.\nAnd R/GA London added two new clients, financial services company, Allianz, and Vollebak Clothing.\nWe named the new CEO at Huge who joined the digital agency after a very successful tenure at Initiative, where he helped turn the agency into a leader in the media space.\nDuring the quarter, Huge also saw strong new business activity, adding Sub-Zero Appliances, Wakefern, Tezos Foundation and Nikko Asset Management.\nThe Martin Agency continues to impact culture and drive strong business results for its clients.\nNotably, the agency sold the city's short film for DoorDash at the Tribeca Film Festival last month and had captured the resilience of New York City's restaurants and the role they play in the city's life.\nAt IPG DXTRA, we also saw recognition as the number of companies were called out for their ability to deliver creative solutions.\nWeber Shandwick was the most awarded PR agency at Cannes this year.\nCurrent Global demonstrated their commitment to closing the disability and inclusion gap by creating guidelines and toolkits for marketers so as to make content more accessible for consumers with sight, hearing, or other cognitive impairments.\nAnd this program was recognized as one of Fast Company's World-Changing Ideas for 2021.\nJack Morton launched what they are referring to as the return-to-live dashboard and that's a tool for brand marketers to access where, when, and how businesses in the US can safely get back to hosting live experiences.\nGolin continued its strong performance in new business, was selected as LinkedIn's Global Social Media Agency of Record and also Agency of Record for Yamaha Music.\nGolin was also named PRWeek's Global Agency of the Year.\nPivoting now back to the holding company, another key area that bears mention is our long-term focus on ESG, including diversity, equity and inclusion.\nIn all of our operations and activities, we're working to build on and more fully live into this commitment.\nAnd this includes reassessing how we hire, train and promote a diverse workforce, incorporate rigorous practices around data ethics and media responsibility as well as reduce our greenhouse gas emissions further around the world.\nKey accomplishments on this front include IPG being recently named by Forbes to their top ten list of America's Best Employers for Diversity.\nDuring the quarter, we also created a new position, our industry's first culture officer, to focus on long-term thought leadership relating to a broad range of social justice issues for underserved and underrepresented communities.\nDuring the quarter, as part of our integrated ESG efforts, we also announced an action plan that consists of three climate roles, committing to set a science-based target; sourcing 100% renewable electricity by 2030, and joining the Climate Pledge, co-founded by Amazon and Global Optimism.\nIn addition, we've published our first SASB report, becoming the first company in the advertising and marketing sector to publish an alignment with SASB's industry standards.\nOur agencies also contribute significantly to our ESG profile.\nAnd importantly, here in the US, we saw media brands take a leading role in the industry conversation about promoting greater media equity.\nAnd they announced that they're committing to invest at least 5% of client budgets in black-owned media by 2023.\nOctagon launched an accelerator program with historically black colleges and universities for students interested in sports and entertainment as a career.\nAnd R/GA created an innovative program to raise money for environmental organizations through a dedicated YouTube channel that plays nature videos, which have become hugely popular during the pandemic, and it directs all of the ad revenues generated on this channel to environmental NGOs.\nLike many of us, I look forward to working live with colleagues and clients, especially given that we're an ideas-driven service business.\nOur culture, our capacity for innovation and the ways in which we combine creativity with technology and data are all enhanced by in-person interactions.\nNow here in the US, we expect to have more people returning to our offices in a flexible hybrid model, beginning in mid-September as is already the case in certain other parts of the world.\nWe will, of course, be mindful of the public health situation and of the learnings we've accumulated during the past 16 months when it comes to flexible work practices.\nThe expected costs associated with live collaboration with colleagues as well as travel will begin to return as a normal part of how we work and therefore be reflected in our operating results.\nFor example, as we look forward to the remainder of the year, we expect an increase in travel costs in the fourth quarter, which could return to levels consistent with what we saw in the fourth quarter of 2019.\nAs we said earlier, these are unprecedented times.\nNone of us had previously been required to adapt the constraints of living and working through a pandemic.\nAnd likewise, none of us has experience in emerging for one.\nEarlier on the call, we shared our perspective on the balance of the year, based on the assumption that there will continue to be a reasonably steady course of macro recovery that people continue to become vaccinated to protect themselves and their communities and that we're able to adequately mitigate the impact of dangerous new variants.\nWe've delivered a very strong first half of the year on top of the most challenging comps in our industry.\nFurther, despite continued macro uncertainty, we have greater clarity to the balance of 2021.\nWe therefore believe that current performance, combined with the continued execution of our long-term strategy, are significant drivers for the sustained enhancement of value for all of our stakeholders.\nAs always, we're committed to sound financial fundamentals, including debt reduction as well as continuing to grow our dividend.\nWe also remain focused on getting back to our share repurchase program and we will keep you apprised of our progress as the year develops.\n Assistant:", "chosen": "compname announces q2 adj earnings per share of $0.70.\nq2 adjusted earnings per share $0.70.\nq2 net revenue was $2.27 billion, an increase of 22.5% from a year ago, with organic growth of 19.8%.\ninterpublic group of companies - upgrades expectation for fy 2021 performance to organic growth of 9%-10% and adjusted ebita margin of about 16.0%.\n"}
{"prompt": "Human: The third quarter marked a nice sequential improvement in our financial performance with results coming in above the high end of our expectations.\nYou will recall that based on early signs of recovery at the end of the second quarter, we raised our guidance for the year.\nBased on stronger-than-expected performance in the third quarter, we are again raising our full-year guidance ranges for revenue, adjusted EBITDA and adjusted diluted EPS.\nWe are expecting a continuation of this recovery trends in the fourth quarter.\nThis, of course, sets us up well for next year.\nAs we promised back in April at the onset of the pandemic, we will talk to you today about our outlook for 2021.\nBased on what we currently see, we think the most significant COVID impacts to our business are behind us and our outlook for 2021 indicates strong performance next year and a return to our growth trajectory.\nRon will discuss 2020 and 2021 guidance in more detail later.\nBefore we review the quarter, a quick operational update.\nWe continue to experience a gradual improvement in the accessibility of clinical research sites in the R&D Solutions business even with the localized flare-ups we've seen around the world.\nWe are seeing a return to onsite monitoring visits and similar to last quarter onsite visits exceeded the number of remote visits.\nIn instances where sites remain physically inaccessible for clinical monitoring, remote monitoring and virtual solutions are proving to be effective workarounds.\nThe pace of start-up activity picked up significantly during the third quarter and we are pretty much back to baseline levels for site initiation visits.\nOf course, patient recruitment trends have started to follow as well.\nMoving to Technology & Analytics.\nAs expected, TAS has remained resilient throughout this crisis in almost every area.\nWe've had very little interruption in data supplier demand.\nOur information services continue to be mission critical to our clients and are therefore very insulated from the impacts of the pandemic.\nThe analytics and consulting businesses have performed remarkably well despite business development being hampered by the lack of in-person interactions.\nOne area we discussed before that has experienced significant disruption is the event management business, which relies almost entirely on face-to-face interaction.\nAnd, of course, as you know, that business is essentially on pause for now.\nDemand for our technology offerings remains strong.\nWe've added 45 OCE clients this year, bringing our total number of clients to 125.\nDuring the quarter, we successfully rolled out OCE Optimizer, a real-time map-based territory and sales rep alignment solution.\nThis tool will save management team significant amounts of time previously spent planning and assessing sales data to ensure resources are effectively focused on the appropriate client base and product.\nFinally, our CSMS business.\nDemand for field reps continues to be soft, which of course impacts revenue.\nBut as we said before, while business development has also slowed due to the lack of in-person interactions, so far the business has performed modestly better than we would have expected as existing clients have largely retained field reps and have been continuing their engagements with us.\nNow against that backdrop, let's now review our third quarter results.\nRevenue for the third quarter came in at $2,786 million, which was $11 million above the high end of our guidance range.\nThis revenue beat came from strong organic operational performance.\nThird quarter adjusted EBITDA was $604 million with a $22 million beat versus the high end of our guidance range.\nThe EBITDA beat was due to better operational performance and productivity.\nThird quarter adjusted diluted earnings per share was $1.63 reflecting the EBITDA drop-through because the below the line items essentially netted out to zero.\nThird quarter R&DS contracted backlog, including pass-throughs, grew 18.5% year-over-year to $21.7 billion as of September 30th, 2020.\nWe had broad based booking strength, but full-service clinical and lab were particularly strong.\nThe contracted net book-to-bill ratio, including pass-throughs, was 1.71 for the third quarter of 2020 and 1.42 excluding pass-throughs.\nThe LTM contracted book-to-bill ratio at September 30 was 1.55, including pass-throughs and 1.45, excluding pass-throughs.\nLet's turn first to revenue.\nThird quarter revenue of $2,786 million grew 0.6% reported and was flat at constant currency.\nRevenue for the first nine months of the year was $8,061 million which was down 1.6% reported and 1.2% at constant currency.\nTechnology & Analytics Solutions revenue of $1,207 million grew 10.2% reported and 9.2% at constant currency.\nYear-to-date Tech & Analytics Solutions revenue was $3,433 million, up 4.9% reported and 5.6% at constant currency.\nIn R&D Solutions third quarter revenue of $1,400 million was down 4.5% at actual FX rate and 5.1% at constant currency.\nExcluding the impact of pass-throughs, R&D Solutions third quarter revenue grew 2.6%.\nYear-to-date revenue of $4,076 million was down 5.6% at actual FX rate and 5.4% at constant currency.\nContract Sales & Medical Solutions revenue of $179 million was down 13.9% year-over-year reported and 14.4% on a constant currency basis in the third quarter.\nYear-to-date revenue was $552 million, down 8.6% at actual FX rates and 8.3% at constant currency.\nNow moving down to P&L, adjusted EBITDA was $604 million for the third quarter, which represented growth of 1.9%.\nYear-to-date adjusted EBITDA was $1,649 million.\nThird quarter GAAP net income was $101 million and GAAP diluted earnings per share was $0.52.\nYear-to-date GAAP net income was $160 million and GAAP diluted earnings per share was $0.82.\nAdjusted net income was $318 million for the quarter and $841 million year-to-date.\nOur adjusted diluted earnings per share grew 1.9% in the third quarter to $1.63.\nYear-to-date adjusted diluted earnings per share was $4.32.\nNow turning to the R&D Solutions backlog.\nAs Ari mentioned, R&DS new business activity remains quite strong.\nConsequent on the robust booking activity that Ari talked about, our backlog grew 18.5% year-over-year to close at $21.7 billion and we expect $5.8 billion of this backlog to convert to revenue over the next 12 months, which is an increase of over $400 million versus where we were at June 30th.\nAnd I would add that the outlook remains quite positive as RFPs are growing low double digits in both volume and dollars.\nMoving to the balance sheet now.\nAt September 30th, cash and cash equivalents totaled $1.5 billion and debt was $12.3 billion, resulting in net debt of $10.9 billion.\nDue to our strong EBITDA and cash flow in the quarter, our net leverage ratio at September 30th was 4.7 times trailing 12-month adjusted EBITDA, which was down a tad [Phonetic] from where we were at June 30th.\nCash flow was a bright spot as it was last quarter.\nCash flow from operations was $574 million in the third quarter, up 74% over last year.\nCapital expenditures were $157 million and that resulted in free cash flow of $417 million.\nM&A spending, as you saw, was negligible in the quarter.\nFor the first nine months of the year, free cash flow was $769 million, which is about double the same period last year.\nAs you know when the COVID-19 outbreak became the pandemic in March, we temporarily suspended our share repurchase program.\nWe did not repurchase any shares in the second or third quarters, but the business is recovering well from COVID-19 disruptions.\nUnderlying demand is robust and cash flow is as well and we have a very solid liquidity position closing the quarter with an undrawn revolver of almost -- undrawn revolver and almost $1.5 billion of cash in the balance sheet.\nAnd as a result of all this, we lifted our suspension on share repurchase program and we're expecting to opportunistically resume share repurchase activity.\nAnd as a reminder, we currently have about $1 billion of share repurchase authorization remaining under the program.\nNow let's turn to guidance.\nGiven the continuing momentum in the business, we're raising our full year guidance range for revenue, adjusted EBITDA, adjusted diluted EPS.\nOur guidance for the fourth quarter and full year of 2020 assumes that business conditions will continue to improve during the fourth quarter.\nAnd specifically, we assume that localized flare-ups of COVID-19 will not have a material impact on fourth quarter results.\nWe now expect 2020 revenue for the full year to be between $11,100 million and $11,250 million, which is an increase of $125 million over our prior guidance at the midpoint of the range.\nFor profit we now expect full-year adjusted EBITDA to be between $2,335 million and $2,360 million, which represents a $27 million increase over our prior guidance at the midpoint of the range.\nAnd adjusted diluted EPS, we are expecting to be between $6.25 and $6.35, which is an increase of $0.10 over our prior guidance at the midpoint of the range.\nThis full-year guidance implies fourth quarter revenue of $3,040 million to $3,190 million, representing growth of 5% to 10.2%.\nNow this is a wider range than we would normally guide to at this point in the year due to the uncertain timing of pass-through revenues associated with the COVID trials that we're working on.\nFrom a segment perspective, we expect Technology & Analytics Solutions revenue would be in the high-single digits at the midpoint of our guidance range, R&D Solutions revenue growth to reach double digits, with the caveat that this growth rate could move up or down based on the timing of pass-through revenue and CSMS revenue growth to be similar to what we saw in the third quarter.\nFor fourth quarter profit, we expect adjusted EBITDA to be between $685 million and $710 million, representing growth of 6.7% to 10.6% and adjusted diluted earnings per share to be between $1.93 and $2.03, or growth of 10.9% to 16.7%.\nThis guidance assumes that foreign exchange rates at September 30th, 2020 remain in effect for the rest of the year.\nAs we indicated at the start of the pandemic, we've decided to advance our planning process versus prior years.\nAnd as a result, we're now in a position to provide our 2021 outlook and this is much earlier than we would have done in the ordinary course.\nFor the full year 2021, we expect revenue in the range of $12,300 million to $12,600 million.\nThis represents growth of 10.1% to 12.8% versus the midpoint of our 2020 guide.\nWe expect adjusted EBITDA to be in the range of $2,725 million to $2,800 million, representing growth of 16.1% to 19.3% compared to the midpoint of our 2020 guidance.\nAnd finally, we expect adjusted earnings per share to be in the range of $7.65 to $7.95, which would represent growth of 21.4% to 26.2% compared to the midpoint of our 2020 guidance.\nA little bit more detail for you.\nThe adjusted diluted earnings per share guidance assumes interest expense of approximately $420 million, operational depreciation and amortization of about $400 million and other below the line expense items such as minority interest of approximately $50 million and also the continuation of our share repurchase activity.\nThe effective tax rate we are assuming will remain largely in line with 2020.\nOur 2021 guidance is predicated on the assumption that business conditions will continue to improve to the fourth -- in fourth quarter and that majority of our business will return to normal during 2021.\nOur outlook for 2021 also incorporates our view that there will be some tail of COVID work, the growth in R&DS will come primarily from our base business.\nSo in summary, we're pleased with our team's ability to navigate the challenges that COVID has presented throughout the year and we're proud to be a critical contributor to the solution to this public health crisis.\nOur R&DS business has adapted well returning to growth in services revenue and achieving another record quarter of bookings.\nOur Technology & Analytics Solutions business improved sequentially and has returned to pre-COVID growth rates despite the headwinds of the event management business.\nOur solid year-to-date overall Company performance has enabled us to raise our guidance for the full year for revenue, adjusted EBITDA and adjusted diluted EPS.\nAnd now this performance combined with our strong free cash flow and liquidity position has enabled us to lift the suspension of our share repurchase program.\nAnd finally, we are expecting a continued recovery in the fourth quarter and a very strong 2021.\nSo with that let me hand it back over to the operator for Q&A.\n Assistant:", "chosen": "q3 adjusted earnings per share $1.63.\nq3 gaap earnings per share $0.52.\nsees fy 2020 revenue $11,100 million - $11,250 million.\nsees fy 2020 adjusted earnings per share $6.25 - $6.35.\nlifting temporary suspension of its share repurchase program.\nfor full year of 2021, expects revenue of between $12,300 million and $12,600 million.\nfor fy 2021, sees adjusted earnings per share of between $7.65 and $7.95.\n"}
{"prompt": "Human: It was great to see many of you in person at our Analyst and Investor Conference in November.\nAnd as you will recall, we shared our expectations that we would meet or exceed our three-year Vision '22 targets.\nWe also laid out our plans to make 2022 yet another inflection point in our growth trajectory and further accelerate the company's growth rate in the next three phase -- three-year phase of our journey to 2025.\nThe team highlighted the power of connected intelligence, which brings together IQVIA differentiated capabilities and drive our leadership position in the clinical and commercial markets.\nThis underpins our new 20 by '25 strategy, which alludes to our plans to achieve at least $20 billion of revenue by 2025.\nWe're excited about this next phase of growth for IQVIA, and we are busy refining our strategies and action plans, and you will hear more about it as the year progresses.\nTwo years -- two weeks ago, IQVIA was named to Fortune's list of the World's Most Admired Companies for the fifth consecutive year.\nImportantly, we earned a first-place ranking within the healthcare, pharmacy, and other services category for the first time.\n1 in the categories of innovation, capital deployment, global competitiveness, quality of product and services, and long-term investment value.\nTurning now to our results.\nWe ended 2021 on a high note despite COVID-19's continued impact on many parts of the world.\nWe delivered robust top and bottom-line growth in the quarter, which, as you know, was against a much tougher year-over-year comparison than earlier in the year.\nThese results reinforce our confidence that we will achieve our 2022 guidance.\nAnd of course, it sets us up well to meet our ambitious 20 by '25 targets.\nLet's review the fourth quarter.\nRevenue for the fourth quarter grew 10.2% on a reported basis and 11.6% at constant currency.\nThe $62 million beat above the midpoint of our guidance range was driven by stronger operational performance across all three segments, as well as higher pass-throughs partially offset by FX headwinds.\nCompared to prior year and excluding COVID-related work, our core businesses, meaning R&DS and TAS, grew mid-teens at constant currency on an organic basis.\nRon will provide a lot more detail in his remarks, including additional COVID-adjusted numbers for each segment.\nFourth-quarter adjusted EBITDA grew 12.7%, reflecting our revenue growth, as well as ongoing productivity initiatives.\nThe $27 million beat above the midpoint of our guidance range was entirely due to our operational performance.\nFourth-quarter adjusted diluted earnings per share of $2.55 grew 20.9%.\nThat was $0.13 above the midpoint of our guidance, with the majority of the beat coming from the adjusted EBITDA drop-through.\nLet me now provide an update on the business.\nOn the commercial side of the business, it was a strong year for new molecules and launches as the industry continued its recovery from the COVID-19 pandemic disruption.\nThis year, 50 new molecules were approved by the FDA and 72 new commercial launches took place.\nIQVIA supported nearly 80% of launches by top 20 pharma and approximately 60% of all launches.\nThis highlights our scale globally and across all customer segments in applying advanced technology and analytics capabilities to enhance launch planning, engagement, and measurement.\nOverall, we've seen significant momentum and continued demand for our technology solutions.\nThere are now over 3,000 clients who have adopted one or more of our technology platforms, including human data science cloud, orchestrated analytics, E360, Omnichannel Navigator, Engage, and of course, Orchestrated Customer Engagement, or OCE.\nIn fact, the footprint of our OCE platform itself has continued to grow, with over 350 clients having adopted one or more modules on the platform since launch.\nEarly in 2021, we launched IQVIA Next Best Action, which is an AI-driven omni-channel customer engagement decision engine.\nTwo top 20 pharma clients have successfully rolled out this intelligence engine to orchestrate customer engagements in over 30 countries and across more than 40 brands each.\nTwo other top 20 pharmas are currently in the implementation phase.\nAnother highlight in our TAS business has been the success of DMD Marketing Solutions, a leading provider of data and digital marketing solutions that help brands deliver personalized digital content to healthcare professionals.\nIn the quarter, we entered into an enterprise agreement with a top 10 pharma clients to utilize DMD's advanced analytic capabilities to power omnichannel engagement across all eight of their brand franchises.\nTo date, 18 of the top 20 have adopted at least one of DMD solutions.\nWe're very excited for the future growth of this business within IQVIA.\nReal-world evidence and other highlights of the year, IQVIA continues to play a leading role in the use of second rig data to answer key questions for life science customers.\nIn the fourth quarter, we won two large post-authorization safety studies in an autoimmune area with a top 10 pharma.\nThese studies use existing healthcare data to observe patients over a period of 10 years to better understand long-term effects of the treatment.\nWe were also recently awarded a disease registry project for an upcoming novel gene therapy.\nHere, we will recruit a broad population of patients with a specific disease to understand how they are currently managing clinical practice.\nThis information is vital to our life science sponsors to inform the design of subsequent clinical trials, so they can target patient groups with the highest unmet need.\nMoving to clinical technology.\nWe saw increased adoption of our Orchestrated Clinical Trials, OCT platform, which supports trial planning, site management, patient engagement, trial management, and clinical data analytics.\nDuring the year, we added 90 new OCT clients, bringing the total to over 350 clients who have adopted one or more modules within our clinical technology suite since launch, including all of the top 10 and 18 of the top one.\nWithin OCT's digital patient suite this year, we secured three preferred provider partnerships with top 30 pharmaceutical clients to provide our interactive response technology, IRT capabilities, to support site operations across their entire clinical trial portfolios.\nThis technology facilitates patient randomization to ensure protocol adherence and streamline site supply chain management to reduce drug wastage and to drive significant cost reductions.\nOur solution was awarded top-ranking by industry leaders in a recent ISR report for randomization and chart supply management capabilities.\nWe also saw increased demand for our industry-leading decentralized clinical trial offering.\nApproximately one-third of our active full-service clinical trials incorporate one or more of our DCT technology or services capabilities, and we expect this to continue to grow as the need for these capabilities in complex studies becomes more evident.\nFor example, we are currently executing a full-service trial for treatment of multiple system atrophy, a severe degenerative neurological disorder affecting the body's involuntary functions.\nWe are deploying our full suite of capabilities, including eCOA, eConsent, and home research nurses on this study to significantly reduce the travel burden on these patients who have significant mobility challenges.\nFinally, our overall R&DS business continues to build on its strong momentum with over $2.4 billion of net new business, including pass-throughs, and it set a record for quarterly service bookings, achieving over $1.9 billion of service bookings for the first time ever.\nThis resulted in a fourth-quarter contracted net book-to-bill ratio of 1.36 excluding pass-throughs and 1.24, including pass-throughs.\nFor the calendar year, we delivered over $10 billion of total net new bookings for the first time ever, an increase of 14.6% compared to 2020.\nThis led to an LTM contracted net book-to-bill ratio of 1.35 excluding pass-throughs and 1.34 including pass-throughs.\nOur contracted backlog in R&DS, including pass-throughs, grew 10.2% year over year to a record $24.8 billion as of December 31, 2021.\nLet's start by reviewing revenue.\nFourth-quarter revenue of $3.636 billion grew 10.2% on a reported basis and 11.6% at constant currency.\nYou'll recall that last year's fourth quarter was a much tougher comparison than earlier quarters as we picked up incremental demand from mega vaccine studies in R&DS and government-related COVID work within TAS.\nAlso, the core business began to rebound from the effects of COVID-19.\nIn this year's fourth quarter, COVID-related revenues were approximately $325 million, down about 25% versus the fourth quarter of 2020.\nIn our base business, that is excluding all COVID-related work from both 2021 and 2020, organic growth at constant currency was mid-teens.\nTechnology and Analytics Solutions revenue for the fourth quarter was $1.496 billion, up 5% reported and 6.6% at constant currency.\nYear over year, TAS experienced just over 400 basis points of headwind due to a step-down in COVID-related work.\nExcluding all COVID-related work, organic growth at constant currency in TAS was high single digits.\nR&D Solutions fourth-quarter revenue of $1.944 billion was up 15.4% at actual FX rates and 16.3% at constant currency.\nExcluding all COVID-related work, organic growth at constant currency and R&DS was approximately 25%.\nContract Sales and Medical Solutions, or CSMS, fourth-quarter revenue of $196 million grew 3.7% reported and 7.4% at constant currency.\nExcluding all COVID-related work, organic growth at constant currency in CSMS was low single digits.\nFor the full year, revenue was $13.874 billion, growing at 22.1% reported and 21.1% at constant currency.\nThe incremental COVID-related revenues in 2021 versus 2020 accounted for approximately half of our growth in 2021.\nFull-year Technology and Analytics Solutions revenue was $5.534 billion, up 13.9% reported and 12.4% at constant currency.\nExcluding COVID-related work, organic growth at constant currency in TAS was high single digits.\nFull-year revenue in R&D Solutions was $7.556 billion, growing at 31.2% reported and 30.4% at constant currency.\nExcluding COVID-related work, R&DS organic growth at constant currency for both total revenue and services revenue was low double digits.\nFull-year CSMS revenue was $784 million representing 5.8% growth on a reported basis and 5.7% at constant currency.\nAnd excluding COVID-related work, organic growth at constant currency in CSMS was low single digits.\nNow moving down to P&L.\nAdjusted EBITDA was $828 million for the fourth quarter, which was 12.7% growth on a reported basis.\nFull-year adjusted EBITDA was $3.022 billion, up 26.8% year over year on a reported basis.\nFourth-quarter GAAP net income was $318 million, and GAAP diluted earnings per share was $1.63.\nFull-year GAAP net income was $966 million or $4.95 of earnings per diluted share.\nAdjusted net income was $496 million for the fourth quarter, up 20.7% year over year.\nAnd adjusted diluted earnings per share grew 20.9% to $2.55.\nFor the full year, adjusted net income was $1.760 billion or $9.03 per share, up 41%.\nNow as already reviewed, R&D Solutions delivered another outstanding quarter of net new business.\nR&DS backlog now stands at a record $24.8 billion, an increase of 10.2% year over year.\nFull year 2021 net new bookings, including pass-throughs, rose over $10 billion for the first time.\nThat's 14.6% growth compared to 2020.\nLet's move to the balance sheet now.\nCash flow was again quite strong in the quarter.\nCash flow from operations was $692 million, and capex was $184 million, which resulted in free cash flow of $508 million.\nThis brought our free cash flow for the full year to a record $2.3 billion, up 70% versus the prior year.\nAt December 31, cash and cash equivalents totaled $1.366 billion and gross debt was $12.125 billion, resulting in net debt of $10.759 billion.\nOur net leverage ratio at December 31 was 3.56 times trailing 12-month adjusted EBITDA.\nNow it's worth highlighting that our improved free cash flow over the last two years allowed us to deploy approximately $4.5 billion of capital to internal investments, acquisitions, and share repurchase, while at the same time, we were able to reduce our net leverage ratio from a high of 4.8x in Q2 2020, which you'll recall was the height of the pandemic to nearly 3.5 times.\nAnd in doing this, we achieved our Vision '22 net leverage ratio target of 3.5 times to four times a full year early.\nIn the quarter, we repurchased $174 million of our shares, which resulted in full-year share repurchase of $395 million, and we ended the year with 195 million fully diluted shares outstanding and $523 million of share repurchase authorization remaining under our existing program.\nNow last week, our board of directors approved a $2 billion increase to our share repurchase authorization, which increases our remaining authorization to just over $2.5 billion.\nNow let's turn to the guidance.\nAs you saw, we're reaffirming the full year 2022 revenue guidance that we issued at our analyst and investor conference in November.\nAnd in maintaining this guidance, we actually absorbed a $70 million revenue headwind from FX since we initially guided in November.\nNow additionally, we're raising our full year 2022 profit guidance versus what we provided you in November.\nSo, to summarize the overall guidance for the full year, we expect revenue to be between $14.700 billion and $15 billion, which represents year-over-year growth of 7.1% to 9.2% at constant currency and 6% to 8.1% on a reported basis compared to 2021.\nNow we now expect adjusted EBITDA to be between $3.330 billion and $3.405 billion representing year-over-year growth of 10.2% to 12.7%.\nAnd we also now expect adjusted diluted earnings per share to be between $9.95 and $10.25, which represents year-over-year growth of 10.2% to 13.5%.\nNow our full year 2022 guidance assumes at December 31, 2021, foreign currency exchange rates remain, in fact, for the balance of the year.\nNow compared to the prior year, I should mention FX is now a headwind of 110 basis points to our full-year revenue growth, and our projected revenue growth includes a little bit over 100 basis points of contribution from M&A activity.\nNow with our analyst and investor conference in November, we told you to anticipate that our COVID-related revenue will step down by approximately $1 billion in 2022 but will more than compensate for that headwind with strong growth in our base business.\nAnd let me give you some additional detail around this that I think will be helpful.\nExcluding COVID-related revenue, the FX headwind, and the contribution of acquisitions, our total company revenue guidance implies organic growth at constant currency in the low to mid-teens.\nAt the segment level, we anticipate full-year Technology and Analytics Solutions revenue growth of between 5% and 7%.\nExcluding COVID-related work, we expect organic revenue growth at constant currency in TAS to be in the high single digits.\nResearch and Development Solutions revenue growth is expected to be between 8% and 10%.\nExcluding COVID-related work, we expect organic revenue growth at constant currency in R&DS to be in the upper teens.\nAnd finally, Contract Sales and Medical Solutions revenue was anticipated to be down about 2%.\nBut excluding COVID-related work, we expect organic revenue growth at constant currency in CSMS to be in the low single digits.\nLet's move to the first quarter now.\nAs you all know, the first quarter of last year marked a continued rebound in our base business after the 2020 pandemic-related decline.\nIn addition, Q1 and Q2 of last year represented our peak COVID-related revenues.\nAs a result of this, the first half of the year will have the most challenging year-over-year compares.\nFor the first quarter, our revenue is expected to be between $3.515 billion and $3.575 billion, representing growth of 4.8% to 6.6% on a constant-currency basis and 3.1% to 4.9% on a reported basis.\nNow excluding COVID-related work, we expect organic revenue growth at constant currency to be in the mid-teens.\nAdjusted EBITDA is expected to be between $800 million and $815 million, up 7.5% to 9.5%.\nAnd finally, adjusted diluted earnings per share is expected to be between $2.40 and $2.46, growing 10.1% to 12.8%.\nSo, to summarize, we delivered very strong fourth-quarter results on both the top and bottom line against what was also a very strong fourth quarter of 2020.\nR&DS recorded its largest-ever quarter of service bookings and for the first time, had over $10 billion of total net new bookings in a year.\nOur contracted backlog improved to a record of nearly $25 billion, up over 10% year over year.\nWe delivered another strong quarter of free cash flow, bringing the full year to a record $2.3 billion.\nWe closed 2021 with net leverage of 3.6 times trailing 12-month adjusted EBITDA.\nOur board approved a $2 billion increase to our share repurchase authorization.\nAnd finally, we're reaffirming the full year of 2022 guidance that we provided in November for revenue, and we're raising our adjusted EBITDA and adjusted diluted earnings per share guidance.\n Assistant:", "chosen": "q4 adjusted earnings per share $2.55.\nq4 gaap earnings per share $1.63.\nsees q1 revenue $3.515 billion to $3.575 billion.\nsees q1 revenue up 4.8 to 6.6 percent.\nq4 revenue rose 10.2 percent to $3.636 billion.\nfull-year 2022 guidance reaffirmed for revenue including a $70 million revenue headwind from foreign exchange.\nfull-year 2022 guidance raised for adjusted ebitda and adjusted diluted eps.\nsees fy 2022 adjusted earnings per share $9.95 to $10.25.\nsees q1 2022 adjusted earnings per share $2.40 to $2.46.\n"}
{"prompt": "Human: I'm Chris Miorin, vice president of investor relations.\nBoth are available on the Investor Relations section of our website, www.\nIn addition, a replay of this conference call will be available later today.\nIn addition, in today's remarks, we will refer to certain non-GAAP financial measures.\nStarting on Slide 3.\n2021 was a pivotal year for Ingersoll Rand with many accomplishments and new records.\nWe solidified our compounding growth story as we reshaped our portfolio to focus on mission-critical, flow creation technologies and high-growth, sustainable end markets while establishing a new capital allocation strategy designed to enable us to consistently compound earnings over time.\nWe continued a strong operational execution where the commercial effectiveness of our team, driven by our IRX process, yielded a backlog at the end of the fourth quarter that was our largest ever and positions us very well for continued strong results in 2022 as demand for our products and services continue to grow.\nMoving to Slide 4.\nI want to take a moment to recognize some of the accomplishments across each of our five strategic imperatives in 2021.\nIn deploy talent, our employees think and act like owners because they are.\nShares granted to employees to date have appreciated from $250 million to over $500 million in value, motivating our engaged employee base to make decisions each day that can benefit our value creation and ultimately, their personal wealth.\nFurthermore, we implemented a plan to also grant shares to employees who join us as new employees or via acquisitions, yet another factor enabling Ingersoll Rand to be considered an employer and acquirer of choice.\nOur employee engagement score, up 17% over the last three years, also shows the power of ownership.\nOur current engagement score now ranks in the top quartile of manufacturing organizations.\nIn expand margins, we have improved the company's adjusted EBITDA margin 370 basis points in 2019, including an improvement of 160 basis points in 2021 alone.\nWe have realized $215 million in synergies out of the $300 million commitment from the IR merger, with an additional $15 million expected in 2022.\nIn operate sustainably, we continue to make progress and have received recognition from ESG rating agencies, including S&P Global and MSCI, once again demonstrating how we leverage the power of IRX to drive performance across a multitude of initiatives.\nIn accelerate growth, our unique growth enablers outlined during our 2021 investor day, strongly contributed to growth in the past year.\nOur demand generation engine now generates three times more marketing-qualified leads compared to 2019.\nIIoT-enabled assets were up 250% year over year, and new product innovation increased 95% in 2021.\nIn allocate capital effectively, we secured approximately $2 billion in gross proceeds from the divestitures of Club Car and High Pressure Solutions and redeployed over $1 billion through acquisitions in 2021, which represents over 6% of sales when annualized.\nWe also repurchased $731 million in shares as part of the KKR's final equity sale, established a new $750 million share repurchase program, and initiated a quarterly dividend of $0.02 per share during the fourth quarter.\nWe're incredibly proud of our 2021 accomplishments and could not have done it without the dedication of our team.\nTurning to Slide 5.\nWe're committed to executing the strategy we outlined at our 2021 investor day and are confident it will produce the expected results.\nThis slide outlines how we are already delivering on that strategy and associated commitments.\nOur portfolio is now positioned to capitalize on global megatrends, such as digitization, sustainability, and quality of life.\nWe expect to leverage our organic growth enablers to deliver mid-single-digit organic growth through 2025.\nAnd as you can see, we outperformed on this commitment in 2021, delivering 12% year-over-year organic growth.\nWhen coupled with mid-single-digit annual growth from M&A and technology investments, we expect to deliver total growth of low double digits through 2025.\nAnd in 2021, we delivered 4% in-year growth from M&A and 6% annualized.\nOur strong pricing, aftermarket, and I2V initiatives enable us to generate operating leverage and incremental productivity, with an expected 100 basis points of margin improvement per year over the period.\nAnd in 2021, we over delivered on this target, capturing 160 basis points of margin expansion despite several challenges like supply chain constraints and inflationary pressures.\nWith IRX as our competitive differentiator and over 275 IMPACT Daily Management or IDM meetings across our company each week, our high-performance culture encourages strong execution.\nThis continues to support our goal of being a premier, high-quality company that consistently compounds earnings by double digits each year, with free cash flow margins in the high teens.\nAnd we feel that we're well on our way, as in 2021, we grew earnings per share by 63% and achieved adjusted free cash flow margin of 16%.\nTurning to Slide 6.\nWe have achieved strong margin improvement across our portfolio since 2019.\nLooking at the company, margins improved 370 basis points from 2019 despite COVID impacts and persistent supply chain and inflationary pressures.\nIn the ITS segment, we improved an impressive 470 basis points since 2019 as we continue to accelerate synergy capture and execute on value creation opportunities from the IR merger.\nIncremental operating leverage and productivity should enable ITS to achieve margins in the high 20s over time.\nIn the PST segment, margins have expanded 170 basis points since 2019 and 290 basis points, excluding M&A.\nContinued strong flow-through in the base PST business, coupled with diligent synergy execution as we onboard acquisitions, should yield adjusted EBITDA margins in the mid-30s over time.\nIt is important to note that as we highlight on the last bullet point, due to the nature of our products, we're mission-critical with premium brands and high quality and reliability, and we have the ability to remain price/cost positive.\nWe have accomplished this in each quarter since the merger even during these inflationary times and expect to do the same in 2022.\nMoving to Slide 7.\nWe're thrilled to announce the recent validation of Ingersoll Rand's progress as an industry leader in ESG.\nBased on demonstrated progress, we received another upgrade from MSCI, which is our second upgrade in the past 18 months, and now have an A rating.\nAnd I'm really excited to announce that S&P Global, in its annual sustainability assessment that was just released a few weeks ago, scored Ingersoll Rand in the top 15% and included us in its Sustainability Yearbook for 2022.\nIn addition, S&P Global recognized us with the Industry Mover Award, which is given to the most improved company in each sector of the year.\nThese recognitions exemplify our unwavering commitment to ESG.\nIn March of 2021, we committed to becoming a top-quartile ESG industrial company in three years.\nAnd we believe we have achieved or are at the cusp of achieving that goal in one year.\nAnd S&P Global agrees as it elected us to its Sustainability Yearbook, which recognizes the top 15% ESG performing companies in each industry sector.\nDespite this progress, we're just getting started on our ESG journey, and we're very focused on accelerating progress toward our ESG growth.\nI'm incredibly proud of our team for being recognized by the rating agencies already this early in our journey.\nMoving to Slide 8.\nWe continue to be encouraged by the performance of the company in Q4, which saw a strong balance of commercial and operational execution fueled by IRX to overcome persistent inflationary pressures in a challenging supply chain environment.\nThrough Q4 2021, we have realized $215 million in cost synergies and are on track to deliver on our $300 million commitment.\nTotal company orders and revenue increased 24% and 16% year over year, respectively, driven by strong double-digit organic orders growth across each segment despite comparisons to a strong Q4 2020.\nOur orders and revenue in the quarter were a record for the company, eclipsing Q3 and setting us up well for 2022.\nThe company delivered fourth quarter adjusted EBITDA of $342 million, a 15% year over year improvement, and adjusted EBITDA margins of 24.1%, a 40-basis-point sequential improvement.\nAdjusted free cash flow for the quarter was $225 million after taking into account the unique items as pointed out on the slide.\nTotal liquidity of $3.2 billion at quarter end was up approximately $400 million from prior year.\nThis takes our net leverage to 1.1 times, an 0.9 times improvement from prior year.\nTurning to Slide 9.\nFor the total company, Q4 orders grew 25% and revenue increased 18%, both on an FX-adjusted basis.\nOverall, we posted a strong book-to-bill of 1.06 for the quarter.\nWe remain encouraged by the strength of our backlog, which is up over 7% from the end of Q3 and over 50% from the end of 2020.\nTotal company adjusted EBITDA increased 15% from the prior year.\nITS segment margin declined 40 basis points, while PST segment margin declined 400 basis points, driven largely by the impact of M&A.\nWhen adjusted to exclude the impact of M&A completed in 2021, PST margin declined by 120 basis points.\nFinally, corporate costs came in at $26 million for the quarter, down year over year, primarily due to lower incentive compensation costs and general savings and prudency.\nWe expect corporate cost to normalize back to the low 30s millions per quarter in 2022.\nAdjusted earnings per share for the quarter was up 51% to $0.68 per share.\nOf note, the adjusted tax rate came in at 5% for the quarter and 12% for full year 2021.\nQ4 benefited from our ongoing tax restructuring efforts, specifically some nonrecurring impacts driven most notably by our efforts to manage and minimize the cash taxes associated with the divestitures of SVT and HPS completed earlier in the year.\nAs we look ahead to 2022, we expect the rate to be back in the low 20s due to the nonrepeat of some of these discrete items.\nTurning to Slide 10.\nOn a full year basis, orders grew 28% and revenue increased 16%, both on an FX-adjusted basis.\nThe full year book-to-bill was 1.12, and total company adjusted EBITDA was up 28% from 2020.\nMargin expanded by 160 basis points, with ITS margin up by 220 basis points and PST declining 50 basis points.\nWhen adjusted to exclude the impact of these acquisitions completed in 2021, PST margins increased by 70 basis points.\nITS posted incremental margins of 38%, with PST at 27% or 36%, excluding the impact of M&A.\nMoving on to the next slide.\nFree cash flow for the quarter was $224 million on a continuing ops basis, driven by strong operational performance across the business while continuing to invest organically.\nCapex during the quarter totaled $23 million, and free cash flow included $4 million of synergy and stand-up costs related to the IR merger.\nIn addition, free cash flow included a net inflow of $3 million in cash taxes related to the divestitures of the HPS and SVT segments.\nExcluding these items, adjusted free cash flow was $225 million in the quarter.\nLeverage for the quarter was 1.1 times, which was an 0.9 times improvement versus the prior year.\nAnd total company liquidity now stands at $3.2 billion based on approximately $2.1 billion of cash and over $1 billion of availability on our revolving credit facility.\nLiquidity increased by $100 million in the quarter, which included outflows of $165 million toward strategic M&A and $8 million to fund our first quarterly dividend.\nOur M&A funnel remains robust and active, up in excess of five times from the close of the IR merger, and we're remaining disciplined in our approach.\nMoving to Slide 12.\nWe'd like to provide an update on synergy delivery and some detail on the impact of price versus cost.\nOn the left side of the page, we are updating the cost to achieve the $300 million synergy commitment related to the IR merger, as well as the associated stand-up of the new company from a combined $450 million to now $280 million, an aggregate reduction of roughly 40% or $170 million from our original estimates.\nThis speaks to how we are always heavily focused on high returns on cash investments regardless of the situation.\nI am very proud of how our employee ownership culture continues to overdrive our performance.\nWith everyone thinking like an owner, they think about how every dollar spent generates profit and improvement.\nIn addition to the $215 million in realized synergies to date, we expect an incremental $50 million in 2022 and $35 million in 2023.\nThe synergy funnel remains in excess of $350 million.\nAnd while we don't expect our synergy commitment to materially change as we look ahead, we will provide periodic updates on status and execution, particularly as we approach the end of the IR merger-related synergy delivery.\nThe right side of the slide highlights the ongoing price/cost dynamic.\nIn 2021, we remain price/cost positive each quarter, and we expect to deliver the same result in 2022.\nNote that we are calculating costs, including direct material and logistics, but not direct labor or labor inflation, as labor is mostly offset with internal productivity actions.\nIn Q4, we delivered an incremental margin of 23% for the total company despite strong inflationary pressures and supply chain challenges.\nWhat I'm most proud of is that even in this environment, our team was able to achieve a sequential margin improvement of 40 basis points.\nThis highlights the resilience of IRX in very difficult environments.\nLooking forward to 2022, we expect to remain price/cost positive each quarter as we continue to leverage IRX to drive commercial execution and productivity initiatives.\nGiven continued inflationary pressures and a very tough comparison from Q1 of 2021, we expect Q1 to be the most challenged period on a year-over-year basis, but nonetheless, expect incremental margins for the total year to be approximately 35% and the quarterly EBITDA profile to be well in line with prior-year quarterly phasing.\nWe know this is not easy, but it just speaks to the commitment of our team to be differentiated and be in the top quartile of performance.\nAnd turning to Slide 13.\nIn our Industrial Technologies and Services segment, organic revenue was up 11%.\nThe team delivered strong adjusted EBITDA, which rose 10% year over year and an adjusted EBITDA margin of 25.7%, up 20 basis points sequentially with an incremental margin of 23%.\nAs a reminder, we're overcoming a very strong comp from Q4 2020 of 400-basis-point margin expansion.\nHowever, important to highlight as well that on a two-year clip, the team has delivered 360-basis-point margin improvement.\nOrganic orders were up 19%.\nStarting with compressors, we saw orders up in the low 20s percent.\nAnd a further breakdown shows orders for oil-free products growing at over 15% and oil-lubricated products growing at over 25%.\nThe Americas team delivered strong performance with orders in North America up mid-20s, while Latin America was up high 20s.\nIn Mainland Europe, orders were up high teens, while India and the Middle East were down low single digits.\nAsia Pacific continues to perform very well, with orders up approximately 20%, driven by low 20% growth in China and high-teens growth across the rest of Asia Pacific.\nIn the vacuum and blower product line, orders were up approximately 20% on a global basis.\nMoving next to the power tools and lifting, Orders for the total business were up approximately 20% and saw continued positive momentum, driven mainly by our enhanced e-commerce capabilities and improved execution on new product launches.\nOn our sustainable innovation in action, today, we want to highlight our recently acquired company.\nJorc is a manufacturer of condensate drains, oil and water separators, and air-saving products, which are part of the compressor ecosystem.\nThese products focus on improving overall system performance and creating energy efficiency through efficient use and recycling of fluids and air, which helps our customers achieve their environmental goals.\nWe're very excited about this complementary acquisition as we continue to expand our offerings with the compressor ecosystem, as well as the impact that Jorc will have as we scale up and expand geographically.\nMoving to Slide 14.\nRevenue in the Precision and Science Technologies segment grew 15% organically, which remains encouraging given the tough comps due to COVID-related orders and revenue in Q4 of 2020 for the Medical business.\nAdditionally, the PST team delivered strong adjusted EBITDA of $78 million, which was up 22% year over year.\nAdjusted EBITDA margin was 26.8%, down 400 basis points year over year, primarily driven by the impact of M&A.\nAgain, the segment was down 120 basis points, excluding the impact of acquisitions in Q4 2021 with an adjusted EBITDA margin of 29.6% ex M&A.\nOverall, organic orders were up 40%, driven by the Medical and Dosatron businesses, which were up strong double digits in the quarter and as they serve lab, life sciences, water, and animal health end markets.\nIncremental margins were 17% as reported and 21% when excluding the impact of M&A.\nLooking at the sustainable innovation in action portion of the slide, we're highlighting our recent Tuthill Pumps acquisition.\nTuthill Pumps manufactures gear and piston pumps for sustainable end markets, such as medical and lab, food and beverage, water, and wastewater.\nTuthill's D Series magnetically coupled pumps are used in lab applications, such as hematology analysis, as well as other chemistry analyzers.\nThe business is complementary to our existing portfolio, and we are well underway with integration of this business.\nMoving to Slide 15.\nWe're pleased to introduce our 2022 guidance.\nIn aggregate, we expect total company revenue to be up 11% to 13%, with the first half up 12% to 14% and the second half up 9% to 11%.\nWe expect organic revenue growth of 7% to 9% for the total company, with 7% to 9% growth expected in ITS and 8% to 10% growth in PST. FX is expected to contribute a headwind of approximately 1%, with 1% to 2% coming in the first half of 2022 and 0% to 1% in the second half.\nM&A announced and closed to date is expected to contribute an incremental $225 million in revenue.\nThis outlook reflects normal seasonality in the business, which is typically lightest in Q1, similarly stronger in both Q2 and Q3 on an absolute basis, and strongest in the fourth quarter.\nWe do not see quarterly phasing to be materially different from 2021.\nWe expect total adjusted EBITDA for the company to be $1.375 billion to $1.415 billion, including corporate cost of approximately $135 million spread evenly over each quarter.\nThis yields an incremental margin of approximately 35% for the total company, with positive margin expansion expected sequentially from Q1 through Q4 of 2022.\nFree cash flow conversion to adjusted net income is expected to be greater than 100%.\nWe anticipate our adjusted tax rate to normalize in the low 20s for the reasons Vik mentioned earlier, with capex representing approximately 2% of revenue.\nLooking at Q1 specifically.\nWe expect double-digit revenue growth year over year with ITS growing high single digits organically and PST growing low double digits.\nWe also expect flat to slightly positive margin expansion due to the tough year-over-year comparison, ongoing supply chain constraints, and inflationary pressures.\nTurning to Slide 16.\nAs we wrap up today's call, I want to reiterate that Ingersoll Rand is in an outstanding position.\n2022 is poised to be a strong year despite the challenging environment.\nWe accomplished an incredible amount together, and we move into 2022 as an even stronger action-oriented team.\nWe continue to invest for growth, both organically and inorganically with a focus on increasing the quality of our total portfolio, while serving as an industry-leading sustainable company.\nIRX is truly our backbone and drives every process in our company, enabling outperformance and ensuring our global team is speaking one language, focused on capturing growth opportunities, driving innovation and efficiencies, and acting boldly to win in the marketplace.\nOur balance sheet is very strong.\nAnd with our disciplined and comprehensive capital allocation strategy, we have significant ability to redeploy capital to compound earnings and continue our track record of market outperformance.\n Assistant:", "chosen": "q4 adjusted earnings per share $0.68 from continuing operations.\nsees full-year 2022 revenue growth to be 11% to 13%.\n"}
{"prompt": "Human: I'm joined by our Chairman and CEO, Scott Santi; and Senior Vice President and CFO, Michael Larsen.\nDuring today's call, we will discuss ITW's third quarter 2020 financial results and provide an update on our strategy for managing through the global pandemic.\nWe saw a solid recovery progress in many of the end markets that we serve in the third quarter as evidenced by our revenue being up 29% sequentially versus the second quarter.\nIn fact, demand levels returned to rates approximating year ago levels in five of our seven segments.\nWith two of those, Construction and Polymers & Fluids, delivering meaningful growth in the third quarter.\nOn the flip side, demand levels in our Food Equipment and Welding segments continue to be materially impacted by the effects of the pandemic, although we did see good sequential improvement in both in Q3 versus Q2.\nWe talk often about the flexibility and responsiveness inherent in our 80/20 front-to-back operating system, and those attributes were clearly on display in our Q3 performance.\nSupported by our decision early on as the pandemic unfolded, to refrain from initiating staffing reductions and to focus on positioning the company to fully participate in the recovery, our people around the world responded to a rapid acceleration in demand by leveraging the ITW business model to provide excellent service to our customers, while keeping themselves and their co-workers safe.\nPerhaps the most pronounced example was our Auto OEM segment where our team executed flawlessly from both of quality and delivery standpoint in responding to demand levels that essentially doubled in Q3 versus Q2 and with a demand -- a very demanding customer base.\nAcross all seven of our segments, our teams can site numerous examples of how our ability to sustain high levels of service in the phase of rapidly accelerating demand resulted in incremental business for the company in Q3.\nIn addition to leveraging our best-in-class delivery capabilities, our divisions remain laser focused on leveraging our strengths to capture sustainable share gain opportunities that are aligned with our long-term enterprise strategy.\nThese efforts are just beginning to take hold and I'm confident that they will contribute meaningfully to accelerating our progress toward our long-term organic growth goals.\nThe operating flexibility that is core to our 80/20 front-to-back operating system also applies to our cost structure, which show through in our operating margin performance in Q3.\nOperating margin of 23.8% in the quarter, included meaningfully higher restructuring expenses versus a year ago in Food [Phonetic] segment specific one-time items, which Michael will provide more detail on in a few minutes.\nExcluding these factors, operating margin was 25.3% in Q3.\nThe second highest in the history of the company.\nOverall, the pace of recovery in the third quarter exceeded our expectations heading into the quarter, as we delivered revenue of $3.3 billion, operating income of $789 million, free cash flow of $631 million, and GAAP earnings per share of $1.83.\nIn addition, after-tax return on invested capital improved to 29.6%, an all-time high for the company.\nIt goes without saying that I cannot be more proud of how the ITW team is managing through this challenging period.\nIn the face of unprecedented challenges and circumstances, our operational and financial performance over the last few quarters supports our decision to remain fully invested.\nAnd the key initiatives supporting the execution of our long-term enterprise strategy and provides further evidence that ITW is a company that has both the enduring competitive advantages and the resilience necessary to deliver consistent upper tier performance in any economic environments.\nLooking forward, we remain focused on delivering strong results, while continuing to execute on our long-term strategy to achieve and sustain ITW's full potential performance.\nSince the beginning of the pandemic, maintaining ITW's considerable financial strength, liquidity, and strategic optionality has been a priority.\nOur objective was to fully leverage the strong financial foundation and resilient profitability profile that we have built in the last seven years to position ITW for maximum participation in the recovery.\nAnd as the recovery progressed, ahead of our expectations going into the quarter, we were ready to meet customer demand and we delivered strong financial results.\nQ3 revenue was up 29% or almost $750 million sequentially versus Q2.\nAnd on a year-over-year basis, organic revenue declined only 4.6% compared to a 27% decline in Q2.\nThe impact of last year's divestitures was 1% and was essentially offset by 0.7% of favorable currency impact.\nProduct Line Simplification was 30 basis points in the quarter.\nDespite the negative volume leverage and our decision to stay invested in our key strategic priorities, Q3 operating margin was 23.8%, down only 120 basis points compared to prior year.\nIf you set aside the impact of higher restructuring expenses and two one-time segment items that I will describe in a moment, operating margin would actually have increased year-over-year to 25.3%.\nStrong execution on our enterprise initiatives was a big contributor once again at 120 basis points, as all segments delivered benefits in the range of 70 basis points to 190 basis points.\nAs expected, our decremental margins were a little higher than normal at 46% in the third quarter.\nExcluding the two one-time items that I just mentioned and the higher restructuring expense, our decremental margins would have been about 20%, significantly better than our historical decrementals of 35% to 40%.\nOperating income was $789 million, and GAAP earnings per share was $1.83, with an effective tax rate of 21.3%, in line with last year's 21.6%.\nSolid working capital performance contributed to free cash flow of $631 million and a conversion rate of 108% of net income.\nOn a year-to-date basis, free cash flow was $1.9 billion, with the conversion rate of 127% compared to 105% last year.\nWe now expect free cash flow to end the year significantly above $2 billion.\nOur balance sheet remains strong.\nAt quarter end, we had $2.2 billion of cash on hand, no commercial paper, and a $2.5 billion undrawn revolving credit facility, tier 1 credit ratings, and total liquidity of more than $4.7 billion.\nIn terms of our debt structure, you can see an increase of $350 million in the short-term debt, which is simply a reclassification from long-term to short-term as our 2021 bonds are coming due in less than 12 months.\nSo in summary, a very good quarter operationally and financially as the recovery progressed well ahead of our previous expectations.\nMoving on to Slide 4, for a closer look at the third quarter recovery and response by each segment.\nYou can see that every segment responded effectively to the increase in demand recovery and improved sequentially on both revenues and operating margin.\nI would highlight just a few things that Scott mentioned, including the fact that our Automotive OEM segment was able to essentially double their volumes in a quarter or just 90 days as operating margins went from negative to 20% plus.\nIn addition, six of seven segments had operating margins, not segment margins, operating margins above 20%.\nIn fact, Food Equipment was just below 20%, but we expect them to get above 20% in Q4, despite the fact that they are operating in a pretty challenging environment.\nNext to Slide 5, starting with a quick look at organic revenue by geography.\nAs you can see customer demand improved in every region.\nNorth America declined by only 5% in Q3 compared to down 26% in Q2.\nEurope also improved significantly down only 8%, a sequential improvement of almost 30 percentage points.\nAsia-Pacific turned positive this quarter, up 3% and China was the standout, up 10%, as the recovery continues to take hold.\nIn China specifically, Automotive OEM, Polymers & Fluids, and Specialty products all grew double-digits.\nSo in summary, broad-based geographic recovery in the quarter.\nNow let's walk through each segment, starting with the one that experienced the most pronounced recovery Automotive OEM.\nIn a matter of weeks, our customers went from being shutdown to operating close to full capacity and the team responded by leveraging their experienced workforce, local supply chains, and flexible operating system, to quickly ramp up and meet customer demand.\nOverall, organic revenue was still down 5% year-over-year, with North America now 10% and Europe down 5%.\nChina, which had already turned positive last quarter at 6% also improved sequentially and was up 15% this quarter.\nLastly, as we discussed on our last call, we did initiate a few restructuring projects that were part of our 2020 plan pre-pandemic, which will lead to a reduction in operating margins of 150 basis points, to 20.8%.\nTurning to Slide 6.\nAs expected, Food Equipment was the hardest hit segment in the quarter as organic revenue declined 20%, a significant improvement though from being down 38% in Q2.\nNorth America and international organic revenue were both down about 20%.\nEquipment sales were down 21% and service was down 17%.\nInstitutional demand was down about 30% and restaurants, including QSR were down a little bit more than that.\nOn a positive note, retail, which includes grocery stores, grew more than 30% supported by the rollout of new products.\nDespite the significant negative volume leverage and higher restructuring expense, operating margin was still 19.6%.\nExcluding the higher restructuring impact, margins would have been 21.4%.\nAnd I think it's worth noting that in this most challenging environment, the segment generated almost $19 million in operating income.\nIn Test & Measurement and Electronics, organic revenue declined only 2% with Test & Measurement down 6% and Electronics, up 2%.\nWhile demand for capital equipment remains soft, the segment benefited from considerable strength in a number of end markets including semiconductor, healthcare, and clean room technology.\nAs you can see from the footnote, the reported operating margin of 23.7%, include a 350 basis points of unfavorable impact from removing a potential divestiture from assets held for sale.\nGiven the current environment, we simply decided to defer this divestiture for now.\nSpeaking of divestitures, let me make a broader comment on our portfolio management efforts and specifically the 2018 decision to divest seven businesses that we determine no longer fit our enterprise strategy framework, with revenue of approximately $1 billion.\nWe expect that the completion of these divestitures will improve our overall organic growth rate at the enterprise level by approximately 50 basis points and increase enterprise operating margins by 100 basis points.\nIn 2019, we made good progress completing four divestitures, with revenues of approximately $150 million and we are seeing the benefits in our financials this year including 20 basis points of operating margin impact.\nWhile the pandemic put a hold on our efforts this year, our view regarding the long-term strategy fit of the remaining divestitures has not changed.\nAccordingly, we will resume the sale process for these businesses when market conditions normalize.\nOkay, turning to Slide 7.\nIn Welding, demand for capital equipment was down year-over-year as organic revenue declined 10%.\nHowever, the commercial business, which accounts for about 35% of revenue and serves primarily smaller businesses and individual users, was up 11%.\nIn Industrial, customers were holding back on capital spending and organic revenue was down more than 20% this quarter.\nOperating margin, though was remarkably resilient at 27.9%.\nOn a positive note, Polymers & Fluids reported record organic growth of 6% in the quarter.\nThe Automotive Aftermarket business benefited from strong retail sales to grow 10%, with double-digit growth in tire and engine repair products.\nFluids was up 6%, strong sales into healthcare and hygiene end markets.\nAs a result of the volume leverage and strong incremental margins of 78%, operating margin expanded by 250 basis points to a record 26.6%.\nMoving to Slide 8, Construction had a remarkable quarter, benefiting from continued strong demand in the home center channel to deliver record organic growth of 8%.\nAll geographies were positive, with North America up 12%, with double-digit growth in the residential and renovation market offset by commercial construction, down 10%; Europe was up 6%, with double-digit growth in the Nordic region; and Australia/New Zealand revenues grew 3% and were positive for the first time in more than two years.\nAs a result of the volume leverage and strong incremental margins of 59%, operating margin expanded by 300 basis points to a record 28.1%.\nAnd some of you may remember, when we launched enterprise strategy in 2012, Construction had the lowest operating margins in the company, seemingly stuck right around 12%.\nCertainly, good performance in industry, but not really ITW caliber.\nThe fact that the construction segment delivered the highest margins inside of ITW in Q3 at more than 28% is therefore pretty remarkable.\nSpecialty organic revenue was down 5%, with North America down 4% and international revenue down 7%.\nDemand for consumer packaging remains solid, but was offset by lower demand in the capital equipment businesses.\nOperating margin was 25.2% and included a one-time customer cost sharing settlement.\nExcluding the impact of this one-time item, operating margins would have been 28%.\nLet's move to Slide 9, for an updated outlook at our full-year 2020.\nAs I mentioned earlier, the demand recovery in Q3 exceeded the high end of our expectations going into the quarter.\nAnd as a result, we're updating our financial outlook for the year.\nAs we sit here today, we expect organic revenue for the full year to be down 11% to 11.5%, operating margin to be in the range of 22% to 22.5% and operating income in the range of $2.7 billion to $2.8 billion.\nAs I mentioned free cash flow performance continues to be strong and we expect to end the year well above $2 billion.\nAs you think about Q4, keep in mind the typical seasonality from Q3 to Q4 and that Q4 has two less shipping days.\nAlso, please note that we expect a slightly higher tax rate in Q4 versus Q3 and our full-year tax rate is expected to be in the 22% to 23% range.\nWith respect to our outlook for 2021, we expect to reinstate annual guidance when we release full-year 2020 results early next year.\nWith that, Karen, back to you.\n Assistant:", "chosen": "compname reports q3 gaap earnings per share of $1.83.\nq3 gaap earnings per share $1.83.\nq3 revenue $3.3 billion versus refinitiv ibes estimate of $3 billion.\n"}
{"prompt": "Human: I'm joined by our Chairman and CEO, Scott Santi; and Senior Vice President and CFO, Michael Larsen.\nDuring today's call, we'll discuss ITW's fourth quarter and full year 2020 financial results and provide guidance for full year 2021.\nThe ITW team closed out 2020 with another quarter of strong operational execution and financial performance.\nFrom my perspective, the highlights are the Q4 revenues got back to year-ago levels despite food equipment being down 17% and net operating income, operating margin and after-tax ROIC were all Q4 records for the Company.\nIt was a pretty solid finish to the year that needless to say, provided some unique and unprecedented circumstances and challenges, and indicates good momentum as we head into 2021.\nWhile it was the challenges brought about by the pandemic that dominated our attention in 2020, it was the collection of capabilities and competitive advantages that we have built and honed over the past eight years to the execution of our enterprise strategy that provided us with the options to respond to them as we did.\nEarly on as the pandemic unfolded, we refocused the entire company on only two core imperatives.\nA, to protect the health, safety and well-being of our people, and B, to continue to serve our customers with excellence.\nAnd in my view, we executed extremely well on both.\nOur manufacturing, operations and customer service teams around the world deserve special recognition for their extraordinary efforts and leadership in support of these two key pandemic priorities.\nTheir dedication and commitment to keeping themselves and their colleagues safe while continuing to deliver excellent service to our customers was truly inspiring and there is no question that we differentiate ourselves with many of our key customers, as a result of our ability to sustain our normal rock-solid quality and delivery performance throughout 2020 as a result of their efforts.\nWe also did our best to take full advantage of ITW's position of strength as we've thought through, how we should manage the Company through the pandemic.\nBack in the spring, as we analyzed and stress-tested the Company's performance across a wide range of scenarios, it became clear that the financial and competitive strengths that we had built up over the past eight years have resulted in a very strong and very resilient company.\nAnd as a result, we didn't have to just pull out our old recession playbook and hunker down.\nAnd for ITW, this was a unique opportunity to react smartly and to stay focused on the long-term.\nThis conclusion led to two key decisions that we made regarding how we're going to manage ITW through the pandemic crisis.\nFirst, we chose to leverage the strong financial foundation that we've built over the last eight years to reinforce our commitment to our people.\nFirst, by providing full compensation and benefits support to all ITW colleagues through the entirety of Q2 when the economic effects of the pandemic were at their most widespread and severe.\nAnd by deciding that we would not initiate any enterprisewide employment reduction mandated programs at any point in 2020.\nThese were not obvious reason decisions given the unprecedented and uncertain circumstances but we believe that they were the right decisions for our Company.\nAnd I know that our people will remember them.\nThese decisions also turned out to be the right ones for us operationally, given the pace of demand recovery that we saw beginning in Q3.\nSecond, we chose to leverage our position of strength by implementing our Win the Recovery agenda in mindset across the Company.\nWin the Recovery was not an opportunistic new strategy.\nWhat it was and is a commitment to staying the course and continuing to prioritize the execution of our long-term enterprise strategy despite the unique and unprecedented challenges brought about by the global pandemic.\nWin the Recovery for us did not mean ignore the pandemic.\nAs across the Company, we had to read and react to the realities of the near-term situation as we always do but it does mean that we are committed to protecting key investment supporting the execution of our long-term strategy and that we have from very early on, given our divisional leadership teams to mandate to continue to think long-term and to remain aggressive through the pandemic.\nFor 2021, our Win the Recovery posture in mindset continues on and serves as the central theme driving the 2021operating plans for every one of our 83 divisions.\nThe performance that they delivered in 2020 provides another proof point that ITW as a company that has the enduring competitive advantages, resilience and agility necessary to deliver consistent top tier performance in any environment.\nLike many of you, I'm sure we are hopeful for a return to somewhere in the vicinity of normal at some point in 2021 and with that getting back to giving our full attention to taking ITW all the way for the Company's full potential.\nBetween now and whenever that is, we will continue to leverage the full breadth of ITW's capabilities and competitive advantages to keep our people safe, continue to serve our customers with excellence and execute our long-term enterprise strategy.\nMichael, over to you.\nIn the fourth quarter, we continue to see solid recovery progress in many of the end markets that we serve as evidenced by our revenue being up sequentially 5% versus the third quarter.\nThe increase is 8% when you adjust for equal number of days when historically our revenue per day has increased by 1% from Q3 to Q4.\nOverall, we delivered revenue of $3.5 billion, operating income of $883 million, an increase of 7% year-over-year, operating margin of 24.4%, free cash flow of $705 million, and GAAP earnings per share of $2.02.\nAfter-tax return on invested capital improved to 32%.\nAnd as Scott mentioned, operating income, operating margin and after-tax ROIC were fourth quarter records for the Company.\nRevenue in all major geographies improved sequentially.\nOn a year-over-year basis, North America organic revenue declined 3%, International revenue grew 1%, Europe was down 2%.\nSimilar to Q3, China was the bright spot with 11% growth.\nAs we've talked about before, the operating flexibility that is core to our 80/20 Front-to-Back operating system also applies to the cost structure, which was on full display through our operating margin performance in Q4.\nWe improved operating margin by 170 basis points to 25.4%, the second-highest margin rate in a quarter in the history of the Company.\nAnd like I say, grew operating income 7% to $883 million, the highest fourth quarter ever.\nThe biggest driver of our margin improvement remains our enterprise initiatives, as the ITW team executed on projects and activities that contributed 130 basis points in Q4.\nThe impact was broad-based with all segments delivering enterprise initiative benefits in the range of 80 basis points to 170 basis points.\nGAAP earnings per share was $2.02 sets, up 2%, but keep in mind, the Q4 last year had $0.11of one-time gains from divestitures.\nTo exclude those gains, earnings per share was up 7%, the same as operating income.\nWorking capital performance was excellent and free cash flow of $705 million was solid with a conversion rate of 110% of net income.\nFinally, the effective tax rate was 22.1%, down slightly from last year.\nIn summary, a strong finish to a challenging year and very good momentum as we head into 2021.\nLet's move to slide 5 to review fourth quarter's recovery and response by segment.\nWe updated this slide from our last earnings call with Q4 information and you can see that our segments continue to respond effectively to the increase in demand recovery and improved sequentially on both revenue and operating margin.\nI would just highlight a few things to illustrate the resilience and adaptability of our businesses.\nYou can see the rapid recovery in our end markets, relative to the Q2 bottom, but down 27%.\nIn Q4, three of our segments experienced demand levels that were higher than a year ago.\nThe most pronounced recovery has been in automotive OEM, which is more than doubled since Q2 and grew 8% year-over-year in Q4, as did construction products.\nPolymers and Fluids grew 7% while demand in three segments, Test & Measurement and electronics, welding and specialty products was only slightly lower year-over-year.\nAs you would expect food equipment continues to be impacted by the effects of the pandemic, although we are seeing some sequential improvement.\nOverall, you can see the benefit of having a high quality diversified portfolio and the fact that we're back to demand levels of a year ago with total revenue essentially flat year-over-year despite one of our core segments being down organically by 19%.\nOn the right side of the page, you can see the operating flexibility that I just talked about and how to also apply to our cost structure and ultimately shows up in our operating margin performance.\nAt the bottom, in Q2, we still delivered solid operating margins of 17.5% and only two segments were below 20%.\nIn Q4, were almost 800 basis points higher at 25.4% despite no volume growth year-over-year and every segment is back about 22% including food equipment and six out of seven segments achieved record fourth quarter operating margins.\nLet's move on to slide 6 for a closer look at individual segment performance, starting with automotive OEM.\nThe team has continued to execute exceptionally well from a quality and delivery standpoint in responding to customer demand levels that have more than doubled since Q2.\nIn Q4, organic growth of 8% year-over-year was the highest growth rate since the first quarter of 2017.\nWhile North America was flat in Q2, it was more than offset by strong demand in Europe, which grew 10% and China, which grew 20%.\nAs expected, food equipment end markets remained challenged in Q4, organic revenue was down 19%, a little better than the third quarter, and demand in Q4 was similar to Q3 when you look at it by geography and the end markets.\nNorth America was down 20%, international down 18%, equipment sales were down 20% and service was down 18%.\nInstitutional demand was down about 30% with restaurants down a little bit more than that.\nAnd not surprisingly, the bright spot throughout the year, continue to be retail with organic growth of 8%.\nMoving to slide 7 for Test & Measurement and Electronics.\nQ4 organic revenue declined 3% with Test & Measurement down 8% against the tough comparison of plus 6% in Q4 '19.\nElectronics was up 3% and while demand for capital equipment remains sluggish, the segment benefited from considerable strength in several end-markets, including semiconductor, healthcare and clean room.\nAs you may have seen on January 19, we announced that we had entered into an agreement with Amphenol to acquire MTS's Test & Simulation Business.\nThe Test & Simulation Business is very complementary to our Instron business, which we highlighted during our 2018 Investor Day and some of you may have visited our facility outside of Boston.\nMTS's Test & Simulation business has similar organic growth potential and there is substantial opportunity for margin improvement through the application of the ITW business model.\nPre-COVID revenues in fiscal year 2019 were $559 million with operating margin of 6%.\nWe expect to get the business to generate ITW caliber operating margins by the end of year five and generate after-tax ROIC in the high teens by the end of year 10.\nAs you saw in the announcement, we expect the acquisition to close in the middle of 2021 and we're very much looking forward to welcoming the MTS Test & Simulation team to the ITW family.\nin welding, where we saw a meaningful pickup in demand as organic revenue improved from being down 10% year-over-year in Q3 to only being down 2% in Q4.\nOur commercial business which primarily serves smaller businesses and individual users and accounts for 35% of the revenue in this segment remained strong and grew 12% year-over-year.\nOur Industrial business showed signs of strong recovery from being down 23% in Q3 to down only 5% in Q4 as customer activity and equipment orders gained strength.\nOverall organic revenue for equipment was flat versus prior year and much improved versus a 10% decline in the third quarter.\nPolymers & Fluids delivered strong organic growth of 7% with fluids up 16% with continued strong demand in end-markets related to healthcare and hygiene.\nThe automotive aftermarket business benefited from strong retail sales with organic growth of 5% and polymers grew 4% with solid demand for MRO and automotive applications.\nMoving to slide 9.\nConstruction continue to benefit from strong demand in the home center channel and delivered organic growth of 8% in Q4.\nGrowth was strong across all geographies with North America up 10%, double-digit growth in the residential renovation market offset by commercial construction, which represents only about 15% of North America revenue down 11%.\nEurope grew 9% and Australia/New Zealand grew 5% due to strong retail sales.\nSpecialty organic revenue was down 3% this quarter with North America down 2% and international revenue down 4%.\nDemand for consumer packaging remains solid, but it was offset by lower demand in the capital equipment businesses.\nSo that concludes the segment commentary and let's move on to the full year 2020 summer results in slide 10.\nAnd in the face of unprecedented challenges that included temporary customer shutdowns across wide swaths of our end markets during the year, organic revenue was down 10%.\nwe delivered operating income of $2.9 billion and highly resilient operating margin of 22.9%, only down 120 basis points year-over-year despite no major cost takeout initiatives on mandates, and with the strong contribution of 120 basis points from our Enterprise Initiatives.\nAfter-tax ROIC was 26.2% and free cash flow was $2.6 billion.\nThroughout the pandemic, one of our priorities was to maintain our financial strength, liquidity, and strategic optionality, and as you can see, we did just that in 2020.\nITW's balance sheet is strong and we have ample liquidity.\nWe did not have a need to issue any debt or commercial paper in 2020 and we ended the year with total debt to EBITDA leverage of 2.5 times, which is only slightly above our 2.25 times target.\nAt year-end, we had approximately $2.6 billion of cash and cash equivalents on hand.\nWith 2020 behind us, let's move to slide 11 for a discussion of our guidance for 2021.\nSo starting with the caveat that we continue to operate in a fairly uncertain economic environment, we have based our guidance as we always do on the current levels of demand in our businesses.\nPer our usual process, we are projecting current levels of demand into the future and adjusting them for typical seasonality.\nThe outcome of that exercise is a forecast of solid broad-based organic growth of 7% to 10% at the enterprise level.\nForeign currency at today's exchange rates is favorable and has 2 percentage points revenue for total revenue growth forecast of 9% to 12%.\nAt our typical incremental margins of 35% to 40%, we expect GAAP earnings per share in the range of $7.60 to $8 a share, up 18% at the midpoint.\nWe're forecasting operating margin in the range of 24% to 25%, which is an improvement of more than 150 basis points year-over-year at the midpoint.\nEnterprise Initiatives are a key driver of operating margin expansion in 2021, as are expected to contribute approximately 100 basis points.\nRestructuring and price costs are expected to be approximately margin neutral year-over-year.\nWe're closely monitoring the raw material cost environment and embedded in our 2021 guidance are the known raw material cost increases in commodities such as steel, resins and chemicals.\nGiven the differentiated nature of our product offerings across the Company, we expect to be able to offset the impact of any incremental raw material cost increases that might arise in 2021 with pricing actions on a dollar for dollar basis.\nWe expect strong free cash flow in 2021 with a conversion rate greater than 100% of net income.\nI wanted to provide a brief update on our capital allocation plans for 2021.\nTop priority remains internal investments to support our organic growth efforts and sustain our core businesses.\nSecond, we recognize the importance of an attractive dividend to our long-term shareholders and we view the dividend as a critical component of ITW's total shareholder return model.\nThird priority, our selective high-quality acquisitions to supplement our portfolio and reinforce or further enhance ITW's long-term organic growth potential.\nI should point out that the guidance we're providing today is for the core business only.\nAfter the MTS Test & Simulation acquisition closes, we'll provide you with an update, but we do not expect a material impact in 2021.\nIn line with our capital allocation, we returned surplus capital to shareholders and we are reinstating share repurchases with a plan to invest approximately $1 billion in 2021.\nWe expect our tax rate for the year to be in the range of 23% to 24%.\nFinally, when it comes to portfolio management, we have decided to defer any divestiture activity until next year.\nAnd instead, focus on our time and efforts on the recovery in 2021.\nWhile our view regarding the long-term strategic fit of the remaining divestitures hasn't changed, we also believe that given their expected performance this year, they will be more valuable in 2022.\nWith the caveat again and the environment remains fairly uncertain, we are providing an organic growth outlook for each segment and based on current levels of demand, we are forecasting solid broad-based growth as every segment is expected to improve their organic growth rate in 2021.\nAt the enterprise level, it all adds up to solid organic growth of 7% to 10%.\nTo wrap it all up, ITW finished a challenging year strong, as we continue to fully leverage the capabilities and competitive advantages that we've built over the past eight years through the execution of our enterprise strategy.\nOur strong operational and financial performance in 2020 provided further evidence that ITW is a company that has both the enduring competitive advantages and resilience necessary to deliver consistent upper-tier performance in any environment.\nLooking ahead to 2021, we have good momentum from Q4 heading into the year and our solid guidance reflects the fact that we remain focused on delivering strong results while continuing to execute on our long-term strategy to achieve and sustain ITW's full potential performance.\n Assistant:", "chosen": "q4 revenue $3.5 billion versus refinitiv ibes estimate of $3.33 billion.\nsees fy 2021 gaap earnings per share $7.60 to $8.00.\nq4 gaap earnings per share $2.02.\nsees 2021 organic growth of 7 to 10%.\n2021 revenue is expected to grow in range of nine to twelve percent.\nplans to repurchase approximately $1 billion of its shares in 2021.\n"}
{"prompt": "Human: Today we will be reviewing our second quarter 2020 financial results, providing investors with an update on our transformation and our response to the COVID-19 pandemic.\nFurther information can be found in our SEC filings.\nWe'll begin on slide 3.\nFirst, I'd like to start today's call by expressing my gratitude for all our associates, who remain so committed keeping our workplace safe and productive in these uncertain times.\nAs a company whose central focus is to make life's experiences possible, their hard work, creativity and dedication has been inspiring.\nInvacare's mission is built on the tenets of integrity leadership accountability and helping everyone be part of an inclusive culture around the world.\nWe benefit as a company from the diversity of our team, differences of individuals, and the inspiring differences of people who rely on our products in their daily life.\nWe're pleased with our performance in the second quarter, achieving our 11th consecutive quarter of year-over-year improvement in adjusted EBITDA, as well as sequential improvement in adjusted EBITDA for the first quarter.\nWe effectively shed costs, but managed cash to offset lower sales.\nDuring the quarter, we also overcame tremendous supply chain challenges, primarily related to our respiratory products, which limited our ability to meet the extremely high demand for these products, which are used for pandemic related care.\nTurning to slide 4; we've established a strong track record of enhancing profitability.\nThis quarter, delivering an 84% improvement in adjusted EBITDA.\nProfitability grew, as a result of stronger gross margin from favorable sales mix, cost savings from continuous improvement initiatives, and reduced SG&A expense.\nI'm pleased with our strong performance in this challenging environment, which highlights the value of changes, we continue to make.\nOn slide 5; we saw two distinct patterns driving demand, as a result of the pandemic.\nBeginning in late first quarter, we saw strong demand in our respiratory category for both stationary and portable oxygen concentrator.\nThat elevated demand continues today.\nWe had a smaller peak in demand for bed systems in our lifestyles category.\nAt this point for the most part, that peak in bed demand has passed, the timing of the return to more normal sales rates and mix for these product groups are still to be determined, based on the course that the pandemic takes from here.\nIn Mobility and Seating, the good momentum we had in first quarter begin to slow in the early parts of second quarter, as public health restriction limited access to clinicians for custom fitting, which reduced sales.\nLooking ahead, we see encouraging signs that demand for Mobility and Seating products are starting to recover, as third quarter quote and order rates are improving over second quarter run rate.\nIn summary, we believe the second quarter will be the low point for sales in the year, as it coincided with the most restrictive phases of the global lockdown.\nBased on reasonable assumptions around the loosening of public health restriction, and when needing to access the healthcare facilities, we anticipate sales will begin to normalize over the next two to three quarters.\nWe're confident that our diverse product portfolio, geographic coverage, continuous improvement initiatives and balance sheet will enable us to manage the business through the pandemic and accelerate our return to growth.\nTurning to slide 6; second quarter results show that our transformation is working.\nImportantly, North America returns to profitability and generated $4.8 million in operating income in an unprecedentedly tough market.\nAs a reminder, the North American segment has been undergoing in multiyear transformation, after the impact of national competitive bidding and sales restrictions related to the FDA Consent Decree, Craig, which combines with significantly reduced sales and profitability, starting nearly a decade ago.\nIn terms of our business optimization plans, we continue to make good progress on our IT modernization program in North America and plant consolidation in Germany, both of which are expected to drive significant cost savings in 2021.\nAs new products are key drivers of sales growth, it's important to have a vibrant R&D pipeline, and we do.\nI'm proud of the team staying on track to develop and launch innovative new products at the same pace, in keeping to the pre-pandemic schedule, which highlights our R&D strength.\nOver the past few quarters, we have launched three major power wheelchairs, all of which have achieved steady growth in their short time in the market.\nThis quarter, we launched another.\nThe MPS Mini Maxx wheelchair with standing capabilities for small drivers, which is eligible for full reimbursement within the U.S. Group-III category.\nOur Adaptive Switch Labs division, which produces sophisticated alternative controls for wheelchair drivers with highly unique need, launched a great new head array.\nAnd in July, in North America, we launched the SMOOV one, a terrific power add-on for manual wheelchairs, which has already achieved great success in Europe.\nAll these products, as well as a very full pipeline of innovation in all categories will continue to support growth, wherever people need durable healthcare solution.\nDuring the pandemic, our team has found creative ways to support our customers and to drive sales, by leveraging telepresence technology.\nThe LiNX wheelchair control system helps us perform contactless wheelchair delivery, and our Assurance program offers a fit guarantee, giving customers the confidence to choose Invacare power wheelchairs, when clinical visits are restricted.\nIn Europe, we upgraded our online presence by launching a digital catalog, a Product Visualizer and a new website.\nThese are just a few of the ways our commercial team has maintained high customer engagement, while complying with safe public health measures.\nI am proud of the continued progress we've made on our transformation, and of our ability to execute under challenging circumstances, a well-developed skill over the past many years.\nOur powerful innovation culture is enabling adaptation and growth.\nTurning to slide 8; reported net sales decreased 16.8% and constant currency net sales decreased 12.9%, primarily driven by growth in respiratory and more than offset by declines in Mobility and Seating and non-bed lifestyle products.\nGross profit increased 130 basis points to 28.9%, primarily due to favorable product mix and lower material and freight costs, partially offset by unfavorable foreign exchange.\nConstant currency SG&A decreased 13.2% or $8.8 million, driven by reduced employment costs and lower commercial expenses.\nLower employment costs included the benefit of reduced work hours and furloughs enabled by government-based programs, to mitigate the impact of the pandemic.\nOperating loss improved by $2.3 million, driven by reduced SG&A expenses, partially offset by lower net sales and higher restructuring costs.\nAdjusted EBITDA was $6.6 million, up nearly 84% driven by reduced SG&A expense and improved gross profit as a percentage of sales.\nThe company's free cash flow usage was $1.9 million, an increase of $2.1 million, due to higher capital expenditures.\nTurning to slide 9; as Matt discussed, consolidated net sales declined due to public health restrictions that limited access to healthcare professionals and elective care, with the greatest impact on Mobility and Seating.\nWhile Mobility and Seating net sales declined, the company expects sequential growth as quotes and orders in the third quarter have been higher than the run rate achieved in the second quarter of 2020.\nWithin the lifestyles product category, higher sales of pandemic related bed systems sold in the home care market, were offset by lower sales of other lifestyle products as a result of limited access to healthcare institutions, including long-term care facility.\nIn respiratory, the company realized higher demand for both stationary and portable oxygen concentrators, with sales limited by global supply chain challenges which dampened manufacturing capacity.\nThe company expects elevated demand for respiratory products to continue through the third quarter, as possible declines from COVID-19 infections lessen.\nTurning to slide 10; during the second quarter, net sales were negatively impacted by strict quarantine measures in the company's key European markets, primarily, the U.K., France and Germany.\nAs a result, reported net sales in Europe decreased 24%, and constant currency net sales decreased 20.7%, driven by declines in sales in Mobility and Seating and non-bed lifestyle product.\nGross profit decreased 90 basis points, driven by unfavorable product mix.\nOperating income decreased $3.3 million, due to reduced gross profit from the lower net sales and unfavorable foreign exchange, partially offset by reduced SG&A expenses and a gain recognized on the sale of a German facility.\nLower SG&A expenses included the benefit of furloughs, and reduced work hours implemented at a majority of the European locations.\nMoving to slide 11, the company was not as impactful -- I'm sorry the pandemic was not as impactful in North America, as compared to Europe, as the U.S. was never fully shut down.\nReported net sales decreased 3.3% and constant currency net sales decreased 3%, with growth in respiratory products more than offset by declines in Mobility and Seating and non-bed lifestyle products.\nWithin Mobility and Seating, higher value power mobility products were resilient, only experiencing a slight decline of 1%.\nThe North America segment realized a favorable mix shift for its higher acuity products, as end users with more severe needs continue to access healthcare, while less urgent elective care was more often delayed.\nGross profit increased 230 basis points or $2.4 million, driven by favorable product mix and lower operational cost, including reduced material and freight costs as a result of previous transformation initiatives.\nThe North America segment returned to profitability, with operating income of $4.8 million, an improvement of $6.1 million driven primarily by lower SG&A expenses primarily in employment costs and the benefit of reduced operational costs.\nTurning to slide 12; All Other, which comprises the sales in the Asia-Pacific region, increased by 8.1% on a constant currency basis, driven by higher sales of lifestyle and Mobility and Seating products.\nOperating loss increased by $300,000, driven by higher corporate SG&A expense, primarily related to equity compensation, partially offset by improved operating income in the Asia-Pacific business, attributable to lower SG&A expense.\nMoving to slide 13; as of June 30, 2020, the company had total debt of $319 million, excluding operating lease obligations of $15.9 million, capitalized on the balance sheet.\nAt the end of the quarter, the company had approximately $104 million of cash on its balance sheet.\nThe increase was primarily the result of cash borrowed on the company's credit facilities, proceeds from the sale of dynamic controls, and government loan programs, partially offset by cash used to fund operations and cash paid to expense a portion of the convertible debt.\nIn the second quarter, the company extended the maturity of a significant portion of the 2021 convertible note, and a portion of the 2022 convertible notes, to new maturity date of November '24, with terms substantially similar to the existing 2024 notes.\nWe are very pleased to have executed this transaction during a turbulent market.\nOn slide 14, we are reintroducing new full-year guidance for 2020.\nBased on the loosening of public health restrictions and renewed access to healthcare facilities, the company anticipates reported net sales in the range of $810 million to $840 million.\nAdjusted EBITDA, similar to the prior year in the range of $20 million to $30 million, and free cash flow usage, in line with the prior year in the range of $7 million to $10 million.\nThis guidance assumes consolidated net sales to improve sequentially, staying below the prior year.\nDue to the more stringent quarantine programs in the company's key markets in Europe, net sales are expected to recover slowly, staying below the prior year in the range of mid-teen declines.\nIn North America, net sales are expected to be below the prior year, in the range of low single digit declines.\nAdjusted EBITDA is expected to improve sequentially and for the full year, achieve results similar to 2019, despite lower net sales due to the pandemic.\nIt was a good quarter in tough times.\nWe acted decisively to ensure the safety of our associates and customers, while protecting our business against the near-term impact of the pandemic.\nThis resulted in continued improvement in profitability, and a significant achievement in these unprecedented times.\nAs I look further out, I'm confident that the actions we've taken to improve our competitiveness, reduce our cost structure, and strengthen our balance sheet, has set the foundation for long-term profitable growth.\nIt was the direct result of the many quarters of hard work that enabled our team to deliver a strong result this quarter, and we plan to unlock additional value for years to come.\nWe'll now take questions.\n Assistant:", "chosen": "sees 2020 reported net sales in range of $810 million to $840 million.\nsees 2020 free cash flow usage in line with prior year, in range of $7 million to $10 million.\nsees fy 2020 adjusted ebitda similar to prior year, in the range of $27 to $30 million.\n"}
{"prompt": "Human: I think we're all very ready to turn the page and what was a very challenging 2020 and while the global pandemic remains very pervasive, we do all see light at the end of the tunnel and we look forward to 2021 with cautious optimism that conditions will improve.\nThroughout 2020, we focused on executing our long-term strategy while recognizing the necessity to focus on employee health and safety, finding ways to work, and serving and delivering expected outcomes for our clients.\nOver the past decade, we've been successful investing ahead of shift in client demand, placing us in a strong position to take advantage of key industry tailwinds in the future.\nOur investments in these capabilities and our tremendous focus on our clients is now again producing good momentum in our business that became more visible as the year progressed by working better to anticipate, understand, and meet client needs during the challenging times.\nWe've achieved six straight months of net long-term inflows, totaling nearly $18 billion in the second half of 2020 with progress across channels, geographies, asset classes.\nRetail flows improved in the second half significantly.\nOur solutions enabled institutional pipeline remain near record levels.\nWe saw net inflows in Asia Pacific, totaling $17 billion in the second half of the year and improving flows in EMEA within the Americas over this timeframe and net long-term flows in the fixed income remained robust during that period.\nAll of these factors combined build a strong foundation as we head into 2021 and maybe a few highlights of the 4th quarter.\nOn slide 4, if you happen to be following along more specifically during the quarter, investment performance for a large portion of our high demand capabilities were in the upper quartile.\nWe had net long-term inflows and then nearly $10 billion during the quarter, long-term inflows in the fixed income capabilities continued while we saw client demand for equities within ETFs, quantitative and index strategies in particular.\nWe saw another quarter of strong inflows from Asia-Pacific region and flows in the Americas turn positive.\nAlison will provide more information in a few minutes on the flow's strategic evaluation and more details of the quarter.\nBut I would like to note, we also improved our operating leverage during the period, paid our credit facility to zero, and made progress improving our cash position.\nI would like to spend a few minutes on slides 5 and 6 to talk about our competitive strength and key capabilities in areas with high client demand and our focus for 2021.\nSlide 5 illustrates the market opportunities we see for these key growth areas and demonstrates the majority of our investment capabilities are aligned with these opportunities.\nIn these areas, our investment performance is strong.\nWe're highly competitive and well positioned for growth and as we move into 2021, we plan to further expand our market leading position in ETFs in the US and EMEA in particular and build our passive presence in Asia-Pacific.\nWe are the fourth largest ETF provider globally, and our capabilities span passive active strategies in establishing and developing a spectrum of ETF-ESG ETFs and building on our 15-year legacy of innovation, we continue to develop the products in this space as demonstrated by the launch of the QQQ innovation suite and our first non-transparent ETFs that we delivered in the 4th quarter.\nStrong alternative platform and our focus is growing our private markets business led by our market leading real estate and bank loan businesses, and active fixed income and global equity remain key areas of opportunity for us and our offerings are well positioned with strong investment performance and high client demand.\nIn addition, we are focused on our solutions efforts and as we have seen by the contribution to the institutional pipeline, clients value the service, the ability to offer solutions that builds the full power of our competitive set of capability and services-services to client continues to be a priority for us during 2021.\nWe continue to invest in our leadership position in Greater China.\nWe have been managing dedicated Chinese products for nearly 40 years.\nWe have already seen the benefits of our early mover[Phonetic] advantage in the China onshore market through our joint venture, which [Technical Issue] our position in the fast-growing China market and further develop our media solutions and asset allocation offerings.\nGiven our investment in the business over the past decade, our most recent efforts to better align the organization with our strategy, I'm confident that we have the talent, the capabilities, the resources, and momentum to [Technical Issue] future growth and success.\n[Technical Issues] happy New year and remain focused on helping our clients achieve their desired outcomes regardless of where the markets take us.\nMoving to slide 7, we had 61% and 70% of actively managed funds on the top half of peers on a 5-year and a 10-year basis, reflecting strength in fixed income, global equities, including emerging market equities and Asian equities, all areas where we continue to see demand from clients globally.\nLooking at our AUM on slide 8, we ended the quarter with $1.35 trillion in AUM.\nOf the $132 billion in AUM growth, approximately $95 billion as a function of increased market values.\nTurning to flows on slide 9, our diversified platform generated long-term net inflows in the 4th quarter of $9.8 billion representing 3.9% annualized organic growth, which we generated positive net inflows in active AUM of $400 million and passive AUM of $9.4 billion.\nOur ETFs experienced net inflows of $6.1 billion including $4.7 billion in long-term ETF and $1.4 billion in our QQQ.\nOur US-listed ETFs excluding the QQQs have their best quarter in their 15-year history.\nWe saw net long-term ETF flows in the US focused on equities in the 4th quarter including a high level of interest in our S&P 500 equal weight ETF which had $2.7 billion in net inflows in the quarter.\nTwo of our top 5 end-flowing ETFs were ESG related.\nWe continue to see momentum in our ETF business and demand for ESG funds and as Marty highlighted, the market opportunity is significant for this key growth area in 2021.\nRetail net outflows were $800 million in the quarter, helped by the positive ETF flows.\nOn the institutional side, we had net inflows of $10.6 billion.\nI'll provide a little more color on these flows on the next few slides, but importantly, the growth in our passive AUM and our institutional AUM is meaningful for the firm and contributed to the positive operating leverage we generated in the period.\nAlso, as Marty noted earlier, we are seeing the mix of ETF inflows being weighted toward higher fee-generating products.\nLooking at flows by geography, you will note that the Americas had net inflows of $2.2 billion in the quarter, an improvement of $6.6 billion from the prior quarter.\nThis improvement was driven by net inflows into ETFs, institutional inflows, various fixed income strategies, and importantly, focused sales efforts and improvement in redemption rates.\nOur global equity products improved by over $1 billion or 37% from Q3 driven by our developing market fund, which returned to positive net flows in the 4th quarter following negative net flows in the first three quarters of the year.\nThe UK experienced net outflows of $100 million in the quarter, as positive flows into our institutional quantitative equity capability were offset by net outflows in multi-asset in UK equities.\nEMEA net outflows were $1.4 billion driven by institutional lumpiness and ETF outflows largely in our S&P 500 and Nasdaq-100 use ETF.\nAnd finally, I noted last quarter that Asia Pacific delivered one of its stronger-strongest quarters ever with net inflows of $8 billion.\nIn the 4th quarter, net inflows were even higher at $9.1 billion.\nNet inflows were diversified across the Asia Pacific region.\n$4 billion of these net flows were from Japan, $3.8 billion arose from our China JV, and the remaining $1.3 billion was generated from several other countries in the region.\nIt's worth noting that we continue to see strength in fixed income across all channels and markets in the 4th quarter with net long-term inflows of $8.2 billion.\nThis following net long-term inflows of $8.8 billion in the 3rd quarter and $6 billion in the second quarter.\nIt's also important to note that of the $26.1 billion in fixed income net inflows in 2020, $25 billion of these net inflows were from active fixed income capabilities.\nActive fixed income has been a growth area for us in 2020 and remains a key investment area in 2021.\nNow, moving to slide 10.\nOur institutional pipeline remains robust at $30.5 billion on the heels of strong pull through in the institutional pipeline during the 4th quarter.\nThis pipeline is diversified across asset classes and geographies, and our solutions capability has contributed to meaningful growth across our institutional network warranting our continued investment in this key capability in 2021.\nTurning to slide 11, you will note that our revenues increased $135 million or 12.4% from the 3rd quarter, driven by higher average AUM in Q4, as well as a meaningful increase in performance fees.\nNet revenue yield at performance fees was 36 basis points flat and flat at the, at the Q3 yield level.\nThe impact of rising markets on our yield was offset by modest fee rate decline from the mix shift we experienced across products in the quarter as well as the impact of non-management fee earning AUM.\nWe recorded performance fees of $78 million in the 4th quarter, $48 million of these performance fees arose from our real estate business and $21 million from our institutional business and our China JV, two of our key growth areas.\nSeasonally, we tend to see higher performance fees in the 4th quarter.\nTotal adjusted operating expenses increased 8.3% in Q4.\nThe $57 million increase in operating expenses was driven by higher variable compensation as a result of both market growth and compensation related to the performance fees in the quarter.\nOperating expenses remained at lower than historic activity levels due to pandemic driven impacts to discretionary spending, travel, and other business operations that persisted in the quarter.\nThat being said, we did see a seasonal increase in marketing expenses as expected.\nMoving to slide 12, we wanted to update you on the progress we have made with our strategic evaluation.\nAs we noted previously, we conducted a strategic evaluation across four key areas of our expense base, our organizational model, our real estate footprint, management of third-party spend, and technology and operations efficiency.\nThrough this evaluation, we will invest in key areas of growth, including ETF, fixed income, China solutions, alternatives, and global equities while creating permanent net improvement of $200 million in our normalized operating expense base.\nAs we noted, a large element of the savings will be generated from compensation which includes realigning our client facing workforce to support key areas of growth and repositioning to lower cost locations.\nIn the 4th quarter, we realized $7.5 million in cost savings, $7 million of these savings were related to compensation expense as depicted on slide 12.\nThe remaining $500,000 in savings were related to facilities, which are shown in the property, office, and technology category.\nThe $7.5 million in cost savings were $30 million annualized is 15% of our $200 million net savings expectation.\nOf the remaining $170 million in net savings, we anticipate we will realize roughly 50% of the savings through compensation expense.\nThe remaining 50% would spread across occupancy, tech spends, and G&A.\nAs it relates to timing, we still expect approximately $150 million or 75% of the run rate savings to be achieved by the end of this year, with the remainder recognized by the end of '22.\nWe estimate that we will realize roughly 75% of the anticipated compensation reductions in 2021, roughly 50% of the anticipated reduction in occupancy expense also in 2021, and all of the reduction in G&A this year.\nThe majority of efficiencies identified in our tech spend will not be realized until 2022.\nIn the 4th quarter, we incurred $104 million of our total estimated $250 million to $275 million in restructuring costs.\nWe expect the remaining transaction costs for the realization of this program to be in the range of $150 million-$175 million over the next two years, roughly two-thirds of this remaining amount occurring in 2021.\nAs a reminder, the costs associated with the strategic evaluation are not reflected in our non-GAAP results.\nWith respect to Q1, after improved market performance and asset inflows in the 4th quarter, we start the year with ever $1.3 trillion in AUM.\nGiven the market improvement with more back-end weighted toward the end of the quarter, we expect both operating revenues excluding performance fees and the associated variable expenses to be modestly higher in the first quarter.\nThis reflects the follow through from the market and slow growth that occurred over the course of the 4th quarter, even if we assume no change in markets from year-end.\nOn the expense side, this will include higher associated variable compensation from the seasonal increase in payroll taxes, partially offset by lower compensation related to the seasonal decline in performance fees and the execution of our targeted cost savings.\nTurning to slide 13, adjusted operating income improved $78 million to $485 million for the quarter, driven by the factors we just reviewed.\nAdjusted operating margin include 230 basis points as compared to the 3rd quarter to 39.5%, demonstrating the operating leverage in our model.\nThis helped drive a 19% increase in adjusted earnings per share to $0.72 a share.\nIn addition, we benefited from higher non-operating income and lower non-operating expenses in the quarter.\nNon-operating income included $31.9 million in net gains for the quarter compared to $15.2 million in net gains last quarter.\nThe increase was driven by unrealized gains primarily in our seed money holdings.\nInterest expense of $24.4 million was 28% lower than the prior quarter.\nQ3 was the final quarter in which we paid dividends related to our forward purchase agreements, a portion of which we settled in January with the remaining portion to be settled in April 2021.\nOur tax rate for the 4th quarter was 21.7%.\nThe reduction in the rate reflects the lower taxes on unrealized gains in our seed portfolio due to the jurisdiction of our holdings.\nWe estimate our 2021 non-GAAP effective tax rate to be between 23% and 24%.\nThe actual effective tax rate may vary from this estimate due to the impact of non-recurring items on pre-tax income and discrete tax items.\nA few comments on slide 14.\nAs Marty mentioned, we reduced revolver balance by $90 million to 0 in the quarter, consistent with our commitment to improve our leverage profile.\nIn addition to using excess cash to reduce leverage, we seek to improve liquidity and our financial flexibility.\nTo that end, our balance sheet cash position improved to $1.4 billion in the 4th quarter from $1.1 billion at the end of Q3, $764 million of this cash is held for regulatory requirements.\nI will note, we paid $117 million earlier in January to settle a portion of the forward share repurchase liability with the remaining liability of $177 million to be settled in April.\nWe believe we're making solid progress in our efforts to build financial flexibility.\nWe remain committed to a sustainable dividend and to returning capital to shareholders longer term through a combination of modestly increasing dividends and share repurchases.\nIn summary, Marty will walk through our key capabilities through organic growth opportunity each presents and our focus on executing the strategy that aligns with these areas.\nWe're also focused on our strategic evaluation and reallocating our resources to position us for growth, and we remain prudent and cautious in our approach to capital management.\nOur focus on driving greater efficiency and effectiveness into our platform, combined with the work we've done to build a global business with a comprehensive range of capabilities, puts Invesco in a very strong position to meet client needs, run a disciplined business, and to continue to invest in and grow our franchise over the long term.\n Assistant:", "chosen": "quarterly adjusted earnings per share $0.72.\nlong-term net inflows of $9.8 billion in q4-20 compared to $7.8 billion in q3-20.\nqtrly adjusted net revenues $1,228.4 million versus $1,267.8 million.\nqtrly operating revenues $1,630.1 million, down 6.5%.\n"}
{"prompt": "Human: During the call, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors.\nThe transcript of this conference call will also be posted on our website.\nAs discussed in our last earnings call, we entered 2021 with a cautious yet optimistic outlook on JLL's ability to take advantage of the expected global recovery.\nWe are pleased to start the year with a strong first quarter.\nOur strong results were yet again driven by the continued hard work and dedication of the entire JLL team.\nAnd I remain impressed by their ability to execute against ongoing rapidly changing and trying circumstances.\nWe continue to realize the benefits of our One JLL philosophy of bringing the best of JLL to our clients for all our services and products across geographies.\nTurning to the market environment.\nThe global economy had modest growth in the first quarter, although highly concentrated in a small number of large economies.\nThe macroeconomic outlook has improved meaningfully as the rollout of the vaccination expands and ongoing global government stimulus programs outpace initial expectations, setting the stage for more robust growth expected in the rest of the year.\nOur research indicates global office leasing activity has remained subdued, with global leasing volumes down 31% compared with Q1 2020.\nEMEA showed relative resilience with a decline of 8% in the quarter, while APAC and the US saw significantly larger declines of 26% and 45%, respectively.\nIn comparison to the fourth quarter of 2020 which saw global leasing volumes down 43% for the quarter, it is clear that the trajectory is trending in the right direction.\nInvestment sales also continued to show signs of recovery, with global volumes down 13% versus the same period last year following a 21% decline in the fourth quarter and 44% in the third.\nThis reflects the steady improvement of liquidity and capital flows.\nThe signs so far lend credence to the belief that 2021 will be a year of sustained recovery and expansion as the world begins to adjust to new normal, despite certain countries continuing to witness the devastating effects of the pandemic.\nWe expect an acceleration of vaccination programs across the world, which should lead to increased transaction activity in the second half of the year for many geographies.\nOur first quarter results build upon the momentum we closed 2020 with.\nWe believe these results reflect strong diversification across the business with exposure to high-growth areas like data centers, life science and industrial and JLL's increasing value proposition for clients particularly around technology and sustainability.\nIn local currency, consolidated revenue fell 4% to $4 billion and fee revenue declined 7% to $1.4 billion.\nAdjusted EBITDA of $190 million represented an increase of 96% from the prior year, with adjusted EBITDA margin increasing 700 basis points to 13.4% in local currency driven by discrete items of approximately $50 million, ongoing cost mitigation initiatives and a better-than-expected performance in our transaction-based service lines.\nOur adjusted net income totaled $109.7 million for the quarter, resulting in adjusted diluted earnings per share of $2.10.\nOur transaction-based service lines continued to face broad-based pressure as a result of the pandemic.\nBut our strong results for the quarter were buoyed by resilience amid slowly improving market conditions for Capital Markets and Leasing.\nOur Property & Facility Management business also continues to demonstrate its strengths, particularly in the Americas.\nFurther, our Advisory, Consulting and Other service line reflected considerable growth from strong valuation results, with Asia Pacific recording substantial gains over Q1 2020.\nOverall, we are encouraged by our strong first quarter results and are increasingly optimistic about the road ahead.\nThis quarter demonstrated the continued growth of our JLL Technologies platform, a key pillar of our strategy.\nJLLT represents our ability to broaden client access to leading-edge technology and transform the real estate industry through innovation.\nWe will continue to expand upon our portfolio of investments, focusing on strategic investments, such as the multi-faceted Roofstock transaction and believe that the value of our portfolio will continue to yield considerable upside for JLL as demonstrated in the first quarter.\nOverall, I'm encouraged with the start of the year.\nFirst quarter top and bottom line results exceeded our expectations and demonstrated continued momentum in the pace of the recovery we saw in the latter part of 2020.\nThe outperformance versus our expectations was relatively broad based, both by geography and business line within real estate services and also due to several discrete items that I'll discuss in more detail later in my remarks.\nOur adjusted EBITDA margin improved 700 basis points year-over-year, driven primarily by the discrete items and cost reduction measures we instituted over the past several quarters.\nGiven the trends in our pipeline, improving macro indicators and our view of the evolving market, we remain cautiously optimistic on the outlook for the year, particularly the second half.\nHowever, the global economic recovery remains uneven with continued uncertainty.\nWe intend to use our strong financial and competitive position to invest for growth and create value for all stakeholders.\nMoving to a detailed review of our operating performance.\nOur overall real estate services fee revenue declined 6% in the first quarter, an improvement from the 17% decline in the fourth quarter.\nThis was driven by a return to growth in Asia Pacific and a moderation in the pace of decline in both EMEA and the Americas.\nThe real estate services adjusted EBITDA margin was 12.7%, which compares with 8.5% a year earlier.\nAbsent discrete items, which include $35 million of noncash valuation increases to investments by JLL Technologies and early stage prop tech companies as well as an $8 million multifamily loan loss reserve release this year and the $31 million increase to the corresponding reserve a year ago, the real estate services adjusted EBITDA margin would have been relatively flat year-over-year.\nBenefits from our cost reduction actions largely offset the impact from lower transaction-based revenues and investments in growth initiatives, including JLL Technologies.\nTurning to the Americas.\nThe fee revenue decline showed steady improvement on a sequential basis, primarily due to performance in Leasing, continued robust growth in Property & Facility Management and a return to growth in Advisory and Consulting.\nWhile Americas Leasing saw a few large transactions pulled forward into the first quarter, our leasing platform is benefiting from diversification across asset classes, including the higher growth areas, such as industrial, life sciences and data centers.\nIn addition, our data-driven and experiential technology platform is leading to increased client engagements, and we believe it is a key differentiator.\nBased on our leasing pipeline, client activity and our overall view of the market, we expect leasing activity to accelerate slightly more than the typical seasonality in the second half of the year, though we emphasize closing rates and timing remain highly uncertain.\nThe Americas office sector continues to be soft, though there are some early indications of improvement, such as an increase in property tours.\nAccording to JLL Research, the decline in net effective rents in offices across major US cities stabilized in the first quarter, down approximately 13% since the beginning of the pandemic.\nAlso, after four consecutive quarters of declines, average lease terms increased, albeit slightly from 7.1 years from 6.7 years.\nThe Americas Capital Markets growth trajectory was slightly impacted by the pull forward of some transactions from 2021 into fourth quarter of 2020.\nBut we are encouraged by the underlying business fundamentals and signs of thawing in the hardest hit sectors.\nThe Americas industrial sector remains strong, and our multifamily debt origination and loan servicing businesses have been resilient.\nEncouragingly, our Americas Capital Markets pipeline continues to build.\nFrom a profitability standpoint, the Americas adjusted EBITDA margin increased approximately 700 basis points.\nNoncash valuation increases within our JLL Technologies investments and movement in the multifamily loan loss reserve were the primary drivers of the expansion.\nOur cost mitigation actions taken over the past several quarters were mostly offset by the impact from lower fee revenues in Capital Markets and Leasing.\nIn EMEA, fee revenue remains down year-over-year, though the rate of decline has moderated meaningfully from prior quarters, in part due to partially lapping pandemic headwinds.\nGrowth and valuations advisory, along with a relatively resilient leasing fee revenue, continues to be more than offset by lower activity in Project & Development Services and our U.K. mobile engineering business.\nContinued robust industrial sector leasing growth was offset by softness in most other sectors, though we are encouraged by early indications of improving activity.\nMaterial moderation in the EMEA Capital Markets rate of decline was driven by improvement in the office sector, mainly due to a few large transactions in Switzerland.\nIn terms of EMEA's profitability, the cost savings from actions taken over the past several quarters were more than offset by the lower fee revenue as well as a contract loss in the U.K., timing of expenses and investments in global growth initiatives, driving a decline in the adjusted EBITDA margin.\nAsia Pacific generated robust double-digit fee revenue growth as activity picked up across most business lines in key markets with the region lapping pandemic headwinds.\nGrowth was particularly strong in Capital Markets due to the timing of several large transactions in the office, life sciences and data center sectors.\nIn addition, our valuations advisory business grew year-over-year.\nLeasing activities are picking up in some markets, particularly in Greater China, but the pandemic resurgence continues to weigh on momentum across the region.\nOn a global basis, our Property & Facility Management service line continues to grow, led by new business wins and contract expansions in the Americas, including an uptick in reentry work.\nProperty & Facility Management has grown throughout the pandemic as corporate occupiers and investors seek our services not only for higher building management standards but also our broad view on best practices and reopening the workplace.\nOur Corporate Solutions business fee revenue grew 2%.\nA strong growth in the Americas was mostly offset by ongoing EMEA headwinds.\nWe continue to be encouraged by the secular outsourcing trend, especially as clients increasingly seek our extensive knowledge and breadth of services, including sustainability, offered under our One JLL philosophy.\nFee revenue declined 17%, primarily on lower transaction fees and the expected absence of incentive fees.\nWe expect the lower level of transaction activity caused by the pandemic to continue in the near term.\nWe continue to forecast full year 2021 incentive fees of approximately $25 million, with about 1/4 of those hitting in the second quarter.\nThe 8% decline in advisory fees was primarily attributable to pandemic-driven AUM valuation declines.\nLaSalle's assets under management grew about $2 billion or 3% from the prior quarter to total $71 billion.\nLaSalle's equity earnings reflect $13 million of noncash valuation increases in our co-investment portfolio, which compares with a $40 million decrease in estimated fair value a year earlier at the onset of the pandemic.\nAs discussed on our last earnings call, we allocate capital by adhering to our framework, maintaining an investment-grade balance sheet, driving future growth through organic and inorganic investments in the business and returning 20% of free cash flow to shareholders over the long term.\nIn the first quarter, we prioritized internal cash needs and investments in areas where clients have increasing demand, which serves to enhance the attractiveness of our products and solutions.\nWe did not repurchase any shares during the quarter.\nShifting now to an update on our balance sheet and cash flows.\nAt the end of March, reported leverage was 0.7 times, within our targeted range and seasonally up from 0.2 times at the end of December.\nOur liquidity stood at $2.9 billion, with 87% available on our $2.75 billion revolving credit facility.\nWe recently renewed the credit facility under essentially the same terms while extending the maturity date three years to April 2026.\nThe renewal also included incentives linked to achieving certain sustainability goals.\nLower incentive compensation payouts from prior year performance and our ongoing focus on improving capital efficiency helped drive a nearly $100 million improvement in the free cash flow deficit compared to the prior year.\nLooking ahead to the full year 2021, the pipeline and business trends I discussed paint a picture of a gradually accelerating recovery as we move through the year.\nWe continue to expect to operate within a 14% to 16% long-term adjusted EBITDA margin target range for the full year.\nWe remain confident in our ability to meet our 2025 Beyond targets.\nOur investments in near-term and longer-term growth initiatives, along with our continued focus on providing a leading data-driven and technology-enabled platform, position us well to deliver for our clients and all stakeholders.\nAs we look ahead, the outlook for the global economy is beginning to brighten.\nThere's particular optimism for the second half of the year, but the recovery will be uneven and staggered across geographies.\nFor example, the US and UK are progressing well with their vaccination efforts, but the news out of India and Brazil is devastating.\nWe are taking complete steps to support our employees and their families during this difficult time.\nWe are also leveraging our global organization to ensure business continuity.\nOverall, we see promising economic indicators as signs of pent-up demand that could benefit general economic activity.\nFurther, JLL Research predicts that by Labor Day, US office physical occupancy levels will top at least 50%, up significantly from the levels observed through the first quarter of approximately 15%.\nWe expect this year we'll see continued recovery in expansion even while the pandemic causes further ways of disruption.\nBefore we close, I would like to provide an update on advancements in our efforts to create value for all of our stakeholders through a continued focus on environmental sustainability practices.\nCentral to our stated purpose of shaping the future of real estate for a better world is our commitment to sustainability, which we believe benefits not only our clients but our communities and society as well.\nCognizant of the real estate industry's impact on the environment, we continue to play a leading role in advancing the focus on sustainability within the broader business landscape.\nAs a company, we successfully ensure that our goals and targets for greenhouse gas reduction, safety and diversity remain at the center of our strategic decisions.\nIt's integrating our long-term sustainable growth objectives throughout our business.\nRegarding environmental sustainability, I would like to share a number of developments.\nIn signing the climate pledge, we announced our aim to achieve net zero carbon emissions by 2040 across all areas of our operations, including the client sites we manage globally.\nWe are continuing to partner with Bloomberg Green for second year to address critical issues related to climate and sustainability.\nAs part of our strategic partnership with World Economic Forum and a member of the CEO Alliance of Climate Leaders, we have to committed to publicly disclose performance against sustainability goals.\nWe conform one Broadgate as our new UK flagship office, which represents an opportunity to achieve one of the most sustainable and technologically advanced workplaces in the UK Lastly, building on Karen's comments, we further formalized our commitment to environmental sustainability as we successfully extended the maturity of our revolving credit facility, leading within our industry by integrating select incentives to the achievement of certain sustainability goals.\nWe will continue to proactively execute against our environmental sustainability strategic road map and raise the bar on acting as a responsible corporate citizen throughout our communities.\nAs we emerge into the next normal, we remain focused on our employee safety, supporting our communities and serving our clients.\nOur first quarter results are a testament of the benefits of our global and scale platform.\nWe are emerging from this period as a stronger company with more integrated services and expertise allowing us to capitalize on new opportunities because of our continued investment in our technology and platform.\nWhile it's clear that the post-pandemic world will look much different, we are encouraged by the fact that clients are seeking the high-quality services, meaningful insight and global connectivity and consistency that JLL is uniquely positioned to offer.\nWe serve our clients with best-in-class services and advise while simultaneously bolstering our strong financial position and continuing to make intelligent investments aimed at enhancing long-term value for all stakeholders.\nOperator, please explain the Q&A process.\n Assistant:", "chosen": "q1 adjusted earnings per share $2.10.\n"}
{"prompt": "Human: During the call, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors.\nA transcript of this conference call will also be posted on our website.\nIn what continues to be a challenging and volatile year, I remain impressed by the resilience of our employees across the world.\nTheir dedication and success in providing unparalleled service to our clients has been nothing short of remarkable and I'm extremely proud and grateful for all that they have done.\nAs cases begin to rise and impact the reentry process to various degrees across the world, we continued to monitor the situation carefully and strictly adhere to the guidance of local and global health authorities to help manage the spread of the virus.\nThe health and well-being of our people, clients and communities remain our first priority.\nTurning to the market environment, global economic activity recovered some ground in the third quarter, despite the pandemic's continuing impact on both global and regional real estate fundamentals.\nImproving economic indicators remain vulnerable to a potential resurgence of the virus as cases and hospitalizations rising in many countries around the world.\nNear-term uncertainty continues to dampen forecast into the severity and longevity of the effects of the pandemic, as the world awaits the broad-based distribution of an effective vaccine before we can begin to regain some semblance of normality.\nCOVID-19 has accelerated many workplace trends that were prevalent in the commercial real estate industry prior to the Pandemic.\nThese include experiential workspaces, outsource real estate functions, and increased focus on employee wellbeing.\nAs a result of the changes the pandemic has had on how people work in suits and boards have increased their focus on real estate decisions to ensure their office spaces will suit their future needs.\nTurning specifically to the global office leasing market, JLL Research reported that activity in the third quarter was down 46% from a year earlier, reflecting an improvement from Q2, but a continuation of subdued demand.\nAsia-Pacific recorded a decrease in activity of only 5% relative to last year while EMEA and the United States were down 52% and 55% respectively.\nVacancy rates moved up across all regions in Q3, so the global vacancy right now recorded at 12.1%, reflecting a 90 basis point increase.\nDeclines in investment sales decelerated in the third quarter as global volumes down 44% compared to the same period last year.\nDespite the headwinds associated with the pandemic, I'm pleased that our diversified and scaled platform generated solid results for the third quarter.\nOverall third quarter results were at the upper end of our expectations due to -- in part to stable one-time items that are not expected to benefit future quarters to the same extent.\nConsolidated revenue fell 12% to $4 billion and fee revenue declined 23% to $1.4 billion, in local currency.\nAdjusted EBITDA of $244 million represented a decline of 19% from the prior year although adjusted EBITDA margin increased 90 basis points to 17.4% in local currency, driven by cost mitigation initiatives as well as government relief program.\nAdjusted net income totaled $156 million for the quarter and adjusted diluted earnings per share totaled $2.99.\nCorporate Solutions, again, demonstrated its ability to withstand challenging market conditions, posting a modest fee revenue decline of 2% for the quarter.\nStrengths in Facility Management was slightly offset by declines in EMEA Mobile Engineering, which continues to face pandemic related headwinds.\nCurrent pipelines for Corporate Solutions are stronger than last year, though the pandemic continues to create delays on real estate decisions affecting the closure rate.\nAs expected, our transaction-based service lines, capital markets and leasing recorded notable declines for the quarter as activity remains depressed due to the uncertainty caused by the pandemic.\nDespite the overall declines, we're encouraged by our performance in some of the less impacted sub sectors such as industrial and logistics, which have shown significant resiliency throughout this year.\nFurthermore, we have seen a strong rebuilding of our transactions pipeline since Q2.\nThese improving pipeline figures offer encouraging indicators for future performance though near-term uncertainty continues to linger.\nClients increasingly turn to JLL for our insights on operating the real estate and preparing for post-pandemic world.\nOur conversations focus, first, on helping them evaluate their workplace challenge and objectives.\nThen we develop long-term solutions that will enable successful transitions while preserving their ability to be agile, adaptable and resilient, as well as productive and profitable.\nWe've crafted the framework for reimagining the workplace to assist in this transition, which is focused on four strategic pillars; business, people, workplace, and commercial real estate.\nOur consultancy expertise is in significant demand because JLL is uniquely capable of providing our clients advisory and execution services as a result of our global reach and full service platform.\nFurther investments in our technology platform have proven to be a strong differentiator when conveying our capabilities and dialog with our clients as the pandemic has accelerated technological disruption in the commercial real estate industry.\nWe continue to expand our collaborations across business lines to respond to clients' evolving needs.\nFor instance, we were able to expand an existing engagement with a major regional American bank to a five year mandate.\nMultiple services in this assignment are facility management, transaction management and brokerage, project and development services, occupancy planning and the management and administration of all leases.\nThe bank identified several benefits of consolidating these services into JLL including our single provider technology platform, our shared services centers, the ability to consolidate services and the opportunity to provide a sustainable carrier roadmap for the internal staff transferring to JLL.\nThis is just one successful outcome of acting as one JLL.\nIt reflects our ability to deliver the full value of JLL across business lines in every client engagement.\nIn this quarter, we took further action as part of our disciplined cost mitigation program while simultaneously preserving our ability to maintain prudent investments across our business.\nThe actions taken better align our cost structure with current demand.\nKaren will discuss this in more detail, but let me assure you that we are positioning the Company to drive strong growth and play a leading role in the recovery.\nI'm confident that JLL will gain market share over the medium and longer term, as clients increasingly seek an advisor with global full-service capabilities but has the expertise and resources to help them reimagine their workplaces.\nStrong earnings and cash flow management led to another standout quarter for cash generation, as evidenced by $320 million of net debt reduction, resulting in our leverage now below pre-HFF transaction level.\nOur capital allocation policy is anchored in maintaining a strong investment grade balance sheet and ample liquidity to support seasonality in economic cycles, organic and inorganic investments to drive growth and long-term value.\nIn addition, we remain committed to returning cash to our shareholders.\nIn the third quarter, we repurchased $25 million worth of shares, bringing our year-to-date cash return to shareholders to $50 million.\nThis is slightly ahead of the amount returned in previous years via dividend.\nFor at least the foreseeable future, we do not expect to resume paying a dividend and instead will return cash to shareholders via share repurchases.\nAs we move through the fourth quarter and 2021, we will continue to evaluate business and market conditions to determine the appropriate mechanism to return value to shareholders in alignment with our long-term strategy.\nOverall, I'm pleased with our third quarter performance, given the current environment.\nThere are three points I'll highlight to summarize the quarter.\nFirst, while our consolidated year-over-year fee revenue percentage decline improved slightly from the second quarter on an organic basis, our top and bottom lines reflected meaningful growth in dollar terms over the second quarter.\nThis is an important trend in an unusual year when seasonal revenue growth is at risk of being disrupted.\nSecond we, again, generated strong cash flow which were used to repay debt to below pre-HFF acquisition levels.\nFinally, we are taking actions to align our cost structure to the current environment, while continuing to invest in strategic priorities that we believe will drive long-term value.\nOur diversified business continues to be impacted in different ways by the pandemic's economic shock.\nThe most significant impact continues to be on our transactional businesses.\nWhile our pipelines in both leasing and capital markets has increased since the end of June, uncertainty remains regarding the evolution of the pandemic and its impact to decision making by corporate occupiers and investors.\nConversely, Property & Facility Management remains a growth area, driven largely by new business wins as corporate occupiers and investors seek our services due to increased building management standards.\nPartially offsetting this top line growth were continued headwinds from our U.K. Mobile Engineering business and the late 2019 divestiture of our Continental Europe Property Management Business.\nMoving now to a detailed review of operating performance.\nOur consolidated adjusted EBITDA margin expanded 90 basis points to 17.4%, driven by our ongoing cost management actions and a 240 basis point impact from various government relief programs globally, partially offset by lower transactional revenue.\nConsolidated leasing fee revenue declined 30%.\nOur investment in the higher growth asset classes of industrial, supply chain and logistics continue to provide partial offsets to the current softness in the office sector.\nWe compared favorably with the 46% decline in global office leasing activity, reflecting the strength of our platform.\nBroadly, clients remain cost conscious and seek to delay significant decisions regarding future real estate strategies.\nAccording to JLL Research, the U.S. office market has seen an increase in the share of lease activity from renewals to 55% in the third quarter from 29% in 2019, as well as a reduction in aggregate effective rents of roughly 7% in mid-March, through both an increase in free rent concessions and a decline in starting rents relative to pre-COVID.\nLooking ahead, our fourth quarter U.S. gross leasing pipeline increased 16% from three months prior.\nWe are encouraged by these trends but emphasize closing rates and timing could be delayed in this environment.\nCapital Markets' fee revenue declined 43%, driven by an over 50% decline in investment advisory and debt placement.\nHowever, we did see stability in our multifamily business, again, reflecting the resiliency of our diversified platform.\nLooking at the global capital market environment, markets of scale with access to domestic capital in Asia Pacific and Western Europe outperformed while the Americas continued to experience the most significant declines.\nGlobal investment volume dropped 44%.\nActivity has been curtailed as investors adjust valuations and pricing to reflect the current environment.\nSo we are seeing a tightening of the bid-ask spread in some markets.\nThe Industrial and U.S. multifamily sectors have been the most resilient to-date.\nOur Capital Markets 2020 pipeline improved modestly across geographies as the quarter progressed, with pipeline at the end of the September up high single-digits, in percentage terms, from the end of June.\nWe are also encouraged by the recent reemergence of cross-border activities.\nThe longer-term trend of increased allocations to real estate is very much intact with significant capital on the side-lines ready to be deployed with highly liquid debt markets.\nThere was no change to our multifamily portfolio loan loss reserve and forbearance activity has been minimal to-date.\nAs Christian mentioned, our Corporate Solutions business was down 2% in the quarter and flat year-to-date.\nWe continue to be encouraged about the secular outsourcing trends.\nTurning to our Real Estate Services segment, we experienced relatively consistent percentage declines in fee revenue across geographies, but meaningful differences in profitability.\nIn the Americas, strong fee revenue growth in Property & Facility Management was more than offset by material declines in other service lines.\nWe are encouraged by the moderation and the pace of decline in Americas Leasing and the reasonably stable rate of organic decline in Americas Capital Markets compared with the prior quarter.\nOur ongoing cost mitigation actions and a 180 basis point benefit from government relief programs drove an adjusted EBITDA margin of 20.9% compared with 19.3% a year earlier.\nIn EMEA, all service lines reported fee revenue declines, with the most significant decline in Capital Markets due to softness in the office sector.\nEMEA leasing, while down 24% materially outperformed the approximate 50% decline in market volumes.\nIncluding a 120 basis point benefit from government relief program, the adjusted EBITDA margin was 2.7% compared with 6.1% a year earlier.\nThe decline in profitability was driven primarily by lower transactional revenue, partially offset by ongoing cost saving actions.\nWithin our Asia-Pacific business, Property & Facility Management and Advisory & Consulting fee revenue were reasonably stable, but the transactional businesses were down meaningfully, particularly Capital Markets.\nOur underperformance in Asia Pacific Capital Markets was largely concentrated in Japan and Greater China.\nIncluding a 710 basis point net benefit from government relief programs, the adjusted EBITDA margin was 20.2% compared with 14.2% a year earlier.\nThe relative stability and profitability excluding the government relief was primarily due to ongoing cost mitigation action.\nTurning to LaSalle; fee revenue was down 2%.\nAdvisory fees, which are annuity like and comprised approximately 80% of LaSalle's fee revenue this quarter grew 4%.\nHigher transaction fees tied to a Japanese REIT secondary offering mostly offset lower incentive fees.\nWe expect a similar level of incentive fees in the fourth quarter as the third quarter which would be considerably lower than the level earned in fourth quarter 2019.\nEquity earnings were $8 million, driven mostly by our co-investment in a publicly traded REIT in Japan.\nLaSalle's AUM totaled $66 billion at quarter end, sequentially up about $1 billion.\nNow, I'll comment on how we are thinking about our cost structure.\nChanges in client needs, particularly in our transactional businesses and continued uncertainty about the pace of recovery made it clear that we needed to accelerate certain cost management action.\nYear-to-date through October, we have taken actions that will result in over $135 million of annualized fixed cost savings.\nSeparately, our expense management focus delivered over $240 million of non-permanent savings over the first nine months of 2020, including about $180 million from cost mitigation actions and $67 million from government relief.\nRoughly half of these non-permanent savings were realized in the third quarter.\nThese non-permanent savings represent cost likely to return in future periods as business volumes recover.\nOur cost actions are part of an ongoing process to improve our operating efficiency.\nWe are confident these actions combined with process improvements and leveraging our technology platform will allow us to continue to deliver exceptional value to our clients and not impede our long-term growth potential.\nPivoting to our balance sheet; the sequential improvement in earnings and modest capex and investment spending drove a $320 million reduction to net debt, which ended the quarter at $752 million.\nAt the end of September, leverage was 0.8 times, down from 1.1 times at the end of June, and just below levels prior to the HFF acquisition, one quarter ahead of our initial expectation.\nWe have nearly $2.8 billion of liquidity, including approximately $440 million of cash and 85% of capacity available on our $2.75 billion revolver.\nWe are well positioned to invest in strategies which generate long-term profitable growth, while also returning cash to shareholders.\nLooking ahead, much will depend on the evolution of the pandemic and client's decisions on their go forward real estate strategy and investment.\nLong term, we are confident that our continuous efforts to refine and enhance our differentiated global platform position JLL to fulfill the evolving needs of our clients, capture market share and benefit from the long-term secular growth tailwinds of our industry.\nAs such, we remain focused on achieving our 2025 Beyond target and believe we are well positioned to continue to generate significant free cash flow and stakeholder value in the years ahead.\nBack to Christian for further remarks.\nAs we look to the rest of the year, a sharp rebound in global GDP growth experienced in the third quarter compared to the second quarter is expect to slow due to a combination of unwinding fiscal stimulus and ongoing caution leading to a more prolonged recovery period.\nWith that backdrop and realizing the difficulty in forecasting the recovery from the pandemic, we expect the fourth quarter operating environment to be relatively consistent with previous quarters on a year-over-year comparison.\nWe expect that our higher margin transaction-based service lines will continue to face significant headwinds which has a disproportionate impact on profitability.\nI'd like to take a minute to provide our latest thoughts regarding the future of commercial real estate and specifically the office.\nCommercial real estate remains a very valuable asset class for investors and a beneficiary of continued rising allocations of that capital, as they are keenly aware of the long-term fundamentals that position the industry for growth.\nWith regard to the future of office, we view the transition to a hybrid work environment as the new normal, one in which employees have a greater sense of empowerment in determining where and how they want to work.\nThis sustained increase in remote work opportunities will largely be offset by a combination of job creation and the de-densification of the office space.\nDepending upon this, we believe that the transformation to a hybrid workplace will see a reallocation of office space to enable creation, collaboration, communication and culture.\nAs I stated in the second quarter call, while it may look different and be utilized in new ways, the office will continue to have a vital future, specifically as a key driver of corporate culture.\nThese changes strengthen the value proposition of JLL as there are a few corporations that can guide our clients through this evolution of the workspace on a global scale.\nAs I mentioned, JLL's solid third quarter performance is a testament to our dedicated employees and our collective commitment to providing world-class advice and solutions to our clients, regardless of market conditions.\nOur results demonstrate the strength of our business model, diversified exposure to both business lines and geographies, and our ability to transact across asset classes.\nWe remain very well positioned to capitalize on not only the anticipated recovery from the pandemic, but the long-term macro trends that support robust commercial real estate growth.\nI'm confident in JLL's ability to succeed regardless of the circumstances in delivering sustainable long-term growth and achieving our goal of shaping the future of real estate for a better world.\nOperator, please explain the Q&A process.\n Assistant:", "chosen": "q3 adjusted earnings per share $2.99.\njones lang lasalle - pandemic continued to disrupt jll's operations, most significantly in transaction-based service lines.\n"}
{"prompt": "Human: Joining me on the call today are Don Kimble, our chief financial officer, and Mark Midkiff, our chief risk officer.\nI'm now moving to Slide 3.\nWe delivered another strong quarter with earnings per share of $0.72.\nThis is an increase of 18% from the first quarter and up significantly from the year-ago period.\nOur results reflect our success in acquiring and deepening relationships across our franchise, further improvement in credit quality, and contributions from targeted investments.\nWe generated positive operating leverage on a year-to-date basis and remain on track to deliver positive operating leverage for the full year.\nWe generated record second-quarter revenue, driven by an 8% year-over-year increase in noninterest income.\nIn our consumer business, we experienced record growth in new households in the first six months, in every one of our markets, and in every age group.\nImportantly, some of our strongest growth has come from younger clients in the western part of our franchise.\nOur new client growth over the past six months exceeds our growth in any full-year period over the last decade.\nAdditionally, our consumer business generated over 4 billion in loan originations for the quarter.\nMortgage originations reached another all-time high and we expect to exceed last year's record level of 8.3 billion for the full year.\nLaurel Road also had another strong quarter despite the federal student loan holiday.\nSince the launch of our National Digital Bank, Laurel Road for doctors, we have added over 2,500 new doctors and dentists.\nThe launch was an important milestone in our digital journey, which brings together several critical elements of our strategy, targeted scale, digital, healthcare, and primacy.\nMoving to our commercial businesses.\nWe had another strong quarter.\nOur investment banking business generated fees of 217 million, a record second-quarter level and the second-highest quarterly level in our history.\nWe experienced growth across the entire platform.\nWe have grown this business consistently over the past decade, and we expect to grow it again in 2021.\nImportantly, this is a business driven primarily by repeat clients.\nOur pipelines are currently at record levels, supporting our strong growth outlook for the business.\nThis quarter, we raised $21 billion for our clients, of which we retained approximately 20% on our balance sheet.\nExpenses this quarter reflect higher production-related incentives and the investments we continue to make across our franchise, in digital, in analytics, and in our teammates.\nLet me highlight just a few of these investments.\nI've already mentioned Laurel Road and the launch of our National Digital Bank.\nNot only have we accelerated client acquisition, but our new clients are doing more with us with approximately half of our new doctor and dentist using multiple products.\nWe also continued to build out our analytic capabilities, including our recent acquisition of AQN Strategies, we have doubled the size of our analytics team.\nYear to date, we have increased our senior bankers by 5% and in our targeted growth areas.\nThis has resulted in a 21% increase in client pitches on a year-to-date basis.\nWe also consolidated 54 branches this quarter with an additional 14 planned for next quarter.\nThese consolidations will drive future cost savings and support our ongoing investments.\nShifting to credit quality.\nOur trends remained positive this quarter.\nNonperforming loans, net charge-offs, and criticized loans were all down from the prior quarter and net charge-offs to average loans were nine basis points.\nWe continue to support our clients while maintaining our moderate risk profile, which has and will continue to position the company to perform well through all business cycles.\nFinally, we have maintained our strong capital position while continuing to return capital to our shareholders.\nOur common equity Tier 1 ratio ended the quarter at 9.9%, which is above our targeted range of 9 to 9.5%.\nOur strong capital position enables us to continue to execute against each of our capital priorities, namely organic growth, dividends, and share repurchases.\nCombining our share repurchases and dividends paid this quarter, we have returned capital representing $0.50 a share for an annualized return of capital of approximately 11% at our current valuation.\nEarlier this month, our board of directors approved a new share repurchase authorization of up to 1.5 billion beginning in the third quarter of this year and continuing through the third quarter of 2022.\nThe board will also evaluate an increase to our common stock dividend in the fourth quarter of 2021.\nOverall, I was very pleased with the quarter, which reflects the hard work and dedication of our team.\nWe grew our top line, and we made targeted investments to position the company for continued growth.\nAs always, we remain committed to our disciplined approach to risk management and our commitment to return capital to our shareholders through dividends and share repurchases.\nI'm now on Slide 5.\nAs Chris said, it was a strong quarter with net income from continuing operations of $0.72 per common share, up 18% from the prior quarter, and four times from the year-ago period.\nThe quarter reflected a net benefit from our provision for credit losses.\nThe reserve release was largely driven by our strong credit metrics and expected improvement in the economic environment.\nImportantly, we generated record second-quarter revenue, driven by strength in our fee-based businesses.\nOur reported return on tangible common equity for the quarter was 22.3%.\nAdjusting for the reserve release, ROTCE was 16% within our targeted range of 16 to 19%.\nTurning to Slide 6.\nTotal average loans were $101 billion, down 7% from the second quarter of last year.\nC&I loans were down $9 billion, reflecting decreased utilization levels.\nConsumer loans were up 9%, benefiting from continued growth from Laurel Road and, as Chris mentioned, record performance from our consumer mortgage business.\nCombined, we had over $4 billion of originations this quarter between our residential mortgage and Laurel Road production.\nThe investments we've made in these areas continue to drive results and, importantly, add high-quality loans and relationships.\nLinked-quarter average loan balances were relatively flat as commercial loans declined due to the commercial utilization rates, partly offset by growth in PPP loans.\nConsumer loans grew 2%, again related to the continued strength from our consumer mortgage and Laurel Road.\nPPP average balances were $7.5 billion for the quarter, up from $7 billion in the first quarter.\nThe PPP balances ended the quarter at $5.7 billion, reflecting $2.8 billion of forgiveness, and $900 million of new production.\nContinuing on to Slide 7.\nAverage deposits totaled $144 billion for the second quarter of 2021, up $16 billion or 13% compared to the year-ago period, and up 5% from the prior quarter.\nThe linked quarter and year-ago comparisons reflect growth in both commercial and consumer balances, which benefited from government stimulus.\nThe growth was partially offset by a continued and expected decline in time deposits.\nTotal interest-bearing costs came down another two basis points from the first quarter, following a three-basis-point decline last quarter.\nWe continue to have a strong, stable core deposit base with consumer deposits accounting for over 60% of our total deposit mix.\nTurning to Slide 8.\nTaxable equivalent net interest income was 1.023 billion for the second quarter of 2021, compared to 1.025 billion a year ago, and 1.012 billion from the prior quarter.\nOur net interest margin was 2.52% for the second quarter, compared to 2.76% from the same period last year and 2.61% for the prior quarter.\nBoth net interest income and net interest margin were meaningfully impacted by the significant growth in our balance sheet compared to the year-ago period.\nThe larger balance sheet benefited net interest income but reduced the net interest margin due to the significant increase in liquidity driven by strong deposit inflows.\nCompared to the prior quarter, net interest income increased $11 million and the margin declined nine basis points.\nLower interest-bearing deposit costs and higher loan fees from PPP forgiveness were offset by lower-earning asset yields and continued elevated liquidity levels.\nFor the quarter, PPP loan fees, including the impact of forgiveness, totaled $50 million, up $2 million from the prior quarter.\nThe significant build in liquidity continues to be the largest driver of our net interest margin.\nWe are maintaining around $20 billion in excess cash.\nCumulatively, excess liquidity has negatively impacted our net interest margin by about 35 basis points with seven basis points of incremental impact for the second quarter.\nMoving to Slide 9.\nWe've continued to see strong growth in our fee-based businesses, which have benefited from the investments we've made.\nNoninterest income was $750 million for the second quarter of 2021, compared to 692 million for the year-ago period and 738 million in the first quarter.\nCompared to the year-ago period, noninterest income increased 8%.\nWe had a record second quarter for investment banking and debt placement fees, which reached $217 million driven by a broad base across the platform, including strong M&A fees.\nCommercial mortgage servicing fees increased $32 million.\nCards and payments income also increased $22 million related to broad-based growth across product categories, including debit, credit, and merchant products.\nThis growth was offset by lower consumer mortgage fees resulting from lower gains on sale margin and also the impact of MSR valuation changes.\nLower operating lease income resulted from leverage lease gains in the year-ago period.\nCompared to the first quarter, noninterest income increased by $12 million.\nThe largest driver of the quarterly increase was a record second quarter and the second-highest ever quarter for investment banking and debt placement fees.\nService charges on deposit accounts and commercial mortgage servicing income also showed strength versus the prior quarter.\nThese were partially offset by lower other income due to positive market-related valuation adjustments in the prior period, offset by negative adjustments in the current quarter.\nI'm now on Slide 10.\nTotal noninterest expense for the quarter was $1.076 billion, compared to 1.013 billion last year and 1.071 billion in the prior quarter.\nOur expense levels reflect production-related incentives and the investments we've made to drive future growth.\nWe have highlighted some of the significant investments on the lower left of this slide.\nWe continue to invest in Laurel Road, including the launch of the National Digital Bank, including spend in marketing and technology.\nWe also grew senior relationship bankers by 5% year to date in our targeted focus areas, including renewables team that we added in May.\nWe've also continued to invest in our digital capabilities, as well as analytics.\nOur analytics team has grown by two and a half times, including our recent acquisition of AQN.\nThe increase from the prior year is primarily in personnel expense related to higher production-related incentive compensation and an increase in our stock price.\nEmployee benefit costs also increased $16 million as healthcare-related costs were low in the second quarter of last year.\nComputer processing expense this quarter was elevated related to software investments across the platform.\nCompared to the prior quarter, noninterest expense was relatively stable.\nHigher incentive and stock-based compensation was offset by seasonally lower employee benefit cost.\nMarketing costs were up $5 million, primarily related to the launch of the Laurel Road for doctors.\nI'm now on Slide 11.\nOverall, credit quality continues to outperform expectations.\nFor the second quarter, net charge-offs were $22 million or nine basis points of average loans.\nOur provision for credit losses was a net benefit of $222 million.\nThis was determined based on our continued strong credit metrics, as well as our outlook for the overall economy.\nNonperforming loans were $694 million this quarter or 69 basis points of period-end loans, a decline of $34 million from the prior quarter.\nAdditionally, criticized loans declined and the over 90-day delinquencies improved quarter over quarter.\nNow on to Slide 12.\nKey's capital position remains an area of strength.\nWe ended the second quarter with a common equity Tier 1 ratio of 9.9%, which places us above our targeted range of 9 to 9.5%.\nThis provides us with sufficient capacity to continue to support our customers and their borrowing needs and return capital to our shareholders.\nImportantly, we continue to return capital to our shareholders in accordance with our capital priorities.\nWe repurchased $300 million of common shares during the quarter, and our board of directors authorized a second-quarter dividend of $0.185 per common share.\nAs Chris mentioned, combined, this return of capital represents $0.50 a share this quarter an annualized return of 11% of our current valuation.\nEarlier this month, the board of directors approved a new share repurchase authorization of up to $1.5 billion beginning in the third quarter of this year and continue through the third quarter of 2022.\nThe board will also evaluate and increase the common stock dividend in the fourth quarter of 2021.\nOn Slide 13, we provide our updated full-year 2021 outlook, which we have adjusted to reflect our outlook for the remainder of the year.\nConsistent with our prior guidance, we expect to deliver positive operating leverage this year.\nAverage loans are still expected to be relatively stable, reflecting continued momentum in our consumer areas, the impact of the PPP program, and a pickup in commercial loan growth later this year.\nWe expect deposits to be up high single digits, reflecting the continued outperformance we have seen to date.\nWe will continue to benefit from our low-cost deposit base.\nNet interest income is now expected to be relatively stable, reflecting a low-rate environment, as well as the slightly lower-than-expected loan balances.\nOur net interest margin will continue to reflect the impact of excess liquidity on our balance sheet.\nNoninterest income should be now up in the high single-digit to low double-digit range, reflecting the broad-based growth in most of our core fee-based businesses, including what is expected to be another record year for our investment banking business.\nGiven the stronger revenue outlook, we now expect noninterest expense to be up low single digits, with the primary driver being higher production-related incentives.\nAs we identified on our expense side, we are also continuing to invest in areas that will drive future growth, namely teammates, technology, and also rolling out new capabilities such as Laurel Road, does not change our focus on core expenses and driving further efficiencies, including our commitment to generate positive operating leverage for the year.\nMoving to credit quality.\nWe have reduced our net charge-off guidance once again, which is now expected to be in the 20 to 30-basis-point range for the year.\nThis reflects the quality of our portfolio, our current outlook, and performance to date.\nAnd our guidance for the GAAP tax rate has increased to 20% for the full year, reflecting the higher expected earnings for this year.\nFinally, shown at the bottom of the slide are our long-term targets, which remain unchanged.\nWe expect to continue to make progress on these targets by maintaining our moderate risk profile and improving our productivity and efficiency, which will drive returns.\nOverall, it was another strong quarter, and we remain confident in our ability to deliver on our commitments to all of our shareholders.\n Assistant:", "chosen": "announced new common share repurchase authorization of up to $1.5 billion.\nqtrly earnings per share from continuing operations $0.72.\nkey's provision for credit losses was a net benefit of $222 million, including a $244 million reserve release for q2 of 2021.\nnet loan charge-offs for q2 of 2021 totaled $22 million, or 0.09% of average total loans.\nwill evaluate an increase to common stock dividend in q4 2021.\n"}
{"prompt": "Human: The Kimco management team participating on the call today include Conor Flynn, Kimco's CEO; Ross Cooper, President and Chief Investment Officer; Glenn Cohen, our CFO; and David Jamieson, Kimco's Chief Operating Officer; as well as other members of our executive team that are also available to answer questions during the call.\nReconciliations of these non-GAAP financial measures can be found in the Investor Relations area of our website.\nAlso in the event our call was to incur technical difficulties, we'll try to resolve as quickly as possible and if the need arises, we'll post additional information to our IR website.\nToday, I will share the highlights of the quarter, provide a recap of our now closed strategic merger with Weingarten and give an update on the strong leasing environment.\nRoss will give an update on the transaction market, and Glenn will cover our operating metrics in detail, discuss our improved balance sheet, Albertsons valuation and the proactive use of our ATM and how we can take advantage of opportunities in the market.\nHe'll close with an updated outlook for the balance of the year.\nWhile we have only owned Weingarten for a partial quarter, our expanded portfolio of grocery-anchored and mixed-use properties is already validating our investment thesis.\nTo date, we are exceeding our initial underwriting on all major metrics, including FFO, occupancy, spreads and renewal rates.\nOur dedicated team has done a remarkable job closing on the merger ahead of schedule and implementing an integration plan that included onboarding and training over 100 new employees, significant systems integration and property management, all while staying focused on executing our strategy.\nOn the operational front, leasing demand continues to be robust across the portfolio with the bright spot being the rebound in demand for small shops.\nThis was illustrated by the portfolio delivering another quarter of improved results, including a sequential increase in occupancy and positive leasing spreads.\nOur pro-rata U.S. occupancy is up 20 basis points to 94.1 percent, while anchor occupancy remained flat at 96.9 percent.\nAnd small shop occupancy rose 180 basis points over prior quarter to 87.3 percent, an increase of 60 basis points year-over-year.\nNew lease spreads were a positive 5 percent, with 141 new leases signed, totaling 605,000 square feet.\nSpreads for renewals and options finished at positive 4.9 percent.\nWe closed the quarter with 270 renewals and options totaling 1.4 million square feet, exceeding the five-year average number of renewals and options reported during the third quarter by 40 percent and exceeded average GLA renewed by 38 percent.\nCombined spreads for third quarter 2021 were positive 4.9 percent and with total 3Q, '21 deal volume reaching 411 deals totaling 2,050,321 square feet.\n411 leases executed represents the most transactions reported during a quarter since the first quarter of 2018.\nOur same-site NOI growth was positive 12.1 percent, including a 30 basis point contribution from redevelopments.\nThe same-site population does not include the Weingarten sites since we only had them for a partial quarter.\nWith the continued strength in leasing, we have maintained our 300 basis point spread of leased versus economic occupancy similar to last quarter.\nAs of September 30, 2021, we had over 400 signed leases representing $44.8 million of pro-rata annualized base rents awaiting rent commencement.\nWhile the operating environment remains favorable, we cannot let down our guard, inflation, supply chain issues in the labor market, together or alone, can impact our business, and that is why we continue to look for the most resilient assets, improve operational efficiencies and seek out ways to help our tenants succeed.\nWe continue to grow our portfolio in the high-growth Sunbelt markets and are committed to being the last-mile solution for tenants.\nThere is no question that our mission-critical, last-mile brick-and-mortar locations are proving to be durable solutions for consumers, retailers and many other businesses that want scale and reach to serve the end customer.\nIn closing, we are pleased with the progress we have made and believe that we have positioned Kimco for sustainable growth over the long term with a combination of internal and external growth levers.\nOur talented and deep team is focused on execution as we're in a unique position to take advantage of a wide range of opportunities.\nWe continue to believe we're building something special, and the best is yet to come.\nIt's been quite an exciting quarter at Kimco, and the excitement has continued into the fourth quarter, as I will discuss shortly.\nThere is no question that open-air shopping centers provide one of the best risk-adjusted returns of all asset classes.\nWe continue to see additional capital sources, new and old, gaining conviction in quality open-air retail, leading to the compression of cap rates.\nWe are fortunate to be in a position with multiple investment strategies that enable us to be active when opportunities arise, but also patient when things become too frothy.\nWith the finalization of the Weingarten merger, we've been able to execute on several accretive investments and new initiatives and with the addition of new joint venture partners inherited through Weingarten, we are excited about potential growth opportunities.\nSubsequent to quarter end, we acquired the remaining 70 percent interest in a portfolio of six Publix-anchored Sunbelt-region shopping centers from our existing joint venture partner, Jamestown, for a gross purchase price of $425.8 million.\nThe Publix-anchored assets represent over 1.2 million square feet of gross leasable area in infill markets throughout the Southeast, with five located in the top-performing South Florida market and one in the high-growth Atlanta market.\nSubsequently, Kimco entered into a joint venture partnership with Blackstone Real Estate Income Trust, under which we will both own 50 percent and Kimco will continue to manage the portfolio.\nIt is rare to have the ability to buy a portfolio like this with short-term mark-to-market opportunities and exceptional tenant sales.\nWe are thrilled to be partnering with Blackstone again on our new strategic venture.\nAlso post quarter end and in line with our value creation strategy, we were successful in buying out our partner's 85 percent interest in two grocery-anchored centers in California.\nAnaheim Plaza is one of the jewels of our Southern California portfolio with extraordinary highway visibility in frontage and two grocery anchors at the same property both performing exceptionally well.\nThe second asset is Brookvale Shopping Center located in Fremont, California anchored by a lucky supermarket in CVS.\nThe gross purchase price of the two assets was $134 million.\nTurning to our redevelopment program.\nIt continues to move ahead, beginning with property-level entitlements and then selectively and creatively activating a few at a time.\nWhile the structure and exit strategy are determined on a case-by-case basis, we see the upside knowing these infill locations are being built at a significant relative spread to the stabilized cap rate.\nComps in multifamily, industrial and other asset classes are regularly transacting with cap rates starting in the 2s and 3s.\nAdditionally, we're continuing our structured investment program with a disciplined approach and an emphasis placed on location, demographics, quality of tenancy and operational strength of the sponsors.\nWe view the base case of these investments as a true win-win, either generating an attractive return with a repayment down the road or exercising our right of first refusal and owning the properties outright.\nOn that front, we completed a $21.5 million mezzanine financing on a strong performing center in San Antonio called Alamo Ranch.\nIn just a few short months, San Antonio has gone from a market that was on our target list at Kimco to a major contributor in our portfolio with the Weingarten merger and now our second structured investment there.\nWe continue to pursue additional opportunities in San Antonio, one of the fastest-growing MSAs in the country.\nWe also sold three small low-growth assets this quarter.\nTwo single tenant boxes and an undeveloped parcel for a total of $23.5 million at a flat 5 percent cap.\nWhile dispositions will remain a relatively small component of our investment strategy, we will be prudent in disposing of low-growth assets and undeveloped parcels from which we can redeploy the capital.\nTo repeat Conor's statement, we are confident that the best is yet to come.\nOff to Glenn for the financials.\nWe are pleased to report very strong third-quarter results.\nOverall, the portfolio continues to produce improving results, including record quarterly revenue, increased occupancy, positive leasing spreads, strong same-site NOI growth, increased collections, and lower credit loss.\nOur balance sheet metrics are also at the strongest levels ever.\nAs you might expect, the completion of the $5.9 billion Weingarten merger, which closed in early August was a key contributor.\nWhile we did not have a full quarter of contribution from the addition of the Weingarten portfolio, the benefits are clearly apparent.\nOur team has put in enormous effort to accomplish the successful integration of Weingarten in a very short period of time.\nWe couldn't be prouder.\nNow for some details on our third-quarter results.\nNAREIT FFO was $173.7 million or $0.32 per diluted share and includes $47 million or $0.08 per diluted share of merger-related expenses.\nThis compares to the third quarter 2020 NAREIT FFO of $106.7 million or $0.25 per diluted share, which includes aggregate charges of $16.1 million or $0.04 per diluted share related to severance for our voluntary early retirement program and early redemption of $485 million of unsecured bonds.\nThe increase in FFO was primarily driven by higher NOI of $98.7 million, of which the Weingarten merger contributed $62.6 million.\nIn addition, NOI benefited from lower credit loss of $30.7 million and higher straight-line rent of $14.5 million, including $2 million from the Weingarten portfolio.\nImprovements in collections and new leases commencing during the quarter were the major contributors.\nSpecifically, during the third quarter, we collected approximately 98 percent of base rents.\nWe also collected 80 percent of rents due from cash basis tenants, up from 77 percent last quarter.\nFurthermore, collections of prior period amounts from cash basis tenants totaled $8 million during the third quarter of 2021.\nOur cash basis tenants comprise 9.1 percent of pro-rata annualized base rents.\nIf we excluded the addition of the Weingarten cash basis tenants, this amount would have been 7.3 percent, which compares favorably to the 8.8 percent level reported last quarter.\nIn connection with the preliminary purchase price allocation for the Weingarten transaction, the debt we assumed was recorded at a fair value, which was $107 million higher than the face amount.\nThis resulted in $6.2 million of fair market value amortization for the third quarter, which reduces interest expense and is also part of the FFO improvement.\nWe expect to finalize our purchase price allocation by year-end.\nDuring the third quarter, FFO also included approximately $6 million or $0.01 per diluted share related to one-time contributions from several joint ventures and higher lease termination fees.\nTurning to the balance sheet.\nWe had an active quarter in the capital markets.\nWe issued a new $500 million unsecured bond at a coupon of 2.25 percent, the lowest coupon for 10-year unsecured financing in the company's history.\nProceeds from this issuance were primarily used to fund the cash component of the merger consideration and the merger costs.\nWe also opportunistically used our ATM equity program to issue 3.5 million shares of common stock, raising almost $77 million in net proceeds to fund some of the investment activity Ross just mentioned.\nThis is in addition to the 179.9 million shares of common stock issued in connection with the Weingarten merger valued at $3.7 billion.\nWe also assumed $1.8 billion of debt, including the fair value adjustment as part of the Weingarten merger.\nTotal common shares outstanding at quarter-end was 616.4 million, and we expect this should be a good guide for the fourth quarter.\nAs anticipated, the Weingarten merger was a deleveraging event.\nAs of September 30, net debt to EBITDA on a look-through basis, including pro-rata share of joint venture debt and preferred stock outstanding was seven times.\nThis metric only includes two months of EBITDA from the Weingarten merger, but all of the debt assumed.\nOn a pro forma basis, including a full quarter of EBITDA from Weingarten, look through net debt-to-EBITDA would be 6.3 times, representing the lowest level since we began tracking this metric.\nOur liquidity position also remains very strong.\nWe ended the third quarter with over $450 million of cash and full availability on our $2 billion revolving credit facility.\nIn addition, during the third quarter, the value of our Albertsons marketable security investment climbed to more than $1.2 billion after increasing by $457 million, which is included in net income but not FFO for the quarter.\nWe continue to evaluate our opportunities to begin the Albertsons monetization process.\nAs we look ahead during 2022, we will have a variety of potential uses for the capital from the redemption of our preferred stock issuances that become callable, bonds that mature in October and November of 2022, and accretive investment opportunities.\nAs our overall business continues to recover from the effects of the pandemic and as we begin to benefit from the successful merger and integration of the Weingarten portfolio, we are raising our full-year 2021 NAREIT FFO per share guidance range to $1.36 to $1.37, which includes $0.10 per diluted share of merger-related costs and the inclusion of the Weingarten portfolio for five months.\nThis compares to previous NAREIT FFO per share guidance of $1.29 to $1.33, which did not include any impact from the Weingarten merger except $0.01 related to merger costs.\nAs I touched upon, our third quarter FFO includes a total of $0.03 per share related to items that were more onetime in nature and which were not budgeted for as recurring items.\nThis includes $0.02 per diluted share from improvements in credit loss and another $0.01 from contributions from joint ventures and lease termination fees.\nWe will provide initial 2022 guidance on our next earnings call.\n Assistant:", "chosen": "q3 ffo per share $0.32.\nqtrly ffo of $0.32 per diluted share, including merger related costs of $47 million.\nsees 2021 nareit ffo of $1.36 to $1.37.\nqtrly nareit funds from operations $0.32 per diluted share.\nsame-property noi, including redevelopments, increased 12.1% for q3 of 2021.\n"}
{"prompt": "Human: We've revised our full-year 2021 estimate for DCF and EBITDA substantially upward.\nSteve, Kim, and David will explain the underpinnings of that change.\nWe also increased our dividend to an annualized rate of $1.08 per share as we promised when we released our original outlook for 2021 back in December.\nIn my judgment, this increase is an indicator of the significant parts of our corporate financial policy.\nFirst, it shows we are intent on returning value to our shareholders.\nSecond, it demonstrates the consistent strength of our cash flow.\nTo put this in perspective, this is the fourth consecutive annual increase in our dividend since 2017, when we were paying an annual dividend of $0.50 per share.\nAnd we have accomplished that while maintaining a real focus on our balance sheet, having reduced our debt from its peak of almost $43 billion in 2015 to $30.7 billion today, a decrease of over $12 billion, quite an improvement.\nNow we're doing all this while continuing to pursue opportunities with our natural gas assets to firm up deliverability and supply to our customers, opportunities that were highlighted by the recent winter storm in Texas, and also while examining opportunities in the energy transition effort.\nAt Kinder Morgan, we remain guided by what we believe is a sound corporate philosophy, fund our capital needs internally, maintain a healthy balance sheet, and return excess cash to our shareholders through dividend increases and opportunistic share repurchases.\nWe think this is a recipe for long-term financial success for KMI and its shareholders.\nI'll focus on our performance during Winter Storm Uri, which is what drove our financial results in the quarter.\nSo starting with the performance during the February winter storm.\nWe were prepared, and that preparation served us well.\nOur previous investments in our assets, particularly on our gas storage assets, were a huge help.\nWe were on maximum withdrawal for days at several of our fields.\nAlso helpful were our investments in backup generators at key compressor stations on our system.\nAnother real key for us was our team.\nOur operations team deployed in advance to keep our facilities running and quickly repair them if they went down.\nWe deployed additional generators and tested our generators before the storm got here.\nOur people were at locations that are normally automated, and they were there in the bitter cold, and undoubtedly, many of them have their own families at home without power and water.\nOur team went to key compressor stations, storage facilities, and delivery points to keep gas flowing, including a key delivery point to the city of Austin.\nOur people kept us going.\nOur investments and especially our team winterized us against a terrible storm.\nWe also purchased additional gas, some at very high prevailing prices, to serve power plants and gas utilities.\nThe result of all this was that we enabled our wholesale customers to serve needs that would have otherwise gone unmet, mitigating the tragedy that too many Texans endured.\nWe performed well operationally and commercially across our entire gas network, but our financial performance was especially strong in our Texas intrastate pipeline and storage network.\nAnd as I'll mention in a minute, in our CO2 business for reasons I'll explain.\nA key difference between our Texas intrastate system and our interstate gas pipeline systems is that we have a purchase and sale business in Texas, supported by high deliverability storage assets.\nIn contrast, our interstate pipelines are nearly exclusively selling unbundled transportation and storage services.\nWe do that in Texas, too, but we also have a purchase and sale business.\nThat business is generally done with reference to an index price.\nFor example, we sell gas at the Houston Ship Channel index plus something and buy at Houston Ship Channel minus something.\nIn normal circumstances, we're effectively getting a transport margin on our purchases and sales and using our proprietary storage to extract margin from price differences across time periods.\nWhen prices are in a normal range, this is a very stable business.\nAnd we view our Texas intrastates as roughly 80% or so take-or-pay.\nIn February, supply and demand conditions caused prices to go up by more than 100x and back down by the same order of magnitude over the course of a week.\nMarket volatility like we experienced that week reveals the value of reliable pipeline and storage assets and a reliable operations team.\nIt reveals the value of having gas in storage and previous purchase arrangements in place.\nIt also reveals the value of preparation in such circumstances in which supply and demand conditions causing prices to go up by more than 100 times, we were able to perform well financially, as well as operationally.\nMany of our additional sales, whether as a result of higher takes under our existing contracts or incremental sales that we were able to do during that week, took place at prevailing market prices.\nwhich during that week at the Houston Ship Channel, range from $180 MMBtu to $400 versus $3 earlier in the same month.\nWhat does this mean for our business longer term?\nWe transact with sophisticated customers who have choices.\nOne of those choices is to purchase firm services from us on a long-term basis, and many of them do.\nWhile we view the events in our financial results as largely nonrecurring, we are already pursuing more long-term firm capacity sales and some associated capital investments that will help our customers to be even better positioned for future extreme weather and create incremental value for Kinder Morgan.\nThere is substantial interest in our services following the storm, which should help us in our base business and in new origination.\nThe results could be long-term, additional, and more consistent earnings and investment without the extraordinary and rare gain that we experienced in the first quarter.\nThe big lesson that should be taken away is that an appropriate amount of contracting for firm deliverability should be in everyone's portfolio.\nAnd February's event reveals the value of storage and firm transport capacity.\nAnd we would hope that any changes made in the market structure would adequately compensate and incent parties to do so.\nI mentioned our CO2 business also.\nThis is a bit of a different effect.\nThat's our biggest power consuming business in the state of Texas.\nOur power contract with our provider enables us to shed load and be compensated at the prevailing power prices.\nWhen they started to see where power prices were headed, Jesse Arenivas and his team started looking at shedding load.\nSo we shut down oil production and shed the load back into the market, where it could be allocated to higher priority human needs.\nThe contract work, as designed and particularly with prices as high as $9,000 a megawatt hour, we earned a substantial financial benefit, while letting those megawatts be made available to serve human needs.\nAlso notable, for the longer term, Jesse and his team were able to restore production quickly and fully following the storm.\nThat's a great accomplishment.\nThey had some practice when oil prices went drastically down last year, and we've gotten better at it since then.\nOur flexibility is greater.\nThis is great flexibility that we've now built into a part of our business that consumes about 340 megawatts in the state of Texas.\nSo good flexibility to have in the power market in the state of Texas.\nSo we're very proud of our whole team's performance, but we have lessons to learn too.\nAnd we'll use those lessons to get even better at severe weather performance for us and for our customers.\nSo what will we do with the proceeds?\nInitially, of course, it's a reduction to our net debt.\nBut as we repeated many times, our financial principles remain the same.\nFirst, maintain a strong balance sheet.\nSecond, we maintain our capital discipline through our return criteria, a good track record of execution, and by self-funding our investments.\nAnd as I mentioned, we may see some incremental investment opportunities as a result of the storm.\nWe don't expect those to be significant for 2021.\nFinally, we are returning value to our shareholders with a dividend increase that Rich mentioned.\nIt's a well-covered dividend.\nAnd our approach to share repurchases remains exactly the same.\nWe'll be selective, not programmatic.\nWe'll base our decisions on the returns versus the alternative uses for the cash that we generate, including projects or assets.\nSo strong balance sheet, capital and cost discipline, returning value to shareholders.\nThose are our principles.\nWe put together a team with financial, commercial, and engineering talent to focus on analyzing and quantifying opportunities for additional assets and service offerings tailored to the ongoing energy transition, including things like renewable natural gas and carbon capture and sequestration.\nThis group reports to Jesse Arenivas, who continues as president of our CO2 business and is headed by Anthony Ashley, who previously served as treasurer and vice president of investor relations.\nWhile still in our early days for this effort, they've already identified and are working on a number of specific opportunities.\nAlso, as I said last time, our business units continue to focus on the energy transition opportunities that fit in with their operations, such as midstream services for renewable diesel and including our -- using our gas transportation and storage services to support renewable power.\nWe are also marketing our low methane emissions performance as responsibly produced and transported natural gas.\nThat's a good synergy between our ESG performance, our low methane emissions, and our commercial opportunities.\nWe participated in our first one of these transactions with Colorado Springs Utilities, which they announced in the first quarter.\nAnd we're working on another as we speak.\nWe believe the winners in our sector will have strong balance sheets, low-cost operations that are reliable, safe, and environmentally sound, and the ability to get things done in difficult circumstances.\nWe're proud of our team and our culture.\nAnd as always, we'll be prepared to meet the challenges and opportunities to come.\nFirst, I'm going to go through the business fundamentals for the quarter, and then I'll talk at a very high level about our full-year forecast.\nStarting with the natural gas fundamentals.\nTransport volumes were down about 3% or approximately 1.1 million dekatherms per day versus the first quarter of '20.\nAnd that was driven primarily by declines in Rockies production, increase in transportation alternatives, and lower production out of the Permian, those two things impacting our volumes on EPNG and contract expiration on our joint venture pipe coming out of the Fayetteville.\nThese declines were partially offset by higher volumes, which were driven by increased deliveries to LNG export facilities, winter weather in the northeast, and the PHP in service.\nPhysical deliveries to LNG facilities off of our pipeline averaged approximately 4.7 million dekatherms per day.\nThat's greater than a 25% increase versus the first quarter of 2020.\nLNG volumes were down from the approximately 5 million dekatherms per day in the fourth quarter of '20.\nAnd that was due to the impact of Winter Storm Uri and some coastal fog in February.\nDuring the storm, total LNG exports dropped to under 2 million dekatherms per day.\nIn the first quarter, Kinder Morgan pipes moved approximately 47% of the volume going to LNG export facilities.\nExports to Mexico on our pipes were up about 3% when compared to the first quarter of '20.\nOur share of Mexico deliveries in the first quarter ran about 55%.\nDeliveries to power plants, they were down due to higher natural gas prices.\nDeliveries to LDCs were up due to colder weather.\nOne, on our natural gas gathering volumes, they were down about 25% in the quarter compared to the first quarter of '20.\nBut for gathering volumes, I think the more informative comparison is the sequential quarter.\nSo compared to the fourth-quarter volumes, first-quarter volumes were down about 11%.\nApproximately two-thirds of that 11% reduction are related to KinderHawk, which is our gathering asset in the Haynesville.\nBut given that there are 45 rigs deployed in that basin, we expect that our volumes will increase sequentially each quarter for the balance of the year, although it will be a little bit slower than what we've budgeted.\nEagle Ford volumes were also down versus the fourth quarter, and we expect that those will be down versus our budget.\nThe Eagle Ford remains a very tough market, given the oversupply of takeaway options.\nOn the positive side, we expect volumes in the Bakken and Altamont to be on plan or better for the year.\nIn our products pipeline segment, refined products volumes were down about 10% for the quarter versus the first quarter of 2020.\nAnd that's just the result of the continued pandemic impact.\nGasoline volumes were up 6% versus the first quarter of '20.\nThat's an improvement from the fourth quarter when they were off about 10% versus the fourth quarter of 2019.\nJet volumes remain weak off about 29%, but that's a big improvement from the fourth quarter when they were off 47% versus the fourth quarter of '20.\nAnd diesel volumes were up 6%, and that's relatively flat to the percentage in the fourth quarter.\nTotal volumes moving through our pipes did improve each month during the quarter.\nMarch volumes were up slightly versus 2020, and they were down about 6% versus 2019.\nCurrently, we're forecasting refined products to be down versus our plan, and I'll go through that a little bit later in my comments.\nCrude and condensate volumes were down about 28% in the quarter versus the first quarter of 2020.\nSequentially, they were up 2%.\nOur terminals business fundamentals have been impacted by two events: the winter storm and the continued impact of the pandemic.\nThe winter storm was short lived, with the impact limited to the first quarter.\nThe pandemic is lingering, and it continues to impact our petroleum product volumes as well as demand for our Jones Act tankers.\nHowever, as we've mentioned in prior quarters, the impact of reduced petroleum product demand on our tankage is more muted than in our product pipeline, given the fixed take-or-pay contracts for tank capacity.\nOur liquids utilization percentage, which reflects the tanks that we have under contract remains high at 95%.\nIf you exclude tanks out of service for required inspection, utilization is about 98%.\nOn the tankers, we have a number of ships that have contract expirations this year, and the market is relatively weak, given the weakness in refined product volumes.\nThe reduction in crude oil production and the tightening WTI Brent spread also impacts this market, but to a much lesser extent, given a smaller percentage of the fleet engaged in that service.\nWe expect this market to improve with the recovery in petroleum product demand.\nBut that may take in for later this year because charter activity tends to lag underlying supply and demand fundamentals.\nNow the CO2 segment was up in the quarter due to our decision to curtail production and deliver power back to the grid that Steve mentioned.\nExcluding the storm impact, oil production was down approximately 15%.\nCO2 sales volumes were down 26%.\nOur net realized oil price was down about $3.50 per barrel.\nHowever, compared to our budget, we're currently anticipating the oil volumes, CO2 volumes and net realized oil price will exceed budget for the year.\nNow let me give you a very high-level update on our full-year forecast.\nAs we said in the release, we're currently projecting full-year DCF of $5.1 billion to $5.3 billion versus our budget of $4.45 billion.\nWe estimate that the Uri impact, and this is across all of our segments, was roughly worst-season hand grenades $1 billion, leaving a variance, again, very roughly, of $200 million to $350 million versus our budget.\nI know $200 million doesn't add up perfectly, but that's because these are very large rounded numbers.\nLet me start with the $200 million variance.\nWe estimate that sustaining capex will be approximately $75 million higher than our budget due to the decision to replace some pipe in rural South Texas as opposed to continuing to spend money running inspection tools and repairing the pipe.\nWe were also able to obtain the pipe at very attractive pricing.\nWhat I'll classify as pandemic-related impacts is roughly $80 million, and that includes weaker petroleum products volumes and lower renewal rates on Jones Act tankers.\nThose two items explain about 75% of the variance, but there are a lot of other moving parts.\nA couple of the other larger items include lower gathering volumes, primarily in the Eagle Ford, and the impact on DCF of a Ruby impairment.\nThose two items are roughly offset by positive performance in the CO2 segment, from higher CO2 and oil volumes and price.\nFinally, the sale of our 12.5% interest on NGPL creates a negative variance versus our budget.\nThe difference in that low and the high end of the guidance range primarily relates to assumptions on petroleum products volumes, Jones Act tanker renewals, natural gas GMP volumes, and the resolution of certain Uri contractual disputes.\nI think it's obvious, but just in case, the lower end of the guidance range assumes a more conservative outcome on these items.\nFor example, The high end of the guidance range assumes petroleum products volume 3% below plan for the balance of the year versus the low end of the guidance assumes they're about 5% below plan for the balance of the year.\nSo for the first quarter of 2021, as Rich mentioned, we are declaring a dividend of $0.27 per share, which is 3% up from last quarter.\nNow looking at the financial performance for the first quarter of this year versus the first quarter of last year, we generated revenues of $5.2 billion, up $2.1 billion.\nWe had partial offsets in our -- a partial offset in our cost of sales with an increase of $1.3 billion there.\nSo our gross margin was up $759 million, mostly driven by our strong performance during the winter storm.\nOur O&M costs declined as a result of the CO2 segment power load shed that Steve walked through.\nAnd that's the main item in the $106 million favorable O&M amount.\nIn the first quarter of 2020, we also took impairments in our CO2 segment of $950 million, which explains most of the $975 million favorable in the item -- the line item called gain and loss on divestitures and impairments.\nThis past quarter, we wrote off the value of our Ruby subordinated note, which was a reduction of $117 million in the earnings from equity investments.\nAnd that was driven by greater uncertainty regarding the recoverability of that note receivable.\nWe also reflected a $206 million gain on the sale of a partial interest in NGPL, and that appears in the other net line item.\nSo overall, we generated net income of $0.62 per share, which is very favorable versus the $0.14 loss in the first quarter of 2020.\nOn an adjusted earnings per share basis, and then that's where we show earnings per share before certain items, we generated $0.60 per share versus $0.24 per share a year ago.\nMoving to our segment EBDA and distributable cash flow performance.\nOur natural gas segment was up $915 million for the quarter, mostly explained by favorable intrastate margins as well as increased revenue on our Tennessee Gas Pipeline, both as a result of the February winter storm performance.\nWe also had favorable contributions from PHP, which was placed in service at the beginning of the year.\nAnd these are all partially offset by lower contributions from our FEP pipeline resulting from the 2020 contract rollovers.\nProduct segment was down $10 million, driven by lower refined product volumes on SFPP, lower crude oil volumes on KMCC, and lower recontracting rates at HH, partially offset by greater contributions from our transmix business.\nOur terminal segment was down $30 million.\nAnd that's really refined product volumes due to continued pandemic-related demand impacts, as well as winter storm-related demand impacts.\nAs has been mentioned, our Jones Act tanker contributions were also down lower due to the lower fleet utilization resulting from the pandemic-related market weakness.\nStorm-related refinery outages also drove decreased contributions from our pet coke facilities.\nAnd these were all somewhat offset by our expansion project contributions.\nOur CO2 segment was up $116 million this quarter versus a year ago.\nAgain, due to the shedding load to deliver power to the grid.\nAnd partially offset by lower -- and that was partially offset by lower crude and CO2 volumes versus Q1 2020 and lower realized crude prices versus Q1 2020.\nOur G&A at corporate and corporate charges were higher by $8 million.\nAnd there we had lower capitalized overhead expenses, partially offset by our organizational efficiency savings.\nJV depreciation, we had less JV DD&A from our Ruby investment there.\nAnd that's after Ruby recognized an entity-level asset impairment in the quarter resulting in lower depreciation.\nThat brings us to adjusted EBITDA, which was $966 million, or 52% higher than Q1 2020.\nMoving down below EBITDA.\nInterest expense was favorable by $52 million.\nThey're lower LIBOR rates benefiting our interest rate swaps drove nice favorability as well as a lower debt balance and lower rates on our long-term debt.\nFor the quarter, sustaining capital was favorable by $34 million, and that was driven by lower terminals and natural gas segment capex.\nBut all of that is timing, and we expect to spend more sustaining capital for the full year versus 2020.\nIn other, we had some lower pension cash contributions versus a year ago.\nThis year, we have a little bit more back-end loaded cash contributions to our pension plan versus more equally spread quarterly contributions last year.\nSo our total DCF was $2.329 billion and was up $1.068 billion, or 85%.\nAnd our DCF per share was $1.02, up $0.47 from last year's $0.55 per share.\nMoving on to the balance sheet.\nWe ended the quarter with net debt to adjusted EBITDA of 3.9 times, down nicely from the 4.6 times at year-end.\nAnd we currently project to end 2021 at 3.9 times to 4.0 times, and that's consistent with the ranges that Kim walked through.\nAnd that's largely a result of the largely nonrecurring winter storm benefits contributing to our EBITDA, but it also is a result of lower-than-budgeted debt balance due to the greater than budgeted cash flow.\nOur longer-term leverage target of 4.5 times has not changed.\nWe also have a very favorable liquidity position.\nWe ended the quarter with almost $1.4 billion of cash on hand and only have $500 million of consolidated debt maturing for the rest of the year.\nSo our net debt, which includes our cash on hand, ended the quarter at $30.7 billion, down $1.348 billion for the year -- from the year.\nAnd now, our net debt has declined by $12.1 billion or almost 30% since Q1 of 2015, as Rich mentioned, but is worth reiterating.\nSo our quarter change to reconcile the change in debt of $1.35 billion for the quarter.\nWe generated $2.329 billion in DCF.\nWe paid dividends of $600 million.\nWe made $200 million of contributions to our growth projects as well as to JVs.\nWe received $413 million from the NGPL sale, and we had $600 million of -- approximately $600 million of working capital uses, primarily interest expense payments, AR increases, and a rate case settlement on SFPP.\nThat explains the majority of the net debt change and completes our first-quarter financial review.\n Assistant:", "chosen": "kinder morgan q1 earnings per share $0.62.\nreases dividend 3 percent and raises 2021 guidance.\nq1 earnings per share $0.62.\napproved a cash dividend of $0.27 per share for q1.\nbulk of improvement in q1 net income and dcf is due to strong performance of natural gas pipelines segment.\nin q1, system deliverability and resiliency was also enhanced by investments in expansion projects and asset maintenance in texas.\nqtrly adjusted earnings per share $0.60.\nkmi also now expects to end 2021 with a net debt-to-adjusted ebitda ratio in a range of 3.9 to 4.0.\nas of march 31, 2021, had over $3.9 billion of borrowing capacity under $4 billion credit facility, over $1.3 billion in cash, equivalents.\nkinder morgan - believe borrowing capacity, current cash on hand, and cash from operations are more than adequate to manage cash requirements, through 2021.\n"}
{"prompt": "Human: We will be referring to that slide deck throughout today's call.\nI'm Kelly Boyer, Vice President of Investor Relations.\nJoining me on the call today are Chris Rossi, President and Chief Executive Officer and Damon Audia, Vice President and Chief Financial Officer.\nThese risk factors and uncertainties are detailed in Kennametal's SEC filings.\nIn addition, we will be discussing non-GAAP financial measures on the call today.\nReconciliations to GAAP financial measures that we believe are most directly comparable can be found at the back of the slide deck and on our Form 8-K on our website.\nI'll start today's call with some general comments on the level of industrial activity we are currently seeing then briefly review the quarter, our strategic initiatives and expectations for Q2.\nDamon will then go over the quarterly financial results in more detail.\nDebt increasing sequentially by 6% of which 3% was due to FX.\nGeneral engineering and transportation end-markets are showing the highest levels of recovery.\nAs a reminder, those two end-markets total more than 60% of our sales.\nOn a year-over-year basis, organic sales declined by 21% on top of an 11% year-over-year decline in the prior year quarter.\nHowever, through disciplined execution on several fronts, we were able to effectively maintain profitability.\nAdjusted EBITDA margin improved by 40 basis points to 11.3% versus 10.9% in the prior year quarter.\nAnd our operating leverage was strong as well, while[Phonetic] continued double-digit declines in volume and associated under-absorption.\nImproved EBITDA margin was driven by lower raw material costs, increasing from simplification, modernization and effective cost control action.\nOperating expense as a percentage of sales increased 23% due to lower sales.\nHowever, in total dollar terms decreased 18% year-over-year.\nOur target for operating expense remains at 20%.\nAdjusted earnings per share was $0.03 compared to $0.17 in the prior year quarter, reflecting the factors I just named as well as a higher adjusted effective tax rate.\nLooking ahead, of course, visibility in this environment is still limited due to COVID-19.\nSo it remains extremely difficult to forecast how our customers as well as our end-markets will be affected, especially with additional shutdowns being contemplated in some regions due to recent spikes and COVID-19 cases.\nWe will not be providing a full-year outlook for fiscal year '21, however, I would like to provide some color on what we might expect in the second quarter.\nBased on the monthly sales results in Q1, early indications from our October sales, assuming that there is no additional second wave of COVID-19 lockdowns in the quarter, we expect Q2 to see low to mid-single digit growth sequentially, which would be above our normal sequential growth pattern of 1% to 2%.\nWhile it feels like the economic recovery may be gaining momentum, as I said, it is still difficult to predict the pace and trajectory.\nSo we continue to focus on the things we can control such as executing our operational excellence and commercial excellence strategies, and share and improve operating results throughout the economic cycle.\nOn the operational excellence side, simplification, modernization initiatives are on track to deliver approximately $80 million in benefits this year, increase of 67% over last year.\nThat will bring the total cumulative savings from inception of the program to $180 million, which is within the original target we set in December 2017, despite much lower volumes than were envisioned at that time.\nAs a reminder, we expect to complete our original footprint rationalization activities with closure of the Johnson City, Tennessee plant, downsizing of the Essen, Germany plant by the end of this fiscal year.\nAlso, the capital spending associated with the simplification modernization program is substantially complete.\nThis will result in significantly lower capex levels going forward, including this fiscal year where total capex is expected to be reduced by approximately 50% to be $110 million and $130 million.\nIn addition to our focus on these transformational operational excellence initiatives, we are equally focused on driving commercial excellence.\nTurning to Slide 3, as you recall, last quarter we announced the combination of our two metal cutting business segments, enabling us to direct our commercial resources, products and technical expertise more effectively toward capturing a larger share of wallet.\nIn addition, we discussed our new brand strategy to reposition the Widia brand and portfolio to the multi-billion dollar fit-for-purpose application space within metal cutting, which we previously have not focused on.\nThis strategy opens a 40% increase in served market opportunity while offering better service, and tooling options to our customers.\nProgress on this initiative is tracking with our expectations and I'm pleased that we already have several wins with new customers and existing customers, including a recent win at a major machine tool builder to apply fit-for-purpose tooling as standard on new machines they sell.\nAlso, the reaction from our channel partners has been broadly positive, especially to be able to operate in the market with clear brand positioning, key to win share in the full-solution application space as well, with the share gain in a major machine tool builders manufacturing facility.\nAnd we are successfully leveraging one of our proven tooling solutions, developed for a wind turbine manufacturer in China to capture share of similar projects in India.\nAnd of course, we remain committed to product innovation to better serve customers and gain share.\nFor example, during the quarter, in the full-solution application space within general engineering, we introduced two best-in-class products, HPX Solid Carbide Drill which delivers 2 to 3 times more productivity than competing products, KCFM 45 face milling cutter, which offers greater flexibility and a cost-effective user friendly solution for a broad range of CNC machines.\nBased on our continued ability to deliver products that are highly valued by customers and the positive reaction to our brand repositioning, we are even more confident in our ability to gain share and drive top line improvement.\nIn addition, as you know, we are also focused on improving the bottom line.\nThe last time, the company experienced a sales decline of this magnitude, it was during The Great Recession.\nTrailing 12-month sales is shown on the left and corresponding adjusted operating margin is shown on the right.\nThe improvement in profitability compared to the earlier downturn, illustrating the benefits of simplification modernization, stronger cost control and remember of the present day numbers do not yet include the full run rate effect of the modernization activities we are currently undertaking.\nBy executing our commercial excellence and operational excellence strategies we are positioning the company for improved performance throughout the economic cycle.\nWe will begin on Slide 5 with the review of Q1 operating results, both on a reported and adjusted basis.\nChris mentioned, demand trends improved off low levels throughout the quarter and outpaced the 10% sequential seasonal decline we normally experienced in Q1.\nFor the quarter, sales declined 23% year-over-year.\nOn organic basis, sales were down 21% year-over-year.\nForeign currency in a business divestiture, each had a negative effect of 1% in the quarter.\nHowever, sales did increase 6% on a sequential basis, with approximately 3% attributed to foreign currency.\nAdjusted gross profit margin of 27% was down 50 basis points year-over-year.\nYear-over-year performance was primarily due to the effect of lower volumes and associated under-absorption, partially offset by the positive effect of the raw materials, which contributed approximately 650 basis points, incremental simplification/modernization benefits and temporary cost control actions.\nAdjusted operating expenses of $93 million were down $21 million or 18% year-over-year.\nAdjusted EBITDA margin was 11.3%, up 40 basis points from the previous-year quarter.\nAdjusted operating margin of 2.9% was down 180 basis points year-over-year.\nAdjusted effective tax rate in the quarter of 33.4% was higher year-over-year due to the combined effects of geographical mix and the continued effect of GILTI on the low level of U.S. taxable income.\nAlthough we expect our adjusted effective tax rate to remain elevated in the low to mid 30% range with these lower levels of earnings, we still expect our tax rate to be in the low to mid 20% range when we return to higher levels of profitability.\nWe reported a GAAP earnings per share loss of $0.26 versus earnings per share of $0.08 in the prior year period, reflecting the reduced volumes and higher tax rate, partially offset by raw materials, simplification/modernization benefits and temporary cost control actions.\nOn an adjusted basis, earnings per share was $0.03 per share versus $0.17 in the prior year.\nThe main drivers of our adjusted earnings per share performance are highlighted on the bridge on Slide 6.\nEffective operations this quarter amounted to negative $0.28, this compares positively to both the negative $0.60 in the prior year period and the negative $0.68 in Q4 of fiscal year 2020.\nThe largest factors contributing to the $0.28 was the effect of significantly lower volumes and associated under-absorption, partially offset by positive raw materials of $0.30 in strong cost control actions.\nSimplification/modernization benefits increased again this quarter totaling $0.20 on top of $0.07 in the prior year.\nThis brings the total benefit since inception from simplification modernization to a $123 million.\nAs Chris mentioned, our expectations continue to be that simplification/modernization benefits will be approximately $0.80 for fiscal year 2021, driven by actions already taken or announced and bringing the total expected cumulative savings to $180 million by the end of fiscal year 2021.\nIncremental savings from our restructuring actions contributed to $17 million of the $22 million in simplification/modernization savings this quarter.\nRemember, restructuring is a subset of our simplification/modernization program.\nSlide 7 and 8 detailed the performance of our segments this quarter.\nMetal cutting sales in the first quarter declined 23% organically on top of an 11% decline in the prior year period.\nAll regions posted year-over-year sales decreases, the largest decline in the Americas at negative 29% followed by EMEA at 24%, Asia Pacific posted the smallest year-over-year decline at 9%.\nPerformance in Asia Pacific reflects more positive economic activity in the region with approximately 10% growth in China year-over-year, partially offsetting weakness in other countries such as India.\nFrom an end market perspective, although improving sequentially, we still experienced year-over-year declines in transportation of 21% and general engineering of 20%.\nSales and aerospace experienced more significant declines, year-over-year and was also down sequentially driven by the COVID-19 associative effects on demand and the supply chain.\nRelatively speaking, energy was the best performing end market in metal cutting on a year-over-year basis with positive trends in wind and renewable energy.\nHowever, it is worth noting that the oil and gas portion of the energy end markets continues to be significantly challenged.\nAdjusted operating margin came in at 1% compared to 7.9% in the prior year quarter.\nThe decrease was primarily driven by a decline in volume and mix, partially offset by incremental simplification/modernization benefits, temporary cost control actions and raw materials that contributed 230 basis points.\nTurning to Slide 8 for Infrastructure.\nOrganic sales declined 18% on top of a decline of 11% in the prior year period.\nOther factors affecting infrastructure total sales were a divestiture of 4%, partially offset by a benefit from business days of 1%.\nRegionally, again the largest decline was in the Americas at 27% then EMEA at 9%, but this time followed by a 1% growth in Asia Pacific.\nBy end market, the results were primarily driven by energy, which was down 31% year-over-year, reflecting the effect of the significant decline in the U.S. land only rig count.\nGeneral engineering was down 14%, earthworks was down 11%, reflecting a continued production decline in Appalachian coal.\nAdjusted operating margin of 6.5% was up 700 basis points year-over-year.\nThis increase was mainly driven by favorable raw materials, which contributed 1,330 basis points, simplification/modernization benefits and temporary cost control actions partially offset by lower volumes and associated under-absorption.\nNow turning to Slide 9 to review our balance sheet and free operating cash flow.\nWe need to remain conservative to ensure the company has ample liquidity to weather the current environment as well as continue to execute our strategy.\nOur current debt maturity profile is made up of two $300 million notes maturing in February of 2022 and June of 2028 as well as a U.S. $700 million revolver that matures in June of 2023.\nAt quarter end, we had combined cash and revolver availability of approximately $760 million and largely repaid the $500 million revolver draw from last quarter.\nDuring the quarter we also amended our credit agreement to improve our flexibility given the continued uncertainty in the economic recovery.\nAt quarter end we were well within these financial covenants.\nPrimary working capital decreased year-over-year to $623 million, but was up sequentially as the decrease in inventory was more than offset by an increase in accounts receivable and accounts payable.\nOn a percentage of sales basis primary working capital increased to 36.4%, a reflection of the continued decline in sales.\nCapital expenditures were $39 million, a decrease of approximately $33 million from prior year as expected.\nWe continue to expect fiscal year '21 capital expenditures will be between $110 million to $130 million with the majority in the first half.\nOur first quarter free operating cash flow was negative $29 million that represents a year-over-year improvement of $15 million, largely reflecting the decline in capital expenditures.\nIn addition, we paid the dividend of $17 million in the quarter.\nThe full balance sheet can be found on Slide 14 in the appendix.\nAs a reminder, this slide details how we expect key factors affecting earnings per share and free operating cash flow to play out during each half of fiscal year '21 on a year-over-year basis and our expectations have not significantly changed since last quarter.\nI've already mentioned our expectations for increasing benefits from simplification/modernization this year, resulting in a year-over-year tailwind in both the first and second half of the year.\nTemporary cost actions will continue to be a year-over-year tailwind in the second quarter, although less of a benefit than in the first quarter as we are increasing our customer visits and rolling back certain temporary cost control actions.\nSequentially, the increase in cost in the second quarter will be in the range of $5 million to $10 million.\nThis continuation of these actions will result in a second half year-over-year headwind as we discussed last quarter.\nThe tungsten prices remaining in the $210[Phonetic] to $230[Phonetic] range, raw materials are expected to continue to be a tailwind in the second quarter, although at a reduced rate in neutral, for the second half on a year-over-year basis.\nAlthough, depreciation, amortization was flat year-over-year in the first quarter, we still expect it to be $10 million to $20 million higher for the full year, starting in the second quarter, as our new equipment comes online.\nIn terms of cash flow, as Chris and I already mentioned, capital spending will be significantly down this year, a tailwind in both the first and second half.\nYear-over-year cash restructuring will be higher in both halves as we execute the restructuring programs.\nIn terms of working capital, we'll be dependent upon the timing of the market recovery with both accounts receivable and accounts payable likely use up cash in the year, offsetting planned inventory reductions.\nAs a reminder, our target for working capital remains 30%.\nFinally, as it relates to Q2, as Chris mentioned, we expect sales to be up, low to mid-single digit sequentially, despite fewer working days in Q2[Phonetic] versus Q1.\nTurning to Slide 11, let me take a few minutes to summarize.\nI'm pleased that we have continued to make significant progress on our initiatives.\nWe are advancing commercial excellence, including a focus on fit-for-purpose customer applications, drive growth and market share gain.\nWe expect to be at target savings of $180 million for the program by the end of this fiscal year, despite much lower volumes.\nTiming of the completion of our simplification/modernization program as well as the renewed focus on commercial excellence will serve us well in a recovery.\nStrength[Phonetic] of our balance sheet and cash position will allow us to optimize capital allocation, while improving customer service and profitability even further, throughout the economic cycle.\nSo I'm fully confident we will achieve our adjusted EBITDA profitability target of 24% to 26%, when markets recover such that sales reach the target sales range of 2.5 to [Technical Issues].\nWith that, operator, please open the line for question.\n Assistant:", "chosen": "q1 loss per share $0.26.\nqtrly adjusted earnings per share $0.03.\n"}
{"prompt": "Human: We will be referring to that slide deck throughout today's call.\nI'm Kelly Boyer, Vice President of Investor Relations.\nJoining me on the call today are Chris Rossi, President and Chief Executive Officer; and Damon Audia, Vice President and Chief Financial Officer.\nThese risk factors and uncertainties are detailed in Kennametal's SEC filings.\nIn addition, we will be discussing non-GAAP financial measures today.\nReconciliations to GAAP financial measures that we believe are most directly comparable can be found at the back of the slide deck and on our Form 8-K on our website.\nFor today's call, I'll start with some general comments on the year followed by an overview of the fourth quarter.\nFrom there, Damon will review the quarterly financial results and our outlook in more detail.\nNow turning to Slide 2.\nIn fiscal year '21, despite the obvious COVID-19 challenges, we continue to operate safely to serve customers and invest in our commercial and operational excellence initiatives, including simplification/modernization.\nWe ended the year on a particularly strong note, with positive momentum heading into fiscal year '22, enabled by continued market recovery and advancement of our strategic initiatives that are transforming the company.\nThe additional simplification/modernization savings in fiscal year '21 bought the total savings achieved from the program to $186 million, in line with the target range we announced in our December 2017 Investor Day, despite lower volumes than we envisioned at that time.\nThis is a notable achievement.\nAnd while fiscal year '21 may have marked the end of investment in our simplification/modernization program, we will continue to drive benefits from this investment.\nIn fact, the structural cost savings for the program are already contributing to strong underlying operating leverage as volumes recover, which we saw in Q3 and Q4 of fiscal year '21 and expect to continue in fiscal year '22 and beyond.\nIn addition, our investment in modernized processes will drive future growth and share gain.\nThese investments enable higher levels of customer service and new product innovations, some recent examples of which include the HARVI I TE endmill, which was a 2021 Golden Edge Award winner for Best Product Innovation at the China International Machine Tool Trade Show and is helping us gain share in aerospace and general engineering.\nAnd our new indexable milling platform, Mill 4-15, designed to improve customer productivity to gain share, especially in general engineering.\nWe also saw a major win in the electric vehicle space with our RIQ Reamer, which was selected over top competitors by a major electric vehicle manufacturer for motor casings.\nWe would not have been able to make this tool without our investments in additive manufacturing as part of modernization.\nAnd finally, our fit-for-purpose products, which as a result, of modernization can now be produced at a price point and availability to win in a multibillion-dollar application space of metal cutting that we previously had not focused on.\nWe are making excellent progress in this space with growth of our fit-for-purpose product portfolio outpacing the broader general engineering and market growth.\nWe're also seeing success in renewable energy applications, such as the machining of components for wind turbines and our infrastructure business segment is successfully leveraging their simplification/modernization investments to improve global reach and expand into mining adjacencies.\nSo looking forward, we are excited and confident to deliver additional returns on our simplification/modernization investment as we leverage it for growth, share gain and improved profitability throughout the economic cycle.\nNow let's review a summary of Q4 on Slide 3.\nWe saw underlying momentum picking up across all our end markets, and in the fourth quarter we posted 29% organic growth versus a decline of 33% in the prior year quarter.\nOn a year-over-year basis, all regions and end markets posted positive growth, except aerospace.\nIt's worth noting, however, that on a sequential growth basis, Aerospace was one of the leading end markets.\nOur adjusted EBITDA margin increased to 19.2%, driven mainly by increasing volume and associated absorption, incremental simplification/modernization benefits, partially offset by the reversal of temporary cost control actions taken in the prior year.\nFree operating cash flow was $66 million for the quarter and $113 million for the full year.\nAdjusted earnings per share was $0.53 for the quarter.\nGraph on the left shows the sales level on a rolling 4-quarter basis through the downturn relative to our sales during the Great Recession while the graph on the right shows the corresponding adjusted operating margin.\nThe margins at the trough were 600 basis points higher through this downturn, illustrating our substantially improved cost structure.\nAlso note that the current trend lines are showing an upswing in both revenue and margin.\nAnd we believe that these trends will continue in fiscal year '22, supported by the strong operating leverage from our simplification/modernization investments as demonstrated on Slide 5.\nYou can see from the slide that on a sequential basis we increased operating income by 57% on a 6% increase in sales.\nThis strong operating leverage is also evident on a year-over-year basis and even more impressive when you consider the roughly $45 million of temporary cost actions we took in the prior year quarter.\nI will begin on Slide 6 with a review of our Q4 operating results on both a reported and adjusted basis.\nAs Chris mentioned, demand trends improved significantly year-over-year and our results highlight the strong operating leverage we are now demonstrating from our continued focus on commercial and operational excellence.\nFor the quarter, sales of $516 million improved 36% year-over-year and 29% on an organic basis from the low of $379 million in the fourth quarter last year.\nForeign currency had a positive effect of 6% on sales and business days contributed another 1%.\nAdjusted gross profit margin of 34.5% was up 680 basis points year-over-year.\nAdjusted operating expenses increased year-over-year to $108 million, reflecting the reversal of temporary cost actions taken last year.\nNevertheless, we were able to hold our operating expenses at 20.9% of sales, close to our target of 20% this quarter.\nAdjusted EBITDA margin increased to 19.2%, up 150 basis points from the prior year quarter and adjusted operating margin of 12.8% was up 400 basis points year-over-year.\nThe 19.2% adjusted EBITDA margin is another validation point related to the successful execution of commercial and operational excellence.\nThe last time adjusted EBITDA margins were over 19% was in the third and fourth quarters of fiscal year 2019, and that was based on quarterly sales of approximately $600 million or 15% higher than this quarter.\nThis is yet another data point of the structural cost improvements we have made in confirming our ability to achieve the 24% to 26% adjusted EBITDA margin target as sales reached the $2.5 billion to $2.6 billion level.\nThe improved year-over-year performance was related to higher volumes and associated absorption, benefits from simplification/modernization and a slight positive from price and raw materials, partially offset by roughly $45 million of temporary cost actions taken last year and a modest mix headwind.\nThe adjusted effective tax rate in the quarter was 24.3%, a more normalized level than the previous year due to higher pre-tax income as well as a reduced effect of GILTI on the effective tax rate this quarter.\nThe adjusted effective tax rate for the full year was approximately 23.6% as expected.\nWe reported GAAP earnings per share of $0.41 versus a loss per share of $0.\n11 in the prior year period.\nOn an adjusted basis, earnings per share was $0.53 per share versus $0.15 in the prior year quarter.\nThe main drivers of our adjusted earnings per share performance are highlighted on the bridge on Slide 7.\nThe effect of operations this quarter amounted to positive $0.02 compared to negative $0.68 in the prior year quarter and negative $0.33 in the third quarter of this fiscal year.\nThe operations bucket turned positive for the first time since Q3 of fiscal year '19, reflecting improving volumes offset by approximately $0.26 related to the reversal of temporary cost actions in effect last year.\nSimplification/modernization contributed an incremental $0.13 in the quarter, bringing the total FY '21 simplification/modernization savings to $0.68 or $85 million and $186 million for the total program.\nThe detailed full year results can be found in the appendix.\nSlides 8 and 9 detail the favorable performance and continuing progress we have achieved on our initiatives in our segments this quarter.\nMetal cutting sales increased 30% organically versus a 35% decline in the prior year period.\nAll regions posted year-over-year sales increases with the largest increase in EMEA at 37%, followed by the Americas at 30% and Asia Pacific at 23%.\nThe slightly lower sales growth in Asia Pacific reflects the earlier timing of the recovery in China last year as well as the ongoing challenges in India this quarter due to a surge in COVID-19 cases.\nFrom an end market perspective, on a year-over-year basis, the increasing strength in demand is broad-based.\nTransportation was the strongest end market with 50% growth, followed by general engineering, up 35%.\nEnergy was up 4% year-over-year despite slowing demand in China due to the reduced wind subsidies.\nAlthough aerospace declined 7% year-over-year, it showed the strongest sequential improvement, up 10%.\nIn addition to aerospace, on a sequential basis, General Engineering also showed strong signs of improvement and energy was slightly positive.\nTransportation declined 11% sequentially due to the temporary supply chain challenges, which force transportation customers to slow their metal cutting factories like engine plants to better align with their overall production.\nBased on comments from our customers, we expect these challenges to persist into our fiscal first quarter and to start to improve sequentially thereafter.\nHowever, the situation continues to be fluid and different customer by customer.\nAdjusted operating margin improved 540 basis points to 11.7% compared to 6.3% in the prior year quarter.\nThe increase was primarily driven by volume and associated absorption, simplification/modernization benefits and price and raw material benefits, partially offset by temporary cost actions taken last year and a modest mix headwind.\nTurning to Infrastructure on Slide 9.\nOrganic sales increased 28% year-over-year versus a 29% decline in the prior year period.\nFX and business days contributed positively to sales in the amount of 5% and 1%, respectively.\nRegionally, the largest increase year-over-year was in the Americas at 35%, then EMEA at 29% and Asia at 14%.\nBy end market, the results were primarily driven by general engineering and energy, up 42% and 41%, respectively.\nEarthworks was up 12%.\nThe bright spots in Earthworks this quarter were in the Americas in agriculture and forestry and in EMEA construction.\nAdjusted operating margin increased to 14.5% from 12.7% in the prior year quarter.\nThe improvement was driven by higher volumes and associated absorption, simplification/modernization benefits, a slight positive effect from price and raw materials, partially offset by temporary cost actions taken last year in mix.\nNow turning to Slide 10 to review our balance sheet and free operating cash flow.\nWe continue to maintain a very strong liquidity position, healthy balance sheet and debt maturity profile.\nAt fiscal year-end, we had combined cash and revolver availability of approximately $850 million.\nPrimary working capital of $602 million was relatively flat year-over-year and down approximately $13 million sequentially.\nOn a percentage of sales basis, it decreased to 33.4% as our focus on working capital during the year continued to strengthen our free operating cash flow even as sales have increased.\nOur primary working capital target remains 30%, which we expect to approach by the end of this fiscal year.\nOur fourth quarter free operating cash flow was $66 million, a significant year-over-year increase, reflecting higher income due to volume and strong operating leverage.\nThis is similar on a full year basis with free operating cash flow of $113 million compared to negative $18 million last year.\nNet capital expenditures for the quarter were $30 million, a decrease of approximately $8 million from the prior year, bringing the total net capital spend for the year to $123 million, in line with our expectations.\nWe also paid the dividend of $17 million in the quarter.\nThe full balance sheet can be found on Slide 18 in the appendix.\nStarting with the first quarter, we expect sales to be in the range of $470 million to $490 million.\nAt the midpoint, this implies year-over-year growth of approximately 20% and approximately 7% sequential decline, which is stronger than our normal Q4 to Q1 pattern.\nAt the midpoint of the sales outlook, we have assumed there will be no significant sequential change in the supply chain challenges in transportation.\nWe expect these challenges to persist into our fiscal first quarter and to start to improve sequentially thereafter.\nHowever, the situation continues to be fluid.\nAlso, we do not expect to see demand adversely affected from additional lockdowns associated with the COVID-19 Delta variant.\nLastly, we are planning for the typical EMEA first quarter extended vacation and summer shutdowns for our customers.\nAssuming our current outlook, we expect adjusted operating income to be a minimum of $45 million and to improve by at least 300% year-over-year despite the $15 million in Q1 year-over-year headwinds related to temporary cost actions taken last year.\nAlso, we expect the adjusted effective tax rate to be in the range of 25% to 28%, and depreciation and amortization will increase $3 million to $4 million year-over-year.\nLastly, we expect free operating cash flow to be slightly negative, which is typical in the first quarter.\nRegarding the full year, visibility remains limited in the current environment.\nBut at this time, we would expect to exceed normal sequential growth patterns throughout the year.\nFurthermore, we are confident that we will continue to achieve strong annual operating leverage in any growth scenario.\nKeep in mind, this annual operating leverage is excluding approximately $25 million of year-over-year headwinds from temporary cost actions taken last year, of which approximately $15 million will return in Q1 and the remaining $10 million in Q2.\nAlso, it's important to note that leverage may vary quarter-to-quarter.\nFor example, in the first quarter, after adjusting for temporary cost actions, the operating leverage is expected to be higher than our normal annualized level as Q1 has the greatest combined effect of raw materials and pricing compared to the remainder of the year.\nMoving on to other variables for the full year.\nWe expect an adjusted effective tax rate of 25% to 28%.\nDepreciation and amortization is expected to increase $15 million to $20 million year-over-year to a range of $140 million to $145 million.\nCapital expenditures will be consistent with this year and in the range of $110 million to $130 million.\nAs I mentioned earlier, we expect primary working capital to trend toward our 30% goal by the end of the fiscal year.\nTogether, this will translate to free operating cash flow generation and approximately 100% of adjusted net income, in line with our long-term target, which further demonstrates our progress in transforming the company by continued execution of our operational and commercial excellence initiatives.\nLooking ahead in fiscal year '22, we are excited to build off Q4's momentum by leveraging our modernized footprint and strong operating leverage to drive growth and higher profitability as well as cash flow at approximately 100% of net income.\nWe expect the end market recovery to continue.\nAnd though visibility remains limited right now, we expect growth to outpace our normal quarterly sequential trends throughout the year.\nThis sales performance will be driven both by market growth and our commercial excellence initiatives, aimed at gaining share in targeted end markets, including growth of our fit-for-purpose offering.\nIn summary, I believe fiscal year '22 will be a year where we further demonstrate the ability to achieve our adjusted EBITDA target when sales reached $2.5 billion to $2.6 billion by continuing to execute on our strategic operational and commercial excellence initiatives.\nAnd I look forward to further outlining the details of these strategic initiatives at our next Investor Day, which is tentatively planned for early next calendar year.\nWe'll provide more details on that as we get closer to the date.\n Assistant:", "chosen": "q4 adjusted earnings per share $0.53.\nq4 earnings per share $0.41.\nq4 sales $516 million versus refinitiv ibes estimate of $514.2 million.\nsees q1 sales up 17 to 22 percent.\nsees fy 2022 capital spending is expected to be $110 million - $130 million.\nsees fy 2022 primary working capital trending toward 30 percent of sales by year-end.\nsees fy 2022 adjusted etr expected to be 25% - 28%.\n"}
{"prompt": "Human: I'm here today with Bill Nash, our president and CEO; Tom Reedy, our executive vice president of finance; Enrique Mayor-Mora, our senior vice president and CFO; and Jon Daniels, our senior vice president, CAF operations.\nCeleste has been an integral part of our IR program for almost 20 years, and I'm sure you will all agree, she'll be deeply missed.\nCeleste, we wish you all the joy and happiness retirement can bring.\nNet earnings up 27% to $297 million and earnings per share up 27.9% to $1.79.\nThis performance was the result of strength across all aspects of our business: retail, wholesale and CAF.\nWe are proud to be the nation's largest and most profitable retailer of used car.\nI'm also proud to say that this quarter, we completed the rollout of our omnichannel offerings.\nThis has been years in the making and has required a remarkable level of focus and change across our entire organization.\nDuring this time, we have evolved nearly every aspect of our business.\nFrom how we support and interact with our customers to how we structure our staffing to how we buy, sell and deliver cars.\nOur omnichannel experience is built to provide a personalized multichannel experience that empowers customers to buy a car on their terms.\nIt is designed as a world-class in-store experience, a world-class online experience and a seamless integration of the two, giving us the largest addressable market within the used car industry.\nNo other used car retailer is in the position to deliver this iconic customer experience the way we can.\nNow turning to our results.\nFor the second quarter, we achieved a 3.9% increase in total used units sold and the used unit comp growth of 1.2%.\nIn June, we experienced a high single-digit negative used unit comp which was more than offset by positive comps in both July and August.\nThe improvement in sales was the result of a variety of factors, including solid execution in operations, finance and marketing in addition to a strengthening used car sales environment.\nIn the quarter, we saw solid growth in web traffic, averaging approximately 29 million visits per month to carmax.com.\nDuring the second quarter, our saleable inventory was below our targeted level as we saw a rapid increase in demand from the first quarter.\nFor the past three months, our teams have done a phenomenal job buying and producing vehicles at record levels, increasing salable inventory by more than 50% in the quarter.\nToday, I'm pleased to report that we've successfully ramped inventory to targeted levels, providing customers with more than 55,000 vehicles nationwide, the largest of any used car retailer.\nWe offer a broad selection of inventory with a focus on zero to 10-year-old vehicles.\nThis quarter, we saw five to 10-year-old vehicles increased to 27% compared with 22% last year as a percentage of our sales mix, reflecting customer demand for older and less expensive vehicles.\nGross profit per used unit for the quarter was $2,214 up $31 per unit from a year ago.\nFor wholesale, performance was supported by strong appreciation in the market and excellent execution by our teams.\nVolume was up 5.1%, driven by one more auction date in the quarter and a record buy rate.\nWe also achieved record gross profit per wholesale unit of $1,086 in the quarter, the result of strong appreciation and operational execution.\nBy the end of the quarter, we saw depreciation return to the marketplace.\nAs a reminder, all auctions continue to run virtually throughout the quarter.\nAs our results show, we have achieved a substantial recovery in our business.\nOver the past several months, our talented workforce has demonstrated incredible agility and ability to drive change in one of the most challenging environments that we've ever faced.\nWe are proud to say that by the end of July, our team was back together again, and we no longer had associates on furlough.\nWe are now actively hiring across the country as we continue to grow our core business, enhance our omnichannel offerings and pursue new opportunities.\nFor the quarter, other gross profit increased $6.8 million or 5.8%.\nEPP profits grew by $6.1 million or 5.4%, largely due to the increase in used units sold.\nIn the quarter, we also recognized $8.2 million in extended service plan profit sharing revenues compared with $6.5 million recognized a year ago.\nIn the second quarter, we maintained our ESP penetration above 60% compared with the prior-year quarter.\nService profits increased $4.5 million or 31%, which benefited primarily from the improved sales growth and the employee retention tax credit from the CARES Act.\nThe increase in EPP and service profits were partially offset by a $5 million increase in net third-party finance fees attributable to a shift in our sales mix by finance channel.\nOn the SG&A front, expenses increased 2% to approximately $9 million to $490 million.\nSG&A per used unit was $2,256, a year-over-year leverage of $44 per unit on the quarter.\nExcluding the impact of stock-based compensation, SG&A leverage was $97 a unit.\nNotable SG&A expense drivers for the second quarter were: the opening of 14 stores since the beginning of the second quarter of last year, which represents a 7% growth in our store base; a $12 million or $53 per unit increase in share-based compensation expense; a 7.7% increase in advertising expense and continued spending to advance our technology platforms and support our core and omnichannel strategic initiatives.\nOur ability to leverage SG&A in the quarter was supported by the decisive actions we took at the start of the pandemic to appropriately manage costs in a challenging environment.\nWe furloughed associates and froze hiring for a period of time, rightsized certain functions, aligned other overhead costs to the business and paused our store expansion strategy, thereby reducing preopening costs in the quarter.\nWe also experienced year-over-year favorability in the quarter due to lower self-insured loss and litigation-related expenses.\nWe remain committed to ensuring we are efficient in our spend, and we expect that targeted areas of focus will continue to deliver improvements over time.\nExamples of these areas include improving the efficiencies of our customer experience centers or CECs, strategic sourcing and inventory production.\nAt the same time, we are very bullish about our future, given our unique customer offering.\nWe recognize that we have an opportunity to capitalize on our current position and grow market share.\nAccordingly, we remain in a period of investment as we continue to evolve our omni experience in the areas of vehicle and customer acquisition.\nWe also planned in the back half of this year to increase our year-over-year spend in marketing, which Bill will address shortly.\nFrom a capital allocation perspective, we remain focused on growing the business while managing with the appropriate amount of caution given the uncertainty that remains in the macro environment.\nFirst, we are ready to resume store growth and are currently planning for eight to 10 new stores in FY '22.\nAnd second, subsequent to the end of the quarter, we fully paid down the outstanding balance in our revolver.\nGiven the turnaround in our business, the strength of the credit markets and our solid balance sheet, we are confident that we have the appropriate liquidity and access to capital.\nFinally, we ended the quarter modestly below our historical leverage target of 35% to 45% adjusted debt-to-capital when netting out cash.\nSimilar to our retail and wholesale business, CarMax Auto Finance and our partner lenders delivered with strong conversion in all credit tiers, and solid growth in cap income independent of the favorable loss experience.\nAs we previously discussed, CAF made some temporary underwriting adjustments early in the pandemic, with the goal of ensuring financeable Tier 1 portfolio.\nWhile we remain cautious in our outlook, we are pleased with the trends we have experienced to date.\nPayment extensions are down significantly, delinquencies are trending favorably, and our July ABS transaction was well received.\nConsequently, in the back half of the quarter, we began originating our normal spectrum of Tier 1 business.\nCAF also curtailed its in-house Tier 3 lending at the start of the pandemic.\nAnd did not originate any loans through this channel in the second quarter.\nBased on the trends I just mentioned, we have reengaged in the Tier 3 space in recent weeks.\nNow I'll turn to performance in the quarter.\nNet of three-day payoffs, they were significantly lower year over year.\nCash penetration was 42.6% compared with 42.2% a year ago.\nTier 2 accounted for 22.3% of used unit sales compared with 19.7% last year.\nAnd Tier 3 was up to 11.1% compared with 9.6% a year ago.\nYear over year, cash net loans originated grew by 1% to $1.8 billion as the increases in used cars sold and penetration rate were somewhat offset by a lower average amount finance.\nFor loans originated during the quarter, the weighted average contract rate charged to customers was 8.2%, down from 8.6% a year ago and 8.4% in the first quarter.\nThe lower rate reflects our focus on a higher-quality portfolio for much of the quarter.\nPortfolio interest margin as a percent of average managed receivables increased to 6% versus 5.7% in Q2 last year.\nCombined with our growth in receivables, this drove an increase in total interest margin of 7.4%, independent of any favorability in the provision for loan losses.\nTotal CAF income for the quarter was up 29% to $147.2 million.\nThis improvement primarily reflected a reduced loan loss provision, plus the increase in both interest margin and average managed receivables.\nThe provision for loan losses was $26 million in Q2, which results in an ending reserve balance of $433 million.\nThat's 3.2% of average managed receivables, which is moderately lower than at the end of Q1.\nWhile its loss experienced in June, July and August was significantly favorable to the expectations we set at the end of Q1.\nThe loss reserve continues to reflect the unpredictability of the current environment in the highly uncertain consumer situation.\nOur results in Q2 illustrate the importance of having a diverse group of lenders that can continually deliver high-quality finance offers to our broad range of customers in all economic environments.\nIn addition, having a fully functioning captive finance such as CAF offers numerous contributions to the business model that are difficult to replicate.\nAs I mentioned earlier, we have completed the rollout of our omnichannel offering.\nThe powerful integration of our online and in person experiences give us the largest addressable market within the used car industry.\nAlong with the ability to buy online, customers are also seeking experienced guidance along the way.\nWe are uniquely capable of providing this help whenever and wherever the customers want with our centralized CECs, experienced floor sales consultants and personalized e-commerce capabilities.\nBuying a used car is still a highly considered and complex purchase.\nCustomers don't want to be forced to interact 100% in-store or 100% online.\nOur competitive advantage is giving customers the option to seamlessly do as much or as little online and in-person as they want.\nWhile omni is now rolled out nationwide, it is still early in its evolution, and we will continue to make enhancements to meet and exceed our customers' current and future needs.\nOne area of focus is our CECs.\nAnd although a relatively new capability for us and still maturing, they are quickly becoming more effective than our previous model.\nAn example of how we are optimizing performance is by leveraging our data advantage and machine learning to ensure we get the right work to the right associate at the right time.\nWe capture our customers' online interactions, combine them with the information in our customers' data mark, and provide a truly personalized experience that is much more effective in meeting the customer needs and improving our conversion rates.\nWe believe that we have an unmatched opportunity to create a superior customer experience by leveraging our data and technology advantages, both online and in-store.\nDigital merchandising is another area of continuous improvement.\nBy the end of this year, we will have rolled out approximately 95% of our photo studios, which provide a more immersive experience with high-quality photos, 360-degree interior and exterior views, feature scoring hotspots and reconditioning with new part call outs.\nWe also continue to upgrade content on our website to help customers fully research a vehicle without ever having to leave carmax.com.\nAll this provides our customers more confidence as they progress online.\nThe other omni area of focus that I will highlight is our customer hub, which provides customers a means to track the progress they have made, both online and in-person.\nIt is here that customers can manage certain aspects of their car-buying journey.\nThey can book mark and save vehicles they've selected online.\nThey can submit financing pre-approval and compare their financing options.\nThey can also get an estimate or an actual offer for their trade-in.\nAnd finally, they can complete the checkout process in the hub for the car they selected online or in-store and choose if they want a home delivery or a curbside pickup.\nOur omnichannel experience has been well received.\nApproximately 70% of our customers interacted with our CECs this quarter.\nAdditionally, approximately 50% of our customers progressed their sale remotely, up from about 42% pre-COVID.\nMost of these customers still chose to come to the store to complete their transaction, and approximately 30% of our customers still opted for an in-store experience only.\nAgain, the advantage of our business model is that customers have the choice as to how they progress their experience.\nThis is what gives us the largest addressable market.\nWe are focused on driving customer engagement strategies to ensure we continue to remain top of mind and the first choice for car buyers and sellers.\nWe launched a national marketing campaign last year, which has reinforced the strength of our brand and established a solid platform for future campaigns.\nWe've now introduced our omnichannel offering nationwide.\nAccordingly, as we go forward, our messaging will focus on clearly differentiating our brand from digital-only and traditional dealer brands by demonstrating the benefits of our omnichannel offering.\nAdditionally, we will be increasing our year-over-year marketing spend in the back half of the year to expand our teams and investments in areas such as SEO, SEM, messaging, content and social.\nOur goal is to drive high ROI customers to our digital properties, while empowering us to create multichannel personalized campaigns.\nWe have a unique retail customer experience that we are continuing to evolve to exceed our customers' expectations.\nAt the same time, we are identifying and investing in new initiatives that we believe will also be solid contributors to our earnings growth.\nAll of this leads to a very exciting future, but none of this would be possible without our great associates.\nI want to recognize all of them and the high-performance culture they maintain here at CarMax, a culture that values all individuals and perspectives.\nOver the past several years, we have taken on the largest transformation in our company history, evolving nearly every aspect of our business.\nWe also accomplished all these great results in one of the most challenging environments we've ever faced.\nAnd through it all, our associates have continued to live our values every day by putting people first and taking care of each other.\nI am very proud of what we've accomplished, and I'm excited about the opportunities ahead.\n Assistant:", "chosen": "q2 earnings per share $1.79.\nqtrly total used units increased 3.9%; used unit sales in comparable stores rose 1.2%.\nqtrly total wholesale units increased 5.1%; wholesale gross profit per unit up $158 or 17.0%, to $1,086.\nresuming store openings, with 8 to 10 new stores planned in fiscal year 2022.\na strengthening used car selling environment also benefited the quarter.\nreturned to targeted inventory levels in september.\npositive comparable used unit sales in both july and august more than offset the high single digit negative comps experienced in june.\n"}
{"prompt": "Human: I'm Quynh McGuire, Vice President of Investor Relations.\nYou may access it via our website at www.\nAs indicated in our announcement, we've also posted materials to the Investor Relations page of our website that will be referenced in today's call.\nReferences may also be made today to certain non-GAAP financial measures.\nJoining me for our call today are Leroy Ball, President and CEO of Koppers; and Mike Zugay, Chief Financial Officer.\nWe'll start on Slide three where there's a save-the-date for our upcoming Investor Day scheduled to be in Pittsburgh on Monday, September 13, starting at 9:00 a.m. Eastern Time.\nNow while there will be an option to join the meeting remotely, we hope that the current developments regarding COVID tamp down enough so that you feel comfortable enough joining us in person for this event.\nOf course, we'll continue to closely monitor health and safety guidelines regarding the COVID-19 pandemic, and we'll have appropriate safety protocols in place.\nInvitation with specific details of the event will be distributed in the coming weeks.\nNow as mentioned, we're also providing remote option to attend.\nNow let's move on to Slide five.\nKoppers continues to serve in an essential role, such as keeping railroads safe so they can transport critical goods, helping to provide power and connectivity to homes and businesses and keeping our infrastructure strong and reliable, both home and away.\nOur team members take this responsibility seriously, and we are incredibly proud to do our part to keep the global economy moving and growing.\nNow let's take a look at our Zero Harm activities and results, as shown on Slide seven, which details the changes in guidance recently outlined by the Center for Disease Control due to the rise in COVID-19 cases from the Delta variant.\nThe Occupational Safety and Health Administration followed suit, directing all U.S. employers to adhere to the CDC's updated guidelines, and we've communicated these updates to our employees and have adopted them at each of our applicable locations.\nThe primary driver of mask requirements is now based on a county-by-county measurement of disease transmission rates.\nA high rate, which is red or significant rate, which is orange, means masks must be worn by all individuals indoors, regardless of whether they've been vaccinated fully, partially or not at all, or whether they've already been infected by COVID-19.\nKoppers has also updated our Zero Harm lifesaving role to reflect these new requirements as described on Slide eight.\nIn the counties with high or significant infection rates, vaccinated employees must wear a mask in public indoor environments and unvaccinated employees must mask and social distance from others.\nThese same guidelines are in effect for employees returning to the office.\nHowever, vaccinated employees do not need to mask, if alone in their office.\nIntentional violations of life-saving rules could lead to disciplinary actions up to and including termination of employment.\nUnfortunately, COVID is not going away quietly and with vaccination rates at our locations ranging anywhere from 22% to 76%, we need to continue to practice good behaviors to keep our people safe.\nAnother Zero Harm news, as seen on Slide nine, following delays due to the pandemic, we've begun reaching frontline employees directly by rolling out a series of Zero Harm in-person training workshops.\nOne of the first examples came when our Zero Harm trainer spent time with our railroad structures frontline employees in the Chicago area, conducting workshops, both in a classroom setting and in the field.\nSimilar trainings have been conducted in Galesburg and Guthrie with more sessions scheduled for the third quarter and the remainder of 2021.\nThe idea, as always, is to illustrate and illuminate specific steps to prevent exposure to unsafe conditions and practices, but also to an instill an epithet mindset, where every employ actively and intuitively is always looking out for other team members and placing safety first.\nWe continue to strongly promote employee vaccinations, addressing misinformation with a special video produced in partnership with the Allegheny Health Network here in Pittsburgh.\ntwo expert physicians, neither of whom are affiliated with Koppers in any way, are featured in the video speaking about how the vaccines were developed and their safety and effectiveness.\nOur purpose in sharing this video is to help overcome any hesitation or concerns among our unvaccinated employee population.\nIn addition, our $250 vaccination incentive remains in place.\nOn another note, the wildfires on the West Coast of the U.S. and Canada have continued their devastation and recently came close to our Koppers Ashcroft facility, forcing employees to evacuate.\nOur operation was down for a total of 11 days as Wildcat Fire Services arrive to fight the fires and keep our people and our facilities safe.\nThe men and women of Wildcat and other fire services like them are amazing, heroic and every other superlative adjective you want to apply to them.\nOn Slide 10 through 15, we have a number of notable happenings that have occurred in the past quarter.\nAnd I won't go through them in any detail, you can do that on your personal time, if you'd like.\nSo in the meantime, I would like to turn the program over to Mike to discuss the second quarter results.\nLet's start on Slide 17, that shows consolidated sales were $441 million, an increase of sales from $437 million in the prior year.\nSales for RUPS were $196 million, down from $210 million.\nPC sales rose to $146 million, up from $137 million, and CM&C sales came in at $100 million, up from $90 million.\nMoving on to Slide 18.\nAdjusted EBITDA for the first quarter was $66 million or approximately 15%, up from $60 million or 14% in the prior year.\nCompared to the prior year, adjusted EBITDA for RUPS was $12 million, down from $23 million.\nPC EBITDA rose to $35 million, up from $29 million, and CM&C EBITDA improved to $19 million, up from $7 million.\nOn Slide 19, sales for RUPS were $196 million and declined from $210 million in the prior year.\nThis was primarily due to lower Class I crossties treating volumes and customers deferring purchases because of price increases associated with a temporary shortage of untreated crossties.\nSome sawmills shifted their capacity to serve higher demand construction lumber.\nThese decreases were partially offset by an increase in the crosstie disposal business.\nMoving on to Slide 20.\nAdjusted EBITDA for RUPS was $12 million in the quarter compared with $23 million in the prior year.\nThis was driven by lower treating volumes, which resulted in reduced absorption of fixed cost.\nWe experienced lower volumes in our Utility business caused by transitioning the production from our former facility in Jasper, Texas to our Summerville, Texas plant.\nAlso higher raw material costs impacted profitability.\nA bright spot was our Australian Utility pole business, which achieved higher margins in Q2.\nOn Slide 21, sales for PC were $146 million in the quarter compared to sales of $137 million in the prior year.\nIn Q2, we experienced strong -- continued strong international sales as well as price increases for copper-based preservatives in the Americas.\nThese positives were partially offset by lower treating levels in North America due to lumber treaters tightly managing their inventory as a result of high lumber prices.\nOn Slide 22, adjusted EBITDA for PC was $35 million compared with $29 million in the prior year.\nThe higher profitability can be attributed to higher sales volumes, lower raw material costs from our copper hedging programs and ongoing strong demand in the home repair and remodeling segments.\nSlide 23 shows CM&C sales at $100 million for the quarter compared to sales of $90 million in the prior year.\nThe year-over-year increase was primarily due to higher pricing for carbon black feedstock in Europe and for phthalic anhydride in North America, partially offset by lower volumes of carbon pitch in North America, which was due to a temporary plant outage, lower pitch volumes in Europe and lower pitch pricing in Australia.\nMoving on to Slide 24.\nAdjusted EBITDA for CM&C was $19 million in the quarter compared to $7 million in the prior year.\nThis increased profitability was driven by higher product demand, favorable pricing in certain markets, strong operational efficiencies and the receipt of an insurance proceed.\nAs demand continues to recover, our efficient cost structure will continue to drive higher margins.\nNow let's review our debt and liquidity.\nAs seen on Slide 26, at the end of June, we had $760 million of net debt with $330 million in available liquidity.\nWe continue to project $30 million of debt reduction for 2021 and expect to be at a 3.1 times to 3.2 times net leverage ratio by year-end.\nWe remain comfortably in compliance with all debt covenants and have no significant debt maturities until 2024.\nOur net leverage ratio dropped to 3.2 times at June 30, down from 3.5 times at December 31, 2020, and it also showed a significant decline from 4.5 times in the prior year quarter.\nLong term, our net leverage goal continues to be between two times and three times.\nNow I'd like to give a little bit more color on each of our business segments, which includes some feedback from our customers and our suppliers.\nSo starting with Performance Chemicals on Slide 28.\nThe moment we knew was coming at some point in time, began actually occurring in the midpoint of Q2 as the U.S. lumber market finally peaked and then began a precipitous descent.\nLumber futures are currently trading at 1/3 of their peak from mid-May, and everyone is still a little skittish as to where things are going in the near term.\nThis has led to treaters and retailers trying to push their high-cost inventory through the system while working hand to mouth on replenishment, so a not to find themselves heavy on inventory on the wrong side of a dropping market.\nAnd while you can never quite be entirely certain, according to our industry contacts, we're at or near the bottom of this curve.\nAnd it's correct and the treaters are expected to gradually increase their buying and treating activity within the next month.\nTo provide some perspective, while our Q2 was a record sales and adjusted EBITDA quarter for PC, we did see a 17% drop in sales from May to June and even more pronounced drop in EBITDA for that period as business pulled back.\nQ3 thus far has been more of the same, but what we are being told is that as lumber pricing moderates, and people get back from their vacations, demand is expected to pick back up as DIYers and contractors push forward on their backlog of projects.\nAlso, we're generally seeing favorable demand in 2021 from our international markets, and they will exceed their pandemic effective 2020 results, which will help offset some of the reduced demand that we're seeing in North America currently.\nIn terms of gaining market share, we're seeing customer consolidations in 2021.\nIt should present new volume growth in the fourth quarter of this year and into 2022, supported by our continued investments in capacity expansion.\nFrom an overall macro standpoint, we're seeing favorable trends that continue to benefit our PC business overall.\nExisting home sales in June increased 1.4% from May, marking sales higher than prior year by 22.9%, with all four major U.S. regions experiencing double-digit year-over-year gains according to the National Association of Realtors.\nThe leading indicator of remodeling activity states that spending on home renovation repairs will reach 8.6% annual growth and surpass $380 billion by mid-2022.\nAnd in July, the Consumer Confidence Index stands at 129.1, the highest level since February of 2020, with consumer spending expected to support robust economic growth in the second half of this year.\nLooking at the international markets on Slide 29.\nWe're working to expand PC sales in overseas markets like Chile, Brazil and others, even as Europe continues to deal with regulatory and supply chain issues.\nWe do expect copper costs to be higher year-over-year for mid-2022 and beyond, but we remain relatively protected with current hedges in place.\nNow if the price of copper does not decline to pre-pandemic levels over the next year, then significant pricing adjustments will need to be put into effect to account for the increase in cost.\nSlide 30 highlights our UIP business, where there's a lot of transition happening.\nWe've been working hard to bring our Summerville, Texas treating plant up on pole production as we exited our operating agreement for the TEC Jasper, Texas plant.\nWe shipped our first poles out of Summerville during the second quarter and are beginning to build our business organically in the Texas market, which has a lot of upside.\nWe expect demand to remain strong in the U.S. and Australia throughout the balance of this year, but we will likely experience some limited sales decline due to our Texas transition.\nThe good news is the sales that are being displaced, were low-margin business.\nSo therefore, EBITDA should improve as we begin building a bigger book of business for Summerville.\nWe benefit from the fact that utilities need to maintain their infrastructure to avoid service interruptions, a need brought into sharper focus as more people choose to work remotely.\nAnd as such, infrastructure is spending for improving broadband availability and the utility grid is projected to increase.\nDemand is also expected to increase for poles among U.S. utilities for project work and upgrades that were delayed by the pandemic.\nPiling business also is opening up with new construction in the Mid-Atlantic region, which will provide additional opportunities.\nWood supply remains strong and pricing steady even as transportation costs increased due to rising diesel fuel costs and lack of third-party trucking.\nWe're working to pass our inflationary cost increases on, but are currently behind the curve and look to catch up as the year progresses.\nAnd with production of Penta ceasing by year-end, we're capturing market share among customers transitioning to new preservatives by converting our facilities from penta treating to CCA and other wood preservatives.\nWe're currently in the middle of a conversion at our Vidalia, Georgia plant, and should have it back online by the end of this quarter with the conversion of our advanced Alabama plant lined up next.\nIn Australia, wildfires have provided a solid demand for poles as utilities need to update an aging network and infrastructure, plus the lack of availability of hardwoods has opened opportunities up for us to market our pine pole alternatives.\nThere are a number of contributing factors to this year shaping up to be one of the better years our Australian pole business has ever experienced.\nMoving on to our railroad products and services business on Slide 31.\nI would say I'm generally more pessimistic about the year compared to where I was last quarter.\nThe pandemic has had an effect on every market it seems, and the effect for this portion of our business has moved from a positive in 2020 as more track work is getting done online with less traffic to a negative in 2021 as pandemic fuel demand for other products produced by sawmillers has pushed up the pricing to get adequate levels of untreated material for crossties to a point where it's affected their buying patterns.\nWe've experienced this phenomenon a couple of times over the past seven to 10 years, and we'll need to ride it out as supply demand either normalizes, crosstie pricing moves up or some combination of the 2.\nNow on the plus side, this is temporary, and we believe will correct itself, but we'll probably not see that until we get out into 2022.\nWe're continuing to work on securing Class I contract renewals in 2021 with a focus on improving utilization at our facilities.\nFeeding into those plants is the ongoing expansion at our North Little Rock, Arkansas plant, which is seeing some delays due to COVID, but we have still made tremendous progress and should be substantially complete in early 2022.\nFor now, the data from various industry experts are supporting various growth projections longer term.\nThe Railway Tie Association, for example, forecast 2021 demand for crossties at $18.9 million or four percent -- 4.7% growth and $19.5 million in 2022 or 3.2% growth, driven by the commercial market.\nThe American Association of Railroads reports total year-over-year U.S. carload traffic increased 9.4%.\nIntermodal units increased 17.5% and combined carloads and intermodal units increased by 13.7%.\nThe AAR added that significant investments have made the industry more adaptable and better able to adjust operational and market conditions.\nKoppers wood preservative technologies are central to those network improvements.\nSlide 32 outlines our maintenance-of-way segment, where we've accumulated a 50% higher backlog than prior year projects and railroad structures in 2021.\nThis is expected to provide further improvement to profitability as our pipeline of opportunities remain strong.\nThis is another area where the labor shortage and turnover has hurt performance and efficiency.\nWe're working to address a lack of personnel and a relatively new workforce with more crew members anticipated in the second half of the year, but this continues to be a significant challenge.\nWe're continuing our efforts to expand our crosstie recovery business to additional Class I accounts, introduce other value-added services, lower costs and increased efficiency for our railroad customers.\nWith all these strategies in place, we expect EBITDA improvement in the second half of 2021 for the maintenance-of-way business this year.\nLight vehicle production worldwide is expected to grow 50% in the second quarter according to IHS Markit, but supply issues around semiconductors have not been resolved.\nNatural disasters and a factory fire in Japan, along with spread of COVID-19 and a lack of vaccine in certain world areas have combined to delay semiconductor capacity, catching up with demand until early 2022.\nIn North America, a strong steel market as tar production in line with pre-COVID levels.\nHowever, due to an overall short call to our market and healthy end market demand, North America will continue importing tar from Europe to meet our customer demand.\nAlso pitch demand is strong and pricing is favorable.\nPhthalic anhydride demand is recovering and expected to return to normal in 2021, while naphthalene and orthoxylene availability is relatively back to normal now.\nThese factors, combined with our streamlined global CM&C footprint support ongoing reinvestment in our Stickney facility to improve reliability and reduce costs.\nSlide 34 describes conditions in our European markets where tar prices are up due to higher oil pricing as well as competition from the carbon black industry.\nPitch demand is down in Central and Southern Europe, while demand and prices for naphthalene and CBF are high.\nIn Australia, tar and pitch supplies and prices are relatively normal levels, and we are benefiting from higher export pricing for pitch from China and oil price increases, along with high demand and favorable pricing for naphthalene and CBF.\nOn Slide 36, our sales forecast for 2021 remains in the range of $1.7 billion to $1.8 billion compared with $1.67 billion in the prior year.\nDue to improved end market dynamics, CM&C is expected to see a seven percent to 15% top line increase this year, while both RUPS and PC could be anywhere from two percent to three percent positive or negative.\nOn Slide 37, we're holding our EBITDA projections for 2021 to a range of $220 million to $230 million compared with $211 million in the prior year.\nThe biggest change from last quarter is a reduction in RUPS guidance due to lower untreated tie purchases and its impact on sales and absorption and a corresponding increase in CM&C due to strong macroeconomic drivers supporting healthy demand of our product portfolio over the remainder of the year.\nOn Slide 38, the EBITDA estimate to adjusted earnings per share guidance of $4.35 to $4.60 per share is unchanged from prior year's quarter -- from prior quarter's guidance and compares favorably to the prior year adjusted earnings per share of $4.12.\nFinally, on Slide 39, our capital expenditures were $60.9 million year-to-date through June 30 or $55.8 million, net of the $5.1 million in cash proceeds.\nWe remain on-track to spend a net amount of $80 million to $90 million on capital expenditures, with half of that dedicated to growth and productivity projects that are expected to generate $8 million to $12 million of annualized benefits.\nIn summary, I continue to have confidence in our ability to deliver significantly better financial performance this year, now that we're through the first six months of 2021, but the effects of the pandemic continue to impact markets in ways that we're still trying to digest and make sense of for the longer term.\nBeyond this year, I remain excited about the many opportunities we have to further build upon our integrated business model, focused on wooden infrastructure and looking forward to sharing the details of how we believe we can continue to take Koppers to over $300 million of EBITDA generation by the end of 2025 at our upcoming September 13 Investor Day.\n Assistant:", "chosen": "q2 sales $441 million versus refinitiv ibes estimate of $461.7 million.\nsees fy 2021 sales $1.7 billion to $1.8 billion.\nsees fy 2021 adjusted earnings per share $4.35 to $4.60.\n"}
{"prompt": "Human: We have slides for our conference call.\nYou can find them in the Investor Relations section of our website at www.\nA great deal has changed over the past year with the COVID-19 pandemic.\nFor us, our top priority is and has been to protect the health and safety of our employees and our customers while ensuring our business continuity to meet our customers' requirements.\nAll of our plants around the world are operating, and we are continuing to meet our customer needs despite the increasingly challenging conditions caused by COVID as well as the current year global supply chain pressures that have impacted raw material availability.\nI'm very proud of what the Quaker Houghton team has done to continue to service our customers as well as continue with our integration.\nWe are very pleased with our strong first quarter results.\nOverall, our sales were sequentially up 11% compared to the fourth quarter, with all regions and segments showing revenue growth.\nThis was primarily driven by higher volumes as our business continues to come back from the negative impact that COVID-19 had on our end markets.\nThe sequential increase was broad-based, with all segments and regions growing between 9% and 12%.\nI also think it is interesting to look at our revenue changes from the first quarter of 2020 which is just when COVID-19 was starting to impact us.\nA year ago, we primarily saw the COVID impact in China, and you can see this impact in our current quarter, Asia Pacific sales growth of 31%.\nEMEA and our global specialty businesses also showed strong growth and were up 14% and 12%, respectively, from a year ago.\nThe Americas were relatively flat in sales from a year ago if you exclude the two recent small acquisitions that we made.\nOverall, we anticipate a sequential sales growth to play out in the first quarter.\nBut we were surprised by how strong our sales volumes ended up being as we simply just did not expect to see this level of growth so soon in 2021.\nSome of this growth may be due to our customers replenishing their products in the supply chain and some pre-buying of our products, but it is really difficult to precisely say this was a major impact.\nI also want to point out that our ability to gain new piece of business and take market share also contributed to our performance as our analysis shows that we had total organic sales growth due to net share gains of approximately 3% in the first quarter of this year versus the first quarter of '20.\nSo we continue to feel good about our ability to deliver on our historical performance of consistently growing 2% to 4% above the market due to share gains.\nAnd looking forward, we continue to feel good about these levels and share gains, given the opportunities we have recently won or are actively working on.\nWhile higher-than-expected sales were a positive for us in the quarter, a clear negative was the continued increase in our raw material costs.\nWhile we knew raw materials were increasing the last time we talked, the increases have continued longer and at a higher level than we expected.\nOverall, our cost of raw materials have increased over 20% since the end of last year.\nThere is tremendous stress on the supply chain of our raw materials and logistics.\nFurther, the availability of raw materials has impacted us at times.\nBut I'm proud to say that we've navigated through this so far and have ensured that all our customer businesses continued to operate.\nThe increase in raw material costs did put downward pressure on our gross margins in the first quarter, and this downward pressure will continue into the second quarter, just given the sheer magnitude and duration of additional increases and the lag effect we experienced between the time the raw material cost increase and the time we have to fully implement price increases to offset that.\nSo overall, we are pleased with the quarter, given the environment we're operating in and saw a strong sequential improvement in our sales and adjusted EBITDA from the fourth quarter.\nSynergy achievement also was a factor in our results as we achieved $18 million in the current quarter compared to $10 million last year.\nRelative to liquidity, we did increase our net debt in the quarter due to the small acquisition in the steel market and an increase in our working capital due to the strong sales growth.\nHowever, our leverage ratio of net debt-to-adjusted EBITDA continued to improve from 3.2 times at the end of the year to 3.1 times to the end of the first quarter.\nAnd we currently expect to be below three times at the end of the second quarter.\nAs we look forward to the second quarter, we expect short-term headwinds from higher raw material costs and some lower volume impacts due to some of the factors I mentioned earlier as well as the automotive market continuing to have semiconductor shortages.\nI do see the second quarter as our lowest quarter of the year, both in terms of gross margin and profitability.\nHowever, we do expect our margins to sequentially improve in the third and fourth quarters and return to where we expected them to be by the end of the year.\nAs I think about our full year, we are continuing with our previous guidance, which is really a floor or the low end of our expected EBITDA.\nHowever, I am more optimistic on our year than I was a few months ago.\nWhile we may end up the year in the same place, we're slightly better based on our strong first quarter, the shape of our year's expected profitability trends has changed.\nEssentially, we're seeing higher demand for the year but greater margin pressures in the near term, which is expected to be largely offset by this higher demand.\nHowever, the margin pressures are expected to be short term in nature, once our price increases are fully implemented.\nSo we currently expect to exit the year at better-than-expected demand for our products and our margins largely returning to our expected levels.\nSo even though we expect to largely end up in a similar or slightly better place as our previous expectations, I feel better about this scenario than the already positive one I had envisioned a few months ago.\nWe will have a step change in our profitability, essentially complete our integration, cost synergies, continue to grow above the market by taking share and reach our targeted net debt-to-adjusted EBITDA leverage of 2.5.\nI am so proud of how our team has performed in servicing our customers, meeting their needs and successfully continuing with our integration execution, which is both critical and difficult for us given the current conditions we are facing this year.\nPeople are everything in our business, by far, our most valuable asset, and ensuring their safety and well-being is and will continue to be a top priority for us.\nSo I can't help but to reemphasize my pride for our Quaker Houghton team and what we have and will be able to accomplish for our customers and investors, both now and going forward.\nI'll now hand it over to Shane so that he can review some of the key financials for you for the quarter.\nGAAP measures and non-GAAP measures provided in our call charts on Pages 10 to 21, for reference.\nLooking at our strong start to the year.\nThe quarter really rounded out, as Mike previously summarized.\nOur performance was driven by record quarterly net sales, partially offset by lower-than-expected gross margin due to higher raw material costs on significant supply chain pressures.\nAs I begin to discuss our quarterly performance, I'll point you to Slides six and seven in our call charts, which provide a further look into our financials.\nOur record net sales of $429.8 million increased 14% from the prior year, which was primarily driven by higher volumes, including 3% from acquisitions and increases due to foreign exchange of approximately 3%.\nThis top line performance is truly a global effort, with each segment contributing nice growth year-over-year.\nAPAC's net sales increase of 31% was the largest increase than the prior year, but this was mainly due to the initial impacts of COVID hitting China in the first quarter of last year versus the rest of the segments being impacted in the second quarter of last year.\nEMEA also showed strong net sales growth of 14% due to a solid bounce back from COVID-19.\nAmericas and GSB had net sales growth of 4% and 12%, largely due to higher volumes, including the Coral acquisition made in December of last year, which helped offset some of the market pressures we are facing, such as the semiconductor shortage.\nNet sales were a positive story to the quarter.\nBut similar to all of our peers and most other manufacturing companies in the world right now, we are facing significant challenges with rising input costs due to the global supply chain disruption.\nGross margins were 36.3% for the quarter compared to 35.4% in the prior year.\nBut excluding onetime COGS increases related to acquisitions, these would have been 36.6% and 35.5%.\nNotably, this 1% improvement year-over-year is really the benefit of strong execution of integration synergies, offsetting higher raw material costs that we incurred in the quarter.\nSG&A was up $5.6 million compared to the prior year quarter, as we had additional costs associated with our recent acquisition of Coral and higher SG&A due to the impact of foreign exchange.\nThese were partially offset by additional savings from integration cost synergies as well as travel and other savings due to the COVID-19 situation.\nSo the net performance resulted in strong adjusted EBITDA growth in the first quarter.\nAs you can see in chart eight, our quarterly adjusted EBITDA of $77.1 million grew 28% from the prior year, which drove an 8% increase in our trailing 12-month adjusted EBITDA to $239 million.\nThese results were really driven by higher operating earnings in each of the company's segments year-over-year as the continued recovery of the company's global end markets, the benefit of recent acquisitions and higher integration cost synergies contributed to a record adjusted EBITDA performance.\nFrom a tax perspective, we had an effective tax rate of 24.2% in the quarter compared to a benefit of 31.1% in the prior year.\nExcluding various onetime items in each period, our tax rate would have been reasonably consistent at 25% for the current quarter compared to 22% last year.\nTo note, we do expect both our second quarter and full year ETRs will be in the range of 24.5% to 26.5%.\nSo net -- our net GAAP earnings per share of $2.11 grew 53% compared to the prior year as our strong operating earnings and adjusted EBITDA, coupled with $3 million of lower interest expense due to lower borrowing rates were partially offset by a slightly higher tax expense.\nAs we look to the company's liquidity, summarized on Chart nine, our net debt of $749.6 million increased $32 million in the quarter, which was primarily driven by a $25 million acquisition of a tin-plating business for the steel end market, $7.1 million of dividends paid and $12.6 million of operating cash outflow.\nRelated to the quarter's outflow of operating cash, the company's major cash requirement is working capital.\nIn periods such as this where our sales and volumes increase dramatically, there is an outflow of cash needed to sustain our day-to-day operating requirements, which will come back to us as our demand trends normalize.\nDespite this increase in net debt, the company was able to improve its reported leverage ratio to 3.1 times as of the first quarter compared to 3.2 at the end of last year.\nOverall, I want to emphasize we are committed to prudent allocation of our capital.\nThis includes prioritizing debt reduction while continuing to pay dividends and invest in acquisitions that provide growth opportunities, which make strategic sense, all while remaining committed to reducing our leverage below our targeted 2.5 times level by the end of this year.\nSo to summarize, Quaker Houghton had a strong quarter that was above our expectations due to continued end market recovery, a pickup in demand and good market share gains.\nAs we look to the second quarter and the remainder of the year, we expect our strong Q1 performance and improved volume demand will be a bit offset as raw material cost increases take full effect and we see more volume impacts from market variability, including the semiconductor shortage.\nThough, as Mike mentioned, we still maintain our previous floor guidance that we will see a greater than 20% increase in adjusted EBITDA in 2021 as compared to the $222 million we achieved in the prior year.\nThat concludes my remarks.\n Assistant:", "chosen": "q1 sales rose 14 percent to $429.8 million.\n"}
{"prompt": "Human: Joining me in virtually today as we are all currently working from home are Mary Hall, our CFO; Robert Traub, our General Counsel; and Shane Hostetter, our Head of Finance and Chief Accounting Officer.\nWe have slides for our conference call.\nYou can find them in the Investor Relations section of our website at www.\nA great deal has changed in the world in 2020 with the COVID-19 pandemic.\nFor us, our top priority is to protect the health and safety of our employees and our customers, while ensuring our business continuity to meet our customers' requirements.\nAll of our 34 plants around the world are operating and we are satisfying all of our customer needs.\nI am very proud of what the Quaker Houghton team has done to continue servicing our customers as well as continuing with our integration effort, which has not missed a beat.\nThe second quarter was consistent with our expectations.\nOverall, our sales were down 27% from the second quarter last year on a pro forma basis and down 24% from the first quarter.\nI think it is helpful to understand where the 24% decline in sales from the first quarter came from and I'll first do this on a geographic basis.\nThe Americas declined 35%, EMEA declined 23% and Asia-Pacific declined 4%.\nThe declines in all three regions were primarily driven by the impact of COVID-19 on our customers' businesses.\nAnd as you could see geographically, there was a large difference between these regions.\nThe Americas was the most impacted as many of our customers had shutdowns or significant slowdown that lasted well into May.\nEMEA was the next largest in impact as the customer shutdowns and production slowdowns were less expensive and a shorter duration than in the Americas.\nAsia-Pacific declined 4%, with most of declines in India and Southeast Asia.\nChina sales were actually higher in the second quarter versus the first quarter as the China industrial sector returned to more normal conditions relatively quickly.\nI'd also like to give you a sense of how our sales played out timing-wise during the quarter.\nApril was the lowest month of the quarter and May was only a little better as we saw a 1% sequential monthly increase in net sales.\nAgain, this is due to the many of our customers have an extended shutdowns or significantly reduced production during this period of time.\nIn June, we did see a much more significant improvement as net sales increased 20% from May's levels.\nAnd we expect this sequential improvement to continue over the next several months, which I'll talk about later.\nAnother way to indicate the sequential quarterly sales trend is to look at what happened with our three major customer industry groups.\nMetalworking declined the most and decreased 30% sequentially from the first quarter, due primarily to automotive OEM and related suppliers having prolonged shutdowns or significantly reduced production in the quarter.\nOur other customer industry groups of metals and global specialty businesses were less impacted and showed declines of 21% and 16%, respectively.\nI hope these different cuts of our 24% sequential sales decline help provide insight into what was happening in the quarter.\nI also want to point out that we did continue to take market share despite the continued or the current difficulties in our end markets.\nAs our analysis continues to show, we had total organic sales growth due to net share gains of 2% in the second quarter of '20 versus the second quarter of '19.\nTurning to gross margins.\nOur second quarter gross margin was down from the second quarter of 2019.\nThe decline is primarily due to lower volumes and its impact on the fixed portion of our manufacturing costs.\nWhat may not be apparent is that our product margins actually increased approximately 2% from last year with our raw material synergies being the vast majority of the increase.\nThis pandemic and its impacts has been similar in many ways to what we went through in late 2008.\nJust like then, we took fast action to save costs in numerous ways.\nEssentially, all discretionary expenses have been eliminated.\nWe stopped new hires, executive pay cuts were implemented, some positions were furloughed, and our planned capital expenditures have been cut by over 30%.\nAnd very importantly, we reviewed our integration synergy plans in light of this situation and took additional actions as well as accelerated other synergies where possible.\nAnd as we announced last quarter, we increased our guidance on synergy achievement.\nFor 2020, our current estimate is $53 million of cost synergies achieved versus our earlier estimate of $35 million.\nIn this quarter, we achieved $12 million of synergies and we expect sequential improvement during our future quarters.\nOne question we have been asked is whether this pandemic impacted our integration and the answer is that it really hasn't negatively impacted the synergy capture part of our integration plan.\nI give our people tremendous amount of credit for being able to do plant shutdowns, product manufacturing site transfers, ERP implementations and various other strategic changes during this challenging work environment.\nOur two years of integration planning and are paying off and we are fortunate to have this integration execution ongoing during this period to help us offset some of the volume impact, we are experiencing.\nEven with these additional cost synergies, we have not done anything that will impede our business execution or strategic initiatives, including our ability to service our customers well, continue to grow above the market in the future, and further develop and execute our strategic platform.\nOverall, it was a tough second quarter by any measure, but one we exited in a better place.\nAlso, while our EBITDA was nearly cut in half from the first quarter, we still generated good cash flow and have less net debt now by $13 million.\nThe positive cash flow nature of our business during severe times is something we have discussed with investors in the past and we are now seeing the positive impacts again in these tough times.\nLooking ahead, we do anticipate that throughout the second half of the year, we will see gradual sequential improvement.\nFor example, we saw June coming stronger than the April, May lows; July was better than June and we expect continued gradual improvement that should make our third quarter performance, better than the second quarter and the fourth quarter better than the third.\nHowever, we do not expect our business to return to the levels we experienced pre-COVID-19 by the end of the year.\nLast quarter, we said that we expect our full-year adjusted EBITDA to be more than $200 million.\nBased on the multiple scenarios we have simulated in our forecasting, we continue to expect this to be the case.\nSo nothing has really changed from what I mentioned last quarter about the full year.\nAlso, we do not expect to have any liquidity or bank covenant issues.\nOverall, our higher expected synergies, additional cost saving actions, improvement in our product margins and our cash flow management are expected to continue to help us during this period of time when our volumes are down versus pre-COVID levels.\nAnd if we look forward to 2021 and 2022, I continue to be optimistic about our future and I still expect us to achieve significant increases in our adjusted EBITDA as we complete our integration cost synergies, continue to take share in the marketplace, and benefit from a projected gradual rebound in demand in our end markets over this period.\nI am so proud of how our team has performed in servicing our customers, meeting their needs, and successfully continuing with our integration execution, which is both critical and difficult for us this year.\nPeople are everything in our business and by far our most valuable asset and ensuring their safety and well-being is and will continue to be a top priority for us.\nWe just celebrated our one-year anniversary of our combination and I'm proud of and very happy with our Quaker Houghton team and what we have and will be able to accomplish for our customers and investors both now and going forward.\nThese are available on our website.\nPlease also note that we updated our risk factors in our Form 10-Q following our Q1 update to address the evolving COVID-19-related issues and these risk factors should be reviewed along with those in our 2019 Form 10-K.\nReconciliations are provided in the appendix of this investor deck.\nWe followed a similar review format for this deck as the one we used during our last couple of calls post combination where our comparison periods show actual and non-GAAP results as well as pro forma sales and pro forma adjusted EBITDA as if we had been combined with Houghton throughout the periods presented.\nSo please see slides 6 through 8 now while I review some highlights.\nAs Mike noted, the precipitous decline in volumes we began to see in the latter half of March continued into April.\nWe expected April to be the trough in volumes, and it was with slightly better performance in May, and in June, we saw more meaningful improvement in volumes and performance as Mike mentioned.\nSo, while our actual sales are up significantly to $286 million in Q2 compared to $206 million in the prior year, this is due to the inclusion of Houghton and Norman Hay.\nOn a pro forma basis, including Houghton in Q2 of last year, net sales declined about 27%.\nMost of this decline was due to the COVID-19 impact on volumes.\nBut we also saw a negative foreign exchange impact on the top line of about 4%, due primarily to the significant weakening of the Brazilian real, the Mexican peso and the RMB versus the dollar.\nThese negative impacts were partially offset by the inclusion of Norman Hay.\nOur gross margin of 34% for Q2 was down from 36.5% in the prior year quarter, which we attribute primarily to the steep decline in volumes and the related impact on fixed manufacturing costs.\nAs Mike mentioned, we realized meaningful procurement synergies in the quarter and our product margins were up approximately 2%, which was masked by the impact of fixed manufacturing costs on our significantly lower volumes.\nAs volumes pick up, we expect the benefits to our gross margin to be more visible and fall to the bottom line.\nThe drag from COVID is also evident in our non-GAAP operating income of $11.2 million compared to $25.5 million in Q2 of '19 and $36 million in Q1 of 2020.\nSimilarly, our non-GAAP earnings per share of $0.21 was down from $1.56 in Q2 of last year and $1.35 sequentially.\nOur effective tax rate in the current quarter was 57.9% compared to 24.2% in Q2 of last year.\nThis quarter's elevated rate was primarily driven by an adjustment to tax reserves related to certain tax credits we acquired with Houghton and also to an adjustment relating to certain foreign tax audits.\nExcluding all unusual items, we expect our effective tax rate for the full year 2020 will be in the range of 22% to 25%.\nAs Mike mentioned earlier, our Q2 adjusted EBITDA $32.1 million is in line with our guidance at roughly half of our Q1 adjusted EBITDA of $60.5 million.\nAnd we continue to expect our full-year adjusted EBITDA will be more than $200 million.\nWith the decline in adjusted EBITDA, our net leverage has picked up about 0.2 times to 3.7 times on a reported basis and 3.1 times on a bank calculated basis, which is still comfortably below our bank covenant of 4.25 times.\nWe stress tested our projections for this year under multiple scenarios as Mike mentioned and expect no problem in remaining in compliance with our bank covenants.\nAnd we have strong liquidity to support these uncertain times.\nIn addition, we're benefiting from the current low interest rate environment as the average interest rate on our debt is now about 1.9% as compared to 2.4% at March 31.\nA bright spot in the quarter was our cash flow.\nWe're pleased to report that our operating cash flow doubled year-to-date to $44.7 million versus first half of last year of $22.4 million.\nIn addition, our Q2 operating cash flow of $24.5 million exceeded the prior quarter of $20.2 million.\nThis positive cash flow trend is primarily due to improved working capital.\nAs we've discussed in the past, the company has a very asset-light business model where the majority of capital deployed is in working capital and not in property, plant and equipment.\nWhen general economic or industry crisis occur and stress sales, we generate cash through the release of working capital.\nWe saw this in the 2008-2009 crisis, and we are seeing it now.\nIn addition, our low capital intensity allows us flexibility in our capex spending and we're on pace to reduce capex by about 30% from our initial combined company estimates as we mentioned last quarter.\nAs Mike mentioned, it was a tough quarter.\nBut we're encouraged by some positive trends in business performance and the increase in cash flow I just mentioned, as well as the $12 million of cost synergies realized this quarter.\nIn addition, the increase in total synergies we expect to realize this year, which is up from $35 million to $53 million and the disciplined cost reduction actions we've taken will help mitigate the impact this difficult economic and business environment.\nIn summary, our track record of weathering tough economic environments through gaining share, cost reductions, and generating good cash flow during major downturn, all give us confidence in our ability to weather the storm.\nMore importantly, we've positioned our company need to leverage the future upswing in business activity when it occurs.\n Assistant:", "chosen": "q2 sales $286 million versus refinitiv ibes estimate of $290.4 million.\nq2 non-gaap earnings per share $0.21 excluding items.\naffirms full year 2020 guidance of more than $200 million of adjusted ebitda.\n"}
{"prompt": "Human: We have slides for our conference call.\nYou can find them in the Investor Relations section of our website at www.\nA great deal has changed in the world in 2020 with the COVID-19 pandemic.\nFor us, our top priority is and has been to protect the health and safety of our employees and our customers, while ensuring our business continuity to meet our customers' requirements.\nAll of our 34 plants around the world are operating, and we are satisfying all of our customer needs.\nI am very proud of what the Quaker Houghton team has done to continuing to service our customers, as well to continue our integration efforts, which are going well.\nWe are pleased with our results for the third quarter when considering we were coming from such a weak second quarter.\nOverall, our sales were up sequentially 28% from the second quarter and down 5% from the third quarter of last year on a pro forma basis.\nLet me now give you a little more flavor on what we experienced by segment or region.\nFirst, as we look sequentially, the Americas saw the largest quarterly net sales improvement as sales grew 48% sequentially, driven primarily by stronger volumes.\nA similar story I heard in Asia Pacific, EMEA, and our Global Specialty Businesses, where volume improvement drove net sales increases of 24%, 21% and 16% respectively compared to the second quarter.\nSo we saw good sequential improvement in all business segments.\nAnother way to indicate this sequentially quarterly sales trend is to look at what happened in our three main customer industry groups on a global basis.\nMetalworking increased the most and grew 39% sequentially from the second quarter, due primarily to automotive OEMs and related suppliers coming back from the prolong shutdowns or significantly reduced production rates in the second quarter due to COVID.\nOur other industry groups of metals and Global Specialty Businesses also increased and showed growth of 21% and 16% respectively.\nI hope these different cuts of our significant sequential sales increases help provide insight to what was happening in the quarter.\nSo overall, our sequential volumes were up 27% but our pro forma volumes were still down versus last year by approximately 10%, when excluding the positive impact of Norman Hay, which we acquired last October.\nThis approximately 10% decline was felt in all regions and segments.\nHowever, Asia Pacific was less impacted since China actually showed modest year-over-year growth.\nI also want to point out that we did continue to take market share despite the weakness in our end markets as our continued analysis shows that we have total organic sales growth due to net share gains of approximately 2% in this quarter versus the third quarter of last year.\nI am very pleased to see this strong rebound from last quarter, but we're certainly not all the way back.\nAs we said previously, we estimate it will take at least two more years for our markets to fully return, and some markets like aerospace, which makes up about 3% of our sales, will take more time than that.\nHowever, we expect our sales to rebound more quickly due to our projected continued market share gains, as well as our potential smaller bolt-on acquisitions in the future that we may make.\nConcerning gross margins for the third quarter, they were up significantly compared to both the second quarter and for last year.\nThe sequential increase is primarily due to higher volumes and its impact on the fixed portion of our manufacturing costs.\nThe increase from last year was primarily due to the realization of our manufacturing and raw material cost synergy savings.\nThis pandemic and its impacts have been similar in many ways to what we went through in late 2008.\nJust like then, we took fast action to save costs in numerous ways.\nEssentially, all discretionary expenses have been eliminated, we stopped new hires where possible, some positions were furloughed, and our planned capital expenditures have been cut by over 30%.\nAnd very importantly, we reviewed our integration and synergy plans in light of this situation and took additional actions as well as accelerated other synergies where possible.\nThis has led to additional cost synergies as we have increased our guidance on synergy achievement again this quarter.\nFor 2020, our current estimate is $58 million of cost synergies achieved versus our earlier estimate of $53 million.\nAlso, the total synergies we estimate that we will achieve in 2021 have been raised from $65 million to $75 million with '22 reaching $80 million.\nIn this quarter, we achieved $17 million in synergies, and we expect sequential improvement during our future quarters.\nSo overall, we are pleased with the quarter, given the environment in which we were operating and we were -- and we did see significant sequential improvement in our sales, gross margins, and adjusted EBITDA.\nAlso, our cash flow is very strong and our net debt decreased by 7% or $58 million.\nThe positive cash flow nature of our business during severe downturns is something we have discussed with investors in the past, and we're now seeing its positive impacts again in these tough times.\nLooking ahead, we anticipate that throughout the next year or two, our markets will show gradual sequential improvement.\nHowever, it's hard to predict that improvement by quarter, given the continued uncertainty in our operating environment.\nFor the fourth quarter, we expect our adjusted EBITDA to be in the ballpark of the third quarter, and for the full year, we expect our adjusted EBITDA to exceed $215 million.\nOverall, our higher expected synergies, additional cost saving actions, and improvement in our product margins and our cash flow management are expected to continue to help us during this period of time when our markets are down versus pre-COVID levels.\nAs we look forward to 2021, we expect our adjusted EBITDA to increase by 20%-plus as we continue our integration savings, take market share in the marketplace, and benefit from an expect gradual rebound in demand.\nI am so proud of how our team has performed in servicing our customers, meeting their needs, and successfully continue with our integration execution, which is both critical and difficult for us this year.\nPeople are everything in our business and by far our most valuable asset, and ensuring their safety and well-being is and will continue to be a top priority for us.\nI'm proud of and very happy with our Quaker Houghton team and what we have and will be able to accomplish for our customers and investors both now and going forward.\nI'll now hand it over to Mary so that she can review some of the key financials for you for the quarter.\nThese are available on our website.\nPlease also note that we continue to update our risk factors in our Form 10-Q to address the evolving COVID-19-related issues, and these risk factors should be reviewed along with those in our 2019 Form 10-K.\nReconciliations are provided in the appendix of this investor deck.\nIn this review, our comparison periods show actual and non-GAAP results, as well as pro forma sales and pro forma adjusted EBITDA as if we've been combined with Houghton throughout the periods presented.\nRemember that we closed the Combination on August 1, 2019, so our actual reported and non-GAAP Q3 2019 results include only two months of Houghton.\nPlease see slides 6 through 10 now, while I review some highlights.\nAs Mike noted, we saw sales rebound of $367 million in the third quarter, up 28% from $286 million in Q2, but still down 5% from pro forma Q3 2019 sales of $386 million, due primarily to lower volumes as a result of COVID-19.\nOur gross margin of 38.2% is up significantly from our gross margin of 34% in Q2 and 32.3% in Q3 of last year, which we estimate would have been about 35.5%, excluding a purchase accounting adjustment.\nWe also saw a benefit to our gross margin this quarter that we estimated approximately 0.5%, which we attribute to price mix that we believe was unique to the quarter.\nYou might remember on our last call that I commented that we expected the benefits of our procurement synergies and manufacturing optimization to be more visible as volumes pick up and this is what you see coming through as part of our sequential improvement.\nIn addition, our cost synergies in these areas continue to increase as reflected in our updated cost synergy estimates.\nOur non-GAAP operating income of $43.2 million rebounded significantly from Q2's $11.2 million and is also up 25% from $34.5 million in Q3 of last year, primarily due to the addition of Houghton and Norman Hay and the benefits of realized cost synergies, partially offset by the negative impact of COVID-19.\nSimilarly, our non-GAAP earnings per share of $1.56 is up significantly from Q2's $0.21, while it is flat to last year as a result of the additional shares issued at close of the Combination.\nOur effective tax rate in the current quarter was an expense of 8.1% versus a benefit of 27.6% in Q3 of last year.\nWe've seen significant volatility in our quarterly effective tax rates due to COVID-19-related changes in profitability as well as continued updates to the 2017 tax law.\nExcluding the impact of all unusual items, we estimate that our Q3 effective tax rates would have been approximately 24% and 20% for 2020 and 2019, respectively.\nFor the full year, we expect our effective tax rate, excluding all unusual items will be in the range of 23% to 25%.\nAs Mike mentioned earlier, we're pleased to see our adjusted EBITDA almost double to approximately $64 million in Q3 from the Q2 level of approximately $32 million and increased approximately 5% compared to our pro forma adjusted EBITDA of $61 million in Q3 of last year.\nThis is due primarily to the benefits of our realized cost synergies in the quarter and the inclusion of Norman Hay more than offsetting the negative impact of COVID-19.\nAnother bright spot in the quarter was our cash flow.\nAs we discussed in our last call, because our business is so asset light, with most of our investment in working capital versus property, plant and equipment, when we experience a major downturn in volumes, we expect to see significant positive cash flow from releases in working capital.\nIndeed, we saw this in both Q2 and Q3 and are pleased to report that our year-to-date operating cash flow more than tripled versus last year to $112 million.\nIn addition, our low capital intensity allows us flexibility with our capital spending, and consistent with our Q2 call, we're on pace to reduce our capex by more than 30% versus our original pre-COVID estimate.\nAs a result of our strong cash flow, we were able to reduce net debt by $58 million, a 7% reduction from Q2.\nThis improves our leverage ratio to 3.4 times from 3.7 times at the end of June, and our bank calculated leverage at the end of Q3 was about 2.9 times versus our covenant maximum of 4.25 times.\nIn short, our liquidity and leverage showed good improvement from already solid levels.\nIn addition, as Mike noted, we further increased our estimates of expected Combination cost synergies from $53 million to $58 million in 2020, from $65 million to $75 million in 2021, and from $75 million to $80 million in 2022.\nIn summary, our track record of navigating successfully through tough economic environments by gaining share, disciplined cost management, and generating good cash flow during major downturns all give us confidence in our ability to weather the current challenges.\nThis strong core operating performance is further enhanced by the cost synergies we are realizing from the Combination, and we're seeing the meaningful impact [Technical Issues] synergies have on our financial performance.\nIn 2021, as Mike mentioned, we expect to see a greater than 20% increase in adjusted EBITDA.\nFinally, we believe the Company is well positioned to leverage the expected upswing in business activity.\n Assistant:", "chosen": "q3 non-gaap earnings per share $1.56.\nfull year 2020 adjusted ebitda guidance increased to exceed $215 million.\nexpects reductions in headcount and site closures to continue during 2020 and into 2021.\n"}
{"prompt": "Human: We have slides for our conference call, you can find them in the Investor Relations section of our website at www.\nA great deal has changed over the past year with the COVID-19 pandemic.\nFor us, our top priority is and has been to protect the health and safety of our employees and our customers, while ensuring our business continuity to meet our customers' requirements.\nAll of our 31 plants around the world are operating and we are continuing to meet our customers' needs.\nI am very proud of what the Quaker Houghton team has done to continue to service our customers as well as continue our integration.\nWe were pleased with our results for the fourth quarter.\nOverall, our sales were sequentially up 5% with all regions or segments showing revenue growth, which was primarily being driven by higher volumes as our businesses continue to come back from the negative impact that COVID-19 had on our end markets.\nThe sequential increase was strongest for us in EMEA as we saw an increase in sales of 13% compared to the third quarter.\nI think it is interesting to look at our revenue changes from the fourth quarter of 2019, which was pre-COVID of course.\nOverall, our sales were down only 1% and our volumes were relatively flat but there was a difference when looking at this by region or segment.\nThe only area that showed an increase in volume sold was Asia Pacific, which had an increase of 8% versus prior year, primarily being driven by higher sales in China and India.\nEMEA was relatively flat on volumes, mainly due to the fourth quarter of '19 being an unusually weak quarter.\nAmericas was down 2% on volumes, primarily due to our end market still being impacted by COVID.\nAnd our global specialty business volumes were down 9%, primarily driven by lower aerospace maskant sales.\nI also want to point out that our ability to gain new pieces of business and take market share contributed significantly to our performance as our analysis shows that we had total organic sales growth due to net share gains of approximately 4% in the fourth quarter of '20 versus the fourth quarter of '19.\nSo while we were overall relatively flat in our volumes, the 4% net share gains made a big difference, as did our Asia Pacific growth, helping to offset the negative COVID impact on our end markets.\nI am very pleased to see the continued improvement from last quarter, but we're certainly not all the way back.\nAs we said previously, we estimate we'll take approximately two more years for our end markets to fully return and some markets like aerospace, which makes up about 3% of our sales, may take up more time than that.\nHowever, we expect our sales to rebound more quickly due to our projected continued market share gains as well as making acquisitions, which I'll now talk more about.\nAs you may have noticed, since our last conference call, we did make two small bolt-on acquisitions.\nThe first was a private company called Coral Chemical based in the US that we purchased in mid-December for $53 million net of cash acquired.\nCoral provides technical expertise and product solutions for pre-treatment, metalworking and waste treatment applications to the beverage can and general industrial end markets.\nCoral had approximately $37 million in net sales and approximately $5.5 million of adjusted EBITDA in 2020.\nFor this acquisition, we also expect to achieve annualized synergies of approximately $3 million over the next two years.\nAlso in February, we bought assets related to tin-plating solutions, primarily for the steel end markets for $25 million, which will add full-year net sales of approximately $8 million and approximately $4 million of full-year adjusted EBITDA going forward.\nSo we are pleased with the strategic additions to our product portfolio, which we estimate will add about $11 million of EBITDA in 2021, which equates to an approximate 7 times EBITDA multiple purchase price for the combination of these two acquisitions.\nSo overall, we were pleased with the quarter given the environment we're operating in and we saw a good sequential improvement in our sales and adjusted EBITDA.\nSynergy achievement also was a factor on our results as we achieved $18 million in this quarter compared to $5 million in the fourth quarter of last year.\nIn addition, our strong operating cash flow of $66 million in the quarter allowed us to reduce our net debt by another $24 million for the full year.\nAnd for the full year, we reduced debt by about 12%, in addition to making the Coral acquisition.\nThe positive cash flow nature of our business during severe downturns is something we have discussed with investors in the past and we have seen this positive impact again over the past year.\nAnd reflecting upon the full year, the past 12 months have been challenging due to COVID-19, but I'm very pleased with our overall performance.\nOver the past year, we continue to service and supply our customers despite difficult economic conditions.\nWe continue to gain share in our markets and we completed a significant part of our integration activities.\nAnd we were able to realize $58 million of cost synergies, which exceeded our previous estimate of $35 million.\nWe also made these two additional bolt-on acquisitions, which will add approximately $11 million to our adjusted EBITDA in 2021.\nAnd even with those acquisitions, we were able to reduce our debt by 12% or $94 million.\nSo in short, we are delivering on the powerful benefits that we anticipated for our combination with Houghton [Phonetic].\nAs we look forward to 2021, we expect some short-term headwinds from higher raw material costs and lower-than-expected volumes to the automotive market due to the semiconductor shortage.\nHopefully, these are just timing issues and will impact mainly the first half of the year.\nDespite these short-term headwinds, we feel positive about 2021and continue to expect a step change in our profitability with over a 20% increase in our adjusted EBITDA from 2020 as we complete our integration cost synergies, continue to take further share in the marketplace, benefit from a projected gradual rebound of demand in our end markets and see the positive impact of our recent acquisitions.\nAs far as the timing and why I made this decision now, I really wanted Quaker Houghton to be in a strong position when we made this transition and we are.\nThis year we will take a step-change in our profitability.\nWe will essentially complete our integration and we will pay down more debt and reach our targeted leverage ratio.\nWe have the right strategy in place, a strong management team, tremendous people throughout the whole organization and strong opportunities for above-market growth in our businesses for the foreseeable future.\nSo to me, our future is very bright.\nAnd this is the right time to make this transition.\nAnd I look forward to continuing to be involved in the company's bright future as Chairman of the Board following my retirement.\nI am so proud of how our team has performed in servicing our customers, meeting their needs and successfully continuing with our integration execution, which was both critical and difficult for us this past year.\nPeople are everything in our business.\nAnd by far, most valuable asset, ensuring their safety and well-being is and will continue to be a top priority for us.\nI'm proud of them very happy with our Quaker Houghton team and what we have and will be able to accomplish for our customers and investors both now and going forward.\nI'll now hand it over the Mary so that she can review some of the key financials for you.\nThese are available on our website.\nPlease also note that updated risk factors will be included in our 2020 Form 10-K, which we plan to file next week.\nWe followed a similar review format for this deck as the one we used for our Q3 call where our comparison periods show actual and non-GAAP results and also pro forma sales and adjusted EBITDA as if we had been combined with Houghton throughout the periods presented.\nOur Q4 comparisons of 2020 and 2019 in this deck reflect actual results, not pro forma, as we completed the combination with Houghton in Q3 of 2019.\nFor the full year comparisons, I will generally compare 2020 to pro forma 2019 results so that you can see the periods on an apples-to-apples basis.\nAs Mike mentioned, the gradual recovery in our business that we began to see in Q3 of 2020 continued through Q4.\nQ4 net sales were up 5% sequentially as all segments benefited from a gradual increase in volumes and net sales were down only 1% compared to Q4 2019.\nRecall however that Q4 2019 was a relatively weak quarter that was negatively impacted by a widespread slowdown in industrial production, especially in Europe.\nFor the full year, reported net sales increased 25% in 2020 due to the inclusion of Houghton and Norman Hay.\nBut on a pro forma basis, sales were down 9%, primarily on lower volumes due to the global downturn in economic production as a result of the COVID-19 pandemic.\nGross margin of 36.8% in Q4 is up from 34.8% in Q4 of 2019, which was deflated somewhat due to inventory adjustments for purchase accounting for Norman Hay.\nExcluding these adjustments, we estimate Q4 of 2019's gross margin would have been about 35.3%.\nThe increase in gross margin Q4-over-Q4 is primarily a result of our progress in achieving combination-related synergies in logistics, procurement and manufacturing.\nOur sequential gross margin was down somewhat from Q3, reflecting a one-time benefit to gross margin in Q3 of approximately 0.5% and current quarter pressure from rising raw material costs and product mix.\nOn a full-year basis, gross margin was 36.2% versus 2019's 34.6%.\nExcluding similar cost adjustments of Q4, we estimate our gross margins in 2020 and 2019 would have been 36.3% and 35.7% respectively.\nLooking ahead, we expect to realize additional combination cost synergies throughout 2021, which should result in a gradual improvement to gross margin.\nWe expect to head toward the 38% gross margin area later this year as we further realize our combination synergies and manage prices to offset rising raw material costs.\nOn both the GAAP and non-GAAP basis, our Q4 operating income improved significantly and our non-GAAP operating margin of 11.3% is up 1.7% versus Q4 last year, reflecting a sequential recovery in sales this year and our combination synergies and the cost-saving actions we took to mitigate the impacts of COVID-19.\nFull-year GAAP and non-GAAP operating income also improved significantly.\nHowever, full-year operating margin declined due to the COVID-related steep decline in sales and volumes in Q2 and the resulting pressure from fixed cost absorption, which we discussed in our Q2 earnings call.\nOur reported effective tax rate was an expense of 4.9% in Q4 of '20 versus a benefit of 18.2% in Q4 of '19.\nExcluding various one-time items, our Q4 effective tax rates would have been approximately 30% and 24% respectively.\nFor full-year 2020 and 2019, we estimate that our effective tax rates, excluding non-core and one-time items, would have been approximately 25% and 22% respectively, in line with our guidance for this year.\nFor 2021, we expect our full-year effective tax rate will be in the range of 24% to 26%.\nOur non-GAAP earnings per share of $1.63 for Q4 is up 22% from $1.34 in Q4 of '19, due primarily to the improved operating income I discussed earlier.\nOur full year non-GAAP earnings per share of $4.78 was down from $5.83 last year but ahead of consensus of $4.67.\nOn Slide 11, we show the trend in our pro forma adjusted EBITDA.\nOur Q4 adjusted EBITDA of $65 million is up $4 million from Q4 last year and up $1 million sequentially.\nAnd our full-year adjusted EBITDA of $222 million is ahead of consensus.\nAlso, our adjusted EBITDA margins improved for both the quarter and the full year.\nOur Q4 adjusted EBITDA margin of 17% is up 1.5% versus 15.5% last year and on a full year basis, our adjusted EBITDA margin increased to 15.7% from our 2019 pro forma margin of 15%.\nThe improved margins are primarily due to the combination-related synergies we've realized, partially offset by the lower impact -- by the impact of lower sales due to COVID-19.\nOn Slide 12, we provide an update on our leverage and liquidity.\nAs Mike noted, cash flow was the star in 2020.\nWe frequently talked about how the asset-light nature of our business helps us to weather downturns as our main investment is in working capital versus property, plant and equipment and we released working capital and generate increased cash flow and economic downturns.\nWe saw this in 2020 during the financial crisis and we saw this year during the COVID pandemic.\nOperating cash flow for the full year was a record $178.4 million, allowing us to reduce net debt by 12% to $717.3 million, paid $53 million for the Coral acquisition, net of cash acquired and pay approximately $7 million in dividends.\nWe're delivering on our commitment to prudently allocate capital by prioritizing debt reduction, while continuing to pay our dividends and seizing growth opportunities which make strategic sense.\nAs a result of our prudent capital allocation, our primary leverage covenant of net debt to trailing 12 months adjusted EBITDA continues to improve and was 3.2 times at year end 2020 versus 3.5 times last year.\nWe expect to be at our target level of 2.5 times net debt to adjusted EBITDA by the end of 2021.\nIn addition, our cost of debt continues to benefit from the current interest rate environment with our borrowing cost under 2%.\nIn summary, Quaker Houghton continued to deliver on its commitments in 2020 despite the very challenging market conditions we faced.\nAt that time, we were in the very early stages of the pandemic with no way of knowing what was to come.\nIt certainly turned out to be a very difficult year, but we focused on what we can control.\nWe kept our integration, execution and synergy capture on track and in fact ahead of schedule, we implemented additional cost savings actions to mitigate the fall off in sales and we continued to deliver market share gains.\nAs a result, we achieved record cash flow during the year and were able to reduce debt while continuing to execute on strategic acquisitions that make financial sense.\nIn 2021, we expect to see a greater than 20% increase in adjusted EBITDA and further expansion of our margins as we realize the full synergy benefits toward the end of the year.\nAnd now, back over to you, Mike.\n Assistant:", "chosen": "michael f. barry will retire from his role as ceo on december 31, 2021.\nmichael f. barry will retain role of chairman of board following his retirement.\nq4 non-gaap earnings per share $1.63 excluding items.\n"}
{"prompt": "Human: I am Alexandra Deignan, the company's Head of Investor Relations.\nToday's discussion also includes certain non-GAAP financial measures that we believe are meaningful when evaluating the company's performance.\nHosting our call today are Kenneth Jacobs, Lazard's Chairman and Chief Executive Officer and Evan Russo, Chief Financial Officer.\nToday, Lazard reported strong results for the fourth quarter and full year 2020.\nWe achieved record quarterly operating revenue.\nFinancial Advisory had a record quarter with strong performance across practices and regions.\nAsset Management's fourth quarter revenue increased 12% and achieved a record year end level of AUM.\nWe entered 2021 with significant momentum as we serve clients positioning themselves for a post pandemic recovery.\nIn Financial Advisory, our M&A activity progressed throughout 2020.\nOur global announcement volume increased 3% even as the markets volume declined 10%.\nThis reflected strong activity in both the US and Europe.\nIn particular, our volume of French and UK announcements increased 34% and 37% respectively from the prior year.\nOur preeminent global restructuring practice continued its work on a wide range of complex assignments.\nIn 2020, Lazard ranked number one in the league tables for completed restructurings globally.\nAs we anticipated, the pace of new restructuring assignments in Europe increased.\nOur sovereign capital and private capital advisory businesses all had strong years as we advise governments, corporations and partnerships on financing strategy and capital raising.\nOur private equity secondary business continues to grow and we are advising on a significant number of growth equity investments globally.\nWe continue to see opportunities for growth in Financial Advisory and have increased our pace of lateral hiring.\nIn 2020, we recruited 12 new Managing Directors globally, plus two more in January of this year.\nIn addition, we are promoting 15 new Managing Directors in Financial Advisory this month.\n10 of them began their careers here as analysts or associates.\nOur ability to develop talent organically remains a powerful competitive strength.\nOur Asset Management business also had a strong fourth quarter, with higher management and incentive fees, reflecting AUM growth and the performance of our strategies.\nOn assets under -- our assets under management increased by $31 billion or 14% from the start to the finish of the fourth quarter.\nOur investments in new strategies and product extensions continue to create new avenues for growth.\nOur quantitative business achieved net inflows for both the fourth quarter and full year as did our global equities and our global and multiregional fixed income platforms.\nWe are also seeing an increase in solutions oriented mandates as we serve more clients with customized strategies.\nWe continue to invest in Asset Management's growth through investment in people, technology and distribution as well as the development of new funds and the scaling up of existing platforms.\nIn 2020, we introduced eight new strategies for clients across our traditional and alternative platforms.\nThree of the strategies are from independent teams we recently recruited.\nAs the asset management industry undergoes a wave of consolidation, we see substantial opportunities to accelerate our recruitment of talent and investment teams, adding strategies that are complementary to our existing platforms.\nWe also continue to build our talent pool from within.\nThis year, Asset Management will name seven new Managing Directors in its annual promotion process.\nFirm wide, Lazard's results -- record results for the quarter underscore the strength of our diversified business model, our global platform and our deep culture of client service.\nWe entered 2021 with momentum across our businesses.\nWe see substantial opportunities for growth in both Financial Advisory and Asset Management and are investing to capitalize on them.\nEvan will now provide some color on our results and then I will comment on our outlook.\nLazard's full year and fourth quarter results reflect the stability and continued high performance of our businesses.\nOur fourth quarter operating revenue of $849 million was a record quarter for the firm, 20% higher than last year's period.\nFourth quarter adjusted earnings per share of $1.66 increased 82%, reflecting the significant operating leverage in our model.\nAnnual revenue of $2.5 billion was about even with 2019, representing a strong recovery from the volatile environment of 2020.\nOur Financial Advisory business had a breakout fourth quarter, with record quarterly revenue of $509 million, which is 23% higher than our previous peak level in 2018.\nThe compelling story behind Financial Advisory's record quarter is that it was driven by strong contributions across our advisory practices and across regions.\nOur revenue performance demonstrates the earnings power of the diversified advisory business we have built.\nIn Asset Management, this story was similar as we generated $336 million in revenue for the fourth quarter, up 12% from the prior year.\nThis reflected contributions across our global platforms with accelerating momentum in a year of extreme volatility.\nFourth quarter management and other fees increased 10% sequentially from the third quarter, reflecting higher average AUM.\nFourth quarter incentive fees were up substantially from the prior year, primarily reflecting strong performance in our alternative strategies.\nAverage AUM for the fourth quarter was $246 billion, up 3% from last year's period and up 9% from the third quarter of 2020.\nThe sequential increase was driven by market appreciation of $25.4 billion and foreign exchange appreciation of $5.8 billion, partially offset by net outflows of $0.3 billion.\nFor the full year, we experienced net outflows of $11.4 billion, primarily in our value strategies within emerging markets and local equities.\nPlatforms with net inflows for the year included global and quantitative equities as well as our global and multiregional fixed income strategies.\nWe finished 2020 with AUM of $259 billion.\nAnd as of January 28, AUM was approximately $258 billion.\nThe decrease was driven by foreign exchange depreciation of $1.3 billion and net outflows of $1 billion, partially offset by market appreciation of $1.3 billion.\nLooking ahead across our franchise, in Financial Advisory, client activity is strong across our advisory practices globally in an improving environment.\nAsset Management is off to a good start in 2021 with AUM well above its average level for 2020.\nWe have a strong pipeline of unfunded mandates.\nWe continue to see demand for both our quantitative and fundamental strategies across our platforms as well as growing demand for our sustainable and customized solutions.\nTurning to expenses, our compensation ratio for 2020 on an adjusted basis was 59.5%, up from 57.5% in 2019.\nOn an awarded basis, our annual compensation ratio was 59.8% compared to 57.7% for 2019.\nThe increase reflected our investments for growth as well as the change in business mix this year.\nWe are maintaining our cost discipline while we navigate a volatile market environment.\nNon-compensation expense of $117 million in the fourth quarter was 10% lower than the same period last year, primarily reflecting a continuation of global travel restrictions and lower business development costs.\nOur adjusted non-compensation ratio for the fourth quarter was 13.7% and the ratio for the full year was 17.1%.\nAs business activity picked up in the fourth quarter, we saw commensurate rise in non-compensation costs especially related to variable expenses.\nOur effective tax rate for 2020 was 20.2% compared to 24.1% a year ago.\nFor 2021, we expect an annual effective tax rate in the low to mid 20% range.\nRegarding capital allocation, our business continues to generate significant free cash flow, which supports our goal of returning excess capital to shareholders.\nThroughout the year, we have been consistent in returning capital through our quarterly common dividend.\nIn the fourth quarter, we returned $51 million of capital to shareholders.\nYesterday, we declared a quarterly dividend on our common stock of $0.47 per share.\nIn 2021, we have resumed our share repurchase program in order to at a minimum, offset dilution from our year end equity grants.\nOur total outstanding repurchase authorization is now $267 million.\nLazard's financial position remains strong with ample liquidity and balance sheet flexibility.\nAs of December 31, our cash and cash equivalents were approximately $1.4 billion.\nKen will now conclude our remarks.\nA few words on our outlook before we open the call to questions.\nIn the near-term, the macroeconomic outlook remains uncertain based on the ongoing health crisis.\nHowever, fiscal and monetary stimulus in developed countries and the rollout of vaccines globally are driving expectations of a recovery by the second half of this year.\nBoth of our businesses are already benefiting from growing optimism in boardrooms and investment committees.\nIn Financial Advisory, the forces driving global strategic activity have accelerated.\nTechnology-driven disruption continues to be a catalyst for M&A across industries.\nShareholder activism has resumed its growth after a brief pause during the first half of 2020 with increasing impact in Europe.\nThe rapid growth of SPACs alongside strategic and private capital, adds substantial dry powder to the M&A market.\nIn addition, climate risk is becoming increasingly relevant to company valuations and is an emerging catalyst for strategic activity.\nOur ESG expertise is well entrenched in our Asset Management business and increasingly in our Financial Advisory business as well.\nIn Asset Management, the expectation of low interest rates for the foreseeable future is a tailwind for our business.\nInvestors need for income and return is driving increased demand for risk assets, including equities and corporate and emerging market debt as well as alternative investments.\nIn addition, institutional investors are seeking sources of differentiated alpha, including ESG, thematic and alternative strategies.\nWe are in an excellent position to meet this demand with a world class investing franchise in markets that reward deep fundamental research and our quantitative strategies are competing effectively in the market for low-cost products.\nWe see substantial opportunities for growth across our businesses and we continue to invest in our people, capability and technology infrastructure to enhance our competitive edge.\nWe remain focused on serving all of our clients well, while we manage the firm for profitable growth and shareholder value over the long-term.\nIn one of the most challenging environments in modern history, they rose to the occasion serving our clients with outstanding financial advice and solutions and reinforcing this great franchise.\nI am proud to work with them.\nNow, let's open the call to questions.\n Assistant:", "chosen": "q4 adjusted earnings per share $1.66.\nq4 revenue rose 20 percent to $849 million.\nfor q4 of 2020, financial advisory operating revenue was $509 million, 29% higher than q4 of 2019.\naum as of december 31, 2020 was of $259 billion, up 4% from december 31, 2019, and up 14% from september 30, 2020.\n"}
{"prompt": "Human: On the call today are Tim Crew, Chief Executive Officer; John Kozlowski, the company's Chief Financial Officer, Maureen Cavanaugh, our Chief Commercial Operations Officer and Steve Lehrer, who leads our insulin biosimilar initiatives.\nA playback will be available for at least three months on Lannett's website.\nWe trust you all remain safe and well.\nDespite the pandemic and ongoing headwinds specific to our industry and our company, we are proud of our significant progression on several strategic fronts these past months.\nFirst, we refinanced our debt providing significant balance sheet runway to execute on our growth plan.\nSecond, we advanced the development of key large pipeline assets, third, we expanded our pipeline of key assets and more such assets are being actively pursued and fourth, we maintained our operating discipline and are tracking to our near-term goals.\nI'll begin my specific remarks with a brief review of our financial results.\nFor fiscal 2021 third quarter, we had net sales of $112 million, adjusted gross margin of 27%, adjusted EBITDA of $17 million and adjusted net income of $1 million equal to $0.02 per diluted share.\nGross margin, adjusted EBITDA and adjusted net income were all better than we anticipated.\nMoreover, our cash position significantly improved to more than $80 million at the end of Q3 from $34 million at the end of the preceding quarter.\nWhile we are pleased with our overall results, we believe the most important recent news was the April refinancing transaction I earlier mentioned.\nWe used the proceeds from the refinancing on some cash to retire our outstanding Term B loan balance of approximately $540 million.\nThe financing was significant for several reasons including, first, we have extended the maturity of our debt to 2026 from 2022 and that maturity is now after several of our larger and more durable pipeline assets are expected to launch and make meaningful contributions to our business.\nSecond, our free cash flow improved substantially, primarily due to the elimination of mandatory principal payments until maturity.\nWe estimate that the transaction will add approximately $50 million of free cash flow in the first year alone.\nOur plan is to use a portion of the extra cash to invest in additional growth opportunities.\nAnd third, the new debt did not have leverage covenants.\nTo our view, we believe the successful offering provides investors' validation of our future expected cash flows.\nSimilarly, I'd like to note that the part of this financing, the second-lien investors received warrants in Lannett, which have historic price of $6.88.\nWe believe the support of these experienced investors to accept the second-lien position in exchange in part for these warrants further validates our assessment of the future earnings anticipated from our pipeline.\nSo now let's turn to our pipeline.\nMost recently, we launched two products in Q3 including Levorphanol, IR tablets 3 mg a partnered product and Chlorpromazine, an internally developed product.\nThus far in Q4, we launched Venlafaxine ER tablets 75 mg and expect to launch a few more products in the next few months.\nIn addition, we have more than 18 products in development, another 11 pending with the FDA including partnered products, plus four additional products that are approved and pending launch.\nWe will now turn to larger more durable opportunities in our near-term pipeline, dealing with products in the respiratory arena.\nAs we recently announced, we achieved a key milestone with the filing of our generic ADVAIR DISKUS product on April 1.\nThis asset is a partnered product and of the larger products in our pipeline is currently the closest to expected commercialization.\nThe investments in technology, dedicated manufacturing infrastructure and development of assets are very significant.\nSo we are quite pleased to be so far along the development and expect only a handful of competitors.\nWhile we do expect more than one FDA review cycle, and we need FDA feedback to firm up our expectations, we continue to believe an approval and U.S. launch of the product is possible in calendar year 2022 and given our listing in the market, we anticipate the product will generate substantial net sales soon after launch.\nAnother drug device combination product in our pipeline is generic Flovent DISKUS.\nThe pivotal clinical trial for this product has been initiated.\nSo we are tracking to a possible launch in 2023.\nAs a reminder, we are co-developing this product with the same partner generic ADVAIR DISKUS.\nThis relationship means that the generic Flovent product leverages the same R&D and manufacturing platforms that support the generic ADVAIR product and will likely follow similar clinical development assets.\nFor both the generic ADVAIR and Flovent products, we are increasingly confident of our path to launch for three primary reasons.\nFirst, the FDA now has clear guidance for companies developing its complex products and our development programs have been advancing rapidly.\nSecond, our partners already built R&D and commercial scale manufacturing facilities, both dedicated to inhalation products.\nAnd lastly, our partnered senior management team includes members of GlaxoSmithKline team that was intently involved in developing, filing and manufacturing the ADVAIR into their product.\nAs we said previously, we are evaluating and in late-stage negotiations for additional product opportunities in the drug device inhalation respiratory space, particularly dry powder inhalers, and Metered Dose inhalers.\nThese markets are, as we have stated before, generally quite large, growing and durable.\nTurning to our biologic insulin products.\nThe situation is similar to what we noticed for the drug device inhalation opportunities, namely, we are relatively well advanced in the programs and the investments in technology, dedicated manufacturing infrastructure and development are even more significant, it takes multiple hundreds of millions of dollars.\nLet me say that again, multiple hundreds of millions of dollars.\nThus we expect only a handful of competitors in what is expected to be a multi-billion dollar market even at competitive biosimilar pricing.\nAnd as we have shared, our partner HEC is shouldering the significant majority of these infrastructure related costs.\nWith regard to biosimilar insulin glargine, we believe we remain on track to; submit an IND later this calendar year, commence the clinical trial early next calendar year, submit the biologics license application later in calendar year 2022, and launch in 2023, just over two years from now.\nYou'll recall that representatives from Lannett and HEC's both received guidance from the FDA on the biosimilar insulin glargine clinical advancement program in June of 2020.\nThe FDA then requested that we submit a protocol and the statistical analysis plan for the pivotal trial for review which we did in November of 2020.\nThe FDA has since completed its review and provided feedback, which we incorporated into design of the upcoming pivotal trial including the type and sized of the trial, as well as primary and secondary endpoints.\nImportantly, the upcoming conforming pivotal human healthy trial plan is similar to our previously completed normal healthy volunteered pilot study.\nIt's a modestly larger study and will be conducted at the same site as the previous study.\nSo the FDA's feedback is very encouraging as they reviewed in detail our human pilot study where our insulin glargine met all the primary pharamakinetic and pharmadynamic safety endpoints and the FDA has indicated the same type of study with glargine produced at commercial scale to complete the new facility will be sufficient to file a 351(k) biosimilar application.\nNote, we believe we will be the first glargine outpatient to take advantage of new biosimilar insulin rules published in November of 2019, which have helped speed our progression.\nIn the related positive development, our partner HEC has completed virtually all the required process development scale of work required to producing insulin glargine at commercial scale at the new insulin facility, which is an important next step.\nProduction of clinical trial materials should occur in the upcoming quarter.\nOn a further positive related note, in February, we announced we have expanded our agreement with HEC to include the biosimilar insulin aspart, a fast-acting insulin, separate and distinct from longer acting insulin glargine.\nSimilar to the two asthma product opportunities, the experience, knowledge, dedicated infection infrastructure and investment supporting insulin glargine can be directly leveraged from the development of insulin aspart.\nAccordingly, while we still need to get FDA feedback on the development plan, we currently anticipate a potential launch of the aspart product in calendar 2024.\nAs you can see, and I think our investors understand, we are now advancing for within our overall launch parade, a steady stream of significant new product launches in the not too distant future.\nTo sum up today's remarks.\nWe completed our refinancing transaction where we retired our Term Loan B and extended the maturity of our debt beyond the expected launch dates of our larger pipeline assets.\nMoreover, the structure of the new debt substantially increased our free cash flow potential around $50 million in the first year alone that will allow us to further invest in growth opportunities.\nThe ANDA for our generic ADVAIR DISKUS product was submitted on April 1, 2021 and pending FDA feedback, we believe this product is tracking to a launch in calendar year 2022.\nThe clinical development of our other large opportunity assets including generic flovent and biosimilar insulin glargine continues to advance the launch of insulin glargine possible in 2023.\nAnd in February, we added to our pipeline another large opportunity product biosimilar insulin aspart.\nThat biosimilar development should track perhaps the year behind insulin glargine and potentially launch in 2024, along with generic flovent, setting up a series of potentially significant product launches in the not too distant future.\nI will begin with our financial results on a non-GAAP adjusted basis.\nFor the 2021 third quarter, net sales were $112.4 million, compared with $144.4 million for the third quarter of last year.\nGross profit was $30.4 million or 27% of net sales, compared with $52.3 million or 36% of net sales for the prior year third quarter.\nOur gross margin for the quarter grew from the previous quarter largely due to improved manufacturing efficiencies, and to a lesser extent sales mix.\nMore specifically, increased sales of certain higher margin products.\nNet sales for the quarter were lower than expected, primarily due to the competitive market pressure for both Levothyroxine tablets and capsules.\nResearch and development expenses declined to $6.0 million from $7.4 million.\nSG&A expenses declined to $14.4 million from $17.7 million.\nInterest expense decreased to $9.8 million from $12.7 million in last year's third quarter.\nNet income was $1.0 million or $0.02 per diluted share, compared with $11.7 million or $0.27 per diluted share.\nAdjusted EBITDA was $17.0 million, which was positively impacted by lower R&D expenses in the quarter due to timing.\nWe expect some of that R&D spend to move to our fourth quarter.\nTurning to our balance sheet.\nAt March 31, 2021, cash and cash equivalents totaled approximately $81 million, up significantly from $34 million at December 31.\nThe increase was due to the receipt of income tax refunds, as well as benefits derived from initiatives to improve our working capital.\nWith that, I would like to provide additional details on our recently completed refinancing transaction, which was leverage neutral and as Tim mentioned, extended the maturity of our debt and enhances our cash flow.\nFor background, in November 2015, we acquired Kremers Urban Pharmaceuticals, primarily using debt to finance the transaction.\nFor the last six plus years, we have made excellent progress paying down this debt reducing by more than half the original outstanding debt balance of approximately $1.3 billion.\nWith the Term B loan scheduled to mature in November 2022, we made the strategic decision to refinance our debt.\nThe refinancing included two new debt instruments, specifically, $350 million of first lien senior secured notes and $190 million of second lien loans, which were used to retire the approximately $540 million outstanding balance of our Term B loan.\nAs part of the transaction, we also upsized our revolving credit facility to $45 million from $30 million.\nThe new first lien secured notes will mature in five years that will be secured on a first lien basis by all non-ABL collateral and a second lien basis on ABL collateral.\nThe second lien facility is junior in priority to the new first lien senior secured notes and included 8.28 million warrants exercisable into the company's common equity at a strike price of $6.88.\nThe second lien facility also matures in 2026.\nThe refinancing improved our financial flexibility in a couple of ways.\nFirst, neither of the two new debt instruments include financial maintenance covenants.\nAnd second, with no principal payments due until maturity, it considerably increases our cash flow.\nNow, moving to our outlook, we made minor revisions to our guidance for the fiscal 2021 full year which were largely due to the refinancing.\nSpecifically, changes to our guidance were in the interest expense line and the income tax line.\nOtherwise, our adjusted guidance range remains unchanged from the guidance we provided on February 3.\nI would note that, given the sales pressure on our Levothyroxine products, combined with an expected delay to our zolmitriptan launch due to an API matter, we would anticipate to be at the lower end of our sales guidance range.\nI would also add that an API issue surrounding our thalidomide product has still not yet been resolved.\nThe launch for the product was most recently expected for late in calendar 2022.\nBut as of now, we are not estimating a launch timeframe.\nWith that context, the revised guidance items are as follows: adjusted interest expense of approximately $44 million, up from $41 million to $42 million.\nAnd income tax in the range of $1 million of expense to $1 million of benefit.\nPlease note we replaced in the income tax line of our adjusted guidance the dollar amount to provide additional clarity.\nWith that overview, we would now like to address any questions you may have.\n Assistant:", "chosen": "q3 adjusted earnings per share $0.02.\nq3 sales $112.4 million versus $144.4 million.\n"}
{"prompt": "Human: On the call today are Tim Crew, Chief Executive Officer; John Kozlowski, the company's Chief Financial Officer, Maureen Cavanaugh, our Chief Commercial Operations Officer; and Steve Lehrer, who leads our insulin biosimilar initiatives.\nA playback will be available for at least three months on Lannett's website.\nIn a moment, Tim will provide brief remarks on the company's financial results, as well as recent developments and initiatives.\nThen John will discuss the financial results in more detail.\nWe hope you remain safe and well as we all manage through the persistency of the pandemic.\nI'll start today reviewing some of the highlights of the past year that are relevant to our future before turning to the key elements we see in that future.\nFirst and foremost, in 2021, we continued to launch products and build our future portfolio.\nWe launched about a dozen new products, highlighted by a few significant contributors, including Levothyroxine tablets, Levothyroxine capsules and Clarithromycin.\nThe products we launched last year added new revenue streams and further diversified offerings, reducing our exposure and reliance on key products.\nWe also grew our base product pipeline with continued investment in a robust internal product development program.\nFor example, our recent Mycophenolate approval was achieved in just under 10 months, the third such product we developed to achieve so called first cycle approval in the past few years.\nWe have made great strides in our internal efforts including significant changes to our portfolio selection.\nSuch changes take time to be fully reflected in our financials, but we believe meaningful value is being built.\nFurther, we are working on our existing strategic alliance partners to expand our agreements to include new products.\nFor example, this past year Insulin Aspart was added to our HEC agreement, and more recently, generic Spiriva, Handihaler was added to our Respirent agreements.\nTogether these products represent multi-billion dollar markets with relatively few competitors expected.\nWe also formed a new strategic alliance partnership to launch Sevoflurane, a product with relatively few competitors and a market size of about $190 million based on IQVIA data.\nWe look to launch Sevoflurane in the back half of the fiscal year.\nThe second key accomplishment last year was even while we launched new products and grew our pipeline, we also maintained firm control over expenses and exhibited operating discipline.\nWe implemented and completed the cost reduction plan that included consolidating our R&D functions to a single location and lowered operating costs by approximately $15 million annually.\nThe third key accomplishment was that we significantly improved our capital structure.\nThis last year, we paid off our Term A loans with cash on hand and later successfully completed a full refinancing transaction of the Term B loans.\nThe refinancing transaction as we have often highlighted was significant for several reasons.\nFirst, we extended the maturity of our debt to 2026 from 2022, which is now after several of our larger and more meaningful pipeline assets are expected to launch and contributed to a reduction in our debt.\nSecond, we upsize our credit facility and substantially freed up cash flow, primarily due to the elimination of mandatory principal payments until maturity.\nThird, the new debt does not have any leverage covenants.\nFourth, as a result of this refinancing, in combination with working capital initiatives, we have improved our cash position.\nThus, we now have more ready resources to invest in growth opportunities.\nOf course, another accomplishment to note was in our teams, particularly in our plants and labs, showed up to work every day throughout the pandemic and maintained a reliable supply of our affordable medicines.\nThis, of course, despite all the extra challenges we have been doing so this past year.\nWe are quite proud of all of these accomplishments.\nOf course, there are also real challenges.\nWell, competition is a fact of life in the generic industry.\nThe competitive environment we encountered last year was particularly impactful because it involved some of our most profitable products.\nWe offset some of these pressures with the aforementioned new product launches and cost reductions, but the decline significantly exceeded the offsets.\nOn top of a particularly competitive environment, COVID-19 continued to impact our financial performance with more downstream influences.\nFor example, as we have said, the pandemic resulted in fewer elective medical procedures being performed, this reduction in limited sales and use of our cocaine-based product.\nAs a branded product, our Numbrino NDA carries a higher than average gross margin for us, so changes up or down in sales have a disproportionate impact on our bottom line.\nFortunately, we believe many of the negative past year are beginning to attenuate while the positive factors continue to foretell meaningful opportunities.\nWith that as a background and leaving John to note the specific financial results, I will turn to our outlook for the upcoming years.\nWe expect our overall net sales and gross margin to continue to face pressure by recent and anticipated competitive pricing of certain key products, partially offset again by the benefit of new product launches.\nWe also expect sales of our Numbrino NDA to be impacted by a continuation of further elective surgeries being performed.\nOnce the pandemic subsides, we would expect to see an increase in these types of procedures and along with that, an increase in sales.\nWhile we are forecasting a down year in sales and profits, we see fiscal '22 as a trough year.\nOur key products have already been impacted by notable competitive pricing pressure, thus, those products have less further downside.\nAt the same time, the relative future potential of our pipeline continues to increase.\nI also want to note that while we believe our generic ADVAIR DISKUS product has the potential to launch in calendar year 2022, we did not include any sales of the product in our FY '22 guidance.\nSimilarly, zolmitriptan is also not contemplated in our FY 2022 forecast, as a result of ongoing delays from our API supplier.\nNevertheless, we do expect both products to be meaningful contributors in fiscal 2023.\nSo now let's turn to our pipeline.\nWe continue to launch products [Indecipherable] approximately 13 ANDAs pending at the FDA including partner products, plus four additional products that are approved and pending launch.\nWe also have more than 20 products in development and expect to add more from both external and internal efforts.\nWe continue to target more valuable products than has been our historical average.\nWith regard to our large durable product pipeline, we currently have five disclosed assets.\nFirst, with our partner HEC, we have two insulin assets, Insulin Aspart, a fast acting insulin product and Insulin Glargine, a long-acting insulin product.\nCombined, the two products participate in a double-digit billion dollar US market as reported by IQVIA.\nSecond, our drug device respiratory portfolio with their partner Respirent now has three assets, generic ADVAIR DISKUS, which is filed with the FDA, along with generic Flovent Diskus, and most recently, generic Spiriva Handihaler.\nCombined sales of these products also represent a multi-billion dollar US market as reported by IQVIA.\nAs we have said, all of these products are differentiated from traditional generic products because of the significant technical expertise required for development and substantial plant investments made by our partners that needed to manufacture them.\nSo for all of these products, we expect only a handful of competitors.\nI will discuss next the significant progress we are making advancing these large durable product opportunities.\nWith regard to generic ADVAIR DISKUS, we have been in regular contact with the FDA regarding this priority application since it was accepted in May of this year.\nWe are encouraged by their level of engagement.\nWe anticipate a mid-cycle review update from the FDA sometime in the next few months.\nThus, we expect to provide a better sense of how the application is progressing on our next investor call in November.\nCurrently, we continue to participate more than one FDA cycle and believe, as just noted, an approval in US launch of the product is possible in calendar year 2022.\nFor those new to Lannett story, generic ADVAIR DISKUS is one of the larger assets in our filed pipeline.\nIt is also currently the closest to expected commercialization in our partnered respiratory portfolio.\nThe second most advanced product in our respiratory portfolio is generic Flovent Diskus.\nThe last patient for the pivotal clinical trial for this product has been dosed and we anticipate the analysis of the trial to be completed within a few months.\nWe are currently planning for an ANDA submission before the end of the current fiscal year and a possible launch in calendar year 2023.\nNext, as noted, we recently expanded our opportunities with Respirent to include generic Spiriva Handihaler.\nThe development arc for this product should be approximately 12 months to 18 months behind the generic Flovent Diskus product.\nHowever, as there were various IP matters involved, we're not commenting today on the specific launch timing expectations.\nFinally, as we have previously said, we're evaluating and in negotiations for additional product opportunities in inhalation respiratory space, particularly dry powder inhalers, and metered dose inhalers.\nThere continues to be additional multi-billion dollar market opportunities to pursue with both current and future partners.\nNow turning to our two biologic insulin products, starting with biosimilar Insulin Glargine.\nClinical material for the drug product has now been manufactured in the new dedicated manufacturing site, which is a very significant milestone.\nWe still expect to submit an IND around the end of the calendar year and commence the pivotal clinical trial early next calendar year.\nHowever, we have recently added a few months to the clinical timeline, due to current COVID-19 restrictions at the study site in South Africa.\nWe have also added a few more months to our timelines to address interchangeability with the FDA, which I'll discuss in a moment.\nThus, we currently think the biologics license application will be filed in the first half of calendar year 2023 and we would expect to launch in the first half of calendar year 2024.\nAlso note, China's version of the FDA, the NMPA has approved HEC's Insulin Glargine for China.\nThat product is made in the same new plant, where we have now just made our Insulin Glargine for clinical trials.\n[Indecipherable] we have added to the development plan to address the interchangeability with the FDA is related to an important recent FDA approval of the first biosimilar and interchangeable Insulin Glargine, the [Indecipherable].\nWe believe that interchangeability approval is good news for Lannett and HEC's insulin.\nIt demonstrates the FDA will approve interchangeable insulin products, which over-time should improve affordable access to these important medications.\nRegarding biosimilar Insulin Aspart, the development of the product continues and we currently anticipate a potential launch of the product about 15 months following Insulin Glargine.\nAgain, Insulin Aspart was produced in the same facilities, working with the same teams and technologies as Insulin Glargine, so we are able to leverage may be earlier Glargine investments in development and manufacturing that have been made by both Lannett and HEC.\nLike our respiratory portfolio, we see several opportunities to leverage our insulin assets.\nThere are other dosage forms of both Glargine and Aspart, such as vials and other distinct insulin products.\nThese opportunities again represent multi-billion dollar markets, as reported by IQVIA.\nWe also see opportunities to leverage our USA clinical data, 10 development and related IP, along with the manufacturing capacity at HEC to form a strategic alliance with third parties looking to accelerate their access to insulin products in international markets such as Europe.\nWell, discussions on such opportunities are very preliminary, such relationships could yield meaningful value for both ourselves and our partners.\nFinally, a few brief comments on Made in America [Phonetic] and ESG.\nWhile we see a future that includes several high technology products from overseas sources, today, we are mainly a US domiciled generic medicines company.\nLannett adheres to strict US laws and US environmental guidelines with regard to development and manufacturing compliance for our US made products.\nMost of our large generic competitors are already based overseas and don't face the same set of regulations and ship most of their products from the far side of the globe.\nWe are proud that today, we serve the US market from the US market and do so with an enviable track record and reputation for being a high quality and reliable manufacturer.\nWe point out these characteristics that make Lannett increasingly unique as a generic supplier so that our investors and customers think of Lannett when they consider Made in America in various ESG related initiatives.\nTo sum-up today's remarks, our accomplishments in fiscal 2021 were significant.\nWe faced head on a highly competitive market environment.\nWe launched new products and made important advances in the development of key products in our pipeline.\nWe expanded existing agreements that added three large durable assets to our respiratory and insulin franchises.\nWe refinanced our debt, improving free cash flow and extended our maturities beyond the expected launch dates of our large pipeline assets.\nWe continue to believe that the exciting products in our advancing and expanding pipeline still have the potential to transform our firm into $1 billion company by 2025.\nI'll begin with our financial results on a non-GAAP adjusted basis.\nFor the 2021 fourth quarter, net sales were $106.0 million, compared with $137.9 million for the fourth quarter of last year.\nGross profit was $26.4 million or 25% of net sales, compared with $48.9 million or 35% of net sales for the prior year fourth quarter.\nR&D expenses declined to $6.0 million from $6.6 million.\nSG&A expenses declined to $15.5 million from $15.6 million.\nOperating income was $4.9 million, compared with $26.7 million.\nInterest expense increased to $12.1 million from $11.3 million in last year's fourth quarter.\nNet loss was $7.4 million or $0.19 per share versus net income of $13.4 million or $0.31 per diluted share.\nAdjusted EBITDA was $12.1 million.\nTurning to our balance sheet.\nAt June 30, 2021, cash and cash equivalents totaled approximately $93 million, up from $81 million at March 31.\nCash increased during the fourth quarter due to a few factors.\nFirst, as a result of the refinancing, we did not have a principal payment on our debt.\nSecond, relates to working capital improvements that continued from the third quarter.\nAnd the third, was the receipt of income tax refunds.\nLooking ahead, we expect to receive additional income tax refunds continue to benefit from initiatives to improve our working capital and we have no mandatory principal payments on our debt until maturity.\nAccordingly, we expect to maintain a healthy cash position throughout the year and end fiscal 2022 with approximately $80 plus million.\nAs for our liquidity, we also have access to our $45 million credit facility, which today we have not drawn upon.\nTurning to our guidance, which as Tim mentioned earlier, does not include sales of generic ADVAIR DISKUS or zolmitriptan.\nFor fiscal 2022, we expect net sales in the range of $400 million to $440 million, adjusted gross margin as a percentage of net sales of approximately 23% to 25%, adjusted R&D expense in the range of $26 million to $29 million, adjusted SG&A expense ranging from $58 million to $61 million, adjusted interest expense of approximately $52 million, the full year adjusted effective tax rate in the range of 21% to 22%, adjusted EBITDA in the range of $40 million to $55 million, and lastly, capital expenditures to be approximately $12 million to $18 million.\nRegarding the phasing of the quarters, we expect net sales and adjusted EBITDA in Q1 to be lower than Q4, ramping up slightly in Q2 and continue to ramp-up more in the second half of fiscal 2022.\nThe increase is related to expected new product launches.\nGross margin in the first half of the fiscal year to be in the lower range of our outlook, ramping up to the upper end of the range in the second half of fiscal 2022 and operating expenses to remain relatively consistent throughout the year, though, we expect Q1 to be slightly higher than the other quarters, as they include certain compensation related expenses that are only recorded at the beginning of our fiscal year.\nWith that overview, we would now like to address any questions you may have.\n Assistant:", "chosen": "q4 adjusted loss per share $0.19.\ncompleted re-financing transaction, debt maturity extended to 2026.\nsees fiscal 2022 gaap net sales $400 million to $440 million.\n"}
{"prompt": "Human: Before we begin, I have an important reminder.\nWe appreciate your participation today and invite you to visit Lincoln's website, www.\nAfter their prepared comments, we will move to the question-and-answer portion of the call.\nThird quarter operating earnings were reduced by pandemic claims and other charges and helped by strong alternative investment results.\nAdjusting out these various items, our underlying earnings and earnings growth potential remains strong.\nOur expectation remains to be at the high end or above our 8% to 10% earnings per share growth target in the intermediate and longer term.\nIntermediate term expectations are primarily based on recovering sales momentum, strong fees on assets under management, incremental expense management initiatives and the combination of $900 million of buybacks related to our recent block sale and ongoing share repurchases.\nTaking each of these in turn.\nSales year-to-date are consistent with our expectations of building off the levels achieved as we exited 2020.\nWe are also achieving returns in the low- to mid-teens on capital backing sales across all business lines.\nOverall, sales growth is reemerging due to our distribution strength, added shelf space, digital capabilities and product innovation.\nAfter introducing 10 new products since the beginning of the year, including the industry's first combined life plus long-term care policy built on a variable chassis, we have more updates planned and additional products in development.\nExpense efficiency has long been a key focus for Lincoln.\nThis quarter, we once again reported a lower expense ratio across most of our businesses.\nWe also have a track record of delivering on past cost savings initiatives.\nWe expect Spark, our new cost savings initiative to drive savings well in excess of the impact of spread compression through 2024 and to improve both our operational effectiveness and the customer experience.\nFinally, our buyback strategy, as just mentioned, is comprised of two components: first, our ongoing repurchases, which returned to pre-COVID levels this year, driven by the capital efficiency of our products, including the impact of the recently announced VA living benefit flow reinsurance deal, low levels of credit losses and net ratings upgrades in our high-quality investment portfolio and our well-managed hedge strategy.\nSecond, the buybacks funded by the block deal.\nBefore turning to the business segments, I want to congratulate Ellen Cooper.\nIn August, the Board announced that Ellen will succeed me as CEO after our Annual Shareholders Meeting next May.\nSince joining Lincoln in 2012, Ellen has worked with me and the rest of our executive team to shape and execute on Lincoln's strategy.\nShe joined us as Chief Investment Officer, and her responsibilities have grown to include leading our enterprise risk efforts and our annuities business.\nEllen is a gifted leader with a proven track record of empowering high-performing teams and executing effectively in challenging environments.\nI know that Lincoln will be in great hands with Ellen at the helm as she moves forward and fully capitalizing on the exciting opportunities ahead for Lincoln.\nEllen will be joining Randy and me on the first quarter's earnings call.\nNow turning to the business segments.\nIn Annuities, we reported sales growth of 7% and over the prior year quarter, driven by our industry-leading product breadth and distribution force plus shelf space added over the last two years.\nSales were down sequentially as we led the industry with weight reductions on indexed variable annuities in response to market conditions as well as typical third quarter seasonality.\nWe remain pleased with our sales mix of guaranteed and nonguaranteed products, providing us diversification and attractive new business returns.\nLooking forward, we are expanding customer choice by adding new investment options and index strategies and have improved the attractiveness of our indexed variable annuity product setting us up for sales growth in the fourth quarter.\nFinally, we expect our earnings to continue to benefit from the high-quality and diversified in-force book we have built over the years.\nIn Retirement Plan Services, we reported another quarter of excellent results and remain well positioned with award-winning digital technology, a competitive cost structure an expanding set of product solutions and scale in our target markets.\nTotal deposits were up 2% despite being negatively impacted by some sales shifting into the fourth quarter.\nWhile we reported slightly negative flows this quarter, trailing 12-month net flows remained strong at positive $1.2 billion, and we expect full year 2021 net flows to be positive.\nSales of YourPath or alternative to target date funds remain strong.\nWe have continued to innovate, enhancing our in-plan income solution called PathBuilder Income and integrating the solution inside our YourPath investment option.\nAs a result of the SECURE Act, we also see significant long-term opportunities around in-plan guarantees, pooled employer plan solutions and advisor managed accounts.\nFinally, the macro environment continues to provide a tailwind to Retirement Plan Services.\nIn addition to healthy equity markets, the economic recovery is contributing to better wage growth, higher employee contribution rates and a greater employer deposits.\nThe retirement business is having an outstanding year as we continue to execute on our strategy.\nIn life insurance, our focus on expanding both consumer value propositions and distribution shelf space resulted in sequential sales growth of 32% this quarter with sales totaling $166 million and all product categories reporting double-digit increases.\nThe focus on expanded customer choice aligns with our ongoing efforts to diversify our product risk profile.\nAs examples, in the life business, our variable MoneyGuard and our principal VUL products offer the customer the choice of lower guarantees and higher upside potential.\nSales of these types of products have been growing faster than segmentwide sales.\nThe products have less potential tail risk and better capital efficiency.\nIn addition to the property and casualty distribution partnership we added in the second quarter -- We recently launched our variable MoneyGuard product at two of our largest strategic partners, providing 25,000 more advisors with access to this first-of-its-kind solution.\nComplementing our distribution and product expansion efforts, our digital-first focus continues to drive a lower cost per policy and an improved customer experience.\nLooking ahead, we are enthusiastic about the future of the life business, we are introducing new solutions that will further expand our customer and distribution reach with more introductions planned for the first half of 2022.\nLastly, our Group Protection business continues to be impacted by the pandemic particularly as the Delta variant affected more individuals under age 65 driving increased claims.\nWhile the pandemic continues to be a headwind, the underlying fundamentals of the business are strong, and we are pleased with the progress we are making.\nWe achieved 5% premium growth over the prior year which is a result of a stronger persistency rate of nearly 90% and renewal rate increases implemented earlier this year.\nYear-over-year sales are flat as we stick to our pricing discipline.\nWe're seeing more sales from our higher-margin employee-paid products year-to-date.\n59% of Group Protection sales have come from these products as more individuals see the value of them.\nWithin this category, we have begun to quote our new hospital indemnity product rounding out our suite of supplemental health products.\nUnderlying margins after adjusting primarily for pandemic-related claims or again, in the middle of our target range this quarter.\nWe will continue to build on our progress and expect margins to grow toward the top end of our 5% to 7% target range.\nAs we remain disciplined on pricing, new business, reducing costs and managing claims.\nBriefly on investment results.\nCredit quality remains excellent.\nOur general account portfolio is predominantly comprised of fixed income investments, of which 97% are investment-grade equivalent.\nWe continue to expect a benign credit outlook and have seen favorable credit trends within our portfolio with minimal credit losses and positive net credit migrations.\nDuring the quarter, we invested new money at an average yield of 2.6% with 1/2 in shorter-duration assets versus 1/3 for the full year 2020.\nAnd reflecting the increase in shorter-duration product sales and our disciplined asset liability matching.\nApproximately 60% of our purchases were in investments other than public corporates, providing diversification and good relative value and yielding approximately 100 basis points over comparability rated public corporates.\nLastly, our alternative investment performance was once again strong with an 8% return in the quarter, exceeding our long-term targeted quarterly return of 2.5%.\nIn summary, reported results this quarter continue to reflect ongoing impacts from the pandemic in life insurance and Group Protection.\nOur product strategy, distribution strength and ongoing innovation are helping to build sales momentum at attractive returns.\nOur new expense savings initiative is expected to more than offset spread compression, improve overall operational effectiveness and drive earnings growth.\nAnd ongoing share buybacks driven by our strong balance sheet and free cash flow generation, combined with the incremental buybacks enabled by our recent block deal will further boost EPS.\nIn sum, our underlying earnings power is improving, and we remain confident in our ability to grow earnings per share at or above our 8% to 10% target range.\nLast night, we reported third quarter adjusted operating income of $307 million or $1.62 per share.\nAlso, this quarter's results were impacted by pandemic-related claims, which reduced earnings by $180 million or $0.95 per share.\nWhile results benefited from strong performance in the alternative investment portfolio, boosting earnings by $89 million or $0.47 per share above target.\nAdditionally, we experienced some unfavorable nonpandemic mortality in the Life Insurance segment that I will discuss further in the life commentary.\nFrom a reported adjusted operating income standpoint, it was a bit of a noisy quarter, but we have strong underlying earnings power as we exit the quarter.\nNet income totaled $318 million or $1.68 per share, boosted by gains in the investment portfolio and strong performance from the variable annuity hedge program.\nMoving to the performance of key financial metrics.\nConsolidated adjusted operating revenue grew 9% from the prior year, which included growth in each of the four businesses.\nAverage account values increased 17%, and book value per share, excluding AOCI, grew 8% and stands at $76.96, an all-time high.\nNow turning to segment results, starting with Annuities.\nOperating income for the quarter was $338 million, which included a $5 million net unfavorable impact from our annual review.\nCompared to $196 million in the prior year quarter, which included a $101 million net unfavorable impact from the annual review.\nAdjusting for notable items in both periods, operating income increased 15% from the prior year quarter, driven by record average account values of $170 billion, up 17% over the past year.\nThe current quarter included $10 million of favorable alternative investment income.\nThe expense ratio improved 80 basis points compared to the prior year period as our focus on expenses continues to benefit the bottom line.\nReturn metrics remained solid with return on assets coming in at 80 basis points and return on equity at 26%.\nRisk metrics on our VA book once again demonstrate the quality of our in-force with a net amount at risk at 63 basis points of account values for living benefits and at 43 basis points for death benefits.\nSo a great result for the Annuities business with another quarter of high-quality earnings, strong returns and solid risk metrics, leaving us well positioned to finish the year with another excellent quarter.\nRetirement Plan Services reported operating income of $60 million compared to $50 million in the prior year quarter, with the increase driven by higher fees and account values, continued expense efficiency and higher alternative investment income, which was $6 million favorable to our expectation in the current quarter.\nOur annual review had no impact in the current quarter, but did have a net unfavorable impact of $3 million in the prior year quarter.\nFavorable equity markets drove average account values up 21% to $97 billion.\nThe expense ratio improved 80 basis points over the prior year quarter as revenue growth combined with continued diligent expense management contributed to improved results.\nBase spreads, excluding variable investment income, compressed 10 basis points versus the prior year quarter, in line with our stated 10 to 15 basis point range as crediting rate actions continue to take hold.\nOverall, the retirement business had an excellent quarter, and continues to be well positioned to drive strong results.\nTurning to life Insurance.\nOperating income for the quarter was $93 million which included a $26 million net unfavorable impact from our annual review compared to an operating loss of $311 million in the prior year quarter, which included a $440 million net unfavorable impact from the annual review.\nAdditionally, the current quarter included an unfavorable notable item of $19 million related to a legal expense associated with the reinsurance arbitration award.\nAdjusting for notable items in both periods, operating income increased 7% from the prior year quarter, driven by higher alternative investment income, as the current quarter included $65 million compared to $37 million in the prior year quarter.\nElevated mortality related to the pandemic was $60 million in the quarter compared to $70 million in the prior year quarter.\nThis quarter's impact for 10,000 COVID deaths of $6 million was down year-over-year as expected, but was up sequentially and as the severity of our average COVID claim was elevated.\nWe believe this elevation is normal volatility as we had a few larger COVID claims in the quarter.\nIn addition to the impacts of the pandemic, underlying mortality was negatively impacted by $34 million.\nWe believe this was driven by two factors.\nFirst, over the course of the pandemic, when COVID cases have been increasing, which they did in the third quarter, we have seen elevated non-COVID mortality as well.\nAnd second, normal quarterly volatility.\nI'd point out that we experienced favorable underlying mortality in the prior two quarters, and when viewed on a year-to-date basis, our actual to expected mortality ratio remains under 100%, better than expected.\nEarnings drivers continue to grow, with average account values up 9% and average life insurance in-force up 7% over the prior year.\nBase spreads, excluding variable investment income, declined 13 basis points compared to the prior year quarter, above our five to 10 basis point expectation.\nOur expense ratio improved 30 basis points over the prior year quarter as our efficiency efforts continue to benefit margins.\nThis was a noisy quarter for life earnings, but growth in earnings drivers, long-term mortality results in line with expectations and continued expense discipline keep us confident in our underlying business.\nGroup Protection reported an operating loss of $32 million which included a $16 million net favorable impact from our annual review of reserve assumptions compared to operating income of $6 million in the prior year quarter, which included a $3 million net unfavorable impact from the annual review.\nAdjusting for notable items in both periods, operating income decreased from $9 million to an operating loss of $48 million, driven by higher mortality impact from the pandemic.\nThe current quarter also included $6 million of favorable alternative investment income.\nOn a sequential basis, pandemic-related claims in the quarter negatively impacted earnings by $120 million compared to $28 million in the second quarter and included $107 million in life claims and $13 million in disability claims.\nIn the quarter, U.S. COVID deaths significantly shifted to the working age population, and in our group business, the average claim size for active employees across all ages is consistently three to four times the size of those for retirees.\nThis significant increase in working age deaths, coupled with the higher average claim size, drove the sequential increase in mortality.\nWhile I've been humbled by trying to predict the impacts of the pandemic, I do believe that this quarter's increased impact reflects the current state of the pandemic, with a higher percentage of deaths occurring in the working-age population.\nExcluding the annual review of reserve assumptions, pandemic claims and favorable alternative investment income, the group margin of 5.9% was consistent with the prior quarter and in the middle of our 5% to 7% targeted range.\nThe loss ratio was 87.8% in the quarter, an 8.5 percentage point sequential increase.\nExcluding pandemic-related claims and the impact of the assumption review, the loss ratio improved 20 basis points to 75.9%.\nGroup's expense ratio remained flat despite ongoing investments in our claims organization to address elevated claim volume from the pandemic.\nDespite the tough quarter for group, we are confident that the underlying business fundamentals are solid and the strength of this business will reemerge as the pandemic subsides.\nTurning to capital and capital management.\nWe ended the quarter with $10.9 billion of statutory capital and estimate our RBC ratio at 63%.\nAs a reminder, our RBC ratio includes 25 percentage points from noneconomic goodwill associated with the Liberty acquisition that we expect will go away by year-end.\nCash at the holding company stands at $754 million, above our $450 million target as we have prefunded our $300 million 2022 debt maturity.\nWe deployed $200 million toward buybacks in the third quarter.\nIn line with our goal communicated last quarter to have full year buybacks in line with pre-pandemic levels of approximately $600 million, excluding any incremental buybacks from transactions.\nOur block sale with Resolution Life, which we announced in September and closed on October 1, generated approximately $1.2 billion of capital, $900 million of which we plan to use for incremental share repurchases.\nWe expect these repurchases to be completed by the end of the first quarter of 2022 and began the incremental buybacks in October, via a $500 million accelerated share repurchase program.\nOutside of the deployment of proceeds from the block sale, we expect to continue our ongoing buyback program.\nAlthough I'd point out that the timing of ongoing buybacks may be influenced by the accelerated share repurchase program.\nWe were pleased to have executed both a life block deal and a VA flow deal last quarter, and we continue to be open to additional block and flow reinsurance deals.\nAdditionally, we announced a 7% increase in our quarterly dividend this quarter.\nNow to provide some details on the Spark initiative.\nAs we have been communicating for the past few quarters, we are excited to be embarking on another meaningful expense savings program.\nTeams from across the organization have been hard at work identifying and prioritizing opportunities for us to invest and improve efficiencies through this initiative.\nAnd they have been working with them and across departments to identify the best project to maximize effectiveness as part of Spark.\nBecause the strategic digital program is nearing its end, we have decided to integrate the balance of that program into this new cost savings initiatives for ease of tracking and communication.\nAs of the end of 2020, the total net recurring benefit from our strategic digital program is $80 million, on track with our target.\nIn addition to these savings, we expect to achieve $260 million to $300 million in run rate savings through Spark as we exit 2024, with benefits growing steadily starting this year, and ramping up in the out years.\nThe total expected onetime investment to achieve the savings is $350 million to $410 million including the $57 million in investments we've made already this year.\nWe expect investment spend to peak in 2022 and decline in subsequent years.\nAll numbers that I've just discussed are pre-tax and pre-DAC.\nSpark will be focused on driving efficiencies throughout all aspects of our business, from leveraging automation to simplifying and improving process efficiency.\nAnd we will continue to focus on enhancing the customer and employee experiences while modernizing our technology footprint.\nWe are also targeting benefits beyond cost savings, including improving the way we work by focusing on reskilling and upskilling our valuable employee base.\nWe will update you on our progress going forward, tying back to this disclosure.\nTo conclude, the pandemic environment continues to challenge our life Insurance and Group Protection segments.\nHowever, underlying earnings in these businesses remains strong.\nOur Annuities and Retirement businesses both delivered excellent results.\nIn sum, our underlying results and earnings power are both strong and growing.\nWe will now begin the question-and-answer portion of the call.\n Assistant:", "chosen": "compname reports q3 earnings per share of $1.68.\nq3 adjusted operating earnings per share $1.62.\nq3 earnings per share $1.68.\n"}
{"prompt": "Human: In addition, we may include references to certain non-GAAP financial measures, such as consolidated adjusted EBITDA and distributable cash flow.\nAs part of our discussion of Cheniere's results, today's call may also include selected financial information and results for Cheniere Energy Partners LP, or CQP.\nWe do not intend to cover CQP's results separately from those of Cheniere Energy, Inc. The call agenda is shown on Slide three.\nJack will begin with operating and financial highlights, Anatol will then provide an update on the LNG market, and Zach will review our financial results and guidance.\nThe second quarter was an extremely productive one for us as we achieved milestones across the enterprise in origination, marketing, operations and engineering and construction, just to name a few.\nGlobal LNG market fundamentals continue to be extremely constructive, and we have begun to see the return of long-term LNG contracts in support of the construction of new liquefaction capacity.\nFor the second quarter, we generated consolidated adjusted EBITDA of $1.023 billion and distributable cash flow of approximately $340 million on revenue of over $3 billion.\nWe generated a net loss of approximately $329 million, due primarily to the unrealized derivative accounting treatment required on our hedges and on our Integrated Production Marketing, or IPM transactions, which Zach will discuss in more detail in a few minutes.\nFor the third consecutive quarter, we're raising our full year 2021 financial guidance.\nWe now forecast 2021 consolidated adjusted EBITDA of $4.6 billion to $4.9 billion and distributable cash flow of $1.8 billion to $2.1 billion.\nThis increase in guidance is being driven by a number of factors.\nFirst, the continued strengthening of the LNG market is yielding higher netbacks on open volumes.\nFor context, since our first quarter earnings call in May, spot margins for 2021 doubled.\nAnd our portfolio optimization team has been able to capitalize on that with our open volumes.\nIn addition, we've been able to further unlock some additional production for the second half of the year, primarily through maintenance optimization, which has contributed to an upwardly revised production forecast.\nAnd lastly, with Henry Hub moving higher over the past quarter, we made some additional lifting margin.\nSo our outlook for the balance of 2021 has improved again based on a very strong LNG market and our very strong operational performance.\nThe fundamentals present in the LNG market are as good or better than at any time since I've been at Cheniere.\nAnatol will cover the market in more detail in a few minutes, but market dynamics on both the supply side and demand side continue to move in our favor and support our conviction in the long-term growth prospects for natural gas worldwide.\nJust after the quarter ended, we signed our third IPM agreement in support of Corpus Christi Stage 3, this time, with Tourmaline, the largest natural gas producer in Canada.\nThis transaction progresses our commercialization efforts on a shovel-ready Stage three expansion project and helps validate our view of a constructive macro backdrop for long-term contracts.\nIn addition, it reinforces Cheniere's record of executing collaborative, innovative solutions to meet the needs of our customers.\nWe will continue to leverage our infrastructure platform and commercial advantages to further progress Stage three toward FID.\nDuring the second quarter, we continue to have meaningful success under our midterm strategy, placing portfolio volumes into the market under various commercial agreements and increasing the percentage of our total volume that is contracted.\nSo far in 2021, we've entered into fixed fee sales agreements for portfolio volumes with multiple counterparties aggregating approximately 12 million tons of LNG volume between this year and 2032, in addition to the IPM deal with Tourmaline.\nThe success of this midterm strategy underscores the strength in the LNG market today and the strategic competitive advantage of our portfolio volumes.\nWe'll continue to place these flexible volumes in the market, tailoring solutions to meet the growing requirements of LNG customers worldwide.\nOn the production side, the record we set in the first quarter for LNG exports didn't stand very long as we broke that record in the second quarter with 139 cargoes of LNG exported from our two facilities.\nYear-to-date, Asia is the top destination of Cheniere cargoes with approximately 45% of our cargoes exported having landed in Asia, followed by Europe with roughly 35%, and Latin America with about 20%.\nSouth Korea and China are the top two countries importing our LNG so far this year, and those two alone account for over 1/4 of all cargo deliveries.\nOur operations and maintenance teams at both Sabine Pass and Corpus Christi have done an exceptional job thus far in 2021, managing our operating plans to maximize asset availability and LNG production in our facilities, enabling us to increase our production forecast for the year, all while ramping Corpus Christi Train three to four rates and stable operations quickly and safely.\nWe look forward to the same performance with the addition of Sabine Pass Train six early next year.\nSpeaking of Train 6, a significant milestone was met last month with the introduction of fuel gas into the train, signaling the start of early commissioning activities.\nAt the site, 17 systems were turned over to the start-up team in June, another 12 in July.\nWith the project approximately 90% complete Bechtel continues to progress this project against an accelerated schedule.\nTurn now to Slide six where we'll provide a brief review of Stage three and the Corpus Christi site overall as the Stage three project comes into focus with our recent commercial momentum and the constructive market we are in.\nAs a reminder, our Stage three project at Corpus Christi is fully permitted, and if fully constructed, would have over 10 million tons of LNG capacity per year.\nStage three enjoys brownfield project economics as it will utilize a significant amount of shared infrastructure constructed as part of trains one through three, which we believe make Stage three a very cost-competitive LNG capacity addition.\nAs for the path to FID, we have said this before, we will maintain our discipline to help ensure that the risk and return profile of Stage three is consistent with that of the first nine trains we've built.\nTo that end, our origination team is focused on commercializing additional capacity from the project, and we are working closely with Bechtel on finalizing the EPC contract.\nWe remain committed to our growth capital investment parameters which help ensure discipline in our capital investment decisions and the sanctioning of projects only when they meet the high standard we have set for all FIDs to date.\nOur excitement around the potential investment opportunities at the Corpus Christi site doesn't end with Stage 3.\nAs you may recall, we have acquired approximately 500 acres adjacent to our existing site, which provides us with a platform for major future development potential.\nAny future capacity developed at this site may be designed to leverage already in place to provide substantial cost advantages.\nAs you can see from the aerial view of the land position at Corpus Christi, the site possesses a substantial running room for growth well beyond Stage 3.\nAnd we may develop additional infrastructure there over time, especially as Stage three moves closer to FID.\nTurn now to Slide seven.\nLast month, we were proud to publish our second annual corporate responsibility report entitled Built for the Challenge.\nThis report, the product of a deep cross-functional effort across the entire company, provides insight into key actions taken by Cheniere to ensure business resiliency in 2020 and beyond, and is the latest example of our transparency on ESG-related issues and how we are building sustainability into our business model.\nBuilt for the Challenge is the latest milestone in our ESG journey, which has seen tremendous progress in 2021.\nHighlights of achievements reached thus far through 2021 include the announcement of our cargo emission tags, the climate scenario analysis we published, our first carbon-neutral LNG cargo we announced last quarter, our participation in the first-ever study to measure methane emissions on an LNG carrier, and our collaboration with leading academic institutions and several of our upstream natural gas suppliers to implement QMRV or greenhouse gas emissions performance at natural gas production sites across several bases.\nAnd finally, earlier today, we announced the publication of our peer-reviewed greenhouse gas life cycle assessment, or LCA, which utilizes greenhouse gas emissions data specific to our LNG supply and will be the foundational analytical tool to estimate greenhouse gas emissions to be included in our CE tags that we provide our customers.\nThe items highlighted on this slide are all steps on a continuous path, and we look forward to leading our industry forward in this area, helping to ensure the long-term sustainability of natural gas and helping all participants among the LNG value chain realized the full environmental benefits of our LNG.\nGlobally, the pace of recovery in LNG markets from the COVID-related lows has exceeded most expectations, especially when looking at demand growth in the fourth quarter of 2020 through the first quarter of '21.\nThis trend continued in the second quarter with not only meaningful growth over the same period in 2020, but also notably well above the five year range, supporting our constructive market views on '21 and subsequent years.\nWe continue to see a fundamentally tight market over the next several years breaking the trend for seasonal demand norms even with rebounding LNG supply.\nAs reflected by the historically high LNG prices in both Europe and Asia, markets remain tight through this past winter, with global LNG demand growing by 9% year-over-year in the second quarter, slightly surpassing the fourth quarter demand levels despite the second quarter historically being a shoulder period in the market.\nAsia and Europe exited spring with sizable storage deficits as the cold winter in Asia and the colder-than-normal spring in Europe, intensified the interbasin competition for LNG supply.\nAsia and Europe's robust demand caused spreads between the two regions to narrow, with European netbacks even surpassing those in Asia in order to attract imports amid insufficient LNG supply availability in Q2.\nGlobal LNG production rebounded 8% year-over-year in Q2, primarily on U.S. volume growing 80% compared to last year when customers were exercising their cargo cancellation rights.\nThrough the first half of the year, U.S. LNG production is up 43% year-over-year approximately 35 million tons.\nHowever, non-U.S. volumes have lagged more than expected during most of '21 so far and remain below 2020 levels in June.\nThese non-U.S. volumes were impacted by feed gas constraints in Trinidad, and maintenance and outages in North Africa and other LNG-producing regions.\nConsequently, less LNG flowed to Europe year-over-year as it competed for cargoes with Asia and Latin America.\nOverall, U.S. LNG flows to Asia increased over 10% in the first half of '21 to 48% of total U.S. exports compared to 38% in the first half of 2020.\nMeanwhile, flows to Europe dropped over 15 percentage points from 51% to 34% year-over-year, coinciding with natural gas storage inventories again at multiyear lows.\nIn Europe, weather-driven demand supported the gas market well into the injection season.\nHigh carbon prices and low wind generation in June further lifted European gas demand for power generation.\nHowever, upstream maintenance across Northwest Europe, flat Russian gas pipeline flows and lower LNG imports, capital market tight and storage inventories at a significant deficit relative to historic norms.\nLNG flows into Europe were 9% or roughly 2.1 million tons lower year-on-year in Q2 as a result of tight global LNG supply balances.\nEuropean inventories currently stand at record low levels, with a 16 BCM deficit to the five year average, which is equivalent to roughly 170 LNG cargoes.\nThese supply and demand dynamics were reflected in European gas prices during the second quarter, with Dutch TTF settlement averages increasing by over $6 an MMBtu to $7.82 in MMBtu and almost 350% increase year-over-year.\nThis average was higher than JKM as the basins competed for import volumes.\nSimilarly, in Asia, the continued call on LNG imports to satisfy growing natural gas demand was driven by an early start to the summer, a surge in economic recovery and industrial activity in China, along with heavy nuclear maintenance in Korea.\nJack mentioned a moment ago that Korea and China alone imported over 25% of all our LNG production year-to-date.\nAsia imported 65 million tons of LNG in the second quarter, an increase of eight million tons or 14% year-on-year.\nThe JKT region contributed over 20% of that growth despite higher nuclear availability in Japan.\n10 nuclear units have restarted in Japan as of July 21, the highest number of operating units since the Fukushima disaster over a decade ago.\nJapan's nuclear availability was offset by lower nuclear output in Korea and Taiwan.\nA particular note, Taiwan retired 25% of its nuclear fleet in the second quarter and has a stated goal to become nuclear-free by 2025.\nSo this should continue to support the LNG market in the region for years to come.\nThe majority of growth in Asian LNG demand, however, came from Mainland China.\nImports in China surged 22% to 20 million tons in the second quarter, making China the largest LNG importer on a global basis surpassing Japan.\nLNG imports were supported by hotter-than-normal weather in South China, rising industrial gas demand, and increased power sector demand amid low hydro levels.\nIn addition to Asia and Europe, we saw a notable uptick in Latin American demand as Brazil's imports reached multiyear highs due to severe drought conditions and the resulting lack of hydropower.\nLatin America's imports increased more than 70% year-on-year in the second quarter, with Cheniere-produced cargoes making up nearly 40% of total imports.\nFlows into Latin America represented 17% of total U.S. exports, increasing over 5% from the comparable 2020 period.\nClearly, both near-term and long-term dynamics in the LNG market provide a highly constructive backdrop for us to execute on our short-, medium- and long-term LNG origination strategies.\nWith highly flexible portfolio volumes available today and cost-competitive brownfield incremental capacity that we are actively commercializing, we possess an ideal platform to meet the growing and evolving needs of LNG customers worldwide.\nAs natural gas solidifies its place as a foundational fuel in a global transition to lower carbon energy sources, LNG consumers and producers are seeking to optimize the environmental performance of LNG throughout the value chain.\nJack reviewed some of the recent steps that we at Cheniere have taken and will continue to take as part of our broader strategy focused on data and transparency through the LNG life cycle, with the ultimate goal of emissions abatement in order to maximize the climate benefits of our LNG for all.\nThe growing focus on environmental stewardship and performance is beginning to be reflected in pricing mechanics for energy.\nIn the European Union, carbon prices reached all-time highs in the second quarter, reaching over EUR55 per ton during the quarter and continuing higher to nearly EUR60 per ton, or roughly $3.50 an MMBtu equivalent in early July.\nIndustry commentators view the growth and increased liquidity in the emissions trading market to be an enduring trend as demand for allowances and offsets growth across the globe, driven by decarbonization efforts.\nWhile Europe is by far the most active market for exchange-traded carbon allowances, we're seeing increased activity in other parts of the world as well, especially Asia.\nChina recently launched its own national emissions trading, market making it the largest carbon market in the world at its onset.\nWe believe other markets will follow this trend as progress on climate action will continue to buoy demand for cleaner burning fuels.\nThis is relevant to Cheniere and the LNG market as the appetite for carbon-neutral LNG is increasing, and carbon offsets our necessary tool in certifying cargoes as carbon-neutral.\nWhile this market is nascent today, as of mid-July, there were 12 carbon-neutral LNG cargoes in 2021 globally.\nThere is significant interest in these offerings among both buyers and sellers.\nGiven our size, scale and progress to date, leading on data-driven environmental transparency and performance and some of the other efforts Jack highlighted, Cheniere expects to play a prominent role in this regard from our life cycle analysis and the cargo emission tags and our QMRV collaboration, we aim to offer increased environmental transparency while providing low emission solutions and competitively structured products for our buyers.\nI'm pleased to be here today to review our second quarter financial results and our increased full year 2021 guidance.\nTurning to Slide 13.\nFor the second quarter, we generated revenue of approximately $3 billion, consolidated adjusted EBITDA of approximately $1 billion and distributable cash flow of approximately $340 million and a net loss of $329 million.\nAs Jack mentioned, our results for the quarter were negatively impacted by the accounting treatment for our derivative instruments, which includes our IPM agreements.\nAs we have discussed in prior quarters, our IPM agreements, certain gas supply agreements and certain forward sales of LNG qualify as derivatives and require mark-to-market accounting, meaning that from period to period, we will experience gains and losses as movements occur in the underlying forward commodity curves.\nThis accounting treatment, coupled with significant volumes, long-term duration and volatility in price basis for certain contracts, most notably our IPM agreements, will result in fluctuations in fair market value from period to period.\nWhile operationally, we seek to eliminate commodity risk by matching our natural gas purchases and LNG sales on the same pricing index, our long-term LNG SPAs do not currently qualify for mark-to-market accounting, meaning that the fair market value impact of only one side of the transaction is often recognized on our financial statements until the sale of LNG occurs.\nThe unfavorable pre-tax impact from changes in the fair value of our commodity and FX derivatives during second quarter 2021 was approximately $672 million, most of which was noncash, but was the primary driver of our recognized net loss for the second quarter.\nFor the second quarter, we recognized in income 522 TBtu of physical LNG, including 508 TBtu from our projects and 14 TBtu from third parties.\nApproximately 80% of these LNG volumes recognized in income were sold under long-term SPAs or from volumes procured under our IPM agreement.\nWe received no cargo cancellations and had no impact to revenue recognition timing related to cargo cancellations in the second quarter.\nWe received $36 million related to sales of commissioning cargoes in the second quarter from LNG, which was in transit at the end of the first quarter, corresponding to six TBtu of LNG.\nAs a reminder, amounts received from the sale of commissioning cargoes are offset against LNG terminal construction and process, net of the costs associated with production and the delivery of those cargoes.\nAs you may recall, we established an initial debt reduction for 2021 to pay down at least $500 million of outstanding debt.\nDuring the second quarter, we fully repaid the remaining outstanding borrowings under Cheniere's term loan and fully repaid Cheniere's convertible notes due May 2021, with $500 million of cash-on-hand and the remainder about $130 million from borrowings under the CEI revolver.\nSo as of June 30, we have already achieved our minimum full year goal of $500 million in debt reduction.\nWith our cash flow profile only improving in the back half of the year, we are poised to exceed that amount this year, along with broadening out our capital allocation plans.\nContinuing with the balance sheet management, since our last call, we have locked in a further $200 million of long-term amortizing fixed rate notes at SPL on a private placement basis, with multiple counterparties.\nYear-to-date, we have locked in approximately $347 million of such notes, which will fund on a delayed draw basis in late 2021 and will economically refinance a portion of SBL's outstanding 6.25% notes due 2022.\nThis continued progress on prudently managing the balance sheet through this new structure, which goes hand-in-hand with our efforts on execution and operational performance, was once again recognized by the credit rating agencies during the second quarter, as S&P Global Ratings changed the outlook on the credit ratings of both Cheniere and CQP to positive from negative, as we mentioned on the May call.\nS&P cited the EBITDA and cash flow growth resulting from the successful completion of eight trains, accelerated schedule of Train 6, and the expectation of significant improvement in leverage levels over the next two years as we execute on our stated deleveraging plan.\nJack and Anatol have both discussed the success we've had so far in 2021 on marketing and origination, with 12 million tons of midterm deals done as well as the recent 15-year Tourmaline IPM transaction.\nThe execution of these transactions not only bring Stage three into greater focus, but also supports our long-term balance sheet management priorities by bringing significantly increased cash flow visibility out into the 2030s, given the fixed fees that have always been the bedrock of our commercial strategy.\nAggregating the midterm and IPM transactions we've completed year-to-date, we have sold approximately 25 million tons of LNG which will generate over $3 billion in fixed fees into the next decade, which clearly has derisked our cash flows further.\nTurning now to Slide 14.\nAs previously mentioned, today, we are increasing our guidance ranges for full year 2021 consolidated adjusted EBITDA and distributable cash flow by $300 million and $200 million, respectively, bringing total increases to $700 million and $600 million, respectively, above the original ranges we provided in November of last year.\nOur revised guidance ranges are $4.6 billion to $4.9 billion in consolidated adjusted EBITDA and $1.8 billion to $2.1 billion in distributable cash flow.\nToday's increase in guidance is largely driven by the continued improvement in global LNG market, pricing and our ability to capture higher netbacks on our open portfolio volume.\nA production forecast we have again revised upward due primarily to maintenance optimization.\nAnd lastly, some added lifting margin due to higher Henry Hub prices.\nDCF guidance isn't moving up quite as much as EBITDA guidance due to some incremental EBITDA accruing at CQP and SBL, where we have accelerated capital spend at Sabine since Train six is ahead of schedule.\nSo we expect to realize the benefits over time in DCF as CQP's distributions increased further in the coming years once fully operational.\nWhen we updated guidance on the last call, one of the primary drivers was an improvement in market margins from approximately $2 in February to approximately $3 in May.\nSince then, that margin has gone up by another over $3, and our production forecast has increased as well.\nThe incremental volume that's been added to the production forecast is all in the third and fourth quarters.\nAnd although it's single-digit number of cargoes in terms of quantity, the impact on the financial forecast is meaningful with netbacks where they are.\nWe currently forecast that the dollar change in market margin would impact EBITDA by less than $25 million for the rest of the full year 2021.\nAs we have now sold almost all of our production for the remainder of the year, we would only provide another update if that were to change materially.\nAs well, given the little remaining exposure to the market we have, we are confident in our ability to deliver results within these upwardly revised guidance ranges for the full year.\nWhile we don't guide to free cash flow for over a year now, we have described 2021 as Cheniere's free cash flow inflection point, and that is certainly materializing in the results we've generated so far this year and in our forecast for the balance of the year.\nEntering 2021, we forecasted free cash flow at around $1 billion for the year.\nAs Bcf guidance has moved up $600 million in the subsequent six months, it's reasonable to think our FCF forecast has moved up largely in lockstep with DCF.\nSo over $1.5 billion.\nThis incremental cash flow puts us in a great position from a capital allocation perspective, especially as we work to finalize our comprehensive capital allocation strategy and framework.\nWith that process nearing completion, we expect to be able to provide that to you in the coming months and before the 3Q earnings call in early November, where we will provide you with the first look at 2022 guidance.\n Assistant:", "chosen": "cheniere energy second quarter earnings.\n"}
{"prompt": "Human: With me on the call are Pam Kessler, Co-President and Chief Financial Officer; and Clint Malin, Co-President and Chief Investment Officer.\nNot being able to quantify an impact of the delta variant on current and near future operations, what we have recently heard from our operators gives us some optimism.\nWe are seeing occupancy gains for the first time in a long while.\nVaccination rates among patients and residents throughout the industry are high, generally in the 80% range with gradual increases expected.\nOur buildings are beginning to stabilize with in-person tours and family visits allowed once again, notwithstanding the recent introduction of the delta variant.\nThe transition of our senior lifestyle portfolio is virtually complete and we are seeing a nice pickup in deal flow and activity.\nWe are seeing a few encouraging signs throughout the industry.\nAccording to Nick's data, communities and nursing centers are doing much better clinically than they have in some time given the high rate of vaccinations among residents and patients.\nOn average, especially with respect to SNF, occupancy is trending slowly upward.\nOver the last 25 weeks, SNF have seen occupancy rise in each week except one, when census remained flat.\nVarious government stimulus programs have helped significantly in keeping skilled nursing operators a float over the course of the pandemic.\nAdditionally, there is about $25 billion remaining for distribution to all healthcare providers in the Provider Relief Fund.\nWhile private pay has not been a beneficiary of adequate government relief to date, we are seeing some signs that more aid may become available soon.\nThis is not to say unfortunately, that all of the challenges facing our industry are slowly trending downward.\nLabor continues to be a major challenge for operators and interest rates and inflation are something we're watching carefully.\nEven so, I believe our industry is on more solid footing today than it has been over the last 18 months and I'm hopeful that some of the remaining pressures will begin to ease in the coming months.\nThat said, however, a serious surge of the COVID delta variant across the country, especially in states with lower vaccination rates among staff could result in the need to stop admissions again temporarily delaying a full recovery but hopefully, any such surge will be addressed locally rather than by a national e-debt.\nSecond quarter rent and mortgage interest income collections were 93.6% excluding Senior Lifestyle and Senior Care an 86.1% excluding just Senior Lifestyle, whose transition Clint will discuss in detail.\nWe are no longer seeing new substantial requests for rent deferrals and abatements and if new ones arise, we will review each on a case-by-case basis, keeping in mind an operator's ongoing operations, rent coverage, corporate financial health and liquidity.\nWe expect to continue providing some amount of relief in the form of deferrals and abatements until occupancy gains become more permanent.\nI'm so very pleased to be able to report that the senior lifestyle portfolio transition is nearly complete.\n19 of the buildings have been or shortly will be under new leases.\nThe other four properties in the portfolio have been sold.\nClint will provide more details in his comments.\nWith respect to Senior Care Centers, bankruptcy proceedings are continuing with the next scheduled court date on August 11.\nBuilding on the uptick, we saw toward the end of the last quarter, deal flow continues to accelerate with several potential transactions in the pipeline that meet our investment criteria.\nThese opportunities are mostly shorter-term and cash flow strategic with what we believe our reduced risk profiles and strong returns.\nThrough the first half of the year, we have actively reviewed a host of transactions passing on most either because the properties are not performing well or the asking prices don't reflect what we believe to be market value rates.\nWe have no problem temporarily remaining on the sidelines for our more traditional long-term investments until we can find the right deal at the right price.\nThe opportunities we are currently working through include mostly structured finance transactions and span the full spectrum of care.\nIt bears repeating that LTC has ample access to liquidity to act on these opportunities when the timing is right.\nBut as a good financial steward we will not enter into a deal that does not produce accretive returns for LTC and our shareholders.\nWith respect to our dividend, I'd like to repeat what I said last quarter.\nIt has been LTC's practice to support a dividend payout ratio of approximately 80% of FAD.\nAs a result, of the financial support we have provided some of our operators and the significant senior lifestyle and senior care defaults our second quarter 2021 dividend payout ratio was 98%.\nHowever, we believe our 2022 FAD will improve as we fully transition the Senior Lifestyle portfolio to more stable operators and the issues related to the Senior Care bankruptcy are resolved.\nAt this time, we will provide guidance for the third quarter.\nWe expect similar NAREIT FFO results as we reported for the just completed second quarter.\nThis guidance does not include recovery of any deferred rent or any rent payment from Senior Care.\nWith that I'll turn things over to Pam.\nTotal revenue increased $9.6 million compared with last year's second quarter resulting primarily from a $9.5 million increase in rental revenue, which was due to a $17.7 million write-off in last year's second quarter related to Senior Lifestyle straight-line rent and lease incentive balances.\nCompleted development projects and higher rent payments from Anthem also contributed to the increase.\nThe increase in revenue was partially offset by reduced rent from senior lifestyle net of rent received from releasing 11 properties in the portfolio defaulted Senior Care lease obligations, abated and deferred rent and a decrease in property tax revenue.\nInterest income increased $113000 from the prior year due to the funding of expansion and renovation projects offset by scheduled principal pay downs.\nInterest expense decreased by $686000 due to scheduled principal paydowns on our senior unsecured notes lower interest rates and a lower outstanding balance under our line of credit partially offset by lower capitalized interest in 2021.\nProperty tax expense decreased $311000 compared with last year's second quarter as a result of the timing of certain operators property tax escrow receipts and the payment of related taxes partially offset by completed development projects.\nG&A was $757,000 greater than last year due to the timing of accrual for incentive compensation salary increases and restricted stock vesting.\nIncome from unconsolidated joint ventures increased $376000 due to mezzanine loan fundings.\nDuring last year's second quarter, we recognized a loss on liquidation of unconsolidated joint ventures of $620000 related to the sale of the four properties comprising our unconsolidated real estate joint venture with an affiliate of senior lifestyle.\nDuring the second quarter of 2021, we recognized a net gain on sale of real estate of $5.5 million related to the sale of three properties in Wisconsin and a closed property in Nebraska all previously leased to Senior Lifestyle.\nWe also transitioned a memory care property in Colorado, previously operated by Senior Lifestyle to an operator new to LTC.\nThe lease has a five-year term and provides a purchase option for $5.5 million, which is exercisable after the first year of the lease.\nCash rents starting in the second year of the lease is $150,000 increasing to $300,000 in the third year and escalating 2% annually thereafter.\nNet income available to common shareholders for the second quarter of 2021, increased by $16.4 million primarily due to the senior lifestyle write-off in the prior year and the gain on sale of the three Wisconsin properties this year.\nThis is partially offset by the revenue declines previously detailed.\nNAREIT FFO per fully diluted share increased to $0.57 from $0.31 last year's excluding nonrecurring items related to last year's second quarter.\nFFO portfolio diluted share was $0.57 this quarter and $0.76 in the second quarter of 2020.\nThe decrease is specifically due to the non- payment of rent by Senior Lifestyle and Senior Care.\nDuring the 2021, second quarter we paid $41 million under our unsecured revolving line of credit.\nAdditionally, we maintained our $0.19 per share monthly dividend by paying our shareholders $22.4 million in common dividends during the quarter.\nSubsequent to the end of the second quarter we entered into lease agreements covering the remaining properties in the Senior Lifestyle portfolio which Clint, will discuss shortly and sold a skilled nursing center in Washington for $7.7 million.\nWe received proceeds totaling $7.2 million and expect to recognize a gain on sale of $2.6 million.\nAdditionally, we paid $25.2 million in regular scheduled principal payments under our senior unsecured notes and borrowed $19 million under our unsecured revolving line of credit at 1.2%.\nIt is important to note that we have no significant long-term debt maturities over the next five years.\nAt the end of the 2021 second quarter, our credit metrics remained strong with a debt-to-annualized adjusted EBITDA for real estate of 5.3 times.\nIn annualized adjusted fixed charge coverage ratio of 4.3 times and a debt to enterprise value of 29%.\nWe expect to see this 5.3 ratio come down as we receive more rent from assets formerly operated by Senior Lifestyle and eventually we expect to be able to collect rent from assets involved in the most recent senior care bankruptcy.\nNext, I'll discuss rent deferrals and abatements.\nAs Wendy mentioned excluding Senior Care and Senior Lifestyle, we collected 93.6% of second quarter rent and mortgage interest income.\nWe provided $1.1 million in rent deferrals and $1.1 million in rent abatements.\nAs a reminder, Senior Lifestyle did not pay us rent in 2021.\nWith the portfolio virtually fully transitioned, we are receiving contractual rent from the operators who now lease these properties.\nAdditionally, during the second quarter Senior Care did not pay rent.\nWe applied the remaining $889,000 of the $2.1 million letter of credit to satisfy certain obligations owed under the master lease in the second quarter.\nAs of June 30, Senior Care's unaccrued outstanding rent balance was $3.1 million.\nIn July we provided rent deferrals totaling $366,000 and rent abatements of $323,000.\nWe have agreed to provide rent deferrals of up to $493,000 and abatements of up to $319,000 for each of August and September 2021.\nAs Wendy discussed, our Senior Lifestyle portfolio is now nearly fully transitioned and I'm excited to provide our final update on the transition.\nI'll speak in some detail about the newest transactions, but I will start with a brief recap of the transactions completed earlier this year.\nIn total the Senior Lifestyle portfolio included 23 properties, 12 of which were transitioned through April of this year.\nSix of those communities were transferred to Randall Residence, a current LTC operator, five to Encore Senior Living an operator new to us and one to Graceful Senior Living also new to us.\nOf the remaining 11 properties, four were sold in the second quarter, three assisted living communities located in Wisconsin were sold for $35 million, which roughly approximates their combined gross book value.\nWe used the net proceeds of approximately $33.9 million to pay down our unsecured revolving line of credit.\nIn total, these properties included 263 units.\nThe fourth was a previously closed property sold for $900,000 for an alternative use.\nThe gross book value when we acquired it in 1997 was $2.5 million and the net book value was $1.1 million.\nOf the remaining seven buildings in the portfolio, three have been transferred and four are awaiting licensure.\nTwo properties are being operated by Juniper in Pennsylvania.\nOne property in New Jersey also to be operated by Juniper should be receiving licensure any day.\nCombined these communities include 168 units.\nJuniper has been a close partner of LTCs since 2012.\nThe new lease has a two year term with zero cash rent for the first three months.\nAfter that time, cash will be reset based on mutually agreed upon fair market rent.\nCash rent will be reset every three months for the first year and twice a year for the second year as cash flow in the buildings improves until we set permanent rates for the longer term.\nthree properties in Nebraska with a combined 119 units will be operated by Oxford Senior Living, an existing LTC partner since 2012 as soon as licensure is received which we also expect in short order.\nThe new lease follows the same pattern as I described for Juniper.\nOne property in Wisconsin is now being operated by a regional partner new to LTC.\nThis community includes 101 unit and will be operated under a 10-year lease with three five year renewal terms.\nCash rent under the new lease is $920,000 in the first year $1.2 million in the second year $1.3 million in the third year then escalating 2% annually thereafter.\nI'll complete my remarks about the Senior Lifestyle portfolio by saying that among the properties that were transitioned in the January and February timeframe, especially in markets that did not have stringent lockdowns during that time occupancy increased under new management sometimes meaningfully.\nNext, I'll provide some detail on our most recent development projects that are now operational.\nWeatherly Court operated by field Senior Living in Oregon began accepting residents last September.\nAt June 30 occupancy was 36% up from 24% on March 31.\nIgnite Medical Resort and Blue Springs located in Missouri began welcoming patients last October.\nAt June 30, occupancy rose nicely to 83% up from 64% on March 31.\nMoving next to our portfolio numbers, please remember that with the pandemic and the challenging environment it created we don't believe coverage is a good indicator of future performance at this time and we are focused mainly on occupancy trends which I'll discuss shortly.\nQ1 trailing 12 month EBITDARM and EBITDAR coverage as reported using a 5% management fee was 0.99 times and 0.8 times respectively for our assisted living portfolio.\nExcluding stimulus funds received by our operators, coverage was 0.85 times and 0.67 times respectively.\nExcluding Senior Lifestyle from our Assisted Living portfolio, as reported EBITDARM and EBITDAR coverages would increase to 1.03 times and 0.84 times respectively.\nExcluding both senior lifestyle and stimulus funds EBITDARM and EBITDAR coverages would be 0.9 times and 0.71 times respectively.\nFor our skilled nursing portfolio, as reported EBITDARM and EBITDAR coverage was 1.94 times and 1.49 times respectively.\nExcluding stimulus funds coverage was 1.44 times and 1.02 times respectively.\nExcluding Senior care from our skilled portfolio, as reported EBITDARM and EBITDAR coverages would increase to 1.98 times and 1.5 times respectively.\nExcluding both Senior Care and Stimulus Funds EBITDARM and EBITDAR coverages would be 1.52 times and 1.06 times respectively.\nNow, for some occupancy trends which are as of July 15.\nAs a reminder, for our private pay portfolio, occupancy is as of that date specifically and for our skilled portfolio, occupancy is the average for the month.\nBecause our partners have given this data to us on a voluntary and expedited basis, the information we are providing includes approximately 70% of our total private pay units and approximately 73% of our skilled nursing beds.\nPrivate pay occupancy was 74% at July 15 and June 30 and 72% at March 31.\nFor our skilled portfolio, which excludes Senior Care, average monthly occupancy through July 15 was 69% versus 68% in both June and March.\nAs Wendy mentioned, our pipeline continues to expand and is more active than it has been in some time with a diverse set of opportunities including a mix of existing operating partners and those new to LTC as well as a mix of private pay and SNFs.\nIn total, our near-term pipeline is valued at about $130 million with additional medium to long-term opportunities totaling about another $90 million.\nOur bid activity remains healthy and we are excited to see this important part of our current investment strategy gaining steam.\nWhile sales cycles remain elongated and pricing for some properties does not accurately reflect what we believe is their true value, we are more optimistic than we have been in some time about our ability to again begin making long-term strategic investments that will position LTC for future growth.\nWe have nurtured our balance sheet to provide us with adequate liquidity and flexibility and believe we can use this to our advantage as we seek to provide strong regional operators with creative financing solutions.\nWe are open to any transaction that meets our underwriting criteria, but also believe that in the current environment, structured finance deals including mezzanine loans and preferred equity financing still represent the best risk/reward profile at this time.\nNow, I'll turn things back to Wendy for her closing remarks.\nWe have come a long way since the start of the pandemic.\nIt has not been an easy road, but I believe we are now coming up on an easier road.\nThis business has never been a newly paced smooth super highway with an express lane.\nBut with great pride, I can say our industry has learned many lessons through many cycles of significant challenge and we continue to provide what I believe is the world's most caring service to the nation's most vulnerable people.\nEach day I become more and more confident in our ability to continue to proactively participate in this vital industry.\nWe are positioned to play offense and are seeking out opportunities to strengthen LTC now and for the future.\nWe will accomplish this by identifying accretive ways to enhance our portfolio, diversify our investments, serve as a growth capital partner of choice and return to a well-covered dividend for our shareholders.\n Assistant:", "chosen": "q2 ffo per share $0.57.\n"}
{"prompt": "Human: I am so pleased to be able to open our comments by saying we have successfully eliminated several ongoing operator challenges, executed on $46 million in new investments and have an active and healthy pipeline.\nAt the same time, the industry is recuperating from the incredible strain created by the pandemic.\nI have said before that our industry handled the unimaginable with grace and poise and is proving that seniors housing is a safe and necessary component of our national network of healthcare in the United States.\nWhile there are still some challenges to overcome, I continue to believe that the industry's strength and perseverance will help us navigate the new normal.\nIn LTC's portfolio, occupancy gains are continuing, vaccination rates among patients and residents remain high, and the potential of the vaccine mandates among staff holds the promise of continuing to reduce the impact of COVID in our buildings.\nIt seems the recovery has begun and should continue into the new year.\nBefore I get into our LTC-specific discussion, I'd like to spend a moment discussing industry staffing.\nThe problem is very real, but our operators are working constantly and creatively to find viable solutions.\nI have not spoken to an operator yet that has not had trouble finding and retaining qualified employees.\nOperators are turning away residents and patients due to the labor shortage and the resulting staffing challenges.\nWe have heard from several operators that if not for the current labor constraints, they could increase occupancy.\nSo they are increasing wages and providing sign up and retention bonuses to help meet this demand.\nAdditionally, in-person school is now open, freeing parents to be able to reenter the workforce.\nAnd COVID-19 related add-ons to unemployment insurance have expired, requiring a return to work for some to make up for that income shortfall.\nHowever, the Child Tax Credit that most families are receiving and is proposed to be part of the Build Back Better legislation will likely continue to provide public support sufficient enough to keep some people from returning to work.\nOn the plus side, it has been reported recently that Texas, where we own 34 properties, passed a bill to support long-term care in the state.\nThe bill proposes $200 million in grants for skilled nursing and $178.3 million in grants for assisted living communities and other care-based providers to help fund staffing recruitment and retention.\nWe would love to see other states follow this example.\nGovernment support for our industry is continuing.\nThere is about $17 billion available for distribution to healthcare providers through Phase four of the Provider Relief Fund and another $8.5 billion available for distribution to rural providers through the American Rescue Plan.\nThe portal for requesting aid closed a few days ago on the October 26 deadline.\nSo we anticipate receipt of funds by operators later this year at the earliest.\nIn a recent interview with Provider Magazine, Mark Parkinson, who has been a past guest on our earnings calls said, and I quote, \"the Delta variant has caused a pause in the financial recovery of the sector\".\nCombined with increasing staff costs that we are already experiencing, we are going to need continued help from both the federal and state governments.\nHe believes that there is a bipartisan support stemming from the efforts made by providers throughout the pandemic, but that passing legislation in a divided Congress will make real change difficult, highlighting the need for actions that don't require congressional approval.\nHowever, short of a new highly contagious variant or COVID surge, I truly believe that our industry is on more solid footing today than it has been since the pandemic began.\nAnd I remain hopeful that some of the remaining pressures will continue to abate over the coming months.\nNow moving to our third quarter.\nRent and mortgage interest income collections, excluding Senior Care and Senior Lifestyle were 94%.\nWe have received no new substantial requests for rent deferrals and abatements.\nWith occupancy increasing and pent up demand for needs-based care, we don't expect to see a big change in rent deferrals and abatements in the fourth quarter.\nFor the last several quarters the requests we've received have been from the same small subset of operators, and that has not changed.\nWe do expect to continue providing some amount of relief until the occupancy gains become more permanent.\nThe Senior Lifestyle portfolio transition is complete with the exception of one building in New Jersey that is awaiting licensure, which we are expecting at any time.\nWe have fully transitioned the senior care portfolio as well.\nWith these challenges successfully addressed, we are excited to be working with new operators and solidifying relationships with current operators who have the resources and desire to stabilize operations and further grow occupancy.\nAs I mentioned earlier, we recently completed 46 million in investments and have built a healthy pipeline.\nWe remain focused on shorter-term cash flow strategic deals that have what we believe to be reduced risk profiles and look forward to announcing additional investments over the next several months.\nWe have ample access to liquidity to act on these opportunities to provide accretive returns for LTC and our shareholders.\nWe maintained our $0.19 per share monthly dividend by paying out $22.4 million in common dividends during the quarter to our shareholders.\nThe payout ratio on our dividend, excluding nonrecurring items was approximately 100% for the third quarter.\nIf we used pro forma performance, including recently completed investments, the third quarter FAD payout ratio excluding nonrecurring items would be approximately 96%.\nAlthough this remains well above our preferred payout ratio of approximately 80% of FAD, we expect our 2022 FAD to improve with the additional revenue from the releasing of the Senior Care and Senior Lifestyle portfolios, which will help bring the payout ratio more in line with historical levels.\nWith respect to guidance, for the fourth quarter we expect FFO to increase approximately $0.02 to $0.03 per share, excluding nonrecurring items from third quarter results.\nPlease note, this guidance does not include the recovery of any deferred rent or additional investments.\nNow I'll turn things over to PAM.\nTotal revenue decreased $701,000 compared with the third quarter of last year, resulting principally from unpaid rent from senior care and senior life, abated and deferred rent and the sale of a property in Washington.\nThe decrease was partially offset by the write-off of straight-line rent receivable balances in the prior-year quarter, rent received from releasing 18 properties in the Senior Lifestyle portfolio, completed development projects and increase in property tax revenue, annual rent escalation, capital improvement funding and higher payments from Anthem.\nInterest income was comparable year-over-year.\nInterest expense decreased 751,000, mostly due to scheduled principal pay-downs on our senior unsecured notes and lower interest rates on our line of credit, partially offset by a higher outstanding balance on our line of credit.\nTransaction cost increased four million, related mostly to our settlement with senior care and related fees.\nDuring the 2021 third quarter, we recognized a gain on sale of real estate of $2.7 million related to the sale of a skilled nursing center in Washington.\nIn last year's third quarter, we recorded a $900,000 impairment charge related to a closed assisted living property in Florida, which was sold in the first quarter of 2021 and received 373,000 in insurance proceeds for damage related to a property sold in the first quarter of 2020.\nNet income available to common shareholders decreased by $1.2 million, primarily due to the previously discussed revenue decline and settlement and related fees for senior care.\nThe decrease was partially offset by a prior-year impairment charge and a current-year gain on sale.\nNAREIT FFO per diluted share was $0.45 this quarter compared with $0.58 in last year's third quarter.\nExcluding non-recurring items, FFO per share was $0.55 this quarter compared with $0.71 in the third quarter of 2020.\nThe decrease excluding nonrecurring items with due to receiving 0 rent from Senior Care and Senior Lifestyle, abated and deferred rent and higher G&A expense.\nThese decreases were partially offset by higher revenues resulting from releasing 18 properties in the Senior Lifestyle portfolio, completed development projects, mezzanine loan funding and lower interest expense.\nDuring the 2021 third quarter, we funded a $4.4 million mezzanine loan and a $1.8 million mortgage loan.\nAdditionally, we funded $2.8 million in capital improvement projects on properties we own.\nSubsequent to the end of the quarter we funded two mortgage loans for a total of $39.5 million.\nClint will discuss our investment activities in a moment.\nDuring the third quarter we borrowed $68.5 million under our unsecured revolving line of credit and paid $25.2 million in scheduled principal pay-downs on our senior unsecured notes.\nCurrently we have $5.9 million of cash on hand, $465.6 million available on our line of credit with $134.4 million outstanding and $200 million available under our ATM.\nThis leaves us with ample liquidity of $671.5 million.\nWe have no significant long-term debt maturities over the next five years.\nAt the end of the 2021 third quarter our credit metrics remain strong with a debt-to-annualize-adjusted EBITDA for real estate of 5.8 times, and annualized adjusted fixed charge coverage ratio of 4.3 times.\nAnd a debt-to-enterprise value of 35.3%.\nPro forma for recently completed investments.\nAnnualized adjusted EBITDA for real estate was 5.7 times.\nThe annualized adjusted fixed charge coverage ratio was 4.3 times, and debt-to-enterprise value was 32.9%.\nI'll finish my discussion with rent deferrals and abatements.\nAs Wendy mentioned, excluding Senior Care and Senior Lifestyle, we collected 94% of third quarter rent and mortgage interest income.\nDuring the quarter we provided $1.3 million in rent deferrals and $970,000 in rent abatements.\nAs Wendy noted, these deferrals and abatements relate to the same small subset of operators that have been receiving ongoing relief from us.\nAs a reminder, Senior Lifestyle did not pay us rent in 2021.\nWith the exception of the one property Wendy discussed, the portfolio is transitioned and we are receiving contractual rent from the operators who now lease these properties.\nAlthough Senior Care did not have rent in the third quarter, we do expect to receive rent from HMG as performance improves.\nClint will provide more detail.\nIn October, we provided rent deferrals totaling $438,000 and rent abatements totaling $240,000.\nWe have agreed to provide rent deferrals of up to $441,000 and abatements of up to $240,000 for each of November and December 2021.\nI'll start today by putting a bell on our Senior Lifestyle and Senior Care portfolios.\nAs Wendy discussed, these portfolios have been fully transitioned but for the licensure of one property currently operated by Senior Lifestyle in New Jersey.\nBy and large, the properties in this portfolio have generated occupancy gains under new management.\nIn total, we have transitioned 18 of the Senior Lifestyle buildings with the 19th expected shortly.\nFor these 19 buildings, occupancy for the month of December 2020 was 71%, increasing to 75% for the month of September 2021.\nI'd like to provide some additional color on the six properties in the portfolio with market-based rents.\nAt June 30, EBITDAR, excluding stimulus, on a trailing 12-month basis for these six properties was $870,000.\nOn a trailing three-month annualized basis, EBITDAR excluding stimulus was $150,000.\nOccupancy for the month of December 2020 for these six buildings was 60%, growing to 65% for the month of September 2021.\nWith respect to the 11 properties in Senior Care portfolio, in late August we reached a settlement with Senior Care and Aubrey Health Services under which LTC made a one-time payment of $3.25 million in exchange for cooperation and assistance in facilitating an orderly transition of the portfolio.\nAs of October 1, the entire 11 property portfolio was leased to an affiliate of HMG Healthcare under a one-year master lease with rent based on cash flows.\nWhen HMG commenced operation of the portfolio, it agreed to assume Senior Care's Medicare provider agreements and took on a known liability for stimulus funds received by Senior Care under the Medicare COVID-19 Accelerated And Advanced Payment Program.\nThis assumed liability is capped at $3.7 million.\nHMG is responsible for the repayment of this liability, which it will fund from cash flow.\nLTC expects to collect rent sometime in 2022 as performance improves and the liability has been repaid.\nIt is our intention to add the 11 properties to a master lease currently existing between LTC and HMG after establishing a stabilized rent rate during the first lease year.\nWe also agreed to provide HMG a $25 million secured working capital loan maturing on September 30, 2022.\nOur strong balance sheet allowed us to provide this loan on an expedited basis to mitigate the timing risk of HMG using a third party lender.\nThis portfolio is based in Texas.\nAnd as Wendy mentioned earlier, the state recently announced an additional $200 million in support for SNFs.\nNext I'll provide an update on our most recent development projects that are now operational.\nWeatherly Court in Oregon, which is operated by Fields Senior Living saw occupancy rise to 45% at September 30, up from 36% at June 30.\nWhile Ignite Medical Resort in Blue Springs, Missouri grew occupancy to 90% at September 30, up from 83% at June 30.\nNow we'll discuss our portfolio numbers with the caveat that we don't believe coverage is currently a good indicator of future performance at this time given the pandemic and the challenging environment it creates.\nBefore I detail our coverage numbers please note that Senior Care and Senior Lifestyle no longer qualify for our same-store portfolio, given the transitions.\nSo they are excluded from these numbers.\nQ2 trailing 12 month EBITDARM and EBITDAR coverage as reported using a 5% management fee was 1.06 times and 0.86 times respectively for our assisted living portfolio.\nExcluding stimulus funds received by operators, coverage was 0.87 times and 0.68 times respectively.\nFor our skilled nursing portfolio, as-reported EBITDARM and EBITDAR coverage was 2.08 times and 1.61 times respectively.\nExcluding stimulus funds, coverage is 1.44 times and 0.99 times respectively.\nNow for some occupancy trends which are as of September 30 and are for our same-store portfolio.\nAs our partners have given the data to us on a voluntary and expedited basis, the information we are providing includes approximately 98% of our total same-store, private-pay units, and approximately 90% of our same-store skilled nursing beds.\nPrivate-pay occupancy was 77% at September 30, 75% at June 30, and 73% at March 31.\nFor our skilled portfolio, average monthly occupancy was 71% in September, 70% in June, and 69% in March.\nAs Wendy mentioned, we recently closed approximately $46 million in investments.\nThe first investment was a $27 million mortgage loan for the purchase of a skilled nursing center in Louisiana by a regional operator new to LTC.\nThe term is three years with one 12-month extension option.\nThe second investment was a $12.5 million mortgage loan for the purchase of an assisted living and memory care community in Florida, to be operated by a regional operator new to LTC.\nThe loan term is for approximately four years and includes an additional $4.2 million loan commitment to be funded at a later date subject to satisfaction of various conditions for the construction of a memory care addition to the property.\nThe third investment was a $1.8 million loan secured by a parcel land in Missouri for the future development of a post-acute skilled nursing center.\nThe loan term is for one year.\nWe are currently negotiating a potential real estate joint venture with Ignite for the development of this center.\nThe final investment was a $4.4 million mezzanine loan for the refinancing of a independent living community in Oregon operated by a regional operator new to LTC.\nThe loan term is for three years with two 12-month extension options.\nIn total, the combined weighted average term of the loans is 3.2 years and the investments are expected to generate an annual interest income of approximately $3.5 million.\nOur pipeline remains healthy.\nIt's a nice mix of opportunities, including for private pay and skilled nursing, and with regional operating partners, both new to LTC and existing.\nIn total, our near-term pipeline is valued at more than 100 million.\nAlthough sales cycles remain elongated and pricing for some properties does not accurately reflect what we believe is their true value, we remain optimistic in our ability to complete additional accretive investments.\nWe are keeping our focus for now on structured finance deals.\nAs Wendy and Pam commented, we have sufficient liquidity and flexibility to provide strong regional operators with creative financing solutions.\nWe continually strive to provide options to operators who are looking for long-term relationships with the ability to grow.\nThis has been a hallmark of only investment strategy and one that we plan to continue.\nNow I'll turn things back to Wendy for some closing remarks.\nAnd while I cannot predict exactly when we'll return to prepandemic levels of operations, we are seeing continuing signs that give us hope.\nOccupancy is increasing, demand for needs-based care is growing, and we're once again making strategic investments.\nIt has not been easy getting to this point, but I couldn't be more proud of our industry, operators and employees for the grit they have shown since the start of the pandemic.\nAs our confidence continues to grow, we look forward to providing operators with the financing solutions they require to serve the nation's most vulnerable population.\nWe are well-positioned to take advantage of favorable industry demographics.\nAnd we'll focus on engaging with more and more regional operators to further strengthen our portfolio for the long term.\nWe may be relatively small, but we are stable and secure.\nWe've built a balance sheet capable of seeing us through what has been a difficult period.\nAnd now with a recovery in process, we plan to use our resources to return to growth in 2022.\nOperator, we're ready to open the call to questions.\n Assistant:", "chosen": "qtrly nareit diluted ffo per common share $0.45.\n"}
{"prompt": "Human: Lexington believes that these statements are based on reasonable assumptions.\nAny references in these documents to adjusted company FFO refers to the adjusted company funds from operations available to all equity holders and unitholders on a fully diluted basis.\nOperating performance measures of an individual investment are not intended to be viewed as presenting a numerical measure of Lexington's historical or future financial performance, financial position or cash flows.\nExecutive Vice Presidents, Lara Johnson and James Dudley will be available during the Q&A portion of our call.\nWe had a great first quarter overall and continue to make substantial progress on executing our business plan.\nAdjusted company FFO was $0.22 per diluted common share in the quarter, which included $10.9 million of lease termination income primarily associated with a legacy industrial asset in Durham, New Hampshire.\nDuring the quarter, we purchased three industrial assets for approximately $51 million and completed the fully leased development project in the Columbus market.\nOverall, these investments produced average estimated stabilized GAAP and cash cap rates of 6.1% and 5.9% respectively.\nMarket rents across our portfolio continued to grow.\nOccupancy is healthy and our industrial exposure represented over 91% of gross real estate assets at quarter-end excluding held-for-sale assets.\nWe continued to see the value of our industrial properties steadily increase during the quarter, and we believe the value of our office portfolio has also improved amid signs of the pandemic easing.\nThere are several factors continuing to drive up the overall value of our holdings.\nCapitalization rates continue to be under pressure replacement cost is increasing rapidly and tenant demand is driving rents higher.\nOur industrial portfolio is benefiting from all these trends with first quarter industrial base and cash base rent renewal increases of 14.6% and 5.4% respectively representing the most visible sign.\nThe factors driving valuations higher are also supporting a highly competitive investment landscape, and we continue to focus our time on finding the best risk-adjusted opportunities in our target markets in the Sun Belt and lower Midwest.\nIndustrial purchases in the quarter included two facilities in Indianapolis and one in Central Florida.\nAdditionally, we have approximately $206 million of assets, either under contract or with an accepted offer, which we expect to close later this quarter.\nAfter a slow start that is typical of the first quarter, current deal flow is robust, with more than $1 billion of investments under review.\nWe are mindful of pricing, as there continues to be a lot of capital chasing opportunities in a competitive market.\nOn the development front, we are finishing the construction of our Atlanta project in Fairburn and we are committed to two other projects in our target markets of Indianapolis and Central Florida.\nDevelopment and the purchase of vacancy continue to be attractive ways for us to produce stabilized yields in excess of what is available in the purchase market for fully leased buildings.\nWe leased 1.5 million square feet during the quarter and at quarter-end our stabilized portfolio was 97.8% leased.\nOur asset management team has done a terrific job in securing both lease extensions and new leases with increasing rents.\nIn addition to the three lease renewals in our single-tenant industrial portfolio, we raised occupancy at our multi-tenant industrial facility in Antioch Tennessee to nearly 100% and simultaneously increased base rental rates by approximately 16% for the two new tenants within the facility.\nSubsequent to quarter-end, we executed a five-year extension at our 423,000 square foot industrial facility in Lumberton North Carolina and increased base and cash base rent by 23% and 8.6% respectively.\nOur balance sheet continues to be in great shape, with net debt to adjusted EBITDA of 4.6 times at quarter-end.\nOur cash balance at quarter-end was $170 million, including restricted cash and we had $94.5 million sold forward in our ATM.\nLiquidity was enhanced during the quarter by $58 million of sales at GAAP and cash cap rates of 6.3% and 6.5% respectively and will be augmented by retained cash flow throughout the balance of the year.\nSubsequent to the quarter, we sold our industrial facility in Laurens South Carolina for $40 million.\nCurrently we have assets under contract or with an accepted offer for an aggregate gross price of approximately $135 million.\nOur remaining non-core sale portfolio consists of 17 properties, which generated first quarter NOI of $8.2 million.\nWe believe the current value of this portfolio is approximately $290 million.\nFinally, we continue to make progress with our ESG efforts and have disclosed long-term environmental targets.\nIn addition, we distributed a tenant survey to collect data, gain feedback and identify opportunities to partner with our tenants.\nWe became a supporter of the task force on climate-related financial disclosures and a participant member of GRESB and we are working on reporting to the GRESB real estate assessment for the first time this year.\nThe two Indianapolis assets we acquired during the quarter are virtually identical buildings, each approximately 150,000 square-foot Class A facilities built in 2019, well-located in Northwest Indianapolis within one mile of I-65.\nThe properties are 100% leased, each with two tenants, and have a weighted average lease term of just under five years, with rental escalations of 2.5%.\nThe Indianapolis, central location, excellent infrastructure and its large high-quality labor pool make it very attractive to both users, particularly e-commerce distributors.\nIndianapolis is one of the top five cargo airports in the country, with the second largest FedEx hub in the world and it ranks as one of the top 10 U.S. bulk distribution markets.\nOur Central Florida acquisition in Lakeland is an example where we can add value through leasing up some vacancy in the facility.\nProperty is a brand-new 222,000 square foot Class A warehouse distribution center and is primarily leased on a long-term basis with 2.5% annual escalations to credit tenant Motion Industries a subsidiary of Genuine Parts Company.\nWe are currently in negotiations with a potential tenant for a portion of the remaining square footage and have multiple prospects viewing the additional space, as we work toward a stabilized cash yield forecasted to be approximately 5.3%.\nLakeland is a core sub-market on the I-4 corridor between, Tampa and Orlando, two of Florida's largest and fastest-growing MSAs.\nAnd the property is just a short distance away, from the new Amazon Air Hub facility in Lakeland.\nOur approximately 320,000 square-foot Rickenbacker project in Columbus, leased to a subsidiary of PepsiCo was completed in the first quarter.\nThe estimated GAAP and cash stabilized yields are 7.9% and 7.7%, respectively.\nAs Will mentioned, we continued to have an attractive pipeline of development projects under way.\nIn Atlanta, our Class A, 910,000 square-foot development project is expected to be substantially completed this quarter.\nAtlanta posted record positive absorption in the first quarter of over eight million square feet.\nIn the airport South Atlanta submarket where the property is located, led the Metro with over five million square feet of positive absorption.\nWe currently estimate our development costs to be approximately $54 million.\nAnd our stabilized cash yield is estimated to be around 5.25%, which assumes 100% occupancy and payment of our tenant of our core Promote.\nThe property is in a prime-location along the I-85, South sub-market of Atlanta and we've been seeing sales trade, at substantial premiums to building costs.\nToday I'll touch on the two development projects that we have begun funding in Central Florida and Indianapolis.\nThe Central Florida project is a Class A, 1.1 million square-foot warehouse distribution center, located on a 90-acre site with frontage along I-75 and near our recently purchased Amazon facility.\nThe estimated development cost is approximately $81 million.\nOcala is very well-situated for statewide Florida distribution requirements, located just north of I-75 Florida turnpike's split offering access to Tampa, Orlando and the East and West Coast of Florida as well as more toward Jacksonville and Georgia.\nOur Indianapolis project in Mount Comfort which we began funding subsequent to the quarter, is just 14 miles east of downtown Indianapolis with easy access to I-70.\nMount Comfort is one of Indianapolis fastest-growing modern logistics sub-markets and offers a very favorable labor profile relative to other competing submarkets.\nThe 1.1 million square-foot facility has an estimated cost of roughly $60 million.\nLike our Atlanta development project both projects feature market-leading specs, including 40-foot clear heights, efficient site plans truck court depths, building depth and column spacing and ample trailer and car parking, to meet the demands of e-commerce and other bulk distributors.\nThe shell completions are anticipated late in the first and second quarters in 2022, for the Ocala and Mount Comfort projects respectively, both with stabilized cash yields in the mid-5% range.\nWe'll continue to provide regular updates on the progress of these projects.\nWe generated adjusted company FFO of approximately $64 million or $0.22 per diluted common share in the quarter and adjusted company FFO would have been approximately $0.19 per diluted common share, excluding lease termination income of $10.9 million.\nRevenues during the quarter were $93 million, representing an increase compared to the same time period in 2020, mostly due to new acquisitions and the termination income I just mentioned.\nProperty operating expenses were roughly $11 million with approximately 88% attributable to tenant reimbursement.\nFirst quarter G&A was $8.4 million.\nAnd we expect our 2021 G&A range, to be $31 million to $33 million.\nOverall, same-store NOI increased 0.6% and would have been approximately 1.7% excluding single-tenant vacancy with our same-store lease portfolio at 97.5%.\nMore specifically, industrial same-store NOI increased 1.5% and would have been 2.8% excluding single-tenant vacancy.\nAt quarter-end, approximately 88% of our industrial portfolio leases had escalations with an average rate of 2.3%.\nOn the capital markets front, we took the opportunity in the first quarter to increase our availability under our ATM program to $350 million.\nAdditionally, we entered into forward sales contracts for an aggregate of 3.6 million common shares, which have not yet settled.\nAs of March 31, we had 8.6 million common shares unsettled under forward sales contracts which had an aggregate settlement price of $94.5 million.\nAs Will mentioned, our balance sheet is in terrific shape with low leverage and ample cash available.\nAt quarter-end, we had nothing outstanding on our unsecured revolving credit facility and unencumbered NOI remains high at 91%.\nIn addition, our consolidated debt outstanding was approximately $1.4 billion with a weighted average interest rate of approximately 3.3% and a weighted average term of 6.7 years.\n Assistant:", "chosen": "q1 ffo per share $0.22.\n"}
{"prompt": "Human: As we look back on 2020, it is clearly not the year anyone predicted, but I'm very proud of how Live Nation has dug in and focused on turning this challenge into an opportunity to improve our business.\nOver the last year, leaders across all of our business lines, Concerts, Ticketing and Sponsorship, have been analyzing ways to improve their business.\nSome of the key initiatives include reorganizing to become more nimble while also reducing our cost structure by $200 million; building concert streaming and direct-to-consumer businesses to expand our revenue streams; advancing our technology initiatives globally while accelerating the shift to digital tickets to meet changing needs of fans, venues and artists; and reinforcing our balance sheet to endure this period while maintaining a strong position to build our business for the future and act on opportunities as we identify them, such as our recent acquisition of the streaming platform, Veeps; and continued pipeline bolt-on acquisitions throughout the globe.\nSo while this past year has been challenging for the company, our employees, fans, artists and so many others globally impacted by COVID, I've never been more excited about the opportunities in front of us.\nWe continue to have a substantial tailwind in the live event industry as consumers, more than ever, are looking to spend on experiences.\nThe supply demand fundamentals of the concert business remains strong, with artists ready to get back on the road and fans eager to reconnect at events.\nAll our data continues to show that there is substantial pent-up demand for concerts on the consumer demand side.\nThe $2.4 trillion projected surplus in savings in the U.S. alone by June is a key indicator of consumer spending potential.\nAt the same time, surveys demonstrate the high demand for concerts globally with 95% of fans likely to attend a show when restrictions are lifted.\nThis is proving out in fan behavior as well with 83% of fans continuing to hold on to their tickets with rescheduled shows.\nOn the artist side, there's a broad desire to get back on stage, to connect with their fans and provide economic support to their bands, crew and hundreds of others employed each night putting on the show.\nGiven the limited touring activity in 2020 and '21, the pipeline for 2022 is much stronger than usual, with almost twice as many major touring artists on cycle in 2022 in a typical year, about 45 artists versus the usual 25.\nAnd there remains plenty of scheduling availability at arenas, amphitheaters and stadiums to accommodate these additional tours, with over 2/3 of these venue nights unused by sporting events or major concerts in a typical year.\nIt appears that the timing to release the pent-up supply and demand is now approaching.\nVaccine distribution is accelerating, and declines in COVID cases throughout most of the world gives us even more confidence that a safe and meaningful return to shows will soon be possible.\nFor both the U.S. and U.K., projections indicate that everyone who wants a vaccine will be able to get one by May or June, and Europe and most other markets following a few months later.\nGiven the mass social and economic toll the lockdown has put on the public, we believe there will be strong momentum to reopen society swiftly as soon as vaccines are readily available, and we believe outdoor activity will be the first to happen.\nSo while the timing of return to live will continue to vary across global markets, every sign points to beginning safely in many countries sometime this summer and scaling further from there.\nFor the fourth quarter, all the key costs and cash numbers are in line with or better than what we forecasted last quarter.\nAs a result, we are confident that our actions taken to cut costs and increase liquidity will provide us with the runway we need until the time is right to bring shows back.\nAs part of this, we further reduced discretionary spending by another $50 million and closed 2020 with over $950 million in lower costs.\nWe also reduced our cash usage by $1.65 billion relative to our pre-COVID plans, $150 million more than we were projecting last quarter.\nLooking at our Q4 AOI results.\nOur AOI loss for the quarter was $244 million, which consisted of $290 million in operational fixed costs and $46 million of contribution margin, which included $96 million contribution from operations along with various onetime items.\nAs we pointed out last quarter, this contribution margin from operations includes our sponsorship business, where we've been able to maintain close to 90% of the commitments that were in place at the end of February last year.\nHalf of this sponsorship moved into 2021, while the portion we retained in 2020 was repurposed in other assets, including streaming concerts.\nOur artist management and merchandise businesses also generated positive contribution margin in the quarter.\nLooking at free cash and liquidity.\nWe ended the fourth quarter with $643 million in free cash, which increased to $1.1 billion in early January with our debt raise.\nThis, along with over $950 million of available debt capacity, gives us $2 billion in readily available liquidity.\nOur total free cash usage in the quarter was $308 million or $103 million per month.\nWe had $97 million per month average in operational burn plus another $44 million per month of nonoperational cash costs to get us to $142 million average per month in gross burn.\nAnd then we had $39 million per month in cash contribution margin and ended up with a total effective cash burn of $103 million per month.\nThe global refund rate for Live Nation concerts that are rescheduled and are in or have gone through a refund window or windows was unchanged from the prior quarter at 17% through the end of Q4.\nFor the tours that have gone through a second refund window, the refund levels were generally much lower for the second window as the casual fans requested their refunds during the first window.\nFestivals generally canceled their 2020 events.\nBut for festivals where fans could retain their tickets for next year's show, 63% of fans are doing so.\nOn deferred revenue, at the end of the fourth quarter, deferred revenue for events in the next 12 months was $1.5 billion versus the $1.4 billion we projected at the end of Q3, higher due to $100 million in ticket sales during the quarter.\nFinally, our 2021 outlook.\nWe won't be giving a multi-quarter outlook given the uncertainty on specific timing and likely varied timing for different markets around the world.\nFor Q1, we will remain focused on our cash burn rate and particularly managing our total effective burn rate to ensure cash contribution margin growth outstrips any increases in our cost structure as we start to ramp back up.\nWith that, let's open up the call for any questions for Michael, Kathy or me.\n Assistant:", "chosen": "live nation entertainment - believes current level of liquidity provides ability to fund operations until expected return of concerts in summer of 2021.\n"}
{"prompt": "Human: Melinda will open and close the call and Bob will speak to segment performance and the financials midway through.\nWe'll then open the call to questions.\nAlthough we believe these statements to be reasonable, our actual results could differ materially.\nThe most significant risk factors that could affect our future results are described in our annual report on Form 10-K.\nWe encourage you to review those risk factors as well as other key information detailed in our SEC filings.\nWith that I'd like to now turn over the call to Melinda Whittington, La-Z-Boy's President and Chief Executive Officer.\nWe are delivering on plan and controlling the controllables even in these times of significant widespread global supply chain disruption.\nAcross the La-Z-Boy enterprise, we delivered all-time record high sales of $576 million with sales 29% ahead of the pre-pandemic fiscal '20 second quarter.\nOur business is much larger today than pre-pandemic, and we believe our momentum is sustainable.\nWe are poised to grow on this base of nearly $2.1 billion in trailing 12 month sales.\nAlso as expected, operating margins improved sequentially as our delivered sales for the quarter reflected pricing and surcharge actions taken to offset unprecedented rising raw material costs.\nAll in all, we are pleased with the momentum and growth we are experiencing during these challenging times.\nLooking forward, demand continues to be strong across the enterprise and our backlog remains at all time highs, even as we continue to increase capacity to service our customers and consumers.\nDuring Q2 of last year, businesses were just reopening and consumers were resuming furniture purchases.\nAt the time, written same-store sales for the La-Z-Boy Furniture Galleries network were unusually strong, up 34%.\nOff that base, written same-store sales for the La-Z-Boy Furniture Galleries network decreased 6% in the fiscal '22 second quarter.\nHowever, comparing this quarter to the pre-pandemic fiscal '20 second quarter written same-store sales for the La-Z-Boy Furniture Galleries network increased an impressive 26% for a compounded annual growth rate of 12% across the two years.\nSimilarly, while written same-store sales for our company-owned retail segment decreased 7% versus the unusual prior-year period written sales increased at a compounded annual growth rate of 12% across the last two years.\nFor Joybird, primarily an e-commerce business, it continued its strong growth trajectory accelerating to rate 56% more business this Q2 than in last year's second quarter and delivering an extremely impressive compounded annual growth rate of 40% across the last two years.\nAs we focus on addressing this strong ongoing demand and accumulated backlog, we continue to make strategic investments to increase capacity and improve capabilities and are producing more units than ever to service customers.\nWe're continuing to add manufacturing cells and now employ almost 40% more manufacturing personnel in pre-pandemic.\nIn Mexico, additional cells are coming online at our SLR facility and the first cells at our new [Indecipherable] plants are expected to begin operations in January, with that location of fully operational by fiscal year end.\nAnd we continue to work to minimize supply chain disruptions from those associated with lack of component parts such as electronic chips to those inherent in hiring and training new workers until they reach normal productivity levels.\nAs we mentioned last quarter, where possible, our procurement team is significantly increasing inventory for key components to minimize disruption while also working to diversify our supply chain with multiple sources in various geographies to protect against continued supply chain volatility.\nIn addition, early in Q3, we acquired the Furnico upholstery manufacturing business in the UK.\nFurnico has been manufacturing La-Z-Boy product for sale in the UK and Ireland since 2008.\nThis expansion of in-house manufacturing capability will provide greater certainty of supply to our customers in the UK and is a key step in building an integrated supply chain network for La-Z-Boy International.\nAlso during the quarter, we continued to return value to shareholders with a dividend payment and $15 million in share repurchases, bringing our total cash returned to shareholders in the first half of the year to $64 million across dividends and share repurchase.\nAnd finally, we were pleased to announce last month, the expansion of our Board of Directors to 12 members with the addition of Erika Alexander, who serves as the Chief Global Officer, Global Operations for Marriott International.\nErika has held various leadership roles for several of Marriott's largest brands and will bring a wealth of operational experience perspective and expertise to La-Z-Boy.\nImportantly, as we manage the current operational challenges across the business, we're also addressing the long term with our work on Century Vision, our winning strategy for growth through our Centennial anniversary in 2027 and beyond.\nAs I noted last quarter, Century Vision includes three key pillars.\nThe first is to leverage and reinvigorate the La-Z-Boy brand.\nThis includes leveraging the La-Z-Boy comfort message, a renewed focus on aging down the core consumer and accelerating our omnichannel offering.\nTo date, our marketing platform featuring Kristen Bell, has been successful in driving brand recognition including young -- including among younger consumers who say the La-Z-Boy brand is relevant to them.\nOur objective is to build on this sentiment and last month we produced a new series of commercials that showcase how La-Z-Boy's range of products meet our consumers' needs.\nAt the same time throughout the course of Century Vision will expand the vibrant La-Z-Boy Furniture Galleries store base to approximately 400 locations across North America and will strengthen the entire network to remodels and relocations with some 30 projects on tap for this fiscal year.\nWhile the purchase journey may start digitally, our consumers like to visit our stores to shop providing us with a great opportunity to deliver the flagship La-Z-Boy Furniture Galleries store experience.\nMost importantly, our goal is to connect with consumers along their purchase journey through multiple means whether that's online or in person.\nWith respect to the Company-owned stores, we've become very successful running our retail business where we benefit from the integrated wholesale-retail margin.\nWe continue to acquire independent La-Z-Boy Furniture Gallery stores to round out our portfolio where it makes sense for us and the dealer.\nWe recently signed an agreement to purchase five stores in the Alabama and Tennessee markets from the retiring dealer that will be accretive as we quickly and seamlessly integrate them into our portfolio when we close the transaction later in the third quarter.\nThe second pillar of Century Vision relates to Joybird where we have a sustainably profitable direct-to-consumer model, an exciting and relevant brand with significant potential.\nWe are fueling Joybird to drive disproportionate profitable growth through an increase in digital marketing spend to drive awareness and customer acquisition, ongoing investments in technology and expansion of product assortment and additional small format urban stores in high traffic areas.\nWe are excited to open a new store in LA, this month and have an additional stores slated to open by the end of this fiscal year.\nIn markets where we have Joybird small format stores, we consistently see a geo lift in the online sales, demonstrating the appeal of an omnichannel model across all brands and retail formats.\nWe also recently opened a virtual store at Joybird's LA headquarters for online shoppers to chat, call and video conference into a dedicated retail environment which has proven to be very successful both in terms of consumer satisfaction and closing sales.\nAnd the third pillar of Century Vision is to leverage and enhance our enterprise capabilities to support the growth of our consumer brands as well as enable the potential for tack-on acquisitions that can benefit from our supply chain expertise and accelerate the La-Z-Boy Incorporated growth story.\nStrengthening digital capabilities across the entire La-Z-Boy enterprise and improving the agility of our supply chain, so that it can more broadly support all our customer brands will be key focus areas moving forward.\nAll in, as we execute Century Vision, we expect to grow the topline higher-than-industry averages and deliver double-digit operating margins.\nWe are proud of our near term results and excited for our future.\nOn a consolidated basis, fiscal '22 second quarter sales increased 25% to a record $576 million versus the prior year quarter, an increase sequentially from the fiscal '22 first quarter reflecting continued strong demand and ongoing capacity increases as well as the effects of pricing and surcharges.\nCompared with the pre-pandemic fiscal '20 second quarter, sales were 29% higher for a compounded annual growth rate of about 14% over the last two years.\nConsolidated GAAP operating income increased $54 million versus the prior year period and non-GAAP operating income increased to $52 million.\nConsolidated GAAP operating margin was 9.4% and non-GAAP operating margin was 9% up sequentially from the first quarter.\nGAAP diluted earnings per share was $0.89 for the fiscal '22 second quarter versus $0.75 in the prior year quarter.\nNon-GAAP diluted earnings per share was $0.85 in the current year quarter versus $0.82 in last year's quarter.\nMy comments from here will focus on our non-GAAP reporting unless specifically stated otherwise.\nI will now review our results by segment.\nDemand for product across all businesses remains strong.\nStarting with our wholesale segment, delivered sales for the quarter grew 28% to $439 million compared with the prior year period and increased 12% sequentially from Q1.\nCompared with the pre-pandemic fiscal '20 second quarter, sales were 25% higher for a compounded annual growth rate of 12%.\nNon-GAAP operating margin for the wholesale segment was 9.1% versus 12.2% in last year's second quarter, primarily reflecting higher raw material and freight costs, start-up costs for new facilities and labor challenges, partially offset by pricing and surcharges, fixed cost leverage on higher volume and lower marketing spend as a percentage of sales.\nAll in, we were pleased with the results and the progress we made sequentially from the first quarter operating margin of 4.7%.\nTurning to the retail segment.\nFor the quarter, delivered sales increased 19% to $192 million.\nDelivered same-store sales increased 17% versus the year-ago quarter.\nCompared with the pre-pandemic fiscal '20 second quarter, delivered sales increased 30% for a compounded annual growth rate of 14%, again demonstrating the strength of the La-Z-Boy brand and our furniture gallery store system in this environment as well as ongoing strong execution at the store level with sales metrics positive across the board.\nNon-GAAP operating margin increased to a second quarter record of 12.5% versus 9.4% in the prior year quarter, driven primarily by fixed cost leverage on the higher delivered sales volume as well as expense management.\nSales for Joybird which are reported in corporate and other increased 37% to $40 million versus the prior year quarter.\nOn a two-year basis, compared with a -- the pre-pandemic fiscal '20 second quarter delivered sales increased in impressive 93% for a compounded annual growth rate of 39%, reflecting the momentum Joybird is building and the direct to consumer marketplace as we continue to acquire customers and strengthen brand awareness through new digital marketing channels.\nFor the quarter, Joybird increased both its web and in-store traffic, conversion and average ticket.\nJoybird's sustaining profitability and with a focus on accelerating disproportionate growth, we will continue to invest in Joybird marketing to drive broader brand awareness and customer acquisition.\nPulling all of this together, consolidated non-GAAP gross margin for the entire Company for the fiscal '22 second quarter decreased 500 basis points versus the prior year quarter, primarily driven by significant increases in raw material and freight costs, start-up costs associated with the expansion of our manufacturing capacity and labor challenges in our wholesale businesses.\nThese items were partially offset by pricing and surcharges in our wholesale business.\nConsolidated non-GAAP SG&A as a percentage of sales for the quarter decreased 280 basis points, primarily reflecting fixed cost leverage on the higher sales volume, mainly in our retail segment as well as lower marketing spend as a percentage of sales.\nOur effective tax rate on a GAAP basis for the fiscal '22 second quarter was 26.6% versus 26% in the second quarter of fiscal '21.\nOur effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes.\nWe expect our effective tax rate for the full fiscal '22 year to be between 25.5% and 26.5%.\nYear-to-date, we generated $15 million in cash from operating activities.\nWe ended the period with $297 million in cash and no debt and held $31 million in investments to enhance returns on cash.\nYear-to-date, we invested $59 million and higher inventory levels to protect against supply chain disruptions and support increased production and delivered sales.\nWe also spent $33 million in capital year-to-date, primarily related to improvements to our retail stores, plant upgrades at our manufacturing distribution facilities, new upholstery manufacturing capacity in Mexico and technology upgrades.\nAs a note, last month we entered into a new five-year $200 million unsecured revolving credit facility which replaced our $150 million ABL facility.\nThe new facility has a $100 million accordion feature, allowing us to expand our borrowing capacity to support future growth.\nIt also provides the option to request to extend the term beyond five years for two additional periods of one year, each.\nBorrowings under the facility may be used for general corporate purposes and working capital.\nAs of today, we have no borrowings against the facility.\nRegarding cash returned to shareholders, during the quarter, we continued to buy back shares, spending $15 million repurchasing more than 400,000 shares of stock in the open market leaving 8.6 million shares in our existing authorized share repurchase program.\nYear-to-date we have returned $51 million to shareholders via share repurchase.\nWe also paid $6.6 million in dividends to shareholders in the second quarter.\nAnd subsequent to quarter end, demonstrating its confidence in the Company's long-term growth prospects, the Board of Directors increased the regular quarterly dividend by 10% to $0.165 per share.\nAs we looked at the future, from a capital allocation perspective, over the long term, we will target to invest roughly half of operating cash flow back into the business via capex and M&A and return the remainder to shareholders via dividends and share repurchases.\nBefore turning the call back to Melinda, let me highlight several important items for the remainder of fiscal 2022.\nAs noted, demand trends were strong across the business and remain significantly higher than pre-pandemic levels with the high backlog and plants for a continued increase in capacity as new assembly cells come online, we expect a strong year of shipments.\nAccordingly, we expect to continued increase in production capacity, particularly in Q4.\nRaw material and freight costs remain high and global supply chain disruptions continue.\nIndustry experts predict it will take multiple quarters before we see resolution of the West Coast shipping backups.\nElectronic chip shortages continue which impact our power furniture.\nAcross multiple areas, we expect to face continued supply chain disruptions with respect to having all component parts available to finished units and complete orders, particularly for our Company-owned retail segment, which tends to disproportionately sell our higher end products.\nGiven the COVID-related shutdown of Vietnam, we expect our case goods business to experience a significant temporary decline in sales and margin in the third quarter reflecting a delay in shipments as manufacturing facilities restart there and product gets on the water.\nFinally, we will continue to monitor the escalating freight environment to determine if further pricing actions needed.\nPulling all this together, we are actively managing supply inputs and recognize that we will likely continue to experience uncertainty and disruption for the foreseeable future, particularly in the third quarter.\nQuarterly trends will also be impacted by our third and fourth quarters containing 12 and 14 production weeks respectively compared to 13 production weeks in our second quarter.\nRecall fiscal 2022 will include 53 weeks of results.\nTaking all of these factors into consideration, we expect sales and margin in Q3 to be similar to Q2 and expect sales and margin to accelerate in the fourth quarter to enable consolidated La-Z-Boy results to finish the fiscal year with a full year non-GAAP operating margin at or near double digits.\nFinally, as we make investments in the business to strengthen the Company for the future, including work related to our Century Vision strategy, we expect capital expenditures to be in the range of $75 million to $85 million for fiscal '22.\nSpending will support updating our La-Z-Boy Furniture Gallery stores; updates to our plants and distribution facilities in Neosho, Missouri; new upholstery manufacturing capacity in Mexico; and investments and technology solutions across the organization.\nI'm extremely proud of our organization and our business partners for delivering these strong results in very challenging times.\nThe team is doing a great job navigating the uncertain environment and is setting us up for strong business growth as we move forward both in the near term and as we execute our Century Vision.\nThe best is yet to come for La-Z-Boy Incorporated as we deliver profitable growth and long-term value for all stakeholders.\nWe'll begin the question-and-answer period now.\nMatt, please review the instructions for getting into the queue to ask questions.\n Assistant:", "chosen": "q2 non-gaap earnings per share $0.85.\nq2 sales rose 25 percent to $576 million.\nq2 gaap earnings per share $0.89.\ncontinue to expect sales and margin momentum to accelerate, particularly in q4.\ncontinue to expect to deliver full-year consolidated operating margin at or near double digits.\nqtrly retail segment delivered same-store sales increased 17% in fiscal 2022 q2 versus year-ago period.\n"}
{"prompt": "Human: I will start by going through some of the highlights of the quarter, then Jack will go through the third quarter results and guidance for the fourth quarter.\nAnd I'll then share some concluding thoughts before we start our Q&A session.\nBut before we start, Jack will now cover the Safe Harbor language.\nThese statements are based on management's current expectations or beliefs.\nFollowing our announcement and special investor call in late August, we were very pleased to recently announce the successful and timely completion of the ettain group acquisition.\nettain was one of the largest privately held IT resourcing and services provider in North America and, since October 1st, is now operating as part of our Experis business.\nIn addition to expanding our IT services in the financial and healthcare sectors, this acquisition also improves our geographic diversification in the U.S. and increases our strength in the digital workspace and business transformation practice areas.\nTurning to our financial results.\nIn the third quarter, revenue was $5.1 billion, up 11% year-over-year in constant currency.\nOur operating profit for the quarter was $151 million.\nExcluding Mexico restructuring and ettain acquisition transaction costs, operating profit was $162 million.\nOperating profit was up significantly year-over-year as the pandemic had a significant financial impact in the prior year.\nReported operating margin was 2.9%, and after excluding Mexico restructuring and acquisition costs, operating profit margin was 3.2%.\nReported earnings per diluted share was $1.77 and $1.93 after excluding Mexico restructuring and acquisition costs and both were significantly above the prior year.\nThe global economic recovery continued in the third quarter.\nAs vaccine rollouts progress in many countries, and pandemic-related restrictions ease, we continue to see very strong hiring demand.\nThis strong demand is again evident in our Q4 ManpowerGroup Employment Outlook Survey of more than 40,000 employers in 43 countries.\nAll countries are reporting improved hiring intentions year-on-year and in 14 of the 43 countries, employers are reporting hiring intentions at the highest levels in more than 10 years.\nThat said, during the third quarter, we have also seen some levelling off in the rate of recovery in some markets.\nConcerns about the Delta variant contribute to parts of the workforce not coming back into the labor market and exacerbating worker shortages in many industries and markets, making it more difficult to meet the strong demand for workers.\nThe impact related to supply chain challenges caused by the pandemic have also become a more visible factor impacting many manufacturers in various industries.\nAs we discussed on our second quarter earnings call, we view supply chain challenges and the impact of the Delta variant as transitory factors, and we remain optimistic and confident in the demand outlook once the effects of the pandemic normalize.\nCompanies all over the world need access to skilled human capital to meet their business objectives and fully participated in the economic global recovery.\nWith our operational and strategic workforce solutions and services, we help them meet the strong demand for their goods and services today and into the future.\nRevenues in the third quarter came in just below our constant currency guidance range, driven by a slowdown in the rate of improvement in France, due to supply chain disruptions, notably in the automotive sector, and Delta variant disruptions.\nGross profit margin came in well above our guidance range.\nAs-adjusted operating profit was $162 million, representing a significant increase from the prior year period which was heavily impacted by the pandemic.\nAs-adjusted operating profit margin was 3.2%, which was at the top end of our guidance.\nBreaking our revenue trend down into a bit more detail, after adjusting for the positive impact of currency of about 1%, our constant currency revenue increased 11%.\nDue to the impact of net dispositions and slightly fewer billing days, the organic days-adjusted revenue increase was 12%.\nComparing to pre-pandemic levels, our third quarter revenues were below 2019 levels by 5% on an organic days-adjusted constant currency basis, which is slightly lower than the second quarter trend on this same basis due to the impact of new regulations in Mexico and the exiting of a low-margin arrangement in Australia.\nTurning to the earnings per share bridge on Slide 4, earnings per share was $1.77, which included $0.07 related to Mexico restructuring costs and $0.09 related to acquisition transaction costs.\nExcluding these costs, adjusted earnings per share was $1.93 which exceeded the mid-point of our guidance range.\nWalking from our guidance mid-point, our results included: improved operational performance of $0.02; slightly lower than expected foreign currency exchange rates which had a negative impact of $0.03; a slightly better than expected effective tax rate that added $0.02; and favorable other expenses which added $0.02.\nLooking at our gross profit margin in detail, our gross margin came in at 16.6%.\nUnderlying staffing margin contributed 20 basis point increase.\nPermanent recruitment contributed an 80 basis point GP margin improvement as hiring activity was strong across our largest markets.\nA lower mix of Right Management career transition business this year drove 30 basis points of GP margin reduction.\nOther and accrual adjustments included a 10 basis point margin improvement from our Experis managed services business in Europe and a 10 basis point improvement from consulting and MSP services, partially offset by a 10 basis point reduction from lower direct cost adjustments in the current year as favorable direct cost adjustments in Latin America were less than the prior year favorable adjustments in France.\nNext, let's review our gross profit by business line.\nDuring the quarter, the Manpower brand comprised 63% of gross profit.\nOur Experis professional business comprised 22%, and Talent Solutions comprised 15%.\nDuring the quarter, our Manpower brand reported an organic constant currency gross profit year-over-year growth of 15%.\nCompared to pre-pandemic levels, this represented a decrease of 4% from the third quarter of 2019 on an organic constant currency basis.\nGross profit in our Experis brand increased 24% on an organic constant currency basis year-over-year during the quarter.\nThis represented a flat trend from the third quarter of 2019 on an organic constant currency basis.\nTalent Solutions includes our global market leading RPO, MSP and Right Management offerings.\nOrganic gross profit increased 16% in constant currency year-over-year.\nThis represented an increase of 14% from the third quarter of 2019 on an organic constant currency basis.\nOur RPO business posted high double-digit GP growth during the quarter on significant hiring activity.\nOur MSP business, which has grown through the entire pandemic, continued to experience double-digit growth in gross profit in the quarter.\nAs the recovery strengthens, our Right Management business continues to see significant run-off in outplacement activity, primarily in the U.S., and experienced a reduction in gross profit of 42% year-over-year.\nOur SG&A expense in the quarter was $703 million and represented a 6% increase on a reported basis from the prior year.\nExcluding Mexico restructuring charges and acquisition costs in the current year and restructuring charges and a loss from dispositions in the prior year, SG&A was 13% higher on a constant currency basis.\nThis compares to an increase in gross profit of 17% in constant currency and reflects investment in incremental recruiters and sales talent based on increased market activity, as well as ongoing technology initiatives.\nThe underlying increases consisted of operational costs of $78 million and currency changes of $6 million.\nSG&A expenses as a percentage of revenue, after excluding restructuring and acquisition costs, represented 13.4% in the third quarter.\nThe Americas segment comprised 19% of consolidated revenue.\nRevenue in the quarter was $1 billion, an increase of 8% in constant currency.\nOUP was $41 million.\nExcluding Mexico restructuring costs and ettain acquisition costs, OUP was $52 million and OUP margin was 5.2%.\nThe U.S. is the largest country in the Americas segment, comprising 65% of segment revenues.\nRevenue in the U.S. was $645 million, representing an 11% increase compared to the prior year.\nExcluding ettain acquisition costs in the current year and restructuring charges in the prior year, OUP for our U.S. business is flat year-over-year at $34 million in the quarter as decreases from Right Management's career placement run-off was offset by improvements across all other businesses.\nExcluding the acquisition costs, OUP margin was 5.3%.\nWithin the U.S., the Manpower brand comprised 33% of gross profit during the quarter.\nRevenue for the Manpower brand in the U.S. increased 9% during the quarter.\nWhile the U.S. Manpower business continues to recover, the labor shortage experienced in the second quarter continued into the third quarter through the summer months.\nThe Experis brand in the U.S. comprised 33% of gross profit in the quarter.\nWithin Experis in the U.S., IT skills comprise approximately 80% of revenues.\nExperis U.S. revenues grew 17% during the quarter and we anticipate continued strong double-digit organic growth in the fourth quarter.\nWe are encouraged by the current trends in our U.S. Experis business and the recent acquisition of ettain which significantly increases our presence in the convenience market for IT professional services.\nTalent Solutions in the U.S. contributed 34% of gross profit and experienced revenue growth of 9% in the quarter.\nThis was driven by RPO which experienced record revenue levels as hiring programs continued to strengthen.\nMSP business continued to perform well and experienced double-digit revenue growth in the quarter.\nIn the fourth quarter, on an organic basis, we expect ongoing underlying improvement and revenue growth for the U.S. in the range of 1% to 5% year-over-year.\nThis represents a 1% decline compared to 2019 levels using the midpoint of our guidance.\nSeparately, we estimate ettain revenues within a range of $175 million to $185 million in the fourth quarter.\nOur Mexico operation experienced a revenue decline of 46% in constant currency in the quarter.\nThe decline was driven by the new labor legislation which prohibits certain types of temporary staffing not considered specialized services.\nThe actual reduction in demand from our clients from the regulation was more severe than originally anticipated.\nThe restructuring actions we have taken in the third quarter have quickly right-sized this business for the impact of new regulations.\nAlthough this will result in significant revenue reductions over the next few quarters, we believe the mix shift toward more specialized staffing will improve the margin profile of our Mexican business over time.\nWe also believe there may be additional revenue opportunities over time as clients adjust their workforce strategies.\nWe estimate that fourth quarter revenues in Mexico will decrease by approximately 55% to 60% year-over-year.\nMexico represented 2.8% of our 2020 revenues.\nRevenue in Canada increased 15% in constant currency during the quarter.\nSouthern Europe revenue comprised 46% of consolidated revenue in the quarter.\nRevenue in Southern Europe came in at $2.4 billion, growing 12% in constant currency.\nOUP equaled $111 million and OUP margin was 4.6%.\nFrance revenue comprised 55% of the Southern Europe segment in the quarter and increased 8% in constant currency.\nCompared to the same period in 2019, France revenues were down 10%.\nAutomotive supply chain constraints and the Delta variant slowed the rate of recovery in the third quarter for our French business.\nOUP was $62 million in the quarter and OUP margin was 4.7%.\nAs we begin the fourth quarter, we are estimating a year-over-year constant currency increase in revenues for France in the range of 2% to 6%.\nComparing estimated fourth quarter revenues to pre-crisis levels in constant currency, this represents an 8% decline compared to 2019 levels in the fourth quarter using the midpoint of our guidance.\nRevenue in Italy equaled $456 million in the quarter, reflecting an increase of 28% in days-adjusted constant currency.\nThrough the third quarter, revenues in Italy continued to exceed 2019 levels.\nOUP equaled $31 million and OUP margin was 6.7%.\nWe estimate that Italy will continue to perform very well in the fourth quarter with year-over-year constant currency revenue growth in the range of 7% to 11%.\nRevenue in Spain increased 1% in days-adjusted constant currency from the prior year and revenue in Switzerland increased 21% in days-adjusted constant currency.\nOur Northern Europe segment comprised 23% of consolidated revenue in the quarter.\nRevenue increased 19% in constant currency to $1.2 billion, driven by all major markets.\nOUP represented $17 million and OUP margin was 1.4%.\nOur largest market in Northern Europe segment is the U.K., which represented 37% of segment revenues in the quarter.\nDuring the quarter, U.K. revenues grew 26% in constant currency.\nWe expect continued growth in the 4% to 8% constant currency range year-over-year in the fourth quarter.\nIn Germany, revenues increased 13% in days-adjusted constant currency in the third quarter.\nWe expect to see ongoing revenue improvement in Germany in the fourth quarter.\nIn the Nordics, revenues grew 19% in constant currency.\nRevenue in the Netherlands increased 5% in constant currency.\nBelgium experienced days-adjusted revenue growth of 10% in constant currency during the quarter.\nThe Asia Pacific Middle East segment comprises 12% of total company revenue.\nIn the quarter, revenue grew 4% in constant currency to $611 million.\nOUP was $23 million and OUP margin was 3.7%.\nRevenue in Japan grew 13% in constant currency which represents an improvement from the 10% growth rate in the second quarter.\nOur Japan business continues to lead the market in revenue growth, and we expect ongoing high single-digit revenue growth in the fourth quarter.\nRevenues in Australia were down 29% in constant currency, reflecting the exit of a low-margin client arrangement during the second quarter.\nI'll now turn to cash flow and balance sheet.\nDuring the first nine months of the year, free cash flow equaled $343 million compared to $685 million in the prior year reflecting significant accounts receivable declines in the prior year period.\nOur third quarter free cash flow of $172 million exceeded the prior year free cash flow of $108 million, representing strong current period cash collections.\nAt quarter end, days sales outstanding was flat year-over-year at 58 days.\nCapital expenditures represented $40 million for the nine-month period and $15 million during the third quarter.\nDuring the third quarter we did not have any share repurchases.\nOur year-to-date purchases stand at 1.5 million shares of stock for $150 million.\nAs of September 30th, we have 1.9 million shares remaining for repurchase under the 2019 share program and 4 million shares remaining under the share program approved in August of 2021.\nOur balance sheet was strong at quarter-end with cash of $1.61 billion and total debt of $1.07 billion, resulting in a net cash position of $547 million.\nOn October 1st, we utilized $800 million of cash to fund the acquisition of ettain.\nOur debt ratios at quarter-end reflect total gross debt to trailing 12-months Adjusted EBITDA of 1.63 and total debt to total capitalization at 30%.\nOur debt and credit facilities did not change in the quarter.\nAlthough our revolving credit facility for $600 million remained unused at September 30th, we did draw $150 million on October 1st in conjunction with the funding of the ettain acquisition.\nAs we previously indicated, we intend to pay this down over the next 12 months.\nNext, I'll review our outlook for the fourth quarter of 2021.\nOur guidance continues to assume no material additional COVID-19-related difficulties beyond those that exists today, including incremental supply chain disruptions, additional variants and the emergence of adverse trends impacting our clients in any of our largest markets.\nOn that basis, we are forecasting earnings per share in the fourth quarter to be in the range of $1.99 to $2.07, which includes an unfavorable foreign currency impact of $0.04 per share and a positive $0.13 impact from ettain.\nThis does not include the impact of acquisition transaction costs of approximately $9 million or integration costs of $4 million to $6 million which will be broken out separately from ongoing operations.\nOur constant currency revenue guidance growth range is between 5% and 9% and, after adjusting for ettain, our organic constant currency growth range is estimated between 2% and 6%.\nThe midpoint of our constant currency guidance is 7%.\nA minor decrease in billing days in the fourth quarter and the impact of net acquisitions, driven by ettain, impact the growth rate, resulting in an outlook for organic days-adjusted revenue growth of 4% at the midpoint.\nThis would represent a fourth quarter organic constant currency decline in the range of minus 2% to minus 4% compared to 2019 revenues, representing an improvement from our third quarter trend.\nAlthough final purchase accounting for the ettain acquisition will be finalized in the months ahead, we currently estimate that intangible asset amortization will be approximately $24 million annually.\nSince amortization will be more significant going forward, we are also disclosing operating profit before amortization, or EBITA, to help assess underlying financial performance.\nWe estimate that EBITA margin during the fourth quarter will be up 30 basis points at the midpoint compared to the prior year with ettain contributing 20 basis points of the improvement.\nWe expect our operating profit margin during the fourth quarter to be up 20 basis points at the midpoint compared to the prior year with ettain contributing 10 basis points of the improvement.\nWe estimate that the effective tax rate in the fourth quarter will be 32%.\nAs usual, our guidance does not incorporate restructuring charges or additional share repurchases and we estimate our weighted average shares to be 55.3 million.\nThe acceleration of digitization and investment in technology by companies during the pandemic means organizations are requiring new skills and capabilities for the future.\nWhile hiring intentions are at some of the highest levels we have seen in years, it is unlikely employers will be able to fulfill all these intentions as a result of the labor market shortages for many skills.\nOur most recent global Talent Shortage survey found that shortages are at a 15-year high for the second consecutive quarter, with 69% of employers stating they cannot find the talent they need.\nIn response, organizations are looking ahead, focusing on strengthening workforce and reskilling, upskilling and building the capabilities to ensure their existing and future workforce has the skills to remain competitive.\nWe believe this is an opportunity for us and through our diversification strategy, we are sourcing the talent they are looking for through the offerings in our Manpower, Experis and Talent Solutions brands.\nWe are also investing in innovation to create the talent pools with skills and capabilities at scale.\nOur successful Manpower MyPath program has impacted over 129,000 lives to date and is a great example of this.\nThrough MyPath, we are building the talent pool of the future and providing clients access to our high potential associates.\nAnother recent example of innovation is our Experis Career Accelerator launched at the global Viva Tech conference in Paris earlier this year and now active in six markets.\nExperis Career Accelerator is our AI-driven platform, developed in partnership with FutureFit AI.\nUsing machine learning and dynamic data to scan the market, it can match our Experis consultants to IT learning pathways and in-demand roles.\nWe are attracting, developing, upskilling our consultants by providing curated learning and technical training content from the world's leading tech clients and accredited learning partners, and preparing our people with the skills tech employers need most.\nMachine learning is also helping us grow our own people's expertise so they are even better at assessing and predicting performance to provide a better job match than either humans or machines could do on their own.\nThat's an example of how we continue to innovate in our brands to invest in our capability to both find and create the best talent pipeline in the market for the benefit of the organizations we work with and for the benefit of the individuals for whom we provide sustainable and meaningful careers and employment.\nThis investment in our people's skills is also reflected in our recent internal Annual People Survey where we are pleased to see higher employee engagement levels year-over-year, despite the challenges experienced by many of them during the pandemic.\nWe are proud and very grateful for the strong culture of our organization and we see this as a competitive advantage with opportunities for even further improvement, positioning us very well for future growth.\nI'd now like to open the call for Q&A.\n Assistant:", "chosen": "q3 earnings per share $1.93 excluding items.\nsees q4 earnings per share $1.99 to $2.07 including items.\nq3 earnings per share $1.77.\nq3 revenue $5.1 billion versus refinitiv ibes estimate of $5.32 billion.\nmanpowergroup - including full quarter impact of ettain group acquisition, anticipate diluted earnings per share in q4 will be between $1.99 & $2.07.\n"}
{"prompt": "Human: Following comments from Michael and Sachin, the operator will announce your opportunity to get into the queue for the Q&A session.\nBoth the release and the slide deck include reconciliations of non-GAAP measures to GAAP reported amounts.\nI'm starting off with the key highlights for the quarter.\nWe delivered strong revenue and earnings growth as we saw further improvement in our underlying operating metrics.\nQuarter 4 net revenues were up 28% and earnings per share up 46% versus a year ago on a non-GAAP currency-neutral basis.\nOn the same basis, Quarter 4 net revenues are 19% above pre-COVID levels in 2019.\nSo with that, let's take a look at the macroeconomic front.\nThe outlook remains positive despite the recent supply chain constraints, geopolitical uncertainties and inflationary pressures.\nAlthough there has been a recent surge in COVID cases, there are signs that these may be peaking.\nBy each of these areas, merit monitoring, underlying spending trends remain strong as consumers, businesses and governments have become more adaptable to a changing environment.\nIn the U.S., economic growth remains solid with low unemployment and healthy consumer confidence.\nAccording to our Quarter 4 SpendingPulse report, which is always based on all payment types including cash and check, guest retail sales ex auto, ex gas were up 6.4% versus a year ago and up 10.9% versus 2019.\nIn Europe, GDV growth has been strong, although recently impacted by mobility restrictions.\nSpendingPulse shows that overall European retail sales in Quarter 4 were up 3.3% versus a year ago and up 1.3% versus 2019.\nIn Asia Pacific, vaccination rates continue to improve, and we expect the economic recovery to pick up pace as both government and businesses ramp up investment.\nThe travel recovery in Asia Pacific has lagged that of the rest of the world and has significant growth potential.\nThe growth in Latin America is expected to moderate a bit following the rebound in 2021.\nAs it relates to COVID specifically, there are early signs that the Omicron will be relatively short-lived.\nThe reality is that the tools we have to deal with the pandemic are more advanced than ever.\n60% of the world's population is now at least partially vaccinated, effective therapeutics are becoming available, and governments are using more targeted measures to limit the spread.\nMore bodies have opened and have stayed open despite the recent variant.\nAlthough we've always said the path forward will not be linear, there are signs we are moving toward the endemic phase of the disease.\nLooking at Mastercard's spending trends, switch volume growth continued to improve quarter over quarter.\nBoth consumer credit and debit continued to grow well.\nThe recovery has continued with overall Quarter 4 cross-border levels now higher than those in 2019.\nWhile Omicron has had some recent impact on cross-border travel, we continue to believe that cross-border travel will return to 2019 levels by the end of this year.\nCross-border card-not-present spending ex travel continued to hold up well in the quarter.\nSo overall, the spending trends are moving in the right direction with some near-term travel-related headwinds as a result of the variant.\nNow turning to our business highlights.\nAs outlined at our investment community meeting in November, we remain focused on our growth, diversified build strategy and our three strategic priorities, which are expanding in payments, extending our services and embracing new networks.\nHere's an update on how we're progressing against each of those priorities.\nFirst, we're expanding in payments, a growing person to merchant payments, scaling across other payment flows and leaning into innovation in new payment technologies.\nIn aggregate, these targeted flows represent $115 trillion in opportunity.\nFirst off, we're driving growth in person to merchant payments through new wins across the globe.\nIn the U.S., I'm excited to announce that we're partnering with Chase and Instacart, a leading online grocery platform in North America on a new Instacart Mastercard co-brand program.\nThis partnership marks an additional co-brand win with Chase, quickly following the recent launch of the Chase Aeroplan World Elite Mastercard.\nIn addition, with First Interstate Bank's planned acquisition of Great Western Bank, we will flip Great Western's consumer debit, credit and commercial portfolios to MasterCard.\nAnd I'm happy to note that the consumer credit portfolio of Merix Bank, over 3 million customers will transition to Mastercard beginning in the second quarter.\nMerix Bank plans to leverage several Mastercard solutions, including our fraud prevention, consulting, open banking and loyalty services.\nOver in the Netherlands, we've renewed our partnership with Rabobank, which includes the migration of 8 million Maestro cards to debit Mastercard.\nWe signed an exclusive deal with Westpac in Australia for the new Banking-as-a-Service platform.\nThis platform will allow new players to leverage Westpac's banking capabilities.\nAfterpay, the first partner on the platform will connect debit Mastercards to their money by Afterpay app.\nAnd in the U.K., the Net West debit migration is progressing to plan as in the early stages of consumer rollout.\nWe're also expanding in payments by capturing new payment flows, including commercial, B2B accounts payable, bill pay and cross-border remittances.\nFor example, in the commerce space, we've expanded our relationship with Bank of America, where we'll be the lead brand for new commercial card issuance.\nWe've also renewed and expanded our relationship with WEX, including the chosen as their strategic partner, and adding open-loop functionality to their millions of closed-loop fleet cards.\nFor accounts payable, we continue to scale Mastercard tracks, WEX, BMO, BOK Financial, [Inaudible] will connect to the platform.\nWe also launched the launch -- we also announced the launch of Mastercard Track Instant Pay, which uses machine learning to analyze and initiate automatic virtual card payments, streamlining processes for buyers and improving cash flow for suppliers.\nAnd we're driving new B2B acceptance through a global partnership with Boost Payment Solutions with an initial focus on expanding the use of commercial card in seven key markets.\nWe're addressing new payment flows in consumer bill payments as well.\nWe recently announced the acquisition of Argus to help deliver bill pay solutions and other real-time payment applications in Latin America.\nArgus enables digital payments for the majority of households built in Mexico and its connections with banks, fintechs and digital wall providers across the region.\nAnd finally, we continue to capture new flows in cross-border remittances.\nThis quarter, we established a partnership with Travelex in Brazil, who will use Mastercard's cross-border services, send P2P transfers to the U.S. and Europe.\nFor domestic disbursements in the U.S., we partnered with fintech processor, TabaPay, to make Mastercard Send easily available to fintechs and merchants across multiple use cases.\nWe're also expanding in payments by leaning into payment innovation in areas like installments, contactless acceptance and crypto currencies.\nHere are a few examples.\nOur open-loop Mastercard installment program that we announced last quarter has been very well received.\nThe U.S. launch is on schedule for Quarter 1.\nWe're actively bringing new partners into the program as we announced in the Middle East, Africa earlier this week, watch this space.\nNow we're making great progress in expanding contactless acceptance by turning the world's billions of active smartphones into potential acceptance devices, enabling people to buy and sell whenever, wherever they want.\nWe now have 100 deployments of Tap on Phone in over 50 markets with leading partners globally.\nContactless penetration increased to one and two of our in-person switch transactions globally this quarter.\nThis is up from approximately one and three prior to the pandemic.\nAnd with that, the potential for accelerated acceptance growth, financial inclusion and consumer convenience is substantial.\nWe're also bringing capabilities, experience and reach to help enable the crypto ecosystem.\nOur new collaboration with Coinbase will allow consumers to use their Mastercard to purchase NFTs, try that myself.\nOur work with consensus will make it easier for software developers to increase the scale, efficiency and speed of transactions on Ethereum and finishing blockchains.\nAnd our CPC Sandbox Test Platform, which we launched in 2020, continues to gain traction.\nWe're helping central banks, financial institutions and fintechs simulate the issuance and distribution of CBDC along with the integration of CBDDs with our card network, our real-time payment modules and native blockchain wallets.\nNow shifting to services.\nOur services support can differentiate our core products and have played a critical role in having many of them I just mentioned.\nThe group services revenue at 25% in 2021 on a currency-neutral basis.\nWe will continue to extend our service capabilities to enhance the value of payments.\nWe even further accelerating our growth by expanding into new areas and new use cases, particularly through our data and services and cyber intelligence propositions, again, a few examples for you.\nIn December, we announced an agreement to acquire Dynamic Yield from McDonald's.\nDynamic Yield uses enhanced AI to deliver customized product recommendations, offers and content to consumers.\nTheir customer set includes over 400 global brands ranging from financial services companies like Synchrony to retailers like Lens End.\nWhen combined with SessionM's loyalty platform and our Test & Learn experimentation software, we will be able to offer a unified consumer engagement and loyalty hub to our customers.\nMcDonald's is a great example of a company who's using all three of these platforms today with plans to further scale and integrate Dynamic Yield's capabilities globally.\nIn addition, our Ethoca platform continues to experience strong traction in preventing unnecessary chargebacks, a real pain point.\nWe added new customers in every region in 2021 for Ethoca.\nRecently, we launched Ethoca Consumer Clarity, which gives consumers detailed information about purchases on their mobile banking app.\nand several European markets, including OTP Bank, central Cooperative Bank and Paybox Bank.\nNow beyond expanding in payments and extending in services, our third strategic priority area is embracing new networks.\nSpecifically, we are leveraging our expertise and payments to build out new networks for the current focus on open banking and digital identity.\nOn the open banking front, we have closed the acquisition of Aiia in November, which brings strong API connectivity to over 2,700 banks across Europe.\nAnd combined with Finicity's North American connection, which covered more than 95% of deposit accounts in the U.S. market, Mastercard has an unparalleled footprint in the key open banking regions, upon which we are building solutions to solve a wide range of these cases.\nOne example is in the mortgage verification space, where Finicity has signed deals with several new partners, including loan people.\nAnd in the digital identity space, we're helping our customers with fast, frictionless identity verification services.\nEthoca has performed strongly over the last quarter, expanding through strategic partnerships with companies such as ZIP and Equifax, as well as growing its global footprint with leading frack providers Tonga and Air Click in Asia Pacific.\nCombined, open banking and digital identity extend our value before and after the payment transaction.\nThese are large, attractive and growing opportunities, and we are uniquely positioned to be a leader in both.\nSo in summary, we delivered strong revenue and earnings growth this quarter.\nThe macroeconomic outlook remains positive with a few areas of the monitoring, and we're executing against our three strategic priorities: spanning and payments, extending our services and embracing new networks.\nAnd all that with substantial progress on the product and deal front this quarter.\nNow Sachin, over to you and the numbers.\nSo turning to Page 3, which shows our financial performance for the quarter on a currency-neutral basis, excluding special items and the impact of gains and losses on our equity investments.\nNet revenue was up 28%, reflecting the continued execution of our strategy and the ongoing recovery in spending.\nAcquisitions contributed 3 ppt to this growth.\nOperating expenses increased 19%, including a 7 ppt increase from acquisitions.\nOperating income was up 37%, which includes a 1 ppt decrease related to acquisitions.\nNet income was up 44%, which includes no impact from acquisitions as the impact of acquisitions on operating income was offset by a onetime acquisition-related tax benefit.\nEPS was up 46% year over year to $2.35, which includes a $0.04 contribution from share repurchases.\nDuring the quarter, we repurchased $1.3 billion worth of stock and an additional $528 million through January 24, 2022.\nSo let's turn to Page 4, where you can see the operational metrics for the fourth quarter.\nWorldwide gross dollar volume, or GDV, increased by 23% year over year on a local-currency basis.\nWe are seeing continued strength in debit and credit.\nU.S. GDV increased by 23% with debit growth of 15% and credit growth of 34%.\nOutside of the U.S., volume increased 23%, with debit growth of 25% and credit growth of 20%.\nTo put this in perspective, as a percentage of 2019 levels, GDV is at 125%, up 4 points quarter over quarter with credit at 116%, up 5 points sequentially and debit at 134%, up 3 points sequentially.\nCross-border volume was up 53% globally for the quarter, with intra-Europe cross-border volumes up 45% and other cross-border volumes up 63%, reflecting continued improvement in travel-related cross-border as several borders opened during the fourth quarter.\nIn the fourth quarter, cross-border volume was 109% of 2019 levels, with intra-Europe at 122% and other cross-border volume at 98% of 2019 levels.\nTurning to Page 5.\nSwitched transactions grew 27% year over year in Q4 and were at 132% of 2019 levels.\nCard-present growth continued to improve while card-not-present growth rates remain strong.\nCard-present growth was aided in part by increases in contactless penetration in several regions.\nIn addition, card growth was 9%.\nGlobally, there are 3 billion Mastercard and Maestro-branded cards issued.\nThe increase in net revenue of 28% was primarily driven by domestic and cross-border transaction and volume growth, as well as strong growth in services, partially offset by higher rebates and incentives.\nAs previously mentioned, acquisitions contributed approximately 3 ppt to net revenue growth.\nLooking quickly at the individual revenue line items.\nDomestic assessments were up 24%, while worldwide GDV grew 23%.\nCross-border volume fees increased 61% while cross-border volumes increased 53%.\nThe APPD difference is primarily due to favorable mix as higher-yielding ex intra-Europe cross-border volumes grew faster than intra-Europe cross-border volumes this quarter.\nTransaction processing fees were up 28%, generally in line with switched transaction growth of 27%.\nOther revenues were up 30%, including a 9 ppt contribution from acquisitions.\nThe remaining growth was mostly delivered by our cyber and intelligence and data and services solutions.\nFinally, rebates and incentives were up 38%, in line with our expectations, reflecting the strong growth in volumes and transactions and new internode deal activity.\nMoving on to Page 7.\nYou can see that on a currency-neutral basis, total operating expenses increased 19%, including a 7 ppt impact from acquisitions.\nExcluding acquisitions, operating expenses grew 12%, primarily due to increased spending on advertising and marketing, higher personnel costs to support the continued investment in our strategic initiatives and increased data processing costs.\nTurning now to Page 8.\nLet's discuss the specific metrics for the first three weeks of January.\nFirst, as a point of process, we continue to provide volume and transaction metrics both on a year over year and as a percentage of 2019 basis.\nHowever, it is important to note that as we turn the calendar and move into 2022, the index versus 2019 metric now looks back three years and, therefore, includes a compounding improvement relative to the 2021 index metric.\nThis compounding impact must be taken into consideration when considering the sequential trend from Q4 to January.\nSo at the highest level, omicron has had a minimal impact on overall switched volumes and transactions and has called some moderation on cross-border panel.\nGoing through the metrics in turn.\nStarting with switched volumes.\nThrough the first three weeks of January, we are now at 149% of 2019 levels, up 13 points versus Q4.\nThis increase is primarily driven by the compounding effect I just referred to.\nAfter adjusting for this compounding effect, switched volumes are tracking similarly to what we saw in Q4.\nThe underlying trends in switched transactions adjusted for the compounding effect are generally tracking the trends we are seeing in switched volumes.\nIn terms of cross-border volume growth, as I mentioned earlier, spending levels as a percentage of 2019 in Q4 are now above pre-pandemic levels.\nThe Omicron variant, which hit partly through December, impacted the strong cross-border travel momentum we saw in November.\nThat impact has carried over into January.\nThis has been partially offset by an increase in cross-border card-not-present ex travel.\nOverall, cross-border volume through the first three weeks of January is now at 116% of 2019 levels, up 7 points versus Q4.\nIn this case, the compounding effect is partially offset by the impact of the Omicron virus on cross-border travel in January.\nTurning to Page 9.\nI want to share our thoughts on the upcoming year.\nWhile there is some uncertainty related to Omicron and potential future variance, our overall expectations for 2022 are positive.\nThe macroeconomic outlook is for continued growth and domestic spending levels have summed up well despite the recent surge in cases.\nThe recovery in cross-border travel was progressing well prior to Omicron and we expect the recovery in cross-border travel to resume as the surge passes.\nAs Michael just noted, the tools available to deal with the pandemic have improved with time.\nAnd although the path forward may not be linear, there are signs we are moving toward the endemic phase of this disease.\nMany countries have relaxed their border restrictions and we continue to expect cross-border travel to recover to 2019 levels by the end of 2022.\nOur recent deal wins, travel-oriented portfolios and diversified set of services position us extremely well to capitalize on these trends.\nTurning to our expectations for the full year 2022.\nOur base case scenario is for net revenues to grow at the high end of a high teens rate on a currency-neutral basis, excluding acquisitions.\ndollar relative to the euro.\nIn terms of operating expenses, we continue to carefully manage our spending as we invest in our payments, services and new network priorities to drive short- and long-term growth.\nFor the year, we expect operating expenses to grow at the low end of a low double-digit rate on a currency-neutral basis, excluding acquisitions and special items.\nAcquisitions are forecast to add about 4 to 5 ppt to this growth, while foreign exchange is expected to be a tailwind of approximately 1 ppt for the year.\nTurning now to the first quarter.\nYear-over-year net revenue growth is expected to be at the high end of a high teens rate, again, on a currency-neutral basis, excluding acquisitions.\nThis reflects some sequential improvement in cross-border travel spending trends within the quarter relative to 2019 as the impact from Omicron starts to recede as the quarter progresses.\nAcquisitions are forecast to add about 2 ppt to this growth, while foreign exchange is expected to be a headwind of 2 to 3 ppt for the quarter.\nFrom an operating expense standpoint, we expect Q1 operating expense growth to be at the high end of high-single digits rate versus a year ago on a currency-neutral basis, excluding acquisitions and special lines.\nAcquisitions are forecast to add about 6 ppt to this growth, while foreign exchange is expected to be a tailwind of approximately 1 ppt for the quarter.\nAs a reminder, we discretely disclosed the impact of acquisitions for the year-end, which it closed and the subsequent year after which time we do not split them out.\nFor instance, Finicity, which closed in November of 2020 is now folded into the base.\nWe are pleased to have closed the acquisitions of both Aiia and Argus in November and anticipate closing the pending acquisition of Dynamic Yield in the first half of 2022.\nOther items to keep in mind.\nOn the other income and expense line, we are at an expense run rate of approximately $115 million per quarter given the prevailing interest rates and debt levels.\nThis excludes gains and losses on our equity investments, which are excluded from our non-GAAP metrics.\nAnd finally, we expect a tax rate of approximately 17% to 18% for the year based on the current geographic mix of our business.\nWith that as a backdrop and turning now to Slide 10, I would like to update you on our three-year performance objectives for the 2022 to 2024 period that we first introduced in November at our Investment Community Meeting.\nThe bottom line is that there is no change, although our jumping off point for earnings is slightly higher due to our Q4 2021 overperformance.\nAs a reminder, these objectives are on a currency-neutral basis, exclude special items, gains and losses on equity investments and acquisitions closed after 2021.\nUsing 2021 as our base over the 2022 to 2024 period, we expect to deliver a net revenue compound annual growth rate in the high teens.\nThis assumes an annual target market volume growth rate of 10% to 11%, cross-border travel returning to 2019 levels by the end of 2022 and doing our services revenues at a 20%-plus CAGR.\nFrom an operating margin perspective, we will continue to operate with the philosophy of delivering a minimum annual operating margin of 50%.\nHaving said this, I would like to emphasize that we continue to believe that it is important for us to invest with a long-term growth while delivering positive operating leverage, and we continue to dive with this philosophy in mind.\nAnd finally, we expect to deliver an earnings per share CAGR in the low 20s range on a currency-neutral basis, excluding the impact of special items, gains and losses on equity investments and future acquisitions.\nDermira, we're now ready for the question-and-answer session.\n Assistant:", "chosen": "fourth quarter adjusted net income of $2.3 billion, and adjusted diluted earnings per share of $2.35.\nfourth quarter net revenue of $5.2 billion, an increase of 27%, or 28% on a currency-neutral basis.\nfourth quarter gross dollar volume up 23% and purchase volume up 27%.\nmastercard - had strong q4 as spending trends continued to improve, with q4 cross-border spending now above pre-pandemic levels.\nqtrly cross-border volume growth of 53% on a local currency basis.\nqtrly switched transactions growth of 27%.\nsees switched volume through january 21st up 27% - presentation.\n2022 \u2013 2024 performance objectives - reiterated - presentation.\n"}
{"prompt": "Human: I'm Shivani Kak, Head of Investor Relations.\nI'm going to begin by providing a general update on the business, including Moody's second quarter 2021 financial results.\nAnd following my commentary, Mark Kaye will provide further details on our second quarter 2021 performance as well as our revised 2021 outlook.\nMoody's delivered strong financial results in the second quarter of 2021.\nRevenue growth of 8% and increase in adjusted diluted earnings per share of 15% highlighted the robust demand for our best-in-class integrated risk assessment offerings.\nFavorable market conditions and heightened M&A activity provided the backdrop for sustained leveraged finance issuance in the second quarter, and it supported growth in our ratings business.\nThe ongoing expansion of our risk assessment solutions combined with strong retention rates drove MA's significant recurring revenue growth.\nTop line performance as well as expense discipline contributed to adjusted operating margin expansion, and our cost efficiency initiatives continue to fund key investments and product innovation that should support ongoing growth.\nAs a result of our solid execution in the quarter, we've revised our full year 2021 guidance and now forecast Moody's revenue to grow in the low double-digit percent range.\nAdditionally, we've raised our adjusted diluted earnings per share guidance to be in the range of $11.55 to $11.85.\nNow turning to second quarter results.\nMIS revenue grew 4%.\nThat's despite the tough prior year comparable, while MA achieved its highest ever quarterly revenue, up 15% from last year.\nOn an organic constant currency basis, MA revenue increased 8%.\nMoody's adjusted operating income rose 12% to $861 million, and the adjusted operating margin expanded 200 basis points to 55.4%.\nAdjusted diluted earnings per share was $3.22, up 15%.\nOn the last earnings call, I highlighted that issuance volumes reached their highest level in over a decade.\nThis quarter, as anticipated, investment-grade activity declined as many issuers had already substantially fulfilled their funding needs in recent quarters.\nAlthough overall issuance declined by 16%, as you can see on the chart, second quarter issuance was still well above the historical 10-year average as shown on the blue line.\nWhile the growth in leveraged loans outpaced high-yield bonds, the demand that we saw earlier this year from both asset classes persisted, albeit a bit slower sequentially.\nWe also saw increased momentum in the CLO market, driven by opportunistic refinancing as spreads remain tight.\nWe frequently comment on our revenue relative to issuance levels, which relates to issuance mix.\nAnd in the second quarter, transactional MIS revenue grew 3%, while MIS rated issuance declined 16%.\nThis chart provides an illustration of our second quarter issuance and revenue mix by asset class.\nSo for example, the dark green bubble on the bottom left corner represents investment-grade issuance.\nAnd you can see that issuance was down 68% in the second quarter versus the prior year.\nHowever, leveraged loans, which has a greater proportion of issuers on per issuance or pay-as-you-go commercial programs, represented by the dark blue bubble on the far right, saw issuance up over 200%.\nAnd that significantly contributed to this quarter's favorable issuance mix.\nSimilar to last quarter, favorable market conditions led issuers to access the debt markets for a variety of reasons.\nCredit spreads tightened as default rates trended lower, keeping the overall cost of debt low and allowing issuers to opportunistically refinance existing debt.\nAnd as the economy started to recover and equity markets continued their strong run, we saw an acceleration of M&A as companies use the combination of cash balances and debt financing to acquire growth and position businesses for the post-pandemic economy.\nWe expect this constructive environment to persist, providing issuers further opportunities to tap the markets.\nThat said, we forecast activity for the remainder of 2021 to moderate from the historical highs that we saw in the first half of this year.\nAnd Mark is going to go into further detail on our issuance guidance by asset class later in the call.\nNow let's turn to MA.\nMA's growing recurring revenue base and strong retention rates demonstrate the market demand for our products.\nOur emphasis on renewable sales has increased the proportion of recurring revenue by four percentage points in the trailing 12-month period to 92%.\nWe continue to see significant opportunities in know your customer and financial crime compliance solutions as well as areas like insurance and asset management, both of which contributed to recurring revenue growth along with research and data feeds.\nWe briefly discussed some of these businesses in the first quarter 2021 earnings call, and I want to further spotlight these two high-growth areas.\nI'll start by highlighting a few key trends in the KYC market.\nFirst, as I've mentioned before, the pandemic has accelerated digital transformation in know your customer and customer onboarding.\nSecond, regulators are requiring organizations to know more about their customers and suppliers than ever before.\nAnd finally, financial crime continues to become more sophisticated, which requires advanced detection and monitoring capabilities.\nOur industry-leading product offerings and solutions leverage information on hundreds of millions of entities and ownership structures as well as detailed profiles on over 13 million politically exposed individuals.\nUsing artificial intelligence, we combine our world-class data sets to map and analyze adverse media, together generating insights and identifying risks at a scale, speed and precision that is difficult for others to match and creating a compelling solution that is unique to Moody's and enables our customers to make better and faster decisions to combat financial crime.\nSimilar to our know your customer and financial crime compliance products, our expanding offerings for insurers and asset managers are contributing to revenue growth for MA and are a core part of our integrated risk assessment strategy.\nWe initially entered the insurance customer segment by providing market-leading regulatory compliance software.\nWe then moved into actuarial models to support global life insurers enabled by our acquisition of GGY.\nWe further expanded our capabilities to include asset and liability management and balance sheet solutions, portfolio analytics and other tools to help address new accounting standards such as IFRS 17 and CECL.\nNow the data, analytics and domain expertise from across our business enables us to provide insurers and asset managers with more comprehensive solutions to manage a wider set of risks.\nAs the industry continues to evolve, our holistic approach allows us to build on our existing position in the insurance space, while at the same time provide a broader range of increasingly important analytics and insights, such as climate risk scenarios.\nTogether, this has contributed to our ability to deliver 20% organic revenue growth over the trailing 12 months in this segment.\nAnd we're excited about the opportunity ahead to serve new and growing risk assessment use cases for insurers and asset managers, leveraging our vast data sets and analytic capabilities.\nI've also talked a number of times about the importance of innovating and integrating our data and analytics across our product suite.\nFor example, this quarter, we launched an industry-first ESG Score Predictor.\nThis offering combines Moody's ESG scoring methodology with company-specific data and predictive analytics to produce ESG scores for over 140 million small- and medium-sized enterprises.\nThese scores allow our customers to screen ESG risks on public and private companies to monitor portfolio and supply chain risk and are a great example of integrating our SME and ESG capabilities to address a key market need, which is ESG assessment to support sustainable supply chains.\nNow staying on ESG for a moment, there's been a proliferation of climate-related financial disclosures over the past few years, and we recently partnered with the TCFD to provide insight on the quality of climate disclosures, leveraging our natural language processing and machine learning tools.\nIn MIS, we expanded our proprietary ESG credit impact score coverage to companies in a broader range of industries as well as to U.S. states and cities.\nAnd we believe this is a unique offering that will allow investors to understand more clearly the impact of E, S and G on any issuer's creditworthiness and enhances our credit ratings relevance and thought leadership.\nIn MA, as a leading provider of know-your-customer data and analytics, our customers are increasingly needing to comply with regulations relating to modern slavery and human trafficking within their supply chain.\nWorking with various stakeholders, we added new AI-enabled features to help our customers screen and track previously undetected instances of human trafficking and modern slavery risk across their supplier base, providing an opportunity to further broaden our KYC customer base beyond financial institutions.\nI'm frequently asked how we are differentiating ourselves in the ESG space.\nSo I thought I would take a minute to provide a few customer case studies that illustrate how we're combining our capabilities to meet the risk assessment needs of different customer types.\nIn the Americas, we worked with a leading global commercial real estate firm to embed physical climate risk analysis into their global funds and client portfolios.\nThe detail and rigor of our climate scores and data on individual properties allowed them to analyze thousands of properties in a more sophisticated and a more efficient way.\nIn Europe, a large government agency requested our expertise on their green bond financing framework.\nThrough our second-party opinion, we assessed that the proposed framework not only aligned with their climate and environmental agenda but also with the 2021 green bond principles.\nAnd since 2012, we provided hundreds of second-party opinions across 30 countries with over 60 second-party opinions provided just in the first half of this year.\nOn to Asia, a large regional bank, also an existing MA customer, recently selected Moody's to create a robust framework to quantify the ESG and climate risk of customers' portfolios, leveraging our ESG assessments, ESG and climate insights and data and our ESG Score Predictor that I just talked about.\nThey also requested in-house training on how to integrate ESG and sustainability into their in-house risk management practices.\nSo it's a really great example of commercializing ESG and climate across our risk assessment offerings and our customer base.\nAnd these matter because they are independent third-party validation about the strength of our offerings across the firm.\nMIS was named Best Credit Rating Agency in multiple areas in the GlobalCapital Bond Awards and the Best Global Credit Rating Agency by Institutional Investor again.\nMIS was also ranked the number one Securitization Rating Agency of the Year in the GlobalCapital European Awards.\nAs I noted, within MA, we are investing in our products to help our customers make better decisions on a wider range of risks.\nIndustry participants recognize the pace of our innovation, awarding MA's Credit Sentiment Score the Best AI-based Solution in the 2021 AI Breakthrough Awards.\nI'm pleased that we ranked number two on Chartis' STORM Top 50, demonstrating our position at the forefront of digital transformation in our sector.\nMoody's ESG Solutions also won the Climate Risk Solution of the Year in Environmental Finance's Sustainable Investment Awards.\nI'm also enormously proud that Moody's was named a Top 50 Company for Diversity by DiversityInc.\nAnd together, these recognitions underscore our commitment to customer delivery, innovation, sustainability and diversity, equity and inclusion, all of which are critical to our sustained success.\nAnd finally, I'm thrilled that Moody's joined the Fortune 500 earlier this quarter.\nThis milestone is a testament to the dedication our employees have shown both to our customers and to one another.\nIn the second quarter, MIS revenue increased 4%, supported by a 3% rise in transaction revenue, while global MIS rated issuance declined 16%.\nAs a result of favorable mix, corporate finance revenue declined 4% versus a 26% decrease in issuance.\nThis was attributable to a surge in leveraged finance activity as U.S. and EMEA issuers opportunistically refinance existing debt and funded M&A transactions.\nInvestment-grade supply contracted compared to the prior year period, which had seen significant liquidity-driven financing caused by uncertainty over the unfolding pandemic.\nFinancial institutions revenue rose 6%, above the 1% increase in issuance.\nThis is due to infrequent EMEA bank issuers who sought to take advantage of the ongoing attractive rate environment.\nRevenue from public, project and infrastructure finance declined 2% compared to a 45% decrease in issuance as increased non-U.S. project and infrastructure activity was offset by a reduction in U.S. infrastructure supply.\nStructured finance revenue increased 73%, supported by an over 200% growth in issuance.\nThis is due to approximately 200 CLO deals this quarter, our highest on record, predominantly attributable to refinancing activity.\nIn addition, CMBS formation further bolstered overall results.\nMIS' adjusted operating margin expanded 230 basis points to 66.3%.\nThis was enabled by strong revenue growth, coupled with operating efficiency initiatives and lower legal accruals, partially offset by higher reserves for 2021 incentive compensation.\nSecond quarter revenue rose 15% or 13% on an organic basis.\nIn RD&A, revenue increased 19% or 16% on an organic basis.\nThis is due to robust demand for KYC and compliance solutions as well as strong customer retention rates and double-digit trailing 12-month sales growth in research and data feeds.\nFor ERS, recurring revenue rose 16%, driving overall ERS growth of 5% or 3% organically.\nThis reflected the demand for our insurance and asset management offerings, tools supporting upcoming accounting standards implementations such as IFRS 17 as well as our SaaS-based credit assessment and origination solutions.\nAdditionally, ERS' recurring revenue comprised 88% of second quarter revenue, up eight percentage points from the prior year period.\nMA's adjusted operating margin expanded 310 basis points to 31.8%.\nThis reflected the benefits of our recently completed restructuring program, which relates to the realization of incremental operating leverage in the quarter.\nTurning to Moody's full year 2021 guidance.\nMoody's outlook for 2021 is based on assumptions regarding many geopolitical conditions, macroeconomic and capital market factors.\nThese include, but are not limited to, the impact of the COVID-19 pandemic; responses by governments, regulators, businesses and individuals as well as the effects on interest rates, foreign currency exchange rates, capital markets liquidity and activity in different sectors of the debt market.\nOur full year 2021 guidance is underpinned by the following macro assumptions: a rise in the 2021 U.S. and euro area GDP to a range of 6% to 7% and 4% to 5%, respectively; benchmark interest rates will remain low, with U.S. high-yield spreads remaining below approximately 500 basis points; the U.S. unemployment rate will decline to under 5% by year-end; and the global high-yield default rate will fall below 2% by year-end.\nOur guidance also assumes foreign currency translation at end of quarter exchange rates.\nSpecifically, our forecast for the balance of 2021 reflects U.S. exchange rates for the British pound of $1.38 and $1.19 for the euro.\nThese assumptions are subject to uncertainties and results for the year could differ materially from our current outlook.\nFollowing our better-than-anticipated second quarter results, we are raising our full year 2021 guidance across several metrics.\nWe now forecast Moody's revenue to grow in the low double-digit percent range.\nWe maintain our expectation for expenses to increase in the mid-single-digit percent range as we balance reinvesting the benefits from our cost efficiency programs against the opportunity for future growth-oriented investments.\nGiven our improved revenue outlook and expense stability, we now project Moody's adjusted operating margin to be approximately 51%.\nWe raised the diluted and adjusted diluted earnings per share guidance ranges to $10.95 to $11.25 and $11.55 to $11.85, respectively.\nWe increased our free cash flow forecast to be between $2.2 billion and $2.3 billion.\nAnd we anticipate full year share repurchases to remain at approximately $1.5 billion subject to available cash, market conditions and other ongoing capital allocation.\nOn prior earnings calls, Rob has detailed our integrated risk assessment strategy, of which investments and acquisitions will play an important role.\nTo that end, we are focused on M&A opportunities in our addressable markets that will advance our strategy.\nAs always, we don't comment on any specific potential acquisitions or divestitures, and we won't comment on any deals that we are pursuing.\nWe have not included the impact of any future acquisitions in our current outlook, but obviously, a transaction could affect our guidance depending on the terms of any deals that we are able to reach.\nUnder our long-held capital allocation policy, we prioritize organic and inorganic investments into the business before returning any excess cash via share repurchases.\nWithin MIS, following a strong second quarter, we now project aggregate global rated issuance to grow in the low single-digit percent range, up from our previous guidance of a low single-digit percent decline.\nWe would like to reiterate that our guidance, similar to last quarter, does not factor in any potential impacts from the U.S. infrastructure bill proposals.\nWe are raising our issuance forecast for leveraged loans to be up approximately 75% and for high-yield bonds to be up approximately 25%.\nThese are meaningful increases compared to our prior outlook of up 55% and approximately flat, respectively, and is the result of better-than-expected second quarter issuance as well as ongoing favorable refinancing conditions and heightened M&A activity.\nWe expect that the increase in leveraged loan supply will continue to drive CLO creation and are therefore also improving the structured issuance outlook to be up approximately 75%.\nFollowing a very active 2020, full year investment-grade supply is now forecast to decrease by approximately 40%.\nThat's slightly lower than our previous guidance, which anticipated volumes to decline 30%.\nAlso, after a surge in activity in the second quarter, we are increasing our guidance for new mandates to be in the range of 950 to 1,050.\nWhile we believe favorable market conditions will persist, we forecast issuance to moderate in the second half of the year to more of a historic sawtooth pattern as we believe many issuers will fulfill the majority of their funding needs early in the year and that liquidity-driven issuance will return to pre-pandemic levels.\nWith our improved issuance outlook, we now estimate that MIS' revenue will increase in the high single-digit percent range.\nMIS' adjusted operating margin guidance remains at approximately 61% as our improved top line outlook is partially offset by higher incentive compensation accruals and an acceleration in ESG, technology and automation investments in the second half of the year.\nFor MA, we are maintaining our low double-digit revenue growth guidance, supported by a high single-digit constant dollar organic growth given robust demand for our renewable products and stable customer retention rates, favorable movements in foreign exchange rates and tailwinds from a recent acquisition.\nWe are raising MA's adjusted operating margin guidance to be in the range of 30% to 31% as we continue to effectively manage our expense base while accelerating strategic investment back into the business.\nAs I mentioned previously, we are reaffirming our full year 2021 expense guidance to increase in the mid-single-digit percent range.\nAlthough we expect higher incentive compensation accruals associated with our improved revenue outlook, many of our cost efficiency initiatives and organic investment assumptions remain in line with our prior update.\nThis enables us to both fund our strategic priorities and reinvest back into the business.\nFinally, we want to reiterate that our spending for key organic investments will be heavily weighted toward the second half of the year.\nBefore turning the call back over to Rob, I'd like to highlight a few key takeaways.\nFirst, we successfully executed our strategic and business objectives, delivering strong results again this quarter.\nSecond, several areas of MA, specifically KYC and compliance, research and data feeds as well as insurance and asset management provided momentum for recurring revenue growth.\nThird, we continue to integrate and embed our holistic E, S and G offerings within our products and solutions, enabling our stakeholders to manage an evolving set of risks.\nFourth, our culture of continuous expense discipline enabled us to purposely reinvest back into the business.\nAnd finally, following a robust first half performance and the ongoing global economic recovery, we are pleased to be able to upwardly revise our 2021 financial outlook.\n Assistant:", "chosen": "moody's q2 adjusted earnings per share $3.22.\nq2 adjusted earnings per share $3.22.\n"}
{"prompt": "Human: Please note that this conference is being recorded and will be available for replay.\nFor information on how to access the replay, please visit our website at mdcholdings.com.\nThese and other factors that could impact the Company's actual performance are set forth in the Company's third quarter 2020 Form 10-Q, which is expected to be filed with the SEC today.\nIt should also be noted that SEC Regulation G requires that certain information accompany the use of non-GAAP financial measures.\nM.D.C. Holdings posted another quarter of strong operating results, highlighted by year-over-year home sales revenue growth of 33%, homebuilding operating margin expansion of 370 basis points and net income growth of 96%.\nNet new order growth for the quarter increased 73% as compared to last year on a sales pace of 6.1 homes per community per month.\nThese results underscore the excellent homebuilding fundamentals we are currently experiencing across our markets and demonstrate our ability to grow our operations while continuing to improve our profit margins.\nHomes increasingly serve as offices, classrooms and places of entertainment for the family, and as a result, people have gravitated to a living environment then can be accommodated in this new reality.\nWhile this trend has been a positive development for the overall housing market, it has been particularly beneficial to the new home market for several reasons.\nFirst, there is a limited existing inventory for consumers to choose from.\nAccording to the National Association of Realtors, total housing inventory at the end of September totaled 1.4 million units, which was down 19% from a year ago and represents less than a three-month supply of homes.\nSecond, a newly constructed home gives consumers the peace of mind that they will be living in a home that no one else has lived in, which is a real selling point for many families during these uncertain times.\nSupplementing the demand we've experienced as the pandemic, is the demographic shift toward home buying that we believe will serve as the tailwind for industry moving forward.\nMillennials are increasingly aging into their prime home buying years, while baby boomers and empty nesters are looking to downsize into homes that fit their new lifestyles.\nMDC is well positioned to take advantage of these demographic shifts due to our strategic focus on opening communities with affordable products.\nHomebuyers of all ages are looking for value when it comes to buying a home, and we have found ways to accommodate the desires through more efficient floor plans, while the combination of lower rates and pandemic-related buying has spurred demand across all product types, we believe the more affordable segments of the market will be the most resilient over time.\nWe have been fortunate in having a deep bench at MDC.\nAnd to that end, I am pleased that Rebecca Givens has agreed to step into Michael's role as Senior Vice President and General Counsel.\nOn the operations side, David Viger has moved into the important role as Chief Operating Officer of our homebuilding operations.\nAnthony Berris has been promoted to President of our Financial Service operations.\nAnd Dawn Huth has taken on additional responsibilities as Senior Vice President of National Finance.\nAll of these individuals have proven themselves to be highly capable leaders during their time at MDC, and I look forward to them contributing to our continued success in the future.\nFinally, I'd like to congratulate David Mandarich, who has been elected as President and Chief Executive Officer of the Company.\nDavid has been associated with the Company since 1977, most recently as our President and Chief Operating Officer.\nAnd he is widely regarded as one of the most skilled leaders within the homebuilding industry.\nHis move into the CEO role is a key step in the evolution of our Company.\nAnd I look forward to continued collaboration with him on strategic directions of the Company.\nDavid will be participating with me in our earning calls going forward.\nWe experienced strong topline growth for the quarter as home sale revenues increased by 33% year-over-year to $1 billion.\nHomebuilding operating margin improved by 370 basis points from the prior year quarter, resulting in a 109% increase in pre-tax income from our homebuilding operations to $101.7 million.\nIn addition, our financial services pre-tax income increased $10.3 million, or 73%.\nThe increase was due to our mortgage business, which continued to benefit from a higher interest rate lock volume and increased capture rate and better net interest income on loans originated during the quarter.\nAs a result, net income increased 96% to $98.9 million, or $1.49 per diluted share for the third quarter of 2020.\nOur tax rate increased from 19.5% to 21.5% for the 2020 third quarter.\nThe increase in rate was primarily due to changes in the estimated amount of energy tax credits to be received during the respective quarters.\nFor the fourth quarter, we currently estimate a 25% tax rate, excluding any discrete items.\nHomes delivered increased 25% year-over-year to 2,147, driven by an increase in the number of homes we had in backlog to start the quarter, and to a lesser extent, an increase in our backlog conversion rate.\nThe average selling price of homes delivered during the quarter increased 6% to about $466,000.\nThe increase was the result of price increases implemented across the majority of our communities over the past 12 months, as well as a shift in the mix of homes closed from Nevada to Southern California.\nWe are anticipating home deliveries for the fourth quarter of 2020 to reach between 2,400 and 2,600 units.\nBacklog conversion for the fourth quarter will be significantly lower than the fourth quarter of 2019 as a result of the considerable year-over-year increase in orders during the 2020 third quarter, many of which are unlikely to deliver this year.\nWe expect the average selling price for 2020 fourth quarter unit deliveries to again exceed $460,000.\nGross margin from home sales improved by 170 basis points year-over-year to 20.5%.\nWhile we have seen an increase in certain building costs, most notably lumber, as a result of the pandemic and other factors, we have been successful to this point in recouping these increased costs through home price increases.\nThis has resulted in improved gross margins on both build-to-order and speculative home deliveries across each of our homebuilding segments.\nGross margin from home sales for the 2020 fourth quarter is expected to approach 21%, excluding impairments and warranty adjustments.\nWe continued to demonstrate solid operating leverage during the third quarter as our SG&A expense as a percentage of home sale revenues decreased 200 basis points year-over-year to 10.4%.\nOur total dollar SG&A expense for the 2020 third quarter increased $10.9 million year-over-year, mostly due to variable commissions and marketing expenses that increased in line with our 33% increase in home sale revenues during the period.\nOur general and administrative expense was down slightly when compared to the prior year, primarily due to a decrease in stock-based compensation that was largely offset by an increase in salaries and other compensation-related expenses.\nOur overall headcount has increased by 5% year-over-year as we work to support the Company's strong growth trajectory.\nFor the fourth quarter of 2020, we may see our general and administrative expense increase to between $50 million and $55 million due to the 5% year-over-year increase in headcount I just mentioned, additional bonus accruals in line with strong operating results, and a potential charitable contribution to our Foundation.\nAs I previously mentioned, as a result of the continued expansion of our gross margin and our improved operating leverage, our homebuilding operating margin, defined as gross margin from home sales minus our SG&A rate, grew by 370 basis points year-over-year to 10.1%.\nOn the strength of this improvement, our last 12 months pre-tax return on equity increased 560 basis points year-over-year to 21.8%, which is our highest level in 15 years.\nLet's look at our net new home order information for the quarter on Slide 9.\nThe dollar value of our net orders increased 89% year-over-year to $1.65 billion, and unit net orders increased by 73%, driven by a 70% increase in our monthly absorption rate to 6.1.\nThe average selling price of our net orders increased by 10% year-over-year, driven by price increases implemented over the past 12 months, as well as a shift in mix to California, which has our highest average price.\nDuring the third quarter, our California markets had nearly as many net new orders as our Colorado markets.\nI'd like to note that we ended the quarter with 194 active subdivisions, which is slightly higher than a year ago.\nWith the strong sales activity we've experienced during the third quarter, we have a number of subdivisions that are approaching closeout earlier than expected.\nAs a result, we anticipate roughly 185 active subdivisions at year-end.\nAlthough this would be a decrease from the end of the third quarter, it would be unchanged from where we started the year.\nOn Slide 10, we provided further net new order detail by month since April.\nYou can see that sales activity ramped up significantly after the initial slowdown related to the COVID-19 pandemic.\nWe saw order activity peak during the month of August, but September remained strong and well above the prior year, even after we increased prices in most of our subdivisions.\nWe also saw the rate of cancellations continue to decrease as the months progressed.\nWe expect some seasonality to kick in during the fourth quarter.\nHowever, October has remained very strong relative to the prior year.\nBased on the activity we've seen to date, we expect our October 2020 net orders to exceed our October 2019 orders by at least 50%.\nAs a result of our strong sales, we ended the quarter with an estimated sales value for our homes in backlog of $3.1 billion, which was up 47% year-over-year.\nThe average selling price of homes in backlog increased 4% due to price increases implemented over the past 12 months, decreased incentives, and a shift in mix to California.\nThese factors were slightly offset by a shift in mix to lower-priced communities consistent with our ongoing strategy of offering more affordable home plans.\nI will now turn to land activity on Slide 12.\nThe number of lots we acquired this quarter increased 63% year-over-year, reflecting our confidence in market conditions and our focus on continuing to grow our business.\nWhile the number of lots we approved earlier this year were down due to the uncertainty created by COVID-19, we approved over 3,800 lots for purchase during the third quarter of 2020.\nIn the end, in spite of immense volatility, the number of lots approved over the last 12 months has increased by 34% compared to the prior year period.\nAs a result, our total lot supply to end the quarter was 8% higher than at the same point in 2019, supporting our growth potential for future periods.\nWe expect to see strong lot approval and acquisition activity continue into the fourth quarter given the robust demand that we have seen in recent months and our conviction about growth prospects for housing in future years.\nIn summary, clearly, we are encouraged by the resilience the housing market has shown in the third quarter given the immense challenges our country has faced in 2020, and we believe that we have executed our operating strategy well in this volatile environment.\nMore importantly, we see an opportunity to sustain growth well into the future, supported by solid demographics and changing customer preferences.\nOur current backlog, not only puts us in position for a strong end to 2020, but also provides us with the opportunity for significant year-over-year increases in home sale revenues and pre-tax income to start 2021.\nWith our strong balance sheet and current land pipeline, we are well positioned to grow community count significantly in 2021 and have a preliminary target of at least 10,000 home deliveries for the coming fiscal year.\nWe are mindful that there are many risks to achieving this target, especially with COVID-19 still impacting our daily lives.\nThese risks will be closely monitored as we work to grow our Company and the safety of our employees, subcontractors and customers will remain top priority.\nFollowing our strong third quarter, our Board of Directors has declared a 21% increase in the quarterly cash dividend from $0.33 to $0.40 per share.\nThis represents a 33% increase from the prior year and demonstrates our commitment to rewarding our shareholders for their continued support.\n Assistant:", "chosen": "mdc holdings sees q4 2020 home deliveries between 2,400 - 2,600.\nq3 dollar value of net new orders increased 89% to $1.65 billion from $871.7 million (adds period).\nsees average selling price for 2020 q4 unit deliveries exceeding $460,000 (not $460,00).\nq3 earnings per share $1.49.\nquarterly cash dividend of $0.40 per share declared, up 21% from prior quarter and 33% from prior year.\nqtrly home sale revenues increased 33% to $1.0 billion from $750.3 million.\nqtrly average selling price of deliveries up 6% to $466,000.\nmizel will continue his leadership role with mdc as newly appointed executive chairman.\nqtrly dollar value of ending backlog up 47% to $3.08 billion from $2.10 billion.\ndavid d. mandarich has been appointed as new president and chief executive officer of mdc.\nstaci woolsey has been appointed as chief accounting officer of mdc.\nsees home deliveries for 2020 q4 between 2,400 and 2,600.\n"}
{"prompt": "Human: If you have not received the release, it is available on the Investor Relations portion of Medifast's website at www.medifastinc.com.\nThese statements do not guarantee future performance, and therefore, undue reliance should not be placed on them.\nAfter I've provided some updates on our business performance, Jim will review the Q4 financial results in more detail.\nWe closed the year on a strong note, with accelerating top line growth over the third quarter.\nRevenue increased 55.3% to $264.9 million in the fourth quarter of 2020, and we continue to execute strongly across all areas of the business.\nEarnings per diluted share were $2.36, a 42.2% increase over the prior year period.\nHowever, due to significant differences in tax rates between the periods, we believe income from operations is a better gauge of how we perform from a profitability standpoint.\nJim will discuss our tax rates in more detail when he covers our financial results.\nFor the fourth quarter, income from operations was $38 million, an increase of 103% versus the same period last year.\nGrowth was driven by significant year-over-year and sequential improvements in the number of active earning OPTAVIA Coaches, which grew to 44,200 in the fourth quarter, another new record.\nAdditionally, productivity per active earning coach increased 13.4% to $5,932 during the quarter compared to the prior year period.\nOur client community remains strong, and we finished 2020 even better than expected, with successful incentive coach programs in Q4 that position us well for 2021.\nThe initiatives we've implemented over the past one to two years are delivering consistent, meaningful progress as evidenced by the results we announced today.\nThe company's focus continues to be supporting our growing community of independent OPTAVIA Coaches as they develop and focus on the four competencies that drive our business success, namely, attracting new clients, supporting clients on the Optimal Weight 5&1 Plan and supporting new coaches and developing coach leaders.\nThere's an ever-growing number of individuals seeking greater health and wellness, and we remain resolutely focused on targeting those for whom diets have filled and who desire a holistic approach to optimizing their overall health and well-being.\nThe key insights supporting our sustained growth is that clients do better on their health and wellness journey when they have the support of a coach.\nCoach-led model has been clinically proven to be more effective in this regard.\nAs such, we have combined the most powerful aspects of the direct selling model and direct-to-consumer offerings and created a model that puts the OPTAVIA Coach at the center of helping clients on their health transformation journey with the company providing the distribution infrastructure to supply products directly to the end consumer.\nWe reach our target audience through the community of OPTAVIA Coaches, who leverage social media channels to relate their success with our proprietary habits of health transformation system and products.\nOur vision is to achieve long-term sustainable growth in the mid-teens by penetrating the large and growing addressable market in the United States, continuing our expansion into Asia Pacific markets and developing other large markets throughout the world.\nAs we continue to grow at scale in both coaches and clients, it's essential that we place sharp focus on building an operational foundation through investments related to organization, technology, digital products, manufacturing and distribution.\nThis will allow us to take full advantage of the long-term growth opportunity.\nConsistent with the business and brand strategy that we communicated last quarter, we are moving forward with the sunset of our Medifast Direct channel and Medifast branded products and anticipate this being complete by the end of the second quarter.\nBy focusing on building capabilities in the areas that matter most to our OPTAVIA Coaches and client-centered model, we will further enhance and solidify our competitive advantage in the health and wellness space in support of our long-term growth and profit vision.\nLast year, we initiated an important project to rationalize our SKUs, enabling us to place greater focus on the most popular and profitable products in our portfolio and to place a more consistent emphasis on our OPTAVIA brand.\nWe continue to enhance our supply chain capabilities to meet product demand across core items, while also empowering further operational optimization across all aspects of the manufacturing and the distribution network.\nThe strategic value of having a strong supply chain has never been more important, and we continue to prioritize these investments, focusing on expanding capacity as well as driving operational excellence.\nWe remain on track to support a $2 billion revenue business by the end of 2021, creating ample headroom for several years depending on the trajectory of future growth.\nWe are scaling up new and existing co-manufacturers, which mitigates the risk through diversification, while also adding capacity.\nWe are also working closely with our third-party logistics partners to leverage their capacity as well as adding distribution assets to our facility in the Maryland area.\nTechnology remains another key area of focus for Medifast.\nWe opened a new technology center in Utah roughly a year ago to become our pioneering digital lab for developing tools that create efficiencies for coaches and drive engagement for clients.\nOur OPTAVIA Coaches continue to refine their use of technology and social media in attracting new clients and broadening their reach.\nOverall, the new coach-directed training regimen and technology support systems are increasingly effective at supporting more clients than has been historically possible.\nDeeper digital expertise will also allow us to further leverage the competitive advantages of the coach model.\nDuring the first half of 2021, we will launch the beta version of the OPTAVIA Coach Connect app, a powerful productivity tool aimed at helping coaches manage clients.\nWe will also launch the beta version of the OPTAVIA client app, which focuses on meal planning on the OPTAVIA Weight 5&1 plan.\nOur team in Utah continues to work on a range of other tools to drive digital engagement with the field, and we're excited about the opportunities in the light had in this space.\nIn 2020, our revenue growth rate was roughly two times our long-term growth rate, essentially pulling forward an entire year.\nWhile we're clearly pleased with this elevated growth rate, as a management team, we're focused on delivering long-term sustainable value.\nOur current business remains strong, and I've never been more confident in the direction of the company and our ability to drive consistent and sustainable growth by delivering on our mission of lifelong transformation, one healthy habit at a time.\nFor current stockholders and prospective investors, the Medifast story remains compelling for several reasons.\nFirst, our addressable market is large and growing.\nThe U.S. weight loss market that is core to OPTAVIA's business has been growing at about 6% per annum and is worth $20 billion today.\nRoughly 70% of the U.S. population is overweight or obese, and this segment is growing at 2% per annum, which highlights the importance of a proven health and wellness solution like the one we offer.\nEarlier this year, we commissioned an independent survey that showed that the pandemic has only heightened consumer focus on health and wellness.\nAround 63% of Americans report that they have adopted new positive health routines since March of 2020.\nAnd of those, 96% plan to continue embracing healthy habits this year.\nCOVID-19 is causing people to put their personal health and wellness higher up in their priorities, and this presents a significant opportunity for our company.\nSecond, our holistic coach center approach is supported by proprietary tools in a vibrant community that provides a clear competitive advantage in the health and wellness space.\nAgain, it is clinically proven that people who want to lose weight do better when they have the support of a coach and a community, and that principle is the very heart of the OPTAVIA offer.\nThird, we have a dynamic and agile organization that adapts quickly to changes in the marketplace.\nEven when those changes come at an unexpected and rapid pace, such as what we saw last year as a result of COVID-19.\nThat makes us more nimble and better placed to take advantage of tactical opportunities as they emerge.\nFinally, we have a strong financial position, efficient business and disciplined strategy for allocating capital, prioritizing organic growth opportunities while returning a significant amount of value to stockholders through dividends and share repurchases.\nBefore I turn the time over to Jim, let me note that our commitment to lifelong transformation is not just in our work with coaches and clients, but also through our active support of the communities in which we live and work.\nIn this challenging time, our commitment to these groups remains a priority.\nAs an example, in the fourth quarter, Medifast behavioral health specialists and registered dietitians and nutritionists partnered with select OPTAVIA Coaches to lead remote classes and activities for the second and fifth graders of the Living Classroom Foundation in Baltimore.\nFor children, the pandemic has brought about increased feelings of stress and anxiety, and these classes were designed to promote the habit of healthy mind and to empower children to better handle stress.\nProud of the work that the company, our employees and our pitched community are doing to create opportunities for people from all walks of life to deliver the best possible version of themselves in whatever way possible.\nWith that, let me now turn the time over to Jim Maloney, who will walk you through the financial results.\nRevenue in the fourth quarter of 2020 increased 55.3% to $264.9 million from $170.6 million in the fourth quarter of 2019.\nAs Dan highlighted, we achieved another record quarter of active earning coaches ending the quarter with 44,200.\nThis represents 39% growth as compared to 31,800 coaches in the same period last year and a 5% increase from the end of the third quarter of 2020.\nAverage revenue per active earning coach for the quarter was 5,932 and compared to 5,229 for the fourth quarter of 2019 and down $6,329 in the third quarter of 2020, mainly due to timing of promotional activity from one quarter to another.\nThe fourth quarter 2020 was the second-highest level of revenue per active earning coach in our history, and we are very pleased with this strong result.\nProgramming in the quarter was largely unchanged from last year's December Dash, other than timing, indicating the strength of the underlying fundamental of our model.\nOPTAVIA branded products grew to 87.2% of our total company consumable units sold in the fourth quarter, up from 79% in the prior year period.\nGross profit for the fourth quarter of 2020 increased 55.6% to $199.2 million compared to $128.1 million in the prior year period.\nGross profit as a percentage of revenue was 75.2%, a slight increase compared to 75.1% in the fourth quarter of 2019.\nSG&A for the fourth quarter of 2020 increased $51.9 million to $161.3 million compared to $109.4 million for the fourth quarter of 2019.\nThe increase was primarily due to higher OPTAVIA commissions expense as a result of growth of OPTAVIA sales as well as increased salaries and benefits related expenses, partially offset by a decrease in sales and marketing expenses.\nSG&A as a percentage of revenue decreased 320 basis points year-over-year to 60.9% versus 64.1% in the fourth quarter of 2019.\nIncome from operations increased $19.3 to $38 million from $18.7 million in the prior year period, primarily as a result of increased gross profit, partially offset increased SG&A expenses.\nIncome from operations as a percentage of revenue was 14.3% for the quarter, an increase of 340 basis points from the year-ago period.\nThe effective tax rate was 26% for the fourth quarter of 2020 compared to 22.4% for the September 30, 2020 year-to-date and compared to a tax benefit of 4.7% in the year-ago period.\nDuring the fourth quarter of 2020, the effective tax rate increased 3.8%, which reduced earnings per diluted share by $0.12 due to a discrete tax reserve recorded during the period.\nFor the full year of 2020, earnings per diluted share was negatively impacted by $0.12 due to this discrete tax reserve.\nThe fourth quarter of 2019 tax benefit reflected the impact of federal tax benefits from share-based compensation, partially offset by increases in the effective state tax rate of 2%.\nNet income in the fourth quarter of 2020 was $28 million or $2.36 per diluted share, based on approximately 11.9 million shares outstanding.\nThis compares to net income of $19.9 million or $1.66 per diluted share-based on approximately 11.9 million shares outstanding in the prior year.\nOur balance sheet remains very strong with cash, cash equivalents and investment securities of $174.5 million as of December 31, 2020, compared to $92.7 million at December 31, 2019.\nThe company remains free of interest-bearing debt and believes it is well positioned in this challenging near-term macroeconomic environment.\nOur Board of Directors declared a quarterly cash dividend in the fourth quarter of $13.4 million or $1.13 per share, which was paid on February 5, 2021.\nThere was -- there are approximately 2,323,000 shares of common stock remaining under our stock repurchase program.\nConsistent with last quarter and due to the ongoing uncertainties related to the COVID-19 pandemic, we are not providing guidance at this time.\nWe would, however, like to provide you with some insight into the first month of the first quarter and that January's top line year-over-year growth trends are performing consistent with or better than the trends we experienced in the fourth quarter.\nIf you are attempting to develop a financial model for 2021, I will remind you that Q2 through Q4 2020 have much harder comparables than Q1 2020 from a top line basis.\nAs Dan discussed, in 2021, we intend to sunset our Medifast Direct channel and Medifast branded products and further invest in our supply chain and technology.\nWe've also budgeted for a return for in-person convention if safety measures permit.\nThese decisions and investments will have an impact on our operating margins during 2021 but will enable long-term growth and operating income objectives.\nAgain, if you are developing a financial model for 2021, these initiatives will increase costs.\nIn closing, 2020 has been a very robust growth in the face of a very challenging and uncertain environment.\nWe remain confident in our business model and are well positioned to capitalize on opportunities that lie ahead.\n Assistant:", "chosen": "compname reports q4 revenue $264.9 million.\nq4 earnings per share $2.36 .\nq4 revenue $264.9 million versus refinitiv ibes estimate of $244.5 million.\n"}
{"prompt": "Human: I'm joined today by Ron Tsoumas our Chief Financial Officer.\nLet's begin with the business highlights on Slide 4.\nOur discussions of year-over-year comparative results should be viewed in this context.\nFor illustration, our sales on a weekly run rate basis and excluding favorable currency translation were up 8% from the prior year.\nWe share this to give investors insight on how we view the underlying strength of our business, which clearly improved year-over-year.\nWhile the top line was strong, we do have some headwinds to gross margin in the quarter.\nSupply chain disruptions led to additional costs such as premium freight as well as to factory inefficiencies.\nMoving forward, these challenges will linger and be joined by demand disruptions caused by the ongoing semiconductor and potentially other material shortages, some of which are related to the recent extreme weather events in the US.\nThis is driving a level of near-term uncertainty that can be seen in our wide guidance range for the fourth quarter.\nHowever, none of these issues are systemic and we expect most to be resolved by the middle of this calendar year.\nOur confidence in the situation improving is evidenced by our decision to give an early indication of our anticipated sales for fiscal 2022 of over 10% organic growth.\nIn addition, as the commercial vehicle market continues to rebound, our sales mix is expected to further improve gross margin.\nTurning to our Automotive business.\nWe continue to see strength in demand.\nOur sales in EV grew and we had a strong Awards for Power, Lighting and User Interface programs in the quarter.\nLast quarter we reported that sales into EV applications were over 9% of consolidated sales and were expected to be in the high single-digits for fiscal 2021.\nThis quarter, EV sales were over 12% of consolidated sales and we now expect that number to be over 10% for fiscal 2021.\nFurthermore, our healthy pipeline of EV programs now gives us visibility to project that this percentage will be in the mid-teens in fiscal 2022.\nMethode's combination of user interface, LED lighting and Power Distribution Solutions is a winning formula in EV and positions us well for continued growth in this exciting market.\nRegarding our balance sheet.\nWe generated over $80 million in free cash flow and significantly reduced our net debt in the quarter.\nThe debt reduction was driven by the full repayment of our $100 million revolver draw from March of last year.\nWe continue to have ample liquidity and our net leverage ratio was now near zero.\nThe strength and flexibility of our balance sheet allows us to consider multiple paths to invest in the business in order to drive growth and ultimately shareholder return.\nIn addition to the COVID-19 pandemic, we faced a growing impact from a semiconductor shortage in the quarter.\nWhile the COVID-19 situation is improving, the ongoing operating issues from it remain.\nIn regard to the chip shortage situation, the impact of Methode in the third quarter was minimal, however, we do anticipate a financial impact in our fourth quarter and beyond as a result of the aforementioned issues as well as other potential supply chain disruptions.\nMoving to Slide 5.\nMethode had its best quarter of this fiscal year for booked awards.\nThese awards continue to capitalize in key market trends like vehicle electrification, LED Lighting in Auto and Sensors in e-Bikes.\nThe awards identified here represent a cross-section of the business wins in the quarter and represent over $50 million in annual business.\nIn vehicle electrification, we won awards for busbar, power distribution and user interface programs.\nWe continue to win programs with OEMs globally in auto, commercial truck and even charging station applications.\nIn non-EV LED Lighting, we were awarded programs for several auto applications.\nWe also continue to participate in the growth of e-Bikes, which utilizes our proprietary Magneto-elastic technology.\nLastly, we won two sizable awards for User Interface programs with international automotive OEMs. For the first three quarters of the fiscal year, Methode has booked orders of over $150 million in potential annual sales.\nWe continue to build on our foundation for organic growth.\nRegarding the anticipated roll off of our largest auto program, while we can't comment on our customers' timing, we are pleased that our strong new program bookings over the last several quarters has put us on a track in aggregate to replace the sales from that program.\nWe are also pleased to protect that our sales from any single customer is expected to drop below 25% from a high of approximately 50% four years ago, all while we continue to grow our top line.\nWe are definitely making progress on reducing both customer and program concentration.\nTurning to Slide 6.\nI would like to elaborate further on our footprint in EVs.\nAs I've shared with you before, Methode has become uniquely qualified three-pronged solution provider for EVs.\nThose solutions includes, User Interface, LED Lighting and Power distribution.\nThe architecture of EV is generally divided into two parts.\nThe Top Hat and the Skateboard.\nThe Top Hat is essentially a body of the vehicle and varies from model to model.\nThe Skateboard is the chassis or framework of the vehicle.\nAs many of you know this type of vehicle architecture is a game changer with EVs, as it can be standardized and leveraged across multiple models and platforms.\nOn the Top Hat, Methode offers its traditional vehicle solutions of User Interface and LED Lighting, along with some EV specific solutions such as charging ports.\nThese charging ports are fairly complex and include features such as actuators and lighting, in addition to the power connection itself.\nOn Slide 7, we show Skateboard.\nThis is where Methode leverage its unique combination of auto grade manufacturing operations, our Auto pedigree and Power distribution expertise to supply various busbars, connectors and battery disconnect units to the EV OEMs. We are also gaining traction with sensor solutions for By-wire systems and battery monitoring.\nHowever, it is in the Power distribution where the largest content growth opportunity lies.\nHistorically, our participation with Power products and internal combustion vehicles was minimal.\nIn EVs it is quickly growing as -- and has reached approximately half of our product sales for EV applications.\nConsequently, Methode has a clear opportunity to incrementally grow our content per vehicle with the transition to EVs.\nThe additional content in EV could range from 20% to over 100% of our current content on an internal combustion vehicle.\nAs I've said in the past, EV is a definite organic growth tailwind for Methode.\nTo conclude, given the recent supply chain challenges and the ongoing pandemic situation, I am extremely pleased that our strategy and our team were able to deliver at the high end of our previous guidance, generate significant free cash flow and win substantial new program awards in the quarter.\nPlease note that the third quarter of fiscal year '21 contains 13 work weeks, whereas the third quarter of fiscal year '20 had 14 work weeks.\nThird quarter sales were $295.3 million in fiscal year '21 compared to $285.9 million in fiscal year '20, an increase of $9.4 million or 3.3%.\nThe year-over-year quarterly comparisons included a favorable foreign currency impact on sales of $9.7 million in the current quarter.\nOn a weekly run rate basis and excluding the foreign currency impact, net sales were up a solid 7.6%, compared to the same quarter of fiscal year '20.\nThe increase was due in part to higher sales of Electric and Hybrid Vehicle Solutions.\nThird quarter net income decreased $9.3 million to $31.9 million or $0.83 per diluted share from $41.2 million or $1.09 per diluted share in the same period last year.\nIn addition to one week less of production activity in the current fiscal quarter, the decrease was primarily due to premium freight and factory inefficiencies resulted from supply chain disruptions due to COVID-19 and to a lesser extent increased tariff expense and product sales mix.\nAlso contributing to the decline was lower other income of $2.5 million and higher income tax expense of $1.8 million.\nThird quarter gross margins were lower in fiscal year '21 as compared to fiscal year '20, mainly due to premium freight and factory inefficiencies resulted from supply change disruptions due to COVID-19 and the mentioned tariff expense and product sales mix.\nFiscal year '21, third quarter margins were 24.6% as compared to 27.7% in the third quarter of fiscal year '20.\nThe premium freight and other expenses resulting from inefficiencies in the supply chain that were experienced in the third quarter are expected to continue in the fourth quarter.\nHowever, we do not believe these issues are systemic and based on our knowledge at this time, it will gradually be resolved in the fourth quarter with lesser impact to the first quarter of fiscal year '22.\nThird quarter selling and administrative expenses as a percentage of sales decreased 50 basis points year-over-year to 11% compared to 11.5% in the fiscal year '20 third quarter.\nThe fiscal year '21 third quarter percentage was attributable to lower compensation expense, lower travel expense and restructuring costs, partially offset by higher stock-based compensation expense.\nThe decrease in compensation expense was primarily related to the benefit of restructuring actions taken in the first quarter of fiscal year '21.\nWhile we anticipate an increase in the SG&A percentage on a go-forward basis due to a full year of LTIP amortization on the restricted stock units and more normal travel expense, we expect the future SG&A expense percentage to be more in line with our historical norms, which is still yield and efficient flow-through from gross margins operating income.\nRegarding our restructuring activities the third quarter expense was $700,000 and the year-to-date third quarter expense was $8.3 million.\nThe company currently expects an additional restructuring expense of $200,000 in the remainder of the fiscal year, resulting from the previous quarters actions.\nThe vast majority of the restructuring took place in the first half of the fiscal year.\nIn addition to the gross margin and SG&A items mentioned above, two other non-operational items significantly impacted net income in the third quarter of fiscal year '21 as compared to the comparable quarter last fiscal year.\nFirst, other income net was lower by $2.5 million, mainly due to lower government assistance between the comparable quarters.\nSecond, income tax expense in the third quarter of fiscal year '21 was $4.6 million or 12.6% as compared to a tax expense of $2.8 million or an effective tax rate of 6.4% in the third quarter of fiscal year '20.\nThe 12.6% effective tax rate for the quarter was less than the estimated tax rate due to the benefits of some tax planning enacted in the third quarter, which was retroactively applied to the first quarter of the current fiscal year.\nWe expect to benefit from the third quarter tax planning in the current fourth quarter, which will result in an estimated fourth quarter effective tax rate of 15%, down from the previously guided rate of 17%.\nShifting to EBITDA, a non-GAAP financial measure.\nFiscal year '21 third quarter EBITDA was $51.3 million versus $58.7 million in the same period last year.\nEBITDA was negatively impacted by the higher costs I previously noted.\nWe reduced gross debt by $103 million in the third quarter, resulting from the full repayment of the $100 million precautionary draw we initiated in March 2020.\nSince our acquisition of Grakon in September 2018, we have reduced gross debt by $113 million.\nNet debt, a non-GAAP financial measure decreased by $108.9 million in the third quarter of the fiscal year '21 as compared to the fiscal year '20 year-end from $134.8 million to $25.9 million.\nWe ended the quarter with $218.7 million in cash.\nOur debt to trailing 12 month EBITDA ratio, which is used for our bank covenants is approximately 1.3.\nOur net debt to trailing 12 months EBITDA ratio was 0.1.\nFree cash flow, a non-GAAP financial measure, which effective in fiscal year '21 is defined as cash provided from operating activities minus capex.\nFor the fiscal year '21 third quarter, free cash flow was $82.8 million as compared to $6.7 million in the third quarter of fiscal '20.\nThe strong free cash flow performance was driven by an approximately $40 million favorable change in working capital in the quarter.\nWhile this level of working capital execution is not likely to be sustainable, especially as we navigate through supply chain challenges, we anticipate continuing our history of consistently generating predictable cash flows, which will allow for ample funding of future organic growth, inorganic growth and return of capital to the shareholders.\nIn the third quarter of fiscal year '21, we invested approximately $4.9 million in capex as compared to $8.1 million in the third quarter of fiscal year '20.\nThe lower third quarter capex was simply due to timing as opposed to any conscious effort to curtail capex.\nWe approved capex during the quarter that was not reflected in the cash flow statement as the actual outlay for these improved expenditures will occur in future reporting periods.\nWe have a strong balance sheet and we'll continue utilizing it by continued investment in our businesses to grow them organically in the future.\nIn addition, we continue to actively pursue opportunities for inorganic growth.\nAs Don mentioned in his remarks, we are providing revenue and earnings per share guidance for the fourth quarter which is subject to disruption at any time due to a variety of factors including direct and indirect impacts from the ongoing COVID-19 pandemic situation, the semiconductor supply shortage and potential challenges from supply disruption resulting from the severe weather experienced in the US in mid-February.\nThe revenue range for the fourth quarter is between $270 million and $300 million.\nDiluted earnings per share range is between $0.60 and $0.82.\nThe wide range is due to the uncertainty from the supply chain disruption for semiconductors and other material on both Methode and its customers.\nFactors that could result in us moving toward the higher end of the sales rate include higher sales due to lesser supply disruption to us and/or our customers, which would result in higher demand for all our products.\nLesser disruption would also minimize the cost of sales impact from premium freight, factory inefficiencies and to a lesser extent tariffs and other logistic factors such as port congestion.\nDon that concludes my comments.\nCatherine, we are ready to take questions.\n Assistant:", "chosen": "compname reports q3 earnings per share $0.83.\nq3 earnings per share $0.83.\nq3 sales $295.3 million.\nsees q4 earnings per share $0.60 to $0.82 including items.\nsees q4 sales $270 million to $300 million.\n"}
{"prompt": "Human: We will reference this information during today's call.\nToday's earnings call will begin with Ward Nye, whose remarks will focus on the state of our business in light of the Coronavirus pandemic, the actions we have and are taking and the strength of our positioning to manage the current environment.\nJim Nickolas will then review our first quarter 2020 financial results and liquidity position, and then Ward will provide some closing comments.\nA question-and-answer session will follow Ward's closing remarks.\nFirst and foremost, we hope that you and your families are and remain safe and healthy as we confront the challenges and uncertainties presented by COVID-19.\nI also want to extend my sincere gratitude to our Martin Marietta team.\nI'm tremendously proud of how everyone is working together to manage through this unprecedented time and how the character of our employees has shown through.\nDay after day, Martin Marietta employees are safely and resolutely meeting the critical needs of our customers.\nThey're also supporting their local communities in both large and small ways donating vital supplies and equipment to healthcare workers and first responders, helping neighbors by picking up groceries and ensuring our colleagues are well cared for and safe.\nOur team has shown great courage, determination and resilience as we successfully meet our stakeholders' needs while never losing sight of our core values of safety, integrity, excellence, community and stewardship.\nThese values define us and our character.\nWe look at these foundational principles to guide our daily and long-term actions and decisions, particularly during difficult times.\nMartin Marietta remains open as an essential business.\nThat designation means we're continuing to provide heavy building materials and services to our customers even in those areas with shelter-in-place orders.\nCommunities across the nation must maintain their vital infrastructure and we're working hard to support that objective in a safe, efficient and responsible way.\nThrough the end of April, our workforce, operations and supply chains have seen little disruption.\nWe believe this is largely due to our company's decisive steps early to respond quickly to this pandemic, our domestic focused approach to sourcing supplies and materials and our expanded safety procedures, all of which are designed to protect Martin Marietta employees and the organizational health of the company.\nDuring this pivotal time, our focus is threefold: communication, resource management and business continuity.\nWe've implemented new robust protocols and practices, including remote working, social distancing and enhanced equipment and facility cleaning, consistent with guidelines for the Centers for Disease Control and Prevention and the medical professionals who partner with the industrial hygienist familiar with our operations.\nThese protocols were updated on an ongoing basis as public experts provide additional guidance.\nWe also established a COVID-19 Planning and Communications task force, canceled all nonessential business travel and in-person meetings and established contingency plans with respect to staffing, and we've been actively engaged enterprisewide to enhance the substance and frequency of our communications to ensure the flow of the most accurate and timely information about our operations, thus enabling our employees, customers, suppliers and other stakeholders to stay fully informed.\nOur operations teams have shown considerable agility, flexibility and perseverance while keeping our business running smoothly.\nAmong other things, they've taken timely and responsible steps to clean and disinfect their facilities, while carefully screening necessary third-party visitors to minimize any COVID-19 exposure.\nAdditionally, for our colleagues that typically work in doors in close proximity to one another, we're utilizing a combination of social distancing as well as work-from-home protocols.\nOur employees are dutifully meeting their job responsibilities and remaining fully accessible.\nImportantly, whether working at an operating site, an office or remotely, our employees are empowered and encouraged to look out for one another.\nWith our team's safe and employee engagement high, we can be attentive to our other stakeholders, our customers, suppliers, creditors, shareholders and communities as we have an essential business to run.\nJim will discuss these results with you shortly.\nLet me first say that we're proud of these results, which underscore our commitment to operational excellence and to our disciplined strategies.\nWhile we had a promising start of what we believe would have been a record-setting 2020, we recognize this year will now be filled with an unprecedented level of uncertainty as the COVID-19 pandemic and related economic and societal outcomes continue to unfold.\nAccordingly, while we remain confident in the fundamental strength and underlying drivers of our business, we have withdrawn our 2020 full year guidance issued back in February.\nWe've not yet seen contractors and customers delaying or canceling building projects in a material way.\nWhile we typically do not comment on intra-quarter trends, these are atypical times.\nWe're making an exception and as highlighted on our supplemental information slides 13 and 14, we are sharing preliminary April shipment and pricing trends to provide greater transparency as to what we're now seeing in a COVID-19-impacted month.\nSpecifically, for the month of April, aggregate shipments remained elevated in most areas but did not match the near-record April 2019 volumes.\nWe saw notable growth in North Texas, Colorado and Indiana.\nCement shipments continue to be strong and are currently trending close to prior year levels.\nThe one notable exception is oil well cement shipments as demand continues to decline due to volatile and historically low oil prices.\nReady mixed concrete shipments are also trending near April 2019 levels, even as some homebuilders temporarily pause construction activity.\nApril revenues for the Magnesia Specialties business are $10 million lower than the comparable prior year period.\nDemand for our lime and periclase products has slowed dramatically as steel-producing customers temporarily idled their facilities in response to the COVID-19-induced shutdown of certain domestic auto manufacturers beginning in mid-March.\nIn terms of April pricing trends, aggregates pricing improved mid-single digits over April 2019 as announced increases were broadly implemented earlier in the year.\nCement pricing is up, even with several competitors announcing plans to delay price increases until June 1.\nPrior to the COVID-19 outbreak, we were highly confident in realizing the full announced increase of $8 per ton implemented April 1, given overwhelming market support in a tight Texas cement environment.\nReady mixed concrete pricing is slightly higher than April 2019 levels.\nWe'll have a clearer picture of ready mixed concrete pricing trends for the remainder of the year as the phased reopening of the Texas and Colorado economies unfold.\nThough ours is a basic and durable industry, it does not mean that we're immune to the disruptions caused by the pandemic.\nOur economy is interconnected and dislocations in consumer behavior or other industries may impact Martin Marietta.\nAs such, looking beyond April, we anticipate product demand will soften in the coming months, with the private sector feeling the effects sooner than the public sector.\nThe timing, duration and extent of weaker demand levels are presently unknown.\nInfrastructure, particularly for aggregates-intensive highways and streets, is expected to be the most resilient of the company's three primary end uses in the near term.\nThe vast majority of state departments of transportation are operational and continue to advertise and award projects.\nNonetheless, we expect many state DOT budgets will face temporary headwinds from lower fuel taxes, tolls, user fees and other related revenue collections as much of the nation has been sheltered in place.\nThe impact of lower funding levels is expected to become more meaningful in the second half of 2020, absent congressional action and will vary considerably among the states.\nFlorida DOT, for example, has accelerated over $2 billion of critical transportation projects to leverage construction efficiencies resulting from lower vehicle traffic, including closing additional travel lanes and performing more daytime hours work.\nTo help mitigate state DOT funding risks, industry representatives are actively engaging with Congress to address surface transportation in the Phase four emergency relief and economic recovery COVID-19 legislation.\nThe first recommendation is the federal backstop of nearly $50 billion in immediate flexible funding to offset the estimated 30% loss in state transportation revenues over the next 18 months.\nThe second recommendation is the passage of a comprehensive major surface transportation reauthorization package.\nWe believe our industry is better equipped than in recent history to execute on an infrastructure build given the backlog of fully designed projects.\nNonresidential construction activity on existing projects has broadly continued in most regions.\nHowever, many commercial projects and the engineering or planning stages are being delayed or canceled, particularly for office, retail and hospitality.\nSome industrial activity, on the other hand, is not expected to experience significant near-term disruption from COVID-19, warehouses, distribution centers and data centers are expected to perform relatively well in the current environment, as businesses increase e-commerce activity, secure regional supply chains and become more reliant on cloud and network services.\nSimilarly, large energy sector projects along the Gulf Coast of Texas that are already under way are expected to continue.\nThe residential market is expected to experience the most rapid and perhaps steepest decline from the impacts of COVID-19 as unemployment and general economic instability of home buyers and home developers to delay plans.\nHowever, in contrast to the Great Recession, we do not anticipate a prolonged period of reduced residential activity.\nToday's housing inventories remain near all-time lows despite notable population gains in Martin Marietta states and to benefit from historically low interest rates.\nAs we prepare for the secondary effects of the economic fallout from the Coronavirus, we rely on our values-driven culture.\nAs I emphasized earlier, the safety, health and well-being of our employees, customers, communities and other stakeholders remains our top priority.\nWith established protections in place to accomplish this, we're focused on our business priorities of generating cash flow, preserving liquidity and adjusting costs to align with product demand.\nOur team has developed extensive plans for a variety of economic scenarios, and we're ready to implement them with immediacy and integrity as warranted.\nIn addition to strengthening our balance sheet through a timely $500 million bond offering in early March, we've cut nonessential costs, reduced capital spending for discretionary projects and implemented hiring restrictions.\nWe're tightening our belts and aligning our capacity with demand consistent with our commitment to being prudent stewards of shareholders' capital.\nWe will reevaluate these actions as visibility improves.\nHaving the right strategy, making the right decisions at the right time, and being able to safely execute them does matter a lot.\nAnd Martin Marietta will do just that.\nWe're well positioned geographically, financially and otherwise to successfully manage through today's unprecedented environment and emerge more resilient and capable.\nFirst, Martin Marietta has a much stronger geographic and competitive position today compared with any previous downturn in our more than 25 years as a public company.\nThis is noteworthy, considering we navigated through the Great Recession and remain profitable throughout, never suspended or cut a dividend and emerged with a healthy balance sheet.\nToday, we continue to generate record profitability on aggregate shipment levels much lower than our peak volumes in 2005, and with a geographic footprint that we've not only considerably expanded but also improved.\nMoreover, we continue to thoughtfully execute on our strategic plans, carefully positioning our business through aggregates-led expansion in high-growth markets with attractive fundamentals and leveraging strategic cement and targeted downstream opportunities.\nThese strategic plans not only provide Martin Marietta with new growth platforms, but also opportunities to expand our footprint to complement existing operations and build critical mass.\nWe now have leading positions in 90% of our markets, up from 65% a decade ago, which supports favorable pricing trends, economies of scale and cost flexibility.\nSecond, we have experienced teams with decades of collective industry knowledge and expertise.\nTogether, their leadership and contributions have produced strong and sustained financial returns for Martin Marietta and our shareholders as recently demonstrated by our one, five and 10-year cumulative shareholder return performance.\nThis is largely the same leadership team that successfully formulated our operational response and prudently addressed our business needs during the Great Recession, the most challenging economic environment our industry ever experienced.\nIn uncertain evolving times, proven cycle tested leadership and experience is critical.\nIn brief, Martin Marietta has the right strategies, priorities, experience and teams to responsibly manage us through these challenging times.\nI will briefly highlight our first quarter results as well as provide a summary of our financial and liquidity positions, both of which support our near- and long-term strategies.\nAs detailed in today's release, our first quarter financial and operational performance exceeded our expectations, particularly considering the record-setting prior year quarter that benefited from carryover work from an extraordinarily wet 2018.\nOn a consolidated basis, total revenues increased 2% to $958 million, a first quarter record.\nGross profit was relatively flat.\nSelling, general and administrative expenses improved 10 basis points as a percent of total revenues.\nDiluted earnings per share was $0.41 and adjusted earnings before interest, taxes, depreciation, depletion and amortization, or adjusted EBITDA, decreased 6% to $149 million.\nThe Building Materials business achieved record first quarter revenues.\nAcross our geographic footprint, product demand trends remain strong, even in the Texas and North Georgia markets that experienced record or near-record precipitation levels.\nAggregates, cement and ready mixed concrete pricing also improved, with all divisions contributing to the solid growth, a testament to the strength of our markets, and the disciplined execution of our locally driven pricing strategy.\nBuilding Materials gross profit improved slightly.\nKey takeaways include the following: aggregates product gross profit decreased $5 million, largely due to our quarterly update of inventory standard costs.\nOur per ton production costs have been trending downward over the last 12 months as cost control measures and operating efficiencies have their desired effect.\nAll else equal, this would result in higher operating margins going forward.\nBut in this quarter, it also resulted in a $4 million expense as we reflected the lower cost in our updated inventory valuation.\nIn contrast, during the first quarter of 2019, we recorded an $11 million inventory valuation adjustment to reflect the higher production costs experienced during the weather-impacted year in 2018.\nWhile this cumulative $15 million year-over-year inventory standard variance reduced quarterly product gross margin by 260 basis points, lower unit production costs will provide future benefits.\nCement product gross margin expanded 1,170 basis points driven by improved cost absorption from higher production levels as well as increased shipments to the San Antonio, Austin and Houston markets.\nPricing gains, combined with lower maintenance and energy expenses also contributed to the improved margin.\nGross profit for the ready mixed concrete business declined $9 million.\nPricing improvements and double-digit shipment growth in Colorado were more than offset by lower Texas volumes from record rainfall, delaying projects in the Dallas/Fort Worth area as well as increased raw material costs.\nFor the Magnesia Specialties business, product revenues decreased 13%, consistent with expectations as chemicals customers continue to reduce inventory levels for reasons unrelated to COVID-19.\nNotably, product gross margin improved 500 basis points despite lower revenues, driven by ongoing cost control measures and lower energy costs.\nWe still currently anticipate the destocking trend of our chemicals customers to be transitory in nature.\nOur consolidated results included several items that affect comparability with the prior year quarter.\nTo provide additional clarity, we included a slide in the Q1 2020 supplemental information posted on our website that provides a normalized view of pre-tax earnings with the items affecting comparability removed from both current and prior year quarters.\nIn addition to the aggregates inventory standard adjustments discussed earlier, these items also included $6 million of other nonoperating expenses to finance third-party railroad maintenance in exchange for a federal income tax benefit of approximately $7 million, which drove the low-income tax rate for the first quarter 2020.\nLastly, we incurred a noncash expense of $2 million to implement a new paid time-off policy for our employees.\nAs you will see on slide five, first quarter 2020 earnings before income tax, absent items affecting comparability, improved $15 million.\nMoving on now to our capital structure.\nThroughout our history, Martin Marietta has operated with a growth mindset, while maintaining a healthy balance sheet to preserve our financial flexibility.\nAs a result, we have ample liquidity for the foreseeable future.\nGiven today's environment, that is an enviable place to be.\nWe will continue to balance our long-standing, disciplined capital allocation priorities to maintain that flexibility.\nOur priorities remain value-enhancing acquisitions, prudent organic capital investment and the opportunistic return of capital to shareholders through dividends and share repurchases, all while maintaining our investment-grade credit rating profile.\nOur approach is intended to ensure our cash flows are sufficient for a range of scenarios.\nIn today's uncertain environment, that range of scenarios is broader and actions to enhance cash flows and preserve liquidity are even more important.\nBefore the extent of the economic disruption became better understood, we repurchased 211,000 shares during the first quarter.\nSince then, we have temporarily paused share repurchases.\nWe will continue to closely monitor the situation and as circumstances change, we will revisit this pause in our share repurchase program.\nTo further bolster cash flows, as Ward mentioned, we are reducing our capital spending for discretionary projects.\nWe now estimate full year capital expenditures will be $325 million to $350 million, down from our original guidance of $425 million to $475 million.\nWe demonstrated our ability to pull back on capital spending in safe and prudent ways that did not damage the business in the long run during the Great Recession.\nWe are doing that again now as appropriate.\nWe've strengthened the company's balance sheet and cash position with our timely bond offering in early March, issuing $500 million of 10-year senior notes at a 2.5% coupon.\nProceeds will be used to repay the $300 million of floating rate notes that mature later this month, with the bulk of the remaining cash preserved on the balance sheet.\nLooking forward, as you can see in our supplemental information slides, after satisfying the May repayment, we will have no additional bond maturities for more than four years.\nWe are confident in our liquidity position.\nNet cash, combined with the nearly $760 million available on our existing revolving facilities, provided total liquidity of approximately $880 million at the end of the quarter.\nAdditionally, at 2.3 times net debt to the consolidated adjusted EBITDA, we remain well within our target leverage ratio of two to 2.5 times at the end of the first quarter.\nIn summary, we are pleased with our solid first quarter performance and enhanced liquidity.\nIn regards to our 2020 full year guidance, we will reinstate earnings guidance once we have sufficient visibility to do so.\nThat said, we remain confident that the attractive underlying market fundamentals and long-term secular growth trends in our key geographies, both of which underpin the company's record 2019 performance and strong first quarter 2020 results, remain intact and will be evident once again as the U.S. economy stabilizes and recovers.\nMartin Marietta is well positioned geographically, financially and otherwise to responsibly navigate today's extraordinary environment and drive sustainable long-term growth and shareholder value as we move forward.\nWe have thoughtfully developed and consistently executed on our strategic plans positioning our business as an aggregates leader in attractive high-growth geographies, aligning our product offerings to leverage strategic cement and targeted downstream opportunities and prudently allocating capital while maintaining financial flexibility.\nIn doing so, we have built a business that is durable, resilient and stronger than ever.\n Assistant:", "chosen": "martin marietta withdraws 2020 outlook in light of covid-19 uncertainty.\nwithdraws previously-issued full-year 2020 guidance in light of covid-19 uncertainty.\nshipments and pricing increased across majority of building materials business in q1.\nqtrly earnings per share $0.41.\nmartin marietta materials - while co is not immune to impact of covid-19, believe co is well prepared to meet current & coming challenges.\n"}
{"prompt": "Human: Ward and I will begin today's earnings call with a discussion of our full year operating performance.\nJim Nickolas will then review our 2020 financial results and liquidity position, after which Ward will discuss market trends and our 2021 outlook.\nA question-and-answer session will follow.\nWe sincerely hope that you and your families remain safe and healthy.\nBy all accounts, 2020 was extraordinary for Martin Marietta.\nWe're proud to have extended our long track record of financial, operational and safety excellence, particularly in a year filled with unprecedented disruption.\nMartin Marietta set new performance records, delivering our most profitable year and the best safety performance in our company's history.\nThese impressive results demonstrate our resilient business model and our team's commitment to Martin Marietta's vision and successful execution of our proven strategic operating analysis and review or store plan.\nAs noted, today's discussion focuses on our full year results and 2021 outlook.\nBefore doing so, I'll highlight a few notable takeaways from our record-setting fourth quarter.\nImportantly, we achieved solid shipment and pricing growth across all product lines as construction activity stabilized from the spring and summer months when we saw a greater impact from COVID-19.\nThese top line improvements, along with our steadfast focus on cost controls, resulted in 7% growth in consolidated total revenues; 20% growth in adjusted earnings before interest, taxes, depreciation and amortization or adjusted EBITDA; and a 40% increase in diluted earnings per share.\nFor the full year, we established new records for products and services revenues, profitability and adjusted EBITDA.\nSpecifically, full year consolidated products and services revenues increased to $4.4 billion.\nConsolidated gross profit increased 6% to $1.3 billion.\nAdjusted EBITDA increased 11% to nearly $1.4 billion, and diluted earnings per share was $11.54, an 18% improvement.\nMartin Marietta's 2020 results marked the ninth consecutive year of growth in these financial metrics.\nOperating our business safely sets the foundation for our long-standing financial success.\nMartin Marietta's industry-leading safety performance continues to trend near or exceed world-class safety levels.\nWe achieved a 25% reduction in total reportable incidents across the enterprise in 2020, and for the fourth consecutive year, we achieved a companywide world-class lost time incident rate.\nThese superior financial and safety results are directly attributable to the dedication and agility of our nearly 9,000 talented employees.\nI'm extraordinarily proud of how our team managed the challenges and disruptions caused by the pandemic, while remaining focused on being good wingmen, working safely and efficiently together and seamlessly meeting our diverse stakeholders' needs.\nWith that overview, let's now turn to our full year operating performance.\nAggregate shipments declined 2% to nearly 187 million tons, reflecting anticipated lower infrastructure shipments in portions of North Carolina, reduced energy sector demand and headwinds from COVID-19 disruptions.\nHowever, in line with broader macroeconomic trends, full year aggregate shipments to the residential market increased, benefiting from healthy single-family housing activity.\nAggregates average selling price increased 4% on a mix adjusted basis, in line with our expectations.\nImportantly, all divisions contributed to this solid growth, a testament to this product line's resilient pricing power and our leading market positions in attractive geographies.\nThe disciplined execution of our locally driven pricing strategy, along with attractive underlying market fundamentals will continue to support sustainable pricing growth moving forward.\nOur cement operations established new records for shipments, which increased 2% to nearly four million tons.\nLarge project activity supported underlying product demand in both North and South Texas throughout the year, offsetting weakness in the energy sector.\nPricing increased 3% on a mix adjusted basis, demonstrating the resilient price fundamentals of core products in the state of Texas.\nWe expect our cement business will continue to benefit from favorable shipment and pricing trends, supported by tight supply and healthy demand in Texas, diversified customer backlogs and April 2021 price increases.\nTurning to our targeted downstream businesses.\nReady mixed concrete shipments increased 3%, excluding shipments from acquired operations and from our Southwest division's former concrete business in Arkansas, Louisiana and Eastern Texas, which we divested in January 2020.\nConcrete pricing increased 2%.\nOur Colorado asphalt and paving business established a new record for asphalt shipments, increasing 15% to three million tons.\nThis growth reflected solid underlying product demand together with carryover work following a weather challenged 2019.\nAsphalt pricing increased nearly 3%.\nWe concluded 2020 with the highest full year adjusted EBITDA margin in Martin Marietta's history.\nDriving this achievement was our Building Materials business, which delivered record products and services revenues of $4.2 billion, a 1% increase, and record product gross profit of $1.2 billion, a 7% increase.\nOur Upstream Materials businesses, namely, aggregates and cement, established all-time records for both full year product revenues and gross profit.\nAggregates product gross margin expanded 130 basis points to 30.6%, a new record, and unit profitability improved 8%.\nThese accomplishments, which resulted from strong pricing gains, disciplined cost management and lower diesel fuel costs demonstrate the cost flexibility and resiliency of our aggregates-led business.\nThe Cement business benefited from the planned kiln maintenance outage that occurred through the end of 2019.\nThe timing of that outage resulted in some expenses being recognized in 2019 versus early in 2020.\nMore importantly, that and other capital investments have dramatically improved our cement operations.\nWe achieved 90% kiln reliability this year, up from 82% in 2019, which facilitated increased throughput and fixed cost absorption at both our Midlothian and Hunter plants.\nThese factors, combined with mix adjusted pricing strength and lower fuel costs contributed to the 510 basis point improvement in cement product gross margin to 37.8%.\nOur targeted downstream businesses also delivered solid full year financial results.\nReady mixed concrete product gross margin increased 10 basis points to 8.4% as pricing growth offset higher raw material costs.\nAsphalt and paving achieved gross profit of $60 million and a 100 basis point improvement in gross margin, driven by double-digit revenue growth.\nOur Magnesia Specialties business returned to revenue and profitability growth during the fourth quarter.\nThe 12% top line improvement in the quarter, however, was not enough to offset demand declines experienced earlier in the year.\nAs a result, full year product revenues decreased 12% to $221 million.\nWe anticipate fourth quarter strength in line with chemicals demand to continue in 2021, now that steel utilization has rebounded from last summer's COVID-19-driven trough and our cobalt customers are resuming activity.\nImpressively, product gross margin improved 80 basis points to 40.6% as we proactively responded to lower shipments with effective cost control measures.\nTurning now to cash generation, capital allocation and liquidity.\nMartin Marietta ended 2020 with the strongest cash generation in our history.\nOperating cash flow of $1.05 billion increased 9%, driven by earnings growth.\nWe continue to balance our long-standing disciplined capital allocation priorities to responsibly grow our business while maintaining a healthy balance sheet and preserving financial flexibility to further enhance shareholder value.\nOur priorities remain focused on value-enhancing acquisitions, prudent organic capital investment and the consistent return of capital to shareholders while maintaining our investment-grade rating profile.\nFor 2020, we invested $360 million of capital into our business and returned $190 million to shareholders through both an increased dividend and the first quarter repurchase of 211,000 shares of our common stock.\nIn August 2020, our Board approved a 4% increase in our quarterly cash dividend, underscoring its continued confidence in our future performance and continuing Martin Marietta's track record of dividend growth.\nSince our repurchase authorization announcement in February 2015, we have returned more than $1.8 billion to shareholders through a combination of meaningful and sustainable dividends as well as share repurchases.\nWe ended 2020 with a debt-to-EBITDA ratio of 1.9 times, slightly below our target leverage range of two to 2.5 times, which offers us the flexibility to pursue accretive investment opportunities.\nOur solid balance sheet, combined with $1.1 billion of availability on our credit facilities, provides the financial strength for Martin Marietta to respond to, then execute on disciplined capital allocation priorities and continue profitably growing our business.\nLooking ahead, we believe 2021 will be a year in which we see a return to a more normalized state as underlying demand fundamentals reset and the nation's economy regains momentum.\nWe remain confident in Martin Marietta's attractive business drivers and are encouraged by accelerating long-term secular trends across our three primary end-use markets and key geographies.\nWe expect these trends to drive construction-led aggregates intensive growth.\nInfrastructure activity, particularly for aggregates-intensive highways, roads and streets, continues to prove resilient.\nWith the One year extension of the Fixing America's Surface Transportation Act, or FAST Act, at current funding levels, state and local governments have the visibility needed to plan, design and award transportation projects through the 2021 construction season.\nImportantly, estimated fiscal 2021 lettings for our top five departments of transportation, or DOTs, are currently above or near prior year levels.\nKeep in mind, our top five states: Texas, Colorado, North Carolina, Georgia and Florida, are disproportionately important to us, representing 71% of our 2020 Building Materials business total revenues.\nAdditionally, DOTs were recently granted nearly $10 billion of targeted relief as part of the Coronavirus Response and Relief Act passed in December 2020 to help offset pandemic-driven transportation revenue shortfalls.\nThis funding assistance has the benefit of no state matching requirements.\nBased on preliminary estimates, over $2 billion of this assistance will be apportioned to Martin Marietta's top five states.\nOver the medium to long term, we anticipate voter-approved state and local transportation measures and passage of a comprehensive federal transportation program package to promote multiyear growth in product demand.\nIn November 2020, voters sent a powerful message of support for state and local transportation investment, approving 94% of ballot measures, the highest ever approval rating.\nThese initiatives are estimated to generate an additional $14 billion in onetime and recurring transportation funding, of which 82% is in Texas, our top revenue-generating state.\nBipartisan support exists for new surface transportation legislation aimed at increasing funding levels not seen in over 15 years, with both the United States House of Representatives and Senate previously advancing proposed bills.\nWe believe this 117th Congress creates a path toward advancing a notable increase in funding over the FAST Act.\nWe're optimistic that agreement on a new bill could be reached this summer, generating meaningful benefits in 2022 and beyond.\nWe expect increased infrastructure investment to provide volume stability and drive aggregate shipments in that end-use closer to our 10-year historical average of 43% of our total shipments.\nFor reference, aggregate shipments to the infrastructure market accounted for 36% of 2020 shipments.\nNonresidential construction should continue to benefit from accelerating e-commerce and remote work trends that require increased investment in heavy industrial warehouses and data centers, particularly in our key metros of Dallas/Fort Worth, San Antonio, Austin, Denver, Des Moines, Indianapolis, Charlotte and Atlanta.\nImportantly, this type of construction tends to be more aggregates-intensive than light commercial construction due to the size, scale and structure of these projects.\nLight commercial and retail construction will remain comparatively challenged until COVID-19 vaccines are more widely distributed.\nOver the longer term, light nonresidential activity will benefit from the attractive collateral effects of strong single-family residential trends.\nAggregate shipments to the nonresidential market accounted for 34% of 2020 shipments.\nSingle-family housing is poised for multiyear growth returning to more normalized levels during this economic cycle.\nWe believe Martin Marietta's leading southeastern and southwestern footprint positions the company to be a notable beneficiary of these trends given underbuilt conditions, favorable population and employment dynamics, land availability, mild climates and lower cost of living in these regions.\nSingle-family housing is two to three times more aggregates-intensive than multifamily construction, given the ancillary nonresidential and infrastructure needs of new suburban communities.\nAggregates to the residential market accounted for 24% of 2020 shipments.\nIn summary, we're confident in the fundamental strength and underlying drivers of our business.\nAs disclosed in today's release, we've returned to providing full year annual guidance.\nWe currently expect 2021 aggregates shipment growth to range from up 1% to up 4%, reflecting single-family housing strength, expanded infrastructure investment and heavy industrial projects of scale that will support our near-term shipment levels.\nWe remain confident that our favorable pricing trends are sustainable, supported by improved contractor confidence and healthy customer backlogs.\nFor 2021, we expect annual aggregates price increases, which become effective from January one to April 1, to increase in a range of up 3% to up 5%.\nCombined with contributions from our Cement, Downstream and Magnesia Specialties businesses, on a consolidated basis, we expect adjusted EBITDA of $1.350 billion to $1.450 billion.\nKeep in mind, when comparing this guidance range to prior year, we're not anticipating the same level of nonrecurring gains from land sales and divested surplus assets as seen in 2020.\nTo conclude, we're proud of our 2020 record financial results and industry-leading safety performance.\nWe're also extremely optimistic about our future.\nDue to our work over the last several years, Martin Marietta is uniquely well positioned to capitalize on the emerging growth trends that are expected to support steady and sustainable construction activity over the long term.\nImportantly, the disciplined execution of our strategic plan, coupled with our pricing discipline, operational excellence, prudent capital allocation and adherence to robust health protocols will continue to enhance Martin Marietta's solid foundation for enduring success.\nAs we move forward, we have the resources, team and capabilities to drive value-enhancing growth.\nWe're confident in Martin Marietta's opportunities to build on our successful track record of strong financial, operational and safety performance and remain focused on delivering superior returns for investors while meeting and exceeding our commitments to our other stakeholders, including our customers, employees and communities.\n Assistant:", "chosen": "martin marietta materials inc - qtrly total revenue $1,179.6 million versus $1,100.4 million.\nmartin marietta materials inc - remains well-positioned to capitalize on emerging demand in 2021 and beyond.\n"}
{"prompt": "Human: I'm Dan Glaser, President and CEO of Marsh McLennan.\nJoining me on the call today is Mark McGivney, our CFO; and the CEOs of our businesses, John Doyle of Marsh; Peter Hearn of Guy Carpenter; Martine Ferland of Mercer; and Nick Studer of Oliver Wyman.\nMarsh McLennan had another outstanding quarter.\nOur third quarter results reflect strong momentum across all of our businesses.\nOur continued strength represents a combination of the current environment as well as impressive day-to-day execution across the firm.\nAlthough there continues to be uncertainty and volatility in the macro economic and geopolitical environment, we are seeing solid demand for our differentiated advice and solutions.\nEven as COVID-19 continues to pose risks in many parts of the world, vaccine rollouts are having a positive impact.\nWe are taking advantage of opportunities to add to our deep venture world-class talent.\nAt the core of our business is a focus on our colleagues and we are dedicated to Marsh McLennan being an exciting and dynamic place to work for outstanding people.\nAnd we continue to innovate and leverage the collective strengths of our organization to help clients address their most pressing concerns, including climate, diversity and inclusion, the future of work, cyber and digital strategies.\nAs we have discussed, 2021 represents Marsh McLennan's 150th year, and success over such a long period of time requires constant innovation and investment to deliver sustained growth and profitability.\nI'd like to discuss just a few recent examples of how we are innovating to develop new unique client solutions.\nNick Studer leads our firmwide climate initiative.\nWe view climate as a significant opportunity, and we are well positioned to help clients with this critical issue.\nIn October, Oliver Wyman launched a Climate Action Navigator, drawing on insights from across the company.\nThis product helps public and private sector leaders plot a path through climate science, identifying emissions at the industry and regional level and quantifying the effects of multiple different carbon reduction technologies and actions.\nWe believe these tools will give business and government leaders vital insights to achieve their long-term climate goals and be a significant enabler of the transition to low carbon climate resilient investment in the corporate sector.\nMercer recently launched Skills-Edge, an innovative platform allowing employers to determine the most important skills for their future and design a talent strategy to assess, acquire, and retain them.\nSkills-Edge provides quantitative insight into the demand and value of skills and supports both employees and organizations in rapidly reskilling for the future of work.\nAnd just last week under the leadership of John Doyle, we launched our Cyber Risk Analytics Center.\nThis brings together cyber risk data and analytics expertise across our firm and provides clients with a comprehensive assessment of their cyber threats, existing and future controls, and the potential economic impact.\nWe are one enterprise, and these are just a few recent examples of how we bring together a leverage, knowledge and capabilities across the firm to offer comprehensive solutions to our clients and address their most pressing concerns.\nWe are a growth company as demonstrated by our track record.\nGrowth doesn't just happen.\nIt takes consistent vision, alignment, commitment and execution.\nSince closing our acquisition of JLT, we've grown our total consolidated revenue by 27%, our adjusted earnings per share by 34% and our colleague base by 22%.\nAchieving and sustaining growth requires consistent reinvestment in the business.\nWe always strive to balance delivering results in the short-term while investing for the long-term.\nIn 2021, we generated year-to-date adjusted earnings per share growth that is higher than any annual period in over three decades while at the same time investing for the future and making a significant press on hiring.\nWe grew our headcount year-to-date by nearly 5,000 or around 7%, mostly organic adds with an emphasis on client-facing roles.\nWe expect this influx of talent will drive growth, add to our capabilities and enhance our ability to serve clients.\nNow let me provide an update on current P&C insurance market conditions.\nMany of the factors that drove the market to harden over the last few years continue, suggesting an inflection to a soft market is unlikely in the near-term.\nThe Marsh Global Insurance Market Index showed price increases of 15% year-over-year consistent with second quarter.\nThis marks the 16th consecutive quarter of rate increases in the commercial P&C insurance marketplace.\nLooking at pricing by line.\nThe Marsh market index showed global property insurance was up 9%.\nGlobal, financial and professional lines were up 32% driven in part by a near doubling in cyber rates, and global casualty rates were up high single-digits on average.\nAs a reminder, our index skews to large account business.\nHowever, small and middle market insurance rates continue to rise as well.\nalthough less than for large complex accounts.\nMeasured and moderate rate increases in global property catastrophe reinsurance witnessed in the first half of 2021 could persist throughout the remainder of the year, reflecting adequate capacity offset by elevated global catastrophes, concerns around real and social inflation, and a continuation of large individual risk lawsuits.\n2021 marks another year of significant catastrophe losses.\nHurricane Ida generated material losses in both the Southeast and Northeast.\nThis is in addition to a record level of flood losses in Europe, flooding in China and the continuation of wildfire losses in many parts of the world.\nMarsh McLennan remains focused on helping our clients navigate these challenging market conditions and making a difference for them in the moments that matter.\nNow let me turn to our terrific third quarter financial performance.\nWe generated adjusted earnings per share of $1.08, which is up 32% versus a year ago, driven by strong top-line growth and continued low levels of T&E.\nTotal revenue increased 16% versus a year ago and rose 13% on an underlying basis, the second consecutive quarter of record underlying growth in over two decades.\nUnderlying revenue grew 13% in RIS and 12% in Consulting.\nMarsh grew 13% in the quarter on an underlying basis and benefited from strong new business and renewal growth.\nGuy Carpenter grew 15% on an underlying basis in the quarter continuing its string of excellent results.\nMercer underlying revenue grew 7% in the quarter, the highest in over a decade.\nOliver Wyman grew underlying revenue 25%, the second consecutive quarter in excess of 20%.\nOverall, the third quarter saw adjusted operating income growth of 19% and our adjusted operating margin expanded 10 basis points year-over-year.\nGiven our excellent third quarter and year-to-date performance, we are on track for a terrific year.\nWe expect to generate the best underlying revenue and adjusted earnings per share growth in over two decades and expand margins for the 14th consecutive year.\nOur entire organization is on its front foot, focused and aligned, and this is evident in our excellent results.\nOur results were outstanding with record third quarter revenue, second consecutive quarter of double-digit underlying growth, margin expansion, and significant earnings growth.\nHighlights from our third quarter performance included a second straight quarter of 13% underlying growth in RIS, with 13% in Marsh and 15% in Guy Carpenter, and a second consecutive quarter of 12% underlying growth in Consulting, with 7% of Mercer and 25% at Oliver Wyman.\nGrowth in adjusted earnings per share exceeded 30% for the second quarter in a row.\nConsolidated revenue increased 16% in third quarter, $4.6 billion, reflecting underlying growth of 13%.\nOperating income in the quarter was $740 million, an increase of 37%.\nAdjusted operating income increased 19% to $759 million and our adjusted operating margin increased 10 basis points to 18.5%.\nGAAP earnings per share was $1.05 in the quarter and adjusted earnings per share increased 32% to $1.08.\nFor the first nine months of 2021, underlying revenue growth was 10%.\nOur adjusted operating income grew 21% to $3.4 billion.\nOur adjusted operating margin increased 120 basis points and our adjusted earnings per share increased 28% to $4.82.\nLooking at Risk and Insurance Services.\nThird quarter revenue was $2.7 billion up 17% compared with a year ago or 13% on an underlying basis.\nOperating income increased 21% to $403 million.\nAdjusted operating income also increased 21% to $469 million and our adjusted operating margin expanded 20 basis points to 20.4%.\nFor the first nine months of the year, revenue was $9 billion with underlying growth of 11%.\nAdjusted operating income for the first nine months of the year increased 20% to $2.5 billion with a margin of 30.3%, up 80 basis points from the same period a year ago.\nAt Marsh, revenue in the quarter was $2.4 billion of 17% compared with a year ago or 13% on an underlying basis.\nGrowth in the quarter was broad-based driven by nearly 40% new business growth and solid retention.\nU.S. and Canada delivered another exceptional quarter with underlying revenue growth of 16% and international underlying growth was 9%, Latin America grew 12%, its best growth since the fourth quarter of 2015, Asia-Pacific was up 9% and EMEA was up 8%.\nFor the first nine months of the year, Marsh's revenue was $7.3 billion with underlying growth of 12%.\nU.S. and Canada underlying growth was 14% and international was up 9%.\nGuy Carpenter's third quarter revenue was $314 million, up 15% compared with a year ago on both a GAAP and underlying basis.\nGrowth was broad-based across geographies and specialties.\nGuy Carpenter has now achieved 7% or higher underlying growth in seven of the last nine quarters.\nFor the first nine months of the year, Guy Carpenter generated $1.7 billion of revenue and 10% underlying growth.\nIn the Consulting segment, revenue in the quarter was $1.9 billion, up 13% from a year ago or 12% on an underlying basis.\nOperating income increased 45% to $404 million.\nAdjusted operating income increased 15% to $350 million.\nThe adjusted operating margin was 18.9% in line with the margin in the third quarter of 2020.\nConsulting generated revenue of $5.7 billion for the first nine months of 2021, representing underlying growth of 9%.\nAdjusted operating income for the first nine months of the year increased 25% to $1.1 billion and the adjusted operating margin expanded 180 basis points to 19.6%.\nMercer's revenue was $1.3 billion in the quarter, up 7% on an underlying basis, the highest result in over a decade.\nCareer grew 13% on an underlying basis, reflecting the continuing rebound in the global economy and business confidence.\nWealth increased 6% on an underlying basis, reflecting strong growth in investment management and modest growth in defined benefit.\nOur assets under delegated management grew to nearly $400 billion at the end of the third quarter, up 24% year-over-year benefiting from net new inflows and market gains.\nOliver Wyman's revenue in the quarter was $610 million, an increase of 25% on an underlying basis.\nThis represents the second consecutive quarter of more than 20% growth as demand remains strong across most geographies and practices.\nFor the first nine months of the year, revenue at Oliver Wyman was $1.8 billion, an increase of 21% on an underlying basis.\nAdjusted corporate expense was $60 million in the third quarter.\nForeign exchange had a negligible impact on earnings in Q3.\nAssuming exchange rates remain at current levels, we expect FX to be a modest headwind in the fourth quarter.\nOur other net benefit credit was $69 million in the quarter and we expect it will remain at this level in the fourth quarter.\nInvestment income was $13 million in the quarter on a GAAP basis and $12 million on an adjusted basis, and mainly reflects gains on our private equity portfolio.\nInterest expense in the third quarter was $107 million compared with $128 million in the third quarter of 2020, reflecting lower debt levels in the period.\nBased on our current forecast, we expect interest expense in the fourth quarter to be similar to the amount in the third quarter.\nOur adjusted effective tax rate in the third quarter was 24.4% compared with 26.5% in the third quarter last year.\nOur GAAP tax rate was 24.2% in the third quarter, down from 30.3% in the third quarter of 2020 which was impacted by some unusual item.\nThrough the first nine months of the year, our adjusted effective tax rate was 24.4% compared with 24.6% last year.\nBased on the current environment, we continue to expect an adjusted effective tax rate between 25% and 26% for 2021 excluding discrete items.\nGiven our year-to-date performance, we are on track for an outstanding year.\nLooking specifically at the fourth quarter, keep in mind the comparisons become more challenging given the rebound in growth in the fourth quarter of 2020.\nWe also continue to build for the long-term by investing in hiring.\nWhile we are excited about the future benefits these investments will deliver, they come with upfront costs we absorb in the short-term.\nThat said, we've consistently demonstrated our ability to deliver exceptional results today while investing for the future and expect we will continue to do so.\nTurning to capital management or balance sheet.\nWe ended the quarter with $10.7 billion of total debt.\nOur next scheduled debt maturity is in January of 2022 when $500 million of senior notes mature.\nWe continue to expect to deploy at least $3.5 billion of capital in 2021, of which at least $3 billion will be deployed across dividends, acquisitions and share repurchases.\nThe ultimate level of share repurchases will depend on how the M&A pipeline develops.\nOur cash position at the end of the third quarter was $1.4 billion.\nUses of cash in the quarter totaled $665 million and included $272 million for dividends, $93 million for acquisitions and $300 million for share repurchases.\nFor the first nine months, uses of cash totaled $2.6 billion and included $750 million for dividends, $566 million for acquisition, $734 million for share repurchases and $500 million for debt repayment.\nWe had a remarkable third quarter positioning us well to deliver strong growth in both revenue and adjusted earnings in 2021.\nAnd operator, we are ready to begin Q&A.\n Assistant:", "chosen": "marsh mclennan q3 earnings per share $1.05.\nq3 adjusted earnings per share $1.08.\nq3 earnings per share $1.05.\nq3 revenue rose 16 percent to $4.6 billion.\n"}
{"prompt": "Human: Joining me on the call today are Mike Hennigan, CEO; Maryann Mannen, CFO; and other members of the executive team.\nWe invite you to read the safe harbor statements on Slide 2.\nActual results may differ.\nBefore we get into our results for the quarter, we wanted to provide a brief update on the business.\nDuring the second quarter, we saw gradual improvements in the demand for our products as the rollout of COVID vaccinations and the removal of mobility restrictions have led to more economic activity and increased demand for transportation fuels.\nThat said, we're close to the end of the summer driving season, which is typically our strongest part of the year.\nGasoline demand is currently 2% to 5% below 2019 levels, with the West Coast still lagging at about 10% down.\nDiesel demand continues to hold up well and is flat to 2019.\nDespite the growing levels of personal passenger traffic, we continue to see an absence of the longer-haul international flights and business travel.\nOverall, jet demand remains down nearly 30% below pre-pandemic levels.\nThe full return of aviation fuel demand will likely still take some time, particularly with the recent increasing spread of the COVID-19 variants.\nAs we head into the second half of the year, we remain hopeful but cautious in the recovery and so we'll remain focused on the elements of our business within our control.\nSlide 4 highlights progress on our strategic priorities for the quarter.\nFirst, on May 14, we closed the sale of our Speedway business to 7-Eleven.\nIn conjunction with the close, we announced our plans to return $10 billion of sale proceeds to shareholders through share repurchases.\nAs part of our commitment to quickly return capital, we immediately launched a modified Dutch auction tender offer in which we were able to repurchase nearly $1 billion worth of shares.\nSecond, we continue to take steps to reposition our portfolio.\nDickinson reached full design capacity during the quarter.\nAt approximately 180 million gallons per year, Dickinson is the second largest renewable diesel facility in the United States.\nAt Martinez, we're progressing detailed engineering and permitting to convert that oil refinery to a renewable diesel facility.\nBased on our progress and discussion with feedstock suppliers, we're confident in the time line we have set to begin producing renewable diesel in the second half of 2022, with approximately 260 million gallons per year of capacity.\nAdditionally, we expect to reach full capacity of approximately 730 million gallons per year by the end of '23.\nThird, we continue to keep a diligent focus on cost and capital in a challenging commodity business such as ours, being a low-cost operator ensures we will remain competitive.\nWe have continued to challenge ourselves to examine all aspects of spend, and as a result, have delivered incremental progress.\nIn the first half of 2021, our operating results reflect our goal to reduce overall refining cost structure by $1 billion.\nImportantly, I want to note that in June, we published our two annual ESG-related reports.\nOur sustainability report provides an in-depth look at the company's sustainability approach and performance consistent with the reporting guidance from SASB and GRI.\nOur perspectives on climate-related scenarios follows guidance from TCFD and analyzes the company's resiliency relative to climate scenarios put forth by the IEA.\nOn Slide 5, I would like to take a moment to go over some of the ways we're challenging ourselves to lead in sustainable energy.\nFrom a strategic standpoint, our focus is to balance the needs of today while investing in a sustainable energy diverse future.\nThat includes strengthening resiliency by lowering our carbon intensity and conservative natural resources, developing for the future by investing in renewables and emerging technologies, and embedding sustainability and decision-making in all aspects of engagement with our people and many stakeholders.\nWe currently have three companywide targets many of our investors know well.\nFirst, a 30% reduction in our Scope 1 and Scope 2 greenhouse gas emissions intensity by 2030.\nSecond, a 50% reduction in midstream methane intensity by 2025.\nAnd lastly, a 20% reduction in our fresh water withdrawal intensity by 2030.\nThe evolving energy landscape presents us with meaningful opportunities for innovation.\nWe've allocated 40% of our growth capital in 2021 to help advance two significant renewable fuels projects.\nIn late '20, we began renewable diesel production at our Dickinson, North Dakota facility, second largest of its kind in the United States and are progressing the conversion of our Martinez, California refinery to a renewable diesel facility.\nFinally, to demonstrate our focus on making sustainability pervasive in all we do for executives and employees, we link a portion of the annual bonus program to an ESG metric.\nWe recently introduced a diversity, equity and inclusion component to these metrics as well, making us the first U.S. independent downstream company to link improving diversity to compensation in the same way we led the industry in linking GHG intensity reductions to our compensation last year.\nSafety in our operations is another key to sustainable operations.\nIn 2020, our teams demonstrated strong safety and environmental performance, including a nearly 40% reduction in the most significant process safety events and a 40% reduction in designated environmental incidents over 2019.\nOur personal safety performance continues to be better than industry average for the U.S. refining and midstream sectors.\nSlide 6 provides a summary of our second-quarter financial results.\nAdjusted EBITDA was $2.194 billion for the quarter.\nThis includes the results from both continuing and discontinued operations.\nCash from continuing operations, excluding working capital, was $1.535 billion, which is approximately $1 billion increase from the prior quarter.\nAnd for the first time in nearly 18 months, we generated ongoing operating cash flow that exceeded the needs of the business, capital commitments, as well as covered our dividend and distributions.\nFinally, we returned nearly $1.4 billion of capital to shareholders this quarter through dividend payments and share repurchases.\nThe close of the Speedway sale marked a significant milestone in our ongoing commitment to strengthen the competitive position of our portfolio.\nSo we wanted to call out some of the key points on Slide 7.\nWe received total proceeds for the sale of Speedway of $21 billion.\nBased on our tax basis, our cash taxes, current and deferred, will be approximately $4.2 billion, which is lower than our original $4.5 billion estimate.\nWe have accrued for this on the balance sheet.\nIn addition, we had closing adjustments of approximately $400 million.\nTherefore, the after-tax proceeds from the sale will be $17.2 billion.\nTo be clear, this number is higher than our initial $16.5 billion estimate.\nOn Slide 8, we present an overview of the use of the proceeds.\nSince the close of the transaction, we have reduced structural debt by $2.5 billion and purchased approximately $1 billion of stock.\nIn the post-tender period, we did not repurchase any incremental shares in light of a couple of regulatory constraints: first, a post-tender cooling off-period; and second, our routine quarterly restricted period in the lead up to the release of our earnings information.\nThat said, not repurchasing during that limited window is not indicative of any deviation from our commitment to complete within 12 to 16 months.\nConsistent with that commitment, as Mike mentioned earlier, we are commencing the next steps to complete the remaining $9 billion return of capital.\nSpecifically, we are entering into an open-market repurchase program that will allow us to buy for a period of time, including when the company may have information that otherwise precludes us from trading, and we will provide updates on the progress during our earnings calls.\nSlide 9 illustrates the progress we have made, lowering our cost structure.\nSince the beginning of 2020, we have made a step change in our refining operating cost and decreased our overall cost profile by approximately $1 billion.\nWhile there is quarter-to-quarter variability, our refining operating cost in 2020 began at $6 per barrel and are now trending at a quarterly average of roughly $5 per barrel for 2021.\nWe have applied the same cost discipline framework that we use for refining operating costs to our corporate costs as well.\nThere may be variations in these corporate costs quarter to quarter.\nWe believe we have lowered our overall cost structure by more than $100 million, and we are committed to challenging ourselves every day on ways to reduce expenses.\nAs you know, natural gas is a variable cost in operating a refinery.\nThese costs have recently increased nearly $1 per MMBtu, and we anticipate this being a headwind for the third quarter.\nWhile our results reflect our focus on cost discipline, every day, we remain steadfast in our commitment to safely operate our assets and protect the health and safety of our employees, customers and the communities in which we operate.\nAs we have shared with you previously, our cost reductions should be sustainable, not impact revenue opportunities, and in no way, jeopardize the safety of our people or our operations.\nSlide 10 shows the reconciliation from net income to adjusted EBITDA, as well as the sequential change in adjusted EBITDA from first-quarter 2021 to second-quarter 2021.\nAdjusted EBITDA was more than $600 million higher quarter over quarter, driven primarily by refining and marketing.\nAs we previously mentioned, this quarter's results include the impacts of closing the Speedway sale.\nHere, you can see the $11.7 billion pre-tax gain on the sale reflected in the adjustments column of $11.6 billion, which includes other adjustments of $79 million for impairment and transaction-related costs.\nThe $3.7 billion financial tax -- excuse me, financial tax provision reflects the net impact of cash taxes and deferred tax impact.\nThe resulting $8 billion gain on sale is reflected in our quarterly net income.\nSlide 18 in our appendix walk through the specific impacts of the Speedway sale across the three financial statements.\nMoving to our segment slide results.\nSlide 11 provides an overview of our refining and marketing segment.\nThe business recorded the second consecutive quarter of positive EBITDA since the start of the COVID pandemic with adjusted EBITDA of $751 million.\nThis was an increase of $728 million when compared to the first quarter of 2021.\nThe increase was driven primarily by higher refining margins, especially in the Mid-Con region as that region's cracks improved 57% from the first quarter.\nAlso contributing to the improved results was higher utilization, which was 94% for the second quarter versus 83% in the first quarter.\nIt's important to recall that we idled two high-cost refineries in 2020.\nIf adjusted to include that capacity idled in 2020, utilization would have been approximately 78% in the first quarter of '21 and subsequently increased to 89% in the second quarter of '21.\nOperating expenses were relatively flat with the previous quarter despite the increase in utilization, reflecting the team's commitment to cost discipline despite rising variable cost.\nSlide 12 shows the change in our midstream EBITDA versus the first quarter of 2021.\nOur midstream segment continues to demonstrate earnings resiliency and stability with consistent results from the previous quarter.\nHere again, the team continues to make excellent progress executing on the strategic priorities of strict capital discipline, lowering the cost structure and portfolio optimization.\nBy the end of 2021, we estimate that MPLX will have decreased their structural cost by $300 million.\nSlide 13 presents the elements of change in our consolidated cash position for the second quarter.\nIt reflects both our continuing and discontinued operations.\nWe have also specifically called out items related to the Speedway close.\nWithin continuing operations, operating cash flow before changes in working capital was $1.5 billion in the quarter.\nChanges in working capital were flat this quarter.\nIncreasing crude prices provided a source of more than $500 million, which was mostly offset by the large receivable balance with Speedway becoming a third-party customer and typical seasonal refined product inventory builds.\nDuring the quarter, MPC decreased debt by $3.3 billion.\nAdditionally, MPLX reduced third-party debt by approximately $800 million during the quarter.\nWith respect to capital return, MPC returned $380 million to shareholders through our dividend and repurchased $981 million worth of shares using Speedway proceeds.\nAt the end of the quarter, NPC had $17.3 billion in cash and higher returning short-term investments, such as commercial paper and certificates of deposits.\nOn Slide 14, we provide our third-quarter outlook.\nWe expect total throughput volumes of roughly 2.8 million barrels per day.\nPlanned turnaround costs are projected to be approximately $195 million in the third quarter.\nThe majority of the activity will be at our Robinson and Mandan refineries in the Mid-Con region.\nAs we have previously mentioned, our turnaround activity is back half-weighted this year.\nOther operating expenses are coordinated to occur during these time periods as well.\nAnd so you are seeing the impact in our guided cost trends for the third quarter.\nTotal operating costs are projected to be $5.05 per barrel for the quarter.\nDistribution costs are expected to be approximately $1.3 billion for the quarter.\nCorporate costs are expected to be $175 million, consistent with the second quarter and reflecting the approximately $100 billion -- $100 million, excuse me, in cost that have been removed on an annual basis.\nWe will be prompt for additional questions.\nWe will now open the call to questions.\n Assistant:", "chosen": "commencing next steps towards completing remaining $9 billion return of capital over next 12 to 16 months.\nr&m segment income from operations was $224 million in q2 of 2021, compared with a loss of $1.5 billion.\nmartinez facility is expected to produce 260 million gallons per year of renewable diesel by second half of 2022.\n"}
{"prompt": "Human: These risks, uncertainties and other factors are detailed in our Form 10-K filings with the Securities and Exchange Commission.\nWith that, I'll hand the call over to Nish.\nKen will then provide a quarterly financial review and give more texture on the strength we're seeing in the demand trends across our portfolio.\nAfter that, we'll start the Q&A session.\nSo let's start with quarterly results.\nOur revenue was $340 million, up 12% overall and 3% on an organic constant currency basis.\nOur core organic product revenue increased 9% and driven by growth across our fire service and industrial PPE segments, partially offset by lower fixed gas and flame detection business, which was impacted by supply constraints.\nLooking more closely at the quarterly comparison, I want to note that our 2020 third quarter benefited from higher pandemic-driven demand for air-purifying respirators.\nIn the current quarter, we saw our APR business return to more normal levels, which was a headwind to overall growth.\nI noted on our second quarter call that our order book was strengthening, and that continued to be the case in the third quarter.\nAs an example, our backlog has increased $50 million, year-over-year.\nNotably, the backlog across our gas detection as well as our firefighter apparel is trending at record levels.\nOverall, our business remained healthy in the quarter, but supply chain disruptions in electronics and, to a lesser degree, labor shortages, did have impact on our delivery capabilities for some products.\nIn addition, our quarterly profitability was impacted by variable compensation resets and higher selling commissions along with discretionary costs as business conditions improve relative to last year.\nLastly, in this inflationary environment, pricing continues to be a key area of focus for us.\nWe implemented off-cycle increases to help mitigate higher input costs, and we continue to evaluate pricing as market conditions evolve.\nWith that as a backdrop, there are three key takeaways from the quarter that support my confidence in the outlook for MSA and our ability to navigate this environment.\nFirst, our strong balance sheet provides plenty of capacity to invest in organic and inorganic growth opportunities.\nTwo, the MSA brand continues to be a pillar of strength.\nI'm grateful that our customers see value in our products, and have been patient in waiting on delivery.\nWe're not experiencing any significant cancellations of orders.\nAnd three, the engagement level of our associates and their passion for the mission of MSA has never been greater, adding fuel to our dedication of protecting the lives of workers throughout the world.\nSo first, let me talk about inorganic growth.\nWe completed the acquisition of Bacharach in a quarter and are making good progress in our efforts to integrate Bacharach into the MSA organization.\nRecent milestones include the completion of a number of key initiatives that will help us meet financial targets that we've discussed with you on past calls.\nKen will provide more detail on the excellent progress we're making with Bacharach.\nAnd with our net debt to trailing EBITDA below two times, we continue to evaluate additional inorganic growth opportunities, staying focused on how we can continue to create value for our customers and our shareholders.\nSecond, we remain very well positioned as the technology leader in safety.\nWe continue to invest in new product development to drive organic growth while providing our customers with innovative market-leading solutions to address their challenges of protecting their employees, and increasing productivity.\nThe most recent example of this is the new connected work platform, our team unveiled at the National Safety Congress earlier this month.\nWith the many complexities associated with implementing a world-class safety program, the value of technology that drives both compliance and efficiency by simplifying safety procedures, and remotely connecting safety managers to our employees has never been more important.\nThis connected services platform will help customers create safer and more efficient work environments through reliable and actionable data in real time.\nThe new offering is a powerful hardware, software combination.\nIt features a new wearable cloud-ready gas detection device, the ALTAIR io4 that enables a broad range of capabilities not previously available with unconnected devices.\nWith direct cellular connectivity, real-time location, live gas readings and automated compliance reporting.\nThis platform provides work site managers with new safety insights and added peace of mind.\nAnother element of MSA's connected work platform is a safety subscription that extends warranty coverage, and provides automatic and ongoing software upgrades.\nWith this subscription, safety managers have a convenient way to stay on the forefront of safety innovation and on budget.\nThis new connected technology platform is a great example of the market-leading work being done by our engineering, marketing and sales teams to drive productivity for our customers.\nMSA was recently recognized as a 2021 top workplace by the Pittsburgh Post-Gazette.\nWhat makes this award particularly gratifying is the fact that it's based exclusively on employee feedback.\nFor 2021, we also earned the New Ideas Award.\nThe award is based on having the highest positive response rate to the prompt question, new ideas are encouraged at this company.\nThese recognitions are reflective of the truly special culture we have at MSA.\nAssociate engagement is always important to us.\nAnd it's especially inspiring to know that this kind of sentiment exists at a time when we faced a myriad of challenges associated with the pandemic.\nWe're executing a number of strategic programs to position MSA for continued success, and none of that happens without attracting, developing and retaining the brightest talent, and these recognitions will certainly help us on that front.\nI'll start the discussion with financial highlights centered around revenue, profitability and cash flow.\nRevenue growth was healthy in the third quarter with core revenue growth of 19%.\nThis included 9% growth in organic core revenue on a constant currency basis.\nWe're seeing robust customer demand, especially in the Americas segment.\nHowever, the persistent electronic component shortage, and labor challenges to a lesser extent, have impacted our ability to fulfill orders and is driving backlog to record levels.\nAdjusted operating margin was 15% in the quarter, which was down year-over-year driven by -- driven primarily by variable compensation resets and higher selling commissions and discretionary costs.\nThese costs are resetting from an abnormally low base in 2020.\nCash flow performance was very healthy in the quarter and continues to support ongoing investment in growth opportunities and return of capital to our shareholders.\nWe're managing working capital well, and that resulted in strong improvements in quarterly cash flow.\nNow let's take a closer look at the financial results in the third quarter.\nI'll start with a focus on revenue.\nQuarterly revenue of $340 million was up 12% overall and 3% on an organic constant currency basis.\nWhile our noncore business was off considerably on the lower level of APR revenues, it was encouraging to see core product revenues up 19% with 9% organic growth in the quarter.\nWe are seeing robust demand in the Americas segment, while revenue in the International segment is being impacted by the prevalence of COVID-19, resulting in a very uneven economic recovery across those regions, with particular weakness in the emerging markets in the International segment.\nThe quarterly book-to-bill was above one times in the quarter.\nWhile order pace strengthened throughout the quarter, supply chain constraints around electronic components, and labor availability to a lesser extent, are impacting our ability to deliver in certain areas.\nThis has resulted in backlog increasing approximately $50 million year-over-year at the end of the quarter.\nIt's difficult to predict how long the supply chain challenges will last, but at this point, we expect that the constraints around electronic components will persist well into 2022.\nGross profit was 42.9% of sales in the quarter compared to 43.4% of sales in the prior year.\nGross profit margin was negatively impacted by 120 basis points for deal-related costs and amortization.\nExcluding this, gross profit margin was up a healthy 70 basis points compared to a year ago.\nWe have implemented off-cycle price increases to offset inflation, we're seeing in electronic components, resins and other materials.\nThat said, the timing difference between pricing going effective and persistent cost inflation resulted in a tough price cost environment in the quarter.\nWe continue to evaluate pricing opportunities and have another price adjustment in Q4 in North America and early next year in international.\nSG&A expense of $87 million was up $23 million from a year ago on a reported basis.\nI want to spend a moment to dissect that amount as there are a lot of moving pieces in the quarter.\nTo level set, Q3 2020 SG&A of $65 million was abnormally low due to favorable compensation-related adjustments and the lack of discretionary spending.\nThe key drivers of the year-over-year increases are: First, we had an increase of approximately $10 million of expense from the acquisitions of Bacharach in Bristol, of which about $6 million will be recurring going forward; second, variable compensation resets and higher selling commissions added $6 million compared to last year; lastly, Discretionary costs are up $3 million associated with the increase in customer-facing activities.\nOur quarterly adjusted operating margin was 15%, down 260 basis points from a year ago.\nLooking at our segment performance, the Americas margin was 19.4%, down 160 basis points year-over-year.\nThe higher SG&A costs, I discussed previously had a significant impact on the segment.\nInternational margin was 11.3%, down 290 basis points year-over-year.\nInternational margins were impacted by lower organic revenue and higher SG&A on the drivers, discussed previously.\nOur quarterly effective tax rate was 31.5% on a GAAP basis.\nAdjusting for nonrecurring transaction costs and other restructuring matters, the effective tax rate was 24.7% in the quarter.\nTurning to cash flow and the balance sheet.\nQuarterly free cash flow was $36 million, well above 100% conversion.\nWhile overall working capital performance was strong, and improvements in receivables.\nWe built some inventory in the quarter, which aligns with our backlog.\nWe continue to execute on a balanced capital allocation strategy.\nIn the third quarter, we completed the acquisition of Bacharach and the buyout of our joint venture interest in China.\nIn the quarter, we borrowed a net $282 million of debt to fund our corporate development activity, funded $17 million of dividends to shareholders and invested $11 million in capex.\nWe finished the quarter with cash of $117 million and net debt of $495 million or 1.8 times adjusted EBITDA.\nWhile we continue to take a measured approach on M&A, our strong balance sheet provides ample capacity to continue to invest in organic and inorganic growth opportunities.\nBefore moving on, I want to provide an update on Bacharach now that we have had a full quarter of contribution.\nThe integration effort is progressing as planned, and the teams are working well together.\nBacharach contributed about $15 million of sales in the quarter, in line with what we communicated when we closed the acquisition earlier this quarter.\nThe Bacharach business is contending with many of the same electronic component challenges we are experiencing at MSA.\nLooking forward, we're pleased with the order book and backlog, and are focused on driving conversion to sales.\nWe continue to expect earnings accretion from the acquisition in line with the range we previously discussed.\nIn the quarter, we had a noncash adjustment to the product liability reserve, which resulted in just about $9 million of additional expense compared to a year ago.\nThis increase is a result of an increase in the number of asserted cumulative trauma claims pending against our subsidiary, MSA LLC\nWe continue to monitor developments and filing rates.\nWe will be conducting our annual review process in the fourth quarter, which we expect to be finalized with our 10-K filing early next year.\nAs we look ahead, we continue to operate in a very dynamic environment.\nSupply chain is the largest variable for us.\nRaw material availability as well as the cost of those inputs can be difficult to predict.\nTo put it in perspective, we had $11 million lower revenue versus 2019 this quarter.\nThe backlog is up well over $70 million versus the same period in 2019.\nWe're laser-focused on executing initiatives to mitigate the impact of the supply chain challenges on our business, both on the top line and the margin profile.\nIt is clear that the economic recovery is progressing, and we see good strength in our Americas segment.\nCOVID-19 continues to have an impact on the world to varying degrees.\nWe are seeing the impact in our International segment, where the demand recovery has taken a little longer.\nOver the course of the year, we have continued to invest in organic and inorganic growth programs that enhance our position as the safety technology leader.\nI'm proud of our team's unwavering commitment to our mission, our business and our customers.\nWe've recently launched innovative new products and services with the ALTAIR io4 and MSA+ service and enhanced our gas detection product suite with the acquisition of Bacharach.\nAnd to finish it out, we remain committed to investing in growth and profit improvement programs that will drive value and best position MSA for long-term value creation.\nFor all of us at MSA, safety is our mission, our passion and it's our purpose.\nIt goes to our associates who work at our Cranberry Township production facility and corporate center.\nThis team recently surpassed a remarkable 10 million hours without a lost time incident.\nThis means it's been more than five years since we've had an LTI at our Cranberry Township campus.\nWhile the balance of 2021 will continue to present us with various challenges, I have tremendous confidence in our strategy and the team we have executing it.\nOur business has demonstrated, its resiliency through a number of economic cycles today our products, people and passion position us to manage through this current cycle.\nAs I've communicated to our global workforce, I believe we are positioned extremely well as the leader in safety technology, ready to emerge as an even stronger organization in 2022 and beyond.\nAt this time, Ken and I will be glad to take any questions you may have.\nPlease remember that MSA does not give guidance.\n Assistant:", "chosen": "q3 revenue rose 12 percent to $340 million.\n"}
{"prompt": "Human: Greg and Jason will review our results along with commentary, and Jack and Kelly will join for Q&A.\nThese materials include GAAP to non-GAAP reconciliations for your reference.\nThese statements are based on current expectations and assumptions that are subject to a variety of risks and uncertainties.\nInformation about factors that could cause such differences can be found in today's earnings news release, in the comments made during this conference call, in the Risk Factors section of our 2020 annual report on Form 10-K and in our other reports and filings with the SEC.\nI'll start off by sharing a few thoughts about the overall business before Jason takes us through results and our outlook.\nFirst, Q1 was an excellent quarter.\nWe achieved Q1 records for sales, operating earnings and cash flow.\nWe expanded operating margins by 220 basis points and ended the quarter with backlog of $11.3 billion, up 8% versus last year.\nAdditionally, demand remains strong, resulting in orders that were higher than any other first quarter in our history.\nSecond, our Software and Services segment had another outstanding quarter and continues to drive revenue growth and operating margin expansion.\nSales for the quarter were up 15%, driven by growth across our LMR, video security and command center software technologies.\nAnd the segment also finished with operating margins up 310 basis points versus last year.\nAnd finally, based on the increased demand we're seeing across our business and our strong backlog position, we're raising our full year guidance for both sales and earnings per share for the full year.\nOur Q1 results included revenue of $1.8 billion, up 7%, including $48 million from acquisitions and $32 million from favorable currency.\nGAAP operating earnings of $298 million and operating margins of 16.8% of sales compared to 15.6% in the year ago quarter.\nNon-GAAP operating earnings of $411 million, up $64 million or 18%, and non-GAAP operating margins of 23.2% of sales, up from 21%, driven by higher sales and improved operating leverage in both segments.\nGAAP earnings per share of $1.41 compared to $1.12 in the year ago quarter.\nThe increase was primarily due to higher sales volume, improved operating leverage and lower legal fees, partially offset by the gain from the sale of a manufacturing facility recognized in the prior year.\nNon-GAAP earnings per share of $1.87 compared to $1.49 last year, primarily due to higher sales and improved operating leverage in both segments, higher pension income and a lower diluted share count, partially offset by a higher effective tax rate.\nopex in Q1 was $455 million, up $4 million versus last year, primarily due to costs related to acquisitions, partially offset by lower discretionary spend.\nTurning to cash flow.\nOur Q1 operating cash flow was $370 million compared with $308 million in the prior year, and free cash flow was $318 million compared with $260 million in the prior year.\nThe increase in cash flow was primarily due to higher sales and improved working capital, partially offset by higher cash taxes.\nCapital allocation for Q1 included $170 million of share repurchases at an average price of $175.53, $121 million in cash dividends and $52 million of capex.\nDuring the quarter, we entered into a new five year $2.25 billion revolving credit facility, replacing our prior $2.2 billion facility.\nAnd subsequent to quarter end, the Board of Directors approved a $2 billion increase to the share repurchase program.\nMoving to our segment results.\nQ1 Products and Systems Integration sales were $1 billion, up 2%, primarily driven by growth in video security and professional and commercial radio, partially offset by lower sales of public safety LMR, which were impacted by supply constraints.\nRevenue from acquisitions in the quarter was $35 million.\nOperating earnings were $131 million or 12.9% of sales, up from 12.4% in the year prior on higher sales and improved leverage.\nSome notable Q1 wins and achievements in this segment include a $300 million frame agreement with the German MOD to meet their TETRA LMR requirements with an initial order of $154 million recorded in Q1.\n$72 million of video sales with government customers, up 32% from last year.\nA $37 million P25 upgrade for a government agency in Canada.\nA $33 million TETRA upgrade for a large customer in Europe.\nAnd a $12 million P25 order with a large U.S. federal customer.\nMoving to the Software and Services segment.\nQ1 revenue was $758 million, up 15% from last year, driven by growth in LMR services, video security and command center software.\nRevenue from acquisitions in the quarter was $13 million.\nOperating earnings were $280 million or 36.9% of sales, up 310 basis points from last year, driven by higher sales, higher gross margins and improved leverage.\nSome notable Q1 wins in the segment include, over $40 million of orders for P25 services, upgrades and body-worn cameras with Nashville, Tennessee.\nA $35 million push-to-talk over broadband multiyear contract with a large U.S. customer, a $22 million P25 and push-to-talk over broadband contract from a large middle eastern customer.\nThe $13 million of body-worn cameras with multiple U.K. customers and our largest cloud-based command center software win to date.\nA $5 million contract with St. Lucie, Florida.\nAdditionally, we announced a new product integration between our V300 body-worn camera and our APX P25 radio platform.\nLooking at our regional results.\nNorth America Q1 revenue was $1.2 billion, up 6% on growth in LMR, video security and command center software.\nInternational Q1 revenue of $588 million, was up 9%, with growth in EMEA, Asia Pac and Latin America.\nThe growth was driven by video security and LMR. Moving to backlog.\nEnding backlog was a Q1 record of $11.3 billion, up $866 million compared to last year, driven by $639 million of growth in North America and $227 million of growth internationally.\nSequentially, backlog was down $130 million, driven by revenue recognition on the Airwave and ESN contracts, partially offset with international growth in LMR products.\nSoftware and Services backlog was up $548 million compared to last year, driven by $491 million of growth in multiyear LMR services and command center software contracts in North America, and $58 million of international software growth.\nThe favorable impact of FX to backlog was offset by revenue recognition for Airwave and ESN.\nSequentially, backlog was down $269 million, also driven by revenue recognition for Airwave and ESN.\nProducts and SI backlog was $318 million compared -- up $318 million compared to last year.\nPrimarily driven by LMR growth in both regions.\nSequentially, backlog was up $139 million, driven by international LMR growth.\nTurning to our outlook.\nWe expect Q2 sales to be up between 19% and 20%, with non-GAAP earnings per share between $1.90 and $1.95 per share.\nThis assumes FX at current spot rates, weighted average diluted share count of approximately 173 million shares and an effective tax rate of 23% to 24%.\nAnd for the full year, we now expect sales to be up between 8% and 9%, an increase from our prior guide of 7.25% to 8%.\nAnd we expect full year non-GAAP earnings per share between $8.70 and $8.80 per share, up from our prior guidance of $8.50 to $8.62 per share.\nThis increased outlook includes the ongoing supply chain constraints, primarily in LMR products and assumes FX at current spot rates.\nA weighted average diluted share count of 173 million shares and an effective tax rate of 22.5% to 23%.\nAnd now I'd like to end with a few thoughts on the business.\nFirst, our results for the quarter were outstanding.\nWe achieved Q1 record sales, orders, operating earnings and cash flow.\nExpanded both gross and operating margins, achieved double-digit growth in video security, command center software and LMR services and our PCR business returned to growth.\nAdditionally, we exited the quarter with a record Q1 backlog and continued strong demand that we expect will drive growth for the remainder of the year, inclusive of the supply challenges that we have.\nWe also announced today that the Board approved a $2 billion increase to our share repurchase program.\nThe second thing I would say is demand in our video security business is really strong.\nAnd we now expect full year growth to be 20% plus, up from the high teens we referenced on our last call.\nIn fixed video, which makes up approximately 70% of the total video security revenue, our investments in AI analytics, cloud services, access control and NDAA-compliant manufacturing is differentiating us from our competitors and driving growth faster than the overall market.\nAnd in mobile video, the call for more transparency is driving growth for our purpose-built body-worn and in-car camera solutions, and we're gaining share in a market that has predominantly been served by one vendor.\nDuring the quarter, we had several large body-worn camera wins, both in the U.S. and internationally.\nAdditionally, during the quarter, we announced two new offerings, the integration of our V300 body-worn camera with our APX P25 radios, which allow us to leverage our market-leading LMR installed base and our $49 per month body-worn camera as a service offering, which offers every police agency in the U.S. with affordable access to a video solution that's fully integrated with our command central software suite.\nAnd finally, I'm very pleased with our progress in leveraging our leading installed base in LMR to expand into command center software, video security and LMR services.\nToday, almost half our revenue is generated from these higher growth areas, up from 20% five years ago, and our addressable market has tripled over that same period of time.\nAnd while we've made significant progress, I absolutely believe we still have a long runway ahead as we continue to deploy capital both organically and inorganically in these areas to drive revenue, margin and cash flow for the company.\n[Operator Instructions] Operator, would you please remind our callers on the line how to ask a question?\n Assistant:", "chosen": "sees q2 non-gaap earnings per share $1.90 to $1.95.\nsees fy revenue up 8 to 9 percent.\nsees q2 revenue up 19 to 20 percent.\nq1 sales rose 7 percent to $1.8 billion.\nq1 non-gaap earnings per share $1.87.\nq1 gaap earnings per share $1.41.\nbacklog of $11.3 billion at quarter end.\nsees fy non-gaap earnings per share $8.70 to $8.80.\n"}
{"prompt": "Human: These statements speak only as of the date made, and M&T undertakes no obligation to update them.\nRevenue in our fee generating businesses was particularly strong including mortgage banking, trust and brokerage and payments.\nCredit trends are stable to improving, illustrated by net charge-offs, about half our long-term average, a modest reserve release and little change in the level of nonaccrual loans.\nIn alignment with the strong revenue trends and the improved profitability over the last year, incentive compensation is rising as well.\nWe'll offer some details on that in a moment.\nLastly, our capital levels continue to rise.\nThe CET1 ratio is near a record high as we await the closing of the People's United merger.\nNow let's review our results for the quarter.\nDiluted GAAP earnings per common share were $3.69 for the third quarter of 2021, improved from $3.41 in the second quarter of 2021 and $2.75 in the third quarter of 2020.\nNet income for the quarter was $495 million, compared with $458 million in the linked quarter and $372 million in the year-ago quarter.\nOn a GAAP basis, M&T's third-quarter results produced an annualized rate of return on average assets of 1.28% and an annualized return on average common equity of 12.16%.\nThis compares with rates of 1.22% and 11.5%, respectively, in the previous quarter.\nIncluded in GAAP results in the recent quarter were after-tax expenses from the amortization of intangible assets amounting to $2 million or $0.02 per common share, little change from the prior quarter.\nAlso included in the quarter's results were merger-related charges of $9 million related to M&T's proposed acquisition of People's United Financial.\nThis amounted to $7 million after tax or $0.05 per common share.\nResults for this year's second quarter included $4 million of such charges amounting to $3 million after-tax effect or $0.02 per common share.\nConsistent with our long-term practice, M&T provides supplemental reporting of its results on a net operating or tangible basis from which we have only ever excluded the after-tax effect of amortization of intangible assets, as well as any gains or expenses associated with mergers and acquisitions.\nM&T's net operating income for the third quarter, which excludes intangible amortization and the merger-related expenses, was $504 million.\nCompare that with $463 million in the linked quarter and $375 million in last year's third quarter.\nDiluted net operating earnings per common share were $3.76 for the recent quarter, improved from $3.45 in 2021 second quarter and up from $2.77 in the third quarter of 2020.\nNet operating income yielded annualized rates of return on average tangible assets and average tangible common shareholders' equity of 1.34% and 17.54% for the recent quarter.\nThe comparable returns were 1.27% and 16.68% in the second quarter of 2021.\nLet's take a look at some of the details that drove our results.\nTaxable equivalent net interest income was $971 million in the third quarter of 2021, compared with $946 million in the linked quarter.\nHigher income from PPP loans accounted for the majority of the $25 million quarter-over-quarter increase in net interest income and the second round of PPP loans began to receive forgiveness from the Small Business Administration.\nThe net interest margin for the past quarter was $2 dollars -- excuse me, 2.74%, down just three basis points from 2.77% in the linked quarter.\nWe estimate that the higher balance of cash on deposit at Federal Reserve contributed about 13 basis points of pressure to the margin.\nLargely offsetting that was the higher income from PPP loans both scheduled amortization and accelerated recognition of fees from forgiven loans, which added an estimated 10 basis points to the margin.\nAll other factors including lower income from hedges, a slightly lower cost of deposits and an additional accrual day netted to zero impact.\nCompared with the second quarter of 2021, average interest earning assets increased by 3%, reflecting a 22% increase in money market placements, primarily cash on deposit with the Fed and a 3% decline in investment securities.\nAverage loans outstanding declined about 3% compared with the previous quarter.\nLooking at the loans by category, on an average basis compared with the linked quarter.\nOverall, commercial and industrial loans declined by $3.3 billion or 12%.\nThe primary driver was a $2.4 billion decline in PPP loans.\nDealer floor plan loans declined by $803 million, reflecting the ongoing impact from vehicle production and inventory issues seen across the industry.\nAll other C&I loans were essentially a little changed from the prior quarter.\nCommercial real estate loans were also little changed from the second quarter.\nResidential real estate loans declined by just under 4%.\nThere are a few moving parts underlying that figure that are worth highlighting.\nBalance decreases due to normal prepayments and principal amortization, including the Hudson City portfolio, drove some of the decrease, as well as repooling of loans previously purchased from Ginnie Mae servicing pools, offset -- those were offset by retention of new loan production, which will be a bigger factor in the fourth quarter.\nConsumer loans were up 3%, consistent with the recent quarters and continuing to be led by growth in indirect auto and recreational finance loans.\nOn an end-of-period basis, total loans were down 4%, reflecting most of the same factors I just mentioned.\nThe 11% decline in C&I loans include a decline of PPP loans outstanding to $2.2 billion at September 30.\nAverage core customer deposits, which exclude CDs over $250,000, increased 2% or $2.8 billion compared with the second quarter.\nThat figure includes $3.8 billion of noninterest-bearing deposits partially offset by lower interest checking deposits.\nTurning to noninterest income.\nNoninterest income totaled $569 million in the third quarter, compared with $514 million in the linked quarter.\nThe recent quarter included an insignificant valuation gain on equity securities, largely on our remaining holdings of GSE preferred stock, while the prior quarter included $11 million of valuation losses.\nMortgage banking revenues were $160 million in the recent quarter, compared with $133 million in the linked quarter.\nRevenues for our residential mortgage business, including both origination and servicing activities, were $110 million in the third quarter, compared with $98 million in the prior quarter.\nResidential mortgage loans originated for sale were down about 7% to $1.1 billion when compared with the second quarter.\nHowever, the lower volume was more than offset by higher gain on sale margins.\nCommercial mortgage banking revenues were $50 million in the third quarter, compared with $35 million in the linked quarter.\nThose results reflect a strong originations quarter combined with prepayment fees on loans previously securitized.\nTrust income was $157 million in the recent quarter, compared with $163 million in the previous quarter.\nRecall that the second quarter's results included $4 million of seasonal fees arising from tax preparation work we undertake for clients, which did not recur in the third quarter.\nAlso, in conjunction with the transfer of M&T's retail brokerage and advisory business to the platform of LPL Financial in mid-June of this year, about $10 million in revenues associated with managed investment accounts, previously classified as trust income, are now included in brokerage services income.\nService charges on deposit accounts were $105 million, compared with $99 million in the second quarter.\nThe primary driver of the increase was customer payments related activity.\nOperating expenses for the third quarter, which exclude the amortization of intangible assets and merger-related expenses previously mentioned, were $888 million.\nThe comparable figure was $859 million in the linked quarter.\nSalaries and benefits were $510 million for the quarter, compared with $479 million in the prior quarter.\nAs was the case in previous quarters this year, the higher salaries and benefits reflect revenue generation in certain business lines and incentive compensation associated with that revenue, notably commercial mortgage banking and trust.\nAlso, at the enterprise level, we are accruing the corporate incentive at a higher rate in 2021, reflecting our expectation that M&T's full-year earnings and profits will be higher than they were in 2020.\nOther cost of operations in the recent quarter, including $5 million from the accelerated amortization of capitalized mortgage servicing rights as a result of the prepayments of previously securitized commercial mortgage loans that we referenced earlier.\nLastly, year-over-year growth in trust income and assets under management in our retirement business has carried with us an increase in the share of those fees paid to subadvisors, which are included in other cost of operations.\nAlso recall that the other cost of operations for the second quarter included an $8 million addition to the valuation allowance for our capitalized residential mortgage servicing rights.\nThere were no adjustments to the valuation allowance in the third quarter.\nThe efficiency ratio, which excludes intangible amortization and merger-related costs from the numerator and securities gains or losses from the denominator was 57.7% in the recent quarter, compared with 58.4% in 2021's second quarter.\nNext, let's turn to credit.\nCredit trends continue to stabilize, but as has been the case for the past little while, some industries are improving more rapidly than others, reflecting challenges such as the supply chain, pressure on materials costs, and the cost and availability of labor.\nThe allowance for credit losses declined by $60 million to stand at $1.5 billion at the end of the third quarter.\nThis reflects a $20 million recapture of previous provisions for credit losses, combined with $40 million of net charge-offs in the quarter.\nAt September 30, the allowance for credit losses as a percentage of loans outstanding was unchanged from June 30 at 1.62%.\nAnnualized net charge-offs as a percentage of total loans were 17 basis points for the third quarter, 19 basis points in the second quarter.\nThe allowance for credit losses at the end of the quarter reflects our assessment of credit losses in the portfolio under the CECL loss measurement methodology which includes our macroeconomic forecasts.\nAs we've previously indicated, our macroeconomic forecast uses a number of economic variables with the largest drivers being the unemployment rate and GDP.\nOur forecast assumes the national unemployment rate continues to be elevated compared to prepandemic levels, averaging 5.5% over 2021, followed by a gradual improvement, reaching 3.5% by mid-2023.\nThe forecast also assumes that GDP grows at a 6.8% annual rate over 2021 and 2.7% annual rate during 2022.\nNonaccrual loans were essentially flat at $2.2 billion compared with June 30, but increased as a percentage of loans to 2.4%, compared with 2.31% of loans at the end of June.\nWe also expect to disclose that our level of criticized loans is a little changed from the second quarter when we file our third-quarter 10-Q in a few weeks.\nLoans past due, on which we continue to accrue interest, were $1 billion at the end of the recent quarter.\nM&T's Common Equity Tier 1 ratio was an estimated 11.1% at quarter end, compared with 10.7% at the end of the second quarter.\nThis reflects continued strong organic capital generation combined with lower risk-weighted assets.\nAs previously noted, while the People's merger is pending, we don't plan to engage in any stock repurchase activity.\nNow let's turn to the outlook.\nAs we enter the final quarter of the year, we see a little need to change our outlook for the remainder of 2021.\nWe expect year-over-year loan growth to be flat to up slightly on a reported basis and flat to down slightly, excluding the impact from PPP loans, which reflects the decline in dealer floor plan loans.\nWe continue to expect net interest income to be down a low single-digit percentage from full-year 2020.\nWe noted on the July conference call that we expected net interest income in the third and fourth quarters to, on average, be in line with the $946 million in the second quarter.\nWe still expect that to be true, but the faster than expected forgiveness of PPP loans did pull some of that income forward into the third quarter from the fourth quarter.\nWe've slightly exceeded our outlook for low single-digit growth in noninterest income.\nAs we begin to retain the majority of residential mortgage loans we originate on the balance sheet, residential gains on sale will be primarily driven by Ginnie Mae repooling gains.\nMomentum in the trust and payments-related businesses remain strong.\nExpenses have grown faster than we forecast in January, but with most of that growth directly connected to better-than-expected revenue and better-than-expected net income trend.\nThe credit environment continues to improve along with the overall economy, but some segments are recovering more slowly than others.\nWe believe criticized assets are at or near their peak, but there still remains some risk of downgrades within criticized loans from accruing to nonaccruing.\nOur preparations for completion of the merger with People's United continue while we wait for regulatory approval.\nOur projections as to the financial impact remain largely in line with what we offered at the time of announcement this past February.\nFollowing our usual practice, we'll offer our thoughts for 2022 on the January conference call.\nOf course, as you are all aware, our projections are subject to a number of uncertainties and various assumptions regarding national and regional economic growth, changes in interest rates, political events and other macroeconomic factors, which may differ materially from what actually unfolds in the future.\nNow let's open up the call to questions, before which Emma will briefly review the instructions.\n Assistant:", "chosen": "compname reports q3 gaap earnings of $3.69 per share.\nq3 operating earnings per share $3.76.\nquarterly net interest income expressed on a taxable-equivalent basis totaled $971 million , up from $947 million in q3 2020.\nq3 gaap earnings per share $3.69.\nquarterly net loan charge-offs were $40 million versus $30 million.\nallowance for credit losses totaled $1.52 billion or 1.62% of loans outstanding at september 30, 2021.\ncompname posts q3 gaap share $3.69.\nqtrly net interest income expressed on a taxable-equivalent basis totaled $971 million , up from $947 million in q3 of 2020.\nq3 gaap share $3.69.\nqtrly net loan charge-offs were $40 million versus $30 million.\n"}
{"prompt": "Human: I'm joined today by Patrick Kaltenbach, our Chief Executive Officer; and Shawn Vadala, our Chief Financial Officer.\nLet me cover just a couple of administrative matters.\nFor a discussion of these risks and uncertainties, please see our recent Form 10-K and other reports filed with the SEC.\nJust one other item.\nMore detailed information with respect to the use of and differences between non-GAAP financial measures and most directly comparable GAAP measures is provided in our Form 8-K.\nI am pleased to report another quarter of very strong results.\nCustomer demand was robust and our growth initiatives continue to be very effective.\nOur teams throughout the world are executing very well.\nI want to give a special acknowledgment to our global supply chain team, which is navigating a myriad of challenges with respect to raw materials, components and transportation.\nOur ability to continue to meet heightened customer demand while overcoming the dynamic challenges in the supply chain is proving to be a competitive advantage in this environment.\nNow let me turn to our financial results.\nLocal currency sales was 16%, and we had broad-based growth in all regions.\nOur Laboratory business had excellent growth and our industrial product lines also performed very well.\nFood retail was a headwind, drove overall sales growth as we had significant decline in the quarter.\nWith our strong sales growth and good execution, we achieved a 19% growth in adjusted operating income and a 24% increase in adjusted EPS.\nCash flow generation was very strong in the quarter.\nOur end markets remain favorable, and our strategic initiatives are very effective at capturing growth.\nOur Spinnaker sales and marketing approach provides the framework to identify and pursue the most attractive market segments while also increasing our sales force exposure to the most strategic customers.\nWe also continue to invest in the strength and breadth of our product portfolio, further extending our technology lead and reinforcing customer trust through our global service offering, which supports customers' productivity.\nWe have several -- we have successfully navigated the challenges of the global supply chain to date, but are cautious as demand dynamics remain challenging and conditions can change rapidly.\nAlthough pockets of uncertainty exists in the global economy, we believe we are ideally positioned to gain market share.\nWith proven strategies, good demand in our end markets and continued focused execution on our growth and margin initiatives, we believe we are in an excellent position to deliver strong results in 2021 and 2022.\nLet me now turn it to Shawn to cover the financial and guidance details, and then I will come back with some additional commentary on the business, and our outlook for next year.\nSales were $952 million in the quarter, an increase of 16% in local currency.\nOn a U.S. dollar basis, sales increased 18% as currency benefited sales growth by 2% in the quarter.\nThe PendoTECH acquisition contributed approximately 1% to local currency sales growth in the quarter, while we estimate that COVID testing was a headwind of approximately 1% to sales growth.\nLast year, the benefit in our pipette business from COVID testing labs was particularly strong.\nOn Slide four, we show sales growth by region.\nLocal currency sales increased 20% in the Americas, 10% in Europe and 16% in Asia/Rest of the World.\nLocal currency sales increased 19% in China in the quarter.\nThe next slide shows sales growth by region year-to-date.\nLocal currency sales grew 20% for the nine months with a 21% increase in the Americas, 15% in Europe, and 23% growth in Asia/Rest of World.\nOn Slide six, we summarize local currency sales growth by product area.\nFor the third quarter, Laboratory sales increased 23%, Industrial increased 12%, with core Industrial up 11% and product inspection up 13%.\nFood Retail came in worse than we expected with a decline of 19% in the quarter.\nThe next slide shows local currency sales growth by product area year-to-date.\nLaboratory sales increased 26%, Industrial increased 16%, with core Industrial up 21% and product inspection up 9%.\nFood Retail declined 1% for the nine-month period.\nLet me now move to the rest of the P and L, which is summarized on Slide eight.\nGross margin in the quarter was 58.4%, a 20 basis point increase over the prior year level of 58.2%.\nWe benefited from volume and pricing which was offset in part by the challenges in the global supply chain, namely higher transportation, logistics and material costs as well as the impact of temporary cost actions we undertook in 2020.\nR and D amounted to $42.3 million in the quarter, which is a 19% increase in local currency over the prior period.\nThe impact of temporary cost savings undertaken last year and greater project activity contributed to this increase.\nSG and A amounted to $240.7 million, a 16% increase in local currency over the prior year.\nThe impact of the temporary cost savings that we undertook last year, higher variable compensation, and increased investments in sales and marketing were the principal factors driving the increase.\nAdjusted operating profit amounted to $272.8 million in the quarter, a 19% increase over the prior year amount of $230 million.\nWe are pleased with this increase, which reflects very strong sales growth combined with good execution.\nAdjusted operating margins reached 28.7%, a 20 basis point increase over the prior year level of 28.5%.\nOn a teo-year combined basis, our margins were up 270 basis points as the prior year margin benefited from the cost actions we implemented due to the pandemic.\nA couple of final comments on the P and L. Amortization amounted to $16 million in the quarter, interest expense was $11.8 million in the quarter, other income in the quarter amounted to $3.3 million primarily reflecting nonservice-related pension income.\nOur effective tax rate before discrete items and adjusted for the timing of stock option deductions was 19.5%.\nFully diluted shares amounted to $23.4 million in the quarter, which is a 3% decline from the prior year.\nAdjusted earnings per share for the quarter was $8.72, a 24% increase over the prior year amount of $7.02.\nOn a reported basis in the quarter, earnings per share was $8.71 as compared to $6.68 in the prior year.\nReported earnings per share in the quarter includes $0.18 of purchased intangible amortization, $0.02 of restructuring offset by $0.19 due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises.\nThe next slide shows our P and L year-to-date.\nLocal currency sales grew 20%, adjusted operating income increased 35%, with margins up 210 basis points.\nAdjusted earnings per share grew 43% on a year-to-date basis.\nThat covers the P and L, and let me now comment on cash flow.\nIn the quarter, adjusted free cash flow amounted to $243.1 million, which is an increase of 19% and on a per share basis as compared to the prior year.\nWe are very happy with our cash flow generation.\nDSO was 35 days, which is two days less than the prior year.\nITO came in at 4.5 times, which is slightly better than last year.\nOn a year-to-date basis, adjusted free cash flow amounted to $615.3 million, an increase of 48% on a per share basis as compared to the prior year.\nLet me now turn to guidance.\nWhile our end markets remain favorable, forecasting continues to be challenging.\nThere are pockets of uncertainty in the global economy, most notably in China.\nFurthermore, the widespread challenges within the supply chain and in transportation and logistics and the corresponding inflationary impact also creates uncertainty.\nFinally, we have seen over the last several months how COVID variance and lockdowns can occur quickly.\nWe recognize the importance of remaining agile and adapting to unexpected changes in the environment.\nWe are very pleased with our ability to navigate the unprecedented challenges of the last two years, which we believe reflects the strength of our organization.\nWhile we remain cautious about factors outside of our control, we feel very good about our growth initiatives and our ability to continue to gain market share and drive margin improvement via our pricing and Stern Drive initiatives.\nNow let me cover the specifics.\nFor the full year 2021, we now expect local currency sales growth in 2021 and to be approximately 17%.\nThis compares to previous guidance of 15%.\nWe expect full year adjusted earnings per share to be in the range of $33.35 to $33.40, which is a growth rate of 30%.\nThis compares to previous guidance of adjusted earnings per share in the range of $32.60 to $32.90.\nWith respect to the fourth quarter, we would expect local currency sales growth to be approximately 8% and expect adjusted earnings per share to be in the range of $10 to $10.05, a growth rate of 8% to 9%.\nFor the full year 2022, based on our assessment of market conditions today, we would expect local currency sales growth to be approximately 6% and adjusted earnings per share to be in the range of $37.25 to $37.65.\nUsing the midpoint of 2021 guidance, this reflects a growth rate of 12% to 13%.\nSome further comments on 2022 guidance.\nWe expect a slight headwind to sales growth from the impact of COVID testing on our pipette business.\nWe expect interest expense to be approximately $50 million in 2022 in total amortization, including purchase intangible amortization to be $65 million.\nPurchase intangible amortization is excluded from adjusted earnings per share and is estimated at $24 million on a pre-tax basis or $0.79 per share in 2022.\nIn 2022, other income, which is below operating profit, will amount to approximately $13.5 million.\nThis is higher than the $10.7 million expected in 2021 due to an expected increase in pension income.\nFinally, we assume our effective tax rate before discrete items will be 19.5% in both 2021 and 2022.\nIn terms of free cash flow for 2021, we now estimate it will reach $810 million, which reflects a 29% growth on a per share basis.\nFor 2022, we would estimate free cash flow in the range of $845 million.\nCash flow in 2022 is impacted by higher variable compensation payments related to the very strong performance in 2021.\nOnce we get beyond 2022, we expect free cash flow per share will grow in line with earnings per share and net income conversion will be in the 100% range.\nWe expect to repurchase approximately $1 billion in shares in both 2021 and 2022, which should allow us to maintain a net debt-to-EBITDA ratio of approximately 1.5 times.\nSome final details on guidance.\nWith respect to the impact of currency on sales growth, we expect currency to increase sales growth by approximately 3% in 2021 and be relatively neutral to sales growth in Q4.\nIn 2022, we would expect currency to decrease sales growth by approximately 1%.\nIn terms of adjusted EPS, currency will benefit growth by approximately 4% in 2021 and be a slight headwind to adjusted earnings per share growth in 2022.\nWe do not expect currency to impact adjusted earnings per share in the fourth quarter.\nLet me start with some comments on our operating results.\nOur Lab business had outstanding growth in the third quarter despite having more challenging comparisons than it faced in the first half of the year.\nAlmost all product lines and regions had very strong growth.\nWe expect good growth in the fourth quarter, but it won't be the same level we have seen year-to-date.\nAs we look at 2022, we expect the strong biopharma trends to continue to be favorable and expect other end markets to do well, but we won't benefit from catch-up demand segments like chemical that we benefited from this year.\nWe also expect a bit of headwind in our pipette business from lower COVID testing activity.\nOverall, we believe we are well positioned to continue to capture growth and gain market share in our Laboratory business.\nAn additional nice development within our Lab business is that we obtained a $36 million grant from the U.S. Department of Defense to expand our pipette tip production in California.\nWe estimate that by the end of 2023, we will expand our global tip production by approximately 15% and the grant will also allow us to enhance manufacturing, automation and warehouse and logistics surrounding tips.\nWe are happy with this grant, which allows us to cost effectively increase tip capacity while at the same time, improving productivity.\nTurning to our Industrial business.\nCore Industrial did well in the third quarter as we are benefiting from some catch-up in demand and have been well positioned to benefit from increasing trends in automation and digitalization.\nCore Industrial should have a solid fourth quarter.\nWe will face tougher comparisons in core Industrial in 2022, but expect to continue to drive market share gains overall.\nProduct Inspection grew 13% in the quarter.\nGrowth was especially strong in the Americas.\nWe expect good growth in the fourth quarter and we are cautiously optimistic about solid growth in 2022 as we should benefit from some pent-up investments from large packaged food customers and our strong product portfolio.\nFinally, Food Retail declined 19% with pronounced declines in Americas and Asia and Rest of the World.\nOur production was impacted by shortages of electronic components as these products use more standardized components that are also used in consumer electronic products.\nWe were also impacted by the timing of project activity.\nWe would expect Food Retail to also decline in the fourth quarter.\nWe are not forecasting much growth in 2022 as we continue to manage this business for profitability.\nNow let me make some additional comments by geography.\nSales in Europe increased 10% in the quarter with very strong growth in Lab.\nWe would expect solid growth in Europe in 2022 against very good growth in 2021.\nAmericas increased 20% in the quarter with excellent growth in Lab, core Industrial and Product Inspection.\nAs mentioned earlier, Food Retail was down significantly in the Americas.\nWhile we will face challenging comparisons in the Americas in 2022, we expect overall good growth.\nFinally, Asia and the Rest of the World grew 16% in the quarter with outstanding growth in Laboratory and good growth in Product Inspection.\nCore Industrial also did well.\nChina had good growth, particularly given the strong growth in the prior year.\nWe expect good growth in China in Q4 and in 2022, although it won't be at the same level we have seen year-to-date.\nWe are very strongly positioned in China, and the team is executing well.\nOne final comment on the business.\nService and Consumables performed well and were up 12% in the quarter.\nWe continue to be very pleased with the growth of -- in this important and profitable part of the business.\nThat concludes my comments on the business.\nAnd now let me provide some context on our 2022 guidance.\nWe believe we are emerging from this pandemic as a stronger company and are further distancing ourselves from competition in several ways.\nDuring the last two years, we have accelerated our digital transformation in sales and marketing.\nWe had already started on this path, but the disruption from COVID-19 allowed us to significantly accelerate our digital approach.\nOur use of eDemos, our vast and expanded digital library of selling materials, further development of selling guides and greater utilization of telesales and telemarketing resources are clear differentiators for remote selling.\nAnd while we expect our face-to-face customer interactions to continue to increase in 2022, these digital tools allow us to expand our customer reach in a cost-effective manner.\nIn addition to the digital gains in sales and marketing, we have also made great strides in sharpening our focus on the most attractive market segments, allowing us to accelerate market share gains.\nIncreasing sophistication in data analytics is fundamental to our ability to guide our sales force to the best growth opportunities.\nWe continue to provide what we refer to internally as Top K alerts.\nThese alerts provide tailored actionable information about potential sales opportunities, which our market organizations qualify and integrate into the territory planning and target setting.\nWe see the trend for greater use and sophistication of data analytics continuing in 2022 and beyond.\nOur global service network and our ability to continue to service our customers during this period has led to steady increases in customer satisfaction.\nService keeps us close to customers, builds trust and the customer is much more likely to purchase additional products if they utilize our service offering.\nWe continue to develop service tailored specific to customer needs.\nFor example, we quickly developed a service tool for customers who utilize analytical balances and quality control to meet new requirements from the European pharmacopeia that goes into effect in January.\nIn addition, as software is becoming an integral part of our solutions, harmonized services for software are becoming increasingly important.\nA new service offering supports our instrument control software LabX to enable customers to achieve consistent performance and meet regulatory compliance.\nThese are just two examples.\nWe have many more within our portfolio.\nWe believe service will continue to provide a good opportunity for growth and differentiation from our competitors, and we use the same data analytics approach to leverage service opportunities within our installed base.\nNew product development also continues to be core to our growth potential.\nI am excited about the many launches that will take place over the coming year.\nOur product pipeline continues to be very strong and product launches reinforce our technology leadership.\nWhile most product and software development will continue to be done in-house, we will also complement this with small acquisitions like the one we completed in October.\nWe acquired a software company Scale Up Systems, which is the leading provider of scale-up and reaction modeling software for pharma and chemical customers.\nIt is a great addition to our AutoChem offering.\nAnd we now have a comprehensive offering for process development and scale-up for the pharma and chemical industries.\nTurning now to supply chain and margin initiatives.\nAs already mentioned, our supply chain team has shown tremendous agility in adapting to very dynamic market conditions and continuing to support customers.\nThere are risks and increasing inflationary pressures in the supply chain and transportation and logistics markets.\nWe have mitigation strategies in place to help offset and believe we can continue to manage effectively, but are cautious as conditions can change quickly.\nOur pricing program and Stern Drive productivity initiatives have good traction and will help us to offset inflationary pressures that we will likely continue to face in the coming months.\nI trust this provides some context to our guidance and shows the confidence we have in our ability to continue to capture growth, gain market share, and deliver solid earnings growth in 2021 and in 2022 and beyond.\n Assistant:", "chosen": "compname posts q3 earnings per share of $8.71.\nq3 adjusted non-gaap earnings per share $8.72.\nq3 earnings per share $8.71.\ncompared with prior year, total reported gaap sales increased 18% to $952.0 million.\nanticipates local currency sales growth for q4 of 2021 will be about 8%.\nsees q4 adjusted earnings per share to be $10.00 to $10.05, a growth rate of 8% to 9%.\nanticipates local currency sales growth in 2022 will be about 6%.\n2022 sales growth of about 6% is expected to result in adjusted earnings per share in range of $37.25 to $37.65.\n"}
{"prompt": "Human: Those and any other projections represent the current opinions of management, which are subject to change at any time, and we assume no obligation to update them.\nHome buying activity remained solid during the third quarter.\nWe continued to experience elevated demand and despite the return of some seasonality in the quarter, monthly demand has improved sequentially from August to September and October.\nThe macro drivers for market demand continued to be what we've experienced all of '21: limited housing supply, still extremely low interest rates and higher home buying activity from millennials and baby boomers who are experiencing life events associated with changes in housing needs.\nNew and existing resale housing supply remained tight, especially for affordable entry-level homes.\nMortgage interest rates are still very attractive as entry-level buyers are typically focused on monthly payment.\nThe low interest rates continued to offset higher ASPS and we are seeing elevated demand persist.\nAnd lastly, we continued to see household formation for millennials and downsizing for baby boomers, both of which create demand for the type of housing that we build.\nWe believe these underlying demographic factors will not fundamentally change in the near future, and although they may be bumpy if interest rates move materially within a short period of time.\nThis quarter, we leaned on our deep vendor relations to navigate ongoing industrywide supply chain challenges.\nThese strategic supply side partnerships and our operating model focus on spec homes and limited SKUs, allowed us to deliver 3,112 homes, which set the company record for the highest third quarter of home closings.\nWe also set two additional quarterly company records: we generated the highest quarterly home closing gross margin of 29.7% in company history as a result of pricing power, more than offsetting the elevated lumber and other commodity costs; and our quarterly diluted earnings per share of $5.25 was the highest in our company's history.\nWe grew community count sequentially again this quarter as well as year-over-year, overcoming municipal delays and supply shortages and land development as well.\nAs of September 30, 2021, we had 236 ending communities and remain confident in our ability to achieve our goal of 300 communities by mid-2022.\nOn slide four, I want to touch on the latest milestones we achieved this quarter.\nThe EPA recognized Meritage as a recipient of the 2021 Indoor airPLUS Leader Award.\nOur advanced air filtration, ventilation and HVAC as well as spray foam insulation helped minimize the indoor exposure to airborne pollutants and contaminants.\nSo it's great to be recognized for these accomplishments nationally.\nIn terms of innovation, we launched self-guided tours in select locations to address customers' changing preferences when it comes to the home buying process.\nSelf-guided tours allow buyers to sign up for a no contact tour of our model homes on our website and then tour the home after-hours at their convenience.\nWe expect to have this program rolled out throughout the country in the coming months.\nAdditionally, we expanded our offering of digital financial services, so Meritage customers can now receive guaranteed on-demand homeowners' insurance quotes on their selected home on our website.\nFrom an ESG perspective, we memorialized our human rights policy, which can now be found on our Investor Relations website, and stay tuned as we will have more to share on ESG -- on the ESG front before year-end.\nOverall, it was another successful quarter, where our teams and supplier relationships helped Meritage deliver 3,112 homes.\nAffordability was one of the cornerstones of our strategic shift in 2016, and we continue to be focused on today.\nFrom land acquisition to operations, we look to maintain our entry-level products as an affordable home offering in the new home marketplace.\nThat being said, the sustained favorable pricing environment stemming from the elevated demand for our products over the past few quarters and the tight housing supply conditions led to ASP increase on orders, backlog and closings that are masking our ongoing product mix shift toward entry level.\nAlthough order ASP grew 12% year-over-year, we experienced a deceleration in ASP growth sequentially this quarter, and the new product we'll be bringing on in 2022 and 2023 will allow us to continue repositioning our future communities down the ASP band.\nDuring the third quarter, we continued metering our orders pace to align with the current production environment and supply chain challenges.\nEven still, our average absorption pace remained elevated at 5.0 per month.\nWe were still typically able to sell inventory shortly after releasing it, but we are only releasing homes once we have visibility into our cost structure and confidence about closing times, which is a bit late in the process today due to supply constraints.\nIt is unclear when the current supply challenges will work themselves out.\nWe currently have no insight to suggest that it's on the near term, and therefore, we are continuing to model elongated cycle times for the foreseeable future.\nNow turning to slide five.\nOur third quarter closings totaled 3,112 homes.\nThey were up 4% over the prior year.\nEntry-level comprised 78% of closings, up from 63% in the prior year.\nFor us, Q3 of last year was the quarterly peak of the surging housing demand since the start of COVID-19, resulting in our all-time highest third quarter absorption pace of 5.8 sales per month.\nIn 2021, we have been metering orders due to the well-documented supply chain issues.\nAs a result, the total orders of 3,441 for the quarter of 2021 reflected a decrease of 11% year-over-year, driven by a 15% decline in average absorption pace that was partially offset by a 5% increase in average communities.\nDespite metering, our third quarter 2021 absorption pace currently remained elevated at five sales per month.\nEntry-level comprised over 80% of quarterly orders, up from nearly 70% in the third quarter of last year.\nEntry-level also represented 77% of our average active communities compared to 60% a year ago.\nMoving to the regional level trends on slide six.\nOur central region, which is comprised of Texas, led in terms of average absorption pace with 5.4 sales per month this quarter, which was 14% lower than prior year.\nThis decline was partially offset by a 5% greater average active communities, which together contributed to a 10% decline in order volume.\nThird quarter order ASP increased 20% year-over-year given solid market conditions in Texas.\nOur east region with the highest entry-level product mix with -- representing 80% of the average community was the only region to generate year-over-year growth in order volume of 3% despite metering as a result of an 8% increase in average active communities in the third quarter, which offset a 4% decrease in average absorption pace.\nSouth Carolina opened several new communities later in the third quarter, which resulted in a 3.7 average absorption pace in the third quarter.\nThis was our lowest absorption pace in the company's quarter, despite South Carolina's orders increasing 11% over prior year.\nGiven healthy demand in the state, we anticipate the order pace will increase in the near future.\nThe west region's third quarter 2021 order volume had our largest decline at 24% year-over-year, mainly due to 25% lower average absorption pace to 4.9 per month.\nSpecifically, Arizona reduced its absorption pace from 6.5 per month in Q3 of 2020 to 4.8 per month this quarter as a result of supply chain challenges.\nColorado remained the lowest percentage of entry-level mix at 48% of its average active communities this quarter.\nDuring the third quarter, California had the highest average absorption pace of all our states at 5.6 per month.\nGiven 100% of the average active communities are entry-level there, we continue to focus on affordability, particularly as it's our most expensive geography.\nThe third quarter order ASP increased 15% year-over-year in the west region.\nArizona and Colorado had the largest increase in order ASP in all our states at 26%.\nSo we are monitoring these markets to ensure we wire ASP to local market condition and continue to introduce products that is more affordable.\nOverall, demand remained healthy in all of our markets.\nTurning to slide seven.\nOf our home closings this quarter, 74% came from previously started spec inventory, which increased from 71% a year ago.\nWe ended the quarter with nearly 2,100 spec homes in inventory or an average of 11.7 homes per community as we push to get homes in the ground.\nThis was an important improvement from approximately 2,300 specs or an average of 11.2 in the third quarter of 2020.\nAt September 30, 2021, less than 5% of the total specs were completed versus our typical run rate of 1/3.\nHaving available spec is crucial to our business model, but even as we started over 3,400 homes this quarter, maintaining our goal of a four to six-month supply of entry-level spec has been challenging.\nAs we have been ramping up our new communities, we are working very hard to get enough spec started in all of them.\nWe didn't accomplish all that we wanted in Q3, but we expect to accelerate our pace in Q4.\nWe ended the quarter with a backlog of over 1,500 units as our conversion rate declined from 68% last year to 57% this year due to supply delays.\nAlthough we believe our spec strategy and entry-level focus will drive the conversion up in the long-term when the supply chain normalizes, we expect current supply issues and the resulting slower backlog conversions to persist at least for the next couple of quarters.\nDuring the third quarter, bottlenecks abound in various areas along supply chain, some on the front-end and others on the back-end, leading to an additional two weeks or so of construction cycle times sequentially from Q2 to Q3 this year.\nIn particular, windows and truss delays impacted our operations throughout the country.\nAs Steve mentioned, our operating structure and strong vendor partnerships have afforded us some advantage as we navigate these disruptions.\nWe reengineered our product a few years ago which limit our SKU count and planned libraries, allowing us to order material in bulk in advance.\nWe have also heavily invested in relationships with our vendors, which we have strengthened during the last couple of quarters.\nWe are maintaining constant communication and remain flexible to substitute or upgrade our SKUs or find alternative supplies as necessary.\nWe have been benefiting from our 100% spec building strategy for entry-level homes.\nPre-starting homes enable us to maintain a steady cadence of homebuilding construction and makes us a preferred partner to our trades This transparency and scheduling visibility as well as no structural changes makes our products simpler to build.\nAt times like these, we appreciate that we can leverage our spec building strategy and our operating model to continue to deliver our backlogs and get more homes started.\nThe 10% year-over-year home closing revenue growth to $1.3 billion in the third quarter of 2021 was the result of the 4% increase in home closings and 7% higher closing ASP despite the mix shift to more entry-level products.\nThe 820 bp improvement in third quarter 2021 home closing gross margin to 29.7% from 21.5% a year ago was driven by the price increases over the past several quarters as well as the leveraging of our fixed costs on greater home closing revenue.\nThe pricing power more than offset the increased cost of lumber and other commodities.\nToday's more normal lumber cost will start to be reflected in our gross margin in early 2022, but will be partially offset by other increased commodity costs as well as the additional overhead burden in gross margin from our community count ramp up.\nOnce we're fully selling and closing from all 300 communities in 2022, we will be able to leverage the higher fixed overhead costs across the corresponding higher revenue.\nWe are also continuing to monitor the recent increases in lumber and the impact they may have on our 2022 gross margin.\nOur SG&A leverage of 9.3% remained better than our 10% expectation and continued to benefit from both greater closing volumes and higher ASPs.\nThe 80 bps year-over-year improvement and SG&A leverage from 10.1% in the third quarter of 2020 also included lower brokerage commissions in 2021 and cost savings from technology innovations that particularly benefited our sales and marketing efforts.\nWe will continue to find ways to incorporate technology into our operations and expect to be able to better leverage our total SG&A on higher closing volumes in 2022 as well.\nThe third quarter 2021's effective income tax rate was 23.3% compared to 19.5% in the prior year.\nBoth years reflect reduced rates primarily from eligible tax credit on qualifying energy-efficient homes closed under the 2019 Taxpayer Certainty and Disaster Tax Relief Act.\nIncreased profit in states with higher tax rates and reduced benefit of the energy tax credit due to greater overall profitability for the company both contributed to the higher tax rate in 2021.\nHigher closing volume, pricing power, expanded gross margin and the improved overhead leverage that we achieved this quarter all led to the 85% year-over-year increase in third quarter diluted earnings per share of $5.25.\nTo highlight a few year-to-date results through September 30, 2021, on a year-over-year basis, we generated an 85% increase in net earnings, orders decreased 1%, closing were up 15%, we had a 640 bp expansion of our home closing gross margin to 27.4%, and SG&A as a percentage of home closing revenue improved 90 bps to 9.4%.\nAs seen on slide nine, our balance sheet reflects ample liquidity and flexibility for further growth.\nAt September 30, 2021, our cash balance was $562 million compared to $746 million at December 30, 2020.\nIt was down just $184 million despite an $815 million increase in real estate assets over the same time.\nOur net debt-to-cap ratio of 17.5% at September 30, 2021, remained low.\nWe still target a maximum ceiling of net debt-to-cap in the high 20s, which is in line with the quick asset turn we expect from our entry-level and first move-up offerings.\nOur capital usage priority is still focused on growth.\nThe bulk of our cash will be spent on land acquisition and development and to get specs in the ground in our new communities.\nWe routinely repurchase shares to offset new grants and keep our dilution neutral.\nAs demonstrated in the third quarter, we will also continue to opportunistically repurchase incremental shares.\nWe repurchased over 95,000 shares during the quarter for $9.5 million.\nSince the end of the quarter, we repurchased an additional nearly 244,000 shares for another $24 million.\nToday, over $153 million remains in our share repurchase authorization program.\nWe expect cash generation to accrete once our 300 communities are operating and delivering homes in the back half of 2022.\nOn to slide 10.\nOur land book increased 46% from September 30, 2020.\nWith nearly 70,000 lots under control at the end of this quarter, we had 5.4 years supply of lots based on trailing 12-month closings, which was higher than our target range of four to five-year supply of lots under control.\nHowever, looking forward to the closing volume that we would generate once our 300 communities are actively selling in the middle of next year, the ratio drops back to our four to five year objective.\nWe secured about 9,800 net new lots this quarter compared to approximately 9,000 in the same quarter of 2020.\nThese new lots will translate to an estimated 45 net new communities, of which 87% are entry-level with an average community size of 196 lots.\nDespite the additional demand for land from all builders today, we were able to meet our internal land acquisition goal while making sure our projects meet our underwriting hurdles, modeling a normalized absorption pace and a higher incentive environment.\nOur understanding of who we are has sharpened as has our confidence level in the type of projects we bid on.\nBy knowing the cost of the home and increasing our land development expertise, we feel comfortable bidding on land parcels that others might not, from acquisition of larger lot sizes to those in secondary submarkets that best align with our entry-level products and projects with complexity in land development.\nIn fact, our year-to-date finished lot cost for newly controlled lots is right around $75,000 a lot.\nDuring the third quarter of 2021, we continued to make excellent progress in our land development despite municipal delays and supply chain constraints, and we opened 40 new communities.\nWe grew our community count by 10 net communities from 226 at the start of the quarter to 236 actively selling communities at the end of the quarter.\nOn a year-over-year basis, we were also up 16% or 32 net communities from 204 at September 30, 2020.\nWe spent $526 million on land acquisition and development this quarter, which was 76% higher than last year's Q3 spending of nearly $300 million.\nWe continue to expect our annual land acquisition and development to be about $2 billion in 2021 and thereafter.\nTo preserve liquidity, we use options for staggered purchasing terms where financially feasible.\nAbout 64% of our total lot inventory at September 30, 2021, was owned and 36% was optioned compared to 58% owned and 42% option at September 30, 2020.\nFinally, I'll direct you to slide 11.\nWith limited visibility into when the supply chain will loosen, we continue to forecast supply chain delays and longer cycle times for the rest of 2021 and into 2022.\nWith more than 5,800 units in backlog and another almost 2,800 specs in the ground today, we are projecting 12,600 to 12,900 home closings for the full year of 2021, which we anticipate will generate $5.05 billion to $5.15 billion in home closing revenue.\nWe are lifting our full year 2021 guidance on home closing gross margin, which we now anticipate will be between 27.5% to 27.75%.\nWith an increase to the projected effective tax rate to 23%, we expect diluted earnings per share to be in the range of $18.75 to $19.40 for 2021, a year-over-year increase of over 70%.\nFor year-end 2021, we also anticipate around 250 active communities.\nWe are reiterating our commitment to 300 communities by June 2022, with around $2 billion of land acquisition and development spend projected for next year as well.\nFor 2022, we anticipate double-digit growth in unit and home closing revenue.\nAs I previously noted, we expect gross margins in '22 to remain elevated, although supply chain issues, commodity costs and recent lumber cost increases may all cap further upside.\nWith the higher volume of communities operating next year, we anticipate full year 2022 SG&A rate will drop below our current SG&A rate of the low 9s.\nTo summarize on slide 12.\nWe have capitalized on the ongoing favorable market conditions by having available supply of entry-level and first move-up homes that are attractive to both millennials and baby boomers, the largest home buying demographic today.\nThe continued significant investment in land acquisition and development as well as the meaningful growth in community count over the past two quarters to 236 communities as of September 30 demonstrates our ability to attain our strategic goal of 300 communities by mid-2022.\nOur operating model, strong execution, growing community count and focus on the entry-level and first move-up markets have all led to the company hitting our closings, achieving an absorption pace of five per month while metering the order pace, growing community count again and obtaining industry-leading gross margins this quarter.\nAdditionally, these attributes position us well to continue expanding our market share, leveraging our operating costs and driving profitability over the next several years.\n Assistant:", "chosen": "compname reports third quarter 2021 results, including record gross margin of 29.7% and diluted earnings per share of $5.25.\nq3 earnings per share $5.25.\nprojecting 12,600 to 12,900 home closings for full year 2021.\nexpect diluted earnings per share to be in range of $18.75-19.40 for 2021.\nin quarter delivered 3,112 homes and produced a 10% year-over-year increase in home closing revenue to $1.3 billion.\n"}
{"prompt": "Human: I'm pleased to be with you today on my first earnings call as chief executive officer.\nToday's remarks also include certain non-GAAP financial measures.\nWith that said, let's turn to our fiscal 2022 first quarter results.\nWe are pleased with our results for the quarter, which exceeded our expectations.\nPerformance at our Australian resorts during the first quarter was negatively impacted by COVID-19-related limitations and restrictions, including stay-at-home orders and periodic resort closures throughout the quarter.\nWe were able to reopen Australian resorts for the last few weeks of the ski season, resulting in favorability relative to our expectations.\nOur Tahoe resorts were negatively impacted by the Caldor fire, which resulted in the early closure of our summer operations in the region.\nAside from these unique challenges, we continued to see strong demand throughout the quarter, which we believe highlights our guests continued desire for outdoor experiences.\nTurning now to our 2021-2022 North American season pass sales and early season indicators.\nPass product sales for the North American ski season increased approximately 47% in units and approximately 21% in sales dollars through December 5, 2021 as compared to the period in the prior year through December 6, 2020, without deducting for the value of any redeemed credits provided to certain North American pass holders in the prior period.\nPass product sales through December 5, 2021 for the 2021-2022 North American ski season increased approximately 76% in units and approximately 45% in sales dollars as compared to the sales for the 2019-2020 North American ski season through December 8, 2019, with pass product sales adjusted to include peak resorts pass sales in both periods.\nPass product sales are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.78 between the Canadian dollar and the U.S. dollar in all periods for Whistler Blackcomb pass sales.\nWe are very pleased with the results of our season pass sales, which continue to demonstrate the strength of our data analytics capabilities and the compelling value proposition of our pass products.\nDriven in part by the 20% price reduction in passes for the 2021-2022 season, we expect that the total number of guests on all advanced commitment products this year will exceed 2.1 million, including all pass products for our North American and Australian resorts, representing an increase of approximately 700,000 pass holders from last year and an increase of approximately 900,000 pass holders from two years ago.\nFor the full pass sales season, we saw a strong unit growth from renewing pass holders and significantly stronger unit growth from new pass holders, which includes guests in our database who previously purchased lift tickets or passes but did not buy a pass in the previous season, as well as guests who are completely new to our database.\nOur most significant unit growth was from our destination markets, particularly in the Northeast.\nAnd we also had very strong growth across all of our local markets.\nWe have focused on growing our destination pass holder base as we have expanded our network.\nAnd over the course of the last two years, we have nearly doubled the number of advanced commitment guests from those markets.\nOur absolute unit growth was led by our core Epic Pass and Epic Local Pass products.\nAnd we also saw very strong growth from our Epic Day Pass products, including strength in our new Epic Day Pass limited products, which offer a lower price point for guests not planning to ski at select resorts as we continue to refine our product offering to help move more guests into advanced commitment products.\nCompared to the period ended December 6, 2020, effective pass price decreased 17% despite the 20% price decrease we implemented this year and the significant growth of our lower-priced Epic Day Pass products, which continue to represent an increasing portion of our total advance commitment product sales.\nWe significantly outperformed our original expectations for pass sales relative to the estimates we provided when we announced the 20% price decrease in our passes, which was driven by the significant increase in new pass holders and guests trading up to higher-value passes.\nWe are encouraged by the indicators of demand heading into the 2021-2022 North American ski season with strong leisure travel demand indicators.\nOur strong pass sales provide visibility into the robust demand for guests to visit our resorts in the year ahead.\nresorts for the upcoming season are trending ahead of pre-COVID-19 levels for the 2019-2020 season, while lodging bookings at Whistler Blackcomb are lagging 2019-2020 bookings, which we anticipated due to the impact of travel restrictions on international visitors to the resort.\nBased on historical averages, around half of the bookings for the winter season have been made by this time.\nSo, it is important to note that our lodging bookings represent a small portion of the overall lodging inventory around our resorts.\nOur early season conditions have been challenging across the network, resulting in delayed openings and limited opening to open terrain.\nMany of our resorts are very recently experiencing snowfall and colder temperatures that have been more conducive to snowmaking, which we expect will allow us to expand our open terrain soon.\nDespite the challenging early season condition, the success of our advanced commitment strategy allows us to secure a significant amount of our demand and revenue ahead of the season, which creates significant stability for our business.\nWe remain dedicated to continuing to improve the guest experience, reduce wait times, and communicate transparently with guests, especially given the excitement and demand for travel this coming season.\nAs announced on November 16, we have taken additional steps to prioritize the on-mountain experience of pass holders this season, including lift ticket sales during the three most popular holiday periods; deploying a new operating plan, which includes significantly improving how efficiently we load lifts and gondolas; launching a new daily forecast of lift line wait times in the EpicMix app; and investing in new lifts and expanded terrain to reduce wait times in order to ensure skiers and riders have an experience of a lifetime at our resorts this season.\nIn Colorado, we completed a 250-acre lift-served terrain expansion in the signature McCoy Park area of Beaver Creek, further differentiating the resort's high-end family focused experience.\nWe also added a new four-person high-speed lift at Breckenridge to serve the popular Peak 7, replaced the Peru lift at Keystone with a six-person high-speed chairlift, and replaced the Peachtree lift at Crested Butte with a new three-person fixed-grip lift.\nAt Okemo, we completed a transformational investment, including upgrading the Quantum lift to replace the Green Ridge three-person fixed-script chairlift.\nIn addition to these investments that will greatly improve uplift capacity, we have invested in companywide technology enhancements, including a number of upgrades to bring a best-in-class approach to how we service our guests through our customer service channels.\nAs Kirsten mentioned, we are pleased with our first fiscal quarter performance.\nNet loss attributable to Vail Resorts was $139.3 million for the first quarter of fiscal 2022, compared to a net loss attributable to Vail Resorts of $153.8 million in the same period in the prior year.\nResort reported EBITDA was a loss of $108.4 million in the first fiscal quarter, which compares to resort reported EBITDA loss of $94.8 million in the same period in the prior year.\nBoth periods continued to be negatively impacted by COVID-19 and related limitations and restrictions.\nAdditionally, the prior-year period included the recognition of $15.4 million of lift revenue associated with the expiration of the credit offers that were made to 2019-2020 pass product holders in connection with COVID-19-related closures.\nWe remain focused on our disciplined approach to capital allocation.\nOur liquidity position remains strong, and we are confident in the free cash flow generation and stability of our business model.\nOur total cash and revolver availability as of October 31, 2021 was approximately $2.1 billion with $1.5 billion of cash on hand, $417 million of revolver availability under the Vail Holdings Credit Agreement, and $220 million of revolver availability under the Whistler Blackcomb Credit Agreement.\nAs of October 31, 2021, our net debt was 2.6 times trailing 12 months total reported EBITDA, and we exited the temporary waiver period under the Vail Holdings Credit Agreement, effective October 31, 2021.\nI'm also pleased to announce that our board of directors has declared a cash dividend on Vail Resorts common stock.\nThe dividend will be $0.88 per share of common stock and will be payable on January 11, 2022 to shareholders of record on December 28, 2021.\nThis dividend payment equates to 50% of pre-pandemic levels, consistent with our prior quarter cash dividend, and reflects our continued confidence in the strong free cash flow generation and stability of our business model despite the ongoing risks associated with COVID-19.\nOur board of directors will continue to closely monitor the economic and public health outlook on a quarterly basis to assess the level of our quarterly dividend going forward.\nMoving now to our fiscal 2022 outlook.\nOur guidance includes an estimated $2 million of acquisition-related expenses specific to Seven Springs but does not include any estimate for the closing costs, operating results, or integration expense associated with the Seven Springs acquisition, which is expected to close later this winter.\nWe are encouraged by our very strong pass sales heading into the season, our favorable first quarter results, and the strong demand we are seeing across leisure travel and in our U.S. booking trends.\nIt's important to note that our growth in pass sales is expected to be partially offset by reduced lift ticket sales as we continue to successfully convert guests from lift tickets to pass products.\nAdditionally, we anticipate modest offsets from limiting lift ticket sales during the three most popular holiday periods across our North American resorts to prioritize access for pass holders.\nEarly season conditions have been challenging, resulting in delayed openings and limited terrain across many of our resorts, and we anticipate that these conditions will have a negative impact on our results leading up to the holidays.\nBut the North American ski season has just begun with our primary earnings period still in front of us.\nThere continues to be uncertainty regarding the ultimate impact of COVID-19 on our business results in fiscal year 2022, including any response to changing COVID-19 guidance and regulations by the various governmental bodies that regulate our operations and resort communities, as well as changes in travel and consumer behavior resulting from COVID-19.\nOur guidance for fiscal year 2022 assumes normal weather conditions -- excuse me, assumes normal weather and conditions from the holiday period onward, and no impact from incremental travel or operating restrictions associated with COVID-19 that could negatively impact our results.\nThe company revised its segment reporting to move certain dining and golf operations from the lodging segment to the mountain segment, consistent with how those operations are managed.\nThis shift has no impact on expected net income attributable to Vail Resorts or resort reported EBITDA.\nWe were thrilled to share our announcement yesterday that we entered into an agreement to acquire Seven Springs Mountain Resort, Hidden Valley Ski Resort, and Laurel Mountain ski area in the Pittsburgh, Pennsylvania area.\nSeven Springs is a leading regional destination in western Pennsylvania, serving guests in Pittsburgh, Cleveland, Washington, D.C., and Baltimore.\nThese resorts create yet another opportunity for us to bring skiers and riders into the Vail Resorts network, providing guests with the opportunity to ski close to home and at world-class destination resorts on the same pass product.\nWe will be acquiring Seven Springs for a purchase price of approximately $125 million, subject to certain adjustments.\nWe estimate that Seven Springs will generate incremental annual EBITDA in excess of $15 million in the company's fiscal year ending July 31, 2023, which includes approximately $5 million for the 418-room Slopeside Hotel and its associated conference facilities and lodging operations.\nThe ongoing capital expenditures associated with the Seven Springs operations are expected to be approximately $3 million per year.\nWe plan to add access to the three resorts to our Epic Pass products for the 2022-2023 North American ski season.\nThe transaction is expected to close this winter.\nAs announced in September, we are excited to be proceeding with our ambitious capital investment plan for calendar year 2022 of approximately $318 million to $328 million across our resorts to significantly increase lift capacity and enhance the guest experience as we drive increased loyalty from our guests and continuously improve the value proposition of our advanced commitment products.\nThe plan includes the installation of 21 new or replacement lifts across 14 of our resorts and a transformational lift-served terrain expansion at Keystone.\nThe updated lift upgrade plan includes two incremental replacement lifts at Jack Frost and Big Boulder in Pennsylvania to provide increased capacity and improved guest experience at the resorts.\nAll of the projects in the plan are subject to regulatory approvals.\nIn addition to these lift upgrade and terrain expansion projects, we are excited to announce additional details on our investment plans not previously highlighted in our September announcement.\nWe continue to remain highly focused on developing and leveraging our data-driven approach to marketing and operating the business.\nOur planned investments include networkwide scalable technology that will enhance our analytics, e-commerce, and guest engagement tools to improve our ability to target our guest outreach, personalized messages, and improve conversion.\nWe will also be investing in broader self-service capabilities to improve guest online experience and engagement.\nIn addition, we are excited to announce a $3.6 million capital investment plan in Vail Resorts' Commitment to Zero initiative, including targeted investments in high-efficiency snowmaking, heating and cooling infrastructure, and lighting to further improve our energy efficiency and make meaningful progress toward our 2030 goal.\nWe expect our capital plan for calendar 2022 to be approximately $315 million to $325 million, excluding approximately $3 million of one-time items associated with real-estate-related capital, and excluding any capital expenditures associated with the Seven Springs acquisition, which remains subject to closing.\nThis is approximately $150 million above our typical annual capital plan based on inflation and previous additions for acquisitions and includes approximately $20 million of incremental spending to complete the one-time capital plans associated with the Peak Resorts and Triple Peaks acquisitions.\nIncluding one-time real-estate-related capital, our total capital plan is expected to be approximately $318 million to $328 million.\nWe will be providing further detail on our calendar year 2022 capital plan in March 2022.\nI am honored and excited to lead this company and culture that I love so much.\nI am especially grateful to the more than 55,000 employees who make Vail Resorts so special.\nOur attention to service and our commitment to delivering an outstanding guest experience across our network continues to be the focus of our company.\nI am also incredibly proud of our company's commitment to inclusivity, environmental sustainability, and supporting our resort communities, all of which are highlighted in our most recent EpicPromise progress report that is available on our website.\nWe are excited to have you join the Vail Resorts family, and we look forward to welcoming you to our network of resorts later this winter when the transaction closes.\nWe hope that you all enjoy a fun and safe season ahead.\nAt this time, Michael and I will be happy to answer questions.\nOperator, we are ready to take questions.\n Assistant:", "chosen": "vail resorts - resort reported ebitda loss $108.4 million for q1 2022 versus resort reported ebitda loss of $94.8 million for q1 2021.\n"}
{"prompt": "Human: Today's remarks also include certain non-GAAP financial measures.\nSo with that said, let's turn to our fiscal 2022 second quarter results.\nWe are pleased with our financial performance for the quarter.\nVisitation trends and demand for the experience at our resorts remains encouraging, particularly with destination guests, with results improving post holidays as conditions improved, more terrain was opened and the impact of the COVID-19 Omicron variant receded.\nAs expected, results for the quarter significantly outperformed the results from the prior year due to the greater impact of COVID-19 and related limitations and restrictions on results in the prior-year period.\nThe 2021/2022 North American ski season got off to a slow start.\nThe confluence of storm cycles, staffing challenges, and the spike in Omicron variant cases created challenges through the holiday period, impacting our resorts' ability to fully open terrain as planned and negatively impacting the guest experience during that time.\nDespite numerous measures taken ahead of the season, including an investment in wages, available staffing was below targeted levels heading into the holidays, consistent with challenges faced by the broader travel and leisure industry at that time.\nDuring the holidays, COVID-19 cases associated with the Omicron variant dramatically accelerated, impacting both travel plans and staffing exclusions despite having a vaccinated workforce.\nAt some resorts, more than 10% of our employees were unable to work due to COVID-19 at one time.\nTo address these challenges, the company increased hourly compensation during the holidays and for the remainder of the ski season at a cost of $20 million in fiscal 2022.\nFollowing the holiday period, the experience across our resorts improved markedly with better snowfall, a stabilization and ultimately reduction in cases of COVID-19, and overall better staffing, allowing us to open terrain across our resorts that was close to normal levels for that time period.\nski resorts, which exceeded our expectations in January in particular.\nWhistler Blackcomb was, as anticipated, disproportionately impacted by COVID-19-related travel restrictions, creating challenging results for U.S. destinations and international visitation to the resort.\nExcluding the Seven Springs Resorts, total visitation for the quarter increased 2% compared to the second fiscal quarter of 2020.\nRelative to the second fiscal quarter of 2020, our ancillary lines of business experienced revenue declines, particularly in food and beverage, which was disproportionately impacted by numerous operational restrictions associated with COVID-19 and overall staffing challenges.\nResort net revenue for the second fiscal quarter of 2022 decreased 2% relative to the comparable period in fiscal year 2020, primarily as a result of the headwinds in our ancillary lines of business and approximately $33 million of past revenue that would have been recognized in the second fiscal quarter of 2022, but was deferred to the third quarter as a result of delayed openings for a number of our resorts.\nOur lodging business experienced strong results during the quarter, with average daily rates exceeding our expectations, partially offset by lower-than-expected occupancy rates during the early season.\nRelative to the second fiscal quarter of 2020, resort reported EBITDA increased 5% despite the challenging early season conditions and COVID-19-related dynamics.\nResort reported EBITDA margin for the second quarter was 43.9%, an increase from 40.9% in the second quarter of fiscal 2020.\nAs Kirsten mentioned, we're pleased with our performance for the quarter, particularly given the slow start to the season.\nNet income attributable to Vail Resorts was $223.4 million or $5.47 per diluted share for the second quarter of fiscal 2022, compared to net income attributable to Vail Resorts of $147.8 million or $3.62 per diluted share in the prior year.\nResort reported EBITDA was $397.9 million in the second fiscal quarter, which compares to resort reported EBITDA of $276.1 million in the same period in the prior year.\nThe increase was primarily due to the greater impact of COVID-19 and related limitations and restrictions on results in the prior year.\nResort reported EBITDA for the second quarter of fiscal year 2020 was $378.3 million.\nTurning now to our season-to-date metrics for the period from the beginning of the ski season through Sunday, March 6, 2022, compared to each of the two prior-year periods through March 7, 2021, and March 8, 2020.\nGiven the significant impacts of COVID-19 in the prior-year period, including significant capacity restrictions that limited skier visits and ancillary revenue, we're also providing metrics relative to the comparable fiscal year 2020 season-to-date period, which was prior to our announcement to close our resorts on March 15, 2020, for the remainder of the 2019/2020 season.\nThe reported ski season metrics are for our North American destination mountain resorts and regional ski areas and exclude the results of our recently acquired Seven Springs resorts and our Australian ski areas in all periods.\nThe reported ski season metrics include growth for season pass revenue based on estimated fiscal year 2022 North American season pass revenue compared to both fiscal 2021 and fiscal 2020 North American season pass revenue.\nThe data mentioned in this release is interim period data and is subject to fiscal quarter-end review and adjustments.\nWe are pleased with the positive momentum we have seen throughout the post-Christmas period.\nSeason-to-date total skier visits were up 2.8% compared to the fiscal year 2020 season-to-date period.\nSeason-to-date total lift ticket revenue, including an allocated portion of season pass revenue for each applicable period, was up 10.3% compared to the fiscal year 2020 season-to-date period.\nCompared to the fiscal year 2020 season-to-date period, season-to-date ski school revenue was down 8.9%, dining revenue was down 27% and retail rental for North American resort and ski area store locations was down 2.8%.\nCompany performance has continued to improve throughout the post-Christmas period, with particular strength in destination visitation and lift ticket sales.\nDespite significant growth of our pass program this year, visitation for the season-to-date period was modestly up 2.8% compared to fiscal 2020, given the company's strategy to shift lift ticket guests into an advance commitment pass product.\nWhistler Blackcomb was negatively impacted by COVID-19-related travel restrictions, creating challenging results for U.S. destination and international visitation to the resort.\nThe ancillary lines of business continued to experience revenue declines, particularly in food and beverage, which is disproportionately impacted by numerous operational restrictions associated with staffing and COVID-19.\nIt is important to highlight that our season pass unit growth of 47% for fiscal year 2022 created significant revenue stability in a period with challenging early season conditions and COVID-19 impacts.\nThe growth in pass units did not drive dramatic increases in visitation as the company is shifting lift ticket guests into advance commitment products.\nIn fact, the growth we saw in visitation in the period ending March 6, 2022, compared to fiscal 2020 occurred on weekdays and non-holiday periods, which were up approximately 9% in visits compared to weekend and holiday periods, which were approximately flat in visits.\nWe also saw peak daily visitation at our resorts during the period that were very consistent with prior -- with previous years.\nFor the season-to-date period ending March 6, 2022, 69% of our visits came from season pass holders, compared to 56% of visits for the same period in fiscal year 2020.\nWe remain committed to our strategy to move lift ticket purchasers into advance commitment products, which offers benefits to our guests and stability to our employees, our communities and our company.\nNow turning to our outlook for fiscal 2022.\nDespite the challenging start to the season through the holidays, we have increased the midpoint of our Resort reported EBITDA guidance as compared to our original guidance provided in September, demonstrating the resilience of our business model and the benefits of our advance commitment strategy.\nThe update to guidance is primarily driven by the strong demand from destination guests at our Western U.S. resorts, particularly with regard to lift ticket sales, which we expect will continue through the remainder of the season, as well as the contribution from the Seven Springs resorts.\nAdditionally, our lodging business is expected to significantly outperform our original expectations in the remainder of the year with strong results on both occupancy and ADR across our properties and the addition of the Seven Springs Resorts.\ndestination and international visitation trends at Whistler Blackcomb, the $20 million investment in frontline staff bonuses, increased wages for our summer operations, and the inclusion of an estimated $6 million in acquisition and integration-related expenses specific to the Seven Springs resorts.\nWe now expect net income attributable to Vail Resorts for fiscal 2022 to be between $304 million and $350 million, and resort reported EBITDA to be between $813 million and $837 million.\nWe estimate resort EBITDA margin for fiscal 2022 to be approximately 32.9% using the midpoint of the guidance range.\nThe updated outlook for fiscal year 2022 assumes normal conditions and operations across our resorts for the remainder of the ski season and no incremental travel or operating restrictions associated with COVID-19 that could negatively impact our results, including for our Australian resorts in the fourth quarter.\nThe guidance assumes an exchange rate of $0.79 between the Canadian dollar and U.S. dollar related to the operations of Whistler Blackcomb in Canada and an exchange rate of $0.72 between the Australian dollar and U.S. dollar related to the operations of Perisher, Falls Creek, and Hotham in Australia.\nOur liquidity position remains strong.\nOur total cash and revolver availability as of January 31, 2022, was approximately $2 billion, with $1.4 billion of cash on hand, $417 million of U.S. revolver availability under the Vail Holdings credit agreement, and $214 million of revolver availability under the Whistler Credit Agreement.\nAs of January 31, 2022, our net debt was 2.1 times trailing 12 months total reported EBITDA.\nWe are pleased to announce that our board of directors has declared a quarterly cash dividend on Vail Resorts common stock of $1.91 per share.\nThe dividend will be payable on April 14, 2022, to shareholders of record as of March 30, 2022.\nWe will continue to be disciplined stewards of our capital and remain committed to prioritizing investments in our guest and employee experience, high-return capacity expanding capital projects, strategic acquisition opportunities, and returning capital to our shareholders through our quarterly dividend and share repurchase programs.\nAs we turn our attention to the 2022/2023 ski season and beyond, the company will be making its largest ever investment in both its employees and its resorts to ensure we continue to deliver our company mission of an experience of a lifetime.\nThe experience of our employees and our guests is core to our business model, and the company intends to use its financial resources and stability it has created through its season pass program to continue to aggressively reinvest to deliver that experience.\nWe believe our business model allows us to make these investments and achieve our short- and long-term financial growth objectives.\nOur employees are the core of Vail Resorts' mission of creating an experience of a lifetime.\nWe are pleased to announce a significant investment in our employees for the 2022/2023 North American ski season with an increase in the minimum hourly wage offered across all 37 of our North American resorts to USD 20 per hour for all U.S. employees and CAD 20 per hour for all Canadian employees, as well as an increase in wage rates for hourly employees, as we maintain all leadership and career stage differentials.\nRoles that have specific experiences or certification as prerequisites, such as entry-level patrol, commercial drivers, and maintenance technicians, will start at $21 per hour.\nTipped employees will be guaranteed a minimum of $20 per hour.\nThe company will also be assessing targeted increases beyond inflation for our salaried employees.\nAnd we'll be making a significant investment in our human resources department to ensure the right level of employee support, development, and recruiting.\nTalent is our most important asset and our strategic priority at all levels of the company.\nAnd we expect these investments will be an important step to enhance the experience for our employees through increased hiring, retention, and talent development.\nOur employee investments are intended to help us achieve normal staffing levels and, in turn, deliver an outstanding guest experience, which supports our advanced commitment strategy and, in turn, provides greater stability to our business model and the ability to drive long-term growth.\nThe increase in wages and the return to normal staffing levels will represent an approximately $175 million increase in expected labor expense in fiscal 2023 compared to the fiscal 2022 expected labor expense, including inflationary adjustments.\nWe remain dedicated to delivering an exceptional guest experience and will continue to prioritize investments to enhance the experience at our resorts.\nWe are committed to continually increasing capacity through lift, terrain, and food and beverage expansion projects and are making a significant one-time incremental investment this year to accelerate that strategy.\nAs previously announced on September 23, 2021, we are excited to be proceeding with our ambitious capital investment plan for calendar year 2022 of approximately $315 million to $325 million across our resorts, excluding one-time investments related to integration activities, employee housing development projects and real estate-related projects.\nThe plan includes approximately $180 million for the installation of 21 new or replacement lifts across 14 of our resorts and a transformational lift served terrain expansion at Keystone.\nIn addition to the two brand-new lift configurations at Vail and Keystone, the replacement lift will collectively increase lift capacity at those lift locations by more than 45%.\nAll of the projects in the plan are subject to regulatory approvals and expected to be completed in time for the 2022/2023 North American winter season.\nThe core capital plan is approximately $150 million, above our typical annual capital plan, based on inflation and previous additions for acquisitions and includes approximately $20 million of incremental spending to complete the one-time capital plans associated with the Peak Resorts and Triple Peak acquisitions and $3 million for the addition of annual capital expenditures associated with the Seven Springs Resorts.\nWe continue to remain highly focused on developing and leveraging our data-driven approach to marketing and operating the business.\nOur planned investments include networkwide scalable technology that will enhance our analytics, e-commerce, and guest engagement tools to improve our ability to target our guests, personalize messages and improve conversion.\nWe will also be investing in broader self-service capabilities to improve guests' online experience and engagement.\nIn addition, we have announced a $4 million capital investment plan in Vail Resorts Commitment to Zero initiative, which includes targeted investments in high-efficiency snowmaking, heating and cooling infrastructure, and lighting to further improve our energy efficiency and make meaningful progress toward our 2030 goal.\nWe plan to spend approximately $9 million on integration activities related to the recent acquired Seven Springs Resorts, including one-time investments related to integration activities and $3 million associated with real estate-related projects.\nOur total capital plan is expected to be approximately $327 million to $337 million.\nIncluding our calendar year 2022 capital plan, Vail Resorts will have invested over $2 billion in capital investments since launching the Epic Pass, increasing capacity, improving the guest experience, and creating an integrated resort network.\nAs we begin to plan for fiscal 2023, there are a number of dynamics related to COVID-19 and unusual weather that are negatively impacting fiscal 2022 and are important to highlight.\nTravel trends at Whistler Blackcomb, our Australian resorts, and our group business were all materially negatively impacted by COVID-19 in fiscal 2022.\nAnd early season results across our resorts this year were depressed with challenging snow falling conditions.\nReturning to normalized levels would result in estimated incremental resort reported EBITDA of approximately $100 million in fiscal 2022.\nThe Seven Springs Resorts did not have a full year of operating results and were impacted by acquisition and integration-related expenses.\nFull year results with no acquisition or integration-related expenses would result in estimated incremental resort reported EBITDA of approximately $7 million in fiscal 2022.\nFinally, our ancillary businesses were capacity-constrained in fiscal 2022 by staffing and, in the case of dining, by operational restrictions associated with COVID-19.\nReturning our ancillary business to normalized levels would result in estimated incremental resort reported EBITDA of approximately $75 million in fiscal 2022, which includes the incremental revenue and operating expense associated with normal capacity, but excludes incremental labor expense.\nThe normalized labor expense for the ancillary businesses is included in the approximate $175 million labor investment.\nAll of these estimates assume normal conditions throughout our ski seasons, continued strength in consumer demand, consistent economic dynamics relative to what exists today, and no material ongoing impacts from COVID-19.\nOffsetting the estimated $182 million of expected favorable resort reported EBITDA impact from returning the business to normal levels relative to projected fiscal 2022 results is the approximate $175 million labor increase from fiscal 2022 to fiscal 2023 that is expected to be necessary to return the company to normal staffing levels, giving the shortages in fiscal 2022 and the current labor market dynamics in our resort communities.\nThese estimates do not take into account any fiscal 2023 projections for volume, price or expense growth, which will be evaluated and incorporated in our full year 2023 guidance that we plan to outline in September 2022.\nI'll pass it back to Kirsten now.\nWe are fully committed to delivering an experience of a lifetime to our employees and our guests.\nOur team is at the core of Vail Resorts' mission.\nI am deeply grateful for the commitment demonstrated day in and day out.\nAnd I'm excited about the path ahead as we make these important investments in our team and the guest experience.\n Assistant:", "chosen": "q2 earnings per share $5.47.\nnow expecting resort reported ebitda to be between $813 million and $837 million for 2022.\nfor 2022/2023 north american ski season, company will be increasing its minimum wage to $20 per hour.\napproved an increase in quarterly cash dividend to $1.91 per share.\n"}
{"prompt": "Human: Participating on the call are Aaron Ravenscroft, president and chief executive officer; and Dave Antoniuk, executive vice president and chief financial officer.\nHowever, actual results could differ materially from any implied or actual projections due to one or more of the factors, among others, described in the company's latest SEC filings.\n2020 was an extremely challenging year.\nAt the onset of the COVID-19 pandemic, we identified three key priorities: one, ensure the health and safety of our team; two, maintain the strength of our balance sheet; and three, position the company for long-term growth.\nI'm very proud of how the team managed through these unprecedented times and how well we executed on these three priorities.\nFirst, with regards to safety.\nWe continue to see low incidence of COVID cases throughout our operations.\nIn addition, we achieved the lowest recordable injury rate in the history of the company.\nThe recordable rate was 1.34.\nSecondly, we ended the year with a strong balance sheet.\nWe have $120 million of cash and over $400 million of liquidity.\nAnd thirdly, we strengthened our foundation for future growth.\nIn the face of the pandemic, we continue to develop the future leaders of our organization.\nDuring the year, approximately 200 frontline supervisors completed a 12-month leadership program that covered safety, leadership skills, and LEAN.\nWe also kicked off a mentoring program for our key female leaders, which has already resulted in a few promotions.\nOur LEAN journey continued in 2020, with almost 900 entries in our global Manitowoc Way Lessons Learned Competition.\nThere were many deserving submissions, but our Wilhelmshaven, Germany facility took home the prize.\nThe team is in the middle of a multi-year initiative to improve production flow on the campus.\nDuring 2020, the team developed a robotic measuring device that proved to be a major breakthrough in our boom assembly process and cleared the path for us to make further progress on several other elements of this initiative.\nIn addition, this year, we rolled out the Manitowoc Way CEO Award to recognize a team member who exemplified not just LEAN thinking, but LEAN action.\nI would like to recognize Saleem Ahmed, test field supervisor in Wilhelmshaven.\nSaleem self-engineered a systems-convert manual boom cable drum alignment on the test field to an electronic process during assembly.\nThis type of behavior embodies our values and culture within the Manitowoc Way business system.\nTurning to the financials.\nOur performance during the fourth quarter exceeded our expectations.\nTaking a closer look, it's really a tale of two stories.\nOur profitability for the fourth quarter was significantly better than our forecast primarily due to a favorable product mix.\nWe had higher-than-anticipated book and ship demand for our tower cranes in Europe.\nThis also has the added benefit of higher factory absorption in those related sites.\nHowever, while our orders and backlog exceeded our forecast, they were heavily influenced by a couple of sizable crawler orders and favorable exchange rates.\nIn terms of our balance sheet, we reached our second-half target to reduce inventory by $80 million on a currency-neutral basis.\nWith that, I'll pass it to Dave to provide more color on the financial results and after which time I'll conclude with some comments on our outlook.\nLet's move to Slide 4.\nOur fourth-quarter orders totaled $509 million, an increase of 8% compared to $472 million of orders last year.\nOn a currency-neutral basis, Q4 orders were up $22 million or 5%.\nAs Aaron previously mentioned, the increase in orders was primarily driven by a couple of large crawler orders in the U.S.\nOur 2020 ending backlog of $543 million was up 14% over the prior year and up 10% on a currency-neutral basis.\nThe increase in backlog was mainly due to the increased crawler crane orders and the timing of shipments in Q4.\nNet sales in the fourth quarter of $430 million were in line with our expectations and decreased $33 million or 7% from a year ago.\nA decline in the Americas segment was partly offset by stronger results in the EURAF and MEAP segments.\nNet sales were favorably impacted by approximately 4% from changes in foreign currency exchange rates.\nOur adjusted EBITDA for the fourth quarter was $34 million, an increase of approximately 11% year over year.\nA favorable product mix, along with reduced discretionary spending, allowed us to exceed the prior year and our expectations for the quarter.\nAs a percentage of sales, adjusted EBITDA margin improved to 7.9%, an improvement of 120 basis points over the prior year.\nDuring the fourth quarter, we incurred approximately $1 million of restructuring expenses predominantly related to severance costs in India and Europe.\nOur GAAP diluted earnings per share in the quarter was $0.05.\nOn an adjusted basis, diluted earnings per share declined $0.16 from the prior year to $0.19 per diluted share.\nHigher income tax expense due to our jurisdictional mix and the impact from net foreign currency losses were the main contributors to the year-over-year decrease in adjusted diluted earnings per share, partly offset by improved operating income.\nWe generated $36 million of cash from operating activities in the quarter.\nOn a currency-neutral basis, we achieved our inventory-reduction target of $80 million in the second half of the year.\nMost of this improvement occurred in Q4, which was the main source of our cash flow generation in the quarter.\nYear over year, our cash flow from operating activities declined due to the timing of collections on accounts receivable.\nWe ended the year with a cash balance of $129 million, a decline of approximately $70 million year over year.\nHowever, our total liquidity remained strong at $412 million with no borrowings outstanding on our ABL.\nNow, I'll recap the financial results for the full year.\nOrders totaled roughly $1.5 billion, down $127 million or 8% from the prior year.\nForeign currency exchange rates benefited 2020 orders by approximately 1%.\nLower orders in the Americas and EURAF segments were partly offset by gains in the MEAP segment.\nOur net sales for the year totaled approximately $1.4 billion, a 21% decrease from 2019, and were positively impacted by $12 million or 1% due to favorable changes in foreign currency exchange rates.\nThe year-over-year decrease was primarily attributable to entering the year with a lower shippable backlog, coupled with a reduction in demand related to the COVID-19 pandemic.\nOur adjusted EBITDA declined $74 million or 47% from the prior year, resulting in a 19% decremental margin on nearly $400 million of less revenue.\nThis better-than-expected flow through result is a testament to the efforts of our team members throughout the world during these unprecedented times.\nWe were able to limit our discretionary spending while continuing to invest in our new product development and growth strategies.\nCongratulations to the team for a job well done.\nOur full-year 2020 adjusted net loss was $12 million, compared to net income of $67 million in 2019.\nAdjusted diluted net loss per share of $0.35 was impacted by approximately $0.01 from our first-quarter share repurchases.\nAs mentioned previously, we suspended our share repurchase program during Q1, and we do not anticipate repurchasing additional shares in 2021.\nFull-year cash flows from operating activities were a use of $35 million, primarily driven by the timing of accounts receivable collections and the net loss recorded in the year.\nAs I previously mentioned, we ended the year with ample liquidity and a strong balance sheet.\nLet's please move to Slide 5.\nTurning our focus to 2021, I see this as a year of transition, one step forward, one step back.\nOverall, while we believe that we are beyond the economic trough brought on by the COVID-19 pandemic, we expect the recovery to be choppy.\nThe recently enacted stimulus packages by many countries and the rollout of the COVID-19 vaccines are all favorable developments.\nHowever, there is still a long way to go to get back to normal.\nAnd unfortunately, some of these actions will have unintended consequences.\nFirst and foremost, while economic stimulus packages are essential to the recovery, fiscal spending has a tendency to create inflation, and we are already seeing this in steel pricing.\nMoreover, the heavy debt burden that this has created in the United States has resulted in a weaker dollar.\nGiven the speed at which both these variables are changing, I am concerned that we will see a dislocation in the market, which will create a short-term cost challenge for us.\nSecondly, Manitowoc benefited from substantial cost containment actions during 2020 that will not repeat in 2021.\nBetween our discretionary spending restrictions, bonus program costs, social claim benefits, and increases in insurance costs, we will easily see more than a $15 million cost headwind.\nThirdly, with the increase in crawlers, our mix is shifting toward lower-margin products, and we continue to suffer from low-production levels at our German factory, where we manufacture all-terrain cranes.\nPlease move to Slide 6.\nWe continue to invest in our future.\nWe have earmarked $15 million of capex to further expand our European tower crane rental fleet in 2021.\nWe continue to scale up our Chinese tower crane business that serves the Belt and Road regions.\nWe are accelerating our product development programs and our all-terrain product line, which we will showcase at Bauma in 2022.\nAnd we continue to pursue acquisitions.\nThese growth initiatives require more investment than we've made over the last couple of years, but we are confident that these strategic initiatives will fuel our future growth as the crane industry rebounds.\nIn closing, the current economic environment is extremely dynamic in terms of demand and costs.\nAnd therefore, we will not provide specific financial guidance for 2021.\nDirectionally, we believe that our revenue will be up modestly, but there are some clear indicators that we will see margin pressure from cost headwinds and product mix while we are investing in the future.\n2021 will be a year of transition.\n Assistant:", "chosen": "q4 adjusted earnings per share $0.19.\nq4 earnings per share $0.05.\n"}
{"prompt": "Human: I'm Monica Vinay, Vice President of Investor Relations and Treasurer at Myers Industries.\nIf you've not yet received a copy of the release, you can access it on our website at www.\nmyersindustries.com, it's under the Investor Relations tab.\nThese comments are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.\nSuch statements are based on management's current expectations and involve risks uncertainties and other factors, which may cause results to differ materially from those expressed or implied in these statements.\nFurther information concerning these risks, uncertainties and other factors is set forth in the company's periodic SEC filings and may be found in the company's 10-K and 10-Q filings.\nWe continued our growth trajectory during the quarter, and we made further progress on our long-term strategy despite a difficult macro environment that's impacting many businesses around the world.\nDuring the quarter, we saw continued strong demand from our material handling and distribution customers.\nThis demand, combined with meaningful contributions from our recent acquisitions, drove the company to $200 million in net sales and more than 50% revenue growth for a second consecutive quarter.\nThe company's top line was the strongest it has been in many years.\nOn organic basis, sales grew 20% compared to the prior year period which marks three consecutive quarters of 20% or more organic growth.\nWe are beginning to see the benefit of our investments in our sales force and sales training and an improved commercial focus across the company.\nWhile our top line performance was strong, we did see macroeconomic headwinds again this quarter, which impacted our margins.\nInput costs climbed higher due to increasing raw material costs, and tightness in the labor market impacted labor costs, both of these drove margin compression during the period.\nThe negative impacts of labor were due to overtime pay, higher wages and in some cases, the lack of labor, which inhibited us from making or shipping certain orders.\nWhile we believe inflationary labor and supply chain headwinds will likely persist for the next several quarters, we are taking numerous actions to mitigate possible impacts on our business.\nThese proactive steps include improvements in our sales and operations planning process, a reinvigorated sales force and the addition of a pricing excellence leader and team.\nWe're also working hard to debottleneck and automate our plants, while we continue to secure the raw materials necessary to ensure that we meet the volume needs of our customers.\nWe remain confident in our ability to manage price, volume and cost.\nAnd as such, we are reaffirming our previous 2021 adjusted earnings per share guidance of $0.90 to $1.05 per share.\nMyers demonstrated growth is meaningful.\nOur company is becoming a growth story.\nA new Myers is here.\nWe're pleased with the growth to date, and we expect this new growth mindset to be a sustained theme and focus at Myers Industries.\nIn the short term, however, we continue to see an inflationary environment that is compounded by labor shortages and supply chain issues.\nTo manage through it, we made a few near-term supply oriented decisions that consume cash in the third quarter.\nThese decisions were made to ensure we continue our high service level to our customers, and we expect cash flow trends to normalize in the fourth quarter.\nLet's begin with a review of our third quarter financial results on Slide four.\nNet sales were up $68 million, an increase of 51%.\nExcluding the impact of the Elkhart and Trilogy acquisitions, organic net sales increased 20% driven by price, which contributed 13%.\nHigher volume mix contributed 7%.\nSales increased in all key end markets in both Materials Handling and Distribution segments.\nAdjusted gross profit increased $7.2 million, while gross margin decreased from 35.6% in the prior year to 27.2% in the third quarter.\nGross margin was negatively impacted by higher raw material costs and higher labor costs which were not fully offset by pricing actions, has led to an unfavorable price-to-cost relationship.\nIncluded in cost of sales was a $1.6 million increase related to the LIFO inventory reserve.\nAdjusted operating income decreased $3.1 million to $12.5 million due to increased SG&A, driven by the addition of Elkhart and Trilogy along with higher compensation cost and higher professional fees.\nAdjusted SG&A as a percentage of sales decreased to 20.9% in the third quarter compared to 23.8% in the prior year as we are experiencing the benefits of our overall larger scale on our infrastructure.\nWe're pleased with the investments we are making in support of our One Myers work strategy are yielding positive results.\nAdjusted EBITDA was $17.3 million, a decrease of $2.3 million compared to the prior year.\nAdjusted EBITDA margin was 8.6%.\nAnd lastly, adjusted earnings per share was $0.23, a decrease of $0.07 or 23% compared to the prior year.\nTurning now to Slide five for an overview of segment performance for the quarter.\nBeginning with Material Handling, net sales increased $63 million or 73%, including the Elkhart and Trilogy acquisition.\nOn an organic basis, Material Handling net sales increased 26%, driven by favorable price of 18%.\nStrong volume mix contributed another 7% and FX, 1%.\nOrganic net sales increased in the vehicle, industrial and food and beverage end markets.\nYou may recall that our consumer end market was up significantly last year, driven by increased storm activity, which led to higher demand for our fuel containers.\nMaterial Handling adjusted operating income decreased $1.3 million or 8% to $15.2 million.\nThe decrease was driven by an unfavorable price-to-cost relationship resulting from escalating raw materials and labor costs, which were not fully offset by pricing actions.\nAdditionally, SG&A expenses increased primarily due to the Elkhart and Trilogy acquisition, higher compensation costs, travel costs and professional fees.\nIn the Distribution segment, sales increased $5 million or 11%.\nVolume mix contributed 6%, resulting from increases across both equipment and supplies and price contributed 5%.\nDistribution's adjusted operating income decreased $700,000 to $4.4 million due to an increase in SG&A expenses, which were more than offset higher volume mix and favorable price-to-cost relationship.\nTurning to Slide six.\nWorking capital timing negatively impacted our cash flow for the quarter.\nFree cash flow was negative $13.8 million compared with positive free cash flow of $16.2 million for the third quarter of 2020.\nCash from operations decreased in the quarter due to increases in working capital, driven by a $14 million and an $8 million increase in accounts receivable and inventory, respectively, combined with a $3 million decrease in trade accounts payable.\nAdditionally, capital expenditures were $6 million in the quarter.\nSales were more weighted in the back half of the quarter, contributing to the elevated accounts receivable balance.\nIn addition to higher raw material costs, our focus on meeting our customers' needs also contributed to higher inventory levels.\nYear-to-date free cash flow was essentially flat, down $700,000.\nCash on hand at quarter end was $15 million.\nWe expect working capital to turn favorable in the fourth quarter.\nOverall, our balance sheet remains strong and gives us the flexibility needed to execute on our long-term growth strategy.\nAs a reminder, on July 30, we utilized our revolving credit facility to finance the Trilogy Plastics acquisition.\nWe ended the third quarter with leverage at 1.8 times.\nOn Slide seven, turning to our outlook for fiscal year 2021.\nWe anticipate net sales to increase in the mid- to high 40% range attributed to both organic growth and acquisitions.\nOur previous sales guidance was in the mid-40% range.\nA little more than half of the growth for the year is expected to come from the Elkhart and Trilogy acquisition.\nElkhart's annual net sales at the time of acquisition were approximately $100 million and Trilogy's annual net sales were roughly $35 million.\nWhile rising input costs and labor pressures continue to impact our profit growth and margins during the third quarter, we are seeing signs of resin cost easing and are cautiously optimistic it will begin to decline as we move through the fourth quarter.\nThis, combined with additional pricing actions affected in the fourth quarter should result in a favorable price-to-cost relationship for the quarter.\nTaking these considerations into account, we are reaffirming our 2021 outlook for adjusted earnings per share of $0.90 to $1.05 per share.\nOur guidance reflects a weighted average share count of 36.5 million shares and the addition of the newly acquired Trilogy business.\nAs a reminder, Trilogy is expected to be only slightly accretive to earnings per share in the current fiscal year.\nOur key modeling assumptions include depreciation and amortization expenses of approximately $22 million and capex of approximately $16 million to $19 million, up slightly from our previous capex guidance of $15 million to $18 million.\ncapex is expected to trend higher than past years with our renewed focus of investing in our facilities and improving our capacity along with the addition of Elkhart and Trilogy.\nThe effective tax rate is forecast to approximate 26%.\nIn closing, while the short term continues to be impacted by macroeconomic factors, our fundamentals remain intact.\nWe are extremely pleased with the demand for our portfolio of products along with our ability to pass along the value proposition they bring through pricing actions.\nWe are making solid progress on our One Myers initiative, which Mike will share with you momentarily.\nStarting on Slide eight.\nIt's been a little more than a year since I first introduced our long-term road map and broader One Myers strategy.\nI'm very proud of the considerable progress we've made to date.\nI have a lot of passion for this company, our company, I see the upside and the opportunity every day.\nWe're currently well into the middle innings on Horizon one of our transformation.\nAs a company, we are aligned and centered on our true north, our mission, which is to transform our Material Handling segment into a high-growth business as the true innovator of engineered plastic solutions while we also continue to grow and optimize our Distribution segment.\nAs I outlined in the past, Horizon one is built on driving self-help initiatives to improve profitability and then using these proceeds to fund organic growth through sales and commercial excellence and bolt-on programmatic M&A.\nWe've made meaningful progress across each of these areas.\nAs we continue to execute the remainder of Horizon 1, we'll have the necessary foundation, knowledge and track record to move into Horizon two.\nWe will continue with the self-help and organic growth efforts, but will use the enterprise level M&A to create shareholder value.\nAfter the completion of Horizon two, we will transition into Horizon three, where we approach M&A on more of a global scale.\nOur One Myers vision and the associated transformation of our business is rooted in our ultimate goal of maximizing long-term value creation for our shareholders, we believe, will be achieved as we execute on this plan.\nSlide nine covers the four strategic pillars that support our One Myers vision.\nMy approach is to be consistent, almost broadly consistent on the pillars and on the levers and the areas of focus we're using to drive our transformation.\nBecause they are the bedrock, the foundation of our transformation, we must maintain consistency in our approach in order to provide direction to our people and ensure execution success.\nThese pillars and work tracks are straightforward and not terribly complicated.\nOur success comes from our relentless and dogged pursuit of their execution.\nSince I've covered these pillars extensively in the past, I'll move on to Slide 10 to update you on the progress we've made across each of these as it relates to our first horizon.\nWe've displayed an outstanding growth -- organic growth trajectory over the last several quarters and believe we are taking the right action to help sustain this momentum.\nWe are building a world-class commercial organization at Myers through the continued addition of strong talent at the middle level and the new and rejuvenated marketing, product management and sales structure we put in place.\nWe've also invested in sales training and improving our sales processes to drive organic growth, customer intimacy and pricing to value not to cost.\nAdditionally, our investments in e-commerce continue to take flight.\nE-commerce is showing encouraging results with year-to-date sales up approximately 30%.\nWe've learned to use e-commerce as a flywheel for volume and have found that it is an excellent channel.\nWe're able to accept or decline business that helps us best optimize our assets capabilities.\nThis flywheel approach will become more impactful as we get better at S&OP and improve how we balance our growing demand across our facilities.\nMoving on to M&A.\nGrowth via acquisition is and will continue to be an integral part of our One Myers strategy.\nWe closed on our acquisition of Trilogy Plastics earlier this quarter and are very excited about its prospects.\nTrilogy enhances our ability to manufacture highly engineered and tight tolerance specialty products.\nWe're already taking some of the learnings and best practices from Trilogy into our plants that were legacy Ameri-Kart or Elkhart Plastics.\nSo far, three months in, the integration of Trilogy is going well and is right in line with our expectations.\nAs a reminder, the integration of Elkhart has also gone well, helping us better serve our customers and capture growth synergies and $4 million to $6 million of cost synergies, both of which exceed expectations.\nFrom a big picture perspective, through our two acquisitions over the last year, we are making progress on developing an effective framework for selecting high-quality companies that complement our businesses.\nAnd as equally important, we're on our way to developing a strong, repeatable playbook and processes to ensure a successful integration of these acquired companies.\nWe have lost connection with our speakers.\nWe will be with you in just a second.\nWe now have the team back on the line.\nI will hand back over to Mike McGaugh.\nSorry about that, folks.\nAnd I'm not exactly sure where it dropped, but I'll pick up around e-commerce.\nSo that's a great place, a great thing.\nSo additionally, our investments in e-commerce continue to take flight.\nE-commerce is showing encouraging results with year-to-date sales up approximately 30%.\nWe've learned to use e-commerce as a flywheel for volume and found that it's an excellent channel.\nWe're able to accept to define business that helps us best optimize our asset capabilities.\nThis flywheel approach will become more impactful as we get better at S&OP and improve how we balance our growing demand across our facilities.\nMoving on to M&A.\nGrowth via acquisition is and will continue to be an integral part of our One Myers strategy.\nWe closed on our acquisition of Trilogy Plastics earlier this quarter and are very excited about its prospects.\nTrilogy enhances our ability to manufacture highly engineered and tight tolerance specialty products.\nWe're already taking some of the learnings and best practices from Trilogy into our plants that were legacy Ameri-Kart or Elkhart Plastics.\nSo far, three months in, the integration of Trilogy is going well and is right in line with our expectations.\nAnd as a reminder, the integration of Elkhart has also gone well, helping us better serve our customers and capture growth synergies and $4 million to $6 million of cost synergies, both of which exceeded our expectations.\nFrom a big picture perspective, through our two acquisitions over the last year, we're making progress on developing an effective framework for selecting high-quality companies.\nThey complement our business and is equally important, we are on our way to developing a strong repeatable playbook and processes to ensure integration -- successful integration of these acquired companies.\nThe plastics molding industry is quite fragmented, and we believe that acquiring specific technologies, niches and best practices is a highly effective way to create value for all of our stakeholder groups.\nWe focus on acquiring founder-owned companies with similar cultures and values to Myers and we worked with the management teams to invest and grow these businesses through improved processes, additional capital investment, retaining and incentivizing key people and collaborating and optimizing across all of our facilities.\nPaying a fair price, not overpaying, for these acquisitions is also an important part of the equation.\nOur M&A strategy has proven to be successful so far, and we will continue to fine-tune it as we believe it will serve us well through the remainder of Horizon one as we pursue large acquisitions in Horizon two and three.\nMoving on to operational excellence.\nThis is an area that's been crucial during the last few quarters where we were faced with multiple supply chain headaches.\nOur purchasing and supply chain teams have done a great job in securing raw materials and managing our supply chain so that we are able to consistently deliver for our customers during the quarter.\nOn a relative basis to our competitors, our service levels remain high.\nThis creates value for our customers.\nWe believe this focus on partnering with our customers on service delivery and on a fair approach to pricing will pay dividends over the medium and long term.\nI'd like to speak about our ability to manufacture and get product out the door.\nAs I mentioned earlier, we've pursued new approaches to staffing and providing labor to our plants and are encouraged by our results.\nWe are providing a safe and well-paying environment for our workers and have been able to source some workers from agriculture markets and second chance work programs.\nThis strategy was key to enabling our third quarter growth.\nIn addition to getting more creative with our approach to labor, we're also investing in automating select operations within our facilities.\nWe have several engineering teams driving automation across Myers, sharing best practices, and we're investing capex in the space and continue to do so, likely at an accelerated pace as we not see the issue of labor or lack of it going away.\nAn important part of operational excellence is pricing excellence.\nAnd we've hired and installed a small but effective team that has led the space at other chemical and plastics companies and instituting this capability at Myers.\nThe team is accelerating our focus on value capture through pricing.\nWe announced additional price increases in September and October and have begun implementing value-based pricing rather than cost-plus pricing.\nThis is a change in approach, and it will take some time to implement, but it's an important lever to deliver value for our stakeholder groups.\nNow I'll turn to our fourth pillar before giving my closing remarks.\nOur high-performance culture is a key enabler of our long-term success.\nHaving a true north, having alignment on our values and our mission is critical for Myers to be successful.\nWe are well on our way on this journey.\nWe're seeing meaningful traction with our recently launched learning management system, which allows employees to take online classes to help develop their capabilities and skills within the company.\nOur desire is to develop our employees and promote from within.\nDoing this inspires loyalty, improves our company's performance, improves our stability and continuity of our employee base, and it also decreases cost.\nWe continue to invest in and build this tool, and we believe it will help us in the for talent.\nAn important part of our culture and value is based on servant leadership.\nI believe on this approach, and I'm committed to instilling it at Myers.\nThe deployment of our certain leadership training is underway and 50 of our leaders have already completed this training and are applying it in their work lives.\nWe have an additional 50 going through the program in early 2022.\nOne final point is our mindset on inclusion.\nAt our senior manager levels and above, we've increased our hiring and promotion of female minority candidates as a percent of total hirings by more than 100% versus past years.\nWhile we're not done yet, we're making progress.\nI'd like to close by letting you know that last week, our management and our Board of Directors held a multi-day retreat to review our strategy in our short-, medium- and long-term goals and objectives.\nThe alignment and collaboration are remarkable and helpful.\nWe're putting the people and the processes in place to drive the company's transformation.\nWe have people in the right roles who know what to do, have done it many times before and are willing to work hard and get their hands dirty to deliver results.\nWe have a clear and straightforward road map to create meaningful shareholder value, and we have the team and the processes to deliver.\nWe'll navigate the short-term inflationary and supply chain bumps while we remain calm, disciplined and focused on the longer term.\nI'm excited for our future, and I appreciate your interest in our company.\n Assistant:", "chosen": "q3 adjusted earnings per share $0.23.\nupdated fy21 net sales growth in mid-to-high 40% range.\nsees fy21 adjusted earnings per share in the range of $0.90 to $1.05.\n"}
{"prompt": "Human: Today, we will follow our customary format with Tony Petrello, our chairman, president, and chief executive officer; and William Restrepo, our chief financial officer, providing their perspectives on the quarter's results along with insights into our markets and how we expect Nabors to perform in these markets.\nAlso during the call, we may discuss certain non-GAAP financial measures, such as net debt, adjusted operating income, adjusted EBITDA, and free cash flow.\nWe have posted to the Investor Relations section of our website a reconciliation of these non-GAAP financial measures to the most recently comparable GAAP measures.\nBefore I begin, I would like to express our thoughts and concern for the members of our community who were affected by the severe weather and the related power and water outages.\nOur rig operations in Texas were essentially unaffected.\nTurning to our results, I will begin with overview comments.\nThen I will follow with a discussion of the markets and highlights from the quarter.\nWilliam will discuss our financial results.\nFirst of all, as we close the books on 2020, I want to recognize the entire Nabors team for its outstanding performance in these extraordinary circumstances.\nOur company's staff confronted the impacts of COVID and the depressed drilling market head on with perseverance and ingenuity.\nThose efforts across all of our segments and functional areas reinforced our leadership in our markets.\nAt the same time, we managed to improve our financial strength.\nWe are emerging from the pandemic as a stronger company.\nNabors is well-positioned to capitalize on the upturn.\nOur financial discipline paid off in 2020.\nFor the full year, we reduced overhead spending by 24%.\nThis effort began in the second quarter.\nOur run rate in the fourth quarter represents nearly 27% drop over the 2019 quarterly average.\nWe also made further progress on our twin priorities, namely: generate free cash flow and reduce net debt.\nWe began the year at just under $2.9 billion in net debt.\nWe delevered by nearly $400 million, fueled, in part, by free cash flow generation of $184 million.\nWe ended 2020 with net debt less than $2.5 billion.\nWe achieved this in the face of very difficult market conditions.\nOur results demonstrate the earnings power and resiliency of our unique portfolio of premium assets with geographical diversification.\nNotwithstanding the most adverse industry and macro conditions in decades, we maintained our position as the preferred drilling contractor and reset our cost structure.\nOur operational strength has supported our financial performance.\nOutside of North America, we remain the largest and most profitable land drilling contractor.\nAnd in the Lower 48, we continue to deliver the highest daily gross margins among our peers.\nBased on the strength of our performance drilling offerings and our digital infrastructure, we increased the penetration of innovative drilling contracts.\nThese contracts generate incremental margin based on value sharing.\nIn the fourth quarter, the combined gross margin from our Lower 48 drilling rigs and our U.S.\nDrilling solutions significantly exceeded those of our peers.\nOur investments in performance, technology, safety, and, importantly, human capital and sustainability, are driving this success.\nWe are positioned well for continued growth.\nI am looking forward to reporting further progress in 2021.\nNext, I would like to spend a few moments on the macro environment.\nAfter briefly testing the upper 30s in late October, the price of near-month WTI increased by 35% through the end of the year.\nSince the beginning of 2021, the price has risen further.\nRecently, WTI was trading above $61.\nBrent, which is also important to our global client base, made a similar move.\nIt was recently priced above $64.\nGlobal oil demand continued to recover in the fourth quarter.\nThe EIA reports consumption increased by more than 2% versus the third quarter.\nIn part, this contributed to a global inventory draw of over 200 million barrels.\nIn early January, the OPEC+ group agreed to keep its production essentially flat.\nThat announcement was followed almost immediately by Saudi Arabia's reported reduction in output.\nThe resulting higher prices, which I detailed earlier, are generally supportive of increased oilfield activity across all markets.\nComparing the fourth quarter and third-quarter averages, the Baker Hughes Lower 48 land rig count increased by 23%.\nOur own working rig count increased by a similar percentage as we added rigs with several customers.\nThese additions more than offset the reduction of our rigs stacked on rate.\nFrom the beginning of the fourth quarter through the end, the Anvers Lower 48 rig count increased by nearly 30%.\nThe growth rate among larger clients was approximately equal to the growth in the smaller operators.\nIt should be noted that more than half of the increase among the larger operators was driven by a single client, and most of that client's increase was the reactivation of just one drilling contractors rigs, which were stacked on rate.\nOnce again, we surveyed the largest Lower 48 clients.\nThis group accounts for approximately 35% of the working rig count.\nOur review of these clients shows a modest pickup in activity planned for the balance of 2021.\nIt is the smaller and medium-sized operators which appear more responsive to the recent strength in commodity prices.\nIn our international markets, we have recently started to see demand increase in selective geographies as measured by the number of active rigs.\nThis trend extends across major markets in Latin America and in Saudi Arabia.\nTo summarize our view of the markets, global oil demand continues to rebound from the pandemic low.\nOil inventories, which expanded considerably in early 2020, are dropping.\nThe resulting increase in commodity prices has improved operator economics.\nWe see the response in the recent growth in rig count.\nOverall, assuming the worst of the pandemic is behind us, the market environment is poised to support higher levels of activity.\nNow, I will comment on our fourth-quarter results.\nTotal adjusted EBITDA was $108 million in the quarter.\nThese results reflect activity, which was somewhat better than anticipated.\nOur Lower 48 operation and our International and Drilling Solutions segments exceeded our expectations.\nWith this adjusted EBITDA performance, we generated approximately $66 million in free cash flow after funding $41 million in capital spending.\nOur global rig count for the fourth quarter was essentially stable at 131 rigs.\nGrowth in the Lower 48 in Canada largely offset the decline in international.\nIn our Lower 48 business, our reported daily rig margin of $9,541 exceeded our guidance and remained in line with the third quarter.\nFor the International segment, adjusted EBITDA for the quarter was higher than our expectations.\nDaily margin outperformed, driven mainly by strong operational performance in Saudi Arabia and by revenue from early terminations.\nThese items more than offset the decline in rig count.\nOur industry-leading fleet capabilities, outstanding operational and safety performance, and expense and capex discipline all drove this accomplishment.\nNext, I would like to mention some specific highlights for the quarter.\nDuring the fourth quarter, we completed a series of debt exchange transactions.\nIn the aggregate, these reduced our outstanding debt obligations by $284 million.\nAdjusted EBITDA in our Drilling Solutions segment increased sequentially by 44%.\nThe adjusted EBITDA margin in NDS widened to 32% in the fourth quarter.\nThis compares very favorably to 24% margins in the prior quarter.\nIn NDS, we increased the penetration of our RigCLOUD platform for digital operations.\nIn the fourth quarter, RigCLOUD was running on nearly all of our working rigs in the Lower 48.\nWe are now in the early stage of growing on third-party rigs.\nWe saw continued growth in our SmartSLIDE and SmartNAV apps.\nSmartSLIDE is our directional steering control system, which automates slide drilling.\nSmartNAV is our automated directional guidance system.\nOur cumulative footage growth for these apps working together increased by 11% in the fourth quarter.\nOur cumulative well count was up by 12%.\nOur portfolio of automation applications in NDS is second to none in terms of capabilities.\nWe developed these products around our SmartROS or rig operating system.\nSmartROS was conceived from the ground up to collaborate with customer workflows while optimizing rig operations.\nWe believe we now have the broadest, most advanced, and most profitable automation solutions in the market today.\nOur focus on ESG is increasingly reflected in our ISS ESG quality scores.\nIn the fourth quarter, our ISS environmental score improved significantly, and the ISS social score improved again.\nWe continue to reinforce our commitment to ESG, and I look forward to reporting on that progress.\nMore recently, Nabors has signed on to the science-based targets initiative.\nWe have committed to setting Science-based GHG emissions targets.\nWe are the only land drilling contractor to do so.\nThe use of alternative power on our rigs is an excellent illustration of our efforts in ESG.\nI will cover this topic in more detail in a few moments.\nIn addition to these highlights, I would like to discuss one of our smart apps in particular.\nBack in the second quarter of 2020, we released an improved version of SmartDRILL, our automated drilling software.\nSmartDRILL digitizes an operators' well plan with optimal task sequences as defined with the operator.\nEssentially, it executes virtually every task that the driller performs from the chair, and it compiles automated sequences of those tasks.\nIt is the only automated drilling solution in the market that enables ad hoc changes to the sequence.\nBy digitizing best practices, SmartDRILL improves consistency and reduces the potential for human error.\nFor example, we are able to minimize the risk of damage and reduce loss time.\nTangible benefits of SmartDRILL include an increase in single run laterals, a decrease in unplanned trips, and improved and consistent connection times.\nWe are excited about SmartDRILL.\nOur pricing models for this app reflect the measurable value that it generates for customers.\nI look forward to reporting on its progress and on other apps in our portfolio in the future.\nI will also make some comments on Nabors's positioning in the energy transition.\nOur plan as we embark on the transition consist of two parallel tracks.\nMost immediately, we are examining alternatives to improve Nabors's own carbon footprint.\nWe actually started down this track several years ago when we introduced the fuel tool.\nFuel tool is a system that monitors and optimizes rig engine usage.\nIt was targeted to reduce fuel consumption.\nNow, we are evaluating technologies aimed at carbon capture, emissions minimization, and power management.\nWe have an inventory of 40 dual fuel packages to satisfy market needs in the Lower 48.\nApproximately 15% of our operating rigs in the Lower 48 are currently running on either high-line power or bi-fuel.\nIn addition, we have introduced our advanced energy management system on one of our rigs.\nThis system yields a significant improvement in the rig's carbon footprint.\nWe are also running 12 rigs in Canada with bi-fuel capability.\nGlobally, I expect the use of these technologies to increase in the future.\nThe parallel track includes opportunities which are relevant beyond our rig fleet.\nThese prospects could include other drillers' rigs or scale beyond the traditional markets in the oil field.\nOur energy transition initiatives are still in the early stages.\nWe expect to make tangible progress going forward.\nI look forward to reporting further on this area.\nBefore turning the call over to William, I will discuss our view of the market in some more detail.\nThe Lower 48 industry has added 151 rigs or 67% since its low in August.\nLooking forward, we see the current commodity price environment supporting increased activity as the year progresses.\nWe expect our own rig count to increase each quarter throughout the year.\nWe are also starting to see some modest improvements in spot-day rates.\nIn our international markets, since the third quarter, we have seen our own activity increase further in Latin America.\nOur working rig count in the region rose more than 50% during the quarter.\nAccordingly, versus the fourth quarter of 2019, pre-pandemic, we have gained significant market share in both Argentina and Colombia.\nIn addition, several customers in Latin America with temporary COVID pricing adjustments have returned to full-day rates.\nNotwithstanding the macro challenges, the operation in Saudi Arabia performed exceedingly well.\nIn addition, the expected rig restarts in the Kingdom have begun.\nSince the beginning of the year, eight of the idle rigs have returned to work.\nOur working rig count in Saudi Arabia now stands at 38.\nThis leaves five expected to return over the next 12 months.\nThese reactivations are consistent with the expectations we laid out last quarter.\nI would like to take a moment here to express our appreciation to our SANAD CEO and the members of the SANAD board, especially the directors from Saudi Aramco.\nThe Aramco board members have been tireless in supporting the management team in delivering best-in-class operational performance.\nThat concludes my remarks on our fourth-quarter results highlights in the market.\nI wish to reiterate that our primary concern remains the health and well-being of the extended Nabors community.\nOn behalf of the company, we extend our heartfelt thoughts to those affected by the pandemic.\nThe net loss from continuing operations of $112 million in the fourth quarter represented a loss of $16.46 per share.\nThe fourth quarter included $162 million of pre-tax gains from debt exchanges and repurchases, partially offset by charges of $71 million, mainly from asset impairments, for a net after-tax gain of $52 million.\nFourth-quarter results compared to a loss of $161 million or $23.42 per share in the third quarter.\nThe third quarter included net after-tax gains of $6 million related to gains from debt repurchases, asset impairments, and severance costs.\nRevenue from operations for the fourth quarter was $443 million, a sequential gain of 1%.\nRevenue improved in most segments, with only international and rig tech partially offsetting those increases.\nIn the Lower 48, despite some deterioration in the average pricing for our fleet, drilling revenue of $103 million increased by $6.9 million or 7% as our rig count improved by 11%.\nLower 48 rig count at 53.6 was up sequentially by 5.4 rigs, which is 2.4 rigs more than we had anticipated.\nDaily rig revenue in the Lower 48 at $20,950 decreased by about $800 as we continue to sign contracts at current market rates that are lower than the average for our fleet.\nIn aggregate, revenue in our other U.S. markets decreased by $3 million, reflecting a reduction in our offshore activity as one of our rigs finalized this contract in the prior quarter.\nFourth-quarter revenue fell with a lower rig count, as well as with the absence of the demobilization revenue we invoiced in the third quarter.\nInternational drilling revenue at $245 million decreased by $3.3 million or 1%.\nThis decrease was primarily related to declines in activity across several markets, as rig count fell by almost nine rigs or 12%.\nThis rig count reduction was higher than anticipated.\nSaudi rig count decreased by five rigs, two more than expected due to temporary suspensions as Saudi Aramco adjusted its drilling activity toward the end of the year.\nKazakhstan and Colombia each had a one-rig termination, both of which we did not anticipate.\nIn addition, Algeria and Kuwait had contracts expiring late in the third quarter that were not renewed.\nThe softer rig count was offset by approximately $4 million in revenue from early terminations and from the restoration of full-day rates for customers with negotiated COVID rates.\nCanada drilling revenue was $14.8 million, an increase of $4.1 million or 38%.\nRig count increased by 2.3 rigs on the usual seasonal ramp-up in activity.\nThe quarter also benefited from a $700 increase in revenue per day.\nNabors's Drilling Solutions revenue of $32 million, up $2.7 million or 9% primarily reflected strong increases in our high-margin performance drilling offerings, as well as our RigCLOUD installations.\nDuring the quarter, we continued to increase the penetration of these services with Nabors and third-party rigs while also benefiting from the higher Lower 48 rig count.\nRig Technologies revenue decreased by $1.1 million or 4% as several clients delayed deliveries beyond the end of the year.\nTotal adjusted EBITDA for the quarter was $108 million, compared to $114 million in the third quarter.\nThe decrease was driven by a $7.4 million reduction in our International segment and a more modest reduction in rig technologies.\nThese were partially compensated by improvements in NDS, as well as U.S. and Canada drilling.\nDrilling adjusted EBITDA of $62.2 million was up by $1.6 million or 3.1% sequentially.\nThe Lower 48 performance came in better than expected on the stronger rig count and higher margins.\nDaily rig margin of $9,541 was about $500 above the high end of our previous guidance and in line with the third-quarter level.\nDecreased costs, mainly a reduction of property tax expenses, offset the pricing deterioration we experienced in the fourth quarter.\nCost-control efforts continue to be a strong focus as we bring rigs back to work.\nAs an example, we have improved our rig stacking and reactivation procedures, and the related costs are significantly better than in the last cycle.\nFor the first quarter, we expect daily rig margins of approximately $8,500, driven mainly by the repricing of renewals as rigs continue to roll off pre-pandemic contracts and by the return to more normal levels of property taxes, with an adverse impact of approximately $600 per day.\nWe forecast a two- to three-rig increase for the first quarter of 2021.\nOur current rig count in the Lower 48 is 57 rigs.\nInternational adjusted EBITDA decreased by $7.4 million to $64.5 million in the fourth quarter or 10% sequentially.\nThe lower rig count was somewhat offset by early termination revenue and return to full-day rates from several customers.\nAverage international rig count was 62.6, a reduction of 8.7 rigs or 12%.\nDaily gross margin for the quarter was $13,500 as compared to $12,700 for the prior quarter.\nThe fourth quarter included approximately $800 per day in early termination revenue.\nTurning to the first quarter, we expect an international rig count increase of two to three rigs as several Saudi rigs returned to work progressively during the quarter and for gross margin per day to settle between $12,500 and $13,000 per day.\nOur current rig count in the International segment is 57 rigs.\nCanada adjusted EBITDA of $3.5 million increased by $1.4 million.\nRig count at 9.7 rigs was 2.3 higher sequentially.\nGross margins per day of $4,633 also increased due to the higher activity level.\nWe expect both rig count and daily margins to improve again in the first quarter by three rigs and $500, respectively.\nWe currently have 14 rigs operating in Canada.\nDrilling Solutions posted adjusted EBITDA of $10.3 million, up from $7.1 million in the third quarter or 44%.\nThe improvement reflected mainly the higher revenues from performance drilling offerings and RigCLOUD infrastructure.\nIn addition, a shift in our U.S. casing running services from manual to integrated materially improve the profitability of that business line.\nWe expect adjusted EBITDA in the first quarter to be in line with the strong fourth quarter.\nRig Technologies reported adjusted EBITDA of $0.5 million in the fourth quarter, a decrease of $800,000.\nThe first-quarter EBITDA should be similar to the fourth quarter.\nNow, let me review our liquidity and cash generation.\nLooking back at 2020, it was a challenging year.\nNevertheless, we maintained our focus on improving liquidity and leverage, and we made significant headway.\nThe capital and cost discipline actions we announced earlier, including cuts to corporate and operations overhead, salaries, dividends, and capital expenses, were fully executed.\nThese actions were instrumental in helping Nabors deliver $184 million in free cash flow for the full year.\nIn 2020, we reduced overhead spend by 24%.\nThese reductions began in the second quarter and translated into cash savings of approximately $90 million over the last 9 months of the year.\nOur run rate in the fourth quarter represents a nearly 28% reduction over the 2019 quarterly average.\nThe decrease in overhead, combined with capex reductions of $170 million and dividend cuts of $7 million, translate into total cash savings of approximately $267 million versus our initial plan for 2020.\nDespite the substantial drop in activity and consequent EBITDA shortfall, Nabors delivered free cash flow, almost in line with our initial pre-COVID target.\nIn the fourth quarter, net debt declined by $290 million to $2.49 billion.\nThis reduction was driven by positive free cash flow and by several debt exchanges we completed during the quarter.\nFree cash flow, defined as net cash from operating activities less net cash used for investing activities, totaled $66 million.\nThis compares to free cash flow of approximately $9 million in the prior quarter.\nThe fourth quarter included minimal interest payments as compared to semiannual interest payments of approximately $80 million in the third quarter.\nDuring the fourth quarter, we experienced a slowdown in collections from a significant number of our customers.\nWhile our quarterly free cash flow was affected by some $30 million, we expect this situation to prove temporary.\nFor the first quarter, we anticipate breakeven cash flow.\nPlease keep in mind that semiannual interest payments for all our senior notes are paid in the first and third quarters.\nIn addition, the first quarter has an unusually high number of one-time annual payments, such as property taxes and bonus payments to our workforce.\nThese payments and other one-time annual outflows in the first quarter typically amount to about $30 million.\nOffsetting these negative impacts on our cash flow, we anticipate a strong recovery in our quarterly collections.\nWe have already experienced an increase in collections during the month of January.\nDuring the fourth quarter, we completed a public debt exchange and various private exchanges.\nThese transactions reduced our total debt obligations by $284 million and reduced our near-term maturities.\nDuring 2020, we reduced through repayments, buybacks or exchanges, near-term notes with maturities in or before 2023 by an aggregate amount of $1.5 billion.\nSubsequent to year-end, we further addressed our capital structure by completing additional debt exchanges and open market purchases of our note.\nThese transactions reduced our debt obligations by an additional $22 million.\nLet me continue with a comment on capital expenses.\nCapital spending in the fourth quarter was $41 million, compared to $39 million in the prior quarter.\nFor all of 2020, capex totaled $190 million, $10 million less than we had planned.\nWe are targeting capex of $50 million for the first quarter and up $200 million for the full-year 2021, excluding Saudi newbuilds for SANAD.\nAt this point, SANAD has been awarded three drilling contracts by Saudi Aramco, and we have issued one purchase order for the first three.\nWe do not expect that any newbuilds were delivered in 2021.\nNonetheless, capex for SANAD newbuilds, if any, would be paid out of SANAD funds.\nThe final comment, it is worth mentioning that we determined, together with our SANAD management team and with our JV partner, Saudi Aramco, that at year-end 2020, SANAD held cash balances beyond its future needs.\nConsequently, a cash payment of roughly $50 million to each partner was approved.\nThis payment was executed in the month of January.\nAs you are aware, Nabors's strategy focuses on three key themes: first, operating premium fit-for-purpose assets in diversified geographies; second, expanding services at the well site using the rig as a platform; and finally, using technology to unlock value and drive future growth.\nThis past year's results demonstrate the value of this strategy.\nWith regard to our assets, we continue to produce leading margins in both the Lower 48 and international markets.\nThis performance reflects the quality of our assets and the competency of our crews.\nOur safety record, which has outperformed our competitors, also confirms that our fleet is second to none.\nIn particular, utilization of our innovative pad-optimal pace X rig remained high throughout 2020.\nUtilization of the X rig, as well as our other advanced Lower 48 models, has increased steadily since last summer.\nAnd in geographies as diverse as the Gulf of Mexico and the Middle East desert, our rig utilization has held up better than most.\nWe predicted in late 2016 that the drilling industry could not count on an ever-increasing rig count to grow EBITDA.\nIn response, we created NDS.\nIts mission was to grow by using the rig as a platform.\nNDS delivers integrated well site services in a more efficient manner, which unlocks value for operators and generates growth for us.\nToday, NDS is one of the most robust and sizable software offerings.\nMarket challenges since 2016 notwithstanding, we have demonstrated that this is a value-creating strategy.\nFinally, with respect to technology, we have maintained our investment in R&D even throughout the downturns.\nThose investments have fueled our premium assets and NDS offerings.\nThey yielded the first software, automated directional drilling, and fit-for-purpose downhole tools.\nWe strongly believe that the next wave of value will be created through process automation, including robotics and digitization.\nESG and efficiency reasons alone will push operators to resolve the red zone management issue and remove employees from the rig floor.\nWe believe we are uniquely positioned to meet that challenge.\nWe have an unmatched portfolio of assets, technology, geographic mix, and people that positions us well for the future.\nWe remain convinced that our portfolio will deliver tangible value to clients and, ultimately, back to Nabors's shareholders.\n Assistant:", "chosen": "q4 loss per share $16.46 from continuing operations.\nq4 revenue $443 million versus refinitiv ibes estimate of $418.4 million.\n"}
{"prompt": "Human: Joining me on the call today are Mike Hayford, CEO; Owen Sullivan, president and COO; and Tim Oliver, CFO.\nAnd as always, a great job with the intro to our third-quarter call.\nI will begin with some of my views on the business, including an update on our move to NCR becoming a software platform and payments company, with a shift to recurring revenue streams and a focus on improving profit margin.\nTim will then review our financial performance and an outlook into the remainder of 2021.\nLet's begin on Slide 4 with some highlights from the third quarter.\nNCR delivered strong performance that included accelerated recurring revenue growth, significant margin expansion and solid cash flow production.\nThe team executed very well both strategically and tactically.\nStrategically improving our mix of software and services, investing in our platform products and at the same time continuing to build momentum in our NCR-as-a-Service strategy, while continuing to focus on meeting customer needs in the challenging supply chain environment that we experienced in the third quarter.\nFirst, we delivered 20% total revenue growth and 39% recurring revenue growth in the third quarter.\nRecurring revenue represented 62% of total revenues in the quarter which is a significant increase from 53% one year ago.\nWe continue to make steady progress increasing our recurring revenue, which is consistent with our 80/60/20 goals.\nAs you know, the third quarter was the first full quarter of incorporating Cardtronics in our financial results as we closed on the transaction in late June and received the final regulatory approval on August 10 from the CMA in the U.K. Second, adjusted EBITDA increased 41%.\nThird, adjusted EBITDA margin expanded to 18.5%, which represents an increase of 280 basis points from the third quarter of 2020 and marks the highest level in four years.\nFourth, we delivered solid free cash flow.\nWe generated 125 million of free cash flow in the quarter.\nThis is the sixth consecutive quarter of positive free cash flow.\nThe successful execution of our NCR-as-a-Service strategy is helping to drive higher recurring revenues, expansion of EBITDA margin and more linear free cash flow production.\nAnd finally, the integration of Cardtronics remains on track.\nWe made progress integrating the teams and going to market as a unified company.\nWe are more enthusiastic than ever.\nWe are well positioned to accelerate the NCR-as-a-Service strategy and further shift NCR's revenue mix to software, services payment, including recurring revenues.\nNow moving to Slide 5.\nWe executed extremely well in the third quarter, driving progress toward NCR-as-a-Service.\nWe have strong momentum across our strategic growth platforms, which support our transition to shift NCR to a software platform and payments company.\nIn Banking, we continue to have a positive momentum in our digital banking platform.\nIn the third quarter, digital banking had 22 renewals, three new logo deals, and eight new product sales to existing clients, all positive drivers of growth.\nDemand has been strong for our business banking platform, as well as for the online digital account opening.\nThe digital account opening, which we obtained through the acquisition of Terafina earlier this year, NCR can now onboard a broad array of accounts across multiple channels.\nI am pleased with the progress we have made returning digital banking to a growth engine for NCR.\nDuring the third quarter, digital banking grew 9% over the same period last year.\nWe are receiving increased interest in our ATM-as-a-Service solution.\nAn integrated go-to-market model between the legacy NCR and Cardtronics teams provide a key point of competitive differentiation.\nLiberty Bank, which is one of the largest mutual banks in the United States, selected NCR to provide end-to-end ATM-as-a-service for its ATM network, including upgrading its entire ATM fleet.\nIn Retail, we continue to gain traction with our NCR Emerald software platform.\nWe have positive momentum in winning the upgrade imperative for retail POS software.\nIn the third quarter, we had significant success advancing our software-defined store, which is a component of our next-gen Emerald solution.\nIt provides us the capability to start our retail clients down the path of upgrading to our next-gen cloud-based solution in a seamless, low-risk approach by accepting select micro services from our NCR eCommerce platform in an incremental approach to transitioning to NCR's next-gen solution.\nWe had two major software-defined store commerce platform signings during the third quarter from large clients that have installed the NCR eCommerce platform validated the technology in a full rollout during 2021, both confirming their success with signing a five-year subscription agreements during the third quarter, these two, Pilot Flying J, the largest operator of travel centers in North America with 750 retail locations in 44 states; and Circle K, which operates more than 15,000 convenience stores in over 20 countries.\nIn addition to the NCR eCommerce platform, Circle K also expanded its relationship with NCR to enable the Allpoint Network across stores in eight states.\nDuring the quarter, we also signed 17 new contracts through our digital front-end app, Freshop.\nThis SaaS solution helps grocers implement their own eCommerce and delivery services without expensive third-party providers.\nFreshop connects to our clients through the NCR platform and provides NCR additional upsell opportunities and value-add for our retail customers.\nIn Hospitality, our focus on customer success and wallet share gain is proving itself in our ability to attract new customers and better service existing customers.\nNCR realized a significant upgrade in our relationship with Buffalo Wild Wings, which is part of the Inspire Brands family, entering into a four-year contract to support Buffalo Wild Wings across 1,200 locations with subscription-based point-of-sale software, various cloud-based applications, and end-to-end managed services.\nIn the SMB market, the momentum of Aloha Essentials, which bundles payments, software, services, and hardware into a single offering, continued in the third quarter with a 102% increase in a Aloha Essentials sites over last year's same quarter.\nOur Payments business continued its success during the third quarter.\nWe increased the number of restaurant payment processing sites by 27% from the second quarter, as well as upselling existing customers to our payments platform.\nDuring the third quarter, we signed enterprise hospitality client Sbarro to our payments platform.\nThis is in addition to two other enterprise hospitality clients Shipley and Pei Wei that we signed a payment processing deals earlier this year.\nIn summary, we have increased momentum accelerating our NCR-as-a-Service strategy across each of our business segments.\nWe continue to focus on taking care of our customers, advancing our product capability with investments in our strategic growth platforms, and improving our productivity.\nWith that, let me pass it over to Tim.\nTo echo Mike's comments, we are very pleased with our third-quarter results.\nWe demonstrated terrific tactical execution in an uncertain business environment and significant acceleration in our more strategic growth areas.\nCMA in mid-August since we last talked to you on our Q2 earnings call.\nToday's report includes the results for the consolidated companies for the full quarter, with legacy Cardtronics now included in our banking segment.\nLet's begin with Slide 6, which presents a top-level overview of our third-quarter financial performance.\nStarting on the top left, revenue was $1.9 billion, up $312 million or 20% versus the 2020 third quarter, driven by strong growth in both our banking and hospitality segments.\nNormalizing for the inclusion of Cardtronics, pro forma revenue was up 3% year over year.\nIn aggregate, we had high double-digit revenue growth in our software business, which is more than sufficient to offset lower hardware revenue.\nWhile demand for hardware across all three segments is increasing, component availability and freight challenges constrained both revenue and profitability in self-checkout and point-of-sale.\nAlso shown here in darker green is our mix of recurring revenue.\nWith the inclusion of the full quarter of Cardtronics revenue, which has a preponderance of recurring revenue, our aggregate result was up 39% and comprised 62% of revenue in the quarter.\nOn a pro forma basis, recurring revenue was up 7% year over year.\nIn the top right, adjusted EBITDA increased $103 million or 41% year over year to $352 million.\nAdjusted EBITDA margin rate expanded 280 basis points to 18.5%, representing a high watermark for the previous four years.\nWhile I will provide a little more detail on the discussion of the segments, in general, a higher value revenue mix, cost productivity and price initiatives were together more than sufficient to overcome premium costs associated with a brutally difficult supply chain and a huge shift to recurring quarter for our retail business.\nIn the bottom left, non-GAAP earnings per share was $0.69, up $0.15 or 28% from the prior-year third quarter.\nThe Cardtronics transaction remains on track to be 20 to 25% accretive to earnings per share within the first full year.\nThe tax rate was 28.5%, and we now expect the full-year tax rate to be 28%.\nAnd finally, and maybe most importantly, we delivered another strong quarter of free cash flow with generation of $125 million.\nThis compares to $160 million in the third quarter of 2020, which benefited from pandemic-related temporal cash preservation actions and the timing of an insurance settlement.\nMoving to Slide 7 for our banking segment results, which now includes the Cardtronics operations.\nBanking revenue increased $273 million or 35% year over year, driven by increases in software and services revenues that more than offset the decline in ATM hardware revenue.\nWe continue to successfully replace our onetime revenue that was traditionally recognized with the sale of ATM hardware with more durable, predictable and valuable software and services revenue streams.\nSubscription software TCV signed in this segment doubled from prior year, with significant increases in both annual value and duration.\nBanking adjusted EBITDA increased $98 million or 68% year over year.\nAdjusted EBITDA margin rate expanded by 450 basis points to 23%.\nThe margin increase was a result of the significant accretion from the inclusion of the Cardtronics businesses, a more profitable and valuable mix of revenue in our legacy NCR businesses, as well as the cost productivity and price increases.\nThe bottom of the slide shows our key metrics for the banking segment.\nOn the left, while current quarter wins have a typical lag to conversion and eventual revenue generation, prior period wins at digital banking drove a 9% year-over-year growth rate in the third quarter.\nThe grade of growth in digital banking has accelerated in the last several quarters.\nWe continue to expect digital banking to exit the year at a double-digit revenue growth rate as we lap most of the attrition caused by the 2019 customer losses.\nDigital banking registered users also increased 9% compared to Q3 of 2020.\nThe shift to recurring revenue continues to gain traction, with recurring revenue up 71% year over year and 7% on a pro forma basis.\nWe are extremely pleased with the first full-quarter performance at Cardtronics.\nAs we continue to add and expand with financial and retail partners, we are driving more transactions over our leading ATM network in the United States.\nCash transactions on our ATMs in the U.S. were up 12% compared to the third quarter of 2020.\ndemonstrates the value of the network to our consumers, to our retailers and to our financial institutions and drove strong performance.\nWe expect to drive both traditional transaction growth and new types of transactions as we invest in expanding the capabilities of this network.\nMoving to Slide 8, which shows our retail segment results.\nWhile I typically start in the top left on these charts, for this quarter in retail, the story is really described by the bottom half of the page.\nLooking at SCO revenue, which is approximately 50% hardware, as we called out in Q2, we posted a very strong Q2 growth rate due to a customer request to accelerate a $30 million self-checkout order into Q2 from the second half of the year.\nThat exacerbated the already sawtooth pattern.\nWe expect a strong Q4 for self-checkout that will result in full-year 2021 growth of more than 10%.\nAnd in the center bottom, our platform lanes, a KPI that illustrates the success of our strategy of converting our retail customers to our platform-based subscription model.\nAs you heard from Mike, we had two key deals at Pilot Flying J and Circle K converting to our software-defined store platform during the quarter.\nThese contracts, much like those that we have standardized on in the banking segment, convert would-be onetime perpetual sales into a multiyear subscription-based revenue stream.\nThe nature of these contracts shifts roughly $30 million of very high profit revenue that would have previously occurred is upfront software license to revenue that now recurs over the next several years.\nConsidering those two retiming impacts, retail revenue declined $3 million or 1% year over year due to the lower hardware revenue and the shift to recurring revenue, partially offset by growth in software and services.\nAnd similarly, retail adjusted EBITDA declined $11 million or 14% year over year, while adjusted EBITDA margin rate contracted 190 basis points to 12.7%.\nThe declines are primarily driven by that shift to recurring revenue.\nRecurring revenue in this business increased 4% versus the third quarter of last year.\nSlide 9 shows our Hospitality segment results, which is participating fully in the recovery of the restaurant industry.\nWe're seeing strong momentum across the business as we see a rebound in the enterprise market with an uptick in new restaurant openings and technology refreshes.\nHospitality revenue increased $50 million or 29% as restaurants reopen, rework existing locations, and expand.\nOur signed subscription total contract value in this business increased 46% from the year-ago third quarter.\nOur sales pipeline is getting stronger and we continue to hire to increase our feet on the street and catalyze growth.\nSecond quarter adjusted EBITDA increased to $35 million, up 46% from the third quarter of 2020, while adjusted EBITDA margin rate expanded 180 basis points to 15.7%.\nThis improved profitability was driven by higher revenue and lower operating expenses.\nHospitality's key metrics on the bottom of this slide include Aloha Essentials sites and recurring revenue.\nAloha Essentials sites more than doubled when compared to the prior year third quarter and grew 30% sequentially.\nAnd in the graph on the bottom right, recurring revenue increased 19% from last year and 7% sequentially.\nTurning to Slide 10, we provide our second-quarter results for our 80/60/20 strategic targets.\nFirst, we strive to generate 80% of our revenue from software and services or less than 20% of our revenue from discrete hardware sales.\nIn the third quarter, software and services represented 76% of our revenue, which is up from 71% in the year-ago quarter.\nStepping down the page, we aim for 60% of our revenues to be recurring to drive more resilient, more predictable, and more valuable revenue.\nWith the addition of Cardtronics, we have now exceeded our goal with recurring revenue representing 62% of the total, up from 53% in last year's third quarter.\nAnd we aspire to a 20% adjusted EBITDA margin rate.\nWe made significant progress in this quarter with an adjusted EBITDA margin of 18.5% compared to 15.7% in the third quarter of 2020.\nOn Slide 11, we present free cash flow, net debt and adjusted EBITDA metrics to facilitate leverage calculations.\nWe continued the trend of strong, more linear free cash flow.\nWe generated total free cash flow of $125 million.\nWe have a strong balance sheet, ample liquidity, and the financial strength to support our growth strategy.\nThe increase in cash provided by operating activities was primarily driven by the effective management of our working capital, including the refinancing of our receivables asset-based revolver to provide higher availability and to make the financing nonrecourse.\nThis provided a onetime $274 million benefit to operating cash flows.\nWe use that cash, along with our strong Q3 free cash flow, to redeem our highest coupon debt to $400 million of 8% bonds.\nTaken all together, all of these efforts have reduced our average borrowing rate to 4.15%.\nThis slide also shows our net debt to adjusted EBITDA metric with a pro forma leverage ratio of 3.8 times.\nWhen we announced the Cardtronics transaction, we estimated that our pro forma leverage would be about 4.5 times with a commitment to delever below 3.5 by the end of 2022.\nWe are significantly ahead of the schedule due to higher-than-forecasted cash generation by both companies.\nWe ended the third quarter with $383 million of cash and remain well within our debt covenants, which include a maximum pro forma leverage ratio of 5.5x.\nWe also have significant liquidity with about $1 billion available under our revolving credit facility.\nFinally, about 90 days ago, we provided guidance for the first time since the beginning of the pandemic to help you bridge your modeling efforts to an NCR that was inclusive of the Cardtronics acquisition.\nConsidering the Q3 results, and the persistently challenging global supply chain, we expect to be at the lower end of those guided ranges.\nWhile we expect a 20% sequential increase in hardware revenue in Q4 and anticipate continued excess demand for both self-checkout and point of sale and some recovery from price increases on hardware, supply chain constraints will likely cause us to carry some backlog into 2022.\nFor EBITDA and EPS, a little less revenue and supply chain premium costs will modestly constrain profit.\nAnd for free cash flow, slightly lower revenue, less linear revenue and the potential need to invest in safety stock of key components to meet customer needs early in 2022 will all impact cash generation.\nNow turning to Slide 12.\nLooking forward, our key priorities are clear.\nFirst, we expect to continue to execute well in a very difficult supply chain environment.\nWe will continue to put our customers first and deliver on our commitments while we manage through the supply chain challenges.\nSecond, we are eager to capitalize on the opportunities that Cardtronics brings us.\nWe are excited to leverage Cardtronics to accelerate ATM-as-a-Service and broaden our retail business.\nThird, we are experiencing increased opportunities to accelerate NCR payments and transaction processing solutions as we go to market with a more robust offering.\nFourth, we will continue to allocate capital to the highest growth and return opportunities with the goal of driving free cash flow and increasing returns for our shareholders.\nFifth, we will continue to focus on our customer satisfaction initiatives with the simple belief that happy customers will buy more solutions from NCR.\nWe strive to garner a larger share of wallet with the mission to help our customers run the store, run the restaurant, and run self-directed banking.\nOur strategy of transitioning customers onto our software and payments platforms is gaining traction with customers on the platforms increasing their spend with NCR.\nAnd lastly, I'd like to extend an invitation to each of you to participate in our virtual Investor Day, which is scheduled for December 9 of this year.\nWe are looking forward to this event and intend to take a deep dive into our strategy, our software and payment platforms, and an update on our strategic goals.\nOperator, please open the line.\n Assistant:", "chosen": "q3 non-gaap earnings per share $0.69.\nq3 revenue rose 20 percent to $1.9 billion.\n"}
{"prompt": "Human: I'm joined here today by Steve Westhoven, our President and CEO; Pat Migliaccio, our Chief Financial Officer; as well as other members of our senior management team.\nThis could cause results to materially differ from our expectations, as found in slide one.\nWe will also be referring to certain non-GAAP measures such as net financial earnings or NFE.\nWe believe that NFE provides a more complete understanding of our financial performance.\nHowever, it is not intended to be a substitute for GAAP.\nOur non-GAAP financial measures are discussed more fully in Item seven of our 10-K.\nOur agenda for today is found on slide two.\nSteve will begin today's call with highlights from the quarter, followed by Pat, who will review our financial results.\nNew Jersey Resources delivered strong performance in the first quarter.\nAnd on slide three, I'll take you through the highlights.\nWe reported NFE of $0.46 per share, driven by the performance of our core business, New Jersey Natural Gas.\nWe are also reaffirming our NFE guidance for fiscal 2021 of $1.55 to $1.65 per share and increasing our fiscal 2022 NFE guidance to $2.20 to $2.30 per share, an increase of $0.15 per share from prior guidance.\nAt New Jersey Natural Gas, we completed almost 90% of the Southern Reliability Link and expect to place the project into service this year.\nWe received approval to move forward with our infrastructure Investment Program, a 5-year, $150 million accelerated recovery program that will improve the resiliency and reliability of our natural gas infrastructure.\nAnd we filed for SAVEGREEN 2020, a new energy efficiency program that is designed to help our customers reduce their energy consumption and save money.\nAt Clean Energy Ventures, we acquired the 2.9 megawatt Mt. Laurel Solar Facility, which is part of our plan to invest $165 million this year.\nIn our Storage & Transportation business, we've begun to construct -- to convert the Southern portion of Adelphia Gateway to natural gas and expect it to be in service later this calendar year.\nAnd just yesterday, the U.S. Supreme Court granted PennEast petition to hear its appeal.\nBut despite this positive news, we are still excluding PennEast for our long term projections until there's more clarity on the project.\nAnd at NJR Energy Services we entered into an asset management agreements, which will result in contracted cash proceeds of $501 million over a 10-year period.\nI'll take you through the transaction in more detail on the next slide.\nTurning to slide four.\nEnergy Services entered into a series of AMAs with an investment-grade public utility.\nThese transactions illustrate the value of our portfolio of natural gas storage and transportation contracts that are a testament to the hard work of our talented team.\nThe transactions assist our counterparty in securing needed supply, while Energy Services monetizes the value of a portion of the assets it controls.\nLet me walk you through some of the specifics.\nBeginning in November of 2021, which is our fiscal year 2022, NJRES will begin to release portions of our pipeline capacity.\nUnder the terms of the agreements, NJRES will receive payments of $261 million over the first three years of the AMAs.\nAfter FY 2024, NJRES will receive additional payments of approximately $34 million per year through 2031.\nThe benefits for NJRES include, extracting value from our assets without the need for weather-related price volatility and reducing operational risks associated with the direct management of these transportation assets.\nThe result will be more predictable earnings and cash flows and a lower risk Energy Services business.\nThese transactions also allow us to increase our fiscal 2022 guidance by $0.15 per share, as we'll see on the next slide.\nAnd later in the call, Pat will take you through other financial impacts of these transactions.\nTurning to our NFE guidance for fiscal 2022 on slide five, we are increasing our overall guidance to a range of $2.20 to $2.30 per share.\nThis reflects the impact of the AMAs and the expected cash settlement of our equity forward.\nHowever, our long term annual growth rate of 6% to 10% remains based off our originally communicated guidance of $2.05 to $2.15 per share, which excludes the impact of the AMAs and any other contribution from Energy Services.\nAs Pat will discuss later, the NFE benefits of AMAs will not be the same every year.\nAnd on slide six, I'll take you through some of the operational highlights.\nLooking at the top left, we invested $89 million in New Jersey Natural Gas during the first quarter, with about 1/3 of the capex providing near real-time returns.\nDespite the ongoing COVID-19 pandemic, we added over 1,900 new customers, only slightly below the customer additions from the same period a year ago, which was pre-pandemic.\nThis is due to the favorable growth demographics in our service territories.\nConstruction on the Southern Reliability Link continues to progress, and we now have almost 90% of the project complete with an in-service date expected this year.\nWe plan to file our rate case to recover the costs associated with the project in fiscal 2021.\nAnd as I mentioned earlier, we received approval for our IIP program and filed for SAVEGREEN 2020.\nOn slide seven, I'll take you through the operational highlights of our other core business, Clean Energy Ventures.\nWe added 2.9 megawatts of capacity this quarter.\nAnd as you can see on the top right, we now have 360 megawatts of installed capacity.\nWe have a strong project pipeline with about $260 million worth of investments, either under contract or exclusivity that are targeted for commercial operation in fiscal 2021 and 2022.\nTotal invested capital at CEV this quarter was $23 million with $17 million of commercial projects and $6 million at Sunlight Advantage.\nThe bottom right shows our expected CEV revenue for fiscal 2021, a significant portion of which is secured through our SREC hedging program.\nThe sustainability agenda we've outlined for our company focuses on innovation, emissions reductions, energy efficiency and transparency.\nBut I'm pleased to report NJR has made significant progress.\nLast quarter, we announced that NJR achieved our goal of reducing our New Jersey operational emissions by 50% of 2006 levels, well ahead of schedule.\nAnd we set a new higher target of 60% reduction by 2030.\nThis is a significant accomplishment that reflects the decades of investment in safety and environmental responsibility.\nIt reflects our strong commitment to sustainability and the hard work of our team.\nOur new target ensures our company's goals are aligned with the state's 2050 statutory goals for emissions reduction.\nLast month, we issued our 12th Annual Corporate Sustainability Report, which is available on our website.\nFor the first time, this year's report includes ESG reporting and disclosures established by SASB, which is another step to increase transparency and strengthen our communications with our investors in the financial communities on these issues.\nSlide 10 shows the main drivers of our NFE for the first quarter.\nAs we communicated at our Analyst Day in November, this is the first quarter where we're utilizing the deferral method of accounting for CEV.\nAnd as such, we've recast our financials for the comparable periods.\nReported NFE of $44.7 million or $0.46 per share compared to NFE of $34.9 million or $0.38 per share in the first quarter of fiscal 2020.\nNew Jersey Natural Gas saw an NFE improvement of $5.6 million due primarily to a full quarter of higher base rates from NJNG's fiscal 2020 rate case settlement as compared to a partial quarter a year ago.\nCEV was down $2, primarily due to increased O&M expenses related to project maintenance costs, especially with new projects placed in service, which is partially offset by a decrease in depreciation expense.\nStorage & Transportation saw a modest increase during the quarter, mostly related to increased operating income from Leaf River, and was offset by interest expense related to the acquisitions of Leaf River and Adelphia Gateway.\nEnergy services improved $6.6 million, primarily due to higher financial margin compared to last year, due to increased natural gas pricing spreads.\nHome Services and Other saw slightly lower operating revenue and slightly higher interest expense.\nAs Steve mentioned, we reaffirmed our NFE guidance of $1.55 to $1.65 per share for fiscal 2021.\nOn slide 11, you can see the segment contributions with our core businesses, NJNG and CEV, accounting for 80% of total NFE.\nTo help understand the distribution of our net financial earnings by quarter, let me walk you through how we expect NJNG's utility gross margin and CEV's revenues will occur.\nFor NJNG, we expect to recognize approximately 70% of our utility gross margin in the first half of the year, in line with our historical trends.\nAt CEV, the majority of our revenue will come in the second half of the year, in particular the fourth quarter, when we expect to recognize the majority of our SREC revenue.\nWe expect the net financial earnings contributions of our Storage & Transportation business to be fairly consistent throughout the year, because of the fixed price contracts.\nOn slide 12, we've highlighted the details of our SREC hedging program.\nWe continue to actively hedge to ensure SREC revenues are largely unaffected by future changes in SREC prices.\nEnergy year 2023, we increased our hedge level to 75%.\nComparing year 2024, market fundamentals and pricing remained strong with SREC trading at over 85% of SACP.\nAnd we now have 49% of our 2024 volumes hedged.\nTurning to slide 13.\nI'll explain some of the nuances to achieve the revenue recognition for the AMAs.\nUnder the terms of the agreements, NJR will initially release the transportation capacity to our counterparty, and later on, will permanently release the contracts to the utility.\nThe accounting standard requires to allocate revenue to both the initial and permanent release.\nWith the disproportionate amount of revenue signed to the permanent releases that occur in fiscal years 2024 and 2032.\nSubsequently, this allocation will generate a mismatch between revenue and cash proceeds.\nFinally, I will note that while the revenue provides some general indication of the NFE, it does not reflect the impact of taxes, demand charges and other items.\nImportantly, though, the cash proceeds provides us with additional benefits that I'll detail shortly.\nAs you can see on slide 14, we now expect our cash flows from operations to grow the CAGR of approximately 25% from fiscal 2020 to 2024 compared to our previous estimate of 20%.\nAnd as you can see from the chart on the right, the strength of our cash flows implies that our dividends are expected to become a smaller percentage, supporting our long term dividend growth rate of 6% to 10%.\nAnother benefit from the AMAs is the improvement to our credit metrics, which you can see on slide 15.\nAs we reported at our Analyst Day, our FFO to adjusted debt ratio is rising from fiscal 2022 to 2024.\nAnd when you have the positive impact of the AMAs, our metrics are expected to increase to the high teens in fiscal 2022, and reach about 20% by fiscal 2024.\nAnd because of these strong credit metrics, we will cash settle the equity forward we put in place during our December 2019 equity issuance.\nAt that time, we issued 5.3 million shares, and we entered into an equity forward to issue an additional 1.2 million shares at a later date, which we no longer need to do.\nAlso, as we mentioned during our Analyst Day, we have no block equity needs in foreseeable future.\nBefore I open the call to questions, I'd like to summarize the quarter.\nNJR is off to a good start for fiscal 2021 and on track to meet our NFEPS guidance for this fiscal year.\nWe increased our fiscal 2022 NFEPS guidance by $0.15 per share, and we expect strong cash flow to support our dividend growth.\nOur key infrastructure projects, SRL and Adelphia Gateway, continue to make progress, and we expect both to be in service this calendar year.\nOur improved credit metrics allow us to cash settle our equity forward.\nAnd as we said in our Investor Day, we have no need for further block equity issuances.\nAnd we've made substantial progress in our commitment to de-risk the Energy Services business by providing more stable fee based revenue.\n Assistant:", "chosen": "new jersey reaffirms nfe/share outlook of $1.55 to $1.65 for 2021.\nreaffirmed nfe per share (nfeps) guidance of $1.55 to $1.65 for fiscal 2021.\nincreased nfeps guidance for fiscal 2022 by $0.15 to a range of $2.20 to $2.30.\nqtrly consolidated net financial earnings of $44.7 million, or $0.46 per share.\n"}
{"prompt": "Human: We're well positioned to continue enhancing shareholder value as we look ahead to the balance of 2021 and beyond.\nIn July, we announced a roughly 2% increase in our common stock dividend effective later this month, thus making 2021 our 32nd consecutive year of annual dividend increases.\nNational Retail Properties is in the select company of only 85 U.S. public companies, including only two other REITs, which have achieved this impressive track record.\nBased on our strong performance, we announced today a further increase in our 2021 guidance for core FFO per share to a range of $2.75 to $2.80 per share.\nOur long-standing strategy is designed and executed to generate consistent per share growth on a multiyear basis.\nAnd as the disruption caused by the pandemic and related store closures is easing, the value of this long-term approach is reflected in our second guidance increase this year.\nTurning to the highlights of National Retail Properties second quarter financial results.\nOur portfolio of 3,173 freestanding single-tenant retail properties continue to perform exceedingly well.\nOccupancy was consistent with the prior quarter at 98.3%, which remains above our long-term average of 98%.\nWe also announced collection of 99% of rents due for the second quarter.\nCollection of previously deferred rent remained at an equally high percentage and we forgave almost no rent during the quarter.\nThese impressive collection results compare very favorably to other retail real estate companies including those with a significantly higher percentage of investment-grade tenants.\nMoreover, we believe that these results validate our strategy of doing direct sale leaseback transactions with large regional and national operators for well-located real estate parcels at low cost per property and reasonable rents.\nAnd while we're on the topic of large tenants, I'm pleased to report that one of our top tenants, Mister Car Wash, recently completed its initial public offering.\nCongratulations to John Lai and the entire management team at this impressive company.\nMister Car Wash was one of our first relationship tenants 15 years ago, and we're very proud of the role that National Retail Properties has played in that company's growth and success.\nDuring the quarter, we invested just under $103 million in 29 new properties at an initial cash cap rate of 6.7% and with an average lease duration of over 17 years.\nAlmost all of our acquisitions were from relationship tenants with which we do repeat programmatic business.\nYear-to-date, we've invested over $208 million in 58 new properties leased to 10 different relationship tenants at an initial cash cap rate of 6.5% and an average lease duration of 17.5 years.\nIn an environment where cap rates remain near all-time lows, we will continue to be very thoughtful in our underwriting and primarily pursue sale-leaseback transactions with our portfolio of relationship tenants.\nBased on our pipeline and conversations with those relationship tenants, we remain comfortable with our ability to meet and hopefully exceed our 2021 acquisition guidance of $400 million to $500 million, primarily via direct sale-leaseback transactions with long duration leases.\nDuring the second quarter, we also sold 15 properties, raising almost $23 million of proceeds to be reinvested in new acquisitions.\nAnd year-to-date, we've now raised over $40 million from the sale of 26 properties, including 15 vacant properties.\nAlthough job one is always to release vacancies and our leasing team does an excellent job of it.\nWe'll continue to sell nonperforming assets if we don't see a clear path to generating rental income within a reasonable time period.\nOur balance sheet remains one of the strongest in our sector.\nIn June, Kevin led the recast of our unsecured line of credit, increasing the capacity of our facility from $900 million to $1.1 billion.\nAlthough our credit line has been upsized, the balance outstanding remains the same, 0, and we ended the quarter with approximately $250 million of cash on hand.\nWith no material debt maturities until 2024, we remain well positioned to fund our 2021 acquisition guidance without needing to tap the capital markets.\nThat's up $0.01 from the preceding first quarter, $0.69 per share, and it's up $0.05 from the prior year's $0.65.\nToday, we also reported that AFFO per share was $0.77 per share for the second quarter and that's also up $0.01 from the preceding first quarter $0.76.\nWe did footnote this amount includes $8.3 million of deferred rent repayments and our accrued rental income adjustment in the second quarter AFFO number.\nSo without that, we would have produced AFFO of $0.72 per share.\nSo excluding those deferral repayments, our AFFO dividend payout ratio for the first six months was 72.7%, that's fairly consistent with prior year's levels.\nOccupancy, as Jay mentioned, was 98.3% at quarter end.\nThat's been fairly flat compared to recent quarters.\nG-and-A expense was $11.9 million for the second quarter.\nThe increase for the quarter and the six months was largely driven by incentive compensation.\nRent collections continue to remain strong in the second quarter.\nAs Jay mentioned, today, we reported rent collections of approximately 99% for the second quarter rent.\nCollections from our cash basis tenants, which represent about 7% of our total annual base rent improved to approximately 92% for the second quarter rent, and that's up from 80% previously reported for that cohort in the first quarter of 2021.\nAs Jay noted, we increased our 2021 core FFO per share guidance from a range of $2.70 to $2.75 per share to a new range of $2.75 to $2.80 per share.\nThis incorporates the better-than-expected rent collections and the actual results in the first half of 2021.\nThe driver for the increase in our full year guidance is the assumed higher rent collection rate more in line with our current collection rates.\nSo while we previously assumed 80% rent collection from the $50 million of cash basis tenant annual base rent, we are now assuming 90% rent collections that incremental 10% amounts to about $5 million on an annual basis.\nAnd for the remainder of our tenants, we continue to assume 1% of potential rent loss.\nAnd again, that's consistent with our prior guidance.\nWe ended the quarter with $250 million of cash on hand and no amounts outstanding on our newly recast $1.1 billion bank credit facility.\nThis bank line, as Jay noted, increased from $900 million in size to $1.1 billion.\nThe interest rate was reduced 10 basis points to LIBOR plus 77 basis points and maturity was extended to June of 2025.\nOur liquidity is in excellent shape, our weighted average debt maturity is now 13 years with a 3.7% weighted average fixed interest rate.\nOur next debt maturity is $350 million with a 3.9% coupon in mid-2024.\nThe very good liquidity and leverage position have no real need to raise any additional capital to meet 2021 acquisition guidance, and we're well positioned as we look forward to 2022.\nA couple of numbers.\nNet debt to gross book assets was 35%.\nAt quarter end, net debt to EBITDA was 5.0 times at June 30.\nInterest coverage, 4.7 times and fixed charge coverage 4.2 times for the second quarter.\nOnly five of our 3,000-plus properties are encumbered by mortgages.\nSo 2021 is shaping up to be a very solid year for us as the economy and retailers capture the government stimulus, which feels like it will have some tailwinds in 2022.\nOur focus remains over the long term as we continue to endeavor to give NNN the best opportunity to succeed in the coming years and, importantly, growing per share results.\nAnd with that, Tom, we will open it up to any questions.\n Assistant:", "chosen": "second quarter 2021 operating results and increased 2021 guidance announced by national retail properties inc.\nqtrly affo per common share $0.77.\ncore ffo guidance for 2021 was increased from a range of $2.70 to $2.75 to a range of $2.75 to $2.80 per share.\n"}
{"prompt": "Human: They involve risks and uncertainty, and actual results may differ materially.\nOur comments also include non-GAAP measures.\nOn a U.S. GAAP basis for the first quarter of 2021, NOV reported revenues of $1.25 billion and a net loss of $115 million.\nLater in the call, we will host a question-and-answer session.\n2020 is 1-2 punch of an oil supply price war, followed closely by an oil demand crushing global pandemic led to a sharp decline in demand for oilfield equipment and consumables through the year.\nNOV's results for its first quarter of 2021 reflect the full impact of the shock wave emanating from the combination of these events that led to this historically painful downturn in an industry noted for painful downturns.\nAs we reported in our operational update on March 16, the quarter was further impacted by other factors: severe winter weather and power outages in Texas and Oklahoma led to 63 NOV facilities being shuttered for a week or more.\nAdditionally, new pandemic control measures flared up overseas, which shut down another couple of large plants and disrupted our supply chains for certain raw materials, notably fiberglass and resin.\nAnd as if that weren't enough, the quarter also ended up being impacted by higher costs on two projects related to poor execution on our part.\nIn one case, a new pipe design has proven more expensive to manufacture than expected.\nAnd another, an offshore platform component was delayed because our engineering took longer than expected.\nBoth have been corrected.\nDespite these, the final quarterly results, slightly exceeded our March forecast due to better progress on cost reductions overall as well as, and this is important, more and more green shoots emerging in the oil field, particularly in Wellbore Technologies and particularly in North America.\nAlthough we would still face headwinds in many markets, our confidence continues to mount that the worst is behind us.\nNorth American oilfield activity continued its recovery during the quarter, with March revenues up sharply from January for certain of our earlier cycle domestic businesses, while international results began to point to early signs of a recovery as well.\nNevertheless, the first quarter sequential decline in capital equipment revenues reflect the pummeling our backlog took in 2020, which led to consolidated revenue declines of 6%.\nEBITDA fell to breakeven, which is unacceptable and is prompting further cost reductions.\nAs a provider of capital equipment and spares to the oilfield, our results lag those of our customers, generally speaking.\nThe first quarter of 2021 reflects the preceding nine months of crashing oil demand and a virtual cessation of capital spending, offset by substantial downsizing and cost reductions.\nWe believe this down cycle is the worst our industry has ever seen.\nOil prices went negative in April.\nIn August, the U.S. rig count hit its lowest level since records began in World War II.\nNorth American frac fleet utilization hit single digits.\nBy year-end, more than 100 North American oil and gas companies had filed for Chapter 11 bankruptcy protection with a combined debt of over $100 billion.\nWere not for a couple of large projects that were awarded before the lockdown, FIDs for offshore projects in 2020 would have marked the lowest since 1960.\nAlthough the recovery has begun taking hold in many markets, average first quarter rig counts were down 46% for North America land, 36% for international land and down 31% for offshore year-over-year.\nWhen I say that it has been a historically bad downturn, what I mean is that it has been a measurably provably historically bad downturn.\nIn this environment, our oilfield service customers are sticking to the tried and true survivor playbook of cannibalizing equipment, spares and consumables, deferring maintenance, reducing spending to bear substance levels and hoarding precious cash.\nNOV's largest competitor in this environment is idled equipment.\nBy fall, every stacked rig had become an incremental source of drill pipe, shaker screens, handling tools, etc at same dynamic applies across all categories of oilfield equipment when utilization collapses and service companies fight to keep the lights on.\nA year ago, day rates began racing to find bottom at daily cash costs, which were insufficient to cover long-term maintenance cash costs, much less the capital consumption costs represented by depreciation.\nFor many sectors, year-end 2020 day rates reflected desperation.\nCompanies discounting to keep some assets and crews working and spending cash only as a last resort.\nConsequently, NOV's oilfield backlogs fell throughout the year and first quarter annualized revenue run rate is down 45% from just five quarters ago.\nHere's the good news.\n160 years of oilfield history demonstrates that this dynamic is always temporary.\nThe amount of idled equipment available to be parted out falls as activity resumes and dwindling spares and consumables must be restocked as utilization improves.\nWe're beginning to see the early signs of this in certain areas as rigs and frac fleets go back to work.\nIdled stripped drilling rigs must have cannibalized pumps and handling tools replaced to go back into service.\nAnd this rebuilding, restocking and reactivation phenomenon occurs at a time when service company desperation is evaporating and optimism is growing with rising oilfield activity.\nWe know this because NOV has lived it through recovery cycles like this in the past.\nAs the oilfield goes back to work, customers will soon start to worry about nontrivial cash investment required to reactivate rigs and equipment.\nThink about the courage required to put your precious cash into the business that almost killed you last year.\nThat's what these customers face when it comes to reactivations.\nWe believe our customers will require higher pricing on their incremental assets going back to work in order to mitigate risk by achieving quicker paybacks on their reactivation investments.\nPlus they'll need to cover rising wage pressures and other inflationary forces and more on that in just a moment.\nAnd if oil prices remain constructive, pricing momentum will lift margins and return significantly, such is the nature of the cyclical business we serve.\nNOV will be a key recipient of this unit reactivation investment.\nAs various basins and categories of equipment pass through the inflection to emerge into higher day rate regimes, their orders for capital equipment will accelerate.\nThis is the sweet spot of our business model.\nThe historical oilfield events of 2020 have led predictably to an enormous disassembly of well construction capability by the oilfield services industry, the tried and true playbook I referred to earlier.\nEvery surviving oilfield service company on the planet has made it this far by downsizing extraordinarily well.\nCollectively, our surviving customers are the dream team of cost-cutters.\nAnd they have been hard at it for several years before, tripling their cost-cutting ferocity in 2020.\nIt stands to reason that the aggregate capacity to construct wells has been materially diminished in our view.\nIf the global economies continue to recover out of COVID and demand more oil, the oilfield services industry will be tested to get back to normalized levels of wellbore construction sufficient to meet rising oil demand.\nWe think that's more likely than not.\nFirst, governments around the world responded to the economic turmoil of the pandemic with unprecedented stimulus packages.\nFor instance, the G10 plus China passed more than $20 trillion of stimulus in the aggregate.\nThis has led to stunning money supply growth.\nThe U.S. M2 is up 27% year-over-year, as an example.\nGenerally, money supply growth and low interest rates inflate asset prices, including commodity prices like oil.\nNext, drug companies invented a vaccine, several, actually.\nWhile there are fits and starts, global vaccination efforts are progressing, positioning the world to emerge from the pandemic lockdown.\nHuge economic stimulus and a powerful catalyst, vaccines, to more or less simultaneously open economies, coupled with sharply improved household balance sheets and a widespread desire to get our lives back to normal, well, I cannot conceptualize a more compelling recipe for a synchronized global economic recovery of a size that we have not seen since the 1950s post-war boom.\nWe believe this synchronized recovery will lead to rising oil consumption.\nIn fact, leading demand indicators for crude oil, gasoline and distillate already point to a stronger recovery than many economists expected, and global inventory levels appear to be normalizing ahead of schedule.\nOn the whole, this is a highly constructive backdrop for oil prices for the next few years in our view.\nKey risk to this thesis include excess Saudi and OPEC capacity, which is scheduled to trickle in over the next several months, and the possibility of the return of Iranian crude production.\nHowever, record levels of crude inventories achieved through the first half of 2020 have, to the extent we have visibility into them, largely dissipated.\nThat only happens because withdrawals have exceeded additions.\nSo supply, held artificially low by OPEC, has been less than demand, held artificially low by the pandemic lockdown.\nAnd the key question is, what will the picture look like as artificial constraints on both ease.\nAnother risk is the productivity of U.S. shales which achieved extraordinary levels of growth off and on throughout the past decade.\nSimul fracs and other advancements point to the relentless march of the domestic E&P industry toward greater efficiencies.\nBut to be fair, the domestic E&P industry was helped in the prior era by, one, gobs of cheap capital that fuel drilling programs seeking production growth; and two, duress in oilfield services that held pricing below that required to replace, let alone earn a return on the capital consumed in the construction of these wellbores.\nCapital, when they can get it, is far, far more expensive now.\nAnd it feels like it is becoming even more so as ESG factors play a more prominent role in investment decisions.\nAnd the incremental investments that will be required to restore oilfield service well construction capabilities will also demand higher returns.\nLayer in on top of that, the consolidation among domestic E&P operators, the higher cost of attracting labor back to the oilfield while a major economic expansion is under way, giving workers a lot of other high-paying options, and well, you get the picture; a return to material production growth from U.S. shales will be more challenging this time around from where we sit.\nBehind the artificial production constraints imposed by OPEC, Russia and Saudi Arabia, the artificial consumption restraints imposed by COVID economic lockdowns lies impressive depletion math.\nAll oil wells decline.\nTo what level has the aggregate natural decline of oil well has been obscured by these artificial constraints.\nWe can debate about what the true supply demand picture looks like, but one thing we can all agree on is that both are far more opaque in 2021 than any prior year.\nAfter all, we've never had an economic shutdown like this before.\nMy point is this, when the industry materially cuts its expiration, its development, it's steady construction of the platforms, projects and wells that produce the oil that our global economy relies on, and further, eviscerates the tools of the oilfield services industry that actually do the work, there will be a day of reckoning.\nThroughout this historic period, NOV has been steadfast in: one, reducing our costs, which are down $12.6 billion since 2014, including approximately $2 billion in annual fixed cost reductions; two, improving our cash flow, which has delevered our balance sheet; and three, investing in the next-generation of technologies, both for the oilfield as well as emerging renewables opportunities.\nWhether it's the next-generation of rig floor technology, like our robotic pipe handling system controlled in our NOVOS digital environment; our ideal e-frac fleet, outfitted with our QuickLatch system and FlexConnect frac host system to remove both emissions and manpower from the completion process; or NOV Max, our digital platform that brings out -- brings all the disparate data sources together for the operator to utilize as he or she sees fit.\nNOV remains at the forefront of the next-generation of oilfield technology.\nOur push into supporting the energy transition focuses on areas where we believe we can carve out significant competitive advantages while delivering superior economic returns for our customers in wind, solar, geothermal and other emerging energy sources.\nseven out of eight Wellbore Technologies business units posted sequential growth in the first quarter, reflecting surging demand for certain products.\nConsequently, we began to add shifts to manufacturing, and we achieved the highest level of absorption we've seen since the first quarter of 2020.\nNOV witnessed share gains for our ReedHycalog bits in West Texas and Saudi Arabia, despite increasing prices due to strong performance and rising activity.\nDrilling motor demand is also increasing and downhole friction reduction tools are completely sold out in certain North American markets as revenues were up more than 30% sequentially.\nWe pushed drilling motor pricing up double digits in some areas.\nNorth American rig instrumentation and solids control services pricing is up double digits on new work back to pre-COVID levels and poised to rise further.\nIn our international markets, we expect our wired drill pipe jobs to increase over 25% in the second quarter.\nAs operators become increasingly convinced of the value of real time, high bandwidth data from the bottom of their drill strings, something that's only available through our proprietary IntelliServ Wired Drill Pipe technology.\nGlobal OCTG demand appears to be picking up, which led to double-digit sequential growth in NOV Tuboscope's pipe inspection services worldwide.\nAnd despite continuing day rate pressure on drilling contractors, Grant Prideco posted a book-to-bill greater than 100% as operators are requiring larger 5.5-inch drill pipe to accommodate better hydraulic performance, leading drilling contractors to purchase this pipe with our proprietary Delta premium connections.\nOn the whole, higher oil prices and higher rig counts, particularly in North America, placed Wellbore Technologies at the forefront of the oilfield recovery.\nOn the other hand, Completion & Production Solutions and Rig Technology segments continue to battle through low capital equipment backlogs and stingy customer spending.\nHowever, the CAPS segment saw its book-to-bill for new capital equipment orders above 100% for the first time since the fourth quarter of 2019, an indication of better results to come.\nThe group's North American quick turn businesses began to see improvement.\nNorth American production chokes backlog popped 30% and our reciprocating pump backlog grew 69% sequentially.\nWe won another Tier four dual fuel fleet upgrade for a domestic pressure pumping service provider and demand for coiled tubing strings tripled from its low point in the second quarter of last year.\nWhile we lost a large project in Alaska, we did win another large project for Brazil, and both projects are evidence that perhaps operators are moving forward with some decisions after protracted COVID-related malaise.\nRig technology sees challenging conditions for rig capex in the near term, but it did see double-digit growth in spare parts orders, followed by two record low spare parts order quarters in a row.\nIt is also seeing rising inquiries for rig engineering around offshore drilling rig reactivations.\nSo while our first quarter results were terrible, I'm growing increasingly confident that results will improve significantly as the year progresses.\nOur spare parts, consumables and services businesses tied to activity are seeing it already, and our sales force is wasting no time repairing pricing to acceptable levels.\nAnd healing for our capital equipment businesses always begins with rising orders, which we started to see in many businesses for the first time in 1.5 years.\nYou skillfully position the company to support our customers and to capitalize on opportunities to serve them better.\nMost importantly, through a year that has thrown a lot at our team, you've taken care of each other.\nI'm incredibly proud to serve with you and appreciate all that you do.\nJose, Blake and I look forward to better days with you as things improve through 2021.\nNOV's consolidated revenue fell $78 million or 6% sequentially to $1.25 billion during the first quarter of 2021.\nThe sequential decline was the result of ongoing austerity from our customer base, operational disruptions from severe weather and COVID-19 challenges, which continue to play global supply chains.\nA simple way to summarize the quarter is that January was extremely slow, February was a frozen disaster and in March, orders began to pour in, and we made up a lot of lost ground, giving us confidence that our results will improve through the rest of the year.\nOngoing cost-out initiatives, a higher-margin revenue mix and better pricing, limited sequential decremental margins to 22%.\nHowever, we take no comfort in this performance, given that we are breakeven EBITDA, which is unacceptable in any market environment.\nWe continue to challenge our organization to look for new ways to drive incremental efficiencies.\nDuring Q1, we realized $52 million in annualized cost savings and identified an additional $31 million in opportunities, bringing the total we expect to achieve in 2021 to $106 million.\nDuring the first quarter, our operations used $27 million in cash and capital expenditures totaled $49 million.\nIt's typical for the organization to consume cash in the first quarter, and we expect to be free cash flow positive for the year.\nWe ended the first quarter with $1.61 billion in cash and $1.85 billion in gross debt or net debt of $244 million.\nFollowing the end of the quarter, we fully redeemed the remaining $183 million of our senior notes due in December 2022 with cash on hand.\nAs a result, our next bond maturity does not occur until December 2029, and interest expense should decline roughly $1 million per quarter.\nMoving on to our segment results.\nOur Wellbore Technologies segment generated $413 million in revenue during the first quarter, an increase of $40 million or 11% sequentially.\nCost cutting, improved absorption in our manufacturing plants, a more favorable sales mix and better pricing drove 55% incremental margins and a $22 million increase in EBITDA to $34 million or 8.2% of sales.\nOur ReedHycalog drill bit business achieved 20% revenue growth with strong improvements across the Western Hemisphere.\nReedHycalog's technology leadership is driving market share gains in most markets, and the gains helped drive modest revenue growth in the Eastern Hemisphere during a quarter in which we typically see a seasonal slowdown.\nShare gains, improved absorption, better pricing and cost-cutting drove incremental margins of almost 50%.\nWe expect our ReedHycalog business to post another solid sequential improvement in Q2, led by growing activity in the Middle East and Asia Pacific markets.\nOur Downhole Tool business realized a 13% sequential improvement in revenue, led by sales growth that meaningfully outpaced the increase in drilling activity in the Western Hemisphere, partially offset by seasonal declines in the Eastern Hemisphere.\nOperators working to reduce trips, maximize hydraulic flow and reduce friction are driving improved demand for our SelectShift drilling motor, fluid hammer, impulse axial pulse technology and agitator tools.\nA more favorable sales mix, higher volumes, improved operational efficiencies and better pricing allowed the business to deliver 50% incremental margins during the quarter.\nOur WellSite Services business realized a 16% sequential increase in revenue, primarily from improving results in its solid control operations.\nThe business unit has steadily recaptured market share in North America from desperate competitors that have fallen out of the market over the last several quarters and is now starting to claw back pricing.\nOur M/D Totco business realized low single-digit revenue growth in the first quarter.\nRevenue from surface sensor and data acquisition offerings in the Western Hemisphere improved in line with drilling activity but was partially offset by the seasonal falloff in capital equipment sales to the Eastern Hemisphere.\nThe business unit's eVolve wire drill pipe optimization services achieved record rental service revenue, and as Clay mentioned, picked up additional jobs for Q2.\nOur track record of improving drilling efficiencies for operators is driving an increasing rate of adoption.\nHowever, the relatively high cost of wire drill pipe in a capital-constrained market has mostly restricted the service offering to operators that have complex wells with tight drilling parameters.\nWe believe our new low-cost, next-generation wire drill pipe technology could significantly expand the market and accelerate the adoption of our wired drill pipe enabled services.\nOur Tuboscope pipe coating and inspection business posted a 10% sequential increase in revenue.\nDemand for inspection services improved globally and was particularly strong in the U.S., where piece counts from steel mills and outside processors improved 43%.\nRevenue from coating operations fell due to seasonal declines in the Eastern Hemisphere, which more than offset improving demand in North America.\nOur Grant Prideco drill pipe business achieved a high single-digit sequential increase in revenue.\nA higher proportion of large-diameter premium pipe in our sales mix drove outsized incremental margins despite meaningful costs associated with the winter storm, which included facility repairs, overtime pay and scrapping costs from power outages that occurred during sensitive heat-treating operations.\nThe business unit achieved a 104% book-to-bill, which should allow for another sequential improvement in Q2.\n31% of our orders came from North America, the highest percentage in quite a while.\nAs Clay mentioned, we saw strong demand for 5.5-inch pipe driven by operators seeking greater hydraulic efficiencies consistent with the driver we're seeing for our high flow rate drilling tools at a time when there continues to be ample supplies of 4.5- and 5-inch customer-owned drill pipe in the U.S. For our Wellbore Technologies segment, we expect activity gains in the U.S. and Latin America to moderate and activity in the Eastern Hemisphere to recover, resulting in sequential revenue growth of 8% to 10% during the second quarter.\nWe also expect continued improvement in the segment's cost structure and better pricing, which should allow incremental EBITDA margins near 50%.\nOur Completion & Production Solutions segment generated $439 million in revenue during the first quarter, a decrease of $107 million or 20% sequentially.\nThe sharp decline was primarily due to depleted backlogs, severe weather-related disruptions and supply chain challenges.\nEfforts to reduce costs and improve operational efficiencies limited decremental margins to 30% and EBITDA declined $32 million to a loss of $4 million.\nOrders for the segment improved $57 million sequentially to $338 million, resulting in a book-to-bill of 127%; the segment's first book-to-bill greater than 100% since the fourth quarter of 2019.\nDuring the quarter, we began to include orders for subsurface fiberglass fuel storage tanks in our capital equipment backlog.\nExcluding this addition, our book-to-bill would have been 115%.\nOur Fiber Glass Systems business realized a 25% sequential decline in revenue.\nDifficulties faced by the unit were emblematic of what we saw in most of our capital equipment businesses during the first quarter.\nWe anticipated absorption challenges resulting from five straight quarters with a book-to-bill below 1, but severe COVID-19 and weather-related disruptions also impacted operations.\nCOVID outbreak shut down our two large manufacturing facilities in Malaysia for three weeks, and the pandemic's impact on global supply chains resulted in shortages of epoxy resin and glass fiber, which limited manufacturing output at our facilities.\nSevere winter weather further hampered operations and caused customers to defer deliveries due to transportation constraints and difficulties installing large subsurface storage tanks and frozen soil.\nDespite demonstrating the near-perfect case study for Murphy's law, our team did everything within reason to protect the bottom line and was able to maintain positive EBITDA margins.\nWhile ongoing supply challenges may not be fully resolved until August, the outlook for this business seems to be improving with each passing day.\nA significant pickup in orders in March for our fuel handling products allowed the unit to post a book-to-bill north of 100%.\nWe're also seeing demand return from marine scrubbers in Asia and fiberglass pipe in the Middle East, providing us with confidence that the business should realize steady improvement in its results throughout the remainder of 2021.\nOur Intervention & Stimulation Equipment business realized a mid-single-digit sequential decline in the first quarter, its fifth straight quarter of declining revenue.\nDespite continued weakness in the North American market, the segment achieved its second straight quarter with a book-to-bill greater than 1.\nDemand for wireline equipment, particularly in the Middle East, Europe and Africa, has been a bright spot.\nAnd while our global coiled tubing business experienced a sharp falloff in Q1, quoting activity from international markets remains healthy and improving completions activity in the U.S. is driving greater demand for consumables.\nIn the pressure pumping space, activity levels have increased significantly, but pricing for our customer services remain well below pre-COVID levels, forcing cannibalization and low-cost purchases of distressed equipment to sustain operations.\nOpportunities to cannibalize are limited.\nAnd while equipment auctions continue, the quality of iron on the auction block is quickly deteriorating.\nAs a result, we're seeing a significant increase in quotes, albeit off extremely low levels for new equipment.\nOur Q1 cementing equipment orders were double the amount we received the entire second half of 2020.\nAnd we're also seeing increasing demand for stimulation equipment with enhanced capabilities and reduced emissions.\nDuring Q1, we booked an order to convert 16 Tier two frac pumps to new Tier four DGB dual fuel units that can run on a combination of diesel fuel and natural gas, lowering operating costs and emissions.\nAdditionally, we're seeing growing interest in our ideal e-frac stimulation equipment, which recently finished its first field trial where our pump completed more than 200 stages at rates up to 22 barrels per minute, nearly 3 times that of a traditional 2,500 horsepower unit.\nWith improved bookings and growing demand for aftermarket services, we expect our Intervention & Stimulation Equipment business will realize a meaningful pickup in revenue during the second quarter.\nOur XL Systems conductor pipe business experienced a sharp sequential decline in revenue during the quarter, resulting from a backlog that was depleted after eight straight quarters with a book-to-bill of less than 1.\nOur team limited decremental margins to only 17%, and we achieved a 143% book-to-bill indicative of improving market conditions.\nInterestingly, we've seen certain customers award work then delay deliveries, while other customers are scrambling hard with urgent orders for newly established near-term spud dates.\nSo sentiment remains mixed, if not a little unusual, but we take the current dynamics as a net positive.\nMeanwhile, competition remains fierce with desperate competitors offering pricing and payment terms that we will not match.\nFortunately, our technological and quality differentiation allows us to win a sufficient number of projects that are not entirely driven by pricing, such as the award we received associated with the industry's first 20,000-psi well development project.\nOur Subsea flexible pipe business realized a low double-digit sequential revenue decline with outsized decremental margins resulting from lower volumes, a less favorable product mix and the manufacturing challenges associated with the new pipe design that Clay mentioned.\nWhile bookings remained light, customer dialogue and order outlook has improved, particularly in Brazil, where we expect large projects to advance later this year.\nHowever, exact timing remains somewhat uncertain as extreme COVID-19-related challenges in the country make it difficult to coordinate efforts and complete essential engineering work required to advance projects.\nWe believe the offshore production-oriented components of our CAPS segment are at or near bottom.\nOn our last several calls, we've mentioned how we've been pursuing a large number of offshore production-related projects that continue to push out quarter after quarter.\nWe finally started to see some of these projects shake loose and remain hopeful that stronger oil prices could support more FIDs through the year.\nFor the second quarter of 2021, we anticipate revenue from our Completion & Production Solutions segment will improve between 15% to 25% sequentially, with incremental margins in the mid-20% range.\nOur Rig Technologies segment generated revenues of $431 million in the first quarter, a decrease of $6 million or 1% sequentially.\nA small increase in capital equipment sales related to offshore wind was more than offset by the seasonal falloff in aftermarket services.\nA less favorable revenue mix and weather-related disruptions resulted in a $6 million decline in EBITDA to $13 million or 3% of sales.\nOrders for the segment declined $78 million sequentially to $112 million, yielding a book-to-bill of 59%; the segment's sixth quarter out of the last seven with a book-to-bill of less than 1.\nOrders for rig capital equipment remained weak as drilling contractors continued to cannibalize idle equipment and minimize spend.\nDespite improving activity and dialogue, there remains a distinct lack of urgency from our customers.\nQuotation levels increased 25% sequentially, and the conversion of quotes to orders also improved, however, only quotes for small orders converted to bookings.\nWe aren't losing larger orders to competitors and customers are not canceling projects.\nThere's simply just a lack of urgency and potential orders keep sliding to the right.\nOngoing waves of COVID-19 outbreaks in international markets do not inspire confidence and neither does uncertainty around the timing of when several of our offshore drilling contractor customers will exit bankruptcy.\nWhile customers in the Middle East and Asia continue to express the need for newbuild rigs and offshore customers require meaningful upgrades for reactivations, we expect the lack of urgency will keep the book-to-bill for our traditional rig equipment business below 1 times.\nHowever, we are optimistic that a few additional quarters of stability in commodity prices and improving activity levels will do quite a bit to move projects forward.\nOn a more positive note, we began manufacturing the first two rigs from our new manufacturing plant in Saudi Arabia.\nNear-term revenue from these projects will help offset the expected weakness in our rig equipment order book.\nAs a reminder, the plant has a commitment for 50 drilling rigs over the next 10 years and accounted for $1.8 billion in backlog.\nWe expect to deliver the first rig at the end of this year, a rig in each quarter during 2022 and five rigs per year beginning in 2023.\nIn our Aftermarket business, spare part bookings increased 22%, led by demand from the Middle East and U.S. land markets as the ability to cannibalize stacked rigs has nearly run its course.\nAs previously mentioned, several of our larger offshore customers are in the late stages of restructuring processes, and we currently have a large amount of their equipment sitting in the -- in our shops.\nWe're optimistic that once capital structures are reset and more FIDs advance, we will realize a meaningful pickup in service repair and recertification-related work.\nOur renewables business has a completely different field than our traditional rig business.\nDuring the quarter, we booked an order for the design, jacking systems and crane for a European wind turbine installation vessel.\nOur Q1 offshore wind order intake was modest relative to the opportunities we are pursuing, which include over $400 million in potential projects that could be awarded before the end of the year.\nLooking ahead to Q2, we expect growth in our renewables business, improving aftermarket activity and progress on the rigs in Saudi Arabia to offset the impact of weak orders from our rig capital equipment business, which should lead to results for our Rig Technology segment that are in line with the first quarter.\nWith that, we'll now open the call up to questions.\n Assistant:", "chosen": "national oilwell varco q1 2021 revenues of $1.25 billion, a decrease of six percent compared to q4 of 2020.\nq1 2021 revenues of $1.25 billion, a decrease of six percent compared to q4 of 2020.\ncompletion & production solutions generated revenues of $439 million in q1, decrease of 20% from q4 of 2020.\ncompletion & production solutions new orders booked during quarter totaled $338 million.\nnew orders booked in rig technologies during the quarter totaled $112 million.\nas of march 31, 2021, company had total debt of $1.85 billion.\n"}
{"prompt": "Human: Joining me are Bill McDermott, our president and chief executive officer; and Gina Mastantuono, our chief financial officer.\nDuring today's call, we will review our third-quarter 2021 financial results and discuss our financial guidance for the fourth quarter of 2021 and full-year 2021.\nWe'd also like to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures calculated in accordance with GAAP.\nA replay of today's call will also be posted on our website.\nWhile a beat-and-raise headline from ServiceNow is familiar, it is no less extraordinary.\nOur team delivered another outstanding quarter, yet again significantly exceeding the high end of our guidance across all metrics.\nSubscription revenues were up 31% organically.\nThis is unprecedented in our industry.\nCRPO was up 32%, subscription billings were up 28%, operating margin was 26%.\nWe again have raised our guidance for the full year, strengthening our clear path to $15 billion-plus in revenue by 2026.\nI was introduced as ServiceNow's CEO more than two years ago.\nWe've all seen a lot since then.\nWhat we've never seen is such consistent innovation and execution at global scale.\nAnd we're only getting started.\nBefore Gina gives you a complete report, let's talk about this dramatic structural incline at ServiceNow.\nThe pace of digital investment is accelerating.\nIDC has consistently sized this opportunity at $7.8 trillion over a four-year period.\nWith this massive addressable market, ServiceNow is at the intersection of two generational opportunities: First, the need for a new technology foundation is supercharging our close partnership with CIOs.\nA recent Wall Street Journal report highlighted the role of CIOs as the architects of digital business.\nOngoing advances in public cloud and machine learning are forging a new era of software innovation.\nTechnology teams want a fully integrated software cycle: planning, development, deployment, operations and service.\nServiceNow is leading this 20th to 21st century migration for our customers.\nThe Now Platform, with its immense versatility and scalability, has become the control tower for digital transformation.\nThe second dimension fueling ServiceNow is the reordering of the enterprise application platforms for hyperautomation.\nLeaders today recognize their technology architecture is their business architecture.\nOver several decades, enterprise has invested trillions into on-premise and first-generation SaaS applications.\nThese applications satisfy the business process needs of the 20th century.\nToday, new business models require a fully connected value chain.\nLegacy environments are not adaptive enough to enable this change.\nAs the pioneer of modern digital workflows, ServiceNow is leading the renaissance.\nThe Now Platform connects different applications and data sources to create intuitive mobile experiences, all at a consumer grade.\nWe don't ask businesses to bet everything on a single system or collaboration tool.\nWe give choice, which not only unlocks value from our platform but from other platform investments as well.\nServiceNow also empowers anyone to build applications on our platform.\nIn its low-code development technologies report, Gartner estimates that 70% of new applications developed by 2025 will use low-code or no-code technologies.\nGartner also named ServiceNow as a leader in its Magic Quadrant.\nThese tailwinds are driving fast organic growth across our entire solutions portfolio.\nThe number of deals greater than $1 million was 63, up 50% year over year, signaling substantial adoption of our platform strategy.\nIn Q3, IT workflows remained very strong.\nITSM was in 18 of our top 20 deals while IT Operations Management had 10 deals over $1 million.\nInternal Revenue Service is in a multiyear digital transformation effort.\nIn Q3, they chose ServiceNow to consolidate 12 complex systems into a single platform to support the agency's mission-critical operations.\nDemand for our entire IT portfolio is strong.\nAnd with the launch of Lightstep Incident Response in Q3, we are unlocking a new wave of product-led growth in application monitoring and observability.\nEmployee Workflows also had a fantastic quarter with HR in 13 of our top 20 deals.\nIn Q3, NTT Data will leverage the Now Platform to create an employee experience portal, enhancing productivity for hybrid work and managing vaccine administration for its entire workforce.\nMomentum continues for Customer Workflows with CSM in 12 of our top 20 deals and eight deals over $1 million.\nIndustry vertical solutions are leading the way with major brands.\nVerizon is adopting our telco solution, American Century, our financial services solution, and Sunbelt Health, our healthcare solution.\nCreator Workflows, which helps businesses build their own applications, was exceptional in Q3 in 18 of our top 20 deals.\nWe're partnering with Stanley Black & Decker to bring ServiceNow's new manufacturing vertical solution with App Engine to change how they serve their customers.\nTogether, we're maximizing facility uptime and delivering great experiences for distributors, dealers and end consumers.\nFujitsu will also expand its use of the Now Platform to drive its own digital transformation.\nWe couldn't be prouder that Uber, Honeywell, Telia and many others all chose ServiceNow in Q3.\nThis is a complete performance for the company, strong growth across the Americas, EMEA, and Asia Pacific/Japan.\nAs we look to a strong finish in 2021 and beyond, here are a few of the many factors giving us great confidence in this business.\nFirst, while lots of talent is raging out there, we're highly encouraged by the colleagues choosing ServiceNow in record numbers.\nOur new joiners, together with our amazing global workforce, are building a uniquely inclusive, driven, and happy culture.\nWe're also seeing major developments in our partner ecosystem.\nJust three weeks ago, we announced a new partnership with Celonis.\nCelonis will deliver process mining insights, ServiceNow will build better workflows, our customers will gain from the integrated approach.\nWe also deepened our long-standing partnership with Microsoft.\nServiceNow's Employee Center can now be directly embedded in Microsoft Teams, reaching 250 million monthly users.\nTogether with our expanding partner community, we will reduce complexity to make work better for people.\nFinally, innovation without disruption is a hallmark of our best-in-class engineering tradition.\nWhen we say without disruption, we mean invisible, a seamless upgrade experience for our customers.\nIn our Now Platform Rome release, we delivered countless new features to customers, including Mobile App Builder, an Automation Discovery tool, Employee Journey Management and new Customer Service Playbooks.\nEvery business leader in the world is looking at the future of work.\nThese new features give the Now Platform even more capability to build that hybrid future.\nI'll defer to a comment made by industry analyst Josh Bersin, who said on our Rome Platform release, \"This company seems to be able to build and deploy enterprise software faster than almost any I've ever seen, and that's why they're a juggernaut\".\nJosh, naturally, I agree.\nIn closing, the company is firing on all cylinders.\nThe quarter speaks for itself.\nWe beat again, we raised again.\nThe secular tailwinds are at our back.\nOur customer base is expanding just as our customer NPS is increasing.\nOur partner ecosystem is fired up.\nWe accelerated our timeline to be net zero.\nWe help businesses drive their own ESG initiatives on our platform with a major release.\nThe list goes on and on.\nOverall, our message to the market couldn't be any clearer.\nWhatever systems, challenges or opportunities you have, however fast you need to move, you have a trusted innovator in ServiceNow.\nWe want to make the world work better for everyone, and we'll never lose our focus on the privilege that comes with saying, the world works with ServiceNow.\nGina, over to you.\nQ3 was another fantastic quarter with continued outperformance across all of our growth and profitability guidance metrics.\nDemand was strong globally across all three of our geos.\nThe consistency of our results quarter after quarter exemplifies the strength of our product portfolio and the team's focus on building deep customer relationships.\nQ3 subscription revenues were $1.43 billion, $22 million above the high end of our guidance range and growing 31% year over year, inclusive of 100 basis points tailwind from FX.\nRPO ended the quarter at approximately $9.7 billion, representing 34% year-over-year growth.\nCurrent RPO was approximately $5 billion, representing 32% year-over-year growth and a 2-point beat versus our guidance.\nCurrency did not have an impact on year-over-year growth.\nQ3 subscription billings were $1.38 billion, representing 28% year-over-year growth and a $55 million beat versus the high end of our guidance.\nFX and duration were 150 basis points tailwind year over year.\nWe saw broad-based strength across the industries we serve, with transportation and logistics and business services seeing particularly robust net new ACV growth.\nOur renewal rate was a healthy 98% in Q3, a testament to the value ServiceNow delivers to our customers.\nWe view our relationships with customers as long-term partnerships, and we continually innovate to provide new solutions to address their evolving business needs.\nThat land-and-expand motion has manifested into a base of 1,266 customers paying us over $1 million in ACV, up 25% year over year.\nAs the breadth of our portfolio and the addressable opportunities have expanded, so too have our deal sizes.\nWe closed 63 deals greater than $1 million net new ACV in the quarter, up over 50% year over year.\nAnd in Q3, all of our top 20 deals included four or more products.\nOperating margin was 26%, 3 points above our guidance, primarily driven by the strong revenue beat.\nWe also saw savings from the delay in return to work and lower travel.\nOur free cash flow margin was 15%.\nTogether, these results show the power of our business model and our ability to drive a balance of growth and profitability.\nWe're delivering great experiences that drive powerful employee engagement, fierce customer loyalty, and significant productivity gains.\nBy delivering more intelligent automation that provides even better experiences, we are well-positioned as the workflow standard on our journey to becoming a $15 billion-plus revenue company.\nWe're raising our guidance for the full year.\nWe're raising our subscription revenue outlook by $32 million at the midpoint to a range of $5.565 billion to $5.57 billion, representing 30% year-over-year growth, including 200 basis points of FX tailwinds.\nWe are raising our subscription billings outlook by $61 million at the midpoint to a range of $6.379 billion to $6.384 billion, representing 28% year-over-year growth.\nExcluding the early customer payments in 2020, our normalized subscription billings growth outlook would be 32% year over year at the midpoint.\nGrowth includes a net tailwind from FX and duration of 200 basis points.\nWe continue to expect 2021 subscription gross margin of 85%, and we're raising our full-year 2021 operating margin from 24.5% to 25%.\nThis reflects the increase in our top-line growth and savings from the delay in return to work and lower travel.\nWe're also raising our full-year 2021 free cash flow margin by 50 basis points from 31% to 31.5%.\nAnd we expect diluted weighted average outstanding shares of 202 million.\nFor Q4, we expect subscription revenues between $1.515 billion and $1.52 billion, representing 28% year-over-year growth, including a negligible impact from FX.\nWe expect CRPO growth of 27% year over year.\nThis includes a 150-basis-point FX headwind due to sharp movements recently in the euro and pound.\nOn a constant currency basis, we expect CRPO growth to be 28.5%.\nWe expect subscription billings between $2.305 billion and $2.31 billion, representing 26% year-over-year growth.\nExcluding the early customer payments in Q4 of 2020, our normalized subscription billings growth outlook would be 32% year over year at the midpoint.\nGrowth includes a net headwind from FX and duration of 50 basis points.\nWe expect an operating margin of 22%, which includes accelerated demand generation spend in the quarter to set us up for a strong start in 2022, and we expect 203 million diluted weighted outstanding shares for the quarter.\nIn summary, the pace of digital investment is accelerating, and ServiceNow is rising up to seize the opportunities before us.\nThe team has never been more engaged and focused on serving the enormous needs of our customers.\nAnd as ServiceNow becomes the defining enterprise software company of the 21st century, we are also remaining steadfast in our goal to create positive impact in the world.\nI'm happy to announce that in September, we committed to reaching our net-zero emissions goal by 2030, two decades earlier than our previous goal.\nWe've never been prouder of our employees and their continued focus on serving our customers, partners, and communities as we make not only work, work better but the world work better, too.\nOur hungry and humble culture is stronger than ever.\nAnd with that, I'll open it up for Q&A.\n Assistant:", "chosen": "subscription revenues of $1,427 million in q3 2021, representing 31% year-over-year growth.\nqtrly total revenues$1,512 million, up 31%.\n"}
{"prompt": "Human: These statements involve a number of risks and uncertainties, including impacts from the pandemic and related governmental responses and their impact on the general economy, as well as other risks and uncertainties that are described in our filings with the SEC, including our most recent Form 10-K and Form 10-Q.\nAlso during the call, we will reference a number of non-GAAP financial measures.\nThe impact of foreign exchange rate changes subsequent to the end of the fourth quarter, interest rate increases differing from assumptions outlined in guidance, impact from the further spread of COVID-19 or other variants, and environmental and litigation charges.\nIt was a successful year across EnPro as we continue to rise to the occasion to meet the challenges and opportunities that have arisen over the past 12 months.\nTo begin, I will provide financial and strategic highlights for the full year, and then Milt will share details on our fourth quarter results.\n2021 represented another transformational year at EnPro.\nWe continue to successfully reshape our portfolio and shift toward our growth markets with products and services that command higher margins and cash flow returns.\nWith the acquisition of NxEdge and the divestiture of CPI in December, as well as the divestiture of the polymer components business in the third quarter, we achieved meaningful strides in our portfolio reshaping strategy, which is positioning our company for a very promising future.\nAs volumes recovered from the 2020 pandemic lows, we saw positive momentum across the organization.\nFor the year, sales grew 6.3% to $1.14 billion.\nOrganic sales grew 14.4%.\nWe saw strong demand in most markets, including general industrial, semiconductor, heavy-duty truck, petrochemical, food and pharma, and aerospace.\nAdjusted EBITDA of $208.4 million, increased by 23.8% compared to 2020.\nAdjusted EBITDA margin of 18.3%, increased 260 basis points, driven primarily by organic sales increases.\nSelect product, select price actions, and the net benefit of strategic portfolio reshaping completed in both 2020 and 2021, partially offset by raw material inflation, as well as supply chain labor and logistics constraints.\nAs we said last quarter, we still expect raw material inflation and supply chain challenges to continue.\nAnd we will see uncertainty and volatility in the macro environment as we enter 2022.\nOur commercial and supply chain teams continue to evaluate all opportunities to mitigate these current circumstances, while meeting the needs of our customers in the Strong demand environment.\nWe are realizing the substantial benefits of our portfolio reshaping actions, which have enabled us to capture incremental margin expansion in 2021 while keeping a close eye on cost and further simplifying our already agile organization.\nOur strong order trends continued during the fourth quarter and we are beginning 2022 with solid demand.\nIn particular, we continue to see broad-based strength across our businesses and are encouraged by what we are hearing from our customers, particularly in semiconductor, heavy-duty truck, aerospace, nuclear, and food and pharma markets.\nAs we look forward, we continue to invest both organically and inorganically in our Advanced Surface Technologies and Sealing Technologies segments, while driving cost and return improvements in the Engineered Materials segment.\nWe will build upon this core industrial technology foundation, now in place, maintaining our focus on margins and cash flow returns.\nFurther, we expect to maintain our strong recurring revenue streams with aftermarket revenue across our businesses approaching 50% of total company revenue.\nFinally, we remain focused on driving long-term shareholder returns through a disciplined approach to capital allocation supported by our steady cash flows and also through our commitment to sustainability and diversity.\n2022 marks our 20th year as an independent public company.\nAs I enter my first year as EnPro CEO, I marvel at how far we have come and could not be more excited for what the future will hold for all of our stakeholders.\nI will now hand the call over to Milt for a deeper dive into our financial results for the fourth quarter.\nWe had another solid quarter despite the well-publicized headwinds we and many others faced.\nAs reported, sales of $280.8 million in the fourth quarter, increased 1.7% year over year.\nWe saw strong demand in the semiconductor, heavy-duty truck, aerospace, general industrial, and food and pharma markets, as well as contributions from the acquisitions of Alluxa and NxEdge, which were largely offset by the reduction in sales due to divestitures and weakness in the automotive market.\nOrganic sales for the fourth quarter increased 10.4% compared to the fourth quarter of 2020.\nAdjusted EBITDA of $47.7 million, decreased 0.8% compared to the prior-year period.\nAdjusted EBITDA was impacted by inflationary pressures affecting raw materials, freight and labor costs, and higher SG&A, more than offsetting pricing initiatives and the benefit of the reshaping actions completed in 2020 and 2021.\nCorporate expenses of $26.9 million in the fourth quarter of 2021 were up from $10.6 million a year prior, driven primarily by acquisition-related expenses associated with the NxEdge transaction, as well as increased incentive compensation expenses, driven mainly by our fourth quarter share price performance.\nAdjusted diluted earnings per share of $1.23 was essentially flat compared to the prior-year period.\nSuch amortization -- amortization of acquisition-related intangible assets in the fourth quarter was $12.7 million, compared to $10.9 million in the prior-year period, reflecting the additions of Alluxa and NxEdge.\nNow, let's move to a discussion of segment performance for the fourth quarter of last year.\nDue to the impact of divestitures, Sealing Technology sales of $143.9 million, decreased 7% versus the prior year.\nExcluding the impact of divested businesses and foreign exchange translation, sales increased 12% versus the prior-year period, driven primarily by strong demand in heavy-duty truck, aerospace, nuclear, and food and pharma markets.\nAlso due to businesses divested in 2020 and 2021, adjusted segment EBITDA decreased 12.3% versus the prior-year period.\nExcluding the impact of divestitures and foreign exchange translation, adjusted segment EBITDA increased 3% compared to the prior-year period.\nResults in the quarter were also impacted by inflationary pressures affecting raw materials, labor and freight costs with such pressures concentrated in our trucking business.\nThese costs were offset by pricing initiatives and leverage on the organic volume increase in the segment.\nTurning now to Advanced Surface Technologies.\nFourth quarter sales of $69.1 million, increased 38.5% versus the prior-year period, driven by strong demand in the semiconductor market and the acquisitions of Alluxa and NxEdge.\nExcluding the impact of acquisitions and foreign exchange translation, sales increased 16.6% versus the prior-year period.\nFor the fourth quarter, adjusted segment EBITDA increased 35.7% versus the prior-year period, driven by the acquisitions and strong organic sales growth.\nExcluding the impact of the acquisitions and foreign exchange translation, adjusted segment EBITDA increased 10.4% compared to the prior-year period.\nThe growth in EBITDA while strong was partially impacted by timing delays and the launch of advanced node chips.\nMoving forward, our qualification and production work with semiconductor customers gives us confidence in the organic growth and profitability profile for our semi business, both in the coming year and over the long term.\nIn Engineered Materials, sales decreased 7.3% versus the prior-year period, driven by the divestitures of the GGB bushing block and CPI businesses.\nFor the quarter, sales to the automotive market were weak due to chip shortages affecting auto production, particularly in comparison to a strong auto market in the fourth quarter of 2020 that continued in the first half of 2021.\nExcluding the impact of divestitures and foreign exchange translation, sales were flat.\nFourth quarter adjusted segment EBITDA decreased 21.9% versus the prior-year period, driven by raw material inflation and supply chain headwinds, as well as the decline in automotive production in Europe and the United States.\nExcluding the impact of divestitures and foreign exchange translation, adjusted segment EBITDA decreased by a comparable amount around 20.2% compared to the prior-year period.\nTurning to the balance sheet and cash flow.\nWe ended the fourth quarter with cash of $338.1 million, $310 million of which is located outside the United States.\nWe have initiated efforts to repatriate portions of this cash for use in debt reduction, where it makes sense to do so from a tax efficiency perspective.\nAt December 31, we had $213.6 million available for borrowing under our revolving credit facility.\nFree cash flow in 2021 was $123.2 million, up from $39.3 million in the prior year, driven by higher operating profits and lower cash taxes resulting from a tax refund associated with a federal income tax audit resolution, partially offset by working capital investments supporting stronger demand.\nDuring the fourth quarter, we paid a $0.27 per share quarterly dividend.\nFor the year, dividend payments totaled $22.4 million.\nOur board of directors voted to increase our quarterly dividend to $0.28 per share effective with the March payment representing our 7th consecutive annual increase in our quarterly dividend since we began paying dividends in 2015.\nMoving now to 2022 guidance.\nTaking into consideration all the factors that we know at this time, we expect low double-digit revenue growth over reported 2021 sales of $1.14 billion and we expect adjusted EBITDA to be in the range of $263 million to $275 million, implying adjusted EBITDA margins north of 20%.\nFurther, we expect adjusted diluted earnings per share from continuing operations to be in the range of $6.70 to $7.25 using a normalized 27% tax rate, reduced from 30% last year.\nThe reduction in our normalized tax rate assumption for 2022 results from the portfolio actions completed late in 2021 which tilt our portfolio to a higher portion of earnings in the United States.\nOur guidance assumes depreciation and amortization expense, excluding amortization of acquisition-related intangible assets of $37 million to $39 million and net interest expense of $30 million to $33 million.\nOur net interest expense estimate factors in 425-basis-point increases in our variable borrowing rate as 2022 progresses.\nUnderlying demand and order trends remain strong as we enter 2022, even as inflationary raw material cost, the impact of the omicron variant on labor availability, and supply chain and logistics constraints that put early year pressure on growth and margins.\nWe will be implementing additional pricing actions across the company as the year progresses in response to inflationary headwinds.\nFinally, I want to note that we continue to monitor the current COVID situation and will remain attentive to the safety and well-being of our colleagues, who have demonstrated great resilience in the face of the very challenging conditions over the past two years.\nEnPro had a remarkable year.\nI am proud of our team and our many accomplishments as we perceive and doing what we said we would do, execute on our multi-year strategy to transform EnPro into a leading industrial technology company, leaning into our best businesses, while investing in markets with faster growth, higher margins, and higher cash flow returns.\nOur 2022 guidance implies adjusted EBITDA margins around 21%, up from the 14% in 2019 when we first began our portfolio reshaping strategy.\nAll the while remaining steadfast in our dual purpose of delivering outstanding financial results and enabling and supporting development of our colleagues and the communities in which we operate.\nOur journey is just beginning.\nWe appreciate your interest in our company.\nNow I'll open the line to questions.\n Assistant:", "chosen": "compname reports q4 adjusted earnings per share of $1.23.\nq4 adjusted earnings per share $1.23.\nq4 sales rose 1.7 percent to $280.8 million.\nintroducing guidance for 2022: revenue growth in low double-digit range.\nsees 2022 adjusted ebitda of $263 million to $275 million.\nsees 2022 adjusted diluted earnings per share from continuing operations of $6.70 to $7.25.\n"}
{"prompt": "Human: Although we face some continued market challenges during the third quarter, including the impact of Hurricane Ida and the lingering COVID-related impact on our international operations, we are encouraged by the improving market dynamics in the oil and gas sector and remain focused on ongoing efforts to reshape our U.S. Fluids business.\nOur third quarter was highlighted by continued strength in Site and Access Solutions product sales along with notable progress in our Fluids recovery.\nConsolidated revenues improved 7% sequentially to $152 million including 11% improvement in Fluid Systems.\nConsolidated third quarter EBITDA generation was $4 million, which includes $4 million of charges associated with Hurricane Ida as well as costs associated with restructuring our U.S. Fluids business.\nTurning to the specifics of the segment.\nThe strong performance from our Industrial Solutions business continued in the third quarter, demonstrating the value of our diversification efforts as we expand our presence in the power transmission and other industrial end markets.\nWhile the third quarter was impacted by the typical seasonal slowdown in T&D project activity, the seasonal low was largely offset by a $4 million increase in site access product sales, reflecting the benefit of our expanding presence outside of oil and gas.\nWith a modestly lower revenue and shift in mix, our Industrial Solutions operating margin declined 18% in the third quarter, generating $13 million of EBITDA.\nThrough the first three quarters of 2021, we remain very pleased with the momentum we are building particularly within the multibillion-dollar transmission access market.\nYear-to-date, we generated $108 million of site access revenues from the power transmission and other industrial markets, which puts us on a pace for nearly $150 million of revenues for the full year 2021, a 25% improvement from our previous high mark.\nThis revenue level and growth rate reflects significant progress in our power transmission market penetration, which is a key component of our strategy.\nTurning to our Fluid Systems.\nTotal segment revenues improved 11% sequentially primarily driven by strength in the Canadian market as well as our other international markets.\nIn North America, revenues improved by 14% sequentially to $71 million, substantially all driven by the Canadian market.\nU.S. revenues remain in line with prior quarter with modest improvements in land activity offset by a $2 million weather-related decline in the Gulf of Mexico.\nInternational revenues improved 6% sequentially to $37 million in the third quarter, with our expansion in Asia Pacific being the primary driver of the improvement, while certain areas in the EMEA region continued to be negatively impacted by COVID-related restrictions.\nBenefiting from the revenue improvement as well as our ongoing efforts to reshape the U.S. Fluids business, the Fluid Systems segment made progress toward a return to positive cash flow generation.\nAs another sign of the international market recovery, I'd like to highlight that we received a five-year award in Albania from Shell Oil as they look to return to drilling activity in early 2022, which we believe will generate roughly $5 million of revenue per year.\nWe've had a strong history with Shell in Albania, though the upcoming contract reflects their first drilling activity in this country since 2019.\nAnd with that, I will hand the call over to Gregg to discuss in more detail our financials for the third quarter.\nI'll begin by covering the specifics of the segment and consolidated financial results for the quarter before providing an update on our near-term outlook.\nTotal revenues for the Industrial Solutions segment declined 3% sequentially to $44 million in the third quarter.\nSite and Access Solutions business contributed $42 million of the segment revenues in the third quarter including $28 million of rental and service revenues and $14 million of product sales.\nAs discussed on our August call, the third quarter was impacted by the typical seasonal slowdown in T&D project activity, which led to a $5 million decline in rental and service revenues following the strong Q2 results.\nThis decline was largely offset by a $4 million increase in revenues from product sales, benefiting from our expanding customer base in the utility sector.\nIndustrial blending contributed $2 million of the segment revenues in the third quarter, in line with prior quarter levels.\nAs discussed last quarter, although our primary industrial blending customer experienced a decline in consumer demand for disinfectant and cleaning products and canceled their orders early in the third quarter, revenues remained flat sequentially largely due to the cancellation fee provisions within our customer contract.\nWith the modestly lower revenues, the Industrial Solutions segment operating income declined by $2 million sequentially to $8 million, contributing $13 million of EBITDA in the third quarter.\nAs highlighted last quarter, the Q2 results included a $1 million gain associated with the enforcement of our patent rights.\nComparing to the third quarter of last year, revenues from the Site and Access Solutions business increased $13 million or 46%.\nThis increase includes an $8 million improvement in product sales along with a $5 million or 22% improvement in rental and service revenues.\nLooking at the year-to-date 2021 performance for the Industrial Solutions business, as Paul touched on, we're continuing to see a significant shift within our segment revenue mix.\nThrough the first three quarters, the power transmission end market contributes more than half of our Industrial Solutions segment revenues, while our historical E&P market activity accounts for less than 20%.\nNow turning to Fluid Systems.\nTotal segment revenues improved by 11% sequentially to $108 million in the third quarter primarily driven by improvements in Canada and other international markets.\nRevenues from U.S. land increased 4% sequentially to $51 million, reflecting the benefit of the 11% improvement in market rig count as our market share remained relatively stable.\nRevenues from the Gulf of Mexico declined by $2 million, contributing $6 million in the third quarter, largely reflecting the weather-related impact on our customers' operations.\nIn Canada, revenues nearly tripled sequentially to $14 million in the third quarter, meaningfully outpacing the market rig count improvements following spring breakup.\nOutside of North America, although we are seeing continued recovery in customer activity levels, the global surge in the COVID Delta variant caused some delays to customers' plans in certain EMEA markets, hampering the pace of recovery.\nInternational Fluids revenues improved 6% sequentially to $37 million in the third quarter, with our ongoing expansion in Asia Pacific being the primary driver of the improvement.\nAs Paul touched on, with the sequential revenue growth in the third quarter, we saw continued progress in returning the Fluids Systems segment to profitability, although the $4 million of charges related to Hurricane Ida and our ongoing cost actions largely offset the improvements, keeping the Fluids Systems reported operating loss flat sequentially at $7 million for the third quarter.\nContributing to this improvement, we achieved a modest net improvement in pricing for this quarter while passing on inflationary impact of raw materials and transportation costs.\nOn a year-over-year basis, our Fluids Systems revenues increased $40 million or 59%.\nNorth America land revenues nearly doubled year-over-year, fairly in line with the market rig count, while Gulf of Mexico decreased modestly.\nInternational revenues improved $12 million or 47% year-over-year, benefiting from new project start-ups and the recovery of customer activity in several European markets and Algeria.\nSG&A costs were $24 million in the third quarter, which includes $7.5 million of corporate office expenses, reflecting a $1 million increase from the prior quarter.\nThe sequential increase in both SG&A and corporate office expense is primarily attributable to the timing of long-term incentive expense along with the full lifting of salary austerity measures put in place during 2020.\nComparing to the third quarter of last year, SG&A costs increased $3 million, including a $1 million increase in corporate office expense.\nThe year-over-year increase in SG&A primarily reflects higher personnel costs including higher incentive expenses in the Industrial Solutions segment and Canada as well as the $1 million increase in corporate office expense.\nInterest expense remained stable at $2.2 million for the third quarter, nearly half of which reflects noncash amortization of facility fees and discounts.\nOur weighted average cash borrowing rate on our outstanding debt is approximately 3.25%.\nThe third quarter includes a $2 million income tax expense despite reporting a pre-tax loss.\nWe are currently unable to recognize the tax benefits on our U.S. losses, and therefore, the income tax expense primarily reflects taxes on foreign earnings.\nOur reported net loss in the third quarter was $0.11 per share, which included $0.04 of charges and compares to a net loss of $0.07 per share in the second quarter.\nReported net loss in the third quarter of last year was $0.26 per share, which also included $0.04 of charges.\nTurning to third quarter cash flow.\nCash used in operating activities was $12 million including $14 million of cash usage associated with a net working capital increase.\nSubstantially all of the working capital increase is attributable to growth in receivables with the majority in Canada and our international Fluids operations.\nWhile partially driven by the improving revenues in these regions, much of the receivable increase is reflective of elevated DSOs driven by the timing of activity within the quarter, which we expect will normalize next quarter.\nInvesting activities used $6 million of cash in the third quarter, substantially all of which reflects mat rental fleet additions in preparation for fourth quarter rental projects.\nIt's worth noting that through the first three quarters of 2021, investments in the rental fleet totaled $13 million, the majority of which replaces mats sold from the rental fleet as part of our standard commercial offering.\nConsequently, while gross capital expenditures totaled $19 million year-to-date, our net capital investments are only $7 million.\nWe ended the third quarter with a total debt balance of $94 million and cash balance of $31 million, resulting in a modest 17% debt-to-capital ratio and 12% net debt-to-capital ratio.\nOur net debt increased by $20 million in the quarter, largely reflective of the elevated receivables as well as the additional capital investments to support our Industrial Solutions growth efforts.\nOur increase in debt was fairly balanced between the U.S. and international loan facilities.\nWe also purchased $10 million of our outstanding convertible bonds in the open market during the quarter, resulting in a small loss on extinguishment of debt.\nWe ended the third quarter with $24 million outstanding on our U.S. asset-based loan facility.\nAnd after providing for the $39 million convertible bond maturity next month, we have $42 million of remaining availability.\nNow turning to our near-term operational outlook.\nAs we look ahead, we remain encouraged by the strength in the longer-term fundamentals across all major energy sectors, though we continue to see significant inflationary pressures on raw materials, transportation and labor costs as well as increasing lead time requirements for many purchases.\nIn the Site and Access Solutions business, we've experienced a meaningful recovery in rental projects in recent weeks following the seasonally soft Q3.\nWe have several power transmission projects now underway including our first large-scale project in Florida following last year's expansion into the Southeast U.S. market.\nIn addition to the stronger rental and service activity, we expect the fourth quarter to benefit from the typical year-end strength for product sales into the power transmission sector.\nMeanwhile, revenues from industrial blending are expected to remain limited in the near term as we look to replace the disinfectant sales volume.\nIn total, we expect Industrial Solutions segment revenues of roughly $50 million, with the level of year-end demand for product sales being the greatest variable.\nAt that revenue level, we expect segment operating margin to remain relatively stable to Q3 primarily impacted by the following factors: first, the significant surge in raw material cost for mats combined with the competitive pricing environment; second, a change in the mix of rental projects with lower pricing on a few of the larger-scale, longer-duration projects; and third, the lack of near-term industrial blending production volume.\nWith the anticipated Q4 performance, the Industrial Solutions segment is expected to deliver more than $190 million of revenues for the full year 2021, just shy of our 2019 results, while also generating more than $60 million of full year EBITDA.\nThis comparison to 2019 highlights the successful transformation in this segment as the strong revenue growth in the power transmission and other industrial end markets is expected to substantially offset the more than $50 million decline in annual revenue derived from the E&P sector as compared to 2019.\nIn Fluids Systems, we anticipate most regions will continue to strengthen in the near term, benefiting from the strong commodity prices and the gradual easing of COVID-related restrictions around the world.\nIn North America, we expect revenues will remain relatively stable with improvements in U.S. land mostly offset by the typical holiday-driven slowdown in December.\nAlthough we previously anticipated a meaningful improvement in the Gulf of Mexico activity in the fourth quarter due to the start-up of a second drillship with Shell, recent changes in Shell's plans for this drillship have now pushed this activity by several quarters.\nInternationally, while the COVID Delta variant surge has tempered the pace of recovery, we expect international revenues to improve by a mid-teens percentage in Q4, benefiting primarily from higher customer activity in Africa with continued international recovery expected into early 2022.\nIn total, we anticipate our Fluids segment revenues to grow by a mid-single-digit percentage in Q4.\nAnd although the change in Shell activity in the Gulf of Mexico provides an unfavorable headwind, we expect Fluids segment operating income will be roughly breakeven for the fourth quarter prior to the cost of any further restructuring, including a solid earnings contribution from our international operations along with improvements in the U.S. Looking beyond Q4, with the improving outlook for the oil and gas sector and particularly benefiting from our meaningful international presence combined with the impacts of our ongoing actions to reshape our U.S. operations, we expect revenue growth in 2022 will continue to deliver solid incremental margins and drive further improvements in Fluids profitability.\nCorporate office expense is expected to remain fairly flat in the near term then decline modestly in the first quarter and beyond.\nAlso, with the December one maturity of our remaining $39 million of convertible bonds, we expect interest expense to step down modestly in Q4 then level off at roughly $1 million of quarterly interest expense in 2022.\nWith the sequential improvement in both segments and the modest decline in interest, we expect consolidated pre-tax income to be roughly breakeven for Q4 prior to restructuring charges.\nWith regard to Capex, we expect expenditures in the near term will remain fairly limited with investments focused on growth opportunities within the Industrial Solutions segment.\nTotal net Capex for the full year 2021 is likely to come in around $10 million.\nIt's also worth noting that as we look beyond the repayment of our upcoming convertible bond maturity in December, in addition to funding the expansion of our Industrial Solutions business and working capital needs of the business, we will look to resume returning value to shareholders in 2022 through purchases of outstanding stock under our existing share repurchase program.\nI'd like to take a moment to elaborate on my recently announced decision to retire as CEO of Newpark.\nI have also decided that upon my retirement, I will resign as a member of the Board.\nAs I reflect on my 15 years as the company's President and CEO, I'm extremely proud of all we have accomplished and the unique culture we have created.\nWhile there is never a perfect time to retire, I believe the time is right, having turned 65 earlier this year and with the executive leadership team in place to continue on Newpark's journey.\nI'd now like to hand the call over to Matthew Lanigan, who was recently promoted to President and Chief Operating Officer,and will ultimately succeed me as CEO upon my retirement.\nAs many of you know, Matthew has been with Newpark since 2016, where he led the transformation and diversification of our Industrial Solutions business.\nI'm confident that Matthew, along with the rest of the Newpark leadership team, will do an outstanding job building upon the platform we have all worked to create and deliver long-term value for our shareholders.\nIt's an honor to have been selected as Newpark's CEO upon Paul's retirement.\nI've had the good fortune to work very closely with him over these last five years and appreciate the profound impact he has had at Newpark including the establishment of a culture with unwavering commitment to safety, compliance and operational excellence.\nEqually, I feel very fortunate to be surrounded by an exceptionally strong senior leadership and employee teams, all of whom who are committed to our core values and driving our long-term strategy across the business.\nAs I look to step into the role of CEO in the coming months, I wanted to provide a few thoughts regarding Newpark's focus going forward.\nConsistent with our long-term planning process and as highlighted in the past, we'd continue to work closely with the management team along with our Board of Directors to evaluate various alternatives to generate value for our shareholders.\nWith ongoing support from outside financial and other advisors, we have continuously reviewed our portfolio during this unprecedented oil and gas market downturn and assessed necessary adjustments in course.\nThese reviews are focused on evaluating changes in the outlook of our served markets and customer priorities while identifying opportunities for value-creating options in our portfolio as well as placing investment emphasis in markets where we generate strong returns and where we see greater long-term viability and stability.\nWe remain encouraged by the progress we are making in the Industrial Solutions segment and our international Fluids business.\nHowever, we recognize that the U.S. and Gulf of Mexico oil and gas markets are facing prolonged headwinds necessitating consideration of broader structural changes to transform this business for the new market realities.\nRegarding our ongoing focus on innovation, we must continue to deploy our industry-leading sustainable products and services into markets where we uniquely meet the needs of our customers and generate acceptable returns.\nNewpark is no stranger to taking the lead in developing solutions that provide meaningful impact to our customers' environmental footprint as well as providing industry-leading service to support them.\nThis focus, which goes back well over a decade, will continue to guide our investments in product and service development.\nWe will also remain focused on our unyielding commitment to safety and to acting in a manner consistent with Newpark's core values.\nNothing is more important than keeping our employees, customers and other stakeholders safe and being a company that is trusted to always do the right thing from a values and compliance perspective.\nI look forward to sharing more about Newpark's strategy and key priorities on future calls.\n Assistant:", "chosen": "net loss for q3 of 2021 was $0.11 per share.\n"}
{"prompt": "Human: Along those lines, recall that in the first quarter of 2020 we launched a rationalization of our locomotive fleet by 703 units, which resulted in a non-cash charge of $385 million, so we will speak to the quarterly results excluding that charge.\nA full transcript and download will be posted after the call.\nIt is now my pleasure to introduce Norfolk Southern's Chairman, President and CEO, Jim Squires.\nNorfolk Southern started strong in 2021.\nOur successful implementation of precision scheduled railroading translated into solid financial results.\nOur team delivered all-time records for operating ratio and free cash flow and achieved first quarter records for earnings per share and operating income.\nNorthern Southern employees accomplished this despite significant supply chain disruptions brought on by severe weather nationwide in February.\nFor the quarter, revenue increased 1% due primarily to volume growth up 3% year-over-year.\nAt the same time, expenses declined 3% or $48 million compared to our adjusted first quarter of 2020.\nThroughout the quarter, we continued to streamline resources resulting in impressive gains in workforce asset and fuel productivity.\nLooking ahead, we remain intent on achieving strong revenue growth and efficiencies to propel the bottom line and create shareholder value.\nInvestments in technology and sustainability will be critical, and I'll provide some recent examples of these after we review the quarter.\nI am excited to share our first quarter achievements and what we have in the hopper looking ahead.\nOur team on the ground is proving its capability and motivation to move quickly on advancing efficiency and restoring service reliability.\nWe've also introduced a few new team members with PSR experience who are leading initiatives alongside our field team to increase productivity inside our major hump and flat switching terminals.\nThese actions are having an immediate impact for our shareholders and our customers.\nSlide 6 shows our operational indicators.\nWhile volumes were variable in the quarter, efficiency gains were consistent.\nBy absorbing additional volumes within our existing train network, despite how those volumes varied during the quarter, we were able to realize substantial gains in train length and train weight and improve fuel efficiency.\nProductivity initiatives such as locomotive horsepower optimization and additional usage of distributed power were key to the success.\nExecution of our efficient scheduled railroading plan enabled us to handle more freight with fewer resources compared to a year ago.\nLet me add some more color on train length.\nWe are committed to improving productivity by running longer trains, and accomplishing that involves targeted investments within certain parts of our network.\nDuring the quarter, we completed an initial assessment of incremental infrastructure that will aid our long train initiative.\nAs a result, we've begun construction on a long siding extension in the Chicago-Atlanta corridor that will be complete ahead of this year's peak season, and we have identified two others that we will begin construction on this year.\nWe will quickly identify and address opportunities to efficiently deploy capital to support both train consolidation and organic growth.\nMoving to Slide 7, weekly carload fluctuations tell an important story of the quarter.\nVolumes rose quickly coming out of the new year's holiday and were running several percentage points higher than last year, until severe winter weather arrived in February.\nThis affected both railroad operations and our shippers, with Chicago being hit the hardest by both snow and extreme cold.\nWhile we kept main lines fluid, overall supply chain congestion slowed traffic through terminals.\nI would like to especially recognize our field operations, engineering and signals teams for ensuring a safe and efficient operation despite historic cold deep into our network.\nTheir work is critical to the success of NS and our customers.\nBeyond the weather episodes, we continued to adjust our yard network to handle volume increases expected during the year.\nWe are focusing on driving improved efficiency and reliability at our key terminals, which in turn creates a capacity dividend that enables us to absorb both volume variability and overall growth.\nWe are continuing our yard and terminal focus in the second quarter.\nSlide 8 shows that to start the year, network fluidity was comparable to 2019 levels, but a condensed winter that followed in February impacted our velocity and terminal dwell and snarled supply chains in general.\nAs you see by the network performance trends over the past seven weeks, we continue to progress and are committed to further improvement to get our service reliability to where we want it to be.\nAdditional progress creating consistent fluidity leads to enhanced rail car velocity, which in turn benefits our shareholders and customers.\nI'll finish on Slide 9 by explaining how we continued Norfolk Southern's operating transformation during the quarter and how it showed up in the results.\nWe've undertaken a series of focused initiatives to improve capacity and drive down dwell at our major terminals, including current humps as well as flat switching operations.\nThese improvements support the longer and heavier trains we are running, allowing us to operate efficiently with fewer resources.\nFinally, Q1 reinforced the benefits of effective interline cooperation, and we are building on that even though the winter weather has passed.\nThe results show in both productivity and asset usage.\nThese trends have been improving since we implemented Top 21 in mid-2019, but the team has been able to both accelerate and extend the improvement and we are very well positioned to continue these trends, leveraging our efficiency initiatives with rising volumes.\nBeginning on Slide 11, we experienced significant volume volatility in the first quarter.\nWe delivered a strong start to the year with January volume exceeding last year, while February was challenged with winter weather events that disrupted supply chains cross the country.\nProgressing into March, business levels improved as supply chain fluidity started to recover and we adjusted to dynamic shifts in the freight environment.\nDespite the difficult operating conditions, overall revenue improved 1% year-over-year to $2.6 billion while volume grew 3%.\nRevenue per unit excluding fuel improved in each of our individual business units this quarter, reflecting our commitment to grow yield as part of our long-term strategy, though total revenue per unit and revenue per unit excluding fuel were down slightly due to the mix of intermodal volume growth with declines in merchandise volume.\nMerchandise revenue fell 4% from prior year levels on a 3% volume decline.\nThis segment faced difficult pre-COVID comps in the energy sector.\nPartially offsetting these declines were gains in soybean, steel and automotive shipments.\nMarch U.S. light vehicle sales surged to a 17.7 million unit seasonally adjusted annual rate, the second highest March ever, while inventories are at a 10-year low.\nMerchandise revenue per unit excluding fuel reached a record high for the quarter, delivering 24 consecutive quarters of year-over-year improvement in this market.\nIntermodal revenue and volume both increased compared to the first quarter of 2020.\nVolume growth was driven by a continuation of the inventory replenishment cycle combined with the tight truck market and strength in consumer activity as retail sales grew 9.8% in March, the largest sequential increase since May 2020 when sales initially rebounded as states reopened from shutdowns.\nIntermodal revenue per unit excluding fuel improved 6% year-over-year, supported by continued strength in the LTL market driven by growth in e-commerce.\nThis marks the 17th consecutive quarter of year-over-year improvement in this metric and a record high.\nOur coal business delivered 5% revenue growth in the quarter.\nVolume gains were driven mostly by export thermal shipments as the global economic recovery continued, as well as tailwinds from China-Australia trade tensions.\nDomestic met and coke volumes continued to improve as demand for finished product accelerated.\nUtility demand was down as it continued to be pressured from product substitution and lower industrial load.\nRevenue per unit improved 3% year-over-year, inclusive of a $9 million incremental gain from volume shortfall revenue.\nWe have an unrivalled consumer-oriented franchise that continued to benefit our customers and shareholders throughout the quarter.\nAlthough severe weather certainly impacted business levels particularly in February, our diverse industrial franchise serves the improving manufacturing economy and we saw gains from rising commodity prices.\nWe are delivering sustainable revenue growth in line with our long term strategy to capitalize on the strength of our franchise and provide value-added solutions in the marketplace.\nMoving to Slide 13, our outlook for the remainder of the year is strong.\nConsensus for U.S. GDP growth is north of 6%, the highest in the last 40 years.\nPMI rose to 64.7 in March, hitting the highest level since 1983, while inventories remain low.\nThese are expected to be key factors driving robust economic activity for the rest of 2021.\nWe remain confident that our markets will achieve volume growth in the high single digits this year and our franchise is poised to capitalize on the expected growth that will drive value for both our customers and our shareholders.\nMerchandise growth will be driven by continued expansion in the manufacturing sector.\nElevated demand levels coupled with low dealer inventories in the automotive segment will drive volume gains; however, the current semiconductor chip shortage creates uncertainty as to the timing of the recovery.\nU.S. light vehicle production currently is expected to exceed pre-pandemic levels in 2021.\nThat production growth along with the return of total industrial production to pre-pandemic levels will drive steel demand, which is another market where we expect to generate volume growth as the year progresses.\nWe also anticipate our energy markets within merchandise will benefit from the return of gasoline demand in the consumer travel sector as the economy fully reopens.\nOur intermodal franchise will continue to build on the momentum associated with the ongoing U.S. economic recovery.\nAn expected rise in consumer spending, low inventory levels, and continued tightness in the trucking sector are all key factors boosting growth opportunities.\nSpending on durable goods is expected to grow 15% in 2021, which bodes well for our domestic intermodal franchise that is closely correlated with consumption markets.\nInternational intermodal will benefit from the resumption of global trade activity.\nCoal business will remain challenged in 2021.\nThe export thermal market continues as a near term strength, although with a lower RPU than average.\nDomestic met and coke volume is expected to improve in line with the economic recovery.\nNatural gas and renewal energy source conversions will continue to negatively impact the utility markets.\nDecisions on stockpile levels will be determined by summer weather and gas prices.\nIn summary, we expect to generate revenue growth in 2021 as economic conditions continue to improve.\nAs the needs of our customers constantly evolve, we remain diligent in delivering valuable transportation solutions to the marketplace.\nWe continue to focus on initiatives to drive growth, margin improvement, and a strong service product.\nWe are confident in our ability to leverage our value in the marketplace to secure new opportunities to support our customers' growth and grow our margins.\nAs Jim mentioned, the OR and earnings per share records we achieved in the quarter came through disciplined cost control while handling additional volume in the midst of pretty challenging operating conditions.\nOn Slide 15, walking you through our summarized results compared with an adjusted first quarter 2020, we reported an OR of 61.5%, which was a 220 basis point improvement, and an earnings per share improvement of $0.08.\nI will note that the $0.08 improvement in earnings per share was dampened by the absence of a gain recognized last year from a 2012 income tax refund that equated to $0.09, so core earnings per share improvement in the quarter was $0.17.\nMoving to Slide 16, revenue grew 1% in the quarter due primarily to the 3% increase in volume year-over-year, with growth in intermodal and coal more than offsetting declines in merchandise.\nAt the same time, we drove operating expenses down by 3% as we harvested additional benefits from workforce and asset productivity.\nThe volume growth coupled with the productivity drove the operating ratio down to a record low 61.5%, improving 220 basis points year-over-year and 30 basis points sequentially versus Q4.\nThis produced operating income of $1 billion, another record, up $62 million or 7% year-over-year, and we generated first quarter free cash flow of $750 million, also a record, up $161 million or 27% versus the first quarter of 2020.\nMoving to a drill down of operating expense improvement on Slide 17, the reduction of $48 million or 3% comes with improvements in nearly all expense categories.\nComp and benefits declined $11 million or 2% from lower employment costs related to a workforce that was 12% smaller than a year ago and 2% smaller than the fourth quarter.\nPartially offsetting these tailwinds are headwinds this year from higher and stock-based compensation.\nPurchase services and rents were collectively down $10 million or 2% as reduced freight car expenses more than offset higher spend associated with technology investments and increased intermodal volumes.\nWhen matched to a 3% volume increase, the 3% decline in opex provides another quarter of additional productivity, building in the work we've done over the past several quarters, as you'll see here on Slide 18.\nFrom the quarter that we launched our Top 21 operating plan, we have made meaningful progress on our workforce productivity with GTMs per employee up 16% since the third quarter of 2019 and a 340 basis point improvement in our operating ratio.\nWe remain intensely focused and committed to drive further improvements.\nTurning to Slide 19 for the remainder of the P&L below operating income, you'll see that other income net of $7 million is $15 million of 68% unfavorable year-over-year due primarily to lower net returns on our company-owned life insurance investments.\nOur effective tax rate in the quarter was just over 22%, and recall last Q1 we had the 2012 tax refund that resulted in a lower effective tax rate.\nAs a result, net income increased by 1% compared to pre-tax earnings growth of 5%.\nEarnings per share rose by 3%, supported by 2.3 million shares that we repurchased in the quarter at an average price of $254.\nWrapping up now with our free cash flow on Slide 20, free cash flow at $750 million was buoyed by strong operating cash conversion and a relatively modest $265 million in property additions in the quarter, which was below our annual targeted run rate for the year due to timing issues, including weather related delays and capital spend.\nOur company is also in the middle of a digital transformation.\nWe expect investments in technology to drive the next phase of improvements in service growth, efficiency and sustainability at Norfolk Southern, and we're already making great headway.\nSlide 22 shows a few recent examples.\nThe introduction of new mobile apps and a redesign of our customer portal are giving customers a more user-friendly and truck-like experience, delivering real time shipment intelligence, facility truck to rail conversions, and reducing emissions.\nWe're putting an easy-to-use mobile application in the hands of our train conductors, streamlining internal workflow and improving shipment visibility for customers.\nWe're digitizing our internal and external communications through a new CRM platform, enabling better, faster decision making.\nWe're using new information systems to promote intermodal equipment utilization and efficiency at our intermodal terminals.\nWe're using predictive analytics to reduce locomotive failures and plan maintenance proactively.\nMachine vision technology is creating a path to automated track and freight car inspections with manifold benefits to safety and efficiency.\nOn Slide 23, we show that NS has been a sustainability leader for over a decade.\nYears ago, we recognized the importance of reducing our environment footprint, beginning in 2007 when we first established our sustainability program.\nWe've been reporting on our results ever since, delivering on the goals we set forth.\nHere we highlight a few key milestones and also show a few examples of external recognition, including recently being named by the Wall Street Journal as one of the 100 Most Sustainably Managed Companies.\nIn summary, we have a track record of leadership on sustainability which is good for business and the right thing to do for all our stakeholders.\nAlthough we don't generally update guidance, given the unusual circumstances in the first quarter with February's extreme cold and a global supply chain disruption, let me wrap up restating our confidence in our ability to meet the market for full year 2021 with the expectation that strength in consumer-oriented and manufacturing markets will drive 9% revenue growth year-over-year.\nFor the full year, we expect to achieve more than 300 basis points of OR improvement versus our adjusted 2020 result, and we expect to end 2021 with a 60% run rate OR.\nAs we've said before, once we achieve these targets, we won't stop improving.\nWe're optimistic about growth in the year ahead and all the initiatives we have under way to create long-term sustained value for our shareholders.\nBefore we open the call to Q&A, I want to quickly address the proposed transactions involving another Class 1 railroad.\nWe're watching the situation closely, but we won't be discussing the proposals or industry speculation generally.\nAs the regulatory review process unfolds, there will be opportunities for further discussion.\nWith that, we'll open the call to questions.\n Assistant:", "chosen": "qtrly railway operating revenues of $2.6 billion increased 1%, or $14 million, compared with first-quarter 2020.\nqtrly railway operating expenses were $1.6 billion, a decrease of 21%, or $433 million, compared with same period last year.\nqtrly railway operating ratio was 61.5%.\n"}
{"prompt": "Human: Along those lines, recall that in the third quarter of 2020, we recorded an impairment charge of $99 million related to an equity method investment.\nSo we will speak to the quarterly results excluding that charge.\nA full transcript and download will be posted after the call.\nIt is now my pleasure to introduce Norfolk Southern's Chairman, President and CEO, Jim Squires.\nOur third quarter results reflect a strong performance from the team as we delivered third quarter records for operating ratio, net income, income from railway operations and earnings per share.\nWhile volume held steady with last year, revenue grew an impressive 14% and our 60.2% operating ratio reflects a 230-point improvement on a year-over-year adjusted basis, our second-best OR performance ever, outpaced only by last quarter's 58.3% mark.\nIn the midst of significant supply chain disruptions and labor shortages across the country, we're delivering upon our commitments.\nAnd we could not have achieved those milestones without the tireless work of our employees who day in and day out, keep our customers' goods moving safely and efficiently.\nNow let's turn to Cindy to go through our operations.\nIn the quarter, we continued to successfully drive productivity improvement throughout the network.\nWe worked to be as efficient as possible as we adjusted to accommodate demand shifts in many of our markets.\nThis quarter shows continued progress as we attack our cost structure while positioning ourselves for further improvement in both cost and service levels.\nThe quarterly operating metrics on slide six clearly show that, once again, we generated positive operating leverage on flat unit volumes and GTMs that were up 5%.\nWhile we are proactively hiring train crews, efficiency in all areas of our operations, including engineering, mechanical and communications and signals, enabled us to run the network with 7% fewer people in the quarter compared to a year ago.\nBecause assets drive activity, reducing the number of active locomotives was an important lever in managing the size of the workforce.\nBoth train weight and train length continue to improve, driven by a focus on improving the productivity in our bulk network.\nCoal, grain and other single commodity unit trains offer real opportunity for gains through collaborating with our customers on operating trains with more cars per set and by doubling up existing trains over portions of their route.\nI expect we will show continued progress in the fourth quarter as we see the fruits of our efforts.\nWhile strong coal traffic helped drive train weight more than length, train length continued to improve and set another quarterly record.\nAfter seven consecutive quarters of fuel efficiency improvements, we saw a modest deterioration this quarter despite the increase in train size as our horsepower leverage was challenged at times due to volatile traffic flows and we had modestly fewer of the very heavy, highly fuel-efficient trains.\nI am pushing the team to respond more quickly in the face of change, and we are committed to closing the gap with our peers over time and are redoubling our efforts in this critical area.\nAs you can see on slide seven, train speed and terminal dwell were generally flat versus second quarter and do not reflect performance at desired levels.\nWhile there were some effects from Hurricane Ida, those impacts were localized, and I'm extremely proud of how the team, especially engineering and our signal forces, helped us return our routes in Louisiana to operation and reopen the New Orleans Gateway very quickly.\nAs I mentioned last quarter, we are experiencing hiring and retention conditions that are increasingly challenging, especially in some of our more critical locations, and it is having an impact on our network.\nDespite hiring all year long, attrition has been accelerating in each of the last two quarters in several of those critical areas.\nIn many of these locations, we've been able to absorb the impact by executing upon productivity initiatives, and this will be very much a part of the equation going forward as we grow capacity, which I'll talk about more in a moment.\nSome of the things we are doing to create relief: we've more than tripled our conductor trainee rank since the first quarter so that we can effectively backfill in critical areas; we've implemented tools such as perfect attendance bonuses, referral bonuses and signing incentives to improve the stickiness of our current and future workforce; and we continue to leverage the valuable Go Teams to quickly respond to business opportunities where needed.\nPeople are the backbone of the railroad, and we need to make progress on these initiatives to better manage the effects of a tight labor market.\nWe are committed to having the right amount of resources in the right place at the right time, which will drive both cost control and service quality.\nAs our business mix continues to evolve, creating capacity across our market segments has become an even more significant area of focus as highlighted on slide eight.\nSome shippers are looking to take advantage of unexpected market opportunities by shipping extra volume.\nOthers are looking for us to help them adjust to volatility coming from other parts of their supply chains, and of course, all place a high value and service predictability.\nWe're adjusting our network and operations to generate the various types of capacity that customers are looking for.\nFor example, increases in both train sizes give shippers extra lift without further demands on our crew base.\nTrain size increases often require connecting railroads, customers and Norfolk Southern to change processes, and we have found those process changes are worth the effort because they improve asset turns and capacity.\nWe also continue to focus on terminal efficiency, whether helping to drive dwell at our biggest hump yard, Elkhart, to very low levels or tactically redirecting trains to intermodal terminals that have the capacity to unload quickly.\nMoving to slide nine.\nI want to show how we can use these capacity efforts to drive productivity.\nWe've had great success over the past two years driving train size and, in doing so, have addressed a handful of infrastructure bottlenecks.\nWe're fast-tracking a set of siding improvements, the first of which went into service at the end of the third quarter so we can keep making progress.\nBigger trains unlocked by siding extensions helped drive locomotive utilization because it allows us to fully match train size to available pulling power.\nAnd because locomotives are at their most efficient when pulling hard, this is a key lever to our fuel efficiency improvement.\nWhile I've used locomotives and fuel as my primary example, capacity additions have a similar effect on our crew productivity: more cars per crew, asset turns, keeping trains moving with greater train capacity, and also helps our customers with improved train and car performance.\nOn slide 10, we are complementing our investment in physical capacity with a comprehensive technology strategy that makes our crews more efficient and our assets more productive.\nVirtually all of our routine signal and track maintenance is now scheduled via the mobile track authority app, a process that used to be measured in minutes can now be accomplished in seconds.\nIt is inherently more efficient than the radio process of the past, and most importantly, safer because it reduces transcription errors.\nIn the words of our chief engineer, the app has been a game changer for the productivity of his forces.\nWe're doing the same with our mobile train reporting app, which enables our train crews to quickly report completed work and to receive updated customer work requests while in route.\nThis takes a lot of hands out of the process, including significant retyping and delay and enables our crews to be more productive.\nWe're still early in the deployment of this application with rollout to the local trains that do the preponderance of pickups and setoffs just beginning.\nThe use cases for this technology in the field are numerous, and driving adoption and innovation around this platform is a focal point that will allow us to capture additional benefit.\nThe common use thread in these apps is that better information allows people to plan.\nOur track supervisors can better plan their schedule knowing the availability of track time, and our customers can better plan their plant operations and product pipeline with up-to-date shipment information.\nIn the third quarter, we continued to execute on our growth plan, yielding double-digit revenue gains in each of our three markets, further demonstrating our ability to deliver value for our customers and shareholders.\nBeginning on slide 12, I will highlight our results for the third quarter.\nWe achieved total revenue of $2.9 billion, representing a 14% increase from the same period last year despite flat volumes.\nOur revenue performance this quarter was driven by significant gains in revenue per unit and revenue per unit less fuel, both reaching record levels with double-digit year-over-year growth.\nThis reflects the success of our ongoing efforts to yield up and improve revenue quality, a strategy that enhances our long-term potential for revenue and margin growth as conditions improve.\nRevenue in our merchandise segment improved 10% year-over-year, while volume increased to 5%.\nGrowth was led by our Chemicals franchise that benefited from recovering energy demand that drove higher shipments of crude oil and natural gas liquids.\nAlso contributing to merchandise growth was sustained strength in steel markets due to record-high commodity prices and growth in manufacturing activity.\nSteel shipments were up an impressive 34% from the same period a year ago.\nPartially offsetting these gains were declines in shipments of finished vehicles and vehicle parts due to the ongoing semiconductor shortage.\nThis limited automotive production activity and further depleted finished vehicle inventories to new lows.\nBoth revenue per unit and revenue per unit less fuel improved year-over-year due to price increases.\nOur intermodal franchise experienced several headwinds related to supply chain disruptions that negatively impacted volume in our domestic and international business lines.\nIn both segments, unprecedented demand from inventory restocking and consumer spending outpaced available capacity in the supply chain ecosystem.\nThe combination of drayage shortages, warehouse productivity, equipment availability, labor force participation and rail network fluidity pressured intermodal volume throughout the quarter, resulting in a 4% year-over-year decline.\nOvercoming these headwinds, we delivered revenue growth of 16% in the third quarter due to higher revenue from storage services, increased fuel surcharge revenue and price strength.\nCoal revenue increased 32% in the third quarter as both domestic and global economies continued to recover from the pandemic and drive demand for electric power.\nExport coal shipments increased significantly as strong demand and record high seaborne prices increased opportunities for US.\nUtility volumes declined in the third quarter as coal supply was limited and some crossover tons moved into the higher-rated export market.\nThe mix shift from utility to export, coupled with price gains, led to a 20% increase in revenue per unit less fuel for coal in the third quarter, a new record for the franchise.\nMoving to our outlook on slide 13.\nWe expect the third quarter environment to continue through the end of the year.\nStrong consumer demand will continue, while pressures from material shortages and labor issues remain challenging global supply chains.\nInventory levels remain at historic lows despite the continued push to replenish stock, providing a boost to transportation demand.\nWe remain confident in our ability to leverage our strengths in these market conditions and deliver robust revenue growth for the full year.\nWe expect merchandise business will continue to benefit from recovering economic activity as conditions that limited business and recreational activities in the fourth quarter of last year have been much less impactful in the fourth quarter of 2021.\nWe anticipate our markets for crude oil, natural gas liquids and waste to experience higher volume as a result.\nOngoing demand for steel will also be a growth driver, with forecast for industrial production up more than 5% year-over-year in the fourth quarter and steel prices currently above $1,900 a ton.\nA projected 4% year-over-year fourth quarter decline in US.\nlight vehicle production will remain a headwind as the industry remains challenged by the chip shortage.\nWithin intermodal, we continue to see strong demand from consumer spending and tightness in the truck sector.\nThese favorable conditions are offset by constraints from supply chain congestion and equipment availability.\nWe are working closely with our customers and our channel partners to mitigate these challenges.\nHowever, we do not see meaningful improvement in these headwinds before the end of the year.\nCoal demand is expected to remain strong with extremely favorable market conditions, although coal supply will be the governor on year-over-year growth.\nNatural gas prices continue to climb, and declining inventory levels leading into the winter months are the current focus of utility customers.\nSeaborne prices are at decades-long highs in the export market, creating demand beyond capacity and supply abilities.\nOverall, we are optimistic about the opportunities in the fourth quarter and confident in our ability to execute our plan to generate value and grow our business.\nTurning to slide 14.\nThere are several factors impacting the supply chain in which we participate.\nThis includes external factors, such as the chip shortage and intensifying congestion in the intermodal supply chain.\nCoal supply availability continues to be a constraint to meet the higher demand in every market as both thermal and met production remain tight.\nNS has taken action to mitigate some of these factors and effectively position us for revenue growth.\nAs drayage challenges affected international intermodal, we provided an alternative storage solution to our customers.\nWe're working diligently to add chassis capacity to support demand and alleviate shortages across the supply chain.\nLast quarter, we outlined our plan to repair a portion of our chassis fleet that was impacted by a manufacturing defect.\nI appreciate the quick action and effort from our team, and I'm pleased to report that this issue is effectively behind us as we have repaired and returned approximately 95% of the recall chassis back to service.\nWe are also in the process of taking delivery of leased chassis to augment our fleet.\nWe've added terminal capacity to support growth driven by e-commerce and a recovering economy as well as reduced terminal congestion and improved network fluidity.\nWe remain focused on growth opportunities across our network.\nWe are continuously innovating to compete in the $800 billion plus truck and logistics market, as shown by our Thoroughbred Freight Transfer or TFT service launched earlier this year.\nTFT is one of our initiatives to drive growth by targeting opportunities for highway conversions to rail.\nThis service combines the efficiency of our intermodal trains, the capacity of our boxcar assets and the last mile flexibility of trucks to provide an innovative door-to-door service.\nWe're also leveraging our sustainability advantage to propel long-term growth.\nThe choice of transportation mode is one of the most powerful levers any shipper has to reduce the size of its carbon footprint, and we are working closely with our customers to deliver additional value through sustainability.\nWe have proven our ability to deliver results despite challenging market conditions by providing innovative solutions that our customers value and position us for future market demands.\nOn slide 16, as Alan just detailed, revenues were up 14% on flat volumes.\nWith operating expenses up 10%, we delivered strong incremental margins leading to 230 basis points of operating ratio improvement, driving us to a Q3 record of 60.2%.\nThe improvement Alan detailed in RPU, coupled with strong productivity, led to record Q3 operating income, with growth of 21% or nearly $200 million.\nAnd our free cash flow is also at record levels, a 33% increase during these nine months compared to last year.\nMoving to slide 17, let's drill down into the change in operating expenses.\nWhile operating expenses grew $149 million or 10%, it's up only 4% or $67 million, apart from fuel cost increases.\nThe fuel cost increase of $82 million is driven mainly by price, but the 5% increase in GTMs also drove more consumption.\nYou'll see purchase services up $35 million, with the majority of the year-over-year increase in areas.\nWe have an increase in technology spend, which is consistent with our technology strategy, and you've heard a couple of project examples in Cindy's remarks.\nThere are also headwinds from Conrail operating expenses.\nAnd there are increases in intermodal costs.\nMore specifically, we had trucking costs associated with shuttling longer dwell containers to satellite parking lots in order to reduce congestion at our terminals and keep the freight moving.\nLift expenses were actually up in the quarter despite fewer lifts, and that is primarily because of inflation we absorbed on lift rates associated with contractor labor availability.\nThis is an area we do expect to see continued inflationary pressure going forward.\nAnd we also absorbed costs in the quarter related to our chassis repairs.\nMoving on to compensation and benefits.\nIt is up 5%, but you'll note the $40 million in savings from 7% lower headcount that more than offset increases in pay rates and over time.\nMeanwhile, incentive compensation comparisons in the quarter are a headwind of $43 million, similar to what we reported in the second quarter, reflecting our strong 2021 financial outlook compared to lower accrual rates last year.\nMaterials, claims and other expenses were all down year-over-year.\nTurning now to slide 18 and looking at the rest of the P&L below operating income.\nYou'll see that other income of $14 million is $25 million unfavorable year-over-year, and that is due almost entirely to lower net returns from company-owned life insurance.\nOur effective tax rate in the quarter was 23.6%, close to our federal and state statutory rates, but unlike Q3 last year where the rate was 21.9% and benefited from tax advantages related to both COLI investment gains and higher stock-based compensation.\nNet income increased by 17% and while earnings per share grew by 22%, supported by 3.6 million shares we repurchased in the quarter.\nWrapping up with our free cash flow on slide 19.\nAs I have mentioned, free cash flow is a record through nine months of 2021 at $2.3 billion, buoyed by very strong operating cash generation, and that translates into a 102% free cash flow conversion.\nWhile property additions are trending a bit lower than run rate for our $1.6 billion guidance number, capital spend is never linear, and we expect fourth quarter property additions will get us close to the $1.6 billion.\nWe first demonstrated our commitment to sustainability with our visionary appointment of a Chief Sustainability Officer back in 2007, the first in the industry.\nAnd our efforts to support a low-carbon supply chain have greatly accelerated since then.\nBuilding upon the momentum earlier this year with the approval of our science-based targets for greenhouse gas emissions reduction and our launch of $500 million in green bonds in the second quarter, we're excited to report another set of milestones on our sustainability journey.\nIn August, we released our 2021 ESG report, our 14th annual report on corporate responsibility, highlighting the transformational role sustainability is having on our business as we further integrate sustainable practices into daily operations.\nWe celebrated our 500th modernized locomotive unit in partnership with Wabtec in August and announced our collaboration with Progress Rail in September on a first of its kind Tier four locomotive prototype for yard and terminal operations.\nAnd just earlier this month, we announced our decision to purchase 100% renewable energy to power company operations in Altoona in Reading, Pennsylvania.\nOur commercial and sustainability teams work hand in hand to provide demonstrable low-carbon solutions to a wide variety of current and prospective customers, providing a compelling value proposition as we convert more freight from truck to rail, simultaneously benefiting our customers, our communities and our shareholders.\nBefore we open the call to Q&A, I'll take a moment to provide an update to our outlook based on the current economic environment.\nAs shared previously, we expect to achieve an operating ratio improvement above 400 basis points for the full year versus our adjusted 2020 result.\nAnd there's likely upside to the 12% year-over-year revenue growth, as strength in our consumer-oriented and manufacturing markets drive the majority of the growth.\nNear-term upside in coal markets provides a boost for the balance of the year as well, though coal remains challenged in the long term.\nWe are delivering on our financial commitments and remain focused on creating long-term sustainable value for our customers and shareholders.\n Assistant:", "chosen": "qtrly railway operating revenues of $2.85 billion increased 14%.\nqtrly railway operating ratio was 60.2%.\n"}
{"prompt": "Human: We appreciate you joining us.\nFirst, I'm going to discuss the details behind our third quarter 2020 financial results.\nPaul will then comment on the key drivers behind our Q3 results, our outlook for the remainder of 2020 and some general comments on 2021.\nI will return to provide our financial guidance for the fourth quarter and an update to the full year 2020 guidance.\nWe'll then end the call with a question-and-answer session.\nIn addition, some of our discussion may include non-GAAP financial measures.\nNow, let's discuss our third quarter results in which we achieved $0.91 in adjusted earnings per share, a 21% increase over Q3 of 2019 and adjusted EBITDA of $58 million, a 13% increase.\nThese results reflect outperformance in worksite employee growth and pricing relative to our expectations in this uncertain and challenging business environment and upside in our direct cost programs brought about by the dynamics of the pandemic and the structure and ongoing management of these programs.\nAs for our growth metric, the average number of paid worksite employees in Q3 of 2020 increased by 1.7% sequentially over the Q2 period to 231,750, which was above the high-end of our expected range.\nNow you may recall that employee layoffs in our client base drove a 6% reduction in paid worksite employees from the outset of the pandemic in March through the low point in May of this year.\nSince then, worksite employees have grown sequentially as employees returning to work and being hired by our clients have outpaced any further layoffs.\nAdditionally, client retention for both Q2 and Q3 has remained at our historical level of 99% and worksite employees continue to be added from new client sales.\nGiven these recent positive trends, we now expect paid worksite employees to return to near pre-pandemic levels by the end of this year.\nNow let's move on to gross profit, which increased by 8% over Q3 of 2019.\nWorksite employee volume and pricing above target levels, combined with upside in our benefit and workers' compensation programs, resulted in significantly higher-than-expected gross profit.\nThis quarter's benefit costs included some favorable development from Q2, a period of highly unusual claim activity due to the impact of the shutdown orders.\nIn addition, healthcare utilization began trending toward more normalized levels in the third quarter, although not to the degree of our expectations.\nGoing forward, we expect further normalization along with the resumption of some deferred care in COVID-19 testing and treatment costs, the extent and timing of which is still uncertain.\nOur workers' compensation program continues to perform well due to ongoing management of safety practices and claims.\nRecent favorable claims development has been associated primarily with periods prior to the pandemic.\nAnd any favorable impact from the reduction in severity of workers' compensation claims associated with the work-from-home status of many of our clients' employees would likely favorably impact our costs in future periods as this claim experience develops over time.\nAs for our pricing, we charge our clients a comprehensive service fee, inclusive of our HR services and direct cost programs.\nWe entered 2020 with certain pricing targets set prior to the offset of the pandemic.\nAnd we continued to manage toward these budgeted targets.\nAs you may recall, certain savings resulting from the disruption caused by the pandemic were negotiated with our vendors and were passed along to our clients in the form of a comprehensive service fee credit as reflected in our Q2 financials.\nNow turning to operating expenses, Q3 operating expenses included continued investment in our growth, including costs associated with a 10% increase in the average number of trained business performance advisors.\nOther corporate employee head count has remained level over the past three quarters due to the effort and effectiveness of our staff in the face of increased HR service demands from within our client base.\nCost savings have been realized in other areas of the business, including travel, training and other G&A costs, as we manage through the current business environment.\nThe Q3 year-over-year increase in total operating expenses of 15% was impacted by increased stock-based compensation costs.\nNow this increase was driven by a few items: first, our outperformance in the level of paid worksite employees and earnings during the pandemic; second, the shift in the weighting to performance stock awards from the performance cash awards for 2020 to further align our employees' interest with shareholders during these challenging times; third, the acceleration of expense for employees meeting retirement eligibility requirements under recent modifications to our plan; and fourth, a comparison to prior year's quarter in which earnings and related performance-based compensation were adversely impacted by large healthcare claim activity.\nNow operating expenses excluding stock-based compensation and depreciation and amortization increased just 4.6% over Q3 of 2019.\nNow, as far as our financial position and liquidity, it remains strong as we manage through the pandemic conditions, continue investments in our growth and provide returns to our shareholders.\nAdjusted cash has increased from $108 million at December 31, 2019 to $213 million at September 30th, while repurchasing 1.3 million shares of stock at a cost of $91 million, paying now $47 million in cash dividends and investing $69 million in capital expenditures to-date during 2020.\nBorrowings increased by $100 million over the nine months and $130 million remains available under our credit facility.\nToday, I'll provide comments on three topics, starting with some thoughts on our significant outperformance in the recent quarter.\nI will then discuss how the primary drivers to our business model reacted to the pandemic, resulting in the opportunity implied by the guidance we are providing today to attain double-digit growth in adjusted EBITDA this year.\nI'll finish with some comments on our view of these factors going forward, which will ultimately drive our outlook for 2021.\nWe are certainly pleased with our execution in the third quarter, which resulted in a variety of factors contributing to better-than-expected results.\nThe resiliency of our client base supported by our dedicated service providers combined with solid sales and retention to drive a nice rebound in sequential growth in our key metric paid worksite employees.\nNet gain in worksite employees from within our client base exceeded our expectation as client hiring of furloughed and new employees occurred sooner and at a faster pace.\nAs Doug mentioned, client retention continued at historical levels of 99%, despite the economic pressure on small businesses in the current environment.\nIn addition, our booked sales since the pandemic have been approximately 70% of our pre-pandemic sales budget, which we believe is solid performance in a virtual selling environment.\nIn the third quarter, paid worksite employees from previously booked sales was 92% compared to the same period last year, demonstrating continued demand for our services and strong execution in enrolling new clients.\nAnother highlight of the quarter was our strong pricing of both new and renewing accounts in service fees and allocations for direct costs, including our benefit programs.\nThe matching of price and direct cost is critical to our model and exceeding our targets in this area is important as direct cost affected by the pandemic normalize.\nWe've also been able to continue to grow and develop our BPA team through this quarter.\nDuring this period, we virtually trained over 350 BPAs in our Level 1, 2 and 3 and our certified Business Performance Advisor programs.\nOur trained BPA count increased 10% over the same period last year, positioning us well for our fall selling season.\nThis quarter, we were also able to divert some operating expense savings to develop client testimonial videos and increase advertising to support our fall selling season and our retention campaign.\nThese videos captured the emotion we were hoping for demonstrating the value of a sophisticated HR function in a crisis.\nWe were also able to continue important technology development beyond responding to the many compliance needs that emerged earlier this year.\nWe are extending our People Analytics platform, which has been very well-received by our mid-market and enterprise clients to our emerging growth segment just in time for our critical renewal period.\nWe are continuing to make strides improving in Insperity Premier, our proprietary human capital management system, rolling out a new time and attendance user interface and using new behavioral analytics tool to guide road maps making premier easier and more efficient for clients.\nThe bottom line for the third quarter was that we experienced the ideal combination of higher volume and pricing and lower direct and operating costs.\nEach of these elements contributed to our strong outperformance in the quarter.\nSo we have responded quickly and effectively to the unusual events we've experienced in 2020 meeting client needs and achieving better-than-expected growth and profitability.\nWe've also kept our eye on the long-term making progress on many important initiatives.\nNow that we have three quarters under our belt and our estimate for Q4, we can evaluate how our business model has reacted during the pandemic.\nWhen the pandemic hit, we did not expect our business model would have the potential to generate double-digit growth in adjusted EBITDA that we have within the guidance we're providing today.\nThe effects for the pandemic on our business model ran the full gamut from obvious expected negatives to completely unexpected positives.\nIt's worth taking a moment to summarize these factors that drive the model since, as we all know too well, this pandemic is not over and it appears the effects will carry into 2021.\nFor example, one would think the pandemic a health issue would increase health costs.\nHowever, what we've seen is that rising COVID cases created the need to protect hospital capacity and limit elective procedures, which combined with people's behavioral tendency to avoid hospitals as much as possible, healthcare expenses have actually declined significantly in the short-term.\nLonger-term healthcare costs may be elevated due to the deferral of [Phonetic]care or cost associated with treatment of COVID or vaccines.\nTo this point, we have not seen these cost increases to actually increase the overall trend as other offsets like telemedicine and some level of deferral of care [Phonetic] continues.\nIn addition, many experts, including the CDC, are anticipating that the precautions currently being taken to reduce the spread of COVID could substantially reduce the incidence of flu this year.\nAn obvious negative factor we experienced from the pandemic related to lockdowns was the economic effect on small and medium-sized businesses, which affects us in the form of layoffs in our client base.\nWe saw a drop in paid worksite employees of approximately 6% in two months, followed by a steady rebound over the following four months, supported by fiscal stimulus and easing restrictions.\nIn retrospect, the CARES Act and specifically the Paycheck Protection Program was effective in mitigating some level of layoffs.\nFurther, we believe our quick and effective support of our clients to take advantage of these programs played a role in fewer layoffs occurring and a faster rebound.\nThe effects of the shutdown also highlighted one specific advantage in our business model, which is our client selection strategy.\nDue to our risk-based client selection process, we have a very small percentage of our client base in industries most affected by the pandemic and shutdowns such as entertainment, hospitality, travel and restaurants.\nAnother surprise somewhat due to our client selection strategy has been the nominal business closings we have experienced in our client base.\nAlthough we expected to see an increase, our strategy of targeting the best small and mid-sized businesses across a wide range of industries proved to provide some insulation from this factor as we saw no significant increase in business failures.\nAnother dramatic effect we experienced was the increased workload as many issues arising from the pandemic landed in the HR department.\nAs I mentioned last quarter, client interactions increased 300% and the average length of time of these interactions doubled.\nThis five-fold increase in workload has diminished somewhat, but remains elevated.\nOn the flip side, lockdowns led to working from home.\nIn our case, this resulted in improved productivity and our dedicated staff performed heroically in response to the increased demand for our services.\nOur experience leads us to believe working from home is effective for ongoing routine activities.\nHowever, innovation and collaboration may suffer in the longer-term.\nA hybrid scenario of working from home and coming into the office may provide optimal productivity, efficiency and innovation going forward.\nAnother upside in our model from the lockdowns and work-from-home environment across our client base is a substantial decrease in the incident rate of workers' compensation claims.\nThis impact is yet to be reflected in our cost, but -- and should benefit future periods to some degree.\nHowever, these lower costs may be offset by COVID-related claims that may be covered by workers' compensation in some states.\nAn additional upside surprise to me has been our effectiveness, continuing to sell in a virtual environment with a service offering as comprehensive and complex as ours.\nWe now know the range of sales efficiency under these conditions.\nAnd as we integrate face-to-face meetings back into the mix, we could see a longer-term efficiency gain.\nOne final observation is the success we've had during the pandemic in retaining clients even as financial considerations prevailed on our client base.\nOur services simply were invaluable and clients have continued our premium services despite the need to tighten their belts.\nSo now that we have a better understanding of the factors driving our business model during a pandemic, what does that mean as we look ahead to 2021?\nWell, first, it means planning will be dependent on these factors and drivers that are likely to ebb and flow based upon the state of the pandemic.\nWe will be monitoring these new inputs very closely and we'll finalize a budget later than usual to include the most recent information.\nMaking estimates at an early stage makes little sense in view of the number and range of possibilities, especially when considering the timing and degree of severity of the pandemic or the actions that may occur to mitigate its effects.\nFor example, COVID cases are on the rise now, but one or more vaccines may be available by 2021 or an anticipated economic downturn from additional lockdowns may occur.\nAdditionally, small businesses may be bolstered by additional fiscal stimulus.\nWhat we have learned is there are many moving parts and offsets in our business model in this environment.\nIf the pandemic intensifies, our direct costs may be below our historical trends as we experienced this year, but growth may suffer.\nConversely, if the pandemic is mitigated or under control, direct costs may be elevated, but growth may accelerate as an offset.\nWhat I do know with the degree of certainty today is, we have an amazing organization with the necessary curiosity and brainpower to provide the agility and capability to manage through a crisis and come out with impressive results for shareholders clients and other stakeholders.\nThis year we have demonstrated the depth and breadth of our competence and level of care for our clients to execute on matters within our control, along with inspiring ingenuity and resourcefulness to respond to unexpected events.\nWe are certainly pleased with our 2020 results today and our outlook for the balance of the year and we look ahead with confidence in the future whatever we face next year.\nAt this time, I'd like to pass the call back to Doug.\nNow let me provide our guidance for the fourth quarter and an update for the full year of 2020.\nAs you're aware, there continues to be uncertainty as to duration and the conditions of the pandemic and the trajectory of the economy.\nThe current political environment and the timing and details of any further government stimulus add to this uncertainty.\nWe have taken this into account when providing our financial guidance over the remainder of 2020 and we will be considering these factors in our budgeting process for the upcoming year.\nWe typically do not provide formal guidance for the upcoming year at this time and, therefore, we'll consider any further developments in these areas and the outcome of our year-end selling and renewal season [Phonetic] when providing 2021 guidance in our next earnings call.\nNow based upon the details that Paul just shared, we continue to expect sequential worksite employee growth over the remainder of 2020.\nFor the fourth quarter, we are forecasting average paid worksite employees in a range of 236,500 to 238,500, a sequential increase of 2% to 3% over Q3 of 2020.\nThis equates to an expected decrease in average paid worksite employees of only 1% for the full year 2020 in the face of significant challenges for the small business community caused by the pandemic and its impact on the economy.\nWith an improved outlook for Q4 worksite employee growth, our current pricing strength and a range around expectations in our direct cost programs, particularly our benefits program, we're now forecasting Q4 adjusted EBITDA of $21 million to $30 million and adjusted earnings per share of $0.20 to $0.38.\nWhen combined with our Q3 outperformance, we're raising our full year 2020 earnings guidance and now forecasting adjusted EBITDA of $271 million to $281 million, an increase of 8% to 12% when compared to 2019.\nAs for full year 2020 adjusted EPS, we are now forecasting a range of $4.35 to $4.53, up from our previous guidance of $3.67 to $4.04.\n Assistant:", "chosen": "q3 adjusted earnings per share $0.91.\nshare repurchase authorization expanded by one million shares.\nsees fy adjusted earnings per share $4.35 \u2014 $4.53.\nsees fy adjusted ebitda $271 million \u2014 $281 million.\n"}
{"prompt": "Human: These statements involve risks and uncertainties and actual results may differ materially from those discussed or anticipated.\nAlso, during the call certain financial numbers may be discussed that differ from comparable numbers obtained in our financial statements.\nWe believe these non-GAAP financial numbers assist in comparing period-to-period results in a more consistent manner.\nAnd with that, I'll turn the time over to Ryan.\nWe really appreciate you joining the call today.\nThis is my first earnings call as Nu Skin's CEO, so I'd like to take a few minutes to share my perspectives on our business both historically and for the future.\nAs we work to further transform our business toward our vision of becoming the world's leading innovative beauty and wellness company powered by our dynamic affiliate opportunity platform.\nNu Skin has a rich heritage of building innovative beauty and wellness products for nearly four decades including billion dollar brands like Nu Skin, personal care, Pharmanex and ageLOC.\nHowever, the value of our business has often been defined through the narrow lens of our historic direct selling distribution channel.\nBut when you examine our business for what it is becoming, we are better described as a beauty and wellness company that connects consumers to innovative products that help them look feel and live better through our trusted brand affiliates, via our socially enabled digital platform, affiliate powered direct to customer social commerce.\nNu Skin is fundamentally a beauty and wellness company, based on our global reputation for high quality, innovative products and deep consumer connections.\nWe provide a holistic inside outside approach backed by robust R&D and scientific rigor, which very few companies provide.\nAnd we are a category leader for beauty device systems, according to Euro monitor for four years running, which provides a very unique opportunity for us as we expand our device ecosystem moving forward.\nWe're now engaged in transforming our business from a traditional direct selling company to becoming the world's leading beauty and wellness company powered by our dynamic affiliate opportunity platform.\nThere are three key strategic imperatives that will enable our next era of growth.\nFirst, we will launch Empower Me, our personalized beauty and wellness strategy as we begin to connect our beauty device systems to our expanding digital ecosystem beginning in 2022.\nSecond, we'll continue to evolve our go-to-market approach from a traditional direct selling business model to an emerging affiliate powered social commerce business model around the globe.\nAnd third, we'll expand our digital platform with an enhanced.com experience, as well as two new apps, Vera for our customers and Stella for our affiliates.\nLet me give a bit more context on our work in each of these three strategic areas.\nBuilding upon our leadership position as the world's number one beauty device systems brand, we will expand our device systems by introducing next generation connected devices beginning in 2022.\nThe beauty device category continues to be the highest growth sector in beauty and personal care, and we believe that our connected device strategy will further expand our share of that category.\nOur products are loved by well more than a million registered customers today and many more unregistered customers around the globe, and through Empower Me personalized beauty and wellness.\nWe will be able to connect even more customers, nurture deeper engagement and build stronger community of brand lovers, which will result in greater lifestyle value.\nWe aspire to achieve what other great device companies like Apple, Amazon and Peloton have done making us the leader in connected beauty and wellness.\nNext, social commerce is disrupting traditional e-commerce just as e-commerce disrupted retail more than 20 years ago.\nGlobal research estimates the social commerce will expand from approximately $500 billion in 2020 to $3.4 trillion by 2028.\nWith nearly 70% of that stemming from Asia.\nThe power of influencer and affiliate marketing is now regarded as the next generation advertising model by most leading beauty brands.\nThis is where Nu Skin wins.\nOur route to market has almost-has always been through micro influencers well before social media.\nWe're evolving our business model to further leverage social scale and reach for our authentic affiliate marketing channel around the globe, including further refinements to our sales incentives, campaigns and promotion plans.\nThis leads to the third strategic imperative extending our digital platform, which currently accounts for more than 90% of Nu Skin's revenues.\nTo fully capitalize on both our Empower Me personalized beauty and wellness product strategy, and our affiliate powered social commerce business model, we will continue to invest in our digital ecosystem by developing new tools to empower our customers and affiliates.\nThis includes our WeShop Tencent-powered social commerce tool set to begin rollout in Q3 in China to help drive customer acquisition.\nVera our product personalization app, which is being expanded with new functionality to enable deeper customer engagement.\nAnd our newest apps Stella, which will contain my site and product offer our most popular affiliate tools, which is in beta test now.\nWe're expanding our social commerce capabilities within both of these apps through our recent acquisition of Maple Leaf an emerging socio-commerce technology company that will help our affiliates more effectively share and sell products via social media, and will continue to make investments that drive growth and advance the business objectives for Nu Skin, providing value creation potential for the overall enterprise.\nThis multiyear transformation will lead Nu Skin into a new era of growth and opportunity as we evolved from our traditional direct selling routes to become the world's leading beauty and wellness company powered by our dynamic affiliate opportunity platform.\nOur sustained growth in the west over a strong 2020 gives us confidence that our strategy is directionally accurate.\nAs we continue to execute our plans, I'm confident you will begin to see the business through a much broader lens with a significantly larger total addressable market.\nWe'll share more about our long term strategy and at upcoming Q1 investor day.\nWe'll also introduce additional metrics we believe to be instrumental in evaluating our evolving business and provide measurable milestones to track our progress against our transformation objectives.\nNow, let me share some thoughts on the third quarter results before turning it over to Connie and Mark for additional detail.\nAs we stated in our pre-release, we were disappointed with our third quarter revenue, which was lower than anticipated due to COVID delta variant disruptions.\nUnexpected government restrictions interrupted selling and promotional activities in several markets, specifically in mainland China and Southeast Asia.\nChina continues to be a challenging market due to macro environmental factors, nevertheless, it continues to hold enormous potential for beauty and wellness brands, and will continue to explore additional approaches to market to rejuvenate growth in the midterm, including our Tencent WeShop partnership.\nAdditionally, macroeconomic issues in Latin America and extended summer time returned to vacation patterns in Europe affected our performance as well.\nDespite these headwinds, we were pleased with 46% reported year-to-date growth in EMEA and see a bright future ahead as this market continues to lean into social commerce.\nWe were pleased with steady gains in the US driven by social commerce expansion and the launch of beauty focus college and plus, we also experienced double digit growth in Korea related to TR90 body shaping system campaigns and various affiliate promotional initiatives.\nBoth markets are well positioned for future growth.\nFor Q4, 2e are now focused on the rollout of Beauty Focus Collagen+, and Pharmanex META in most of our markets.\nCollagen+ leverages our unique insight outside R&D capabilities to enter the growing $53 billion global beauty supplements market.\nMETA is particularly interesting for us given the growing metabolic health challenges around the world.\nBoth products hold great potential as we roll them out this quarter.\nSo in summary, while the third quarter was a near term setback, we remain on track to grow 3% to 5% this year on top of a strong 2020.\nIn fact, our two-year growth is projected to be 10% to 11%.\nAs we further our strategic transformation, we anticipate challenges along the way, but I'm very optimistic about our future as we lead the beauty and wellness industry into a new era of connected consumerism, with Empower Me, through our dynamic affiliate powered social commerce model.\nWe have the right vision strategy and plans to achieve it.\nAnd we have built the right team who will lead Nu Skin into the future.\nIn fact, we were pleased to be recognized this past month by Forbes on its list of the world's top female friendly companies.\nAnd then Mark for a review of our financials and our updated 2021 guidance.\nConnie is new to all of you but not new to business transformation, global markets or our industry.\nShe's spent almost her entire career in beauty and wellness, and has been a significant addition to our Nu Skin leadership team over the past several months as we partner together to transform our global business.\nYou'll then hear from Mark whom you all know in his also transfer transformational leader coming out of Silicon Valley in the connected devices world of Amazon Lab 126, which provides critical perspective and experience for a future direction.\nSo Connie, with that, take it away.\nI'm excited to speak and share my perspective with you today.\nChoosing to join Nu Skin in April was an easy decision for me as I believe the company is on the brink of something truly remarkable.\nThere are a couple of key things that drew me to Nu Skin.\nFirst, I'm working in the beauty and wellness space most of my career, I have known Nu Skin for having exceptional products.\nThe second is the opportunity to draw upon the unique strengths of our affiliate community to better attract, engage and retain millions of customers and maximize that power of influence through our digital first approach and customer obsession commitment to deliver community building interaction.\nIn addition, the expanding sharing economy, another macro trends Ryan mentioned are lining up in our favor.\nYou'll be hearing more details about our specific plans at an upcoming investor day.\nBut rest assured, we are focused on providing high quality customer experiences for those who are curious and just starting to explore Nu Skin products to our most loyal fans who count on receiving their subscription of Nu Skin products each month.\nAs we do this, we are confident that we will drive customer attraction, loyalty, longevity and lifetime value.\nSo let me now provide a little more insight into each of our market segments.\nAt the highest level, the challenges in China have been offset by accelerated growth of the business in the West, up 35% year-to-date over a very strong 2020.\nThis improves the geographic balance in our business with less reliance upon any given market.\nIn the Americas region, the successful introduction of beauty focus Collagen+ in the US led to 14% revenue growth in the quarter on top of 67% growth in Q3 of 2020.\nThe US continues to benefit from the increased adoption of innovative products and social commerce.\nThe US achieved strong revenue and leader growth due to promotional product cadency and leadership alignment.\nHowever, the Americas segments decline in revenue during the quarters predominantly due to the continued economic instability in several Latin America markets.\nOur America's plans for the balance of the year include the continued launches of beauty focus, Collagen+ and boost, followed by connected devices in 2022.\nMoving on to EMEA.\nThe 9% decline in revenue for the quarter is primarily attributable to extended summer vacations from pent up demand after a restrictive 2020 and a challenging compared to Q3 2020 growth of 72%.\nEMEA continues to be the gold standard when it comes to social commerce adoption, with strong product promotions planned for Q4, we remain optimistic about the future of EMEA.\nMainland China continues to face industry and macro environmental pressures.\nHowever, we remain committed to this market and continue to innovate our approach to market with the rollout of our Tencent digital tools, which include a WeShop personal storefront.\nQ3 revenue was further negatively impacted by the COVID-19 Delta variant and the associated government restrictions.\nOur customer count increased modestly due to the September WeShop shop rollout.\nOur focus will continue to be increasing social commerce adoption, in what has traditionally been a person to person market.\nDuring q4, we expect to benefit from the introduction of ageLOC META and Collagen+ and will continue these efforts throughout 2022.\nIn Hong Kong and Taiwan revenue remained relatively stable despite this being negatively impacted by the COVID-19 Delta variant.\nWe remain focused on advancing social commerce training in these markets and expect to benefit from introductions of ageLOC META in Q4.\nNow, turning to Japan, the COVID impact caused us to give back some of the momentum we had been experiencing there as Japan was a market not only impacted by government restrictions, but also supply chain disruptions impacting product availability.\nWe continue to ramp up social commerce training for our leaders in this mature market, and have also begun introducing ageLOC META, which will continue throughout 2022.\nIn Korea, we were highly encouraged with our Q3 results as we continue to improve in this important market.\nThe 10% revenue and 18% growth in sales leaders was driven by successful product promotions around our TR90 body shaping system.\nOur focus for the balance of the year will be previewing ageLOC META and expanding leader training around social commerce.\nAnd finally, Southeast Asian Pacific.\nThis segment has been perhaps the most impacted by COVID with deepening lockdowns in various markets and local market distribution challenges hindering our ability to fulfill orders in some markets.\nFor the balance of the year we are looking forward to the introduction of ageLOC META in the fourth quarter.\nI look forward to further participating on these calls, and hopefully meeting some of you in person soon.\nI'll provide a financial overview and then give Q4 and full year 2021 guidance.\nFor additional detail, please visit our Investor Relations website.\nFor the third quarter, our revenue was $641.2 million and benefited 2% due to foreign currency.\nWhile this represents an 8.8% decline versus Q3 2020, it is growth of 8.7% on a two-year look back versus Q3 2019.\nEarnings per share for the quarter were $0.97 down 10% year-over-year, but up 22.8% versus the same period in 2019.\nGross margin for the quarter improved 130 basis points to 75.2%.\nGross margin for the core Nu Skin business was 78.6% compared to 76.3% driven by product mix, product cost reductions and supply chain efficiencies.\nSelling expense as a percent of revenue remained consistent with the prior year at 39.9%.\nFor the Nu Skin core business selling expense was 42.7% compared to 42.4%.\nGeneral and administrative expenses as a percent of revenue were 25.1% compared to 23.5% in the prior year.\nFor the quarter G&A declined $3.9 million year-over-year, as we remain focused on carefully managing expenses.\nOperating margin for the quarter was 10.2% compared to 10.6% in the prior year period, largely impacted by revenue.\nWe still anticipate an approximate 50 basis points year-over-year improvement in operating margin for 2021.\nOn our way to our stated midterm goal of 13%.\nThe other income expense line reflects a $2.8 million gain, compared to a $0.5 million gain in the prior year.\nThe benefit this quarter largely stems from unrealized gains and our rise investment holdings.\nAs our investments and rise increase, you can expect more variability in our other income expense line item.\nCash from operations was $30.2 million for the quarter, and was impacted by our continued strategic investment in inventory to meet customer demand for new products and build some protection from global supply chain construction.\nWe anticipate this elevated inventory level will decrease over the next few quarters.\nWe paid $19 million in dividends and repurchased $10 million of our stock with $255.4 million remaining in authorization.\nOur tax rate for the quarter was 27% compared to 24.8% in the prior year period.\nOur rise segment, which includes our manufacturing partners, grew 4% in the quarter.\nThese manufacturing entities continue to benefit our core business by helping shore up our supply chain and generate US profit that lowers our overall tax rate.\nAs Ryan mentioned, we also acquired an emerging social commerce technology company Mabelle.\nAnd we continue to carefully seek investment opportunities.\nGiven our Q3 results, we are adjusting our annual guidance and now expect revenue of $2.67 billion to $2.70 billion, which is annual growth of 3% to 5% or growth of 10% to 11% versus 2019.\nWe anticipate earnings per share of $3.93 to $4.03, year-over-year improvement of 8% to 11% or 27% to 30% on a two-year look back.\nThis guidance assumes a positive foreign currency impact of 2% to 3% and a tax rate of 26% to 28%.\nWe are projecting fourth quarter revenue of $645 million to $675 million.\nAssuming a foreign currency headwind of approximately 1%.\nQ4 earnings per share guidance is $0.90 to $1 and assumed a tax rate of 25% to 29%.\n Assistant:", "chosen": "q3 earnings per share $0.97.\nsees fy revenue up 3 to 5 percent.\nq3 revenue $641.2 million.\nsees 2021 eps:$3.93 to $4.03.\nsees 2021 revenue to be $2.67 billion to $2.70 billion.\n"}
{"prompt": "Human: They are based on management's assumptions, which may or may not occur.\nIn addition, some of our comments today reference non-GAAP adjusted measures.\nWe expect to file our 10-K later today.\nAs mentioned, this teleconference is being recorded and will be available on our website following the call.\nPlease note these calls are designed for the financial community.\nWell, years come and go but 2020, as we all know, was unforgettable.\nThe pandemic affected many aspects of our daily lives, and I'm proud of the way our employees pulled together to provide our customers with superior service.\nWe successfully navigated a number of challenges while still achieving our key financial and operational goals.\nWe reported net income from continuing operations of $2.30 per share for 2020.\nThat's driven by solid performance at the gas utility and a strong contribution from our new platform of water utilities.\nOn the gas operations front, our field crews successfully handled everything from wildfires to restoring service in several towns over Christmas to navigating COVID, social unrest, etc.\nJust a few weeks ago, our employees in the natural gas system once again rose to the occasion and provided a reliable service through an extreme weather event.\nOur storage facilities and overall hedge positions worked to mitigate the amount of gas purchased on the spot market and helped to minimize the impact to our customers' bills.\nThis was incredibly important as prices, as everybody knows, spiked across the country from the widespread cold snap.\nOur balance sheet remains strong with ample liquidity.\nIn 2020, we also executed on one of the largest capital programs in the Company's history aimed at supporting reliability.\nWe continue to operate one of the most modern and tightest systems in the nation, a system that has no cast iron and no bare steel.\nIn 2020, we invested over $270 million in our natural gas infrastructure.\nFrom an economic perspective, 2020 was truly unprecedented.\nPrior to the pandemic, we had a very fundamentally sound sustainable growing economy with record low unemployment both nationally and in our service territories.\nWe continue to see economic recovery and steady growth in several important areas.\nPortland's unemployment right now is 6.1% in December, actually, essentially matching the national rate that's down from a 14.9% high in April.\nSingle-family housing activity remains strong.\nIn the Portland metro region, home sales were at 8.3% from 2019, with price growth of about 12%.\nAnd new single-family permits issued last year were up 4% compared to 2019 levels.\nAt Northwest Natural, we continue to see good customer growth.\nNew construction plus conversions translated in connecting over 13,000 meters during the last 12 months ended December 31.\nOur overall customer growth rate as a result was 1.5% for the same period, based on this strong single-family home construction, partially offset by the loss of some commercial customers due to the pandemic.\nThe rollout of vaccines is expected to ease pandemic related restrictions and allow businesses to reopen.\nStill, we know these are difficult times for some customers and we've worked very closely with commissions, staff and stakeholders to determine the best way to return to normal business practices.\nWe've agreed to timelines for resuming collection processes and continue to evaluate the parties what makes sense for customers given the economic conditions, while also providing financial assistance and payment plans to vulnerable customers.\nEnhancing the system includes a bill forgiveness program and working with the Oregon Legislature to provide additional funding for bill relief.\nThrough a variety of programs and agencies, we've provided over $4 million to over 10,000 households to pay their bills and stay warm during the last heating season.\nWe also donated about $1 million to nonprofits in our communities and initiated a special COVID-19 employee giving campaign.\nFor Oregon, previously approved new rates took effect on November 1 last year.\nGas bills continue to remain low.\nOur customers are paying about 40% less today for their bills than they did 15 years ago.\nIn addition, in June, we passed back a record $17 million in storage bill credits to Oregon gas customers.\nSafety, reliability and affordability make natural gas a preferred fuel source.\nEight out of 10 homeowners in our service territory prefer natural gas according to a study conducted in December 2020.\nThere's a strong recognition that natural gas is affordable, efficient and preferable to electricity for heating and cooking.\nIn fact, over 80% of respondents said they would pay $50,000 more for a home that has gas amenities over an all-electric home.\nCustomers also showed their appreciation by ranking Northwest Natural second in the West among large utilities in the 2020 JD Power's residential customer satisfaction survey.\nAnd then finally, our Board approved the dividend increase in the fourth quarter back in 2020, the 65th consecutive year of annual dividend increases.\nWe are proud to provide the return to shareholders and be one of only three companies on the NYSE with that long record.\nI will begin by discussing the financial impacts of COVID-19 and the highlights of the fourth quarter and full year 2020 results and then conclude with guidance for 2021.\nIn 2020, our utility commissions approved COVID deferrals and term sheets that outlined the types of revenues and costs that may be recovered.\nThese include PPE, bad debt expense, financing costs associated with additional liquidity and certain loss revenues.\nDirect expense reductions such as lower travel and meals and entertainment are to be netted against the deferral.\nPrudency review and recovery of the deferral accounts will be determined in future proceedings.\nWhile our business model is resilient, we are experiencing some financial impacts related to the pandemic.\nThrough December 31, we incurred an estimated $10 million pre-tax of incremental costs and lower revenues due to the effects of COVID-19.\nOf this, $4.8 million were deferred to regulatory accounts.\nIn addition, $1.3 million of late fee revenue that has not been charged to customers since the suspension of normal collection processes will be recognized in a future period when we begin to recover the foregone fees through rates.\nThe remaining $3.8 million that cannot be recovered through rates are primarily due to lower natural gas utility margin from customers that stopped service and slightly lower usage from customers that are not decoupled.\nIn order to further mitigate the financial effects of the pandemic, we initiated temporary cost savings measures which provided approximately $3.5 million of savings in 2020.\nIn summary, the total P&L impact of COVID in 2020 was $1.6 million.\nTurning to our detailed financial results.\nNote, I'll describe earnings drivers on an after-tax basis using the statutory tax rate of 26.5%.\nAlso note that year-to-date earnings per share comparisons reflect the successful issuance of 1.4 million shares in June 2019 as we raised equity to fund investment in our gas and water utilities.\nAs a reminder, Northwest Natural's earnings are seasonal with a majority of revenues and earnings generated in the first and fourth quarters during the winter heating season.\nFor the quarter, we reported net income from continuing operations of $45.8 million or $1.50 per share compared to $38.3 million or $1.26 per share for the same period in 2019.\nThe gas utility posted an increase of $0.19 per share related to new rates in Oregon beginning November 1, 2020, offset in part by higher depreciation and general tax expense and the impacts of COVID-19.\nContribution from our other businesses increased $0.05 per share from the water assets we acquired in Washington and Texas and lower expenses at the holding company.\nUtility margin in the gas distribution segment increased $11.5 million from the benefit of new rates in Oregon and customer growth, partly offset by the effects of COVID-19.\nUtility O&M decreased $500,000 in the quarter, reflecting cost savings efforts.\nI am proud of our employees whose hard work and commitment allowed us to accomplish this while still providing exceptional service.\nDepreciation expense and general taxes increased $2.9 million related to the ongoing investment in our system.\nFor the full year 2020, we reported net income from continuing operations of $70.3 million or $2.30 per share compared to net income of $65.3 million or $2.19 per share for 2019.\n2019 results included a regulatory disallowance of $0.22 per share related to an Oregon Commission order on tax reform and pension expense.\nExcluding that disallowance on an adjusted non-GAAP basis, earnings per share from continuing operations was $2.41 for 2019.\nThe $0.11 per share decline is largely due to year-over-year growth in expenses, the effects of COVID and the positive effects of weather and pipeline constraints on 2019 results.\nIn the gas distribution segment, utility margin increased $11.3 million.\nHigher customer rates in Oregon and Washington, customer growth and revenues from the Northwest expansion project contributed an additional $21.5 million.\nThis was offset by lower entitlement and curtailment fees related to pipeline constraints in 2019 and warmer weather in the first quarter of 2020 compared to 2019, which collectively reduced margin by $4.5 million.\nUtility margin also declined $1 million due to lower revenues from late fees as we suspended normal collection processes.\nThe remaining $5.2 million decline in utility margin is a result of the 2019 Oregon order.\nWith the exception of the first quarter pension disallowance, this order has no impact on net income as offsetting adjustments were recognized through expenses and income taxes, as I'll describe in a moment.\nUtility O&M and other expenses declined $5.4 million.\nThis decrease is associated with the Oregon order which resulted in $14 million of additional expense in the first quarter of 2019, as discussed previously.\nThis was offset by a $6 million increase in underlying O&M related to higher compensation costs, contractor and professional service expenses as well as moving costs.\nThis was partially offset by the management driven cost savings measures I described earlier.\nPension expenses, included in other expense, increased $2.8 million.\nHowever, this expense is now recovered in rates.\nOver the last several years, we have invested in our gas system at historically high levels.\nAs a result, depreciation expense and general taxes increased $10.2 million.\nFinally, utility segment tax expense in 2019 included a $5.9 million benefit related to the implementation of the Oregon order, with no significant resulting effect on net income.\nNet income from our other businesses increased $2.2 million from higher earnings from the wastewater, water and wastewater utilities and lower expenses at our holding companies, partially offset by lower asset management revenues.\nA note on capex.\nWe invested $294 million into the business, with $273 million of gas utility capital expenditures and $38 million for water acquisitions.\nOur balance sheet remains strong with ample liquidity.\nWith regards to the ongoing effects of COVID-19, approximately 97% of our commercial and industrial customers are current with their bills.\nNonetheless, we have seen some commercial customers go out of business and shut off their meters as they have been negatively impacted.\nWe will continue to monitor -- closely monitor usage levels and commercial customer losses.\nWe will also continue to be disciplined regarding cost management in an effort to mitigate these circumstances.\nMoving on to 2021 financial guidance.\nGas utility capital expenditures for the year are expected to be in the $280 million to $320 million range, including significant projects related to system reinforcement, resource center renovations across our service territory and technology upgrades.\nThe Company initiated 2021 earnings guidance today in the range of $2.40 to $2.60 per share.\nGuidance assumes continued customer growth, average weather conditions and no significant changes in prevailing regulatory policies, mechanisms or outcomes or significant changes in laws, legislation or regulations.\nWhile the past year held challenges, our focus remains the same: providing superior customer service, maximizing returns from our strong and growing regulated natural gas utility and diversifying our business by investing in the water sector.\nWe made progress on that last front with the sale of two investments that were no longer central to our strategy.\nIn August, we sold our interest in the Trail West pipeline project, and in December we completed the sale of the Gill Ranch storage facility in California.\nProceeds from the sales are expected to be reinvested in our gas and water businesses.\nThis past year reinforced our decision to build a water and wastewater utility platform and highlighted the value we bring and can create in this sector.\nOur water and wastewater utilities experienced organic customer growth of almost 3%, 2.8% to be exact, over the 12 months ended December 31, 2020.\nWe also completed infrastructure improvements and filed our first water utility general rate case.\nAlthough COVID temporary slowed acquisition -- temporarily closed acquisition activity -- slowed -- excuse me, temporarily slowed acquisition activity, we were still able to add a water and wastewater utility in Washington to our portfolio and made our first acquisition in Texas.\nAnd we continued to make smaller acquisitions within our existing footprint while pursuing new expansion opportunities.\nI remain -- I continue to remain very excited about the investment potential in this business.\nAnother key pillar of our strategy is aggressively pursuing a renewable future and working to decarbonize our gas utility system.\nBefore I take you through our approach, it's important to remember our starting point.\nNorthwest Natural serves about 74% of the residential square footage in our service territory and meets 90% of our space and water heat customers' energy needs on our coldest days, yet the emissions associated with that use accounts for only 6% of Oregon's total greenhouse gas emissions.\nIn the Northwest, the gas and electric system have concurrent peaks in the winter.\nThe gas system delivers about twice as much energy during the peak than the electric system, with even more capacity available.\nThis advantage positions us well to help drive decarbonization in the region in a way that ensures reliability and affordability.\nAnd, as we have seen in recent weeks, one can never underestimate how important reliability is during the winter.\nLet me walk you through three components of our vision of carbon neutrality by 2050.\nFirst, we intend to continue to pursue aggressive energy efficiency to lower energy usage.\nIn the past 40 years, the number of residential natural gas customers in the US has grown by almost 90%, but demand has remained flat, which is a testament to the industry and how well they foster continued efficiency.\nOur residential customers today use half of the amount of natural gas that they used in 1970 despite consistent growth in the average size of homes and more clients as per home.\nSecond, we're striving to integrate renewable natural gas from a variety of waste streams into our system.\nThe technical potential of RNG supply in Oregon alone is estimated to be nearly 50 billion cubic feet, about the same amount as all of the residential gas throughput in our state.\nNationally, early estimates show about 14 trillion cubic feet of technical potential or about 88% of all throughput.\nClearly, there's vast technical potential.\nNow we need to collectively focus on getting as much as we can to market economically.\nWe also see the potential for hydrogen being added to the pipeline.\nWe believe there are three applications for -- of hydrogen from the power to gas process, blended, methanated and dedicated hydrogen systems.\nWe also envision the possibility of blue hydrogen, made from natural gas and paired with carbon capture, utilization and storage as playing a role in the US gas system.\nAnd we're watching Europe, Canada and Australia efforts -- Australia's efforts in this area.\nIn 2019, Northwest Natural sent a technical team to Europe to meet with government agencies, think tanks and gas companies.\nAnd we learned a lot about new technologies, projects and policy.\nIt was clear Europe was many years ahead of the US and they're thinking about the gas networks system and the role of green molecules in the energy transition that we're all going to go through.\nOnce [Phonetic] they realize gas infrastructure, which is already in place, is a huge advantage, and one great example of this is storage.\nThe natural gas infrastructure is built to provide long duration energy storage that doesn't degrade.\nIt can store RNG and methanated renewable hydrogen today in existing facilities.\nAnd when we think about decarbonization strategies across the energy sector, the fact that the infrastructure already exists and has significant cost advantages is incredibly important in my opinion.\nFor example, Northwest Natural has 20 billion cubic feet of underground storage today.\nThat's equivalent to storing about 6 million megawatt hours of renewables.\nIn today's cost, that would be about a $2 trillion lithium battery.\nAnd this is where policy is key to helping us leverage our existing infrastructure in new ways and accelerate our region's decarbonization efforts.\nIn Oregon, we have Senate Bill 98, the first of its kind renewable natural gas legislation that sets 30-year targets for gas utilities to procure R&D and renewable hydrogen for customers.\nWe just announced our first RNG investment under the bill and are actively working on more.\nNorthwest Natural has started hydrogen blending testing in our training facility, and we're working with Eugene Water And Electric Board in Oregon to propose a project that would include methanated hydrogen for our system.\nWe're excited about these early steps and are committed to pushing for solutions that include system resilience as part of the energy transition.\nNow, more than ever, it's clear to us how critical our gas infrastructure is to furthering our collective climate goals, while also ensuring energy system diversification and reliability for the communities we serve.\n Assistant:", "chosen": "q4 earnings per share $1.50 from continuing operations.\ninitiated 2021 earnings guidance in range of $2.40 to $2.60 per share.\nnw natural capital expenditures for 2021 are expected to be in range of $280 million to $320 million.\n"}
{"prompt": "Human: They are based on management's assumptions, which may or may not occur.\nWe expect to file our 10-Q -- or 10-K, excuse me, later today.\nThis teleconference is being recorded and will be available on our website following the call.\nPlease note, these calls are designed for the financial community.\n2021 was a year of success for our company, and we continue to build on our fundamental strengths in our gas and water utilities group, and we launched a competitive renewable natural gas business.\nFor 2021, we reported net income of $2.56 per share, which is an 11% increase compared to net income from continuing operations of $2.30 per share in 2020.\nNew rates in Oregon drove results for the natural gas utility, along with solid customer growth, and we saw higher revenues at our interstate storage business.\nThis financial growth is a product of multiyear efforts, a keen focus on our long-term plan and proof that consistent progress yields positive results.\nWe also see positive momentum in our local Portland Metro Area economy.\nUnemployment rates in this area declined to 3.9% in December 2021, compared to 7.3% a year ago.\nAnd single-family housing activity remains very strong.\nHome sales were up 10% during 2021 compared to 2020, with the average sales price up 16%.\nAnd new single-family permits issued were up 12% with multifamily permits up 37% in Oregon this past year compared to the prior period.\nConstruction and development remained robust in our region.\nThis translated into over 11,000 new customers connecting to our gas system during 2021 for a growth rate of 1.5%.\nOur water and wastewater utilities also continued to grow.\nStrong residential housing construction, primarily in Idaho and Texas, translated into a 3% organic customer growth rate.\nWe also closed four acquisitions in 2021.\nMost notably, we acquired a stake in the largest privately held water company here in Oregon.\nThe combination of organic growth and acquisitions increased our water utility connections by nearly 30% last year.\nNow a few comments on gas facility.\nOn November 1, new rates for gas utility customers went into effect for the current heating season.\nThat included the impact of the general rate case we concluded in the State of Washington.\nDespite these increases, our customers continued to pay nearly 30% less for their natural gas today than they did 15 years ago.\nAnd this reflects the decline in commodity costs, energy efficiency efforts and prudent expense management, along with smart investments in gas storage assets that continue to reap benefits for customers.\nThe result, natural gas continues to maintain its competitive position of fuel of choice.\nAdded to its performance benefits, natural gas enjoys up to a 60% price advantage over an electric or oil formats for the typical home we serve.\nAnd our customers are central to our success at Northwest Natural.\nThat's why I'm thrilled Northwest Natural ranked second best among large natural gas utilities in the J.D. Power Residential Customer Satisfaction Study.\nThis continues a nearly 20-year legacy of outstanding results.\nI'm proud of all of our employees who make this exceptional service happen every day.\nAnd as you know, growth is not always linear, and in certain years, the focus will be on initiatives that set stage for future growth.\n2022 for us is such a year.\nTo that end, 2021 and 2022 include robust capex plans related to crucial spend for safety and reliability, technology system upgrades and cybersecurity investments.\nTo recover these long-planned project costs, we took the necessary step at the end of 2021 and filed in the rate case.\nThe request includes a revenue requirement increase of $73.5 million based on a 50-50 cap structure and ROE of 9.5% and a cost of capital of about 6.7%.\nWe filed an increase in average rate base of $294 million since the last rate case.\nThe Oregon Commission and stakeholders have 10 months to review the case, and we expect new rates to be effective November 1.\nAt the same time, we continue to make progress under the Landmark Oregon Senate Bill 98 Legislation, which supports renewable energy procurement and investment by natural gas utilities.\nI'm happy to report we signed an agreement with Archaea to procure RNG on behalf of our customers in the fourth quarter of 2021.\nNorthwest Natural also recently committed -- excuse me, completed commissioning the first of four RNG projects with Tyson Foods and BioCarbN.\nConstruction on our second facility began this month with commissioning slated for early 2023.\nTo date, we signed agreements with options to purchase or develop RNG on behalf of our customers, totaling about 3% of Northwest Natural's current annual sales volume in Oregon.\nI am very proud of the progress we've made in less than two years.\nTo put it in perspective, today, wind and solar account for about 11% of our total nation's electricity supply after decades of investment.\nWe intend to continue to take these critical steps to source more and more of our supply for renewables, knowing that our customers want a decarbonate system and a clean energy future.\nA new survey conducted by an independent leading opinion search -- research firm showed that 77% of Oregon and Southwest Washington voters want access to all forms of energy, renewable energy, hydro, wind, solar and renewable natural gas for a balanced low-carbon future.\nIn fact, 78% of voters value the natural gas system for its critical role in lowering emissions with both affordability and reliability and, of course, resiliency as top priorities.\nAnd nearly 80% of owners support local government's efforts to encourage the use of natural gas.\nCreating value across all of our businesses allowed our board of directors to increase our dividend for the 66th consecutive year.\nOur annual dividend -- indicated dividend rate is now $1.93 per share.\nWe are very proud to provide returns to our shareholders and be one of only three companies on the NYSE with this record.\nI will begin by discussing the highlights of the fourth quarter and full year 2021 results and conclude with guidance for 2022.\nI'll describe earnings drivers on an after-tax basis using the statutory tax rate of 26.5%.\nAs a reminder, Northwest Natural's earnings are seasonal with the majority of revenues and earnings generated in the first and fourth quarters during the winter heating months.\nFor the quarter, we reported net income of $40.5 million or $1.32 per share, compared to net income of $45.8 million or $1.50 from continuing operations for the same period in 2020.\nThe decrease in net income over last year was driven by results of our gas utility, which posted a $0.15 per share decline in earnings.\nThe other businesses posted a $0.03 per share decrease in earnings, driven by higher business development costs.\nLower earnings at the gas utility were primarily related to higher operations and maintenance and depreciation expenses, partially offset by new rates in Oregon and Washington.\nUtility margin in the gas distribution segment increased $4.5 million as a result of the new rates and customer growth.\nUtility O&M increased $5.7 million, reflecting higher levels of expense for payroll and benefits, contractor and professional services and information technology upgrades.\nUtility and depreciation and general taxes increased $1.6 million due to higher property, plant and equipment as we continue to invest in our system.\nFor the full year 2021, we reported net income of $78.7 million or $2.56 per share, compared to net income from continuing operations of $70.3 million or $2.30 per share for 2020.\nThis $0.26 per share increase was driven by both the gas utility, which contributed an additional $0.16; and our other businesses that contributed an additional $0.10 per share.\nHigher earnings at the gas utility were primarily related to new rates in Oregon and Washington, along with customer growth.\nUtility margin increased $30.7 million as higher customer rates and customer growth contributed $30.9 million.\nThis was partially offset by a loss from the gas cost incentive sharing mechanism as we purchased higher-priced gas during the February '21 cold weather event.\nUtility O&M increased $14.2 million, driven by higher employee compensation and benefit costs, lease expenses for our new operations and headquarters building and higher costs related to information technology system upgrades.\nDepreciation and general taxes increased $9 million.\nNet income from our other businesses increased $3 million, largely due to higher asset management revenues from the cold weather event in February.\nFor 2021, cash provided by operating activities was $160 million, an increase of $15 million compared to last year.\nWe invested $300 million into the business, most of which was for the gas utility capital expenditures.\nOur balance sheet remains strong with ample liquidity.\nMoving on to 2022 financial guidance.\nGas utility capital expenditures for the year are expected to be in the $310 million to $350 million range, including significant projects related to system reinforcement and technology upgrades.\nThese capital investments, coupled with higher forecasted expenses from technology and payroll, supported our decision to file the Oregon rate case with rates effective in November of this year.\nConsistent with these business drivers, the company initiated 2022 earnings guidance today for net income in the range of $2.45 to $2.65 per share.\nGuidance assumes continued customer growth, average weather conditions and no significant changes in prevailing regulatory policies, mechanisms or outcomes or significant changes in loss legislation or regulations.\nWe continue to see solid long-term growth in our natural gas and water utilities.\nAnd as discussed last quarter, we've launched our competitive renewable natural gas business.\nAs a result, we are now targeting a long-term earnings-per-share growth rate of 4% to 6% from 2022 to 2027.\nThis past year, we made significant progress on our business strategy.\nOur focus moving forward is clear: maximizing returns from our strong and growing regulated gas utility and positioning our business for incremental long-term growth by investing in water utilities and the competitive renewable natural gas business.\nWe'll keep our focus on the future, making sound investments today to ensure sustainable growth for tomorrow.\nAnd to that end, we released our Destination Zero scenario report for the gas facility in November last year.\nThis report illustrates different possible scenarios to transform into a provider of carbon-neutral energy by 2050.\nKim Heiting, our senior vice president of operation, will touch on the details of this work in a minute.\nBut central to it is our belief that diversified energy system is more affordable, more reliable and importantly, more resilient.\nEvents in Texas and California are stark reminders of why two energy systems are better than one.\nThe electric and gas systems depend on each other to serve our communities, and each system provides different benefits.\nIn fact, by their nature, each system complements the other and hedges against certain risks, with wires above ground delivering renewable electrons and pipes below ground delivering renewable molecules.\nThis diversification helps us effectively meet different energy needs and will be even more important going forward as climate change and the potential for more severe weather post new risk.\nWith that, let me turn it to Kim to give a little bit more details on Destination Zero analysis.\nOur Destination Zero analysis is the next evolution for us and built off our 2016 carbon savings goal for our customers' use, and the 2019 study we commissioned with the Environmental Consultant E3, Paris Climate Accord reduction targets by 2050.\nSince then, we've continued to build on our internal carbon-modeling capabilities and evaluate new developments that allow us to evolve our thinking about the possibilities for our system.\nIn this new work, we evaluated multiple scenarios with technologies that exist today, some of which are further along the development path in Europe, but all of which are considered viable tools that we are either actively pursuing or evaluating now.\nThe three scenarios we modeled use both supply and demand side levers designed to achieve carbon neutrality for the emissions associated with our sales customers' energy use and future customer growth.\nAll of them use varying levels of renewable natural gas, clean hydrogen, synthetic gas and enhanced energy efficiency, including gas heat pumps and hybrid heating systems, as well as a conservative level of offsets and carbon capture.\nWe use different assumptions to tackle these components to stress test our ability to achieve carbon neutrality under different conditions and views of future technology adoption and availability of renewable supply.\nWe believe the most likely scenario will be a combination of activities that make usage more efficient and also reduce the carbon intensity of the energy we deliver.\nAnd of course, all scenarios rely on the adoption of supportive policies over time to lower costs for technology innovations like renewable or clean hydrogen.\nDriving that policy support is a focus of Northwest Natural and our industry going forward.\nWhile our analysis and modeling continues to evolve as we progress through this transition, our view of the future remains consistent, which is a transformed gas system distributing renewable molecules, enabling our region's ability to achieve its ambitious climate goal in a reliable, resilient and more affordable way.\nI'm very proud of our team and their efforts.\nAnd under Kim's leadership, we're in a great place there.\nI believe this is one of the first in-depth decarbonization scenario reports by gas utility, and it's a critical planning tool that helps us continue to make progress.\nIn addition to moving our gas utility toward a renewable future, last year, we also launched a competitive renewable natural gas strategy and formed a new non-regulated subsidiary, Northwest Natural Renewables.\nBy forming this new organization, we are committed to leading the energy transition and providing renewable natural gas to the utility, commercial, industrial and transportation sectors.\nWe're focused on providing cost-effective solutions to help these sectors decarbonize using existing waste streams and renewable energy resources.\nAs you know, we're in the beginning of a historic energy system transformation, and we're confident the demand for renewable fuels is going to continue to grow.\nWe project the substantial increase in renewable natural gas demand to meet voluntary and compliance-driven targets instituted by states and utilities.\nWe see promising investment potential in RNG and believe we're well-positioned to help fulfill this need as it aligns with our core competencies and is a natural extension of our sustainability efforts.\nWe're also an attractive counterparty for developers and feedstock owners seeking a reliable, long-term strategic partner.\nMost RNG projects are sized right for us to effectively transact and to provide meaningful growth and cash flow.\nAnd as you know, we've already taken our first steps with a 20-year RNG supply agreement and a total of $50 million investment.\nI'm excited to announce that as of the end of January, Mike Kotyk joined our team to lead our competitive RNG efforts.\nMike brings more than 25 years of experience in this sector, and I know we're ready and resourced to pursue these opportunities.\nIn conclusion, we intend to remain disciplined and focused as we assess other RNG investments to support the energy transition and provide additional earnings and cash flow growth for the company.\nTurning to our water utility business.\nSince announcing our initial transaction four years ago, we solidified our water strategy and increased the number of customers we serve fivefold through nearly 20 acquisitions across four states.\nAnd we're not stopping there.\nLast year, we signed purchase agreements that will more than double our total number of connections.\nAnd most notably, we signed our largest acquisition today to acquire Far West Water and wastewater utilities in Yuma, Arizona, which serves approximately 25,000 customers.\nI'm pleased to expand into our fifth state and in a region that is fast growing.\nThe acquisition, subject to regulatory approval, is expected to close in the fourth quarter of this year and be accretive to earnings per share after its full -- first full year of operations.\nJust this month, we also announced additional agreements to acquire two water utilities near our existing systems in Texas.\nAnd central to the water utility business is strong and collaborative relationship with regulators, and we've been pleased with their support to consolidate this fragmented industry with final approval of acquisitions and recovery for prudent investments for safety and reliability.\nWe remain excited about the investment potential for this business, and we look forward to more announcements soon.\nSo in conclusion, your company is financially strong, and I'm pleased the opportunities in the renewables and water sectors have allowed us to increase our long-term earnings-per-share growth rate of 4% to 6%.\nWe intend to continue working on your behalf to pursue sustainable growth.\n Assistant:", "chosen": "q4 earnings per share $2.56.\n"}
{"prompt": "Human: Joining me remotely, again, this will probably be our last remote one, we'll see, hopefully, our last one, is Susan Kreh, our chief financial officer; Molly VandenHeuvel, our chief operating officer; Jessica Moskowitz, vice president and general manager of the consumer products division; Fred Kao, our vice president of global sales for Amlan International; Laura Scheland, general counsel; and Leslie Garber, our manager of investor relations.\nAnd, Leslie, if you would walk us through our safe harbor, please.\nActual results in those periods may materially differ.\nWe ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil-Dri stock.\nAnd we certainly can explain what's going on with the margin pressure and really rampant cost increases in my career as president, which started in 1995, I haven't seen this since Hurricane Katrina back in August of 2005 when natural gas went through the roof.\nSo I think we're seeing it everywhere.\nSupply chains are being squeezed.\nMaterials are being -- demand is exceeding supply, i.e., prices are going up.\nAnd so we are obviously working very hard to get increases to offset these.\nBut, you know, fell woefully short in the quarter.\nAnd that's why you saw the top line look fine, but gross profit and bottom line are not fine.\nWell, let me jump right in.\nFor the third quarter of fiscal year 2021, Oil-Dri delivered net sales of 76.3 million, which was on par with our record third quarter in fiscal 2020.\nStaying with net sales, I would remind you that our third quarter compares to a unique third quarter in the prior year, where we experienced very high sales in our cat litter products that were driven by consumer-pantry loading as the pandemic began to close down many businesses, schools, ball fields, etc.\nAnd consumers stocked up on cat litter, toilet paper, and other essential goods in anticipation of potential supply chain disruptions.\nOn the positive side, during the quarter, our industrial and sports businesses began to rebound from the pandemic as businesses in ball fields that had been shut down as a result of the pandemic began reopening.\nIn addition, we experienced steady growth of our agricultural and our animal health products.\nThe third-quarter net sales in our business-to-business products group decreased 1% from the prior year to 26.3 million.\nThe higher demand of agricultural and animal health products that I mentioned earlier was offset by decreases in co-packaging, of course, cat litter, a result of the prior year's pantry loading, as well as decrease in bleaching clay sales.\nAgricultural product revenues rose 7% in the third quarter compared to the last year, primarily resulting from increased sales to our existing customers.\nSales of animal feed additives increased 3% in the quarter versus the prior year, driven by higher demand within Asia and Latin America that was partially offset by lower revenues in China.\nThis decreased demand within China was really primarily due to the shift in timing of the Chinese New Year when many businesses temporarily shut down in observance of the holiday.\nThat occurred during the second quarter in fiscal year 2020, but in the third quarter of fiscal year 2021, making the quarter comparison a little bit differ.\nThird-quarter sales of our bleaching clay and fluids purification products declined by 3% from the prior year due to the timing of orders, improved crop conditions that require less material for purification, and the negative impact for the pandemic as many edible oil manufacturing plants have delayed plant tests or have unused product on-hand due to lower production.\nThe pandemic has also negatively affected our sales of our Ultra-Clear products, which are used for jet fuel processing.\nNow switching to our retail and wholesale products group.\nThird-quarter net sales reached a record of 50 million, a 1% increase over the strong quarter in the prior year.\nA 20% increase in our sales from our industrial and sports products drove much of this growth as commercial businesses are recovering since the pandemic and many sports fields have reopened.\nAlthough we continue to experience the positive impact of increased pet adoption resulting from COVID-19 and the overall macro trend of higher spending on pet, net sales of cat litter decreased in the third quarter compared to the prior year, which, as I mentioned earlier, benefited from the unprecedented pantry loading during the early stages of pandemic.\nNow switching to costs.\nOur third-quarter gross profit of 16.5 million was approximately 4.9 million lower than the third quarter of fiscal 2020.\nThis decline can be attributed to a 14% increase in cost of goods sold per manufactured tons driven by higher freight, packaging, materials, natural gas, and nonfuel manufacturing costs.\nDomestic trucking supply constraints and elevated fuel costs resulted in a 28% increase in freight costs for manufactured tons compared to the same period last year.\nA 19% increase in packaging costs for manufactured tons due to higher resin prices also contributed to the reduction in margin.\nNatural gas and material costs for manufactured tons increased by 11% and 9% respectively in the third quarter over the prior year.\nDan mentioned, we certainly did experience some market-based increases in costs, and to offset these significant cost increases, the general managers of our businesses have been implementing and continue to evaluate price increases, many of which are effective as of May 1, which will result in us seeing the impact during our fiscal fourth quarter.\nFurther, some of those price increases required 90-days notice to our customers and costs continued to rise since those increases were set.\nTherefore, we continue to evaluate the needs for further price increases, particularly in our consumer business that is significantly impacted by increases in freight and resin-based packaging costs.\nShifting to total selling, general, and administrative expenses for the third quarter.\nThey were approximately 1.1 million lower than the prior year, representing a 7% in decrease.\nIncreased advertising and marketing expenditures were offset by reduced travel, reduced bad debt expense, and a lower estimated annual incentive bonus for fiscal year 2021 compared to fiscal year 2020.\nOur effective tax rate in the quarter is worthy of mention.\nDuring the third quarter, it was a negative 1%, compared to 17% in the same period in the prior year.\nThis reduction reflects not only a decrease in our expected annual taxable income as we have a better line of sight to the impact of cost increases versus price increase on our fiscal year ending July 31, 2021.\nIt also includes certain employment-related tax credits of which we were able to take advantage during the quarter.\nIn addition, we were able to claim a new tax deduction for foreign-derived income, which further reduced the effective tax rate for the third quarter.\nNet income attributable to Oil-Dri was 2.2 million in the third quarter, compared to 4.6 million during the third quarter of fiscal 2020, resulting from the impact primarily of the increased costs we discussed earlier.\nAnd for the same reasons, our earnings per diluted common share of $0.32, compares to $0.65 in the third quarter of the prior year.\nAll that said, our financial position remains strong as is reflected in our balance sheet.\nWe ended the quarter with cash and cash equivalents of 30 million and have very little debt, equating to a debt of total capital ratio of about 6%.\nOne of the primary uses of our cash flow is to fund our trade working capital.\nTaking a year-to-date perspective here, during the first nine months of fiscal 2021, our accounts receivable increased 3.9 million, reflecting our sales growth, as well as a shift in our customer mix, which includes an increase of sales to foreign customers who tend to have longer term.\nOur income taxes shifted from a 2.6 million payable balance included in accounts payable as of July 31, 2020, to a prepaid balance of 2.3 million as of April 30, 2021, representing a use of cash of 4.9 million during the first nine months of fiscal 2021.\nThe decrease in accrued expenses of 4.1 million for the nine months ending April 30 was primarily driven by a reduction in the incentive bonus accrual.\nDuring the year, we used our cash in line with our plan to fund capital investments in our business, including those required for growth and those required to drive cost reductions in addition to normal repair and replacement capital.\nWe also used cash to opportunistically repurchase stock to help offset dilution that occurs as shares of our restricted stock less.\nYear to date, we have repurchased approximately 82,000 shares of our common stock for $2.9 million.\nIn conclusion, Oil-Dri remains in a strong financial position with low leverage and is well-positioned to capitalize on the strategic investment opportunities that may become available.\nAnd at this time, I would like to open up the Q&A so we can cover the issues that are most important to our investors.\nSo let's open up the Q&A line.\n Assistant:", "chosen": "q3 sales $76.3 million.\nqtrly earnings per common share $0.32.\n"}
{"prompt": "Human: The company delivered another fantastic quarter, with better-than-expected results, another record-setting bond deal, an excellent achievement in all areas of leasing.\nThird quarter FFO is adjusted for comparability of $0.57, outperformed the high end of guidance by $0.01, and represented the sixth time in the past seven quarters that we outperformed expectations.\nWe also exceeded our guidance for two of the last three quarters.\nFor the third time this year, we're increasing the midpoint of our full year guidance for FFO per share as adjusted.\nThe $2.27 midpoint of updated 2021 guidance is $0.08 above our original midpoint and represents an increase of 7.1% over 2020 results.\nWe completed another record bond financing in the quarter.\nIn August, we issued $400 million of senior unsecured notes with a 2% coupon, which tied as the second lowest coupon ever issued among office REITs.\nOur growth strategy targets owning and developing specialized office and data center shells in mission-critical Defense/IT locations, and this strategy continues to deliver excellent results.\nIn the quarter, we achieved a total of one million square foot of leasing, which included extremely strong vacancy leasing of 215,000 square feet.\nThis vacancy leasing volume represented the highest achievement in two years, and was 67% above the trailing eight-quarter average volume.\nVacancy leasing also included a 68,000 square foot lease with the United States government for two floors at 310 NBP.\nIn the quarter, we also completed 274,000 square feet of development leasing, all at Defense/IT locations, including a full building lease with the US government.\nLastly, we renewed 553,000 square feet, delivering a 76% retention rate at lease economics that were consistent with our expectations.\nLeasing for the nine months indicates our fundamentals continue to strengthen, with customers making long-term commitments to new space.\nWe completed 2.7 million square feet of total leasing, which included 420,000 square feet of vacancy leasing at an average lease term of 8.6 years.\nWe completed 1.4 million square feet of renewals, achieving a 75% retention rate.\nAnd we executed 915,000 square feet of development leasing with an average initial term of 14.1 years.\nAfter the quarter, we leased another 263,000 square feet, bringing our total development leasing for the year to just under 1.2 million square feet with an average lease term of 13.4 years.\nAs a result of this transaction, our active developments totaled 1.8 million square feet that are 94% leased.\nDevelopment leasing to date exceeds our 2021 goal by 18% and represents the fourth consecutive year we've achieved over one million square feet of development leasing.\nOur excellent leasing performance continues to translate into impressive operating results.\nIncluding the impact of assets sold to fund development, for the nine-month period, NOI from real estate operations increased 7%, FFO per share as adjusted for comparability grew 10%, and AFFO is up 16% from one year ago.\nOur unique Defense/IT portfolio, strong balance sheet and reliable low-risk development program continue to generate high-quality FFO per share and cash flow growth that are extremely durable because demand is driven by defense spending and national security requirements rather than traditional office fundamentals.\nAs important, demand in our Defense/IT locations is not impacted by work from home and other trends that may affect office demand in the future.\nWe continue to have a strong set of leasing and development opportunities before us and the balance sheet to seize upon them.\nWith that, I'll hand the call over to Todd.\nContinued strong demand in our markets has driven outstanding lease achievement this year.\nThird quarter vacancy leasing was exceptionally strong at 215,000 square feet, representing 18% of our available space at the beginning of the quarter.\nTo put this achievement in perspective, since defense spending began rebounding in 2016, our quarterly vacancy leasing has averaged 132,000 square feet.\nThere were two major transactions from the quarter worth highlighting, the first of which was a 68,000 square foot lease with the US government at 310 NBP, leaving two floors to lease to bring that building to 100%.\nThe customer continues to indicate their intent to lease the remaining space, but because the government is operating under a continuing resolution, we now project lease execution during 2022.\nThe second major vacancy lease was for 63,000 square feet at 6740 Alexander Bell Drive in Columbia Gateway.\nThe new tenant is consolidating multiple offices, and executed a 16.5-year lease for the entire building with lease commencement expected in July 2022.\nAlthough we had intended to redevelop this asset, we backfilled the full building in just four months and accordingly have moved it back into our same property pool.\nFor the nine months, our 420,000 square feet of vacancy leasing represented 114% of the trailing five-year average through nine months, and was the second highest nine-month volume in the past five years.\nOur current leasing activity ratio is 101%, and since the start of the second quarter has averaged 90%, underpinning much of the third quarter's vacancy leasing success and our expectation for strong lease achievements continuing into the fourth quarter.\nDuring the third quarter, we renewed 553,000 square feet, translating into a 76% tenant retention rate.\nCash rents on renewals rolled down 0.6%, and GAAP rents grew 1%.\nExcluding an 89,000 square foot renewal where the tenant was rolling off a 10-year lease that had escalated above market, cash and GAAP rents increased 1% and 5%, respectively, in the quarter.\nFor the nine-month period, we completed 1.4 million square feet of renewals with a 75% retention rate, cash rents rolling down 0.3%, with annual escalations averaging 2.4% and average initial lease terms of 3.8 years.\nExcluding the two Boeing buildings and Redstone Gateway that are still on one-year renewals, the lease term for the nine months averaged 4.7 years.\nWe continue to advance negotiations to renew the 11.25 megawatt user at DC-six.\nThe customer's process remains slow and methodical, and we are confident they will renew.\nGiven we cannot control their pace, we are not putting a time frame on its completion.\nThe tenant's original lease remains in effect and they continue to pay their escalated rent.\nDuring the quarter, we executed 274,000 square feet of development leasing at Redstone Gateway.\nThe largest transaction was a 205,000 square foot full building lease with the U.S. government.\nLease commencement is scheduled for early 2024.\nThis development represents our second building in the secured campus, which, upon completion of this project, will total 460,000 square feet.\nThe remaining 69,000 square feet of development leasing was with two defense contractors who leased space at 8,000 Ride Out Road.\nThat development was started because of the contractor demand we are tracking, and is now 88% leased.\nWe are working to close a lease for the remaining 12,000 square feet.\nEarlier this month, we executed leases with Northrop Grumman for two build-to-suit office buildings along right out road at Redstone Gateway.\nThe 2-building campus totals 263,000 square feet of highly visible Class A office space with one of the world's largest defense contractors, just outside Redstone Arsenal's main gate.\nWe are on track for lease commencement in the second half of next year.\nOnce the active projects under development at Redstone Gateway are placed into service, the park will total 2.2 million square feet, making it our second largest concentration of Defense/IT assets, and equal to slightly more than half the size of the National Business Park.\nThe Northrop leases brought our year-to-date development leasing total to nearly 1.2 million square feet, making 2021 the tenth straight year we have exceeded our development leasing goal.\nBased on the 1.5 million square feet of opportunities we are tracking in our development leasing pipeline, we expect continued strong development leasing.\nLastly, in the first nine months, we placed 709,000 square feet of developments into service that were 89% leased.\nWe expect to place another 74,000 square feet into service in the fourth quarter bringing our total for the year to roughly 800,000 square feet.\nThird quarter FFO per share as adjusted for comparability of $0.57 exceeded the midpoint of guidance by $0.02 driven by $0.01 of deferred R&M projects and $0.01 of other outperformance.\nWe expect to complete the deferred R&M projects in the fourth quarter, which will impact same-property cash NOI and FFO per share.\nIncorporating this change, we are adjusting the midpoint of our fourth quarter guidance to a new range of $0.55 to $0.57.\nThe timing of R&M projects drove 165 basis points of outperformance in same-property cash NOI, which increased 4.8% in the quarter.\nGiven the year-to-date results, we are increasing our full year guidance for same-property cash NOI growth again from a prior range that was flat to up 1% to a new range that is up 50 to 100 basis points.\nAt the 75 basis point midpoint, our revised full year guidance for same-property cash NOI growth is 175 basis points above the midpoint of our original guidance.\nWe are also narrowing our full year guidance for same-property occupancy from the prior range of 90% to 92% to a new range of 90% to 91.5%.\nOur revised guidance continues to incorporate the 20 basis point negative impact of joint venturing fully occupied, wholly owned data center shells to raise equity in the fourth quarter, and has been adjusted to include the 40 basis point negative impact of placing 6740 Alexander Bell Drive back into service, back to the same property pool.\nIn August, we issued $400 million of long 7-year senior unsecured notes priced at 2% and used the proceeds to retire floating rate debt.\nSpecifically, we prepaid $100 million of our 2022 term loan, retired the $89 million construction loan at 2100 L Street and paid down amounts on our line of credit with the remainder.\nThe August deal was more than five times oversubscribed and priced at 105 basis points over the seven-year treasury, which was 25 to 30 basis points below initial price talk.\nThe 2% coupon ranks as the lowest among office REITs for seven-year paper and ties as the second lowest overall face rate of any duration among office REITs.\nOur credit spreads compare favorably to peers who are rated one notch higher by the rating agencies.\nClearly, fixed income investors appreciate the durability of our cash flow, the high quality credit of our tenants and their in-office work requirements.\nAlso of note, since September of 2020, we have issued $1.4 billion of senior notes with an average term of over eight years, and use the proceeds to retire debt carrying an average term of 1.8 years.\nLastly, incorporating the items addressed earlier, we are increasing our full year guidance from a previously elevated range of $2.24 to $2.28 to a new range of $2.26 to $2.28.\nAt the midpoint, our updated guidance range implies 7.1% growth over 2020 results and is $0.08 higher than the midpoint of our original guidance.\nIt is important to note that placing several development projects into service earlier than originally planned, drove nearly $0.02 of this year's outperformance, and pulling that NOI forward into 2021 tempers 2022 growth by approximately 1%.\nWith that, I'll hand the call back to Steve.\nI'll close the call with a recap of our key message points.\nOur company's investment strategy is supported by the defense economy, which is funded by the United States defense budget and aligned with priority national security needs of the United States.\nThe US defense budget has been well funded since fiscal year 2016 and has bipartisan support for continued growth to address the increasingly risky global threat environment.\nOur portfolio office usage levels remains very high as high security defense work cannot be performed from remote locations.\nOur defense tenants are not experiencing diminished office usage, significant contractions or seeking short-term lease extensions.\nRather, they continue to require densely configured office space to accommodate mission growth.\nAnd as our results continued evidence, they are making long-term commitments to our Defense/IT locations.\nThe likes of our development, vacancy and renewal leases remain at or above pre-pandemic levels, demonstrating our tenants' commitment to working in their offices for the long term, and their confidence in the outlook for the defense industry.\nOur company has exceeded its business plan throughout the pandemic era.\nAnd this year, we're experiencing further strengthening of business fundamentals and achievement suggesting continued strength and performance in coming years.\nClearly, our strategy of investing in a priority defense, mission locations and creating value through new low-risk development at these locations is very different from other office companies and continues to deliver high-quality FFO per share and cash flow growth regardless of the broader economic trends.\n Assistant:", "chosen": "q3 adjusted ffo per share $0.57.\nsame-property cash noi increase of 4.8% in quarter.\nincreasing midpoint of same-property cash noi guidance for year.\nsees q4 ffops, nareit definition of $0.55-$0.57.\n"}
{"prompt": "Human: Please turn to Page 3.\nLike other banks, we faced a number of COVID-19 related challenges during the second quarter.\nBut for us at OFG, the pandemic also followed the earthquakes we experienced in January and occurred while we were in the process of integrating the Scotiabank acquisition.\nCertainly, no small challenge.\nBut by acting quickly and with foresight, we produced excellent results for our customers, communities and people, and continue to help them build better financial futures.\nIn March, governments in Puerto Rico and US Virgin Islands shut down businesses and personal activities.\nRestrictions were eased in late May.\nBut recent spikes in new cases have forced Puerto Rico to reduce some of the flexibility.\nThe Federal Reserve Bank cut rates 150 basis points in March, following the 75 basis points reduction in the second half of 2019.\nOur commitment and preparation enabled us to successfully manage these challenges facil, rapido, hecho; easy, fast, done, as we say at OFG.\nAll our branches operated safely throughout the quarter, enhanced by our technology platform.\nOur full-service ATMs and ITMs, mobile app, and online bill paying tools facilitated routine transactions in a contactless manner.\nOnline and mobile appointment scheduling helped make COVID safe customer meetings possible at branches.\nWe deployed a 100% digital client-friendly application and funds disbursement process for PPP loans.\nAbout half of our team members are still working remote.\nWe also implemented extensive new safety protocols for our customers and people on site.\nAnd we continued to offer new benefits for our people such as free COVID on-site testing and daily online health check-ins, as well as incentives.\nThe results speak for themselves.\nWe provided high levels of customer service, safety and knowledge throughout all channels.\nLoan production in the second quarter totaled more than $500 million.\nCustomer deposits increased $760 million.\nOur online loan deferral tool and call centers processed relief for more than 44,000 retail customers.\nWe reduced higher-cost wholesale funding, maintained a strong level of net interest margin and continued to build liquidity and capital.\nAnd we secured $100,000 in Federal Home Loan Bank of New York grants to support local non-profit and small businesses in Puerto Rico and the US Virgin Islands.\nPlease turn to Page 4.\nWe have continued to see strong technology utilization trends among both our retail and business customers since the beginning of the year and, in particular, since March.\nOnline bill enrollment -- bill pay enrollments were up 12% as of March and 24% as of June.\nMobile banking users jumped 17% by the end of the second quarter from the beginning of the first.\nThe number of remote deposit capture users are up 68% from the end of March.\nIn another area of success for us, during the second quarter, we scheduled more than 18,000 COVID safe appointments with our customers through our online and mobile tool.\nWe are very pleased with this -- to see these trends.\nTechnology is a core part of our overall corporate strategy.\nWe continue to look into new ways and innovative ways to use it to help our customers.\nPlease turn to Page 5.\nLooking at our SBA PPP program, we continue to exceed our market share in Puerto Rico.\nWe generated a total of $286 million in new loans.\nThis enabled us to help more than 4,000 small businesses save more than 50,000 jobs.\nIt also enabled us to attract new accounts in this strategically important customer base.\nAnd we were able to distribute these funds electronically within five days of application approval.\nThis is a great example of our ability to act quickly in response to changing conditions to the benefit of both existing and new customers and the communities we serve.\nLet's talk about our results on Page 6.\nWe reported earnings per share of $0.39, and $0.37 on a non-GAAP basis.\nTotal core revenues were $128 million.\nMost of that was due to a large increase in interest earning assets, chiefly loans and cash.\nThis was partially offset by a decline in yield due to significantly lower rates on cash and lower yields on variable rate commercial loans.\nIn addition, we have lower investment security balances.\nAs a result, we generated net interest income of $105 million with a net interest margin of 4.78%.\nBanking and wealth management revenues totaled $23 million.\nNon-interest expenses were $86 million, primarily due to the addition of the Scotiabank acquisition.\nSecond quarter results included several items.\n$9.5 million in revenues from Scotia Bank interest recoveries and bargain purchase gain.\nWe added $5 million in provision for the pandemic.\nAnd within non-interest expenses, we had a $5 million in merger and restructuring charges and COVID-related operating costs.\nPlease turn to Page 7.\nThe effects of these results is that we're building tangible book value, and our return on asset and return on equity continued to improve sequentially from the fourth quarter.\nPlease turn to Page 8 for operational highlights.\nAverage loan balances increased 52% year-over-year and 2% quarter-over-quarter.\nAverage core deposits, excluding brokered, increased 76% year-over-year and 5% quarter-over-quarter.\nLoan generation was strong.\nIncreased production from PPP and other commercial loans was partially offset by reduced production in our retail categories, primarily due to the economic shutdown.\nWe ended the quarter with good momentum and good pipelines in the mortgages and auto businesses.\nLoan yield at 6.97% continued to hold up well despite the recent Federal Reserve cuts.\nThe cost of core deposits declined 4% -- 4 basis points year-over-year.\nNet interest margin declined to 4.78%.\nPlease turn to Page 9 to review credit quality.\nThe net charge-off and non-performing loan rate declined year-over-year and quarter-over-quarter, reflecting loan paydowns and the effects of deferrals.\nProvision for credit losses of $18 million was level with last year.\nI'd like to note the year-ago provision included an extra $9 million related to loans transferred to held for sale.\nPlease turn to Page 10 to review our loan deferrals.\nAfter disruptions in economic condition caused by COVID-19, we offered several loan payment deferral programs ranging from one to four months.\nAs I've mentioned, we've enhanced this effort by quickly developing unique and first-to-market digital tools to help consumers apply for forbearance on an individual basis.\nOur online loan deferral tool and call centers processed relief for more than 44,000 retail customers.\nIn total, we have about $1.4 billion or 32% of our retail loans on deferral.\nThe pace of retail requests is significantly slow.\nIn addition, we have about $685 million or 26% of our commercial loans on deferral.\nPlease turn to Page 11.\nThe allowance for loan and lease losses of $233 million increased $70 million year-over-year.\nAnd we have almost doubled the level of reserves from December 31, 2019.\nCompared to March 31, 2020, the allowance increased $2 million.\nExcluding SBA guaranteed PPP loans, second quarter 2020 allowance was 3.49% of loans, 8 basis points higher than the first quarter.\nPlease turn to Page 12.\nWe are in a strong capital position.\nOur CET capital ratio, as you see on that slide, of 12.03% is up 112 basis points since last year.\nPlease turn to Page 13.\nWhile we still face much uncertainty regarding COVID and the economy, we are in a strong financial position, ready to help our customers during these trying times.\nOnce we get through this, Puerto Rico stands to benefit significantly from COVID stimulus and still unspent and undistributed Maria and earthquake-related stimulus programs.\nAt OFG, we believe our results and our history demonstrate our ability to quickly respond and adapt to changing economic environments.\nDuring the second quarter, we continued to build momentum in our core businesses and developed a good pipeline of new loans.\nFrom a liquidity, capital and balance sheet point of view, we are well positioned both financially and strategically.\nOur agenda going forward is clear.\nWe plan to continue integrating the former Scotiabank operations and finish by the end of this year.\nAt the same time, we must achieve the full benefits of the acquisition by the end of 2021.\nWe also plan to continue to invest in the future to further simplify our operations and enhance our ability to serve customers.\nAnd ultimately, we intend to continue to play a significant role in the recovery in Puerto Rico and the US Virgin Islands.\nCrises bring out the best in people to help others.\nOur people demonstrate that with purpose every single day.\nOperator, please open the call for the Q&A session.\n Assistant:", "chosen": "compname reports q2 earnings per share $0.39.\nq2 earnings per share $0.39.\nqtrly total core revenues were $128.2 million compared to $$99.2 million in 2q19.\nexpect to complete integration of scotiabank operations as planned by end of year.\n"}
{"prompt": "Human: Also during the course of today's call, we will discuss certain non-GAAP measures in talking about Omnicom's performance.\nWe will begin the call with an overview of our business from John, then Phil will review our financial results for the quarter.\nWe're very pleased to report that in the third quarter, we continued our year-over-year double-digit growth in our key financial performance metrics, led by a very robust top line.\nThe top line results were broad-based across our agencies, geographies and disciplines.\nOur growth was especially strong in CRM Precision at 24%.\nOur CRM Precision Group is helping clients on their MarTech transformation, digital and e-commerce communications and direct-to-consumer marketing.\nThe group has played a key role in many of our recent new business wins where, overall, we continued our very strong momentum in Q3.\nBroadly, across our group, growth was driven by improved economic conditions.\nOmnicom's suite of services and capabilities are positioning us to be extremely competitive in the marketplace to: reimagine and strengthen our clients' brands, seamlessly connect them with their customers across their marketing journey, transform their marketing technology platforms and innovate in e-commerce and new media channels.\nOur revenue performance flowed through to our operating profit in bottom line.\nOur EBIT margins for the third quarter were 15.8%, which exceeded our 2020 margins and significantly outpaced the comparable period in 2019.\nNet income and earnings per share for the quarter grew by more than 13% versus 2020 and were also significantly above our 2019 results.\nAs we head into the fourth quarter, we are well positioned competitively and expect to benefit as economic growth continues to improve globally and from ongoing cost management.\nWe currently expect our full year organic growth to be approximately 9% and our full year EBIT margin to exceed our year-to-date margin for the nine months ended September 30, 2021 of 15.1%.\nGoing forward, we remain focused on our key strategic initiatives, which is centered around our talent, dedication to creativity and building on our already strong capabilities in precision marketing and MarTech consulting, e-commerce, digital and performance media and predictive data-driven insights.\nIn the third quarter, we made progress across these strategic initiatives as we announced three acquisitions.\nOmnicom Media Group acquired Jump 450 Media, a performance marketing agency.\nThe company leverages algorithmic scaling strategies, rapid creative testing and data analytics to optimize digital media spend and drive customer acquisition.\nJump 450 will form the foundation for a dedicated performance media platform and business operation within OMG.\nIts focus on e-commerce and pure performance marketing will strengthen and add a distinct set of capabilities to OMG's existing performance media offerings.\nAlso in late September, we announced the acquisition of two German-based companies: antoni and OSK.\nantoni is one of the most innovative and creative agencies in Europe and was born with data and digital capabilities at its core.\nantoni's creative leadership and depth of talent will significantly strengthen our capabilities in Europe and around the globe.\nOSK has been in the top-10 of PR and comms agencies in Germany since 2008 and is the undisputed number-one for automotive.\nIt provides a broad portfolio of services at the intersection of PR and social media and excels in the convergence of technology, mobility and communications.\nOur ability to bring together the brightest talent and data-driven consumer insights from across our organization to deliver holistic and integrated brand experiences is proving to be highly successful in our new business opportunities as well as in servicing our existing clients.\nFollowing on the heels of Philips naming Omnicom their global integrated service partner for creative and media communications, in the third quarter, Mercedes-Benz appointed Omnicom its global marketing communications partner.\nOne of the world's most iconic brands, Mercedes-Benz is today the leading luxury automotive experience company.\nTMX, a dedicated team from across our groups, will bring together the best-in-class talent and capabilities across Mercedes-Benz' customer journey with expertise in media and CRM, brand and performance creator, web personalization and content automation, public relations and events as well as paid and organic social.\nAnd just last week, we won the Chanel media business globally, adding another iconic global brand.\nAs in all our significant wins as well as for our existing clients, our teams are able to showcase our creativity, better analysis and predictive insights and technology capabilities to deliver connected, personalized and seamless brand experiences for their respective customers at all touch points of the consumer journey.\nOne key differentiator for Omnicom in servicing our clients is our cohesive culture that binds us together.\nIt's a culture of creativity, flexibility and caring that are common values shared across our group.\nI often hear from clients that a deciding factor in their decision to hire Omnicom is that our people who bring distinct specialized skills to them, know and respect one another and genuinely collaborate.\nOur ability to integrate services from across our marketing disciplines is underpinned by Omni, our open operating system that orchestrates better outcomes.\nOmni is built for collaboration, acting as a conductor between different specialists using a single processing workflow from insights to execution.\nIt empowers our people and our clients to make better and faster decisions, maximizing efficiency and ROI.\nOmni also provides better intelligence by orchestrating first-, second- and third-party data sets to present a single comprehensive view of consumers.\nOur teams can then develop insights to create, plan and deliver the most impactful messages, content and communications to them at each stage of that consumer journey.\nOmni is a unique and powerful tool for us, and we now have over 40,000 Omnicom colleagues provisioned on the platform in over 60 countries.\nHundreds of our clients, including all of our top-20, utilized Omni.\nMoreover, the open-source system enables our practice areas like commerce, health and PR to customize Omni with different data sources for their clients.\nFor example, Omnicom Health Group created a custom offering called Omni Health.\nSince rolling it out in April of this year, OHG has leveraged the platform to play a key role in expanding the group's omnichannel offering with new and existing clients, including AstraZeneca and Janssen, XARELTO, to name a few.\nIn summary, even during the pandemic, we accelerated the strength of our services, capabilities and organization to deliver better outcomes for our clients and win new business.\nOur offering is powerful and differentiated.\nWe have best-in-class talent and creativity using best-in-class operating systems and technologies.\nIt's a formula that will continue to win for us.\nThroughout one of the most difficult times in recent history, our people have shown ingenuity, resilience and strength.\nWe continue to spend and invest in training and development programs for all of our people from basic skills training all the way through the advanced programs of Omnicom University.\nWe recently expanded the curriculum for our DE&I and OPEN2.0 strategies.\nAs the pandemic continues to present a substantial health risk, the well-being of our colleagues remains our top priority.\nWe are ensuring we have a safe work environment and are offering a variety of programs for managers and individuals to support their wellness, resilience and health at work.\nI recently traveled to several of our U.S. and European offices and have met with many colleagues and clients who are happy to be back in the office.\nWe are looking at many alternatives to provide our people a safe return back to the office.\nFor example, this week, we're testing a private transportation service for New York City-based colleagues.\nIn the months ahead, we look forward to welcoming more of our staff back with a continuing priority on their safety and flexibility.\nIt is truly our world-class talent and our dedication to creativity and innovative solutions that drive real business outcomes for our clients.\nA key recent proof point reflecting the quality of our talent is Omnicom being named the Most Effective Holding Company in the U.S. by the 2020 [Technical Issues] report.\nOverall, we're extremely pleased with the third quarter.\nI'm proud to see that our strategic focus and the decisions we made throughout the pandemic are now leading to positive results.\nOur results once again reflect Omnicom's ability to adapt and respond to the changes in the market and deliver through economic cycles.\nWhile the impact of the pandemic continues to be felt across the globe, that impact has continued to moderate significantly as evidenced by our continued growth in the third quarter.\nSlide 3 shows our third quarter improvement across our income statement, where our revenue growth and expense control drove an 8% increase in operating profit.\nOur effective tax rate for the third quarter was 24.1%, down from our estimated effective rate for 2021 of between 26.5% and 27%.\nThis was primarily due to the favorable settlement of uncertain tax positions in certain jurisdictions, the impact of which was approximately $10 million.\nThese items positively impacted net income and diluted earnings per share, which was $1.65, up $0.20 or 13.8% versus Q3 of last year and up $0.33 versus the third quarter of 2019.\nSo our growth continues on this important metric as well.\nAnd finally, our $0.70 quarterly dividend, which was raised back in February, is 7.7% higher than last year.\nLet's now flip to Slide 4 and look at the quarter in more detail, beginning with revenues.\nOur total revenue growth was 7.1%.\nOrganic growth for the quarter was 11.5% or $367 million, which represents a significant improvement compared to Q3 of 2020 when the pandemic drove an organic revenue decline of 11.7%.\nThe impact of foreign exchange rates increased our revenue by 1.6% in the quarter as the dollar continued to weaken against most of our larger currencies compared to the prior year.\nIf FX rates stay where they were on October 15, we expect foreign exchange to decrease our reported revenue by approximately 1% for the fourth quarter and increase our reported revenue by 2% for the full year.\nThe impact on revenue from net acquisitions and dispositions decreased revenue by 5.9%.\nBased on transactions that have been completed through September 30, 2021, our estimate is the net impact of our acquisition and disposition activity for the balance of the year will decrease reported revenue by approximately 7% in the fourth quarter and by approximately 4% for the full year.\nWhile we will continue our process of evaluating our portfolio of businesses as part of our strategic planning, as John has said regarding dispositions, we are substantially complete.\nAdvertising, our largest discipline at 53% of our total revenues, posted 8.6% organic growth with very strong performance from both our creative agencies and our media agencies.\nPlease note that reported Advertising growth is down 0.4%, due primarily to the disposition of ICON in Q2 of 2021.\nOur agencies focused on direct, digital and marketing transformation consulting services in our precision marketing discipline also posted strong organic growth at 24.3%.\nWith the exception of the second quarter of 2020, this discipline has been a consistent grower for some time and has become a larger portion of our business each quarter.\nCRM Commerce and Brand Consulting was up 18%, with our branding agencies leading the discipline's performance.\nCRM Experiential was up 50%.\nThis business declined far more than our other disciplines in the third quarter of last year during the pandemic and has not yet recovered to pre-pandemic levels due to various global restrictions.\nHowever, this remains an important area for our clients, and we look forward to further growth as global economies continue lifting social distancing restrictions.\nCRM Execution & Support was up 8.3%, reflecting a recovery in client spend compared to the prior year in our field marketing businesses, while our research businesses continued to lag.\nPR was up 10.5%.\nWe have a positive outlook for the discipline, especially within our global agencies, as clients adjust to the new post pandemic realities.\nAnd finally, our Healthcare discipline was up 6.6% organically.\nHealthcare was the only one of our service disciplines that had positive organic growth during the depths of the pandemic and continue to perform well.\nFlipping to Slide 6, our revenue by region.\nThe key takeaway is that all of our geographies again posted solid organic growth.\nThis growth was driven by virtually every discipline within each region.\nOutside the U.S., where total organic growth was 16%.\nDouble-digit growth in each region was led by Germany, the U.K., Canada and Australia.\nOur advertising, media and PR agencies performed well with double-digit growth, and our precision marketing agencies were sizable contributors and also posted strong double-digit growth.\nIn addition, experiential growth outside the U.S. was over 100% in total.\nIn the U.S., we generated 7.7% organic growth, which was boosted by strong double-digit growth in our precision marketing and PR disciplines as well as solid growth at our healthcare agencies.\nThe last revenue view I'd like to share with you is by industry sector on Slide 7.\nThe change in mix by sector in the portfolio was small on a year-to-date basis when compared to last year.\nIn summary, our revenue performance was very strong across the board on both a reported and organic basis and when analyzed by discipline, geography or industry sector.\nTo make the analysis more relevant, we have also included a supplemental slide in the appendix that shows the 2021 amounts presented in constant dollars.\nBeginning with our largest category, salary and service costs.\nThese costs increased by 7.6% in total, and they tend to fluctuate with the change in revenue.\nWe would also note that Q3 2020 salary and service cost amounts were reduced by reimbursements received from government programs of $68.7 million.\nAs we continue to look forward, we expect a healthy advertising and marketing spending outlook, and strong demand from our clients will necessitate an increase in staffing.\nThe tight labor market will create challenges in the near term that we are confident our management teams will overcome.\nMoving down the P&L.\nThird-party service costs, which fluctuate with changes in revenue, decreased 6.9% during the quarter due to our net disposition activity, primarily related to the disposition of ICON and partially offset by the organic growth in revenue as well as the effects of foreign currency exchange rate changes.\nOccupancy and other costs, which are not directly linked to changes in revenue, were up 4.5% year-on-year or 2.9% when excluding foreign exchange rate translation impacts.\nAs expected, these good results continue to reflect our efforts to reduce infrastructure costs and also benefited from a decrease in general office expenses as the majority of our staff continue to work remotely in Q3.\nSG&A expense levels were up 5.3% on a year-over-year basis or 4.2% when excluding foreign exchange rate translation impacts.\nWe are beginning to see a return of travel and certain other addressable spend costs as pandemic-related government restrictions ease.\nHowever, based on our use of technology during the pandemic, we're developing practices, particularly with respect to travel, that we expect will allow us to continue to retain some of the benefits we achieved in reducing addressable spend during the pandemic.\nOverall, we expect that the increase in addressable spend for the balance of the year will be mitigated in part by the benefits we will continue to achieve from a hybrid and agile workforce.\nAs we think about our future expense levels, we certainly expect that some areas will increase in line with our business as activity picks up and life returns to normal.\nBut at the same time, we will also continue to evaluate ways to improve efficiently throughout the organization by continuing to focus on real estate portfolio management, back-office services, procurement and IT services.\nWith the strong revenue growth we discussed earlier, coupled with good expense control, you can see a notable improvement in our operating profit on a year-over-year basis at the bottom of the slide, up 8% for the quarter and 60.1% year-to-date.\nGrowing our operating profit dollars remains one of our most important areas of focus.\nThis strong growth in operating profit was also accompanied by improved margins, which you can see on Slide 9.\nFor the third quarter, our operating profit margin was 15.8% as expressed in terms of our reported total revenues.\nWe continue to see operating margin improvement year-over-year, resulting from the proactive management of our discretionary addressable spend cost categories, including a reduction in travel and related costs, reductions in certain costs of operating our offices given the continued remote work environment, as well as benefits from some of the repositioning actions taken back in the second quarter of 2020.\nLastly, on this slide, our reported EBITDA for the quarter was $560.3 million, up 7.4% for the quarter and 56.3% year-to-date.\nEBITDA margins also remained strong for the quarter and have expanded nicely year-to-date compared to last year, and we expect this strong performance to continue through the rest of this year.\nLet's now turn to our cash flow performance on Slide 10, where you can see that in the first nine months of 2021, we generated $1.2 billion of free cash flow excluding changes in working capital, a $114 million or 10% increase versus the same period last year.\nThere were no material year-over-year changes for capex or acquisitions as we continue to conservatively manage our cash.\nWhile stock repurchases are down relative to pre-pandemic periods due to curtailment during the pandemic, we resumed our activity during the second and third quarters of this year, and we expect to continue in Q4 and beyond.\nYou should not expect a change in our historical approach to capital allocation and the use of our free cash flow in the future.\nWe will continue to pay an attractive dividend.\nWe have indicated that we increased our focus on acquisition opportunities and are in the process of closing on several acquisitions.\nImportantly, our acquisition strategy is focusing on the faster-growing disciplines in our portfolio and driving future organic growth for the company.\nAnd we will use the balance of our free cash flow to repurchase our stock.\nOur strong cash generation again enhanced our credit and liquidity, which you can see summarized on Slide 11.\nOur total debt was down about $500 million since this time last year as we eliminated the extra liquidity we added early on in the pandemic.\nWe did this through the early retirement in Q2 of $1.25 billion of our 3.65% senior notes, which were due next year, partially replaced with the issuance of $800 million of 2.6% 10-year notes due in 2031.\nAs you can see in the slide, our maturities are well laddered with nothing due until late 2024 as we delevered to pre-pandemic levels.\nAs for our debt ratios, due to our overall operating improvement versus Q3 of 2020 and our recent refinancing activity, we've reduced our total debt-to-EBITDA ratio to 2.2 times and our net debt-to-EBITDA ratio to 0.4 times.\nBoth metrics increased substantially over the 2020 levels.\nWhile these are just two points in time, it's important to remember our long-term track record of providing solid returns to shareholders through business execution and the resulting consistent allocation of capital to dividends, strategic acquisitions and share repurchases.\n Assistant:", "chosen": "q3 earnings per share $1.65.\noperating margin for q3 of 2021 increased to 15.8% compared to 15.6% for q3 of 2020.\nqtrly increase in revenue from organic growth of 11.5%.\nglobal economic conditions may continue to be volatile as long as covid-19 remains which could negatively impact clients' spending plans.\norganic growth in third quarter of 2021 compared to the third quarter of 2020 increased across all of co's fundamental disciplines.\nexpect global economic performance of businesses to vary by geography and discipline until covid19 impact on global economy subsides.\n"}
{"prompt": "Human: Both of the documents are available at Old Republic's website, which is www.\nRisks associated with these statements can be found in the Company's latest SEC filings.\nLet us first reiterate our continued best wishes to all of you, your families, friends, co-workers as we all face the challenges related to the COVID-19 pandemic.\nAs we mentioned in the release, while some of our associates have begun returning to our office, the majority of Old Republic's more than 9,000 associates continue to work remotely, ensuring that our services are delivered uninterrupted to our customers, agents and brokers and all in our remote work efforts have gone extremely well.\nGiven the challenges emanating from COVID-19, we're pleased with the results we posted for this quarter, particularly the very strong Title Insurance results and the recovery in shareholders equity since the end of the first quarter.\nAs we noted could be the case in our first quarter release, the effect of COVID-19 and the associated governmental responses have indeed had a negative effect on the top line in the General Insurance Group in the second quarter.\nHowever, our Title Insurance Group set yet another production record, again demonstrating that our strategic diversification between General Insurance and Title Insurance works very well.\nSo at this point, I'll turn the discussion over to Karl Mueller, to discuss our overall consolidated financial results and also our small RFIG run-off business.\nAnd then he'll turn things back to me to discuss the General Insurance segment, followed by Carolyn Monroe, who will discuss the Title Insurance segment and after that I'll make a few closing comments before we open up the discussion to Q&A.\nSo with that, Karl, please take it away.\nEarlier today, we announced second quarter net income excluding all investment gains and losses of $124 million or $0.42 per share and that's down approximately 7% from last year.\nFor the first six months of 2020, earnings per share was $0.89, up nearly 4%.\nConsolidated net premiums and fees earned grew by 1.5 percentage points during the second quarter and 5.7% for the first half of this year.\nOur Title Insurance Group as Craig said continues to set the pace with an increase of almost 10% for the quarter and 16% year-to-date.\nGeneral Insurance recorded relatively modest decline of 3.8% and 0.6% for the quarter and the first six months of the year, as the pandemic further impacted economic activity here in the US.\nNet premiums earned in our mortgage run-off business continued to decrease as expected and really there are no longer a significant contributor to the consolidated total.\nNet investment income dropped by 3.8% for the quarter and 1% year-to-date, and that's mostly caused by lower yields, which offset the generally higher invested asset balances.\nTurning to underwriting results, this quarter's consolidated combined ratio ticked upward by less than 1 percentage point to 96% from 95.2% last year.\nFor this year's first six months, the combined ratio was 95.4% and that was largely unchanged from the same period a year ago.\nConsistent with recent trends, the claim ratios moved lower and the expense ratio higher and that's due mainly to a shift in the mix of business toward the Title business, making up a greater percentage of total.\nAnd as we've pointed out in the past, Title carries lower loss and higher expense ratio and that's influencing the consolidated total.\nClaim reserves on a consolidated basis dropped or developed favorably for the current quarter and year-to-date periods, reducing the reported claim ratios by 0.4 percentage points and 0.6 percentage points.\nPrior year development for the comparable 2019 period was again favorable by 0.2 percentage points and 0.9 percentage points.\nAt June 30th, the allocation of the investment portfolio remained relatively consistent, roughly 75% is invested in bonds and short-term investments, with the remaining 25% directed toward equity securities.\nOur primary investment objective is to create a steady and growing stream of interest and dividend income and in that light, we do not anticipate any material changes to our investment strategy.\nTurning to -- during this year's first quarter, disruption to the financial markets resulted in a 24% or $963 million decline in the value of our equity portfolio.\nDuring the second quarter, the financial markets improved considerably resulting in a $354 million recovery in the valuation of our equities portfolio.\nAnd I would also add that as of yesterday's close, the portfolio had rebounded by an additional $126 million on top of the $354 million.\nOld Republic's book value per share increased from $17.29 at March 31st to $19.68 at the end of June, driven both by operating income and increases in the fair value of the investment portfolio.\nBook value is now up slightly for the year after consideration of the regular cash dividends paid year-to-date, which now generate nearly a 5% yield.\nIn fact 2020 marks the 79th year of uninterrupted regular cash dividends and the 39th consecutive year of increasing dividends.\nSo now let me turn briefly and discuss our run-off mortgage insurance business.\nAs previously noted, we continue to monitor the impact of unemployment levels along with the effects of government loan, forbearance programs on reported delinquencies.\nAt the end of the first quarter, we cautioned that these factors along with the rate at which the US economy recovers could affect future claims experience and potentially slow the return of capital from the run-off business.\nDuring the second quarter, we did actually experience an increase in reported delinquencies.\nA significant portion of these still reported almost 41% of total delinquencies outstanding at June.\nOur loans in forbearance and our experience with prior forbearance programs suggest that these loans will have significantly lower ultimate claim rates.\nTherefore, they have been segregated and reserved for separately.\nWe have also pre-emptively increased the frequency factors on early stage delinquencies for normal loan defaults and what I mean by that loans that are not in forbearance and we've done so in consideration of the current economic environment.\nSo in combination, these additional reserves resulted in the $5 million pre-tax operating loss and escalated claim ratios that were reported.\nSo overall, we believe this was a very good quarter.\nAnd there are number of positives to build upon for the future of Old Republic.\nSo as the release indicates, compared to the second quarter, General Insurance saw quarter-over-quarter operating revenue decreased by 3.6% and quarter-over-quarter pre-tax operating income decreased by 1.8%.\nFor the General Insurance Group, quarter-over-quarter combined ratio, we saw that it rose slightly to 98.4% from 98.1%, while the expense ratio remained very steady.\nAs shown in the financial supplement, net premiums earned in commercial auto decreased by 2.5% quarter-over-quarter, attributable to a decline in the exposure base resulting from the economic downturn, along with tighter risk selection criteria, offset by the positive effect of rate increases that have continued at a pace in the percentages in the lower teens.\nClaims frequency has decreased significantly for commercial auto, again attributable to the economic downturn, but this was offset by severity that continued to increase.\nWe believe that comes from higher speeds as a result -- as a result of less congestion on the highways and also continued effect of social inflation on settlements.\nContinuing with financial supplement, workers' compensation experienced a 14.3% decrease.\nNet premiums earned quarter-over-quarter here too attributable to decline in exposure base resulting from the economic downturn.\nAnd on this line, that's also further exacerbated by the effect of rate decreases that continued in the low single digits for workers' compensation.\nAside from COVID-19 related claims, claim frequency here too decreased, again attributable to government and businesses and their responses to the COVID-19 pandemic and of course the impact on the overall economy.\nTurning to the line of coverage claim ratios in the financial supplement, our second quarter commercial auto claim ratio increased to 83.4% compared with 79.6% in the same period of 2019.\nSo our work on this line of coverage continues with necessary rate increases and stricter risk selection criteria to bring that claim ratio back in line with our target in the low 70s.\nTurning to the workers' compensation claim ratio, the second quarter came in at 65.7%, compared to 69.3% in the second quarter of 2019.\nAs we discussed following the first quarter, it's important to remember that more than 90% of our COVID-19 workers' compensation claims emanate from loss-sensitive business such as large deductibles.\nAnd furthermore, greater than 90% of the COVID-19 claims that we see in workers' compensation are mild in nature, with very low claim payments.\nAnd ultimately less than 1% of those workers' comp claims are severe and less than 1% result in a fatality.\nSo, therefore based on our current analysis, we are confident in our current accident year, loss ratio selection for workers' compensation and we're confident that they're adequate, especially taking into consideration the loss sensitive nature of our business, the reduction in frequency we spoke about and the very high proportion of mild cases for COVID-19 claims.\nFor commercial auto workers' comp, general liability combined given that we usually provide these coverages together to our customers, we like to look at it that way as well and quarter-over-quarter that claim ratio came in at 74.6% compared to 75.3% last year.\nStill looking at the financial supplement, the remainder of our other line of coverage claim ratios are generally within our targets and we feel very good about those.\nSo for General Insurance, the second half of 2020 will remain challenging from a top line perspective no doubt, but we will continue to seek the appropriate price for our products and continue with our long-term focus.\nSo on that note, I'll turn the discussion over to Carolyn for her comments on Title Insurance.\nCarolyn along with her team continue to do a remarkable job, keeping our Title operations executing at an extremely high level.\nSo, Carolyn, please take it from here.\nAs the trials of COVID-19 continued in the second quarter, our Title employees continue to face the challenges head on effectively serving the needs of agents and customers.\nWe have transitioned a portion of our workforce back to their office.\nSo we are maintaining our nationwide work-from-home capabilities.\nOur high standard of service commitment and execution remain regardless of the location of our employees.\nIn our first quarter earnings call, we reported that our owned digital closing provider, Pavaso had adjusted its platform to allow our agents and offices to be able to offer electronic signing products that were key to facilitating real estate transactions in the manner predicated in many of the emergency orders implemented by state government.\nPrior to the COVID-19 pandemic, the real estate industry had not committed to adopting the digital closing models.\nBased on need and then following regulations, there has been a dramatic increase in this activity.\nFrom a national perspective, these electronic closings are relatively small number of the overall transactions.\nHowever, as a result of the emerging interest to continue these methodologies, we have accelerated the development and roll out of our digital close tools.\nWe also continue to evaluate multiple products that will augment automation in the Title Production segment.\nAll-time second quarter and mid-year highs were set for both underwriting revenue and operation profit.\nFor the second quarter, total premium and fee revenue was up 9.9% and up 16.4% year-to-date.\nOur pre-tax operating income of $65.4 million for the quarter, compared to $60.2 million in last year's second quarter was an increase of $5.2 million or 8.6%.\nYear-to-date, pre-tax operating of $108.7 million compared to $80.8 million in the prior year-to-date period and the increase of $27.9 million or 34.6%.\nYear-to-date 2020, our composite ratio of 93.1% compares favorably to the 94.3% reported for the comparable 2019 period.\nDespite all the unknowns surrounding COVID-19, we remain cautiously optimistic going into the third quarter, with a robust order count in both purchase and refinance transactions, a strong real estate market, the 30-year mortgage rates remain historically low around 3% and expectations for these favorable rates to continue for this foreseeable future.\nWhile we have adjusted to doing business during COVID-19, we are still mindful of the challenges ahead for our organization and our nation.\nMy appreciation goes out to all our employees and Title agents as they remain dedicated and positive, as we all deal with the daily challenges of the pandemic.\nOur accomplishments are achieved through the commitment of our employees and the support of our agents.\nAs with past challenges, we rely on the same guiding principles of integrity, managing for the long-run, financial strength, protection of our policyholders and the well-being of our employees and customers that have served us well over the last 100 plus years.\nSo again, our second quarter operating results indicate that our businesses continue to perform and our strategic diversification between General Insurance and Title Insurance works well.\nWe will continue to focus on underwriting excellence and we will continue to ensure that our capital position remains very strong as we weather the current economic disruptions.\n Assistant:", "chosen": "old republic international - qtrly total operating revenues $1,623.9 million versus $1,607.7 million.\n"}
{"prompt": "Human: Due to the material impact of COVID-19 on our business in fiscal 2020, we will also include comparisons to our fiscal 2019 results.\nBefore I begin reviewing third quarter results, I want to remind everyone of Oxford's core operating philosophies.\nOur objective is always to deliver long-term shareholder value.\nOur strategy for delivering this value is to own a portfolio of powerful lifestyle brands that can drive sustained profitable growth.\nAnd our purpose as a company and in each of our brands is to make people happy.\nWith that, we're delighted to be reporting record sales and earnings for the third quarter of fiscal 2021.\nThese outstanding results are directly attributable to the power of our brand portfolio, the strength of our product offerings and our ability to connect with and serve customers across channels, combined with the great work our teams have done to fortify these foundational cornerstones during the pandemic.\nAs compared to the same quarter last year, our sales increased 41%.\nAnd even more importantly, our sales also increased as compared to pre-COVID fiscal 2019 levels.\nExcluding Lanier Apparel, where operations were effectively exited during the third quarter of fiscal 2021, net sales increased 15% over the same period of fiscal 2019.\nThe robust sales growth that we experienced during the third quarter was driven by 40% growth in our full price direct-to-consumer business, with growth in each of our brands compared to fiscal 2019, including a 13% increase in full-price retail and a 100% gain in full-price e-commerce.\nRestaurant sales also contributed to our top-line improvement, growing 14% in the third quarter of fiscal 2021 as compared to the third quarter of fiscal 2019 fueled by strong increases at existing locations, as well as the addition of five new Marlin Bar locations.\nAt the same time, adjusted gross margin increased an impressive 710 basis points to 62% during the third quarter of fiscal 2021 as compared to fiscal 2019.\nScott will elaborate on all these excellent metrics in more detail momentarily.\nBut I will mention that they drove record third quarter earnings of $1.19 per share on an adjusted basis compared to an adjusted loss of $0.44 per share last year and adjusted earnings per share, up $0.10 during the third quarter of fiscal 2019.\nWhile our third quarter results no doubt benefited from a very strong consumer market, we believe the primary driver of our outperformance was the excellent execution of our strategy and purpose.\nThe exit of Lanier Apparel during the third quarter mark an important milestone in our long-term strategy as Lanier was the last of our legacy private label businesses.\nOur current portfolio consists of five excellent lifestyle brands: Tommy Bahama, Lilly Pulitzer, Southern Tide, The Beaufort Bonnet Company and Duck Head.\nThese brands are 100% focused on the consumer and making that consumer happy with powerful clear brand messages, exceptional differentiated product, superior customer experiences, including our e-commerce websites, our stores and restaurants and strategic wholesale accounts.\nOver the last two years, across our brands, we have redoubled our commitment to delivering our positive upbeat brand messages through beautiful creative content in imagery.\nThose brand messages are resonating with our consumers and are a big part of the excellent results that we are delivering.\nThe predominant mix of direct-to-consumer, which is expected to be over 80% of our business enhances our ability to deliver happiness to our customers.\nThe direct model gives us significant agility and flexibility in managing the flow of product to our customers.\nThis flexibility has proven especially useful this year, as industrywide supply chain challenges had required our merchants to be highly adaptable as to what product we are featuring on the floor and on our websites at any particular point in time.\nThe direct business also provides us with significant margin power and is responsible for a large portion of the gain in gross margin that we achieved during the quarter.\nFinally, the direct-to-consumer model gives us the opportunity to deliver an unparalleled customer experience that is consistent with the aspirational positioning of our brands.\nAnd our incredible people have continued to provide that elevated experience through all the challenges of the last two years.\nOne of our strategic priorities over the last couple of years has been to enhance our digital marketing capabilities by improving our ability to assimilate and analyze data, use that data to develop insights about existing in potential customers, create campaigns designed to reach those consumers and measure the effectiveness of those campaigns with the goals of increasing our customer account, retaining existing customers and driving higher spend across all customers.\nI'm pleased to report that on a trailing 12-month basis, customer metrics at the end of the third quarter of fiscal 2021, including customer accounts, rate of new customer additions, retention rates and customer lifetime value were all strong relative to pre-pandemic numbers.\nFrom a product perspective, we continued to see strength in the casual, easy and cozy styles, that are a hallmark of all our brands.\nGreat examples of this are continued strength in Tommy Bahama knits and shorts, women's lounge and sleepwear, and Lilly Pulitzer's Luxletic athleisure collection.\nAt the same time, we saw a nice rebound in some of the occasion-driven categories that were most challenged last year including men's pants and woven shirts and women's dresses, as people reengaged in more social events.\nAs we head into the final stretch of the year, I'm pleased to report that the holiday selling to-date has been robust and I firmly believe that we will deliver a strong finish to a fantastic year.\nI'm incredibly grateful to our team, and share their pride in what we have delivered for our customers and our shareholders.\nAs Tom just mentioned, we had outstanding performances in each of our brands during the third quarter, which resulted in significant sales, gross margin, operating margin and earnings growth to levels exceeding pre-pandemic results.\nOn the top line, demand for our products remained high and revenue exceeded 2019 at our direct-to-consumer channels and in each of our brands.\nExcluding Lanier Apparel where operations were effectively exited during the third quarter of fiscal 2021, consolidated sales increased 15% to $243 million.\nWe had improvements in all regions, with particular strength in Florida, the Southeast and Texas.\nHawaii has been positive overall with strength, except on the island of Oahu, which is more dependent on foreign tourists, than the other islands.\nOur gross margin continued to track significantly higher than 2019.\nOn an adjusted basis, gross margin expanded 710 basis points over 2019 to 62% in the third quarter.\nDriving this improvement was the higher proportion of full price sales, our overall shift in our sales mix to higher margin direct-to-consumer channels of distribution and improved IMUs.\nApproximately 270 basis points of higher freight cost, including the use of air freight partially offset some of the margin improvement.\nOn an adjusted basis, we gained 260 basis points of SG&A leverage in the third quarter, improving from 56% of sales in 2019 to 53% of sales in 2021.\nAdjusted SG&A dollars decreased modestly from 2019 levels but decreases in employment costs due to headcount reductions and lower occupancy cost, partially offset by increases in marketing expense.\nAs a result, our consolidated operating margin expanded 970 basis points from 1% in 2019, to 11%.\nTommy Bahama, Lilly Pulitzer and Southern Tide all experienced operating margin expansion.\nMoving to the balance sheet, our liquidity position is strong.\nWe ended the third quarter with $188 million of cash and short-term investments and no borrowings outstanding under our revolving credit facility.\nFIFO inventory decreased 17% compared to fiscal 2020 excluding Lanier Apparel due to higher-than-expected sales during the first nine months of 2021, ongoing enhancements to enterprise order management systems and prudent seasonal purchases.\nWe believe our inventory is well positioned to meet forecasted demand throughout the remainder of the holiday selling season.\nLooking ahead, we are pleased with our holiday season results to-date and are confident we can deliver a solid fourth quarter.\nOur outlook reflects our expectation of continued strength in full price direct-to-consumer business.\nWe expect full price direct-to-consumer sales growth and consolidated gross margin expansion over 2019.\nWhile we raised our outlook for the year, year-over-year improvement in our full price direct business is expected to be partially offset by a handful of specific items in the fourth quarter of the fiscal year.\nWe expect sales from Lanier Apparel to be approximately $20 million lower than 2019's fourth quarter as we exited the business in Q3 of this year.\nIn addition, we expect our branded wholesale business to be approximately $15 million lower than 2019.\nThis is impacted by the shift to certain initial spring wholesale shipments.\nThese have historically shipped in the fourth quarter, but are expected to ship in the first quarter of 2022, as we reduced our reliance on air freight for warmer weather product.\nWe also expect the Lilly Pulitzer fourth quarter flash clearance sale, to be lower compared to 2019, due to strong year-to-date full price sales resulting in less available inventory for the flash sale.\nFor the fourth quarter, we expect sales to be between $285 million and $295 million compared to sales of $298 million in the fourth quarter of fiscal 2019.\nAgain Lanier Apparel generated $20 million in net sales in the fourth quarter of 2019.\nIn the fourth quarter of fiscal 2021, we expect earnings of $1.20 to $1.35 per share on an adjusted basis, compared to earnings of $1.09 per share on an adjusted basis in the fourth quarter of 2019.\nOur outlook includes strong quarter-to-date results with a solid start to the holiday selling season.\nFor the full year, we now expect sales in a range of $1.127 billion to $1.137 billion as compared to sales of $1.123 billion in 2019.\nFor the full year, sales from Lanier Apparel are expected to be $25 million in 2021, compared to $95 million in 2019.\nAdjusted earnings per share is expected to be between $7.52 and $7.67.\nThis compared to earnings of $4.32 per share on an adjusted basis in 2019.\nOur effective tax rate for the full fiscal year 2021 is expected to be approximately 22%.\nWe continue to support our business with investments for future growth.\nCapital expenditures are expected to be between $35 million and $40 million in fiscal 2021, primarily reflecting investments in information technology initiatives, new Marlin Bars and retail stores.\nWe're excited to open our first company-owned Beaufort Bonnet Company store in Grand Boulevard at Sandestin later this quarter.\nWe continue to generate strong cash flow from operations, including a $157 million year-to-date.\nOur capital allocation priorities include investing in our businesses, acquisitions and the return of capital to shareholders through dividends and share repurchases.\nWe remain in a strong position to return cash to shareholders and are proud of our long history of returning value through dividends, which we have paid every quarter since going public in 1960.\nThis quarter, our Board of Directors has declared a dividend of $0.42 per share.\nAdditionally, in assessing our capital allocation plan, our Board of Directors approved a new share repurchase authorization of $150 million.\n Assistant:", "chosen": "compname reports q3 adjusted earnings per share $1.19.\noxford: strong consumer demand and excellent execution drove record third quarter results, raises full year guidance.\nq3 adjusted earnings per share $1.19.\nsees q4 sales $285 million to $295 million.\nsees fy sales $1.127 billion to $1.137 billion.\nsees fy adjusted earnings per share $7.52 to $7.67.\n"}
{"prompt": "Human: The fourth quarter of 2021 was a fitting year -- a fitting way to end the year where Oxy's operational and financial performance advanced from strong to stronger.\nOur focus on consistently delivering outstanding operational results, combined with our steadfast dedication and patience in improving our balance sheet, has positioned us to begin increasing the amount of capital returned to shareholders.\nOur new shareholder return framework, which we will detail today, includes a dividend that is sustainable in a low price environment.\nWe are pleased to implement this new framework, beginning with an increase in the quarterly common dividend to $0.13 per share.\nThe position of strength that we are in today stems from our team's hard work and accomplishments last year.\nThroughout 2021, we strived tirelessly to improve our already exceptional operational performance.\nWe capitalized on efficiency improvements by embedding innovative techniques across our operations.\nOur focus on learning, implementing change, where needed, and maximizing opportunities for improvement enabled us to accelerate time to market for our products while generating notable capital saving.\nWe will continue to maximize operational efficiencies in 2022 by executing on the capital plan that invest in our highest-return assets to generate long-term sustainable free cash flow.\nRob and I will then discuss our shareholder return framework, and Rob will provide guidance for the first quarter and year ahead.\nBefore turning to Q&A at the end, I will provide a preview of the Low Carbon Ventures investor update that we have planned for next month.\nNow to talk about delivering cash flow priorities.\nThose who have followed us at Oxy's journey over the past several quarters know that our cash flow priorities have centered around derisking our balance sheet and reducing debt.\nWe diligently delivered on these cash flow priorities throughout 2021, including the repayment of approximately $6.7 billion of debt.\nWe now expect that our net debt will be below $25 billion by the end of the first quarter of 2022, which will mark a change in how excess cash flow will be allocated going forward.\nBefore I detail our updated cash flow priorities and shareholder return framework, I would like to first touch on a few of the many operational and financial successes that enabled us to reach this significant turning point.\n2021 was a year of continuous operational improvements, which drove record free cash flow generation, rapid debt reduction and a return to profitability.\nOne of Oxy's core strengths is our ability to develop assets in a way that efficiently maximizes production and recovery while generating significant cash flow, and that is just what we did in 2021.\nMultiple drilling and completion records were set across our domestic and international businesses as our production for the year averaged 1.167 million BOE per day.\nThat's 27,000 BOE per day higher than our initial guidance.\n2021 was also a more conventional year in terms of commodity prices, operations and planning, all of which was helpful in providing a reserve update that reflects a more normalized price environment.\nOur reserves for year-end 2021 increased to 3.5 billion BOE, representing a reserve replacement ratio of 241%.\nOur reserves position means that we have a vast supply of low-breakeven projects and inventory available.\nOver the last year, we significantly advanced our commitments toward a low-carbon future.\nWe are proud to be one of only a few oil and gas companies with net-zero goals that are aligned with the Paris Agreement's 1.5-degree Celsius pathway.\nIn December, Oxy became the first U.S. upstream oil and gas company to enter into a sustainability-linked revolving credit facility, which includes absolute reductions in our combined Scopes 1 and 2 CO2 equivalent emissions as the key performance indicator.\nWe set additional interim emission targets to further refine our net-zero pathway, including a short-term target to reduce our CO2 equivalent emissions to approximately 3.7 million metric tons per year below our 2021 level and to accomplish that by 2024.\nWe set a medium-term target to facilitate the geologic storage or use of 25 million metric tons per year of CO2 in Oxy's value chain by 2032.\nWe also endorsed the Methane Guiding Principles and Oil and Gas Methane Partnership 2.0, a climate and clean air coalition initiative led by the United Nations Environment program.\nThis is consistent with our commitment to enhance methane emissions reporting and reducing those emissions.\nOur journey toward net zero is underway, and we look forward to discussing in greater detail at our Low Carbon Ventures investor day next month.\nNow the fourth quarter highlights.\nThe strong operational and financial performance that we delivered throughout last year continued in the fourth quarter.\nWe set a fourth consecutive record for quarterly free cash flow generation before working capital, which contributed to generating our highest-ever annual level of free cash flow in 2021.\nWe continue to apply free cash flow toward reducing debt and strengthening our balance sheet, repaying an additional $2.2 billion of debt in the fourth quarter.\nOperationally, all three business segments excelled in driving our robust financial performance.\nOxyChem delivered record earnings for the second consecutive quarter as performance throughout the year culminated in 2021 being OxyChem's strongest in over 30 years.\nThe fourth quarter, which is typically lower due to seasonality, even exceeded the record third quarter.\nAnd in our oil and gas segment, our Permian, Rockies and Oman teams set new operational records and efficiency benchmarks in the fourth quarter, further improving on their third quarter record.\nOur midstream business outperformed by maximizing gas margins during the fourth quarter.\nWhile short-term opportunities in the commodity markets are difficult to predict, our midstream team exceed at finding and taking full advantage of such opportunities when they arise.\nNow I'm pleased to say that our fourth quarter results continued to demonstrate the commitment of all of our employees, no matter their position or location, to find ways to further create value by lowering costs, improving efficiencies and maximizing recoveries.\nThey truly are driving our strong financial results and providing a solid foundation for free cash flow generation.\nNow on to 2021 oil and gas operational excellence.\nOn each of our last several calls, I've enjoyed highlighting the many operational achievements our teams continuously deliver.\nThe magnitude of these achievements is striking when viewed on a combined basis over the last year.\nWe established record drilling cycle times in the Gulf of Mexico, the Permian, Rockies and in Oman, and set new efficiency benchmarks across our portfolio in 2021.\nWe intend to maintain our focus on continuous improvement in the year ahead as we work to maximize the value our portfolio can generate for shareholders.\nNow our 2022 capital plan.\nOur 2022 capital plan invests in cash flow longevity while building on the capital intensity leadership we demonstrated in 2021.\nWe have sized our capital plan to sustain production in 2022 at 1.155 million BOE per day while investing in high-return projects that will provide cash flow stability throughout the cycle.\nWe have also incorporated an expectation for inflation and a capital range to reflect the potential for fluctuations in our third-party-operated assets and our low-carbon opportunities during the year.\nOur sustaining capital, which we define as the capital required to sustain production in the $40 WTI environment over a multiyear period, remains industry-leading.\nOur multiyear sustaining capital is expected to increase from our 2021 capital budget of $2.9 billion, the reduced inventory of drilling uncompleted wells and additional investment in our Gulf of Mexico and EOR assets, to optimize the long-term productivity of our reservoirs and facilities.\nIf the macro environment requires spending below our multiyear sustaining capital, we have the ability to reduce it further and hold production flat for shorter periods of time, as we've demonstrated.\nWe are also investing in attractive mid-cycle projects that will provide cash flow stability through the cycle in future years.\nFor example, these projects include the Al Hosn expansion, which began last year.\nAnd OxyChem is in the process of completing a FEED study to modernize certain Gulf Coast chlor-alkali assets from diaphram to membrane technology.\nOur capital plan also includes investments to advance our net zero pathway, including reducing emissions, improving energy efficiency and developing our carbon sequestration initiative.\nWe are allocating capital in the budget to 1PointFive to begin construction on the first direct air capture facility.\nWe continue to make progress on both the engineering and commercial needs for direct air capture development.\nWe are improving both of these aspects and believe Oxy's capital helps retain value for our shareholders.\nAs the construction phase and technology of this new project advance, we will continue to consider strategic capital partnerships and structures to address financing.\nWe'll provide more comprehensive update on 1PointFive and direct air capture at our March 23 LCV investor update.\nWe benefited greatly from commodity price rebound last year and appreciate how swiftly the price environment can change.\nThe optionality that our scale and asset base provide enables us to retain a high degree of flexibility in our capital and spending plans.\nThe majority of our capital program is comprised of short-cycle investments, meaning that we have the ability to quickly adapt to changes in the macro environment.\nWithin six months or less, if necessary, we can reduce capital spending to sustaining levels.\nAnd if oil prices remain supportive this year, our intent is to follow our cash flow priorities and capital framework that we will share with you today.\nWe have no need and no intent to invest in production growth this year.\nHaving a flexible capital budget that includes investment and cash flow longevity provides us and puts us in a strong position to implement shareholder return framework that will benefit shareholders over the long term.\nWith respect to cash flow priorities, our priorities for 2022 remain largely unchanged, with a continuing emphasis on reducing debt while maintaining our asset base integrity and sustainability.\nThe objective of strengthening our financial position remains the same: Enable us to confidently increase the amount of capital that we may sustainably return to shareholders throughout the cycle.\nAs we expect net debt to fall below $25 billion by the end of the first quarter, our focus has expanded to returning capital to shareholders, beginning with the increase in our common dividend to $0.13 per share and the reactivation and expansion of our share repurchase program.\nThe increase in the dividend to $0.13 per share is consistent with our intention to initially increase the dividend to a level that approximates the yield of the S&P 500.\nWe believe establishing framework for returning capital to shareholders through a sustainable common dividend, combined with an active share repurchase program and continued debt reduction, creates an attractive value proposition for shareholders while also improving the company's long-term financial position.\nFor the first phase of our shareholder return framework initiated, we have the options in future years to invest in cash flow growth.\nWe have the ability to grow oil and gas cash flow through higher production, but also have multiple investment opportunities across our other businesses.\nAs evidenced by our guidance for 2022, we do not intend to grow production in 2022.\nAt the point where it is appropriate to invest in future cash flow growth, we will only do so if supported by long-term demand.\nAny future production growth will be limited to an average annual rate of approximately 5%.\nAs Vicki mentioned, the first phase of our shareholder return framework consists of the debt reduction; an increase in the common dividend to $0.13 per share; and the reactivation, expansion of our share repurchase program.\nWith net debt expected to be below $25 billion by the end of the first quarter, we are ready to begin returning more capital to shareholders, but we'll continue to prioritize debt reduction to focus on our medium-term goal of regaining our investment-grade credit rating.\nWe place high importance on debt reduction for the reasons I highlighted last quarter, mainly that as debt is reduced, our company's enterprise value rebalances to the benefit of our shareholders.\nWe recognize that oil prices are uncertain and may remain volatile, particularly in the current environment.\nWe then prioritized retirement of an initial $5 billion of debt to drive our net debt toward our next milestone of $20 billion.\nWhen this milestone is achieved, our balance sheet will improve significantly even from where we are today.\nWe intend to provide our shareholders with a competitive common dividend while maintaining a long-cycle cash flow breakeven at $40 WTI or less.\nThe long-term sustainability of our dividend will be enhanced by continued deleveraging and share repurchases, as well as our best-in-class capital efficiency and a deep low-cost portfolio of assets.\nAs debt is retired, our cash interest payments will decrease, freeing up cash that can be used to support future common dividend growth.\nIn addition to increasing the common dividend to $0.13 per share, we intend to purchase approximately $3 billion of outstanding shares of common stock.\nMaintaining an active share repurchase program with the benefit of a healthy balance sheet will potentially enable us to grow the dividend on a per-share basis at a faster rate.\nAs evidenced by our progress reducing debt last year, debt retirement remains a higher cash flow priority than our share repurchase program.\nWe intend to make substantial progress toward retiring an additional $5 billion of debt before initiating share repurchases.\nIt is our goal to reward shareholders with the triple benefit of: A sustainable common benefit, an active share repurchase program and a continuously strengthening financial position.\nI'll now turn to our fourth quarter results.\nIn the fourth quarter, we announced an adjusted profit of $1.48 and a reported profit of $1.37 per diluted share.\nOur adjusted income improved significantly through 2021, with the fourth quarter being the strongest quarter of the year.\nThe increase in earnings was primarily driven by higher commodity prices and volumes, as well as OxyChem's excellent financial performance.\nOur domestic oil and gas expenses experienced a sizable reduction on a BOE basis from the previous quarter and reflected a more normalized environment absent any significant weather disruptions.\nThe strong performance of our businesses, combined with the benefit of a healthy commodity price, enabled us to deliver another consecutive quarter of record free cash flow.\nOn our third quarter call, we announced the completion of our large-scale divestiture program, but reiterated our intention to continue seeking opportunities to optimize our portfolio to create shareholder value.\nIn November, we completed a bolt-on acquisition to increase our working interest in EOR assets that we'd operate.\nAnd in January 2022, we divested a small package of Permian acreage that had yet no immediate plan to develop.\nThe purchase and sale prices of these transactions largely offset each other, while the EOR acquisition added approximately 5,000 BOE per day of low-decline production, as well as increasing our inventory of potential CCUS opportunity.\nWe exited the fourth quarter with approximately $2.8 billion of unrestricted cash on the balance sheet after repaying approximately $2.2 billion of debt in the quarter.\nIn total, last year, we paid approximately $6.7 billion of debt and retired $750 million of notional interest rate swaps.\nOur debt reduction continues to drive a pronounced improvement in our credit profile.\nSince our last call, both Fitch and S&P upgraded our credit ratings to BB plus, one notch below investment grade; while Moody's assigned us a positive outlook on our debt.\nReducing the amount of cash that is committed to interest payments today places us in a stronger position for a sustainable return of capital in the future.\nWe estimate that the balance sheet improvements executed in 2021 will reduce interest and financing costs by almost $250 million per year going forward, which will fund approximately half of the increase in our common dividend.\nOur business incurred a negative working capital change in the fourth quarter.\nIt was primarily driven by higher accounts receivable balance due to higher commodity prices and, to a lesser extent, an increase in inventories, including a higher number of barrels on the water at year-end.\nThe oil and gas hedges we had in place rolled off at the end of the fourth quarter, and we are now positioned to take full advantage of the current commodity price environment.\nWe recognize the possibility of a swift change in commodity prices always exists.\nThe debt maturity profile we have today is far more manageable mantle than it was two years ago, and our liquidity profile remains robust.\nIn addition to cash on hand, we have $4.4 billion of committed unutilized bank facility.\nWe continue to believe that reducing debt and maintaining maximum flexibility in our capital plans is the most effective long-term solution to managing risk while providing shareholders the benefits of commodity price gain.\nWe expect our full year production to average 1.155 million BOE per day in 2022.\nProduction in the first quarter of 2022 is expected to be lower than the fourth quarter of 2021 due to the timing impact of wells that are brought online in 2021, severe winter weather in the Permian earlier this month and the impact of significant planned international turnaround activities this quarter.\nAlgeria, Al Hosn and Dolphin are all undergoing scheduled maintenance in the first quarter, which is reflected in our international production guidance.\nThe downtime associated with Al Hosn is notably larger than typical years as the plant is undergoing the first full shutdown since its inception to substantially complete the tie-ins associated with the expansion project and to enhance plant sustainability and reliability.\nAdditionally, a portion of our international production is subject to production-sharing contracts, where we typically receive fewer barrels in a higher-price environment, the impact of which is captured in our full year and first quarter guidance.\nThe Permian activity we added late in the fourth quarter is expected to replace the production benefit received in 2021 and completed our DJ -- our inventory of DJ Basin undrilled, uncompleted wells in the early part of last year.\nOur 2022 Permian capital allocation is expected to provide benefits that will last into 2023.\nWe anticipate that our activity this year will provide us the flexibility to either hold Permian production flat at our 2022 exit rate for similar capital next year, or spend less capital in 2023 to hold production relatively flat to our 2022 average.\nWe also expect that our production in 2022 will increase throughout the year to achieve our full year guidance as our international operations will resume their normal production levels and our activity in the Permian brings new production online.\nAdditionally, the trajectory of operating production is anticipated to offset lower production in the Rockies this year as our activity in the DJ Basin is tapered, reflecting development planning timing to ensure efficient operations as new permits are obtained.\nPartially offsetting lower Rockies production with higher Permian production, combined with an increase in EOR activity, will result in a slightly higher domestic operating expense as the DJ Basin has one of the lowest operating costs on a BOE basis in our portfolio.\nThe increase in Permian production is expected to result in domestic cash margins improving by -- in 2022 as the companywide oil cut increases approximately 54.5%.\nThe mid-cycle level of capital we intend to spin this year provides flexibility to sustain production in 2023 and beyond at our multiyear sustaining capital level of $3.2 billion in a $40 price environment.\nWe expect that OxyChem's 2022 earnings will exceed even 2021.\nOxyChem continues to benefit from continued demand improvement for caustic soda, while PVC pricing remains strong.\nAdditionally, as I mentioned on our last call, we expect chlorine markets to remain tight as chlor-alkali producers seek the highest value for their products.\nOxyChem's integration toward multiple chlorine derivatives enables us to optimize our production mix to supply the products the market requires, whether this is for chlorine for water treatment, vinyls or PVC, for example.\nThis year, we will make an incremental capital investment as we complete a FEED study for the modernization of certain Gulf Coast chlor-alkali assets from diaphram to membrane technology.\nModernizing these assets would result in a material energy efficiency improvement, but will also lower the carbon intensity per ton of the product produced and delivered.\nThe project would also provide the opportunity for a significant expansion of our existing capacity to meet growing demand for our key products.\nWe expect to reach final investment decision later this year, at which time, we will be prepared to share additional details.\nTo assist investors to reconcile our guidance with our segment earnings, we have made a change in how we guide midstream going forward.\nOur midstream guidance now includes income from WES, which is a change to how we've guided midstream previously.\nQuarterly guidance now includes Oxy's portion of WES income using the average of the previous four publicly available quarters.\nOur annual guidance now includes Oxy's portion of WES income using the sum of the previous four publicly available quarters.\nAs we look to the year ahead, we will work to continue to improve on the numerous operational and financial success of 2021, including making additional inroads on reducing debt, implementing our shareholder return framework and advancing our low-carbon aspirations.\nWhen we established Low Carbon Ventures in 2018, we knew we were ahead of the curve in recognizing the opportunity and necessity of building a carbon management business, both to help reduce global emissions and to enhance our business.\nAt that time, we were focused on key technologies and projects that would reduce Oxy's emissions and provide a more sustainable future business.\nToday, we have advanced that vision and fully appreciate the vast scope of the carbon management opportunity, as well as the cross-industry support and partnership in front of us.\nOn past earnings calls, we had discussed several of the initiatives Low Carbon Ventures is developing and Oxy's ambition to achieve net zero before 2050.\nWe've been working on key technology developments and important commercial needs to advance LCV's projects that are now in a position to move more fully -- and more fully detail our low carbon business and how it positions us to realize our net-zero ambition and improve our long-term business.\nOn March 23, we will host a Low Carbon Ventures investor update, where we will provide a detailed update on our low-carbon strategy, with a focus on the technology and commercial development of carbon-capture projects, specifically direct air capture.\nThe event, which we expect may last up to two and a half hours, will be accessible through our website.\nAs I've said before, we are excited about our unique position and capabilities as a company.\nWe value our broader low-carbon and business partnerships that are growing, and our workforce is energized to advance this immense opportunity before us.\n Assistant:", "chosen": "occidental increases dividend.\noccidental petroleum corp - board of directors has declared a regular quarterly dividend of $0.13 per share on common stock.\n"}
{"prompt": "Human: I'm Charlotte Rasche, Executive Vice President and General Counsel of Prosperity Bancshares.\nDavid Zalman will lead off with a review of the highlights for the recent quarter.\nHe will be followed by Asylbek Osmonov, who will review some of our recent financial statistics and Tim Timanus, who will discuss our lending activities including asset quality.\nDuring the call, interested parties may participate live by following the instructions that will be provided by our call moderator, Tom.\nBefore we begin, let me make the usual disclaimers.\nProsperity reported some of the best results in our history.\nMuch of the success is attributed to the dedicated associates of Prosperity and LegacyTexas who helped make our combination with LegacyTexas so successful.\nOur annualized return on average assets, average common equity and average tangible common equity for the three months ending December 31, 2020 were: we made 1.63% on average assets; we made 8.98% return on average common equity, and we made a 19.5% return on average tangible common equity.\nRespectively, Prosperity's efficiency ratio, net gains -- excluding the net gains and losses on the sale or writedown of assets and taxes was 40.7% for the three months ended December 30, 2020.\nOur net income was $137 million for the three months ended December 31, 2020, compared with $86 million for the same period in 2019.\nHowever, the net income for the fourth quarter of 2019 included a $46.4 million of merger-related expenses.\nOur earnings per diluted common share were $1.48 for the three months ended December 31, 2020, compared with $1.01 for the same period in 2019 and were impacted by the merger-related expenses of $46.4 million or $0.43 per diluted common share in the fourth quarter of 2019.\nOur loans at December 31, 2020 were $20.2 billion, an increase of $1.4 billion or 7.4% compared with $18.8 billion at December 31, 2019.\nOur linked quarter loans decreased $548 million or 2.6% from $20.7 billion at September 30, 2020, primarily due to a $430 million decrease in PPP loans.\nIn addition, we continue reduce loans identified at LegacyTexas that we determined to exit.\nAt December 31, 2020, the company had $963 million of PPP loans outstanding.\nOur deposits at December 31, 2020 were $27.3 billion, an increase of $3.1 billion or 13% compared with $24.2 billion at December 31, 2019.\nLinked-quarter deposits increased $901 million or 3.4% from $26.4 billion at September 30, 2020.\nWe continue to see increased deposit balances.\nSome of the money is from stimulus payments and some from increased savings given the unknowns in the economy.\nThis may begin to change as vaccinations increase and we return to a more normalized daily life.\nOur asset quality, the non-performing assets decreased $2 million or 14.3% from the quarter ended September 30, 2020.\nOur non-performing assets totaled $59 million or 20 basis points of quarterly average interest earning assets at December 31, 2020 compared with $62 million or 25 basis points of quarterly average interest earning assets at December 31, 2019, and as mentioned, $69 million or 24 basis points of quarterly average interest earning assets as of September 30, 2020.\nWith regard to acquisitions, as mentioned in prior conference calls, we believe that the M&A activity will increase.\nAnd we saw PNC's acquisition of BBVA announced last quarter as well as two other large transactions.\nBank stock prices have risen, which results in sellers being more active.\nFurther, most banks are facing lower net interest margins and higher operating costs due to technology and other operational investments.\nWe believe that these factors, combined with the unknown regulatory burden going forward, may cause more bankers to explore the strategic alternatives including a sale.\nWe are open to exploring acquisition transaction if it makes sense for our shareholders and is appropriately accretive to earnings.\nWith regard to the economy, Texas and Oklahoma continue to benefit from a pro-business attitude.\nCompanies continue to move to Texas with HP and Oracle announcing their headquarters move and other companies such as Tesla announcing a major expansion into Texas.\nAlso, Samsung recently mentioned a $10 billion plant expansion in the Austin area.\nThe Federal Reserve Bank of Dallas has projected achieving a nationwide 5% GDP growth by year-end 2021 and an unemployment rate of 4.5% noting the first half of the year will be slower with an expected increase in the second half of the year.\nWe believe Texas will have a higher growth rate and outperform other states over the next several years.\nWe expect that we will face several challenges over the next few years such as higher tax rates that will affect income and continued lower interest rates that will affect our net interest margin.\nHowever, a steeper yield curve could help to mitigate both issues.\nLet me turn over our discussion to Asylbek Osmonov, our Chief Financial Officer to discuss some of the specific financial results we achieved.\nNet interest income before provision for credit losses for the three months ended December 31, 2020 was $257.6 million compared to $232 million for the same period in 2019, an increase of $25.6 million or 11%.\nThe increase was primarily due to three months of combined bank earnings for the fourth quarter 2020, resulting from the Legacy merger on November 1, 2019 and reduced cost of funds partially offset by the decrease in loan discount accretion of $7.7 million.\nThe net interest margin on a tax equivalent basis was 3.49% for the three months ended December 31, 2020 compared to 3.66% for the same period in 2019 and 3.57% for the quarter ended, September 30, 2020.\nExcluding purchase accounting adjustments, the core net interest margin for the quarter ended December 31, 2020 was 3.26% compared to 3.26% for the same period in 2019 and 3.25% for the quarter ended September 30, 2020.\nNoninterest income was $36.5 million for the three months ended December 31, 2020 compared to $35.5 million for the same period in 2019 and $34.9 million for the quarter ended September 30, 2020.\nNon-interest expense for the three months ended December 31, 2020 was $120.2 million compared to $156.5 million for the same period in 2019, which included $46.4 million in the merger-related expenses.\nOn a linked quarter basis, non-interest expense increased $2.3 million primarily due to salaries and benefits.\nFor the first quarter 2021, we expect non-interest expense of $118 million to $120 million, which includes elevated employment-related taxes for vested restricted stock.\nThe efficiency ratio was 40.8% for the three months ended December 31, 2020 compared to 58.1% for the same period in 2019, which included $46.4 million in merger-related expenses and 48.2% for the three months ended September 30, 2020.\nWe estimate fair value loan income for the first quarter 2021 to be around $7 million to $10 million based on the current fair value discount for each loan amortized over its remaining loan life.\nThis does not account for additional discount accretion income that may occur due to early loan pay downs or payoffs, which cannot be accurately estimated.\nIn the fourth quarter of 2020, we recognized $10 million from the fair value loan amortization and additional $6 million from early payoffs for a total of $16.1 million in fair value loan income.\nThe bond portfolio metrics at 12/31/2020 showed a weighted average life of 2.8 years and projected annual cash flows of approximately $2.4 billion.\nOur non-performing assets at quarter end December 31, 2020 totaled $59,570,000, a 29 basis points of loans and other real estate compared to $69,542,000 or 33 basis points at September 30, 2020.\nThis represents approximately a 14% decline.\nThe December 31, 2020 non-performing asset total was made up of $48,884,000 in loans, $93,000 in repossessed assets and $10,593,000 in other real estate.\nOf the $59,570,000 in non-performing assets, $10,682,000 or 18% are energy credits, $10,147,000 of which are service company credits and $535,000 are production credits.\nSince December 31, 2020, $2,715,000 in non-performing assets have been put under contract for sale.\nThis represents approximately 5% of the non-performing assets.\nNet charge-offs for the three months ended December 31, 2020 were $7,567,000 compared to $10,570,000 for the quarter ended September 30, 2020.\nNo dollars were added to the allowance for credit losses during the quarter ended December 31, 2020.\nThe average monthly new loan production for the quarter ended December 31, 2020 was $439 million.\nLoans outstanding at December 31, 2020 were $20.2 billion, which includes $963.2 million in PPP loans.\nThe December 31, 2020 loan total is made up of 38% fixed rate loans, 38% floating rate loans, and 24% resetting at specific intervals.\nTom, can you please assist us with questions?\n Assistant:", "chosen": "q4 earnings per share $1.48.\nnet interest income before provision for credit losses for three months ended december 31, 2020 was $257.6 million.\n"}
{"prompt": "Human: Mike Speetzen, our interim chief executive officer; and Bob Mack, our interim chief financial officer, have remarks summarizing the quarter and our revised expectations for the full year.\nThen we'll take some questions.\nYou can refer to our 2020 10-K for additional details regarding these risks and uncertainties.\nOnce again, the Polaris team delivered an impressive quarter despite substantial supply chain challenges.\nOur team has remained focused on meeting the needs of our dealers and customers, which allowed us to again beat expectations this quarter.\nConsumer interest in powersports continued at record levels throughout the quarter, with strong growth coming from both existing customers and new customers.\nI'm pleased to report that our ORV market share gains continued, which we expect to be an ongoing trend for the year.\nI'm also pleased to report that motorcycles, snowmobiles and boats also had strong retail demand and gained share in Q1.\nThe strong growth we are experiencing is not only in our North American whole good retail.\nOur PG&A business grew nearly 50% during the quarter, with all segments and categories up significantly year over year.\nAnd our international business was also strong, with sales increasing 59% as countries impacted by the pandemic slowly began to reopen.\nQ1 results reflect an all-out effort by the Polaris team to overcome numerous challenges.\nWe continue to operate our plants at maximum supply chain-constraint capacity and utilize every available tactic at our disposal to produce the products our customers were demanding.\nWhile our dealer inventory remains below optimal levels, we largely met demand and expertly navigated supply chain constraints.\nTo do so, logistics, commodities and rework costs have increased substantially.\nWe are managing the cost as best we can and, where it makes strategic sense, have raised prices to compensate for this inflation.\nAnd yet, despite these headwinds, given the overall strong and better-than-expected performance seen in Q1 and continuing into April, we are raising our full-year guidance.\nBob will give you more details shortly.\nFirst-quarter North American retail sales were up a robust 70%, continuing the unprecedented levels of growth.\nThe comparables were easier in the last two weeks of March when the pandemic drove an abrupt shutdown of commerce in 2020.\nEven after adjusting for that impact, our retail was up an impressive 50-plus percent for the quarter.\nWe continue to see an expanding customer base, with new customers growing 70% in Q1.\nWe are especially proud to see success in our strategy to further diversify our customer base.\nWhile many of these new customers have been in powersports for only a short time, our early data indicates a strong intent of these new customers to stay with the sport and a stronger intent to purchase another vehicle versus what we have historically seen, which is a promising indicator to support ongoing strong retail.\nAnd the continued growth in sales to our existing owners, which increased an impressive 40% year over year, reinforces our confidence that these customers will return.\nAs I indicated earlier, our ORV business gained over 4 percentage points of market share in the first quarter.\nBoth Indian and Slingshot's first-quarter retail was strong as well, collectively finishing up over 70% and market share increased about 3 percentage points.\nboats retail was also strong, tracking ahead of the industry based on preliminary data.\nSnowmobile sales were strong as well, with retail up low 20% range for the first quarter.\nLet me spend a minute talking about the strong performance of our Snowmobile business.\nWhile our Snowmobile business is one of our smaller product lines today, it is where we started over 66 years ago in Northern Minnesota.\nThe North American snowmobile industry concluded its strongest season in over a decade, with industry retail up approximately 16%.\nPolaris retail eclipsed the market, growing in the mid-20% range, resulting in market share gains of over two points for the season, the best share position in 16 years.\nWe are seeing tremendous new customer growth in Snowmobiles.\nDuring the 2020, 2021 selling season, new customers represented over 60% of the sales growth, nearly double the rate from the prior season ending March 2020.\nDuring the quarter, we held our annual spring dealer meeting and, while virtual, it was one of the best attended meetings in over a decade.\nAttendance was up almost 80% compared to 2020.\nDuring the meeting, we introduced 22 new snowmobiles on the revolutionary Rider-First Matryx Platform, which delivers industry-leading ride and handling, both on and off trail.\nAdditionally, we introduced the company's first turbo-charged two-stroke engine, the Patriot Boost.\nThis new engine uses proprietary SmartBoost technology for unrivaled combustion stability, enabling 10% more power at sea level and 50% more power at 10,000 feet than our current 850 Patriot engine.\nThe strong model year lineup, along with continued demand from new customers entering the sport, has generated demand we haven't seen in years.\nIn fact, our SnowCheck orders, which concluded a couple of weeks ago, will make up over half of our Snowmobile build this year, eliminating much of the uncertainty around in-season sales required later in the year.\nAs you well know, strong retail demand in all of our businesses has continued to pressure our ability to fill the dealer channel.\nInventory levels declined further on a sequential basis and were down 71% year over year, with ORV realizing the most significant decline.\nSupplier constraints and logistics delays remain the ongoing bottlenecks, and we are working all available options to ease the supply chain strain as quickly as possible.\nI'll talk more about our efforts to manage the situation shortly.\nAs we've discussed in the past, presold vehicles continue to be a lever that our dealers can utilize to ensure they capture the sale.\nThis is enabled by our advanced manufacturing capability which provides visibility into and flexibility of our production plan.\nThis is just one of many examples of how the team is navigating this challenging environment to ensure dealers and consumers get the vehicles they want.\nGiven the current environment and our expectations that the supply chain constraints may not improve significantly until late in 2021, we anticipate it will likely take until sometime in 2022 to return dealer inventory to targeted levels.\nThat said, our ability to continue to expertly manage the supply chain through 2021 positions us well to meet consumer demand.\nThe number of suppliers impacted by COVID-related constraints has been somewhat of a moving target.\nThe Polaris team has been doing a tremendous job of keeping product flowing to fulfill demand by expediting shipping, working directly with suppliers on their staffing and supply base, rebalancing in-sourced and outsourced manufacturing, using alternative logistics lanes to shorten lead times, staging Polaris employees at ports to expedite customs clearance and optimizing the flow and location of inventory to fill backlog as quick as possible.\nAdditionally, we're adding capacity at select locations, including Monterrey, Mexico for RZR and GENERAL; Elkhart and Syracuse, Indiana for Bennington and Hurricane; Rigby, Idaho for climb apparel and Wilmington, Ohio for PG&A distribution.\nWe will be evaluating additional expansion needs with our board as the year progresses based on the trajectory of current demand.\nThese capacity additions, along with the anticipated supply chain improvements later in the year, will allow us to further ramp production in the coming quarters.\nHowever, as I said before, we do not see dealer inventory returning to targeted levels until sometime in 2021.\nDespite these distractions, I'm happy to report that we are still on track with our supply chain transformation and that the savings are being realized slightly ahead of plan.\nThis is an incredibly important strategic initiative for us with the goal of identifying suppliers that can provide the best quality, delivery, service, technology and value.\nWe have now made all sourcing decisions for two of the four waves, and we kicked off the third wave in February through a virtual supplier conference and are optimistic about the continued success of the program.\nBy the end of the year, we expect to be almost halfway to our goal of approximately $200 million of gross savings.\nCurrently, these savings are partially offsetting increased costs from logistics, commodities, rework and tariffs.\nThe good news here is when these costs abate, our sourcing savings will continue.\nOur sports electrification is a very real opportunity, appealing to current as well as new consumers.\nAs we look into the future, EV technology will continue to mature and grow, both in terms of performance capabilities and consumer awareness and interest.\nOur efforts today will set the stage and enable us to be well positioned for the future.\nOur revved up strategy aims to position Polaris as the industry leader in electrification, both through the introduction of new vehicles and expansion of current offerings.\nOur goal is to offer consumers an electric vehicle option within each of our core product segments over the next five years.\nLast fall, we partnered with Zero Motorcycles, a global leader in electric motorcycle powertrains and technology, to bring to market an all-new 2022 electric RANGER by December 2021.\nThis all new electric powertrain will elevate the RANGER platform to a whole new level of capability, durability and performance.\nWe're also making investments to grow our current EV offerings with the co-development of a fully autonomous low-speed shuttle using our GEM vehicles, coupled with Optimus Ride's full stack of sensors and software to enable fully autonomous shuttles.\nThe vehicles are expected to roll out in the second half of 2023.\nAs we move through the year, watch for additional details on our revved up strategy in the upcoming RANGER product launch.\nAs you just heard, our first quarter far exceeded our expectations given the ongoing strong retail demand across the portfolio.\nThe Polaris team has met the challenges of supply chain shortages, logistics delays by working tirelessly with our suppliers, executing significant rework and coordinating with our logistics providers to deliver on our dealer and customers' expectations.\nFirst-quarter sales were up 39% on a GAAP and adjusted basis versus the prior year.\nSales were up significantly for all segments of our business, driven by the ongoing strength in powersports, the boating industry and in our adjacent markets and Aftermarket segments.\nFirst-quarter earnings per share on a GAAP basis was $2.11.\nAdjusted earnings per share was $2.30, which was up significantly over last year's first quarter.\nThe results were driven by increased volume across the portfolio, lower promotional costs and operating expense leverage during the quarter.\nAdjusted gross margins were up 352 basis points year over year primarily due to the lower promotional costs driven by the strong retail demand and lower floor-plan financing costs as a result of the low dealer inventory levels.\nSupply chain constraints were an ongoing pressure point to gross margins as logistics and rework remained high.\nAnd as we previously indicated, tariff costs were higher during the quarter as the onetime exemptions and refunds we saw in 2020 largely ended.\nOperating expenses as a percentage of sales were down 584 basis points as we realized leverage from the strong sales growth and the timing of some R&D expenses and stock-based compensation costs being delayed into the coming quarters.\nIncome from financial services declined 18% during the quarter as income from the Polaris Acceptance joint venture, which dealers use to finance their inventory, continue to be down due to the lower level of inventory in the channel.\nForeign exchange also had a positive impact on our quarterly results, primarily driven by the Canadian dollar and the euro.\nFrom a segment reporting perspective, all segments reported increased sales for the quarter.\nORV & Snowmobiles increased 50%.\nglobal adjacent markets was up 27%.\nAnd boats increased 29% for the quarter.\nOur segments benefited from lower promotional costs, which has decreased considerably across the powersports industry, given the high demand and the lack of product in the channel.\nAnd aside from boats, all powersports segments also experienced a negative product mix during the quarter as supply chain constraints caused a shift in the types of products we were able to produce.\nTwo additional highlights I want to point out are International and parts, garments and accessories businesses.\nInternational sales were up 59% during the quarter.\nAll segments and regions experienced increased sales during the quarter, mostly driven by strong ORV, snow, motorcycle and PG&A sales.\nAbout 10 points of the growth came from improved currency rates.\nAnd our parts, garments and accessories sales increased 49% during the quarter.\nAll segments and product categories grew significantly during the quarter, driven by strong retail and installed base demand.\nMoving on to our revised guidance for 2021.\nGiven the stronger-than-anticipated performance in the first quarter, we have increased our total company sales growth guidance and now expect sales to increase in the 18% to 21% range for the year, up from the 13% to 16% we guided in January.\nWe are also increasing our full-year adjusted earnings per share guidance for 2021 and now expect earnings to be in the range of $9 to $9.25 per diluted share.\nThe increase is driven by higher volume, increased pricing through growth, MSRP changes and continued lower promotional spending and floor-plan financing costs in addition to improved foreign exchange rates and operating expense leverage.\nThese positives are, however, being partially offset by continued manufacturing inefficiencies and higher logistics costs in addition to commodity and component pricing pressures driven by supply chain constraints.\nWhile we are pleased with the strong demand we are experiencing, it continues to stress our supply chain as our supply partners attempt to match our demand trends.\nThis is putting additional pressure on gross profit margins for the remainder of the year.\nWe now anticipate that gross profit margins will be down 60 to 90 basis points, primarily driven by ongoing negative product mix we saw in the first quarter, along with increased logistics and manufacturing inefficiencies due to the high level of rework in our factories.\nAdditionally, we are seeing increases in commodity prices that we expect to hit our P&L beginning in the second quarter.\nAs a result, we are implementing price increases to help offset these pressures.\nHowever, we expect it will take several quarters for the two to converge.\nAnd as Mike indicated, our supply chain initiative now in its third year will help offset some of the additional supply chain costs.\nWhile our gross profit margins are expected to be down for the year, as I stated on our last earnings call, if you exclude the impact of tariffs and supply chain disruptions, our gross profit margin rate would be up over 200 basis points compared to last year.\nAdjusted operating expenses are now expected to improve 80 to 100 basis points as a percentage of sales as sales growth outpaces operating expense growth.\nOur guidance for operating expenses in dollars for the full year hasn't changed.\nThe improvement in operating expenses as a percent of sales is entirely driven by the escalating sales growth anticipated this year.\nIncome from financial services is now expected to be down in the high single digits percent, driven entirely by the expectation that dealer inventory levels will remain low.\nRetail financing availability remains at acceptable levels.\nGuidance for the remainder of the P&L items remains materially unchanged from our previously issued guidance.\nGiven our strong performance in Q1, our expectation for sales and earnings per share are relatively consistent across each of the next three quarters.\nSeasonality of products will have some impact but, in general, we will produce -- be producing the maximum number of vehicles our supply chain will allow.\nAs I mentioned earlier, we expect supplier constraints to continue to negatively impact our sales mix.\nAdditionally, higher commodity costs will begin to materialize in Q2 and are expected to remain for the balance of the year.\nBoth of these factors will result in lower gross profit margins as compared to the first quarter.\nWe expect operating expenses in each of the remaining three quarters to be approximately 10% to 15% above Q1 given the timing of spending.\nMoving on to sales expectations by segment.\nThe increase in total company sales is driven by the sales increases in all of our businesses, given the strong first-quarter demand and significant order backlog.\nAs we have stated, the gating factor in meeting the current demand and beginning to fill the dealer channel is the ability of our supply chain and the logistics network to be able to deliver materials to the factories.\nOur operations and sourcing teams continue to work diligently to maximize production levels.\nFirst-quarter operating cash flow finished at $56 million compared to a negative $71 million in the first quarter of last year.\nWhile our first quarter is typically a heavy cash use quarter given the working capital timing, our strong cash from earnings was able to overcome the cash needs and provide positive cash from operations.\nOur cash flow performance expectations for the full year remain unchanged as we work to rebuild dealer and factory inventory to more acceptable levels.\nOur bank leverage ratio improved sequentially to approximately 1.3 times as our debt levels continue to decline as anticipated.\nOur expectations for use of cash for 2021, outside investing in the business, remains a combination of debt reduction and share repurchases.\nDuring the first quarter, we spent almost $300 million on share repurchases.\nOf the $300 million spent, $130 million was generated from the exercise of options.\nThis helps minimize the dilution of our shares.\nWe anticipate continuing to buy back shares throughout the remainder of the year, subject to market conditions and available authorizations.\nOur expectations for capital expenditures of approximately $250 million remain unchanged.\nAnd on January 28, the board of directors approved a 2% increase in the regular quarterly cash dividend, which is the 26th consecutive year of Polaris increasing its dividend.\nDuring the quarter, we experienced broad-based retail strength across all of our businesses.\nNew customers continue to drive significant growth during the quarter, supplementing strong demand from our dedicated installed base.\nOur supply chain's ability to keep pace with demand trends will remain an ongoing challenge for longer than originally anticipated.\nBut our size, agility and seasoned Polaris team gives me confidence in our ability to match supply with demand better than anyone in our industry.\nThe company is in the best financial position in years, with a strong cash position, debt below our targeted leverage ratios and all segments expected to grow sales, improve profitability and gain market share in 2021.\n Assistant:", "chosen": "compname says q1 earnings per share $2.11.\npolaris first quarter 2021 earnings results.\nq1 earnings per share $2.11.\nq1 reported and adjusted sales increased 39% to $1,951 million.\nadjusted net income for q1 was $2.30 per share.\nnorth american retail sales increased 70% for quarter compared to last year driven by broad-based strength across biz.\nfull year 2021 adjusted sales is now expected to be up 18% to 21% over prior year.\nnow expects full year earnings to be in range of $9.00 to $9.25 per diluted share.\n"}
{"prompt": "Human: Again, I'm Mark Kowlzan, Chairman and CEO of PCA.\nAnd with me on the call today is Tom Hassfurther, Executive Vice President, who runs the Packaging business; and Bob Mundy, our Chief Financial Officer.\nWithout a doubt, these may be the most unpredictable and unprecedented times that hopefully we will ever encounter.\nThere is no reference manual for managing through a public health crisis with severe economic ramifications, such as what has occurred with the COVID-19 pandemic.\nOur routines, habits, personal preferences, work and social activity and many other aspects of our lives are sure to change forever as a result of this.\nPCA's operations qualify as an essential or critical element under the various state and local shelter-in-place orders.\nOur leadership team is in constant communication discussing safety, the state of our operations, business continuity and other critical management topics.\nIt is our responsibility at PCA to ensure that, first and foremost, we help provide for the well-being of our more than 15,000 employees and their families.\nWe must do everything in our power to assist our customers and suppliers as well.\nWe have implemented various procedures and safeguards at all our manufacturing, converting and office locations across the country to help keep our employees safe and healthy as we provide the goods and services considered essential for assisting with our country's response to the pandemic.\nWe have also put measures in place to assist them with the economic ramifications that have resulted from these response measures.\nTo date, we have not experienced any significant interruptions at our operations or in our supply chain due to the virus.\nOur network of mills, converting facilities and distribution operations strategically located throughout the United States gives PCA asset flexibility to manufacture and ship products to multiple locations.\nWe will continue to closely monitor developments, take proactive measures to protect our employees, and provide our customers with the products and services they require.\nI could not be more proud of the effort, responsiveness and sacrifices displayed by all PCA employees as well as our customers and suppliers.\nIt has truly been an inspiring observation.\nI'll then wrap things up, and we'll be glad to take some questions.\nYesterday, we reported first quarter net income of $142 million or $1.49 per share.\nFirst quarter net income included special items expenses of $0.01 per share, related primarily to costs and expenses associated with the COVID-19 pandemic.\nExcluding special items, first quarter 2020 net income was $143 million or $1.50 per share compared to the first quarter of 2019 net income of $187 million or $1.98 per share.\nFirst quarter net sales were $1.7 billion in both 2020 and 2019.\nTotal company EBITDA for the first quarter, excluding special items, was $311 million in 2020 and $371 million in 2019.\nExcluding special items, the $0.48 per share decrease in first quarter 2020 earnings compared to the first quarter of 2019 was driven primarily by lower prices and mix in our Packaging segment of $0.64 and Paper segment of $0.05; lower volumes in our Paper segment of $0.03; higher annual outage expenses, $0.04; higher depreciation expense, $0.04; other expenses, $0.01; and higher tax rate, $0.01.\nThe items were partially offset by higher volumes in our Packaging segment of $0.14; lower operating costs of $0.09; lower converting costs, $0.04; lower freight and logistics costs, $0.01; and lower interest expense, $0.04; and nonoperating pension expense, $0.02.\nThe results were $0.30 above the first quarter guidance of $1.20 per share, primarily due to higher volumes in our Packaging segment of $0.03 and our Paper segment of $0.01, higher prices and mix in the Packaging segment of $0.02 and lower operating costs of $0.15, resulting from the excellent fiber and energy usage and lower input prices in our mills.\nFreight and logistics costs were lower than expected by $0.03, as were converting costs, annual outage costs and other expenses, each lower than expectations by $0.02 per share.\nLooking at our Packaging business.\nEBITDA, excluding special items in the first quarter of 2020 of $290 million with sales of $1.5 billion resulted in a margin of 20% versus last year's EBITDA of $334 million and sales of $1.5 billion or a 23% margin.\nOur containerboard mills established a new first quarter volume record, even while performing scheduled annual maintenance outage work at four of the mills.\nOur containerboard production allowed us to maintain our industry-leading integration rate of approximately 95% by supplying the necessary containerboard to our box plants, who achieved an all-time record for total box shipments as well as a new first quarter shipments per day record.\nWe were able to meet this greater-than-anticipated demand through proactive management, changing the sequencing of our scheduled maintenance outages as well as outstanding execution of the work performed during these outages.\nOur enhanced capabilities to optimize the mix, freight and logistics costs, inventory levels and internal and external customer needs of the customer of the containerboard system provided to us by our machine conversion at Wallula Mill were a key component as well.\nWe ended the quarter with containerboard inventories at their lowest levels since the acquisition of Boise's packaging business in 2013.\nCorrugated products and containerboard demand were very strong during the quarter.\nAs Mark indicated, our corrugated products plants achieved a new all-time record for total box shipments, which were up 5.6% over last year as well as a new first quarter record in shipments per day, which were up 3.9% compared to last year's first quarter.\nOutside sales volume of containerboard was 13% above last year's first quarter, primarily attributable to increased domestic demand with export demand slightly higher as well.\nDomestic containerboard and corrugated products prices and mix together were $0.54 per share below the first quarter of 2019 and down $0.06 per share compared to the fourth quarter of 2019.\nExport containerboard prices were down about $0.10 per share versus last year's first quarter and flat compared to the fourth quarter of 2019.\nLooking at our Paper segment.\nEBITDA, excluding special items in the first quarter of $42 million with sales of $217 million or 19% margin compared to the first quarter of 2019 EBITDA of $55 million and sales of $240 million or 23% margin.\nFirst quarter paper prices and mix were below last year as expected, however, they were flat compared to the fourth quarter of 2019.\nOur Paper volume was also lower as expected, primarily due to the scheduled maintenance outage at our Jackson, Alabama mill; however, it was about 3% higher than we had assumed.\nAlthough we ended the quarter with our inventory slightly lower than planned, on April 1, we announced downtime at our Jackson, Alabama mill for the months of May and June to ensure we manage the supply according to our demand outlook for the second quarter.\nThroughout the quarter, the mills did an outstanding job, managing fiber and chemical usage and maintained tight control over indirect and fixed expenses.\nWe had record first quarter cash generation with cash provided by operations of $237 million and record first quarter free cash flow of $166 million.\nThe primary uses of cash during the quarter included capital expenditures of $71 million and common stock dividends of $75 million.\nWe ended the quarter with $764 million of cash on hand or $913 million, including the cash we recently moved to marketable securities.\nOur liquidity at March 31 of over $1.2 billion is the highest ever for our company.\nAnd with the refinancing we completed in the fourth quarter of 2019, we have no debt maturities for the next 3.5 years.\nRegarding our announcement of taking our paper mill in Jackson, Alabama down for the months of May and June, our estimated second quarter financial impact of this decision is approximately $30 million or $0.24 per share.\nI want to update you on our full year guidance for certain items that we provided on last quarter's call.\nAs Mark alluded to earlier, we managed through a very strong first quarter demand in our Packaging business, partly by altering the sequencing of the scheduled maintenance outages at our containerboard mills as well as the containerboard machines impacted versus what we discussed during last quarter's call.\nThere are no changes to the scheduled outages at our white paper mills.\nThe actual impact in the first quarter was $0.22 per share, and the estimated impact by quarter for the remainder of the year is now $0.09 per share in the second quarter, $0.16 in the third and $0.34 per share in the fourth quarter.\nThe full year estimate remains at $0.81 per share, as we mentioned previously.\nAlso, our full year interest expense is now expected to be $88 million versus $81 million.\nAnd our net cash interest is now estimated to be $92 million versus $84 million, primarily due to lower expected interest income.\nOur cash tax rate estimate is now slightly lower than our earlier estimate of 19%, partially due to the downtime we announced at our Jackson mill, and our effective tax rate remains at approximately 25%.\nAfter a thorough review of our capital spending plans, we are not changing the range of spending we provided previously, which was between $400 million to $425 million, nor are we changing our full year outlook for pension contributions or depreciation.\nAs I mentioned earlier, these may be the most unpredictable and unprecedented times that hopefully we will ever encounter.\nNot a day passes that we realize something new being impacted in a way we had never thought of or imagined of before.\nOur consistent approach toward prudent capital allocation and sound financial governance has served us well for many, many years and is certainly helpful in times like this.\nPCA entered this uncertain period of time brought on by the COVID-19 crisis from a position of financial and balance sheet strength.\nOur focus has been and will remain on preserving that strength through the actions and decisions we make as a management team.\nAs Bob mentioned, our company's liquidity position has never been higher nor has our confidence in the future success of PCA.\nWe are well positioned to manage through whatever lies ahead, while ensuring we take care of the needs and expectations of our employees, customers, suppliers and shareholders.\nHowever, the confidence does not translate to the same degree short-term predictability or guidance specifics that we normally provide at this time.\nHowever, due to the uncertain scope and duration of the pandemic and the timing of the global recovery and economic normalization, we're not able to properly quantify our guidance for the second quarter.\nWe've already announced the actions being taken in our Paper business, and we believe these actions will position us properly for what we anticipate right now for the second half of 2020.\nHowever, nothing is certain, especially now, and it may require further action to be taken.\nWe know that we experienced a demand surge in our Packaging business in the first quarter, and the second quarter has also begun quite strong as well.\nOur containerboard inventory is at the lowest levels, both in total and in weeks of supply since our acquisition of the Packaging business from Boise.\nAnd while recycled fiber prices began moving significantly higher during the first quarter, our position as a primarily virgin fiber producer minimizes its impact compared to other producers.\nHowever, it only makes logical sense that demand in certain end markets will return to more normal growth trends at some point, although we've been successful at securing new business in end markets with a stronger demand outlook versus markets whose demand may be impacted more negatively.\nAlso, it is impossible to predict what additional health-related measures will be or must be taken or dictated to us by the various state and local governments where we operate.\nSuch events and actions could adversely impact the operation of not only our facilities, but also the availability of services and products we rely upon from our suppliers.\nThat being said, it is also a fact that the products our company provides are essential to the response efforts, the recovery and the well-being of our country.\nThe needs for our cost-effective, sustainable and renewable products will continue.\nWhile no one knows the severity or longevity of the virus' impact on global economy, it is my belief that this need will be even more in demand as the world recovers from this crisis.\nThe statements were based on current estimates, expectations and projections of the company, and involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC.\n Assistant:", "chosen": "q1 earnings per share $1.50 excluding items.\nq1 earnings per share $1.49.\nq1 sales $1.7 billion versus refinitiv ibes estimate of $1.66 billion.\nstrong demand in our packaging segment drove q1 results.\ndue to uncertain scope and duration of pandemic , we are not able to properly quantify our guidance for q2.\n"}
{"prompt": "Human: I'm pleased that you're able to join us today.\nThe slides are available on our website at investors.\nWe caution you that such statements involve inherent risks and uncertainties and actual results may differ materially from our expectations.\nLeading our discussion today are Maria Pope, President and CEO, and Jim Ajello, Senior Vice President of Finance, CFO and Treasurer.\nHot summer weather and power market volatility had a significant impact on our region and on our results this quarter.\nTurning to slide four, we reported net income of $50 million or $0.56 per share for the third quarter of 2021.\nThis compares with the loss of $17 million or $0.19 per share for the third quarter of 2020.\nYear-to-date financial performance is on track.\nAnd despite, third quarter volatility in the energy markets and higher O&M, we are reaffirming our 2021 earnings guidance of $2.70 to $2.85 per share.\nOur long-term outlook remains unchanged and we are reaffirming our 4% to 6% long-term earnings growth guidance.\nOverall, our business is strong, driven by load growth from the technology and digital sectors, as well as elevated residential use due in part to the hot summer weather and continued COVID constraints.\nYear-to-date revenue is up 12% versus 2020 and for the quarter, up 17% versus last year.\nJim will cover third quarter results in more detail, provide regulatory and capital updates and discuss the outlook for the rest of the year.\nThe ongoing impacts of climate change underscore the importance of investments and actions that we are taking to rapidly transition to a clean energy future and meet our 2030 decarbonization goals while also ensuring that we have sufficient capacity.\nWe estimate that our 2030 targets will require approximately 1,500 to 2,000 megawatts of additional carbon-free resources and approximately 800 megawatts of non-emitting capacity resources.\nIn addition to removing coal from our portfolio, we're seeking approximately 1,000 megawatts of renewables and non-emitting capacity resources as part of our RFP, which will be issued in December.\nAs part of this procurement, we plan to add 375 to 500 megawatts of renewables to our portfolio.\nWe will also bring on approximately 375 of non-emitting to special capacity.\nWe will work with the OPUC and parties to evaluate opportunities to procure additional resources, so the types of projects submitted in the IRP process, excuse me, the RFP process make sense for customers and are attractively priced.\nWe could see procuring about a third of our clean energy resources needed to meet the 2030 emissions target reductions with this RFP.\nWe not only need more renewables.\nWe need to upgrade the grid to integrate these resources, making it easier for customers to participate in demand response and distributed energy programs, helping to keep service reliable and affordable.\nIn our recent distributed resource, excuse me, distributed system plan.\nWe lay out plans for the grid of the future that supports robust two-way energy flows and better manages energy use, especially during peak periods.\nWe estimate that as much as 25% of flexibility needed to meet our decarbonized future would come from customers and distributed energy resources, such as solar panels, batteries, electric vehicles.\nDuring the 2021 summer heat up, we worked with customers to save 62 megawatts of power equivalent to powering 25,000 homes.\nWe're working to significantly grow this program to 500 megawatts by the end of 2023.\nWe are very pleased to have been selected by the Department of Energy as part of their connect communities program and are working with local DE&I groups on the placement of resources, such as batteries, two-way EV charging and solar panels to ensure that our customers in underserved communities participate in this clean energy transition.\nAs one of the early participants in the western energy and balance market, we have been a leader in advocating for the expansion and strengthening of wholesale markets to increase reliability, accelerate decarbonization, and lower cost for customers.\nPGE and our utility partners across the west are working to bolster reliability planning, advance integrated markets, and examine the benefits of a Western Regional Transmission Organization.\nThroughout these processes, we'll continue to advocate for rigorous resource adequacy standards.\nSustainability is foundational to our business.\nIn September, we published our ESG report, building upon our number one ranked voluntary renewable program.\nSustainability is part of the fabric of everything we do, including financing.\nWe recently adopted a green financing framework, under which we successfully placed $150 million in green bonds.\nYesterday, we filed a rate case with the Federal Energy Regulatory Commission to review our third-party transmission revenue.\nThe revenue that we receive from these new prices, we'll offset retail customer prices through a revenue credit.\nWe continue to make progress on our 2022 general rate case and have reached settlements with stakeholders.\nIn October that resolves the cost of equity and gives at 9.5% as well as the 50/50 cash structure.\nWe look forward to working with stakeholders on the remaining items.\nDawn retired as President and CEO of TransAlta in March, her deep experience in the energy sector, as well as her leadership in transforming a thermal based generation company to a leading clean renewable energy company will be important as we advance our own transformation.\nOur third quarter results reflect the ongoing opportunity and the challenge as the economy enters a new normal.\nWe experienced strong load growth from higher demand and hotter weather.\nAt the same time, volatility in the power markets was evident throughout the summer.\nThe fundamentals of our economy remained strong and are fueling strong growth in energy demand and a growing labor market with continued job growth in the region.\nThis quarter, we had strong deliveries across our customer segments with additional benefit from a favorable weather.\nOur high tech and digital services sectors continue to grow at a rapid pace 9% higher when compared to Q3 2020.\nCustomers are expanding capacity and we've seen an uptick in site selection activity by data center developers and others.\nResidential usage remains significantly elevated as remote work continues.\nWe anticipate these trends to continue and this has contributed to our strong year-over-year load growth.\nTurning to slide five.\nWe reported GAAP income of $0.56 per share in the third quarter of 2021, compared to a GAAP loss of $0.19 per share in the third quarter of 2020.\nNon-GAAP income for the third quarter of 2020 is $0.90 after removing the negative impact of the energy trading losses.\nI'll cover our financial performance quarter-over-quarter on slide six.\nBeginning with the loss of $0.19 per share for the third quarter of 2020, we will add back the $1.09 one-time impact of the energy trading losses.\nWe experienced a $0.37 increase in total revenues, primarily due to the strong economy driving growth in our service territory with the balance due to warmer weather.\nThis represents a 17% year-over-year increase in total revenues.\nOffsetting this was a $0.39 of unfavorable power cost.\nWe experience substantially higher market prices due to warmer weather and increased regional demand for capacity, as well as lower renewable generation.\nAs a result, we are forecast to be above the $30 million threshold to begin customer cost sharing pursuant to our power cost adjustment mechanism.\nThrough the quarter, we have deferred $27 million, which represents 90% of the variance above that threshold.\nWe anticipate the regulatory process related to this deferral will begin in 2022 after the pending rate case concludes.\nOur power costs this summer were not materially impacted by rising natural gas prices.\nOur portfolio is well positioned and a bit long to balance gas price fluctuation and we have significant gas storage at the 4.1 billion cubic foot North Mist facility that we can draw on as needed.\nThere was $0.11 decrease to earnings per share from cost associated with our fixed operating expenses, including $0.03 for enhanced wildfire mitigation, $0.04 of additional vegetation management, including work that was delayed as we focused on storm restoration during the second quarter, $0.02 of service restoration costs and $0.02 of miscellaneous other expenses.\nThere was an $0.18 decrease to earnings per share from administrative expense.\nHalf of the year-over-year increase is attributed to items that were unique to 2020, including $0.07 in adjustments to incentive programs, following the energy trading losses in the prior period and $0.02 from the deferral of bad debt following the approval of the COVID-19 deferral.\nThe remaining administrative expense can be attributed to $0.06 for outside services to support improvements to our customer experience, a $0.02 increase in employee benefit expenses and $0.01 from miscellaneous other expenses.\nWhile O&M was higher this quarter when compared to Q3 2020, on a year-over-year basis our cost have increased only 2% annually since 2019.\nThe fact that we have reduced planned outages by 29% year-over-year, stood up a large wildfire prevention program and greatly increased vegetation management is a testament to the efficiency we built into the O&M program.\nManaging consistent with inflation, while increasing wildfire resiliency, improving our customer experience and growing our digital capabilities demonstrates the effectiveness and efficiency of our workforce, as well as the use of technology.\nFinally, there was a $0.03 decrease to earnings per share from the following items; $0.03 benefit from lower depreciation and amortization due to plant retirements, $0.04 of higher tax expense due to the timing difference of asset retirements in 2020, and $0.02 from other unfavorable miscellaneous items.\nTurning to slide seven.\nLast month, we reached an agreement with stakeholders on cost of capital in our 2022 general rate case.\nOur agreement supports a capital structure of 50% debt, 50% equity, and a 9.5% allowed ROE.\nWe see this as a constructive outcome and look forward to discussing remaining unsettled issues with parties in the case.\nAs you see saw earlier this month, we made several regulatory filings, which we shared-in which we shared our plans to advance the strategy to meet our targets for reducing greenhouse emissions in the power we serve to customers.\nWe still plan to bid in benchmark resources into the RFP process.\nTo support our bids, we filed for an affiliated interest entity that will help support our decarbonization interest.\nOur proposal is intended to address certain structural tax disadvantages encountered by utilities due to the unintended consequences of tax normalization requirements.\nThe affiliate interest would provide a greater price benefit to our customers as PGE decarbonizes its generation portfolio.\nTurning to slide eight, which shows our updated capital forecast through 2025.\nWe increased our capital expenditure forecast by over $100 million this quarter.\nThis increase is concentrated in 2022 and is primarily associated with grid-based investments.\nWith our recent settlement in the GRC, assuming approval by the OPC, this affirms that we will not need to issue equity in 2022 to meet our capital requirements, unless there is a significant renewable addition stemming from the aforementioned RFP.\nWe continue to maintain a solid balance sheet, including strong liquidity and investment grade ratings, accompanied by a stable credit outlook.\nTotal available liquidity at $930 million is just over $1 billion.\nAt PGE sustainability is woven into the fabric of who we are as a company and we stand behind that through our actions as an organization, including in our financing plans.\nThis quarter, we renewed and increased by $150 million our revolving credit facility to include sustainability linked performance metrics.\nWe also refinanced the Wheatridge renewable energy facility with low cost debt under a green bond in alignment with our green financing framework.\nThe demand for this was evident as it was nearly six times oversubscribed.\nOur investors are keen to purchase debt linked to sustainable investments.\nGoing forward, we will seek out opportunities to tie our long-term debt toward our sustainability strategy through capital investments.\nNot only are these actions good for our business, but they're also good for society.\nTurning to slide nine.\nOur year-to-date 2021 performance remains on track and we reaffirm our guidance range of $2.70 to $2.85 and remain on track to achieve long-term earnings growth guidance of 4% to 6% from the 2019 base year.\nThe picture for 2021 and beyond remains clear, strong growth in cost demand for clean, affordable, safe, reliable and equitable energy paves the way for us to execute on our long-term financial targets and deliver value for customers and investors alike.\n Assistant:", "chosen": "compname reports q3 earnings per share of $0.56.\nreaffirms fy earnings per share view $2.70 to $2.85.\nq3 earnings per share $0.56.\nreaffirming estimate for full-year 2021 earnings guidance of $2.70 to $2.85 per diluted share.\n"}
{"prompt": "Human: Before we begin our call today, I want to remind you that in order to talk about our company, we're going to mention a few things that are not historical facts.\nThese non-GAAP measures are adjusted net loss, adjusted net income, adjusted loss per share, adjusted earnings per share, adjusted operating loss, adjusted operating profit, EBITDA, and adjusted EBITDA.\nWe're using these non-GAAP measures today because they allow us to compare performance consistently over various periods without regard to non-recurring items.\nIn addition, RPC is required to use EBITDA to report compliance with financial covenants under our revolving credit facility.\nPlease review these disclosures if you're interested in seeing how they are calculated.\nrpc.net for a copy.\nDuring the fourth quarter, we continued to execute our downsizing plans, first disclosed in October, including closing various facilities and scrapping equipment.\nIn addition, we reduced headcount by approximately 21% since the end of the second quarter.\nOur CFO, Ben Palmer, will discuss this and other financial results in more detail, after which I will have a few closing comments.\nDuring the fourth quarter, we recorded additional impairment and other charges of $10.6 million related primarily to severance and underutilized assets, bringing the total of impairment and other charges to $82.3 million in 2019.\nWe do not currently expect any additional significant charges based on this review.\nFor the fourth quarter of 2019, revenues decreased to $236 million compared to $376.8 million in the prior year.\nRevenues decreased due to lower activity levels resulting from a more pronounced fourth quarter seasonal decline than in the prior year, lower pricing, and a smaller fleet of pressure pumping equipment.\nAdjusted operating loss for the fourth quarter was $17.3 million compared to an operating profit of $19.7 million in the fourth quarter of the prior year.\nAdjusted EBITDA for the fourth quarter was $23.2 million compared to EBITDA of $61.7 million in the same period of the prior year.\nFor the fourth quarter of 2019, RPC reported a $0.07 adjusted loss per share compared to a $0.06 diluted earnings per share in the prior year.\nCost of revenues during the fourth quarter of 2019 was $176.9 million or 75% of revenues compared to $274.4 million or 72.8% of revenues during the fourth quarter of 2018.\nCost of revenues decreased primarily due to lower materials and supplies expenses and other expenses associated with lower activity levels.\nIn addition, cost of revenues declined due to lower employment costs as a result of our downsizing.\nCost of revenues as a percentage of revenues increased primarily due to significantly lower activity levels and more competitive pricing for our services.\nSelling, general and administrative expenses decreased to $36.8 million in the fourth quarter compared to $40 million in the fourth quarter of the prior year and this was due to lower employment costs.\nDepreciation and amortization expense was $40.3 million during the fourth quarter of 2019, a decrease of 5.2% compared to $42.6 million in the prior year.\nTechnical Services segment revenues for the quarter decreased 38.7% compared to the same quarter of the prior year.\nExcluding impairment and other charges, we incurred an operating loss of $17.2 million in the fourth quarter of 2019 compared to 19.9% [Phonetic] operating profit in the prior year.\nThese results were due to lower pricing and activity in the fourth quarter of 2019.\nOur Support Services segment revenues for the quarter decreased 13.2% compared to the same quarter in the prior year.\nOperating profit in the fourth quarter of 2019 was $1.2 million compared to $2.5 million in the prior year.\nOn a sequential basis, RPC's fourth quarter revenues decreased 19.5% to $236 million from $293.2 million in the third quarter due primarily to pronounced seasonally lower activity levels and slightly lower pricing.\nCost of revenues during the fourth quarter of 2019 decreased by $48.3 million or 21.5% due to lower activity levels and our cost reduction actions.\nAs a percentage of revenues, cost of revenues decreased from 76.8% in the third quarter to 75% in the current quarter due primarily to a favorable job mix within RPC's pressure pumping service line.\nSelling, general and administrative expenses decreased to $36.8 million during the fourth quarter of the current year compared to $42.6 million in the prior quarter.\nRPC generated an adjusted operating loss of $17.3 million during the fourth quarter of 2019 compared to an adjusted operating loss of $21 million in the prior quarter.\nOur adjusted EBITDA was $23.2 million compared to adjusted EBITDA of $22.8 million in the prior quarter.\nOur Technical Services segment revenues decreased by 55.6% [Phonetic] or 20.3% to $218.9 million in the fourth quarter.\nThe Technical Services segment incurred a $17.2 million operating loss in the current quarter compared to an operating loss of $18.2 million in the prior quarter.\nOur Support Services segment revenues in the fourth quarter were $17.1 million compared to $18.8 million in the prior quarter.\nOperating profit was $1.2 million in the fourth quarter compared to $1.6 million operating profit in the prior quarter.\nAt the end of the fourth quarter, RPC operated 10 pressure pumping fleets.\nWe will continue to adjust the number of fleets based on conditions and customer activity level.\nAt year-end '19, RPC's pressure pumping fleet totaled approximately 735,000 hydraulic horsepower.\nFourth quarter 2019 capital expenditures were $41.4 million and the full-year total of $250.6 million and we currently estimate 2020 capex to be approximately $80 million.\nAs 2020 begins, we are focused on improving utilization and well site execution as well as effectively managing our costs.\nWe believe the actions taken as a result of our strategic assessment better align our operations with current market conditions.\nDespite the challenging environment during 2019 and approximately $250 million of capital expenditures, we ended the year with $50 million in cash and no debt.\nWe will continue to maintain a strong balance sheet and allocate capital to maximize long-term shareholder returns.\n Assistant:", "chosen": "q4 adjusted loss per share $0.07.\nq4 revenue $236 million versus refinitiv ibes estimate of $237.6 million.\nqtrly revenue decreased by 19.5% due to seasonally lower activity levels and a smaller active fleet of pressure pumping equipment.\nrpc - during q4, continued to execute downsizing plans, including closing facilities, scrapping equipment & reducing headcount.\nrpc -in connection with preparation of q4 financial statements, additional impairment and other charges of $10.6 million in technical services segment.\n"}
{"prompt": "Human: The Everest executives leading today's call are Juan Andrade, President and Chief Executive Officer; Mark Kociancic, Executive Vice President and Chief Financial Officer.\nWe are also joined by other members of the Everest management team.\nManagement comments regarding estimates, projections and similar are subject to the risks, uncertainties and assumptions as noted in these filings.\nManagement may also refer to certain non-GAAP financial measures.\nFor nearly 50 years, Everest has been a source of strength for our customers.\nThis has never been more important than in today's public health, economic, social and natural catastrophe-impacted environment.\nOur business is running smoothly.\nAnd our people continue to demonstrate the passion, professionalism and resilience that differentiates Everest.\nI am particularly proud of Everest recently being named by Business Insurance as one of the best places to work in 2020, a meaningful achievement in the current environment.\nThe economic recovery is uneven, and there was significant natural catastrophe activity in the quarter.\nDespite this, Everest has continued to grow and generate operating profit.\nOur broadly diversified Reinsurance and Insurance franchise, our financial strength, deep distribution relationships and our focus on providing solutions to our customers represent the foundation that position us well for the strength we see in the reinsurance and Insurance Markets today.\nIn addition, we have added two exceptionally talented and seasoned global executives to our management team.\nMark Kociancic, our new Group Chief Financial Officer, joins us from SCOR, where he was the group CFO since 2013.\nJim Williamson, our new Group Chief Operating Officer, joins us from Chubb.\nBoth of these executives have made an immediate impact to Everest.\nCraig has played an important role in the growth and evolution of Everest.\nCraig will remain with the company until the end of 2020 to assist Mark with a smooth and seamless transition.\nWe have also further fortified our already strong capital base with a $1 billion senior notes offering completed on October 7.\nThis is very efficient long-term 30-year capital at a low 3.5% coupon.\nAs I said in the second quarter earnings call, we have the capital to play offense in this improving market, and we also have capital flexibility.\nWe chose to exercise some of this flexibility opportunistically, given the state of credit markets and the low borrowing rates available.\nWe will seek to deploy these proceeds as favorable market opportunities continue to develop and in support of our overall strategy to grow book value over time.\nOur already strong company is now even stronger.\nEverest's strength is evidenced by our third quarter results for the group, where despite the high frequency of natural catastrophe activity, we achieved 16% gross written premium growth and improved attritional combined ratio of 85.8%, excluding cat and pandemic impacts, net investment income of $234 million, operating income profit of $97 million, net income of $243 million, book value per share growth of 7% from year-end 2019 or 9% adjusted for dividends, and a record shareholders' equity of $9.6 billion.\nOur growth in the quarter stems from a combination of new business opportunities, improved rate levels and high retention rates on our existing book.\nThe underwriting loss for the quarter was driven by the previously announced $300 million in catastrophe losses.\nThis is in the context of an estimated $35 billion industry loss in the third quarter.\nWe also added $125 million to our COVID-19 loss provision, reflecting the ongoing nature of this event and our prudent reserving philosophy.\nThis provision is predominantly IBNR.\nExcluding catastrophes and the pandemic impact, our attritional combined ratios for the group in each of our segments, Reinsurance at 83% and Insurance at 94%, improved year-over-year and are reflective of the earnings generating power of the Everest franchise.\nUnderwriting profitability remains at the core of everything we do.\nOn a nine-month year-to-date basis, Everest has grown 15% and delivered an 88% attritional combined ratio, excluding the pandemic impact.\nEverest Reinsurance had 20% quarterly growth year-over-year.\nWe executed our strategies to underwrite a high-performing book of business with higher economic returns and lower volatility.\nWe executed on reinsurance opportunities in several classes, including facultative risk, Property & Casualty and in certain territories, including the U.S., Canada and Latin America.\nTraditional capital from highly rated carriers, like Everest, has become more relevant and supply is tight.\nWe see the favorable pricing environment continuing for the foreseeable future.\nWe also continue to be disciplined and rigorously evaluate each transaction.\nJohn Doucette is available to provide additional details on market conditions during the Q&A.\nEverest Insurance had solid execution in the quarter with continued underlying margin improvement over 2019 and 6% growth year-over-year, despite exposure reductions in certain lines given the current economic environment.\nThe attritional combined ratio, excluding the pandemic impact, improved to 94% for the quarter compared to 96% in the third quarter of 2019.\nWe are strategically managing the Insurance portfolio to build a more diversified business and steer our mix toward product lines that earn higher margins over the long term.\nOur significant position in both E&S and Retail channels give us access to a wide set of opportunities.\nFor the quarter, the main insurance growth drivers were continued rate momentum of plus 19% excluding workers' compensation, and plus 13% including workers' compensation.\nWe had strong growth across property, excess casualty and D&O, where market capacity is constrained and we are seeing the strongest rate increases and better terms.\nWe had continued strength in the excess and surplus line space.\nAnd we also had strong renewal retention in both our Retail and E&S businesses.\nMike Karmilowicz is available to provide additional details on market conditions during the Q&A.\nRegarding the ongoing COVID-19 pandemic, the $125 million loss provision in the third quarter was comprised of $110 million for Reinsurance and $15 million for Insurance.\nOur overall COVID-19 loss provision year-to-date is $435 million, of which 85% is IBNR.\nConsistent with our analytical rigor, we continue to take a measured approach to our COVID-19 loss estimation that is based on credible, fact-based and supportable information.\nWe instituted a thorough loss estimation process at the start of the pandemic.\nIt is conducted team by team and contract by contract.\nAs events unfold and more data becomes available, we are continuously testing our estimates.\nThe claims data we're seeing is consistent with our expectations.\nIt is also important to reiterate that as a reinsurer, our analysis is specific to each situation.\nAnd similar to reserving, we have established an equally prudent and rigorous claims process.\nWe evaluate claims presented based on existing policy and contract terms and conditions.\nLastly, we remain comfortable with the exposure and loss reserves in our Mortgage business in the context of the ongoing economic uncertainty from the pandemic.\nIn summary, Everest continued to perform well in the third quarter despite the uncertainty in the world today.\nWe continue to purposely seek the best opportunities to write business at attractive returns.\nWe have a talented team, a diversified global platform and a strong capital position, all of which allows us to provide attractive solutions to our clients and capture the improving opportunities in front of us.\nI am very excited to be joining the great team here at Everest with its excellent talent base and culture.\nI look forward to contributing to the company's continuing growth and success.\nI think my industry experience and skill sets will be assets to further augment the great foundation that has been built here at Everest.\nEverest delivered a strong set of financial results for the third quarter of 2020.\nWe achieved significant net income and positive operating income, continued our growth into favorable market conditions and strengthened our already robust capital position.\nFor the third quarter of 2020, Everest reported strong net income of $243 million.\nThis is more than double the $104 million of net income for the third quarter of 2019.\nOn a year-to-date basis, net income was $451 million compared to $792 million for the first nine months of 2019.\nYear-to-date, net income included $67 million of net after-tax realized capital gains compared to $90 million in the first nine months of 2019.\nThird quarter results were driven by strong premium growth across the group, strong investment income performance and improved attritional loss and combined ratios.\nWe also had Q3 catastrophe activity of $300 million, pre-tax and net of reinsurance and reinstatement premiums.\nAnd we added $125 million COVID-19 pandemic loss provision.\nYear-to-date, our COVID-19 provision stands at $435 million.\nAnd as Juan stated, it's predominantly IBNR.\nThe group experienced an underwriting loss in Q3 of $115 million due to the elevated level of natural catastrophes in the quarter as compared to an underwriting loss of $28 million in 2019.\nTurning to Everest's market position and growth.\nOn a year-to-date basis, gross written premium was $7.7 billion, up $1 billion or 15% compared to the first three quarters of 2019.\nThis reflects balanced and diversified growth in both segments, with Reinsurance up 15% and Insurance up 15% compared to last year.\nDuring the third quarter of 2020, the company reported $300 million of catastrophe losses.\nThese losses are pre-tax and net of reinsurance and reinstatement premiums and related to Hurricanes Laura, Isaias, Sally; wildfires in California and Oregon; and other events including the Midwest United States derecho windstorm.\nThe after-tax basis amount was approximately $240 million.\nOn a year-to-date basis, the results reflected net pre-tax and net of reinstatement catastrophe losses of $345 million compared to $335 million during the first nine months of 2019.\nExcluding catastrophe losses and the impact from the COVID-19 pandemic, the comparable combined ratios were 85.8% for Q3 2020 and 87.1% for Q3 2019, an 88% through the first nine months of 2020 and 87.7% for the first nine months of 2019, mostly attributable to the Reinsurance business mix changes.\nExcluding the pandemic loss estimate, the group attritional loss ratio for the third quarter of 2020 was 59.3%, down from 59.7% compared to Q3 2019.\nExcluding the pandemic loss estimate, the group attritional loss ratio for the first nine months of 2020 was 60.2%, up from 59.5% for the first nine months of 2019, primarily due to the continued change in Reinsurance business mix year-over-year.\nFor the Reinsurance segment, the Q3 2020 attritional loss ratio, excluding the pandemic loss estimate, was 57.5%, essentially flat from 57.6% in Q3 2019.\nYear-to-date, it stood at 58.5%, excluding the pandemic loss, up from 57.5% for the first nine months of 2019.\nThis increase was related to the continued shift toward more pro rata business, which carries a higher loss pick versus excess of loss, but allows us to benefit directly from the firming primary market.\nThe Reinsurance division has $323 million of year-to-date operating profitability, given its $294 million of year-to-date net investment income.\nFor the Insurance segment, the Q3 2020 attritional loss ratio, excluding the impacts from the pandemic, was 64.8%, down from 65.9% in Q3 2019.\nYear-to-date, it stood at 65.2%, down compared to 65.6% for the first nine months of 2019.\nOur U.S. franchise, which makes up the majority of our Insurance business, continues to run an attritional combined ratio in the low 90s, excluding the pandemic loss estimate.\nThe Insurance division has $62 million of year-to-date operating profitability, given its $126 million of year-to-date net investment income.\nThe Q3 group commission ratio of 20.2% was down compared to the prior year Q3 level of 23.3%.\nThis was driven by business mix and Reinsurance, notably more facultative business written and earned, and also higher ceding commission received in the Insurance segment.\nThe group commission ratio of 21.7% year-to-date was down compared to the prior year figure of 23%, largely due to the same reasoning.\nThe group expense ratio remains low at 6.1% for the first nine months of 2020, in line with our expectations.\nQ3 investment income increased strongly to $234 million versus $181 million for Q3 2019.\nFor investments, pre-tax investment income was $420 million year-to-date as compared to $501 million for the first nine months of 2019.\nThe fixed income portfolio generated $408 million of investment income year-to-date compared to $383 million for the same period last year.\nAs expected, net investment income increased substantially as we recorded $89 million quarter-to-date of largely fair market value adjustments of our limited partnership investments in this line.\nThe limited partnership result was due to the impact of improvement in the economy and financial markets.\nAs a reminder, we report our limited partnership income one quarter in arrears.\nThe pre-tax yield to maturity on the investment portfolio was 3.1%, diminishing from 3.4% one year ago.\nWe continue to hold a well-diversified, high credit quality bond portfolio with conservative duration at approximately 3.5 years.\nThe current overall fixed income reinvestment yields are averaging approximately 2%.\nOther income and expense included $38 million of foreign exchange gains during the first nine months of 2020 compared to a loss of $44 million for 2019.\nRegarding income taxes, our effective tax rate on operating income was minus 0.1% through Q3.\nThere is a year-to-date tax benefit of $31 million related to the CARES Act that we reported in the first quarter.\nExcluding this benefit, the effective tax rate on year-to-date operating income would be 8.9%.\nAlong with growth and profitability, positive cash flow was a highlight this quarter as we generated record operating cash flows of approximately $1.1 billion for the third quarter of 2020 compared to $633 million in Q3 2019, reflecting the strength of the growth in premiums in 2020 compared to 2019.\nEverest has a strong balance sheet, which was endorsed by the market with our very attractively received debt raise during October.\nEverest solidified its very strong capital position in the aforementioned opportunistic $1 billion senior notes offering in early October with a low coupon of 3.5% and 30-year tenure under very favorable market conditions.\nThis represents very efficient long-term capital for Everest.\nThe debt leverage ratio pro forma for Q3 stands at 15.1%.\nShareholders' equity for the group was $9.6 billion at the end of the third quarter, up from $9.1 billion at year-end 2019.\nThe increase in shareholders' equity in the first nine months of 2020 is largely due to the $451 million of net income; the mark-to-market impact on the fixed income assets, which increased by $349 million from December 31, 2019 plus $387 million of paid dividends and share buybacks.\nNet book value per share stood at $239.98, up 7% from year-end 2019, or plus 9.3% when adjusted for dividends.\nAgain, I'm very excited about the future of Everest and the opportunity to further help drive its performance off a strong base.\n Assistant:", "chosen": "qtrly gross written premium of $2.8 billion, reflecting growth of 16% over same quarter in 2019.\n"}
{"prompt": "Human: Actual results could differ materially from expected results.\nLast night, we reported a loss of $1.24 in adjusted operating EPS, which included $474 million in COVID-19 impacts or $5.31 per share.\nIn the context of a quarter that saw pandemic related deaths reached their highest peak in some of our markets.\nThis was obviously a challenging quarter for us.\nBut if I take a step back, our core business performed well overall, and we consider this another solid quarter, further demonstrating the resilience of our global business platform and franchise.\nBoth our Asia Traditional and Financial Solutions businesses had excellent results.\nU.S. Group and individual health performed well, and Australia was breakeven.\nDuring the quarter, we completed a number of in-force transactions, deploying $100 million in capital, which will further add value to our underlying earnings engine.\nThe transaction pipeline remains very good with opportunities in all our regions.\nOur approach to capital deployment during this crisis remained balanced and disciplined as we seek opportunities to deliver long-term value.\nI'm also proud to announce that for the 10th consecutive year, RGA has been ranked #1 for business capabilities on a global basis by NMG in their 2020 global reinsurance report.\nLeveraging our capabilities and being a trusted partner as well as a thought leader, has allowed us to deliver value to our clients throughout the past year.\nA point of personal pride in this organization and a tribute to all our employees and our culture of client centricity.\nResults in our U.S. Mortality business were significantly impacted by the certain COVID-19 claims seen in the first three months of the year.\nConsidering the elevated level of population depth, these results are not unexpected.\nOur large claim experience was in line this quarter after being very favorable in the previous two quarters.\nAnd our mortality performance over the past 12 months, after adjusting for COVID-19 claims, has been in line with our expectations.\nTodd and Jonathan will provide additional information on COVID-19 impacts for all our businesses.\nAs we look forward, there is reason for optimism as increasing vaccination rates in the U.S., U.K. and Canada should reduce the level of COVID-19 deaths through the remainder of the year.\nAnd other markets should follow, as vaccine availability continues to expand.\nRGA's business fundamentals are strong, our business prospects are robust and we are taking appropriate actions to protect our business and position RGA for profitable growth.\nAs a final point, it is worth reflecting that through the end of the first quarter, RGA has incurred over $1.2 billion in COVID-19 claims since the pandemic began.\nOur ability to absorb these claims is a testament to our financial strength, but it also serves as a reminder of the important purpose that our industry and RGA play in helping millions of families around the world who have been affected by this pandemic.\nRGA reported a loss for the quarter of $115 million on a pre-tax adjusted operating basis.\nAdjusted operating earnings per share was a loss of $1.24 per share, which includes COVID-19 impacts of $5.31 per share.\nOur trailing 12-month adjusted operating ROE was 3.7%, which was reduced by COVID-19 impacts of 8.8%.\nReported premiums increased 3% in the quarter.\nGrowth was 5%, excluding the premium decline in Australia, reflecting our continued caution in that market.\nThe effective tax rate on pre-tax adjusted operating loss was 26.9% for the quarter, above the expected range of 23% to 24% due to the geographical mix of the earnings.\nBeginning with the U.S., the U.S. and Latin America traditional segment reported a pre-tax, adjusted operating loss of $344 million in the quarter, including COVID-19 claim cost of $358 million.\nLet me spend a minute providing a little bit more detail.\nFor individual mortality, approximately $340 million of claim costs are attributed to COVID-19.\nThe approach used to estimate COVID-19 claims is consistent with that used throughout 2020.\nWe also experienced some excess mortality claims in the quarter that is likely directly or indirectly related to COVID-19.\nWhich is not unexpected, given the excess mortality experience that has been observed in the general population throughout the pandemic.\nIt is important to note that our mortality experience over the past 12 months, excluding COVID-19, was in line with our expectations.\nOur group and individual health business both performed better than our expectations in the quarter.\nVariable investment income was strong in the quarter as the limited partnership investment performance was favorable.\nOur asset-intensive business reported results modestly below the expected run rate due to some unfavorable policyholder experience.\nU.S. Capital Solutions reported results that were in line with our expectations.\nThe traditional segment, first quarter results reflected COVID-19 claim cost of approximately $26 million.\nOur Financial Solutions segment performed well in the first quarter, reflecting favorable longevity experience, which we attribute to COVID-19.\nIn the Europe, Middle East and Africa segment, our traditional business results reflected a meaningful level of COVID-19 claims in both the U.K. and South Africa.\nWe estimate the COVID-19 claim cost for the EMEA traditional segment in the quarter were $98 million.\nEMEA's Financial Solutions business results -- reflect the negative effects of model updates and the longevity offset from COVID-19 was lower-than-expected as a result of longer reporting lags, but we expect that benefit to come through in future periods.\nTurning to our Asia Pacific traditional business.\nIn the first quarter, Asia had favorable underwriting experience across most of the region.\nWhile we did see some COVID-19-related impacts, they were modest and within our expectations.\nAustralia results were breakeven for the quarter.\nWhile there remains some uncertainty in the Australian market, we are continuing to see progress and remain prudent in our approach to new business and focused on actions to improve results.\nOur Asia Pacific Financial Solutions business continued to produce good results in the first quarter, benefiting from organic growth and favorable experience on existing treaties.\nThe Corporate and Other segment reported pre-tax adjusted operating income of $94 million.\nAdjusting for that, the results were better-than-expected from our run rate and reflected lower overall expected expenses.\nGoing forward, there is the potential for additional volatility and variable investment income from the change in unrealized gains and losses on our equity method investments.\nMoving on to investments.\nThe non spread portfolio yield for the quarter was 5.67%, reflecting strong variable investment income.\nExcluding the previously mentioned accounting correction, the yield was 4.52%, as we had strong contribution this quarter from the limited partnership investments.\nOur overall investment portfolio, average quality of A was maintained and credit impairments were negligible.\nWe continue to have ample liquidity as we continue to prudently manage capital during the remainder of the pandemic.\nRGA's global platform, strong balance sheet and effective capital management strategy have been vital to RGA's success during this pandemic.\nWhile we expect to have some additional COVID-19 claims in 2021, we feel confident about RGA's ability to produce attractive financial results in the future.\nAs Anna mentioned, Q1 COVID-19 general population deaths were at their highest levels in many countries, notably the U.S. and the U.K.\nOur models continue to track well to actual results and our overall COVID-19 mortality claim costs, which only include claims that we believe will ultimately be reported with the COVID-19 cause of death, were within our expected range based on the level of general population deaths.\nThe U.S. continues to be the driver of our mortality claim costs, accounting for 74% of our global total.\nThis was approximately $17 million per 10,000 U.S. general population deaths at the lower end of our model estimates and very consistent with the prior quarter.\nBoth the U.K. and Canada had Q1 COVID-19 mortality claim costs in excess of our model ranges, which we are attributing primarily to short-term volatility.\nThe U.K. and Canada had a greater number of larger COVID-19 claims in the quarter relative to what we saw in 2020.\nAfter considering this quarterly volatility, we are reiterating our previous rules of thumb for claim cost estimates in these markets as shown on slide 12.\nAll other markets combined, accounted for approximately 10% of our COVID-19 mortality claim costs in line with our expectations, with the majority of this coming from South Africa, consistent with the high level of general population death they experienced this quarter.\nIndia accounted for less than 1% of our COVID-19 claim costs in the quarter.\nBoth countries have experienced a significant level of excess mortality beyond what is being reported in general population COVID-19 figures, much of which we believe is likely COVID-19.\nSince the beginning of the pandemic, over the last 12 months, South Africa has accounted for approximately 5% of our COVID-19 mortality claim costs and India approximately 2%.\nThe majority of our Q1 longevity experience is based on reporting from Q4 2020 and the significant increase in U.K. general population mortality in Q1 of 2021 is not yet reflected in our results.\nWe do expect to see this impact over the next several quarters as reporting is received.\nGoing forward, the ultimate longevity offset to our global mortality claim costs may be lower than our 10% rule of thumb, given our concentration of this business in the U.K. and the success of their vaccination efforts to date.\nThe significant reduction in general population mortality rates as vaccination levels rise in the U.S., the U.K. and Canada is expected to reduce our COVID-19 mortality claim costs over the remainder of 2021.\nAt the same time, we continue to closely monitor the impact that the pandemic variants are having and countries that are at earlier stages of vaccine rollouts where higher mortality could persist for a longer period of time.\nLet me hand it back to Todd.\n Assistant:", "chosen": "q1 adjusted operating loss per share $1.24.\nin q1, consolidated net premiums totaled $2.9 billion, an increase of 3% over last year's q1.\n"}
{"prompt": "Human: Then Tom Dineen, our Chief Financial Officer, will give an overview of the third quarter 2021 financial results, and then I will discuss our operations and the state of the market.\nCopy of these documents may be obtained by contacting the company or the SEC or on the company website at ruger.com/corporate or, of course, the SEC website at sec.gov.\nWe do reference non-GAAP EBITDA.\nNow Tom will discuss the company's third quarter 2021 results.\nFor the third quarter of 2021, net sales were $178.2 million and diluted earnings were $1.98 per share.\nFor the comparable prior year period, net sales were $145.7 million and diluted earnings were $1.39 per share.\nFor the first nine months of 2021, net sales were $562.7 million and diluted earnings were $6.64 per share.\nFor the corresponding period in 2020, net sales were $399.6 million and diluted earnings were $3.31 per share.\nThe substantial increase in profitability for the third quarter compared to the third quarter of 2020 was primarily attributable to the increase in sales and production, resulting in favorable leveraging of fixed costs including depreciation, engineering and other indirect labor expenses.\nCompared to the second quarter of 2021, profitability declined principally due to three factors: First, all of our firearms facilities took a very well-deserved shutdown week in July, which reduced the number of workdays in the quarter to 59 compared to 64 workdays in Q2.\nThis decrease in production reduced sales and resulted in some unfavorable deleveraging of fixed costs.\nSecond, after a relatively quiet second quarter, COVID positive cases in our plants were then tripled in the third quarter.\nThis resulted in significant increases in lost production.\nAnd third, following six quarters of exceptional demand, excess resales decreased from the second quarter, adversely impacting our overall profitability.\nOur strong financial results yielded significant cash generation.\nDuring the first nine months of 2021, we generated $117 million of cash from operations.\nWe reinvested $15.6 million of that back into the company in the form of capital expenditures.\nWe estimate that 2021 capital expenditures will be approximately $20 million, predominantly related to new product development.\nOur ability to shift manufacturing equipment between cells and between facilities improves our overall utilization and allows for reduced capital investment.\nOur balance sheet at October 2, 2021, remain strong.\nOur cash and short-term investments, which are invested in U.S. T-bills totaled $192.7 million.\nOur current ratio was 3.8:1, and we had no debt.\nOur stockholders' equity was $338.1 million, which equates to a book value of $19.21 per share, of which $10.95 per share was cash and short-term investments.\nIn the first nine months of 2021, we returned $45.2 million to our shareholders through the payment of dividends.\nOur Board of Directors declared a $0.79 per share quarterly dividend for shareholders of record as of November 15, 2021, payable on November 30, 2021.\nUpon receiving this $0.79 quarterly dividend, shareholders will have received $3.36 of dividends per share in 2021.\nAs a reminder, our quarterly dividend is approximately 40% of net income, and therefore, it varies quarter-to-quarter.\nThat's the financial update for the quarter.\nDemand for our products has remained strong.\nDespite a moderation of overall industry demand, as reflected in the last two quarters of adjusted NICS, we shipped all of the firearms that we built this quarter without the need to aggressively promote or discount any of our products.\nWe've just begun to replenish the distributor and retail inventories that were largely depleted over the past 18 months, putting us in a great position as we head into the fourth quarter, which has traditionally been a period of strong demand.\nThe estimated unit sell-through of the company's products from the independent distributors to retailers increased 9% in the first nine months of 2021 compared to the prior-year period.\nFor the same period, the National Instant Criminal Background Check System, background checks, as adjusted by the National Shooting Sports Foundation, commonly referred to as NICS checks, decreased 11%.\nThe increase in the sell-through of the company's products compared favorably to the decrease in adjusted NICS background checks, and may be attributable to strong consumer demand for Ruger products, increased production in 2021 and the introduction of new products that have been met with strong demand.\nNew product development continues to drive results.\nThe MAX-9 pistol and the Ruger LCP MAX pistol, which were both launched in 2021 remain in strong demand.\nIn the first nine months of 2021, new product sales represented $116 million or 22% of firearm sales compared to $88 million or 24% of firearm sales in the first nine months of 2020.\nAs a reminder, we include only major products introduced in the past eight quarters in our new product sales metric.\nDerivatives, product line extensions of mature product families and models introduced more than two years ago are not included.\nWe are hard at work on some exciting new product initiatives, including the return of Marlin lever action rifles, which we begin -- plan to begin shipping later in the fourth quarter.\nSince March of 2020, our workforce has been strengthened by 370 folks, an increase of just over 20%, and our quarterly unit production has increased by more than 160,000 units or 45% during that period.\nA 20% increase in personnel yielding a 45% increase in production.\nThat is a tremendous accomplishment by our operations teams at all of our manufacturing plants.\nDespite the growth in production at the end of third quarter 2021, our finished goods inventories remained near historic lows and distributor inventories of Ruger products were 150,000 units lower than they were at the end of 2019, the last time inventories were at what we would consider normal or expected pre-COVID-19 levels.\nAs Tom mentioned earlier, after an unprecedented 16-month run of seemingly insatiable product demand and continual monthly production increases, we took a one week shutdown during the first week of July.\nThis is our first shutdown in two years, which gave our workforce a very well-deserved break and allowed us to perform some routine maintenance and reconfigure some of our manufacturing operations.\nThe shutdown reduced our third quarter production sales and earnings, but that was a small price to pay.\nIt was the right thing to do, and I'm glad we did it.\nOur dedicated and hard-working folks deserved and needed a break.\nAnd after the shutdown, we are better prepared as we head into what we expect will be a busy fourth quarter and 2022.\nSince the onset of the COVID-19 pandemic in March 2020, we have remained proactive in maintaining the health and safety of our employees and mitigating its impact on our business.\nWe provide all hourly employees with additional paid time off and offer incentives to any employee who becomes vaccinated.\nIf practical, we allow employees to work remotely.\nAnd we continue to follow robust cleaning, sanitizing and social distancing protocols to maintain a cleaner and safer workplace.\nWith the United States once again seeing a rise in COVID-19 cases in positivity rates, we remain vigilant and are proactively adjusting our plan accordingly to keep our associates healthy and safe and to minimize any disruption to our business.\nOur financial strength, evidenced by our debt-free balance sheet provides financial security and flexibility as we manage through the challenges like COVID-19 and remain focused on our long-term goals and the creation of shareholder value.\nIn the third quarter, we added a 225,000 square foot facility in Mayodan, North Carolina, about 1.5 miles down the road from our original Mayodan building that we purchased in 2013.\nThis new facility doubles the size of our footprint in Mayodan and provide some room for expansion.\nWe moved our finished goods inventory, our ShopRuger operations and our customer service call center into the new facility.\nThis freed up some manufacturing space in our original building in addition to the overall -- excuse me, to the available space in the new facility.\nThose are the highlights of the third quarter of 2021.\nOperator, may we have the first question?\n Assistant:", "chosen": "compname reports q3 sales of $178.2 million.\ncompname reports third quarter diluted earnings of $1.98 per share and declares quarterly dividend of 79\u00a2 per share.\nq3 earnings per share $1.98.\nq3 sales $178.2 million.\n"}
{"prompt": "Human: We appreciate your time and interest in Raymond James Financial.\nWith us on the call today are Paul Reilly, Chairman and Chief Executive Officer; and Paul Shoukry, Chief Financial Officer.\nCalling your attention to slide two.\nThese statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, anticipated timing and benefits of our acquisitions, including our proposed acquisitions of Charles Stanley PLC and TriState Capital Holdings, and our level of success in integrating acquired businesses, anticipated results of litigation and regulatory developments, impacts of the COVID-19 pandemic or general economic conditions.\nWe urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q and Forms 8-K, which are available on our Investor Relations website.\nDuring today's call, we will also use certain non-GAAP financial measures to provide information pertinent to our management's view of ongoing business performance.\nI want to first, by apologizing, I'll sound like a broken record, using the word record over and over again.\nIt really was an outstanding year and quarter.\nI wish management could take credit, but it is really the work of our advisors and associates that delivered these results.\nTheir dedication and perseverance during the fiscal year was amazing.\nWe've proven once again that focusing on our time-tested client-first strategy and providing outstanding service to our advisors and their clients will guide us through uncertain economic and global conditions, in this case, in record-setting fashion.\nThe record results we generated would not have been possible without everyone's contribution.\nStarting on slide four with our quarterly results.\nThe fiscal fourth quarter capped off what was a record fiscal year on a number of fronts.\nThe firm reported record quarterly net revenues of $2.7 billion and record quarterly net income of $429 million, or earnings per diluted share of $2.02, which reflects the impact of the three for two stock split in September.\nExcluding the $10 million of acquisition-related expenses, quarterly adjusted net income was $437 million and adjusted earnings per diluted share equaled $2.06.\nThe increase in quarterly net revenues was largely driven by record investment banking revenues and record assets under management and related administrative fees, primarily due to higher private client group assets and fee-based accounts.\nAnnualized return on equity for the quarter was 21.3% and adjusted annualized return on tangible common equity was 24.1%, a very impressive result, especially in the near zero-rate environment and given our strong capital position.\nMoving to slide five.\nWe ended the quarter with record total client assets under administration of $1.18 trillion, up 27% on a year-over-year basis and 1% sequentially.\nWe also achieved record PCG assets and fee-based accounts of $627 billion and record financial assets under management of $192 billion.\nWe continue to focus on supporting advisors and their clients through leading technology solutions and a client-focused culture.\nAs a result, we had a fantastic year in terms of advisor retention as well as record results in recruiting new advisors to the Raymond James platform through our multiple affiliation options.\nWe ended the quarter with records of 8482 financial advisors, net increases of 243 over the prior period and 69% over the preceding quarter, representing a new record during the fiscal year we recruited financial advisors with approximately $330 million of trailing 12-month production and approximately $54 billion of client assets to our domestic independent contractor and employee channels.\nAlso in the Private Client Group, advisors generated domestic net new assets of approximately $83 billion in fiscal 2021, representing 10% of domestic PCG assets at the beginning of the fiscal year, a very strong result reflecting our excellent retention and record recruiting.\nAdditionally, this year, new account openings and advisor productivity were very strong contributing to the excellent net new asset results.\nAlso worth noting on the slide is the impressive loan growth at Raymond James Bank during the quarter, up 5% sequentially to a record $25 billion.\nThis growth was driven by securities-based loans to the Private Client Group clients as well as a strong corporate loan growth.\nMoving to segment results on slide six.\nThe Private Client Group generated record quarterly net revenues of $1.8 billion and pre-tax income of $222 million, a 12.3% pre-tax margin reflecting significant operating leverage over the past year.\nThe Capital Markets segment generated record quarterly net revenues of $554 million and pre-tax income of $183 million, representing an extremely impressive 33% pre-tax margin to net revenues.\nThese record results were driven by record investment banking revenues, strong tax credit fund revenues and solid fixed income brokerage revenues.\nThe Asset Management segment generated record net revenues of $238 million and record pre-tax income of $114 million, up 29% and 46% over the year ago period respectively.\nThese results were primarily due to growth in financial assets under management, driven by net inflows to fee-based accounts in the Private Client Group partially offset by market depreciation and net outflows for the Carillon Tower Advisers during the quarter.\nRaymond James Bank generated quarterly net revenues of $176 million and pre-tax income of $81 million.\nQuarterly net revenues increased 9% over the year ago quarter, as higher levels of earning assets offset year-over-year compression in the bank's net interest margin.\nSequentially, net revenues grew 4% due to higher asset balances during the quarter.\nThe pre-tax income growth year-over-year was due to the aforementioned revenue growth and lower bank loan provision for credit losses in the current quarter.\nCompared to the preceding quarter, the bank's pre-tax income declined largely due to a reserve release in the preceding quarter compared to a loan loss provision, primarily associated with the strong loan growth during the fiscal fourth quarter.\nLooking at the fiscal year 2021 results on slide seven, we generated record net revenues of $9.76 billion, up 22% over fiscal year 2020 and record net income of $1.4 billion, up 73% over fiscal 2020.\nExcluding losses on the extinguishment of debt and acquisition-related expenses during the year, adjusted net income was $1.49 billion, up 74% over adjusted net income in fiscal 2020.\nMoving to the fiscal year results on slide eight.\nThe Private Client Group, Capital Markets and Asset Management segments, generated record net revenues and record pre-tax income and all of our segments realized substantial operating leverage during the fiscal year.\nOnce again, these results reinforce the value of our diverse and complementary businesses.\nI'll begin with consolidated revenues on slide 10.\nRecord quarterly net revenues of $2.7 billion grew 30% year-over-year and 9% sequentially.\nRecord asset management fees grew 8% sequentially, commensurate with the sequential increase in the beginning of the quarter balance of fee-based assets.\nPrivate Client Group assets and fee-based accounts were up 2% during the fiscal fourth quarter, providing a modest tailwind for this line item for the first quarter of fiscal 2022.\nConsolidated brokerage revenues of $541 million grew 9% over the prior year, but declined 2% from the preceding quarter.\nInstitutional fixed income brokerage revenues remain solid, albeit down from the strong levels of the comparison periods.\nBrokerage revenues in PCG were up 17% on a year-over-year basis, but flat sequentially due to lower trading volumes, which offset the benefit from higher asset balances and associated trailing commissions.\nFor the fiscal year, brokerage revenues were up 13% to a record $2.2 billion, reflecting records for both PCG and fixed income, which had a fantastic year that was a testament to their leading position in the depository segment.\nAccount and service fees of $170 million increased 21% year-over-year and 6% sequentially, largely due to higher average mutual fund assets driving higher associated service fees.\nPaul already discussed our record investment banking results this quarter.\nSo let me touch on other revenues.\nOther revenues of $74 million were up 35% sequentially, primarily due to higher tax credit funds revenues.\nWe also had $18 million of private equity valuation gains during the quarter of which approximately $5 million were attributable to non-controlling interest reflected in other expenses.\nMoving to slide 11.\nClients' domestic cash sweep balances, which are the primary source of funding for our interest-earning assets and the balances with third-party banks that generate RJBDP fees ended the quarter at a record $66.7 billion, up 6% over the preceding quarter and representing 6.3% of domestic PCG client assets.\nAs we continue to experience growing cash balances and less demand from third-party banks during fiscal 2021, $10.8 billion of client cash is being held in the client interest program at the broker dealer.\nOver time that cash could be redeployed to our bank or third-party banks as capacity becomes available, which would hopefully earn a higher spread than we currently earn on short-term treasuries.\nOn slide 12, it was great to see an 8% sequential increase in the combined net interest income and BDP fees from third-party banks to $198 million.\nThis growth was largely attributable to strong asset growth and a resilient net interest margin at Raymond James Bank, which remained right at 1.92% for the quarter.\nWe expect the bank's NIM to settle right around 1.9% over the next couple of quarters.\nThe average yield on RJBDP balances with third-party banks remained flat at 29 basis points in the quarter.\nIf banks demand for deposits doesn't improve from current levels, we believe there will be downward pressure on this yield in fiscal 2022, especially in the back half of the fiscal year, which is why we have been so focused on generating on-balance sheet growth in assets that could deliver good risk-adjusted returns.\nMoving to consolidated expenses on slide 13.\nFirst our largest expense compensation.\nThe compensation ratio decreased sequentially from 67.2% to 65.8% largely due to record revenues in the capital markets segment, which had a very low 52% compensation ratio during the quarter.\nGiven our current revenue mix and disciplined management of expenses, we are confident we can maintain a compensation ratio of 70% or lower in this near-zero short-term interest rate environment.\nAnd as we experienced in fiscal 2021, we can do meaningfully better than 70% with Capital Markets revenues at or near these record levels, which is our expectation for at least the next quarter or two.\nNon-compensation expenses of $361 million decreased 15% sequentially, primarily driven by the $98 million loss, on extinguishment of debt in the fiscal third quarter.\nSomewhat offsetting this favorable variance, we had a modest provision for credit losses during the quarter, compared with a bank loan loss reserve release in the fiscal third quarter.\nOverall, our results in fiscal 2021 show, we have remained focused on managing controllable expenses, while still investing in growth and ensuring high service levels for advisors and their clients.\nWhile we are still finalizing our fiscal 2022 budget, we do expect expenses to increase meaningfully in fiscal 2022, for a variety of reasons.\nFirst and foremost, we are going to continue investing in people and technology, to support the phenomenal growth of our business over the past year, ensuring we maintain very high service levels and leading technology solutions for advisors and their clients.\nWe also expect business development expenses to pick-up, as travel recognition trips and conferences have already started resuming in the fiscal first quarter, which our advisors and associates are really excited about.\nJust as a reminder, business development expenses totaled about $200 million in fiscal 2019, before the start of the pandemic.\nAdditionally, whereas we had a $32 million net benefit for credit losses in fiscal 2021, we would expect bank loan loss provisions for credit losses associated with net loan growth, in fiscal 2022.\nSlide 14 shows the pre-tax margin trend over the past five quarters.\nPre-tax margin was 20.8% in the fiscal fourth quarter of 2021.\nAnd adjusted pre-tax margin was 21.2%, which was boosted by record revenues and still relatively subdued business development expenses.\nAt our Analyst and Investor Day in June, we outlined a pre-tax margin target of 15% to 16% in this near-zero interest rate environments.\nAnd right now, we believe, the top end of that range is an appropriate target given the aforementioned expense growth, we currently expect in fiscal 2022.\nBut, as we experienced during the fiscal year, there is a meaningful upside to our margins, when Capital Markets revenues are as strong as they have been in fiscal 2021.\nOn slide 15, at the end of the quarter, total assets were approximately $61.9 billion an 8% sequential increase, reflecting solid growth of loans at Raymond James Bank as well as a substantial increase in client cash balances being held on the balance sheet.\nLiquidity and capital remained very strong.\nThe total capital ratio of 26.2% and a Tier 1 leverage ratio of 12.6% are both over double the regulatory requirements to be well capitalized, giving us significant flexibility to continue being opportunistic and grow the business.\nYou can see that RJF corporate cash at the parent ended the quarter at $1.15 billion, decreasing 26% during the quarter, as we have restricted the cash that we plan on using to close on the Charles Stanley acquisition, which we currently expect to close in the first or second quarter of fiscal 2022, for as soon as we receive the requisite regulatory approvals.\nSlide 16 provides a summary of our capital actions, over the past five quarters.\nDuring the fiscal year, we repurchased nearly 1.5 million shares, split adjusted for $118 million.\nAs of October 27th, $632 million remained under the current share repurchase authorization.\nDue to the restrictions following our announced acquisition of TriState Capital Holdings, we do not expect to repurchase common shares until after closing.\nLastly, on slide 17, we provide key credit metrics for Raymond James Bank.\nThe credit quality of the bank's loan portfolio remains healthy with most trends continuing to improve.\nCriticized loans declined and non-performing assets remain low at just 20 basis points.\nThe bank loan loss provision of $5 million was primarily driven by strong loan growth during the quarter.\nThe bank loan allowance for credit losses as a percent of loans held for investment, declined from 1.34% in the preceding quarter to 1.27% at quarter end.\nFor the corporate portfolios these allowances are higher at around 2.25%.\nOverall, I'm very pleased with our fantastic results for this quarter and the fiscal year, which exceeded many records.\nAs for our outlook, we are well positioned entering fiscal 2022 with strong capital ratios, quarter-end records for all of our key business metrics and strong activity levels for financial advisor recruiting and investment banking.\nIn the Private Client Group segment, results will benefit modestly by starting the fiscal first quarter with a 2% sequential increase of assets in fee-based accounts.\nAdditionally, based on our robust recruiting pipeline, we hope to continue our current recruiting trend as prospective advisors are attracted to our client-focused values and leading technology platforms.\nIn the Capital Markets segment, the investment banking pipeline remains very strong and we expect a solid fixed income brokerage results, driven by demand from the depository client segment.\nIn the Asset Management segment, if equity markets remain resilient, we expect results will be positively impacted by higher financial assets under management.\nAnd Raymond James Bank should continue to grow, as we have ample funding and capital to grow the balance sheet.\nWe will continue to focus on lending to PCG clients through our securities-based loans and mortgages and we will continue to be selective and deliberate in growing our corporate loan and agency-backed securities portfolio.\nAs we look ahead, we remain focused on the long-term and our long-term growth.\nAnd as we've outlined at our recent Analyst and Investor Day, those key growth initiatives include driving organic growth across our core businesses continuing to expand our investments in technology and sharpening our focus on strategic M&A.\nOur recent announcements to acquire TriState Capital and Charles Stanley Group demonstrate our focus on these initiatives and our commitment to deploy excess capital over time.\nWe believe these acquisitions stay true to our long-standing criteria, which is a good cultural fit, a strategic purpose and makes sense for our shareholders.\nThese results are a testament to the dedication of everyone in the Raymond James family.\n Assistant:", "chosen": "raymond james qtrly earnings per share $2.02.\nqtrly net revenues of $2.70 billion, up 30% over prior year's fiscal q4.\nqtrly earnings per share $2.02.\nqtrly adjusted earnings per share $2.06.\nquarter-end private client group assets under administration of $1.12 trillion, up 26% over sept 2020.\n"}
{"prompt": "Human: We're excited to share these strong results with you.\nBut before I turn things over to Jay Farner, I will read our disclaimers.\nToday's call is to provide you with information regarding our fourth-quarter and full-year 2020 performance in addition to our financial outlook.\nOur commentary today will also include non-GAAP financial measures.\nAnd with that, I'll turn things over to Jay Farner to get us started.\nThe excellent results that we're about to discuss and the innovations that drove them are a testament to your focus and dedication in what was an incredibly difficult year for the world.\nYour contributions to our clients and communities were a shining example of how successful our for-more-than-profit mindset can truly be.\nThe platform continues to be the key to our long-term success in the verticals where we operate as well as the record results that we've achieved in 2020.\nOver the next few minutes, you'll see how the technology that we've built and refined over decades will continue to drive success, not only in the products that you're familiar with today, but also in product extensions and entirely new verticals in the future.\nIf you were to ask us what our most important product is, we'd say it's the platform itself.\nIn walking through our results, I'll provide updates on each of the key pillars of the Rocket Platform, our technology, the strength of our brand, the Rocket Cloud Force, which I'll discuss later, and our data science foundation.\nI'll finish today's remarks by talking about how our platform allows us to continue to grow and become more efficient in our existing lines of business while also launching and rapidly scaling new businesses.\nOur mission over the last several decades has been to take the most complicated and stressful transactions in life and simplify them with technology.\nWhether those transactions are mortgage, real estate, auto sales, or any number of new initiatives we're currently incubating, we provide a simple digital process, exceptional client experience, and certainty.\nThis mission began in 1998 when our founder and Chairman, Dan Gilbert, wrote an email committing all of the company's resources to moving online.\nHis vision was simple, but decades ahead of its time.\nMost of the Internet companies of that era focused on problems like search, advertising, or basic e-commerce.\nDan saw things differently.\nHe spotted the potential to take the most complex transaction in a consumer's life, the buying and financing of a new home, and leverage technology to make it accessible online to consumers across the country.\nFor more than two decades, we've been quietly building our technology platform right here in Detroit to transform the way our clients experience life's most important events.\nWe've continued to strengthen our digital products and infrastructure in 2020, deploying nearly 4,500 product features throughout the year and delivering improvements to our platform every 28 minutes on average.\nSupporting our platform is our strong national brand that consumers and partners know and trust.\nAs we grow, we continue to invest and find new ways to extend our reach and expand our marketing channels we leverage, allowing us to connect with more and more clients.\nI'm pretty sure the majority of you were among the nearly 100 million fans who watched the Super Bowl a couple of weeks ago.\nIn that game, we ran two 60-second advertisements highlighting that \"certain\" is better when it comes to buying a home.\nWe aired one commercial, highlighting rocket mortgage and our technology that helps bring certainty to the home buying process, something that is needed now more than ever in today's red hot real estate market.\nThe second demonstrated the significant role mortgage brokers play in American homeownership.\nAs you know, brokers are important partners as we continue to extend the reach of our platform.\nThis massive exposure, the first-ever national advertisement showcasing brokers during a super Bowl allows them to align with the power of the Rocket brand to create differentiation in their local markets.\nOur ads were ranked Nos.\n1 and 2 on USA Today's ad meter, which I am certain is the most prestigious consumer ranking of top Super Bowl ads.\nThis means not only were our ads led by millions of consumers, but also received tremendous lift and visibility through social media, news articles, and TV networks playing our ads for free.\nAll told, our Super Bowl activation resulted in more than 3.3 billion consumer impressions.\nWhen you look at the areas where we continue to excel and set the standard, you see both a company and a brand that some of the most well-respected organizations in the world want to associate with.\nWe've talked about our relationship with American Express, with State Farm, Intuit, Charles Schwab, and others in the past.\nOn our last call, I also hinted that we would soon be announcing a new partnership.\nToday, I am happy to share that Morgan Stanley and E*TRADE have entered into a new agreement with Rocket Mortgage, where our company will originate, close, and service conforming mortgages for their clients.\nThis arrangement allows Morgan Stanley to continue focusing on its jumbo lending while allowing Rocket Mortgage to provide conforming loan options to the firm's millions of clients.\nWe are very excited about this opportunity, which will kick off this year.\nAnother pillar of our business model is the incredible Rocket Cloud Force, now consisting of more than 6,600 U.S.-based professionals trained to advise our clients on complex transactions.\nThe COVID pandemic truly proved that the power of our Rocket Cloud Force can be harnessed anywhere as our team members work from home in locations across the country.\nThe versatility and skill of this team allows us to continue exploring new verticals and services.\nOur ability to build, train and license large-scale sales teams provides us a significant competitive moat.\nToday's consumer expects simple, powerful digital experiences, backed by support and consultation from trusted advisors.\nThe Rocket Cloud Force's ability to seamlessly integrate into the online experience with timely, accurate, and actionable information is a game changer.\nIn markets where the legacy experience can be confusing and discouraging, like buying or selling a home, searching for a car, or considering a personal loan, our digital solutions and trusted advisors provide confidence and certainty.\nAlong with our powerful Rocket Cloud Force, our company also continues to rapidly grow its use of ethical, artificial intelligence, and machine learning to streamline the business.\nWe have the benefit of millions of clients working with us each year to buy a car, get a personal loan, buy a home or refinance a mortgage, and we've been able to leverage this information to build sophisticated models to ensure our brand is in front of our clients and top of mind when they're ready to transact.\nIn fact, since the beginning of 2019, data science has driven more than $75 billion in application volume.\nThe importance of data cannot be overstated.\nIt is this information that allows us to quickly innovate, anticipate the market and, in some cases, develop new companies altogether.\nThese real-time insights are a significant market advantage and consistently guide us to the right decisions with incredible efficiency.\nTogether, these pillars of our business: our scalable platform, our national brand, our Rocket Cloud Force, and our strategic use of data, combine to create a technology powerhouse that continues to accelerate at scale.\nIt took our company 25 years to close our first 1 million loans.\nIn 2020 alone, we have helped more than 1.1 million clients with their mortgage, automotive, real estate, or personal loan needs.\nInnovation and execution, paired with a highly trained Rocket Cloud Force, creates a flywheel that continues to rapidly accelerate.\nI'm even more excited about where we're going in the future.\nJust three years ago, we launched Rocket Auto with the belief that we can leverage our platform and Rocket Cloud Force to help simplify the process of purchasing a car.\nEveryone knows buying a car is complicated and intimidating.\nIt's an experience that few consumers look forward to, but we've been able to make it approachable and enjoyable.\nStarting from zero in 2017, we've organically scaled Rocket Auto to more than $750 million of gross merchandise value in 2020.\nNow that we've validated the model, we will continue to invest in accelerating the growth in 2021 and beyond.\nOur partner network is another increasingly important growth driver for Rocket Companies.\nWe continue to evolve and diversify from our original direct-to-consumer business model.\nPartner volume made up 38% of our closed loan volume in 2020, up from 23% just two years ago.\nWe view this evolution similar to Amazon's past decision to open up its marketplace to third-party sellers.\nLike Amazon, we've built a proprietary platform and have the capacity to process millions of transactions a year.\nThe partner network brings growth and diversification to our business.\nSupporting these efforts, in late January, we announced that we launched a directory of nearly every broker in the country on rocketmortgage.com.\nWe then promoted that directory with the Super Bowl ad that I mentioned earlier.\nThe impact has been tremendous.\nIn less than one month since launching, we've had tens of thousands of consumers visit the directory and click through to contact a broker.\nAll of these elements together have created an incredibly profitable company that has shown an ability to grow, strengthen and scale in any market environment.\nThe fourth quarter of 2020 was no exception.\nAll of our businesses performed above expectations, leading to a full-year adjusted revenue of $16.9 billion and adjusted EBITDA of $11.1 billion.\nAs a result of our exceptional financial performance, Rocket Companies has generated substantial capital.\nAnd today, we're excited to announce that we are sharing our success with our shareholders.\nAs Julie will soon explain, our Board has authorized a special dividend of $1.11 per share for holders of our stock as of March 9 to be paid on March 23.\nWe're also accelerating our long-term approach of launching and scaling new businesses from the ground up.\nI'm pleased to announce the creation of Rocket Labs.\nRocket Labs' mission is to incubate new businesses within Rocket Companies that leverage our platform and provide our clients with services that complement our existing core products.\nOur approach is to empower small, independent teams to work on big ideas and concepts, which form the core of our future products.\nWe are excited about Rocket Labs and the possibilities it represents.\nBefore I turn things over to Julie to share our financial results, I'm going to take a moment to give her a proper introduction.\nJulie and I have worked together inside this company for 17 years.\nDuring that time, she's led the finance and accounting teams and done a tremendous job managing all aspects of our liquidity.\nIt's Julie's foresight that has helped us continue to grow in all market cycles.\nNot only that, but there's nobody who knows the financial side of this industry better.\nWe're all lucky to be working alongside her.\nWith that introduction, Julie, take it away.\nI'm pleased to again report strong financial results for Rocket Companies.\nFor the full-year of 2020, Rocket Companies generated $16.9 billion of adjusted revenue and $11.1 billion of adjusted EBITDA as we wrapped up a record-setting year.\nIn discussing today's results, I'll walk through some of the key advantages of Rocket Companies' business model.\nIn particular, I'll highlight the power of our platform to unlock scale, drive efficiency and serve as a launchpad for new businesses focused on simplifying complicated transactions.\nI will also provide some insights on our capital allocation priorities.\nOur 2020 results demonstrate true growth at scale.\nFor the full-year 2020, we generated $320 billion of closed loan volume, representing an increase of 121% year over year.\nOur success in 2020 was broad-based, with consistent increases across both our direct-to-consumer and partner network channels.\nOur growth was so balanced between new and existing client relationships.\n2020 was also a year of robust growth across Rocket Companies, with particular strength at Amrock, our title company, with revenues increasing 124% to $1.3 billion during the year.\nRocket Auto, our automotive retail marketplace, also generated robust results orchestrating more than $750 million in gross merchandise value of automotive e-commerce transactions.\nThis equates to just over 32,000 auto units in 2020 up more than 60% as compared to 2019.\nWe finished 2020 on a particularly strong note, with fourth-quarter rate lock volume of $96 billion and closed loan volume of $107 billion, both significantly exceeding the high end of our expectations.\nMultiple drivers contributed to the outperformance in Q4.\nIn particular, we are seeing a consumer that is increasingly comfortable completing large complex transactions online.\nContinuing the trend, we've seen throughout 2020, our automated, self-serve, digital experience was our fastest-growing channel in Q4.\nWe also saw strength in Q4 from our branded partnerships and mortgage broker partners after launching the Rocket Pro TPO brands to the broker community and releasing multiple enhancements to our TPO software portal during the fourth quarter.\nRocket Homes also finished the year on a strong note as they assisted clients with nearly $1.6 billion of real estate transactions during the fourth quarter alone.\nWhile current industry estimates on market size very widely, it is clear that Rocket gained meaningful market share in 2020.\nOur full-year closed volume growth of 121% substantially exceeded any estimate of the overall industry's growth from third-party sources, which estimates 67% growth on average.\nOur Platform business model is the key to enabling our growth at scale that is truly unmatched.\nTo put this in perspective, Rocket Mortgage's incremental closed volume of $175 billion in 2020 and was more than double the growth of any other market participant.\nIn fact, our incremental gain in 2020 alone, was nearly large enough to eclipse the entire all-in closed loan volume of the nation's second largest originator last year.\nGrowing at this pace in a complex category like home loans requires a platform with broad reach scalable infrastructure and centralized software-driven operations.\nThe Rocket platform is built to perform and grow in the largest, most complex markets.\nOur infrastructure also leads to a highly efficient economic model with substantial operating leverage.\nOur 2020 results demonstrate Rocket's ability to drive increased scale from a single platform with limited incremental cost.\nFor the full-year 2020, a Rocket's adjusted revenue increased by $11 billion year over year.\nWe drove this revenue growth while only adding $2 billion of expenses during the year, or $3 billion of annualized operating expenses based on our fourth quarter.\nTo demonstrate the efficiency of the business model, Rocket's transactions per production team member in 2020 will roughly triple the industry average.\nWhile our low-cost platform model is driving record profitability, we're continuing our long-term strategy to reinvest in the business.\nKey targets for investment include our brand, product development, and initiatives to drive growth in the purchase market.\nWe continue to invest in talent growth, particularly in technical roles.\nAs an example, our data science team now includes over 300 professionals.\nWe're seeing high performers choose to join Rocket across multiple teams, including the ongoing expansion of our technology and product strategy teams.\nOur brand is another key investment priority, including our recent Super Bowl ads, which generated significant brand recognition and drove record traffic to our online and mobile properties.\nAmong our key product development priorities is Rocket Logic, the next generation of our core workflow management platform.\nThe new platform guides users through the next best action, resulting in faster, more accurate workflows.\nWe are very impressed with our initial pilot where we are seeing 20% improvement in turn times within the pilot group.\nWhat's even more exciting is that Rocket Logic can be applied to enhance processes beyond mortgage origination.\nWe expect Rocket Logic and our many automation initiatives to drive continued efficiency in the business model.\nThe core of our economic flywheel is that we are constantly leveraging our profitability advantages to reinvest in the business, further strengthening our competitive position.\nAnother key advantage of the Rocket Companies' platform is our ability to test, launch and rapidly scale new business models.\nThis entrepreneurial approach can be seen in our scaled mortgage operations.\nIn two years, our partner network has grown from less than $20 billion in closed loan volume to $120 billion on an annual basis.\nWe see similar opportunity within our early stage, rapidly expanding businesses such as Rocket Auto, Rocket Loans, and Rocket Homes.\nTo that end, and as Jay announced a few minutes ago, the launch of Rocket Labs will further accelerate our focus on expanding the business in ways that leverage our platform and serve our client base.\nWe believe our clients will be greatly served over time with these additional business lines.\nTurning to our first-quarter outlook.\nWe expect closed loan volume of $98 billion to $103 billion compared to $51.7 billion in the first quarter of 2020; net rate lock volume of $88 billion to $95 billion, up from $56 billion in the first quarter of 2020; and gain-on-sale margins of 3.6% to 3.9% compared to 3.25% in the first quarter of 2020.\nWe're excited about the continued strength and momentum of the Rocket platform.\nWe ended 2020 with an extremely strong balance sheet, including $2 billion of cash and $7.7 billion of total liquidity.\nTotal liquidity includes cash on hand, undrawn lines of credit, undrawn MSR lines, and corporate cash used to self-fund loan originations, which could be transferred to funding facilities at our option.\nAs we communicated at the time of our IPO last summer, our capital allocation priorities always start with properly capitalizing and reinvesting in the business.\nAs I discussed earlier, we are actively deploying capital with investments in our platform, our brand, and our talent.\nWe also want to deploy through add-on acquisitions that would be additive to our economic flywheel and bring value to our client base.\nOur next priority is to return capital to shareholders through dividends, opportunistic use of share buybacks, or a combination of the two.\nGiven our record level of profitability in 2020, the Board approved a special dividend of $1.11 per Class A common share funded by an equity distribution of $2.2 billion.\nOur substantial cash generation provides us significant optionality to drive long-term value for our shareholders.\nAdditionally, we remain authorized to repurchase up to $1 billion of Rocket Companies' common stock.\n Assistant:", "chosen": "compname reports special dividend of $1.11 per class a share of common stock.\ncompname announces special dividend of $1.11 per class a share of common stock.\nsees closed loan volume of between $98 billion and $103 billion in q1 2021.\nsees net rate lock volume of between $88 billion and $95 billion in q1 2021.\n"}
{"prompt": "Human: The slides for today's call can be found on the Investors section of our website, along with the news release that was issued today.\nThese uncertainties include economic conditions, market demands and competitive factors.\nAlso, the discussions during this conference call may include certain financial measures that were not prepared in accordance with generally accepted accounting principles.\nReconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today's call, which is posted on the Investors section of our website.\nTurning to slide three.\nAlso joining us on the call is Ram Mayampurath, who was announced earlier today has been appointed Rogers' Chief Financial Officer, effective May 1.\nRogers delivered another strong financial performance in Q1 driven by growth in advanced mobility markets, a strengthening market recovery and continued operational excellence.\nFirst quarter net sales increased 9% to $229 million and exceeded the top end of our guidance.\nGross margin improved to 39% as a result of our strong operational performance.\nEPS also exceeded the high end of our guidance, and we reported earnings of $1.66 per share on a GAAP basis and record adjusted earnings of $1.92 per share.\nThe increase in Q1 sales was broad-based, and nearly all of our markets increased at double-digit rate.\nThe impressive growth was enabled by both our strategic focus on fast-growing markets and the ongoing economic recovery.\nWe continue to realize the benefits of our multiyear investments in innovative technologies to capitalize on the accelerating opportunities in advanced mobility markets.\nEV/HEV and ADAS sales increased at double-digit rates sequentially and grew more than 30% compared to Q1 of 2020.\nSales of compression pads and related solutions for EV batteries were especially strong and more than doubled year-over-year.\nSales of our power semiconductor substrate solutions were also higher.\nWe anticipate further top line growth as these markets continue to accelerate.\nAs announced last quarter, we are investing aggressively in additional capacity for our advanced battery compression pad and ceramic substrate technologies to take advantage of this opportunity.\nWe are also investing in additional resources and capabilities to support this growth.\nWe are at a growth inflection point, and these investments will position Rogers to capitalize on the significant momentum in these markets and add to our strong market positions in the near term and longer term.\nSales in the defense market increased at an impressive rate in Q1, similar to the EV/HEV and ADAS markets.\nOur focused strategy and new product introductions continue to drive design wins and growth.\nWe saw a resurgence in industrial demand in Q1 as sales grew sharply versus the prior quarter and returned to pre-pandemic levels.\nOur sales in the industrial market are closely tied to levels of capital investment, which continues to improve.\nDemand was strongest for applications used in semiconductor equipment.\nOther markets, such as clean energy and wireless infrastructure, also showed strong improvements in Q1 with sales growing at double-digit rates.\nIn the portable electronics market, sales were seasonally lower in the first quarter and consistent with our expectations.\nThe impact to sales from the disruption to our UTIS facility was minimal as a result of selling our undamaged finished goods inventory.\nWe continue to work closely with our customers during this time, and we remain on track to resume production in the fourth quarter of this year.\nQ1 sales were largely unaffected by global supply chain disruptions, but we began seeing more impacts as we exited the quarter.\nIn the second quarter, the lack of availability of certain raw materials, primarily due to weather interruptions along the U.S. Gulf Coast, will somewhat temper our sales growth and gross margin.\nHowever, we expect this headwind to moderate by the end of Q2.\nHigher commodity costs reduced Q1 gross margin, while our copper hedging strategy largely offset the impact to earnings per share.\nIn Q2, we are continuing to offset the impact of higher commodity costs through hedging activities and commercial actions.\nIn summary, we had an excellent quarter delivering strong sales growth, improved profitability and robust cash generation.\nContinuing on to slide five, I'll discuss the latest market outlook.\nAs mentioned, we are seeing broad strength across our market portfolio.\nThis is driven by two major factors.\nFirst, we are benefiting from our strategic positioning in markets with long secular tailwinds, such as advanced mobility.\nWe are also seeing exceptional growth in this area, primarily driven by the accelerating adoption of EVs and HEVs.\nSecond, the global economic recovery continues to gain momentum.\nOur expectation is that near-term economic activity will continue to improve, aided by stimulus measures and vaccine rollouts.\nThis should continue to support strong demand, and we are maximizing output at existing manufacturing facilities in response.\nTurning to the long-term outlook for advanced mobility, estimates continue to point to an extremely strong growth outlook for the EV/HEV market.\nRecent analysis from industry experts points to an acceleration in EV/HEV adoption.\nIn their updated report, BCG now expects that by 2026, EVs and HEVs will account for more than half of global light vehicle sales, four years earlier than previously expected.\nUnderscoring this trend is the ongoing investments and commitments by global automakers.\nSome examples in recent weeks include commitments from Volvo and Honda to phase out internal combustion engines and announcements of sizable investments in battery capacity from VW, GM and others.\nIt's important to note that full electric vehicles are expected to be the fastest-growing segment of this market with a CAGR of over 40%.\nThis is significant for Rogers because our content opportunity increases with higher degrees of electrification.\nFor example, our ceramic substrate content opportunity in a full EV ranges from around $25 to $40 compared to a content opportunity of approximately $5 in a 48-volt mild hybrid.\nThe same concept applies to our battery compression pad solutions used in plug-in HEVs and EVs.\nOur content can be greater than $30 per vehicle and rises meaningfully as the battery size increases.\nOther solutions, which are used across the entire EV/HEV market, include vibration dampening pads and battery pack sealing solutions.\nAlso, we have secured design wins with several promising entrants to the EV market with our power interconnect solutions.\nWe continue to see a very strong mid-teens growth potential over the next five years driven by increasing penetration rates and higher levels of vehicle autonomy.\nNear-term auto production faces some challenges from the limited supply of certain semiconductors, but the long-term outlook remains robust.\nWe are encouraged by our progress in this market, and we continue to expand our customer base with new design wins.\nIn addition to the opportunities in advanced mobility, we also see attractive growth potential in other markets, such as renewable energy and defense.\nThe renewable energy market is expected to grow at a 10% CAGR over the next five years, which we anticipate will continue to drive robust demand for our power semiconductor substrates.\nRogers has a very rich heritage of innovation and a proven track record of developing solutions that drive growth end markets with strong secular tailwinds.\nWe achieved these results by combining our deep expertise in material science with collaborative engineer-to-engineer customer relationships.\nOur global innovation in R and D centers are key to maintaining a strong development pipeline.\nThey are staffed with world-class personnel who identify, develop and acquire the technology needed to enable the next-generation of products.\nThrough partnerships with universities and other research institutions, we can further expand our product development pipeline in an efficient and cost-effective manner.\nThe progress we've made in our EV/HEV business is a prime example of how innovation drives growth at Rogers.\nFor example, our advanced battery pad and battery pack sealing solutions and silicon nitride substrates were all developed through our innovation and R and D process in recent years.\nThese products form the core of our solutions for the EV/HEV market, which has now increased to more than 11% of total sales.\nOur focus on innovation continues with a number of advanced solutions that are currently under development.\nSome of these -- some of the products in our development pipeline include next-generation silicon nitride substrates with improved thermal performance, advanced battery compression pad solutions and high-performance antennas for next-generation auto radar.\nOur ability to drive organic growth through innovation is a source of competitive advantage for Rogers and will continue to be a core element of our strategy.\nTurning to slide seven.\nI'll recap our key messages from today's call.\nFirst, we delivered strong Q1 results driven by our strategic focus on advanced mobility markets and by continuing our market recovery.\nWe also continue to drive operational improvements and higher sustainable gross margins.\nThe growth opportunities in advanced mobility markets and especially the EV/HEV space continue to accelerate driven by powerful, long-term secular tailwinds.\nThis opportunity is extremely compelling, and we are investing aggressively to capitalize on this growth.\nAs a longtime Rogers employee and a seasoned senior finance leader, it gives me great confidence to have Ram step into the Chief Financial Officer role.\nRam has over 30 years of corporate finance experience and has held senior finance leadership positions at Rogers, where he has had responsibility for financial operations, financial planning and analysis, business transformation and treasury.\nI have appreciated Mike's wise and insightful counsel, which has helped Rogers navigate through some difficult situations and has helped make Rogers a stronger and more resilient company.\nMike will remain with the company during the transition period to help facilitate a seamless transition with Ram.\nPlease join me in wishing Mike a long, healthy, happy retirement.\nYour thoughts are truly appreciated.\nI've enjoyed my time at Rogers immensely, and I'm appreciative of the opportunity to have made a positive impact on the results and culture of Rogers.\nIt's been my fortune to work with a tremendous senior management team, a supportive Board and a hard-working dedicated Rogers global community.\nLet's jump back to the results.\nOn the slides ahead, I'll review our first quarter 2021 results.\nTurning to slide nine.\nAs Bruce mentioned, Rogers delivered strong financial results in the first quarter.\nRevenues increased sequentially in both our EMS and AES business segment.\nAs communicated in our Q4 earnings call, the AES business segment is comprised of the former ACS and PES business segments.\nWe delivered gross margin that was 70 basis points higher than Q4 through increased volumes and operating efficiency, despite a less favorable product mix and significantly higher commodity and freight costs.\nIn Q1, we delivered strong earnings through increased revenues, improved gross margins and increased other income.\nIn our GAAP results, we recognized $1.5 million in restructuring costs related to the footprint optimization activities communicated in our third quarter 2020 call and $1.3 million for the loss resulting from the fire at our UTIS facility, net of expected insurance proceeds.\nOur effective tax rate for Q1 was 25.2%.\nTurning to slide 10.\nOur Q1 revenues of $229.3 million increased by $18.6 million compared to the fourth quarter, reflecting broad strength across our product markets.\nAES revenues increased 10% to $131.9 million, while EMS revenues grew 6% to $91.8 million.\nCurrency exchange rates favorably impacted first quarter revenues by approximately 1.5% compared to Q4.\nAES revenues grew sequentially due to strong demand in all three product lines: RF solutions, power semiconductor substrates and power interconnects.\nWithin RF Solutions, the Aerospace and Defense business accounted for 19% of the business segment revenues and grew 15% sequentially.\nThe ADAS business accounted for 18% of the revenues and grew 12%, and wireless infrastructure accounted for 17% of the revenues and grew 26%.\nDefense applications continue to be a solid growth area for Rogers as customer programs continue to ramp.\nRecord ADAS revenues continue to benefit from the rebound in automotive manufacturing and, to date, have not been adversely impacted by the semiconductor chip shortage.\nWireless infrastructure revenues experienced a nice sequential increase due to 5G installations, both inside and outside of China.\nClean energy, which is comprised of the renewable energy revenues in both the power semiconductor and the power interconnect business as well as the variable frequency drive business in the power semiconductor business, accounted for 16% of the business and grew 15% sequentially.\nThe sequential increase in our variable frequency drive business was the first in several quarters and is reflective of the general economic recovery.\nWe believe the renewable energy demand will be uneven in the short term as this business is comprised of project opportunities but will have meaningful long-term momentum.\nEV/HEV application revenues accounted for 12% of the segment revenues and increased 2% sequentially as order timing tempered the Q1 increase in ceramic substrate revenues.\nEMS revenues grew sequentially primarily due to significant increases in nearly all applications, highlighted by a 41% increase in EV/HEV applications which accounted for 11% of the segment revenues and a 23% increase in general industrial applications, which accounted for 44% of the segment revenues.\nThe EV/HEV applications continue to gain momentum, consistent with the accelerated demands in the EV/HEV market.\nAnd the increase in general industrial revenues continues a recovery trend that commenced in the fourth quarter and mirrors the general economic recovery.\nAs expected, revenues for the portable electronics, which accounted for 22% of the segment revenues, experienced a 31% sequential seasonal decline off a very strong second half of 2020.\nRevenues from our UTIS factory were down just slightly compared to Q4 despite the fire that occurred in mid-February.\nTurning to slide 11.\nOur gross margin for the first quarter was $89.5 million or 39% of revenues, 70 basis points higher than Q4.\nThe increase in gross margin was due primarily to higher volume and improved manufacturing execution, more than offsetting the unfavorable product mix and increased raw material and freight costs.\nWhile both the AES and EMS businesses had to overcome the aforementioned headwinds, the AES business was able to produce increased gross margin in all three product lines.\nThe EMS gross margin declined sequentially, even though manufacturing execution improved.\nAlthough our gross margin percentage increased by 70 basis points sequentially, the significant increase in copper cost meaningfully dampened our gross margin percentage in the quarter.\nTo mitigate the higher cost of copper on our profitability, we enter into copper hedging contracts.\nThe gains and losses on these contracts are recorded in other income expense below our operating profit results.\nIn addition to hedging our copper purchases, we have taken commercial actions to mitigate the increased cost of commodity and other raw materials.\nAlso on slide 11, we detail the changes to adjusted net income for Q1 of $36 million compared to adjusted net income for Q4 of $29.7 million.\nThe adjusted operating income for Q1 of $43.5 million and 19% of revenues was 60 basis points higher than Q4.\nAdjusted operating expenses for Q1 of $46 million or 20.1% of revenues were 20 basis points higher than Q4 expenses.\nThe higher adjusted operating expenses were due to higher performance-based compensation costs as well as higher benefit costs.\nOther income expense was $1.2 million favorable compared to Q4.\nIncluded in other income expense in Q1 are the realized gains on our copper hedging contracts, which offset the impact of higher copper costs included in the gross margin in the first quarter.\nAs discussed earlier, Rogers' effective tax rate for the first quarter was 25.2%, higher than our forecasted rate of 22% to 23%.\nWe now expect our effective tax rate for 2021 will be 23% to 24% due to the geographic mix of pre-tax income.\nTurning to slide 12.\nThe first -- in the first quarter, the company generated strong free cash flow of $33 million and ended the quarter with a cash position of $199.1 million.\nIn the quarter, we generated $36.5 million from operating activities, net of an increase of $10.8 million in working capital and repaid $21 million on our credit facility.\nWe ended the first quarter with an outstanding balance on our credit facility of $4 million and a net cash position of $195.1 million.\nIn Q1, the company spent $3.6 million on capital expenditures.\nDespite the low level of expenditures in the first quarter, we continue to guide capital expenditures of $70 million to $80 million in 2021, with over 50% of the expenditures to capture the accelerating advanced mobility market opportunities in both AES and EMS business segments.\nThe guided expenditures exclude the capital necessary to restore the UTIS operation, a significant portion which we expect to be reimbursed by insurance proceeds.\nI've had the pleasure of working closely with Ram during my time at Rogers.\nHe is an excellent choice to continue driving the company's growth and profitability forward.\nIt is a privilege to be named as Chief Financial Officer at Rogers, and I'm extremely excited about the opportunity to serve in this capacity at such a pivotal time for the company.\nLastly, I look forward to becoming better acquainted with the members of our investment community.\nTurning now to second quarter guidance on slide 13.\nAs Bruce discussed earlier, we see continued strength in many of our markets, particularly in advanced mobility, general industrial, defense and wireless infrastructure.\nBased on the strong outlook, we are guiding our second quarter revenues to be in the range of $230 million to $240 million.\nThe effect of our UTIS factory being off-line and the lack of availability of certain raw materials will impact our second quarter growth.\nFollowing several quarters of significant gross margin improvements, we expect Q2 to be flat sequentially before improving further in the second half of 2021.\nTo prepare for our strong second half, we will be stepping up our resources across the business in the second quarter.\nAlso in the quarter, we will continue to see challenges from mix, raw material cost increases and supply constraints related to the Gulf Coast interruptions mentioned earlier.\nWe have taken commercial actions to mitigate the increase in raw material costs.\nThese actions will have a positive impact on our gross margins in the second quarter, with full impacts benefiting the second half of 2021.\nWe expect to overcome the supply constraints by the end of the second quarter and see favorable impact from higher volume and better mix in the second half.\nWe guide our gross margins to be in the range of 38.5% to 39.5%, consistent with our first quarter.\nThe company will recognize higher operating expenses in the second quarter from timing of certain expenses, including performance-based compensation.\nCosts incurred to support anticipated growth in the second half and to restore UTIS operations will also increase operating expenses in the quarter.\nWe are guiding GAAP Q2 earnings in the range of $1.58 to $1.73 per fully diluted share, and we guide fully diluted adjusted earnings in the range of $1.80 to $1.95 per share for the second quarter.\n Assistant:", "chosen": "compname reports qtrly adjusted earnings per diluted share of $1.92.\nqtrly diluted earnings per share$1.66.\nqtrly adjusted earnings per diluted share $1.92.\nqtrly net sales $229.3 million versus $198.8 million.\nsees q2 net sales $230 million to $240 million.\nsees q2 earnings per share $1.58 to $1.73.\nsees q2 adjusted earnings per share $1.80 to $1.95.\n"}
{"prompt": "Human: I'd like to start by taking a moment on behalf of our Board, our entire team and myself to recognize Henry Tippie for everything he's done for our organization over the last 68 years.\nAs many of you are aware, Mr. Tippie recently retired from our Board, leaving behind an incredible legacy of leadership and service to Rollins, its employees and customers.\nHenry's financial knowledge and guidance helped shape Rollins to become the world's best and largest pest control company.\nDuring his distinguished career, not only was Henry our longest-serving CFO through a period for over 17 years, he was the architect of Rollins' purchase of Orkin in 1964.\nIncidentally, this is considered to be the country's first-ever leveraged buyout and was studied for years at the Harvard Business School.\nHenry, along with Randall Rollins, our Chairman at the time, were the only two Rollins Directors present during our initial stock exchange listing in 1968, and again, on our 50th year New York Stock Exchange anniversary.\nAdditionally, in recognition of his broader impact to the business world, the New York Stock Exchange inducted Henry in 2018 into their exclusive wall of leaders.\nRandall Rollins was inducted as well.\nRollins would not be the company it is today without Henry's numerous contributions.\nWe will continue to honor your legacy and the example of hard work and dedication that you provided.\nThroughout his 12-year career with Rollins, Lee helped guide the company through several important technology advancements, while building a fantastic IT team.\nHe selected and developed a team to not only improve the company's performance presently, but will prevail well into our future.\nIn the end, it all comes down to the many positive contributions of our employees continue to make every day.\nThey have risen again to the occasion, going above and beyond what they've ever accomplished before.\nWe're grateful for their extraordinary dedication and adaptability during the past year.\nThey truly are our most valuable asset.\nWhile we faced many challenges over the past year, we continue to successfully improve our operations, and we are greatly encouraged by our first quarter performance.\nI think we are benefiting from our technology investments and overall business momentum and are looking forward to another successful year.\nAs Gary mentioned, we are pleased with our first quarter results.\nRevenue grew 9.8% to $535.6 million compared to $487.9 million for the same quarter in 2020.\nNet income rose to $92.6 million or $0.19 per diluted share compared to $43.3 million or $0.09 per diluted share for the first quarter of last year.\nEddie will review the GAAP and non-GAAP results shortly as there was one adjustment impacting our financials.\nIt is not just the results we are pleased with, but the returns we are seeing in the business, highlighted by strong performance in our residential and termite service lines, growing 14.9% and 12.2%, respectively.\nFurther, our commercial business has improved every single quarter during 2020 and continued this steady progress once again this quarter, reaching 2.9% growth over the first quarter 2020.\nI am grateful, greatly appreciative of his many years of leadership as part of our management team and as a Board member.\nWhile it's never easy to follow in the footsteps of someone who made that type of impact, we are pleased with the distinguished executives that have agreed to join our Board of Directors over the past several months.\nMany of you may recall that we have enhanced an already experienced and strong Board with the recent additions of Jerry Nix, Susan Bell, Patrick Gunning and Harry Cynkus.\nThey each bring a wealth of knowledge and diverse experience in many different areas that we believe will make us stronger as a company moving forward.\nWe have also recently announced the appointment of several new committee chairs and committee designations.\nJerry Nix was appointed as our new Lead Director and was selected to chair our Compensation Committee, as well as chair our Nominating and Governance Committee.\nHe is also now serving as a member on our Audit Committee and will be joining our Chairman, Gary Rollins, on our Executive Committee.\nAdditionally, Susan Bell was selected to chair our Rollins Audit Committee and to chair our Diversity Committees.\nPatrick Gunning was also appointed to be a member of our Audit Committee.\nAs Gary just mentioned, Lee Crump has contributed significantly to Rollins' success during his tenure, and we wish him the very best as he retires.\nSucceeding Lee is our new Chief Information Officer, is Thomas Tesh.\nWhile we have spent the last six months working to ensure a seamless transition, Thomas has been a key part of the Rollins family since 2012, previously serving as the Vice President of Information Technology.\nThomas is extremely qualified, having led our technology improvement journey through several major rollouts over the years.\nAnd we believe his deep experience and solid track record makes him uniquely qualified for this important position.\nThe first quarter business environment was extremely solid across all of our business lines.\nAnd our total revenue, less significant acquisitions, grew 7.9% over first quarter 2020 as both our residential and termite segments presented double-digit growth of 12.8% and 11.2%, respectively.\nThese growth levels have exceeded anything we've recently experienced.\nCommercial, ex fume revenue, less significant acquisitions, presented positive growth for the first time since first quarter 2020.\nThis segment has enjoyed sequential improvement since last April, reaching 1.3% growth over first quarter of 2020.\nOur team's continued dedication in serving our commercial customers and their recovery has been outstanding.\nWe're pleased with the steady progress achieved over the past 12 months in this segment.\nTurning to our mosquito service.\nAs families spend more time outdoors recreationally and with the continued threat of mosquito-borne disease, we're realizing significant growth in this segment of our business.\nFor the quarter, our mosquito revenue experienced growth of over 30%.\nAdditionally, the strength of our termite business remains solid, and we expect continued growth in the future.\nLooking deeper at our results, we continue to attract customers to all of our services and brands.\nWe're particularly pleased with our international performance in the U.K. and Australia.\nDomestically, Northwest Exterminating, which joined the Rollins family in 2017, continues to realize strong growth in the Southeastern U.S. HomeTeam has continued their consistent high-growth levels as they capitalize on a thriving residential home construction industry.\nSimilar to last quarter, we experienced tremendous growth in wildlife service offerings through our Trutech and Critter Control brands.\nAlso, we continued to selectively purchase Critter Control franchises and combine them together with our growing wholly owned wildlife operations.\nOperationally, we remain focused on ensuring our residential and commercial customers receive the highest quality of services.\nAs part of our approach in 2015, we began the rollout of a new branch operating system, BOSS, at our largest brand, Orkin U.S. During 2020, we successfully deployed BOSS in two additional brands, Orkin Canada and Western Pest Services.\nWith this new system in place, we were able to add virtual route management software to improve our routing and scheduling processes.\nEven though we're still in early stages, for Orkin Canada, we've achieved routing improvements of over 20% at this time.\nOver the next few years, we expect additional improvements as the system gains maturity within these brands.\nLooking ahead, we remain committed to investing and implementing technology improvements to other brands in order to improve operational efficiencies as well as enhance our customers' trust by continuing to deliver a worthwhile experience.\nOverall, we are pleased with the progress we've made during the first quarter and as the economy continues to recover, we're encouraged about our prospects for further improvements for the rest of 2021.\nI, too, have greatly benefited from Mr. Tippie's vast experience, wisdom and knowledge.\nHis guidance on cost containment, mergers and acquisitions and managing the balance sheet have been invaluable to me.\nThe results of this quarter are, in part, a testament to his steady guidance throughout his 68-year involvement with the company.\nFor the quarter, our residential pest control, commercial pest control, termite and ancillary service lines showed growth and key to the quarter included cost containment across all major categories throughout the organization, overall good weather conditions that helped with demand and customer retention rates improving across the board.\nAs John referenced, I will be reporting both GAAP and non-GAAP financials for the quarter, which were positively impacted by our gain on the sale of several of our Clark properties.\nAs a reminder, when we purchased the initial Clark business in 2019, we bought their pest control, distribution businesses and their owned properties.\nReal estate is not a core competency of ours, and we decided to make the properties available to the market and secure branch leases.\nThe first group that sold netted a $31 million gain included in our numbers this quarter.\nLooking at the numbers, the first quarter revenues of $535.6 million increased 9.8% over the prior year's first quarter revenue of $487.9 million.\nOur GAAP income before income taxes was $119.9 million or 116.3% above 2020.\nOur GAAP net income was $92.6 million, up 114.1% compared to 2020.\nAnd our GAAP earnings per share were $0.19 per diluted share.\nWhen removing the positive impact of the property gain on the sale of $31 million, our non-GAAP income before income taxes was $88.8 million compared to $55.4 million in 2020 or up 60.3%.\nOur non-GAAP net income was $69.8 million, up 61.2% compared to Q1 of 2020.\nThis surge in customer demand again tested our new technology to see how we would be able to handle higher levels of both existing and new customer starts.\nAs we move from what we would call Stage two to Stage three of our five-stage routing and scheduling transformation, our latest changes have enabled our technicians to continue to improve the efficiency of their day and give the customer a better experience.\nSpecifically, our latest updates are helping to maximize our ability to be proactive with our customers instead of reactive.\nOur operations support has added the use of a planning board, which enables them in real time to adjust for openings in the technician schedule.\nIf a customer needs to reschedule service for some reason, that opens up a time slot during the day, our support group is quickly able to fill that slot with a new customer or to support the changing needs of an existing customer.\nThis enables our technicians to be more efficient and our customers to have a better experience with their service needs.\nThese changes positively impacted our margins and our customer retention rates for the quarter.\nLet's take a look through the Rollins revenue by service line for the first quarter.\nOur total revenue increase of 9.8% included 1.9% from significant acquisitions and the remaining 7.9% was from pricing and new customer growth.\nIn total, residential pest control, which made up 44% of our revenue, was up 14.9% and commercial, excluding fumigation pest control, which made up 35% of our revenue, was up 3.6%.\nTermite and ancillary services, which made up approximately 20% of our revenue, were up 12.2%.\nAlso, as Jerry mentioned, our wildlife service continued to see strong double-digit growth.\nAgain, total revenue, less significant acquisitions, were up 7.9%, and from that, residential was up 12.8%; commercial, ex-fumigation, increased 1.3%; and termite and ancillary grew by 11.2%.\nOur residential business continues to perform well, and our commercial pest control business has seen steady improvements each month since April 2020.\nWe anticipate a continued steady improvement in our commercial pest control business for the remainder of 2021.\nIn total, gross margins increased to 51.2% from 49.5% in the prior year's quarter.\nThe quarter was positively impacted by lower service salary expense as well as a lower fleet expense through continued improvements from our routing and scheduling efficiencies.\nDepreciation and amortization expenses for the quarter increased $2 million to $23.6 million, an increase of 9.3%.\nDepreciation increased $920,000 due to acquisitions and planned IT upgrades, while amortization of intangible assets increased $1.1 million due to several acquisitions, including McCall Pest Control in December of 2020.\nSales, general and administrative expenses for the first quarter increased $4.3 million or 2.8% to $162.2 million or 30.3% of revenues.\nThis was down 6.5% compared to 2020, and the quarter produced savings in administrative salaries and benefits, travel and telephone savings from better negotiated contracts.\nThere's been a lot of inflation discussion related to the economy and what impact companies are seeing or will see as we move through 2021.\nAt this point, we do not see major inflation exposure that would materially impact our margins.\nAs you probably know, payroll, fleet and materials and supplies are our largest three expense areas.\nAt this time, payroll margins are mainly improving due to enhanced technology and efficiency.\nOur fleet has been positively impacted by lower fuel costs and a mid-single-digit percentage reduction in our miles driven.\nFinally, our materials and supply costs are lower as a percent of revenue, even with our continued personal protective equipment use by our customer-facing employees.\nAs for our cash, for the period ended March 31, 2021, we spent $17 million on acquisitions compared to $47.6 million during the same period last year.\nWe paid $39.4 million on dividends and had $7.8 million of capital expenditures, which was slightly higher compared to 2020.\nWe ended the period with $117.3 million in cash, of which $71.3 million is held by our foreign subsidiaries.\nYesterday, the Board of Directors approved a regular cash dividend of $0.08 per share that will be paid on June 10, 2021, to stockholders of record at the close of business on May 10, 2021.\n Assistant:", "chosen": "q1 earnings per share $0.19.\nq1 revenue rose 9.8 percent to $535.6 million.\n"}
{"prompt": "Human: We begin with our Safe Harbor statement.\nYou should listen to today's call in the context of that information.\nToday, we will discuss our results for the quarter primarily on an adjusted non-GAAP basis.\nFor the second quarter, the difference between our GAAP results and adjusted results consist of the following item: amortization of acquisition-related intangible assets; and purchase accounting adjustments to commission expense.\nAs usual we'll leave plenty of time to talk to all your question toward the end.\nAs we turn to Page five, we deliver an excellent second quarter with strength across all four of our segments.\nSpecific to the financial metrics, which Rob will detail shortly, revenue, EBITDA, DEPS and cash flow, all grew north of 20% in the quarter.\nAlso during the quarter, we are encouraged to see the post-pandemic recovery gain momentum and broaden at the same time.\nSpecifically, not only that we experienced continued improvement across virtually all of our businesses, the strength within each business was broad.\nOur software businesses, which now make up over 55% of our revenue base performed very well in the quarter.\nSpecifically, on an organic basis, we grew our Application Software segment 9% and grew our software businesses within our NSS segment 10%.\nAcross our software businesses, we saw the acceleration of our recurring revenue growth, approximately 80% of our soft revenues from mid-singles to high-singles and a solid recovery of perpetual license activity.\nRelative to our product businesses, a very similar pattern acceleration and recovery of our consumables revenue sources and very nice ordering patterns for our capital equipment type products.\nIn addition, our 2020 acquisition cohort led by Vertafore is performing very well.\nImportantly, and consistent with our guidance over the last three quarters, we continue to delever our balance sheet at a rapid pace now under 4 times debt to EBITDA.\nAnd finally before handing things over to Rob, just a great first half to the year.\nOur teams have performed magnificently.\nGiven the great start in the positive momentum across our enterprise, we are once again increasing our full-year guidance.\nRob, let me hand it over to you.\nAnd congrats again on the lightening winning [Indecipherable] go.\nTurning to Page six, looking at some of the key financial highlights for Q2.\nTotal revenue increased 22% to $1.59 billion another record for any Roper quarter.\nQ2 organic revenue growth was 7% versus last year's comp of minus 3.\nAll four segments performed well, with strong organic growth across our portfolio of software and product businesses.\nQ2 EBITDA grew 26% to $579 million and EBITDA margin increased to 110 basis points to 36.4%.\nAdjusted DEPS was $3.76, 28% above prior year and also above our Q2 guidance range of $3.61 to $3.65.\nFree cash flow was $409 million, up a very strong 30% versus last year.\nAs a reminder, last year we adjusted our Q2 cash flow to account for the income tax payments that were deferred from Q2 to Q3, due to 2020 delayed tax deadlines.\nNet working capital was negative 8%, we continue to benefit from Roper's transformation to a high recurring revenue, majority software business model that is structurally designed to consistently drive high cash conversion.\nLastly, we have been laser-focused on debt reduction this year after last year's record capital deployment and we continue to make great progress on that front with an additional $375 million paid down in Q2.\nSo in summary, an excellent second quarter wrapping up a very strong first half for Roper.\nTurning to Page seven, an update to the charge we introduced last quarter, showing our rapid deleveraging.\nThrough the first half of 2021, we have now reduced our net debt by nearly $900 million, raising the total debt reduction to approximately $1.4 billion, since completing the 2020 acquisitions late last year.\nOur debt reduction along with the meaningful contributions from our 2020 acquisitions has enabled us to rapidly lower our net debt to EBITDA ratio from 4.7 times to 3.8 times in only six months.\nWe expect this downward trend in leverage ratios to continue moving forward, which positions us well for a return to meaningful capital deployment in the coming quarters.\nLet's turn to Page nine and walk through our Application Software segment.\nRevenues in this segment were $592 million, up 9% on an organic basis.\nAs a reminder, this segment grew 1% organically last year aided by strong results from our lab software franchises that were critical to the COVID response.\nEBITDA margins were 43.7% in the quarter.\nAcross the segment, we saw organic recurring revenue, which is a touch north of 75% of the revenue for the segment increased approximately 9%.\nThis recurring revenue strength is based on strong customer retention, continued migration to our SaaS delivery models, new products cross-selling activity and new customer adds.\nTo that end, the non-recurring organic revenue in this segment grew 9% as well.\nSpecific to business unit performance Deltek, our enterprise software business that serves the US federal contractor, architect, engineering and other services end-market had an excellent quarter.\nTheir strength was rooted in large scale GovCon customer wins and expansion activity.\nDeltek was further benefited by the recovery in the professional services end markets, terrific job by Mike and the entire team at Deltek.\nAderant our legal software business continues its momentum and market share gains.\nIn addition and encouragingly, their customers are beginning the journey of migrating to Aderant's cloud solutions.\nThis will take many years for the entire customer base to migrate, but will result in increased customer intimacy and higher levels of recurring revenue.\nCliniSys and data Innovations continue their long string of market share gains in the quarter and CBORD grew based on strength in healthcare and in particular their higher education product offerings.\nFinally, our 2020 cohort of acquisitions continue to perform very well both at Vertafore and EPSi.\nAs we turn to the outlook for the balance of the year, we expect high single-digit organic growth for this segment based on strength in both our recurring and non-recurring revenue streams, a solid quarter here for sure.\nAnd with that let's turn to our next slide.\nTurning to Page 10.\nRevenues in our network segment were $459 million, up 5% on an organic basis, and EBITDA margins were 42.5% in the quarter.\nOur software businesses in this segment about 65% of the revenues were, up 10% on an organic basis.\nThis growth was broad-based among our software businesses and driven by organic recurring revenue growth of approximately 11%.\nAt the business level, our Freight Match businesses, both in the US and Canada, continue to be solid growers.\nAs a reminder, our Freight Match networks are critical and necessary elements to help organize interact and transact the trucking, shipping spot markets.\nStrength in our businesses has been on both sides of the network; brokers and carriers, but with particular strength in this quarter on the carrier side of the network.\nWe also continue to see nice organic gains at ConstructConnect as their network enables commercial construction planning and bidding to occur in a more efficient and transparent manner.\nFoundry, our media and entertainment software business, which enables the combination of live action and computer generated graphics to be combined into a single frame, recovered nicely in the quarter with particular strength in the mid-market.\nImportantly, we continue to see very strong customer retention levels across each and every one of our network software businesses.\nThe strong growth in our software businesses was partially offset by project delays and our Transcore New York congestion pricing project.\nThese delays are based on pending federal environmental approvals, while we all believe the federal approval will be granted, the approval process to complete our work is taking longer than originally anticipated.\nConversely TransCore tag demand appears to be normalizing for the balance of the year.\nAs we look to our second half outlook, we expect to see high single-digit growth in this segment.\nThe growth will be underpinned by strength in our network software businesses, which we expect to grow in the low double-digit range in the second half of the year.\nBased on the New York TransCore project pushing to the right, we now expect about $40 million of this projects revenue to push-out of the second half of the year and into 2022.\nAll in all, high single-digit organic increases in this segment for the balance of the year.\nPlease turn to the next slide.\nAs we turn to Page 11, revenues and our MAS segment were $397 million, up 7% on organic basis.\nOrganic growth in this segment excluding Verathon was north of 20%.\nEBITDA margins for the segment were 33.4% in the quarter.\nVerathon coming off unprecedented demand for their intubation family of products a year ago is roughly 40% larger today versus 2019.\nThe momentum within this business continues given the larger installed base of intubation capital equipment, which enables recurring consumable pull through volumes.\nIn addition Verathon continues to experience impressive growth within their Bronchoscope product family and the recovery in their bladder scan ultrasound product group.\nEBITDA margins in the segment were lower due to Verathon's extraordinary prior-year quarter and the associated margin benefit.\nOur other medical product businesses accelerated nicely in the quarter based on hospitals and hospital equipment OEMs resuming normal levels of activity.\nDemand at Neptune was very strong as well.\nThe Northeast opened up and the balance of the country experienced normalizing levels of activity.\nOur industrial businesses were strong.\nAs I mentioned in the opening the strength was buoyed by improving consumables activity and solid returns to capital equipment spending.\nOur businesses within this segment have done a nice job navigating the difficult supply environment.\nAnd supply environment like the one we are in right now are decentralized, highly nimble organization tends to perform quite well.\nThis quarter was no exception.\nFor the balance of the year, we expect double-digit growth for this segment.\nThis is based on broadly improving conditions both in medical and industrial markets and easing prior year comps for Verathon.\nNow let's turn to our final segment Process Tech.\nAs we turn to Page 12, revenues in our Process Tech segment were $140 million, up 13% on an organic basis.\nEBITDA margins improved by over 500 basis points to 32.8% in the quarter.\nThe short story here is we're seeing improving end market conditions across virtually every one of our businesses in this segment after over nearly two years of declines.\nOur upstream oil and gas business is starting to recover nicely.\nCornell continues to perform well for us.\nThis is partially based on market conditions, but also based on Cornell's product innovation as they are seeing very nice demand pickup for their IoT connected pumping solutions.\nAnd finally at CCC, we're seeing the resumption of previously deferred projects and the demand for field services to come back online.\nAlso greenfield bidding activity is back in full swing, especially on an international basis.\nAs we turn to the outlook for the balance of the year, we expect 20%-plus organic growth based on improving market conditions and continued easing comps.\nNow please turn to Page 14 and I'll highlight our increased guidance for 2021.\nBased on strong first half performance improvement to our recurring revenue growth rates and improving market conditions, we are raising our full-year adjusted DEPS to be in the range of $15 and $15.20 per share.\nOf note, our prior high-end DEPS guidance was 15% now the bottom end of our range.\nAlso, we are increasing our guidance notwithstanding pushing roughly $40 million of the TransCore New York City project into next year, providing everyone a good sense of how strong the balance of our portfolio is performing.\nOur full-year organic growth is expected to be 7% or a touch higher.\nThis full-year growth outlook implies low double-digit organic growth in the second half.\nOur tax rate should continue to be in the 21% to 22% range.\nFor the third quarter, we're establishing adjusted DEPS guidance to be between $3.80 and $3.84.\nTurning to Page 15, and our closing summary.\nThis is a very strong quarter for enterprise with softer revenues growing on an organic basis 9% in our Application Software segment and 10% for our software businesses and our NSF segment.\nIn addition, the recovery pattern is characterized as gaining momentum and being broad, strength in product and software, strength in recurring and non-recurring.\nWe performed very well virtually in every financial metric, growing 20% plus in revenue, EBITDA, DEPS and cash flow.\nEBITDA margins expanded by 110 basis points and free cash flow increased 30%, to $409 million in the quarter.\nAs promised, we continue to delever our balance sheet, reducing debt by $375 million in the quarter and by $1.4 billion, since completing our 2020 acquisitions in Q4 of last year.\nAs we look forward, positive momentum continues to build.\nOver the last decade, we have worked to improve the quality of our portfolio to be more software base resulting in enterprise having higher levels of recurring revenue and be increasingly asset light.\nIn addition to having this improved quality within our business portfolio, we're seeing our recurring revenue growth rates improve from mid-singles to high-singles.\nFinally, our businesses will benefit from improving end market conditions.\nGiven each of these improved portfolio quality, improving recurring revenue growth rates and improving market conditions we expect to see double-digit organic growth in the second half of the year.\nAlso, our 2020 cohort of acquisitions continue to perform very well and solidly contribute to and improve the quality of our enterprise.\nGiven all of these factors, we are increasing our outlook for the full-year.\nFinally while we continue to focus on deleveraging our balance sheet, we also remain committed to our long-term capital deployment strategy.\nTo this end, our pipeline of M&A candidates is active, robust and has many high-quality opportunities.\nAs our balance sheet becomes more offensive toward the end of the year, our active pipeline of M&A targets will enable us to resume capital deployment and our usual process oriented and disciplined manner.\n Assistant:", "chosen": "sees fy adjusted earnings per share $15.00 to $15.20.\nsees q3 adjusted earnings per share $3.80 to $3.84.\nq2 adjusted earnings per share $3.76.\nq2 revenue $1.59 billion versus refinitiv ibes estimate of $1.58 billion.\n"}
{"prompt": "Human: Mike was previously the CFO of our Specialty Products Operating and Specialty Products Group operating segment.\nHe succeeds Keith Smiley who will be retiring at the end of the month.\nAfter nearly 30 years of distinguished service to RPM.\nI'll begin by sharing broad commentary on our performance for the quarter.\nMichael then provides details on our financial results and Rusty will conclude our former remarks with comments and our outlook for the second quarter of fiscal 2022.\nOur comments will be on an adjusted basis unless otherwise indicated.\nFor the first quarter of fiscal '22, three of our four operating segments are the Construction Products Group, Performance Coatings Group, and Specialty Products Group generated solid sales and adjusted EBIT growth.\nCombined sales in these three segments increased more than 15% and their adjusted EBIT was up more than 40%.\nThis performance was especially notable in light of the raw material shortages, supply chain disruptions, and inflation all of our segments and businesses are facing.\nDuring this supply disruption, we lost the equivalent of nearly 300 production days across RPM facilities around the globe during the 2022 first quarter.\nMore days that were lost due to COVID-related shutdowns in last year's first quarter.\nWe estimated the negative impact and consolidated sales during this first quarter was about $200 million due to these challenges and disruptions.\nOver half of which occurred in our consumer segment.\nThis was about double the negative sales impact we experienced in the fourth quarter of fiscal '21.\nSales and earnings for our consumer group decreased during the quarter as a result of these factors, as well as a difficult comparison to the prior-year period when sales increased on an organic basis by 34% and adjusted EBIT was up 122%.\nThese growth rates in the prior-year period were largely driven by extraordinary DIY demand during the pandemic.\nAll indicators suggest that the underlying demand for our consumer products is still strong and that supply and material disruptions, the segment is currently experiencing are temporary.\nDuring the first quarter and early in the second quarter we made strategic growth investments in our businesses.\nAnd as you can see on Slide 4, among these were the recent acquisitions of Dudick, Pure Air, and a recent purchase of a large manufacturing facility in Corsicana, Texas.\nAcquired in June Dudick will allow our carboline business to strengthen its position in the secondary containment linings market in established and trusted product lines while simultaneously opening the door to expanded sales and future growth opportunities around the globe.\nPure Air was acquired in August and provides indoor air quality service and is complementary to our Tremco Roofing and Tremco WTI business.\nWe intend to swiftly scale Pure Air by leveraging Tremco's North America sales force, strategic partnerships, and operational infrastructure.\nAlso on this slide, you'll see an image from 178,000 square foot plant we purchased 120 acres in Texas.\nThis will serve as a manufacturing center of excellence for multiple RPM businesses.\nThe plant is fully operational has an experienced operating team that will allow us to add long-term resilience in our supply chain, improve fill rates, and more easily expand production of a number of our high-growth product lines in the coming quarters and years.\nFrom a more long-term macro viewpoint, there are a number of market opportunities in industry trends that we are well-positioned to capitalize on for continued growth and success among the market opportunities on Slide 5 are the following: The increasing need for investment in infrastructure with spending estimated to be $2.8 trillion globally.\nOur Performance Coatings Group and Construction Products Group have a vast array of products and services to meet this need.\nThe new DIYers born from the pandemic who continue to tackle home improvement projects with both our core product ranges and expanding sales in relatively new categories like abrasives and architectural coatings.\nThe continued growth and more holistic connected building envelopes, such as those provided by our Construction Products Group, which make structures more airtight, weather tight, and energy-efficient.\nAnd the demand for wall systems like those it can be constructed using insulated concrete forms made by our new Nudura business.\nThey make building stronger, and more energy-efficient, and reduce construction cycle time and labor.\nIndustry trends benefiting RPM include nesting by consumers who are making more home improvements, school reopening is requiring more maintenance to repair, a need for building owners and facility managers to consolidate their construction management to a single source, and a greater desire for energy-efficient driven by both the cost benefits as well as a desire to minimize environmental impacts.\nRPM is well-positioned to meet and grow with all of these trends.\nTurning to Slide 6, on a consolidated basis, our sales increased to a record $1.65 billion up 2.7% over a strong fiscal 2021 first quarter, which grew 9.1%.\nLargely, due to the unprecedented demand for our consumer groups home improvement products during the pandemic.\nThe growth was 2.1% from recent acquisitions and 1.6% due to foreign currency translation tailwinds.\nMore than offsetting in organic sales declines of 1%.\nAdjusted diluted earnings per share of a dollar rate decreasing 25% compared to the prior-year periods extraordinary adjusted diluted earnings per share growth approved 52%.\nOur consolidated adjusted EBIT of 206.8 million decreased 23.2% due to supply chain challenges, inflation, and consumer groups' tough comparison against the prior year.\nIf you look at our consolidated results on a double stack basis that compares the first quarter of fiscal 2022 to the pre-pandemic first quarter fiscal 2020.\nOur sales, EBIT, net income, and diluted earnings per share all show strong growth.\nThis indicates that last year's results were a bit of an anomaly created by the pandemic.\nThat we are now getting back to a more steady level of performance across the business.\nRaw material shortages and inflation continue to be serious challenges.\nIn order to protect their margins, we are continuing to implement price increases where appropriate across all our segments.\nWe also continue to benefit from incremental cost savings resulting from our recently concluded Map to Growth operating improvement program.\nIt continues to pay dividends as we generate further operational efficiencies in our manufacturing, procurement, and administrative business functions.\nMoving on to Slide 7, our construction products group with our fastest-growing segment in the first quarter generating record sales and record adjusted EBIT.\nIts organic growth at 15% was particularly impressive given that non-residential construction put in place a relevant market indicator for the segment is down 11.6% this calendar year.\nNearly all of the CPG businesses experienced strong top-line performance.\nPartially by focusing on growing markets such as technology and distribution.\nCPG businesses that performed particularly well were those that provide commercial roofing systems, concrete add mixtures and repair products, and insulated concrete forms.\nThe segments' European operations generate a double-digit top-line growth.\nDue in part to the comparison to last year's first quarter when the shelter in place requirements were most severe.\nEarnings increased due to market-share gains, operational improvements, cost controls and selling price increases, which offset production and efficiencies due to supply chain disruptions and cost increases.\nOn Slide 8, you'll see that sales recovered at our performance coatings group as they increased at nearly all of its major business units.\nPartially aided by comparisons to last year's first quarter once pandemic restrictions did not allow contractors on worksites and former energy market conditions led to deferrals in industrial maintenance spending.\nSales are strong at the recently acquired Bison which is a manufacturer of raised flooring systems.\nWe also experience strong growth in emerging markets and in industrial maintenance outside of the energy sector.\nIt was encouraging to see EBIT growth outpacing sales in spite of inflation because CPG has been the segment that has been most heavily impacted by the pandemic.\nEarnings were boosted by improved pricing, incremental savings from operating improvement initiatives, and two recent acquisitions.\nTurning to Slide 9, our Specialty Products Group produced record top-line growth largely driven by its businesses providing marine coatings, powder coatings, wood stains and sealers, and disaster restoration equipment.\nEarnings increase due to higher sales volumes and incremental operating improvement program savings, which were partially offset by high raw material inflation inefficiencies associated with supply chain disruption and investment and SG&A for future growth initiatives.\nIn response, SBD businesses are continuing to institute price increases.\nNext on Slide 10, our consumer group faced a tough comparison the prior year for the reasons Frank mentioned earlier.\nDuring the first quarter of fiscal 2022, this segment experienced a negative sales impact of roughly $100 million from production outages due to supply constraints and disruptions.\nHowever, the consumer groups' fiscal 2020 to first-quarter sales were 12.3% above pre-pandemic levels of the first quarter of fiscal 2020 in spite of the negative sales impact from supply chain challenges during the current year.\nThere is pent-up demand for our products and inventory and many of our channels are low.\nWe expect to recover the lost sales when conditions normalized.\nEarnings declined during the first quarter of fiscal '22, as a result of inflation in materials for labor as well as the unfavorable impact of supply shortages on productivity.\nThese factors were partially offset by price increases and savings from our operating improvement program.\nWe are proactively building resiliency in our supply chain to secure raw materials required today and in the future.\nIn addition, we are adding manufacturing capacity to serve new DIY demand.\nWhile this additional capacity is being established in the near term we are using contract manufacturing at a higher cost to meet customer demand.\nI'll now move on to Slide 11, as we look ahead to our fiscal 2022 second quarter we anticipate that raw material, trade, and wage inflation will persist.\nAs well the raw materials shortages and supply chain challenges we have been experiencing.\nIn addition, we face another difficult comparison to the prior year when sales on a consolidated basis increased 6% and adjusted EBIT increased nearly 30%, driven by a 66% increase in the consumer segments adjusted EBIT.\nWe anticipate these factors to be partially offset by price increases, operational improvements, and new manufacturing capacity.\nWe expect our fiscal 2022 second-quarter consolidated sales to increase in the mid-single digits.\nOur Construction Products Group, Performance Coatings Group, and Specialty Products Group are anticipating double-digit sales growth.\nOur consumer group is anticipated to experience a double-digit decrease in sales due to continued raw materials shortages and a difficult comparison to the prior-year period when pandemic fuels demand rapidly drove organic growth up 15%.\nHowever, in a similar manner to the first quarter, we expect the consumer segment's second-quarter sales to be above its pre-pandemic level, which is a fair comparison.\nWhile underlying demand remains strong for our products and services, we still face material shortages and inflationary pressures.\nSo adjusted EBIT is expected to be down 15% to 25%.\nThe Q2 results will be directionally similar to Q1 with significant year-over-year declines again in our consumer group, which is still lapping tough comparisons and double-digit sales and earnings increases for our other three segments in aggregate.\nTurning to Slide 12, moving forward we intend to maintain the positive momentum created by our operating improvement program as we complete its remaining projects.\nSuch as the one plant closure completed during Q1 of F '22 leverage resources across RPM to manage supply chain issues and meet customer demand.\nIdentifying new opportunities for efficiencies through our continuous improvement culture and make investments and growth opportunities including capacity expansions.\nThis concludes our formal comments.\n Assistant:", "chosen": "q1 sales $1.65 billion versus refinitiv ibes estimate of $1.64 billion.\nlooking ahead to our fiscal 2022 q2, we expect raw material, freight and wage inflation to persist.\nexpect our fiscal 2022 second-quarter consolidated sales to increase in mid-single digits.\nexpect that second-quarter results will be directionally similar to q1.\n"}
{"prompt": "Human: Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made.\nCertain of these factors are described as risk factors in our Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the first quarter 2020.\nUltimately, our success through the pandemic lies in ample liquidity, excellence in the operations, business continuity and a strategic outlook for the future.\nThese four principles have driven what we have done and will continue to do throughout this pandemic and in the post-pandemic environment.\nLed by an operationally hands-on, proactive, motivated and crisis-tested management team, we sit in a position of relative strength following a two-year transformation of our organization, our predominantly grocery anchored and value orientated portfolio and our flexible balance sheet.\nCombined with recent actions, we believe that RPT will be able to weather the current storm and thrive once it passes.\nIn short, the actions we took increased our cash to over $320 million at the end of the first quarter, which should allow us to weather the downturn created by COVID-19.\nAs a management team, we see tremendous opportunity ahead and are in this for the long-haul and we felt that the salary adjustments were a proactive step that created alignment with our employees and our shareholders.\nCombined, we expect to save about $1 million in cash from these actions.\nLastly, the Board recently made the decision to temporarily suspend the quarterly common dividend, preserving roughly $18 million per quarter.\nNo decisions regarding dividend payments beyond second quarter 2020 have been made.\nFuture dividend decisions will be made based on liquidity needs and REIT taxable income distribution requirements.\nManagement and the Board did not take the decision to suspend the dividend lightly.\nAnd we are committed to providing investors with a healthy and sustainable dividend as cash flow visibility improves and the longer term impacts of COVID-19 are more apparent.\nCurrently, all 49 of our properties are open and operational.\nAs of May 7, 53% of our tenants by ABR are open.\nAs of May 8, we collected 58% of our April rent and reimbursements, largely from open tenants.\nOf our top 25 tenants based on ABR, over 86% have paid or have agreed in principle to some form of short-term deferment.\nThe majority of April uncollected rent was tied to the non-essential and experiential tenant categories with whom we are in active conversations with.\nNot surprisingly, these categories comprise the vast majority of our tamp relief requests that we have received today.\nIn terms of May collections, it is too early to comment given the fluidity of tenant negotiations.\nWhile the segmenting of our portfolio has importance and provides transparency into our business, the single best predictor of collections remains whether or not the store is open for business.\nAs such, we are encouraged that some states have begun to lift lockdown orders, allowing more tenants to reopen their doors.\nThat said, every tenant has different circumstances, each rent deferment negotiation has different considerations and there are still elements of uncertainty in all cases given the rapidly changing health environment we are experiencing today.\nIn order for us to clearly evaluate our cash flows by risk level, we have classified our tenants into four tiers based on our assessment of their ability to pay rent near term and the sustainability of their rent payments long term.\nIn Tier 1 are tenants who have both good long-term business models and have largely been able to remain open through the pandemic.\nThese include essential businesses as well as QSR and fast casual restaurants remain open, even if only a takeout, drive-through or delivery basis.\n87.9% of this tier remains open and 83.9% paid April rent as of May 8.\nIn Tier 2 are tenants with solid long-term business models and good balance sheets pre-COVID, but that sell more discretionary items.\nThe discount apparel retailers like T.J. Maxx and Ross fall into this category along with other investment grade quality tenants not included in Tier 1.\nOur Tier 2 tenants paid 78.7% of April rent, but only 27.2% by ABR were opened in April.\nTier 3 tenants offer more commodity like products like full-line apparel and accessories.\nAnd Tier 4 tenants are more experiential in nature, including full service restaurants and in many cases were key drivers of traffic pre-pandemic.\nCollectively, Tier 3 and Tier 4 tenants paid 36.1% of April rent, 35.6% by ABR remained open.\nTurning now to tenant negotiations.\nI would characterize our approach as firm but fair.\nOur size is an advantage right now as our top executives are directly involved in negotiations.\nWe understand that many of our tenants are in an extremely difficult position relative to their businesses and sales channels being turned off overnight.\nWe are working in good faith with them to get through the current turmoil in a way that both the tenant and landlord can be successful beyond the crisis.\nTo assist our tenants, we started the RPT Tenant Concierge Service to support our small business partners and gaining access to various government assistance programs by hosting educational webinars and providing and paying for direct access to legal resources.\nOf the 275 tenants that we targeted, nearly two-thirds have told us they applied for the PPP loan.\nApplication for an SBA loan for eligible tenants is a prerequisite for consideration of any form of deferral.\nThat said, let me be clear.\nWhile we are empathetic to our tenants' current situations, we are actively pursuing collections and will pursue all remedies where we believe tenants have the capacity to pay rent.\nWhat we are not doing is sacrificing long-term cash flow just for short-term April-May rent gain.\nApril rent is still coming in and as I said earlier, we will continue to pursue collections aggressively.\nGetting through this will take the collective efforts of the entire ecosystem.\nThere is no place for bad actors.\nFor our part, we continue to service our debt to pay our real estate taxes and insurance, and are maintaining the assets to operate safely during the mandated shutdowns while preparing for the reopening of the economy.\nAs we negotiate any form of rent relief, we are using our tiering process to guide our decision making process and focus on deferrals to support tenants in need or granting rent relief abatements judiciously.\nTo this point, while only 127 rent relief requests have been approved, 121 have been in the form of deferrals totaling $3.8 million and only six abatements have been granted totaling less than $71,000.\nTypical deferral terms call for repayment by the end of 2020 and range from one month to three months.\nPlease know that neither deferrals nor abatements are being granted for free, and we're using them as currency to improve lease terms that will add significant value down the road.\nSome examples include cleaning up co-tenancy clauses, eliminating no builds, and extending term to name a few.\nWe have proven to be exceptional on the operational side of the business and we will navigate this storm through that exact same lens.\nAlthough much of this focus has been on who is not paying rent, I think it's important to keep in mind that the pandemic is also highlighting the importance of key tenant categories and specifically the grocery channel.\nWe are seeing incredible demand at our non-grocery anchored centers from grocers and are currently in negotiations with seven top tier grocers at non-grocery anchored centers in our portfolio that would improve the durability of cash flows at these centers if we -- if closed and increase the number of our centers with a grocer or grocery components by 14%.\nTurning now to RPT's response to the pandemic at the organizational and community levels, which I believe is a strong reflection of the caliber and quality of the company.\nAt the organizational level, we responded quickly and definitively in response to what was a rapidly escalating situation to ensure the safety and health of our employees and to provide uninterrupted service to our tenants.\nWe shut down our New York office in early March, followed shortly by the closing of our Michigan office.\nOur employees have now been working safely and efficiently from home for almost 10 weeks, but a year ago, we established an option to work-from-home day program, which made the transition to full work-from-home environment quite smooth.\nOur technology, tools and processes allowed us to rapidly evolve with the situation real-time and with limited disruption.\nWhile we are all looking forward to the day we can return to the office, we are prepared and ready to continue to work remotely as long as it takes to ensure the health and safety of our people.\nIn addition to our work-from-home programs, we have also been working diligently to protect the ongoing health and well-being of our employees through weekly wellness emails, COVID-related seminars and weekly companywide virtual happy hours.\nAt the tenant and community level, RPT has been actively engaging with and supporting both our tenants and those on the frontlines of the pandemic.\nToday, we have donated over 20,000 meals to support school lunch programs, at-risk populations, essential workers and nursing home employees and local communities.\nWe have also matched employee contributions to support hospital workers and volunteers.\nIn anticipation and preparation of the reopening of many of our tenants in the coming weeks, we have developed plans for several key initiatives at our shopping centers to keep customers and tenants safe.\nThe current health crisis has caused us to reshape our business plans quickly and to refocus our efforts in the near term.\nOur response to the pandemic has been focused on the health and safety of our employees and their families, our tenants and our shopping center customers, maintaining business continuity during and after the pandemic and increasing liquidity to withstand the near-term financial impact of the health crisis, while positioning the company for long-term success after the crisis passes.\nThough the pandemic is having a profound impact on how we think about the business, we remain confident that at its core, the value and service-orientated as well as the grocery anchored shopping center model is one that will stand the test of time as we all seek out common ground, upon which to gather experience life and yes, shop.\nOver the last several weeks since the pandemic gained force, many of our key decisions have been through the land of liquidity.\nOur goal is simple: focus on what you can control and prepare for what you cannot.\nA significant contributor to this was our recent borrowings on our line of credit.\nOut of abundance of caution and after analyzing our potential cash need, we drew down $225 million from our line during the quarter, bringing our total cost position to over $320 million at the end of March.\nBased on all the steps we have taken over the last two years to solidify our balance sheet, we are fortunate to not have any debt maturing in 2020, only $37 million maturing in '21, and just $53 million in '22.\nIf our cash collections remained at the April level of 58%, we would be able to fund our ongoing operations without utilizing much of our cash on hand.\nOur breakeven cash collection rate is roughly 61%.\nIn short, we believe we have more than enough liquidity to withstand the impacts of COVID-19 despite the severity of the situation.\nWhile we have no material use for cash today, we will continue to balance our future cash needs and debt covenant compliance requirements to ensure we have optimal liquidity and flexibility to operate our business.\nIt is also important to note that 46 of our 49 properties are unencumbered, providing us with the optimal operational flexibility to make decisions quickly without the burden of servicers or lenders.\nQuickly on our first quarter results.\nOperating FFO for the first quarter was $0.26 per share, which was in line with our internal projections.\nDuring the quarter, we recognized about $800,000 in costs related to the suspension of our acquisition and disposition program, which have been excluded from operating FFO as they are non-recurring in nature.\nSame-property NOI growth for the first quarter 2020 was 2.3%, which included a 120 basis point drag from rent not probable of collection reflecting the initial impact from COVID-19 attributable to a conservative approach we took with an entertainment tenant that had a substantial open AR balance that we deemed uncollectible.\nAbsent this, same-property NOI growth for the quarter was in line with our expectation.\nWe ended the quarter at an occupancy rate of 93.3%, down 100 basis points sequentially given typical seasonality and recapture of an expected anchor space but up 150 basis points year-over-year.\nOn a leasing front, volume faltered in early March due to COVID-19, impacting our new lease volume.\nAs a result, we had a much higher mix of renewal activity during the quarter.\nIn total, we signed 46 leases comprised of 558,000 square feet of which 60,000 square feet were new leases and 490,000 were renewal leases.\nWe experienced blended releasing spreads of 6.2% and 36 comparable leases, including a 6.2% renewal spread and a 5.2% new lease spread.\nTurning now to our outlook for the remainder of the year, in late March, we pulled our 2020 guidance given the lack of visibility created by the coronavirus.\nWhile we are not reintroducing guidance today, we want to provide some additional points to think about as you attempt to model the balance of the year relative to our previously provided guidance.\nWe entered the quarter with signed not open ABR of about $2.1 million.\nDespite the pandemic, we have been able to continue most of our construction activities associated with these leases.\nWhile we have seen a slight delay with rent commencement dates, we expect the rents to commence over the next 12 months.\nRegarding near-term rent expirations, we only have 3.4% of our ABR expiring over the balance of 2020, mitigating some near-term tenant retention risk.\nFrom a capital perspective, we have only $14 million of remaining committed capital spend in 2020, of which $11 million is related to our signed not open backlog and residual capital for recently opened tenants, with the balance largely related to essential maintenance capital.\nTurning to the common dividend, as Brian mentioned, once the dust settles from the current disruption and longer term implications for the market become more clear, subject to Board approval, we expect to reinstitute a sustainable dividend that will again provide a stable income stream for our investors.\nExtrapolating the $18 million per quarter common dividend we were paying would equate to $54 million in potential capital preservation through the next three quarters.\nLastly, in the spirit of transparency, it's worth noting that we provided additional details on our tiers that Brian discussed earlier, in addition to more information on our merchandising mix and performance as it pertains to rent collections in our quarterly investor deck posted on our website.\n Assistant:", "chosen": "q1 operating ffo per share $0.26.\ntemporarily suspended payment of the common dividend.\nwithdrawn all previously provided guidance for 2020 as disclosed in q4 earnings press release.\n"}
{"prompt": "Human: Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made.\nI hope you and your families are all well.\n2020 will be a year not soon forgotten.\nThe health and economic impacts from COVID-19 have been unprecedented.\nAdd to this, the social and political unrest our country has experienced, and 2020 will no doubt go down as one of the most historic and difficult years in our lifetime.\nWhile the issues facing an open-air shopping center REIT are small in comparison to 2020's broader challenges, I am proud of RPT's response and execution this past year.\nFrom our tenant assistance program and charitable donations to our property-level safety and curbside pickup initiatives, RPT demonstrated its commitment to our purpose of turning commercial ground into common ground.\nWe also took swift and decisive actions to shore up our liquidity and preserve our access to capital with our first-time investment-grade credit rating from Fitch.\nIn addition, I was very pleased with the team's tireless effort in pursuit of rent collections, which improved to 91% in the fourth quarter.\nFollowing the payoff of our remaining $100 million balance on our revolver, we have over $100 million of cash and a fully undrawn $350 million revolver and are now positioned to take full advantage of our unique and valuable partnership with GIC and opportunistically execute on our external growth plans.\nWe continue to track a healthy pipeline of acquisitions and have started to see some improvement in activity in recent weeks.\nLet me just reemphasize that the underlying real estate is the primary driver of our acquisition strategy.\nWhat we then look for is growth.\nThat could come in a variety of ways from under-market rents and mismanaged assets to redevelopment opportunities.\nIt could also come in a variety of different retail formats from grocery anchored, lifestyle centers, power centers to community centers.\nAs previously reported, we had five deals in our GIC venture either signed or in negotiations in February of 2020.\nOnce the pandemic hit, we and our partners made the decision to get out of all of them.\nWe are now fortunate to have the liquidity and the deep pipeline within our core markets and believe the widening value gap between property types, tenant categories and markets is creating differentiated opportunities that we hope to take advantage of in 2021.\nOne thing we pride ourselves on is skating to where the puck is going, not to where it's been.\nLast year, we entered the Austin market with our off-market acquisitions of Lakehills Plaza.\nSince our acquisition, Tesla announced a new $1.1 billion assembly plant.\nGoogle, Oracle and Digital Realty, to name a few, each announced relocation or expansion plans to Austin.\nAnd Barshop & Oles announced plans for a new $1 billion mixed-use development directly across the highway from our property.\nIt's been a little over a year since our acquisition.\nAnd we are more convinced than ever about this dynamic market that truly represents where the puck is going.\nFrom a leasing perspective, we continue to make good progress on our grocery negotiations and are also in negotiations with tenant categories such as home improvement, wholesale club stores, off-price, QSR and medical-use tenants.\nThis quarter, we signed a total of 120,000 square feet, up 10% year-over-year.\nNotable signings this quarter included two new deals with a modern, tech-enabled healthcare provider.\nThese deals exemplify our enhanced focus on health and wellness tenants.\nWe also have good activity on the two Stein Mart boxes that we took back in the quarter, where we have an opportunity to significantly improve the tenancies of both boxes.\nAt under $11.50 of ABR per square foot, we also see a solid mark-to-market opportunity upon release of these spaces.\nOne Stein Mart box is already in lease and the other has multiple LOIs that are being negotiated with some very strong national brands.\nWe ended the fourth quarter with a signed but not open backlog of $3.2 million, up from $3 million last quarter.\nWe are currently tracking roughly $2 million of ABR that is currently in lease negotiation, up from about $1.5 million last quarter, giving us some visibility on offsets to potential future fallout.\nThe leasing pipeline is robust, and we are encouraged by the impact it will have on our future cash flows.\nAdditionally, we have a number of remerchandising opportunities that we are pursuing that are listed in our supplement.\nThese 11 projects consist of redemising, expanding or combining spaces similar to the 18 targeted remerchandising opportunities that we completed in 2019.\nAs we did on those projects, we expect to earn attractive returns on our capital of high single to low double digits on this next set of deals.\nDespite the end of year increase in reported COVID cases, our suburban portfolio was less impacted by additional lockdown measures taken since this summer.\n94% of our portfolio by ABR remains open, unchanged from last quarter, with 4% of our closures tied to our theaters.\nThe reopening of our theaters remains fluid.\nOur exposure is almost entirely tied to Regal, whose parent company, Cineworld, recently obtained additional financing they expect to provide liquidity through 2021 and beyond, which is a positive milestone for this tenant.\nWhile we continue to place a high premium on our cheapest source of capital, retained cash flows, we understand how important the dividend is as a component of our total return to shareholders.\nWith that in mind, we established a $0.075 per share common dividend for the first quarter of 2021.\nThe quarterly rate reflects a purposeful analysis of our expected taxable income and our liquidity needs.\nWe believe the new rate is sustainable and could be grown in conjunction with earnings while allowing us to preserve cash to support our growth opportunities and providing sufficient cushion to weather periodic future downturns.\nToday, I will discuss our fourth quarter results, our strong balance sheet and liquidity position, and end with commentary to help everyone understand our expectations on how our business will trend in 2021.\nFor the fourth quarter, our bad debt and abatements were $4.4 million, about the same as the third quarter.\nWe reserved about 89% of our uncollected fourth quarter recurring billings, leaving limited downside from these categories relative to our fourth quarter run rate.\nAs of year-end, $18.1 million of recurring billings for the period of April through December 2020 remain outstanding, of which $11.9 million have been reserved.\nWe expect most of the unreserved amount of $6.2 million to be paid back over the course of 2021 and 2022.\nWe continue to be quite pleased with the resiliency of our portfolio and our limited bankruptcy exposure as our leased rate of 92.8% held up well in the quarter, down just 50 basis points sequentially, primarily driven by the recapture of our two Stein Mart leases that I noted last quarter.\nBlended rent spreads for the quarter remained positive at 3.4%, impacted by a few flat strategic renewals.\nAlso, it's important to note that the releasing spread is just one factor in the organic growth profile.\nThe other factor that we heavily weigh in lease negotiations are the annual contractual rent increases.\nThe leases that we signed during the quarter, annual contractual rent increases, were about 150 basis points, which is a key contributor to creating a long-term sustainable NOI growth profile.\nAs we have noted consistently, we expect some volatility in our quarterly statistics given the size of our portfolio but see a continued mark-to-market opportunity as we cycle legacy leases over the next few years.\nAnd as Brian noted in his remarks regarding dividend policy, we have placed a premium on free cash flow, allowing us to utilize our cheapest form of capital to take advantage of these opportunities as we restabilize our portfolio to pre-COVID leased rate levels of nearly 95%.\nWe were very pleased with our first-ever investment-grade credit rating from Fitch, highlighting our balance sheet strength and flexibility.\nCouple this distinction with an increased confidence in our business and in our access to low-cost debt capital, we no longer felt the need to maintain an outsized cash balance and repaid the remaining revolver balance of $100 million last week.\nWe will also continue to mine our portfolio for additional capital-raising opportunities to further bolster our liquidity position and fuel our external growth plans.\nWe ended the fourth quarter with trailing 12-month net debt to pro forma adjusted EBITDA of 7.4 times, up slightly from 7.2 times last quarter as another COVID-impacted quarter entered the calculation.\nWe remain committed to bringing leverage into our long-term target range of 5.5 to 6.5 times and expect to see steady improvement in EBITDA as we return to more normalized reserve levels and as our signed leasing backlog begins to kick in over the course of 2021.\nWe are establishing 2021 operating FFO per share guidance of $0.77 to $0.87, which is an expected improvement over the annualized 2020 fourth quarter operating FFO per share of $0.72.\nKey drivers from there are a favorable impact of $0.03 from interest expense, primarily due to the repayment of our revolving line of credit, and $0.02 from our signed not open backlog that we expect the vast majority to open ratably in 2021.\nFurther upside is based on favorable bad debt reserves, which we expect to be heavily influenced by the reopening of our theaters, which is a function of the trajectory of the vaccine rollout and movie productions.\nWhile our assumption is that these circumstances will improve over the course of '21, we felt establishing a wider range was appropriate given the potential varying outcomes for our theater exposure, which represent about $0.10 per share of earnings.\nIf our theaters remain closed and do not pay their contractual rent, our operating FFO could be at the low end of the range.\nAnd conversely, if they are open and paying, we should be near the high end, all else equal.\nIt is important to note that our guidance does not include the net impact of changes to 2020 estimates for bad debt and straight-line rent reserves.\nAlso, while acquisitions are not assumed in our guidance range, we intend to redeploy $100 million of cash on the balance sheet into opportunistic acquisitions that meet our strict underwriting standards, representing upside to our range.\nWhile the near-term COVID trajectory remains uncertain, we are cautiously optimistic that the worst is now behind us.\nAs we move closer to a more normalized environment and given the conflicting impacts of permanent move-outs and rent collection statistics, we hope to return our focus to more traditional measures of REIT operating performance like occupancy, rent spreads and same-property NOI growth.\nAs part of our ongoing efforts to improve our disclosures, this quarter we added a net asset value page to our supplemental on page 14 to help facilitate your analysis of our real estate value.\n Assistant:", "chosen": "rpt realty reinstates quarterly common dividend.\ninitiated 2021 operating ffo per diluted share guidance of $0.77 to $0.87.\n"}
{"prompt": "Human: You will also find our 10-Q on Range's website under the Investors tab, or you can access it using the SEC's EDGAR system.\nFor additional information, we've posted supplemental tables on our website to assist in the calculation of EBITDAX, cash margins, and other non-GAAP measures.\nThe first quarter of 2021 saw Range made continued progress toward our key strategic objectives, improving margins through cost controls and thoughtful marketing, generating free cash flow, enhancing liquidity and extending our maturity profile, operating safely and efficiently, and ultimately positioning the company to return capital to shareholders as the most efficient natural gas and NGL producer in Appalachia.\nI'll touch briefly on each of these before turning it over to Dennis and Mark to cover in more detail.\nI'll start with unit costs and margin improvements.\nRange's unit costs for the quarter were right on track and ahead of our expectations with G&A, LOE, exploration expense, and production taxes, coming in at the low end of our guidance and expectations.\nAdditionally, we reported a significant gain in our marketing activities for the quarter.\nAs expected, GP&T increased versus the prior quarter but was more than offset by the significant improvements we saw in NGL and natural gas realizations, resulting in the vast improvements to Range's margins.\nIn fact Range's unhedged realized price for the quarter was approximately $3.20 per mcfe, which was $0.51 above the NYMEX Henry Hub equivalent price of $2.69.\nThis premium to Henry Hub is a result of our diversified marketing portfolio and liquids production.\nThis liquids uplift improve margins and reduces Range's breakeven costs when compared to producing only dry gas.\nIn fact Range's pre-hedge margin improved by over $1 per mcfe in the first quarter when compared to the 2020 average.\nGiven the improved fundamental backdrop for natural gas liquids with approximately 65% of our activity in the liquids-rich window this year, Range is very well positioned to continue to benefit from this dynamic.\nDuring the quarter, Range was also able to benefit from improved daily prices in the natural gas market, realizing a natural gas differentials that was $0.08 better than the midpoint of guidance only partially offset by higher transportation fuel costs, again benefiting margins and cash flow.\nOn the back with this improved pricing, Range generated $193 million in cash flow from operations before changes in working capital, and with capital spending, coming in at just $105 million for the quarter, Range generated solid free cash flow.\nAs shown on slide 14, we expect this to continue with significant growth in EBITDAX this year versus last.\nWhen combined with absolute debt reduction, this organic free cash flow generation puts us well on our way toward our longer-term balance sheet targets.\nTouching on the all-in capital investment of $105 million on the quarter, it's clear that the team's operational execution was superb.\nAnd we continue to find ways to lower costs, once again leveraging our large contiguous acreage position to find ways to complete the operational plan with peer-leading capital efficiency.\nAfter delivering on operational plans below budget for the last three years, Range remains on track to do the same for the fourth consecutive year in 2021.\nThe operational team safely delivered this capital-efficient plant with an eye toward our long-term environmental goals.\nRange closed out 2020 with class-leading emissions intensity, reducing greenhouse gas emissions intensity and putting us right on track toward our 2025 goal of net-zero.\nAs we strive for this goal, it all starts with efficient operations that minimize our operating footprint and importantly, generates competitive returns.\nWe believe Range's peer-leading capital efficiency and maintenance capital are key differentiators among peers.\nAs we've discussed in the past, Range's large blocky acreage position affords us operational and financial efficiencies on multiple fronts including water recycling, infrastructure, rig mobilization, and equally optimization, just to name a few.\nDennis will cover a good example of how this combination of these benefits, benefit range from both an ongoing development and corporate return standpoint in addition to strengthening our environmental efforts.\nWhen combining our low well costs, strong recoveries, and shallow base decline of under 20%, Range is operating at a high level of capital efficiency that provides a solid foundation for generating sustainable free cash flow, what further differentiate Range is our ability to deliver this level of efficiency for an extended period of time giving our multi-decade core inventory.\nFor some added context on our inventory, Range is turning to sales approximately 60 wells this year, but we have approximately 2,000 Marcellus locations with EURs that are greater than 2 Bcfe per 1,000 foot of lateral.\nThe average recovery of these wells is very similar to the wells Range has turned to sales for the last several years providing Range an unmatched runway of high-quality wells that's measured in decades.\nThis is not the case for many of our peers, which we believe positions Range as well as any upstream company to benefit from improving commodity price environment over the medium and long-term.\nBefore turning it over to Dennis and Mark, I'll just reiterate that Range remains committed to sustainable free cash flow.\nOver time, we believe Range will stand out among peers as a result of our low sustaining capital, competitive cost structure, marketing strategies, and importantly our multi-decade core inventory life, which will be an increasing competitive advantage in the years to come as other operators exhaust their core inventories.\nWe will continue to focus on safe, efficient, and environmentally sound operations, prudent capital allocation, and generating sustainable returns to shareholders.\nImportantly, these are all reflected in our updated compensation metrics that can be found in our most recent proxy statement.\nOver to you, Dennis.\nWhen we communicated the operational details for our 2021 program, our framework was built around improving both operational and capital efficiencies, enhancing margins, all while striving to further improve our environmental and safety performance.\nAs we look at our first quarter results, our operating teams are off to a strong start delivering on our objectives for the year, beginning with Q1 production above our communicated guidance and capital spending in line with our 2021 plan.\nFirst quarter capital spending came in at $105 million or approximately 25% of our 2021 program budget.\nAs we discussed on the prior call, our capital spending program is front-end loaded for the year and is a consistent approach with previous years.\nAs we look forward, our second quarter capital spending is expected to be approximately one-third of the annual budget for the year, mainly driven by activity timing for completions and turn in lines shifting to Q2.\nThe reduced capital investments in the second half of 2021 are aligned with our activity cadence reducing to one drilling rig and one frac crew during the third and fourth quarters.\nOur first quarter production level of 2.08 Bcf equivalent per day was a direct result of recent strong well results combined with exceptional field run time for the quarter due in large part to the near flawless winter operations planning and execution by our production operations team.\nUnderpinning our first quarter production including turning to sales, 16 wells spread across are dry, wet, and super-rich acreage.\nOur Q1 turn-in lines consisted of an average horizontal length in excess of 11,500 feet and added just under 200,000 producing lateral feet to Range's Appalachia assets.\nDuring the fourth quarter of last year, through the first quarter of 2021, our activity shifted toward wells located across our processable gas footprint.\nThe results of these turn-in lines increased Range's average oil production to a level exceeding 8,000 barrels per day in Q1 and, has increased overall liquids production in similar levels seen during the first half of 2020.\nThis level of wet production contribution is expected to continue through the end of this year with second quarter production projected at approximately 2.1 Bcfe per day.\nThis will position us to achieve our 2021 maintenance target of 2.15 Bcfe per day through additional margin enhancing liquids production while spending $425 million or less.\nShifting to our operational highlights.\nDuring the first quarter, 15 wells were drilled across our dry, wet, and super-rich footprint.\nFour of these wells are in the top 20 lateral links for Range's Marcellus program history with all four exceeding 17,800 feet.\nDrilling efficiencies continued with nearly three-quarters of the new wells drilled on pads with existing production, coupled with a 5% increase in daily lateral footage drilled compared to 2020.\nOn the completion side, 16 wells were completed during the quarter.\nOverall, the team completed just under 1,200 frac stages while setting a first quarter winter operations efficiency record by averaging over eight frac stages per day.\nThis efficiency level exceeds Range's previous best first quarter in winter operations record by 14%.\nThe water operations team built upon prior water recycling successes by utilizing nearly 2 million barrels of third-party produced water, a first quarter record and as a result, reduced overall completion costs for the quarter by more than $4.5 million.\nDespite cold weather conditions and heavy snowfalls, the team produced some of our best operational results in our program to date.\nAll while keeping safety and environmental performance at the forefront.\nLease operating expense for the first quarter was consistent with our prior year's Appalachia level and remained low at $0.09 per Mcfe.\nAchieving this LOE level is in large part due to a well-coordinated proactive winter operations plan with the objective of minimizing weather-related production impacts and associated costs.\nThese efforts generated a field runtime that exceeded 99% with a weather-related production impact of less than 0.5 million cubic feet per day for the quarter, a remarkable achievement.\nLooking at the operational successes and milestones achieved during the first quarter, involves a focused, continuous improvement approach, and it's anchored by four key areas.\nRange's water recycling program, long lateral development, utilization of existing infrastructure, and lastly optimize the use of drilling and completions equipment.\nEach of these are key drivers in delivering on our operational and capital efficiency and our integrated part of achieving our ESG or more specifically our environmental objectives.\nWe often touch on the benefits each of these bring to our program ranging from a reduction in operating costs, efficiency gains, minimizing our environmental footprint, and reductions in emissions.\nToday, I'd like to take a moment and walk through how these four strategies are being implemented by our operations and support teams along with the positive impacts.\nI'll use three of the wells that were turned to sales in the first quarter as an example.\nThese three wells were drilled on an existing surface location with producing wells that were originally developed and turn to sales in 2013.\nThe average lateral length of the original wells was just over 3,000 feet per well.\nIn stark contrast, the average lateral length of the new wells is nearly 16,000 feet per well, more than 5 times longer.\nNo additional earth disturbance was needed for 5 times the acreage development and no additional production, gathering, and processing infrastructure was required to add these new wells.\nTo put this into perspective, Range has close to 250 developed pads in Southwest PA and as of today, we've returned 84 of these locations to drill additional wells.\nAdditional wells are planned for these same pad sites along with the approximate other two-thirds of Range's pads that we've yet to return to for added activity.\nSimply put, we're only scratching the surface of this opportunity.\nThe three new wells were completed late last year, utilizing our contracted electric fracturing fleet which displaced 470,000 gallons of diesel fuel.\nThis reduced our cost by approximately $300,000 per well along with large reductions and associated emissions.\n40% of the water used to complete these new wells was recycled water from Range's producing wells along with third-party water, sourced from our water sharing process.\nThe balance of the water was pumped from our water pipeline network, which was installed nearly a decade ago, further reducing emissions associated with truck traffic by more than 13, 400 truck trips.\nThe average initial production of these wells exceeded 44 million cubic feet equivalent per day including more than 9,700 barrels per day of combined condensate and natural gas liquids per well, placing them in the top tier of wells in our Marcellus program history.\nThis is just one of many examples we could share from our development during the past several years with results such as this.\nThese efforts have underpinned our operational efficiency gains and give us confidence in the durability around keeping our drilling complete cost below $600 per foot, all while achieving our environmental goals and producing best-in-class wells.\nThese benefits highlight the importance and value of having a high- quality contiguous acreage position and forward-thinking technical team.\nBefore moving on to marketing, I'd like to touch on Range's environmental and safety performance.\nTo further reduce production facility emissions, in 2020, Range transitioned to a quarterly leak detection program doubling the number of inspections conducted.\nAs a result of this increased inspection frequency, an additional 7,400 metric tons of CO2 equivalent emissions was removed from our program, resulting in a 67% reduction for those related components.\nThis effort along with the continued advancements in our production facility design and utilization of an electric frac fleet has resulted in further reductions in Range's reported emissions, reaching a new low CO2 equivalent level.\nThis level of performance is competitive with any natural gas play in North America and puts Range in an enviable position globally.\nConsistent with our environmental results, Range's safety performance saw similar improvements delivering an over 30% improvement in recordable incidents for the quarter, which was the best Q1 performance versus the prior five years.\nSwitching to marketing, Range's NGL and condensate business benefited from a strong first quarter.\nMarket prices improved across the board and our advantaged portfolio of contracts enabled Range to capture premium pricing and a pre-hedge NGL realization in Q1, that was the highest level since late 2018.\nThe primary driver for improved pricing across both NGLs and condensate was strong demand in a market that saw decreased supply.\nPreliminary results for US propane and butane or LPG reveal that Q1 2021 domestic demand was 13% higher year-on-year while supply decreased by 4%.\nSimilarly, condensate supply in the Northeast is estimated to have decreased by 15% to 20% year-on-year.\nAs a result of these improved fundamentals, the market average NGL barrel price improved significantly during the quarter.\nAt $24.83 per barrel, Range's Mont Belvieu equivalent barrel was at 38% over the prior quarter and 83% compared to the first quarter of 2020.\nPropane prices led the way, increasing nearly 60% versus the prior quarter and 140% versus Q1 of 2020.\nAdditionally Range's premium to a Mont Belvieu equivalent barrel increased by approximately $1.50 per barrel versus the prior quarter as Range realizes this highest premium to Mont Belvieu in the company's history.\nLooking forward, we see propane and butane market prices continuing to post strong year-on-year gains as storage balances of these NGLs are much tighter relative to last year.\nThis past winter, propane posted its largest seasonal withdrawal and well over a decade, leaving the end of March propane stocks at a 33% deficit to last year and a 17% deficit to the five-year average.\nGiven the strong international demand that we are seeing with new chemical capacity coming online and recovering global economies, we believe it will be challenging for propane to replenish US stocks to a comfortable level by fall.\nAs a result, we expect propane prices to transact at levels at or above 60% of WTI crude this fall and the upcoming winter.\nOn the commercial side, beginning April 1st, Range entered into a set of new and diverse LPG export-related contracts.\nThese contracts will add flexibility, reduce cost and further enhance realized propane and butane prices continuing Range's momentum of achieving strong price premiums, relative to the market.\nFinally, we continue to optimize Range's condensate sales portfolio by adding flexibility, improving margins, and assuring product placement.\nAs this year progresses and optimization continues via a diverse set of counterparties, we expect that our condensate differentials to WTI will continue to improve, further benefiting our liquids area development plan discussed earlier in the call.\nOn the natural gas side, cold weather during mid-Q1 equated to the third coldest February, when looking at the past 10 years.\nAnd despite milder conditions in both January and March, Q1 gas weighted heating degree days finished slightly above the five-year average.\nThrough utilization of our diverse transportation portfolio, Q1 resulted in a differential of $0.14 under NYMEX, including basis hedging.\nLooking ahead, we see potential for additional positive improvements for natural gas pricing, given that a high percentage of operators are targeting maintenance production levels this year, coupled with year-over-year improvements in storage, the fundamentals point toward an undersupplied natural gas market.\nWithin this constructive outlook for natural gas, Range is on track with its differential guidance of $0.30 to $0.40 for the year.\nAs we close out our operations and marketing updates, the first quarter results clearly reflect our operations are off to a strong start for the year with the team further building on our operational and capital efficiency performance, all while delivering on our environmental and safety objectives.\nConsistent delivery on stated objectives, that is Range's fundamental strategy.\nAnd as you've heard from Jeff and Dennis something the team successfully executed during the first quarter; efficient operations delivering production, efficient drilling and completions activity with capital spending trending in line to better than budget, combined with margin enhancing expense management, all resulted in significant free cash flow.\nOur ultimate goal is to repeat this quarter in and quarter out.\nResults for the first quarter reflect the benefits of reliable operations, productive wells, and diversity in sales points for natural gas, natural gas liquids, and condensate.\nCash flow from operations before working capital was $193 million compared to $105 million in capital spending.\nSignificant improvements in free cash flow compared to past periods were driven by a 50% improvement in pre-hedge realized prices per unit of production versus the prior-year period, which reached $3.20 per mcfe in the first quarter.\nThis realized price per unit is $0.51 above NYMEX Henry Hub, driven by improved natural gas basis and importantly further enhanced by a 77% increase in NGL price per barrel, which reached $26.35 pre-hedge.\nRealized NGL price on Mmcfe [Phonetic] basis equates to $4.39 per mcfe and condensate realizations equate to $8.17 per mcfe.\nHence the realized premium to Henry Hub.\nAdditionally, Range's NGL prices exceeded a Mont Belvieu NGL barrel by $1.52 due to our unique portfolio of domestic and international sales contracts.\nMargin enhancing focus on unit cost is a constant state of mind for Range.\nLease operating expenses declined over 40% year-over-year to $0.09 per unit on the back of consistent, efficient, Marcellus operations, despite the winter weather and the divestiture of higher-cost assets.\nCash G&A expenses declined to $28 million or $0.15 per unit in the first quarter.\nThe decline results primarily from lower compensation costs of a leaner organization, coupled with targeted value-focused spending on IT, data services, safety, environmental, and other essential areas.\nCash interest expense was roughly $55 million.\nHigher interest expense is the result of our most recent refinancing activity, which dramatically and positively reshaped the debt maturity profile of the company and enhanced liquidity.\nGathering, processing, and transportation expense increased, but it is important to keep in mind that this is a positive byproduct of strong NGL prices that resulted in significantly higher NGL margins.\nRecall that Range's processing costs are the percent of proceeds contracts such that we pay a percentage of NGL revenues as the fee.\nConsequently, a fraction of the material higher prices received for NGLs is paid as higher processing cost in that quarter.\nFor perspective, an increase of $1 per NGL barrel equates to approximately $0.01 per mcfe and cost.\nThis structure is unique to range in the Appalachian Basin and is a right way risk arrangement that has led to reduce costs for several quarters of lower prices and now continues to drive material margin expansion.\nAs a result of rising NGL prices in recent months, GP&T expense in 2021 is trending toward the high end of guidance.\nHowever, this is more than offset by expected higher NGL revenue, forecasted at current strip pricing relative to earlier this year.\nTurning to the balance sheet, Range has diligently and successfully managed the debt profile, such that liability management projects reduced bond maturities through 2024 by almost $1.2 billion while at the same time improving liquidity to nearly $2 billion.\nDuring the first quarter, we issued new bonds due 2029 in the amount of $600 million, which combined with the reaffirmation of our facilities, $3 billion borrowing base and $2.4 billion in commitments provide substantial liquidity and a strong evidence of what we believe is durable asset value.\nCash flows are expected to retire debt maturities in coming years and are backstopped by ample liquidity.\nDuring the first quarter, we called in $63 million in near-term maturities of senior and senior subordinated notes closing on the redemption in early April.\nThere has been substantial improvement in the debt markets, and it's evident in the trading levels of Range's bonds that both access to and cost of capital has improved.\nFuture debt retirement is expected to be funded primarily by organic free cash flow.\nWe will be cost-conscious in effectively managing debt retirement, while also being mindful of any potential refinancing risk of debt maturities.\nBeing opportunistic in bond redemptions, this prices in early redemption options become economic on a risk-adjusted basis.\nLiability management over the last two years has as expected temporarily increased interest expense, however, this avoided much higher cost forms of capital that would have diluted shareholder ownership and participation, and what we see is a steadily improving natural gas and natural gas liquids business.\nWhile we're proud of the steps taken to date, further improving our balance sheet remains a principal objective.\nAs can be seen in the recently filed proxy, leverage metrics have been incorporated into long-term compensation criteria with the target of 1.5 times debt to EBITDA were better.\nShareholder value creation through the generation of free cash flow and its prudent redeployment is our focus.\nTo be clear, we believe this is an achievable goal.\nAt current commodity prices by the end of 2022, Range's leverage is approaching target levels.\nOn the topic of hedging, we have a glide path or common range in which we add positions over the course of the year.\nWithin that path, we intentionally moved at a deliberate pace during 2020, as we added 2021 hedge positions.\nWe plan to follow similar principles this year in adding hedges for 2022 and beyond.\nBy that I mean, we'll seek to balance the twin goals of prudently derisking cash flows while not hedging away the improved supply demand balance into backward dated price curves.\nOur strategic actions over the last three years have been focused on reducing risk while maintaining and enhancing the intrinsic value of the asset base.\nWe believe Range holds the largest portfolio of quality inventory in Appalachia.\nExposure to that inventory on a per-share basis has been preserved and enhanced by our actions.\nWe believe steps taken represent material progress in positioning Range as a more resilient business and as evidenced by first quarter results primed to participate in improved market dynamics.\nJeff, back to you.\nOperator, we'll be happy to answer questions.\n Assistant:", "chosen": "compname reports q1 adjusted non-gaap earnings per share of $0.30.\nproduction for full-year 2021 is expected to average about 2.15 bcfe per day, with about 30% attributed to liquids production.\nq1 adjusted non-gaap earnings per share $0.30.\nrange's 2021 all-in capital budget is $425 million.\n"}
{"prompt": "Human: Jon Vander Ark, our Chief Executive Officer; and Brian DelGhiaccio, our Chief Financial Officer, are joining me as we discuss our performance.\nThe material that we discuss today is time sensitive.\nIf in the future, you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is October 28, 2021.\nI want to remind you that Republic management team routinely participates in investor conferences.\nWe are pleased with our strong performance in the third quarter.\nWe continue to execute on our strategic priorities of customer zeal, digital and sustainability to drive growth and value for our stakeholders.\nDuring the third quarter, we delivered revenue and EBITDA growth of approximately 14% compared to the prior year.\nGenerated adjusted earnings per share of $1.11, which represents an increase of 11% over the prior year and produced $1.4 billion of adjusted free cash flow on a year-to-date basis.\nWe continue to effectively allocate capital by investing in value-creating acquisitions and returning excess cash to our shareholders.\nYear-to-date, we've invested over $900 million in acquisitions to further enhance our market position and increase free cash flow.\nThis is the highest level of acquisition investment in over a decade.\nOn August 31, we completed the acquisition of ACV Enviro.\nThis strategic acquisition broadens our capabilities and offerings in the environmental services industry.\nIt also provides us with a platform to pursue additional growth.\nOur acquisition pipeline remains robust with opportunities in both the recycling and solid waste and the environmental solutions businesses.\nWe now expect to invest over $1 billion in acquisitions through the full year.\nIn addition to investing in acquisitions, we have returned $622 million to our shareholders through dividends and share repurchases.\nWe continue to prioritize customer zeal to drive profitable growth.\nThis includes increasing customer loyalty, driving willingness to pay and attracting new volume as the provider of choice.\nOur customer retention rate remains at a record-setting level of 95%.\nDuring the third quarter, we delivered outsized revenue growth throughout our business.\nTotal core price remained at an all-time high of 5.2%, and average yield increased to 3.2%.\nVolume increased 4.3% compared to the prior year, which exceeded our expectations.\nAnd acquisitions contributed an incremental 350 basis points to total revenue growth.\nThe outlook for organic and acquisition growth for the remainder of the year is strong.\nWe continue to realize the benefits of our investments in technology.\nIn the third quarter, we made meaningful progress on the rollout of the next phase of our RISE platform.\nWe have now implemented tablets in approximately 70% of our large and small container fleet.\nWe expect to be substantially complete by the end of this year with plans to further deploy to the residential fleet beginning in 2022.\nNext, turning to our sustainability platform.\nWe continue to partner with developers to capitalize on landfill gas to energy opportunities.\nWe currently have 17 projects in the pipeline with more opportunities thereafter.\nOn top of the royalty revenue, these plants will generate a majority of equity investment opportunities to further participate in the project economics.\nWe also recently opened a solar project on one of our closed landfills in Belleville, Illinois.\nThis project consists of 30,000 solar panels and will produce enough energy to power 2,200 homes annually.\nWe remain committed to increasing the recycling and circularity of key materials as part of our ambitious 2030 sustainability goal.\nWe recently opened the first solar-powered compost facility in California to further our progress and address the growing community needs.\nThis facility will provide critical organic processing capabilities to residents and businesses in the greater San Diego area.\nOur strong financial and operational results will not have been possible without our dedicated Republic employees.\nWe continue to invest in developing both existing and new talent and creating innovative solutions for the increased demand for skilled workers.\nWe recently unveiled our Republic Services Technical Institute, which is the industry's first ever diesel technician school.\nThis subsidized program is already building a strong pipeline of high demand technician talent for Republic.\nAdditionally, graduates will have upskilling opportunities to further grow their career with Republic.\nThese types of innovative investments in talent lead to external recognition for our company.\nRepublic was recently certified as a great place to work for the fifth consecutive year.\nThis is a meaningful achievement as employee recruiting and retention remains a prominent focus in today's labor market.\nFinally, turning to our outlook for the remainder of the year.\nGiven the continued strength in our business, we now expect to exceed the full year guidance we upwardly revised last quarter.\nAccordingly, we are increasing 2021 full year financial guidance as follows: adjusted earnings per share is now expected to be in the range of $4.10 to $4.13; and adjusted free cash flow is now expected to be in the range of $1.475 billion to $1.5 billion.\nCore price during the third quarter was 5.2%, which included open market pricing of 6.5% and restricted pricing of 2.9%.\nThe components of core price included small container of 8.2%, large container of 5% and residential of 5%.\nAverage yield was 3.2%, which increased 60 basis points from the second quarter.\nThird quarter volume increased 4.3%.\nThe components of volume included an increase in small container of 5.4%, an increase in large container of 3.9% and an increase in landfill of 6.6%.\nFor reference, small container and MSW volumes in the third quarter were both above a 2019 pre-pandemic baseline.\nMoving on to recycling.\nCommodity prices increased to $230 per ton in the third quarter.\nThis compares to $99 per ton in the prior year.\nRecycling processing and commodity sales contributed 160 basis points to internal growth during the third quarter.\nNext, turning to our environmental solutions business.\nThird quarter Environmental Solutions revenue increased $27 million from the prior year.\nThis was driven by both organic growth from increased activity and the contribution from acquisitions.\nOn a same-store basis, environmental solutions contributed 20 basis points to internal growth during the third quarter.\nAdjusted EBITDA margin for the third quarter was 30.4%, and increased 10 basis points over the prior year.\nThis included a 90 basis point increase from recycled commodity prices, a 50 basis point headwind from net fuel and a 30 basis point headwind from the impact of recent acquisitions, primarily driven by deal and integration costs.\nSG&A was 10.2% of revenue.\nThis represents an increase of 20 basis points over the prior year, which was exclusively due to higher incentive compensation accruals.\nYear-to-date adjusted free cash flow was $1.4 billion and increased $247 million or 22% compared to the prior year.\nThis was primarily driven by EBITDA growth in the business.\nWith respect to our full year cash flow guidance, we expect to spend a disproportionate amount of our full year capex and cash taxes during the fourth quarter.\nIt should also be noted that we increased our expected full year capital spending in our upwardly revised guidance by over $50 million.\nThis increase relates to capital to support growth opportunities.\nFree cash flow conversion through September continued to track ahead of our original expectations and increased 330 basis points over the prior year.\nDuring the quarter, total debt was $9.3 billion, and total liquidity was $2.4 billion.\nInterest expense decreased $11 million due to refinancing activities completed last year, and our leverage ratio was 2.8 times.\nWith respect to taxes, our third quarter adjusted effective tax rate was 25.5%.\nWe had an equivalent tax impact of 27% when you include noncash charges from solar investments.\nWe expect our fourth quarter equivalent tax impact to be approximately 25%.\nThis includes the effective tax rate and noncash solar charges.\nWe continue to create value for our stakeholders by executing our strategic priorities, which drives profitable growth and increases returns.\nWe are expecting the positive momentum in our business to continue to produce profitable growth in 2022.\nAt this point, we anticipate producing above-average revenue growth, leading to high single-digit adjusted free cash flow growth compared to our full year 2021 performance.\nAs usual, we will provide full year detailed 2022 guidance on our fourth quarter earnings call.\nWith that, operator, I would like to open the call to questions.\n Assistant:", "chosen": "q3 adjusted non-gaap earnings per share $1.11.\nsees fy adjusted earnings per share $4.10 to $4.13.\nraised 2021 full-year financial guidance.\nqtrly revenue $2,933.9 million versus $2,572.1 million.\n"}
{"prompt": "Human: We are very pleased with our third quarter results, which once again demonstrates the strength of Reliance's resilient business model.\nOur diverse product mix and end-market exposures, along with our decentralized operating structure, enabled us to quickly respond to varying fluid market conditions.\nOur gross profit margin expanded 200 basis points from the prior quarter to a record 32.4%, significantly exceeding our estimated sustainable range of 28% to 30% on net sales of $2.09 billion.\nOur increased gross profit margin, combined with diligent expense control, increased our non-GAAP earnings per diluted share to $1.80, a 37.5% increase from the prior quarter, and generated strong cash flow from operations of $296.3 million.\nEven more importantly, we would once again like to express our gratitude to all of our outstanding folks for their hard work and perseverance through one of the most challenging time in our company's history.\nOur people are truly the key ingredient of the secret sauce of Reliance, and we would not be where we are today without their unwavering commitment and support.\nOur managers maintain their focus on the employee health and safety, including adherence to strict procedures to prevent the spread of COVID-19 and improve our safety performance on a year-to-date basis compared to the same period in 2019.\nWe continue to support our employees and their families as well as our customers, suppliers and communities in a safe, positive, sustainable manner.\nGetting back to our third quarter financial results.\nOur shipments surpassed our expectations, increasing 5.9% over the prior quarter despite typical third quarter normal seasonal customer shutdowns and vacation schedules.\nImproved demand in the major in the majority our end markets as the economy continued to slowly reopen following COVID-19-related shutdowns and project delays in the second quarter of 2020 drove this strength.\nIn addition, our toll processing volumes increased materially compared to the second quarter levels as automotive production continued to ramp up.\nAs a reminder, since we do not take ownership of the metal, our toll processing volumes are not reflected in our tons sold metric.\nMetal pricing began to improve in the third quarter as mill price increases from many of the products we sell were implemented, with announcements for further price increases continuing into the fourth quarter.\nDespite these mill price increases, our average selling price per ton sold in the third quarter was down 4.3% compared to the second quarter, primarily as a result of product mix changes that Karla will discuss in more detail.\nThe 200 basis points improvement in our gross profit margin to a record 32.4% was the major highlight of our third quarter financial performance, which drove a 40.6% increase in our non-GAAP pre-tax income over the prior quarter.\nThe primary contributor to our record gross profit margin was a significant rebound in our tolling businesses that service the automotive market, which generally operate at higher gross profit margins than our companywide average.\nIn addition, shifts in our diverse product mix, along with our ability to implement price increases at the time of mill announcements, collectively drove incremental increases in our third quarter gross profit margin.\nWhile we expect that the impact of certain of these factors will be temporary, we believe our managers will continue to successfully leverage the significant investments we have made to expand our value-added processing capabilities to support a sustainable higher gross profit margin.\nIn regard to conditions in our key end markets.\nDemand in nonresidential construction, the largest market we serve, continue to slowly increase during the third quarter due to healthy bidding activity for new projects and the restart of projects that had previously been put on hold.\nQuoting activity remains strong for projects related to transmission towers and military, schools and municipalities as well as large warehouses, data processing centers and assisted living facilities.\nWe have also seen an increase in certain infrastructure projects, such as roads and highways and water treatment plants.\nAs such, we remain cautiously optimistic that demand for nonresidential construction activity will continue to improve through the end of the year based on healthy backlogs and positive customer sentiment.\nDemand for the toll processing services we provide to the automotive market rebounded significantly in the third quarter as automotive OEMs and steel and aluminum mills continued to ramp up production following COVID-19 shutdowns in the second quarter.\nWe simultaneously increased our processing volumes at our toll processing operations in both the U.S. and Mexico to support increased activities, and we were pleased to be able to recall the majority of our furloughed employees to our tolling operations.\nWe remain committed to expanding our presence in toll processing in response to ongoing solid demand trends.\nEarlier this month, we commenced operations at a new facility in Kentucky.\nWe will also soon break ground on a new greenfield tolling facility in Texas.\nThese new facilities expand our carbon steel tolling capacity and will position us to better service our toll processing customers, primarily metals producers and their end users in the Ohio Valley and the Eastern United States as well as in the Southwestern U.S. and Mexico.\nNeedless to say, our outlook for our tolling operations remains positive.\nDemand in heavy industry for both agriculture and construction equipment remained generally consistent with the second quarter.\nProduction schedules in some areas have begun to increase, and we remain cautiously optimistic our businesses servicing the large industrial market should improve from current levels through the remainder of the year.\nSemiconductor demand steadily improved from the second quarter of 2020, and the market continues to be strong.\nLeading indicators for semiconductor space currently points to a more positive development in the fourth quarter and early 2021, and we believe we are very well positioned to participate in any improvement.\nI'd like to start by noting that our aerospace businesses service diverse segments.\nCommercial aerospace represents about half of our aerospace exposure.\nIn the third quarter, commercial aerospace demand continued to decline as reductions in travel due to COVID-19 persisted.\nIn response to reduced commercial airline build rates that we expect to continue at low levels in the near term, we recorded impairment and restructuring charges related to facility closures, workforce reductions and a negative outlook at certain of our businesses servicing the commercial aerospace market.\nConversely, demand remains strong in the military, defense and space portions of our aerospace business, which represents the other half of our aerospace exposure.\nWe continue to see opportunities to expand our participation in defense, which will help offset some of the weakness on the commercial side.\nWe will continue to monitor and assess the health of each of our aerospace businesses and take appropriate cost-reduction actions, if and when needed, to ensure the continued long-term profitability of these businesses.\nFinally, demand in the energy sector, which is mainly oil and natural gas, remains under significant pressure.\nAs I highlighted on our last call, we have taken proactive cost reduction measures throughout 2020, including the consolidation of certain facilities and head count reduction.\nAs a result, we believe we are well positioned to maintain our presence as a dominant player in the energy spaces and support any further recovery in that market.\nOne bright spot, in particular, is the renewable energy space in which we sell a significant amount of metal for solar and wind power projects.\nTurning to capital allocation.\nOur countercyclical cash flow generation enables us to remain flexible and opportunistic as we allocate capital for both growth and stockholder return opportunities in both good times and bad.\nOur capital expenditure budget for 2020 is weighted toward growth activities that supports our customers through the addition of innovative equipment and advanced technology to further expand and strengthen our value-added processing capabilities.\nWe have increased our 2020 capital expenditure budget by $80 million to a total of $270 million in response to opportunities to better service our customers, including the toll processing expansion in Texas and to maintain and upgrade our equipment to provide our customers with the highest-quality products and services.\nOn the M&A front, we continue to see a healthy pipeline of prospective opportunities.\nAs always, we evaluate potential candidates using stringent criteria to ensure the best possible fit within our family of companies.\nWe continue to seek well-run profitable businesses that possess strong management teams and superior levels of customer service with a focus on safety.\nAcquisitions must also complement our product and end-market diversification strategy and be immediately accretive to our earnings.\nIn regard to stockholder returns, we are pleased to maintain our payment of a regularly quarterly dividend, as we have for 61 consecutive years, without ever suspending payment or reducing our dividend rate.\nWe've increased our dividend 27 times since our 1994 IPO, including the most recent increase of 13.6% in the first quarter of 2020.\nWe also repurchased a small amount of our common stock during the third quarter of 2020.\nAnother key highlight during the quarter was our diligent inventory management.\nWe continue to rightsize our inventory to reflect current demand levels through reduced buying as well as cross-selling inventory within our expansive network of service centers.\nAnd we are pleased to have achieved our companywide goal of 4.7 inventory turns during the third quarter.\nIn summary, we are very proud to have improved our financial results amid the unprecedented global uncertainty that continues to materially impact the economy.\nOur decentralized structure afforded us the flexibility to immediately respond to rapidly changing demand trends and help preserve our long-term profitability.\nIt is through their efforts that the unique aspects of our business model were able to really shine through, enabling us to achieve significant gross profit margin expansion to a record 32.4%.\nThe consistent execution our -- of our resilient business model is a testament to, not only the diversity of our products, end markets and geographies, but also our commitment to: strong pricing discipline; diligent expense control, when needed; inventory management and leveraging our investments in organic growth and innovation.\nWe believe customers realize increased value in our model during challenging markets as they confidently rely on us to do more for them, often in smaller sizes or on a more frequent basis.\nAs Reliance continues to evolve as a leading diversified metal solution provider, we will leverage both the knowledge we have acquired while navigating the pandemic and our commitment to continuous improvement and innovation to provide enhanced solutions to our customers and drive stockholder value through increased efficiencies and profitability.\nAmerica is going to need Reliance to rebuild.\nOur net sales of $2.09 billion for the third quarter of 2020 decreased 22.4% from the third quarter of 2019, with our tons sold down 13.1% and our average selling price down 11%.\nCompared to the second quarter of 2020, net sales increased 3.3%, with our tons sold up 5.9% and our average selling price per ton sold down 4.3%.\nOur tons sold exceeded our expectations of flat to up 2% from the prior quarter as demand in many of our end markets improved, with the most notable strength in nonresidential construction.\nAlthough not included in our tons sold metric, the significant rebound in our toll processing operations contributed meaningfully to our increased sales, with toll processing volumes up 81.5% from the lows experienced in the second quarter of 2020.\nAnd our average selling price per ton sold declined 4.3% compared to the second quarter.\nOur lower average selling price in the third quarter was mainly due to shifts in our product mix rather than overall metal pricing trends.\nThe most significant shift was a 14.9% decrease in our aerospace tons sold in the third quarter, the majority of which was heat-treated aluminum and titanium products, which represent some of the higher-priced products we sell.\nMeanwhile, our shipments of flat-rolled carbon steel, which are among our lowest-priced products, increased as a percent of our total shipments, which also reduced our average selling price.\nAnd lastly, our alloy sales now represent a lower portion of our total tons shipped due to the closure of certain of our energy businesses.\nOur gross profit margin for the third quarter of 2020 was a record at 32.4% and well above our estimated sustainable range of 28% to 30%.\nThis ties our record gross profit margin set in the fourth quarter of 2019 when we recorded LIFO income of $81 million compared to LIFO income of $12.5 million in the current quarter.\nOn a non-GAAP FIFO basis, which we believe is the best measure of our day-to-day operations, our gross profit margin of 31.8% increased 300 basis points from 28.8% in the third quarter of 2019 and increased 160 basis points from 30.2% in the second quarter of 2020.\nAs Jim highlighted, this is a direct result of the outstanding performance by our managers in the field who, despite challenging circumstances, maintained pricing discipline by focusing on higher-margin orders and providing more value to our customers through our expanded value-added processing capabilities.\nAnd these actions are the key drivers behind our ability to increase and sustain our strong gross profit margin.\nDuring the third quarter, certain other factors contributed to our increased gross profit margin, the impacts of which we believe may be more temporary.\nFirst, a significant rebound in our toll processing volumes drove a meaningful increase in our gross profit margin as our tolling businesses operate at higher margins than our companywide average.\nSecond, changes in our product mix contributed as our lower-margin contractual commercial aerospace sales declined, while shipments of lower-priced carbon flat-rolled products increased.\nGiven a lower average overall selling price, value-added charges are a larger component of our sales, which has a positive impact on our gross profit margin.\nAnd third, we were able to enhance our gross profit margin for certain of our carbon steel products as mills announced price increases late in the third quarter.\nWe recorded LIFO income of $12.5 million or $0.15 of earnings per diluted share in the third quarter of 2020 compared to LIFO income of $40 million or $0.44 of earnings per share in the third quarter of 2019 and LIFO income of $5 million or $0.06 of earnings per share in the second quarter of 2020.\nAnd given our current estimate of $50 million of annual LIFO income in 2020, we expect to record $12.5 million of LIFO income in the fourth quarter of 2020.\nAs a reminder, we will true-up to our actual LIFO adjustment at December 31.\nAnd our LIFO reserve was $100.1 million at September 30.\nOur third quarter non-GAAP SG&A expenses decreased $75.2 million or 14.5% compared to the third quarter of 2019 on a 13.1% reduction in shipments.\nThe decline in SG&A expense was mainly due to reduced variable expenses, such as plant supplies and freight costs, along with lower average head count, which was down 13.8%; as well as lower performance-based compensation.\nWhen compared to the second quarter of 2020, our non-GAAP SG&A expenses increased only 2.6% on a 5.9% increase in our tons shipped, demonstrating the efficiencies gained through our state-of-the-art processing equipment along with our continuous improvement and innovation initiative.\nDuring the third quarter of 2020, we recorded impairment and restructuring charges of $14.6 million as we continued to close or merge a few of our smaller locations and wrote off certain intangibles due to our outlook for a more challenging environment in certain markets.\nWe recorded an additional $14.6 million in nonrecurring charges, comprised of settlement charges related to the termination of multiple small, frozen, defined benefit plans and settlement of an obligation in our SERP plan.\nWe also recorded $1.8 million in debt restructuring charges related to our financing activities in the quarter for total nonrecurring charges of $31 million in the third quarter of 2020.\nWe remain solidly profitable in the third quarter of 2020, with non-GAAP pre-tax income of $158 million and a non-GAAP pre-tax margin of 7.6%.\nOur effective income tax rate for the third quarter was 22.6%, down from 25% in the third quarter of 2019 and up from 20.9% in the second quarter of 2020.\nOur lower tax rate was driven by reduced income levels in 2020 attributable to the impacts of COVID-19.\nAnd at this time, we estimate our effective tax rate for the full year of 2020 will be approximately 22.5%.\nNon-GAAP net income attributable to Reliance for the third quarter of 2020 was $120.9 million, resulting non-GAAP earnings per diluted share of $1.87, down from $2.39 in the third quarter of 2019 and mainly due to lower pricing, demand levels; and up from $1.36 in the second quarter of 2020 due to our strong gross profit margin and recovering demand.\nOn a GAAP basis, our earnings per diluted share were $1.51 in the third quarter 2020.\nTurning to our balance sheet cash flow.\nWe generated strong cash flow of -- from operations of $296.3 million during the third quarter and $942.8 million during the first nine months of 2020 due to our continued profitable operations and effective working capital management, including a continued focus on rightsizing our inventory levels, which resulted in achieving our inventory turn goal of 4.7 times.\nDuring the quarter, we issued $400 million of 1.3% 5-year senior notes and $500 million of 2.15% 10-year senior notes through a public offering.\nWe used a portion of the proceeds to repay all of our outstanding indebtedness under our unsecured revolving credit facility and term loan, and we'll utilize the remaining proceeds for general corporate purposes.\nAdditionally, in early September, we entered into an amended and restated $1.5 billion five year unsecured revolving credit facility that replaced our previous credit agreement and includes an increase option for up to an additional $1 billion.\nThe facility amendment, combined with the proceeds from the notes offering, have significantly enhanced our liquidity position and extended our debt maturity profile.\nAt September 30, 2020, our total debt outstanding was $1.66 billion, resulting in a net-debt-to-total-capital ratio of 17.3%.\nOur net debt-to-EBITDA multiple was 1.1 times.\nAnd as of the end of the third quarter, no borrowings were outstanding on our $1.5 billion revolving credit facility.\nIn regard to capital allocation, our increased 2020 capital expenditure budget of $270 million includes additional strategic investments to address our customers' needs and drive organic growth.\nWe will continue to pay our regular quarterly dividend and selectively execute attractive acquisition and share repurchase opportunities.\nIn the third quarter of 2020, we invested $38.2 million in capital expenditures and returned $41.2 million to our stockholders through dividends and share repurchases.\nTurning to our outlook.\nWhile macroeconomic uncertainty stemming from the COVID-19 pandemic continues, based on current expectations and market conditions, we anticipate that overall demand will continue to slowly improve in the fourth quarter of 2020.\nWe expect shipping volumes will decline in the fourth quarter due to normal seasonal factors, including customer holiday-related shutdowns and fewer shipping days in the fourth quarter compared to the third quarter.\nBut we believe the impact of seasonal factors in the fourth quarter may be less significant than in prior years.\nAs a result, we estimate our tons sold will be down 4% to 6% in the fourth quarter of 2020 compared to the third quarter of 2020.\nWe anticipate metals pricing, primarily for carbon steel products, will improve due to mill price increases.\nHowever, similar to the drivers behind our average selling price decline in the third quarter, we believe the impact of these price increases will be partially offset by our diverse product mix and declining sales in certain markets, such as aerospace, which typically involves higher-priced products.\nAs a result, we expect our average selling price in the fourth quarter of 2020 will be flat to up 2% compared to the third quarter of 2020.\nBased on these expectations, we currently anticipate non-GAAP earnings per diluted share in the range of $1.30 to $1.40 for the fourth quarter of 2020.\nLooking ahead, we will continue to execute our business model and remain focused on managing the elements of our business that are within our control.\nIn closing, we are very pleased with our third quarter results amid the broader macroeconomic uncertainty the pandemic has caused.\nOur managers in the field delivered excellent execution as demand began to slowly recover throughout the quarter, maintaining their strategic focus on high levels of customer service and value-added processing.\nThis, combined with our emphasis on expense control and our ability to respond quickly to market conditions, resulted in yet another quarter of solid profitability and cash flow, enabling us to support our growth and stockholder return priorities.\nWe believe our people, along with our proven business model, are the keys to the strength and resiliency of our business.\nWe look forward to improved conditions in the quarters ahead as we work with our employees, customers, suppliers and communities to mitigate the ongoing impact of COVID-19.\n Assistant:", "chosen": "sees q4 2020 non-gaap earnings per share $1.30 to $1.40.\nq3 non-gaap earnings per share $1.87.\nq3 earnings per share $1.51.\nqtrly tons sold 1.3 million, down 13.1%.\nqtrly average selling price per ton sold $1,609, down 11%.\nanticipates overall demand to continue its slow improvement in q4 of 2020.\nestimates that tons sold will be down 4% to 6% in q4 of 2020 compared to prior quarter.\nestimates its average selling price per ton sold for q4 will be flat to up 2% versus q3.\nbelieves remaining businesses servicing energy sector are well positioned to support any future recovery in this market.\nqtrly net sales $2,085.6 million, down 22.4%.\ncautiously optimistic demand for non-residential construction activity will continue to improve in q4 2020.\n"}
{"prompt": "Human: Despite the extraordinary challenges 2020 presented on a global scale, we are extremely pleased with the strong execution of our team -- that our team has shown, not only in the field, but by all of the employees within the family of companies, who demonstrated the true resiliency of the Reliance business model.\nI applaud each and every one of you for your tremendous efforts to quickly and nimbly adapt to the changing environments, ensure our customers were always taken care of, and most importantly, maintain your unwavering commitment to health and safety, our most important core value.\nSince 2017, our SMART Safety program has been focused on embedding our culture of safety across our entire family of companies.\nWorking together as one company, we focused on this initiative in 2020 like never before in response to the new and unique challenges presented by the COVID-19 pandemic.\nIn addition to developing new policies and procedures to prevent the spread of the virus, we improved our safety performance in 2020 with an approximately 23% reduction in our incident rate compared to 2019.\nWhile this is a significant milestone, as I've stated in the past, we will not be satisfied until this rate reaches 0.\nI'd like to take a moment to congratulate both Karla Lewis and Arthur Ajemyan for the recently announced well-deserved promotions.\nConsistent with our Board's strategic executive leadership succession plan, Karla was promoted from CFO to President and was simultaneously appointed to our Board of Directors effective January 15.\nKarla has demonstrated excellent judgment and leadership in each role she has held since joining Reliance in 1992, and her unique abilities and talents have earned the respect of our employees and shareholders.\nKarla's promotion recognizes her significant contributions to Reliance.\nIt will allow her to broaden her knowledge of Reliance's field operations and increase the diversity of her experience.\nIn addition, Arthur Ajemyan was promoted to Vice President and Chief Financial Officer effective January 15.\nArthur has held various positions in Reliance's finance and accounting department for over 15 years and has done a phenomenal job.\nI congratulate both Karla and Arthur on their promotions and look forward to continuing to work closely with them in their new roles.\nNow let's turn to our 2020 results.\nWe delivered a solid financial performance in 2020, driven by consistently strong operational execution despite considerable turbulence in the market.\nOur results demonstrate the strength and resiliency of our people and unique business model as well as our ability to execute through both good times and bad given the diversity of our products, end markets and geographies.\nOur decentralized structure allowed us to respond rapidly to fluid market conditions and demand trends.\nThese factors, combined with pricing discipline and continuous improvements to our value-added processing capabilities, enabled us to achieve our second consecutive year of record annual gross profit margins at 31.5%, up 120 basis points from 2019 and exceeding our estimated sustainable range of 28% to 30%.\nWe also maintained healthy profitability levels despite the extraordinarily volatile and challenging market conditions.\nFor the full year, we generated non-GAAP earnings per share of $7.71 as a result of the combination of strong margin discipline and effective expense control, which helped mitigate our decline in profitability.\nOn the heels of a record year in 2019, we maintained strong cash flow from operations of $1.17 billion in 2020 driven by our profitability and focus on working capital management.\nFueled by our ongoing focus on rightsizing our inventory to reflect current demand levels and our differentiating advantage of cross-selling inventory among our family of companies, we achieved our companywide inventory turn goal of 4.7 times based on tons for 2020.\nIn line with historical trends and the cornerstone of our business model, a significant portion of our metal we purchase is from domestic suppliers.\nAnd it is paramount that we continue to support our mill partners who, in turn, have consistently been there for Reliance during challenging times.\nOur countercyclical cash flow generation allows us to remain flexible and opportunistic in executing our growth initiatives while concurrently returning value to our stockholders.\nWe invested $172 million in our business through capital expenditures in 2020, including many growth opportunities such as our recent toll processing expansion in Texas and Kentucky.\nToday, we are introducing our 2021 capital expenditure budget of $245 million that includes new buildings and other projects to expand, upgrade and maintain many of our operating facilities.\nWe are installing energy-efficient lighting and solar panels in certain of our facilities.\nOur 2021 budget also includes innovative new processing equipment to provide our customers with the highest-quality products and services.\nAlthough COVID-19 has slowed the pace of acquisitions activity in general, we continue to see a healthy pipeline of potential candidates as we've begun to broaden our view on the universe of prospective growth opportunities.\nAs always, we evaluate opportunities based on a strict set of criteria to ensure a strong fit within the family of companies.\nNow turning to stockholder returns.\nIn 2020, we repurchased $337.3 million worth of our common stock at an average cost of $91.80 per share and paid $164.1 million in dividends to our shareholders.\nWe've maintained our payment of regularly quarterly dividends for 61 consecutive years without ever suspending payment or reducing our dividend rate.\nIn addition, we've increased our dividend 28 times since our 1994 IPO, including the most recent increase of 10% for the first quarter of 2021.\nLooking forward into the remainder of 2021.\nReliance will continue to execute and improve upon our tried-and-true model that has led us to industry-leading results for many decades.\nOver the past year, we've adapted to operate more efficiently than ever before without sacrificing our competitive edge and the critical elements of our business that make Reliance a trusted and reliable business partner.\nWe will maintain our focus on opportunities to enhance our products, end markets and geographical diversification, along with our ongoing commitment to strong pricing discipline, diligent expense control, when-needed inventory management, organic growth and innovation.\nAs was evident throughout the past year, our customers rely on Reliance to continue to support them through trying times, often in greater capacity and on a more frequent basis.\nAs I continue to say, and I will say again, America is going to need Reliance to rebuild.\nAs an essential business, we were able to continue operating throughout the pandemic, with our 2020 tons sold decreasing only 10.8% compared to 2019.\nOur average selling price was down 9.6% in 2020 compared to 2019 due to declining mill prices for most of the products we sell during the first nine months of the year.\nDespite these negative trends, we achieved record gross profit margin in 2020.\nIn the fourth quarter of 2020, healthy demand conditions in the majority of our end markets resulted in our tons sold declining only 1.3% compared to the prior quarter.\nThis was the lowest Q4 seasonal decline we've experienced in the last 10 years and exceeded our guidance by a significant margin.\nDespite customer holiday-related closures and less shipping days typical of the fourth quarter, we experienced solid demand trends throughout the fourth quarter as the economy continued to regain momentum.\nSupported by solid demand and rising input costs, metal pricing improved as mill price increases for many of the products we sell accelerated throughout the fourth quarter with prices for certain carbon steel products almost doubling, which led to our average selling price increasing 4.6% compared to the third quarter of 2020, again, exceeding our expectations.\nThe favorable demand and pricing conditions in the fourth quarter contributed to our record gross profit margin of 33%, a 60 basis point improvement from the third quarter of 2020.\nAnd on a non-GAAP FIFO basis, which we believe is the best measure of our day-to-day operating performance, our gross profit margin of 33.6% increased 180 basis points from 31.8% in the third quarter of 2020.\nOur record gross profit margin reflects the outstanding performance by our managers in the field who effectively implemented price increases at the time of mill announcement prior to receiving the higher-cost metal into inventory, pushing our gross profit margin above already strong levels, resulting from our focus on higher-margin orders.\nWhile we are very pleased with our record Q4 and full year gross profit margin, we continue to believe our estimated sustainable gross profit margin range of 28% to 30% is appropriate as we navigate the ongoing COVID-19 pandemic and operate through this uncertain environment.\nThat said, maintaining our strong gross profit margin remains a cornerstone of our business model.\nWe believe our managers will continue to successfully leverage the significant investments we have made to expand and improve our value-added processing capabilities.\nIn fact, one of the key factors contributing to our record gross profit margin for the full year was our value-added processing capabilities, which have increased in recent years as a result of our significant investments in state-of-the-art equipment.\nWhile the percentage of orders with value-added processing declined to approximately 49% from 51% in 2019 due to changes in product mix caused by the pandemic, process orders continue to serve as a stabilizer to our margins in challenging markets with declining demand and pricing trends.\nI'll now turn to a high-level overview of the conditions in our key end markets.\nDemand in nonresidential construction, the largest market we serve, remained relatively steady during the fourth quarter due to ongoing healthy bidding activity for new projects and the restart of projects that had been put on hold earlier in the year.\nWe've been seeing quoting activity in the areas you might expect such as infrastructure projects, schools, utilities, water and power, strip malls and data and distribution centers.\nDemand for the toll processing services we provide to the automotive market was strong, with activity back to pre-pandemic levels in the fourth quarter as automotive OEMs and steel and aluminum mills continued to ramp production as a result of reopenings following COVID-19 shutdowns in the second quarter of 2020.\nWe commenced operations at our new facility in Kentucky in late November and also recently broke ground on a new greenfield tolling facility in Texas, with both focused on carbon steel tolling to support increased capacity of our toll processing customers, who are primarily metal producers and their end users.\nDemand in heavy industry for both agricultural and construction equipment rebounded to solid levels in the fourth quarter as production schedules continued to ramp following customer reopenings from COVID-19-related shutdowns and to meet equipment dealer restocking needs.\nSemiconductor demand steadily improved from the third quarter of 2020, and the market continues to be one of our strongest.\nDemand in commercial aerospace further declined in the fourth quarter as a direct result of reduced air travel due to COVID-19, which has reduced airplane build rates.\nWe believe the fourth quarter represented the trough.\nThat said, demand in the military, defense and space portions of our aerospace business remained stable at solid levels throughout the fourth quarter.\nFinally, demand in the energy sector, which is mainly oil and natural gas, remained under pressure in the fourth quarter of 2020.\nAnd throughout 2020, we took prudent cost-reduction measures, including the closure of certain facilities, which helped strengthen our overall efficiency and position us to support a recovery in this market.\nWe are optimistic on both demand and pricing trends in the first quarter of 2021 as we have experienced strength in both so far in the first quarter.\nAnd Arthur will now review our financial results.\nI'll start with our sales discussion.\nFourth quarter 2020 sales were down 12.8% from the prior year period as our markets continued to recover following the reopening of the economy.\nApproximately half of the decline in our sales can be attributed to our businesses supporting the commercial aerospace and energy end markets, as evidenced by the disproportionately higher declines in our sales of aluminum and alloy products.\nFor the full year of 2020, sales were down 19.7% from 2019.\nApproximately half of the decline in sales was due to lower shipping volumes across all major end markets we sell to, and the remaining half was due to lower average selling prices.\nHowever, both recovering demand and pricing from the reopening of the economy in the third and fourth quarters of 2020 helped to mitigate the annual decline in our sales.\nAs Jim and Karla highlighted, we generated a record quarterly gross profit margin of 33% in the fourth quarter of 2020, up 60 basis points from both Q3 2020 and Q4 2019 and a record gross profit margin of 31.5% for the full year of 2020, up 120 basis points from our previous annual record of 30.3% in 2019.\nOur non-GAAP FIFO gross profit margin in the fourth quarter of 2020 was up 450 basis points from Q4 2019, and for the full year of 2020 was up to 280 basis points from 2019.\nWe incurred LIFO expense of $15.5 million in the fourth quarter of 2020 due to rapidly increasing mill costs for most of our products.\nHowever, for the full year of 2020, we still recognized LIFO income of $22 million as our cost of inventory on hand at the end of the year was still below the levels at the beginning of the year.\nThis compares to LIFO income in the fourth quarter and full year of 2019 of $81 million and $156 million, respectively.\nWe ended 2020 with a LIFO reserve of $115.6 million on our balance sheet.\nBased on current market conditions, we expect to incur an annual LIFO expense of $340 million in 2021.\nConsistent with our accounting policy, we allocate our annual estimate on a pro rata basis in each quarter.\nAs such, our current projected Q1 2021 LIFO expense is $85 million.\nAs in prior years, we will update our expectations each quarter based upon our inventory cost and metal pricing trends.\nOur fourth quarter non-GAAP SG&A expenses decreased $51 million or 9.9% compared to the fourth quarter of 2019 on a 7.9% reduction in shipments.\nFor the full year, same-store SG&A expenses declined $241 million or 11.5% on a 10.8% reduction in shipments.\nThe decline in SG&A expenses was due to reduced spend across every major expense category.\nAs you've heard us say before, approximately 60% to 65% of our SG&A expenses are people related.\nWhen looking at the 11.5% year-over-year decline in same-store SG&A expenses, approximately half of the decrease was people-related as our headcount declined 14% compared to the prior year.\nIn addition, lower incentive pay due to lower gross profit and pre-tax income levels also contributed to the decline in our compensation costs.\nAlthough we are entering the first quarter of 2021 with a more efficient expense structure because of strong volume and pricing trends, we expect our expenses will increase in the first quarter of 2021 from the fourth quarter of 2020, consistent with seasonal trends.\nI will address our Q1 2021 outlook for demand and pricing shortly.\nFor the full year of 2020, our effective income tax rate declined to 22.1% from 24% in 2019 mainly due to our lower pre-tax income level in 2020.\nWe currently anticipate our full year 2021 effective income tax rate will be 24%.\nOur strong gross profit margin and effective expense management resulted in $2.01 of earnings per diluted share in the fourth quarter of 2020, well above our outlook of $1.30 to $1.40 per diluted share but down 17.6% from $2.44 in the fourth quarter of 2019 mainly due to reduced demand levels related to the pandemic, with commercial aerospace and energy end market sales being significant contributors to the decline in our sales.\nIn comparison to the third quarter of 2020, fourth quarter non-GAAP earnings per diluted share of $2.01 was up 7.5% from $1.87 due to improved pricing, strong gross profit margin and recovering demand in most end markets.\nTurning to our balance sheet and cash flow.\nWe generated strong cash flow from operations of $230.2 million during the fourth quarter due to our profitable operations and effective working capital management, including our focus on rightsizing our inventory levels.\nAt the end of the year, our total debt outstanding was $1.66 billion, resulting in net debt-to-EBITDA multiple of 1.1 times.\nAlso at the end of the year, no borrowings were outstanding on our $1.5 billion revolving credit facility.\nAs mentioned last quarter, we significantly strengthened our liquidity position through the successful completion of both our $900 million senior notes offering and amended/restated $1.5 billion five-year unsecured revolving credit facility.\nThe facility amendment, combined with the proceeds from the notes offering, provides us with ample liquidity and an improved debt maturity profile.\nI'll now turn to our outlook.\nWhile macroeconomic uncertainty stemming from the COVID-19 pandemic continues, favorable market conditions have persisted so far into the first quarter of 2021, with improving demand and additional mill price increases on many carbon and stainless steel products.\nThis environment allows us to maintain higher gross profit margin levels as we increase our selling price prior to receiving the higher-cost metal in our inventory.\nWe expect these favorable conditions to continue for the remainder of the first quarter.\nAs a result of these favorable conditions and the normal seasonal improvement, we estimate our tons sold will be up 10% to 12% in the first quarter of 2021 compared to the fourth quarter of 2020.\nWe also expect our average selling price in the first quarter of 2021 will be up 12% to 14% compared to the fourth quarter of 2020.\nBased on these expectations, we currently anticipate non-GAAP earnings per diluted share in the range of $3.40 to $3.50 for the first quarter of 2021.\nIn closing, we are very pleased with our fourth quarter 2020 financial and operational results.\nOutstanding execution by all of our employees greatly contributed to our success in 2020.\nTheir efforts, coupled with our resilient business model and disciplined execution of our strategy, resulted in yet another quarter of solid profitability and cash flow, enabling us to continue supporting our growth and stockholder return priorities.\n Assistant:", "chosen": "reliance steel & aluminum q4 earnings per share $2.01.\nq4 non-gaap earnings per share $2.01.\nqtrly average selling price per ton sold $1,683 up 4.6% versus q3.\nsees q1 non-gaap earnings per share $3.40 to $3.50.\nqtrly diluted earnings per share $2.01.\nexperienced ongoing improvements in demand in nearly all of end markets it serves in quarter.\ncautiously optimistic demand for non-residential construction activity in co's space will continue at q4 levels in q1.\nmaintains its positive outlook for aerospace defense market.\ncautiously optimistic that demand in commercial aerospace may begin to slowly recover in latter half of 2021.\ndemand in energy market remained under pressure in q4 with modest improvement expected in q1.\nestimates that tons sold will be up 10% to 12% in q1 of 2021 compared to q4 of 2020.\nestimates its average selling price per ton sold for q1 of 2021 will be up 12% to 14% compared to q4 of 2020.\n"}
{"prompt": "Human: The non-GAAP financial measures provided should not be utilized in isolation or considered as a substitute for measures of financial performance prepared in accordance with GAAP.\nAlso note that the content of this conference call contains time-sensitive information that is accurate only as of today.\nThe company does not intend and undertakes no obligation to update this information to reflect subsequent events or circumstances.\nFinally, today's call is being recorded and will be available on the company's website later today.\nThough we are closely monitoring the latest Delta variant of the coronavirus, the entire organization has been energized to see the reopening of the economy, continued strength in the housing market and exceptional performance and growth in our business.\nStrong operating income and rising portfolio valuations drove exceptional financial results for the second quarter, including GAAP earnings of $0.66 per diluted share, well in excess of our $0.18 per share dividend for the second quarter.\nThis contributed to a 6.5% increase in our GAAP book value to $11.46 per share at June 30th.\nThe results we've generated thus far in 2021 are reflective of a business that can expand profitably, while successfully serving it's mission of making quality housing accessible to all American households.\nAs you know this mission emphasizes borrowers whose needs are not well served by government loan programs or potentially not at all.\nOur residential and business purpose lending teams together target the non-agency mortgage market, the segment of the market that many who recently ignored in large part due to the absence of Federal Reserve stimulus.\nThe non-agency market represents the residential mortgage universe outside of government-backed mortgage programs.\nBy targeting this market rather than a specific borrower profile as we had in the past, our business is not tied to the direction of the homeownership rate.\nInstead Redwood now offers a comprehensive product mix that serves both non used to be consumers and housing investors alike, and it's a big market.\nMany of forecasted residential non-agency origination volumes have significantly increased in 2021 from the $435 billion of originations in 2020.\nThat's only beginning to reflect the potential from a regulatory pullback for non-owner occupied loans, something that can provide a significant tailwind to our sector going forward.\nOur results remain strong in the second quarter despite market conditions that were significantly more challenging than they were in the first quarter.\nRising interest rates reemerged in the residential lending space, largely as the result of uncertainty and whether the Fed will alter it's support for the agency mortgage market.\nThe sharp competitive forces that arose as a result along with the corresponding decline in refinance activity triggered a contraction in margins across the industry.\nExaggerating the effects of strong competition were signs of pro-cyclical and supply chain inflation with the shift in yield curve driving significant hedging and execution costs for those managing large mortgage pipelines including for us.\nAgainst this backdrop, in the second quarter, we still locked close to $4 billion of jumbo loans at margins in the high end of our historical target range.\nThe business purpose lending market also became more crowded in the second quarter with new competitor using the rate sheet to buy their way into the space, particularly for lower balance bridge and rental loan products.\nThe shift out of apartment living and toward single family detached homes as a trend had shown no sign of ebbing despite the recent reopening of most major metros.\nThis has led to a shortage of high quality homes with aggressive demand from both investors and consumers alike.\nIn many regions rent growth has been significantly outstripped by home price appreciation highlighting the scarcity value of quality housing in the multiple constituencies focused on acquiring single-family homes.\nLeveraging a well-earned reputation as a nimble and reliable lifecycle lender, CoreVest our BPL platform eclipse $500 million of fundings for the quarter and a balance of single family rental and bridge originations.\nThe sustained performance through this challenging backdrop showcased our strategic foundation and is the essence of what makes Redwood unique.\nOur mortgage banking businesses offer highly complementary products that drive durable earning streams.\nAnd our investment portfolio continues to offer significant upside as the economy recovers.\nOur credit discipline and ability to create our own assets remain key differentiators.\nOur strategic foundation has facilitated returns that are significantly outpacing our growing dividends.\nIn the first half of 2021 approximately 70% of Redwood's adjusted revenue was driven by our mortgage banking operations with the remaining 30% from our investment portfolio.\nWe expect mortgage banking and by extension our taxable subsidiaries to continue to be a strong earnings driver going forward.\nThe revenue generated through mortgage banking is nearly double the percentage contribution of recent years and highlights the ongoing shift in our business model as we adapt to changing market conditions.\nIt also supports continued expansion of book value over time, the retain earnings acting as a zero cost avenue for capital formation that has reduced our marginal need for funding and stands in contrast to others in the space, manage their balance sheets.\nBy continuing to reinvest in our infrastructure, both organically and through partnerships our path to realizing transformative scale is clear.\nAcross our enterprise, we've cultivated a talented and inspired workforce, we have embraced technology to serve our customers more quickly than ever before.\nOne great example of this approach is last quarter's launch of our early stage investment platform RWT Horizons.\nThis is something Dash will touch on in more detail.\nAs we look ahead, we continue to raise our game, invest in our people and infrastructure and attack our markets with the service standard that continues to separate us from our competition.\nWe're excited by recent changes in the regulatory landscape that have made the non-agency mortgage market more relevant than it's been in many years.\nOur goal is to build a business that serves an important public mission and scale profitably and generates a very attractive return profile for our shareholders.\nOur second quarter results reflect continued strategic progress and strong operating momentum.\nWhile our comprehensive non-agency market footprint benefited from ongoing strength in the housing and credit markets, we coupled these macro tailwinds with homegrown ingredients, both new and familiar.\nOur team's usual crisp execution was complemented by meaningful progress with our technology infrastructure, both organic and through new partnerships already bearing fruit.\nIn sum, the final product was another quarter of significant outperformance.\nAs Chris referenced, benchmark rates remain an area of acute focus for the markets.\nThe uptick in rates during the second quarter has almost fully retraced, however, uncertainty around the level of government support for agency mortgages may very well moderate the amount of borrower refinance activity, we typically see in this kind of rally.\nAgainst this backdrop, it's important to unpack the key drivers of profitability across our platforms.\nAs Chris noted, the markets we serve continue to grow as the path of home prices, evolution and consumer demand for housing, and important regulatory trends are driving an expansion of non-agencies true potential footprint.\nAnd while we're not immune from moves in MBS prices versus benchmark rates, our diverse distribution channels and unique product mix allow us to benefit from different drivers of demand.\nCase in point, while margins compressed elsewhere in the market during the second quarter we enjoyed durability in our margins with sustained strength in volume across both residential and business purpose lending.\nIn fact an ebb in demand for agency mortgages represents another potential tailwind for our business.\nMortgage originators are still ramping up capacity to address the pent-up demand from jumbo borrowers, and as home price appreciation has increased nationwide along with consumer preference for single-family detached rental housing, our suite of BPL offerings remains in high demand and our residential business geographic footprint continues to expand.\nOur equity is now at its highest level in at least a decade pushing more loan demand above the conforming loan limits and into Redwood's addressable market.\nAs we note in our updated investor supplement, there are now 13 states in which we have a lot more loans year-to-date than in each of the two years prior to the pandemic.\nCollectively, locks in these states represent 35% of our year-to-date volume, a trend we continue to track with great interest.\nOverall market observers now forecast single family home price appreciation for 2021 to be 14% and 16% for existing and new homes respectively.\nEven if this moderates is expected into 2022 we expect the trend to continue of more locations across the country evolving into non-agency markets.\nAnother key driver is the regulatory environment.\nThe evolving rules are likely to meaningfully increase the Qualified Mortgage or QM cohort a significant boon for high quality expanded credit borrowers.\nFurthermore, caps in place since earlier this year on GSE purchases of non owner-occupied loans could expand on non-agency market by an estimated $25 to $35 billion per year.\nAnd there is likely more of the non-agency market can do to help address broader access to credit and the associated impact on first time homebuyers and low-to-moderate income borrowers overall.\nAlso critical to the equation is the availability of high quality rental housing including single family detached, an issue solved in part by an increase in custom built projects.\nAs we discussed on prior calls, housing supply has not kept up with demand and building material costs moderating remain high contributing to significant price escalation on home.\nSingle-family homes for rent can meet the demand for expanded space in desirable neighborhood at a monthly payment that more consumers can afford.\nReflecting these supply demand dynamics, single-family rental occupancy rates remain at record highs with a weighted average of 95% for all US single-family rental homes, and single-family rents have remain meaningfully more than multifamily rents since early last year.\nOur second quarter results reinforce this broader backdrop.\nOperating highlights for the quarter included reaching our second highest level of jumbo locks ever and our highest BPL volume since late 2019.\nAs Brooke will elaborate on book value increased 6.5% driven by a mix of asset appreciation through fair value changes and retained earnings from mortgage banking income earned at our taxable REIT subsidiary.\nCollectively, our platforms distributed $3.6 billion of loans through direct loan sales and 4 securitizations.\nFollowing a historic first quarter, our residential business registered $3.9 billion of lock volume in Q2.\nAs anticipated, purchase money loans were a key driver and represented a 60% share of the quarter lock volume.\nDespite the interest rate backdrop and competitive pressures impacting GSE eligible production, the business delivered margins at the high end of our historical target range of 75 to 100 basis points reflecting the diversity of our distribution channels and strength of our pipeline management amid broader market volatility.\nDuring the second quarter, we sold $1.8 billion of loans and completed 3 Sequoia securitizations for $1.5 billion.\nWhile we saw moves in rates during the quarter and a dramatic flattening of the yield curve after the June Fed meeting, the end-to-end coordination and efficiency with which our teams function remain a true competitive advantage.\nThe flexibility of our securitization program coupled with whole-loan distribution facilitates further scale as collectively they allow us to be in the market consistently.\nDuring the second quarter, we were once again faster to market than the competition and distributing our pipeline.\nAnother encouraging metric was the contribution that Redwood Choice, our expanded prime product made to volumes.\nChoice represented 15% of our locks in the second quarter, up materially from 5% in Q1.\nChoice represented as much as 40% of our locks pre-pandemic, a reminder of how meaningful this channel can be.\nIn recent public remarks we continue to emphasize changes to the QM rules that we believe will be a key tailwind to Choice's reemergence.\nIf adopted safely the new roles focus on mortgage rate as the determinant of QM status will allow another sleeve of high quality borrowers to qualify more easily for competitive rates, an important step that underscores the true potential of the non-agency market to serve a deeper bench of consumers.\nWe are actively engaging with our seller base to bring this to fruition.\nThese macro trends also reflect meaningful talents for CoreVest, our business purpose lending platform.\nThe second quarter was particularly productive in BPL as we advanced several key initiatives, most notably completing our strategic investment in Churchill Finance.\nCoreVest originated $527 million overall in the second quarter, up 37% from Q1.\nOur funding mix consisted of $312 million of single family rental loans and $215 million of bridge loans.\nBridge production was up over 60% from Q1, an increase for the fourth consecutive quarter driven by increased usage by borrowers on lines of credit and several build-for-rent and multifamily loans coming online for funding.\nThe origination mix for BPL.\nIn the second quarter reflects the strength of our multi-product strategy, which results in high levels of repeat borrowers, including those that utilize more than one of our loan products.\nIn all, 67% of total originations in the second quarter were from repeat customers and the pipeline remains strong with a consistent mix of new loans and refinance opportunities.\nSFR production remains strong in the second quarter with fundings up 23% from Q1.\nAs we discussed on our last call, the pipeline remains robust and execution has benefited from increasingly constructive securitization market.\nWe completed our first broadly syndicated CoreVest securitization of the year in April.\nachieving all time tights on credit spreads with a deep bench of investors.\nThat record proved short-lived.\nLast week's follow on transaction once again priced at all time tights including a spread of 57 basis points on the AAA-rated securities.\nAs we've seen many times before, this type of execution inevitably breeds additional competition, which we view as an opportunity for CoreVest to continue differentiating itself as the BPL market's lender of choice.\nWe have high expectations for our forthcoming refresh client portal, especially it's new user interface, which will make it even easier for our clients to upload documents and track progress of their loans.\nAdditionally, we continue to press our advantages as a nimble lifecycle lender, we're finding a product suite to continue serving the end-to-end needs of a deepening cohort of sophisticated housing investors.\nHighlighting this progress is our partnership with Churchill which we expect will diversify our sourcing channels with a particular emphasis on smaller balanced single-family rental and bridge loans.\nWe have now closed our first purchase of bridge loans and SFR loans from Churchill and see an attractive near-term pipeline to complement our direct lending products.\nIn periods of increased competition, it's important to reinforce the value of an institutional platform like CoreVest in a market that in many ways is still developing.\nWe have now completed optional calls on two CoreVest securitizations, refinancing many of the underlying loans with a platform made 5 or more years ago.\nMany borrowers have now been with the platform for at least that long as CoreVest continues to support their growth and evolution.\nThat sort of track record matters and has immense intangible value on the field of play.\nOur newest initiative RWT Horizons is doing its part and keeping pace with our enterprisewide progress.\nSince formally launching Horizons earlier this year, we have completed 5 investments in our assessing an exciting pipeline of new opportunities.\nMost recently our direct investments include liquid mortgage, a platform focused on leveraging blockchain technology to bring efficiencies to the non-agency market, and a tech enabled residential construction management firm.\nAt this early stage, it's exciting to witness tangible progress with our new partners.\nLiquid mortgage recently procured a key patent covering the vast majority of its business plan, a big step in our collective efforts to apply blockchain technology to the non-agency ecosystem.\nRent room and rent butter also both had productive quarters and are meeting or exceeding their planned product development and rollout initiatives.\nMost critically these partnerships reflect the intellectual collaboration that drive true alpha for all parties involved.\nWe are engaging directly with liquid mortgage and developing the work streams required to safely put mortgages on blockchain, and together are working to engage other key stakeholders across the industry.\nFor rent room and rent butter two investments sourced through CoreVest borrower network, we are facilitating synergies with our broader client base.\nWe're thrilled to be working shoulder to shoulder with those standing on the frontier of innovation in our markets.\nAs previously noted, our second quarter 2021 results reflect the durability of our model and continued strength across our entire platform.\nWe reported GAAP book value per share of $11.46 at June 30th, a 6.5% increase relative to the prior quarter end.\nThe primary drivers of the $0.70 increase in book value per share or GAAP earnings of $90 million or $0.77 per basic share, partially offset by our quarterly dividend of $0.18 per share.\nWe are pleased to have maintained a strong momentum for the first quarter, generating a total economic return on book value of 19% for the first half of 2021.\nOur economic return spotlights not only our growth in book value, but also to our growth in our dividend which we raised by another 13% in the second quarter.\nThese are particularly strong results this quarter from our business purpose mortgage banking operations, which delivered a 52% after-tax operating return on capital with the net operating contribution of $20 million, which is up 80% from Q1 on a 37% increase in origination volumes.\nIncome from residential mortgage banking operations decreased from historic first quarter level while still delivering an after-tax operating return of 17%.\nEven as loan purchase commitments were down 22% Q2 still marks our second highest volume on record.\nTo reiterate Dash's point, gross margins remained at the high end of our historical target range despite a challenging macro backdrop the impacted securitization execution and increased hedging costs relative to the first quarter.\nTurning to the investment portfolio, we had $49 million of positive investment fair value changes primarily from our RPL assets, even further spread tightening, and improved credit performance this quarter which I'll expand upon shortly.\nNet interest income increased approximately 20% or nearly $5 million from the first quarter of 2021 due to higher average balance of loans and inventory at our operating businesses, higher yield maintenance income from SFR securities, growth in our bridge loan portfolio and a decline in interest expense from our investment portfolio.\nShifting to the tax side, we had retaxable income of $0.11 per share versus $0.09 in the first quarter, primarily on higher net interest income.\nOur taxable REIT subsidiaries earned $0.27 per share in Q2, down from $0.47 in Q1.\nThe decrease was primarily driven by lower mortgage banking income, partially offset by lower operating expenses and resulted in a $5 million lower tax provision for the quarter.\nOn a combined basis, our operating businesses generated an annualized after-tax return of over 28% in Q2, utilizing $483 million of average capital.\nAs a reminder, these earnings can either be reinvested back into our operating businesses or paid as a dividend to the REIT.\nThis quarter we continued our focus on higher margin businesses that produced strategic asset for our investment portfolio.\nSpecifically, we deployed $45 million of capital to Brisbane during the quarter and $50 million to SFR securities in core loans.\nYear-to-date we've net reduced the size of our third party investment portfolio through opportunistic sales.\nWorking capital for our mortgage banking businesses represented less than 30% of our allocated capital, but produced approximately 65% of our adjusted revenue for the second quarter.\nAs Chris mentioned, the proportion of adjusted revenue from our mortgage banking operations has been growing in recent years and has facilitated returns that are significantly outpacing our growing dividends.\nTotal portfolio returns rose by a combination of improved credit and faster prepayment speeds on securities we hold at a discount to face value.\nHigher prepayment speeds continue to benefit these portfolios and allow us to accelerate our call options within Sequoia and CoreVest Securities.\nWe settled the call rights on three Sequoia securitizations and one capital securitization during the second quarter, acquiring $83 million of seasoned jumbo loans and $45 million of seasoned SFR loans all at par, which benefited book value by $0.05 per share.\nWe estimate about $250 million to $300 million of expected call activity across capital and Sequoia through the remainder of the year and we estimate at current market conditions the underlying loans can generally be sold or resecuritized well above their par value creating further potential upside to earnings and book value of approximately $0.68 per share for 2021.\nFurthermore, we project another $2 billion of loans that could become callable by the end of 2024 with the majority of those currently expected to occur by the end of 2022, and that could potentially add another $0.63 to $0.65 per share on average to book value depending on execution.\nNet delinquencies in our portfolio continue to improve with new forbearance requests near zero.\nSpecifically Choice and RPL securities experience improved 90-day delinquencies during the quarter with select remaining flat from Q1 and absolute low levels of 80 basis points.\nIt's worth noting the improved delinquency trends with our RPL securities portfolio experiencing 60-day delinquencies now below pre-COVID levels, and voluntary prepayment speeds continue to well exceed our original modeled expectations.\nLTVs in the portfolio are low and continue to improve or hold stable and average coupons aren't excess of our current mortgage rate which should provide options to help distressed borrowers and keep actual losses low.\nAt quarter-end, our balance sheet and funding profile were in excellent shape following several liability and capital management actions taken during the quarter.\nWe added over $750 million of financing capacity to support growth of our operating platforms including the refinance of a $242 million bridge loan financing which contributed to a roughly 100 basis point cost of funds improvement for our overall investment portfolio.\nImportantly, the second quarter marked another record for Redwood with combined $3.3 billion of residential whole loan sales and securitizations underscoring our ability to source and distribute in side.\nOur recourse leverage was marginally higher at 2.2 times at the end of the second quarter as we incurred additional warehouse borrowings to finance higher loan inventory.\nAt June 30th our unrestricted cash was $421 million, which is over half the size of our outstanding marginable debt, and at quarter end, our investable capital was $175 million, not including $100 million of incremental capital generated from a secured term financing we closed in early July.\nI'll close with an update on our 2021 financial outlook.\nWe continue to see upside potential in our book value from here both from anticipated call activity in our investment portfolio and through our ability to grow and retain earnings at our taxable REIT subsidiary.\nWe encourage you to review the supplemental quarterly materials we published earlier today, which provide more detailed and refresh guidance for the remainder of the year to highlight some of the key inputs that support our financial narrative.\nConfidence in our ability to achieve our guidance of grounded in a sustainable trend we're seeing across our businesses.\nAs Chris and Dash have outlined, the key themes that will drive our performance include, increasing our wallet share using technology to drive efficiency, allocating more capital to our higher ROE operating platforms, continuing to create value through the investment portfolio and using partnerships M&A and other growth strategies to further efforts in our target markets.\nAs we look ahead, we remain on track to keep pace with the robust volumes we've seen through the first half of the year anticipating another $6 to $8 billion of jumbo lock and approximately $1 billion of BPL originations for the second half of the year, which would have nearly doubled the volume of that business year-over-year.\nFor perspective, the second half volumes on the residential front approach our full year volume just a couple of years ago.\nWe've demonstrated our ability to successfully grow not only our origination volume, but also our market share and we believe we can continue to do that across our platform and in each of their underlying channel.\nSmall changes in market share can have a meaningful impact to our overall profitability and scale and that's what we're planning to do over time.\nFor the remainder of the year, we anticipate generating an adjusted return on allocated capital between 20% to 25% from our mortgage banking operations, and 10% to 12% for the investment portfolio.\nAs credit spreads have tightened fairly significantly and fair values have since increased this forward yield on the investment portfolio, which is in line with our forecast at the beginning of the year reflects improvements in our financing costs and capital optimization.\nAnd finally, in terms of the potential sources and book value upside we began the year with $444 million of net accretable discount in our portfolio, and even after growing book value of $1.55 per share or roughly $175 million since that time we have approximately $2.60 per share or $300 million of remaining discount in the portfolio that we have the potential to recognize over time.\n Assistant:", "chosen": "q2 gaap earnings per share $0.66.\ngaap book value per common share was $11.46 at june 30, 2021, up 6.5% from march 31, 2021.\n"}
{"prompt": "Human: They are also referenced on Page 2 of our financial supplement.\nWith that, let's start our teleconference with opening comments from Dave Nunes, President and CEO.\nFirst, I'll make some high-level comments before turning it back over to Mark McHugh, Senior Vice President and Chief Financial Officer to review our consolidated financial results.\nThen I'll ask Doug Long, our Senior Vice President of Forest Resources, to comment on our U.S. and New Zealand timber results.\nAnd following the review of our timber segments, Mark will discuss our real estate results as well as our outlook for the balance of 2021.\nWe are pleased to report that the encouraging momentum we experienced across all our businesses to start 2021 continued into the second quarter.\nSpecifically, we generated adjusted EBITDA of $95 million and pro forma earnings per share of $0.22 per share.\nAdjusted EBITDA exceeded the prior-year quarter by 21%, as favorable results in each of our timber segments more than offset lower adjusted EBITDA in the real estate segment.\nAs we reflect on the second quarter, the operating environment was markedly improved as compared to the prior year period.\nWe're pleased with how our team continues to capitalize on strong domestic lumber markets improving, real estate market trends and export market opportunities.\nAs Mark will discuss in greater detail based on our solid first half results and our expectations for the balance of the year, we are modestly raising our 2021 adjusted EBITDA guidance.\nDrilling down to our different operating segments, our Southern Timber segment generated adjusted EBITDA of $31 million for the quarter, which was 16% above the prior year second quarter.\nNet stumpage prices increased 14% which more than offset a 4% reduction in harvest volumes as weather conditions impacted productions across the South.\nIn our Pacific Northwest Timber segment, we achieved adjusted EBITDA of $14 million, an improvement of $10 million versus the prior year quarter.\nThis sharp increase in adjusted EBITDA was driven by a 30% increase in delivered saw timber prices stemming from favorable domestic lumber markets and increased log export demand as well as higher volumes following the merger with Pope Resources.\nIn our New Zealand Timber segment.\nSecond quarter adjusted EBITDA nearly triple to $28 million.\nThe year-over-year increase in adjusted EBITDA was due to both significantly higher harvest volumes as the second quarter of 2020 was severely impacted by COVID 19 related headwinds and weighted average log prices and increased 51% as a result of robust export and domestic log demand.\nIn our Real Estate segment, we generated adjusted EBITDA of $29 million, down from $45 million in an exceptionally strong period last year.\nThe decline versus the prior year quarter was driven by a 61% reduction in acres sold, partially offset by significantly higher per acre prices.\nImportantly, our real estate team closed significant transactions in both our Wildlight and Belfast Commerce Park development projects during the quarter.\nSwitching gears from second quarter results, I'd like to provide an update on the Timber Fund business that we acquired last year through our merger with Pope Resources.\nTwo weeks ago we announced that we had sold the rights to manage to -- of the Timber Funds, as well as our co-investment stake in both of these funds.\nThe aggregate purchase price was $35.9 million and the transaction will be reflected in our third quarter financial results.\nAs we had previously communicated the private equity timber funds business was not a long-term strategic fit for Rayonier.\nWe believe this transaction reflects a favorable outcome for our shareholders.\nAs it allows us to simplify our operations and allocate capital to other strategic priorities.\nFollowing this transaction, we continue to manage, as well as own 20% co-investment stake in one Timber Fund comprising 31,000 acres in the Pacific Northwest.\nSince this fund is at the end of its investment term it was not included in the sale transaction rather we have commenced a process to liquidate the assets from this fund, which if successful will complete our exit from the fund business.\nLet's start on Page 5 with our financial highlights.\nSales for the quarter totaled $291 million, while operating income was $84 million and net income attributable to Rayonier was $57 million or $0.41 per share.\nOn a pro forma basis, net income was $31 million or $0.22 per share.\nPro forma adjustments for the quarter were primarily associated with a large disposition in the Pacific Northwest, as well as a series of debt actions that I will discuss momentarily.\nAs Dave touched on second quarter adjusted EBITDA of $95 million was above the prior year period as higher results across all of our timber segments more than offset a lower contribution from our Real Estate segment.\nOn the bottom of Page 5, we provide an overview of our capital resources and liquidity at quarter-end as well as a comparison to year-end, our cash available for distribution or CAD for the first half of the year was $111 million versus $80 million in the prior-year period, primarily due to higher adjusted EBITDA, partially offset by higher cash taxes, interest expense and capital expenditures.\nA reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 8 of the financial supplement.\nConsistent with our nimble approach to capital allocation, we raised $81 million through our at-the-market equity offering program during the second quarter an average price of $36.79 per share.\nAs previously discussed, we view the ATM program as a cost-effective tool to opportunistically raise capital strengthen our balance sheet and match fund bolt-on acquisitions.\nWe are also active in the debt market during the quarter taking steps to address our 2022 bond maturity, improve our debt maturity profile and lower our weighted average borrowing cost.\nSpecifically in May, we issued $450 million or 2.75% senior notes due 2031.\nAdditionally while currently remains undrawn.\nWe executed a credit agreement for a delayed-draw term loan for up to $200 million, which if utilized would mature in 2029.\nWe also obtained an amendment to lower the interest rate on the term loan we have maturing in 2026 and amended the terms of the debt we assumed in the Pope acquisition to make this debt, unsecured.\nFurthermore, we also lowered the pricing of our revolving credit facility as well as extended its maturity by year to April 2026.\nA portion of the proceeds from the May debt offering were used to completely repay a $250 million term loan that was due in 2025.\nAdditionally, given our strong cash position, following the large disposition completed during the quarter we prepaid $100 million of the term loan that matures in 2026 reducing the outstanding balance to $200 million.\nIn conjunction with these actions, we recorded a $2.2 million loss associated with the termination of an interest rate swap as well as cost of $1.1 million related to debt extinguishments and modifications.\nCollectively, these items translated the $0.02 per share, a pro forma adjustments in the quarter.\nLooking ahead, we believe the actions taken during the quarter help to facilitate an optimal capital structure and leave us with ample liquidity to fund the repayment of our 2022 bond maturity early next year.\nPro forma for the repayment of our 2022 bond maturity, we expect that our weighted average cost of debt will drop below 3% and our weighted average maturity will extend to roughly seven years.\nMoreover, almost all of our term debt has been swapped to fixed, which gives us strong visibility on our forecasted interest expense.\nLastly, by tapping into the bond markets at an advantageous time we preserved additional debt capacity within the farm credit system providing us with increased future financing flexibility.\nIn sum, we closed the quarter with $310 million of cash and $1.4 billion of debt, both of which exclude cash and debt attributable to the Timber Funds segment which is non-recourse to Rayonier.\nOur net debt of $1.1 billion represented 17% of our enterprise value based on our closing stock price at the end of the second quarter.\nLet's start on Page 9 with our Southern Timber segment.\nAdjusted EBITDA in the second quarter of $31 million was $4 million above the prior year quarter.\nThe year-over-year improvement was largely attributable to higher net stumpage pricing albeit partially offset by lower harvest volumes.\nThe 4% decline in volume during the second quarter was largely due to wet weather resulting in lost production days.\nThis modest decline in volume though was more than offset by higher prices.\nSpecifically, average sawlog stumpage pricing was roughly $28 per ton, a 10% increase compared to the prior year quarter.\nImproved pricing strong demand from sawmills as well as improved export log demand in certain markets.\nPulpwood pricing climbed 14% from the prior year quarter, reflecting robust customer demand, coupled with tighter supply due to wet weather conditions.\nA favorable mix shift toward our Coastal Atlantic markets also contributed to the strong year-over-year comparison.\nOverall weighted average pine stumpage prices increased 14% versus the prior year quarter due to higher sawtimber and pulpwood prices as well as a more favorable mix of sawtimber.\nWe are encouraged by the pricing gains registered during the quarter.\nWhich underscore the importance of local timber market dynamics across the USL and the construction of our portfolio across those markets.\nMoving to our Pacific Northwest Timber segment on Page 10.\nAdjusted EBITDA of $14 million was $10 million above the prior year quarter.\nThe year-over-year increase was largely attributable to significantly improved pricing due to strong domestic lumber markets and the incremental pension created by healthcare export demand.\nSecond quarter harvest volume was 4% above the prior year quarter due to additional volume from last year's merger with Pope Resources.\nAt $98 per ton, our average delivered sawlog price during the second quarter was up 30% from the prior year quarter.\nStrong pricing was sustained throughout the quarter.\nEven as lumber prices preceded from the record levels set in May.\nIn part due to the pricing support created by stronger export market demand meanwhile pulpwood pricing fell 21% in the second quarter relative to prior year quarter.\nAs sawmill residuals remain plentiful and that increased lumber production.\nAs it relates to the export market in Pacific Northwest improved demand we discussed on our last call has continued into recent months.\nThe constricted flow of European Spruce salvage logs, the ban on Australian log exports to China and an improvement in Japanese demand have all contributed to a favorable environment for log exports from the region.\nAnd we have seen more inventories in China rise in recent weeks.\nWe believe these forces continues for healthy demand for log exports Pacific Northwest.\nWe've continued strong demand for domestic sawmills as well as the attention created by the flow of Pacific Northwest marks in the export market will translate into a relatively stable pricing environment in the second half of the year.\nWhile we are closely monitoring the correction in lumber prices, we believe the underlying log demand remains healthy.\nIn particular, demand for green logs remained robust given the supply disruptions caused by wildfires, and other regions.\nOn that note, I'd also like to offer a few comments regarding the risk wildfires across parts of the Western United States.\nThus far, none of our properties have been seriously threatened by the fires that have impacted the region in 2021.\nAs a reminder, none of our fee timber properties were impacted by last year's fires, either on the roughly 10,000 acres of timber fund properties sustained fired image.\nWhile there continues to be upward pressure on higher cost in the areas that have been directly impacted by fires over the past year, our operations have not been materially impacted from the salvage efforts conducted by others.\nPage 11 shows results and key operating metrics for our New Zealand Timber segment.\nAdjusted EBITDA in the second quarter of $28 million was nearly triple the $10 million that we reported in the prior year quarter.\nThe increase in adjusted EBITDA was driven by a much stronger pricing and then more normalized level of harvest activity versus the prior year period constrained by COVID 19 disruptions.\nIncreased volumes and pricing were partially offset by reduced carbon credit sales.\nWe continue to defer credit sales during the quarter as we expect that the value of these credits this poised for further price appreciation.\nTurning to pricing, average delivered prices for export sawtimber jumped 50% in the second quarter from the prior year period to $148 per tonne, reflecting improved China demand the ban on a strain log exports in China and the reduced flow of European Spruce salvage logs into China.\nAs we've previously noted, prior to the ban Australia was applying approximately 10% of the total volume imported by China.\nFurthermore shipments of European Spruce salvage logs in the China may constrained by higher transportation costs and the lack of container availability.\nThese constraints on the flow of logs into China.\nWhen coupled with the healthy demand translated an exceptionally strong export pricing in New Zealand.\nUnderscoring the favorable pricing environment A grade log export prices to China surpassed previous record highs during the second quarter.\nAs reaching record levels, though there has been a pullback in pricing in recent weeks as demand for Radiata logs has softened in response to higher log inventories in China.\nShifting to the New Zealand domestic market average delivered sawlog prices increased 27% in the prior year period to $85 per ton.\nThe increase in US dollar pricing was driven primarily by foreign exchange rates and New Zealand domestic pricing improved by more modest 9% in the second quarter versus the prior year quarter.\nAverage domestic pulpwood pricing declined 35% as compared to the prior year quarter.\nIn sum, while we expect lower pricing over the balance of the year, our New Zealand operations continue to generate strong net stumpage realizations.\nWe believe we are well positioned to continue to capture market share from Australia and Europe and the export market as well as benefit from strong domestic demand.\nI'll now briefly discuss the results from our Timber Funds segment.\nHighlight on Page 12 Timber Funds segment generated consolidated EBITDA of $8 million in the second quarter on harvest volume of 185,000 tons.\nAdjusted EBITDA, which reflects the look through contribution from the Timber Funds was $1 million.\nAs discussed earlier, we are in the process of extinguish Timber Funds business expect contribution from this segment will be negligible moving forward.\nLastly, in our Trading segment we reported $400,000 of adjusted EBITDA in the second quarter.\nAs a reminder, our trading activities typically generate low margins in our primarily designed to provide additional economies of scale for fee timber export business.\nAs detailed on Page 13, our Real Estate segment delivered strong results in the second quarter, second quarter real estate sales totaled $75 million on roughly 17,000 acres sold, which included a large disposition in Washington consisting of roughly 8500 acres.\nExcluding this transaction, second quarter sales totaled $39 million on roughly 8,000 acres sold at an average price of $4900 per acre.\nAdjusted EBITDA for the quarter was $29 million.\nSales in the Improved Development category totaled a record high $19 million in the second quarter as we closed significant transactions within both our Wildlight and Belfast Commerce Park development projects.\nIn our Wildlight development project north of Jacksonville, Florida sales included a $9.1 million sale of 130 acres to a national homebuilder for the first phase of an active adult community.\nDue to post closing obligations roughly $5 million of revenue from this transaction was deferred and will be recognized in future periods.\nThe addition of an active adult community is a significant milestone for the Wildlight project as it adds a complementary market segment, which we believe will help to catalyze additional downstream demand.\nIn addition, we closed on 36 residential lots in our Wildlight project for $2.3 million or $65 per lot.\nMeanwhile, in our Belfast Commerce Park development project south of Savannah, Georgia, we sold 153 acre parcel to a national developer of industrial properties for $7.9 million or $51,000 per acre.\nOverall, we are pleased with the demand for entitled infrastructure served land that is translating into additional momentum across our development projects.\nWe remain encouraged by the pipeline of opportunities in Wildlight, Richmond Hill and the West Puget Sound area of Washington.\nIn the rural category sales totaled roughly 7700 acres at an average price of just over $2600 per acre, a nearly 100-acre sale in Georgia to the Conservation Fund comprise the bulk of our second quarter activity.\nMore broadly, demand for rural land remains healthy as the space privacy and recreational opportunities offered by these properties continue to attract buyers.\nWe are well positioned to capitalize on these demand trends moving forward and remain focused on achieving price realizations well above timberland values.\nWe also closed on a conservation easement sale covering 18 acres in Washington for $4 million in the second quarter.\nThe property covered by this easement was in the Town of Port Gamble, which was acquired as part of the merger with Pope Resources.\nLastly, if we closed on a large disposition in Western Washington during the quarter for $6 million roughly $100 per acre.\nThis roughly 8500-acre property was a relatively less strategic holding for us in the region and was sold through a competitive bid process.\nNow moving on to our outlook for the year.\nBased on our solid first half results and our expectations for the balance of the year, we are raising our full-year adjusted EBITDA guidance to range of $300 million to $320 million, which reflects a 3% increase at the midpoint from our original guidance.\nIn our Southern Timber segment, we now expect full year harvest volumes of $5.9 million to $6.1 million tons as production has been constrained by regional weather conditions and trucking availability.\nWe expect that weighted average pricing will remain above prior year levels, driven by continued strong demand from domestic pulp and lumber mills, as well as improving export demand in select US South markets.\nHowever, we are seeing higher trucking costs which could limit the upside and net stumpage realizations over the balance of the year, we are taking measures to mitigate the upward pressure on these costs by optimizing whole distances on our deliberate log sales and targeting stumpage sales to customers with great advantages.\nOverall, we expect full-year adjusted EBITDA of $118 to $122 million and our Southern Timber segment a modest increase from prior guidance.\nIn our Pacific Northwest Timber segment we are maintaining our full year volume guidance of $1.7 million to $1.8 million tons, along with our full-year adjusted EBITDA guidance of $50 million to $55 million.\nWe expect pricing in the region, we remain relatively stable as long demand across both the domestic and export markets remains favorable.\nIn our New Zealand Timber segment, we are maintaining our full year volume guidance of $2.6 million to $2.8 million tons.\nGiven the robust start to 2021, we now expect full-year adjusted EBITDA of $78 million to $82 million.\nThat said, we expect relatively lower export pricing over the second half of the year as log inventories in China have increased significantly in recent weeks.\nFurther, we anticipate that shipping and demurrage costs will remain elevated.\nIn our Real Estate segment, we now expect full-year adjusted EBITDA of $78 million to $86 million.\nWe expect a strong second half of the year in this segment given the healthy demand for residential and commercial properties within our real estate development projects, as well as continued strength in rural land sales activity.\nOverall, we're very pleased with the quarter and optimistic about our outlook for the balance of the year.\nAs I reflect on the last 18 months.\nI'm very proud of how our team has successfully navigated pandemic related disruptions and integrated Pope Resources, while also continuing to execute on several other strategic priorities.\nTo this end, in the second quarter, we continue to improve our portfolio through both addition and subtraction.\nWe opportunistically recycled capital out of a non-strategic timberland holding in Washington State while also closing on a total of $22 million of bolt-on acquisitions.\nThese portfolio moves have helped us improve our positioning in the strongest softwood log markets in the US and New Zealand, which should help us grow both cash flows and value per share over time.\nSubsequent to quarter end, we also closed on the sale of two Timber Funds, an important step toward exiting a private equity fund business that is not a strategic fit for Rayonier.\nMeanwhile, the benefits of the strategic investments we've made on the real estate front, are being increasingly realized as quarterly improved development real estate sales reached a record high in the second quarter.\nFurthermore, we took steps to optimize our cost of capital and better position our balance sheet for long-term growth by accessing both the debt and equity markets during the quarter.\nIn addition to achieving important operational and financial goals, we also continue to embrace the increased interest from stakeholders in our environmental social and governance practices.\nAs previously discussed, we believe our mission of providing industry-leading returns while serving as a responsible steward of the lands is well aligned with key ESG principles that we're looking to advance.\nBuilding on the inaugural carbon report we published earlier this year, we are planning to release a comprehensive sustainability report in the coming weeks, which will further enhance our ESG disclosures.\nOverall I continue to be impressed by the dedication and focus of our employees as they work together to better position Rayonier for long-term success.\n Assistant:", "chosen": "q2 pro forma earnings per share $0.22.\nq2 earnings per share $0.41.\nanticipate full-year net income attributable to rayonier of $98 to $106 million, earnings per share of $0.69 to $0.75.\nanticipate full-year pro forma earnings per share of $0.51 to $0.57, and adjusted ebitda of $300 to $320 million.\n"}
{"prompt": "Human: They are also referenced on page two of our financial supplement.\nWith that, let's start our teleconference with opening comments from Dave Nunes, President and CEO.\nFirst, I'll make some high-level comments before turning it over to Mark McHugh, Senior Vice President and Chief Financial Officer, to review our consolidated financial results.\nThen we'll ask Doug Long, Senior Vice President, Forest Resources, to comment on our U.S. and New Zealand timber results.\nAnd following the review of our timber segments, Mark will discuss our real estate results as well as our updated guidance.\nWe're very pleased to report our strongest quarterly adjusted EBITDA result since our separation into a pure-play timberland REIT in 2014.\nWe Specifically, we generated adjusted EBITDA of $115 million and pro forma earnings per share of $0.35 per share during the third quarter.\nAdjusted EBITDA exceeded the prior year quarter by 71%, fueled by solid contributions across our timber segments as well as an outsized contribution from our Real Estate segment due to the closing of two significant development transactions.\nWe continue to capitalize on healthy domestic timber demand in the U.S., favorable log export pricing in New Zealand, and robust real estate market trends in the third quarter.\nHowever, wet weather conditions and trucking shortages in the U.S. South constrained production during the quarter, while production in New Zealand was negatively impacted by a government-mandated shutdown in response to an outbreak of COVID-19.\nGiven these headwinds, we were very pleased with the results delivered by our team.\nAs Mark will discuss in greater detail.\nBased on our performance over the first nine months of the year and our outlook for the balance of the year, we're modestly raising our full year 2021 adjusted EBITDA guidance to a range of $320 million to $330 million.\nDrilling down to our different operating segments.\nOur Southern Timber segment generated adjusted EBITDA of $24 million for the quarter, which was 7% below the prior year quarter.\nWe were encouraged to see net stumpage prices increase by 16%, but this lift in pricing was more than offset by 20% reduction in harvest volumes due to wet weather conditions and trucking shortages.\nIn our Pacific Northwest Timber segment, we achieved adjusted EBITDA of $13 million, an improvement of 38% from the prior year quarter.\nThis increase in adjusted EBITDA was driven by a 15% increase in sawmill (sic) sawtimber prices as domestic lumber markets remained favorable.\nIn our New Zealand Timber segment, third quarter adjusted EBITDA increased 10% year-over-year to $20 million.\nFavorable pricing more than offset, a significant increase in export shipping costs as well as 14% lower production volumes due to the government-mandated shutdown, which prohibited harvest activity throughout the country during a two-week period in August.\nIn our Real Estate segment, we generated record adjusted EBITDA of $64 million, up from $22 million in the prior year period, as we closed on a $38 million Unimproved Development sale in Kingston, Washington, and a $25 million improved development transaction in our Belfast Commerce Park project south of Savannah, Georgia.\nSwitching gears from the third quarter results, I'd like to provide an update on our Timber Fund business, which we acquired last year through our merger with Pope Resources.\nAs we previously communicated, the private equity timber funds business was not a good long-term strategic fit for Rayonier.\nI am pleased to report that we have now completed our exit from the timber fund business.\nDuring the third quarter, as previously announced, we sold the rights to manage Timber Funds, III and IV, as well as our co-investment stake in both funds for an aggregate purchase price of roughly $36 million.\nWe subsequently entered into three separate agreements to sell the remaining Fund II Timberland assets for an aggregate purchase price of $157 million.\nNote that one of these transactions closed on September 30, and is reflected in our third quarter financial results, while the other two transactions, closed on October five and November 1, respectively, and will be reflected in our fourth quarter financial results.\nAll said, based on Rayonier's 20% ownership interest in Fund II, and factoring in the repayment of Fund II debt, proceeds to Rayonier from the sale of Fund II assets, will be roughly $24 million.\nIn addition, we expect to receive a carried interest incentive fee with respect to Fund II of approximately $14 million.\nOverall, we view this as a favorable result for the sale process, particularly given the negative impact that last year's forest fires had on roughly 10,000 acres of Fund II and Fund IV properties, in Oregon.\nWe believe, the successful sale of our co-investments in Funds III and IV, and as well as the properties in Fund II, represent a positive outcome for our shareholders as the wind down of the fund business allows us to simplify our operations, and allocate capital to other strategic priorities.\nLet's start on page five with our financial highlights.\nSales for the quarter totaled $365 million, while operating income was $123 million, and net income attributable to Rayonier was $76 million or $0.53 per share.\nOn a pro forma basis, net income was $50 million or $0.35 per share.\nPro forma adjustments for the quarter were primarily associated with a large disposition in the Pacific Northwest, as well as the actions taken to exit the fund business.\nAs Dave touched on, third quarter adjusted EBITDA of $115 million was considerably above the prior year period, as an exceptionally strong contribution from our Real Estate segment, and year-over-year improvements in the contributions from our Pacific Northwest and New Zealand Timber segments more than offset a modestly lower contribution from our Southern Timber segment.\nOn the bottom of page five, we provide an overview of our capital resources and liquidity at quarter end, as well as a comparison to year-end.\nOur cash available for distribution, or CAD, for the first nine months of the year was $204 million versus $124 million in the prior year period, primarily due to higher adjusted EBITDA, partially offset by higher cash taxes and capital expenditures.\nA reconciliation of CAD to cash provided by operating activities, and other GAAP measures, is provided on page eight of the financial supplement.\nConsistent with our nimble approach to capital allocation, we raised $52 million through our at-the-market equity offering program during the third quarter at an average price of $37.26 per share.\nAs previously discussed, we view the ATM program as a cost-effective tool to opportunistically raise capital, strengthen our balance sheet, and match fund bolt-on acquisitions.\nAlso building upon the actions taken in the second quarter to improve our debt maturity profile, and lower our weighted average borrowing cost.\nIn September, we opportunistically repaid the $45 million outstanding under our credit facility with Northwest Farm Credit Services, which previously -- which we had previously assumed in the Pope Resources transaction.\nIn sum, we closed the third quarter with $420 million of cash and $1.4 billion of debt, both of which exclude cash and debt attributable to the Timber Funds segment, which is nonrecourse to Rayonier.\nOur net debt of $957 million represented 15% of our enterprise value based on our closing stock price at the end of the third quarter.\nLet's start on page nine with our Southern Timber segment.\nAdjusted EBITDA in the third quarter of $24 million was $2 million below the prior year quarter.\nThe year-over-year decline was primarily driven by lower harvest volumes, partially offset by higher net stumpage pricing.\nMore specifically, volume declined 20% during the third quarter as wet weather conditions, and constraints on trucking availability, hindered production throughout most of the region.\nThis decline in volume was partially offset by a 12% increase in average sawlog stumpage pricing compared to the prior year quarter.\nAt slightly over $20 per ton, third quarter pricing reflected the highest average sawlog pricing, we have registered since early 2015.\nThe improved pricing reflects strong demand from sawmills weather-related constraints on supply, upward pressure on ship and sell pricing, due to increased competition from pulp mills, and improved export log demand in certain markets.\nLikewise, Pulpwood pricing was also at its highest level since early 2015.\nSpecifically, our prices climbed 23% from the prior year quarter in response to strong domestic demand, constrained supply due to wet weather conditions, and an increase in pulpwood exports to China.\nOverall, weighted-average pine stumpage prices increased 16% year-over-year, despite a shift toward a higher mix of pulpwood sales as compared to the prior year quarter.\nWe are encouraged by the pricing gains registered during the quarter, albeit fueled in part by the wet weather conditions.\nMoving forward, we believe certain southern markets are poised for stronger pricing, and believe our results continue to underscore, the relative strength of local timber market dynamics, across our footprint in the region, including proximity to the dominant work serving log export markets.\nMoving to our Pacific Northwest Timber segment on page 10.\nAdjusted EBITDA of $13 million was $3 million above the prior year quarter.\nThe year-over-year increase was largely attributable to favorable domestic lumber markets, coupled with increased export demand relative to a year ago.\nAs the third quarter harvest volume was flat versus the prior year quarter.\nAt nearly $108 per ton, our average delivered selling price during the third quarter was up 15% from the prior year quarter.\nStrong pricing was generally sustained throughout the quarter as underlying log demand remained healthy, even as lumber prices receded from the record level set earlier in the year.\nMeanwhile, pulpwood pricing fell 2% in the third quarter relative to prior year quarter as sawmill residuals remain plentiful, amid strong lumber production.\nWhile domestic demand remains healthy in the Pacific Northwest, we have seen export demand from China soften over the past few months.\nThis softness is largely attributable to elevated log inventories in China, concerns about the country's near-term economic outlook and supply chain disruptions.\nWe expect some choppiness in demand for log exports from the region to continue over the near term.\nHowever, we believe the reduced harvest of European spruce salvage logs, the continued ban on Australian log exports to China, and the ban on Russian log exports beginning in 2022, will support continued demand for logs from Pacific Northwest, particularly as inventory levels in China normalize.\nI'd also like to offer a few comments regarding the wildfires that have impacted parts of the Western U.S. this year.\nFortunately, none of our properties were seriously threatened by the fires.\nThat said, the availability of pulpwood has constrained pricing in some areas, and there has been upward pressure on hauling costs in areas that have been directly impacted by fires.\nConsistent with our previous updates on this front, our operations have not been materially impacted from the salvage efforts conducted by others, which are generally winding down.\npage 11 shows results and key operating metrics for our New Zealand Timber segment.\nAdjusted EBITDA in the third quarter of $20 million was $2 million above the prior year quarter.\nThe increase in adjusted EBITDA, was driven by much stronger domestic and export pricing, largely offset by lower harvest volumes, higher cost and reduced carbon credit sales.\nVolume declined 14% in the third quarter as compared to the prior year quarter.\nAs the government shut down all nonessential activity across New Zealand from August 18 through August 31 due to COVID-19.\nOur team in New Zealand was generally able to resume harvest operations in September, but there were some regions where restrictions continued as the government aimed to limit the spread of the delta variant.\nHarvest operations have now resumed across the country, but full year 2021 volumes are expected to be modestly lower than we had previously anticipated due to the disruptions encountered in the third quarter.\nAverage delivered prices for export sawtimber jumped 59% in the third quarter from the prior year to $150 per ton, reflecting solid demand from China, the ban on Australian log exports to China, and the reduced level European spruce salvage logs into China.\nWhile net stumpage realizations on export volumes were well above the prior year period levels, favorable export pricing was largely offset by a significant increase in shipping costs, as supply chain issues drove freight, and emerged costs higher.\nSince reaching record levels a few months ago, there has been a pullback in pricing for radiata pine logs in response to elevated log inventories in China.\nA slowdown in construction activity, adverse weather conditions, and power shortages in China, have collectively reduced the offtake from ports and resulted in pricing pressure on log exports.\nWhile we anticipate pricing will remain favorable from a historical perspective, we expect relatively lower export pricing over the balance of the year.\nWe generally expect that net stumpage realizations on export volume will decline in the fourth quarter as we've seen only limited relief in shipping costs.\nShifting to the New Zealand domestic market.\nDemand remains very strong, albeit constrained to some degree by COVID-related restrictions and the availability of labor.\nDuring the third quarter, average delivered sawtimber prices increased 21% from the prior year period to $85 per ton.\nExcluding the impact of foreign exchange rates, domestic sawtimber prices improved 14% versus the prior year period.\nfollowing the upward trend in the export market.\nAs a reminder, domestic sawtimber pricing normally follows export pricing with a lag.\nAverage domestic pulpwood pricing climbed 25% as compared to the prior year quarter.\nAs it relates to carbon credits, we continue to defer sales during the quarter.\nThe value of carbon credits has roughly doubled over the past year.\nMoving forward, we will continue to be opportunistic in our sale of carbon credits based on our market outlook.\nIn sum, we are pleased with third quarter results in the New Zealand Timber segment, especially given the COVID-related disruptions, and cost pressures we encountered.\nMoving forward, we remain well positioned to continue to capture market share from Australia, and Europe, in the export market as well as benefit from strong domestic demand.\nHowever, we do anticipate a relatively lower contribution from our New Zealand operations in the fourth quarter as compared to the first three quarters of the year.\nI'll now briefly discuss the results from our Timber Funds segment.\nHighlighted on page 12, the Timber Funds segment generated consolidated EBITDA of $4 million in the third quarter on harvest volume of 61,000 tons.\nAdjusted EBITDA, which reflects the look-through contribution from the timber funds was less than $1 million.\nAs Dave discussed earlier, we recently completed our exit from the Timber Funds business.\nLastly, in our Trading segment, we generated breakeven results in the third quarter, -- As a reminder, our trading activities typically generate low margins and are primarily designed to provide additional economies of scale to our feed timber export business.\nAs detailed on page 13, our Real Estate segment delivered exceptionally strong results in the third quarter.\nThird quarter real estate sales totaled $93 million on roughly 12,000 acres sold which included a large disposition in Washington, consisting of roughly 8,100 acres.\nExcluding this transaction, third quarter sales totaled $73 million on roughly 4,100 acres sold at an average price of over $17,000 per acre.\nAdjusted EBITDA for the quarter was $64 million.\nAs Dave mentioned earlier, excluding gain on the large disposition, third quarter real estate sales -- third quarter real estate results that are record for pro forma sales, pro forma operating income, and adjusted EBITDA, since our separation into a pure-play timberland REIT in 2014.\nSales in the improved development category totaled a record high $28 million in the third quarter.\nIn our Richmond Hill development project, South of Savannah, Georgia, we closed a $25 million transaction for three entitled industrial parcels at the Belfast Commerce Park near the new Interstate 95 interchange that is adjacent to our property.\nThis transaction, coupled with the sale of a 153-acre parcel to a national industrial developer last quarter, underscores the strong demand for shovel-ready sites strategically positioned near transportation corridors and in this case, the Port of Savannah.\nMeanwhile, within our Wildlight development project north of Jacksonville, Florida, we closed on 42 residential lots, to three different homebuilders, for $2.8 million in total or $66,000 per lot.\nUnimproved development sales of $38 million consisted of a 359-acre sale in Kingston, Washington, for roughly $105,000 per acre.\nThis property known as Arborwood is a well-positioned entitled land parcel accessible by passenger ferry to Downtown Seattle, which was sold to two national homebuilders.\nThe property was acquired through our merger with Pope Resources last year, and we are very pleased to have successfully completed the sale at an attractive value.\nThe benefits of the strategic investments we've made on the real estate front over the last several years, are being increasingly realized.\nThe location and maturity of our development projects have allowed us to capitalize on favorable migration and demographic trends.\nAnd looking ahead, the pipeline of future opportunities in Wildlight, Richmond Hill, and the West Puget Sound area of Washington, remains strong.\nIn the rural category, sales totaled just under 3,300 acres at an average price of roughly $2,100 per acre.\nAs we close out 2021 and look toward 2022, demand for rural land remains healthy as the space, privacy, and recreational opportunities, offered by these properties continue to attract buyers.\nLastly, we closed on a large disposition, comprising roughly 8,100 acres in Washington state during the quarter for $20 million or nearly $2,500 per acre.\nThis property was a nonstrategic holding, sold through a competitive bid process to a conservation-oriented buyer.\nNow moving on to our outlook for the year.\nBased on our strong results through the first nine months of 2021, and our expectations for the balance of the year.\nWe are raising our full year adjusted EBITDA guidance to a range of $320 million to $330 million, which reflects a 5% increase at the midpoint from our previous guidance, and an 8% increase at the midpoint from the original 2021 guidance we've provided in February.\nIn our Southern Timber segment, we now expect full year harvest volumes of 5.7 million to 5.8 million tons, as production has been constrained by regional weather conditions and trucking availability.\nHowever, we expect that improved pricing will largely offset the decline in volumes.\nOverall, we expect full year adjusted EBITDA of $118 million to $120 million in our Southern Timber segment, a slight decrease at the midpoint from prior guidance.\nIn our Pacific Northwest Timber segment, we are maintaining our full year volume guidance of 1.7 million to 1.8 million tons.\nWe expect that weighted average log pricing in the region will be lower in the fourth quarter, as compared to the exceptionally strong pricing realized during the third quarter, but will be fairly consistent with the pricing achieved, during the first half of the year.\nWe now expect full year adjusted EBITDA of $53 million to $55 million, a modest increase at the midpoint from prior guidance.\nIn our New Zealand Timber segment, we now expect full year harvest volumes of 2.5 million to 2.6 million tons as we do not expect to fully recover production loss during the third quarter due to the COVID-19 shutdown.\nWe further expect lower export pricing during the fourth quarter as log inventories in China remain elevated.\nOverall, we now expect full year adjusted EBITDA of $75 million to $78 million, a decrease from prior guidance.\nIn our Real Estate segment, we now expect full year adjusted EBITDA of $101 million to $104 million, a significant increase from prior guidance.\nAs previously discussed, the successful completion of the Arborwood sale in Washington is the primary driver for this favorable revision.\nFollowing an extraordinarily strong third quarter, we expect real estate closings for the balance of the year will be relatively light.\nEven with lower EBITDA in the fourth quarter, the full year contribution from Real Estate segment in 2021, is poised to be well above historical levels in this segment.\nWhile we expect continued favorable tailwinds in this business, we believe it's prudent to remind everyone, that we do not expect these outsized results in 2021, to be repeated in 2022.\nOverall, we're very pleased with our financial performance through the first nine months of 2021, and believe we are well positioned to benefit from continued strength in U.S. housing market, and favorable long-term export market demand trends.\nThat said, we're not immune from the supply chain, and inflationary pressures, that are impacting many parts of the global economy.\nSignificant constraints on trucking availability, as well as higher fuel costs, and a considerable increase in fertilizer costs, are among the headwinds our industry is facing in the current environment.\nWe expect these challenges will likely persist into 2022.\nHowever, our team continues to work diligently to optimize haul distances leverage our scale in both domestic, and export markets, and make prudent silviculture investment decisions tied to localized supply demand dynamics.\nFurther, we believe our focus on local timber market dynamics, and active portfolio management, leave us well positioned to navigate logistical challenges, and recoup the impact of cost increases in our log pricing.\nOn that note, active portfolio management remains central to our view of how best to create value for shareholders.\nWe have continued to improve our portfolio through both addition and subtraction this year.\nWe opportunistically recycled capital out of nonstrategic timberland holdings in Washington state and exited the timber fund business, while also closing on a total of $52 million on bolt-on acquisitions through September.\nMoving forward, our balance sheet is well positioned for future growth, particularly following the actions we have taken this year, to reduce leverage, extend our debt maturity profile, and optimize our cost of capital.\nI would also note that we continue to advance many of our ESG-related initiatives.\nIn August, we published our sustainability report as well as an updated carbon report.\nWith COP26 currently underway in Europe, I want to reiterate, the important role working for us can play as a natural climate change solution.\nAs discussed within our sustainability report, we believe the myriad environmental and social benefits offered by our lands, and the products made from our trees, leave Rayonier uniquely well positioned for a low-carbon economy.\nIn sum, I remain extremely grateful for the dedication of our employees, and their ability to adapt to ever-evolving market conditions, and business opportunities.\nOur team remains committed to maximizing the potential of our assets, and creating long-term shareholder value through growing cash flows, and value per share over time.\n Assistant:", "chosen": "compname reports q3 earnings per share of $0.53.\nq3 pro forma earnings per share $0.35.\nq3 earnings per share $0.53.\nexpects full-year adjusted ebitda for new zealand timber segment of $75 million to $78 million, a decrease from prior guidance .\n"}
{"prompt": "Human: With me on the call today are Chris Brickman, President and Chief Executive Officer; and Marlo Cormier, Chief Financial Officer.\nWe hope that you are all safe and well.\nAt SBH, we are fortunate to have an incredible community of team members customers and partners that continue to help us navigate this dynamic environment.\nIn the first quarter, our associates across the organization delivered strong execution despite the ongoing challenges of the pandemic.\nDuring a time of significant retail disruption, they remain focused on safely serving our customers and continue to implement the key initiatives we outlined on our year-end earnings call in November.\nThis allowed us to deliver strong gross margins, profitability and cash flow despite top line headwinds caused by the pandemic.\nIndeed, for much of the quarter, especially in the latter weeks, we were operating against the backdrop of temporary store closures, capacity restrictions, salon shutdowns and an acceleration in COVID rates that most certainly impacted traffic in our open locations.\nAs a result, enterprise same-store sales declined 3.7%.\nFor added perspective at the end of the quarter, approximately 45% of our store locations were under some level of capacity restriction or closure across the globe.\nDuring the quarter, we saw ongoing strength in hair color, which is our chief recruitment vehicle for new customers, both for the retail consumer and the professional stylist.\nHair care is closely linked to color while other categories like nails, skin and wax are incremental and drive additions to the basket.\nDespite the top line disruptions, hair color was up 19% at Sally U.S. and Canada.\nIn addition, vivid colors remained on trend and delivered another quarter of strong performance, up approximately 50% at Sally U.S. and Canada over the prior year.\nIn Q1, vivid accounted for 25% of our total color sales and they continue to attract a new and younger customer to our stores.\nFinally, nails were up 7% at Sally U.S. and Canada and salon supplies were up over 50% at BSG compared to the prior year.\nAlthough we were operating under challenging circumstances, our expanded digital capabilities enabled us to serve our customers through multiple fulfillment options.\nThese include buy online/pick up in-store, curbside pickup and ship from store at Sally Beauty and same-day delivery and curbside pickup at BSG stores.\nAdditionally, our e-commerce business achieved strong growth, up 48% versus a year ago.\nDespite the external pressures of the macro environment, our teams also did an excellent job on margin and expense control, which resulted in first quarter adjusted earnings per share of $0.50, up 6% on a year-on-year basis.\nWe ended the quarter with inventory down 10% compared to the prior year and approximately $538 million of cash on the balance sheet.\nSubsequent to the close of the quarter, we made the strategic decision to repay the outstanding balance on our fixed rate term loan, making further progress toward deleveraging our balance sheet.\nMore on this from Marlo later in the call.\nAs we reflect back on the investments we've made and the hard work of our teams over the past 3.5 years, today, we have a business that is well positioned from a strategic, operational and financial perspective.\nDuring our successful transformation journey, we accomplished a number of objectives that set us up to scale over the long term.\nOne, we refocused the business on owning professional hair color and care for both the DIY enthusiasts and the professional stylists.\nTwo, we improved our retail fundamentals.\nThree, we advanced our digital commerce capabilities.\nFour, we modernized our supply chain.\nFive, we improved the shopping experience, both in-store and online.\nAnd six, we strengthened our retail leadership team.\nToday, we are executing against a well-defined operating strategy and growth plan.\nIn fiscal 2021, we are focusing on three major priorities.\nBy the end of the year, we expect to have completed the key elements of our transformation, including the full implementation of JDA and the replatforming of our BSG e-commerce site.\nSecond, we expect to be leveraging all of our new capabilities and tools in service of our mission to recruit and retain color customers.\nAnd third, we expect to further reduce our debt leverage ratio closer to our target of 2.5.\nFrom a tactical perspective, in fiscal 2021, our teams are working to optimize the transformation investments we've made and unlock more robust functionality across retail fundamentals, digital commerce and supply chain.\nLet me take you through our key initiatives.\nFirst is our expanded delivery service model.\nAs I mentioned earlier, our new capabilities are enabling us to serve our customers with multiple fulfillment options, which we believe will ultimately foster greater customer loyalty and stickiness.\nIt's early days but adoption rates are growing fast.\nFor example, At Sally U.S. and Canada, BOPIS accounted for 11% of our e-commerce sales for the quarter after launching nationwide in November.\nAnd BOPIS sales surpassed 20% of our e-commerce sales for the month of December, while ship from store represented 31% of our e-commerce sales during the quarter.\nOn the BSG side, same-day delivery is adding tremendous value to our professional stylists by providing them with the flexibility to quickly react to the needs of their customers and adeptly manage their business.\nIn the second half, we'll be adding the rollout of BOPIS to the BSG segment, providing another element of convenience for our stylists.\nThe second initiative is replatforming the BSG digital storefront, which is on track for completion in early Q3.\nThis new, more robust platform will enable deeper and more effective digital engagement with our stylists as we move along the customer funnel from recruitment to transaction.\nThe digital journey begins with a focus on education, innovation and tools that enable them to more effectively and profitably run their business, including features like product reorders, easy bulk orders, simplified tax reporting and navigation enhancements.\nTurning now to our third area of focus, loyalty and CRM.\nWe are rapidly gaining traction on the rollout of our Private Label Rewards Credit Card to both Sally and BSG customers in the U.S. At the end of the first quarter, we had 163,000 cardholders.\nAnd our rewards card accounted for 2% of sales in the Sally segment and 5% in the BSG segment.\nWe're capturing critical insights into customer needs and purchasing behavior and expect this program to grow significantly in the coming months and quarters.\nIn addition, we have bolstered our marketing team in recent months and now have the talent to exploit this data and utilize CRM to develop highly targeted digital programs and strengthen the connected shopping experience across marketing, commerce and service.\nWe expect loyalty to become another critical differentiator for SBH and something that further expands our competitive moat.\nThe fourth key initiative for fiscal 2021 is completing the rollout of JDA, our new merchandising and supplying platform.\nBoth JDA and our new North Texas distribution center are running smoothly in the initial months.\nAnd our teams are working to bring JDA to our remaining DCs in the latter part of this year.\nThis will be a significant milestone as it represents the final step in our multiyear transformation journey.\nThrough our thoughtful investments and strategic repositioning over the past three to four years, we have evolved SBH into a market leader with a solid infrastructure and robust digital capabilities that position us to own professional hair color and care.\nUnderlying this is our continued focus on generating strong profitability and cash flow and returning value to shareholders.\nThere is certainly more work to do as we shift from the heavy lifting of our transformation to a new phase of growth that will see us optimize and drive scale.\nWe believe our ability to generate strong cash flow, carefully manage inventories and prudently control discretionary spending will allow us to continue to strategically invest in capabilities, tools and teams in support of our mission to recruit and retain color customers.\nAs we move through the first half of fiscal 2021, it is clear that the environment will continue to be choppy, creating additional top line headwinds at least in the near term.\nToday, we are operating under mandated store closures in Europe, Canada and Latin America, capacity restrictions in several domestic markets and reduced capacity at salons in California, which were closed for most of January.\nBecause these disruptions are continuing and there is still a great deal of uncertainty related to potential restrictions going forward, we expect net sales to decline in our second fiscal quarter, softening modestly from Q1 levels.\nDuring this time, we are remaining agile and our teams are running the business with operational and financial rigor to preserve profitability and prudently manage cash.\nMost importantly, with our transformation journey nearing completion, we feel highly confident in our competitive positioning, the strong foundation we've built and the capabilities we've established and the ability of our teams to execute.\nIn short, we believe SBH is positioned for a return to consistent top line growth when pandemic headwinds abate.\nBefore turning the call to Marlo, I want to express my appreciation to all of our team members and associates around the globe for playing an important role in our successful transformation and continuing to work tirelessly in service of our customers as we navigate the dynamic COVID environment.\nI also want to say how pleased we are to have Marlo in the role of Chief Financial Officer.\nAfter joining us last spring as Senior Vice President of Finance, she has quickly and seamlessly transitioned to the new position and serves as a valuable member of our executive team.\nNow over to Marlo to discuss the financials.\nI've been with the company now for 10 months.\nSo I was really able to hit the ground running when I assumed the CFO position in November.\nI've enjoyed the opportunity to speak with some of you at recent virtual conferences and marketing days and look forward to continuing to get to know our SBH shareholders.\nTurning now to the financials.\nYou heard from Chris that COVID disruptions put tremendous pressure on the top line this quarter.\nAfter a strong start in October, new restrictions set in during November.\nAnd by the end of Q1, approximately 45% of our stores globally were operating under capacity restrictions or closures.\nThis resulted in a consolidated same-store sales decline of 3.7%.\nIn our open locations, traffic was choppy and declined on a year-over-year basis.\nDespite lower traffic, we saw increases in average ticket, units per transaction and average unit retail versus the first quarter of fiscal 2020.\nOur global e-commerce business remained strong in Q1 with consolidated sales up 48% versus one year ago.\nAs we continue to optimize our new digital capabilities, we expect e-commerce to become an increasingly larger part of the overall business over time.\nLooking now at gross profit.\nOur fewer, bigger, deeper strategy continues to drive underlying margin strength.\nFirst quarter gross margin came in at 50.3%, up 190 basis points to last year.\nThe year-over-year increase reflects strength in the Sally segment particularly in the U.S. and Canada.\nThis was partially offset by margin pressure at BSG as lower inventory levels drove higher capitalized costs.\nLooking at the remainder of fiscal 2021.\nWe anticipate that our targeted promotional strategy will allow us to continue to deliver strong consolidated gross margin in the range of 50%.\nSG&A expenses totaled $366 million in Q1, down $12 million versus last year.\nThe savings can primarily be traced to lower field labor and advertising costs and reflects our ability to pull expense levers as needed while pandemic headwinds persist.\nAs we expected, as a percentage of sales, SG&A deleveraged on a year-over-year basis, coming in at 39.1%, up 50 basis points from Q1 of 2020 due to lower sales volume.\nLooking at Q2, we expect SG&A dollars to be flat to up slightly on a sequential basis from Q1.\nThis primarily reflects investments in digital marketing in both the Sally and BSG segments as well as IT spending as we continue to deploy and scale our new tools and capabilities.\nThese investments will be partially offset by lower field labor costs and variable expenses.\nOn a full year basis, we expect SG&A dollars to increase versus fiscal 2020 with spending primarily directed toward additional marketing and IT spend in the back half of the year.\nAs a reminder, we will also be lapping last year's furloughs and rent abatements.\nAs Chris said, we are pleased with the success of our transformation journey.\nAnd the investments we have made to date are clearly bearing fruit.\nIf we began to see pandemic headwinds abating, we will make selective investments in other key growth areas during the latter part of the year.\nOur solid gross margins and careful cost controls allowed us to deliver strong performance across operating income, EBITDA and EPS.\nIn Q1, adjusted operating margin was up 130 basis points to 11.2%.\nAdjusted EBITDA increased 5% to $134 million and adjusted diluted earnings per share grew 6% to $0.50.\nMoving to segment results.\nI'll start with Sally Beauty.\nThe first quarter same-store sales decline of 3.3% can largely be traced to extensive closures and restrictions in Europe and Latin America.\nIn the U.S. and Canada, same-store sales declines were less than 1%.\nAnd gross margin remained strong, reflecting the effectiveness of our new promotional strategy.\nThis drove a significant increase in segment operating margin, which expanded 440 basis points to 17.4%.\nE-commerce remained strong, up 46% versus one year ago.\nIn our BSG segment, same-store sales declines of 4.6% and primarily reflect restrictions on store capacity across several territories in the U.S. and Canada and salon closures in California and parts of Canada.\nE-commerce remained strong, delivering growth of 51% over the prior year.\nGross margin decreased by 40 basis points, reflecting higher capitalized costs due to lower inventory purchases.\nLooking at the balance sheet and cash flow.\nWe ended the first quarter with $538 million of cash on the balance sheet and a zero balance on our $600 million revolving line of credit.\nInventories at quarter end totaled $896 million.\nThat's down 10% versus one year ago and reflects our efforts to return to more optimal levels.\nAs we talked about on our Q4 earnings call, we exited the year with a focus on rebuilding inventories.\nWe made good progress and significantly improved our in-stocks during Q1.\nThat said, we did face some COVID disruptions and port delays particularly in the BSG segment.\nAs a result, first quarter cash flow from operations came in better than we anticipated at $39 million.\nAnd we anticipate this will pressure cash flow in Q2.\nCapital expenditures totaled $15 million and were deployed mostly toward store repair and maintenance and digital capabilities, most notably buy online/pick up in-store.\nwhich, as you heard from Chris, is gaining good traction.\nFree cash flow was $24 million for the quarter.\nAt the end of Q1, our leverage ratio stood at 2.78 times.\nFor comparison purposes, the leverage ratio that we often cite, as defined in our loan agreement, where the impact of cash on hand is capped at $100 million for net debt calculation purposes was 3.73 times.\nAfter the close of the quarter, we further reduced our debt levels by another $213 million in early January, which is consistent with our philosophy to deleverage the balance sheet.\nGoing forward, we expect to continue to utilize excess cash to reduce debt and return value to shareholders.\nIn fiscal 2021, we expect to make additional progress toward bringing our debt leverage ratio closer to our target of 2.5 times.\nAs we look at the balance of the year, we expect the environment to remain choppy as COVID disruptions persist.\nWith closures and restrictions continuing thus far into the second quarter, we anticipate that Q2 net sales trends will soften moderately from Q1 levels.\nUntil we see a definitive shift in the macro factors affecting our top line, we will continue to operate prudently and remain focused on the operating initiatives Chris talked about, which we believe are setting us up to achieve consistent growth and long-term success.\nAnd now we'll ask the operator to open the call to Q&A.\n Assistant:", "chosen": "compname posts q1 gaap earnings per share $0.50.\nq1 gaap earnings per share $0.50.\nqtrly adjusted diluted earnings per share of $0.50.\nqtrly consolidated same store sales decreased 3.7%,.\nwill not be providing formal guidance at this time.\n"}
{"prompt": "Human: If you do not yet have a copy, you can access them on our website.\nWe are providing that information as a supplement to information prepared in accordance with Generally Accepted Accounting Principles.\nWith us on the call today are John Arabia, President and Chief Executive Officer; Bryan Giglia, Chief Financial Officer; and Marc Hoffman, Chief Operating Officer.\nI can say without hesitation, that I'm glad 2020 is behind us, and I firmly believe the better days lie ahead.\nIt goes without saying, that 2020 posed the most difficult challenges the hotel industry has ever faced, and we are forced to do things we never thought we would have to do.\nThat said, in rising to the occasion, we and others working together, also accomplished things we never thought possible.\nSimply stated, we are not out of the woods yet.\nWe have recently witnessed evidence of a recovery in demand, including leisure, commercial and group demand.\nWe believe if these trends continue and a gradual recovery has started, and we are likely to resume hotel profitability sometime late in the second quarter or early in the third quarter of this year.\nToday, I'll provide a recap of 2020 including our accomplishments here at Sunstone, as well as our annual and quarterly operating results.\nI will then provide comments on recent operating and booking trends, followed by an update on our liquidity, and an overview of our 2021 capital projects as we continue to focus on long-term growth.\nBryan will later provide more details on our recent earnings, finance transactions, liquidity and dividends.\nSo let's begin with a recap of last year.\nDespite the extremely challenging operating environment, we were able to navigate the pandemic and execute on several transactions that increased the quality of our portfolio, reduced our debt, and better positioned the Company for long-term growth.\nDuring the year, we sold two hotels, the Renaissance Baltimore and the Renaissance LAX for combined gross proceeds of nearly $172 million.\nThese two transactions bring the number of hotels sold in the past three years to a total of nine hotels for gross proceeds of approximately $575 million.\nIn July, we sold the Renaissance Baltimore at a reasonable discount to pre-pandemic pricing, which we believe was a good outcome, considering the asset is lower quality, urban group-oriented hotel that was losing money and expected to lose money for some time.\nIn December, we are fortunate to compete the sale of the Renaissance LAX, and what we believe to be a pre-pandemic valuation.\nThis was a fantastic execution, and a direct result of our strong balance sheet and nimble investment team.\nWe did not have to sell this hotel, nor did we need the incremental liquidity, and because of this, we were able to hold the line and extract premium pricing equating to a 6.8% cap rate on 2019 actual earnings.\nAdditionally, during the fourth quarter, we reached a resolution with the lender of the mortgage on the Hilton Times Square, resulting in in assignment-in-lieu.\nGiven the operating challenges this hotel faced prior to the pandemic, which were only exacerbated by a proposed uneconomic ground rent reset, and an increase in property taxes, we expected the hotel to generate sizable cash losses for the foreseeable future.\nWhile we are hoping for another outcome, the assignment of our interest in this hotel mitigated what we believe to be a deteriorating situation, and all things considered was the best outcome in a terrible situation.\nThe departure of these three hotels in 2020 further consolidates our portfolio into long-term relevant real estate, and further reduces our ground lease exposure.\nIt is worthwhile to note that the combined 2019 RevPAR and EBITDA per key of these three hotels, in aggregate, was approximately 19% lower and 54% lower respectively than the remainder of our portfolio.\nAdditionally, the dispositions leave us with only two ground lease assets in the portfolio, which we believe compares about the best across all publicly traded hotel REITs.\nDespite the limitations on the incurred environment, we continue to make selective capital investments in 2020 that we believe will result in long-term value creation.\nDuring the year, we invested $51 million into our hotel portfolio, with the largest project being the complete repositioning renovation of the Bidwell Portland, which turned out just beautifully.\nAs many of you know, we take a long-term view of our business, and so despite the uncertainty facing the industry in 2020, we chose to accelerate several highly disruptive projects that were on hold awaiting a quiet time to be completed.\nAt our Renaissance Orlando, we completed the first phase of a refresh of the hotel large atrium lobby, including replacing nearly 50,000 square feet of flooring, which would have otherwise resulted in millions of dollars of displacement.\nThe lobby looks amazing.\nAnd we were able to complete this investment without any displacement or guest impact.\nAt our Wailea Beach Resort, we added 32 beautiful lanai decks, which has significantly increased the appeal and the revenue potential of these oceanfront rooms.\nAlso in Wailea, we remain on track to complete our solar project in this quarter, which will eliminate approximately 650,000 kilowatts annually of energy, and reduce not only our carbon footprint, but also our energy bill by roughly $160,000 per year.\nAnd finally at our DC Renaissance, we have completed the refresh of our product to share and the meeting space escalator modernization, both of which have result -- would have resulted in meaningful group displacement during normal operating times.\nIn summary, despite very challenging times, we had a productive year at Sunstone.\nLet's move on to 2020 operating results.\nOf our 17 hotels, 15 were in operation at the end of the year, which represents 92% of our rooms in the portfolio, and nearly 98% of our comparable 2019 hotel EBITDA.\nFor the full year, comparable portfolio revenues were $233 million, and RevPAR was just over $46, which represent declines of 76% and 77% respectively, compared to 2019.\nTo put this into perspective, roughly 75% of our comparable revenues in the year were generated in the first quarter prior to the pandemic.\nFull year comparable property-level EBITDA was a loss of $64 million, which represents a decline of 120% relative to 2019, despite a previously thought unattainable 56% decline in same-store operating expenses.\nThree of our hotels, Wailea Beach Resort, Embassy Suites La Jolla and Oceans Edge achieved positive EBITDA for the year.\nMoving on to the fourth quarter.\nComparable portfolio revenues were $32 million and RevPAR was $25.36, which represents a decline of 86% and 87% respectively, compared to the fourth quarter of last year.\nOur fourth quarter RevPAR was challenged by the seasonal slowdown in business and the increase in both COVID cases and stay-at-home restrictions, which had a temporary impact on transient reservations.\nNevertheless, our portfolio RevPAR of just over $25 increased from the nearly $18 witnessed in the third quarter and the $3 in the second quarter, as we opened up additional hotels, and as occupancy at several hotels increased, particularly our higher-rated properties.\nDemand in the fourth quarter came from a combination of leisure transient, contract business, and event-driven groups that were primarily related to either government or emergency management business.\nFourth quarter group business, which was made up of non-congregating room blocks, was generally limited to our hotels in San Diego and New Orleans.\nWe have also recently seen a very small, but growing number of commercial transient rooms, particularly in October and November, as workforce started to return to traditional offices and get back out on the road.\nFurthermore, in December, we saw an increase in holiday travel at Oceans Edge, Wailea Beach Resort, Renaissance Orlando and both of our hotels in San Diego.\nLeisure demand continues to be the primary source of business for many of our hotels.\nOur drive-to hotels and resort destinations continued to outperform our City Center hotels, particularly on the weekends as people seek travel opportunities away from their homes.\nOur Oceans Edge Resort in Key West ran at 53% occupancy in the fourth quarter, and a slightly higher rate than the fourth quarter of 2019 driven completely by transient leisure business.\nThis spacious resort with six separate pools is an ideal destination for a socially distance vacation.\nOver the New Year's holiday, Oceans Edge ran nearly 90% occupancy, with an average rate that was competitive that of the prior year.\nSimilarly, our hotel in Wailea continues to rebound despite the flighty nature of the Hawaiian Islands, which reopened for business in mid-October, albeit with significant testing requirements and limited open amenities.\nAs expected, demand in Wailea has been building slowly with occupancy levels in the range of 19% to 23% per month.\nAs Wailea's occupancy builds, we continue to maintain our premium pricing integrity and have been disciplined in our approach to revenue management as opposed to lowering prices in hopes of creating demand.\nOur November ADR at the property was 13% higher than the previous year, and our ADR from Christmas to New Year was over $725.\nWe continue to believe that our outstanding hotel product, and desire by travelers to vacation in Mali, will allow us to maintain our high rates, while building our occupancy, as more people feel comfortable travel.\nNow let's take a look at our quarterly group performance.\nGroup business increased sequentially in the fourth quarter compared to the third quarter from 21,000 room nights to 32,000 room nights or about 24% of the total room nights achieved in the quarter.\nCurrent group business continues to be composed primarily of government and emergency management-related groups, all of which tend to book with little lead time.\nThat said, we have also started to see a few incidences of traditional groups keeping their meetings as planned.\nFor example, while certain isolated events that showed up were small compared to historic events, its sports group kept our room block at our Renaissance Orlando in early January, and two medical groups recently showed up at Wailea Beach Resort.\nDuring the fourth quarter, property-level expenses declined by 70%, which includes the benefits -- benefit of approximately $8.7 million of operational level credits and adjustments, including several real estate tax adjustments and employee tax credits.\nDespite such a material decline in cost, the challenging demand environment resulted in property-level adjusted EBITDA loss of $18 million in the fourth quarter.\nNow, a loss of $18 million is nothing to get excited about, but it does show continued improvement from the third quarter, which had a loss of $32 million for the comparable portfolio.\nSimilar to the third quarter, the fourth quarter property-level loss was several million dollars better than we had anticipated, even after accounting for the credits we received.\nWe continue to work with our operators, not only to reduce expenses in the short term, but also to identify efficiencies and other improvements to our operating model that are expected to generate sustained cost savings for owners as demand returns to our hotels.\nWe believe 2021 group business will ultimately depend on the speed and efficacy of the vaccine distribution, and the degree to which that allows us to return to normal.\nIn the near term, cancellations in the first quarter of '21 are trending in line with that of the fourth quarter of last year, and we would expect a limited group room nights outside select government-related groups.\nLooking at the second quarter, our group cancellations have increased over the last 90 days, but at a much slower pace than what we saw in recent quarters.\nSeveral groups remain intent on holding their events in the second quarter, including a couple of association events in San Diego, and a few small city wise in Boston.\nThis gives us some confidence that group room nights will begin to increase in the second quarter.\nAnd then as the distribution of the vaccine becomes more widespread, this travel restrictions and social distance requirements ease, group trends will accelerate in mid-to-late summer.\nGiven the expected vaccination trajectory, meeting planners have become more confident about holding their events in the third and fourth quarter, and we've witnessed minimal group cancellations for that time period.\nBased on these assumptions, we expect our portfolio will perform materially better in the second half of 2021, and specifically in the fourth quarter.\nRecent pace of future group bookings also points to recovery.\nFollowing the loosening of stay-at-home orders in the earlier part of this year, we saw a meaningful increase in bookings in group lead volume.\nIn January, our portfolio group lead volume was up 130% over December, and the total number of leads reached a level not seen since last March.\nFrom a production standpoint, Hilton San Diego Bayfront had its highest January group production in the last six years, with over 17,000 room nights booked, and Boston Park Plaza booked several large pieces of business for the third and fourth quarter.\nIn New Orleans, Jazz Fest, French Quarter Fest and two other festivals were rescheduled for October, and now every weekend in October has the potential for market compression, which is great and something we have not seen in quite some time.\nLooking further group bookings.\nSince the beginning of the fourth quarter, we booked 140,000 new group room nights for all future months, excluding the rebooking of previously cancelled groups.\nWhile a portion of these bookings relate to isolated driven event business, the remaining balance still represents an acceleration from previous months and demonstrate there is pent-up demand to hold meetings when conditions permit.\nIn addition to new bookings, to date we have rebooked 266,000 group rooms -- group room nights that previously cancelled or approximately 25% of all cancelled group room nights since the start of the pandemic.\nWe would expect that number of rebook rooms to increase as another 3% of cancelled rooms are at various stages of reworking their contracts, and an incremental 24% of cancelled room nights have expressed an interest in rebooking and are working with our sales team to potentially secure new dates.\nTaken together, the new group -- groups booked, since the beginning of the fourth quarter and all rebook groups, and those in the contracting process, represent approximately $100 million of group room revenue, and approximately $125 million of total group revenue.\nWe are confident we would not have captured all of this business, if we did not keep sales professional on property to work with and take care of our meeting planners and group customers.\nWhile our 2021 group room night pace is down materially compared to pre-pandemic levels, we currently have approximately 290,000 group rooms on the books for 2021, representing $62 million of group room revenue, a significant increase from the depressed 2020 levels.\nIn addition to the more optimistic outlook for group business, transient trends are also showing signs of improvement, particularly after the vaccine distribution began.\nLooking at the historical trajectory, in mid-March 2020, net transient bookings quickly turned sharply negative, meaning reservation cancellations materially outpaced new reservations as travel came to historic standstill.\nWeekly net transient reservations generally remained negative through the middle of July, and then gradually increased through mid-October as more hotels opened.\nAround late October, or early November, net transient reservations remained positive but decelerated, because the weather turned cooler and COVID-19 cases spiked.\nThat said, I'm pleased to report the net transient reservations have rapidly improved since the vaccine distribution began.\nAnd our weekly forward bookings, while still short of normal levels, are at the highest levels that they have been since the first week of March 2020.\nFollowing the onset of the pandemic, the booking window grew increasingly short, with most reservations being made within a few days of arrival.\nWe are now starting to see a booking window extend.\nFor example, Oceans Edge has a significant increase in transient bookings that span over a three-month period.\nSimilarly, we are starting to pick up transient reservations as far out as the fourth quarter, particularly in places like Wailea.\nFor the second half of the year Wailea has 13% more transient rooms on the books, compared to the same time in 2019, and the outlook has been improving weekly.\nWhile it is obvious that we still have a long way to go to get back to normal operating levels, the trend is clearly headed in the right direction, particularly as the majority of our portfolio is open and vaccine distribution continues to accelerate and show promise.\nNow let's talk a bit about our improving cash burn.\nOn our last call, we provided an estimate of our monthly cash burn, assuming the majority of our portfolio was in operations, but would continue to run at very low occupancies.\nAt that time, we established that we would incur property-level cash losses of approximately $10 million to $13 million a month, and with -- and when combined with our corporate expenses, debt service and preferred dividends represented a total monthly cash burn of $16 million to $20 million before capex and extraordinary items.\nOur actual cash, or excuse me, our actual hotel-level cash burn for the fourth quarter was approximately $9 million per month.\nAnd when combined with our corporate cash requirements, equated to a monthly burn rate of $16 million on average, which was at the low end of our estimated range.\nWe continue to fine-tune our operating model at the prevailing occupancy levels, and remain focused on minimizing operating expenses.\nWe currently expect that our first quarter monthly corporate cash burn rate before capital investment will range from approximately $14 million to $17 million per month or 14% decline from the previously provided range.\nFurthermore, if occupancy begins to increase, we would expect second quarter cash burn to decrease significantly, and anticipate that our portfolio could achieve monthly profitability late in the second quarter or early in the third quarter, and then our monthly corporate cash usage could achieve breakeven levels by the end of the third quarter.\nSo let's switch gears and talk a bit about our significant and enviable liquidity position.\nWe ended the year with $368 million of unrestricted cash, and full availability on our $500 million credit facility.\nOur year-end cash balance included the proceeds from the sale of the Renaissance LAX, as well as the repayment of the mortgage secured by the Renaissance DC, which was paid off just prior to year end.\nRepayment of the DC loan eliminates roughly $10 million of annual debt service, and will leave us with only three mortgages.\nAs our cash burn rate continues to decline, we are increasingly confident that a notable portion of our existing unrestricted cash balance is available for investments that we believe are likely to become available in the next several quarters.\nThat is, we're one of the few companies that is not dependent on credit facility draws or other borrowings to fund meaningful acquisitions.\nFrom a capital perspective, we plan to invest approximately $70 million to $80 million into our portfolio in 2021.\nOur largest projects this year will be the Renaissance Washington DC, where we have been working with Marriott on a plan to convert the hotel to the Western brand.\nAs part of the conversion, nearly all areas of the hotel will be reinvented, including a full renovation of all 807 guest rooms and bathrooms, conversion of a majority of bathtubs to showers, the addition of nine new keys, upgrading the fitness center, the redesign of all public spaces, meeting areas and food and beverage outlets, as well as enhancements to the exterior facade.\nWe believe the Western brand will elevate the hotel's positioning, allow it to be better compete for both group and transient customers, and ultimately, enhance the long-term earnings potential and value of the hotel.\nRenovation work will begin later in '21, and the rebranding will occur in 2022, once the repositioning is substantially complete.\nWe anticipate that the total investment for the conversion to be approximately $70 million, with nearly $30 million of that spend occurring in the current year.\nThis investment is roughly $30 million over the cost of a cyclical renovation, but one that we believe will generate a low- to mid-teens return on incremental investment given the increased rate potential.\nWe are excited about this project and look forward to working with Marriott on another successful repositioning.\nIn addition to the conversion project in Washington DC, we have several other value-enhancing projects planned across the portfolio this year.\nAt the Hilton San Diego Bayfront, we're renovating the ground floor by redesigning and reconcepting our restaurant and converting a formerly leased restaurant space into meeting space.\nThe new meeting space will enable us to sell more group rooms and allow for the combination of indoor and outdoor waterfront meeting space that sits adjacent to our event lawn.\nAt our Boston Park Plaza, we are converting another former ground floor retail space into additional meeting and pre-function space.\nSimilar to our successful Avenue 34 meeting space, we anticipate this will also be highly sought after for social catering events, and will provide additional breakout space to attract large groups.\nFinally, we are adding a second adult serenity pool at our Wailea Beach Resort to better accommodate guests, and to further enhance our overall resort experience.\nTo sum things up, we believe that the worst is behind us and we are now in a period of transition.\nThe vast majority of our portfolio is operating, and we are seeing trends that give us increased optimism and confidence that we are on the path to return to profitability in the second half of 2021.\nAnd finally, our significant cash on hand before drawing down on our credit facility, not only provides us with stability during these uncertain times, but will also allow us to find attractive investments earlier than others who may be focused on shoring up liquidity.\nAs of the end of the quarter, we had approximately $416 million of total cash and cash equivalents, including $48 million of restricted cash, and then undrawn $500 million revolving credit facility.\nDuring the quarter, we utilized proceeds from the sale of the Renaissance LAX, along with cash on hand, to repay the $108 million mortgage secured by the Renaissance Washington DC.\nThe repayment of this loan removes our highest cost piece of secured debt, eliminates nearly $10 million of debt service per year, and leaves us with only three secured mortgages remaining in the portfolio.\nDuring the quarter, we also executed amendments to our unsecured debt agreements, which provide for additional covenant relief and extend the financial covenant waiver period until the first quarter of 2022.\nWe appreciate the ongoing support of our high-quality lending group throughout this process.\nOur balance sheet remains strong with significant liquidity, and continues to position us not only to successfully navigate the current operating environment, but to also allow us to take advantage of opportunities as they may arise, as the industry recovers.\nWe continue to focus on managing our costs and minimizing hotel expenses, while maintaining our properties in good condition, and opportunistically investing in projects that would have resulted in material displacement.\nWorking with our operators, we have reduced operating expenses by approximately 60% to 70% since the start of the pandemic.\nOur current projected cash burn rate is now $14 million to $17 million per month before capital expenditures, which has reduced from our previous range of $16 million to $20 million per month, and down from the actual fourth quarter burn of approximately $16 million.\nShifting to fourth quarter financial results.\nOur fourth quarter performance was significantly better than third quarter.\nOperations continue to reflect the most dramatic decline in hotel demand the industry has ever seen.\nFourth quarter adjusted EBITDA was a loss of $19 million, and fourth quarter adjusted FFO per diluted share was a loss of $0.16.\nWhile we were anticipating the fourth quarter results, which showed sequential improvement, the actual results also benefited from approximately $8.7 million of operational level credits and adjustments, some of which may not repeat in the first quarter of 2021.\nWhile we are not providing guidance at this time, let me provide a basic framework on how we are thinking about 2021.\nAs we've noted, we expect our near-term monthly corporate cash burn to be between $14 million and $17 million before capex.\nThat is, our assumption for the first quarter, which is marginally better, but generally in line with the fourth quarter of last year.\nAs the year progresses, we anticipate that the monthly cash burn will decline meaningfully, and we expect to reach hotel profitability by the end of the second quarter or early third quarter.\nThe rate of acceleration will depend on the success of vaccine distribution, the continued easing of state and local restrictions, and the return of group travel.\nAs John indicated, we are seeing multiple signs of demand acceleration, especially in the back half of the year.\nWe have suspended our common dividend, and will reach -- we have suspended our common dividend until we return to taxable income, which may or may not occur in 2021.\nSeparately, our Board has approved the routine quarterly distributions for both of our outstanding series of preferred securities.\nAnd with that, we can now open the call to questions.\n Assistant:", "chosen": "q4 adjusted ffo loss per share $0.16.17 hotel portfolio revpar decreased 86.9% to $25.36 in quarter.\nto reposition and rebrand renaissance washington dc to westin washington dc.\nsunstone - in 2021, expects to invest about $70 million - $80 million of capital, including about $30 million to reposition and rebrand renaissance washington dc.\n"}
{"prompt": "Human: And the company undertakes no obligation to update or revise these statements.\nIn addition, on the call, we will discuss non-GAAP financial measures.\nInvestors can find both the detailed discussion of business risks and reconciliations of non-GAAP financial measures to GAAP financial measures in the company's Annual Reports quarterly reports and other forms filed or furnished with the SEC.\nWe have divided our call into 3 parts.\nFirst, I will provide an overview of our recent operating performance and the strong demand trends we are seeing second Sandeep will go into more detail about our financial results and give an update on the progress of our transformation plan.\nFinally, I will return to discuss why we are excited about our future over both the short and long-term.\nI am pleased to be able to report that the 2021 season is off to a strong start.\nDespite the significant challenges due to the pandemic, last year we were the first company able to safely reopen a theme park in North America.\nThis year, we had the first theme parks open in California and in many cases we have opened our parks earlier than in 2019.\nWe have either opened or announced firm opening dates for all of our theme parks, with the exception of Montreal this is due to the creativity adaptability of our Six Flags team who worked hard to establish the highest standards of cleanliness and safety protocols.\nI'm also pleased to report that our guests are excited to return to Six Flags and we are seeing strong demand across all of our markets.\nI've spent the last couple of months visiting many of our parks, which has allowed me to connect with our great team members understand reopening challenges reinforce our priorities and examine the effectiveness of our operations.\nMy time with our outstanding park leaders only reaffirms that we have a highly capable team a healthy industry and a resilient business.\nOur full-time team members appreciate that we stood by them throughout the crisis.\nThe signed a strong consumer demand for our parks are very clear.\nThrough this past weekend our year-to-date attendance trends have accelerated at our open parks increasing to 79% of 2019 levels compared to 51% in the 4th quarter of 2020.\nWe are seeing strong guest spending per capita and our active pass base has surpassed prior year first quarter levels placing us solidly on track toward recovery we have center decision making squarely on our guests extending privileges for season passes and memberships while also offering high tiered benefits to our members who continue their payments and they have rewarded us with their loyalty.\nExperiencing such robust demand.\nAt this time of year does present operational challenges however.\nWe have encountered difficulty, fully staffing our parks upon reopening with a shortage of labor availability due to many factors, including school COVID schedules, immigration restrictions limiting the number of international temporary worker visas, and extended unemployment benefits keeping people at home.\nWe expect these labor challenges to start to abate as we enter the core of our operating season at the same time, the overall operating environment remains challenging, as we balance the requirement to delivering a safe experience during the pandemic, while still delighting our guests, our safety protocols have reduced right throughput, which can result in longer the normal lines and less rides per guest.\nWe are continuing to require masks in our parks but we will constantly assess as policy and partnership with our industry, the CDC and local health officials.\nWe are also working with local health officials and eliminating constraints around park capacity and right seating as more Americans receive their vaccinations.\nOur outdoor venues have a tremendous amount of open space.\nTherefore our parks are naturally conducive to social distancing and all states are supportive of working with us to safely increase attendance levels our recent results in guest surveys indicate that there is extraordinary demand for outdoor entertainment options close to home and we believe that this widespread desire will help drive attendance in the coming quarters.\nSo while it is still early in the season.\nWe are pleased by recent trends and are optimistic about both the short and long-term prospects of our business.\nIn the first quarter, we also continue to make progress on our transformation plan, which focuses on strengthening our core business and we are on track to achieve our previously issued financial targets.\nI want to start by stressing that results for the first quarter are not comparable to prior year because we closed all of our parks in mid-March last year prior to the spring break for most of our parks.\nFor that reason, I will provide comparisons to 2019.\nTotal attendance for the quarter was 1.3 million guests a 38% decline from first quarter 2019.\nRevenue in the quarter was down $46 million or 36% to $82 million.\nBecause of our fiscal quarter change our first fiscal quarter 2021 ended on April 4 instead of March 31 as it did in 2019.\nAs a result, our 2021 results include four calendar days in April when many of our parks operated during which we had 293,000 of attendance and this was inclusive of the Easter holiday weekend.\nIn 2019, the Easter holiday, which affects the timing of spring break in many of our markets occurred in the second quarter.\nSo far through this past weekend year-to-date attendance had open parks is trending at 79% versus 2019.\nAs a reminder our second fiscal quarter in 2021 will end on July 4 and will include a majority of the July 4 holiday weekend which will shift attendance out of the 3rd quarter and into the second quarter of this year relative to calendar in 2019.\nTotal guest spending per capita increased 16% in the quarter versus 2019.\nSince the beginning of the membership program, a portion of the membership revenue has been allocated between admissions spending and in park spending.\nBeginning in October 2020 the company prospectively began allocating an incremental portion resulting in a reduction in admission spending per capita and an increase in in-park spending per capita with no change in total guest spending per capita.\nApplying a pro forma allocation to 2019 admissions spending per capita increased 17% and in-park spending per capita increased 14% compared to the first quarter of 2019.\nThe increase in admissions spending per capita compared to 2019 was driven primarily by higher realized ticket deals for both single day tickets and the active pass base as our revenue management team focused on leveraging our pricing and product mix.\nThe increase in in-park spending per capita compared to 2019 reflected high consumer demand for our products.\nAttendance from our active pass base in the first quarter represented 54% of total attendance versus 64% percent for the first quarter of 2019 demonstrating a more balanced approach to ticket sales.\nOn the cost side, cash operating and SG&A expenses versus 2019 decreased by $29 million or 20% primarily due to the following.\nFirst, cost savings from our transformation efforts.\nSecond, savings and labor utilities and other costs related to the fact that several of our parks were not operating and third lower advertising costs.\nAdjusted EBITDA for the quarter was a loss of $46 million compared to a loss of $42 million in the first quarter 2019.\nGAAP loss per share was $1.12 compared to a loss of $0.82 in 2019, primarily due to the lower attendance in our parks.\nWe are pleased with the retention of our active pass base of 4.1 million pass holders, which included 1.7 million members and 2.4 million traditional season pass holders at the end of first quarter 2021.\nOur active pass base is up 1% compared to first quarter 2020 and down only 9% compared to first quarter 2019.\nAs we reopen our parks.\nWe are steadily reducing the number of paused members to near zero.\nThe retention of these members is a testament to our unique offering and loyal following.\nLooking ahead, we expect the active pass base trends to continue to improve as we have begun selling new season passes and memberships.\nA very large active pass base is a tremendous asset for our company as pass holders generated more annual revenue and cash flow then single day visitors.\nThe utilize excess capacity as they tend to visit during off peak periods and shoulder months.\nWe also provide a weather hedge since they pay in advance and have the ability to visit for the entire season.\nFinally, our members, provide a source of recurring revenue that smooths our cash flow and makes our earnings less seasonal.\nDeferred revenue as of April 4, 2021 was $245 million, up $96 million or 65% compared to first quarter 2020 and up $67 million or 38% compared to first quarter 2019.\nThe increase was primarily due to the deferral of revenue from members and season pass holders whose benefits were extended through 2021 and the acceleration of season pass sales over the past few weeks of the quarter.\nWe expect to recognize most of this deferred revenue in 2021.\nThe capital expenditures for the quarter was $23 million.\nWe expect our full-year 2021 capital spend to be slightly lower than 2020 due to the carryover of new rights that were delivered and paid for, but not commission in 2020.\nOur liquidity position, as of April 4 was $524 million this included $461 million of available revolver capacity net of $20 million of letters of credit and $63 million of cash.\nThis compares to a liquidity position of $618 million as of December 31, 2020.\nNet cash outflow for the quarter was $95 million representing an average of $32 million per month.\nThis is significantly better than the projection of 53 million to $58 million per month that we gave on our last earnings call.\nThis improvement was driven by higher than expected attendance and season pass sales.\nBased on our anticipated park schedules we expect to be cash flow positive for the balance of the year and will not be providing a quarterly outlook on cash flow going forward.\nWe are obligated each April to offer to purchase the outstanding partnership units from the unitholders who own the third-party interests of Six Flags over Texas, Six Flags over Georgia and Six Flags White Water Atlanta.\nLess than $1 million of value in units has been put to Six Flags during the current year tender period that will end later today.\nI would now like to give you an update on the progress of our transformation plan.\nWe expect the transformation plan to unlock $80 million to $110 million in incremental annual run rate EBITDA once fully implemented and attendance returns to 2019 levels.\nIn 2021, we expect to achieve $30 million to $35 million from our organizational redesign and other fixed cost reductions.\nWe have already realized more than $8 million through the first quarter of this year.\nAs part of our transformation plan, we have incurred $44 million in cost so far through the first quarter 2021 including the non-cash write-offs of $10 million that occurred in 2020.\nWe expect to incur the remaining $26 million in 2021 and 2022, the majority of which is related to investments in technology, including a new CRM system.\nWe continue to make progress with our revenue and cost initiatives as shown by the positive impact on our attendance, per capita spending and cost savings.\nOur new revenue management team is up and functioning as we focus on leveraging pricing and product mix, to drive incremental unique attendance and yield higher admissions and in park spending per capita.\nWe launched more than 20 RFPs as part of our non-headcount cost savings initiatives and we are seeing very promising results especially in procurement savings.\nWe began migrating toward centralized shared services in finance, IT and human resources and we began testing our new park labor scheduling system.\nIn closing my own remarks the operating environment remains dynamic.\nWe will not be providing annual guidance at this time.\nHowever, we are extremely encouraged by the improvements we are seeing in our attendance trends and the value creation that will come from implementing our transformation plan.\nWe feel we are well positioned as we enter the heart of our 2021 operating season now, I'll pass the call back over to Mike.\nSandeep innovation is in our DNA.\nIn 2021, we will be introducing several record breaking and first of their kind rides including the Jersey Devil Coaster at Six Flags greater venture in New Jersey, the world's tallest fastest and longest single rail coaster inspired by New Jersey folklore.\nTsunami surge at Six Flags Great American Illinois which will be the world's tallest water coaster and we are reintroducing West Coast racers at Six Flags Magic Mountain in California, the world's first racing coaster with side by side tracks, which is the parks 19th coaster.\nIn addition, we are rebranding our water parks in Oklahoma City, Oklahoma in Rockford, Illinois to Hurricane Harbor in creating a separate gate for our water park in Gurnee Illinois creating our 27th parks.\nFinally, due to its popularity we will continue to operate our Drive-thru Safari in New Jersey as a separately gated attraction.\nThe parks successfully opened in March, creating the longest season in the Safari's history.\nWe will also be investing in our park infrastructure adding technology to help us modernize the guest experience and in specific areas like food and beverage to help us improve our overall food quality and efficiency.\nIn addition, to new ride and infrastructure investments we will be introducing numerous new events and festivals in our parks this year.\nSome examples include roller coaster power hours and event held on Thursday and Friday evenings with unlimited number of gas can ride roller coasters non-stop while listening to a live DJ.\nOur Mardi Gras Festival which continues to grow popularity, is one of our tent pole events in a bigger than ever, July 4 Fest which includes fireworks and in Park events.\nI believe Six Flags is well positioned to delight our guests and to create significant value for our shareholders.\nIn the near term, my optimism is based on a few factors, first reopening progress.\nWe have approval to operate nearly all of our parks either today or in the near future.\nAnd we have proven in several markets that we can safely operate our parks without capacity restrictions.\nSo we expect to gradually ramp our capacity back to normal levels while adhering the social distancing and other safety protocols.\nSecond, consumer demand is very strong.\nAttendance at our open parks continues to accelerate as US consumers are eager to get out and have fun and Six Flags sits squarely in the middle of everything a consumer is looking for right now.\nOur venues are extremely safe.\nThey are outdoors and provide ample room for social distancing, our safety standards and protocols have been recognized as best in class by all state, city and county officials.\nIn addition, the vast majority of our guests drive to our parks so we are not dependent on air travel.\nThird, our active pass base continues to grow, which positions us well for the upcoming operating season with a built-in base of guest.\nAs I mentioned in my opening statement we are proud of our high customer retention and customer loyalty.\nCustomer loyalty is a very powerful competitive edge of Six Flags and one that provides a valuable recurring revenue stream.\nOver the long term I'm optimistic for several reasons.\nFirst, we have a unique value proposition.\nOur combination of thrill rides and entertainment for the entire family provides a truly unique experience in an affordable form of entertainment that is resilient even in difficult economic periods.\nIn addition, our parks are located in each of the top 10 markets in the US, giving us access to the biggest and most lucrative markets around the country.\nSecond, it our transformation initiative will fundamentally improve our guest experience and our profitability.\nWe are already seeing the early benefits in our improved single day ticket mix, our in-park spending growth and cost savings from our leaner organizational structure in our procurement efforts, but we're just getting started and we are on track to deliver the full $80 million to $110 million of incremental EBITDA when we are back in a normalized operating environment.\nThird and most importantly, we have a talented and dedicated team of people who have created a guest centric culture.\nOur team members have exhibited tremendous resiliency during a very challenging period.\nOur organizational design resulted in a strong balance of theme park expertise and outside industry perspectives, which will help us stay true to the past while embracing the future.\nThe strength of our people is truly why I'm confident that our future is bright.\nWe believe the strategic actions we are taking to transform our company will drive our growth and enhance shareholder value.\nI look forward to updating you on our continued progress and as we ramp back up to normal operations, you can expect to hear about our progress in our three key strategic initiatives.\nTo modernize the guest experience through technology, to improve operational efficiency and to drive financial excellence.\nCatherine, at this point.\nCould you please open the call for any questions.\n Assistant:", "chosen": "q1 revenue $82 million.\ncash outflow for q1 2021 better than expectations.\ncompany reported a decline in attendance for q1 2021 as compared to same periods in 2020 and 2019.\ntotal attendance for q1 2021 declined 15% compared to 2020 and 38% compared to 2019.\nsix flags - since parks began re-opening with limited operations in june 2020, attendance trends compared to 2019 have continued to improve.\nin q1 2021, attendance at company's open parks was 95% of q1 2019.\nqtrly loss per share $1.12.\nestimates that it will be cashflow positive for last nine months of 2021.\ncashflow forecast will depend on all of company's parks remaining open and attendance levels continuing to normalize.\n"}
{"prompt": "Human: I'm joined today by Mike Renna, our President and Chief Executive Officer; Steve Cocchi, our Chief Financial Officer, as well as additional members of our senior management team.\nLet me remind you that throughout today's call, we will be making references to future expectations, plans and opportunities for SJI.\nReconciliations of economic earnings to the comparable GAAP measures appear in both documents.\nOur CFO, Steve Cocchi, will then review our second quarter and year-to-date operational performance and financial outlook.\nMike will conclude by offering some closing remarks.\nI am pleased to report that SJI, notwithstanding the challenges of COVID-19, delivered solid performance in the second quarter and through the first half of 2021.\nYear-to-date, we saw economic earnings increase by roughly $25 million, up nearly 24% over the same period in 2020, reflecting strong performance in both our utility and nonutility businesses.\nConsistent with our strategy, our utilities, South Jersey Gas and Elizabethtown Gas represent the majority of our earnings.\nMargin growth remains strong, reflecting above average customer growth, positive rate case outcomes, infrastructure modernization programs and effective O&M management.\nNatural gas remains in strong demand across New Jersey, with our utilities adding more than 11,000 new customers in the last 12 months alone.\nAnd while we are seeing increased new construction across the state, the bulk of our growth continues to come from customers converting from heating oil and propane to clean burning low-cost natural gas.\nOur infrastructure and modernization investments critical to ensuring safe and reliable service remain on track and have the added benefit of significantly reducing methane emissions.\nNonutility operations also experienced meaningful second quarter and year-to-date improvement, largely the result of new clean energy investments and restructuring of our wholesale marketing portfolio.\nBoth our Energy Management and Energy Production segments delivered strong results.\nPerformance in Energy Management reflects solid results from both our traditional wholesale marketing and our fuel management activities, while Energy Production reflects strong performance from our renewable investments, particularly our Staten Island fuel cell as well as initial contributions from our equity interest in our RNG development partner, REV LNG.\nThroughout 2021, we've made significant progress in our efforts to reposition SJI at the forefront of a decarbonized energy future.\nIn March, we executed several financing transactions designed to strengthen our balance sheet, improve our credit ratings and significantly fund our capital plan.\nIn April, the BPU approved a substantial expansion of energy efficiency programs at both our utilities.\nThese innovative programs are a cost-effective way to reduce greenhouse gas emissions by lowering usage.\nThe program also allows for decoupling mechanism on Elizabethtown Gas, similar to the one we have at South Jersey Gas.\nAlso in April, we announced an industry-leading commitment to decarbonization, setting an aggressive goal to reduce our operational emissions of consumption 70% by 2030 and 100% by 2040.\nWe also announced commitments to deploy at least 25% of annual capital spend toward sustainability investments moving forward.\nThese targets are [Indecipherable] those established under the Murphy administration's Energy Master Plan.\nWe were excited to see Atlantic Shores awarded a project to develop 1,500 megawatts of clean, renewable wind energy for our state.\nOur partnership with Atlantic Shores on a green hydrogen pilot project will be essential to unlocking additional decarbonization energy sources for New Jersey and diversifying our renewable energy mix.\nAnd finally, in May, we hosted our virtual Investor Day, which afforded us the opportunity to lay out our long-term vision and the priorities and strategies that support our mission, delivering safe, reliable, affordable clean energy, entity that supports the economic prosperity and environmental goals of New Jersey.\nAs we look to the balance of the year, we remain focused on delivering on our commitment to clean energy and decarbonization and on successful resolution of our pending regulatory initiatives.\nOn the clean energy front, in June, we announced the acquisition of a 5-megawatt fuel cell project in the Bronx.\nThis fuel cell, which will be our 30 catamaran is similar to the two Staten Island fuel cells that were brought online in 2020.\nIt's eligible under New York's VDER program, which fixes 75% of revenue.\nIt's supported by an O&M agreement that guarantees 95% availability and long-term offtake agreements with creditworthy anchor customers.\nLike our previous fuel cell investments, SJI received 92% of the ITCs, cash flows and net income.\nImportantly, this project supports a substantial portion of our ITC goals for 2021.\nOn the regulatory front, as you know, we have requested $742 million in phase three infrastructure modernization investment at South Jersey Gas.\nThis critically important program targets coated steel and vintage Aldyl-A plastic pipe, supporting the Murphy administration's safety and reliability, job creation and environmental goals.\nSettlement discussions are progressing toward a final resolution.\nAs Mike noted, our business has performed very well through the first half of 2021.\nSecond quarter economic earnings were $2 million compared with a loss of $900,000 for the comparable period a year ago.\nImproved results reflect increased profitability from both our utility and nonutility operations, partially offset by the impact of financing activities.\nOur utilities contributed second quarter earnings of $3.3 million compared to $3 million last year.\nImproved results primarily reflect rate relief at South Jersey Gas, strong customer growth and base rate roll-ins related to infrastructure modernization investments under our authorized plans.\nOur nonutility operations contributed second quarter economic earnings of $8.1 million compared to $5 million last year.\nThese improved results were driven by increased profitability at both Energy Management and Energy Production.\nEnergy management contributed second quarter economic earnings of $7 million compared to $6.3 million last year, primarily reflecting improved asset optimization opportunities as well as fuel management contracts that became operational over the last 12 months.\nEnergy production contributed to second quarter economic earnings loss of $200,000 compared to a loss of $2.4 million last year, primarily reflecting contributions from our fuel cell and solar investments over the past year.\nAnd our midstream segment contributed second quarter earnings of $1.2 million compared to $900,000 last year, reflecting AFUDC related to our PennEast pipeline investment.\nOur other segment contributed a loss in economic earnings of $9.3 million compared to a loss of $8.8 million last year, reflecting an increase in outstanding debt, partially offset by debt repayments and refinancing activity.\nFor the six months year-to-date, economic earnings were $130.9 million compared with $106 million last year, reflecting improved utility and nonutility profitability.\nThe improved utility results largely reflect SJG's base rate release, which became effective on October 1, 2020, as well as positive customer growth and the roll-in of infrastructure modernization programs.\nImproved nonutility results largely reflect the same factors as previously discussed benefited second quarter results.\nOur capital expenditures and clean energy investments for the year-to-date were approximately $270 million, with more than 80% of this amount allocated for regulated utility investments in support of utility infrastructure upgrades, system maintenance and customer growth.\nOur balance sheet debt and credit metrics have all improved over the past year and support our growth plans.\nWe remain committed to a capital structure that supports our regulated focused capital spending plan while maintaining a balanced equity to total capitalization, ample liquidity and a solid investment-grade credit rating.\nOur GAAP equity to total capitalization improved to approximately 37% as of June 30 compared with approximately 32% at December 31, 2020, reflecting debt and equity financing and repayment of debt using proceeds from asset sales.\nOur non-GAAP equity to total cap, which adjusts for mandatory convertible units and other long-duration debt improved to approximately 45% at June 30 compared with approximately 40% at December 31, 2020.\nWe continue to have ample liquidity at both SJI and our utilities, with $1.18 billion in total cash, credit capacity and available through our equity forward and approximately $1.14 billion available as of June 30.\nIn addition, with the proactive refinancing efforts we've undertaken over the past year as well as our repayment of debt from our transactions and the remarketing of our prior mandatory convertible units, SJI has no significant debt maturities due in the near term.\nTurning now to guidance.\nBased on solid operational performance through the first half of the year, we are reaffirming our expectation for 2021 economic earnings of $1.55 to $1.65 per diluted share.\nOur long-term economic earnings-per-share growth target remains 5% to 8%, with significant step-ups expected in 2023 and 2025, driven by timing associated with utility rate cases and clean energy investments.\nWe're also affirming our 5-year capital expenditures outlook through 2025 of approximately $3.5 billion and our expected 2021 investment of $740 million to $780 million, with $490 million to $510 million for utility investment and $250 million to $270 million for nonutility investment, primarily focused on decarbonization and renewables.\nQ2 2021 represents the sixth consecutive period of steadily improving financial results.\nResults have been achieved despite a global pandemic turmoil on trading markets, political upheaval and shifting priorities in energy policy.\nLooking back, the past few years has been one of unprecedented change for our industry.\nThe world is moving toward a clean energy future.\nSJI has invested in it.\nOur strategy is centered around it, and our team is executing on it every day.\nWe are excited by the progress we've made so far and remain highly confident in our ability to execute on our plan to safely and reliably deliver the clean decarbonized energy of the future to a fully modernized 21st century system.\nWe also know that it's incumbent upon us to continue to execute effectively and consistently to reward your confidence and investment in us.\n Assistant:", "chosen": "sji reaffirms guidance.\n"}
{"prompt": "Human: I will be presenting today with Eric Thornburg, Chairman of the Board, President and Chief Executive Officer; and Andy Gere, President and Chief Operating Officer of San Jose Water Company.\nFor those who would like to follow along, slides accompanying our remarks are available on our website at www.\nThese statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions and expected future developments as well as other factors that the company believes are appropriate under the circumstances.\nI will now turn over the call to Eric.\nI am Eric Thornburg, and it is my honor to serve as Chairman, President and CEO of SJW Group.\nWe're now more than 13 months into the COVID-19 pandemic.\nThere is a sense of cautious optimism that the worst is behind us, and we have begun planning for the safe return to our offices and work centers.\nOver the past year, we've learned much about our teams, our culture, how we can adapt and what we can achieve through remote work.\nDespite the challenges, our people have personified our mission, trusted professionals passionate about delivering life-sustaining, high-quality water and exceptional service to families and communities while protecting the environment and providing a fair return to shareholders.\nLooking ahead, we are preparing for a phased return to our offices and work sites, building on our established risk-based process that has served us well during the past year.\nWe will adhere to the safety guidelines provided by our national, state and local health authorities.\nOur goal remains the same as it has been throughout the pandemic to deliver on our public health mission as a water service provider and protect our employees, customers and communities.\nI and the rest of our executive leadership team are looking forward to the day when we can express our appreciation to all employees in-person and meet the new employees, who have joined our team over the past year without having set foot in our offices.\nWe are committed to a safe return that seizes the benefits of remote work while providing a safe physical environment to nurture collaboration and our culture.\nThe extreme cold and winter weather experienced in Texas last February proved the benefits of a pure-play water and wastewater utility with national scale, geographic diversity and locally focused operations.\nSJW Group was able to draw on resources from our operations on the East and West Coast to assist our Texas operation during the event.\nOur communications teams from both coasts assisted with customer notifications as well as website, social media and news media updates, while our operations and safety teams provided valuable incident support.\nThe direct experience of the Connecticut and Maine teams dealing with cold weather events added to our response.\nIn California, the rainfall season is largely behind us.\nWe have experienced lower-than-normal precipitation for the second consecutive year, and that is impacting available surface water supplies produced from our watershed.\nA very low precipitation that we have experienced in the Santa Cruz Mountains this winter has had a significant impact on our local surface water operations, both in terms of storm runoff collected at the creek intakes for immediate treatment as well as the volume of water that we've been able to impound in our Lake Elsman reservoir for release later in the year.\nFor the first time in my 25 years at San Jose Water, we are temporarily taking our Montevina Water Treatment Plant offline due to low supply.\nWe will bring the plant back into service when hydrologic conditions allow.\nTo provide some perspective, the chart on Slide 10 shows the historic surface water production in blue compared with the associated rainfall at Lake Elsman in red over the same period.\nAs you can see, there's been just one other year, 2014, where we saw such low levels of rainfall and surface water production.\nFortunately, the regional water supply picture is somewhat better, and despite the low rainfall and snowpack this winter, the total groundwater storage at the end of the first quarter remained at Stage one or normal of Valley Water's water shortage contingency plan.\nBased on available recharge and the current rate of withdrawal.\nValley Water reports that it is forecasting to remain in the normal range through year-end by supplementing normal supplies with additional imported water.\nThat bodes well for the upcoming summer months when demands are typically highest, and we anticipate adequate supplies to serve our customers.\nAs a result of the water supply situation in California, we anticipate increases in our operating costs through the reliance on purchase water from our wholesaler to meet our customers' needs in 2021.\nCurrently, every billion gallons of purchased water has an incremental cost to the company of $4.2 million more than using our own supply sources.\nAs a direct result of the water supply outlook and in full transparency, we are announcing guidance of $1.85 to $2.05 per diluted share in 2021.\nThis assumes no additional company produced surface water in California for the remainder of 2021.\nWe are in the process of updating our strategic water supply plan to evaluate current and future supply reliability and resiliency.\nOur current California general rate case proceeding will address the impact of surface water availability.\nThe prudent management of our business and financial resources continues to be fundamental to our growth and our ability to return capital to shareholders.\nWe are proud to have continuously paid a dividend for over 77 years and to have increased the annual dividend in each of the last 53 years, delivering value to our shareholders.\nAfter Jim's remarks, I will address regulatory and other business matters.\nOur first quarter operating results reflect new revenues authorized by our 2019 California general rate case.\nWater infrastructure conservation adjustment and water infrastructure surcharges authorized in Connecticut and Maine and customer growth in Texas.\nThese increases were offset by a decrease in customer usage, the impact of a February ice storm in Texas and a decrease in available low-cost surface water due to the dry weather conditions in California that Eric and Andy just discussed.\nFirst quarter revenue was $114.8 million, a 1% increase over the first quarter of 2020.\nNet income for the quarter was $2.6 million or $0.09 per diluted share, an 8% increase over net income of $2.4 million or $0.08 per diluted share reported in the first quarter of 2020.\nThe increase in diluted earnings per share for the quarter was primarily attributable to cumulative rate increases of $0.08 per share, cumulative cost savings of $0.04 per share, a tax benefit of $0.04 per share and an increase in nonregulated income of $0.03 per share.\nThe diluted per share increase was partially offset by a decrease in customer usage of $0.08 per share.\nCustomer credits in Texas totaling $0.02 per share issued in connection with the February Ice storm, a decrease in the availability of surface water of $0.02 per share and an increase in depreciation and amortization of $0.06 per share.\nOur revenue decrease was a result of $2.8 million in decreased customer usage.\nIn addition, customer credits in Texas reduced revenue by $700,000 and net changes in certain balancing and memorandum accounts reduced revenue by $600,000.\nThese decreases were partially offset by $2.8 million in cumulative rate increases and $500,000 in revenue from new customers.\nTotal 2021 first quarter water production costs were slightly lower when compared to the first quarter of 2020.\nThe minor reduction was primarily due to $800,000 in lower average per unit cost for purchased water, groundwater extraction and energy charges and lower usage, partially offset by a $700,000 increase due to the purchase of additional water supplies to supplement the lower level of surface water production we experienced during the quarter.\nOther operating expenses increased $1.6 million or 2% for the quarter, primarily due to $2.1 million in higher depreciation related to utility plant additions, and $200,000 in higher maintenance expenses, partially offset by $400,000 in lower general and administrative expenses.\nIn addition, in the first quarter of 2020 we incurred $400,000 in merger-related expenses.\nNo similar expenses were incurred in 2021.\nThe effective consolidated income tax rates were approximately negative 52% and 15% for the quarters ended March 31, 2021 and 2020, respectively.\nThe lower effective tax rate for the quarter ended March 31, 2021, was primarily due to excess tax benefits relating to share-based payment awards, state tax credits and other discrete tax items.\nTurning to our capital expenditure program.\nWe added $46.7 million in company-funded utility plant during the first quarter of 2021.\nThis represents 20% of our total 2021 planned capital expenditures.\nFrom a financing perspective, first quarter 2021 cash flows from operations increased 321% over the first quarter of 2020.\nThis change was primarily the result of a decrease in accounts payable and accrued expenses of $8.3 million, an increase in accounts receivable collections of $2.2 million and a $1.5 million increase in net income adjusted for noncash items.\nIn addition, in 2020, we made an upfront payment of $5 million to the city of Cupertino in connection with our service concession agreement and refunded $8.4 million to California rate payers that were accumulated in our 2017 Tax Act Memorandum Account.\nNo similar payments were made in 2021.\nIn March 2021, SJW Group issued approximately $1.2 million -- I'm sorry, 1.2 million of new shares in an offering that raised net proceeds of approximately $66.9 million.\nProceeds from the offering were used to repay outstanding balances on the company's credit facilities and for general corporate purposes.\nIn addition, in April 2021, the company's California subsidiary entered into a $140 million credit agreement, and the company's Texas subsidiary entered into a $5 million credit agreement, both with JPMorgan Chase Bank.\nThe new credit agreement replaced the existing JPMorgan Chase credit agreements, which have been paid off and were set to mature and expire on June 1, 2021.\nAt the end of the first quarter, we had $138 million available on our bank lines of credit for short-term financing of utility plant additions and operating activities.\nThe average borrowing rate on line of credit advances during the quarter was 1.42%.\nSJW Group continues to execute on our core growth strategy of investing in high-quality water systems to provide safe and reliable water service to customers and communities and earning a fair return on those investments.\nAs Jim just mentioned, we have already invested approximately 20% of our planned 2021 capital spending through the end of the first quarter.\nWe have high-quality water systems throughout our service areas and are investing to sustain them for the benefit of customers, communities and shareholders.\nOther regulatory developments in the first quarter include the filing of general rate cases for both San Jose Water and Connecticut Water in January.\nSan Jose Water's GRC application proposes a $435 million capital program for the years 2021 through 2023, supported by our award-winning enterprise asset management system.\nNew rates are expected to be effective in the first quarter of 2022.\nCalifornia employs a future test year, and thus, the level of capital spend is authorized during each general rate case cycle.\nConnecticut, Texas and Maine, employ a historical test year, where capital investments not otherwise recoverable through surcharge mechanisms and expenses are recovered in subsequent general rate case filings after they have been incurred.\nConnecticut Water's general rate case is the first since their last decision in 2010.\nA primary driver of the case is the $266 million in infrastructure investments that have been completed and are providing a benefit to customers, but are not yet covered in rates.\nThe Connecticut Public Utilities Regulatory Authority, or PURA, is expected to issue a decision in the third quarter.\nConnecticut Water rate case also includes tiered rates for residential customers that promote water conservation.\nIn Connecticut, PURA-regulated water utilities are able to collect their authorized revenues regardless of usage through the water revenue adjustment mechanism, which mitigates risk of such a rate design and support state policy goals for conservation.\nA 1.1% increase in the Water Infrastructure and Conservation Adjustment surcharge, or WICA, was authorized by PURA earlier this year and went into effect on April 1.\nThis covers $8.7 million in qualified infrastructure investments that have been completed and will provide incremental annual revenue of about $1 million.\nThe current cumulative WICA surcharge will be rolled into base rates, and the surcharge will be reset to 0 as part of the general rate case.\nMaine Water filed a general rate case application for its Biddeford Saco rate division, requesting a $6.7 million increase in annual revenues with the Maine Public Utilities Commission, or PUC, in March.\nThe application is driven by a $60 million replacement of the 1,884 vintage drinking water treatment plant.\nMaine Water's application includes an innovative proposal that would spread the increase over three years in roughly equal amounts.\nA decision on the rate smoothing mechanism to authorize a customer surcharge, starting in the third quarter of 2021 is expected in the second quarter and a decision on the requested revenue increase is expected in the second quarter of 2022, in alignment with the completion of the new water treatment facility.\nThese various state regulatory filings include capital investments that over the long term benefit customers, communities and shareholders as they enhance our ability to deliver safe, high-quality and reliable water service while increasing rate base, the earnings engine for the company.\nWe are mindful of the economic impact that COVID has had on some of our customers over the past year.\nConnecticut Water is proposing a 15% discount on water bills for income-eligible customers that is similar to a program offered by San Jose Water since late 2005.\nMeanwhile, San Jose Water anticipates proposing a debt forgiveness plan for its Water Rate Assistance Plan, or WRAP, or low-income -- for low-income customers.\nThe proposal includes tracking the forgiven amount in San Jose Water's WRAP balancing account for potential future recovery.\nOn April 9, SJWTX, our Texas Water and Wastewater Utility, executed the closing agreement to acquire the Clear Water Estates Water System.\nThis is the first acquisition completed by a regulated water utility under the state's new fair value -- fair market value regulation.\nThe acquisition added 230 new customers, gained additional water supplies to serve current and future customers and added rate base that reflects market value for future rate making purposes.\nMore importantly, the acquisition demonstrated that the fair market value process worked as envisioned.\nThis was the 13th acquisition completed by SJWTX, which has tripled its customer base since 2006.\nThe company serves two of the top four fastest-growing counties in the United States.\nWith a diverse portfolio of letter supplies and continued additions to customer base through organic growth and acquisitions.\nWe remain optimistic about the prospects for SJWTX and its increased contributions to consolidated earnings.\nWe are committed to investing in our culture, diversity and the environment.\nOur diversity, equity and inclusion council has honestly and authentically guided our commitment to further build on our diverse and inclusive culture.\nWe have goals to expand our supplier diversity programs so we can extend our efforts into the broader community.\nAt the Board level, SJW Group is just one of 154 companies in the Russell 3000 to achieve a gender balanced board rating in 2020.\nAccording to the 50/50 Women on Boards Gender Diversity Index.\nWe've set the foundation for creating a comprehensive greenhouse gas inventory across all of our operations, understanding where we are now will allow us to set meaningful reduction goals for the future and develop prudent plans that will serve as a road map to achieve those goals.\nBob has served as a Director of the company since 2006 and as Lead Independent Director since 2015.\nBob's knowledge of the water industry is second to none and his contributions to our company and stockholders are too long to list.\nMoreover, you won't find a person in business with more integrity, character and a genuine commitment to serve our company, customers, employees and communities than Bob.\nOn behalf of the Board and all of our employees, we wish him the very best.\n Assistant:", "chosen": "sees fy earnings per share $1.85 to $2.05.\nq1 earnings per share $0.09.\nq1 revenue $114.8 million.\n"}
{"prompt": "Human: I will be presenting today with Eric Thornburg, chairman of the board, president and chief executive officer; and Andrew Walters, chief financial officer and treasurer.\nFor those who would like to follow along, slides accompanying our remarks are available on our website at www.\nThese statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions and expected future developments, as well as other factors that the company believes are appropriate under the circumstances.\nI'm Eric Thornburg, and it is my honor to serve as chair, president and CEO of SJW Group.\nI'm pleased to report that 2021 was a strong year for SJW Group.\nOur talented and passionate employees and leaders rose to the challenges, and positioned us well for 2022 and coming years.\nWe were solid in the key areas of our long-term growth strategy, delivering a reliable supply of high-quality water and world-class service to customers, investing in drinking water and wastewater systems to serve customers and communities and seeking a return of and on that investment, focusing on drinking water and wastewater continuing to acquire water and wastewater utilities, maintaining constructive relationships with our stakeholders and adding shareholder value through prudent growth.\nIn 2021, we delivered earnings of $2.03 per share, invested more than $230 million in our water and wastewater systems, successfully processed our general rate case in Connecticut, obtained approval for a Step 1 of a multiyear rate plan for the new water treatment facility in Maine, and grew our customer base in our Texas operation by 20% through acquisitions and organic growth.\nIn January of 2022, we reached a constructive settlement agreement with the Public Advocates Office and our California general rate case.\nOur success has its roots in our culture of teamwork and service, and the commitment to excellence in environmental, social and governance strategies.\nOur teams collaborate across our national footprint and are passionate about serving customers efficiently and sustainably.\nWe view all aspects of our operations, planning and construction through an ESG lens.\nIn 2021, we had an emphasis on supporting the drive of our people who understand our social and environmental responsibilities and wanna be a positive force for good in the communities where we live, work and serve.\nWe intend to emphasize this even more in 2022.\nOur accomplishments have been recognized with prime status by ISS ESG.\nAmong our U.S. water utility peers, SJW Group is tied for the lead in overall social score from ISS, and tied for second in the overall environmental score.\nThe company has the best overall governance score possibly.\nSJW Group's 2021 corporate sustainability report, which is now available on our website, demonstrates how ESG is reflected throughout our organization, our diversity equity inclusion efforts are a good example.\nSJW Group has signed on to the CEO action for diversity and inclusion.\nWe embrace each person's unique background traits and personality so that they will bring their true selves to our teams.\nWe have a commitment to supplier diversity.\nOur efforts in California were recognized by the Public Utilities Commission.\nVeterans Magazine honored SJW as one of the nation's top supplier diversity programs in 2020.\nWith California as the model, programs have been implemented, and supplier diversity goals established for our operations in other states.\nSJW Group also adopted a vendor code of conduct that applies our values across the supply chain.\nLikewise, we've been committed to being responsible stewards of the environment by sustainably managing and protecting water resources, which is critical to maintaining adequate supplies of high-quality water.\nWe know that focusing on water resources is no longer enough.\nThat is why we've committed to reducing greenhouse gas emissions, 50% by 2030 when compared with a 2019 baseline, a science-based target that aligns with the Paris Agreement to limit the warming of the planet.\nIt's the right thing to do, and we will report on our progress.\nWe are seeing extreme weather across our operations.\nA year ago, our Texas operation experienced ice, and prolonged temperatures below freezing causing widespread power and water outages.\nIn Connecticut this summer, we saw tropical storms and record rainfall.\nIn California, we experienced extreme dry conditions into last fall and the early part of 2022.\nPrecipitation in California has since we saw between above average and below average.\nWe plan to issue 2022 guidance after the rainy season has concluded on our first quarter financial results call.\nThere was enough precipitation in late 2021 to bring our Montevina drinking water treatment facility back online in mid-December 2021.\nwe're hopeful that California's reservoirs continue to replenish through the rainy season.\nOur customers are still under a mandatory conservation order that requires a 15% reduction in water usage compared with 2019.\nWe will continue to promote water conservation aggressively in our California operations as long as necessary.\nWater Conservation Memorandum and water conservation expense memorandum accounts have been established that allow for the potential future recovery of the revenue and expense impacts of such water use reductions.\nWe offer and actively promote financial assistance programs to customers in need.\nOur utilities work with customers experiencing onetime or ongoing financial hardships through bill forgiveness, flexible payment arrangements and in California and Connecticut through our Water Rate Assistance Programs that provides a 15% reduction on water bills for income eligible customers.\nSJW Group is also committed to ensuring that our customers are aware of state and federal assistance programs such as the federally funded Low Income Household Water Assistance Program.\nIn California, we applied for funds on behalf of our customers in need and received a check for almost $10 million from the California Water and Wastewater Arrearage Payment Program that will provide immediate relief for our customers who have been in arrears.\nWe believe that customer assistance programs and innovative rate-making are at the core of water equity.\nArtificially keeping rates low by deferring investment is shortsighted, and it's unsustainable and does not really serve customers who all deserve quality water and service for the long term.\nOur subsidiaries will continue to make investments in infrastructure so that customers at all income levels will have access to the high-quality and reliable water service they deserve.\nThrough prudent planning and rate-making, such as the low income rates, the cost and rate impacts of these investments will be incurred gradually so they could be managed more easily by the utility and customers.\nBuilding and retaining our workforce of water professionals is also critical.\nWe invest in the training and development of our people so they can have rewarding careers at SJW Group utilities.\nThey are the foundation.\nOur success is built on.\nWe strive to provide a safe and productive work environment, support the training and development of our teams and measure employee satisfaction and engagement through independent surveys.\nEarlier this month, Connecticut Water was recognized as a top workplace in the United States, one of just 1,100 companies across the country to achieve that distinction.\nAnd after Jim's remarks, we will address regulatory and other business matters.\nOur 2021 operating results benefited from authorized rate increases in each of our four operating utilities.\nThese increases were offset by a decrease in customer usage, most notably in our California utility as a result of the drought emergency declarations by the state governor in Valley Water, our local wholesale water agency, as well as a decrease in the availability of surface water supplies in our California surface area.\nIn addition, we experienced higher general and administrative expenses, due primarily to rate case activity in three of our four water utilities, and increases in other operating costs.\nAlso, in the fourth quarter of 2021, we benefited from property sales in California and recorded a long-lived asset impairment in Texas that together provided a net benefit to our reported results.\nDiversification, coupled with our strong local operations, and supported by our national framework, enable us to provide high-quality water and reliable water service to our customers and communities, protect our employees and deliver solid results for our shareholders.\nFourth quarter revenue was $139.7 million, a $4 million increase over reported fourth quarter 2020 revenue.\nNet income for the quarter was $18 million or $0.60 per diluted share.\nThis compares with net income of $13.3 million or $0.46 per diluted share for the fourth quarter of 2020.\nDiluted earnings per share for the quarter was primarily driven by cumulative rate increases of $0.34 per share, decreased production cost due to lower customer usage of $0.30 per share, the sale of nonutility property of $0.29 per share, and recognition of the impact of our California Water Conservation Memorandum Account, or our WCMA, of $0.12 per share.\nThese increases were offset by a decrease in customer usage of $0.40 per share, an increase in per unit production cost of $0.20 per share and the impairment of a long-lived asset of $0.09 per share.\nIn addition, in the fourth quarter of 2020, we recorded a tax benefit of $0.14 per share related to flow-through items and the impact of such items on lower fourth quarter pre-tax earnings.\nNo similar rate impact occurred in 2021 due to higher fourth quarter pre-tax income.\nTurning to our comparative analysis for the quarter.\nThe $4 million increase in revenue was primarily due to $10 million in cumulative rate increases and $3.4 million in the recognition of balancing and memorandum accounts in California, which includes $3.2 million attributable to the WCMA.\nThese increases were partially offset by a $10.5 million decrease in customer usage.\nThe cumulative rate increases include the impact of final decisions on our general rate case and reconsideration proceeding in Connecticut, which we received at the end of July and November of 2021, respectively.\nWhile these decisions occurred later in the year than we anticipated, when coupled with our WICA, or our WICA filing, that was approved by PURA in December of 2021.\nOur Connecticut utility will benefit from an increase in our annual revenue requirement by approximately $9.9 million beginning January of 2022.\nWater production expense decreased $1.8 million compared to the fourth quarter of 2020.\nThe decrease included $7.8 million due to lower customer usage partially offset by $5.3 million in higher average per unit water production cost.\nOther operating expenses decreased $1.5 million during the quarter, primarily due to a gain on the sale of nonutility property of $7.5 million, partially offset by increased general and administrative expenses of $1.6 million and the recognition of an impairment on a long-lived asset of $2.2 million.\nThe increase in general and administrative expenses was primarily due to the cost of rate case proceedings in the three of our four operating utilities, as well as higher compensation, consulting and insurance costs.\nThe effective income tax rate for the fourth quarter was 15%, compared to net negative 7% for the fourth quarter of 2020.\nThe higher effective tax rate in 2021 was primarily due to the impact of flow-through items on the change in profit before income taxes as compared to 2020.\nOn November 17, 2021, SJW Group entered into an equity distribution agreement whereby the company may offer the sale of shares of its common stock from time-to-time in at-the-market offerings.\nSJW Group sold and issued approximately 355,000 shares of common stock with a weighted average price of $70.4 per share, and received approximately $24 million in net proceeds under the agreement in 2021.\nProceeds from the sale of the shares were used to finance the acquisitions of Kendall West and Bandera East Water utilities in Texas, which closed on December 17, 2021.\nOn December 1, 2021, San Jose Water Company issued $50 million in its Series O senior notes.\nThe notes are unsecured, accrue interest at 3% and mature 30 years from the issue date.\nIn addition, on December 1, Connecticut Water Company issued $50 million of its Series 2021 Senior B notes.\nThese notes are also unsecured, accrue interest at 3.10%, and mature 30 years from the issue date.\nTurning to our annual results.\n2021 revenue was $573.7 million, a $9.2 million increase over the prior year.\nNet income in 2021 was $60.5 million or $2.03 per diluted share, compared to $61.5 million or $2.14 per diluted share in 2020.\nThe change in diluted earnings per share for the year was due to many of the same factors noted for the quarter.\nCumulative rate increases contributed $0.86 per share, decreased production costs due to lower customer usage added $0.51 per share, and the sale of nonutility property contributed $0.28 per share.\nIn addition, various regulatory mechanisms and balancing and memorandum accounts added $0.21 per share, and the recognition of the California WCMA contributed $0.12 per share.\nThese increases were offset by a decrease in customer usage of $0.93 per share, a production cost price increase of $0.44 per share, and an increase in administrative and general expenses of $0.25 per share.\nIn addition, depreciation expense increased $0.20 per share.\nCalifornia surface water production resulted in a decrease of $0.15 per share and the long-lived asset impairment in Texas decreased earnings by $0.08 per share.\nThe 2021 increase in revenue was primarily due to $25.2 million in cumulative rate increases, $2.5 million in the net recognition of certain regulatory mechanisms in Connecticut and Maine, and $3.9 million in the recognition of balancing and memorandum accounts in California, including $3.2 million attributable to the WCMA, and $2.9 million in revenue from new customers.\nThese increases were partially offset by $24.7 million in decreased customer usage.\nWater production expenses increased $3.3 million in 2021.\nThe increase was primarily due to $11 million -- $11.6 million in higher average per unit water production cost, $3.9 million due to a decrease in surface water supply production, and a $1.3 million increase in California cost recovery balancing and memorandum accounts.\nThese increases were partially offset by $13.5 million in lower customer water usage.\nOther operating expenses increased $12.4 million in 2021, primarily due to $7.6 million in higher general and administrative expenses, $5.1 million in increased depreciation and amortization expenses, and $3.9 million in higher maintenance costs.\nAs noted earlier, in the fourth quarter of 2021, we recognized an impairment on a long-lived asset of $2.2 million and a gain on the sale of nonutility property of $7.5 million.\nThe change in other income and expense for the year was primarily the result of the $3 million TWA holdback amount, which I discussed during our second quarter earnings call.\nTurning to our capital expenditure program.\nWe added approximately $64.1 million in company-funded utility plant in the fourth quarter of 2021, bringing total company-funded additions to $233.9 million for the year.\nOur 2021 cash flow from operations increased approximately $26 million over the same period in 2020.\nThe increase was primarily due to an increase in collections of previously billed and accrued receivables of $13 million, an increase in general working capital and net income adjusted for noncash items of $6.8 million and a $5.2 million decrease in the payment of amounts previously invoiced and accrued due to lower fourth quarter activity.\nIn addition, in 2020, we made a $5 million upfront service payment related to a concession agreement amendment that did not recur in 2021.\nThese increases were partially offset by an increase in the crude water production costs of $4 million.\nAt the end of 2021, we had $197 million available on our bank lines of credit for short-term financing of utility plant additions and operating activities.\nThe average borrowing rate on our 2021 line of credit advances was approximately 1.32%.\nSJW Group continues to deliver on our core growth strategy of investing in high-quality water systems to provide high-quality water and reliable service to customers and communities and earn a fair return on those investments.\nIn 2022, SJW Group's subsidiaries plan to invest $223 million in infrastructure improvements to serve our customers in California, Connecticut, Maine and Texas, more than $1.3 billion in infrastructure investments as planned across the organization over the next five years.\nConnecticut Water's 2021 GRC concluded in the fourth quarter in San Jose Water and the California Public Advocates Office have reached a settlement agreement that was filed with the California Public Utilities Commission last month.\nAndrew Walters will discuss the results of the Connecticut case, the highlights of the settlement agreement in California and rate cases in Maine and our Texas growth story and provide an update on our California water supply.\nOur board has authorized a $223 million capital spending plan for 2022.\nNearly half of it is allocated to pipeline replacement projects.\nThe plan includes budgeted investments of $115.1 million in California, $61.4 million in Connecticut, $21.8 million in Maine and $24.5 million in Texas.\nSan Jose Water Company's 2021 GRC application for new rates in 2022 through 2024 is pending before the CPUC.\nThe application seeks an increase of nearly $88 million in the revenue requirement over the three-year period, authorization of a $435 million capital budget over the three years, and recovery of $18.5 million from balancing and memorandum accounts.\nSJWC filed for interim rates to be effective on January 1, 2022.\nThe settlement recognizes the need for continued investments in the water system to deliver high-quality and reliable service for customers and communities served.\nAdditionally, it further aligns authorized and capital -- authorized and actual consumption, particularly for business customers, addresses our water supply mix challenge and provides greater revenue recovery in the fixed charge.\nA final decision is anticipated in the second quarter of 2022.\nThe 2022 through 2024 cost of capital proceeding for all Class A utilities is pending before the CPUC.\nThe application requests an increase in revenue to support a return on equity of 10.3%, an adjustment on the proposed capital structure of 54.55% equity and 45.45% debt, partially offset by a decrease in the cost of debt to 5.48%.\nThe decision is expected in the third quarter of 2022.\nSan Jose Water's advanced metering infrastructure application is pending before the CPUC, An all-party settlement agreement was submitted to the CPUC for adoption that would authorize infrastructure investment of $100 million over four years, outside of the capital budget requested in the GRC to deployment of AMI.\nA final decision is anticipated in the second quarter of 2022.\nIn Connecticut, the Connecticut Public Utility Regulatory Authority issued a final decision in November of Connecticut Water Company's request for reconsideration, which was the last outstanding piece of the company's 2021 GRC.\nThe final decision allows CWC to increase annual revenues by an additional $2.1 million above the $5.2 million originally authorized in the July 28, 2021 GRC decision for a total of $7.3 million authorized through the GRC.\nPURA also authorized a WICA of 2.44% effective on January 1, 2022.\nThe increase was for more than 2020 -- was more than $22 million in completed WICA projects, many of which were not considered by PURA in the GRC because of the deadline and the GRC proceeding for pro forma capital additions.\nThe new WICA is expected to generate $2.6 million in additional revenue.\nBetween July 2021 and January 22, the authorized revenue for CWC increased to $9.9 million through the GRC, request for reconsideration and the WICA filings.\nMaine Water Company's previously received approval from the Maine Public Utilities Commission for an innovative REITs moving mechanism that provides a more gradual ramp to new rates, driven by the $60 million project to replace a 138-year-old treatment plant in the Biddeford/Saco division.\nA supplemental rate application for $6.9 million is pending with the MPUC, which would be the second step in a multiyear rate plan for the project.\nMWC has entered settlement discussions with the Office of Public Advocates on this application, and a decision is expected in the second quarter of 2022.\nA third step filing associated with the new treatment facility is expected in the second half of 2022 following the completion of a new Saco River drinking water treatment facility.\nMaine Water received MPUC approval for a 3% increase in WISC, effective January 1, 2022, for a $1.9 million infrastructure project in the Skowhegan division.\nThe company also expects that by March 1, 2022, it will have filed rate case applications in four of its divisions as required as a condition of settlement agreements for the 2019 Tax Cuts and Jobs Act order.\nWe continue to see a pipeline of growth opportunities at SJWTX, our Texas Water and Wastewater Utility.\nIn the fourth quarter, SJWTX closed on the acquisition of Kendall West and Bandera East Water and Wastewater Utilities.\nThe company also closed on the acquisition of Texas Country Water in January of 2022.\nCombined, these completed acquisitions added nearly 1,800 service connections and expanded SJWTX's service area.\nOverall, the company serves more than 24,000 service connections between Austin and San Antonio, and three of the five fastest-growing counties in the United States, which include Comal, Hays and Kendall Counties.\nSJWTX has more than tripled its customer base over the past 15 years, providing service to about 70,000 people today.\nWith a diverse portfolio of water supplies, a growing wastewater business and continued additions to the customer base through organic growth and acquisitions, we remain optimistic about the prospects for SJWTX and its increased contributions to consolidated earnings.\nSurface water supply in California improved in the fourth quarter.\nAs shown on the chart, we have experienced a significant increase in levels at our Elsman reservoir in the Santa Cruz Mountains due to higher-than-average rainfall in October and December, which allowed San Jose Water to put Montevina Water Treatment Plant back online in mid-December, as Eric mentioned earlier.\nThe current level at Elsman will support approximately 1.3 billion to 1.4 billion gallons in production during the balance of 2022.\nFor production year to date, water produced from San Jose Water Company's surface water supplies was approximately 350 million gallons, which was generally from runoff until recently supplemented by releases from Elsman.\nWhile there has not been significant rainfall since December, the traditional rainy season continues through the end of March, which could positively impact the runoff and storage in 2022.\nThe prudent management of our business and financial resources continues to be fundamental with growth and our ability to return capital to shareholders, demonstrating the company's strong commitment to our shareholders.\nIn January of 2022, the board authorized a 5.9% increase in SJW Group's 2022 dividend to $1.44 per share as compared with the total dividends paid in 2021.\nWe are proud to have continuously paid a dividend for over 78 years, and have increased the annual dividend in each of the last 54 years, delivering value to our shareholders.\nWe look forward to working with the new commissioners and their staff to address the water-related issues facing California's regulated water utilities.\nShe has an impressive background of service and extensive experience with water and utilities.\nBecky is the principal of an energy and water consulting company in Austin and past chair of the Public Utilities Commission of Texas.\n Assistant:", "chosen": "q4 revenue $139.7 million versus $135.7 million.\nqtrly diluted earnings per share $0.60.\n"}
{"prompt": "Human: We have on the call today, Nick Pinchuk, Snap-on's chief executive officer; and Aldo Pagliari, Snap-on's chief financial officer.\nAldo will then provide a more detailed review of our financial results.\nAs usual, we have provided slides to supplement our discussion.\nThese slides will be archived on our website along with a transcript of today's call.\nBoth can be found on our website.\nAs usual, I'll start the call by covering the highlights of our first quarter.\nAnd along the way, I'll give you my perspective.\nOn our results, they are encouraging.\nIn our markets, they're standing firm and on our progress, it's made us stronger than ever before.\nAnd we'll also speak about what it all means.\nWe believe it means we're getting better and better positioned for more, even while we're still in the midst of a once in a 100-year pandemic.\nAnd after all that, Aldo will move into a more detailed review of the financials.\nWe believe our first quarter is clear confirmation of Snap-on's ability to continue its trajectory of positive results, further accommodating to the virus environment, overcoming period-to-period variations from business to business, dealing with macroeconomic headwinds and advancing along our runways for both growth and improvement.\nOur reported sales in the quarter of $1.0246 billion were up 20.2%, including $19.2 million of favorable foreign exchange and $11.3 million of acquisition-related sales.\nOrganic sales growth was 16.3%, gains in every group.\nIt's our third straight quarter of being above our pre-pandemic levels.\nAnd ongoing contributions from our Snap-on Value Creation processes, the principles we use every day, safety, quality, customer connection, innovation, and rapid continuous improvement, or RCI, they all combine to drive that progress.\nProgress there was -- opco operating income of $200.9 million was up $62 million from last year, which included $7.5 million of restructuring charges.\nOpco operating margin was 19.6%, up from the 2020 level of 16.3% or 17.2% as adjusted for restructuring.\nFor financial services, operating income of $65.3 million increased 14.8% and the delinquencies were down, even in the midst of a pandemic stress test, during commercial trial of what we could call extraordinary proportion.\nAnd that result combined with opco for a consolidated operating margin of 23.9%, a 300-basis-point improvement as reported and up 220 basis points as adjusted.\nFirst-quarter earnings per share was $3.50, up 40.6% from last year's $2.40.\nAnd excluding the 2020 restructuring charges, earnings per share grew 34.6%.\nI said it before, and I'll say it again.\nWe believe Snap-on is stronger now than when we entered the Great Withering.\nAnd we also believe that our first-quarter results testify to just that, especially when we compare them to 2019 before the virus.\nSo let's do that.\nVersus 2019, our sales in the past quarter grew $102.9 million or 11.2%.\nThat reflects $15.3 million of acquisition-related sales; $11.6 million of favorable foreign; currency and a $76 million or 8.1% economic gain.\nThe 2021 opco operating margin of 19.6% was up 50 basis points from the 2019 level as adjusted for a legal settlement in that earlier period, and that 50-point gain was achieved against 80 points of unfavorable currency and acquisition impacts, all while still absorbing the COVID.\nNow to our markets.\nAuto repair remains quite resilient.\nThe technicians are rolling.\nThey know they weather the depth of the COVID shock and have learned to accommodate the virus environment and are moving to psychological recovery.\nThere's still some air of vigilance, but their activities are robust.\nAnd they know they won't be shocked again by a spike.\nThey're quite positive regarding the future of driving as people pivot from shared mobility to individual transportation, and it's vehicle repair with the technicians as a strong and resilient market.\nYou can hear it.\nYou can hear it in our franchisees' voices and you can see it written clearly across our double-digit numbers.\nAlso in auto repair, there are shop owners and managers.\nThere are signs that the auto business is rising.\nDemand for new and new cars is high, but dealership repair and maintenance and warranty is still attenuated.\nSo there is a gradual gain and we're positioned to take advantage with the broader and stronger product line, with innovations like our TRITON-D10 diagnostics and new acquisitions like Dealer-FX putting us deeper into dealerships than ever before and providing us a clearer view of the future repair trends, new technologies, and evolving vehicle platforms.\nDealer-FX puts us at the right place at the right time as things change.\nFinally, let's talk about critical industries, where Snap-on rolls out of the garage, solving tasks of consequence.\nThis is where C&I operates, the most international of our operations.\nAnd these are the customers that have been most impacted by the virus.\nThey're slower to accommodate and to recover, but they have been recovering.\nAnd in the quarter, the results showed that trend, despite some significant headwinds, including the continuing impact of the virus, the February freeze in Texas, some challenged business sectors like oil and gas, and troubled geographies like Southeast Asia.\nDespite that variation, we did see growth in critical industries, improvement in a number of areas, in aviation, and education, and a heavy-duty fleet, they all combined to overcome the continuing turbulence in natural resources.\nAlso in C&I, SNA Europe, SNA Europe, another quarter of double-digit growth with broad strength across its geographies in places like France, Spain, Italy, Germany, Germany and the Nordic region.\nAnd from our Asia Pacific division, up double digits as well with solid increases in key countries like China and India and Japan.\nSo overall, I'd describe our C&I markets as improving and representing clear opportunity.\nAnd coupled with our auto repair related businesses, we believe there's clear overall progress along our runways for growth, enhancing the van network, expanding to repair shop owners and managers, extended critical industries and building in emerging markets, leveraging our broadening product line, we're holding our strengthening brand and deploying the increasing understanding of the work.\nUnderstanding of the work that is the hallmark of Snap-on people, even in the throes of the pandemic shock.\nAbout a year ago, as we entered the virus, we recognize the resilience of our markets and the strength of our model, projecting a V recovery, and that's how it played out.\nYou can see it in the results.\nSo now let's turn to the segments and discuss those results.\nIn the C&I group, on a reported basis, including $9.2 million of favorable foreign currency translation and $7.3 million of acquisition-related sales, first-quarter volume rose 15.3% compared to last year.\nOrganic sales were up 9.5%, double-digit growth in our European hand tool business had a mid-single-digit rise and critical industries led the way.\nFrom an earnings perspective, C&I operating income of $50.7 million, including $1.4 million of unfavorable currency, represents a rise of $19.2 million, compared to the $31.5 million registered in 2020, which included $4.4 million of restructuring.\nThat all means, on an adjusted basis, an adjusted increase of over 40%, an as adjusted increase of over 40%, and the operating margin was 14.7% and as reported increase of 420 basis points and 290 as adjusted.\nNow when compared with 2019, the pandemic-free measuring stick sales were up 7.2%, and that included $10 million or a 3.1% organic gain; $8 million of acquisitions, and $5.2 million for favorable foreign currency.\nOnce again, C&I demonstrated sequential improvement.\nIf you go back and look at the numbers, they keep getting closer and closer, now they're above pre-pandemic levels despite the ongoing uncertainty.\nIt's one of the things I think we want to remember, the virus isn't gone.\nWe're still bearing it and we didn't have it in 2019 and C&I is above that level.\nAs part of the trend, we remain committed to extending in critical industries.\nThat's the C&I sweet spot.\nSo we'll keep strengthening our position to capture those opportunities as they arise.\nAnd enabling that intent is our expanding lineup of innovative new products, developed especially to make critical work easier.\nOne example is our CT9010, 3/8-inch drive, 18-volt brushless impact wrench, the newest member of our MonsterLithium family, aimed at tight space sustained power, rugged durability, and precise control.\nThe 9010 features 320-pound feet of bulk breakaway torque and 240-pound feet of working torque, all the power of technician needs when they're working in confirmed quarters.\nIt offers a variable speed trigger in three-speed selections in Ford and reverse.\nThat means greater control, adaptable to any applications, and no overtorque-ing important.\nThe 9010 advanced design also reduces motor temperature rise, delivering higher durability and great power to rate ratio.\nIt's been fitted with 100-lumen headlight that helps technicians work in dark environment, just what's needed for those close jobs.\nAnd the 18-volt battery with the five-amp hours ensures consistent output and extended the run time, which translates to less charging and more efficient workday.\nAnd all of this comes -- and this is the best part, I think -- all of this comes in an extremely compact size.\nOnly six and three-quarter inches in overall length that will fit into the tightest of workspace.\nThe CT9010 is a great tool.\nIt's had strong demand, and it's already one of our $1 million hit products.\nI don't want to leave C&I without mentioning SNA Europe.\nDouble-digit sales growth again, progress by the Black ergo tool management system, expanding product customization to the needs of the task, driving progress across -- against the twin headwinds of a difficult proven environment.\nEurope is not so easy these days and the uncertainty of Brexit, no small feat.\nWell, that's C&I, continuing sequential improvement and positioned for more.\nNow on to the tools group.\nSales of $478.3 million, up $102.4 million, including $6.7 million of favorable currency and a $95.7 million or 25% organic gain, double-digit growth, both in the U.S. and the international operations.\nThe operating margin was 20.7%, yes, 20.7%, up 780 basis points.\nCompared with pre-virus 2019, tools group sales grew $68.1 million, 16.6%, including $5.2 million favorable currency translation and $62.9 million or a 15.1% organic gain.\nAnd this year's 20.7% operating margin was up 430 basis points compared with pre-pandemic 2019.\nThe tools group is responding to the challenges of the day, increasing its product advantage, fortifying its brands, and further enabling its franchisees and the results show it.\nWe do believe our runway for coherent growth, enhancing the franchise network represents a continuing opportunity.\nAnd there's evidence that we're realizing some of that potential across the van channel in our franchisee metrics, the financial and physical indicators that we monitor closely.\nAgain, this quarter, they remain clearly favorable.\nAnd based on those metrics, we believe the franchisees have never been stronger.\nAnd they say so.\nAnd our direct interactions at events like this past January's kickoff meeting held this year at a distance.\nIt was a great affair.\nWell attended, strong orders, visible commitment to our brand, watch parties all over the country.\nI zoomed into several of myself, and they were brimming with enthusiasm and optimism.\nOur franchisees entrepreneurs and professionals all are pumped, confident, and reaching higher.\nThe tools group quarter that's a strong advantage for us.\nThe tools group quarter was also marked with Snap-on value creation, customer connection, and innovation, offering new products.\nSometimes, just an improvement on an established line, but clearly making work easier, solving problems, delivering productivity gains.\nAll of these are born out of observing the changing work in shops on an everyday basis.\nWe're in those shops every day.\nWe watch the work.\nWe author the products.\nOne such add is our KERN681, seven-drawer, single bank EPIQ series roll cab, configured entirely with extrawide 62-inch drawers, greater flexibility and capacity and a standard footprint, making the most of limited shop space.\nOur franchisees are already calling an uninterrupted storage.\nIt's the first large-capacity roll cab with a full complement of extrawide drawers in the industry.\nIt's made on our Iowa plant.\nI saw some of them being made there just last month.\nThe local team is proud of them.\nIt comes with two swivels and two rigid casters located right on the corners of the box.\nIt doesn't seem like much of a change, but that's a clever innovation that provides mobility and tight spaces, while also greatly enhancing box stability.\nThat's a very important feature for a high-capacity unit, the KER681 EPIQ strength, styling, and styling, 8,000 pounds of low capacity, and more than 45,000 cubic inches of storage space.\nThe franchisees are saying it's been a clear hit and they're right.\nWe spent some time over several quarters, working to expand franchisee selling capacity, harnessing social media, improving product training and RCI and Van operations, so it's paid off.\nSelling capacity is up.\nAnd you can see it clearly in the three straight gangbusters quarters for our tools group.\nI don't need to say any more about them.\nNow let's speak about RS&I.\nFirst-quarter organic sales rose 7.6% with varying gains across the board.\nUndercar equipment coming back, delivering double-digit rise, diagnostics and information products, independent repair shops, growing at mid-single digits.\nAnd the business focused on OEM dealerships are advancing low single digits.\nOperating earnings of $81.4 million, including $1.5 million of unfavorable foreign currency effects, increased $4.1 million from 2020, which included $3.1 million of restructuring costs.\nCompared with 2019, sales grew $19.7 million or 6%, including a $10 million or 3.1% organic gain, $7.3 million from acquisitions, and $2.3 million of unfavorable foreign currency.\nWe clearly see the potential and our runways for growth in the RS&I group, expanding Snap-on's presence in the garage with coherent acquisitions and a growing line of powerful products.\nAdvanced driver assistance systems, or ADAS, are active and passive aids to keep vehicle passengers safe, things like collision avoidance, lane departure warnings, automatic parking, and crosswind stabilization.\nThese new features are great.\nBut what's really music to our ears is that they require periodic calibrations to make sure they're working with precisions, and calibrations can be complicated.\nSensors and cameras vary considerably across vehicle makes and models.\nAnd if you get a faulty recalibration, it leads to rework and it's not good for safety.\nSo our new John Bean 2.80 of calibration system is the fix, making sure the vehicle is physically aligned correctly, guiding calibration of the sensors, and documenting that the procedure was formed appropriately.\nAnd it does so for the multitude of mix and model seen regularly in OEM and aftermarket shops.\nThe new Tru-Point is easy to use.\nIt requires minimal training.\nIt compensates for the floor irregularities that are so common in garages and bedevils alignment and calibration.\nIt's quick and efficient and it's OEM compliant.\nIt's a powerful product right in the crosshairs of automated vehicle technology that's so prominent today.\nProgress in diagnostics and information with independent repair shop owners and managers was also clearly evident in our diagnostics business and our RS&I activity.\nAnd in this quarter, the launch of the new TRITON-D10 handheld helped author that positive.\nThe new TRITON is ultrafast, a two-second boot-up, and it has a best-in-class 10-inch touchscreen.\nIt's geared to the more capable technician, offering a one-touch full diagnostic cold scan scope capabilities for performance display and guided testing of suspect components that you may want to replace, but you want to make sure there's the problem.\nIt's loaded with our Fast Track intelligence diagnostics rooted in our proprietary database of over 200 billion vehicle events, a Snap-on only feature that enables quick and accurate diagnosis of even the most difficult and unusual repairs, ensuring an efficient and effective solution for those very, very time-consuming problems.\nJust what the capable and senior technician needs.\nNow as I've said, we've spent said before, we spent considerable effort working to help franchisees sell the complex tools of today efficiently.\nAnd it's paying off with TRITON.\nFollowing that initial instruction, the demo unit could then be put immediately in the hands of a technician to physically showcase the great benefits of our powerful new tool and it worked.\nThe launch has been a success.\nOur franchisees are comfortable selling new and complex tool, and many are now calling the TRITON-D10 the best diagnostic unit ever.\nFinally, RS&I got a nice boost in the quarter, as often as the case by new technologies and OEM dealerships, helped by some significant essential tools and equipment programs supporting the new electric vehicle launches.\nWe're quite positive about RS&I's future with repair shop owners and managers as the vehicle industry evolves.\nIt plays to our strength.\nSo that's the highlights of the quarter, continued in strong progress.\nOur third straight period exceeding pre-pandemic levels; C&I, sequential improvement, sequential advancement; RS&I is solid; the tools group, strong and pumped; organic sales rising 16.3%; opco operating margin, 19.6%; EPS, $3.50 a big rise and most important, most important, more testimony that Snap-on has emerged from the turbulence much stronger than when we entered.\nIt was an encouraging quarter.\nOur consolidated operating results are summarized on Slide 6.\nThe first quarter of 2021 exhibited robust financial performance, particularly as compared to last year when we experienced the initial shock of the virus.\nThe quarter's results also compared favorably with the first quarter of 2019, which being a prepandemic time period may serve to be the more meaningful baseline.\nNet sales of $1.0246 billion in the quarter increased 20.2% from 2020 levels, reflecting a 16.3% organic sales gain, $11.3 million of acquisition-related sales and $19.2 million of favorable foreign currency translation.\nAdditionally, net sales in the period increased 11.2% from $921.7 million in the first quarter of 2019, including an 8.1% organic gain, $15.3 million of acquisition-related sales and $11.6 million of favorable foreign currency translation.\nConsolidated gross margin of 50.1% and compared to 49.5% last year, which included 60 basis points from restructuring costs.\nThe gross margin contributions from the higher sales volumes will benefit from the company's RCI initiatives were offset by 40 basis points of unfavorable foreign currency effects.\nOperating expenses as a percentage of net sales of 30.5% improved 270 basis points from 33.2% last year, which included 30 basis points from restructuring costs.\nThe improvements primarily reflect the impact of higher sales and cost containment actions, partially offset by higher stock-based costs and 30 basis points of operating expenses related to acquisitions.\nOperating earnings before financial services of $200.9 million compared to $138.9 million in 2020, reflecting a 44.6% year-over-year improvement.\nAs a percentage of net sales, operating margin before financial services of 19.6% improved 330 basis points from 16.3% last year, which included 90 basis points for restructuring costs.\nFinancial services revenues of $88.6 million in the first quarter of 2021, compared to $85.9 million last year, while operating earnings of $65.3 million increased $8.4 million from 2020 levels, principally due to the higher revenue as well as lower provisions for credit losses.\nLast year's provisions included a $2.6 million charge for higher reserves, resulting from the economic uncertainty caused by COVID-19.\nConsolidated operating earnings of $266.2 million increased 36% from $195.8 million last year.\nAs a percentage of revenues, the operating earnings margin of 23.9% compared to 20.9% in 2020, which included 80 basis points from restructuring costs.\nExcluding the restructuring costs, operating earnings margin in 2021 increased 220 basis points from last year.\nOur first-quarter effective income tax rate of 23.5% compared to 24.2% last year, which included a 10 basis point increase related to the prior-year quarter's restructuring charges.\nFinally, net earnings of $192.6 million or $3.50 per diluted share increased $55.4 million or $1.01 per share from 2020 levels, representing a 40.6% increase in diluted earnings per share.\nAdditionally, net earnings increased $14.7 million or $0.34 per share from 2019 levels, representing a 10.8% increase in diluted earnings per share.\nNet earnings in 2020 included restructuring charges of $6 million after tax or $0.11 per diluted share, and net earnings in 2019 included a benefit of $8.7 million after tax or $0.15 per diluted share from a legal settlement.\nExcluding these items, diluted earnings per share of $3.50 in 2021 increased 34.6% from 2020 and 16.3% from 2019 levels.\nNow let's turn to our segment results.\nStarting with the C&I group on Slide 7, sales of $345.7 million increased 15.3% from $299.9 million last year, reflecting a 9.5% organic sales gain, $7.3 million of acquisition-related sales and $9.2 million of favorable foreign currency translation.\nThe organic gain includes double-digit increases in the segment's European-based and tools business and Asia Pacific operations as well as a mid-single-digit gain in sales to customers in critical industries.\nImprovements in year-over-year sales growth were widely seen across Europe as well as in most emerging markets.\nAdditionally, within Critical Industries, strong sales gains were achieved in aviation, heavy-duty and technical education, while year-over-year declines in the natural resources sector improved from those experienced in the fourth quarter of 2020, but continue to lag pre-pandemic sales levels.\nAs a further comparison, net sales in the period increased 7.2% from 2019 levels, representing a 3.1% organic sales gain, $8 million of acquisition-related sales and $5.2 million of favorable foreign currency translation.\nGross margin of 38.7% improved 190 basis points from 36.8% in the first quarter of 2020, which included 150 basis points from restructuring charges.\nAside from the improvements resulting from the lower restructuring costs, contributions from higher sales volumes were partially offset by 70 basis points of unfavorable foreign currency effects.\nOperating expenses as a percentage of sales of 24% improved 230 basis points as compared to last year, primarily as a result of the higher volumes and savings from cost containment actions.\nOperating earnings for the C&I segment of $50.7 million, including $1.4 million of unfavorable foreign currency effects, compared to $31.5 million last year, the operating margin of 14.7% compared to 10.5% a year ago.\nTurning now to Slide 8.\nSales of Snap-on tools group of $478.3 million increased 27.2% from $375.9 million in 2020, reflecting a 25% organic sales gain and $6.7 million of favorable foreign currency translation.\nThe organic sales increase reflects double-digit gains in both our U.S. and international operations.\nNet sales in the period increased 16.6% from $410.2 million in the first quarter of 2019, reflecting a 15.1% organic sales gain and $5.2 million of favorable foreign currency translation.\nGross margin of 45.9% in the quarter improved 320 basis points from last year, primarily due to the higher sales volumes and benefits from RCI initiatives.\nOperating expenses as a percentage of sales of 25.2% improved from 29.8% last year, primarily due to the higher sales volumes and savings from cost containment actions.\nOperating earnings for the Snap-on tools group of $98.9 million, compared to $48.6 million last year, the operating margin of 20.7%, compared to 12.9% a year ago, an increase of 780 basis points.\nTurning to the RS&I group shown on Slide 9.\nSales of $347.6 million compared to $314.6 million a year ago, reflecting a 7.6% organic sales gain, $4 million of acquisition-related sales and $4.8 million of favorable foreign currency translation.\nThe organic increase includes a double-digit gain in sales of undercar equipment, a mid-single-digit increase in sales of diagnostic and repair information products to independent repair shop owners and managers, and a low single-digit gain in activity with OEM dealerships.\nAs compared to 2019 levels, net sales increased 6%, reflecting a 3.1% organic sales gain, $7.3 million of acquisition-related sales and $2.3 million of favorable foreign currency translation.\nGross margin of 46% declined from 47.9% last year, primarily due to the impact of higher sales and lower gross margin businesses and 70 basis points of unfavorable foreign currency effects.\nAs a reminder, undercar equipment as well as facilitation program-related activity, both of which had healthy sales increases in the quarter, typically have a gross margin rate that is below the RS&I segment's average.\nOperating expenses as a percentage of sales of 22.6% improved 70 basis points from 23.3% last year, which included 80 basis points of restructuring cost.\nExcluding the effects of restructuring benefits from the higher sales volumes were more than offset by 80 basis points of operating expenses related to acquisitions.\nOperating earnings for the RS&I group of $81.4 million compared to $77.3 million last year.\nThe operating margin of 23.4%, compared to 24.6% a year ago.\nNow turning to Slide 10.\nRevenue from financial services of $88.6 million compared to $85.9 million last year.\nFinancial services operating earnings of $65.3 million compared to $56.9 million in 2020.\nFinancial services expenses of $23.3 million decreased to $5.7 million from 2020 levels, primarily due to lower provisions for credit losses resulting from $2.4 million of lower year-over-year net loan charge-offs and the absence of the previously mentioned first-quarter 2020 $2.6 million charge.\nAs a percentage of the average portfolio, financial services expenses were 1.1% and 1.4% in the first quarters of 2021 and 2020, respectively.\nIn the first quarter, the average yield on finance receivables of 17.6% in 2021, compared to 17.7% in 2020.\nThe respective average yield on contract receivables was 8.4% and 9%.\nThe lower yield on contract receivables in 2021 includes the impact of lower interest business operation support loans for our franchisees.\nThese loans were offered during the second quarter of 2020 to help accommodate franchisee operations and dealing with the COVID-19 environment.\nAs of the end of the first quarter, approximately $11 million of these business operating support loans remain outstanding.\nTotal loan originations of $261.8 million in the first quarter increased $6.2 million or 2.4% from 2020 levels, reflecting a 1.7% increase in originations of finance receivables while originations of contract receivables were up 5.7%.\nMoving to Slide 11, our quarter-end balance sheet includes approximately $2.2 billion of gross financing receivables, including $1.9 billion from our U.S. operation.\nOur worldwide gross financial services portfolio decreased $25.8 million in the first quarter, primarily due to an increase in net collections.\nThe 60-day plus delinquency rate of 1.6% for the United States extended credit is down 10 basis points from the first quarter last year and down 20 basis points as compared to the fourth quarter of 2020.\nWe believe this reflects the typical seasonal delinquency pattern that customarily results in a decline in the first quarter, followed by increases later in the year, usually peaking in the fourth quarter where we compete with the technicians holiday-related discretionary spending.\nAs it relates to extended credit or finance receivables, trailing 12-month net losses of $43.9 million represented 2.55% of outstandings at quarter end, down seven basis points sequentially and down 44 basis points as compared to the same period last year.\nNow turning to Slide 12, cash provided by operating activities of $319.3 million in the quarter increased $105.9 million from comparable 2020 levels, primarily reflecting the higher net earnings and net changes in operating assets and liabilities, including a $32.1 million decrease in inventory.\nNet cash used by investing activities of $207.2 million included $200 million for the acquisition of dealer FX and the capital expenditures of $19.3 million, partially offset by net collections of finance receivables of $12.1 million.\nFree cash flow during the quarter of $312.1 million was 158% in relation to net earnings.\nNet cash used by financing activities of $131 million included cash dividends of $66.7 million and the repurchase of 722,000 shares of common stock from $151.9 million under our existing share repurchase programs, partially offset by proceeds from stock purchase and option plan of $93 million.\nAs of quarter end, we had remaining availability to repurchase up to an additional $268.7 million of common stock under existing authorizations.\nTurning to Slide 13.\nTrade and other accounts receivable increased $10.1 million from 2020 year end.\nDays sales outstanding of 62 days, compared to 64 days at 2020 year end.\nInventories decreased $16.4 million from 2020 year end and on a trailing 12-month basis, inventory turns of 2.6 compared to 2.4 at year-end 2020.\nOur quarter-end cash position of $904.6 million compared to $923.4 million at year-end 2020.\nOur net debt-to-capital ratio of 12.4% compared to 12.1% at year-end 2020.\nIn addition to cash and expected cash flow from operations, we have more than $800 million in available credit facilities.\nAs of quarter end, there were no amounts outstanding under the credit facility, and there were no commercial paper borrowings outstanding.\nThat concludes my remarks on our first-quarter performance.\nI'll now briefly review a few outlook items for 2021.\nWe anticipate that capital expenditures will be in the range of $90 million to $100 million.\ntax legislation, our full-year 2021 effective income tax rate will be in the range of 23% to 24%.\nWell, that's our first quarter.\nAnother encouraging period, resilient markets through the shock and on the way to psychological recovery.\nThe third straight quarter of upward trajectory, clear year-over-year achievement and the third straight quarter of results exceeding the pre-pandemic levels of 2019.\nThe RS&I sales continuing upward with OI margins of 23.4%, attenuated but still strong.\nC&I, ongoing sequential growth across the world and OI margins 14.7%, up nicely even from 2019.\nAnd then the tools group.\nSales up organically, 25% versus 2020, up in all product lines and in all geographies, volume up 15.1% versus 2019 and an OI margin of 20.7%.\nFinally, financial services in the midst of the greatest stress test, profits up, delinquencies down, rock solid.\nAnd it all came together with Snap-on sales rising organically 16.3% versus 2020 and 8.1% versus '19.\nOI margin, 19.6%, up significantly despite the virus, the unfavorable currency and the acquisition impacts.\nAnd the EPS, $3.50, a substantial rise versus both 2020 and 2019.\nWe do believe that Snap-on is abundant opportunity as the COVID recedes, and the world shifts away from the cities and away from share transportation and as new vehicle technologies make the car park more complex.\nAnd we further believe that we are stronger today than when we entered the storm our advantages of product, brand and people are even greater, and we're in a favorable position to wield those strengths, realize the opportunities and continue our positive trajectory throughout 2021 and beyond.\nI want you to know that your work in this withering has made a difference to our company and to our society.\nFor your efforts in keeping our world and its critical mobility and tact, you have my admiration.\nFor your contribution to our progress in this first quarter, you have my congratulations.\n Assistant:", "chosen": "q1 earnings per share $3.50.\nprojected that capital expenditures in 2021 will be in a range of $90 million to $100 million.\n"}
{"prompt": "Human: Kessel Stelling, chairman and chief executive officer, will begin the call.\nHe will be followed by Jamie Gregory, chief financial officer; and Kevin Blair, president and chief operating officer.\nDuring the call, we will reference non-GAAP financial measures related to the company's performance.\nAnd now here's Kessel Stelling.\nJust last month, six months, after converting to drive-through appointment only, our retail branch network reopened to walk-in customers.\nAlthough things are far from back to normal, we're fundamentally a relationship bank, and I've enjoyed so much hearing from our front-line team members who take such pride and pleasure in serving our customers in person, even if it's across a plexiglass barrier or from a distance of six feet.\nOur team's response to this ongoing pandemic continues to demonstrate what's unique about this company, our culture of service, our focus on customers and communities, our adaptability in changing circumstances and our ability to execute.\nAll of those, along with continued economic recovery contributed to our strong performance in the third quarter of 2020.\nDiluted earnings per share was $0.56 per share compared to $0.57 last quarter and $0.83 a year ago.\nAdjusted diluted earnings per share was $0.89 per share compared to $0.23 last quarter and $0.97 a year ago.\nThe primary difference between reported and adjusted figures for the quarter was a $0.30 per share impact from a goodwill impairment of our mortgage reporting unit that Jamie will detail shortly.\nPeriod-end loan balances of $39.5 billion were down $364 million from the prior quarter, with commercial loan growth partially offsetting declines in the consumer portfolio.\n1% of loans had a full principal and interest deferral at the end of the quarter, down from 15% in May.\nTotal deposits of $44.7 billion were up $471 million from the prior quarter.\nBroad-based core transaction deposit growth of $1.6 billion allowed us to accelerate our deposit pricing and remixing strategy, which led to stable net interest income at $377 million.\nThe net interest margin declined three basis points to 3.10%, slightly better than we expected as headwinds from student loan sales and bond portfolio repositioning completed in the second quarter were partially offset by the favorable trends in deposit pricing and remixing.\nAdjusted non-interest revenue of $116 million was strong, up $20 million from the prior quarter.\nThe improvement was led by quarter-over-quarter increases in net mortgage revenues of $8 million and core banking fees of $5 million.\nAdjusted non-interest expense of $269 million was down $8 million from the prior quarter, led by an improvement of $5 million in employment expenses.\nProvision for credit losses of $43 million were down $98 million from the prior quarter.\nThe ACL ratio increased six basis points to 1.80%, excluding P3 balances.\nThe past due NPA and net charge-off ratios remained relatively stable.\nThe CET1 ratio increased 40 basis points to 9.3%, following strong core performance in the settlement of transactions we executed in the second quarter.\nThe total risk-based capital ratio increased 46 basis points to 13.16%, the highest level since 2014.\nJamie will now share more detail about the quarter.\nBefore moving to Slide 4, I'd like to provide an update on goodwill.\nWe have been conducting evaluations of goodwill in response to market volatility and expectations for a lower for longer interest rate environment referenced by the FOMC in August.\nAs a result, there has been a goodwill impairment for our mortgage reporting unit of $45 million.\nThis is a noncash charge that has no impact to cash, liquidity, tangible book value or regulatory capital ratios.\nBeginning on Slide 4.\nTotal loans declined $364 million in the third quarter as commercial loan growth helped offset reductions from P3 loan payoffs of $77 million and strategic asset dispositions of single service loans.\nExcluding the impact of asset dispositions and P3 payoffs, we had net loan growth of $245 million in the quarter.\nCommercial loans, excluding P3 balances, increased $291 million.\nAlthough pipelines are lower than they were pre-COVID, we continue to see demand, especially in middle market businesses and our higher growth and higher opportunity markets, such as Atlanta, Birmingham and South Florida.\nConsumer loans declined $578 million, led by the disposition of roughly $185 million of non-relationship mortgages, along with continued declines in our lending partnership portfolios.\nAdditionally, a portion of the decline can be attributed to the continuation of our GreenSky strategy, which we highlighted last quarter, and which to some degree, is offset by an increase in balances within our held-for-sale portfolio.\nWhile we will continue to evaluate opportunities to efficiently manage our balance sheet, there are currently no existing plans for material dispositions, such as those we made the last two quarters.\nWe expect loans, excluding the impact of P3 forgiveness, to be relatively flat in the fourth quarter.\nAs shown on Slide 5, we had total deposit growth of $471 million.\nMore importantly, we're continuing to strategically reposition the portfolio.\nBroad based core transaction deposit growth of $1.6 billion offset the strategic declines in time deposits of $1.2 billion and broker deposits of $381 million.\nWe estimate approximately $2.3 billion or 80% of deposit balances associated with P3 loans remained on the balance sheet at the end of the quarter.\nThe cost of deposits fell by 14 basis points from the previous quarter to 39 basis points due to a combination of rates paid and deposit remixing.\nFor context, this compares to a low of 26 basis points in the third quarter of 2014.\nWe continue to believe there are further opportunities to reduce deposit costs through CD turnover, repricing and remixing.\nThese activities in an environment of lower for longer interest rates, combined with strong growth in core customer deposits, should allow us to get our total deposit cost to the 26 basis point lows of the prior cycle.\nSlide 6 shows net interest income of $377 million, stable from the previous quarter and included $12 million in fee accretion from our P3 loan portfolio.\nThere are $74 million of P3 processing fees remaining.\nEarlier this month, the SBA announced a streamlined forgiveness process for certain P3 loans of $50,000 or less.\nApproximately 7% of our P3 balances fall within this threshold.\nThere is approximately $10 million in fees associated with these loans, which will be accelerated when we receive the forgiveness proceeds.\nNet interest margin was 3.10%, down three basis points from the previous quarter.\nConsistent with our expectations, the current level of interest rates, combined with a nine-basis-point headwind from bond repositioning and student loan sales executed in the second quarter, put downward pressure on NII and NIM in the third quarter.\nHowever, these headwinds were partially offset by a handful of factors, including further declines in deposit pricing and favorable deposit remixing trends.\nOur guidance from the previous quarter largely remains the same, and we continue to expect modest downward pressure on NIM as the repricing within our fixed rate asset portfolio is partially offset by continued declines in overall deposit costs and further improvements in managing liquidity costs.\nExcluding the potential impacts from P3 forgiveness, we expect NII and NIM will decrease slightly in the fourth quarter.\nIt was another strong quarter for non-interest revenue, which is shown on Slide 7.\nCore banking revenue improved by $5 million from the second quarter, primarily due to increased transaction activity as most components are gradually returning to pre-COVID levels.\nNet mortgage revenue of $31 million remained elevated, primarily due to increase in secondary revenues driven by higher loan sales and gain on sale.\nSecondary mortgage production was $654 million in the third quarter, which is an increase of $19 million or 3% from the second quarter's record production.\nWe continue to see positive momentum in other fiduciary service business, including brokerage and trust.\nAssets under management of $17.5 billion grew 6% from the previous quarter.\nOther income for the quarter included a valuation adjustment for tax credits and gained from the previously mentioned mortgage portfolio sales.\nIn the fourth quarter, we expect stable revenues from core banking fees, fiduciary services and capital markets income.\nWe expect to see declines in mortgage revenue and other income.\nSlide 8 includes non-interest expenses, which were $317 million or $269 million adjusted.\nAdjustments include $3 million in restructuring charges, primarily related to branch optimization, as well as the $45 million goodwill impairment previously discussed.\nThis goodwill impairment is limited to the mortgage reporting unit and results from a combination of factors, including the extended duration of lower market valuations, high volumes and refinancings that have reduced mortgage yields and the clarity around longer term policy actions designed to keep interest rates low.\nTotal employment expenses were $5 million less than the previous quarter, primarily due to lower commissions, lower headcount and reduced COVID-related staffing expenses.\nTotal COVID-related expenses for the quarter were minimal.\nWe expect further headcount reductions in the fourth quarter as part of the normal attrition and a voluntary retirement offer we recently extended.\nThe voluntary retirement offer is expected to result in a onetime fourth-quarter expense of approximately $14 million and have a two-year payback.\nThese savings are part of the Synovus forward initiatives and will help offset expected increases to other line items such as travel and advertising in 2021 as banking activity returns closer to normal.\nWe continue to focus on what we can control, which includes prudent expense management.\nExcluding the upfront expenses associated with Synovus Forward initiatives, we expect adjusted NIE in the fourth quarter will be in line with the third quarter.\nKey credit metrics are on Slide 9.\nThere were slight increases in NPA, NPL and past due ratios from the previous quarter, but we currently do not see widespread deterioration in the portfolio.\nOur comprehensive reviews have largely isolated the elevated risks to certain segments, including hotels and full service restaurants, and we continue to work with borrowers who have been most negatively impacted by the pandemic.\nProvision for credit losses of $43 million includes net charge-offs of $28 million or 29 basis points.\nDowngrades in the hotel portfolio, one of the hardest hit industries, accounted for $603 million of the increase in criticized and classified loans.\nThere were $125 million in hotel loans that had principal and interest deferrals at the end of the quarter, which represents about 8% of the total hotel portfolio.\nOur latest economic outlook includes an unemployment rate of about 8% as of year-end before declining modestly in 2021.\nThis, along with credit migration and other portfolio activity resulted in an allowance for credit losses of $665 million, up $15 million from the previous quarter.\nThe allowance for credit loss ratio increased six basis points to 1.8%, excluding P3 loans.\nThe amount of provision for credit losses going forward will continue to fluctuate based on a number of factors, including economic outlook, loan growth, loan mix, risk rate migration, as well as the timing and impact of future government stimulus.\nHeightened levels of uncertainty and those factors could result in reductions of allowance less than net charge-offs.\nAs the outlook becomes more stable and uncertainty declines, we expect changes in allowance to rely more heavily on the traditional factors previously mentioned.\nPreliminary capital ratios on Slide 10 continued to build from a combination of earnings and balance sheet activities completed over the past several months.\nThese balance sheet activities include the settlement of our second-quarter bond repositioning and our ongoing efforts to reduce single service loan portfolios as we prioritize our balance sheet for core client relationships.\nCET1 increased 40 basis points to 9.3% this quarter, that's an increase of 35 basis points from the end of 2019 and was accomplished while increasing the reserve by $382 million.\nThe total risk-based capital ratio of 13.16%, up 46 basis points from the second quarter was the highest since 2014.\nWe remain focused on supporting our overall capital position and are targeting the higher end of our CET1 operating range of nine to nine and a half percent, given the heightened uncertainty in the current economic environment.\nWe expect core earnings will continue to support our capital position and allow us to achieve our strategic objectives, with consideration for our anticipated balance sheet growth and the payout objectives we've outlined previously.\nAs a reminder, we do not expect any share repurchases for the rest of the year.\nI'd like to begin on Slide 11 with an update on deferments.\nAt the end of the third quarter, we had $337 million in loans on a full principal and interest deferral, which was less than 1% of total loans.\nThe aggregate amount in deferment was well below the 3 to 5% range we estimated last quarter and down significantly from the 15% we referenced in our first quarter 10-Q filing.\nWe attribute the lower P&I deferral activity this quarter to the strength of our borrowers and improving economic environment and support provided through various government stimulus programs.\nOf the $337 million in deferment at the end of the quarter, 50%, or $169 million were in the consumer book.\nThese were predominantly consumer mortgage loans, which are largely comprised of physician and private wealth customers.\nThe $169 million in deferments represents approximately 2% of total consumer loans.\nCommercial deferments as of 9/30 were $168 million, or 54 basis points of the total commercial portfolio.\nFull P&I deferments were largely concentrated in the hotel and full-service restaurant segments, which comprise 85%, or $143 million of commercial deferments at the end of the quarter.\nWe have not only seen a significant reduction in the level of deferments.\nWe are also seeing strong performance from those that have exited a deferral status.\n94% have made a payment, while another 5 to 6% have not had a payment due or were in a grace period at the end of the quarter.\nOnly approximately 20 basis points of loans that exited a deferral status were past due are moved to nonaccrual status at the end of the third quarter.\nIn addition to the full P&I deferment program, we have continued to work with other borrowers who have been impacted during the current crisis to provide flexibility in payment terms, which may include modifications such as interest only or amortization extensions.\nInclusive of these modifications, we estimate that total loans with accommodations, as of the end of September, remained below 3%, which was at the low end of the range we projected last quarter for full P&I deferrals.\nMoving to Slide 12 and the COVID-sensitive industries.\nWe shared on the second-quarter earnings call, a second round deferral estimate for each of these industries.\nConsistent with the loan portfolio in aggregate, these industries also had a lower than estimated level of P&I deferments at the end of the third quarter.\nAs we mentioned on the previous slide, the hotel and full-service restaurant segment had a total of $143 million with a full principal and interest deferment as of 9/30, well below the original estimates.\nThe hotel industry continues to be a segment that has been hit the hardest by the change in customer behaviors, which was reflected in the downgrades Jamie mentioned earlier.\nBut the vast majority of our portfolio continues to pay as agreed.\nDespite the results to date, we continue to closely manage and monitor this portfolio as we do not see the normalized return of revenues in the near term.\nWe have, however, conducted in-depth reviews of the loans in the hotel portfolio.\nAnd from a longer-term perspective, we feel that we are very well positioned in several ways.\nThese include low loan-to-value, high-quality hotel properties with great brands and sponsorship from guarantors with strong liquidity.\nAs it relates to the restaurant industry, we have seen signs of recovery since the reopening efforts of April and May.\nQuick service and fast casual restaurants in our portfolio have largely recovered based upon our cash inflow data, and in some cases, are outperforming pre-COVID levels.\nSynovus has $365 million of full-service restaurants, and using our portfolio cash inflow data, we estimate they are operating at an average of 85% of revenue compared to the prior year.\nThere were $18 million of full-service restaurant deferrals at the end of the third quarter.\nIt is worth noting that we do not have any shopping center customers in a second round deferral.\nWhile we continue to closely monitor this portfolio, our customers have experienced improving rent collections during the last quarter, overall, due largely to the strength of the grocery pharmacy, discount and home improvement segments.\nWe are also seeing stronger recovery in in-line service provider tenants that alleviate much of the concern from spring and early summer.\nRetail trade, art, entertainment and recreation, as well as oil-related industries also had no deferments in the second round, and we continue to be optimistic as to the ability for our customers to weather the short-term cash flow reductions experienced during the economic shutdown.\nWhile the deferral trends are extremely positive to this point, we are keenly aware, additionally mandated closings from COVID surges in our markets would have the potential of impacting cash flows and would affect these segments more quickly and severely.\nTherefore, we will continue to closely monitor and manage our exposure within these industries.\nMoving to Slide 13.\nIt provides an update on our portfolio's cash inflows, consistent with what we shared on last quarter's call.\nThe graph shows continued improvement in year-over-year cash inflows, which serve as a proxy for revenues.\nDuring the third quarter, we saw the portfolio year-over-year inflows improve from being down 6% in June to being up 3% in July and then settling in essentially flat with the prior year in August.\nThese results are largely consistent with various industry metrics, as well as the conversations we're having with our customers throughout our footprint.\nIn addition to cash flow improvements, we have also seen our customers making the necessary adjustments within their expense bases to further reduce the impact that crisis is having on their bottom line.\nWe've included trends for some of the industries that were considered to be more sensitive to COVID, including accommodations, retail trade, food services and other services.\nResults in these segments show consistent trending with the portfolio as a whole, but also note the differing impact within industry segment, which has served as the basis for many of the K-shaped recovery scenarios that had been developed and discussed more recently.\nWe continue to use this data to inform our bankers, as well as support our COVID specific deferment and portfolio management programs.\nAs I close out my section, let me transition to a business and Synovus Forward update, which we've highlighted on Slide 14.\nWe have maintained three primary focuses on the business front in 2020.\nNumber one, proactively manage the credit environment through the current economic downturn.\nAs I've shared on the previous slides, we feel good about our progress and results to date in this area.\nNumber two, utilize our relationship banking approach to continue to serve our customers, expand share of wallet and attract new relationships.\nDespite the challenges presented by the pandemic, we have continued to drive core loan, deposit and assets under management growth, while improving service levels and adding new technology to support our customers' changing needs.\nThroughout 2020, we have accelerated the deployment of new digital tools and capabilities with enhanced servicing and online origination functionality, with the overarching goal of making it easier to do business with us, as well as the changing business dynamics associated with COVID.\nDigital user enrollment is up 10% year to date, and we've experienced a 30% increase in the number of deposits being handled outside of our branch network.\nWe have achieved this success as we partner with existing and new fintechs to efficiently and effectively deliver these enhanced capabilities.\nWe fully recognize and remain committed that when we get to the other side of the current challenges we face, we want to be even better positioned to grow and win in our marketplace.\nAnd that brings me to the third area of focus, Synovus Forward, we remain focused on the execution of this program to drive incremental efficiencies and sources of new revenue now and in the years to come.\nOur original financial objective of an incremental $100 million of pre-tax income remains the baseline for execution.\nWe are beginning to realize the benefit of several of these initiatives while we kick off additional initiatives that will have 2021 deliverables and run rate benefits.\nAs we progress with these, we will continue to update and fine-tune the size and timing of the benefits.\nOn the expense front, we are executing on the $25 million third-party spend program with work streams continuing to be implemented through the early part of 2021.\nOur plan for 13 branch closures in 2020 remains on track with additional back office real estate consolidation planned for 2021.\nWe are also in flight with our overall organizational efficiency program.\nThis program is a comprehensive portfolio consisting of many initiatives that will deliver reductions in personnel and other expenses, as well as cost avoidance and additional areas throughout the remainder of 2020 and 2021.\nExecution on these initiatives are under way, as Jamie noted, the reduction in headcount during the third quarter.\nAnother example of progress is the voluntary retirement program, which we announced during the third quarter and will largely be completed in the fourth.\nAs Jamie mentioned, it is expected to have a onetime charge of approximately $14 million and have an earn-back period of less than two years.\nWe will continue to update and provide further details as we execute on the overall organizational efficiency program, and we remain confident in our ability to generate up to $65 million in savings overall.\nAs we previously noted, we will continuously evaluate the underlying economic environment to gauge the size and the timing of our overall expense management program.\nWhile we've been more focused on the efficiency initiatives out of the gate, we are progressing with revenue opportunities that were identified during the diagnostic phase with continued confidence in the pre-tax income range of 35 to $55 million.\nWe have kicked off our pricing for value and customer analytics work streams.\nThese initiatives have the potential to begin creating revenue enhancement in 2021 through the repricing of solutions and products, as well as enhancing tools and capabilities to improve sales and retention efforts.\nThe dedicated teams leading these efforts are adjusting and enhancing the program on a continuous basis.\nAs we complete the programs and the execution and in-flight phases, we have additional initiatives that will commence, which are all part of our longer-term strategic road map and change management plans.\nBefore we move to Q&A, Slide 15 highlights a few accomplishments from the quarter that we believe are just as important as the numbers we've reviewed today.\nI'll not cover each one in detail, but just to summarize, we expanded the talent and expertise of our already strong and diverse board.\nWe were named by Forbes as the best employer for women.\nWe celebrated as two of our senior-most female leaders in our executive and board levels were recognized for their contributions to our company and our industry.\nAnd we formed a council comprised of some of our most senior African-American leaders to ensure accountability for continued progress in promoting racial equality.\nWe made significant investments in education, including donating $1 million to the United Negro College Fund to provide scholarships for African American students, who want to attend historically black colleges and universities or other higher learning institutions across our five state footprint.\nWe've continued supporting our communities through increased outreach and financial investments as organizations, schools, individuals, families and entire communities face unprecedented challenges, and we continue to deliver financial education across the footprint through our now virtual Raise the Banner program.\nAnd finally, we've remained active participants in multiple CARES Act stimulus programs to help our customers recover sooner rather than later.\nWe're proud of these actions, and we believe they reflect our deep sense of responsibility for leading and strengthening the communities we serve.\n Assistant:", "chosen": "compname announces q3 earnings per share $0.56.\nq3 adjusted earnings per share $0.89.\nq3 earnings per share $0.56.\nnon-cash goodwill impairment charge of $44.9 million, or $0.30 per share in quarter.\n"}
{"prompt": "Human: This conference call is the property of SYNNEX Corporation and may not be recorded or rebroadcast without our prior permission.\nAnd so now, I'll cover some of the key highlights from Q3, and discuss Q4 guidance.\nIn the face of continuing economic uncertainty in these unprecedented times, our revenue, net income and diluted EPS, all exceeded our expectations, reflecting our resiliency and ability to do what we do best.\nOur GAAP results announced today, while continuing to be impacted by COVID, have not been adjusted for COVID-19 costs.\nWhere appropriate, I will reference the financial impact COVID-19 had on Q3 results.\nOn a consolidated basis, total revenue was a third quarter record of $6.5 billion, up 4% compared to $6.2 billion in the same quarter last year.\nOn a constant currency basis, revenue was up 5% compared to the prior year quarter.\nOur consolidated gross profit dollars totaled $708 million, down 2% or 18 million versus a year ago, and gross margin was 11% compared to 11.7% a year ago.\nTotal adjusted SG&A expense was $448 million or 7% of revenue, down $8 million compared to the year ago quarter.\nConsolidated non-GAAP operating income was $260 million, down $10 million or 4% compared to a year ago.\nNon-GAAP operating margin of 4% was lower by 34 basis points, compared to the prior year period.\nNow shifting gears to Q3 operating performance by business segment.\nFirst on Technology Solutions revenue was $5.3 billion, up 5% or $258 million over the prior year quarter.\nTechnology Solutions' gross margin was 5.6%, and that was 37 basis points lower than the prior year quarter, primarily due to product mix.\nOperating income of $132 million was down $6 million compared to a year ago.\nNon-GAAP operating income was $142 million, down 5% or $7 million compared to the prior year quarter.\nNon-GAAP operating margin was 2.7%, 29 basis points lower than a year ago.\nTechnology Solutions COVID-19 related net incremental expense was approximately $8 million for the quarter, primarily made up of an increase in allowance for doubtful accounts, staffing and work from home costs.\nNow to Concentrix; Concentrix revenue was $1.2 billion, up 24 basis points over the prior year quarter.\nConcentrix gross margin was 35.5%, up 308 basis points sequentially, and down 126 basis points compared to the year ago quarter, primarily due to the impact of COVID-19.\nNon-GAAP operating income in the quarter was $118 million, down $3 million in absolute dollars or 2% compared to a year ago.\nNon-GAAP operating margin was 10.1% compared to 5.9% in fiscal Q2 and 10.4% a year ago.\nNet Concentrix COVID-19 related incremental expenses were approximately $13 million for the quarter.\nNow moving back to our consolidated results; third quarter net total interest expense and finance charges were $29 million, a reduction of $14 million compared to a year ago quarter.\nThe decrease was driven by a reduction in our average outstanding borrowings, compared to the prior year quarter, as well as a lower interest rate environment.\nFor the fourth quarter, we expect interest expense to be approximately $29 million.\nTotal non-GAAP net income was $173 million, up $3 million or 2% over the prior year period, and non-GAAP diluted earnings per share was $3.33, up $0.03 or 1% over the same period a year ago.\nThe effective tax rate for the third quarter was 25.2% compared to 25.3% a year ago.\nFor the fourth quarter of fiscal 2020, we expect the effective tax rate to be approximately 25%.\nTurning to the balance sheet, our accounts receivable totaled $3.6 billion and inventories totaled $2.8 billion on August 31, 2020.\nOur cash conversion cycle for the third quarter was 38 days, 11 days lower from a year ago and improved eight days from last quarter and led to a preliminary cash flow from operations of $321 million.\nThe improvement was supported by continued collaboration with our partners and faster churn on our inventory.\nAt the end of Q3, including our cash and credit facilities, SYNNEX had approximately $2.8 billion in total liquidity available to fund operations.\nI also wanted to provide an update regarding the Concentrix spin.\nWe remain on track for a calendar Q4 spin, and believe the most natural date for the spin to be December 1.\nAs is consistent with our year-end, and as a good clean start for 2020, for both Concentrix and SYNNEX.\nAs we see it today, the estimated the SYNNEX Corp gross debt will be approximately $2.6 billion with Concentrix receiving approximately $1.1 billion and SYNNEX receiving approximately $1.5 billion.\nThe majority of cash on hand, which we estimate will be approximately $700 million at spin, will be held by SYNNEX.\nThe use of cash in Q4 will be for normal seasonal use and debt pay down.\nAs we have previously discussed, we want both companies to be well positioned among its peers from a leverage and liquidity standpoint.\nThese debt balances are estimates and could change based on Q4 performance.\nWe are well down the path with our bankers in securing third party financing for Concentrix, and are confident in the capital structure of both businesses.\nSYNNEX and Concentrix will have the appropriate dry powder to support growth and M&A opportunities.\nNow moving to our fourth quarter outlook; we expect revenue to be in the range of $6.45 billion to $6.65 billion.\nNon-GAAP net income is expected to be in the range of $191 million to $204 million.\nNon-GAAP diluted earnings per share is expected to be in the range of $3.68 to $3.93 per diluted share, on weighted average shares of approximately $51.5 million.\nNon-GAAP net income and non-GAAP diluted earnings per share guidance excludes after-tax costs of approximately $37.5 million or $0.72 per share, related to the amortization of intangibles and acquisition-related and integration expenses.\nIn previous discussions with you, we've let you know about one of our valued [Phonetic] customers, that will be moving to a consignment model.\nThe transition date remains fluid and will not begin in early 2021.\nAs we learn more and have proper visibility to a start date, we will certainly let you know.\nI want to start off by expressing my appreciation to all our stakeholders across the globe for their continued commitment and dedication in partnering with us, as we have jointly faced a multitude of challenges and economic issues in 2020.\nOur associates delivered a phenomenal result in Q3, for which I am truly grateful.\nWe are all a bit worn down by the ongoing pandemic, but the SYNNEX spirit and determination continues to inspire me.\nI see the positive impact we are having on our communities and the strong support our teams are providing to each other, our partners and customers.\nAlong with executing a great quarter, the team also made significant progress on our proposed spin of Concentrix to a stand-alone public company.\nThe Concentrix F-10 document is available for your review.\nThird party financing is in final stages, and most of the remaining spend related activities are nearing completion.\nThus, we believe we are in a solid position to close this transaction in calendar Q4.\nNow moving to our third quarter results; in our TS distribution business, better-than-expected revenue was driven by strong demand in education, state and local, and e-commerce channels.\nThis was driven by ongoing work, learn and shop from home needs.\nWe also experienced a slight improvement from our second quarter in office environment and SMB sales.\nConsistent with Q2, we saw higher demand in notebooks, Chromebooks, cloud, collaboration and security products.\nFrom a year-over-year perspective, we experienced some softness in product support in the office environment, such as desktop, PCs, printers, supplies, and on-premise datacenter equipment.\nFrom a geographic perspective, North America was the strongest performer, but all geos net or performed better than expectations during the quarter.\nOverall, TS distribution grew year-over-year.\nIn our TS Hive business, we delivered a sequential improvement and a year-over-year increase in revenue, as we continue to support our largest customers in Q3.\nThe mix of programs delivered was more skewed toward higher volume, lower margin products, but overall we are pleased with the high results in Q3.\nOur Concentrix business also exceeded our expectations in Q3, despite the known challenges.\nI'm very pleased with how we have performed, and I will now turn over the call to Chris, to discuss Concentrix in more detail.\nWe are very pleased with our continued momentum, both on our business execution and on being ready to spin, as Marshall indicated early December.\nWe delivered very solid results, returning to a pre-COVID revenue growth trajectory and double digit adjusted operating margin.\nThe third quarter revenue for Concentrix totaled $1.16 billion, slightly higher than the same quarter last year.\nOn a sequential basis, third quarter revenue increased across all our delivery regions.\nThis would not have been possible, without addressing COVID-19 challenges across three separate areas aggressively.\nFirst, providing a flexible safe workplace that incorporates both at home and at-office elements, to nimbly meet our clients' demands.\nSecond, our strong technology solutions, that support clients regardless of the channels they choose.\nAnd third, driving a culture of security and integrity, backed up by innovations like our recently announced SecureCX offering.\nSecureCX is a proprietary platform that incorporates advanced technology, to ensure close to the same level of security at home, as available in an office.\nThis is just the latest innovation from our staff of well over 1,000 skilled engineers and developers.\nConcentrix has been enabling technology in few solutions like this, for well over a decade, and we will continue to lead by investing in this space.\nWe continue to be happy with our execution also around vertical mix.\nThe communication vertical is now approximately 21% of revenue, representing an impact of 4% to our year-over-year growth rate, but giving us a much more balanced portfolio.\nAs expected, our travel, transportation and tourism clients during the quarter have been impacted by COVID-19, resulting in an additional 2% impact on growth.\nMore than offsetting these headwinds was strong growth with clients in our technology, healthcare, financial services and e-commerce verticals, which represent about two-thirds of our business on a combined basis.\nNew business signings were very encouraging in the quarter, coming in at a record level of expected annualized contract revenue.\nThis heightened demand is based on the values that our clients place in the strengths of our best-in-class CX platform, and our ability to meet their evolving needs.\nWe continue to take share with strong signings across our strategic verticals, and win new business that has historically not been outsourced.\nEven with our record signings, our pipeline remains strong and growing.\nWe continue to watch the COVID developments daily, and are ready to recalibrate with our clients, as their needs change.\nNow moving to profitability; adjusted operating income for the quarter was $118 million or 10.1%, nearly reaching the year-ago level.\nThe return to double-digit operating margin reflects revenue over performance, with lower variable spend, despite $13 million of additional net COVID-19 cost impacts.\nCash flow from operations in the third quarter totaled approximately $91 million.\nCapital expenditures totaled approximately $37 million.\nWe generated positive free cash flow, despite the impact of prior quarter revenue reductions that reduced our collections in the third quarter.\nCapital expenditures we see trending slightly higher than historical norms to support growth and reconfiguring some of our facilities due to COVID-19.\nTurning to our outlook for the fourth quarter; we remain focused on keeping our staff safe, overdelivering for our clients, so that we remain their partner of choice, and emerging from the pandemic stronger, so that we can drive sequential improvement in both revenue and profitability.\nIn the fourth quarter, we expect more sequential revenue growth than last year, resulting from the strong new business signings in the third quarter, in addition to seasonal increases.\nAs a result, we expect fourth quarter revenue to increase by at least 2% year-over-year on a constant currency basis, and we expect our adjusted operating margin to be above 12.5%.\nWe continue to feel confident in our ability to achieve and exceed industry growth rates, while increasing our adjusted operating margin over time.\nNow turning to our spin from SYNNEX, estimated to be on December 1, we believe that we are ready to go.\nWe intend to announce our Board of Directors in an updated Form 10 Registration Statement in early October.\nWe are very proud, that the Board will reflect the diversity we have in our business.\nAs Marshall indicated, we will have less than approximately two times debt to EBITDA when we separate, giving a strong liquidity and meaningful flexibility to invest in organic and inorganic growth.\nAs always, we have a disciplined approach to both.\nWe believe the spin-off would result in benefits for the shareholders, our team members and our clients.\nA pre spin event will be held for analysts early November, with one-on-one meetings with investors shortly thereafter.\nI look forward to updating you in the coming weeks on the incredible opportunity and our superior ability to lead in the customer experience industry.\nThe effort, resourcefulness and dedication are a tribute to our people, our culture and our diversity that we'll be able to take advantage of, as we enter this new chapter of Concentrix.\nTurning to our fourth quarter outlook.\nOur priority continues to be on the safety and health of our associates.\nFor our business, in general, we see positive signs of continued recovery, as economies open further.\nHowever, we are still cautious, as there are many differences from geo to geo and within geos.\nFor Technology Solutions, we expect an overall seasonal improvement for Q4.\nWe anticipate TS distribution will be up sequentially, partially offset by a decline in TS Hive.\nTS distribution will be driven by continued strength in remote enablement, the federal buying season, improvement in delayed on-premise projects, and overall continued investment in digital transformation.\nWe expect a solid quarter for TS Hive, though we will be comparing to an exceptional Q4 last year.\nAs well, given the unpredictability of this business, we tend to use the low end of internal expectations in our guidance calculations.\nAs Marshall indicated, COVID related expenses declined in Q3 and are expected to decline in Q4.\nAs we stated in our last call, a portion of these costs will be part of our normal TS run rate going forward.\nOver time, we expect to find ways to offset these amounts, while running in the most effective and efficient business possible.\nFor Concentrix, as Chris indicated, we expect to have a seasonally strong Q4.\nOur return to growth, positive cash flow, and a solid pipeline, are among many aspects that I am pleased about, as Concentrix moves toward becoming an independent business.\nI'm also pleased and excited for the independent TS as well, our ongoing opportunities to improve our core operation, the many investments we have in place to organically grow our business, and the opportunities that exist for inorganic investments, give me confidence in our business, and the services we provide to our partners.\nAs well, our goal of growing faster than the market and increasing our profit at a higher rate will continue.\nWe appreciate everything you have done for SYNNEX during this challenging period.\nOur thoughts continue to be with those who have been affected by COVID-19, please stay safe and healthy.\nAs well, we are, with all those who are working for positive change on social issues.\nI appreciate the SYNNEX team members, who have been of service in these and other important areas.\n Assistant:", "chosen": "compname reports q3 adjusted earnings per share of $3.33.\nsees q4 2020 non-gaap earnings per share $3.68 to $3.93.\nsees q4 2020 revenue $6.45 billion to $6.65 billion.\nqtrly adjusted earnings per share $3.33.\nqtrly technology solutions revenue was $5.3 billion, up 5.1%.\nqtrly concentrix revenue was $1.2 billion, up 0.2%.\n"}
{"prompt": "Human: Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties.\nWe encourage you to read the risks described in the company's public filings and reports, which are available on the SEC's or the company's corporate website.\nNow I would like to turn the conference over to Karen Colonias, Simpson's President and Chief Executive Officer.\nI'll begin with a summary of our full-year 2020 results before turning to a discussion on our key fourth quarter performance drivers and initiatives.\nBrian will then walk you through our financials and fiscal 2021 business outlook in greater detail.\nI am extremely proud of our strong financial and operational performance in 2020 which we delivered in a highly challenging operating environment amid the COVID-19 pandemic.\nOur net sales improved 11.6% over 2019 to $1.28 billion, the highest in the company's history, driven by strong sales volume.\nAs a result, we generated record earnings of $4.27 per diluted share, up 43.3% over 2019.\nThese results would not have been possible without the hard work and dedication of all our Simpson employees.\nTheir diligence including strict adherence to protocols to help minimize the spread of COVID-19 has enabled us to continue operating our business with minimal disruptions from the pandemic.\nOn behalf of the entire Simpson management team, we applaud them for their tremendous efforts.\nThe health, safety and well-being of all our employees remains our Number 1 priority and we will strive for continuous improvement to ensure Simpson remains a safe and rewarding place to work.\nOur record 2020 results were further supported by our commitment to position Simpson for long-term sustainable and increasingly profitable growth.\nIn October of 2017, we unveiled a three-year 2020 plan with aggressive targets to maximize our operating efficiencies and drive long-term shareholder value.\nSince then, we've made significant progress against our goal, some of which we updated in July of 2019 to reflect changes in the macroeconomic landscape.\nWhile we elected to withdraw these financial targets in April 2020 due to the significant level of uncertainty surrounding COVID-19, we continued to execute based on the same underlying principles, focusing on operating efficiencies and cost savings to guide us through the COVID-19 pandemic.\nAt the same time, we did experience certain tailwinds in our business as a result of the COVID-19 related macroeconomic conditions, namely we had favorable steel prices, temporary reduction in travel and related operating expenses, and an increase in repair and remodel activity.\nDue to the culmination of these factors, we were able to meet or exceed nearly all of our ambitious 2020 plan objectives.\nWe are very proud of these accomplishments and I'd like to spend a few minutes discussing those with you.\nOur first 2020 plan objective was a continued focus on organic growth.\nOur goal was to achieve a compounded annual growth rate in net sales of approximately 8% from 2016 to 2020.\nAs of the year end of 2020, we had well exceeded this target, achieving a compounded annual growth rate over 10% relative to our 2016 baseline.\nMilestones that helped support this goal included price increase for the majority of our US wood connector products in the third quarter of 2018, the signing of one of our largest US homebuilding companies onto our builder program resulting in 23 of the Top 25 US builders now engaged on our program, strong repair and remodel trends associated with the COVID-19 pandemic and the return of Lowe's as the home center customer in mid-2020.\nOur second objective involved rationalizing our cost structure to improve companywide profitability.\nWe aimed to reduce our total operating expense as a percent of net sales from 31.3% in 2016 to a range of 26% to 27% by the end of 2020.\nWe tackled this through a combination of zero based budgeting, lowering our indirect procurement costs and other cost reduction measures we took in both Europe and in our concrete business.\nIn addition, specifically in 2020, we experienced solid cost savings from our expense management practices as well as one-time benefits from the reduced travel and trade show costs as a result of the COVID-19 restriction.\nThese factors combined with strong topline growth enabled us to exceed our operating expense target.\nFor the full year of 2020, we recorded operating expenses as a percent of net sales of 25.6%, representing 570 [Phonetic] basis points of improvement compared to 2016.\nOur next plan was to improve our operating income margin to a range of 16% to 17% by the end of 2020.\nWe exceeded this target as our gross margin significantly benefit from lower material costs and limited spending on operating expenses due to the COVID-19 restrictions.\nWe reported an operating income margin of 19.9% for 2020, a 350 basis point improvement compared to 16.4% in 2016.\nAt the consolidated level, our gross margin improvement was supported by enhanced gross margins in our concrete business, another 2020 plan goal.\nFollowing the unveiling of the 2020 plan, we implemented a new concrete strategy in late 2017 by narrowing our concentration to six distinct product categories.\nBy focusing on these higher margin products to increase profitability, we exceeded our goal of improving our global concrete gross margin from 34.7% in 2016 42% in 2020.\nOur final profitability goal was to improve our operating income margin in Europe.\nWe've made substantial progress in Europe over the past few years, including rolling out our fastener lines in the Nordic region and in France, the consolidation of our European management team to create efficiencies as well as significant cost cutting initiatives.\nAs a result, we achieved an operating income margin of 7% excluding our SAP costs of approximately $2.5 million in 2020.\nWhile this is lower than our original target range of 8% to 9%, we are pleased with the results, which reflect approximately 350 basis points of improvement versus the 2016 numbers.\nOur third objective focused on improving our working capital management and overall balance sheet discipline.\nSince the onset of the 2020 plan, we've made headway on this front, primarily through inventory reductions and the implementation of lean principles throughout our operation.\nWe've completed a three-phase SKU reduction program, eliminating upwards of 12,000 non-moving or slow-moving items and converted our customers over to replacement products.\nIn addition, we carried out rapid improvement events at many of our US production facilities, resulting in efficiency enhancements as well as improved management of inventory and purchasing practices.\nAs we move forward, we remain committed to driving continuous cost management and improved efficiencies through our lean initiatives.\nHowever, consistent with our strategy, it is critical that we balance our inventory purchases with our liquidity needs in order to maintain our commitment to product availability standards and an exceptional customer service experience.\nThe final element of our 2020 plan was focused on maximizing shareholder value with the goal of improving our return on invested capital from 10.5% in 2016 to a range of 15% to 16% by the end of 2020.\nThrough our solid operational execution, combined with the enactment of the US Tax Cuts and Jobs Act of 2017, which lowered our effective income tax rate beginning in 2018, we surpassed this target, ending 2020 with the return on invested capital of 20%.\nBeyond this, we continued to return capital to our shareholders in the form of dividends and share buybacks.\nIn 2020, we returned $116.2 million to our stockholders through the payments of $40 million in dividends and $76.2 million in share repurchases.\nSince the onset of the 2020 plan, we have returned over 83% of our cash generated by operations to our shareholders, far exceeding our target of 50% I'm extremely proud of all that we've accomplished in these past three years and by executing on the 2020 plan, we achieved solid organic growth, we've rationalized our cost structure to improve companywide profitability and we've improved our working capital management and balance sheet position, in turn creating value for all key Simpson stakeholders.\nNow let's turn to a brief information on our fourth quarter results and operating initiatives.\nOur fourth quarter consolidated net sales grew 12% year-over-year to $293.9 million on significantly higher volume.\nGross margin increased to 42.1% from 41.9% in the prior year quarter, primarily related to strength in Europe, where we experienced lower material and warehouse costs.\nOur solid gross margin combined with effective expense management and reduced costs from travel and other restrictions as a result of the COVID-19 drove a 7.8% year-over-year increase in our income from operations to $39.5 million and earnings of $0.68 per diluted share.\nThe increase in sales volume we experienced in the fourth quarter was primarily related to ongoing momentum in the home center distribution channel, which includes both our home centers and co-op customers.\nWe are continuing to experience a shift in consumer behavior toward home renovations as a result of the pandemic.\nSales from home center distribution channels where we see much of our repair and remodel business improved over the prior year period.\nGrowth was supported by our product rollout of our connectors, mechanical anchors and fastener product solutions into all 1737 Lowe stores, which we completed during the fourth quarter.\nAs a reminder, Lowe's returned to Simpson as a home center customer beginning in the second quarter of 2020.\nOur sales were further supported by solid US housing starts, as we generally experience a multiple month lag in the demand from the time of the start, in the fourth quarter, we benefited from strong third quarter 2020 housing starts which grew over 11% year-over-year.\nIn addition, while we typically see lower seasonal sales in the fourth quarter related to holiday closures and winter conditions, in 2020, the fourth quarter, we experienced a very mild winter.\nThis enabled construction activity to continue late into the year, further bolstering our net sales.\nTurning now to Europe.\nSales continued to recover nicely following government-ordered shutdowns to our operations in the United Kingdom and France due to COVID-19 in late March.\nSales were assisted by strong demand trends and our ability to meet our customer needs through our solid inventory management practices.\nWe believe our sales benefited in Europe during the fourth quarter as many of our competitors experienced supply chain issues.\nDuring this time, we were able to offer customers the important products they required to keep up with demand and to maintain job site on schedule.\nI'd also like to note that while the United Kingdom has reimplemented shutdowns due to the most recent COVID-19 surge, we have been deemed an essential business and all of our major production and distribution facilities have remained open and operational with remote work being promoted where possible, such as in our corporate offices.\nIn regards to, [Indecipherable] implementation, the rollout continued to progress despite travel limitations related to COVID-19.\nIn the fourth quarter, we completed the SAP rollout at our UK branch and Gallatin, Tennessee locations, both of which are now live.\nMost recently, we successfully transitioned all of our Canadian-based sales organization over to SAP, thus completing the full SAP rollout in North America, a very important milestone.\nThis year we will continue working on the SAP transition in our European locations and the rest of the world and we currently anticipate a companywide completion in 2022 and we will continue to monitor and update our timeline should circumstances change.\nNow I'd like to briefly touch on our capital allocation structure.\nWe are very grateful to be able to operate as a supplier to other essential businesses with only minimal disruptions due to the pandemic.\nAs our business continues to generate strong cash flow, we remain focused on appropriately balancing our growth and stockholder return priorities.\nWe are also very pleased to be in a position to pay off our line of credit borrowing in pool, as well as declare our quarterly dividend as we have done consistently since 2004.\nWhile the challenges of the COVID-19 pandemic continue to impact our broader economy, exiting 2020 we feel confident in the bright future that we believe lies ahead for Simpson.\nWith another quarter of strong year-over-year growth in housing starts, which were up over 11% in the fourth quarter of 2020, we believe housing will continue to be a key element of the economic recovery in the coming years ahead and we are well positioned to capitalize on this environment.\nAt the same time, we continue to pursue our strategy of diversification, positioning our business to be less vulnerable to US housing market through key investments and adjacent products in markets and we also remain focused on growth, including M&A opportunities that would complement our existing product offering, manufacturing footprint or strengthening our software capabilities.\nOur success in achieving the 2020 plan target has created a very strong foundation for Simpson, successfully positioning our company for long-term sustainable and increasingly profitable growth.\nBut now we are ready for our next chapter.\nToday, I'm pleased to announce that on Tuesday, March 23, we plan to host a Virtual Analyst and Investor Day to provide more insight and details surrounding the elements of our business strategy in 2021 and beyond.\nAdditional information about this event will be released in the coming days.\nI'm pleased to discuss our fourth quarter financial results with you today.\nNow turning to our results.\nAs Karen highlighted, our consolidated net sales were strong, increasing 12% to $293.9 million.\nWithin North America segment, net sales increased 9.8% to $249.1 million primarily due to higher sales volumes in our home center distribution channel, which includes our home center and co-op customers.\nSales volumes were supported by the return of Lowe's along with increased repair and remodel activity.\nOur net sales further benefited from other distribution channels, which experienced increased demand from new housing starts and repair and remodel activity.\nIn Europe, net sales increased 24.9% to $41.8 million primarily due to higher sales volumes in local currencies.\nWood construction products represented 85% of total sales compared to 83% and concrete construction products represented 15% of total sales compared to 17% last year.\nConsolidated gross profit increased by 12.4% to $123.7 million, which resulted in a stronger Q4 gross margin of 42.1% compared to last year.\nGross margin increased by 20 basis points, primarily due to lower material and warehouse costs, which were partially offset by higher labor costs.\nOn a segment basis, our gross margin in North America declined to 43.2% compared to 43.9%, while in Europe, gross margin increased to 25.3% compared to 29.9%.\nFrom a product perspective, our fourth quarter gross margin on wood products was 41.8% compared to 40.8% in the prior year quarter and was 39.6% for concrete products compared to 43.7% in the prior year quarter.\nNow turning to our fourth quarter costs and operating expenses.\nResearch and development and engineering expenses increased 10% to $12.9 million primarily due to personnel costs, stock-based compensation, product testing and cash profit sharing expenses.\nSelling expenses decreased 1.2% to $27.8 million due to lower travel and entertainment and advertising and trade show expenses, partly offset by higher personnel costs, cash profit sharing, sales commissions and stock-based compensation expense.\nOn a segment basis, selling expenses in North America were down 2.1% and in Europe, they were mostly flat.\nGeneral and administrative expenses increased 10.9% to $43.6 million primarily due to increases in cash profit sharing, stock-based compensation and software subscriptions and licenses.\nTotal operating expenses were $84.3 million dollars, an increase of $5.1 million or approximately 6.5%.\nAs a percentage of net sales, total operating expenses were 28.7%, an improvement of 150 basis points compared to 30.2%.\nOur solid topline performance combined with our stronger Q4 gross margin and diligent management of costs and operating expenses helped drive a 7.8% increase in consolidated income from operations to $39.5 million compared to $36.6 million.\nIn North America, income from operations decreased 1.8% to $36.1 million.\nIn the fourth quarter of 2019 North America income from operations included a $5.6 million gain on the sale of a selling and distribution facility.\nIn Europe, income from operations increased 145.8% to $1.3 million primarily due to increased gross profit.\nOn a consolidated basis, our operating income margin of 13.4% decreased by approximately 50 basis points.\nOur effective tax rate increased to 25.6% from 22.3% due to the release of foreign valuation allowances in 2019.\nAccordingly, net income totaled $29.6 million or $0.68 per fully diluted share compared to $28.1 million or $0.63 per fully diluted share.\nNow let's turn to our balance sheet and cash flow.\nOur balance sheet remained healthy with ample liquidity to operate our day-to-day operations.\nAt December 31, cash and cash equivalents totaled $274.6 million, an increase of $44.4 million compared to December 31, 2019 after paying down the remaining $75 million on our revolving credit facility during the quarter.\nAs of December 31, 2020, the full $300 million on our primary line of credit was available for borrowing.\nOur inventory position of $283.7 million at December 31 increased by $23.6 million from our balance at September 30 as we continue to see higher levels of construction activity along with the unprecedented demand we've experienced through the pandemic.\nWe continue to be highly selective in regard to inventory purchases through careful management and purchasing practices along with maintaining our high level -- high levels of customer service and on-time delivery standards As a result of our improved profitability and effective working capital management, we generated strong cash flow from operations of $77.5 million for the fourth quarter of 2020, an increase of $21.1 million or 37.4%.\nFor the full year of 2020, we generated $207.1 million of cash flow from operations, which increased nearly $1.5 million.\nDuring the fourth quarter, we used approximately $17 million for capital expenditures.\nFor the full year of 2020, capital expenditures were approximately $37.9 million, in line with our reduced expectations as a result of our focus on cash preservation in mid-2020 due to COVID-19.\nWe were also pleased to have paid $40.4 million in dividends in fiscal 2020 including $10.2 million in the fourth quarter.\nIn addition, we repurchased approximately 1.05 million shares of our common stock in 2020 at an average price of $72.33 per share for a total of $76.2 million.\nThis includes approximately 151,000 shares of our common stock that we repurchased during the fourth quarter at an average price of $89.49 per share for a total of $13.5 million.\nAs our authorization for repurchases of common stock expired at year-end, on December 16, our Board of Directors authorized the repurchase of up to $100 million of our common stock, which went into effect on January 1, 2021 and runs through December 31, 2021.\nIn addition, on January 22, our Board of Directors declared a quarterly cash dividend of $0.23 per share, which will be payable on April 22, 2021 to stockholders of record as of April 1, 2021.\nBased on business trends and conditions as of today, February 8, we are initiating guidance for the full year ending December 31, 2021 as follows.\nOperating margin is estimated to be in the range of 16.5% to 18.5%.\nThe effective tax rate is estimated to be in the range of 25% to 26% including both federal and state income taxes and capital expenditures are estimated to be in the range of $50 million to $55 million including approximately $10 million to $13 million, which will be used for maintenance capex.\nAs of today, the magnitude and duration of the COVID-19 pandemic and its impact on general economic conditions remains uncertain.\nIt's important to note that the potential economic impact related to COVID-19 on our operations, raw material costs, consumers, suppliers and vendors may have a material adverse impact on our 2021 financial outlook should conditions materially change from the current environment.\nWe will continue to monitor the impact of COVID-19 on our operations, which were not significantly impacted in the fourth quarter of 2020.\nIn summary, despite the COVID-19 related challenges in the marketplace and ongoing uncertainty, we were very pleased with our fourth quarter financial results and operating performance.\nOur industry-leading position, geographic reach and diverse product offerings combined with our strong balance sheet and liquidity position gives us confidence in our ability to maintain operational excellence and support current and future demand trends.\nAs Karen mentioned, we look forward to updating you on our go-forward business strategy in 2021 and beyond during our Virtual Analyst and Investor Day on March 23.\n Assistant:", "chosen": "compname reports q4 earnings per share $0.68.\nq4 earnings per share $0.68.\nq4 sales $293.9 million versus refinitiv ibes estimate of $276.1 million.\nsees fy 2021 operating margin is estimated to be in range of 16.5% to 18.5%.\ncapital expenditures are estimated to be in range of $50 million to $55 million for 2021.\n"}
{"prompt": "Human: We will be discussing results that were released yesterday after the close.\nTo listen online, please go to the stewart.com website to access the link for this conference call.\nBecause such statements are based on an expectation of future financial operating results and are not statements of fact, actual results may differ materially from those projected.\nIn a minute, David will take you through the details of this quarter's financial results.\nBut before then, I'd like to discuss Stewart's operational evolution to date and the continued execution of our long-term strategy.\ntwo years ago, we started a journey here at Stewart, a journey to become the premier title services company.\nWe knew it would take some time, but we also knew we had a valued brand, strong balance sheet and associates that were ready and willing to have and to make an impact.\nBetween then and now, we have navigated the dramatic impacts of COVID-19 life as well as historic real estate market that continues to have momentum.\nSo where are we on the journey?\nAnd what have been the main areas of focus and progress?\nWe've made significant improvement on our operational capabilities by adding greater scale in priority markets, augmenting our core business with essential real estate technology and services, and injecting new talent and energy into a 125-year-old company.\nAs I like to say, we are a 125-year-old start-up.\nInitial goals of achieving double-digit margin have been met and exceeded, albeit with the help of a very robust market.\nAs David will discuss, Stewart's operating revenues are up almost $240 million or 40% from last year.\nAnd operating income was up over $30 million or 55% in a quarter in which the Mortgage Bankers Association forecasts have purchase originations down 12% year-over-year and overall mortgage originations down 25%.\nSo we feel we are comfortably outperforming the market and creating some real value.\nAt this stage of our journey, we can safely say much has structurally changed and improved, but we have more work to be done.\nThrough acquisitions, we have grown scale in many critical markets where our size once hindered profitability and prevented the efficient managing of daily operations.\nScale and flexibility are critical in a business that is both seasonal and cyclical.\nWe accelerated our restructuring in the midst of heavy transaction volume.\nWe closed offices where we foresaw challenges going forward.\nAnd we entered two markets we believe will be the center of real estate activity in the future.\nOn the topic of talent, we are becoming a destination for some very special talent.\nOn the -- of the top people at Stewart, what we call our senior leadership team, 50% are new or have been promoted.\nOur aggressive entrepreneurial actions have attracted great talent, not just from the title operations but across the real estate services spectrum.\nAnd in real estate technology, given our investment, our commitment and nimbleness, many talented leaders have joined us.\nThis investment and improvement and talent will support our journey for years to come.\nMost importantly, we have become more valuable to our customers by building ease into the customer experience.\nFor our larger lender partners, we have added technology and services that bring greater efficiency and usefulness, both in the current market and as well as a more digitally transformed marketplace.\nFor our smaller customers, they see the value in our ability to make their daily life easier through tools, technology, service and security.\nThe last component being of vital importance is wirefraud has become a critical issue for agents and the very reason we have partnered with Certified.\nI will leave with you a couple of thoughts.\nFirst, while our operational performance has benefited from the historic real estate market we are in, here at Stewart, we are focused on building a business that will thrive through the full real estate cycle and also be able to take advantage of technology and digitization to further transform the closing process.\nWe intensely focus on driving the digital innovation required to deliver a superior closing process today and into the future.\nAnd I am confident our investments have positioned us for the current and future success.\nSecond, while it is critical to build toward a vision of fully automated and digitized closing process in the future for now, at its core, title insurance remains a technology-enabled but execution-driven business, in which the clearing of title removes risk from customers who are ultimately making the largest purchase of their lifetime.\nThis is a very important reality.\nOur journey continues, and we are a quarter closer to our goal.\nAnd David will now update everyone on the results of the quarter.\nAlthough we are entering a seasonally slower real estate period, real estate markets remain strong, driven by demand and favorable interest rates.\nCommercial is showing good recovery, particularly in industrial, energy and multifamily.\nThere are going to continue to be several watch items that could impact future business performance, including Fed and government policy and action, improving yet historically high mortgage delinquency and forbearance, a lingering virus, rising inflation, and slower supply chains.\nConsistent with our strategy and Fred's comments, we continue to focus on the areas that will have the most meaningful and durable impact on our long-term operating performance: gaining scale in attractive direct markets; improving scale and geographic focus on agency and commercial operations; broadening and scaling lender services offerings; and throughout our business, improving service and digital capabilities to provide ease of use and better user experience.\nFor the third quarter of 2021, Stewart yesterday reported net income of $89 million and diluted earnings per share of $3.26 on total operating revenues of $830 million.\nThe adjustments to our third quarter net income were primarily driven by a gain relating to an acquisition contingent liability adjustment.\nCompared to last year, total title revenues for the quarter increased $205 million or 37% due to solid results from our residential agency and commercial operations.\nThe title segment generated pre-tax income of $119 million, which is $37 million higher than last year's quarter as a result of this revenue growth and continued management focus.\nPretax margin for the segment also improved 90 basis points to 15% compared to last year.\nWith respect to our direct title business, residential revenues increased $55 million or 23%, driven by higher purchase transactions and improving scale.\nResidential fee per file was approximately $2,400, a 24% improvement compared to last year's average fee per file due to a higher purchase mix.\nDomestic commercial revenues improved $28 million or 76% due to increased transaction volume and higher average fee per file, which was $15,400 versus $9,700 in last year's quarter.\nTotal international revenues increased $17 million or 49%, primarily due to improved volumes in our Canadian operations.\nTotal opened and closed orders in the third quarter decreased 13% and 3% respectively due to lower refinancing transactions consistent with the market trend.\nHowever, commercial and purchase closed orders increased 11% and 8% respectively compared to the third quarter of 2020.\nIn line with our direct title business, agency operations generated a strong quarter, with revenues improving 42% to $402 million versus $283 million last year.\nThe agency remittance rate for the third quarter was 17.9% compared to 18.2% last year.\nOn a year-to-date basis, it was 17.8% for both '21 and '20.\nOn title losses, total title loss expense increased $2 million or 7% primarily as a result of higher title revenues, partially offset by favorable claims experience.\nAs a percentage of title revenues, the title loss expense in the third quarter was 4% compared to 5% in the prior year quarter.\nIn regard to operating expenses, which consist of employee and other operating costs, total operating expenses increased primarily in relation to higher revenues.\nEmployee costs as a percentage of operating revenues improved to 24% from 26% last year, while other operating expenses increased to 18% from 17% last year primarily due to increased pass-through appraisal and service costs.\nExcluding these costs, our overall other operating expense ratio would have been similar to last year.\nOn other matters, regarding Informative Research, the transaction closed at the end of September.\nAt that point, the company had $85 million in run rate revenues and a 15%-plus pre-tax margin, with new customers to be onboarded and a good pipeline of future business that should grow both the top and bottom line going forward.\nOur financial position remains very strong to support our customers, employees and the real estate market.\nOur total cash and investments on the balance sheet are approximately $585 million over regulatory requirements, and we had about $74 million on our existing line credit facility.\nStockholders' equity attributable to Stewart increased to $1.2 billion at September 30, 2021, with a book value of approximately $45 a share.\nLastly, net cash provided by operations for the third quarter increased to $107 million compared to $91 million from last year's quarter.\nWe remain grateful for and inspired by our customers and associates, advocates for everyone's improved safety and prosperity, and confident in our support of real estate markets.\n Assistant:", "chosen": "qtrly diluted earnings per share of $3.26 ($3.17 on an adjusted basis).\n"}
{"prompt": "Human: With that, I'll now turn things over to Mike.\nLet me start with an update on our ongoing response to the COVID-19 pandemic.\nWe continue to take all necessary measures to ensure the health and safety of our workforce and have implemented policies and procedures that follow the guidelines established by the CDC, OSHA, and local health and governmental authorities to protect our workforce and contractors.\nOur COVID-19 task force continually monitors and evaluates the evolving situation and responds and adjusts as the environment develops.\nTurning to our third quarter performance.\nCokemaking operations performed well despite operating at turndown levels.\nAll of our facilities demonstrated excellent cost discipline and delivered results in line with our expectations despite the challenging macro environment.\nAnother significant achievement for SunCoke during the quarter was the extension of the Haverhill II contract with AK Steel for an additional two years.\nThat contract now expires on June 30, 2025.\nThis extension further illustrates the strength and long-term nature of our relationships with our customers.\nDuring our previous quarter's earnings call, we announced that SunCoke would enter the foundry coke market.\nThe testing, development and capital deployment activities necessary for profitable foundry coke market production are going well, and we are excited to enter this new market with a high-quality product.\nWe have tested our foundry coke in Cupolas with a number of potential customers, and the results have been very encouraging.\nWe are now well positioned to profitably enter the foundry coke market in 2021.\nWe continue to execute on our revised 2020 objectives and are well positioned to achieve our full year adjusted EBITDA guidance.\nMoving on to third quarter performance.\nAs you could see on slide four, diluted earnings per share was a loss of $0.03 per share in the third quarter of 2020 compared to a loss of $1.81 per share in the third quarter of 2019.\nThe prior year period included $1.94 per share impairment charge related to our logistics goodwill and long-lived assets at CMT. Excluding this noncash charge, earnings per share was down quarter-over-quarter by $0.16, mainly due to lower volumes across the segments.\nLooking at adjusted EBITDA, this came in at $47.8 million in the third quarter of 2020 versus $66.7 million in the third quarter of 2019.\nAdjusted EBITDA from the coke operations decreased $11.8 million compared to the prior year period.\nDomestic sales volumes were approximately 190,000 tons lower than the prior year due to customer turndowns.\nThe volume shortfall was partially offset by lower operating costs.\nAdjusted EBITDA from the Logistics segment decreased by $5.3 million versus third quarter of 2019.\nThe throughput volumes at CMT and the domestic terminals were lower by approximately 1.4 million tons versus the prior year.\nSlide five bridges the third quarter 2019 adjusted EBITDA to the third quarter 2020 adjusted EBITDA.\nAs we discussed on our second quarter conference call, in response to a challenging and unprecedented environment, we partnered with our coke customers to address their near-term coke needs.\nIn exchange for the extension of several coke contracts, we agreed to reduce our coke production in 2020 by approximately 550,000 tons.\nSubstantially all of this reduction will occur in the third and fourth quarters of 2020.\nThis volume decrease contributed to lower adjusted EBITDA from coke operations in the third quarter of 2020 as compared to the prior year.\nStrong cost control partially offset the impact of these lower volumes.\nThe logistics operations were $5.3 million lower quarter-over-quarter due to lower volumes and lower pricing, which was again offset by lower operating costs.\nCorporate expenses in the quarter includes foundry-related research and development costs of approximately $1 million.\nAnd we're also impacted by period-over-period mark-to-market adjustments in deferred compensation, driven by changes in the company's share price.\nSlide six details the Domestic Coke operating performance.\nWe sold 868,000 tons of coke in the quarter.\nSales volumes for all facilities were impacted by the volume relief provided to our customers.\nQ3 2020 adjusted EBITDA per ton was approximately $56 per ton compared to $57 per ton in Q3 of 2019.\nThe decrease in adjusted EBITDA per ton was due to lower sales volume but was largely offset by favorable cost recovery and strong cost management.\nOur plants have been diligent in lowering costs where possible by managing supplies and services, overtime, contractor usage, postponing capital work and various other efforts.\nMoving to slide seven.\nLogistics adjusted EBITDA was $4.3 million in Q3 of 2020 versus $9.6 million in Q3 of 2019.\nCMT contributed $1.7 million to Q3 2020 adjusted EBITDA as compared to $7.4 million in Q3 2019 on comparable volume.\nThe deterioration of adjusted EBITDA at CMT is due largely to lower pricing.\nThe domestic terminals handled approximately 2.2 million tons in Q3 of 2020 versus 3.4 million tons in Q3 of 2019.\nThe lower volumes at domestic logistics terminals were more than offset by the measures taken to reduce costs, including a meaningful workforce reduction.\nMoving on to the next slide.\nYou could see on the chart that our cash balance at the end of the quarter was $86 million.\nIn the quarter, cash flow from operations generated $74.5 million, and we had capex of $16.5 million.\nWe paid down a portion of the revolver borrowing as working capital charges were a source of cash this quarter.\nWe expect working capital to reverse in the fourth quarter as we build coal inventories going into the winter and as we prepare for an increase in production for 2021.\nAdditionally, we paid a $0.06 per share dividend in the quarter, which was a use of cash of $5 million and today, announced the declaration of the third quarter dividend.\nWe established the dividend at a rate that we believe is sustainable even during challenging market conditions.\nAnd while this is a decision made quarterly by our Board of Directors, we believe we have ample liquidity to maintain this dividend.\nAt the end of the quarter, on an LTM basis, our gross leverage was 3.37 times, and our net leverage was 2.98 times.\nWe intend to continue executing on our long-term capital allocation priorities with the primary focus on reducing gross leverage to three times or lower.\nTo that end, we repurchased $7.5 million face value of SXCP notes in the third quarter and an additional $33.2 million here in Q4.\nWrapping up on slide nine.\nAs we continue to operate during these extraordinary times, our first priority continues to be the safety and well-being of our employees and contractors.\nWe will continue to do everything possible to ensure that they are well-positioned, are well-protected and able to perform their jobs with confidence.\nWe remain focused on our core businesses and how to best-optimize our operations, including our logistics assets.\nAs we announced in the previous quarter, we have made significant progress in reducing our cost structure and adding near-term stability by working collaboratively with our customers to address both current market challenges and longer-term supply requirements.\nWe also continue to maintain our asset base to ensure that we are able to operate efficiently in the long term, even as operating levels may fluctuate in the near term.\nWe are proud of the investments we have made, creating the highest quality assets in the industry, which we are committed to fully utilizing and maintaining.\nFinally, we are confident in the revised financial targets we have put forward and our entire organization is focused on achieving these results.\nWith that, we can open up for Q&A.\n Assistant:", "chosen": "compname reports q3 loss per share $0.03.\nq3 loss per share $0.03.\n"}
{"prompt": "Human: This information can be accessed by going to the Investor Relations section of the website.\nDuring the call, we will refer to non-GAAP financial measures in discussing the company's performance.\nYou can find a reconciliation of these measures to GAAP financial measures in our materials for today's call.\nFinally, Synchrony Financial is not responsible for and does not edit or guarantee the accuracy of our earnings teleconference transcripts provided by third parties.\nThe power of Synchrony's model continued to show through in our third quarter financial results.\nWe continued to reach and serve more partners and customers.\nNew accounts grew 17% to 6.2 million and average active accounts increased 5% to 67.2 million during the period.\nThis is in large part attributable to the powerful combination of our data driven insights, our seamless customer experiences, and our industry-leading product suite, which resonates deeply with customers.\nSynchrony's omnichannel capabilities enable our partners and customers to connect wherever and whenever they want to be met and the variety of financing options and value propositions we offer empowers them with choice.\nAs we continue to anticipate and deliver on the needs of our partners and customers, we drive more value and greater utilization.\nThis translated to an 11% increase in purchase volume per active account during the third quarter and 16% growth in total purchase volume compared to last year.\nOf course, this strength in purchase volume was largely offset by the persistently elevated payment rate trends resulting from government stimulus and industrywide forbearance actions, leading to a 2% increase in loans, including loans held for sale.\nNet interest margin of 15.45% was 165 basis points higher than last year, primarily reflecting the reduction in excess liquidity.\nOperating expenses were down 10% compared to last year and down 7% year-to-date as our cost efficiency initiatives continue as planned.\nWe remain on track to reduce about $210 million from our expense base by year-end even as we continue to invest in our business.\nThe efficiency ratio was 38.7% for the quarter largely flat with last year.\nCredit continued to perform very well.\nNet charge-offs were 2.18% for the third quarter, down 224 basis points from last year.\nNet earnings were $1.1 billion or $2 per diluted share and included a $0.33 benefit from the reserve release related to the reclassification of the Gap portfolio to held for sale.\nTurning to our balance sheet, deposits were down $3 billion or 5% versus last year, reflecting retail deposit rate actions we took to manage our excess liquidity.\nDeposits represented 82% of our funding mix at quarter-end, a slight increase versus last year due to the retirement of debt.\nDuring the quarter, we returned $1.4 billion in capital through share repurchases of $1.3 billion and $124 million in common stock dividends.\nWe also continue to reinvest in our business.\nAs we highlighted during our recent Investor Day, our ability to remain nimble and adapt to the ever-changing consumer finance landscape has been driven by our continued investment in our product suite and our innovative digital capabilities.\nIn fact, if you think about the last decade alone, the introduction of digital wallets, point of sale financing and a greater variety of installment offerings just to name a few has demonstrated the importance of diversity, accessibility, and utility in both products and experience.\nAnd so Synchrony has continuously evolved, adding new financing options, enhancing our technology platform and expanding our channels and distribution networks in order to reach and serve more partners and customers in sustainable ways that drive greater value for all.\nIn addition to launching new products and partner programs, we are remaining focused on innovative ways to get scale distribution of our product suite.\nLast week, we announced our expanded strategic partnership with Fiserv through which small businesses will now be able to access Synchrony products and services and accept private label credit card payments via the Clover point of sale and business management platform from Fiserv.\nThis will enable accelerated growth for small businesses, empowering merchants to attract more customers and generate more revenue by offering our customers greater flexibility and choice in how they make purchases.\nWe will also explore additional opportunities to cross-sell Synchrony products to existing Clover merchants.\nImportantly, this strategic partnership also deepens Synchrony's ecosystem and reinforces our growth strategy to expand and accelerate innovative product offerings through additional distribution channels.\nIt builds on our momentum to bring our products to merchants faster and leverages Synchrony's leadership in financing, analytics and services.\nWe're excited to utilize the point of sale innovations driven by Clover to continue to transform the way people purchase while helping merchants grow.\nFurthermore, as we and our partners' endeavor to provide more comprehensive customer access to financial products and resources, we are excited to expand our partnership with PayPal.\nAs announced in late September, Synchrony will be launching PayPal savings, a new PayPal branded savings account.\nThis unique opportunity will allow us to expand the distribution of our savings product to a unique set of customers with features and functionality inside the PayPal app delivering an enhanced customer experience while also further diversifying our deposit base at an attractively low cost to acquire.\nIn addition to our ongoing efforts to expand both our product suite and distribution network, we also seek to enhance partner and customer engagement through customized value propositions and omnichannel capabilities.\nWe recently launched two industry-first retail health and wellness credit cards.\nThe myWalgreens Mastercard and myWalgreens private label credit card, which reward customers with savings on future health and wellness purchases.\nMyWalgreens credit card holders can earn 10% Walgreens cash rewards on eligible Walgreens branded products and 5% Walgreens cash rewards on other eligible brands and pharmacy purchases.\nmyWalgreens Mastercard holders can also earn 3% Walgreens cash rewards on eligible grocery and health and wellness purchases everywhere else, including healthcare providers and 1% Walgreens cash rewards on eligible purchases anywhere Mastercard credit cards are accepted.\nIn a world where consumers are increasingly responsible for a greater proportion of their health-related costs, we believe these value propositions will drive considerable value while also providing greater financing flexibility for health-related needs and enhancing loyalty over time.\nFurthermore, Synchrony's digital capabilities allow us to seamlessly engage with customers wherever they are.\nWe have deep digital integration across the Walgreens web, mobile, and native app channels with the ability for customers to apply and instantly buy through all of these channels.\nWe've launched frictionless customer experiences, leveraging technology capabilities like QR codes, quick screen [Phonetic], which is a real-time pre-screen of one [Phonetic], customer-initiated pre-qualification, a direct-to-device in-store application process, card servicing integrated seamlessly into the Walgreens app and API integration with the myWalgreens loyalty program.\nAnd while it's still early, the initial data we're seeing indicates that both the value prop and dynamic customer experience we have achieved with Walgreens are resonating very well with card holders in driving spend both inside and outside of Walgreens in categories such as grocery, health and wellness.\nBy empowering our partners and customers with best-in-class wallet optionality and compelling outcomes, Synchrony is increasingly well positioned as the partner of choice.\nWith more than 65 million active accounts, Synchrony has market-leading reach and deep diverse lending insights that enable us to better anticipate the needs of customers and therefore which financing options will optimize utilization and drive lifetime value.\nSo whether it comes in the form of our dual, co-branded and private label credit cards, our various SetPay installment products or our Synchrony Mastercard, we deeply understand when, why and how customers seek financing solutions for their day-to-day purchases.\nWe're particularly excited about the opportunity we see for our Synchrony Mastercard, which allows us to tap into the $500 billion general purpose credit card market.\nWe are taking a measured approach to growth.\nHowever, by leveraging our scale and underwriting expertise, we've been able to identify better performing customer segments, acquire more customers at lower CPAs, and fine tune our channel strategy over the last two years.\nToday, Synchrony Mastercard offers a variety of value propositions, which we use in combination with our pricing strategy to expand our customer reach and optimize conversion and we have great digital utility through dApply and integration in Apple Wallet as well as our mobile app.\nThis allows customers to access their various bank products, their money market and high-yield savings accounts as well as their credit card balances and transaction data.\nThis value proposition and seamless digital experience resonates very well with our customer, leading to purchase volume growth of 36% versus the same period in 2019.\nWe're also seeing higher levels of engagement around the product and brand as spend per active account is up 40% versus 2019.\nSo we're very excited about our Synchrony Mastercard.\nIt's an important offering within our product suite strategy that we believe will enable us to capture a larger portion of customers top of wallet spend and which should [Phonetic] drive highly scalable growth and above average returns to our business over the long-term.\nSynchrony's third quarter financial results reflected broad-based strength across our business, highlighted by a double-digit purchase volume increase and continued loan growth, a significant improvement in our net interest margin, historically low losses and delinquencies, and continued cost discipline.\nThe combination of these results led to $1.1 billion in net earnings or $2 per diluted share, a return on average assets of 4.9% and a return on tangible common equity of 40.1%.\nThese results are a true testament to the power of Synchrony's unique business model, which builds on our deep domain expertise in consumer lending and leverages dynamic digital capabilities a little bit [Phonetic] through our comprehensive multi-product suite to reach and serve deep and diverse universe of partners and customers.\nLooking at our third quarter performance in greater detail, beginning with purchase volume, which grew 16% compared to last year and 16% compared to 2019 excluding Walmart demonstrates clear broad-based strength in consumer demand.\nThis is also reflected in our purchase volume per account, which increased 11% compared to last year.\nDual card and co-branded cards accounted for 40% of the purchase volume in the third quarter and increased 29% from the prior year.\nOn a loan receivable basis, excluding the impact of the reclassification of the Gap portfolio to held for sale, dual and co-branded cards accounted for 24% of the portfolio and increased 4% from the prior year.\nAverage active accounts increased 5% compared to last year and new accounts increased 17% totaling more than 6 million new accounts in the third quarter and over 17.5 million new accounts.\nIn late August, we reached an agreement for the sale of the Gap portfolio, which led to the reclassification of $3.5 billion of loan receivables to held for sale and therefore reduced our ending loan receivables balance.\nExcluding the impact of the reclassification, loan receivables would have increased by 2% versus the prior year as the period's strong purchase volume growth was largely offset by a persistently elevated payment rate.\nPayment rate for the third quarter was approximately 200 basis points higher when compared to the last year.\nInterest and fees on loans increased 2% compared to last year, reflecting similar growth in average loan receivables.\nNet interest income was 6% higher than last year, primarily reflecting a decline in interest expense due to lower benchmark rates.\nRSAs were $1.3 billion in the third quarter and 6.38% of average receivables.\nThe $367 million year-over-year increase primarily reflected the impact of the lower provision for credit losses and continued strong program performance including growth and improvement in net interest income.\nTo put this in context, remember that RSAs are designed to align interest between ourselves and each of our partners.\nThis means driving growth in attractive risk-adjusted returns enhancing program profitability.\nThis allows each partner to share the programs performance, so when profitability expands, our partners participate in that upside.\nNow when you think about the combined $1.4 billion year-over-year improvement in net interest income, net losses and the reserve change, we shared $367 million of that through the RSA.\nFocusing on our credit performance, provision for losses was $25 million.\nIncluded in this quarter's provision was reserve release of $407 million which incorporated our continued strength in credit performance and we're optimistic macroeconomic environment and the impact of reclassifying our Gap portfolio loan receivables to held for sale.\nThis resulted in a reserve reduction of approximately $247 million.\nOther income decreased $37 million, generally reflecting higher loyalty program costs from higher purchase volume during the quarter.\nOther expense decreased $106 million compared to the prior year.\nAs you recall, last year we recognized an $89 million restructuring charge and we continue to see favorability from lower operational losses.\nMoving to Slide 8 and our platform results.\nWe saw a broad-based purchase volume growth across all five platforms, reflecting strong consumer demand.\nOur Home & Auto, Diversified & Value, Digital, and Health & Wellness platforms each experienced double-digit year-over-year growth in purchase volume.\nThe 10% year-over-year increase in Home & Auto was generally driven by strong retailer performance across almost all verticals while purchase volume in Diversified & Value increased 25% reflecting the continued return to in-person retail experiences.\nIn Digital, the 21% increase was due to broad-based growth across our partners coupled with growth in our new programs with Verizon and Venmo.\nIn Health & Wellness, the 10% growth in purchase volume primarily reflected consumers being more comfortable with the environment and undergoing planned procedures.\nMeanwhile, purchase volume grew a more modest 2% in lifestyle reflecting broad-based growth across the platform, but having a tough comparable to last year's strong growth in power sports.\nLoan receivable growth trends by platform generally reflected modest growth rates versus the prior year as higher purchase volume was largely offset by elevated payment rates.\nThe one exception being in our Diversified & Value platform which was impacted by store closures in 2020.\nAverage active account trends ranged on a platform basis up by as much as 10% in Diversified & Value and 7% in Digital while Home & Auto and Health & Wellness average active accounts were generally flat.\nThe active account growth in Diversified & Value largely reflected the return to in-store retail experiences.\nDigital active accounts were up versus prior year due to greater engagement across our existing customer base as well as the impact of recent program launches.\nInterest and fee trends were generally improved across the platform with the exception of Diversified & Value, which was down due to lower receivables.\nI'll move to Slide 9 to discuss net interest income and margin trends.\nThe accumulated savings by consumers resulting from stimulus, forbearance and lower discretionary spending continue to impact the payment rates during the third quarter.\nPayment rates were approximately 260 basis points higher than our five-year historical average.\nThat said, we've begun to see some signs of moderation in certain cohorts as payment rate was about 200 basis points higher year-over-year compared to almost 300 basis points higher year-over-year comparison in the second quarter.\nWe expect the payment rate to gradually normalize as consumer spending remains robust, excess savings have peaked and widespread forbearance dissipates.\nInterest and fees were up approximately 2% in the third quarter reflecting [Phonetic] average loan receivable growth.\nNet interest income increased 6% from last year reflecting the year-over-year improvement in interest and fees as well as lower interest expense for the period.\nThe net interest margin was 15.45% compared to last year's margin of 13.8%, a 165 basis point improvement year-over-year driven by the mix of interest earning assets and favorable interest bearing liabilities costs.\nMore specifically, the mix of loan receivables as a percent of total earning assets increased by 550 basis points from 78.3% to 83.8% driven by lower liquidity held during the quarter.\nThis accounted for 106 basis point increase in our net interest margin.\nInterest bearing liabilities costs were 1.31%, a year-over-year improvement of 59 basis points primarily due to lower benchmark rates and funding mix.\nThis provided a 51 basis point increase in our net interest margin.\nThe loan receivables yield was 19.59%, a year-over-year improvement of 10 basis points.\nThis resulted in an 8 basis point improvement in our net interest margin.\nNext, I'll cover our key credit trends on Slide 10.\nFirst, let's discuss our delinquency trends where higher payment trends have continued to drive year-over-year improvements.\nOur 30-plus delinquency rate was 2.42% compared to 2.67% last year.\nOur 90 plus delinquency rate was 1.05% compared to 1.24% last year.\nIt should be noted that removing the impact of the Gap program from the third quarters of this year and last year, the 30-plus delinquency metric would have been down about 40 basis points versus 25 basis points and the 90 plus metric would be down about 25 basis points instead of 19 basis points.\nAnd in terms of our portfolio's loss performance, our net charge-off rate was 2.18% compared to 4.42% last year.\nThis year-over-year improvement was primarily driven by strong delinquency trends we've experienced.\nOur allowance for credit losses as a percent of loan receivables was 11.28%.\nLet's move to Slide 11 and discuss expenses.\nOverall expenses were down $106 million or 10% from last year to $961 million primarily reflecting the impact of the prior year's restructuring charge of $89 million and lower operational losses.\nThe efficiency ratio for the third quarter was 38.7% compared to 39.7% last year.\nThis metric remains elevated relative to our historical average due to lower revenue resulting from the impact of higher payment rate and lower average receivables.\nWe continue to maintain a disciplined focus on cost containment while we make strategic investments in our business to deepen our competitive advantage and drive long-term value for shareholders.\nMoving to Slide 12, given the reduction in loan receivables in 2020 and early 2021 coupled with the strength of our deposit platform, we continue to carry a higher level of liquidity.\nWhile we believe it's prudent to maintain a higher liquidity level during uncertain and volatile periods, we continue to actively manage our funding profile to mitigate excess liquidity and optimize our funding profile.\nAs a result of this strategy, there was a shift in our funding mix during the third quarter.\nOur deposits declined by $3.2 billion from last year and our securitized and unsecured funding sources declined by $3 billion.\nThis resulted in deposits being 82% of our funding, compared to 80% last year with securitized and unsecured funding each comprising 9% of our funding sources at quarter-end.\nTotal liquidity including undrawn credit facilities was $18.4 billion which equated to 20% of our total assets, down from 28% last year.\nBefore I provide detail on our capital position, it should be noted that we elected to take the benefit of the transition rules issued by the joint federal banking agencies, which has two primary benefits.\nFirst, it delays the effect of the CECL transition adjustment for an incremental two years.\nAnd second, it allows for a portion of the current period provisioning to be deferred and amortized with the transition adjustment.\nWith this framework, we ended the quarter at 17.1% CET1 under the CECL transition rules, 130 basis points above last year's level of 15.8%.\nThe Tier 1 capital ratio was 18% in the CECL transition rules compared to 16.7% last year.\nThe total capital ratio increased 120 basis points to 19.3% and the Tier 1 capital plus reserves ratio on a fully phased in basis decreased to 26.6% compared to 27.3% last year.\nDuring the quarter, we returned $1.4 billion to shareholders, which included $1.3 billion in share repurchases and $124 million in common stock dividends.\nOur business generates strong returns and considerable capital resulting from our commitment to drive growth at appropriate risk-adjusted returns, the scalability of our technology platform and our ongoing cost discipline.\nWe will continue to take the opportunistic approach to returning our excess capital to shareholders as our business performance and market conditions allow, subject to our capital plan and any regulatory restrictions.\nWhile there are a number of external variables that are difficult to predict with precision, we generally expect the third quarter's key operating trends to be stable in the fourth quarter.\nUnderpinning our forecast is a stable and improving macroeconomic environment and the pandemic continues to be largely in control.\nWe expect strong consumer demand through the holiday season to support continued strength in purchase volume.\nThis strength, partially offset by continued elevation in payment rates should lead to a modest growth in receivables.\nOur net interest margin will likely be consistent with 3Q '21.\nOur provision for credit losses will continue to reflect the impact of asset growth, credit performance and macroeconomic factors as well as continued reserve reductions related to the Gap portfolio.\nAs credit losses begin to normalize, we expect the RSA as a percent of average loan receivables to begin to moderate.\nLastly, turning to our operating expense, we expect the acceleration in purchase volume to contribute to a slight sequential increase in absolute dollars for the fourth quarter.\nThat said, we continue to expect the full-year operating expenses to be down compared to 2020.\nAs we close out the year and look forward to the future, we're excited about the opportunities we see to continue to drive strong financial results and shareholder value.\nWe are well positioned to execute on the strategy we laid out during our Investor Day and drive sustainable growth and attractive risk-adjusted returns simply by continuing to leverage our inherent core strengths, the breadth and depth of our business model, the scalability of our innovative digital capabilities and customer lifetime value expansion we drive through our diversified product suite and powerful value propositions.\nI'm really proud of the results that we as a team continued to deliver for Synchrony's partners, customers and stakeholders.\nWe have a truly unique understanding of the wide range of needs that our partners and customers seek to address at any given time and our differentiated approach to addressing those needs enables us to deliver solutions and experiences that deeply resonate whether it's through the optionality embedded within our diverse product suite and customized value propositions or the many ways in which we power the connection between our partners and customers, Synchrony continues to reach, engage and serve more customers and drive greater, more sustainable outcomes for our stakeholders.\nWe will now begin the Q&A session.\nSo that we can accommodate as many of you as possible, I'd like to ask the participants to please limit yourselves to one primary and one follow-up question.\nIf you have additional questions, the Investor Relations team will be available after the call.\nOperator, please start the Q&A session.\n Assistant:", "chosen": "third quarter 2021 net earnings of $1.1 billion, or $2.00 per diluted share.\nq3 net earnings included a $187 million post-tax benefit, or $0.33 per diluted share.\nq3 net interest income increased $201 million, or 6%, to $3.7 billion.\nq3 provision for credit losses decreased $1.2 billion, or 98%, to $25 million.\n"}
{"prompt": "Human: This information can be accessed by going to the Investor Relations section of the website.\nDuring the call, we will refer to non-GAAP financial measures in discussing the company's performance.\nYou can find a reconciliation of these measures to GAAP financial measures in our materials for today's call.\nFinally, Synchrony Financial is not responsible for and does not edit nor guarantee the accuracy of our earnings teleconference transcripts provided by third parties.\n2020 was a challenging year, marked by a global pandemic, economic disruption and unrest due to racial injustice.\nIt was a true test to our resilience, our agility and our strength as a business.\nWe're proud of the way Synchrony managed through these challenges.\nThough there have been significant developments that provide hope that the pandemic will begin to moderate, the virus resurgence and resulting regional shutdown and continued impact on unemployment is something we are still managing through.\nAnd though the pandemic continues to impact results, we are encouraged by some of those trends that have developed.\nLater in the call, Brian Wenzel will detail these impacts on the quarter's results and provide a view on how we think this year might develop.\nI will provide a high-level overview here.\nLet's first focus on our quarterly results, including some of our recent successes, which are outlined on slides three and four.\nEarnings were $738 million or $1.24 per diluted share, an increase of $0.09 over last year.\nLoan receivables were down 6% to $81.9 billion, and average active accounts decreased 10% from last year, with new accounts down 19%.\nPurchase volume per account increased 10% over last year to $602.\nAnd average active balance per account increased 4% to just under $1,200.\nNet interest margin was down 37 basis points to 14.64% and the efficiency ratio was 37.1% for the quarter.\nNet charge-offs hit a new low at 3.16%.\nAs a result of our liquidity and funding strategy, in response to COVID-19 impact on our balance sheet, deposits were down $2.3 billion or 4% versus last year.\nThis includes a strategic decision to slow overall deposit growth, given the excess liquidity we have.\nTotal deposits comprise 80% of our funding and our direct deposit platform remains an important funding source.\nOur ability to service and provide digital tools to customers, makes our bank attractive to depositors, and we will continue to build out additional capabilities.\nDuring the quarter -- we returned $128 million in the quarter through a common stock dividend.\nWe also announced that the Board authorized $1.6 billion in share repurchases for 2021, beginning in the first quarter.\nWe have a solid pipeline across our platforms, a mix of start-up and existing programs.\nBut we are being very disciplined around risk and returns, given the uncertainty in the current environment.\nAnd while this retail landscape is shifting, we believe similar opportunities will continue, as evidenced by recent wins.\nI will touch upon a few highlights.\nWe announced that we will become the issuer of Walgreens co-branded credit card program in the U.S., the first such credit program in the retail health sector.\nThe card will allow customers to earn rewards for purchases anywhere Mastercard is accepted.\nWe expect to launch the new program in the second half of 2021.\nThis new agreement is built upon the company's existing strategic partnership.\nCareCredit is already accepted at more than 9,000 Walgreens and Duane Reade stores.\nWe are committed to providing Walgreens customers and patients with unparalleled experiences, a best-in-class loyalty program and the ability to manage their health and wellness spending.\nIn addition, we renewed our strategic partnership with Mattress Firm.\nWe provide flexible financing solutions and innovative business tools that empowered Mattress Firm to meet their customers at critical moments in the purchasing journey, which is increasingly online.\nOur digital tools and industry-leading credit program team, including marketing, and analytic retail experts have optimized every step of the omnichannel customer journey to deliver a competitive user experience.\nWe look forward to many more years as a strategic partner of Mattress Firm.\nWe also reached a definitive agreement to acquire Allegro Credit, a leading provider of point-of-sale consumer financing for audiology products and dental services.\nAllegro offers numerous customers loan options through its merchant partners with flexible payment terms at the point of sale.\nThese products are designed to offer customers choice to purchase the products and services they need or want.\nThe addition of Allegro Credit's merchant network and customers complements our strategy of growing CareCredit, our leading health and wellness financing platform.\nThe transaction is expected to close in the first quarter of 2021.\nAltogether this quarter, we signed nine renewals and won seven new deals, along with the acquisition.\nI cannot overstate the importance of digital innovation to the success of our programs.\nConsumers are rapidly adopting technologies that enable contactless commerce and expect engagement along their digital purchase journeys.\nWe are leveraging our digital assets and continuously investing to ensure our partners are well positioned in this rapidly evolving dynamic.\nThese investments include the capabilities to empower SaaS and seamless integration with our partners' digital assets, enable customer choice at the point of sale, enhance contactless experiences, facilitate a seamless and easy application process, bring the in-store experience to a customer's digital devices for applications and payment, and integrate our financing office throughout the entire digital shopping experience.\nWe also continue to expand our digital penetration of all aspects of our customer journey: apply, buy and service.\nApproximately, 60% of our applications were done digitally during the fourth quarter and grew 18% in mobile channel applications.\nIn Retail Card, 51% of our sales occurred online.\nFinally, approximately 65% of our payments were made digitally.\nIn short, we are rising to the challenges presented by this difficult time.\nWe have strengthened the strategic position of our business and expanded the opportunity set that lies before us.\nAnd we're investing in the right strategy that will enable near-term successes while also driving considerable shareholder value over the long term.\nWith our future in mind, as you know, a few weeks ago, we announced some important changes to the leadership of this company.\nEffective April 1, I will transition to the role of Executive Chair of our Board of Directors, and Brian Doubles will become Synchrony's President and CEO.\nSynchrony means so much to me, and one of my goals as CEO was to set up a thoughtful leadership transition with a successor who will advance what we have built.\nBoth the Board and I believe there is no one in the world better equipped to do that than Brian.\nBrian has helped to build Synchrony every step of the way.\nHe has been my trusted partner for more than a decade, including through our IPO.\nWhen we started Synchrony back in 2014, we set out to build a great business with a great culture that delivers for our partners and customers every day.\nTogether, with our 16,500 employees, we are doing just that.\nWith Synchrony in a position of strength, now is the time to implement this transition, allowing Brian to continue the incredible progress that has been made and to drive the next stage of Synchrony's exciting growth journey.\nI look forward to working with Brian through this transition and continuing to support Synchrony's growth and future success as Executive Chair.\nWe truly would not be where we are or who we are today without her leadership, and it's an absolute honor to succeed her and lead Synchrony into the future.\nI am also grateful that we will continue to benefit from Margaret's expertise and leadership in her role as Executive Chair.\nAnd I am excited to partner with her and the Board, our leadership team, and especially our employees as we continue to capitalize on our momentum.\nThere is a lot to be excited about as we continue Synchrony's journey.\nWe have a strong business, a winning culture, and a tremendous opportunity to build on this strong foundation.\nAs incoming CEO, I will continue to implement the strategy that we've developed over the last few years, and which has enabled the momentum that our business has today.\nWe will continue to leverage our competitive strength, deepen our market leadership and invest in digital, data analytics and new product offerings to create a seamless customer experience.\nWe will continue to grow our business and drive value for all of our stakeholders, our investors, our employees, our partners and our customers.\nFundamental to our business is our objective to provide a full suite of products that can be tailored to serve the evolving needs of our customers and partners, while earning appropriate economic returns.\nOur partners' most critical needs are centered on their ability to offer a product that can seamlessly integrate with our digital assets and systems, deliver higher average order volumes and sales, increase conversion rates and deepen customer loyalty.\nBy the same token, customers have their own unique set needs, including financing solutions that fit within their budget, are transparent and easy and convenient to use, and which offer them flexibility in their purchase and financing decisions.\nWe have extensive experience in installment lending, which has informed our approach to equal payment financing.\nWe think about these products in two categories.\nWe offer mid- and long-term equal payment plans with promotional periods anywhere from 12 to 162 months, depending on the product category.\nWe also offer short-term equal payment plans with promotional periods of three to 12 months.\nWe offer collateralized installment products with bigger ticket purchases with promotional periods from 12 to 180 months.\nAnd we also offer short and long-term installment loans through our SetPay product.\nThese products run anywhere from three to 36 months.\nAll of these products are priced appropriately to meet our partner and customer objectives with APR starting at 0%, and each of these products, in turn, offer distinct benefits and address the unique objectives of our partners and customers.\nRevolving equal pay products, for example, can be embedded inside of an existing revolving account, eliminating the need for a customer to open a new account.\nAnd given the nature of their functionality, they also provide for repeat purchases as well as higher engagement and loyalty to the partners plan.\nMeanwhile, closed-end products can be appealed to customers that prefer regular predictable payments.\nTo put our overall equal payment financing strategy in perspective, we currently have $15 billion in equal payment balances, 56% of which have 0% APR financing.\nWe have about 74,000 partners or locations offering our payment plan products.\nAnd we have an overall repeat purchase rate of approximately 30% within 24 months of the first purchase.\nSynchrony's success in this and our other core strategies has been driven by our commitment to data-driven innovation, a deep understanding of our partners' objectives and customer needs, and our ability to adapt as the competitive landscape and market conditions have evolved over time.\nOur organization is built around being nimble, responsive and results oriented.\nWe leverage our decades of underwriting experience, our proprietary data analytics and our industry expertise in order to design and implement customized solutions that address our partners' needs while also delivering appropriate economic outcomes.\nThis is what has driven Symphony's long-standing track record and deepened our market leadership over the years.\nWe are excited to drive this momentum forward in 2021 simply by continuing to enhance the value we offer to all those we serve.\nI speak for everyone in the company when I say we look forward to working closely with them in the next chapter for Synchrony.\nAs we begin 2021, we're encouraged by the developments being made to fight the pandemic, and continue to be inspired by those in the front lines.\nFor our part, we remain dedicated to keeping our employees safe in helping our partners, customers and communities during this difficult period, guided by our values and principles.\nAnd with the partner-centric focus, we are working to help our constituents navigate this environment with an eye toward the future and the opportunities ahead of us as we begin to overcome the pandemic.\nHowever, our business mix, which includes a significant digital component and certain industries benefiting from staying at home, such as home-related products and services, veterinary services, and electronics and appliances have outbalanced against some of the effects of the economic downturn.\nPurchase volume was essentially flat, down 1% versus last year and in line with our expectations for the quarter, despite some pressure from new shutdowns and restrictions as the pandemic progressed during the quarter.\nThe continued pressure caused our average active accounts to be down 10% and a decrease in loan receivables of 6%.\nPayment rates continue to be elevated relative to normalized levels.\nInterest and fees on loans were down 11% from last year, consistent with the core decrease we experienced last quarter.\nDual and co-branded cards account for 38% of our purchase line in the fourth quarter and declined 4% from the prior year.\nOn a loan receivable basis, they account for 24% of the portfolio and declined 10% from the prior year.\nWhile we're seeing positive trending in our growth metric as we enter the quarter, the acceleration of the pandemic result in regional shutdowns and diminished effects of the CARES Act stimulus slowed that early momentum.\nWhile our sales are stable, we are encouraged by recent developments, including the recently enacted stimulus, the proposed stimulus, a new administration and national rollout of a vaccine.\nWe believe these factors will have a positive impact.\nIt should provide momentum as we progress through 2021.\nI'll provide a more comprehensive view on 2021 shortly.\nRSAs increased $18 million or 2% from last year.\nRSAs as a percentage of average receivables was 5.2% for the quarter.\nThis was elevated from the historical average, primarily due to the significant improvement in net charge-offs and the elimination of Walmart, which operated at a lower than company average RSA percentage.\nThe improvement in net charge-offs resulted in a decrease in the provision for credit losses of $354 million or 32% from last year.\nThis was partially offset by a reserve build in the fourth quarter of $119 million.\nOther income decreased $22 million, mainly due to higher loyalty costs.\nOther expense decreased $79 million or 7% from last year due to lower purchase volume and average active accounts, coupled with lower employee costs as we have begun to implement our strategic plan to reduce operating expenses.\nMoving to our platform results on slide eight sales platforms continue to be impacted in varying degrees due to COVID-19, and their trajectories through this period have been different based on factors such as business and partner mix, digital concentration, provider access and availability of hardline goods.\nIn Retail Card, loan receivables were down 8%, with the COVID-19 impact being partially offset by strong growth in digital programs.\nThat resiliency is evident in the growth in purchase line, which was up 1% over last year.\nOther performance metrics were down due to the impact from COVID-19.\nWe're excited about the launch of our new value prop with Sam's Club.\nThey are an important and valued partner, and we're excited about the changes in this program for Sam's Club members.\nThe continued strength of powersports and home specialty and payment solutions helped offset some of the impact from COVID-19.\nLoan receivables declined 2%.\nAverage active account and interest and fees on loans were down 9%, which was driven primarily by lower yield on loan receivables.\nPurchase line decreased 7% this quarter.\nWe signed several new programs and renewed several key partnerships this quarter.\nWe continue to drive growth organically through our partnerships and networks and added over 2,800 new merchants during the quarter.\nWe also continue to drive higher card reuse, which now stands at approximately 34% of purchase volume, excluding oil and gas.\nOur efforts and successes are expanding an already solid base for growth as we exit the pandemic.\nAlthough CareCredit was impacted the most by COVID-19 earlier this year, we began to see some improvement as the year progressed as providers continue to increase elective and planned services from the trough in the second quarter.\nThat said, rising infection rates and increasing stay-at-home restrictions did slow some of this progress.\nLoan receivables declined 7% with interest and fees on loans decreasing 4%, primarily driven by lower merchant discount revenue as a result of the decline in purchase volume, which was down 6%.\nAverage active accounts decreased 10%.\nAs Margaret noted earlier, we're excited about our partner activity within this platform including the acquisition of Allegro Credit, our Aspen Dental renewal and expansion and our new partnership with Community Veterinary Partners.\nDuring the quarter, we also continued to grow our CareCredit network and enhance utility of our card.\nThe expansions of our network and acceptance strategy has helped to drive reuse rate to 59% of purchase line in the fourth quarter.\nWe are proud of these achievements, I'm particularly excited about the opportunities we see to drive future growth in this platform as the impact of the pandemic subsides.\nI'll move to slide nine and cover our net interest income and margin trends.\nNet interest income decreased 9% from last year primarily driven by an 11% decrease in interest and fees on loan receivables due to the impact of COVID-19.\nNet interest margin was 14.64% compared to last year's margin of 15.01%, largely driven by the impact of COVID-19 on loan receivables, an increase in liquidity and lower benchmark rates.\nSpecifically, the mix of loan receivables as a percent of total earning assets declined approximately 30 basis points from 80.2% to 79.9%, driven by higher liquidity held during the quarter.\nThis accounted for five basis points of the net interest margin decline.\nThe loan receivables yield of 19.93% was down 94 basis points versus last year and was a driver of a 75 basis point reduction in our net interest margin.\nThe liquidity yield declined as a result of lower benchmark rates and accounted for a 30 basis point reduction in our net interest margin.\nThese impacts were partially offset by an 89 basis point decrease in the total interest-bearing liabilities cost to 1.69%, primarily due to lower benchmark rates and a higher proportion of deposit funding.\nThis provides a 73 basis point increase in our net interest margin.\nNext, I'll cover our key credit trends on Slide 10.\nIn terms of specific dynamics in the quarter, I'll start with the delinquency trends.\nThe 30-plus delinquency rate was 3.07% compared to 4.44% last year.\nThe 90-plus delinquency rate was 1.40% compared to 2.15% last year.\nHigher payment trends have helped drive the improvement in delinquency rates.\nFocusing on net charge-off trends.\nThe net charge-off rate was 3.16% compared to 5.15% last year.\nThe reduction in the net charge-off rate was primarily driven by improving delinquency trend as customer payment behavior improved throughout 2020.\nThe allowance for credit losses as a percent of loan receivables was 12.54% with the increase to last year being primarily driven by the adoption of CECL in 2020 and the impact from COVID-19.\nMoving to slide 11.\nI will cover expenses for the quarter.\nOverall expenses were $1 billion for the quarter, down $79 million or 7% from last year.\nThe decrease was driven by lower purchase volume and average active accounts as well as reduction in employee costs and operational losses.\nThe efficiency ratio for the fourth quarter was 37.1% compared to 34.8% last year.\nThe ratio was negatively impacted by lower revenue that resulted from lower receivables and lower interest and fee yield, which was partially offset by the reduction in employee costs and operational losses.\nMoving to slide 12.\nGiven the reduction in our loan receivables and strength in our deposit platform, we continue to carry a higher level of liquidity.\nWhile we believe it's prudent to maintain a higher liquidity level during this uncertain and volatile period, we are actively managing our funding profile to mitigate excess liquidity where appropriate.\nAs a result of this strategy, there is a shift in the mix of our funding during the quarter.\nDeposits declined $2.3 billion from last year.\nOur securitized and unsecured funding sources were down $2.6 billion and $1.5 billion, respectively.\nThis resulted in deposits being 80% of our funding compared to 77% last year with securitized and unsecured funding, each comprising 10% of our funding sources at quarter end.\nTotal liquidity, including undrawn credit facilities, was $23.7 billion, which equated to 24.7% of our total assets, up from 22% last year.\nBefore I provide details on our capital position, it should be noted that we elected to take the benefit of the transition rules issued by the joint federal banking agencies in March, which had two primary benefits.\nFirst, it delays the effects of the CECL transition adjustment for an incremental two years; and second, it allows for a portion of the current period provisioning to be deferred and amortized with the transition adjustment.\nWith this framework, we ended the quarter at 15.9% CET1 under the CECL transition rules, 180 basis points above last year's level of 14.1%.\nThe Tier one capital ratio was 16.8% under CECL transition rules compared to 15% last year.\nThe total capital ratio increased 180 basis points as well to 18.1%.\nAnd the Tier one capital plus reserves ratio on a fully phased-in basis increased to 27% compared to 21.4% last year, reflecting the increase in reserves as a result of implementing CECL.\nDuring the quarter, we paid a common stock dividend of $0.22 per share.\nFor the full year, we returned approximately $1.5 billion to shareholders in the form of share repurchases and common stock dividends.\nAs we finish 2020 and enter 2021, we have continued to assess the capital and liquidity strength of the company and the stability of our business at this point in the pandemic.\nWith this backdrop, the Board has authorized $1.6 billion in share repurchases for 2021, beginning in the first quarter.\nRepurchases are subject to our capital plan, and regulatory restrictions as well as overall market conditions, including any potential deterioration from the ongoing pandemic.\nNext, on slide 13, we are providing a framework on key drivers for 2021.\nIt goes without saying that the current environment will have periods of uncertainty and volatility until the pandemic is under control and the resulting impact to the economic environment is more fully known.\nWhile our visibility is limited, we're providing this framework about how we are thinking about the year might unfold based on our best assessment as of today.\nThese views assume that in the first half of the year, there is continuing pressure from the pandemic and a slow economic recovery.\nIn the second half, we assume that pandemic is largely under control and economic recovery accelerates.\nFirst quarter purchase items is expected to be consistent with the trends that developed at the end of 2020.\nSecond quarter comparisons will obviously reflect the economic trough experienced in second quarter '20.\nThe second half of the year, we anticipate improving growth trends as the pandemic impact moderate and macroeconomic growth accelerates.\nRegarding loan receivable growth.\nIn the first half, we expect continued higher payment rates from the stimulus actions to impact loan growth.\nIn the second half of the year, we believe payment rates will slow as stimulus abate, and we return to more normalized payment behavior patterns, combined with the expected increase in purchase volume from an improving macroeconomic environment.\nThese drivers will contribute to accelerating asset growth.\nFor net interest margin, overall, we expect continued improvement as we enter 2021.\nRegarding the improvement, in the first half, we anticipate that higher payment rates will contribute to continued excess liquidity impacting asset mix.\nIn the second half, excess liquidity is reduced through asset growth and slowing payment rates, which drive normalized interest and fee yields leading to increasing NIM.\nWith respect to our view on credit for the year, delinquencies are expected to increase with peak delinquencies occurring in third quarter 2021 and result in sequential quarter increases in net charge-offs.\nWe would expect reserves to be largely driven by asset growth and the impacts from any changes in the credit macroeconomic scenario.\nWe anticipate a reserve release during 2021 as the credit macroeconomic environment develops.\nRSAs will remain elevated in the first half, primarily reflecting the strong program performance, including revenue and net charge-offs.\nIn the second half, we expect lower RSAs, generally reflecting the higher net charge-offs, partially offset by higher revenue.\nAs we outlined previously, we've implemented cost reductions across the organization.\nWe believe this will result in expense reductions of approximately $210 million during the year.\nPartially offsetting these cost reductions will be expense increases related to growth in addition to the anticipated increase in delinquent accounts.\nWe will continue to closely monitor how the pandemic develops and its impact to the macroeconomic environment and adjust as the landscape unfolds.\nAs we enter 2021, we remain optimistic in the strength and the strategic position of our business to meet the challenges and exit the pandemic period in a stronger position than when we entered.\nWe will continue to make investments in our people, products, technology and platforms to drive long-term value and continue to ensure safety of our employees, while meeting the needs of our partners, merchants, providers and cardholders.\n Assistant:", "chosen": "compname reports q4 net earnings of $738 mln or $1.24 per diluted share.\nq4 earnings per share $1.24.\nqtrly net interest income decreased $370 million, or 9%, to $3.7 billion.\n"}
{"prompt": "Human: I'm joined by our Chief Executive Officer, Patrick Beharelle.\nWe use non-GAAP measures when presenting our financial results.\nAny comparisons made today are based on a comparison to the same period in the prior year, unless otherwise stated.\nTotal revenue for the third quarter was down 25% and we posted positive net income of $9 million or $0.25 per share.\nWe are very pleased that the company has returned to profitability.\nWe've taken the right actions to restore profitability and position the company for long-term growth as the economy recovers.\nDuring the third quarter, we saw steady improvements in our revenue trends across most of the industries and geographies we serve.\nOur cost management actions continue to show meaningful results which helps position us for stronger incremental profit margins when revenue growth returns.\nNow, let's turn to our results by segment, starting with PeopleReady.\nPeopleReady is our largest segment representing 61% of trailing 12-month revenue and 76% of segment profit.\nPeopleReady is the leading provider of on-demand labor and skilled trades in the North American industrial staffing market.\nWe service our clients via a national footprint of physical branch locations as well as our JobStack mobile app.\nPeopleReady's revenue was down 29% during the quarter and we saw intra-quarter improvement with revenue down 27% in September versus down 32% in July.\nPeopleManagement is our second largest segment representing 30% of trailing 12-month revenue and 15% of segment profit.\nPeopleManagement provides onsite industrial staffing and commercial driving services in the North American industrial staffing market.\nThe essence of a typical PeopleManagement engagement is supplying an outsourced workforce that involves multi-year, multi-million-dollar onsite or driver relationships.\nThese types of client engagements tend to be more resilient in a downturn.\nRevenue for PeopleManagement was down 8% during the quarter with the top line down just 2% in September versus down 12% in July.\nTurning to our third segment, PeopleScout, represents 9% of trailing 12-month revenue and 9% of segment profit.\nPeopleScout is a global leader in filling permanent positions through our recruitment process outsourcing and managed service provider offerings.\nRevenue was down 48% during the quarter versus down 53% in Q2.\nPeopleScout results were particularly impacted by exposure to large travel and leisure clients.\nNow I'd like to shift gears and update you on our key strategies by segment, starting with PeopleReady.\nOur long-term strategy at PeopleReady is to digitize our business model to gain market share.\nMost of our competitors in this segment are smaller mom and pops that don't have the scale or capital to deploy something like our JobStack mobile app.\nSo this, along with our nationwide footprint, is what makes us unique.\nWe began rolling out JobStack in 2017 to our associates and in 2018 we launched the client side of the app.\nWe now have digital fill rates north of 50% and more than 26,000 clients using the app.\nIn Q3 2020, we filled 726,000 shifts via JobStack representing a digital fill rate of 51%.\nOur client user count ended the quarter at 26,100, up 37% versus Q3 2019.\nIn mid-2020, we introduced new digital onboarding features that cut application time in half.\nThis has led to some great operational results as we increase the ratio of associates put to work versus all applicants.\nEarly results indicate a 20% increase in worker throughput.\nThis is exciting because as we move back to a supply constrained environment, an increase in worker throughput will translate directly to revenue.\nWe believe we can further improve applicant throughput as we fine tune our processes.\nRight now, we're also very focused on driving heavy client user growth.\nA heavy user is a client who has 50 or more touches on JobStack per month whether it's entering an order, rating a worker or approving time.\nJobStack heavy users have consistently posted better year-over-year growth rates compared to the rest of PeopleReady.\nThe growth differential is north of 20 percentage points and has held true even in this market downturn.\nThis makes sense, since we have many clients who use multiple vendors and we can grow our business simply by growing our wallet share even if our client's total volume is flat to down.\nOur focus on heavy user growth is starting to pay-off.\nWe doubled our heavy user mix since 2019, up from 11% of our business in fiscal 2019 to 22% for 2020 year-to-date.\nOur positive strategic progress is obviously overshadowed by the macro environment at the moment, but we continue to invest in our digital strategy and believe this approach will help PeopleReady emerge stronger than ever.\nAs our digital strategy continues to mature, we're taking a look at areas within PeopleReady where we can reduce our service delivery costs.\nIn 2020, we began testing a few different strategies.\nIt's too early to quantify potential savings, but we're developing a plan where cost savings will come from a mixture of both technology utilization and changing our go-to-market approach.\nAs we move down this path, I want to emphasize that the value and importance of our branch network should not be underestimated.\nWe need to maintain a local presence in the communities where we do business.\nAt the same time, we do see an opportunity to centralize more services and reorient job roles to improve our client-focused delivery.\nWe'll continue to update you on this front as plans evolve.\nTurning to PeopleManagement, our strategy is to focus on execution and grow our client base.\nInitiatives we've already implemented include sharpening our vertical market focus to target essential manufacturers and leverage our strength in e-commerce.\nThese are verticals that have held up well relative to the decline in non-essential goods at traditional bricks and mortar retailers.\nWe've also completed the integration of our Staff Management and SIMOS brand sales teams allowing the integrated team to offer a full portfolio of hourly and cost-per-unit solutions to clients.\nThese strategic initiatives are already paying off.\nEven in the middle of this downturn, year-to-date new business wins at PeopleManagement are up 13% versus the prior year as we've secured $70 million of annualized new business wins versus $62 million the prior year.\nApproximately half of new wins are in our Q3 run rate.\nAs the demand environment recovers, we'll be increasing sales resources and investing in client care programs to maintain our momentum.\nTurning to PeopleScout, our strategy is to capture opportunities in an industry poised for growth.\nBefore COVID struck, we noticed a trend toward in-sourcing, with a handful of clients bringing more recruitment functions in-house.\nMany of those in-house teams have been reduced or eliminated during the pandemic and we expect a trend reversal back toward outsourcing as the economy recovers.\nOur strategy leverages our strong brand reputation as we are consistently ranked as a market leader by independent industry analysts and PeopleScout is traditionally the highest margin business within our portfolio.\nFinally, I'd like to take a moment to touch on our balance sheet and capital allocation priorities.\nWe do have a solid balance sheet.\nOur credit facility provides ample liquidity and we ended Q3 with more cash than debt.\nBefore the pandemic hit, we were generating substantial free cash flow and were focused on returning capital to shareholders.\nOver the last five years, we've returned $169 million of capital to shareholders via share repurchases.\nAs we return to a more normalized environment, investing in our organic business opportunities will remain our top priority, but we'll also expect to renew our focus on returning excess capital to shareholders.\nI'll now pass the call over to Derrek who will share greater detail around our financial results.\nTotal revenue for Q3 2020 was $475 million representing a decline of 25%.\nWe posted net income of $9 million or $0.25 per share and adjusted net income of $8 million or $0.24 per share.\nWhile this quarter's bottom line results are lower than the prior year period, they are sizably better than the losses incurred in Q2 this year due to further improvement in our revenue and SG&A expense trends.\nThe Q3 year-over-year revenue decline was 14 percentage points better than the Q2 year-over-year revenue decline and the Q3 year-over-year SG&A decline was 8 points better than the Q2 year-over-year SG&A decline.\nAdjusted EBITDA was $18 million, down from $39 million in Q3 2019, but up from a loss of $5 million in Q2 2020.\nGross margin of 23.3% was down 300 basis points.\nOur staffing businesses contributed 230 basis points of compression with 180 basis points of pressure from negative bill and pay rate spreads and 50 basis points from mix and other items.\nPeopleScout contributed another 70 basis points of compression primarily due to client mix and lower volume.\nI'm going to spend a few moments stepping back from this quarter's gross margin results and share our perspective on the ebb and flow of gross margin across an economic cycle.\nDuring a recession, the bill rates in our staffing businesses come under pressure as customers look to cut costs and as staffing companies compete in a lower demand environment.\nHowever, pay rates do not come under the same amount of pressure which creates gross margin contraction.\nIn this particular recession, pay rate inflation has accelerated to entice contingent employees given COVID health concerns and due to the amount of federal unemployment benefits available, which for jobs on the lower-end of the pay scale when combined with state unemployment benefits, can provide more take-home pay than a work assignment.\nIn the recruitment process outsourcing business, gross margin also comes under pressure, but this has more to do with volume than price as RPO cost of sales is mostly comprised of recruiting personnel costs.\nWhile we are able to reduce recruiting costs by reducing headcount, there is a semi-fixed component that creates negative operating leverage in the cost of sales for the RPO business as revenue declines, similar to the dynamic with the rest of our enterprise personnel costs that are reported in SG&A expense.\nAs the economy recovers, pricing power has historically swung back to the industrial staffing industry as demand for talent surges due to economic growth as well as a preference for more contingent labor due to the hesitation of businesses to hire permanent staff associated with uncertainty about the sustainability of the recovery.\nLikewise, additional revenue volume has assisted the recovery of RPO gross margin.\nWe have an experienced team that has operated through these economic cycles and we have tested processes in place to help ensure we seize the opportunity to improve our gross margin in the future.\nTurning to SG&A expense, we turned in another quarter of very strong results.\nExpense was down $40 million or 31% compared to Q3 2019.\nWe also continue to challenge prior assumptions about the costs needed to run the business and invest in technology.\nWe are optimistic that these actions will result in a more efficient service delivery model.\nThe opportunity for additional cost savings is greatest in our PeopleReady business.\nWe see opportunity to further reduce the costs of our branch network while maintaining the strength of our geographic footprint through a greater use of technology, centralizing work activities, and repurposing job roles.\nWe've made good progress in 2020 by centralizing certain recruiting activities and repurposing certain job functions.\nA necessary precursor to further reducing the costs of the branch network is a broader repurposing of jobs to increase centralization which can be accomplished through the normal course of employee attrition.\nClient-facing job functions must also be repurposed to ensure we continue to meet the service expectations of our clients.\nWe will be testing these plans throughout 2021 before we make large-scale changes which will also help us provide more clarity on the savings opportunity.\nTurning to our tax rate, our effective tax rate was 30% in Q3, which is higher than what we had experienced in prior years as a result of this quarter's performance reducing the net operating loss for the year.\nThis results in a reduction to our CARES Act carry-back benefit expectation resulting in some catch up expense this quarter.\nAdditional information on the components of our effective tax rate is available in our 10-Q filed today.\nTurning to our segments, PeopleReady, our largest segment, saw a 29% decline in revenue and segment profit was down 39%.\nWe saw nice intra-quarter revenue improvement with September down 27% compared to 32% in July with further improvement to a decline of 19% in October.\nThe improvement was broad-based across most geographies and industries with construction, manufacturing, services, and transportation industries leading the way.\nPeopleManagement saw an 8% decline in revenue and segment profit was up 35%.\nPeopleManagement experienced encouraging intra-quarter revenue improvement with September down 2% compared to 12% in July.\nMonth-to-date for October, PeopleManagement was up 1%.\nAbout half of the segment profit growth is attributable to cost management actions and half from unique costs in Q3 last year creating a favorable comparison this year.\nTurning to PeopleScout, we saw a 48% decline in revenue and segment profit was down 97%.\nIntra-quarter revenue did show improvement with September down 40% compared to 52% in July.\nAs Patrick noted, PeopleScout results were adversely impacted by exposure to travel and leisure clients, which made up roughly 25% of the prior year mix and revenue for this vertical was down 74% year-over-year.\nNow let's turn to the balance sheet and cash flows.\nOur balance sheet continues to shine, providing financial flexibility and stability.\nOur credit facility provides ample liquidity and our debt position is at its lowest level since 2012.\nWe also repurchased 9% of our common stock at favorable prices earlier this year to boost shareholder return.\nYear-to-date cash flow from operations was $99 million as compared to $53 million for Q3 year-to-date last year with the increase coming from the deleveraging of accounts receivable.\nWe've been on a nice trajectory of reducing our total-debt-to capital.\nIn 2017, our total debt-to-capital was 18%; in 2018, 12%; in 2019, 6%; and as of Q3 this year, nearly zero.\nFor the fourth quarter of 2020, we expect gross margin contraction of 250 basis points to 190 basis points.\nThis is less contraction in comparison with Q3 due to favorable mix and less recruiting staff in our PeopleScout business given the current revenue volume.\nOur cost management strategies are on track.\nFor the fourth quarter of 2020, we expect a year-over-year SG&A reduction of $23 million to $27 million, which would result in $102 million to $106 million of savings in 2020.\nAll-in, this would produce a decrease in SG&A expense of about 20% in 2020.\nI'd also like to remind everyone that our business can generate an incremental operating margin of about 20% on incremental revenue which can of course run much higher with gross margin expansion or further SG&A declines.\nFor capital expenditures, we expect about $7 million for the fourth quarter of 2020, which is net of approximately $4 million of build out costs for our Chicago headquarters that are to be reimbursed by our landlord.\nOur outlook for fully diluted weighted average shares outstanding for the fourth quarter of 2020 is 34.8 million.\nWith respect to our tax rate, we are not able to provide an effective income tax rate outlook due to the variability associated with the relatively lower pre-tax income base and the semi-fixed nature of the Work Opportunity Tax Credit.\nIt's also worth noting that the Work Opportunity Tax Credit expires at the end of this year.\nWhile this program has been in existence for decades and has always been renewed due to its appeal to both political parties, the timing can be lumpy.\nTotal benefits derived from this program were $11 million for fiscal 2019 and $6 million year-to-date in Q3 of this year.\nWhile we have a lot more work to do to get back to where we were before COVID hit, we like the progress we have made.\nWe've taken the right actions to restore profitability and have done so without losing our operational strengths or technology momentum.\nIt has challenged us to think of new ways of running our business more efficiently.\nOur balance sheet is strong.\nOf most importance, the spirit of our employees is high.\nThis experience has created an even deeper sense of teamwork and camaraderie among all of us and we are excited about the opportunities in front of us.\n Assistant:", "chosen": "q3 adjusted earnings per share $0.24.\nq3 earnings per share $0.25.\nq3 revenue $475 million versus refinitiv ibes estimate of $454.4 million.\n"}
{"prompt": "Human: Please visit our website at transdigm.com to obtain a supplemental slide deck and call replay information.\nThe company would also like to advise you that during the course of the call, we will be referring to EBITDA, specifically EBITDA, as defined, adjusted net income and adjusted earnings per share, all of which are non-GAAP financial measures.\nAs usual, I'll start off with a quick overview of our strategy, a few comments about the quarter, and then Kevin and Mike will expand and give more color.\nTo reiterate, we're unique in the industry in both the consistency of our strategy in good and bad times, as well as our steady focus on intrinsic shareholder value creation through all phases of the aerospace cycle.\nTo summarize, here are some of the reasons why we believe this.\nAbout 90% of our sales are generated by proprietary products, and over [ three-quarters ] of our net sales come from products for which we believe we are the sole source provider.\nMost of our EBITDA comes from aftermarket revenues, which generally have significantly higher margins and over any extended period of time have typically provided relative stability in the downturns.\nWe follow a consistent long-term strategy.\nSpecifically, we own and operate proprietary aerospace businesses with significant aftermarket content.\nSecond, we utilize a second -- a simple, well-proven, value-based operating methodology.\nThird, we have a decentralized organization structure and a unique compensation system closely aligned with our shareholders.\nFourth, we acquire businesses that fit this strategy and where we see a clear path to PE-like returns.\nAnd lastly, our capital structure and allocation of our capital are key parts of our value-creation methodology.\nOur long-standing goal is to give our shareholders private equity-like returns with the liquidity of a public market.\nTo do this, we have to stay focused on both the details of value creation, as well as careful allocation of our capital.\nWe see a bit more light at the end of the tunnel but are still in a pretty tough commercial aerospace market environment.\nOn a positive note, we saw another significant sequential increase in quarterly commercial aftermarket bookings in Q2.\nThis is the second quarter in a row with a significant step-up.\nThe stalling of the air travel recovery that concerned us last quarter, though still spotty, looks somewhat better now but may have pushed a ramp-up a quarter or so out.\nThe two most important operating items we have focused on through this downturn were on the things we can, to some degree, control: one, tightly managing our cost, and I think we have this well in hand; second, assuring substantial liquidity, and this also seems well in hand.\nAbsent some large additional dislocation or shutdown, we should come out of this with substantial firepower.\nWe continue to look at possible M&A opportunities and are always attentive to our allocation.\nBoth the M&A and the capital markets are always difficult to predict and especially so in times like these.\nBut in Q2, we acquired the Cobham Aero Connectivity business for an enterprise value of $965 million.\nOn the divestiture front, in the last 60 days, we signed agreements to sell three additional, less proprietary and mostly defense businesses for about $240 million.\nCollectively, these businesses have revenues of roughly $180 million and EBITDA margins in the low 20%.\nWe expect to receive all the proceeds in Q3.\nWe still have one primarily defense business that we are currently considering for sale.\nAt this time, I do not anticipate that we will make any significant dividend or share buybacks for the next three or four quarters or at least until the commercial market show stronger signs of a rebound and our leverage level settles down a bit, but we'll keep watching and see if our view changes over time.\nWe believe we are about as well-positioned as we can be right now, and we'll watch for market developments and react accordingly.\nAnd now let me hand it over to Kevin to review our performance.\nToday, I will first provide my regular review of results by key market and profitability of the business for the quarter.\nI'll also comment on recent acquisition activity and fiscal 2021 outlook.\nDuring our Q2 fiscal 2021 quarter, there continued to be a significant unfavorable impact on our business as a result of the reduced demand for travel due to the pandemic.\nHowever, the commercial aerospace industry has continued to show signs of recovery in recent months with the distribution of the COVID-19 vaccine and increasing air traffic, especially in certain domestic markets.\nIn our business, we saw another quarter of sequential improvement in commercial aftermarket revenues with total commercial aftermarket revenues up 12% over Q1.\nAdditionally, I am very pleased that we continue to sequentially expand our EBITDA as defined margin as a result of careful management of our cost structure and focus on our operating strategy in this challenging commercial environment.\nNow we will review our revenue by market category.\nFor the remainder of the call, I will provide color commentary on a pro forma basis compared to the period -- the prior-year period in 2020.\nThat is assuming we own the same mix of businesses in both periods.\nThis market discussion now includes the recent acquisition of Cobham Aero Connectivity and removes the impact of any divestitures completed by the end of Q2.\nIn the commercial market, which typically makes up close to 65% of our revenue, we will split our discussion into OEM and aftermarket.\nOur total commercial OEM market revenue declined approximately 43% in Q2 when compared with Q2 of the prior-year period.\nWe continue to assume the demand for our commercial OEM products will be significantly reduced throughout the remaining half of 2021 due to reductions in OEM production rates and the airlines deferring or canceling new aircraft orders.\nLonger term, the commercial aerospace market is fluid and continues to evolve.\nWe anticipate a depressed commercial OEM end market for some uncertain period of time when compared to pre-COVID levels.\nHowever, recent commentary from Airbus on potential A320 rate ramps in 2022 and beyond are certainly encouraging.\nOn a positive note, Q2 bookings demonstrated strong sequential improvement of over 20% compared to Q1 bookings and solidly outpaced sales.\nAs we mentioned last quarter, the bookings improvement we are seeing is likely an indicator of OEM destocking slowing.\nNow moving on to our commercial aftermarket business discussion.\nTotal commercial aftermarket revenues declined by approximately 39% in Q2 when compared to prior-year Q2.\nThis quarterly decline was primarily driven by decreased demand in our passenger and interior submarkets.\nHowever, our commercial transport freight market returned to modest growth and slightly offset this decline.\nTo repeat, sequentially, total commercial aftermarket revenues grew approximately 12% in Q2, another encouraging data point.\nCommercial aftermarket bookings were still down this quarter compared to the same prior-year period.\nHowever, the bookings declined less than the observed flight traffic declines with freight and business jet bookings continuing to improve.\nQ2 bookings sequentially improved almost 30% and solidly outpaced sales.\nThis is likely the result of destocking slowing in airlines, increased flight activity and future planning.\nTo touch on a few key points of consideration, global revenue passenger miles are still low though off the bottom and now recovering.\nIATA's most recent forecast expects that calendar-year 2021 revenue passenger miles will be 57% below 2019, but we are cautiously optimistic.\nThere was an uptick in domestic air traffic in March and April, and the airlines are seeing strength in bookings that will drive summer flight schedules.\nCertain airlines have already announced domestic wide-body routes to serve the anticipated demand this summer.\nIATA does forecast a strong second half of calendar 2021 with a rebound in domestic travel in the U.S. back at 2019 levels of revenue passenger miles and China well above that level.\nThere is also potential for international travel openings more as governments consider revising travel restrictions.\nFor cargo demand, this was weaker prior to the COVID-19 crisis as FTKs have declined from the all-time high in 2017.\nHowever, a loss of passenger belly cargo and the pickup in e-commerce has helped cargo operations to recover quicker than commercial travel.\nBusiness jet utilization data has shown that activity in certain regions has rebounded to pre-pandemic or better levels.\nThis is due to personal and leisure travel as opposed to business travel at this time.\nIt remains to be seen if business jet utilization will continue to expand, but current trends are encouraging, We believe there is a global pent-up demand for travel.\nWe see evidence of this demand through the recovery in domestic travel, specifically in the U.S. and China, and the optimism of airlines for the summer season.\nDomestic travel is currently benefiting from international travel restrictions and could offset some lost international travel in the market.\nIn due time, with vaccine distribution and lifting of travel restrictions, passenger demand across the globe will increase.\nHistorically, personal travel has accounted for the largest percentage of revenue passenger miles.\nAnd forecasts still indicate a more meaningful pickup in personal travel in the back half of this calendar year, followed later by business travel, and we are hopeful this will be the case.\nNow let me speak about our defense market, which, traditionally, is at or below 35% of our total revenue.\nThe defense market revenue, which includes both OEM and aftermarket revenues, grew by approximately 8% in Q2 when compared with the prior-year period.\nOur defense order book remains strong, and we continue to expect our defense business to expand throughout the remainder of the year.\nMoving now to profitability.\nI'm going to talk primarily about our operating performance or EBITDA as defined.\nEBITDA as defined of about $519 million for Q2 was down 23% versus prior Q2.\nEBITDA as defined margin in the quarter was approximately 43.5%.\nWe were able to improve our EBITDA as defined margin approaching 100 basis points sequentially despite the acquisition dilution from the recent Cobham acquisition of about 100 basis points as well.\nNext, I will provide a quick update on our recent acquisition.\nThe Cobham acquisition integration is progressing well under the leadership of one of our experienced EVPs, Joel Reiss.\nWe have now owned Cobham a little over four months, and we are pleased with the acquisition thus far.\nWe have split Cobham into two operating unions -- units: Canyon AeroConnect located in Prescott, Arizona; and Chelton Limited, located in Marlow, U.K. Two experienced TransDigm presidents are leading the integration of these two operating units.\nNow moving to our outlook for 2021.\nWe are still not in a position to issue formal fiscal 2021 sales EBITDA as defined in net income guidance at this time.\nWe will look to reinstitute guidance when we have a clearer picture of the future.\nWe, like most aero suppliers, are hopeful that we will realize a more meaningful return of activity in the second half of the calendar year.\nFor now, we are encouraged by the recovery in our commercial OEM and aftermarket bookings in the first half of our fiscal year, along with the improvement we have seen in our commercial aftermarket revenues.\nAs for the defense market and an update to our defense revenue growth comments on the Q4 and Q1 earnings calls previously, we now expect defense revenue growth in the mid-single-digit percent range for fiscal 2021 versus prior year.\nThe previous expectation communicated for fiscal 2021 defense revenue growth was low to mid-single-digit growth.\nAdditionally, given the continued uncertainty in the commercial market channels and consistent with our past commentary, we are not providing an expected dollar range for fiscal 2021 EBITDA as defined.\nWe assume a steady increase in commercial aftermarket revenue going forward and expect full-year fiscal 2021 EBITDA margin roughly in the area of 44%, which could be higher or lower based on the rate of commercial aftermarket recovery.\nThis includes a dilutive effect to our EBITDA margin from Aero -- from the Cobham Aero Connectivity acquisition.\nMike will provide details on other fiscal 2021 financial assumptions and updates.\nLet me conclude by stating that I am pleased with the company's performance in this challenging time for the commercial aerospace industry and with our commitment to driving values for our stakeholders.\nThe commercial aerospace market is -- its recovery is under way, and current trends are encouraging.\nThere is still uncertainty about the pace of the recovery, but the team remains focused on controlling what we can control.\nWe are closely monitoring the ongoing developments in the commercial aerospace industry and ensure that we remain ready to meet the demand as it returns.\nWe look forward to the remaining half of 2021 and expect that our consistent strategy will continue to provide the value you have come to expect from us.\nI'm going to quickly hit on a few additional financial matters for the quarter and then also the full fiscal year.\nFor the quarter, organic growth was negative 20%, driven by the declines in our commercial end markets and despite some healthy defense growth in the quarter.\nOn taxes, our expectation for the full year is unchanged.\nThat is, we still anticipate our GAAP cash and adjusted rates to be in the 18% to 22% range.\nRegarding tax rates out beyond FY '21, we're monitoring potential changes in the U.S. tax code under the new administration, and we'll provide some guidance on our future rate expectations once any legislation is finalized.\nOn interest expense, we now expect the full-year charge to be $1.06 billion, reduced from prior guidance, primarily for the refinancing activity completed this year.\nMoving over to cash and liquidity.\nWe had another quarter of positive free cash flow.\nFree cash flow, which we traditionally define at TransDigm as our EBITDA as defined less cash interest payments, cash capex and cash taxes, was roughly $146 million.\nFor the full fiscal year, we expect to continue running free cash flow positive as we define this metric.\nIn line with our prior November guidance, we still expect this amount to be in the $800 million area, maybe a little better for our fiscal '21.\nWe ended the second quarter with $4.1 billion of cash, down from $4.9 billion at last quarter's end.\nNote that last quarter's $4.9 billion balance was prior to the Cobham acquisition for an enterprise value of $965 million that closed on January 5.\nPro forma for the closing of this acquisition, our Q2 net debt-to-LTM-EBITDA ratio was 8.2 times.\nWith our last pre-COVID quarter now having rolled out of the LTM EBITDA computation, we believe that the net debt-to-EBITDA ratio as of our second quarter end is at or very close to its peak.\nIn subsequent quarters, it should, at worst, remain relatively stable but more likely start to show gradual improvement as our commercial end markets rebound.\nFrom an overall cash liquidity and balance sheet standpoint, we think we remain in good position and well prepared to withstand the currently depressed commercial environment for quite some time.\nLastly, and shifting gears from financial matters, I'd like to provide a quick update on our ongoing U.S. DoD IG audit.\nWe've been actively engaged with the IG office with some ebbs and flows and continue to work through the audit process, and our best assessment and based upon what we see.\nThis ongoing audit appears to be similar in scope to our prior audits.\nWhile it's difficult to know exactly when a final report could be issued publicly, we expect that this might happen sometime during Q3 or Q4 of our fiscal '21.\n Assistant:", "chosen": "fiscal 2021 financial guidance remains suspended at this time.\n"}
{"prompt": "Human: I'm joined by John Garrison, Chairman and Chief Executive Officer; and John Duffy Sheehan, Senior Vice President and Chief Financial Officer.\nIn addition, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance.\nReconciliations for these non-GAAP measures can be found in the conference call materials.\nMost importantly, I hope you and your families are remaining safe and healthy.\nThroughout these challenging times, we are proud of all Terex team members, who are keeping themselves and others safe, meeting the needs of customers and helping our communities.\nSafety remains the top priority of the company, driven by Think Safe, Work Safe, Home Safe.\nOur team members remain vigilant by carefully following the COVID-19 safety protocols and continuing to keep their guard up.\nDespite a challenging year, we delivered results for all stakeholders.\nWe prioritize their health and safety while maintaining our Terex Way values.\nGlobally, team members gave back to their communities with their time and donations.\nFor our customers, they are the center of our recovery and we have continued to maintain the highest levels of safety and our sales and service operations.\nAnd finally, for our shareholders, we minimize the operational and financial impacts related to the pandemic.\nDespite the challenging markets during the fourth quarter, our team continued to meet customer demand, tightly managed all cost, aggressively reduced networking capital, especially AWP inventories, and delivered outstanding free cash flow.\nQ4 revenue improved sequentially as end markets continued to recover despite the fourth quarter normally being seasonally slower.\nThe sequential improvement in revenues was driven by MP whose revenues improved approximately 18%.\nCustomer bookings in Q4 represented a continued strong improvement from Q3.\nSequentially AWP and MP bookings were up dramatically.\nIn addition to sequential strength in bookings, AWP bookings were flat with last year's pre-COVID levels and MP's bookings were up 53%.\nYear-end customer backlogs increased 25% over prior year pre-COVID levels.\nOur stringent cost control and producing the customer demand helped us deliver operating margins in line with prior year on 11% lower revenues, even with $18 million of restructuring and related charges.\nAWP recorded near breakeven operating margins, including $11 million of restructuring charges and revenue down 18% from the prior year, representing a decremental margin of 7% or an incremental margin of 3% when excluding restructuring and related charges.\nWe are driving improvement in AWP's profitability to restore the segment to industry competitive margins and we will continue to take the actions necessary to deliver on that improvement.\nOur MP segment achieved outstanding financial results, reporting a 15 % operating margin while revenues were down slightly year-over-year reporting an 82% incremental margin.\nThroughout 2020, we right-sized our inventory levels to the customer demand environment, especially in our Genie business.\nTheir inventory levels remained consistent with 2016, which was the last time there was an industrial downturn.\nIn 2021, aerial products will manufacturer to customer demand.\nOur intense focus on networking capital management drove a $129 million of free cash flow in the fourth quarter, delivering excellent full year cash flow generation.\nOverall, our Q4 financial performance demonstrated strong execution by our global team.\nWe are committed to improving these results in 2021.\nIn 2020, we evolved from our Focus, Simplify, Execute to Win strategy to execute, innovate and grow.\nThis transition and strategic priorities has strengthened our business operations.\nSo we took swift and decisive measures in 2020 to improve, strengthen and position Terex for growth.\nOn the cost side, we looked at every aspect of the business to ensure we maximize our ability to be globally cost competitive.\nWe aggressively took out cost, not just manufacturing cost, we also executed on an SG&A cost reduction initiative with a target of SG&A percent of sales for 2021 of approximately 12.5%.\nWe listen to customers to ensure our products and services offer the features and benefits that provide value.\nWe also invested in our connected assets and digital capabilities across the enterprise to better serve customers.\nWe continue to drive global adoption of our products, Genie scissors and booms for working safely at height and mobile crushing and screening products for aggregate production.\nFinally, we maintain our resolve to invest in the business for future growth.\nLooking ahead to 2021, we recognize that execution is the foundation to deliver on our commitments to team members, customers and shareholders.\nThe hard work to rescale the company's cost structure will be aggressively managed to achieve our strategy of being globally cost competitive.\nWe'll continue to invest in innovative products and services to serve our specialized markets.\nTerex is well positioned for growth in 2021 because we have strong businesses, strong brands and strong market positions upon which we can grow.\nWe will continue to invest, including investing in new products and manufacturing capacity where demand calls for it and we're a more focused organization.\nI'm confident this will result in Terex being an even stronger company.\nTurning to Slide 7.\nLet me begin by reviewing our Q4 financial results.\nI would like to call your attention to our financial reporting structure as you will notice consistently throughout 2020, we did not report adjusted financial results.\nInstead, we are identifying specific financial callouts, which impacted our Q4 reported results.\nLooking at the fourth quarter, we achieved net sales slightly higher than our outlook from the beginning of the quarter.\nThroughout the quarter, we saw our end markets continue to stabilize and improve.\nOverall revenue of $787 million was down 11% year-over-year.\nFor the quarter, we recorded an operating profit of $32 million compared to adjusted operating profit of $36 million in the fourth quarter of last year.\nThe overall operating profit resulted from revenues being down, combined with $18 million of severance and restructuring charges primarily in our AWP segment.\nWe achieved this positive operating result through disciplined cost control and adapting to the market environment.\nWhile lower revenues impacted our gross margins and resulted in elevated SG&A as a percentage of sales, our aggressive cost reduction actions allowed Terex to achieve an approximately 5% decremental margin in Q4.\nThis decremental margin was achieved despite $5 million of gross profit charges primarily due to restructuring.\nIn addition, SG&A was adversely impacted by $13 million primarily due to team members' severance and restructuring.\nExcluding these charges, operating profit was $49 million and Terex achieved an incremental margin of 13% in the quarter.\nThe low operating income, interest and other expense was almost $10 million lower than Q4 of 2019 because of several factors, including: first, lower interest rates versus a year ago; second, $4 million of investment income; and third, non-recurrence of $2 million in FX losses recognized in the prior year.\nOur 2020 global effective tax rate was approximately 18% compared to our previous estimate of 52%.\nDuring the fourth quarter, there were a few discrete items benefiting our Q4 tax rate.\nFinally, our reported earnings per share of $0.21 per share includes the adverse operating impact on gross profit and SG&A, offset by the favorable benefits in other income that I just discussed.\nTurning to Slide 8 and our segments' financial results.\nAWP sales of $412 million contracted by 18% compared to last year, driven by end markets in North America and Europe due to the impacts from the pandemic.\nThe aerial products market and our sales in China remain robust.\nThe utilities market remained stable and improved during the quarter across end markets.\nWe continue to aggressively manage production levels in aerial products to ensure that we are not building excess inventory.\nDuring Q4, our aerial products production was 16% lower than Q4 2019.\nThis continued aggressive production control allowed us to achieve almost $180 million reduction in aerial products inventory levels year-over-year.\nAWP delivered flat operating margin in the quarter, driven by aggressively rightsizing production and cost to align with end market demand.\nAWP achieved strong decremental margin performance of 7% in the quarter, which includes $11 million of charges for severance and restructuring.\nAWP fourth quarter bookings of $753 million were flat with pre-COVID Q4 2019 levels, while backlog at quarter end was $826 million, up 10% from the prior year.\nNow turning to Materials Processing.\nMP had another solid quarter achieving 15% operating margins as markets continue to improve.\nIt is a testament to the MP team's operational strength to deliver these positive operating margins and revenues down 3%.\nSales were lower at $366 million, driven by cautious yet improving customer sentiment.\nThe MP team has been aggressively managing all elements of cost in a challenging market environment, resulting in incremental margin performance of 82%.\nBacklog of $523 million was 59% higher than last year and up 81% sequentially.\nMP saw its businesses strengthen through the quarter with bookings up 53% year-over-year and up 76% sequentially.\nCustomers sentiment in both segments continues to improve as equipment is being utilized and ordered for 2021.\nTurning to Slide 9.\nOverall, 2020 demonstrated the resilience of our business and team members to deliver these results against a very challenging backdrop.\nSignificant cost actions reducing SG&A by $82 million from 2019 helped deliver 21% decremental margin and beat our 25% target.\nIn addition, strong positive cash flow generation was helped by tightly managing net working capital and aligning production to demand.\nTurning to Slide 10.\nWhen the pandemic arose during the first quarter, we quickly refocused our investment initiatives and took decisive action to reduce our overall cost structure through temporary and permanent actions.\nAnd over the course of 2020, we instituted an SG&A cost reduction initiative, not just in corporate but across the entire company.\nWe always had an SG&A target going back to our 2016 Analyst Day of 12.5% of sales.\nAs detailed on this slide, we took a variety of actions to reduce our cost base.\nWhether it was moving our corporate headquarters, improving productivity and selectively rescaling investments, we scrutinized every possible expense.\nThe results of these actions is that we were able to reduce our SG&A cost structure by more than $100 million for 2021 versus 2019 and delivered the improved results detailed in my earlier comments.\nThese actions have enabled Terex to come into 2021 well-positioned to meet the 12.5% target.\nTurning to Slide 11.\nNow I would like to update you on how we currently anticipate 2021 to develop financially.\nIt is important to realize we are operating in an unprecedented period and results could change negatively or positively.\nDisruptions associated with COVID, whether it is team member absenteeism or supply chain disruptions, could impact our outlook.\nWith that said, this outlook represents our best estimate as of today.\nAlso, consistent with 2020, we do not plan to report adjusted financial results in 2021.\nThe outlook included on this chart includes all known income and cost but does exclude the impact of potential future acquisitions, divestitures, restructuring transformation or other unusual items.\nAs we identify currently unknown income or costs, we will identify them in our reported results.\nAs for commercial demand, we have seen our markets stabilize and improve over the course of 2020.\nAll other things being equal, we do expect to see markets improve due to the global deployment of COVID-19 vaccine and AWP customers' fleet replenishment.\nHowever, our guidance does not include any benefit from potential infrastructure legislation.\nWe anticipate earnings per share of $1.95 to $2.35 per share based on sales of approximately $3.45 billion.\nFrom a quarterly perspective, we expect revenues for the full year to be relatively evenly split between the first and second half of the year, with the second quarter being the strongest of the year.\nWe look forward to returning to year-over-year sales growth in the second quarter this year.\nOperationally, the absolute amounts of operating profit and operating margins are expected to increase each quarter year-over-year with slightly more operating profit in the second half of the year versus the first half of the year.\nImportantly, we are planning for and look forward to reporting incremental, rather than decremental margins, which meet or exceed our 25% target for full year 2021.\nQuarterly earnings per share are expected to be generally consistent with the development of operating profits during the year.\nBased upon global tax laws, we expect a 2021 tax rate of 19%.\nWe are monitoring potential changes to tax laws in the United States and around the globe and we will adjust our operational and tax strategies as required.\nFor full year 2021, we are estimating free cash flow of approximately $100 million, reflecting another year of positive cash generation.\nWe do expect Q1 cash flow to be negative, which is consistent with historical patterns.\nWe also estimate capital expenditures, net of asset dispositions, will be approximately $9 million.\nCorporate and other costs are planned to occur relatively evenly throughout the year, although Q1 is expected to be slightly lower and Q2 slightly higher than the average.\nWe continue to monitor developments associated with the UK's exit from the European Union and do not expect any material impact.\nNow, let me turn your attention to the operating margin bridge on the slide.\nWe believe it is important that the investment community understand the key elements of our operating margin improvement in 2021.\nFirst, cost reinstatements represent the restoration of team members' compensation after the reductions we enacted in 2020.\nIt is important to pay team members competitively to retain our talent.\nNext, I would point out that positive volume and improved manufacturing efficiency would drive much of our margin improvement.\nAdditionally, our SG&A cost reduction effort also provides significant improvement in our 2021 operating margin.\nFinally, we did have severance, restructuring and other charges in 2020 that are not expected to reoccur in 2021.\nTaking together, these operational improvements drive our 2021 operating margin guidance of approximately 7%.\nTurning to Slide 12.\nNow I'll review our segment guidance.\nWe expect the improved customer sentiments demonstrated by our Genie and utility customers to continue into 2021.\nAWP margins are expected to be positive each quarter of 2021 with incremental margins well above our targeted 25%.\nMaterials Processing is expected to continue its consistent operating performance delivering double-digit operating margins each quarter throughout 2021.\nFollowing the run up in steel prices in 2018, we implemented a steel hedging program with respect to our Aerial's North American hot rolled coil, or HRC, steel consumption.\nApproximately two-thirds of our Aerial's steel consumption is HRC.\nYou may be aware that there is not presently any forward market for hedging plate steel.\nDuring 2020, we purchased hedges for the predominant amount of our anticipated 2021 North American Aerial HRC requirements.\nThe guidance we are providing today takes into account the steel hedging actions we took in 2020 as well as current steel prices for the remainder of our global steel requirements.\nOverall, our 2021 guidance represents a dramatic improvement in operating performance when compared to 2020.\nThe swift and decisive actions taken in 2020 enabled this effort and we will continue to aggressively manage costs of positioning the business for growth.\nTurning to Page 13.\nI'll review our disciplined capital allocation strategy.\nWe introduced our strategy back at our 2016 Analyst Day.\nIt has served the company well during the pandemic and will enable us to grow in 2021.\nOur team members remain vigilant and will continue to aggressively manage production, especially within our AWP segment, and scrutinize every expenditure, so we continue to generate strong positive free cash flow.\nWe have ample liquidity with greater than $1 billion available to us.\nWith no near-term debt maturities, we can manage and grow the business.\nIn 2021, we have entered into a partnership with a US bank to provide financing solutions to our Genie customers.\nIn connection with this arrangement, last week, the bank purchased approximately $100 million of our Terex Financial Services portfolio of receivables.\nAs a result of our strong liquidity position, including the proceeds from the sale of the TFS on-book portfolio, we initiated this week the repayment of approximately $200 million of term loans, reducing outstanding debt and lowering leverage.\nIn Q1, we will recognize the corporate and other operating gain of $7 million in connection with the TFS sale and interest and other charge of $2 million related to the repayment of the term loans.\nNeither this gain or the charge is included in the financial guidance we are providing today.\nWe continue to invest in the business in 2020 at reduced levels and we'll continue to invest in 2021 with capital spending, net of assets disposition, of approximately $90 million.\nIn 2020, we executed a strong and swift actions to rightsize the business so tariffs can profitably grow in the future.\nWe remain resolute in tightly managing production and SG&A.\nOur strong balance sheet and expected 2021 free cash flow generation allowed our Board of Directors to reinstate our quarterly dividend for 2021.\nThe Board has approved a Q1 dividend of $0.12 per share as we return cash to shareholders.\nOur earnings power and healthy capital position provides a strong foundation for us to manage and grow Terex.\nTurning to Slide 14.\nThis quarter's results demonstrated progress, but we have more work to do.\nOur Aerial team has stayed in close contact with our customers during this critically important part of the year when customers are planning their 2021 requirements.\nBeing customer-centric also means developing products that add value for customers at the appropriate price.\nWe are delivering a new electric drive, or E-Drive scissor, and just recently announced a brand-new Telehandler.\nThese products demonstrate Genie's strength in listening to customers and responding with innovative industry-leading products.\nDuring 2020, we invested in the expansion of our world-class manufacturing facility in Changzhou, China and completed our Watertown, South Dakota utilities facility.\nThe utilities businesses in very important growth area for AWP.\nThe TL shown at the top of the page is a new product to take advantage of the adoption of transmission line work in China.\nAt the bottom of the page, the photo shows a customer delivery from our Watertown facility.\nTerex utilities is well positioned to participate in the increased investment in electrical grid infrastructure.\nFrom an operational perspective, the AWP team executed in Q4 by delivering breakeven operating margins despite $15 million of restructuring charges, aggressively taking cost out of the business to improve the ability to deliver future industry competitive margins and innovating by continuing to bring new products to market.\nIt is a competitive industry.\nSo we are controlling what we can control, superior execution and aggressively reducing cost to improve margins and win in the global marketplace.\nTurning to Slide 15.\nOnce again, Materials Processing demonstrate a strong operating performance and positioned the business to benefit from improving market conditions.\nMP is a diversified, high performing portfolio of businesses, which continues to invest for future growth.\nThe investment in our Campsie, Northern Ireland facility, will enable our Ecotec business to grow in waste recycling.\nShown on the slide is the new Ecotec metal shredder, which supports recovery applications for the recycling and waste industries.\nIt's a new and unique offering demonstrating MP's continued investment in new products and adjacent markets.\nIn addition, the adoption of MP's innovative products, whether it's mobile crushing and screening in China or Franna pick and carry cranes in India is just starting.\nThe financial performance of MP relative to market conditions by achieving an operating margin of 15% in Q4 demonstrates the MP team's strong execution.\nMP's bookings improved and increased throughout the fourth quarter, resulting in bookings being up 53% year-over-year.\nMP benefits from customer, product and geographical diversity and strong execution to consistently deliver outstanding results.\nTurning to Slide 16.\nTo wrap up our remarks, Terex team members around the world are focused on the right things, safety, health, customers and improved productivity.\nWe are reducing cost to improve margins, especially within AWP.\nWe are driving positive free cash flow by reducing working capital.\nOur businesses have a strong future.\nSo we are continuing to invest in innovative products and services to be prepared as market demand returns.\nAs a result of these actions, Terex is well-positioned for an improved 2021.\n Assistant:", "chosen": "q4 earnings per share $0.21 from continuing operations.\nprovides financial guidance for 2021.\ndeclared a quarterly dividend of $0.12 per share.\nexpectations are that 2021 sales will be approximately $3.45 billion, and earnings per share will be approximately $1.95 to $2.35.\n"}
{"prompt": "Human: Additionally, during this conference call, you will hear management make references to what the estimated positive or negative impacts were as a result of COVID-19 during the second quarter of 2020.\nYou will also hear management make statements regarding intra-quarter business performance during the month of July.\nManagement is providing this commentary to provide the investment community with additional insights concerning trends, and these disclosures may not occur in subsequent quarters.\nIt's a pleasure to speak with you today.\nI'd also like to take a moment to recognize the Teleflex employees around the world.\nThese past few months have been far from normal, and our employees continue to inspire me as they have stepped up in extraordinary ways to ensure that we are able to provide our products to the hospitals, clinicians and patients who need them most.\nNow on to our Q2 results.\nWhen you take into consideration the global escalation of the COVID-19 pandemic, we are quite pleased with our second quarter performance as it significantly exceeded our internal expectations and reflected improvements in underlying monthly revenue trends for the product categories most impacted by the postponement of non-emergent procedures, most notably, Interventional Urology, Interventional Access and Surgical.\nQ2 revenue was $567 million, which was down 12% as compared to the prior year period on a constant currency basis.\nThe decline in revenue is due to the negative impact from COVID-19, which we estimate caused a net negative impact of approximately $130 million or approximately 20%.\nIf we were to normalize for the negative COVID impact, we estimate that we grew our underlying business by approximately 8% on a constant currency basis, or near the high end of our initially provided 2020 full year constant currency revenue growth rate range.\nFrom an earnings per share perspective, like revenue, our adjusted earnings per share of $1.93 in the quarter also significantly exceeded our internal expectations.\nThis reflects the recovery we saw in monthly procedures as we moved through the quarter, coupled with prudent operating expense management.\nLastly, at the end of the second quarter, we also commenced our workforce reduction plan, which will allow us to capitalize on programs designed to drive further long-term profitability.\nThis latest effort is primarily focused on streamlining certain sales and marketing functions within EMEA as well as certain manufacturing operations within our OEM segment.\nTurning to a more detailed review of our second quarter results.\nAs I mentioned, quarter two revenue declined 12% on a constant currency basis and 13.1% on an as-reported basis.\nThe decline in revenue was primarily due to COVID-19, which we estimate had a negative impact of approximately $144 million across several global product categories.\nThis was somewhat offset by approximately $14 million of additional revenue within our vascular access and other product categories, which experienced higher-than-expected demand as a result of COVID-19.\nFrom a margin perspective, we generated adjusted gross and operating margins of 53.9% and 21.8%, respectively.\nThis translated into a year-over-year decline of 380 basis points on the gross margin line and 340 basis points on the operating margin line, as reduced sales volumes and unfavorable revenue mix impacted by COVID were major headwinds.\nThese headwinds were partially offset by our cost containment efforts as we continue to tighten our belts where we deem appropriate in the current environment, balanced with continued investment to sustain our long-term growth aspirations.\nAdjusted earnings per share was $1.93, down 27.4% year-over-year, but well ahead of our internal expectations as the business started to recover during the quarter.\nAnd while I never like to see declines in year-over-year revenue and profitability, I am very pleased with our overall financial performance as it demonstrates the resiliency of the diversified global product portfolio we have built over the past few years.\nNext, I thought it would be helpful to provide some context regarding how we saw COVID-19 impact our second quarter results.\nDuring the second quarter, we estimate that COVID-19 was a headwind to revenue across Interventional Urology, Surgical, Interventional Access, Anesthesia and OEM.\nSomewhat offsetting these headwinds were positive tailwinds within Vascular Access and other, as hospitals continued to have strong demand for those types of products.\nNetting these two impacts, we estimate that COVID was a $130 million headwind or an approximate 20% detractor from our 2Q revenue growth.\nImportantly, we were encouraged that after a difficult April, the key global business units impacted most negatively by COVID improved sequentially as we moved through May and June.\nSpecifically, Interventional Urology year-over-year revenue was down approximately 79% in April.\nIt was down approximately 30% in May and then down approximately 8% in June.\nTurning to Interventional Access.\nYear-over-year revenue declined approximately 30% in April, approximately 28% in May, and then it was down approximately 2% in June.\nAnd finally, our Surgical business experienced year-over-year revenue declines of approximately 34% in April, 31% in May and then approximately 21% in June.\nAs we anticipated and stated on our last earnings conference calls, as various states and countries began to reopen, Interventional Urology led the recovery.\nBut we also saw improving trends within Interventional Access and Surgical as most hospitals have restarted non-emergent procedures in earnest.\nAnd while our business our businesses have not yet to fully return to normal, we are encouraged by our trends into July, which largely reflect further improvement in the business.\nThat said, while we view the latest trends as encouraging signs of a continued global recovery, we remain cautious as select hospital capacity has come under pressure in certain geographies as COVID-19 cases have reemerged.\nAs a result of the uncertainty associated with the scope and duration of COVID-19, we made the decision not to reinstate our 2020 financial guidance at this time.\nLet's now turn to the quarterly results.\nI will begin with a review of our reportable segment revenue.\nThe Americas delivered revenues of $312.5 million in the second quarter, which represents a 16% decline.\nGrowth within the Americas was driven by Vascular Access and respiratory products, which both saw elevated demands driven by COVID.\nHowever, this was more than offset by declines in other product categories.\nWe estimate that the Americas would have grown approximately 8% excluding an estimated 24% impact of COVID on the region.\nImportantly, as we progressed throughout the second quarter, Interventional Urology saw sequential improvement from April to May and then from May into June with a positive momentum largely carried forward into July.\nWhile we are encouraged by this recovery, we are cautious due to the recent outbreaks and reduced non-emergent procedure capacity in states, including Texas and Florida.\nEMEA reported revenues of $131.6 million in the second quarter, representing an 8% decline.\nLike the Americas, growth drivers included vascular and respiratory businesses, which benefited from elevated demand related to COVID-19.\nHowever, like the Americas, growth in these product categories was outweighed by declines elsewhere.\nAdjusting for COVID, we estimate approximately 1% underlying growth for the region.\nRevenues totaled $67.1 million in the second quarter, which represents a decline of 7.8%.\nHowever, we estimate that we would have had a positive constant currency revenue growth in the low double digits consistent with our long-term outlook for the region if not for the impact of COVID-19.\nAnd lastly, our OEM business reported revenues of $55.8 million in the second quarter, or 70 basis points recurring on a constant currency basis.\nAs we anticipated, during the second quarter, our OEM business saw a lagged impact related to COVID relative to our other businesses.\nInvestors familiar with Teleflex will be aware that our OEM business supplies device companies with complex catheters and surgical sutures.\nAnd the 2Q impact reflects reduced orders from these customers whose business is tied to non-emergent procedures.\nExcluding the estimated COVID-19 impact, the business grew roughly 25%, which includes a 16% benefit from HPC.\nAs it relates to the acquisition of HPC, the integration efforts are well under way, and I am very pleased with how the business is performing under our leadership.\nLet's now move to a discussion on our revenues by global product categories.\nConsistent with my prior comments regarding our reportable segments, commentary on global product category growth will also be on a constant currency basis.\nStarting with Vascular Access.\nDue to the growth within both our central venous catheter and EZ-IO products, Q2 revenues increased 8.8% to $164.9 million.\nWe estimate that COVID-19 positively impacted the growth rates of our vascular products during the second quarter by approximately 5%.\nMoving to Interventional Access.\nSecond quarter revenue was $82.6 million, which is lower than the prior year by 20.3%.\nThe decrease was largely due to the delay in the performance of certain non-emergent procedures because of COVID-19.\nWe estimate that underlying growth was in the mid-single digits, adjusting for an approximate 24% COVID-19 headwind.\nQ2 revenues were $64.9 million, which is lower than the prior year by 23%.\nThe revenue decline was due to lower sales of laryngeal masks and regional anesthesia products.\nWe estimate that COVID had an approximate 22% negative impact in the quarter.\nRevenue declined by 28.4% to $67.3 million, driven by lower sales of our ligation portfolio and instruments.\nWe estimate a significant 30% headwind from COVID during 2Q.\nHowever, as we stated earlier, we have seen sequential improvements on a monthly basis since April lows.\nMoving to Interventional Urology.\nQ2 revenue decreased 40.9% to $40.1 million.\nWe estimate an approximate $58 million COVID-19-related headwind during 2Q.\nUnfortunately, the cancellation of elective procedures impacted this product line more than any other in our portfolio.\nThat said, because the UroLift procedure is primarily performed in an outpatient lower acuity setting, we envisioned that UroLift will be one of the first types of procedures that would be performed once the United States began to reopen, and that's exactly what we have seen with sequential improvements from April to May, May to June and from June into July.\nAnd finally, our other category, which consists of our respiratory and urology care products grew 5.4%, totaling $91.4 million.\nIn large part, we estimate the growth during the quarter was due to increased demand for certain humidification and breathing products resulting from COVID-19.\nIf we were to exclude the estimated benefit from COVID-19, we estimate that the other category would have been down slightly as compared to the prior year period.\nThat completes my comments on quarter two revenue performance.\nTurning to some clinical and commercial updates.\nOur body of clinical evidence for UroLift continues to expand during the second quarter with data from two studies presented at the AUA 2020 Virtual Science Event and data from another study published in the Canadian Journal of Urology.\nThe first study presented at the AUA 2020 Virtual Science Event in May was a meta-analysis of patients' sexual function following treatment with the UroLift System versus medical therapy, while the second study was an analysis comparing patient outcomes from the large Real World Retrospective study to those found in the L.I.F.T.\npivotal trial and the P.U.L.S.A.R. urinary retention trial.\nThe results from the first study compared sexual function outcomes of 849 sexually active men who received daily treatments with an alpha blocker, 5-alpha-reductase inhibitor, either alone or in combination and 190 men from combined clinical studies of the UroLift System at 12, 24, 36 and 48 months.\nResults from the analysis showed that patients treated with the UroLift System experienced significant improvement in ejaculatory function and erectile function at 12 and 24 months post treatment.\nPatients also reported significant improvement in overall sexual satisfaction through 48 months post treatment.\nIn contrast, none of the medical therapies significantly improved patients' erectile or ejaculatory function at any time point and some therapy significantly reduced function.\nAdditionally, the UroLift System significantly outperformed all three medical therapies across all-time points at preserving patient ejaculatory function.\nOnly patients who received UroLift System reported significant improvement in overall satisfaction in sexual life.\nThe second study compared patient outcomes from the large Real World Retrospective study to those found in the L.I.F.T.\npivotal trial and P.U.L.S.A.R. urinary retention trial, which studied catheter-dependent BPH patients.\nResults from analysis showed patients from all groups experienced similar absolute IPSS scores at all-time points following treatment with the UroLift System.\nAnalysis also revealed equivalent safety profiles among non-urinary retention and urinary retention patient groups from the Real World study when compared to corresponding groups in control studies.\nFinally, the results indicated that the majority of retention patients became catheter independent at the end of the study.\nLastly, a study comparing patient experience of those treated with the UroLift System to those who received tissue ablation by a steam injection was published in the Canadian Journal of Urology.\nThe study compared 53 non-retention patients from two U.S. sites.\nEarly postoperative results showed positive differences for patients treated with the UroLift System compared to resume, including better sexual function outcomes, less interference in daily activities and higher patient satisfaction.\nWe continue to extend our body of clinical evidence which should help to get the fast followers on board with UroLift, which is quickly becoming the standard of care as the leading minimally invasive surgery to address a massive global market opportunity.\nTurning to the next slide on key commercial updates.\nWe received FDA clearance for the UroLift advanced tissue control or ATC system.\nThis is an instrument that optimizes UroLift for the treatment of obstructive median lobe.\nWe plan to hold a market acceptance test for this product in late 2020.\nAnd while we estimate that between only 5% and 10% of the market have an obstructive median lobe, this enhancement demonstrates our commitment to invest in R&D to expand our leadership position in BPH.\nIn addition, as we began to see a recovery in the performance of non-emergent procedures as the second quarter progressed, we made the decision to launch our pilot national DTC campaign in early July, building on the success of our regional DTC efforts.\nThe national campaign will run from July to December, and the strategic role of DTC is important, as about half of the 12 million men being treated for BPH believe prescription medications are their only solution.\nOur regional digital DTC efforts indicated strong patient engagement in June, along with positive sentiment from clinicians, both of which gave us confidence in the July launch.\nWhile it's still early, the initial patient response is very strong, with significant increases in call volumes and web traffic spikes to urolift.com versus the weeks prior to launch.\nPhysician feedback has also been very positive.\nIndeed, UroLift is leading the way in BPH, and this is the first time in recent years that a BPH brand is reaching patients directly in a meaningful way.\nAdditionally, we submitted the UroLift two for 510(k) FDA approval at the end of the second quarter.\nAnd lastly, I would like to congratulate the interventional urology team on surpassing 200,000 patients treated with UroLift.\nWhile this is a significant milestone, with DTC in the U.S., approximately 2,700 urologists trained and major market launches scheduled over the next few years, we have only scratched the surface in treating the approximate 100 million men globally estimated to have BPH.\nTurning to some clinical updates within our Interventional business unit.\nWe recently began enrolling for a prospective single-arm IDE study, targeting 150 patients across approximately 15 sites within the U.S. to evaluate the performance of Teleflex coronary guidewires and specialty catheters in chronic total inclusion percutaneous coronary intervention procedures.\nThe study will evaluate the performance of the entire range of Teleflex complex PCI products in chronic occlusive coronary disease, which is the most demanding PCI environment.\nWe view PCI as a high-growth space within the Interventional Cardiology segment, and we will continue to invest in areas that will improve our weighted average market growth rates over time.\nOverall, we continue to invest in clinical and commercial catalysts that will help to sustain our upper single-digit revenue growth aspirations in a normalized environment.\nGiven the previous discussion of the company's revenue performance, I'll begin at the gross profit line.\nFor the quarter, adjusted gross profit was $305.8 million versus $376.6 million in the prior year quarter, or a decrease of approximately 19%.\nAdjusted gross margin totaled 53.9% during the quarter, which is a decrease of 380 basis points versus the prior year period.\nThe decline in gross margin was primarily attributable to COVID-19-related impacts, including unfavorable product mix, lower sales volumes and higher manufacturing costs.\nThe mix impact was significant for the quarter.\nThe adverse revenue impact from COVID-19 tended to skew toward higher gross margin products, including UroLift, Surgical and Interventional Access.\nIn total, we estimate that COVID-19 negatively impacted our adjusted gross profit by approximately $100 million in the quarter.\nBecause of the reduced revenue and gross profit resulting from COVID-19, we continue to look for opportunities to help mitigate the earnings impact while at the same time, maintaining Teleflex's ability to rapidly rebound once non-emergent procedures recover.\nAs such, operating expense reductions tend to be focused on categories that are non-revenue-generating and are discretionary in nature, including savings from meetings, travel and management variable and performance-based compensation.\nAs a result of the efforts, we estimate that operating expenses were reduced in the second quarter by approximately $35 million.\nWhile we expect the actions taken to continue to deliver opex savings through the second half of the year, by far, the largest quarterly benefit will be realized in the second quarter.\nAdjusted operating profit was $123.9 million as compared to $164.7 million in the prior year or a decrease of approximately 25%.\nSecond quarter operating margin was 21.8% or down 340 basis points year-over-year, driven by the gross margin declines and loss of operating leverage, partly offset by the reduction in operating expense.\nFor the quarter, net interest expense totaled $15.5 million, which is a decrease of approximately 24% versus the prior year quarter.\nThe decrease in interest expense primarily reflects reduced interest rates associated with our variable rate debt, partly offset by higher average debt balances in the second quarter of 2020 versus the prior year period.\nDuring the quarter, we took steps to further improve our liquidity by issuing $500 million of 8-year senior notes at 4.25%.\nThe proceeds obtained from the note issuance were used to repay revolver borrowings.\nMoving now to taxes.\nFor the second quarter of 2020, our adjusted tax rate was 15.8% as compared to 13.4% in the prior year period.\nThe year-over-year increase in our adjusted tax rate is primarily due to less benefit from stock-based compensation as compared to the prior year period.\nAt the bottom line, second quarter adjusted earnings per share decreased 27.4% to $1.93.\nIncluded in this result is an estimated adverse impact from COVID-19 of $1.18 as well as a foreign exchange headwind of approximately $0.04.\nNow I'd like to discuss our recently introduced workforce reduction plan.\nDuring the second quarter of 2020, we committed to a workforce reduction plan, designed to improve the profitability by streamlining certain sales and marketing functions in our EMEA segment and certain manufacturing operations within our OEM segment.\nWe estimate that we will incur aggregate pre-tax restructuring charges of between $10 million and $13 million, consisting primarily of termination benefits, which will also result in future cash outlays.\nWe expect that most of these charges will be incurred prior to the end of 2020.\nOnce the plans are fully implemented, we project annual pre-tax savings of between $11 million and $13 million, and we expect the savings will begin in 2020.\nI will also provide a summary of all of our ongoing restructuring and cost savings programs.\nIncluding the latest workforce reduction plan, savings across all programs are expected to be between $59 million and $72 million.\nApproximately 1/2 of the savings are expected to be realized in 2020 and 2021 and in the remaining 1/2 over the period 2022 through 2024.\nAs such, we have good line of sight to non-revenue-dependent margin expansion in the foreseeable future.\nThis also adds to our confidence that our prior LRP financial targets of 6% to 7% revenue growth, 60% to 61% gross margin and 30% to 31% operating margin remain the right goals for Teleflex.\nAnd the question is only when, not if we achieve them.\nTurning quickly to select balance sheet and cash flow highlights.\nFor the first half of 2020, cash flow from operations totaled $134 million as compared to $157.3 million in the prior year period or a year-over-year decrease of $23.3 million.\nThe decrease is attributed to a $10 million pension contribution made in the first half of 2020 and was not made in the first half of the prior year and a $54 million increase in first half 2020 contingent consideration payments versus payments made in the first half of 2019.\nOverall, the balance sheet remains in good shape.\nAt the end of the second quarter, our cash balance was $553 million versus $406 million at the end of the first quarter.\nNet leverage at quarter end was approximately 2.6 times, providing comfortable headroom when compared to our covenant, which requires that we stay below 4.5 times.\nLastly, we have no near-term debt maturities of material size.\nBefore closing, I'd like to make you aware of a matter that will be disclosed in our 10-Q filed today.\nIn June, we began producing documents and information responsive to a civil investigation demand received by one of our subsidiaries, NeoTract from the U.S. Department of Justice through the United States Attorney's Office for the Northern District of Georgia seeking documents and information pertaining to communications with and certain rebate programs offered to a single NeoTract customer in relation to the DOJ's investigation of that customer.\nSubsequently, in July, the DOJ advised us that it had opened an investigation under the Civil False Claims Act with respect to NeoTract's operations broadly in addition to the customer investigation.\nWe maintain policies and procedures to promote compliance with the Anti-Kickback Statute, False Claims Act and other applicable laws and regulations.\nAnd while the company intends to cooperate with the government's investigation and request for information, we will vigorously defend our programs, practices and conduct, which we believe are lawful and in accordance with industry best practices and standards.\nWe cannot, at this time, reasonably predict the duration, scope or the outcome of this matter.\nIn closing, we delivered solid second quarter results as our diversified portfolio helped to dampen the impact COVID had during April, and procedures have started to improve month-over-month in May, June and into July.\nHowever, it remains difficult to predict the shape and duration needed to measure the path to recovery.\nAnd while the next several quarters will have elements of uncertainty, we remain confident that our long-term underlying fundamentals remain solid, and we still see great opportunity over the long-term to serve our key constituents.\nWe, as an organization, will continue to focus on serving the vast majority of hospitals that remain open for procedures while also monitoring closely, those select regions that are temporarily shut down.\nWe continue to adapt our business and opportunistically shift toward a greater emphasis on digital tools, both internally as well as with our customers.\nWe will manage the business prudently, while staying focused to capitalize on long-term potential of our global product portfolio.\n Assistant:", "chosen": "compname reports q2 adjusted earnings per share $1.93 from continuing operations.\nq2 adjusted earnings per share $1.93 from continuing operations.\nq2 revenue $567 million versus refinitiv ibes estimate of $537.9 million.\nnew workforce reduction plan to further improve company cost structure announced.\nnot reinstating 2020 financial guidance due to covid-19 pandemic.\nwill incur aggregate pre-tax restructuring charges of $10 million to $13 million.\nexpect to begin realizing plan-related savings in 2020.\nexpect to achieve annual pre-tax savings of $11 million to $13 million once restructuring plans are fully implemented.\n"}
{"prompt": "Human: During this conference call, you will hear management make statements regarding intra-quarter business performance.\nManagement is providing this commentary to provide the investment community with additional insights concerning trends, and these disclosures may not occur in subsequent quarters.\nIt's a pleasure to speak with you today.\nFor the third quarter, Teleflex generated double-digit constant currency revenue and 27% adjusted earnings-per-share growth on a year-over-year basis despite a greater-than-expected headwind from increased COVID-19 infections due to the Delta variant.\nAll of our global product families grew on a constant currency basis year-over-year with the exception of our other category due to the divestiture of the respiratory assets to Medline.\nAlthough we encountered a change in macro trends versus expectations at the time of the second quarter, the solid performance for Teleflex during the third quarter of 2021 reflects the diversified nature of our business and the benefits of the company's broad portfolio of medically necessary products and category leadership.\nOur six primary product families and broad global footprint helped offset pressure on product revenues associated with elective surgery that were subject to pauses during the third quarter.\nAs many investors will be aware, there were restrictions on elective surgical procedures in as many as 28 states during the third quarter.\nHowever, as we have seen since the pandemic began, our broad-based portfolio provides a hedge in periods of increased COVID activity with more than 60% of our business, either benefiting from increased COVID-related treatments or remaining relatively insulated from disruptions due to the pandemic.\nAlthough we do not routinely provide intra-quarter commentary, given the larger-than-expected surge in COVID-19 infections from the delta variant, I will share some details for the third quarter.\nRelative to guidance provided at the time of our Q2 earnings report, we saw a greater-than-anticipated pause in elective surgical procedures across select geographies in the U.S., Europe and Asia.\nHowever, as COVID-19 infections trended down, we saw our average daily sales for products most exposed to elective surgical procedures begin to improve as we progressed through September.\nDuring the third quarter, our Americas, EMEA, Asia and OEM segments demonstrated resilience with all regions showing constant currency revenue growth over 2020 despite the headwinds from the delta variant.\nAs I mentioned earlier, this underscores the benefit of our diversified product portfolio.\nFor the third quarter, gross and operating margins exceeded levels achieved in 2020 and 2019 in comparable periods.\nOur continued progress in margin expansion in 2021 has allowed us to increase directed investments toward growth drivers, which is an important component of our long-term strategy to enhance durable growth.\nWe remain cognizant of uncertainty around COVID-19 infections as the weather turns colder in the Northern Hemisphere, new variants and healthcare worker shortages.\nAccordingly, we believe that it is prudent to assume that COVID-19 will remain a headwind and that a broad-based return to elective surgical procedures to normal volumes is unlikely during the fourth quarter.\nWe anticipate these elements to be transitory in nature, and we expect a more normalized environment to be established in 2022.\nGiven our year-to-date results and outlook for the fourth quarter, we are reducing our constant currency revenue growth to a range of 8% to 9% from 8.5% to 9.75% previously.\nThe revision in the constant currency growth outlook is primarily driven by lower growth expectations for products used in elective surgical procedures.\nHowever, given strength in our operating margin performance and improvements in our balance sheet, we are increasing earnings per share guidance to a range of $13.15 to $13.35 versus our previous range of $12.90 to $13.10, implying growth of 23% to 25% year-over-year.\nTurning to a more detailed review of our third quarter results.\nThird quarter revenue was $700.3 million, an increase of 10.3% year-over-year on a constant currency basis.\nThe year-over-year increase reflects the benefit of our diversified portfolio and was driven by contributions from all business segments, offset by the impact of COVID-19 and the divestiture of the respiratory assets to Medline.\nIn comparison to the comparable period in 2019, third quarter revenue increased 5.8% and demonstrated accelerating quarter-over-quarter growth in our Vascular, OEM and Anesthesia businesses, which offset sequential deceleration in areas of the business more exposed to the surge in COVID-19, including Interventional Urology, Interventional and Surgical.\nThird quarter growth and operating margin performance exceeded our expectations reflecting the strength of our diversified portfolio, partially offset by greater-than-anticipated headwinds from COVID-19.\nOur year-to-date margin performance is an encouraging sign for our longer-term profitability objectives.\nThird quarter adjusted earnings per share of $3.51 increased 26.7% year-over-year and exceeded our internal expectations.\nDespite higher-than-anticipated headwinds from COVID-19 on our adjusted earnings per share results in the third quarter, the year-over-year performance reflects growth in our diversified product portfolio, modest price increases, gross margin expansion and better-than-expected operating expense management.\nWe continue to execute on our strategy to deliver durable growth with investment in organic growth opportunities, product innovation, margin expansion and deployment of capital for deleveraging our balance sheet and M&A.\nI am proud of how the team continues to execute in a challenging environment.\nOur third quarter financial performance demonstrates the resilience of our diversified global product portfolio, our targeted investment in growth drivers, including UroLift and MANTA while also reflecting progress toward our longer-term margin aspirations.\nTurning now to a deeper look at revenue results.\nI will begin with a review of our reportable segment revenues.\nAmericas revenues were $417.3 million in the third quarter, which represents 10.9% growth year-over-year.\nContributors to the year-over-year growth were Surgical, Vascular and Interventional, partially offset by the impact of pauses in elective surgical procedures.\nEMEA revenues of $143.9 million increased 3.6% year-over-year with Interventional and Vascular products leading the growth.\nEMEA benefited from a favorable COVID-19-related comparison due to improved procedure volumes year-over-year as countries across the region continued to open up despite disruptions related to COVID-19.\nRevenues were $75 million, increasing 6.3% year-over-year.\nJapan was strong in the third quarter, growing north of 30%, but was partially offset by the impact of COVID-19 in Southeast Asia.\nLet's now move to a discussion of our third quarter revenues by global product category.\nConsistent with my prior comments regarding our reportable segments, commentary on global product category growth will also be on a constant currency basis and ranked by size of our business units.\nAs a reminder, there were no meaningful differences in year-over-year selling days in the third quarter.\nStarting with Vascular Access.\nThird quarter revenue increased 8.5% to $175.5 million.\nOur category leadership in central venous catheters and midlines, along with our novel coated PICC portfolio, continues to position us for dependable growth.\nOur Vascular Access portfolio remains important in the treatment of COVID-19 patients, driving strength in the third quarter due to increased rates of coronavirus infections.\nOur PICC portfolio continues to perform well with 10% growth year-over-year.\nWe continue to invest behind our differentiated PICC portfolio and are taking market share.\nIntraosseous was also solid in the third quarter with growth up 12% year-over-year.\nThird quarter revenue was $104.3 million, up 10.4% year-over-year.\nWe executed well during the third quarter, although increased COVID-19 infections slowed complex PCI and TAVR procedures.\nWe continue to invest behind our interventional portfolio, including complex catheters and MANTA, our large-bore closure device.\nMANTA momentum remains strong, both in the U.S. and in international markets, with over 80% global growth year-over-year in the third quarter.\nGiven the year-to-date performance for MANTA, we are confident in our ability to achieve 8% share in 2021 of the $200 million to $300 million global market opportunity.\nTurning now to Anesthesia.\nThird quarter revenue was $97.1 million, up 26.6% year-over-year.\nProducts from Z-Medica contributed roughly 85% of the growth as the business continues to track to our $60 million to $70 million revenue expectations for 2021, partly offset by lower sales of tracheostomy products.\nIn our Surgical business, revenue was $92.8 million, representing 10.9% growth year-over-year.\nAmong our largest product categories, we witnessed robust growth in sales of our ligation clips and instruments as the elective surgical procedure environment was stronger than in the prior year period, partially offset by the impact of the Delta variant in select geographies.\nUrology, third quarter revenue was $83.1 million, an increase of 1.5% year-over-year and below our expectations at the time of the quarter two conference call.\nThe quarter was impacted by elective surgery cancellations due to state restrictions and ICU capacity limitations as delta variant infections rose sharply in certain regions of the U.S. as well as continued business disruption associated with the pandemic.\nWe are closely monitoring trends in our UroLift business.\nImportantly, our analysis of commercial and Medicare billing claims over the past six months indicates that UroLift has not lost market share to competing minimally invasive treatments for BPH and remains the leading procedure.\nWe continue to see COVID-19 as having the most significant impact on UroLift utilization with physician office staffing shortages also disrupting the business.\nWe see both of these impacts as transitory in nature and expect a more normalized environment in 2022.\nThe preference for UroLift continues to be driven by strong clinical results, with studies showing rapid symptom relief and recovery, no new sustained sexual dysfunction and durable results.\nIndeed, our analysis shows that very few of our experienced users offer other technologies for the treatment of BPH given their confidence in UroLift.\nThe UroLift system remains distinct from other device-based BPH treatments, and we intend to maintain our leading market position in day surgery treatments for this condition.\nWe continue to target patients that are suffering from BPH and have either failed or are not satisfied with drug therapy, a population that is estimated to be 1.5 million men in the United States.\nAs we look toward the fourth quarter of 2021, we are assuming a relatively stable macro environment as compared to our September trends given lingering COVID-19 headwinds for elective surgical procedures.\nWhen taking into account the softer-than-expected UroLift revenues during the third quarter and our recalibration of the fourth quarter, we are reducing our 2021 Interventional Urology revenue growth guidance to 15% to 17% year-over-year.\nWe would anticipate a more normal environment for elective surgical procedures to emerge during 2022.\nWe remain encouraged by the physician engagement as measured by our active users, new physician training, and the ability to perform UroLift procedures in all relevant care settings.\nOur OEM business, which accounts for roughly 9% of total sales increased 29.4% year-over-year to $64.1 million in the third quarter.\nWe continue to see strength in our OEM business as customer ordering normalizes, and we remain well positioned in our markets with customers valuing our design and manufacturing capabilities.\nAnd finally, our other category, which consists of respiratory products that were not included in the divestiture to Medline, manufacturing service agreement revenues and Urology Care products declined by 4.3% to $83.4 million year-over-year.\nThe decline largely reflects the loss of revenue due to the divestiture of the respiratory products, partially offset by manufacturing service agreement revenues and growth in Urology Care.\nWe continue to expect manufacturing service agreement revenues to phase out at the end of 2023.\nThat completes my comments on the third quarter revenue performance.\nTurning to some commercial updates and starting with UroLift.\nIn the third quarter, we trained 124 urologists.\nInterest in UroLift remains strong, and with over 355 doctors trained in the year-to-date, we remain positioned to meet our training target of 450 to 500 urologists in 2021.\nTurning to our consumer marketing efforts.\nWe continue to view direct-to-consumer as a multiyear catalyst for UroLift in the United States.\nWe have continued to fund our DTC campaign to prime the pump for the recovery in elective procedures, and we'll keep investing in the fourth quarter.\nWe recently won a bronze award for best new branded television campaign from DTC perspective, which is a meaningful accomplishment given 13 finalists.\nSearch interest for UroLip remains high and well above other minimally invasive BPH treatments with the majority of urologist surveys continuing to report patients asking for the UroLift System.\nMoving to UroLift 2.\nWe remain on a full rollout in the United States.\nWe've formally launched the product as well as the UroLift ATC to the broad urology community at the AUA meeting in September.\nWe are well positioned to convert the majority of physician customers to UroLift two by the end of 2022, fueled by advantages in tissue compression, reduced storage space and increased manufacturing capacity.\nUroLift two remains an important margin driver as we remain positioned to generate 400 basis points of UroLift gross margin expansion as the revenue base is fully converted.\nRegarding Japan, we continue to make progress toward an upcoming commercial launch for UroLift.\nRecently, the three major Japanese urology societies agreed on guidelines for UroLift usage, which is a positive development.\nAs for reimbursement approval, we remain highly engaged with the MHLW and has been officially notified that UroLift will be reviewed at an expert panel in November.\nAlthough we cannot control the timing of the regulatory pathway, the panel confirmation is an important milestone toward reimbursement in Japan, marking one of the final steps in the process.\nThere is no change to our baseline assumptions that our commercial ramp will begin in 2022.\nJapan remains an important long-term opportunity for UroLift with a $2 billion TAM and we are excited for our upcoming launch.\nWe continue to expect our sales in the region to ramp in a similar fashion to the U.S. in a market that is 1/3 the size.\nAside from Japan, our international regulatory and commercialization efforts for UroLift remain active.\nOn another positive note, we are excited about our initial commercial activity in Brazil.\nAlthough we have been expecting to enter Brazil in late 2022, we have been able to shorten our time line with a limited market release late in the third quarter of 2021.\nWe have made good progress with select key opinion leader training and initial UroLift cases have already been performed in the hospital and office setting.\nAlthough it is early, and the market will take some time to develop, Brazil remains an important geography in our expansion of UroLift outside of the United States, and we are quite encouraged by the early experience.\nOn the U.S. reimbursement front, and as a reminder, CMS published its proposed physician fee schedule for calendar 2022 on July 13, 2021.\nThe proposed rule would negatively impact reimbursement for roughly 600 procedures performed in the doctor's office across a broad range of surgical specialties with a disproportionate hit to device-heavy procedures such as UroLift.\nTeleflex provided a detailed response to CMS during the public comment period regarding our position on the proposed rule.\nWe believe that the changes to the physician fee schedule would limit healthcare access for Medicare patients and shift procedures to more costly sites of service.\nTeleflex, along with numerous other stakeholders, have urged CMS to postpone the implementation of the proposed physician fee schedule until additional analysis can be performed given the unintended consequences of the current proposed route.\nWe anticipate that the final rule will be published in November, consistent with historic timing.\nWe are pleased with the performance of our recently launched Arrow ErgoPack kit, which contributed over $5 million in revenue during the third quarter.\nAmong other improvements, the new kit configuration for our CVC catheters as a nitinol guidewire which is kink-resistant and an enhancement that clinicians find beneficial.\nGiven our leading market share in CVCs, the launch is a trade-up strategy that drives incremental gross profit dollars and helps sustain our dominant market leadership position in CVCs.\nLastly, on our acquisition of Z-Medica, which was completed in December of 2020.\nThe integration of Z-Medica continues to track slightly ahead of our internal milestones, and we are pleased with the progress we are making.\nRegarding potential label expansion opportunities for the hemostat portfolio, we have completed patient enrollment in a 231-patient IDE study, evaluating the performance of QuikClot Control+ hemostatic devices from mild-to-moderate bleeding in cardiac procedures as compared to standard goals.\nWe intend to file a 510(k) for expanded use of QuikClot Control+ following the completion of the study.\nGiven the previous discussion of the company's revenue performance, I'll begin at the gross profit line.\nFor the third quarter, adjusted gross margin totaled 59.5%, a 230 basis point increase versus the prior year period.\nThe year-over-year increase in gross margin was driven by product and regional mix, benefits from cost improvement initiatives, favorable impacts from pricing, M&A and foreign exchange, partly offset by raw material and distribution inflation.\nThird quarter adjusted operating margin was 28.5% or a 340 basis point year-over-year increase, driven by the gross margin improvement as well as disciplined expense management and partially offset by planned investment in the business.\nFor the quarter, net interest expense totaled $11.8 million, a decrease from $16.4 million in the prior year period.\nThe year-over-year decrease in net interest expense reflects savings from the redemption of the 2026 notes and also includes the impact of debt paydown using the proceeds of the respiratory divestiture and operating cash flows.\nOur adjusted tax rate for the third quarter of 2021 was 11.3% compared to 7% in the prior year period.\nThe year-over-year increase in our adjusted tax rate is primarily due to a lower benefit from stock-based compensation compared to the prior year period.\nAt the bottom line, third quarter adjusted earnings per share increased 26.7% to $3.51.\nIncluded in this result is an estimated favorable impact from foreign exchange of approximately $0.13 per share versus prior year.\nTurning to select balance sheet and cash flow highlights.\nYear-to-date, cash flow from operations totaled $450.5 million compared to $241.5 million in the prior year period and represented a year-over-year increase of $209 million.\nThe increase was primarily attributable to favorable operating results, lower contingent consideration payments, lower payroll and benefit-related payments and proceeds received under the manufacturing supply agreement with Medline.\nMoving to the balance sheet.\nOur financial position remains sound.\nAt the end of the third quarter 2021, our cash balance was $481.2 million versus $375.9 million at the end of the fourth quarter of 2020.\nAs noted previously, we made a $259 million payment in July against our revolving credit facility, using funds primarily generated from the initial close of the respiratory business divestiture.\nAt the end of the third quarter, we had $342 million drawn on our revolver and net leverage was approximately 2 times.\nNow moving on to our 2021 guidance update.\nWe are adjusting our 2021 constant currency revenue growth guidance to a range of 8% to 9% year-over-year compared to 8.5% to 9.75% previously.\nRealized outlook reflects the benefits of our diversified portfolio, offset by lower UroLift revenues due to the recovery in elective surgical procedures progressing at a slower rate than what our prior 2021 financial guidance had assumed.\nWe continue to assume a 2% tailwind to reported revenue from foreign exchange rates in 2021, which is unchanged from our previous assumption.\nAs a result, we are reducing our as-reported revenue growth guidance to 10% to 11% year-over-year versus 10.5% to 11.75% previously.\nThe updated guidance would equate to a dollar range of between $2.791 billion and $2.186 billion.\nNow for some commentary on our margin outlook.\nWe are lowering the top end of our 2021 adjusted gross margin guidance by 25 basis points to a range of between 59.25% and 59.5%.\nOn a year-over-year basis, we expect gross margin expansion to be driven primarily by a favorable mix of high-margin products, including Interventional Urology, Interventional Access and Surgical as well as from manufacturing productivity improvement programs and benefits from previously announced Footprint restructuring programs, partially offset by inflation.\nRelative to our prior guidance, the revised outlook is associated with lower UroLift revenues and the impact of higher inflation than previously assumed.\nThere is no change to our expectation at Z-Medica, will add approximately 50 basis points to gross margin for 2021.\nOn the topic of inflation, we continue to experience increased cost pressures in raw materials, freight and to a lesser extent, labor.\nAdditionally, at the end of 2020, we had entered into contracts for sea freight lanes in order to lock-in pricing at that time.\nThe majority of those contracts expired at the end of September, with the remainder expiring at the end of the year.\nAs a result of the expiring shipping contracts and increasing inflation, we now estimate that inflationary costs will be roughly $3 million higher in the fourth quarter than what was incurred in the third quarter.\nThis impact is reflected in our revised guidance for gross margins.\nFor adjusted operating margin, we are increasing our 2021 guidance range to 27.5% to 28%, representing an increase of 75 basis points at the low end and 50 basis points at the high end of the range versus prior guidance.\nThe increase in adjusted operating margin reflects the year-to-date performance, partially offset by the lower gross margin outlook.\nMoving down the P&L.\nWe now expect interest expense to be roughly $57 million versus our previous guidance of $60 million to $62 million.\nThe decrease in net interest expense for 2021 largely reflects a reduction in debt, funded by proceeds from the respiratory divestiture and our strong cash flow generation.\nOn taxes, we now expect our adjusted tax rate for 2021 to be roughly 12% to 13% versus the prior range of 13% to 13.5%.\nConsidering all of these elements, we are raising our adjusted earnings per share outlook for 2021 by $0.25 at the high and low end of the range to $13.15 to $13.35, a 23.2% to 25.1% year-over-year increase.\nIn closing, I will highlight our three key takeaways from the quarter.\nFirst, our diversified product portfolio enables Teleflex to deliver double-digit constant currency growth in the third quarter, even with greater-than-expected disruption from COVID-19.\nSecond, we continue to execute on our strategy to drive durable growth across our diversified portfolio with investment in organic growth opportunities, margin expansion and deployment of capital for M&A.\nThird, we raised our earnings per share guidance for 2021, reflecting 23% to 25% earnings growth year-over-year.\nIn closing, we feel good about our overall performance in the quarter, which was anchored by our diversified portfolio of medically necessary products.\nOur balance sheet is in a solid position with leverage at 2 times, providing ample financial flexibility for our capital allocation priorities.\nWe remain confident in our future and our ability to continue to meet commitments to patients, clinicians, communities and shareholders.\n Assistant:", "chosen": "teleflex q3 adjusted earnings per share $3.51 from continuing operations.\nq3 adjusted earnings per share $3.51 from continuing operations.\nq3 revenue $700.3 million.\n2021 constant currency revenue growth outlook reduced to 8.00% to 9.00% from 8.50% to 9.75% previously.\n2021 adjusted earnings per share outlook raised to $13.15 to $13.35 from $12.90 to $13.10 previously.\n"}
{"prompt": "Human: I'm William Prate, Senior Director of Global Financial Planning and Analysis and Investor Relations.\nOur Chief Operating Officer, Dave Huml, is tending to a family matter today and is not able to join the call.\nChris will brief you on our operations and the progress we're making toward our enterprise strategy, then Andy will cover the financials.\nAfter their remarks, we will open the call to questions.\nThese risks and uncertainties are described in today's news release and the documents we file with the Securities and Exchange Commission.\nWe encourage you to review those documents, particularly our safe harbor statement for a description of the risks and uncertainties that may affect our results.\nAdditionally, on this conference call, we will discuss non-GAAP measures that include or exclude certain items.\nWe hope that you and your loved ones are managing to stay safe through this pandemic.\nAs you may have seen, in September, we celebrated Tennant's 150th anniversary.\nWhile our current operating environment could not be more different than what our founder George Tennant encountered in 1870, the Company has always maintained a tradition of innovation and resilience, demonstrated by our ability to adapt and stay relevant to our customers.\nWhen the pandemic started, we were quick to respond and established three guiding principles; to keep our employees and customer's safe, to manage our costs and cash flow, and to stay in a position to ramp up quickly when markets recover.\nAt the same time we honored our commitment to provide our customers with the innovative solutions they needed to keep their facilities clean and safe.\nWe continued with that approach in the third quarter and saw encouraging signs of recovery across all of our regions.\nOur global teams have worked hard in overcoming the unprecedented sales and operational challenges resulting from the pandemic, and we work closely with our customers, supply chain partners, and carriers to avoid operational disruptions.\nFurthermore, the execution of our Enterprise Strategy yielded improvements in our operating performance with third quarter EBITDA growth, despite a year-over-year COVID-19 related decline in organic sales.\nWhile the pandemic continues to pose considerable macro level uncertainty, especially as some markets see spikes in COVID 19 cases, we have a high level of confidence in our near-term business outlook.\nAs Andy will speak to in a few moments, we are reinitiating our full year guidance for 2020 which not only reflects our revenue and profitability expectations, but also our commitment to investing in our business to support our long-term enterprise strategy.\nThat strategy includes, winning where we have competitive advantage, reducing complexity and building scalable processes, and innovating for profitable growth.\nWhile the global pandemic impact or the economic impact of the pandemic is nothing anyone could have predicted a year ago, it has not diminished our ability to execute on our enterprise strategy because the key elements are all within our control.\nFor example, while innovating for profitable growth might sound like a lofty ideal; for Tennant it represents how we take customer insights and leverage our tremendous engineering capabilities to solve real world problems.\nA recent illustration of this commitment is our October 1st introduction of our new T380AMR, which complements our current robotic offering by providing a smaller-sized machine that enhances maneuverability and navigation to help customers with smaller footprints.\nThis new product and our continued partnership with Brain Corporation enabled us to finalize agreements in the third quarter to provide two national retailers and a separate regional retailer with our full suite of autonomous floor scrubbers.\nAdditionally, we are starting to achieve wins in additional verticals like logistics, education and aviation.\nFollowing our initial roll-out with Walmart earlier this year, wins like these demonstrate how we're continuing to lead with innovation and deliver value to a more diverse customer base.\nIn support of our enterprise strategy, we recently hired Dan Glusick as our Senior Vice President of Operations, reporting directly to our COO, Dave Huml.\nDan has broad enterprise leadership and deep functional expertise across all aspects of manufacturing operations, supply chain management, and enterprise transformation and he brings more than 25 years of Global Operations leadership experience to Tennant.\nDan is an important hire and will play a critical role in the implementation of our Enterprise Strategy as we advance our supply chain and optimize our operations to support our product standardization and local for local initiatives.\nIn short, this is an important area of focus as we position Tennant for success in a post pandemic world.\nLastly, given the improving demand trends that we've seen since May and our confidence in the improved trajectory of our business, we recognize the need for strategic investments to support the continued execution of our strategy, to backfill key leadership roles, and to recognize and retain our best talent.\nThis is core to the guiding principles we outlined at the start of the pandemic.\nWe began making such investments in Q3 and we'll continue to do so in Q4.\nThey are essential to how we can support our customers, emerge strong as markets recover, and continue to drive shareholder value.\nPlease note that in my comments today, any references to earnings per share, both GAAP and non-GAAP, are on a fully diluted basis.\nAs Chris noted, while Tennant's third quarter results reflected the continuing impact of the pandemic, we did see some encouraging trends across all of our regions.\nOverall, for the third quarter of 2020, Tennant reported net sales of $261.9 million, down 6.7% year-over-year.\nOrganic sales, which exclude the impact of currency effects declined 7.1%.\nThis represents the significant improvement in our sales trajectory when compared to the 27% decline we experienced in the second quarter.\nFor the third quarter, we reported net earnings of $11.7 million or $0.63 per share, down from $14.6 million or $0.79 per share in the year ago period.\nAdjusted EPS, which excludes certain non-operational items and amortization, totaled $0.90 compared with $0.85 in the prior year.\nWe'll now take a closer look at our third quarter sales results by geography, which we divide into three regions; The Americas, which includes all of North America and Latin America; EMEA, which covers Europe, the Middle East and Africa; and Asia Pacific, which includes China, Japan, Australia and other Asia markets.\nSales in the Americas declined 9.9% year-over-year and were down 8.8% organically.\nDeclines in direct Industrial business sales and distributor sales were partially offset by the continued success of Tennant's AMR platform and strong growth in Brazil.\nSales in EMEA declined 0.3% or down 4.5% organically in the quarter as a result of market weakness across the region.\nThe declines were mainly in the United Kingdom and the Iberian Peninsula, which offset growth we experienced in France and Italy.\nSales in the APAC region declined 0.8%, down 2.3% organically.\nDeclines in Southeast Asia and Korea were partially offset by growth in direct sales in Australia.\nOverall, the Company's service and parts and consumables business trends continued to be a bright spot.\nWhile equipment sales were down approximately 12% year-over-year for the quarter, aftermarket revenue was up 6% over the same period last year, reflecting our efforts in helping customers meet their rapidly evolving cleaning needs during the pandemic.\nAdjusted gross margins during the third quarters of 2020 and 2019 were 40.2% and 40.8% respectively.\nThe year-over-year decrease reflects a number of strategic investments and deleverage on lower volume which were partially offset by cost out actions driven by strategic initiatives.\nTurning to expenses, during the third quarter, our adjusted S&A expenses were 29.8% of net sales compared with 31.2% in the year ago period, mainly as a result of cost containment efforts and adjustments to management incentives.\nThis included a number of strategic investments that we made during the quarter.\nGiven the macroeconomic uncertainties created by the pandemic, careful S&A management continues to be an important part of our response.\nCombining these results, our EBITDA in the third quarter of 2020 was $32.6 million or 12.4% of sales compared with $31.4 million or 11.2% of sales in the third quarter of 2019.\nThe increase as a percent of sales was attributed to adjustments to management incentives and reductions in discretionary spending that were implemented in the quarter.\nAs for our tax rate, in the third quarter, the Company had an adjusted effective tax rate of 11.3% compared to 16.1% in the year ago period.\nThe lower tax rate primarily resulted from an increase in discrete tax items in the quarter and a favorable mix of earnings.\nTurning now to cash flow, capital allocation and balance sheet items.\nIn the third quarter of 2020, Tennant generated $48.9 million in cash flow from operations, primarily driven by business performance and improvements in working capital.\nAlso in the third quarter, we repaid an additional $17 million of debt.\nAs of September 30th, we had $124.7 million in cash and cash equivalents, and approximately $172 million of undrawn funds on our revolver.\nLastly, turning to guidance.\nAs you may recall, in April, we withdrew the full-year guidance we had provided in February due to the uncertain nature of the pandemic.\nWhile there is still uncertainty in the market, we do have a higher level of confidence in our near-term projections and we are reinitiating full-year guidance for 2020.\nAs included in today's earning announcement, our full year 2020 guidance is as follows; Net sales of $995 million to $1,005 million with organic sales declining 12.5% to 11.5%; GAAP earnings of $2.00 to $2.20 per share; adjusted earnings per share of $2.80 to $3.00 per share, which excludes certain non-operational items and amortization expense; adjusted EBITDA in the range of $116 million to $121 million; capital expenditures of approximately $35 million; and an effective tax rate of approximately 17%.\nIt's worth mentioning that our guidance does include approximately $5 million to $8 million of government benefits, which is primarily driven by the wage subsidies we received and mentioned in our second quarter results.\nAlso, and as Chris noted, this guidance incorporates continued investing in our business to support our enterprise strategy.\nAt the same time, while we believe the underlying business performance is improving and we expect our revenue will continue to increase sequentially quarter-over-quarter, it's important to note that organic sales would reflect a difficult year-over-year comparison as Q4 2019 was Tennant's second highest revenue quarter ever.\nAs a result, we are anticipating that our implied fourth quarter organic decline will be greater than the third quarter; and due to the continued strategic investments that I just mentioned, our anticipated EBITDA dollar and percent of revenue will be lower than previous quarters.\nWith that, we will now open the call to questions.\n Assistant:", "chosen": "q3 adjusted earnings per share $0.90.\nq3 earnings per share $0.63.\nsees fy 2020 adjusted earnings per share $2.80 to $3.00.\nsees fy 2020 gaap earnings per share $2.00 to $2.20.\nsees fy 2020 sales $995 million to $1.005 billion.\nq3 sales $261.9 million versus refinitiv ibes estimate of $237.7 million.\nreinstates 2020 guidance for net sales, adjusted ebitda and eps.\nsees 2020 capital expenditures of approximately $35 million.\n"}
{"prompt": "Human: Before Kevin begins I'd like to direct all participants to our website at www.\nI'll now turn over the call to Kevin to begin.\nWith me here in Vancouver I have Stewart Andrade Teekay Tankers Chief Financial Officer.\nTeekay Tankers generated total adjusted EBITDA of $132 million during the fourth quarter more than double the $62 million reported in the fourth quarter of 2018.\nFor the full year 2019 we generated total adjusted EBITDA of $259 million up approximately 100% from the $129 million in fiscal year 2018.\nWe reported adjusted net income of $83 million or $2.47 per share in the fourth quarter up from an adjusted net income of $14 million or $0.42 per share in the fourth quarter of 2018.\nFor the full year in 2019 we reported adjusted net income of $64 million or $1.91 per share up from an adjusted net loss of $55 million or $1.63 per share in fiscal year 2018.\nOur spot tanker rates in the fourth quarter of 2019 peaked at the highest level since 2008 and Teekay Tankers marked one of the most profitable quarters since the end of the tanker market super cycle in 2009.\nIncluding all of these items our pro forma net debt at the end of the year was reduced by $153 million or 15% since the third quarter of 2019.\nAnd our pro forma liquidity at year-end increased to approximately $260 million from $95 million at the end of last quarter.\nThe strength in the tanker market continued into the early part of the first quarter of 2020 and I'm pleased to report that we have secured significantly higher spot tanker rates to date than those achieved in the fourth quarter.\nWhile crude tanker spot rates have come under pressure in recent weeks primarily due to the coronavirus and the removal of sanctions against COSCO we continue to believe the underlying tanker supply and demand fundamentals point toward an improved rate environment in the medium term.\nI will touch on this in the next few slides.\nTurning to slide four.\nWe look at recent developments in the spot tanker market.\nCrude tanker spot rates saw extreme volatility during the fourth quarter of 2019 as shown by the chart on the right of the slide.\nThe market initially started tightening in September as a result of firmer refining demand ahead of IMO 2020 and a slowdown in tanker fleet growth due to shrinking newbuild deliveries and vessels being taken out of service for scrubber retrofitting.\nThe market received a significant boost in October from the removal of 26 COSCO-owned VLCCs from the trading fleet due to sanctions imposed by the United States.\nThis tightened available fleet supply further exacerbating positive underlying fundamentals and caused crude tanker spot rates to spike to the highest level since 2008.\nThis spike in spot rates also drove an increase in time charter rates and Teekay Tankers took advantage of this window of opportunity by chartering out four Suezmaxes at very attractive rates averaging $37000 per day for average durations of 12 months.\nThe window for chartering out at those levels was relatively brief with rates correcting to more normalized seasonal levels at the start of November as the market absorbed the news of the COSCO sanctions.\nNevertheless rates remained relatively firm.\nAnd in the fourth quarter as a whole rates averaged the highest since the last market peak in the fourth quarter of 2015 as shown by the chart on the left of the slide.\nSpot tanker rates started 2020 on a positive note as the supply demand fundamentals remain fully intact in the new year and various market events continue to support rates.\nHowever rates in most segments have come under pressure during February due to a combination of weaker refining margins the onset of seasonal refinery maintenance the return of the COSCO vessels to the trading fleet and the impact of the coronavirus outbreak.\nI will discuss these factors in more detail on a later slide.\nTurning to slide five.\nWe give a summary of our earnings in the first quarter of 2020 to date.\nBased on approximately 77% and 62% of spot revenue days booked Teekay Tankers' first quarter-to-date Suezmax and Aframax bookings have averaged approximately $51700 and $38100 per day respectively.\nFor our LR2 segment with approximately 65% of spot revenue days booked first quarter-to-date bookings have averaged approximately $40100 per day.\nIn each segment rates achieved to date are significantly above those achieved during the fourth quarter.\nIt's also important to note that we are currently trading the majority of our LR2s in the crude market hence the LR2 earnings being comparable to those achieved by Aframax fleet and at a substantial premium to earnings which could be achieved in the clean market.\nAs discussed in the previous slide the freight market for most segments except our U.S. Gulf Aframaxes have come off from the highs seen at the start of the year and we expect spot rates during the balance of Q1 to be at levels substantially lower than those booked in the quarter-to-date for these segments.\nTurning to slide six.\nWe discuss some of the factors which will impact the tanker market over both the near and medium terms.\nIn the near term the tanker market faces a number of headwinds most prominent of which is the recent coronavirus outbreak.\nAlthough the full impact of the outbreak remains uncertain it appears likely that the tanker market will be negatively impacted in the coming weeks or months due to reduction in Chinese oil demand and associated refinery run cuts.\nIn an effort to support oil prices the OPEC+ group have also indicated the potential for additional supply cuts in the anticipation of reduced demand caused by the virus outbreak.\nAlthough the near-term outbreak of the coronavirus on the tanker market is clearly negative there are offsetting factors which could mitigate a portion of the overall impact.\nSome refiners may look to take advantage of lower oil prices and a contango pricing structure by stockpiling cheaper oil.\nIn addition lower oil prices will also lead to lower bunker costs which will help support spot tanker earnings.\nWe're also seeing delays to vessels discharging at Chinese ports as well as delays at Chinese newbuild yards and Chinese repair yards.\nThis could help to tie up tonnage and will also likely extend scrubber retrofits further into 2020 than was previously expected.\nIn addition to the coronavirus the tanker market also faces headwinds in the near-term from the return of the COSCO vessels to the trading fleet weak refining margins in Asia and the onset of seasonal refinery maintenance.\nAlthough the near-term outlook for the tanker market is uncertain we believe the underlying supply and demand fundamentals remain positive.\nNon-OPEC oil supply is expected to grow by over two million barrels per day in 2020 led by the U.S. Brazil Guyana and Norway.\nThis will lead to an increase in long-haul Atlantic to Pacific crude oil movements and a stretching of the fleet as more vessels will have to ballast back to the Atlantic to load cargo.\nWe also believe that global oil demand could experience a strong rebound once the impact of coronavirus passes particularly if the Chinese government acts to further stimulate their economy.\nThe outlook for tanker fleet supply remains highly encouraging with the tanker order book currently at a 23-year low when measured as a percentage of the existing fleet.\nWe also believe that scrapping could rebound this year as 13 million deadweight ton of tankers reaches 20 years of age.\nAs highlighted earlier fleet supply should also remain constrained through 2020 by ongoing vessel removals for scrubber retrofits.\nAnd finally new tanker ordering remains at relatively low levels compared to previous market cycles due to a lack of available financing and uncertainty created by anticipated long-term changes to maritime regulations and new technology development.\nIn sum while the coronavirus creates a period of uncertainty we believe the underlying supply and demand fundamentals are constructive for a return to a healthier rate environment in the medium term.\nI will now turn over the call to Stewart to cover the next couple of slides.\nTurning to slide seven.\nTNK continues to maintain significant operating leverage to the tanker market as highlighted by the two graphs on this slide.\nOn an annualized basis the rates we achieved in the fourth quarter of 2019 would result in over $320 million of free cash flow or over $9.5 per share.\nThis is compelling relative to our closing share price yesterday of $12.66 per share and equates to a free cash flow yield of approximately 75%.\nFrom an earnings per share perspective using a similar methodology it would translate into $8 per share which can be seen in the graph on the right.\nThis equates to a compelling 1.6 times price to earnings ratio.\nTurning to slide eight we highlight significant balance sheet improvements that we have made since the beginning of the third quarter.\nStarting with the graph on the top of the page we provide our debt repayment profile before and after the recently secured five year $533 million revolving credit facility refinancing which was approximately two times oversubscribed.\nThis attractively priced refinancing at LIBOR plus 240 basis points reduces our 2021 balloon maturities from approximately $390 million to approximately $70 million with our next balloon maturity coming at the end of 2024.\nIncluding this refinancing and our previously mentioned asset sales our pro forma December 31 liquidity is $260 million compared to $95 million at the end of the third quarter.\nOur balance sheet leverage has also improved with net debt to capitalization decreasing by 5% from 51% at the end of the third quarter to 46% on a pro forma basis at December 31.\nOur net debt which includes our debt and capital lease obligations less cash on hand has reduced significantly since the beginning of 2019 as shown by the graph on the bottom of the page.\nTaking into account cash flows earned from the improved tanker market and proceeds from agreed asset sales our pro forma net debt at the end of the year stands at $844 million a decrease of over $200 million or approximately 20% since the end of 2018 and a decrease of $150 million or approximately 15% from the third quarter of 2019.\nIn 2020 we will continue to allocate capital toward debt reduction as we think this will create the most shareholder value by increasing our net asset value better positioning us to exercise purchase options on higher cost sale leaseback debt thereby reducing our cost of capital and strengthening our balance sheet which will further which will build further our financial flexibility.\nTurning to slide nine we have summarized our execution on many of the strategic priorities that we laid out at our recent Teekay Group Investor Day in November with a goal of creating shareholder value and strengthening our balance sheet.\nOperationally we have maintained our high spot market exposure while locking in attractive time charters when the market spiked in October.\nFinancially we have increased balance sheet strength by aggressively reducing debt and pushing out maturities.\nOn the asset side we have opportunistically agreed to sell more than $100 million of assets further accelerating our debt reduction and exiting a noncore business.\nAnd lastly on IMO 2020 I am pleased that we have had a very smooth transition to burning lower sulfur more environmentally friendly fuels which we attribute to our extensive preparations over the past three years and to having secured supply contracts with quality fuel suppliers covering approximately 75% of our requirements.\nGiven our leverage to the tanker market and tanker supply and demand fundamentals pointing toward a healthier rate environment in the medium term we expect to continue creating significant shareholder value and increasing our financial strength.\nWith that operator we are now available to take questions.\n Assistant:", "chosen": "teekay tankers q4 adj earnings per share $2.47 excluding items.\nq4 adjusted earnings per share $2.47 excluding items.\n"}
{"prompt": "Human: This includes projections for our business in the current or future quarters or fiscal years.\nIn addition, as we continue to anniversary the onset of the COVID-19 pandemic last year, we will be providing financial information compared to FY '19 or pre-pandemic and FY '20 where applicable.\nFor a full reconciliation of corresponding GAAP financial information, please visit our website, www.\nNow let me outline the speakers and topics for this conference call.\nJoanne will begin with highlights from the fiscal year for Tapestry and each of our brands.\nShe will also provide an overview of the progress we've made on our Acceleration Program, along with goals for FY '22.\nScott will continue with our financial results and priorities going forward.\nFollowing that, we will hold a question and answer session where we will be joined by Todd Kahn, CEO and Brand President of Coach.\nAfter Q&A, Joanne will conclude with brief closing remarks.\nWe delivered standout results in fiscal 2021, a transformational year for Tapestry.\nWe are a fundamentally different company today than we were just one year ago.\nThrough our Acceleration Program, we reached new customers in new ways and effectively adapted to a rapidly changing environment.\nOur success is a testament to our powerful brands and talented team.\nWe achieved many strategic milestones this year, which have strengthened our organization.\nWe've sharpened our focus on the consumer and clarified the unique positioning of each of our brands.\nThis drove improvements in key customer metrics, including recruitment, retention and reactivation.\nWe enhanced our digital capabilities, highlighted by our global e-commerce channel, a margin accretive business for Tapestry, reaching approximately $1.6 billion in revenue, nearly doubling versus prior year and over $1 billion ahead of pre-pandemic levels.\nThis was fueled by the acquisition of nearly 4 million new customers in North America alone, including a growing number of millennial and Gen Z consumers.\nAnd we sustained double-digit e-commerce sales growth in the fourth quarter, even as we lapped more difficult comparisons online.\nAt the same time, we drove continued sequential sales improvement for our global store fleet with operating margins that were once again above pre-pandemic levels.\nWe further strengthened our positioning in China, which still has tremendous runway, supported by the growth of the rising middle class.\nIn fact, Tapestry's business in Greater China reached $1.1 billion in sales this fiscal year, led by over 60% growth on the Mainland.\nAt the same time, we grew our business with Chinese consumers globally, increasing at a high-single-digit rate as compared to pre-pandemic levels.\nWe successfully leveraged data and analytics, embedding capabilities across the company to enhance our understanding of the customer, increased responsiveness and drive faster, more effective decision making.\nThis has underpinned our ability to optimize the assortment planning process, lower SKU counts by 40% to 45% and reduced promotional activity, supporting higher AUR and gross margin as well as improved inventory turns.\nWe also embraced new ways of working with a leaner operating model and more empowered teams.\nThis resulted in $200 million of gross expense savings in fiscal year '21, which funded investments in areas such as digital and marketing to fuel our continued growth as well as our purpose-led initiatives to accelerate and amplify our work within our social fabric to effect positive change for our industry and stakeholders.\nImportantly, the traction of our strategy is clearly evidenced by our financial performance, including the achievement of record operating margin at Tapestry Inc. as well as operating income and earnings per share growth versus both FY '20 and FY '19 in each quarter of the year.\nWe also exceeded pre-pandemic sales in the fourth quarter, representing an important financial milestone.\nIn addition, we generated $1.2 billion of free cash flow and ended the year in a strong cash position, while reducing our leverage through organic profit growth and the pay down of the company's revolver.\nGiven our strong financial position and underlying business trends, our board of directors approved the reinstatement of our capital return programs with a plan to return over $750 million to shareholders through both dividend and share repurchases in fiscal year '22.\nThese actions underscore our conviction and Tapestry's ability to drive long-term growth along with our commitment to enhancing value for our stakeholders.\nScott will discuss our capital allocation priorities in more detail shortly.\nNow let me touch on our results and strategies for Coach, Kate Spade and Stuart Weitzman.\nCoach, our largest brand, led Tapestry, outperforming in each quarter of the year.\nThe brand fueled momentum through innovation across consumer touch points, driving engagement with new and existing customers.\nDuring the fourth quarter, Coach revenue rose 117% versus prior year, outpacing pre-pandemic levels of sales by 2%, a meaningful achievement given the volatile backdrop.\nIn addition, we delivered significant profitability enhancements during the fiscal year, resulting in operating income increases of 67% on a one year basis and 14% on a two year basis.\nThis outstanding performance was the result of both gross margin expansion and SG&A leverage, reflecting strategic actions and structural changes we've made to sustain long-term growth.\nThroughout the fiscal year, we made significant progress at Coach against the pillars of our multi-year growth agenda.\nFirst, we've deepened our engagement with consumers by leaning into our brand values of inclusivity and authenticity to drive increased recruitment and reactivation.\nIn addition, through the launch of our loyalty program in North America and more targeted marketing, we drove significant gains in the number of repeat transactions.\nSecond, we created innovative, unique and compelling product to meet the needs of our target consumer segment.\nWe are building enduring icons that create a foundation for our product pipeline and future seasons.\nThis was evidenced by the recent success of newness within the Tabby family, including our Pillow and Mini versions.\nIn addition, we saw continued strength in our signature platforms across an expanded assortment of refresh styles, highlighting desirability for the brand.\nThird, we drove triple-digit sales growth in our digital channels on both the one and two year basis led by new customer recruitment.\nDuring the fiscal year, we acquired nearly 2.5 million new Coach customers through our digital channels in North America alone, a meaningful increase versus prior year.\nImportantly, we sustained strong momentum in the fourth quarter even as we comped our digital initiatives and the initial uplift in e-com sales that occurred during the pandemic in the prior year, highlighting continued opportunity in the channel.\nFourth, we accelerated growth in China by leveraging our foundation in the country, which resulted in over 60% revenue growth on the Mainland in fiscal year '21 with strength across channels.\nThis performance reflected our integrated and comprehensive brand building strategy, including investments in marketing, innovative product and a continued focus on digital channels.\nMost recently, we hosted our live stream fashion show in Shanghai, which was extremely well received and highlights our commitment to the Chinese consumer.\nFinally, we enhanced profitability to realize an operating margin of over 31%.\nThis performance was driven by higher gross margin, which reached nearly 74% through a focus on streamlining our offering, sharpening our merchandising efforts and reducing SKU counts by approximately 45%.\nThese initiatives resulted in global handbag AUR growth in each quarter of the fiscal year.\nIn fact, in the fourth quarter, our handbag AUR rose high-single-digits globally led by particular strength in North America.\nIn addition, we made structural changes to SG&A, including our fleet optimization efforts.\nLooking ahead to fiscal year '22, our goals are to increase market share in our core handbag and small leather goods categories through a combination of AUR and unit growth by continuing to develop the brand's iconic families, approachable and inclusive messaging and consistent global positioning, invest and grow in digital while delivering differentiated and compelling omnichannel experiences, continue to drive growth in China with key initiatives to capitalize on market trends of the emerging middle class and increased digitalization and grow men's by expanding lifestyle, building brand awareness and increasing our presence in Asia in keeping with our ambition to deliver over $1 billion in revenue in this category over our planning horizon.\nIn summary, Coach has both a remarkable 80-year history and a bright future.\nWe are confident that the deliberate actions we've taken to improve the foundation of the brand, including the realization of higher AUR and stronger margins are sustainable over the long-term as revenue continues to inflect.\nWe're continuing to improve on the momentum we've built to drive market share gains at sustainably high margins in fiscal '22 and beyond.\nNow moving to Kate Spade.\nThroughout the year, the brand delivered consistent improvement on the top-line, resulting in fiscal year '21 sales growth of 3% compared to prior year or 13% decline compared to pre-pandemic revenue levels.\nIn the most recent quarter, sales increased 95% versus prior year and were 4% below fiscal year '19.\nDirect sales in the fourth quarter, excluding wholesale, increased on a two year basis.\nIn addition, for both the quarter and fiscal year, operating income rose meaningfully with margin expansion compared to prior year on both a stronger gross margin and SG&A leverage.\nWe are pleased with Kate Spade's progress across its growth strategies, which highlight the traction we're making to build stronger connections with consumers.\nIn fiscal '21, we crystallized the brand's purpose, returning to its roots of unique and best-in-class storytelling and fulfilling its promise as a lifestyle brand, representing joy, optimism and color.\nDuring the most recent quarter, we continued to rereengage lapsed customers and an increasing rate as we reactivated 550,000 customers through our North America digital channels, an increase of nearly 35% compared to prior year, demonstrating our focus on building lasting relationships with our customers.\nSecond, we embedded a laser focus on the customer by harnessing the power of the broad and loyal Kate Spade community to engage consumers in new and exciting ways.\nThis was evidenced by our viral Happy Dance Campaign on TikTok, which has over 11 billion views and counting.\nThird, we reenergized our core handbag offering by introducing innovative and universal brand elements.\nWe're seeing traction in leather with the introduction of the Knot, which has already grown to approximately 20% of our retail assortment, proving its position as a key family in the assortment going forward.\nIn addition, our new signature branding, the Spade Flower continues to perform, while the reimagine Sam and Nylon has outpaced expectations.\nThese platforms represent strong foundations for future growth.\nFourth, we leaned into our digital strength, delivering approximately 35% growth compared to prior year across our e-commerce channels, reaching 35% of sales for the fiscal year.\nThis growth was driven by both the acquisition of nearly 1.4 million new customers through our North America digital channels as well as the engagement of existing customers.\nFifth, we improved profitability by focusing on acquiring, reengaging and retaining customers to drive top and bottom line growth.\nThrough the use of data, we adjusted our assortment and pricing strategies, which resulted in approximately 40% lower SKU count and disciplined promotional activity.\nThis ultimately drove overall handbag AUR growth, which increased mid-single-digits in both the fourth quarter and for the fiscal year.\nFinally, we've continued to focus on talent and culture.\nThis year, we reorganized our creative structure with the formation of the cross-functional ideation studio spanning across our brand creative, design, merchandising and marketing teams.\nThis has increased collaboration and cohesion to drive more impactful and consistent storytelling.\nAs we head into fiscal '22, we are building on the strong foundation we've established with the goal to deliver profitable and sustainable global growth.\nTo achieve this, we will maintain a consumer-centric approach across all aspects of the business, amplify recent product introductions, while continuing to build out our core handbag platforms, continue to engage newly acquired reactivated and existing customers to drive higher lifetime value, drive brand heat through marketing focused on our Kate Spade community, particularly in social channels, maximize lifestyle positioning by strengthening the foundation of ready-to-wear, jewelry and footwear and improve the global omnichannel experience and drive continued growth in digital.\nOverall, we are pleased with Kate Spade's execution and the traction we gained with consumers in fiscal '21, including AUR improvement and strong customer engagement.\nThis progress is reflected in Kate Spade's outperformance versus internal expectations, reinforcing our confidence in the brand's potential.\nKate Spade is a unique yet universal brand, and our teams are galvanized around driving our clear strategy.\nWe continue to believe in the significant runway ahead and our ability to achieve $2 billion in revenue and enhanced profitability in the future.\nTurning now to Stuart Weitzman.\nThroughout the fiscal year, the brand progressed on its growth strategies.\nSpecifically, we continued to renew the brand's reputation for fit, comfort and quality by listening and responding to customer needs.\nDuring the fourth quarter, we were pleased to see a significant increase in demand for dress styles as much of the world began to reopen and events and in person socialization returned.\nSecond, we grew our key categories by building strength in boots, booties and sandals through fashion innovation, highlighted by the continued success of our iconic 5050 Land and Nudist families, which brought a new and younger customers.\nWe also expanded the casual assortment, including a broader sneaker offering in the recently introduced on-trend Jelly styles.\nAt the same time, we dramatically simplified the product assortment with SKU counts declining approximately 45%.\nThird, we focused our distribution on markets and channels of greatest opportunity to create a foundation to return to profitability as revenues inflect.\nThis included the exit of unprofitable markets across the globe and rightsizing of the fleet in North America.\nAt the same time, momentum continued for our China business in fiscal '21 with revenue on the Mainland increasing over 35% compared to prior year or nearly 50% on a two year basis.\nWe kept the Chinese consumer at the forefront of our strategy, highlighted by our tailored product offering featuring capsule collections, relevant marketing with key opinion leaders and continued outperformance across digital channels.\nChina remains an important area of long-term opportunity for Stuart Weitzman at structurally higher margins.\nFourth, we strengthened our relationship with wholesale partners by providing relevant products and faster more consistent execution.\nAs previously shared, we reentered 90 Nordstrom doors in the year, fueling North America wholesale revenue ahead of pre-pandemic levels in the fourth quarter.\nFinally, we made progress in establishing a robust digital presence and drove approximately 30% e-commerce growth during the fiscal year, including continued strength in the fourth quarter, even as store trends improve.\nIn fiscal '22, our overarching goal is to return to profitability.\nWe will recruit and engage customers through products that sparks desire with a focus on must-have launches featuring icons, key items and capsule collection as well as [Technical Issue] drive brand heat with a digital-first drumbeat of relevant romantic storytelling; fuel continued growth in China, including an expanded footprint and further investment in digital; elevate the omnichannel customer journey, including delivering a best-in-class digital experience and accelerate wholesale partnerships with an expanded footprint in key accounts globally.\nOverall, I'm pleased with the progress we've made at Stuart Weitzman and we remain focused on restoring the brand's profitability.\nIn closing, we are focused on driving our next phase of growth supported by our clear strategy, compelling brands and differentiated platform.\nAlthough the environment remains volatile, we see a strong consumer who is ready to shop and continuing to engage with our brands.\nWe entered fiscal year '22 with a solid foundation, improved capabilities and increasing momentum.\nFrom this position of strength, we are confident in our ability to win with consumers and capture market share, accelerating growth and profitability across our portfolio long-term, enhancing value for all stakeholders.\nI'm thrilled to be with you today after joining Tapestry just a few months ago.\nWhile I'm still relatively new, I can already see that this is a truly unique company with strong and engaged talent, great brands that are well positioned in attractive market spaces and a distribution model that allows us to directly own our consumer relationships coupled with advanced digital and analytics capabilities.\nAs we move forward, my focus is to work alongside our management team to align business and financial strategies to drive sustainable long-term growth, which profits shareholders and all stakeholders alike.\nLooking back at fiscal year '21, it was a transformational year for the organization, as Joanne mentioned.\nWe effectively executed our Acceleration Program against a difficult backdrop, created a foundation for sustainable growth.\nSpecifically, we increased the penetration of our margin accretive digital and China businesses, which led overall growth in the fiscal year.\nWe expanded gross margins, primarily through higher AURs, driven by lower levels of promotional activity.\nWe grew operating margin by 300 basis points versus FY '19, reaching peak levels of Tapestry.\nThis despite significant investments in talent, digital capabilities and marketing, which were more than funded by gross profit gains and $200 million in gross SG&A savings delivered through the Acceleration Program.\nAnd we further strengthened our financial position through tight inventory management and a reduction in debt levels, while achieving $1.2 billion in free cash flow, resulting in an ending cash position of approximately $2 billion.\nTurning to the details of the fourth quarter.\nTotal sales rose 126% versus prior year on a 14-week basis or 113% on a 13-week basis, outpacing pre-pandemic levels, an important milestone.\nThese results were led by strength at Coach, while Kate Spade and Stuart Weitzman delivered material sequential improvements in trends.\nBy region, North America led the overall growth, rising approximately 150% versus FY '20 and a high-single-digit percentage versus FY '19, fueled by digital and a continued improvement in our brick and mortar businesses.\nIn Mainland China, our strong momentum continued as revenue increased approximately 60% on a one year basis and over 40% compared to pre-pandemic levels.\nAcross the balance of Asia, sales rose materially compared to the prior year, but remained below pre-pandemic levels with notable pressure in Japan given the continued state of emergency and lack of tourists sales.\nIn Europe, while a small portion of our total sales experienced a sequential improvement in trends on both a one and two year basis as lockdown measures were lifted and while revenue remained well below the fiscal '19.\nGiven the lack of tourist travel, our local demand did rise in the quarter.\nBy channel, we maintained strength in digital, which grew more than 35% compared to prior year, reaching 30% penetration, that's three times 2019 level.\nWhile our stores remain pressured, slightly better traffic drove a sequential improvement for the channel.\nAnd in wholesale, while revenue remained below FY '19, trends improved with particular strength in duty-free growth in China.\nMoving down the P&L, we realized another quarter of overall gross margin expansion compared to prior year and FY '19 with all brands exceeding expectations.\nWe continued to successfully execute our strategy to maintain price discipline, reduced SKU counts and leverage data analytics to more effectively tailor our product assortment and marketing messaging to the consumer.\nAs anticipated, SG&A rose significantly given the prior year's atypical comparison due to the impact of COVID-19.\nOn a two year basis, the increase in SG&A was attributable to higher marketing spend of almost $100 million compared to Q4 '19, and an increase in our annual incentive plan given our outperformance this year.\nIn addition, our expenses for the quarter included the $25 million contribution toward the endowment of the newly established Tapestry Foundation.\nTaken together, we achieved our fourth consecutive quarter of operating income growth and margin expansion compared to pre-pandemic levels.\nEarnings per diluted share for the quarter was $0.74 on a 14-week basis or $0.65 on a 13-week basis, a significant increase compared to a loss in the prior year and 7% ahead of pre-pandemic earnings per share levels.\nNow moving to distribution.\nWe continued to optimize our global fleet to prioritize profitability.\nFor Tapestry, we closed a net of 59 locations globally in FY '21, including 10 net closures in the fourth quarter.\nAs compared to fiscal '19 year end, we have closed a net of 90 locations across our brands.\nTurning to a discussion of our balance sheet and cash flows.\nWe ended the quarter in a strong position with $2 billion in cash and equivalents and total borrowings of $1.6 billion.\nTotal inventory at quarter end was approximately in line with last year and 6% below FY '19, reflecting in part deliberate actions to reduce SKU counts and prioritize inventory turn.\nAnd we generated $1.2 billion in free cash flow in FY '21 versus $202 million in the prior year and $118 million in fiscal '19.\nThis included capex of $116 million, a decline of 44% versus prior year as we prioritize investments in high return projects, notably in digital, while tightly controlling overall spend and reducing our outlay for new stores.\nNow touching on our capital allocation priorities.\nFirst, we continue to prioritize investments in the business to support strong returns and long-term profitable growth.\nSecond, we're committed to returning capital to shareholders through both dividend and share repurchases.\nIn keeping with the strategy, we're pleased to announce today our plan to return over $750 million to shareholders.\nSpecifically, the board declared a quarterly cash dividend of $0.25 with an anticipated annual dividend rate of $1 per share.\nOver time, our intent is to increase the dividend at a faster rate than earnings growth.\nWe also expect to repurchase approximately $500 million worth of stock in fiscal '22 under our current authorization.\nImportantly, once we have more visibility into a normalization in the external environment, we expect over time, to more aggressively returning cash to shareholders.\nAnd finally, in keeping with our objective to reduce leverage, we expect to repay our July 2022 bonds totaling $400 million at the end of this fiscal year.\nSo when considered together, the dividend, share repurchase and debt repayment are intended to approximately equal our projected free cash flow in the fiscal year.\nAnd as Joanne mentioned, these actions demonstrate our confidence in the underlying strength of our business as well as our commitment to driving total shareholder returns.\nNow moving to our fiscal '22 outlook.\nBefore touching on the specific details, it's important to note the paradigm shift compared to just a year ago.\nEntering COVID, there was a macro demand concern, and we took bold actions to adjust supply in order to preserve liquidity.\nAs you can see in our just reported results, we were very successful in achieving our goals, while continuing to accelerate investments to drive increasing momentum in our brands.\nToday, we find ourselves in a dynamic where the consumer demand backdrop is strong, while supply chain remains challenging.\nSo I want to emphasize the underlying strength and trend of our business and separate that from the uncertainty in the macro environment, primarily due to COVID-related impacts, which are largely out of our control.\nTherefore, the outlook we're giving you is a reflection of what we know as of today.\nIt's a point in time.\nWhile we have visibility into the risks that we see on the horizon, we're not trying to predict that which is unknowable.\nWe have taken the position that we will be aggressive on protecting the momentum of the business by securing significant expedited deliveries at an additional cost in order to mitigate the impact of supply chain disruptions, at least through the holiday period.\nFurther, we will continue to increase AURs as price is a lever to counter some of the additional cost pressures.\nOf course, we'll continue to monitor the impact of the new developments on our outlook over time.\nNow turning to the details of our FY '22 outlet.\nPlease note that all growth rates as compared to prior year are on a comparable 52-week basis.\nWe expect revenue to increase at a mid-teens rate versus FY '21, resulting in approximately $6.4 billion in sales, which would mark a record for the company.\nThis includes the expectation for a continuation of strong growth in digital and Greater China as well as improving global trends in stores.\nWhile we expect stores to show improvement, revenue is currently planned to remain below pre-pandemic levels.\nTurning to gross margin.\nWe expect to sustain the company's strong margins through continued AUR improvements and lower promotional activity.\nOur outlook also incorporates the expectation for GSP's renewal for the retroactive benefit in the second fiscal quarter, which is currently planned to partially mitigate the negative impact associated with higher freight costs currently embedded in our plan.\nTouching on SG&A, we expect expenses to grow relatively in line with sales for the year.\nWe continue to estimate that we will realize approximately $300 million in structural gross run rate expense savings, including $100 million of incremental savings from the prior year.\nWe are utilizing these savings to fund investments in the business, including $50 million of planned higher marketing spend, which is expected to represent approximately 7% of sales in fiscal '22, up roughly 75% or 3, 4 percentage points compared to FY '19.\nWe're also investing in our teams, adding talent to growing areas of the business such as digital.\nAnd we're focused on continuing to retain and develop these strong teams as evidenced by our recently announced commitment that all U.S. Tapestry employees will earn at least $15 per hour.\nOperating income is expected to increase in a mid-teens rate, resulting in operating margin modestly ahead of prior year and an increase of over 300 basis points versus 2019.\nNet interest expense for the year is expected to be $65 million, and the tax rate is estimated at 18.5%, assuming a continuation of current tax laws.\nWeighted average diluted share count is forecasted to be in the area of 283 million shares, approximately even with last year with share repurchase activity expected to offset dilution.\nWe anticipate earnings per share to be in the range of $3.30 to $3.35, reflecting leverage to the bottom line.\nCapex for the year is projected to be about $220 million.\nWe anticipate approximately 40% of the spend to be related to store development, primarily in China, with the balance dedicated to our digital and IT initiatives, including the initial investments related to build out our new distribution center.\nSpecifically, as our digital business continues to grow, we've recognized the opportunity to sharpen our focus on the consumer by expanding our distribution capabilities.\nWe recently signed a lease for a new distribution facility based in Las Vegas, which we believe will allow us to better serve our customers in the western part of the United States.\nFinally, we expect inventory levels to be up meaningfully throughout the year as we pulled forward receipts to match strong demand and faced elongated lead times from supply chain pressures due to COVID disruptions.\nGiven the dynamic environment and last year's atypical comparisons, we again expect significant variability by quarter.\nRevenue growth versus prior year is expected to be front-half weighted given relatively easier compares due to lapping COVID impacts with the first quarter forecasted to increase more than 20%.\nEarnings growth in the first half is expected to be somewhat pressured due to incremental SG&A investments along with last year's unusual compare, including lower expenses due to compensation reductions, lease abatements and the timing of government assistance.\nThat said, we still expect earnings per share growth in the first half versus prior year, particularly in Q1.\nSo in closing, we drove strong results in FY '21.\nOur significant progress is a testament to the successful execution by our passionate teams, the power of our brands and our competitive advantages, including our differentiated platform.\nThe bold and deliberate actions we've made under Tapestry's Acceleration Program has transformed our organization.\nThese changes are foundational and will continue to be a meaningful point of difference for our brands.\nAs we look ahead, with regard to those things we can control, we're continuing to build momentum and we are confident in our ability to leverage the solid foundation to drive sustainable top and bottom line growth across our portfolio of brands.\nAnd with respect to those things we can't control, we've taken aggressive actions to protect our strong momentum and mitigate those macro challenges we see today.\nOur conviction is underscored by our capital allocation actions, highlighting our optimism for the future and commitment to enhancing value for all stakeholders.\nI'd now like to open it up for Q&A.\n Assistant:", "chosen": "q4 revenue rose 126 percent to $1.62 billion.\n"}
{"prompt": "Human: Additionally, David Bray, group president, poultry; Noelle O'Mara, group president, prepared foods; Shane Miller, group president, fresh meat; and Chris Langholz, group president, international, will join the live Q&A session.\nEarlier today, we announced our first quarter fiscal 2022 results.\nTyson Foods once again delivered strong financial results.\nAt our Investor Day, I shared our plan to grow our top and bottom lines aggressively over the next three years.\nThis meant earnings per share growth of high single digits relative to a 2019 baseline and volume growth ahead of the market.\nOur results this quarter put us firmly on that path.\nWe achieved double-digit sales and earnings growth, both of which were driven by ongoing demand strength, productivity savings, and improving execution across our segments.\nOur diverse protein portfolio, omnichannel capabilities, leading brands, and value-added products contributed to our results.\nStrong performance in our beef segment, earlier-than-expected recovery in prepared foods, and improvement in chicken and pork all supported strong earning results.\nOur retail core business lines, which include our iconic brands, Tyson, Jimmy Dean, Hillshire Farm, and Ball Park maintain their volume share position even as we work through price increases to address inflationary pressure.\nAnd our foodservice Focus 6 product lines grew share year over year in broad-line distribution.\nThis growth was driven in large part by value-added chicken, which outperformed industry recovery and breakfast sausage where we were seeing improved fill rates.\nImportantly, and despite the continued impact of COVID-19, our volumes improved slightly across the company relative to the same quarter last year.\nChicken was a bright spot, where we saw our volumes improved 3.6%.\nWhile this is a good start, we are not where we want to be on volume.\nSo we're taking actions segment by segment to improve our volume performance.\nThese actions include investing in our team members, in additional capacity, and in brands and product innovation.\nAs discussed at Investor Day, we are also in the process of building 12 new plants.\nEach of these is progressing and each will enable Tyson to address capacity constraints and meet the growing global demand for protein.\nBottom line, we're committed to improving our total company volumes during the year.\nWe're also making sure that our pricing incorporates inflationary cost pressures on our business.\nIn the quarter, our cost of goods sold was up 18% relative to the same period last year.\nWe are seeing higher costs across our supply chain, including higher input costs, such as feed and ingredients.\nWe're also managing the higher cost of labor, transportation due to strong demand and limited availability.\nWith these higher costs, we work closely with our customers to achieve a fair value for our products.\nAs a result, our average sales price for the quarter increased 19.6% relative to the same period last year.\nThis helped us capture some of the unrecovered costs due to the timing lag between inflation and price.\nFinally, our balance sheet and overall liquidity position are strong, providing optionality to pursue strategic growth priorities and invest in growth across our portfolio.\nWe have a disciplined approach to deploying capital to support capacity expansion while achieving improved returns on invested capital.\nOur first-quarter results clearly demonstrate that we are making progress on our growth objectives, that we remain focused on outpacing the overall market, improving operating margins, and driving strong returns for our shareholders.\nWhile we're growing our business, we are mindful of our corporate responsibilities around environment, social, and governance goals.\nFor example, we committed to investing in and supporting our communities in rural America and around the world.\nLast year, Tyson Foods donated more than 16 million pounds of protein, the equivalent of 64 million meals to fight hunger.\nWe're incredibly proud of this work and the people that make it possible.\nTyson is a great company with a great team doing great things, and I'm pleased that this was recognized just last week by Fortune Magazine, who announced that for the sixth year in a row, Tyson Foods was No.\n1 in our sector in their rankings of the world's most admired companies.\nNow let's look at a few financial highlights from the first quarter.\nOur results included double-digit top and bottom-line growth.\nWe delivered solid operating income performance, up 40% for the quarter.\nThis performance was broad-based across segments where continued strong consumer demand and effective pricing to mitigate the impact of inflation drove higher earnings.\nOn volume, we are up slightly.\nAnd while we're working to achieve optimal throughput across our segments, labor challenges are still impacting our volumes and the ability to achieve optimal mix across our network.\nCompared to pre-pandemic levels, our volume performance is outpacing our peer set.\nIn retail, despite substantial market pressures, core business lines held share in the first quarter, led by strong performance in lunch meat, hotdogs, snacking, and bacon.\nWe also realized strong e-commerce results with Tyson Foods outpacing total food and beverage growth in our core lines gaining share in the quarter.\nStill, customer demand continues to outpace our ability to supply products.\nSo we have targeted actions in each segment to improve volumes.\nThis is key to delivering on our commitments.\nTo realize our volume goals, we must be able to fully staff our plants across the company.\nWe continue to take meaningful action toward becoming the most sought-after place to work.\nFor example, we provided our hourly team members with more than $50 million in bonuses during the first quarter.\nWe are piloting subsidized and on-site child care and we are adjusting schedules to flex with workforce needs.\nThese actions are bearing fruit as we see some improvement on the labor front.\nAnd while we have seen some labor challenges during the omicron surge, we are generally seeing lower turnover in absenteeism.\nWe saw chicken volumes grow 3.6% in the quarter, driven by strong fundamental demand and improved live production.\nWhat is important to note is that we grew ahead of the market and gained market share.\nIn prepared foods, volumes were down 2.6% in the first quarter.\nAbout half of the decline was related to pet treats divestiture.\nWe expect to sequentially improve these results over the remainder of fiscal year '22 as we take actions to expand and improve capacity utilization.\nIn beef, volumes were down 6.2%, driven by labor shortages previously mentioned.\nIn addition, port congestion has also dipped in export volumes in the segment.\nWe expect these headwinds on volume to normalize over the course of fiscal 2022.\nIn pork, we have sequentially improved our capacity utilization.\nWe are still working to optimize the mix.\nIn international/other, while we are starting from a relatively small base, our investment in capacity, innovation, and brands are supporting our market share growth objective.\nOverall, we expect to grow our total company volumes by 2% to 3% in FY '22, outpacing protein consumption growth.\nChicken remains a top priority and we continue to execute against our road map to achieve an operating income margin of 5% to 7% on a run-rate basis by mid-fiscal '22.\nI remain confident we will meet this goal.\nIn the first quarter, we've started to see profitability improvement resulting from our actions.\nFor example, we're investing aggressively in automation and technology to help us address some of the most hard-to-fill roles.\nThis is not a series of projects but is a well-planned program with automation designed to use common designs and equipment across our plants to optimize cost, maintenance, and asset utilization.\nThe second imperative is to improve operational performance and critical to improving performance is maximizing our fixed cost leverage, which means having enough furs to run our plants full.\nSince September, we've seen an improvement in our hatch rate ahead of our expectations.\nWe continue to expect full recovery in this year.\nWe were pleased with our volume growth in the quarter and expect further improvements as we grow our harvest capacity utilization from an average of 37 million head per week in FY '21 to 40 million head per week by year end.\nWe've noted previously that strength in spot prices for commodity chicken products put our buy versus grow program at a relative disadvantage.\nWe have reduced our reliance on outside meat accordingly.\nWe will staff our plants, service our customers, grow our volumes and be the best in the business.\nThe plan we have continues to be the right plan and our commitment to winning with our team members, winning with our customers and consumers, and winning with operational excellence is delivering results.\nLast year, we announced the launch of a new productivity program designed to drive a better, faster, more agile organization that is supported by a culture of continuous improvement and faster decision-making.\nThe program aims to deliver $1 billion in recurring productivity savings by the end of fiscal '24 relative to a fiscal 2021 cost baseline and has three critical focus areas, which are operational and functional excellence, digital solutions, and automation.\nWe're making some good progress on this front.\nI spoke just a minute ago about our investments in automation, but we've also attacked other issues.\nIn Prepared Foods, we're making use of supply chain, digitization, and advanced analytics.\nOur digital manufacturing platform allows us to analyze real-time data to take actions to optimize process conditions that drive better yields, lower costs, consistent quality, and increased output.\nIn transportation and logistics, we have established ongoing optimization of the mix and allocation of our private fleet, dedicated fleet, and third-party fleet, mitigating inflationary pressures and supporting better on-time deliveries to our customers.\nIn addition, we continued the expansion of our direct shipment program, reducing miles driven, and product touches in our supply chain.\nAs a result of projects like these, we're on track to deliver $300 million to $400 million of savings in fiscal 2022.\nWe shared at our Investor Day that we are taking actions to accelerate our growth and drive disciplined return on invested capital.\nThe five imperatives on this slide show how we will achieve our commitments and drive value creation.\nThis starts first with our commitment to our team members with a focus on ensuring their health, safety, and well-being as well as ensuring an inclusive and equitable work environment.\nWe are proud of our COVID-19 vaccine policy implemented last year in the U.S. and of the broader investments that we have made to keep our team members, their families, and our communities safe.\nBecause of our policy, our team members are better protected and the cases we do see have been mild or asymptomatic, resulting in an extremely low number of hospitalizations.\nWe are strongly encouraging boosters and are hosting clinics to make it easier for our team members and their families to get boosted.\nSecond, we are working to enhance our portfolio and capacity to better address demand.\nThis includes increasing the contribution of branded and value-added sales.\nAs a result, we expect our volume to outpace this growing market.\nThird, we are aggressively restoring competitiveness in our chicken segment.\nThis starts by returning our operating margin to the 5% to 7% level by the middle of fiscal 2022.\nFourth, we're driving operational and functional excellence and investing in digital and automation initiatives.\nThis is at the heart of our new productivity program.\nWe're working diligently to drive out waste, minimize bureaucracy and enhance decision-making speed across the organization.\nFifth, to address projected demand growth over the next decade, we are using our financial strength to invest in our business.\nOn capital alone, we're expected to invest $2 billion in fiscal year '22 with a disproportionate share focused on new capacity and automation objectives.\nAnd we continue to return cash to shareholders.\nDuring the quarter, we returned over $500 million in dividends and share repurchases.\nTo wrap it up, we are committed to winning with our team members, customers, and consumers as well as winning with operational excellence.\nI'm more excited about the future of Tyson Foods with each passing day.\nLet me turn first to a summary of our total company financial results.\nWe're pleased to report a strong overall start to the year.\nOur sales were up approximately 24% in the first quarter, largely a function of our pricing initiatives to offset inflationary pressures.\nVolumes were also up slightly, although impacted by continued labor challenges.\nLooking at our sales results by channel, retail drove almost $350 million of top-line improvements versus last year.\nImprovements in sales through the foodservice channel drove an increase of $1 billion and our export sales were nearly $333 million stronger than the prior-year period as we leveraged our global scale to grow our business.\nFirst-quarter operating income of $1.4 billion was up 40% relative to the same quarter last year due to increased earnings in beef, pork, and chicken.\nDriven by the strength in operating income, first-quarter earnings per share grew 48% to $2.87.\nHigher operating income led to higher adjusted earnings per share compared to the same period last year.\nAnd first-quarter earnings per share also benefited from lower net interest expense and taxes.\nSlide 10 bridges year-to-date operating income, which was $407 million higher than fiscal 2021.\nVolumes were up slightly during the year, primarily a result of improvement in chicken, pork, and international/other, offset by declines in beef and prepared foods.\nDeclines in beef and prepared foods were largely due to continued labor challenges in those segments.\nOur pricing actions led to approximately $2.1 billion in sales and price/mix benefits during the quarter.\nwhich offset the higher cost of goods sold of $1.6 billion.\nWe saw continued inflation across the business, in some instances, up 20% to 30%.\nNotable examples were labor, grain costs, live cattle and hog costs, and freight costs.\nAnd finally, SG&A was $88 million unfavorable to the same period last year, which was largely a result of cycling a $55 million benefit recorded last year for the recovery of cattle.\nMoving to the beef segment.\nSegment sales were more than $5 billion for the quarter, up 25% versus the same period last year.\nSales growth was driven by continued strong demand for beef products, which has supported higher average sales price.\nPartially offsetting higher sales prices were higher capital costs during the first quarter versus the comparable prior-year period.\nWe had sufficient livestock available in the quarter driven by strong front-end supplies.\nWe have good visibility into cattle availability through fiscal year 2022 and continue to expect it will also be sufficient to support our customer needs.\nWe delivered segment operating income of $956 million, up 81% versus the prior comparable period.\nThis improvement was driven by strong global demand for beef products and a higher cutout, which were partially offset by higher operating costs.\nOur operating margin of 19.1% was notably higher than the same quarter last year but was down on a sequential basis versus the last two quarters as cost increases led to a narrowing of the spread.\nNow let's move on to the pork segment on Slide 12.\nSegment sales were over $1.6 billion for the quarter, up 13% versus the same period last year.\nKey sales drivers for the segment included higher average sales price due to strong demand and increased hog costs, partially offset by a challenging labor environment.\nAverage sales price increased 12.8% and volumes were slightly higher relative to the same period last year.\nSegment operating income was $164 million for the quarter, up 41% versus the comparable period.\nOverall, operating margins for the segment improved to 10.1% for the quarter.\nThe operating income improvement was driven by higher spreads in the business.\nMoving now to prepared foods.\nSales were $2.3 billion for the quarter, up 10% relative to the same period last year.\nTotal volume was down in the quarter with strength in the retail channel and continued recovery in foodservice more than offset by labor and supply chain challenges.\nSales growth outpaced volume growth driven by inflation-justified pricing.\nDuring the quarter, retail core business mines maintained share, driven by consumer demand for our brands and continued strong execution by our team.\nOperating margins for the segment were 8% or $186 million for the first quarter.\nThe decline in segment operating margins versus the same quarter last year was driven by significant increases in raw material and other input costs that we were not able to fully recover through price during the quarter.\nRaw material costs, logistics, ingredients, packaging, and labor have increased our cost of production.\nOur pricing lagged inflation, but we expect to recover cost increases during fiscal 2022.\nIn addition to pricing, we've executed productivity, revenue management, and commercial spend optimization initiatives while ensuring the continued development of brand equity through marketing and trade support.\nMoving into the chicken segment's results.\nSales were $3.9 billion for the quarter, up 37%.\nVolumes improved 3.6% in the quarter due to strong consumer demand and increased life production.\nOur teams have been focused on streamlining our plants to deliver higher volumes and we expect to deliver substantial volume improvements in fiscal 2022 as hatch recovers, and we continue to look for ways to operate our plant more efficiently.\nAverage sales price improved around 20% in the first quarter compared to the same period last year.\nThis increase is due to favorable product mix and price recovery to offset cost inflation.\nOn pricing, we made tremendous progress toward driving our pricing mechanisms toward more variable structures and are now seeing those benefits.\nWe restructured our pricing strategies given our experience in fiscal 2021 to ensure that we have the flexibility to better respond to market and inflationary conditions.\nChicken delivered adjusted operating income of $117 million in the first quarter of fiscal 2022, representing an operating margin of 3%.\nOperating income in the quarter was negatively impacted by $185 million of higher feed ingredient costs.\nNow turning to Slide 15.\nAs part of our capital allocation approach, we focused on building financial strength, investing in our business, and returning cash to shareholders.\nIn pursuit of our priority to build financial strength and flexibility, we used improved earnings to retire debt in fiscal year 2021 and expect to do the same this year.\nContinued strength in our earnings this quarter have further improved our leverage ratio to 1.1 times net debt to adjusted EBITDA.\nInvesting in our business for both organic and inorganic growth will continue to be an important priority and will help Tyson increase production capacity and market capabilities.\nThis will support strong return generation for our shareholders.\nFinally, as our track record has demonstrated, we are committed to returning cash to shareholders through both dividends and share buybacks.\nWe finished the quarter with a powerful balance sheet and continued capital allocation optionality.\nLet's now discuss the fiscal '22 financial outlook.\nWe are maintaining our total company sales guidance of $49 billion to $51 billion, although we expect to perform at the upper end of the range.\nIn support of our sales growth, we still expect a 2% to 3% volume growth on a year-over-year basis as we work to optimize our existing footprint and run our plants full.\nLooking at AOI margin target ranges for our segments, in chicken, our operational turnaround is working and we still expect to achieve a run rate profitability of 5% to 7% by the middle of the year.\nWe expect full-year margins that also fall between 5% to 7%.\nPrepared foods is expected to deliver margins during fiscal '22 of between 7% and 9%.\nBased on our first-quarter performance, we now expect the full-year margin performance in prepared foods to be at the upper end of the range.\nIn beef, we are maintaining our AOI margin at 9% to 11%, but we expect to perform at the upper end of the range.\nAlso, we expect the front half of the year to be meaningfully stronger than the back half as industry and labor conditions are expected to normalize partway through the year.\nIn Pork, we expect similar performance during fiscal '22 to what we accomplished during fiscal '21, equating to a margin of between 5% and 7%.\nAs is normal seasonality for pork, we expect the first quarter to be the strongest.\nIn international/other, we expect margins of 2% to 3% as capacity expansions and strong global demand support volume growth and improved profitability.\nConsistent with our expectation for a meaningful increase in capex spending to pursue a healthy pipeline of projects with strong return profiles, we anticipate capex spending of approximately $2 billion during fiscal 2022.\nWe now expect lower net interest expense due to lower anticipated average debt balances during the fiscal year.\nOur expectations for productivity savings and tax rate changes remain unchanged.\nOur net leverage is expected to remain well below two times net debt-to-adjusted EBITDA, providing optionality for inorganic investment and additional return of cash to shareholders over the course of the year.\nIn summary, we've had a strong start to the fiscal year.\nWe have a great team, growing demand for our products, strong portfolio diversity, and the differentiated asset footprint needed to win in the marketplace.\nWe set out ambitious calls at our Investor Day, and we expect to achieve them.\nOperator, please provide the Q&A instruction.\n Assistant:", "chosen": "compname reports q1 adjusted earnings per share $2.87.\nq1 adjusted earnings per share $2.87.\ncurrently on track to achieve our planned productivity savings for fiscal 2022.\nexpect sales to be at upper end of $49 billion to $51 billion in fiscal 2022.\nexpect capital expenditures of approximately $2 billion for fiscal 2022.\ntyson foods - targeting $1 billion in productivity savings by end of fiscal 2024, $300 million to $400 million in fiscal 2022.\ntyson foods - qtrly beef sales volume decreased due to impacts associated with a challenging labor environment and increased supply chain constraints.\nqtrly pork sales volume was up slightly as strong global demand was offset by impacts associated with challenging labor environment.\nqtrly chicken sales volume increased primarily due to increased live production and a strong demand environment.\ntyson foods - qtrly prepared foods sales volume decreased due to divestiture of our pet treats business in q4 as well as lower production throughput.\nanticipate improved results from our foreign operations in fiscal 2022.\n"}
{"prompt": "Human: I'll start by acknowledging the sad and disturbing recent events in the Minneapolis-St. Paul metro area and across the nation that began with the horrific death of one of our community members George Floyd.\nOur hearts go out to the family and friends of Mr. Floyd and the communities directly affected.\nRegrettably, these events are representative of larger social and systemic issues.\nAs our communities work together through these tragic circumstances, we must stand for what is right.\nThe Toro Company has a long-standing focus on the importance of respect for all in our workplaces, in how we conduct business, and in the communities we serve.\nIn addition to the events of the past week, we all continue to deal with the effects of COVID-19.\nWe hope all of you and your families are safe during this difficult time.\nIt was humbling to see how so many people and organizations moved forward without hesitation to do what was needed to help others as the COVID-19 pandemic spread around the world.\nIn response to the coronavirus, we prioritized the safety, well-being and support of our employees, customers and communities.\nIn addition to our value of respect for all as previously mentioned, some of our other core people values include carrying relationships, trust and integrity.\nEven through significant personal and family challenges, our team has transformed the way we work to protect the safety of one another, support our customers, and help our communities.\nI am deeply grateful for all of our employees around the world, many who are coming into our facilities each day, to develop, test, build and ship our products.\nThe team's flexibility, resourcefulness and resolve is being demonstrated as we've acted to make our facilities safe and implement work-from-home policies.\nAt the same time, we are maintaining the critical functions of our manufacturing operations.\nAll of this is vital, given The Toro Company's standing as an essential business.\nIn support of our communities, we launched a special COVID-19 giving initiative called Together We Can Do More.\nThrough this initiative, we directly donate and match all employee contributions made to COVID-19 relief efforts.\nIn addition, The Toro Foundation contributed $500,000 to organizations supporting families and communities most directly affected by the pandemic.\nRecognizing the financial strain among our employees and their families, we expanded the availability of the Melrose/Hoffman Employee Critical Need Fund.\nAdditional voluntary contributions were made to that fund by our leadership team and the Board of Directors.\nTo quote our legendary former Chairman and CEO, Ken Melrose who sadly passed away last month, everyone has the potential to contribute to achieving the goals of the company.\nIf you unleash that potential, success will be a natural byproduct.\nThese words mean a lot coming from Ken who successfully led The Toro Company through some of the most challenging times in our history.\nI will turn now to our business and financial review.\nFrom a business perspective, our focus has been on maintaining ample liquidity, growing our position in the market, and balancing short and long-term objectives.\nOur results this quarter were net sales sales of $929 million, down 3.4% from the prior year, primarily due to reduced Professional segment retail demand as a result of COVID-19.\nWe reported adjusted diluted earnings per share of $0.92, down 21.4% from the prior year.\nTo provide specific information by business segments, in the Professional segment, total net sales were $661 million, down 8.6%.\nSales benefited from incremental contributions from the Charles Machine Works and Venture Products acquisitions.\nThis quarter, we passed the one-year anniversary of the Charles Machine Works acquisition.\nWe are fortunate to have this business and its employees as part of our company.\nCharles Machine Works added scale and diversification to our portfolio, open access to new markets and provided additional opportunities for synergy and value creation across the company.\nWe are on track to achieve or exceed our stated synergy targets.\nOffsetting the gains from acquisitions were declines in most of our Professional businesses as a result of soft retail demand due to COVID-19.\nThe declines were most pronounced in commercial golf and grounds which saw fewer shipments of turf equipment and irrigation products.\nThis was driven by budget deferrals at golf course and municipalities, landscape contractor businesses which had fewer shipments as our channel partners aligned field inventory levels which reduced retail demand and rental specialty and underground construction businesses which have experienced reduced sales volumes as a result of global economic slowdown and impact on the construction and oil and gas markets.\nIt's important to note the Professional segment performance was tracking consistent with our expectations of modest growth until mid-March.\nIn April, we experienced additional and significant declines in most of our Professional markets.\nWe typically do not discuss the current quarter in our earnings calls.\nHowever, we appreciate that this quarter is very different.\nSo, we'll share some color on what happened in May.\nFor the Professional segment, it was largely a story of new equipment purchase deferrals and focus on service and repair.\nWe're seeing continued challenges across golf and grounds, landscape contractor, and rental specialty and underground construction businesses.\nThese challenges stem more from lower budgets and deferred purchases than from temporary facility closures.\nFor golf, most play has resumed and demand for rounds has been robust.\nHowever, lower food and beverage and event revenue has negatively affected club budgets, putting pressure on new equipment purchases.\nFor our municipal grounds customers, budgets have been lowered or diverted to non-ground support which has resulted in reduced equipment demand.\nThe repair and defer story is the same with landscape contractors.\nHowever, with the lessening of stay-at-home restrictions, there were some improvements in these categories starting in late May.\nIn rental, specialty and underground construction, 5G infrastructure and broadband spending increased modestly in May with high demand for system capacity as a result of stay-at-home orders.\nUnderground infrastructure, rehab and repair projects remained steady.\nHowever, this is being offset by continued construction and oil and gas project softness, reduced capital spending from national rental accounts resulting in new equipment purchase deferrals and lower dealer retail.\nIn the Residential segment, sales were up 12.9% in the second quarter.\nThis was mainly driven by incremental shipments to our expanded mass retail channel and strong retail demand.\nSome of the demand drivers were favorable spring weather, new products and consumers focusing on home and garden improvements during stay-at-home orders.\nOur product sales through captive and partnered e-commerce sites were up significantly in the second quarter.\nFor May, Residential segment momentum continued, driven by the same trends.\nRegarding operations, all of our facilities are currently open with some operating at reduced capacity.\nDuring the second quarter, some sites closed temporarily due to government orders or to manage inventory levels.\nWe will continue to align production to customer demand, comply with government orders and ensure the safety of our teams.\nWe had no supplier-related shutdowns in the quarter.\nRegarding cash and financial flexibility, we continue to have a strong balance sheet and ample liquidity.\nWe took measures in the quarter to ensure that we have sufficient cash given the economic climate.\nFor the remainder of fiscal 2020, we are taking, across the board, pay cuts inclusive of leadership and eliminating merit increases and discretionary retirement plan contributions.\nWe also reduced expenses and paused new hires except for critical positions.\nAt the same time, we have preserved jobs and retained key talent.\nWe continue to benefit from productivity initiatives and enterprise synergy opportunities as a result of recent acquisitions.\nAs with past periods of economic challenge, we know what works and how to play to our strengths.\nOur culture and business management approach are well adapted to respond to uncontrolled external variables.\nWhile certain factors do lie out of our control, our diverse portfolio and flexibility, help us adjust to shifting situations, while continuing to provide long-term growth and sustained free cash flow.\nWe will continue to invest in the future for the benefit of all of our stakeholders.\nThe Toro Company is comprised of a balanced portfolio of products that enhance our customers' productivity across the seasons.\nThe company has a strong balance sheet that enables us to allocate capital effectively among a variety of alternatives, including new product development, acquisitions, dividends, debt pay down and share repurchases.\nQ2 was no exception.\nWhile the COVID-19 pandemic affected our results, we were able to adjust our operations and move the business forward.\nWe reported net sales of $929 million in the quarter, a 3.4% decrease from the second quarter of fiscal 2019.\nDiluted earnings per share was $0.91 for the quarter compared to $1.07 last year.\nAdjusted diluted earnings per share was $0.92, down 21.4% compared to the second quarter of fiscal 2019.\nFor the first six months of fiscal 2020, net sales increased 8.4%.\nDiluted earnings per share was $1.55 compared to $1.62 in the first six months of fiscal 2019.\nYear-to-date adjusted diluted earnings per share was $1.56 compared to $1.69 a year ago.\nBefore I review segment results, I'll cover liquidity.\nBack in March, we entered into a three-year term loan agreement for $190 million.\nThis was to refinance our revolving credit facility borrowings, incurred in connection with Venture Products acquisition which closed on March 2.\nWith the funding of this new term loan, the company now has liquidity of approximately $800 million including cash and cash equivalents of $200 million and availability under our revolving credit facility of approximately $600 million.\nWe have no significant debt maturities until April 2022.\nWe continue to work closely with our banking partners and monitor credit markets.\nReceivable collections continue to track similar to last year.\nAll of this gives us confidence in our ability to weather the current and potentially extended period of macroeconomic uncertainty.\nI'd like to provide more color and some of the actions we've taken so far to maintain the strength of the company given the unprecedented speed and depth of the pandemic.\nFrom a demand perspective, we've executed business continuity plans and work to ensure product availability in areas where demand remains strong such as in our Residential segment.\nAdditionally, we scaled back production in areas where demand was weaker.\nAs Rick discussed, we have taken actions to align costs with near-term demand and we'll continue to look for ways to make our cost structure more flexible and competitive.\nMeanwhile, we focus on maintaining productivity and synergy intiatives which were driven by recent acquisitions and then extended across the enterprise.\nNow, to the segment results.\nFor the second quarter, Professional segment net sales decreased 8.6% to $661 million.\nThe top line benefited from the Charles Machine Works and Venture Products acquisitions which together added incremental net sales of $142 million.\nProfessional segment sales declined compared to the second quarter of 2019, due to lower shipments driven by COVID-related demand pull back.\nUntil mid-March and the impact of COVID-19, sales were tracking to modest growth in line with our expectations.\nWe saw a modest sales decline in the second half of March and a more significant reduction in April as compared to prior-year performance.\nFor the year-to-date period of fiscal 2020, net sales increased 6.6% compared to the same period of fiscal 2019.\nProfessional segment operating earnings for the second quarter decreased 29.2% to $106 million, reflecting a 460 basis point decline in segment operating earnings as a percent of sales, primarily due to manufacturing variance as a result of COVID-19 related facility closures and social distancing initiatives, incremental marketing, engineering and administrative costs as a result of the Charles Machine Works and Venture Products acquisitions, higher warranty expense and unfavorable product mix.\nThis was partially offset by favorable net price realizations, productivity and synergy gains, lower commodity and tariff costs and decreased incentive compensation expense.\nYear-to-date Professional segment operating earnings declined 12.3% compared to the same period in the prior fiscal year.\nProfessional segment operating earnings decreased 360 basis points to 16.6%.\nResidential segment net sales for the second quarter were up 12.9% $262 million, mainly driven by incremental shipments of zero turn riding and walk power mowers to the expanded mass retail channel as well as strong retail demand.\nYear-to-date fiscal 2020 net sales increased 13.4% compared to the same period of fiscal 2019.\nResidential segment operating earnings were up 68.5% to $37 million.\nThis reflects a 470 basis point year-over-year increase in segment operating earnings to 14.2%.\nThis improvement was largely driven by productivity and synergy gains, lower commodity and tariff costs, lower freight costs and SG&A leverage.\nThis was partially offset by unfavorable manufacturing variance and higher warranty expense.\nYear-to-date Residential segment operating earnings increased 67.2% to $58.7 million.\nOn a percent of sales basis, segment earnings increased 440 basis points to 13.7%.\nMoving to our operating results.\nWe reported gross margin for the second quarter of 33%, a decrease of 40 basis points over the prior year period.\nExcluding acquisition-related charges and one-time costs associated with the inventory writedown of the Toro branded underground business, adjusted gross margin decreased 100 basis points to 33.4%.\nThe decrease in adjusted gross margin was primarily driven by manufacturing variance due to production downtime and inefficiencies as a result of COVID-19 related closures and product mix with higher Residential segment net sales compared to Q2 of 2019.\nThis was partially offset by productivity and synergy gains, favorable net price realizations within our Professional segment and lower commodity and tariff costs.\nFor the first six months of fiscal 2020, gross margin was 35.1% compared with 34.3% in the prior year period.\nAdjusted gross margin was 35.3% compared with 34.9% in the first six months of fiscal 2019.\nSG&A expense as a percent of sales increased 40 basis points to 19.5% for the quarter due to incremental marketing and engineering costs as a result of the Professional segment acquisitions as well as higher warranty expense.\nThese cost increases were partially offset by decreased incentive compensation costs and lower transaction and integration costs.\nSG&A expense as a percent of sales for the first six months of fiscal 2020 was 22.3%, up 130 basis points from the prior year period.\nOperating earnings as a percent of net sales decreased 80 basis points to 13.5% for the second quarter.\nAdjusted operating earnings as a percent of net sales decreased 240 basis points to 14%.\nFor the first six months of fiscal 2020, operating earnings as a percent of net sales were 12.8% compared to 13.3% a year ago.\nAdjusted operating earnings as a percent of net sales for the first six months of fiscal 2020 were 13.1% compared with 14.7% a year ago.\nInterest expense increased $2 million and $5.4 million for the second quarter and year-to-date, respectively, compared to a year ago.\nThese increases were due to higher debt outstanding related to the Professional segment acquisitions.\nFor the full year, we anticipate interest expense of about [Phonetic] $34 million.\nThe effective tax rate was 18.9% for the second quarter and the adjusted effective tax rate was 20%.\nFor the first six months of fiscal 2020, the effective tax rate was 18.8% and the adjusted effective tax rate was 20.4%.\nFor the full year, we anticipate an adjusted effective tax rate of about [Phonetic] 20.5%.\nTurning to the balance sheet and cash flow.\nAccounts receivable totaled $400 million.\nThis was down 6.6% from a year ago as a result of lower professional segment sales at the end of the second quarter, driven by reduced demand due to COVID-19.\nThis was partially offset by incremental residential segment sales to the expanded mass retail channel and additional receivable as a result of the Venture Products acquisition.\nInventory was up 16.8% to $714 million from a year ago, primarily due to higher finished goods in our Professional segment due to COVID-19 related sales reduction, increased raw materials and work in process as a result of production downtime due to facility closures and production inefficiencies and incremental inventories from Venture Products.\nAccounts payable decreased 16.4% to $327 million from a year ago.\nThis was mainly due to decreased material purchases as we align production levels with reduced sales volume.\nIncremental payables from Venture Products partially offset the decline in purchases.\nWe expect depreciation and amortization for fiscal 2020 of about $100 million which includes approximately $3 million of fair value step-up related to the acquired inventory from Venture Products.\nWe are now estimating lower capital expenditures of $80 million versus our prior expectation of $100 million.\nFree cash flow for the quarter was below prior year amounts, primarily due to decreased net earnings, lower accounts payable, and higher inventory.\nOur disciplined capital allocation strategy includes investing in organic and M&A growth opportunities, maintaining an effective capital structure and returning cash to shareholders.\nOur keen focus on near-term liquidity has reaffirmed our capital allocation priorities for the year.\nConsistent with our objectives following the Venture Products acquisition, we will continue to prioritize debt repayments in order to manage our leverage target, curtail share repurchases for the year and consider strategically compelling acquisitions.\nIn May, we declared our regular quarterly dividend.\nBased on our current outlook and strong financial position, we expect to maintain our dividend.\nAs a result of the many and evolving COVID-19 related factors we discussed today and more that could emerge, should the current economic climate extend for a prolonged period, we do not have the ability to predict its impact on our businesses and financial results.\nThat said, we do want to share with you some of our thinking about the remainder of the year.\nAt this point, based on current information regarding the global economic outlook, the company expects the most pronounced year-over-year sales and earnings per share percentage declines in the third quarter of fiscal 2020.\nWe also expect negative year-over-year fourth quarter sales and earnings per share growth.\nThis assumes continued customer behavior changes that include lower capital outlays and cash preservation, mostly in the Professional segment.\nOn the positive side, our products have a natural replacement life.\nSo we anticipate net sales will rebound in future periods.\nCOVID-19 related factors that could impact these expectations include: first, the company's ability to continue operations and or adjust our production schedules due to governmental actions that have been and continue to be taken in response to the COVID19 pandemic; second, supplier risk and the company's ability to obtain commodities, components, parts and accessories in a timely manner and at anticipated costs; and finally, prolonged periods of economic stress that may affect customer liquidity and could impede customer buying patterns.\nWhile we do not know how long this COVID-19 uncertainty will continue, we anticipate an easing of these pressures as we head into fiscal 2021.\nIn summary, with our flexible business model and strong culture as our foundation, we have taken the necessary steps to be in a position to grow as we enter fiscal 2021.\nWe have preserved jobs, lowered costs, strengthened our financial position, served our partners well and continued to invest in technology and innovation and we are prepared to take further actions to serve our customers in multiple potential economic scenarios.\nAs we've seen so for so far in 2020, we have been agile in our response to the pandemic and remain committed to our core values of innovation and caring relationships built on trust and integrity.\nWhile our near-term visibility is limited, we've taken measures to ensure a solid financial position as we move forward.\nWe are confident in our ability to continue serving our global customers throughout and far beyond the pandemic.\nAs we look ahead, we are optimistic about our many exciting opportunities, our investments in alternative power, smart connected products, and robotic and autonomous technologies will drive an entirely new cycle of innovative products across our markets.\nWe continue to expand our full future portfolio of battery-powered products as customers see convenience and an opportunity to reduce emissions.\nWe expect the customers who deferred new equipment purchases will return to historic buying patterns as the economy improves.\nIn past recessionary times when we saw new equipment purchase deferrals, we experienced strong growth in the recovery.\nIn construction, the buildout of 5G and rural broadband should benefit sales of our underground equipment like the new JT24 horizontal directional drill.\nIn golf and grounds, we will continue to innovate to increase productivity and solve customer challenges.\nFor example, our IntelliDash course management platform professionals helps turf professionals integrate data and use information to simplify operations and use water and other resources more efficiently.\nWe continue to support contractors with an expanded line of high productivity equipment solutions.\nFor the snow and ice season, this includes the BOSS Snow Raider and Ventrac SSV and for the growing season, the Exmark Staris and Toro GrandStand Multi-Force.\nThese are just a few examples of how we're creating long-term growth through new product development and strategic acquisitions.\nWe also expect continued homeowner interest in home and garden improvement.\nWe have an exciting array of new products, including an expanded portfolio of 60-volt solutions, refreshed brand content and marketing and a new channel partner that is broadening our reach.\nIn closing, our strategic priorities are enduring.\nNow and long after we emerge from this challenging time, we remain focused on accelerating profitable growth, driving productivity and operational excellence and empowering people.\n Assistant:", "chosen": "compname reports q2 earnings per share of $0.91.\nq2 adjusted earnings per share $0.92.\nq2 earnings per share $0.91.\nall of company's facilities are currently open with some operating at reduced capacity.\nwill not be providing detailed financial quarterly or full-year guidance until visibility into market conditions has improved.\nexpects most pronounced year-over-year sales and earnings per share percentage declines in q3 of fiscal 2020.\nalso expects negative year-over-year q4 sales and earnings per share growth.\n"}
{"prompt": "Human: We will begin with our safe harbor statement.\nYou should listen to today's call in the context of that information.\nWe will also discuss some of our results for the quarter on a non-GAAP basis.\nAny reference to sales in the discussion today is referring to local currency sales, which compares results between periods as if current period foreign exchange rates had been the exchange rates in the prior period.\nJust 13 months ago, along with a new leadership team, we began the process of turning around this iconic company.\nWe've committed to right size the cost structure, to fix the core business, increase the use of digital tools and strengthen the balance sheet.\nBut more about a quarter on our performance in just a minute.\nLet me first reiterate key elements of our strategic growth plan that are well under way.\nWe want to pivot from a distributor push to consumer pull and distributor push model.\nUpdate a brand architecture to allow us to segment branding, products, channels and pricing to appeal to a broader consumer base; expand into new product categories and push consumer permission of our iconic brand; align product development efforts to address needs of all consumer social subsegment; expand distribution and access points to meet consumers where they shop.\nAnd most importantly, fix the core direct selling business with proven methods.\nToday, in our 75th year, the brand is very strong, widely known and accepted.\nAnd we intend to leverage this important asset.\nWe also believe we're on trend with a worldwide focus on ESG by producing and selling environmentally friendly reusable products.\nYou've seen our increased efforts in this area with the sponsorship of National Park and our use of new, more environmentally friendly materials.\nDue to the strength and awareness of our brand, we made the strategic decisions to be a branded house, not a house of brands, as we develop our new brand architecture.\nAs such, we expect to divest all the non-Tupperware businesses this year and use the proceeds to continue to pay down our debt and continue to invest in the business.\nWe believe the execution of this new brand architecture will enable us to penetrate new channels of distribution, new product categories and new pricing structures, all of which have the potential to accelerate our growth, while minimizing any potential conflict with our current direct selling channel.\nIn the first quarter, we reorganized our leadership team around channels, with Patricio Cuesta leading our direct selling business.\nHector Lezama now leads our nondirect selling business, which include key markets, like China and Korea, along with all the important markets, and most importantly, our efforts to penetrate new channels of distribution.\nImproving our abilities and expanding our capabilities in product innovation will be a key objective for our executive team over the next two years.\nWe believe they are highly innovative manufacturers around the world that we can strategically partner with to accelerate our efforts to broaden our current product offerings, extend our brand into new categories and appeal to consumer in different social subsegments.\nAlso, we believe there is an exciting R&D journey ahead to use no raw materials to accelerate our efforts to continually improve the planet.\nOur Eco+ line is an example of this.\nThis product line is a revolutionary product portfolio made with sustainable materials.\nWe are adding two new products, Launch-It Container and sandwich keepers with a new material partner Tritan Renew from Eastman.\nTritan Renew uniquely offers Tupperware's ability to design clear or transparent products with 50% certified recycled content, without compromising on quality or clarity.\nThese products with this new material will be launched in Europe in the second half of this year.\nOur efforts to fix the core business are evident in our recent financial results.\nIn each of the past three quarters, we have reported 20-plus percent year-over-year growth.\nWhile we are up against easy comps, this growth reflects increases activity, higher engagement and rapid adoption of detailed tools and techniques by our sales force.\nAs we mentioned on our last earnings call, a key strategic shift for us in 2020 was that our sales force realized that geography was no longer a hindering factor to growing their business.\nBy utilizing social media platforms and digital tools, they have been able to reach beyond their physical neighborhood and leverage the expansive reach of their online social network.\nWhile it is still early in their transition to embrace in detailed selling tools and methods, we're confident we can build upon the success gain in 2020 and accelerate widespread adoption in 2021.\nWe believe a more digitally equipped sales force will enable ongoing engagement and increase productivity as we move forward with all our other growth initiatives.\nOur overall digital strategy is making great progress, with the expansion of sales force enablement tools, social commerce and web sources.\nOur top-tier markets now have these important tools in order to create a more seamless interaction between consumers and our sales force and increase the options for consumers to access our products.\nSpeaking of more ways to access consumers, let me take a few minutes to discuss some new business opportunities.\nHistorically, we have done 30 to 35 million per year in business-to-business partnerships.\nIn these partnerships, we sold products to well-known retailers, who then use the product in their loyalty programs.\nTupperware products are then exchange for points based on consumer buying activity with a major retailer.\nWe believe there are opportunities to expand these partnerships.\nCurrently, we're working with major brands in Mexico, Brazil and Europe and are evaluating more opportunities for the remainder of the year to accelerate our growth in this channel.\nAdditionally, here in the U.S., we will be testing new channels of distribution.\nThis past weekend, Tupperware ran a future segment using limited products with a major home shopping channel, who has access to more than 92 million homes across the U.S. through various media channels.\nThis new product and brand exposure allow us to deepen engagement around our brand and provides potential leads for our sales force.\nAdditionally, this is an opportunity to reach an expanded audience through the power of storytelling and discovery driven shopping experience.\nJust a few months ago, Tupperware became the first reusable plastic container brand to partner with TerraCycle's circular reuse platform, Loop.\nLoop works with leading brands to create zero waste, durable and returnable packaging.\nAs part of this agreement, Tupperware has recently partnered with one of Loop's prominent brand partners, and we're currently designing a one of a kind reusable package option for this brand, and it will be available later this year.\nAnother example of our efforts to reduce the use of single-use plastic is our partnership with a National Park Foundation.\nThis summer, Tupperware will be releasing a limited edition, especially designed national theme park line of sandwich keepers and on the go carts, which will be sold through a national park service retail partner, available at select parts around the country, as well as through Tupperware direct selling and e-commerce channels.\nAlso, our donation will help expand access to clean drinking water through new refilling stations.\nTurning to first-quarter results, let me highlight a few of our large markets before Sandra discusses our overall financials.\nIn the U.S. and Canada market, sales increased 83%, and sales force activity was up 92%.\nIt is important to note that this level of growth is not sustainable going forward.\nAs the first quarter of 2021 had the ECS year-over-year comparisons.\nAdditionally, we're shifting to more profitable sales in this market, and we will reduce some of the highly promotional programs and improved distribution costs.\nAs we become more consumer-centric in the U.S. and Canada, our customer profile is changing.\nVirtual selling leads to more people purchasing smaller units, reflecting our consumer pull strategy.\nThis changing order profile has increased our distribution cost.\nAnd while we accept the higher cost in the near term, we're evaluating ways to embrace the shift into more efficient ways.\nThis is an important market to Tupperware, and we will be working intensely internally with our sales force to continue to increase the profitability in this market.\nTupperware Mexico had an 18% sales growth in the first quarter on a 6% growth in average active sales force.\nThis market also had an easy comparison in the first quarter of 2021 that need to be considered going forward.\nWhile we're experiencing sales growth in Mexico, we're not meeting what we believe to be our potential in this market.\nAs a result, we recently made a leadership change to make sure that we leverage the opportunity of our products, brand and sales force going forward.\nThe new leader of this market worked with me over the last 10 years, and I'm confident he will be able to work with the local sales force to increase sales and profitability.\nIn Brazil, sales increased 46% on an easy first-quarter comparison and was achieved through an increase in sales force activity of 40%.\nAs you know, the second wave of COVID has hit Brazil very hard.\nWhile this second wave has not yet significantly impacted sales, our recruiting efforts have been affected.\nSo we will remain cautious in this market until the trend stabilizes and COVID rate subside.\nAnd lastly, a key market in our loan-term growth plan in China, which declined 14% as active studios were down 7% versus last year.\nOur new leader in China is focused on improving product innovation, exploring bigger opportunities in e-commerce and fixing the core entrepreneur led retail business.\nThe turnaround in this market will take time, but we're confident that our brand is accepted and recognized by Chinese consumers.\nLooking forward, our key priorities in 2021 to strengthen our direct selling business are the following: detail and product investment, segmentation of our sales force, introducing preferred customer loyalty programs around the world, use of data to identify best practices, use of data to upsell and cross-sell to our preferred customers and ensure competitive service and costs.\nAnd our key priorities in the business expansion are: to explore new channels of distribution, avoiding a potential conflict with our current direct omnichannel.\nIn tradition, Tupperware sub-brands and penetrating into different product categories where we know the consumers give us permission to enter.\nWe believe the execution of these priorities is creating competitively strong foundation that will create meaningful value for our shareholders for years to come.\nThe strong revenue momentum from the second half of 2020 carried over to the first quarter of 2021, reaffirming the firm financial foundation we are establishing as part of our turnaround plan.\nOur first-quarter sales were 460 million, which was an increase of 20% compared with last year in local currency and up 22% on a reported basis.\nand Canada, Mexico and Brazil contributed 74% of the dollar increase.\nAdditionally, reflecting the breadth of our efforts to fix our core business, the majority of our markets posted improved sales in the quarter as well.\nOn a regional basis, North America increased 43%, South America increased 53%, Europe increased 12% and Asia was up 6%, excluding the negative impact from China's decline that you heard Miguel say.\nThese higher sales, coupled with our turnaround land cost savings led to a gross margin of 70.3%, 480 basis points higher than a year ago.\nOf the improvement, 330 basis points was attributable to lower manufacturing costs.\nThe balance of the improvement reflects favorable changes in country and product mix.\nLike other companies you may follow, we are experiencing higher resin cost.\nBut so far, we've been able to offset this negative impact through additional cost savings throughout our operations.\nMoving on to SG&A.\nWe also experienced tremendous year-over-year improvement.\nAdjusted SG&A as a percentage of sales was 53.9% and reflected an 820 basis point improvement from last year.\nRightsizing efforts contributed 560 basis points and 310 basis points improvements are from lower promotional costs.\nThese improvements were partially offset by 50 basis points of higher distribution costs.\nLooking forward over the next few quarters.\nTo support our strategy to grow in new channels, we are accelerating investments in IT infrastructure to increase our capabilities and enhance our cybersecurity, data privacy and strengthen our controls.\nWe plan to also make incremental investments in the supply chain to improve the service levels required by consumers in these new channels.\nWe estimate this incremental investment to be in the range of 30 to 35 million for the balance of 2021.\nAdditionally, through approximately 10 million of additional investments in our tax strategy, we believe we have the ability and opportunity to more quickly achieve a tax rate in the low 30 for the full year of 2021.\nWe expect these 2021 additional investments will result in SG&A in the mid-50% range in the near term.\nLonger term, we will continue to pursue SG&A at sub-50% of sales through ongoing centralization efforts, creating centers of excellence to leverage our size, simplifying our compensation plans, and through sales growth in our omnichannel initiatives.\nFor the first quarter, the improvements in gross margin and SG&A that I just discussed, combined with our contribution margin on the 20% sales growth resulted in an adjusted operating income of 75.3 million or 16.4% of sales, which reflects a significant improvement of 1,290 basis points versus prior year.\nWe made a huge commitment toward cost savings in 2020, and it's gratifying to see it now reflected in our P&L.\nNow let me turn to a non-GAAP metric, EBITDA.\nIn addition to the higher operating income I just mentioned, Q1 EBITDA was favorably impacted by a one-time gain on sale of assets of $9 million, a $3 million benefit related to a grant from the China government normally received in the fourth quarter and a bad debt reversal in Germany of 2 million.\nAdjusted for these items, and the incremental investments that I just discussed, future quarter EBITDA will be slightly lower than the first quarter, but still above 2020.\nThe improvements in the operations, higher sales and higher margins led to a GAAP diluted earnings per share in the first quarter of $0.85.\nThis is a dramatic turnaround from the loss of $0.16 in the first quarter of 2020.\nAnd adjusted earnings per share of $0.82 also improved significantly compared to just $0.09 last year.\nThe $0.73 of improvement in adjusted earnings per share includes $0.69 of turnaround plan savings profits associated with the growth in sales and less COVID-19 impact.\n$0.07 related to the China grant and the reversal of the bad debt reserves.\nOffset by $0.03 of acceleration of interest related to the debt repayment, which I'll discuss in a minute.\nIn the first quarter, our total balance of debt was 695 million, reflecting a reduction of nearly 300 million from the 991 million in the first quarter of last year.\nIn addition to the proactive actions we took in 2020 to reduce and restructure our debt, in the first quarter, we used the proceeds of approximately 34 million from the sale of noncore assets to pay down our term loan debt.\nThe debt reduction, together with strong improvement in EBITDA, resulted in a debt to adjusted EBITDA ratio for debt covenant purposes of 2.36 versus 5.36 last year and well below our required covenant of four.\nThe debt reduction also triggers a favorable 50 basis point reduction in our new term loan interest rate effective during the second quarter.\nWe expect the rate to decline from 9.75% to 9.25% on 240 million of term loan debt.\nAchieving double-digit growth for the third consecutive quarter, delivering profits that continue to reflect our rightsizing efforts and lowering our debt through the proceeds of noncore asset sales, resulting in a leverage ratio of 2.36 are continued evidence that our turnaround plan is working.\nAs we discuss today, and as we look forward to the rest of the year, we are shifting our focus to support efforts contained in our growth strategy.\nAnd therefore, we plan to make incremental investments that we believe will drive penetration and growth into new channels.\nWe are also committed to finalizing the divestiture of noncore asset sales to focus our resources on growing our branded health.\nAs a result, we believe these actions and our strategic plans will create a stronger, more competitive company for the future.\n Assistant:", "chosen": "q1 gaap earnings per share $0.85.\nqtrly net sales of $460.3 million increased 22% versus.\n2020, up 20% in local currency.\nqtrly adjusted diluted earnings per share were $0.82.\n"}
{"prompt": "Human: Before we begin, I'd like to mention we will be discussing future estimates and expectations during our call today.\nOn the call today, we have Scott Donnelly, Textron's chairman and CEO; and Frank Connor, our chief financial officer.\nTextron's revenues in the quarter were $3.7 billion, down $368 million from last year.\nDuring this year's fourth quarter, we recorded $23 million in pre-tax special charges, largely related to restructuring activities on industrial and Textron Aviation or $0.07 per share after tax.\nWe also recognized a one-time favorable tax benefit related to the sale of TRU Canada of $0.04 per share.\nExcluding special charges and the one-time favorable benefit, adjusted net income was $1.06 per share compared to $1.11 in last year's fourth quarter.\nManufacturing cash flow before pension contributions was $467 million, down $183 million from last year's fourth quarter.\nFor the full year, revenues were $11.7 billion, down from $13.6 billion a year ago.\nAdjusted net income was $2.07 per share compared to $3.74 last year.\nManufacturing cash flow before pension contributions was $596 million, as compared to $642 million last year.\nOur business has closed out the year with a strong operating performance in the fourth quarter, as we saw margin improvement in Systems, Industrial, and Bell that drove an increase in Textron's manufacturing margin to 8.8% on lower revenues.\nAt Bell, margins of 12.6% were up 30 basis points, as compared to the prior year despite lower military revenues and commercial volume.\nWe delivered 57 commercial helicopters, down from 76 in last year's fourth quarter.\nOn the military side, the Japanese officially began V-22 flight operations in November.\nThis continues the growth of the worldwide fleet of operating aircraft, which has amassed over 560,000 flight hours.\nLooking to Future Vertical Lift, Bell marked the third anniversary of the V-280's first flight in December, with the aircraft having now flown more than 200 hours.\nArmy leadership and Congress have been very supportive of Future Vertical Lift and we expect this will continue under the new administration.\nIn December, the U.S. Army provided the draft RFP for the FLRAA program for review and comment.\nThe Army continues to anticipate a down-select and FLRAA program award in mid-2022.\nAt Systems, revenues were down primarily on lower volume at the TRU Simulation + Training business.\nIn November, Systems announced sale of its commercial air transport simulator business to CAE.\nThis transaction closed in January.\nIn the quarter, ATAC won the recompete of the U.S. Navy and Marine Corps flight, fighter jet training services program.\nThis contract expands the scope of the services we currently provide into the program and it's worth up to $440 million over the next five years.\nAlso in the quarter, unmanned systems was awarded a $66 million contract for the U.S. Army for 36 Shadow aircraft.\nThe Shadow platform now has over 1.2 million flight hours globally.\nRevenues were down primarily due to reduced demand in the ground support equipment business within Specialized Vehicles.\nKautex, the automotive production outlook, has steadily improved since the low point in May and demand from our customers continues to ramp in the fourth quarter as revenues approach their prior-year levels.\nMoving to Textron Aviation.\nRevenues were down in the quarter, primarily on lower jet deliveries and aftermarket volume.\nWe delivered 61 jets, down from 71 last year and 61 commercial turboprops, up from 59 in last year's fourth quarter.\nOn the new product front, Aviation began deliveries of the new King Air 360 with eight units in the quarter and announced the new King Air 260.\nCessna SkyCourier program continues to progress with three aircraft flying in the certification program.\nThe flight test -- test program has completed over 400 flight hours and the aircraft is on track for entry into service in the second half of 2021.\nIn summary, 2020 was a difficult year with many challenges for our operations and I'm proud of the way our teams responded.\nThrough our focus on working capital management and cost control, the business has generated a strong manufacturing cash flow performance for the year.\nAt our defense businesses, we were able to maintain our operations, meeting our customer commitments and delivering strong results.\nOn the commercial side, we overcame temporary manufacturing shutdowns and disruptions in our end markets to deliver strong fourth-quarter results and look forward to carrying that momentum into 2021.\nWith this backdrop, we're projecting revenues of about $12.5 billion for Textron's 2021 financial guidance.\nAt Aviation, we are projecting growth from increased aircraft deliveries on both jets and turboprops, including the entry into service of our new Cessna SkyCourier and higher aftermarket revenues driven by increased fleet utilization.\nAt Systems, we're expecting higher revenues and margin expansion, primarily driven by growth in ATAC and Marine and Land Systems.\nAt Bell, we expect solid margin performance despite lower military and commercial revenues while continuing to invest in Future Vertical Lift.\nAt Industrial, we're expecting revenue growth and margin improvement at Kautex as auto demand continues to recover from pre -- to pre-COVID levels.\nAt Textron Specialized Vehicles, we're also expecting revenue growth and margin improvement as we continue to grow our powersports business with Bass Pro Shops.\nWe are projecting adjusted earnings per share in the range of $2.70 to $2.90 per share.\nManufacturing cash flow before pension contributions is expected to be in the range of $600 million to $700 million.\nSegment profit in the quarter was $324 million, down $16 million from the fourth quarter of 2019 on a $368 million decrease in revenues.\nLet's review how each of the segments contributed, starting with Textron Aviation.\nRevenues at Textron Aviation of $1.6 billion were down 10%, primarily due to lower Citation jet volume and lower aftermarket volume.\nSegment profit was $108 million in the fourth quarter, down from $134 million a year ago, primarily due to the impact from lower volume and mix.\nBacklog in the segment ended the quarter at $1.6 billion.\nMoving to Bell, revenues were $871 million, down from $961 million last year, primarily on lower military revenues and commercial volume.\nSegment profit of $110 million was down $8 million, largely on the lower volume, partially offset by a favorable impact from performance, primarily reflecting higher favorable program adjustments.\nBacklog in the segment ended the quarter at $5.3 billion.\nAt Textron Systems, revenues were $357 million, down from $399 million a year ago, primarily due to lower volume at TRU Simulation and training.\nSegment profit of $49 million was up $16 million, primarily due to favorable performance.\nBacklog in the segment ended the quarter at $2.6 billion.\nIndustrial revenues were $866 million, a decrease of $61 million from last year, primarily due to reduced demand in the ground support equipment business within Specialized Vehicles.\nSegment profit was $55 million, up 25% from the fourth quarter of 2019, largely due to a favorable impact from pricing and inflation and favorable performance, partially offset by the impact of lower volume and mix.\nFinance segment revenues were $13 million and profit was $2 million.\nMoving below segment profit, corporate expenses were $50 million and interest expense was $36 million.\nWe recorded pre -- pre-tax special charges of $23 million in the quarter related to restructuring activities.\nFollowing the strong cash performance in the quarter, we ended the year with approximately $2.3 billion of cash on the balance sheet.\nThe $2.3 billion represents a higher-than-normal level of cash on hand, reflecting a prefunding of $500 million of 2021 debt maturities.\nDuring the quarter, we repaid $350 million of floating rate notes that matured in November and $362 million of outstanding borrowings on corporate-owned life insurance policies that were drawn in the first quarter for additional liquidity.\nIn the quarter, we also reactivated our share repurchase program and repurchased approximately 120 -- 129 million of shares.\nAt Textron Aviation, we're expecting higher revenues of about $4.5 billion, reflecting higher aircraft deliveries for both jets and turboprops, as well as, higher aftermarket revenues.\nSegment margin is expected to be approximately 5.5%, reflecting the higher volume and increased production.\nLooking to Bell, we expect slightly lower revenues of about $3.1 billion, reflecting lower military revenues from a lower H-1 production and aftermarket volume and lower commercial deliveries.\nWe're forecasting a margin of about 12.5%, largely reflecting the lower military and commercial revenues and increased R&D investments related to FLRAA and FARA.\nAt Systems, we're estimating higher 2021 rev -- revenues of about $1.4 billion.\nSegment margin is expected to be about 12.5%.\nAt Industrial, we're expecting segment revenues of about $3.4 billion, reflecting higher revenues at Kautex and Textron Specialized Vehicles.\nSegment margin is expected to be about 6%.\nAt finance, we're forecasting segment profit of about $10 million.\nTurning to Slide 10.\nWe're estimating 2021 pension income of about $30 million versus a pension cost of $33 million last year.\nOur 2021 pension, reflects the strong return on our pension assets for 2020 of 17.4% and a change to the amortization period for accumulated actuarial losses for one of our domestic plans, resulting in those losses being amortized over a longer period.\nOffsetting these favorable changes are a 75-basis point decrease in our discount rate to 2.7% and a decrease in our estimated long-term asset return of 50 basis points to 7.25%.\nTurning to Slide 11.\nR&D is expected to be about $600 million, up from $545 million in 2020.\nWe're estimating capex will be about $400 million, up from $317 million last year.\nMoving below the segment line and looking at Slide 12, we're projecting about $120 million of corporate expense, $135 million of interest expense, and a full-year effective tax rate of approximately 18%.\nOur full-year 2021 adjusted earnings per share guidance is $2.70 to $2.90 per share, which excludes $20 million to $30 million of pre-tax special charges for the completion of our previously announced restructuring plan and a pre-tax gain of about $10 million from the sale of TRU Canada.\nOur outlook assumes an average share count of about 227 million shares as we continue to deploy the majority of our free cash toward share repurchases in 2021.\n Assistant:", "chosen": "q4 adjusted non-gaap earnings per share $1.06.\ntextron aviation backlog at end of q4 was $1.6 billion.\nbell backlog at end of q4 was $5.3 billion.\nforecasting 2021 revenues of about $12.5 billion, up from $11.7 billion in 2020.\nexpects full-year 2021 adjusted earnings per share from continuing operations in range $2.70 to $2.90.\n"}
{"prompt": "Human: I'm Steven Sintros, UniFirst's President and Chief Executive Officer.\nActual future results may differ materially from those anticipated, depending on a variety of risk factors.\nAs I have the last several quarters, I want to start by saying that first and foremost, our thoughts are for the safety and well-being of all those dealing with the impact of the COVID-19 pandemic.\nGood news is that during the quarter we have seen real improvement from a health and safety standpoint, both in our Company and in our communities related to COVID-19.\nI also want to again highlight that for over a year now, our team partners have continued to put forth tremendous efforts in the face of many obstacles created by the pandemic.\nConsolidated revenues for our third quarter were $464.3 million, up 4.2% from the prior year and fully diluted earnings per share were $2.21, up from $1.12 in the third quarter a year ago.\nOur Core Laundry operations revenues were positively impacted by a modest level of customer reopenings as well as increases in the sale of PPE.\nOur Specialty Garments segment also contributed to our overall performance with a very -- with very strong results during the quarter that exceeded our expectations.\nShane will provide you with the details of our quarterly results shortly.\nClearly, our comparisons to the prior year third quarter are being positively impacted by the significant effect that COVID-19 pandemic had on our fiscal 2020 third quarter.\nAs a reminder, that quarter a year ago was the quarter most impacted by customer closures during the pandemic.\nOverall, we are pleased with the results of our quarter which exceeded our expectations from a top and bottom line perspective.\nIn addition, we have started to see early signs of improved activity in the energy dependent markets that we service.\nOur new account sales and account retention experience was solid during the quarter and we continue to position our sales resources to take advantage of current opportunities as well as capitalize on future opportunities as the economy recovers.\nAs I'm sure many of you are aware, we are operating in an increasingly inflationary environment.\nThe cost of labor as well as other business inputs are clearly on the rise.\nIn addition, we expect, and have begun to experience a rebound of several costs that trended significantly lower during the pandemic, such as merchandise, healthcare, energy, travel and others.\nFor example, merchandised amortization for the full year fiscal 2021 is running at least 100 basis points lower than more historical levels.\nAs we look ahead beyond our fourth quarter into fiscal 2022, we expect that the increases in these costs as well as the inflationary impact on labor and other business inputs will pressure our margins.\nWe will provide you with further insights into our outlook for fiscal '22 during our fourth quarter earnings call.\nOur solid balance sheet positions us well to meet our ongoing challenges, while continuing [Phonetic] to invest in growth and strengthen our business.\nAs we've talked about over the last year or two, we continue to be focused on making good investments in our people, our infrastructure and our technologies.\nAll of our investment is designed to deliver solid long-term returns to UniFirst stakeholders and are integral components to our primary long-term objective to be universally recognized as the best service provider in the industry.\nWe continue to make good progress on these core initiatives such as our CRM systems project.\nOur CRM deployment is certainly a foundational change to our infrastructure that will allow for service improvements and efficiency moving forward.\nWe will continue to invest in our infrastructure and future over the next several years, including key investments in supply chain, other technology infrastructure, route efficiency as well as our brand.\nWe will provide additional details as we progress with some of these key initiatives in the quarters ahead.\nAs always, we will continue to focus on providing our valuable products and services to existing customers and selling new customers on the value that UniFirst can bring to their business.\nAs we have discussed, the pandemic has clearly highlighted the essential nature of our products and services.\nWe believe the need and demand for hygienically clean garments and work environments positions our Company well to support the evolving economic landscape.\nAs Steve mentioned, consolidated revenues in our third quarter of 2021 were $464.3 million, an increase of 4.2% from $445.5 million a year ago, and consolidated operating income increased to $54.2 million from $27.7 million or 95.5%.\nNet income for the quarter increased to $42 million or $2.21 per diluted share from $21.3 million or $1.12 per diluted share.\nOur effective tax rate in the quarter was 22.9% compared to 21.8% in the prior year.\nAs a reminder, our tax rate can move from period to period, based on discrete events including excess tax benefits and efficiencies associated with employee share based payments.\nOur Core Laundry revenues for the quarter were $409 million, an increase of 5.3% from the third quarter of 2020.\nCore Laundry organic growth which adjusts for the estimated effective acquisitions, as well as, fluctuations in the Canadian dollar was 4.3%.\nThis increase was primarily driven by the COVID-19 pandemic, significantly impacting our customers' operations and ware levels in prior year, which was partially offset by a large $20.1 million direct sale also in prior year.\nAs Steve discussed, our quarterly top line performance exceeded our expectations as the impact of the pandemic on our customer base continues to subside as well as from increased sales of PPE.\nCore Laundry operating margin increased to 11.2% for the quarter from $45.6 million, from 5.1% in prior year or $19.7 million.\nThe increase was primarily driven by a number of items affecting our prior-year period, including: The impact of the decline in rental revenues on our cost structure; higher cost of revenues related to the large $20.1 million direct sale; higher bad debt expense and; additional costs which the Company incurred responding to the COVID-19 pandemic.\nThe current quarter operating margin continued to benefit from certain costs that have trended favorably during the pandemic, including lower merchandise and travel related costs.\nIn addition, the segment's operating results benefited from lower payroll cost due to understaffing caused by the challenging employment environment.\nCompany also relieved some of its bad debt reserves in the quarter that it had provided for during the pandemic, as our expectations around future uncollectible accounts have moderated.\nThese benefits were partially offset by higher healthcare claims costs which trended unfavorably due to what we believe was pent-up demand from our Team Partners deferring elective activities during the pandemic.\nEnergy costs were 4.2% of revenues in the third quarter of 2021 compared to 3.4% the prior year.\nOur Specialty Garments segment, which delivers specialized nuclear decontamination and cleanroom products and services had a very strong quarter and exceeded our expectations in both revenues and operating income.\nRevenues increased to $38.2 million from $36.2 million in prior year or 5.7%, and were primarily driven by growth in our cleanroom and European nuclear operations.\nSegment's operating margin increased to 21.7% from 17.6% primarily due to lower merchandise costs and bad debt expense as a percentage of revenues, as well as costs incurred in the prior year responding to the COVID-19 pandemic.\nAs we've mentioned in the past, this segment's results can vary significantly from period to period due to seasonality and the timing of nuclear reactor outages and projects that require our specialized services.\nOur First Aid segment's revenues were $17.1 million compared to $20.9 million in the prior year.\nHowever, the segment's operating profit was nominal compared to $1.6 million in the comparable period of 2020.\nThese decreases were primarily due to elevated PPE sales in prior year.\nIn addition, the current quarter operating results reflect continued investment in the Company's initiative to expand its first aid van business into new geographies.\nWe continue to maintain a solid balance sheet and financial position with no long-term debt and cash, cash equivalents and short-term investments totaling $535 million at the end of our third quarter of fiscal 2021.\nFor the first three quarters of fiscal 2021, capital expenditures totaled $96.6 million as we continue to invest in our future with new facility additions, expansions, updates and automation systems that will help us meet our long-term strategic objectives.\nDuring the quarter, we capitalized $4.2 million related to our ongoing CRM project which consisted of license fees, third-party consulting costs and capitalized internal labor costs.\nAs of the end of our quarter, we had capitalized a total of $32 million related to the CRM project.\nIn the third fiscal quarter of 2021, we began to depreciate part of the system over a 10-year life, and our quarterly depreciation approximated $0.7 million.\nAs a reminder, the depreciation of the full system combined with additional hardware we will install to support our new capabilities like mobile handheld devices for our route drivers will eventually ramp to an estimated $6 million to $7 million of additional depreciation expense per year.\nThe Company did not repurchase any shares during the quarter under its previously announced stock repurchase program.\nAs of May 29th, 2021, the Company had repurchased approximately 368,000 shares of common stock for $61.8 million under the program.\nBased on our results to date, as well as our outlook for the remainder of the year, we now expect that our fiscal 2021 revenues will be between $1.810 billion and $1.817 billion.\nWe further expect that full year diluted earnings per share will be between $7.80 and $8.00.\nThis outlook assumes that our Core Laundry operating margin in the fourth quarter will approximate 10.6% at the midpoint of the range.\nThis outlook also reflects continued benefits in areas that have trended lower during the pandemic, including merchandise and travel costs, although we have also assumed that those benefits will continue to moderate.\nWe further assume that our payroll costs will increase as a percentage of revenues as we work to fill open positions and begin to adjust compensation levels in certain high demand roles in response to the current employment landscape.\n Assistant:", "chosen": "unifirst corp - q3 revenue $464.3 mln.\nq3 earnings per share $2.21.\nq3 revenue $464.3 million versus refinitiv ibes estimate of $454.4 million.\nsees fy 2021 revenue $1.81 billion to $1.817 billion.\nsees fy 2021 earnings per share $7.80 to $8.00.\n"}
{"prompt": "Human: I'd like to start by recognizing our colleagues, the people of Optum and UnitedHealthcare, for delivering strong results throughout 2021 and creating the momentum that is carrying us through as we enter into this year.\nFor example, performance in two key elements of our growth strategy, accelerating the transition of patients to Optum-led value-based care and strong United Healthcare growth in serving Medicare Advantage consumers, are both tracking well with the expectations we shared with you at our recent investor conference.\nThese, and the broader performance across the enterprise, confirm our confidence in our ability to advance our stated growth strategies and to support our long-term 13% to 16% earnings per share growth rate.\nWhen you look back at the prevailing themes for 2021, you see a story of accelerating growth, strong collaboration between Optum and UnitedHealthcare and with our many external partners helped us grow in serving both commercial and government markets, unlock new innovation, introduce integrated products and services to the marketplace and significantly increased the number of people benefiting from value-based models of care.\nLast year, we leveraged our technology capabilities to help physician and hospital systems better serve their patients and communities.\nAnd we sharpened our focus on the consumer, working to elevate and improve the end-to-end experience.\nTaken together, these efforts helped us add more than $30 billion in revenue for the year, about $10 billion above our initial outlook.\nAnd you should expect similar growth in the year ahead.\nWe see an even greater demand for integration to bring together the fragmented pieces of the health system, to harness the tremendous innovation occurring in the marketplace, to help better align the incentives for providers, payers, and consumers, and to organize the system around value.\nA healthcare system that is more connected, more informed, more human, and more responsive to every person's unique needs.\nAt our investor conference, we shared five key areas for growth and for differentiated experiences across our portfolio.\nThese growth opportunities will guide our strategy this year and for many years to come.\nFirst is care delivery, more specifically, value-based care.\nFor UnitedHealth Group, this is more than a primary care strategy.\nIt's a comprehensive clinical strategy encompassing our growing behavioral, home, ambulatory, and virtual care capabilities.\nOur second growth area is health benefits, advancing the quality, innovation, and consumer appeal of our benefit offerings and bringing our value-based strategy to life.\nWe enter '22 having generated strong consumer growth in Medicare Advantage and saw further progress in Medicaid and growing momentum in our commercial business.\nOur major partnerships across the country help health systems improve their performance and returns, all to better support their missions.\nWe're energized by the potential to bring these comprehensive tailored solutions to a greater number of system partners in 2022 and beyond.\nFourth, health financial services, vastly improved in the health payment sector, streamlining and simplifying payments for providers, payers and consumers while reducing friction and increasing speed and convenience.\nAnd finally, pharmacy services, where people interact most often with the healthcare system.\nWe can better use the significant breadth, volume, and value of our foundational pharmacy services and data capabilities and integrate our medical pharmacy and behavioral capabilities, all of this to provide whole person care, support the discovery of new drugs and treatments and support value-based models of care.\nIn sum, we enter 2022 with heightened confidence in our ability to execute upon the objectives we set forth in late November.\nI thought I would take a few minutes providing you with some additional details on our first growth priority: value-based care, how we have prepared for it, the investments we have made and how we see it working in the near future.\nThis has been something we have been working on and building over the course of a decade.\nFor example, there was significant operational groundwork and investment that went into supporting the half-million new patients for whom OptumHealth will become accountable in 2022.\nSuccessful execution requires a lot of detailed planning, investing, and building.\nIt has become a distinctive competency of our enterprise, which we can now increasingly apply at scale.\nSo what does it take to prepare for moving to a fully accountable arrangement?\nInvestments can be significant.\nAs an example, in '21, we incurred over $100 million in preparation expense.\nWithin this, there are three major workstreams involved: clinical training and staff preparation, technology and data enhancement and third is network coordination.\nThe first workstream focuses on physician education.\nIt begins well more than a year prior.\nIt's important to provide the resources and knowledge for physicians to begin approaching their patients differently.\nThey engage in their patients' whole health, well ahead of taking on greater accountability.\nWe find it to be an essential and sometimes complex shift in what our long-held fee-for-service practices.\nBeyond education, we ramp up our capacity in the form of physicians, nurses, and other clinicians to meet the requirements of our business.\nThe second area focuses on the technology systems and information needed to support patient care and effective clinical management.\nThis includes things like patient portals and utilization management systems as well as reporting systems for teams to effectively manage.\nFinally is the planning and network coordination work to support clinical oversight beyond primary care and ensure true continuity of care.\nThis planning and coordination includes initiatives such as identifying the patients most in need and ensuring a seamless transition to high-touch clinical care services that improve health and quickly pairing patients with a personal care navigator to assist in supporting complex health needs, appointment scheduling, and timely medication support on day one.\nThese foundational preparations and investments have been critical in creating strong results across the variety of geographies and practices we have transitioned.\nWe expect this expertise will serve us well as we transition even larger groups of patients in the years to come.\nBefore handing it over to John, I'd like to update you on how COVID has impacted our operations.\nLike other businesses, we have experienced moderately higher levels of attrition and more unplanned absences.\nWe had prepared for this situation through increased recruiting capacity as well as meaningfully upgraded digital capabilities to improve customer experience and reduce call volumes.\nAs a result, in the first two weeks of '22, traditionally our most demanding period, we were able to service the needs of our patients and customers.\nAt the same time, we responded swiftly to the federal mandate for cash-free COVID test for consumers, a highly complex undertaking.\nWith four days' notice, UnitedHealthcare created a customer digital experience for ease of reimbursement and established a partnership with Walmart and now Rite Aid that eliminates cash outlays by consumers at point of purchase.\nWe expect more partnerships in the days ahead.\nAs we look forward, we believe we have the right capacity in place to execute our business priorities and meet our customers' expectations.\nI'll start by expanding a bit upon Dirk's comments on the COVID impacts we're seeing.\nIn the most recent weeks, inpatient hospitalization levels for our members are similar to the January 2021 levels, even with national COVID case rates about four times higher.\nFor those people needing inpatient care, severity is seemingly lower as we are seeing shorter lengths of stay compared to that earlier period.\nAt the same time, we are observing familiar correlations of care activity patterns to other periods of elevated infection rates experienced over the past two years.\nFor example, in these early weeks of January, we are seeing slowing in primary care, elective visit, and procedural volumes.\nActivity over the past several weeks shows primary care visits having declined about 10% and an even higher rate of decline in specialist visits.\nAs always, our prime focus is on helping people get the care they need when they need it.\nMoving now to our specific business performance.\nOptumHealth's revenue per consumer grew by over 30% in '21, driven by the increasing number of our patients served under value-based arrangements.\nConsistent with the expectations we shared in late November, we had a strong start to the year and continue to expect to add 500,000 new patients in accountable value-based relationships, benefiting from the groundwork laid over the past many years.\nOptumInsight's earnings grew 25% in '21, with operating margins approaching 28% for the year.\nWe ended the year with a revenue backlog of $22.4 billion, an increase of $2.2 billion over the prior year.\nOur expanding relationships serving health systems has been a key factor driving this growth, and we expect these partnerships to continue to grow in '22 and beyond.\nOptumRx earnings grew 6% for the year, driven by the continued expansion of our pharmacy services businesses, supply chain initiatives and strong cost management activities and benefiting from strong customer retention.\nIn addition, we continue to see the impact of OptumRx's movement to a higher-value pharmacy care and specialty services orientation.\nFull-year revenues of $223 billion grew 11%.\nAs noted, our 2022 Medicare Advantage member growth outlook is very positive and consistent with the objectives we established at our November investor conference.\nWithin the up to 800,000 new members we will serve in '22, about three-quarters will be in individual and group Medicare Advantage and the remainder in dual special needs plans.\nAnd given the steady strides we've made in quality performance, we have the opportunity to enroll people in our newly rated five-star plans throughout the entirety of this year.\nOur Medicaid membership outlook for '22 continues to incorporate an expectation that states resume eligibility redeterminations, resulting in modest net attrition.\nIn January, we began serving the citizens of Minnesota and continue to support the Missouri expansion this year as well as renewed relationships with Ohio, Tennessee, and Nevada.\nOver the course of the year, we will look to continue to expand upon the nearly 8 million individuals we serve across 31 states.\nWe concluded '21 with commercial membership about 200,000 people ahead of the original outlook provided.\nCreating this momentum is the strong response we are seeing to the new innovative products you have heard us discuss, products such as NavigateNOW, which use the Optum virtual network as a first option.\nOur capital capacities remain strong.\nFull year '21 cash flow from operations was $22.3 billion or 1.3 times net income, about $2 billion above the initial outlook we shared a year ago.\nWe continue to expect our 2022 cash flow to approach $24 billion, about 1.2 times net income.\nAnd we ended '21 with a debt-to-total capital ratio of 38%.\nThese ample capital capacities allow us to continue to accelerate our investments, while remaining committed to an advancing shareholder dividend and supporting our expected repurchase of between $5 billion and $6 billion of stock in '22.\nOur 2022 adjusted earnings per share outlook of $21.10 to $21.60 is consistent with the view we offered seven weeks ago.\nFrom this distance, and in contrast to the past two years, we expect the seasonal pattern to be more consistent with our historical experience, with just under 50% of full-year earnings in the first half and the first two quarters comparably even.\nBefore we transition to the Q&A portion of the call, I hope you've already taken away the strong sense of confidence John, Dirk, and I share in the growth potential of this company, rooted in the growing number of people we're serving in value-based models, the depth of relationships we're building with local health systems, our pharmacy capabilities and the innovation and consumer focus that's driving growth across our government programs, individual and commercial businesses.\nAs demand for innovation and integrated solutions, products, and services only continues to grow, we've never been in a better position to help bring together the fragmented pieces of healthcare and create more value for the people we try to serve.\nOne per caller, please.\n Assistant:", "chosen": "affirmed 2022 growth and performance objectives established at its november 30, 2021 investor conference.\nunitedhealth - confirmed 2022 growth forecast elements provided at its investor conference, including for people served through medicare advantage.\nunitedhealth - cash flows from operations for the full year 2021 were $22.3 billion or 1.3x times net income.\n"}
{"prompt": "Human: These reports, when filed, are available on the UPS investor relations website and from the SEC.\nFor the third quarter of 2021, GAAP results included after-tax transformation and other charges of $54 million or $0.06 per diluted share.\nUnless stated otherwise, our comments will refer to adjusted results, which exclude transformation and other charges.\nIn the 17 months that I've been CEO, I've learned that no matter what comes our way, UPSers deliver.\nBut through it all, UPSers leverage the flexibility of our integrated network and the technology that powers it to deliver what matters.\nA little over one year ago, we laid out our better, not bigger framework under a customer-first, people-led, innovation-driven strategy.\nInside that strategic framework is a focus on three main areas.\nFirst is to improve revenue quality, including growing SMB volume.\nSecond is to reduce our cost to serve through productivity and cost takeout initiatives.\nAnd third is to effectively allocate capital to create a better customer experience, happier UPSers, and higher returns on the capital we deploy.\nWhile it is early in the execution of our strategy, the progress we are making is clearly visible in our results.\nLooking at the third quarter, our performance was better than we anticipated.\nConsolidated revenue rose 9.2% from last year to $23.2 billion, driven by another quarter of improved revenue quality across all three of our operating segments.\nConsolidated operating profit grew 23.4% to $3 billion, driven by solid revenue growth and strong expense control.\nEach of our segments delivered year-over-year operating profit improvement and double-digit operating margins.\nAnd for the first nine months of 2021, UPS has generated more operating profit than any full year in our history.\nBrian will share the details of our performance shortly.\nAs we've discussed, we are laser-focused on adding capabilities that enable UPS to grow with SMBs.\nThese improvements also benefit large customers that value our end-to-end network.\nExpanded weekend delivery services is one of our new capabilities.\nThis initiative will be completed in the U.S. as planned by the end of this week.\nWe will now cover about 90% of the U.S. population on Saturday for both residential and commercial pickups and deliveries.\nIn addition, expanded Saturday services provides more capacity for Sunday SurePost delivery.\nThe best part of our weekend delivery program is that we've unlocked additional network capacity that benefits all customers without deploying additional capital.\nAnd we've done this while expanding our U.S. operating margin on a year-over-year basis.\nAs we look at our third-quarter results, we see that SMBs value the new capabilities we are providing.\nIn the U.S., SMB average daily volume, including platforms, was up 10.9% year over year.\nIn fact, we've seen strong growth here for the past six quarters.\nvolume, up 380 basis points from one year ago.\nAnd outside the U.S., SMB average daily volume growth was 3.9%.\nWe see many opportunities to grow our international SMB volume as we continue to improve our digital experiences and roll out DAP, our Digital Access Program, to customers outside of the U.S. Let me also touch on SMBs and healthcare.\nWhen COVID-19 vaccines were rolled out late last year, the world turned to UPS, and we were ready with connected capabilities, technology, and expertise.\nOur brand relevance here is attracting new SMB healthcare customers and significantly driving profit growth in this sector.\nAnd just on COVID-19 vaccines, we are on track to deliver more than 1 billion vaccine doses by the end of this year with 99.9% on-time delivery.\nWe are relentlessly focused on reducing our cost to serve, and we're making good progress.\nWhile Brian will go through the details, I'll call out a few highlights.\nIn the U.S. we drove a measurable improvement in productivity as PPH, or pieces per hour, increased by 2.5%.\nAdditionally, as Nando described at our June Investor Day, through our ongoing efforts to optimize loads in our trailers, cube utilization in the third quarter was up 520 basis points versus last year.\nThis helped us eliminate more than 10% of daily trailer loads year over year.\nAnd as we've discussed previously, we are creating fewer but more impactful jobs.\nSo to reduce turnover and improve productivity, we are converting around 1,000 part-time supervisor positions in our operations into nearly 400 full-time positions at no additional cost to our company.\nTurning to what we refer to as Transformation 2.0 or plans to optimize our nonoperating expense.\nWe are on track to eliminate $500 million in nonoperating costs this year, with about $500 million of additional opportunity in 2022.\nFinally, our third area of focus is disciplined capital allocation.\nSince we began executing our strategy, we've seen marked improvement in our employee satisfaction and competitive Net Promoter Scores, due in part to how we've allocated capital to enhance the employee and customer experience.\nIn October, we completed the acquisition of Roadie, a technology platform that also provides delivery services for packages that don't lend themselves to our small package network.\nWe continue to be disciplined in our capital spending practices.\nThis discipline, plus record earnings, yield a significant amount of cash.\nSo far this year, we've generated a record $9.3 billion in free cash flow.\nAnd we expect full-year 2021 return on invested capital to be around 29%, which is a 730-basis-point improvement from what we reported at the end of last year.\nTurning to the fourth quarter.\nThe global supply chain market is challenging.\nThere are capacity, congestion, and cost concerns.\nBut for UPS, our outlook is positive as, once we get a package, we get it delivered.\nOutside of the U.S., where we peak, we are ready, and tight capacity benefits our freight forwarding business.\nIn the U.S., we project a robust peak season, and through our planning efforts, we believe we are well on our way to deliver a peak that will be a win for UPS shippers, recipients, and share owners.\nLet me share a few details.\nTo begin with, the calendar is helpful as we have one more peak operating day than last year.\nFurther, we've expanded weekend delivery and added additional sorting capacity.\nNonetheless, we expect consumer demand will outpace capacity in the market.\nWe began collaborating with our largest customer several months ago, and we'll stay in close contact with them during the holiday shipping season.\nOur technology allows us to match daily capacity with customer demand.\nAnd where we need to, we will again control the amount of volume that enters our network.\nThese actions will minimize chaos costs and enable high service levels.\nOn the labor front, we've digitized and simplified our job application process.\nenabling qualified applicants to receive a job offer within 30 minutes of applying.\nIn parts of the country, labor costs are higher than they were last year, but we are effectively managing through that cost pressure.\nWhen you add it up, in the fourth quarter, we expect to generate record consolidated operating profit and expand operating margin year over year.\nWhile we are laser-focused on peak, our business doesn't end on December 31st.\nLater this week, we will release our U.S. general rate increase.\nThe 2022 increase will be 5.9%, reflecting the value of the services we offer and cost inflation pressures.\nThe details will be posted to ups.com.\nAs we move ahead, we will continue to execute by leveraging our global Smart Logistics Network, our amazing UPSers, and a strategy that's driving strong financial results today and positions us well for the future.\nIn my comments today, I will cover four areas, starting with a macro overview, then our third-quarter results.\nNext, I'll review cash and shareowner returns.\nAnd lastly, I'll wrap up with some comments on our outlook for the full year.\nLet's start with the macro.\nIn the third quarter, the global economy continued its strong growth despite the dampening effects of COVID-19 and inflation, along with shortages in inventory and labor.\nWithin this backdrop, demand for our services remained high and the pricing environment in the industry was firm.\nWe expect similar dynamics in the fourth quarter, and as we demonstrated in the third, we will continue to execute our strategy and capture profitable growth opportunities in the market.\nIHS is forecasting fourth-quarter global GDP will grow 3.8% and U.S. GDP is expected to grow 4.9%, which remain above historic GDP growth rates.\nMoving to our third-quarter consolidated performance.\nThe progress we've made to improve revenue quality enhance productivity and allocate capital is driving strong top and bottom line results.\nConsolidated revenue increased 9.2% to $23.2 billion.\nConsolidated operating profit totaled $3 billion, 23.4% higher than last year.\nAll three segments generated record third-quarter operating profit and achieved double-digit operating margins in the quarter.\nConsolidated operating margin expanded to 12.8%, which was 150 basis points above last year, and diluted earnings per share was $2.71, and up 18.9% from the same period last year.\nNow let's take a look at the segments.\nOur results in U.S. domestic were better than we anticipated principally due to higher than planned for improvements in revenue per piece and productivity gains.\nAs we expected, average daily volume in the U.S. was down 540,000 pieces or 2.7% due to a decline in SurePost of 576,000 packages per day.\nThis decline was partially offset by growth in ground commercial volume.\nOur results reflect the continued execution of our strategy to win in the most attractive parts of the market.\nIn fact, customer mix continued to be positive as higher-yielding SMB average daily volume, including platforms, was up 10.9%.\nAnd in the third quarter, SMBs made up 27.4% of U.S. domestic volume, compared to 23.6% last year.\nRegarding our delivery mix, our commercial business continued to recover and grew 6.8%, representing 42% of our volume in the third quarter, compared to 39% in the third quarter of last year.\nNearly all industry sectors grew B2B average daily volume, including retail and high tech.\nFor the quarter, U.S. domestic generated revenue of $14.2 billion, up 7.4%, driven by a 12% increase in revenue per piece with fuel driving 270 basis points of the revenue per piece growth rate.\nTotal expense grew 5.8% and with fuel driving 180 basis points of the year-over-year expense growth rate.\nThrough our focus on productivity, overall improvements, led by our inside sort operations and on-road activities, helped offset the market rate adjustments we implemented in certain geographies, as well as the cost of expanding Saturday delivery.\nAnd as Carol mentioned, a key measure of UPS productivity is pieces per hour.\nAnd in the third quarter, we made improvements in nearly every area of our operations, led by preload, which improved by 6.5%.\nCombined, these improvements contributed to a decrease in direct labor hours per day of 5.1%.\nIn summary, revenue growth was above expense growth, which generated positive operating leverage.\nThe U.S. Domestic segment delivered $1.4 billion in operating profit, an increase of $281 million or 24.8% compared to last year, and operating margin expanded 140 basis points.\nThe segment continues to generate strong profit growth, driven by the execution of our strategy.\nDue to tough year-over-year comparisons and some supply chain disruptions, growth in average daily volume moderated in the third quarter and was up 1.9%.\nB2B average daily volume grew 3.8% on a year-over-year basis and offset a decline in B2C volume, which was down 2.3%.\nOn a two-year stack, total average daily volume was up 14%.\nTotal export average daily volume was up 1.3% on a year-over-year basis.\nExport growth in Europe and the Americas offset a 4.8% decrease in export average daily volume out of Asia.\nThe decline in Asia was due to difficult comps from a year ago and the implementation of network contingency plans in response to COVID-19 protocols at select airports.\nRelative to our plan, we had 137 fewer flights out of Asia than we anticipated.\nFor the quarter, international revenue was up 15.5% to $4.7 billion with strong growth across all regions.\nRevenue per piece was up 14%, including a 500 basis point benefit from fuel.\nRevenue quality improved on a year-over-year basis as we continue to utilize surcharges to match demand with available capacity.\nIn the third quarter, international delivered its fourth consecutive quarter of profits over $1 billion.\nOperating profit was $1.1 billion, an increase of 14%, and operating margin was 23.5%.\nNow looking at supply chain solutions.\nThe segment delivered record third quarter top and bottom line results as the team executed exceptionally well in a dynamic environment.\nRevenue increased 8.4% to $4.3 billion with all major business categories contributing to profit growth.\nMarket demand remained elevated with a couple of key profit drivers.\nIn forwarding, capacity constraints, and consumer demand in the market drove volume growth in air freight forwarding and strong yields in our ocean freight product, which drove top and bottom line results.\nAnd in logistics, revenue and operating profit grew by double digits led by our healthcare portfolio.\nIn the third quarter, supply chain solutions generated record operating profit of $448 million, and the operating margin was an impressive 10.5%.\nAs a reminder, this is our first full quarter without UPS freight results, given that we closed the sale on that business on April 30th of this year.\nWalking through the rest of the income statement, we had $177 million of interest expense.\nOther pension income was $285 million.\nAnd lastly, our effective tax rate came in at 22.3%, which was lower than last year due to favorable changes in jurisdictional tax rates and discrete items.\nNow let's turn to cash on the balance sheet.\nWe are generating strong cash flow from our disciplined focus on capital allocation and growth in net income.\nSo far, in 2021, we have generated a record $11.8 billion in cash from operations and $9.3 billion in free cash flow.\nAnd in the first nine months of this year, UPS has distributed $2.6 billion in dividends.\nIn August, we announced a $5 billion share repurchase plan.\nwith the intent to repurchase $500 million of shares in 2021, which we completed in the third quarter.\nWe expect to execute the remainder of the program over the next few years.\nNow I'll make a few comments regarding the full-year outlook.\nWe are continuing to pay close attention to and manage through several external factors, including COVID-19, inflationary pressures, and inventory and labor shortages.\nDespite these challenges, consumer demand is expected to be strong during peak season and in the fourth quarter.\nDue to our third-quarter outperformance, combined with the progress we are making with our strategic initiatives, and our increased fourth-quarter plan, we are raising our full-year guidance.\nOn a consolidated basis, we expect full-year 2021 revenue growth of around 13.8% year over year, which takes into account the divestiture of UPS freight.\nAdditionally, consolidated operating margin should be around 13%.\nIn U.S. domestic, we anticipate full-year 2021 revenue growth of about 12.7% with revenue growing faster than volume.\nWe anticipate the full-year 2021 U.S. operating margin will be around 10.5%.\nAs you update your models for the U.S. domestic segment, there are a couple of things to keep in mind as we get into the fourth quarter.\nFirst, as usual, enterprise and B2C volume will represent a larger percentage of our total volume due to peak when compared to the rest of the year.\nAnd second, we are lapping more than $550 million in peak season surcharges in addition to the early customer pricing actions we implemented last year as a part of our revenue quality initiatives.\nAs a result, we expect the sequential revenue per piece growth rate to moderate in the fourth quarter.\nMoving to the international segment.\nWe expect full-year revenue growth of around 20.7%, with an operating margin of about 23.9%.\nAnd in the supply chain solutions segment, we anticipate full-year revenue growth of around 10.3% and operating margin of about 10%.\nAdditionally, for the full year in 2021, we expect free cash flow to be around $10.5 billion, and return on invested capital will be around 29%.\nCapital expenditures are now expected to be approximately $4.2 billion.\nAnd lastly, our effective tax rate for the full year is expected to be about 22.5%.\nAs I wrap up, the economic outlook and the effects of our revenue quality and productivity initiatives are putting us well on our way to achieving the high end of our 2023 targets that I shared with you in June.\nWe are executing our strategy under the better, not bigger framework, and delivering on our commitments despite a very dynamic environment.\nWe are laser-focused on improving revenue quality, reducing our cost to serve, and remaining disciplined on capital allocation to improve the experience for our customers and our people and the financial performance of our company.\nAnd operator, please open the lines.\n Assistant:", "chosen": "compname reports q3 adjusted earnings per share of $2.71.\nq3 adjusted earnings per share $2.71 .\nups releases 3q 2021 earnings.\nups - raises full-year 2021 financial guidance.\nq3 revenue rose 9.2 percent to $23.2 billion.\nups qtrly consolidated revenues of $23.2b, up 9.2% from last year.\nups qtrly gaap results include after-tax transformation and other charges of $54 million, equivalent to $0.06 per share.\nups - fy capital expenditures are now planned to be approximately $4.2 billion.\nups - expects fy adjusted return on invested capital to be around 29%.\n"}
{"prompt": "Human: I'll begin on Slide 3.\nIn the third quarter, we reported earnings per share of $1.30 and generated total revenue of $5.9 billion.\nOur linked quarter pre-tax pre-provision net revenue growth of 2.7% was driven by continued momentum across our fee businesses, growth in average loan balances, and continued focus on expense management resulting in positive operating leverage.\nWe released $310 million of loan loss reserves this quarter, supported by our outlook on the economy and better-than-expected credit quality metrics.\nOur book value per share totaled $32.22 at September 30, which was 1.5% higher than June 30.\nOur CET1 ratio was 10.2% at September 30.\nSlide 4 provides key third quarter performance metrics, including a return on tangible common equity of over 20%.\nSlide 5 highlights strong trends in digital engagement.\nOn Slide 6, we are providing an initial information about our Business Banking and payment relationships, which we plan to update every quarter.\nOur complete payments ecosystem is a competitive advantage for us and provides a number of cyclical and secular growth opportunities.\nOver the next few years, we believe there is a significant potential to expand and deepen relationships within this ecosystem.\nOur starting point is that, we have about 1.1 million Business Banking relationships, which we define as businesses with under $25 million in revenue.\nCurrently, about half of our payments customers of this size have a Business Banking product and just under one-third of our Business Banking customers have a payments product.\nThe opportunity is to both increase the number of Business Banking relationships and to deepen these relationships by connecting our banking customers with our payments products and services, and connecting our payments customers with our banking products and services.\nAs we discussed previously, we believe we can grow our small business relationships by 15% to 20% and related revenue by 25% to 30% over the next few years.\nAverage loans increased 0.8% compared with the second quarter, driven by growth in other retail loans, primarily installment loans, as well as growth in credit card and residential mortgages.\nThis growth was partially offset by lower commercial loan balances which was impacted by lower levels of PPP loans.\nAt September 30, PPP loan balances totaled $2.4 billion compared to $4.9 billion at June 30.\nExcluding PPP loans, third quarter average loans grew by 1.8% on a linked quarter basis.\nTurning to Slide 8, average deposits increased 0.5% compared with the second quarter and 6.4% compared with a year ago.\nOn both a linked quarter and year-over-year basis, we continued to benefit from favorable mix shift as average non-interest bearing deposits increased while higher cost time deposits declined.\nSlide 9 shows credit quality trends.\nNon-performing assets declined on both a linked quarter and year-over-year basis and our net charge-off ratio hit a record low of 20 basis points.\nOur reserve release was $310 million this quarter, primarily reflecting strong credit quality metrics.\nOur allowance for credit losses as of September 30 totaled $6.3 billion, or 2.1% of loans.\nThe allowance level reflected our best estimate of the economic outlook and trajectory of credit quality within the portfolios.\nSlide 10 provides an earnings summary.\nIn the third quarter of 2021, we earned $1.30 per diluted share.\nThese results include a reserve release of $310 million.\nTurning to Slide 11, net interest income on a fully taxable equivalent basis of $3.2 billion increased by 1% compared with the second quarter.\nThe growth was primarily driven by higher loan fees associated with the Paycheck Protection Program.\nExcluding PPP-related fees, net interest income would have been stable, reflecting lower loan yields and the impact of change in loan mix, offset by the beneficial impact of core loan growth, lower premium amortization, and an additional day in the quarter.\nOur net interest margin was stable compared with the second quarter.\nSlide 12 highlights trends in non-interest income.\nCompared with a year ago, non-interest income declined 0.7% as decreases in mortgage revenue and commercial products revenue more than offset strong growth in payments revenue, trust and investment management fees, deposit service charges, and treasury management fees.\nOn a linked quarter basis, non-interest income increased 2.8% reflecting higher-than-expected payments revenue and a 20% increase in mortgage revenue driven by growth in production volume and related gain on sale margins, as well as higher loan sales.\nSlide 13 provides information on our payment services business.\nOur payments business continues to benefit from improving economic conditions and spend activity.\nIn the third quarter, sales volumes for both our credit card and our merchant processing businesses exceeded the pandemic compared period in 2019, while CPS volume was about in line.\nAs expected, prepaid card volume declined in the third quarter as the impact of government-related stimulus continues to diminish.\nThe reduced prepaid volume resulted in a slight decline in credit and debit card revenue on a linked quarter basis.\nHowever, corporate payment revenues increased by 13%, which was better-than-expected, driven by improving business spend activity.\nMerchant processing revenue increased by 4.8% due to higher merchant and equipment fees, as well as higher sales volumes.\nTurning to Slide 14, non-interest expense increased 1.2% compared to the second quarter.\nThis increase primarily reflected higher revenue-related compensation and performance-based incentives.\nSlide 15 highlights our capital position.\nOur common equity Tier 1 capital ratio at September 30 was 10.2%, which increased slightly compared to June 30.\nAt the beginning of the third quarter, we suspended our share buyback program due to our recent announcement that we have agreed to acquire MUFG's Union Bank.\nWe expect that our share repurchase program will be deferred until the second quarter of 2022.\nAfter the closing of the acquisition, we expect to operate at a CET1 capital ratio between our target ratio and 9%.\nAs PPP winds down and we approach the end of the forgiveness period, we expect PPP fees to decline $60 million to $70 million in the fourth quarter compared with the third quarter.\nExcluding the impact of PPP fees, we expect fully taxable equivalent net interest income to be relatively stable on a linked quarter basis.\nWe expect PPP to be immaterial to both net interest income and the net interest margin in 2022.\nIn the fourth quarter, we expect total payments revenue trends to continue to strengthen, driven by improving sales volumes.\nHowever, the fourth quarter is typically seasonally lower than the third quarter, which affects linked quarter comparisons.\nIn the fourth quarter, we expect to see a seasonal increase in amortization of tax-advantaged investments of approximately $60 million, as well as some seasonal impacts in marketing and in business investments.\nCredit quality remains strong.\nOver the next few quarters, we expect the net charge-off ratio to remain lower than normal.\nFor the full-year of 2021, we expect our taxable equivalent tax rate to be approximately 22%.\nI'll hand it back to Andy for closing remarks.\nTo summarize our third quarter results, we're positive on several fronts, highlighted by a solid growth in core loans, good fee revenue momentum, and strong credit quality.\nWe are finishing off the year in a strong position heading into 2022 and we're excited about the many organic growth opportunities we see across the franchise, supported by our continued investment in people, digital, technology, and data analytics.\nOur three payments businesses will continue to benefit from the improved spend activity, particularly as consumer and business travel recovers toward pre-pandemic levels.\nMore importantly, we believe our secular growth initiatives aimed at connecting payments with banking provide a meaningful potential for market share gains over the immediate and longer-term.\nOur Business Banking initiatives are still in the early innings but we're gaining traction and our partnership with State Farm continues to evolve and grow.\nWe are encouraged by the results we're seeing.\nAside from our organic growth opportunities, our recently announced acquisition of Union Bank provides a platform to achieve cost synergies, expand our distribution network in demographically attractive West Coast markets, and leverage our broad product set in leading digital capabilities across a loyal but underpenetrated customer base.\nAll of this will enable us to accelerate revenue and earnings growth, and continue to deliver the industry-leading returns on equity that our shareholders have come to expect.\nWe'll now open up the call to Q&A.\n Assistant:", "chosen": "u.s. bancorp q3 earnings per share $1.30.\nq3 earnings per share $1.30.\nq3 revenue $5.9 billion.\nus bancorp - allowance for credit losses declined $310 million during quarter given improving economic outlook and credit trends.\nus bancorp - cet1 capital ratio increased to 10.2% at september 30, 2021.\n"}
{"prompt": "Human: Ron Bernstein, Senior Advisor to Liggett Vector Brands, will join us during the Q&A.\nLike many other companies, we are operating in the context of important and long overdue changes.\nRecent events have demonstrated that systemic racism and social injustice continue to exist today.\nWe all have significant work ahead of us, as meaningful actions bring meaningful change.\nWe will hold ourselves accountable, and accountability is a priority for our company.\nNow, to our second quarter results.\nNick will then summarize the performance of the tobacco business.\nAs of June 30, 2020, Vector Group maintained significant liquidity with cash and cash equivalents of $540 million, including cash of $61 million at Douglas Elliman and $218 million at Liggett, and investment securities and investment partnerships with a fair market value of $137 million.\nThe cash balances at Liggett include $132 million of deferred federal excise tax payments, which will be paid in the third quarter.\nDuring the second quarter, our liquidity increased by $53 million from the issuance of 5 million shares of common stock.\nWe will be strategic with our liquidity and believe the current economic environment will present opportunities for investments yielding above-market returns.\nNow, turning to Vector Group's operations for the three and six months ended June 30, 2020.\nVector Group's revenues for the three months ended June 30, 2020 were $445.8 million compared to $534.8 million in the 2019 period.\nOur tobacco segment reported an increase of $18 million in revenues due to price increases and increased unit volume.\nHowever, our real estate segment reported a significant decline in revenues due to the impact of the COVID-19 pandemic, as well as an unusual year-over-year comparison because of the acceleration of real estate closings in New York City in the 2019 second quarter.\nThis acceleration occurred in anticipation of the increase in New York State Mansion Tax on residential real estate on July 1, 2019.\nNet income attributed to Vector Group for the second quarter of 2020 was $25.8 million or $0.16 per diluted share compared to net income of $39.3 million or $0.25 per diluted common share in the second quarter of 2019.\nThe Company recorded adjusted EBITDA of $76.5 million compared to $83.5 million in the prior year.\nAdjusted net income was $28.7 million or $0.19 per share diluted compared to $43.2 million or $0.28 per diluted share in the 2019 period.\nFor the six months ended June 30, 2020, Vector Group's revenues were $900.2 million compared to $959.4 million in the 2019 period.\nOur tobacco segment reported an increase of $48.3 million in revenues.\nThis contrasted with a decline in revenues in our real estate segment.\nNet income attributed to Vector Group for the six months ended June 30, 2020 was $22.5 million or $0.14 per diluted share compared to net income of $54.3 million or $0.03 per diluted common share for the six months ended June 30, 2019.\nThe Company recorded adjusted EBITDA of $136.7 million compared to $133.2 million in the prior year.\nAdjusted net income was $68.6 million or $0.45 per diluted share compared to $56.1 million or $0.36 per diluted share in the 2019 period.\nFor the six months ended June 30, 2020, Douglas Elliman reported $298.5 million in revenues, a net loss of $74.1 million and an adjusted EBITDA loss of $8.8 million compared to $404.8 million in revenues, net income of $4.7 million and adjusted EBITDA of $7.7 million in the first six months of 2019.\nDouglas Elliman's net loss for the six months ended June 30, 2020 included pre-tax and non-cash impairment charges of $58.3 million and pre-tax restructuring charges of $3 million.\nThe COVID-19 pandemic continues to have a profound effect on the economy.\nIn response to the pandemic, state and local governments instituted restrictions on individuals and on the type of business that can operate, which directly impacted Douglas Elliman's and others' ability to do business in New York and its other markets.\nAs a result, in the second quarter of 2020, Douglas Elliman's revenues in the New York metropolitan area declined by 52% from the second quarter of 2019.\nTo address the impact of COVID-19, Douglas Elliman implemented a reduction of personnel by 25% in April 2020 and began consolidating offices and reducing other administrative expenses.\nThese expense reduction initiatives resulted in a decline in Douglas Elliman's second quarter 2020 operating and administrative expenses by approximately $20 million from the second quarter in 2019.\nThird quarter cash receipts to date have shown improvement from the second quarter in all markets.\nWe believe the changes implemented at Douglas Elliman will provide long-term upside to the stockholders of Vector Group.\nAs Howard mentioned, Liggett performed exceptionally well in the second quarter despite the continued impact on the economy from the COVID-19 pandemic.\nYear-over-year volume and market share increased during the second quarter, contributing to a 14.5% increase in tobacco adjusted operating income.\nAs I mentioned during our previous earnings call, we made various adjustments during the first quarter to address the health and safety of our employees and those with whom we do business.\nThese changes will remain in place throughout the second quarter.\nI'm pleased to report, our tobacco business operations remain largely unaffected by the pandemic.\nAs the pandemic unfolded in March, there were some anticipatory wholesale, retail and consumer buying related to early concerns of the ongoing availability of cigarettes.\nThose concerns proved to be unfounded, and we continued to ship product as usual throughout the second quarter.\nThe entire supply chain has operated normally to this point.\nAnd importantly, our underlying year-over-year retail sales trends are strong.\nAs noted on previous calls, we are well into the income growth phase of our EAGLE 20's business strategy, and I'm very pleased with the results we have achieved so far.\nWe began increasing prices on EAGLE 20's in late 2018 and have grown volume, share and profit since then.\nOur market programs and promotions have proven successful, and we remain optimistic about EAGLE 20's continued growth going forward.\nI will now turn to the combined tobacco financials for Liggett Group and Vector Tobacco.\nFor the three and six months ended June 30, 2020, Liggett revenues were $312.5 million and $599.6 million respectively, compared to $294.5 million and $551.3 million for the corresponding 2019 periods.\nTobacco operating income for the three and six months ended June 30, 2020 was $79.3 million and $148.5 million respectively, compared to $68.7 million and $128.8 million respectively.\nTobacco adjusted operating income for the three and six months ended June 30, 2020 was $79.4 million and $148.5 million respectively, compared to $69.3 million and $129.5 million for the corresponding periods a year ago.\nLiggett's higher year-over-year earnings resulted primarily from increased unit volumes and higher net pricing.\nAccording to Management Science Associates, overall industry wholesale shipments for the second quarter were down 4.5%, while Liggett's wholesale shipments increased 1% versus the prior year quarter.\nAs we rightly [Phonetic] note, we believe retail shipments are a better indicator of industry trends than wholesale shipments, as various actions by manufacturers and wholesalers can impact trade volumes.\nThese effects are typically less pronounced with retail shipments.\nFor the second quarter, Liggett's retail shipments increased 0.2% over the prior year quarter, while industry retail shipments decreased 2.2% during the same period.\nLiggett's retail share for the second quarter increased 11 basis points to 4.3%.\nEAGLE 20's retail volume for the second quarter grew by nearly 7% compared to the prior year period, and it remains the third largest discount brand in the US.\nEAGLE 20's is now sold in approximately 78,000 stores nationwide, and its growth continues to provide an effective volume and profit complement to PYRAMID and other Liggett brands.\nDespite managed and anticipated volume declines, we remain pleased with the performance of PYRAMID.\nThe brand continues to deliver substantial profit and market presence for the company, has strong distribution and is currently sold in approximately 100,000 stores nationwide.\nWhile our second quarter 2020 results had limited impact from smaller deep discount-focused companies, this market segment remains the industry's most active.\nVarious smaller companies create pricing pressure as they seek to undercut the market in targeted geographies.\nLiggett has marketplace advantages relative to these companies, including the broad base of our distribution, our consumer-focused promotional programs and the executional capabilities of our sales force.\nWe are very pleased with our second quarter 2020 performance, particularly in light of the current macroeconomic environment.\nOur results continue to validate our market strategy.\nAnd as we look ahead, we remain focused on generating operating income from the strong sales and distribution base of PYRAMID, while delivering volume, share and profit growth from EAGLE 20's.\nAs mentioned earlier, we have implemented workplace protocols to meet or exceed state and federal guidelines, including employee health evaluations and social distancing.\nWe have in place protocols for rapid mitigation of any issues that may arise in connection with COVID-19 and are confident that we are well equipped to manage contingencies.\nFinally, while we are always subject to industry and general market risks, we remain confident that we have effective programs to keep our business operating efficiently, while supporting market share and profit growth.\nVector Group has strong cash reserves, has consistently increased its tobacco unit volume and profits, and has taken the necessary steps to position its real estate business for future success.\nWe are pleased with our long-standing history of paying a quarterly cash dividend.\nIt remains an important component of our capital allocation strategy.\nWhile we continue to evaluate our dividend policy each quarter, it is our expectation that the policy will continue well into the future.\n Assistant:", "chosen": "compname reports q2 revenue $445.8 million.\nq2 earnings per share $0.16.\nq2 revenue $445.8 million.\n"}
{"prompt": "Human: We are also excited to discuss Vector Group separating its businesses through the spin off of Douglas Elliman.\nWith me here today are Bryant Kirkland, CFO of Vector; Richard Lampen, Chief Operating Officer of Vector; Scott Durkin, President and CEO of Douglas Elliman Realty LLC; David Ballard, CTO of vector; and Nick Anson, President and COO of Liggett Vector Brands.\nWe also have Ron Bernstein, Senior Advisor to Liggett Vector Brands joining for the Q&A portion of the call.\nWe will then discuss the exciting news of our intention to spin-off Vector Group's real estate brokerage business, including Douglas Elliman and its cutting edge PropTech investments into an independent publicly traded company.\nWe also filed a Form 10 with the SEC.\nLet me start with financial results.\nAt September 30, 2021 Vector Group's consolidated balance sheet remain strong.\nWe maintained significant liquidity with cash and cash equivalents of $524 million, including cash of $159 million at Douglas Elliman and $133 million at Liggett.\nWe also held investment securities and investment partnership interests with a fair market value of $214 million at September 30, 2021.\nNow turning to Vector Group's consolidated results from operations for the three months ended September 30, 2021.\nVector Group's revenues were $652.6 million compared to $547.8 million in the 2020 period, the 104.8 million increase in revenues was a result of an increase of $125.7 million in the real estate segment, partially offset by a decline of $20.9 million in the tobacco segment.\nMoving on to -- excuse me, net income attributed to Vector Group was $48.9 or $0.32 per diluted common share compared to $38.1 million or $0.25 per diluted common share in the third quarter of 2020.\nThe company recorded adjusted EBITDA of $116.5 million compared to $103.3 million in the prior year.\nAdjusted net income was $52.6 million by $0.34 per diluted share compared to $38.3 million or $0.25 per diluted share in the 2020 period.\nMoving on to the results for the nine months ended September 30, 2021.\nVector Group's revenues were $1.93 billion compared to $1.45 billion in the 2020 period.\nThe $478 million increase in revenues was a result of an increase of $500.4 million in the real estate segment offset by a decline of $22.5 million in the tobacco segment.\nNet income attributed vector Group was $174.2 million or $1.13 per diluted common share compared to $60.7 million or $0.39 per diluted common share in the 2020 period.\nThe company recorded adjusted EBITDA of $355.1 million compared to $240 million in the prior year.\nAdjusted net income was $194.3 million or $1.26 per diluted share compared to $106.9 million or $0.70 per diluted share in the 2020 period.\nMoving on to the results for the last 12 months ended September 30, 2021.\nVector Group reported revenues of $2.48 billion, net income of $206.4 million and adjusted EBITDA of $44.8 million [Phonetic].\nTurning to our tobacco business financial results.\nLiggett continued its strong 2021 performance during the third quarter, delivering an increase in both retail market share and operating income.\nEagle 20's continues to deliver significantly higher margins, while Pyramid delivers both substantial profit and market presence and we continue to be pleased with the performance of our price-fighting brand, Montego, as we expand its distribution into targeted geographies across the country.\nBased on Management Science Associates retail data, the discount category increased approximately 80 basis points in the third quarter from a year ago, now comprising 26.5% of the total market as compared to 25.7% for the same period last year.\nAs the deep discount segment continues to offer attractive value proposition for the consumers, we expect down-trading trends will continue for the foreseeable future.\nAs such, we remain confident that our value focused brand portfolio and broad distribution position us well to meet these evolving market demands and drive profitable growth.\nI will now turn to the combined tobacco financials for Liggett Group and Vector Tobacco.\nFor the three and nine months ended September 30, 2021, revenues were $297.9 million and $895.9 million respectively, compared to $318.9 million and $918.4 million for the corresponding 2020 period.\nTobacco adjusted operating income for the three and nine months ended September 30, 2021 was $91.8 million and $273.9 million compared to $91.6 million and $240.2 million for the corresponding periods a year ago.\nThrough the first three quarters of 2021, tobacco adjusted operating income exceeded our full year 2019 figures, which was a record at that point in time.\nLiggett's third quarter earnings increase was primarily the result of higher gross profit margins associated with higher pricing and promotional spending efficiencies, offset by lower wholesale volumes and higher Master Settlement Agreement expense.\nAs discussed in last quarter's conference call, we anticipated pressure on our third quarter wholesale volumes following a significant inventory increase at the end of the second quarter and we estimate approximately half of our year-over-year third quarter wholesale shipment declines related to a reduction in wholesale inventories.\nIn addition, significant reductions made to our net MSA expense in the third quarter of last year because of unusually strong third quarter 2020 industry volumes put additional pressure on our year-over-year earnings comparison.\nAccording to Management Science Associates, overall industry wholesale shipments for the three months ended September 30, 2021 were down 11.8% compared to last year, while Liggett's wholesale shipments declined by 11.6% for the comparable period.\nAs we regularly note, however, we believe retail shipments are a much better indicator of underlying industry trends due to varying wholesaler buying patterns.\nLiggett's retail shipments for the three months ended September 30, 2021 declined 6.1% from the year ago period, while industry retail shipments decreased 7% during the same timeframe.\nAs a result, Liggett's third quarter retail share increased to 4.22% from 4.18% in the corresponding period last year.\nSequentially, Liggett's retail share increased by 13 basis points in the third quarter over the second quarter.\nIn summary, we remain pleased with the operational and financial performance of our tobacco business.\nFinally, while we always subject to industry regulatory and general market risks, we remain confident that we have effective programs and infrastructure in place to keep our business operating efficiently and delivering both market share and profit growth from our value-based brand portfolio.\nBefore Howard addresses the spin-off transaction, turning to Douglas Elliman's financial performance for the three, nine and last 12 months ended September 30, 2021.\nFor the three months ended September 30, 2021, Douglas Elliman reported $354.2 million in revenues compared to $208 million in revenues in the 2020 period.\nDouglas Elliman reported net income of $25.1 million and adjusted EBITDA of $27.8 million in the third quarter compared to $11.8 million and $14.1 million in the year ago period.\nFor the nine months ended September 30, 2021, Douglas Elliman reported $1.02 billion in revenues compared to $506.5 million in revenues in the 2020 period.\nDouglas Elliman reported net income of $82.2 million and adjusted EBITDA of $89.5 million for the nine months 2021 period compared to a net loss of $62.2 million and adjusted EBITDA of $5.3 million in the 2020 period.\nThe net loss in the 2020 period included pre-tax charges for non-cash impairments of $58.3 million and pre-tax restructuring charges up $3.3 million.\nFor the last 12 months ended September 30, 2021, Douglas Elliman reported $1.29 billion in revenues, $96.2 million of net income and $106.2 million in adjusted EBITDA.\nIn addition, Douglas Elliman reported closed sales of $47.7 billion in the last 12 months ended September 30, 2021.\nDouglas Elliman's year-to-date results were driven by strong continued activity in all markets.\nBoth closed sales volume and revenues doubled from the comparable 2020 period.\nWe are particularly pleased with the continued strength of South Florida market as well as a rebound of the New York City market during the first nine months of 2021.\nIn addition, Douglas Elliman's gross margin or company dollar increased to $94.5 million in the third quarter 2021, up from $58.9 million in the third quarter of 2020.\nFor the nine months ended September 30, 2021, Douglas Elliman's gross margin or company dollar increased to $274.1 million or $154.8 million for the same period in 2020.\nAnd as Douglas Elliman's revenues and gross margins significantly increased in 2021, we have discontinued certain expense reductions, which were implemented in the second quarter of 2020.\nThese include reductions to activity-based items such as advertising and discretionary compensation.\nThis team has substantial real estate expertise and a proven track record of driving growth.\nWe are very excited about this team because we have combined a strong management team from Vector with decades of public company management experience and a strong industry team from Douglas Elliman, which brings decades of real estate experience.\nMoving to Page 4, let's discuss our plan to separate Vector Group's real estate brokerage business and it's PropTech investments into an independent publicly traded company.\nWe are doing this because we believe Douglas Elliman as a separate company will leverage its comprehensive suite of real estate solutions, industry leading brand name PropTech Investment Arms, New Valley Ventures LLC, and talented team of finding technology, marketing and communication employees to unleash its growth potential.\nWe are doing this now, especially given current trends in the large and growing U.S. residential real estate industry at a time when the size of our business has reached a critical mass, positioning us well to succeed in the market as a stand-alone company.\nAnd of course, it will also be able to access the capital markets and widen its potential investor base, as well as use it pure play stock for M&A purposes and provide incentive opportunities for its key talent.\nWe expect this transaction to create significant value for all of Douglas Elliman's key stakeholders: developer, clients, brokerage customers, employees, agents and stockholders.\nSpecifically, we believe our presence in the most important primary luxury market in United States, our opportunities for continued growth, our diverse revenue streams, as well as our distinctive approach to technology will furnish a higher earnings multiple.\nMoving to Page 5, this is planned as a tax-free spin-off of Douglas Elliman to Vector Group stockholders.\nUpon completion, the new company called Douglas Elliman Inc will be a separate publicly traded company on the New York Stock Exchange under the ticker symbol, DOUG.\nDouglas Elliman Inc will consist of the brokerage, New Valley Ventures LLC, DE property management, DE development and marketing, DE title, DE mortgage and portfolio as well.\nThe rationale for the spin-off is that Vector Group's two businesses tobacco and real estate operate in distinct markets and possess unique growth prospects and investment profiles.\nAs planned, Vector Group stockholders will receive one share of Spinco common stock for every two shares of Vector Group common stock held.\nWe also expect subject to Board approval that Spinco will initially pay $0.05 per share quarterly dividend to holders of Douglas Elliman common stock and if Vector were to continue its $0.20 per share quarterly dividend.\nDoug's Board will consist of Dick Lampen and myself, as well as five seasoned public and private company executives who bring technology, legal and financial expertise: Ron Kramer, Wilson White, Lynn Mestel, Michael Liebowitz and Mark Zeitchick.\nNow, let us turn to Page 6 for an overview of Elliman's business.\nFounded in 1911, Douglas Elliman is one of the preeminent cutting edge residential brokerage companies in the United States.\nDouglas Elliman is a leading real estate brand associated with luxury service and forward thinking that operates in premium markets, primarily those that are densely populated international finance and technology hubs, as well as many of the second and third home markets, which DEDM.\nThese markets offering housing inventory at premium price points.\nWith a brand name synonymous with luxury and its comprehensive suite of technology enabled real estate services and investments, focus element is well positioned to capitalize on the highly attractive dynamics in the U.S. residential real estate market.\nAs a stand-alone publicly traded company, Douglas Elliman will pursue profitable growth opportunities to create stockholder value through the expansion of its geographic footprint, adoption of cutting edge PropTech and investments in PropTech companies through New Valley Ventures continue to excel in its retention and recruitment of best-in-class talent, acquisitions Aqui-hires and operational efficiencies.\nDouglas Elliman will also be able to directly and more efficiently access the capital markets and widen it's potential investor base.\nDouglas Elliman has an attractive financial profile with a balance sheet strength of $200 million of net cash at significant operating leverage, currently Douglas Elliman has approximately 6,600 agents and for the 12 months ended September 30, 2021, it had gross transaction volume of $47.7 billion, revenue of $1.29 billion and adjusted EBITDA of $106.2 million.\nTurning to page 7, Douglas Elliman is one of the largest residential brokerage companies in the New York metropolitan area, which includes New York City, Long Island, Westchester and the Hamptons and is sixth largest in the United States by sales value according to HousingWire.\nNote, this is sixth among brokerage such as Realogy, Berkshire Hathaway and Compass, for example, all of which opposed to tens of thousands of agents compared to Elliman 6,600.\nSince 2013 Douglas Elliman has expanded throughout Florida, California, Aspen and Snowmass, Colorado, Houston, Dallas and Austin, Texas and Massachusetts including Boston, Cape Cod, Martha's Vineyard and Nantucket.\nThe company can leverage Douglas Elliman's brand equity and earn credibility to expand its presence in new existing and adjoining markets and recruit best in class agents who recognize and trust the Douglas Elliman name, all contributing to increased market share.\nAn important point of differentiation for Elliman from Realogy and Compass is that the primary focus of our business is on the leading densely populated international finance and technology hubs, where housing inventory is at a premium price levels.\nThis is unlike these two competitors, one of whom is a multi-brand national franchise whose growth plans are less focused and include many markets through the country with these same demographics.\nThis results in Elliman having an average price per transaction substantially higher than our leading competitors.\nThis is important because the economics of the luxury market are attractive with commission rate strong, but also because we see the luxury market has more recession proof with drivers to our markets such as the continued migration to lower and lower tax states, the prevalence of remote working and a growth in millennials entering the housing market, who are generationally inclined to buying.\nWe believe this creates a large runway for us to continue to grow our business, not only in our existing, but in completely complementary markets as well.\nTurning to Page 9 to review the investment highlights for Spinco.\nThe U.S. residential real estate market has highly attractive growth dynamics.\nElements comprehensive suite of real estate solutions provide some multiple revenue streams and opportunities to monetize our agent relationships.\nDouglas Elliman is an industry-leading brand with a presence in most major U.S. luxury markets.\nWe have cutting-edge technology which support agent recruitment, retention and productivity.\nWe have a strong platform for continued and sustainable growth.\nThe stand-alone Douglas Elliman will have a balance sheet strength and significant operating leverage.\nAnd finally, we have a seasoned management team with substantial real estate experience and a track record of driving growth.\nTurning to Page 10, which highlights the attractive characteristics of the U.S. residential market.\nSince the beginning of 2020, U.S. homeowner equity has grown 17.6% to $23.6 trillion.\nNew and existing home sales in the U.S. are forecast to grow to approximately 7.4 million units in 2022, up from 6.9 million units in 2021 and 6.5 million units in 2020.\nThis is occurring against the backdrop of low mortgage rates driving home sales and even with some increase next year likely still on a relative basis at very attractive levels.\nThis is accompanied by increased mobility, driven by a number of factors including the continued migration to low tax jurisdiction, as well as COVID related factors such as greater remote work flexibility leading to increased demand for greater space and second homes.\nDouglas Elliman increasingly refers to buyers wanting multiple primary residents with their second and third residents having all the amenities and space they desire for a full-time residents.\nTurning to Page 11, another contributing factor to long-term demand in the residential market arises from millennials, the largest population cohort, entering the housing market in large numbers as they hit family formation and peak homebuying age, making their first home purchases at an older age than prior generations, they now are an important and growing part of the demand and we anticipate them to prefer technology focused firm like Douglas Elliman.\nThis strong demand combined with low inventory has resulted in significant price appreciation in many sectors of the market, including in many of our luxury markets.\nAnd finally agents continue to play a critical role in the purchase and sale of residential real estate, notwithstanding various agentless models like iBuying.\nThey represent a very small piece of the market ended approximately 90% of all residential transactions an agent is involved.\nAs real estate transactions are complex and agents help to facilitate the successful completion of the transaction.\nTurning to Page 12, Douglas Elliman's comprehensive suite of real estate solutions provide for multiple revenue streams in addition to our residential brokerage business.\nOur existing portfolio of ancillary real estate services allows us to enhance client experience and drive revenue and earnings growth, with an opportunity to accelerate growth via investments and acquisitions.\nThese other revenue streams include the Douglas Elliman development sales and marketing platform, which enhances Elliman's position in the luxury real estate segment, headed by Susan de Franca, an industry leader, the new development is sought after by well-known real estate developers as it offers expertise from project inception to close, including sales, leasing and marketing for new developments in key U.S. markets.\nThe firm ranks among New York City's and South Florida's most prominent marketing and sales firms with 75 in-house development professionals overseeing a $40 billion portfolio of buildings by such famed architects as Jean Nouvel and iconic brands, including the Waldorf Astoria, the St Regis and the Ritz-Carlton.\nThrough a strategic global alliance with Knight Frank residential, the world's largest privately owned property consultancy, Douglas Elliman new development benefits from immediate opportunities to market properties to international audiences.\nWith new development sales and marketing, unlike our principal competitors, Douglas Elliman employees a hybrid broker model, where our traditional residential real estate agents work in tandem with our Douglas Elliman new development professionals and leverage their extensive industry relationships for the benefit of our developer clients.\nOur agents are able to market and sell high profile developments that enhance their brands and provide additional commission revenue potential.\nWe believe this model provides a competitive advantage to our new development business, while also increasing the attractiveness of the Douglas Elliman platform to current and prospective agents.\nOur premium residential property management business, Douglas Elliman property management, provides a full range of fee-based management services for approximately 360 properties representing about 56,500 units in New York City.\nNassau County, Long Island City and Westchester County.\nThe buildings we manage provides an important source of referrals for our agents through our building specialist program, which allows designated edged agents to leverage the relationship trust developed by our property management team with building owners and tenants.\nDE title services provides a wide, the full range of title insurance services to real estate buyers and financial institutions in New York and Florida.\nPortfolio escrow, a leader in the California escrow market delivers all pertinent documents for recording to the appropriate county clerks office, the release of funds to the seller and any other agreed upon entity.\nWe look over the coming year to expand our title and mortgages businesses into additional of our markets.\nTurning to Page 13.\nToday, we believe Douglas Elliman is the preeminent luxury brand in the U.S. with an established reputation for luxury and trust built over the last century.\nThis is an important point of differentiation for us from our peers.\nWe have successfully leveraged Elliman's brand equity to expand from our historical focus on the New York metropolitan area into new and adjoining luxury markets throughout Florida, California, Massachusetts, Colorado and now Texas, places where our clients often have primary, second or third residences and where agents and clients recognize and trust the Douglas Elliman name.\nOur brand recognition and agent credibility lead to a large referral network among Elliman agents who were provided ample opportunities throughout the year to connect in person at bespoke events including Art Basel, the Winter Equestrian Festival and the Hampton Classic.\nThese carefully curated events allow agents to develop personal and professional relationship and a mutual trust with each other's clients, looking to invest in multiple markets.\nTo build on this established brand presence, Douglas Elliman produces a tremendous amount of owned content on social media for its digital magazine Element Insider and it's quasi print magazine Elliman.\nThe firm also generates earned media via important news organizations including The Wall Street Journal, The New York Times, The Financial Times and CNBC to name a few, building a very high level of credibility in the real estate space, as well as targeted exposure of brand initiatives, exclusive listings, new development projects and closed deals.\nSuch important press coverage resonates with our clients as it showcases element agents and executives' thought leadership and contributes to a strong share of voice across all major markets in which we operate.\nAs you can see from the chart on the slide, Elliman is number one in earned media in each of its principal markets including New York City, Florida and Los Angeles.\nAnd as a final point, we sponsor the Miller Samuel report, the gold standard of market research in the residential brokerage world.\nJonathan Miller is the most quoted and respected researcher and analyst in our business and our association with these reports builds a high credibility factor for our agents.\nTurning to Slide 14, Elliman has a large and growing presence in most of the leading luxury markets in the United States.\nOur 6,600 agents across the country are augmented by our exclusive relationship with Knight Frank with its international network with approximately 500 offices and 19,000 agents.\nThis is an invaluable relationship that is truly singular in the U.S. residential brokerage community and provides our agents with unprecedented global exposure to important buyers from around the world.\nThis is of particular importance today as our borders open to foreigners on November 9th.\nAnd as you can see from the charts, our significant and growing market share in our principal markets and we are regularly one of the largest firms in New York.\nOur focus on the major U.S. luxury markets is reflected in Douglas Elliman having substantially higher average transaction value than any of our major competitors, approximately 1.6 million year-to-date, materially higher than Compass and Realogy.\nStarting on Page 15, you'll start to see that our general approach to real estate technology is leveraging best of breed technology, leveraging proven technology around legacy investments, as well as leveraging new early stage disruptive PropTech companies from New Valley Ventures.\nThis strategy gives our stakeholders access to fast and changing industry-leading technology, while enabling Douglas Elliman to benefit from traditional valuation growth of breakthrough PropTech companies.\nHiring technology talent to develop new products inside large companies such as Douglas Elliman is costly, takes longer to bring new technology to the market and rarely generates most cutting-edge solutions and then limits the value of the emerging product to the company's own usage.\nInstead, we believe technology innovation is best fostered in smaller, purpose-built PropTech companies.\nWe operate a very open architecture technology infrastructure that allows for plug and play environment where new features and functionalities can quickly be added for the benefit of our agents and their clients.\nThis ensures our technology remain state of the art.\nVendor optionality is maintained and our costs are minimized.\nBy investing in early stage PropTech companies, Douglas Elliman can gain differentiation access into the innovative PropTech services, while benefiting from expected growth and valuation of these firms without the need to build or fully acquire them.\nWe anticipate that these investments will continue to provide us with unique access to cutting edge industry-leading technology, providing us with valuable technology system to improve the efficiency of Douglas Elliman's business, while also capturing some of the most valuable created combination of experience between a real estate industry and the PropTech companies which we partner with.\nOur Douglas Elliman agent portal shown on this page powered by invent.\nus is built on a native cloud SaaS infrastructure foundation that is designed to rapidly adjust and incorporate new initiatives and solutions.\nThe user-friendly portal incorporates automated and simplified workflows for our agents, interactions, expansive data rich dashboards and reports backed by artificial intelligence and integrated data assets.\nThe technology is completely plug & play and enabled, which supports our ability to quickly adjust our solution in concert with the digital transfer information happening in the PropTech industry today.\nTurning to Page 16, leveraging this solution -- leveraging this strategy, we also can quickly incorporate innovative technology to meet our business requirements at a rapid pace.\nExample in 2018 to 2020 on average, we were able to roll out about 2 to 4 major solutions needed to support our business in addition to just small changes that were required for our existing solutions.\nOver the course of 2021, we've rolled out nine solutions that are target -- nine solutions and we target two more by the end of the year.\nSolutions like mobile ready CRM, DIY marketing solutions, transaction management powered by rechat and others, AI integration powered by purlin, e-sign, online notary, DIY robust video abilities and expanding revenue opportunities by leveraging partners like Humming Homes for home services.\nTurning to Page 17.\nOur open architecture technology strategy allows access to fast changing industry-leading technology, while enabling Douglas Elliman reality to benefit from the potential adjacent revenue streams and valuation growth at the breakthrough tech firms.\nElliman is bringing innovation technology driven PropTech solutions to Douglas Elliman Reality and the greater real estate community through its New Valley Ventures subsidiary.\nThe investment approach and insurers at Douglas Elliman companies and its agents are on the cutting edge of the of the industry with new solutions and services that can easily be integrated into our technology foundation, while keeping us asset-light.\nThis includes access to exciting fast growing sectors in the PropTech space such as EV and green tech, which significantly align with our assets.\nThe PropTech companies we invest and benefit access to Douglas Elliman's operating business and distribution to grow their own business, while simultaneously driving Elliman's growth and competitive differentiation.\nAnother additional revenue stream example would be our white label homeowners engagement platform that supports long-term client relationships by providing clients' lifetime access to services that include home management, moving HVAC support, home insurance, change of addresses, and many more.\nOur access to leading industry technology also enhances agent productivity, earning potential and satisfaction thus supporting effects to recruit and retain high performing agents through the appeal of more creative offerings and to the increase of our market share.\nI now return return back to Scott to go through Page 18 and 20.\nMoving on to Page 18.\nDouglas Elliman has a strong platform for continued growth.\nThis involves growth in existing markets and in markets adjacent to where we are today, as well as entree into new markets.\nIn addition to organic growth through recruiting in our major markets, we have a number of very significant opportunities to grow our market share in adjacent markets, where the Elliman name is well known and trusted.\nSome clear examples in New York, where we have a significant presence in New York City, Long Island and the Hampton, we are working hard to grow our business in Westchester County; Greenwich, Connecticut and in New Jersey.\nLikewise, we are focused on scaling our business in Boston and nearby summer luxury market.\nIn Florida, we are building on our strength in South Florida from Miami to Palm Beach to increase our presence on the West Coast of the state and recently, for example, has had a significant growth in our Naples present.\nAnd we have made a strategic decision to aggressively grow our current business in Texas.\nThis past summer, we restructured our relationship with our partners and are fully integrating the business with the rest of our operations.\nWe are actively recruiting top agents and talent in Houston, Dallas and Austin, and we believe Texas could be a major market for us in the future.\nTexas is a low tax state and growing in importance as a tech hub, seeing significant in migration from California and other markets where we operate in.\nThere are a number of potential markets where our strength in the luxury segment could make these markets interesting.\nThese include as examples markets such as Nashville, Scottsdale, Denver, Las Vegas and San Francisco.\nThese are also examples of markets where there is also potential for new development sales and marketing business, which can be a good way for us to enter a new market.\nIn the aggregate, the 18 markets shown represent approximately $180 billion in transaction value, which would represent a 50% increase in our addressable market.\nIn terms of growth of our new development sales and marketing platform, this is very important as a part of our business.\nTotal revenues for this business was $66.7 million year-to-date and our pipeline is very strong.\nWe see a number of attractive opportunities to expand this business into new markets and are actively working to expand our presence in Texas.\nAnd as discussed before, we have a real opportunity to expand our ancillary services, such as mortgage title and escrow to enhance client experience and stickiness, as well as to drive profitable revenue growth.\nTurning to Page 19, a final key to our continued growth lies in the retention and the recruitment of agents.\nWe have a very high retention rate for our industry equal to approximately 90% of our revenue and our agents are long tenured with 87% of our revenue coming from agents who have been with us for more than three years.\nWhile we have all the technological assets and leadership acumen of any major corporation, our agents and employees often describe our completely close-knit culture as family like and probably have agents who have called Elliman home for 10, 20 and even 30 years.\nForbes has ranked us is one of the best places to work several years running.\nWe are steeped in culture, rich in entrepreneurialism and work closely with agents to help develop very unorthodox, yet winning business plans that have led to some extremely successful initiatives that bring Elliman worldwide acclaim and recognition.\nSuch examples include the shows Million Dollar Listing Los Angeles, Million Dollar Listing New York and most recently Kendra Sells Hollywood.\nDouglas Elliman has many of the most successful and most visible agents in the U.S.\nWe pride ourselves on our track record for many years of recruiting high profile best in class agents who are attracted to the strength of our platform and our brand.\nAs David mentioned before, we will continue to invest in compelling PropTech opportunity that will help propel our growth and competitive differentiation, as well as enable us to benefit from growing adjacent revenue streams and the potential growth in valuation of breakthrough tech firms.\nIt is very important for Douglas Elliman to have a strong financial profile that is commensurate with its luxury customers.\nThis strong financial profile will enhance Douglas Elliman's growth prospects as it expands and seeks merger and acquisition opportunities and related to valuation, we believe this position of strength should entitle DOUG to a higher earnings multiple.\nPlease turn to Page 22.\nPage 22 provides a summary of the attractiveness of Douglas Elliman, strong operating performance with impressive revenue growth, disciplined expense management led by seasoned industry executives, healthy margins and limited capital expenditures that support strong future growth initiatives and a quarterly cash dividend from a balance sheet with $200 million of net cash.\nPlease turn to Page 23.\nThis slide shows our strong key performance indicators, a healthy number of principal agents, significant growth in transactions and transaction value and most importantly, an average sales price of $1.55 million per home over the last 12 months, well above the national average.\nThe reduction in principal agents from 2018 to 2021 is the result of cost reduction initiatives that began in 2019.\nThe fruits of our work from increasing revenues as well as expense reduction initiatives are demonstrated on page 24.\nIn addition to a healthy EBITDA margin of 8.2%, there is a solid conversion to free cash flow with low capital expenditures.\nPlease turn to pages 25 and 26, where the company's income statement and balance sheet are presented.\nNow turning to page 27, a summary of the investment and some highlights are presented including Douglas Elliman operates in a highly attractive US real estate market.\nDouglas Elliman is an industry-leading brand name that is associated with luxury.\nDouglas Elliman has a seasoned management team with substantial Real Estate, technology and operating experience.\nDouglas Elliman's technology creates a strong platform for continued growth.\nDouglas Elliman's comprehensive solution for multiple revenue streams capitalizes on its monetization of its valued agent relationships and Douglas Elliman has a healthy balance sheet with significant operating leverage for expansion.\nIn summary, we believe Douglas Elliman's strong leadership team, technology and financial profile is commensurate with the profiles of its luxury customers.\nBeing a separately traded public company will enhance DOUG's strength, which along with DOUG's runway for expansion will increase its growth prospects as it expands and seeks M&A opportunities.\nWe are pleased with our long-standing history at Vector of paying a quarterly cash dividend.\nIt remains an important component of our capital allocation strategy and following the spin off, it is our expectation that our current policy of quarterly dividends of $0.20 per share will continue well into the future.\n Assistant:", "chosen": "compname posts q3 earnings per share of $0.32.\nq3 revenue rose 19 percent to $652.6 million.\nq3 earnings per share $0.32.\n"}
{"prompt": "Human: We appreciate your interest in Vulcan Materials and hope that you and your families continue to be safe and healthy.\nI want to begin today's call by taking a moment to congratulate our team for their solid execution during the first half of the year.\nOur performance through the first two quarters further demonstrates the strength of our aggregates-led business.\nWe expect the momentum we generated in the first half of the year to carry through the second half, and we reiterate our full year 2021 adjusted EBITDA guidance range of $1.38 billion to $1.46 billion.\nFor the first half of the year, our adjusted EBITDA increased by 7% and our aggregates cash gross profit per ton expanded by 5% through a combination of volume growth, higher pricing and improved operating efficiencies.\nAdjusted EBITDA for the second quarter was $406 million, essentially unchanged versus the same quarter last year.\nWe achieved this result despite a $25 million headwind from much higher diesel and liquid asphalt costs.\nDiesel costs rose by $15 million in the quarter.\nLiquid asphalt costs were $10 million higher than the same period last year.\nAnd together with wet weather, negatively impacted the profitability of our non-aggregate segments.\nEven after considering the energy headwind, our aggregates cash gross profit per ton grew by 2% in the quarter due to our team's consistent execution of our four strategic disciplines.\nWith a 4% increase in aggregates volume in the second quarter and the market's current visibility to demand, the pricing environment continues to improve.\nFreight-adjusted aggregates pricing increased 3% in the quarter, and the rate of growth improved sequentially throughout the quarter.\nAdjusted for mix, freight-adjusted price improved 2.6%, twice the growth rate realized in the first quarter.\nAlong with improved volume and pricing, operating efficiencies and cost control helped to offset inflationary pressures.\nOur total cash cost of sales increased by 4% in the quarter versus the prior year.\nExcluding the diesel headwinds, cash cost of sales grew by less than 1%.\nDuring the second half of the year, we will remain diligent and focused on controlling what we can control and on driving further improvements in our profitability.\nThe solid aggregates performance helped to offset reduced profitability in the non-aggregates segment.\nOur second quarter non-aggregates gross profit declined year-over-year due primarily to the higher liquid asphalt cost, which I mentioned earlier, and lower volumes in both asphalt and concrete.\nWet weather impacted asphalt shipments while a shift in timing of projects, particularly in Virginia, resulted in lower-than-anticipated concrete shipments.\nTurning now to the demand picture.\nIt has improved across our major end markets as well as geographies.\nThe residential end-use has shown continued strength with solid starts in single-family housing.\nWe've also seen an uptick in multifamily housing starts.\nNow with respect to the nonresidential outlook, improvement continues in a number of leading indicators and we have begun to see month-over-month improvement in starts.\nThe strongest nonresidential sector continues to be the work related to e-commerce and technology infrastructure, but lighter traditional nonresidential demand is also recovering.\nThe level of highway starts remained healthy in the first half of 2021 as states got back to normal funding and budget levels.\nOn the broader subject of federal highway and infrastructure spending, we're encouraged by the progress made toward a Highway Bill with substantially higher funding over the FAST Act levels.\nWe've also seen an acceleration of starts in public infrastructure such as water and sewer treatment systems, airports and storm and flood control.\nBefore turning the call over to Suzanne, I want to briefly touch on our growth strategy and the recently announced agreement to acquire U.S. Concrete.\nWe have three paths to growth, and it's important to strike the right balance between these three in order to drive higher returns.\nThose paths are organic growth, greenfields and M&A.\nWe always start with organic growth because it offers the most attractive and compelling value proposition on a risk-adjusted basis.\nWe have a unique and irreplaceable asset base spread across the most attractive geographies in the U.S.\nOur four strategic disciplines are designed to accelerate our organic growth, and the benefits are clear as we expand our unit profitability.\nWe also have a long and successful history of developing and opening new aggregate locations, particularly in growth corridors where acquisition opportunities may be limited.\nWe like the flexibility that greenfields provide in regards to timing and pace of capital spending.\nOur third growth engine is M&A.\nU.S. Concrete is a great strategic fit for Vulcan as it naturally complements our existing aggregates business.\nIt also brings new geographic exposure to the company, expanding and diversifying our already strong footprint into the Northeast.\nAlong with my colleagues at both Vulcan and U.S. Concrete, I'm very excited about the potential for this combination.\nIt will allow us to further drive sustainable long-term shareholder value.\nAnd I look forward to welcoming the U.S. Concrete team to the Vulcan family.\nI'd like to begin by highlighting a few key areas to consider this quarter: our aggregates price realization, unit profitability, return on invested capital and balance sheet strength.\nFirst, our ability to consistently deliver compounding price improvements is an important driver of our unit margins.\nThe current pricing environment is positive due to improving demand visibility and inflationary pressures.\nWe've seen attractive sequential improvement in pricing through the first half of the year, and we expect the momentum to carry over to the second half.\nClearly, these compounding price improvements, along with good operational execution, are having a positive impact on our unit profitability.\nThis quarter marked the 12th straight quarter of improvement in our trailing 12-month cash gross profit per ton.\nFor the trailing 12 months, cash gross profit per ton was $7.26, and for the quarter, it was $7.83 per ton, moving ever closer to our current goal of $9 per ton.\nThe next area of focus is our return on invested capital.\nWe are pleased with our improving returns.\nAnd on a trailing 12-month basis, return on invested capital was 14.8%, an increase of 60 basis points compared to the prior year period.\nThis improvement was comprised of an essentially unchanged invested capital base and a 4% increase in trailing 12-month adjusted EBITDA.\nAnd finally, we will continue to prioritize our balance sheet strength to create the flexibility and optionality necessary to support our capital allocation strategy.\nAt June 30, our net debt-to-EBITDA was 1.3 times, reflecting $968 million of cash on hand.\nOur debt has a weighted average maturity of 15 years with no significant maturities in the near term.\nIt's important to note that even after the anticipated close of the U.S. Concrete acquisition, our balance sheet will be in good standing and we remain committed to maintaining our investment-grade rating.\nBefore turning the call back over to Tom, I do want to touch briefly on two housekeeping matters.\nFirst, you will have noted an increase in our interest expense this quarter.\nConcurrent with the announced pending acquisition of U.S. Concrete in June, we obtained a bridge facility commitment to support the deal.\nSubsequently, we executed a $1.6 billion delayed draw term loan which will be used to fund the acquisition along with cash on hand.\nBorrowings under that facility are due three years from the funding date.\nAnd so this facility will be used as an interim measure prior to accessing the bond market at the appropriate time.\nAs a result, financing cost of $9 million for the bridge commitment was recognized as expense in the second quarter.\nThe final matter to mention is our effective tax rate.\nAnd as a reminder, at the end of first quarter, we increased our expectation of the full year rate to between 23% and 24%.\nThat guidance is still applicable.\nOur people are what makes Vulcan better every day.\nI would be remiss if I didn't comment on the current COVID environment and the recent announcement by the CDC in response to the surge in the Delta variant.\nWe will continue to closely monitor the spread of the virus, ensuring the health and safety of our employees and their families.\nWe will continue to operate Vulcan for the long term.\nThis means keeping our people safe and healthy, staying focused on strong local execution, driving unit margin expansion and improving our financial returns.\n Assistant:", "chosen": "compname reports q2 earnings per share $1.46.\nq2 earnings per share $1.46.\n"}
{"prompt": "Human: I'm joined on the call today by Michael Happe, president and chief executive officer; and Bryan Hughes, senior vice president and chief financial officer.\nThese factors are identified in our SEC filings, which I encourage you to read.\nAs always, we appreciate your interest in Winnebago Industries and taking the time to discuss our fiscal '22 second-quarter results.\nI'll start the call with an overview of our performance during the second quarter and what factors are driving those results.\nWinnebago Industries is built on our strong momentum and delivered robust results in the second quarter of fiscal 2022, capitalizing on sustained and elevated demand for our portfolio of premium products.\nWe grew revenues by 39% year over year to $1.2 billion, matching the previous sales record set last quarter.\nOverall, our results were shaped by two key dynamics: first, sustained and powerful consumer demand drove higher unit sales compared to the prior year; and second, Winnebago Industries' successful execution of pricing actions to offset higher material and component costs.\nAlso, the Barletta pontoon boat business recently acquired this past August, contributed nine percentage points of growth, and continues to exceed our expectations and gain market share in the pontoon boat market.\nI want to spend a minute talking about these drivers in more detail.\nIt all begins with the consumers' continued strong affinity for the outdoor lifestyle and in particular, Winnebago Industries premium brands.\nThrough our interactions with our consumers and feedback we receive from our dealers, consumers clearly recognize our products as being differentiated.\nThis differentiation is a result of our relentless focus on our golden threads of quality, service, and innovation.\nRobust consumer demand is a powerful undercurrent that we believe will continue to propel our company's growth through the current fiscal year and beyond.\nA recent RV industry association study confirmed that 51% of new RVers in the 2020 and 2021 time periods suggested that that reasons surrounding COVID were certainly the impetus for purchasing in RV.\nWe are confident though that many of these interest trends have become ingrained and that consumers will continue to invest in products that enable them to pursue their love for the outdoors.\nCompelling data supports our thesis.\nOur friends at the campgrounds of America cited a 16% projected increase in households camping through November of 2021 versus the same period in 2020.\nHere are some other nuggets from the previously noted and recently released new RV owners survey conducted by the RVIA.\nContrary to some theory speculating on possibly low retention of 2020 and 2021 first-time RV buyers.\nNew purchasers are most likely to keep and use their current RV into 2022 and beyond.\nWith 50% already seeking an upgrade via new parts or a different RV altogether.\nSix in 10 new millennial RVs, those who bought an RV for the first time in 2020 and 2021, already say they are likely to purchase another RV in the future.\nAs it relates to the growing popularity of flexible work, among new RVers 25% of millennials and 27% of Gen Xers stated that they used an RV for a place to stay while working as a reason for purchasing the RV.\nImportantly, Winnebago Industries is already capitalizing on the sustained demand drivers.\nOur second-quarter total unit sales grew year over year despite a tough comparison to the second quarter of fiscal 2021, which was nearing the height of the COVID-19-driven demand spike.\nStrong attendance at the recent Tampa RV show and the Miami Boat Show resulted in retail sales that exceeded our expectations.\nIn fact, most of our retail shows this spring are seeing record sales for our brands.\nThis foreshadows a solid spring selling season that is historically reflected in our second-half results.\nThe combined tailwinds of societal trends, Winnebago Industries proven portfolio brand strength, and sharp execution spells great opportunity in the future for our business.\nWe remain confident that there remains strong engagement in the outdoors by consumers and Winnebago Industries is positioned to continue growing market share in both the RV and marine industries.\nOn a trailing three-month basis through January, our RV market share was 14.3%, up a full 100 basis points from 13.3% for the same period in 2021.\nAnd in our marine segment, Barletta has now grown to be the fifth-largest pontoon boat company by market share at 4.6% on a trailing three-month basis through December, and recent retail results show them approaching and breaking the 5% barrier.\nThis is a meaningful improvement from just seven months ago when we completed the Barletta acquisition.\nSpeaking of Barletta, I am pleased to report that its differentiated pontoon portfolio has continued to perform above our expectations and exceeded the calendar 2021 performance targets we set when we announced the acquisition.\nThe second major driver of our revenue results was pricing actions.\nThe positive demand environment and the unique strength of our brands positioned Winnebago Industries well to take continued pricing actions to offset component and material cost inflation and preserve margin performance across our segments.\nWe began taking pricing actions ahead of inflation in the second quarter of last year.\nAs the spring selling season gets underway, we will continue to evaluate our pricing power as needed as a lever to offset higher materials and component costs while still balancing and driving market share gains.\nThis is a testament to the resiliency of the demand environment and the clear quality of our expanded product portfolio.\nOur strong top-line performance was coupled with excellent operational efficiencies internally.\nI tip my cap to the entire Winnebago Industries team for another quarter of net strong execution, which is especially appreciated these days as the supply chain remains volatile.\nWe continue to work collaboratively with our suppliers to get materials on time so we can get products out the door as efficiently as possible for our customers and dealer partners while not sacrificing quality and service.\nOur motorhome business this past quarter probably faced the most significant supply chain constraints, holding that segment back from optimal performance in this period.\nOur teammates efforts, though, enabled us at a consolidated level to power through the supply chain constraints and inflationary pressures that we continue to experience at levels comparable to the first quarter.\nWith our strong execution and pricing actions, Winnebago Industries delivered gross margin of 18.6% during the second quarter, equal to the great results last year.\nA focus on operational excellence will continue to be a critical component of our strategy going forward, creating organic and flexible capacity, driving productivity and margin improvement opportunities, and ensuring industry-leading product quality.\nWinnebago Industries robust backlogs have increased versus last year and are significantly higher than the second quarter 2020 period due to continued strong in consumer demand.\nKeeping dealer inventories in all of our segments at acceptable levels throughout the fiscal 2022 year for our dealer partners is a key focus area for all of our teams.\nAnd I am fully confident they will continue to rise to the challenge to meet the high retail and wholesale demand levels in a disciplined manner.\nWe are fortunate to have a world-class team of Winnebago Industries employees and strategic partners.\nWorking together, we remain uniquely well-positioned to continue capturing outsized growth and delivering value to all our stakeholders as more families take to the great outdoors.\nAs Mike mentioned, second-quarter revenues, including results for Barletta were $1.2 billion, reflecting an increase of 39%, compared to $839.9 million for the fiscal 2021 period.\nExcluding Barletta, our organic growth for second quarter was 29%.\nWe were pleased to see that revenue growth was achieved in all three segments against a very robust 2021 comparison period.\nGrowth in total was driven by a combination of pricing actions and unit shipments.\nWe delivered another period of very strong profitability in the quarter, evidenced by meaningful growth despite a steep year-over-year comparison.\nGross profit was $216.6 million, representing an increase of 38%, compared to $156.6 million for the fiscal 2021 period.\nGross profit margin of 18.6% was equal to last year, driven by operating leverage and pricing offset by higher material and component costs as well as some operating inefficiencies caused by supply chain constraints and the associated inconsistencies in the deliveries of parts and subcomponents.\nOperating income was $136.8 million for the quarter, an increase of 37% compared to $100 million for the second quarter of last year.\nOur second-quarter operating income includes $0.5 million in acquisition-related costs and $4.6 million of incremental amortization of intangible assets related to the Barletta acquisition.\nFiscal 2022 second-quarter net income was $91.2 million, an increase of 32%, compared to $69.1 million in the prior-year quarter.\nNote that fiscal 2022 net income includes $6.5 million of contingent consideration fair value adjustment, which is included in non-operating income related to the earn-out included in the deal structure associated with the Barletta acquisition.\nYou will note that we are removing this deal consideration in the calculation of adjusted EPS.\nWe are pleased to note that Barletta performance through the end of calendar 2021 as specified by the July 2021 purchase agreement will result in the full dispensation of $15 million which is the maximum payout for the first earn-out period tied to calendar year 2021 performance.\nAs stated previously, recall that we structured the earnout in such a manner that the multiple on this deal is further reduced as the earn-out that is paid increases.\nReported earnings per diluted share was $2.69, compared to reported earnings per diluted share of $2.04 in the same period last year.\nAdjusted earnings per diluted share was $3.14, which represents an increase of 42%, compared to adjusted earnings per diluted share of $2.21 in the same period last year.\nNow I'll turn to our segment performance, starting with our towable segment.\ntowable segment revenues were $646.6 million for the second quarter, up 47% over the prior year, primarily driven by pricing increases across the segment and unit growth of 13%.\nUnit growth of 13% is especially strong given last year's 55% growth versus fiscal year 2020 for the same time period.\nSegment adjusted EBITDA was $100.6 million, up 61% over the prior-year period.\nAdjusted EBITDA margin of 15.6% increased 140 basis points over the prior year, driven by operating leverage and pricing, partially offset by cost input inflation.\nNext, let's turn to our motorhome segment.\nIn the second quarter, revenues for the motorhome segment were $417.6 million, up 9% from the prior year driven by pricing increases across the segment.\nSegment adjusted EBITDA was $46.1 million, representing a decrease of 10% from the prior year.\nAdjusted EBITDA margin was a strong 11%, while a decrease of 230 basis points from the prior year.\nIn the current quarter, we experienced ongoing supply chain inconsistencies in the delivery of chassis and other key components that were disruptive to our operational flow and introduce inefficiencies into the environment as compared to very high productivity across our operations in the prior year.\nWhile we expect such inefficiencies to be remedied in the longer term, they did impact the current quarter.\nIt should be noted that the pricing actions taken to date in the motorhome segment continued to outpace the inflationary impacts on our products.\nAnd the pricing versus inflation equation is not a driver of the margin reduction versus last year.\nFinally, let's turn to our marine segment.\nIn the second quarter, revenues for the marine segment were $97.3 million.\nThe retail trends for the Barletta and Chris-Craft businesses remain strong and dealer inventories remain low.\nmarine segment adjusted EBITDA of $13.0 million was $11.9 million higher than the same period last year, and adjusted EBITDA margin was 13.3%, 620 basis points higher than last year, reflecting the addition of the Barletta business.\nTurning now to the balance sheet.\nWe continue to maintain a healthy liquidity position with approximately $327 million available, including an untapped ABL of $192.5 million.\nOur leverage ratio is currently at 0.8 times.\nFrom a capital allocation perspective, we continue to prioritize investment in our businesses to fuel organic growth.\nOn a fiscal year-to-date basis, capex spending is $43.4 million, which is three times higher than last year's year-to-date capex.\nWe continue to carry elevated inventory as a means of mitigating some of the supply inconsistencies that we encounter on a daily basis.\nWhile this is a detraction from generating high cash flow in the near term, we continue to view this as a prudent action to support our operations and believe that this cash investment will liquidate in the longer term and be available for other capital allocation priorities as the eventual drawdown in working capital occurs.\nDuring the quarter, share buybacks totaled $40 million, and on a year-to-date basis, we have bought back $59.6 million worth of shares.\nAs discussed previously, our dividend this year is running at a 50% higher than it was last year.\nCombining share buybacks with dividends, we have returned a robust $115 million to shareholders on a trailing 12-month basis through the second quarter of fiscal 2022.\nThis is approximately four times the prior year's trailing 12-month period.\nThat concludes my review of our quarterly financials.\nMike, back to you.\nIn addition to delivering strong financial results and market share growth, Winnebago Industries continued our deep commitment to our corporate responsibility in our communities and for our shareholders.\nAt the January RV consumer show in Tampa, we revealed the e-RV, the first all-electric zero-emission motor home concept from a major RV manufacturing.\nThe e-RV concept vehicle is an entirely new all-electric zero-emission RV that incorporates an advanced drivetrain and battery package that also powers all the living area systems of the coach.\nDesigned by our advanced technology group for a new generation of RVers who want to preserve the natural world as much as they want to enjoy it, the e-RV combines all-electric operation with sustainable and innovative materials.\nWe look forward to talking more about the e-RV as we move closer to commercialization.\nOur go-to-market version is sure to bring significantly enhanced features and capabilities than the concept model shown.\nIn addition to the exciting e-RV, our Advanced Technology Group is also actively engaged on electrification relevant to marine and RV towable products as we continue our legacy of innovation and explore new frontiers and outdoor lifestyle products for the benefit of our customers, investors, and communities.\nNow turning to our outlook for the remainder of 2022.\nI want to reiterate my confidence that the demand for outdoor lifestyle products and particularly Winnebago Industries brands will continue to be very robust.\nLooking at the RV industry at a macro level, we believe wholesale shipments for the calendar year could be down low to mid-single digits percentage-wise, as compared to the record 600,000 units shipped in calendar 2021.\nBacklogs remain elevated as supply chain constraints persist, which we expect to be an ongoing reality throughout 2022.\nWe will continue to work closely with our suppliers to mitigate issues as much as possible and provide our dealer partners with quality units to replenish their inventories.\nWe anticipate Industry towable inventories to recover to a new normal first and mid-2022, followed by motorized later this calendar year and for some brands into 2023, especially our Newmar brand.\nmarine inventories will be the last to recover, and it could be well into 2023 or beyond for that to happen.\nFrom an RV retail sales perspective, we have mentioned previously, and still maintain that we expect industry RV retail sales in calendar 2022 will likely be the second highest on record.\nMore specifically, we believe retail sales will be down mid- to high single digits percentage-wise.\nThis level of retail sales, combined with the wholesale shipment perspective mentioned earlier, will bring total dealer inventories back to reasonable levels and reflect dealer turns that we believe are sustainable into the foreseeable future.\nWe also believe that dealers will be targeting inventory levels that will generate elevated turns versus historical times and higher operating profits.\nAs always, in this very dynamic industry, our enterprise will responsibly produce and ship product.\nWhile we anticipate the supply chain constraints and inflation to continue, we will work closely with our suppliers to mitigate the impact of those forces as much as possible.\nMost importantly, we will continue to match our production levels with confirmed dealer orders.\nThis enterprisewide mandate at Winnebago Industries is imperative within our business model and is especially important as the industry works to replenish but not overdrive dealer inventory levels.\nIn short, we are continuing to focus on executing our proven strategies and building on our strong momentum.\nWe are investing in the future of our business as well, with significant capital projects, especially related to new product line expansion, future innovation, and stronger customer intimacy tools.\nThe unique strength of Winnebago Industries brands will position us to keep winning in the positive demand environment.\nAnd our employees' relentless hard work and dedication will allow us to deliver superior execution despite supply chain constraints and inflation, which we are constantly monitoring.\nWe have much to navigate and continued room for improvement.\nI'd like to remind our investors of the significant progress we've made in the last five to six years.\nOur trailing 12-month sales of $4.3 billion, compares to $976 million at the end of fiscal 2015.\nOur fiscal year-to-date 19.2% gross margin, compares to 10.7% in fiscal 2015.\nOur current three-month trailing RV share of 14.3%, compares to 2.9% at the end of 2015.\nOur approximate working capital of 11% in this fiscal year, compares favorably to 20% in 2015.\nOur leverage ratio is under one times for each of the last four fiscal quarters, and in the last 12 months, we have returned more than $100 million of cash to shareholders.\nWe are proud of our team's hard work, but we recognize the bar is high in the short term and in the long term, both in the marketplace, but with our shareholders.\nWe are confident that Winnebago Industries has significant headroom for sustained profitable growth across our portfolio and enhanced value creation for our end consumers, dealers, employees, and shareholders.\nWhile we do not have any physical operations in the region and feel that we can manage any indirect supply chain implications, our thoughts are with the Ukrainian people, and everyone affected by this tragic situation.\nAs part of our commitment to corporate citizenship and to our values, Winnebago Industries has made a grant to the Center For Disaster Philanthropy and joined in support with the National Association of Manufacturers recent resolution condemning Russian aggression.\nLike all of you, we sincerely hope for a peaceful resolution.\n Assistant:", "chosen": "winnebago industries delivers strong second quarter fiscal 2022 results.\nq2 adjusted earnings per share $3.14.\nq2 earnings per share $2.69.\nq2 revenue $1.2 billion.\n"}
{"prompt": "Human: I am joined on the call today by Michael Happe, president and chief executive officer, and Bryan Hughes, senior vice president and chief financial officer.\nThese factors are identified in our SEC filings, which I encourage you to read.\nWe, as always, deeply appreciate your interest in Winnebago Industries and taking the time to discuss our fiscal fourth quarter and annual 2021 results.\nOur fourth-quarter fiscal 2021 was a strong finish to a remarkable year, characterized by record revenue and record profitability, propelled by three key factors.\nFirst, a sustained elevated excitement for the outdoor lifestyle remained a powerful tailwind driving demand for Winnebago Industries premium products.\nWinnebago Industries grew fourth-quarter revenues 40.4% year over year, and 56.8% on an organic basis ex-Newmar, compared to our fiscal 2019 fourth quarter.\nSecond, Winnebago Industries trend of expanding market share accelerated in the fourth quarter, gaining a full 2.1 percentage points of share during the three-month period ending August.\nImportantly, this is driven by both new and experienced consumers who recognize the differentiated quality and innovation in Winnebago Industries brand portfolio.\nAnd the exceptional service we are known to provide in partnership with our dealers.\nAnd third, our team's relentless demonstration of operational excellence, which enabled us to deliver for consumers and our dealer partners efficiently and profitably during a very challenging period as supply constraints and inflation have endured.\nAs a result, we expanded margins in both our motor home and towable segments during the fourth quarter.\nBefore I continue, I want to recognize the superb Winnebago Industries employee team.\nOur employees now 6,800 plus drawn with the addition of Barletta, have worked tirelessly to provide the high-quality products and exceptional service our customers and dealer partners have come to expect.\nWhile managing through record high backlogs to meet the tremendous demand for our products, their dedication throughout this year has been the key factor in our success.\nThe pandemic has undoubtedly catalyzed and accelerated powerful demand for outdoor experiences.\nAnd we believe this secular shift already underway pre-COVID-19 will have a lasting impact as more and more new families experience the great outdoors.\nOver 10 million households camp for the first time in 2020, and we are tracking toward another estimated 4.3 million households to have their first camping experience in 2021.\nIn addition to first timers, a new wave of engaged enthusiasts, especially millennials, younger generations are investing more of their time and income in the outdoor lifestyle.\nTo put a finer point on this, even as we saw the easing of pandemic restrictions over the summer, creating a possible return to a broader set of vacation and travel leisure options.\nOur performance in the summer selling season was strong, setting revenue records in both our fiscal third quarter, and now, our fiscal fourth quarter.\nOur record backlog of orders continues to grow, and we are seeing rapid sell-through of inventory we provide to dealers.\nWe are also confident that the diverse cohorts making memories in the outdoors will be the foundation of our growth in the decades ahead.\nSo, we're bullish on the broader recreation economy and investing to expand our reach beyond RVs, in line with our strategy to become a premier outdoor lifestyle company.\nEarly in the first quarter of our fiscal 2022 year, we completed our acquisition of Barletta Boat Company.\nBuilding on our past marine investment in the Chris-Craft brand, Barletta's premium pontoon boats meaningfully expand and extend our marine platform into one of the fastest-growing boating segments in pontoons.\nLooking ahead, we're excited to discuss the exciting opportunity in our new marine reporting segment in quarters to come.\nDue to the strength of our overall offering, we have been very successful in harnessing the industrywide demand for the outdoor lifestyle and delivering net total growth.\nWinnebago Industries is increasingly winning with customers, and we're proud that an outsized share of new outdoor adventures has chosen to become part of the Winnebago Industries' community.\nAs of August 2021, our RV fiscal year-to-date market share is now 12.5%, up 140 basis points from the same period last year.\nEven better, we've been able to achieve these gains while maintaining record low levels of discounting.\nOur performance and ability to capture share in the full value of our products in a competitive market underscores the unique appeal of our differentiated brand portfolio, which includes a broad range of options for new customers as they enter the market, as well as more premium products as customers upgrade and move up the value chain.\nContinuing to invest in our products and brands unified by our golden threads of quality, innovation and service ensures we are positioned to meet consumer demands on technology and capabilities to drive share gains now and into the future.\nFinally, our world-class team did a masterful job translating demand growth and market share gains into financial performance in the fourth quarter with an enterprisewide commitment to operational efficiency, despite the challenges posed by the ongoing pandemic, including supply chain disruptions and inflationary pressures.\nThese operational efforts can be clearly seen as we kept off the fiscal year with record consolidated annual gross margins of 17.9%.\nOne key element of our operational excellence is the success of our enterprisewide operations and sourcing teams, who quickly adapted to component shortages and supply disruptions that have become commonplace across the supply chain.\nOur team has remained flexible using creative and strategic material sourcing strategies and solutions to keep our assembly lines moving.\nWe will continue to monitor supply chain issues and provide updates along with our results as long as they persist.\nOur work to improve communication across our supply chain has allowed us to better anticipate and plan for disruptions in partner component availability.\nAnd we are continuing to strengthen and deepen our relationships with our dedicated dealer network as we focus on replenishing their inventories as quickly as possible.\nWe are incredibly proud of our team and the performance in the fourth quarter and for our entire fiscal 2021 year.\nOur results demonstrate that we are executing well on our proven value creation strategy.\nThe new heights we were able to achieve in revenues and profitability demonstrate the unique strength and appeal of our growing platform, as well as our world-class team.\nI'll touch on fourth quarter and annual highlights, recent capital allocation announcements and several items impacting reporting going forward.\nThis information can be found on our investor relations website at investor.\nAs Mike mentioned earlier, our first fiscal fourth quarter was a strong finish to an already outstanding fiscal 2021.\nFourth-quarter revenues were a record $1 billion, an increase of 40% compared to the fiscal 2020 fourth quarter.\nFourth quarter consolidated gross profit margin of 18.1% was up 150 basis points compared to the same period last year due to leverage, pricing, including lower discounts and allowances and profitability initiatives.\nFourth-quarter record revenues and strong margins resulted in record levels of earnings per share.\nFourth-quarter earnings per diluted share was a record $2.45, an increase of 96% versus the same period last year.\nFourth-quarter adjusted earnings per diluted share was a record $2.57, up 77% versus the same period last year.\nNow turning to the full-year fiscal 2021 results.\nConsolidated fiscal 2021 record revenues of $3.6 billion increased approximately 54% from $2.4 billion in fiscal 2020, positively impacted by strong consumer demand for Winnebago Industries product, coupled with continued RV market share gains.\nRevenues were also positively impacted by pricing taken throughout the year, which was implemented to offset inflationary cost input, as well as lower levels of discounts and allowances.\nAnnual gross profit margin improved 460 basis points to a record 17.9%, primarily due to robust fixed cost leverage, profitability initiatives, increased pricing, including lower discounts and allowances and favorable segment mix.\nIn line with the fourth quarter, strong annual revenues and healthy margins drove record levels of profitability.\nFull-year earnings per diluted share were a record $8.28, an increase of 350% compared to fiscal 2020.\nAnnual adjusted earnings per diluted share also hit a record high of $8.55, an increase of 231% compared to adjusted earnings per diluted share of $2.58 in the same period last year.\nNow, turning to the individual segments.\nTowable segment revenues for the fourth quarter were $560 million, up approximately 35% from $414 million in fiscal 2020, primarily driven by strong-end consumer demand and pricing, which was implemented to offset inflationary cost input pressures.\nSegment adjusted EBITDA for the fourth quarter was $83.4 million, up approximately 36% year over year, primarily driven by the higher revenues.\nFourth-quarter adjusted EBITDA margin of 14.9% increased 10 basis points, compared to the same period last year, primarily driven by operating leverage, which was offset by a shift in mix favoring travel trailers versus fifth wheel.\nFor the full-year fiscal 2021, revenues for the towable segment were a record $2 billion, up 64% from fiscal 2020, driven by high demand for our towable products and pricing, which was implemented to offset inflationary cost input pressures.\nSegment adjusted EBITDA for the full year was $289 million, up 95% from fiscal 2020.\nSegment adjusted EBITDA margin of 14.4% increased 230 basis points for the full year over fiscal 2020.\nNow, let's turn to our motor home segment.\nIn the fourth quarter, revenues for the motor home segment were $448.9 million, up approximately 49% from the prior year, driven by strong end consumer demand, particularly in class B and class A and pricing, which was implemented to offset inflation.\nSegment adjusted EBITDA was $50.4 million, up approximately 159% from the prior year.\nAnd adjusted EBITDA margin was 11.2%, an increase of 480 basis points over the prior year and 150 basis points sequentially, driven by fixed cost leverage and profitability initiatives.\nFor the full-year fiscal 2021, revenues from motor home segment were $1.5 billion, up approximately 46% compared to fiscal 2020 due to increased unit sales and pricing.\nSegment adjusted EBITDA for the full year was $169.2 million, up 414% from fiscal 2020.\nSegment adjusted EBITDA margin for the full year was 11%, up 790 basis points over fiscal 2020.\nTurning to the balance sheet.\nAs of the end of the 2021 fiscal year.\nThe company had outstanding debt of $528.6 million comprised of $600 million of gross debt, net of convertible note discount of $60.4 million and net of debt issuance costs of $11.1 million.\nWorking capital was $651.6 million.\nOur current net debt to adjusted EBITDA ratio is 0.4 times, below our targeted range of 0.9 to 1.5 times providing financial flexibility and balance sheet strength to enable continued investment in our strategic imperatives and health returns for our shareholders.\nWe continue to maintain a very healthy liquidity position.\nOur cash balance increased to $434.6 million at the end of fiscal 2021, and we have not drawn on our $192.5 million ABL.\nThis liquidity of approximately $627 million provided the necessary funding for the Barletta acquisition, which closed in early fiscal 2022.\nWe also bought back approximately $45 million worth of shares throughout the year with approximately $35 million occurring in the fourth quarter.\nCombining share repurchases with dividends paid, Winnebago Industries returned a total of $62 million to shareholders in fiscal 2021, while also growing the business significantly.\nThe effective income tax rate for the full year was 23.3% compared to 20.5% for fiscal 2020 due to relatively consistent year-over-year tax credits on higher pre-tax income in fiscal 2021.\nLooking ahead to fiscal 2022, we expect our tax rate to be in the range of 23.5% to 24.5%, not considering unforeseen discrete items or any change in the tax law.\nOur balance sheet and financial health have never been so strong.\nWith that in mind and looking ahead, I want to comment on our capital allocation priorities.\nFirst, we will continue to invest in our business and advance our strategic priorities focused on growth and to meet the robust demand we continue to expect.\nWe are planning investments to add capacity, including new facilities, executing production flow, redesign and optimizing our operational capabilities.\nThese improvements will support continued production output, as well as product innovation, and they signal our confidence in the future of Winnebago Industries and the vitality of our end markets.\nWe continually look for areas of improvement across our Winnebago, Grand Design, Newmar, Chris-Craft, and now, Barletta, manufacturing and assembly footprint and will add meaningful square footage in the coming year.\nOur acquisition of Barletta completed in early fiscal 2022 was primarily funded out of cash but also included newly issued shares.\nThis effective deal structure keeps our liquidity position strong and our leverage ratio low, so we can continue to pursue M&A opportunities as they arise.\nIssuing shares also serves to align all parties on driving a successful integration and our collective future success.\nOn August 18, 2021, the company's board of directors approved a quarterly cash dividend of $0.18 per share, payable on September 29, 2021, to common stockholders of record at the close of business on September 15, 2021.\nThis quarter's dividend declaration represents a 50% or $0.06 per share increase from the previous quarter and further demonstrates our confidence in future business performance while also delivering financial returns to our shareholders.\nAs mentioned previously, we returned approximately $45 million to shareholders through share repurchases during the year.\nwith approximately $35 million occurring in the fourth quarter.\nTo enable further repurchase activity in the future, our board approved a new share buyback program on October 13 that authorizes us to repurchase up to $200 million of our shares in the future.\nThis should be interpreted as a signal that we have confidence in our future, and we will continue to utilize our share repurchase program as another mechanism to return cash to our shareholders.\nBefore I conclude my remarks, I want to raise three items that will change our reporting beginning with the first quarter of our fiscal year 2022.\nThe first is that, as previously announced, our acquisition of Barletta Boat Company materially increases the scale of our marine platform.\nBeginning next quarter, Q1 of fiscal 2022, Winnebago Industries' public reporting will include a new reporting segment, the Marine segment, comprised of Barletta and Chris-Craft.\nComparisons will be made to fiscal 2021, which will only include Chris-Craft results, and we will report the same key data points for the Marine segment as we do with our RV segments, specifically revenues, units, adjusted EBITDA, backlog and field inventories.\nSecond, going forward, we will be adjusting for 100% of intangible amortization within our adjusted earnings per diluted share metric.\nWe are taking this step to ensure that our adjusted earnings per share best reflects the core operations of our business.\nThird, the tax rate for adjusting items that impact reported earnings per share to arrive at adjusted earnings per share will be 24.2%.\nWe have historically utilized the federal statutory 21% rate.\nThis change will be effective going forward, and we will not restate prior years.\nTo conclude, our Q4 and annual fiscal 2021 results reflect very strong position in the industries we compete in and also reflects the great contributions to the Winnebago Industries portfolio of businesses and the people that comprise these businesses.\nWe are extremely proud of these results, and we have strong expectations for our future.\nThat concludes my review of our quarterly and full-year financials with that.\nAs we reflect on 2021, as Bryan said, we're proud of the financial, strategic and cultural strides we have made together with our talented team.\nIn addition to delivering strong financial results and market share growth, Winnebago Industries also continued our deep commitment to our corporate responsibility to our communities and shareholders.\nAs part of our commitment to our Winnebago Industries family and all of our stakeholders, we have made several important strides toward enhancing our ESG efforts across the organization.\nJill is responsible in partnership with the rest of company leadership for advancing DEI programs and initiatives and leading the execution of our overall DEI strategy and road map.\nAs an example of lifting others up, we launched a year-round Go Together fund to aid employees facing natural and personal disasters.\nFollowing our work mobilizing resources recently to support earthquake relief and recovery in Haiti as an example, which is closely connected with many of our valued Chris-Craft teammates.\nAt Winnebago Industries, we are committed to the pursuit of outdoor adventures and in doing so, seek to be vigorous protectors of the environment.\nIt is essential to our mission that our employees and customers are able to experience the beautiful natural spaces our planet has to offer.\nIn the spirit of reducing our footprint for the next generation of outdoor enthusiasts, we recently strengthened our commitment to sustainability by joining the business ambition for 1.5 degrees Celsius, a United Nations-backed global coalition of business leaders.\nAs part of this program, we are committing to help limit the impact of climate change by setting a goal to achieve net zero greenhouse gas emissions by 2050.\nWe also announced additional goals on water, waste and product sustainability.\nWe look forward to working with the science-based target initiative and external validators to develop an active plan for achieving this net zero goal, which represents an important focus of our corporate responsibility strategy.\nAs we move into the coming year, you can expect us to continue to prioritize corporate responsibility in our investments and partnerships.\nTurning to the future.\nThe unprecedented interest in our products and bullish industry outlook has provided us with a very bright outlook for fiscal 2022.\nIn addition to leveraging the strength of our RV and Chris-Craft brands, we are excited to add Barletta, the fastest-growing brand and the fastest-growing segment of the marine category in pontoons.\nBarletta's quality brand and high-quality dealer partners adds to our existing portfolio of premium brands, bringing more families access to the long-term value of Winnebago Industries' quality products provide.\nCollectively, our brands exemplify quality, service and innovation to our dealers and end consumers.\nThe golden threads that will drive market share gains for us in the RV and marine industries during fiscal '22 and the years ahead.\nConsumer interest in the outdoors remains strong.\nCampground reservations are just one metric that remained robust due to more households camping and camping more frequently.\nWebsite traffic is as strong as ever on our websites, and dealers continue to see steady interest in the outdoor lifestyles of RV and boating.\nAs I mentioned earlier, over 14 million households will have experienced camping for the first time during the 2021 and 2021 period.\nAnd those experiences have resulted in many of those families buying their first RV.\nAs these new households experience the outdoors and further identify what they want from their experiences, our dealers are already seeing the upgrade cycle take place.\nYes, some new customers from 2020 are trading out of the lifestyle, which is not at all historically unusual.\nBut our broad dealer conversations across all RV brands indicate dealers are also seen at a higher accelerated pace of users trade up, a trend that favors our premium brands as we tend to outperform the broader market when consumers upgrade.\nLong term, we believe the number of new customers who came into the outdoor lifestyle in 2021 and 2020 will bode well for the industry.\nAnd we're particularly excited about the number of kids who experienced RV and boating as those experiences have been proven to translate into a love of the outdoors throughout their future lifetimes.\nFrom a supply perspective, we continue to see material and component cost increases from suppliers, and we continue to manage out of stock or late deliveries on a weekly basis.\nThere is limited visibility right now to when those trends will dissipate meaningfully.\nDespite those challenges, though, we continue to deliver record-level revenues and margin accretion as our teams continue to work very hard in deploying effective sourcing and production strategies.\nGiven the levels of cost input inflation that we have witnessed over the past year, we are thoughtfully working to mitigate these cost increases with our internal cost savings initiatives.\nHowever, it has also been necessary for us to pass price increases that serve to offset the inflationary pressures we are seeing while also ensuring our products are viewed as having exceptional value in the marketplace.\nThe level of price increases year-over-year across our portfolio of our respective brands varies from mid-single digits to 20% plus.\nThere is no one price increase number for our business.\nEach of our outdoor brands are blending a price to market and price to cost approach that protects profitable market share growth.\nAccordingly, consumers are seeing the price of boats and RVs go up as pricing to the consumer is a combination of OEM pricing and improved dealer margins due to high levels of demand.\nRetail pricing is not a result of OEM pricing strategy alone.\nDespite higher prices, we are still sustaining a higher double-digit percentage retail pace currently than two years ago.\nBefore we open the call to questions, I want to touch quickly on expectations for the RV industry for the upcoming year.\nWe are aligned with RVIA's recent -- recently released RVIA forecast for calendar year 2022, which calls for 600,000 wholesale shipments or a growth of 4% versus the calendar year 2021 forecast of 577,000 units.\nOn a fiscal year 2022 basis for Winnebago Industries, the RVIA forecast translates to 605,000 wholesale industry shipments or 6% growth compared to the fiscal 2021 number of 569,000 units.\nRV retail sales for the industry in our fiscal year 2021 were approximately 585,000 units, a record number and will likely be adjusted upwards as SSI adjustments take place in the coming months.\nLooking ahead, we expect that fiscal 2022 RV industry retail sales will be strong.\nWhile they will still likely fall short of the record fiscal 2021 retail results, we fully expect that we will see industry retail sales for our fiscal 2022 period, notch the second highest level of industry retail sales on record in that period.\nGiven that outlook, it is highly unlikely that industry field RV inventories will be adequately replenished by the end of our fiscal year 2022, suggesting that the restocking phase will continue into our fiscal 2023.\nAs we approach inventory normalization sometime in the future, we've mentioned in the past that we could see that some dealers, not all, but some work on lower levels of inventory and higher turns.\nIn line with history as markets normalize, dealers will rationalize the quantity of OEM brands on their lots, and we believe we are competitively advantaged in that scenario with our brands.\nWe would also expect that dealers will return to more normal or historic levels of profitability, implying pricing to end customers may ease as that occurs and as general inflation dissipates in the future.\n Assistant:", "chosen": "compname reports q4 earnings of $2.45 per share.\nq4 adjusted earnings per share $2.57.\nq4 earnings per share $2.45.\ncompname posts q4 adjusted earnings per share $2.57.\n"}
{"prompt": "Human: On the call today, we have Brian Casey, our President and Chief Executive Officer; and Terry Forbes, our Chief Financial Officer.\nWe hope you're keeping safe in what's a difficult circumstances for all of us.\nAs always, I'll discuss our quarterly earnings and we'll cover the impact of the COVID-19 crisis on our company.\nLooking back, the past quarter was one for the record books.\nThe global COVID-19 pandemic swept across the globe, sending liquidity and returns sharply lower with much of the pain felt in March.\nThe S&P 500 suffered the worst first quarter performance since 1928 while global equity and fixed income markets were equally battered.\nInvestors remain focused on when the number of new cases of the virus may peak for clues about the future, though the path to economic recovery is anything but clear.\nIn our U.S. Value Equity products, the unprecedented sell-off in equities was large in absolute terms, but higher quality companies up and down the market cap spectrum were the best relative performers.\nEvery single one of our U.S. Value strategies outperformed its passive benchmark, as the benefits of active management were clearly evident.\nOur flagship LargeCap Value strategy showed resilience during the sell-off, capturing only about 85% of the downside and posting nearly 400 basis points of outperformance relative to the Russell 1000 Value Index.\nLargeCap Value is ahead of the benchmark over multiple time periods, and its ranking among institutional LargeCap Value peers remains strong.\nThrough the first quarter, our LargeCap Value strategy was in the top-decile for the trailing three-year period and in the top-quartile for the trailing one-, five- and seven-year periods.\nOur LargeCap Select strategy also finished the quarter ahead of the Russell 1000 Value benchmark and it now possesses a ranking in the top-decile among institutional peers in the eVestment large-cap value manager universe for the trailing three-year time period.\nOur SMidCap strategy also beat the Russell 2500 Value Index by over 400 basis points and now has returns above the benchmark in most trailing year periods.\nRankings among institutional peers were also strong.\nThe strategy now ranks in the top half ranking for the trailing five and seven years and the top-quartile for the trailing one- and three-year time periods.\nOur portfolio managers have worked hard to improve the track record and we are seeing growing interest in the strategy from the institutional channel.\nSmallCap was the hardest hit sector of our U.S. Value strategies, but our portfolio managers continue to focus on finding companies with strong fundamental qualities and finished the quarter ahead of the Russell 2000 Value benchmark by approximately 260 basis points.\nOur institutional strategy also maintained attractive peer rankings with a top one-third placement for the quarter and trailing one-year time period.\nSmallCap's longer-term tracker record places it in the top-decile over the trailing seven-, 10- and since inception time periods.\nAs we work through the economic situation created by the COVID-19, market volatility will create an attractive investment opportunity for high-conviction, actively managed portfolios centered around quality and value.\nWhile the value style, which emphasizes companies priced at low valuation levels has historically performed best coming out of a recession, today, many companies have higher debt levels than in past cycles and may find themselves with limited options.\nFinancial distress is particularly acute in the energy sector and we're already seeing several companies filing for bankruptcy protection.\nAs the market pays more attention at balance sheets, the cream will rise to the top and the debt-laden companies of the past cycle will falter.\nOur investment process has always incorporated a fundamental understanding of a candidate's balance sheet and that has historically served our clients well in times of stress.\nMany index funds hold more than one-third of their portfolio in companies with zero profits and high debt levels.\nIncreasing losses and debt will kill a lot of these companies and we believe this to be an opportune time for investors to sell index funds and lean in on active managers, who can thoughtfully navigate through the minefield of winners and losers.\nTurning now to our Multi-Asset group, our product line-up in Multi-Asset holds an array of strategies aligned across the risk and return spectrum that are tailored for a client specific risk profile and investment objective.\nIncome opportunity, our largest strategy in the group, showed attractive characteristics relative to the equity markets.\nHowever, investors rush to assets perceived as safe, pushing treasury returns up and holding back our relative performance.\nAsset classes such as preferreds, convertible bonds and mortgage-backed securities experienced large declines during the quarter.\nThe drop in convertible securities has provided opportunities not seen since the global financial crisis.\nAnd it's created an opportune time for investors to look at strategies such as our Global Convertible and Alternative Income strategies that have historically delivered solid risk-adjusted results.\nOur Global Convertible and Alternative Income strategies performed as expected and acted as diversifiers in an asset allocation mix during a very difficult and volatile time.\nCorrelations across capital markets went to one and volatility shot up to levels last seen during the global financial crisis.\nAmong institutional peers, our Alternative Income strategy ranked in the Top 20% for the trailing one-year and top-decile in the trailing five-, seven- and 10-year time periods.\nIn Emerging Markets, the valuation case remains positive, particularly relative to developed markets following the asset class' under-performance of recent years.\nIn our strategies, performance fell behind primarily due to our underweights in China and Hong Kong.\nGlobally, Emerging Markets had unprecedented volatility and the reaction to COVID-19 was swift and indiscriminate.\nInvestors reached for any kind of liquidity and these markets were particularly impacted by this flight to liquidity and safety.\nThis reaction also caused currencies in several emerging market countries in which we invest, including Brazil, Indonesia, Mexico, and Chile to see larger sell-offs.\nWe do not believe this volatility is over yet.\nThe duration and depth of the shockwaves are still to be determined and will vary across geographies.\nOutside China, some of the largest emerging markets are in the middle of lockdowns and government economic reactions are evolving.\nAs in our other strategies, dislocations in these markets have created opportunities to invest in companies with strong management teams, strong cash flow and solid balance sheets.\nOur emphasis on quality companies has enabled us to manage through past crises and gives us conviction that our holdings will be well positioned for the long run.\nShifting to Wealth Management, our teams in Dallas and Houston have been actively contacting clients to assist them through the market's uncertainty.\nMany of our larger high net worth clients are choosing to add to their accounts during this time to take advantage of the sell-off and position themselves for an eventual recovery.\nWe have broadened service offerings at Westwood Private Bank for our high net worth clients, improving our ability to retain clients in the Westwood branded ecosystem.\nThe combination of banking services, integrated with Westwood's existing financial planning, trust and investment services is resonating well with our clients.\nAs we move forward, Westwood Trust will begin rolling out our new digital portal to allow us to better engage with clients.\nThe Select Equity strategy, managed out of Westwood Trust Houston office, saw its risk management metrics work as expected this quarter, posting outperformance against its benchmark.\nSelect Equity and its tax-efficient counterpart is designed to provide a high-quality, low-turnover portfolio with risk controls for downside protection.\nAt the market's lows this quarter, both held up well due to the emphasis on risk control and investments in companies with high-quality balance sheets.\nBoth versions of our strategy recently completed their three-year track record and are ahead of their global benchmark.\nAdditionally, we tax loss harvest throughout the year instead of waiting until year-end, which helps lower our clients' tax bills and has provided over 200 basis points of additional annualized alpha over the last three years.\nIn our institutional and intermediary sales group, we had inflows of nearly $400 million and $950 million in outflows for total net outflows of $560 million.\nMost of the outflows were in our sub-advisor relationships in LargeCap Value, Global Converts, Alternative Income and Emerging Markets.\nSmallCap was again our most successful strategy with net inflows in the quarter as existing clients added funds to their accounts and new clients were earned into our mutual fund.\nWith the strong relative performance in our U.S. strategies, we feel that we're well positioned to capture sales in the current environment.\nThe investments we've made in distribution infrastructure and alignment of investment teams, vehicles, pricing, product definitions, risk guidelines and messaging have allowed us to create a cohesive message that positions our sales teams for success.\nOur intermediary and institutional investment teams continue to work on adding consultant approvals; and overall, our pipeline remains healthy and spread across several different strategies.\nNew opportunities were added in SmallCap and Income Opportunity during the quarter and a large portion of our pipeline is in the mid- to late-stage and we are hopeful of decisions throughout the year.\nWe have made it well within the red zone on approvals for our SmallCap fund at several of the largest wirehouses.\nAlthough COVID-19 has created market disruptions and slowed the sales cycle with prospects, our distribution teams continue to execute on our plan to build a broader, more sustainable distribution business and our client services teams continue to provide strong service to our clients.\nWhile we're not able to conduct face-to-face meetings, our teams are functioning quite normally.\nWe did an online campaign to 25,000 advisors a few weeks ago and we were thrilled to see over 10,000 views.\nConference calls, portfolio updates, RFPs and questionnaires continue as usual.\nWe are cognizant of the fact that clients and consultants need timely and relevant communication.\nThey need communication on how the pandemic is affecting portfolios and our portfolio investment decisions and they're interested to know how our business continuity plan is functioning and changing.\nOur success working remotely is also a key point of inquiry as clients work to understand how we've protected the integrity of our business in this environment.\nPrior to COVID-19, the asset management industry was already experiencing disruption on several fronts, including fee compression, margin erosion and rising data, technology and other costs.\nAs I've noted in the past, Westwood made major investments in technology to reduce costs, gain operational efficiencies, prepare our business for disruptions and increase our agility.\nGiven recent events, these have proven to be a wise investment as we have not only increased efficiency, but we're able to move to a fully operational, remote working environment with little to no disruption.\nWe will continue to evaluate our business and take meaningful steps to reduce our cost structure.\nTo-date, we've identified over 750,000 of cost reductions that are being implemented or in process over the balance of the year.\nWe've been researching the outsourcing of trading for the past six months and recently made the decision to move forward with this project.\nWe will move to an outsourced trading model later this summer and expect to save over $1 million per year beginning in 2021.\nWe will continue to utilize technology to define our future state to be more efficient wherever possible.\nWe will close or eliminate commercially unviable funds and put only our best products and people on the field.\nAlthough, financial performance over the last year has been disappointing, we continue to execute on numerous initiatives to strengthen our foundation for the future.\nOur partnership with InvestCloud continues to reap operational benefits.\nThe U.S. Value and Multi-Asset strategies are delivering alpha and we have commitments from private wealth clients for a new credit opportunities fund that we launched a few weeks ago.\nWe expect industrywide disruption to continue and the steps we've taken to reinvent ourselves have placed us in a position to survive and grow.\nFinally, I want to emphasize that the health and safety of our employees and their families is our first priority.\nAll our employees are well, working remotely and completing their work in an efficient manner.\nWe understand that we have a business to run and we're working hard to balance the company's needs with the employees' personal needs.\nAnd I'm really proud of everyone at Westwood and how well everyone is working together, yet apart, during this difficult time.\nOur customers still have goals and priorities and we will continue to service them to the best of our ability.\nToday, we reported total revenues of $16.7 million for the first quarter of 2020 compared to $18.6 million in the fourth quarter of 2019 and $23.9 million in the prior year's first quarter.\nThe decrease from the fourth quarter and the prior year's first quarter was primarily due to lower average assets under management.\nFirst quarter net income was $1.1 million or $0.13 per share compared to $2.5 million or $0.30 per share in the fourth quarter of 2019.\nThe decrease primarily related to lower total revenues and unrealized losses on private investments, partially offset by lower operating expenses and income taxes.\nEconomic earnings, a non-GAAP metric, were $4.2 million or $0.50 per share in the current quarter versus $5.4 million or $0.64 per share in the fourth quarter of 2019.\nFirst quarter net income of $1.1 million or $0.13 per share compared to $0.4 million or $0.05 per share in the prior year's first quarter.\nThe increase primarily related to lower operating expenses, particularly employee compensation and benefits, foreign currency transaction gains and income taxes, partially offset by lower revenues and unrealized losses on private investments.\nEconomic earnings for the quarter were $4.2 million or $0.50 per share compared to $4.1 million or $0.49 per share in the first quarter of 2019.\nFirmwide assets under management totaled $11.6 billion at quarter end and consisted of institutional assets of $6.3 billion or 55% of the total, wealth management assets of $3.8 billion or 33% of the total and mutual fund assets of $1.5 billion or 12% of the total.\nOver the quarter, we experienced market depreciation of $3 billion and net outflows of $0.6 billion.\nOur financial position continues to be very solid with cash and short-term investments at quarter end totaling $82.4 million and a debt free balance sheet.\nIn the first quarter, we repurchased approximately 272,000 shares of our common stock for an aggregate purchase price of $4.9 million.\nIn April, we repurchased an additional 407,000 shares for an aggregate purchase price of approximately $8.1 million.\nThis completed the amount authorized under our share repurchase program.\nThat brings our prepared comments to a close.\n Assistant:", "chosen": "q1 earnings per share $0.13.\nq1 revenue $16.7 million versus $23.9 million.\nq1 non-gaap earnings per share $0.50.\n"}
{"prompt": "Human: This is Brandon Day, Whiting's investor relations Manager.\nAlso available to answer questions during the Q&A session will be our CFO, Jimmy Henderson; COO, Chip Rimer; and VP Commercial, Jo Ann Stockton.\nThose include risks relating to commodity prices, competition, technology, environmental and regulatory compliance, midstream availability and others described in our filings with the Securities and Exchange Commission, which are incorporated by reference.\nI believe you have all thoroughly read and enjoyed our 10-Q we filed last evening as well as our news release and reconciliations to non-GAAP measures and you can refer to them for detailed information.\nOver the past year, the macroenvironment has changed dramatically.\nHowever, we have remained disciplined in our approach and continue to execute on our plan.\nWe find ourselves in an enviable financial position, whereby we expect to have no debt and be cash positive before the end of 2021.\nWe're working through the 2022 capital plans now and I'll give some high-level thoughts after briefly discussing some of the quarterly financial numbers.\nStarting with our financial results for the third quarter of 2021, we had net income, on a GAAP basis, of $198 million or $5 per diluted share during the quarter as compared to a loss of $61 million or $1.57 per share for the previous quarter.\nAdjusting for certain items, primarily the mark-to-market of hedging instruments and the gain on sale properties in the previously announced divestiture, we had adjusted net income of $142 million or $3.57 per diluted share as compared to $118 million or $3.01 per share for the previous quarter.\nAdjusted EBITDAX was $201 million compared to $176 million in the previous quarter, primarily due to better commodity prices.\nOur company's production on a barrels of oil equivalent remained relatively flat quarter over quarter, averaging 92,100 boe compared to second quarter production of 92,600 boe.\nOil production for the third quarter averaged 51,800 barrels of oil, which was down from the second quarter of 53.4 million barrels of oil -- 53,400 barrels of oil.\nMost of the wells turned in line during the quarter were in our Sanish field, which typically come on with lower initial production rates, but experienced a shallow overall decline, particularly in the first year.\nAdditionally, some of our third-party midstream providers have continued to increase ethane recoveries as illustrated by our NGL yield for the quarter.\nOil differentials have continued to narrow given an overall basin production level that remains significantly behind total takeaway capacity of which increased during the quarter as expansion capacity was placed into service.\nOn an activity basis, our oil differential was similar to what we realized in the second quarter.\nHowever, revisions primarily from third-party providers recognized in the third quarter resulted in a wider differential reflected in our financials.\nWe expect our full year oil differentials to land within the low end of our stated guidance.\nAdditionally, with the majority of our G&P agreements structured on a fixed fee, we've seen a more pronounced benefit to our net realized price from the increase in both residue gas and purity product benchmark prices.\nThe company invested capex of $67 million during the third quarter to bring 17 gross 9.1 net wells on to production and we drilled 10 gross 5.6 net operated wells.\nWe ended the quarter with 25 gross 14.3 net drilled uncompleted wells.\nThe company currently has a rig running in the Sanish Field and a second rig in our Cassandra area, that commenced drilling operations at the end of September.\nWe have just released a completion crew this week and we expect them to return in mid-December.\nLease operating expenses were $57 million or $6.68 per boe for the third quarter of 2021.\nLOE benefited from less operating expense workovers during the quarter.\nGeneral and administrative expenses of $12 million or $1.41 per boe was similar quarter over quarter.\nIn September, we completed the previously announced acquisition of assets in North Dakota and divested our Redtail assets located in Colorado.\nThe assets in the Williston Basin overlap our Sanish field and expand our inventory by over 60 gross locations.\nThe acquisition also included five drilled uncompleted wells.\nThe acquired assets will allow us to maximize lateral length across several DSUs, allow us to develop stranded resources and eliminate costs for frac protect as acreage is developed.\nWe plan to issue our 2020 sustainability report later this quarter.\nI'm pleased with the progress the company has made and how we continue to improve on the goals we've set for the safety of our employees, the environmental controls for our operations and the ongoing governance improvements.\nGas capture remains to be an area of focus for the company and we continue to make improvements in that area.\nI would now like to spend a little time thinking about 2022.\nWe expect the company's reinvestment rate in 2022 to be similar to what we saw here in 2021 where we will have invested roughly 35% of our EBITDA.\nLet me highlight a few items that we think will impact our 2022 outlook.\nFirst, we are budgeting for some additional activity in '22, both from an operating standpoint, as shown from our second drilling rig that we brought in during September, but also non-operated properties and we've seen our peers increase activity during the year.\n2021 has been somewhat of an anomaly for us and that the company shut down operations during its restructuring in '20 and therefore, '21 has been a rebuilding year.\nOur corporate decline rate increased during '21 as we brought on new wells and therefore, we will need some additional activity level to replace that production.\nSecond, we do believe we will be dealing with some inflationary costs and we are estimating this to be in a range of high single-digit to low double-digit percentages.\nTo address price inflation, the team has been aggressively securing contracts and lining up equipment through the first half of '22.\nWe are hoping to see some relief with supply chain issues and perhaps some rollover with steel prices in the back half of '22.\nAnd finally, we have some infrastructure to build out next year, particularly in the Sanish field for new well connections and to alleviate flaring and/or curtailment of production.\nSome of these costs were deferred in '21 due to the lower commodity price environment at the beginning of the year.\nMost importantly, the company is in a desirable financial position as we exit 2021 and move into 2022.\nMany of the derivatives that were linked to much lower prices rolled off during 2021 and we now have a much more attractive hedge portfolio and commodity prices continue to benefit the bottom line, increasing our free cash flow.\nWith the free cash flow we expect to generate from operations, we will continue to pursue acquisitions which enhance Whiting's competitive position in the Williston Basin including bolt-on opportunities that create synergies with Whiting's existing asset base.\nWhile we continue to believe that we will have attractive opportunities to create value through investments in our operations, Management and the board also understands important to returning capital to shareholders.\nNow that we have the company in a solid financial position, we expect to initiate a return of capital to shareholders in some form commencing in the first quarter of 2022 at a level that is competitive with our peers.\n Assistant:", "chosen": "q3 adjusted non-gaap earnings per share $3.57.\nexpects to continue to fund its operations fully within operating cash flow.\nforecasts to be in a positive net cash position with no outstanding balance on its credit facility by end of 2021.\n"}
{"prompt": "Human: On our call today, we have Andy Rose, Worthington's President and Chief Executive Officer and Joe Hayek, Worthington's Chief Financial Officer.\nToday's call is being recorded and a replay will be made available later on our worthingtonindustries.com website.\nToday we'll be sharing our results consistent with our new reporting segments for the first time.\nWe believe the new structure will provide greater insights into the underlying performance of our businesses.\nWe had a strong start to our fiscal year, reporting earnings of $2.55 a share in Q1 versus $11.22 in the prior-year quarter.\nExcluding restructuring and one-time items, we generated a record $2.46 per share in earnings in Q1 compared to $0.64 in the prior-year quarter.\nDuring the quarter, we recognized a net after-tax restructuring gain of $5 million or $0.09 a share primarily related to the sale of a shuttered facility owned by our WSP joint venture.\nThat compares to restructuring and impairment charges of $0.16 a share a year ago.\nIn addition, the prior-year results included a net benefit of $10.74 per share related to our investment in Nikola Corporation.\nConsolidated net sales in the quarter of $1.1 billion were up significantly compared to $703 million in Q1 of last year.\nThe improvement was primarily due to higher steel prices combined with increased volumes across most of our segments.\nGross profit for the quarter increased to $219 million from $113 million a year ago and our gross margin increased to 19.7% from 16.1%.\nAdjusted EBITDA in Q1 was a record $196 million, up from $75 million in Q1 of last year and our trailing 12-month adjusted EBITDA is now $604 million.\nIn Steel Processing net sales of $823 million nearly doubled from $431 million in Q1 of last year due to higher average selling prices and increased volumes.\nTotal shipped tons were up 14% from last year's first quarter when demand was just beginning to recover from COVID-related shutdowns, particularly at our automotive customers.\nDirect tons in Q1 were 49% of mix, which was consistent with the prior-year quarter.\nWe continue to see solid demand across nearly all of our major end markets, including automotive, construction, heavy truck and agriculture.\nDespite the solid demand and year-over-year growth, automotive shipments could have been better, if not for the continuing semiconductor-related slowdowns.\nEverything we see suggest that while consumer and fleet demand for new cars remain strong, chip shortages will persist for the next several quarters and our automotive demand will be subject to some uncertainty as a result.\nThe demand is clearly there.\nIt would likely just take some time for the semiconductor shortage to resolve itself.\nOur teams continue to do a terrific job navigating unprecedented market conditions while remaining laser-focused on the needs of our customers.\nIn the current quarter, steel generated adjusted EBIT of $108 million and adjusted EBIT margin of 13% compared to $14 million and 3% in Q1 of last year.\nThe large year-over-year increase was primarily driven by increased demand, higher spreads and arbitrage gains.\nIn the quarter, we had pre-tax inventory holding gains estimated to be $47 million or $0.68 per share compared to holding losses of $7 million or $0.09 a share in Q1 of last year.\nBased on current steel prices, we expect inventory holding gains again in Q2, but we will also continue to see the impact of the widening scrap gap.\nIn Consumer Products, net sales in Q1 were $148 million, up 10.6% from the prior-year quarter.\nLegacy consumer products revenues were up slightly and the inclusion of sales from GTI, which was acquired in January, drove the balance of the growth.\nEBIT for the consumer business was $21 million and EBIT margin was 14%, down from $24 million and 18% in the prior-year quarter.\nThe decrease in EBIT was due to higher labor and input costs.\nOur consumer business has some longer fixed-price contracts with customers, which can create a short-term drag on margins when input rises -- when input prices rise as rapidly as they have.\nThese dynamics are typically short term and we do expect margins to improve moving forward.\nBuilding Products generated net sales of $115 million in Q1, which was up 30% from $88 million in the prior-year quarter.\nIncrease was due primarily to higher volumes as the prior-year quarter was impacted by COVID-related disruptions.\nBuilding Products EBIT was $49 million and EBIT margin was 42%, up significantly from $23.4 million and 27% in Q1 of last year.\nWe saw significant growth year-over-year in our wholly owned Building Products businesses but the majority of the upside was driven by strong results at WAVE and ClarkDietrich that contributed $26 million and $17 million respectively in equity earnings.\nWAVE and ClarkDietrich both had better demand environments than in Q1 of last year and all of our teams in Building Products are doing an excellent job managing dynamic supply chains and continuing to execute in challenging conditions.\nIn Sustainable Energy Solutions net sales in Q1 were $25 million, down from $28 million in the prior-year quarter.\nLargest end market for this business is transportation and the semiconductor chip shortage created a headwind for them with respect to demand.\nIn addition, the economy in Europe is recovering, but very slowly.\nThe business reported a negative EBIT of $3 million in the current period as volumes were too low to absorb fixed costs.\nWe remain very excited about this business and its prospects over the long term as its innovative products and solutions are poised to grow quickly serving hydrogen ecosystem and adjacent sustainable energies like compressed natural gas.\nWith respect to cash flows in our balance sheet, operations used cash of $50 million in the quarter, which was driven by $149 million increase in working capital, primarily associated with higher steel prices along with annual accrued compensation being paid out during the quarter.\nAbsent further increases in steel prices, we would expect the significant working capital increases to subside in the next quarter or two.\nDuring the quarter, we received $20 million in dividends from our unconsolidated JVs, received $27 million in proceeds from asset sales, completed one acquisition for $105 million, invested $24 million in capital projects, paid $15 million in dividends and spent $61 million to repurchase 1 million shares of our common stock.\nFollowing the Q1 purchases, we have 8.3 million shares remaining under our share repurchase authorization.\nLooking at our balance sheet and our liquidity position.\nFunded debt at quarter end of $706 million was relatively flat sequentially and interest expense of $8 million was in line with the prior-year quarter.\nEnded Q1 with $399 million in cash and we continue to take a balanced approach to capital allocation focused on growth and on returning capital to shareholders.\nEarlier today, the Board declared a $0.28 per share dividend for the quarter, which is payable in December 2021.\nIt's great to start fiscal '22 with another record performance.\nHowever, the operating environment remains quite challenging with the continued rise in steel prices, supply chain issues in steel and other components and the continuing labor shortage.\nOur people continue to showcase their commitment by going the extra mile to ensure that we are working safe and doing their best to meet our customers' needs.\nDemand levels are good across almost all of our end markets and backlogs remain at elevated levels.\nWe continue to raise prices in many of our product lines to offset rising input costs, particularly steel.\nHigher working capital needs had a meaningful impact on free cash flow this quarter, but this will reverse if steel prices begin to decline as we expect in coming quarters.\nThis is the first quarter reporting our three new operating segments, Consumer Products, Building Products, and Sustainable Energy Solutions.\nHopefully you will find, as we believe, that each of these segments is an attractive business with unique advantages and compelling strategies to grow for years to come.\nWe will continue to leverage our transformation playbook, new product development and innovation and M&A to drive above-market growth and higher returns on capital.\nWhile our innovation and M&A growth initiatives continue across the portfolio, the M&A environment is proving challenging with elevated purchase multiples and difficult earnings analysis due to the unpredictability of the COVID environment.\nTo the extent we do find compelling targets, our balance sheet remains strong with significant cash and borrowing capacity.\nFinally, we just published our second corporate citizenship and sustainability report.\nSince our inception, we have worked hard to be a good corporate citizen for all of our constituencies and in our communities, as well as to minimize our environmental footprint.\nWhile we are a relatively clean manufacturing operation overall, in 2012 we started our successful GreenStar initiative that aims to recognize our manufacturing facilities for environmental conservation and stewardship.\nIn fiscal '21, 64% of our facilities achieved a four or five star performance rating.\nWe are working toward an even more robust approach to reducing our environmental footprint and expect to have more details in the future regarding our goals.\nIt is often difficult to follow a record year but we were off to a fast start and our teams remain focused on continuing to deliver for our customers and creating value for our shareholders.\nWe'll now take any questions.\n Assistant:", "chosen": "q1 sales rose 58 percent to $1.1 billion.\nworthington industries - qtrly earnings per share $2.55.\nqtrly adjusted earnings per share $2.46.\n"}
{"prompt": "Human: Along with me co-hosting, we have our Executive Chairman, Bill Berkeley; as well as Rich Baio, Group CFO.\nWe're going to follow a similar agenda to what we've done in the past, so we're in a moment or two going to hand it over to Rich to walk us through the quarter and focus our attention on a few highlights.\nAnd once he is through, I'm going to offer a few soundbites, and then we will be opening it up for Q&A.\nRich, so if you would please.\nThe positive momentum continues to build in our business as evident by our growth in premium and expansion in underwriting profits as rate improvements and additional premium associated with increase in exposure through the income statement.\nWe reported a consecutive quarterly record underwriting profit in the second quarter of 2021 along with strong net investment income, resulting in an annualized return on beginning of year equity of 15%.\nThe company reported net income of $237 million, or $1.27 per share.\nThe components include operating income of $219 million, or $1.17 per share and after-tax net investment gains of $18 million or $0.10 per share.\nDrilling down into our quarterly underwriting performance, you will note that gross premiums written grew by $529 million, or 24.8%, almost $2.7 billion.\nNet premiums written grew $472 million, or 27.2% to more than $2.2 billion, recognizing an increase in both segments.\nOur overall cession rate decreased in the quarter due to changes in certain underlying outward reinsurance arrangements, lower reinstatement premium and business mix.\nMoving into segment production of net premiums written, the insurance segment grew 29.2% to almost $2 billion, with an increase in all lines of business.\nProfessional liability led this growth with 64.8%, followed by commercial auto with 31%, other liability of 28.7%, short tail lines of 21.2% and workers' compensation of 15.6%.\nThe reinsurance and Monoline Excess segment grew about 11% to $218 million, with an increase in Monoline Excess of 20.9% and casualty reinsurance of 17.5%, partially offset by a decrease in property reinsurance of 13.8%.\nUnderwriting income benefited from the compounding rate improvement above loss cost trends along with growth in exposure and lower claims frequency in certain lines of business.\nWe did experience an above average level of non-weather related property losses in the quarter that partially offset these benefits.\nIn addition, our current accident year, catastrophe losses decreased significantly quarter-over-quarter from $146 million, or 8.7 loss ratio points in the prior year to $44 million or 2.2 loss ratio points in the current quarter.\nAs a result, quarterly underwriting income increased almost 800% to a record $202 million.\nThe reported loss ratio was 61% in the current quarter, compared with 67.7% in 2020.\nPrior-year loss reserves developed favorably by about $0.5 million in the current quarter.\nAccordingly, our current accident year loss ratio, excluding catastrophes was 58.8% compared with 59.2% for the prior year's quarter.\nThe continued growth in net premiums earned has benefited the expense ratio, which was 28.7% in the current quarter compared with 31% a year ago.\nNet premiums earned outpaced underwriting expenses by a margin of more than 8.5%.\nWe also continue to benefit from reduced cost associated with travel and entertainment, but do anticipate some of this will be given back as the economy more fully reopens.\nWrapping up the full picture.\nOn the underwriting side, our current accident year combined ratio, excluding catastrophes, was 87.5% for the quarter compared with 90.2% for the prior year quarter.\nOn the investment front, net investment income increased 96.9% to $168 million, driven by strong results in investment funds.\nThe fixed maturity portfolio reflected a decline quarter-over-quarter due to the lower interest rate environment.\nAlthough the quarterly gap is closing.\nWe also continue to maintain an above average level of cash and cash equivalents as of June 30, 2021, which has been decreasing over the past few quarters where we see opportunities to invest at attractive risk-adjusted returns.\nOur duration remains flat at 2.4 years, while maintaining a high credit quality of AA minus.\nPre-tax net investment gains in the quarter of $24 million is primarily comprised of realized gains on investments of $39 million, a reduction in unrealized gains on equity securities of $18 million, and a decrease in the allowance for expected credit losses of $3 million.\nThe realized gain was largely driven by the sale of two real estate properties, which also resulted in the reduction in our debt that was supporting one of the real estate properties of approximately $102 million.\nCorporate expenses increased approximately $13 million due to debt extinguishment costs of $8 million relating to the redemption of hybrid securities on June 1st, and higher incentive compensation costs as well.\nIn addition, we announced the formation of a new operating unit in the second quarter, which you may recall that such expenses are reflected in corporate until the operation begins writing business and is then moved into the underwriting expense.\nStockholders' equity increased by $164 million to approximately $6.6 billion in the quarter after regular and special dividends of $112 million.\nBook value per share increased 2.5% in the quarter and book value per share before dividends increased 4.3%.\nAnd finally, cash flow from operations continue to be strong with approximately $700 million on a year-to-date basis.\nAnd with that, I'll pass it back to Rob.\nSo let me just offer a couple of quick observations and then we'll get to your Q&A and take the dialog anywhere participants would like to.\nI think by virtually any measure, it was a great quarter for the company.\nAnd from my perspective, it's been in the making for some period of time.\nIn addition to that, I think there is a growing amount of evidence that would support the idea that there is more to come and it's just again quite encouraging.\nAnd as far as drilling down into the market a little bit more, when we look at the major product lines with the exception of workers' compensation, all of them continue to get rate increases that outpace our view of loss trend, and that is even as we have been factoring in a bit more for financial inflation.\nRegarding workers' compensation, there are again growing but early signs that the level of erosion there is slowing.\nThat having been said, we also are paying close attention to wage inflation and what that may mean for the comp economic model.\nRich walked you through the top line, obviously, the 27% growth plus is pretty healthy.\nA couple of observations there, though, one, please keep in mind, if you go back and you look at 2020, we were not an organization, where in Q2 of '20, our top line fell off a cliff.\nWe will give or take flat.\nSo this was not just a bounce back to a normal run rate.\nThis was a meaningful growth.\nIn addition to that Richard commented around the Excess and reinsurance segment, you would have noted possibly in the release and also again in Rich's comments, that it was the reinsurance segment where particularly our domestic treaty business where we backed away from a couple of deals where we just felt as though the rates were good, they weren't good enough for us to participate.\nIf you unpack the 27% growth overall, give or take about a third of it is coming from rate, the balance of it is coming from exposure as you would have gathered from the rate increase coming in ex-comp at just shy of 10%.\nI think it's important that people not read too deeply into as I suspect some might as to the rate increase.\nAnd what does this mean relative to what the rate increase was last quarter or the same time in the prior year?\nThe simple fact is that when we think about our economic model, it is multi-dimensional.\nWe look at the margins that are available in the business and as we become pleased with available margins, we start to think about possibly how we reprioritize exposure growth versus pushing further on rate.\nAnd again, as we have seen the margins in a meaningful part of our portfolio become particularly attractive.\nWe are still pushing for rate.\nWe are still getting rate by and large ex-comp that outpaces trend, but again growing exposure becomes even more of an opportunity that we are capitalizing on.\nCouple of other comments just as it relates to the top line, I think it's a helpful data point, particularly our specialty businesses are getting flooded with submissions.\nIt's a clump and in particular, it's our E&S businesses.\nTwo things, and opening economy which clearly we are benefiting from across the board.\nAnd of course, a standard market that continues to revisit its appetite.\nAs far as the opening economy just bouncing back to workers' compensation.\nAs we have expressed in the past, we are concerned with that product line and where rates have gone.\nBut you would have seen that product line growing in our release [Phonetic], and that is really driven by payroll growth.\nAnd again, I think it just speaks to the health and well-being of the US economy, as it continues to recover.\nMaybe pivoting over to the combined ratio, Rich got through a lot of this.\nJust a couple of observations from my perspective.\nOn the expense front, coming in at a 28.7% from our perspective is a pretty good place with opportunity to improve from here.\nAs Rich suggested, as our travel and entertainment picks back up.\nCertainly some if not all of the approximately 50 basis point benefit that we've been getting as far as expenses due to COVID, that is likely to erode and disappear.\nThat having been said, if you look at the power of the earned premium coming through and how it is likely to build from here, and you can see that given the written leads the earned, there is likely more benefit to be had over time.\nLoss ratio pretty good at a 61%.\nThe ex-cat accident year, as Rich mentioned, was a 58.8% [Phonetic].\nHe talked about non-cat property loss activity of that added relative to where it was running last year, about a little over two points.\nSo this was, quite frankly, we had a rash of fires.\nSome would suggest it's bad luck, we tend to believe that oftentimes you make your own luck.\nSo we're digging into that to make sure that this is not a new normal, and it was more of a one-time unfortunate series of events.\nAnother data point on the loss ratio front, the paid loss ratio came in at a very attractive 44.3 [Phonetic].\nA couple of comments on the investment portfolio.\nAgain, Rich, commented on the duration of the 2.4 years, the book yield is running coincidentally at about 2.4 as well.\nWe continue to be very focused on inflation.\nFrom our perspective, inflation is very much here.\nThere are some people that talked about it being this transient, that may be true.\nI'm not quite sure when people talk about transient will -- well, how long is transient, regardless the cost of things are up today.\nBut even if you saw inflation return to 2.5% or 3% level, we continue to believe that a 10-year at 130 [Phonetic] or less doesn't make a whole lot of sense for the long run.\nOne other comment just related to the balance sheet and the capital structure and we can get into this during the Q&A, if people are interested.\nWe've done a fair amount of work and restructuring certain things per one of Rich's comments around the prepayment or the calling of certain securities and the cost associated with that.\nBut as you think about, again, the earnings power of the business later this year, but even more so for '22 and '23, there is a very meaningful benefit that will be coming through, again, savings around capital costs.\nSo long story short, very good quarter.\nAnd I think what's more encouraging than even just the results is, if you look at how the table is set for what is likely not just to be the next couple of quarters, but quite frankly the next couple of years.\nThis is an organization that is going to benefit greatly from the broader macro conditions.\n Assistant:", "chosen": "compname reports qtrly earnings per share $1.27.\nqtrly earnings per share $1.27.\n"}
{"prompt": "Human: We refer to certain of these risks in our SEC filings.\nParticipating in today's call with me will be Paul McDermott, President and Chief Executive Officer; Steve Riffee, Executive Vice President and Chief Financial Officer; Drew Hammond, Vice President, Chief Accounting Officer and Treasurer; and Grant Montgomery, Vice President and Head of Research.\nI'd like to start off with an update on the progress of our Southeastern market expansion, following our commercial asset sales.\nI will also discuss the efforts that are underway to transform our operating model and current market conditions in the DC Metro and Atlanta, where we are actively growing our footprint.\nSteve will then update you on our portfolio performance and trends and we'll discuss our third quarter results and outlook as we execute our transformation.\nStarting with our geographic expansion.\nWe are pleased to report that in just over four months since our transformation announcement, we have already deployed or tied up over 55% of our $450 million target.\nWe have deployed or under binding contract to deploy approximately $154 million and we have been awarded another $97 million that is moving toward a binding contract.\nWe also have other opportunities that we are pursuing, all of which in line with our strategies and offer very strong NOI growth prospects.\nWe have a very active pipeline and remain confident that we will meet our target over the balance of this year and perhaps into early next year.\nDuring the quarter, we closed the sales of our office and retail portfolios as planned.\nWe closed our first Southeastern multifamily acquisition, The Oxford, on August 10th for $48 million.\nWe have three additional acquisitions in process, including two communities that are under binding contracts of $106 million and the $97 million property that is moving toward the binding contract.\nWe expect all three to close during the fourth quarter.\nWe have and will remain disciplined and we are only underwriting assets that fit our strategy and provide stronger NOI growth.\nThree of our initial properties aligned with our B Class portfolio strategy, with price points that target the deepest demand segments in their respective sub-markets and the other property aligns with our Class B value-add strategy and offers a near-term value-add renovation pipeline.\nOur first acquisition, The Oxford, is a 240 unit garden-style community in the city of Conyers, Georgia.\nThe area is primarily comprised of family households who want the benefits of living in the suburbs, combined with connectivity with downtown, midtown and the South Atlanta business districts, along with the proximity to local employment nodes, including the Interstate 20 corridor, which is experiencing significant investment as employers expand into the area.\nThe Oxford was built in 1999 and over the past five years same-store rent growth for the submarkets 1999 product has outperformed the average for all 90s vintage apartments in the Atlanta market and significantly outperformed the overall Atlanta market rent growth for all apartments.\nOver the past three years, the submarket has widened its outperformance versus the region's 90s vintage rent growth by over 3%.\nThe Oxford has performed very well during the first two-and-a- half months we've operated it, with very strong new lease rate growth of 25% during September and increasing to 26% in October.\nOccupancy is tracking above our expectations, driven by very high retention rates and new leasing activity.\nWe acquired The Oxford at a cap rate of 4.7% and we expect an NOI growth rate that will be very high for the next three years.\nTwo of the properties that we currently expect to close in the fourth quarter are located in Henry County in the southern suburbs of Atlanta, where rent growth has outperformed the overall Atlanta market on a trailing five and three-year basis and is projected to continue to outperform over the next several years.\nThese properties are a strategic fit, aligning with our Class B portfolio strategy.\nWe will provide more details after we close.\nIn terms of our plans for our remaining capital and growth beyond, we are underwriting opportunities to acquire Southeastern communities, with low double-digit NOI growth prospects, which is stronger than our initial expectations when we decided to enter these markets.\nWhile the Southeastern markets are competitive, we have several advantages that appeal to sellers and are helping us to succeed.\nWe have a 55-year track record of owning and operating multifamily properties and a strong track record of execution, which allows for a smooth and efficient due diligence process.\nWe have well-established relationships in the multifamily industry that transcend into our new Southeastern growth markets that we are profiting from.\nAdditionally, we are an all cash buyer with no financing contingencies, which sets us apart and adds a greater level of certainty of execution to the seller.\nWhile cap rates have tightened further since June, we are keying in on opportunities that will yield outsized rent and NOI growth and align with our strategic goals.\nInvestment discipline is critical for us and we spend a lot of time and effort, researching and selecting our target markets and strategies for each market.\nOur research tells us that the industrial mix of an economy can determine what rent growth will look like over the long-term.\nOur current target markets of Atlanta, Raleigh-Durham and Charlotte have outsized exposure to industry that drive productivity growth, which creates a virtual feedback loop of job and income growth in migration and increasing education levels.\nYear-over-year effect of rents for Atlanta, Raleigh/Durham and Charlotte grew by 19.8%, 19% and 17.6% respectively in September as reported by RealPage.\nNew lease trade outs were even stronger, averaging 22.7% across the three markets and a 580 basis point inflection between June and September.\nAnnual demand also serves across these markets as in migration and household formation drove record-setting absorption.\nReported first quarter annual demand had already exceeded the five-year average in each target market, yet it climbed over 23% higher from the first and the third quarters.\nRaleigh/Durham posted a second quarter annual demand at 142% of its five-year average, while Charlotte and Atlanta second quarter annual demand topped 162% and 161% of their five-year averages respectively.\nIn order to maintain a disciplined approach and invest in these economies without competing with new supply, we're evaluating acquisition opportunities at the submarket level and targeting vintages with price points located at the deepest section of the demand curve.\nWe are targeting renters that are benefiting from economic and wage growth, but remain underserved by new supply, which provides us the opportunity to create a quality living experience, while also growing rents without competing with new supply.\nWe remain in active negotiations, pursuing additional opportunities and would like to tie up another $200 million in multifamily assets that we expect can now be completed by early 2022.\nAgain, we remain disciplined and are committed to allocating capital according to our strategy.\nWe have passed on opportunities that did not meet our criteria or would not generate accretive growth.\nWhile we believe diversifying and expanding our footprint makes sense, we will also continue to explore acquisition opportunities in Northern Virginia, should they create greater value.\nThe Washington apartment market is exhibiting some of the same positive trends that we are seeing in our Southeastern target markets.\nYear-over-year effective rents climbed 640 basis points from June to September.\nSuburban Virginia's performance followed a similar pattern, but with even stronger growth with year-over-year effective rent growth accelerating to 9.7% in September.\nOur DC portfolio is positioned well with 80% of our portfolio in Northern Virginia where the rapidly expanding consumer technology sector continues to drive job and income growth.\nFurthermore, our value-oriented price points offer favorable supply and demand fundamentals over the long-term as the regional housing shortage worsens and cost of ownership and new apartment supply remains unaffordable for mid-market renters.\nAs many of you know we have been planning this transformation for several years and our transformation plan includes bringing property level management in-house while building a new operating platform for the future.\nOver the past year, we have worked with a consultant to map out a plan to optimize our operational design as we scale our multifamily portfolio.\nWe are now in phase one of this project, which includes three phases in total.\nWe're making steady progress against the road map that we laid out and we anticipate that by the time of our year-end call, we will have selected all technology, establish the elements required to support our operations including a comprehensive human capital program and established a new brand that best defines our approach for investors, residents and employees.\nAt that time, we expect to be able to give guidance on G&A and transformation costs as we will be actively building out the platform.\nWe hope to execute phase two, which includes core platform implementation in 2022 and phase three, which incorporates the onboarding of our property management functions to our internal systems starting in late 2022 into mid-2023.\nWhile we control our revenue strategy and do all capital planning internally, day-to-day marketing, maintenance and property management staffing have been outsourced.\nFollowing the complete internalization of property management and enhancements to our operational platform, we expect to realize significant operational benefits from streamlining our business processes through the use of technology to establishing a closer connection with our residents to operational design efficiencies as we scale the business and optimize G&A expenses.\nAt the property level, we believe that there are operating efficiencies ahead of us from internalizing property management because we are designing an operating platform aligned with our strategies for resident experience and employee satisfaction and growth.\nBy utilizing corporate functions in a centralized model, we can be highly scalable, which will allow us to grow NOI at a much higher rate than G&A expenses.\nBy designing and implementing our operating platform from scratch, we are not limited by existing infrastructure and will offer value and opportunity to all our stakeholders.\nThe lease rate momentum that we experienced during the summer months has continued into the fall and we are positioned well heading into the winter months with low double-digit lease rate growth on our most recent new lease executions.\nNew lease rate growth was 9% for leases signed in September and 11% for leases signed thus far in October on an effective basis.\nOn the renewal side there has been very strong demand and the renewal lease rate growth was over 6% for September renewals and over 7% for October renewals on an effective basis.\nConcessions declined dramatically from June through September and are nearing pre-COVID levels.\nTotal concessions for September move-ins declined over 95% compared to June move-ins driven by both a decline in the number of new leases with concessions and a decline in the average concession amount per lease.\nThe percentage of new leases with concessions declined from an average level of 60% during the first half of the year to only 9% of new leases for September move-ins.\nThe average concession value for new leases where concessions were granted, declined by 60% from $1300 for June move-ins to approximately $560 per home for September move-ins.\nOccupancy remains strong, with a forward trend that will allow us to continue to increase rents.\nSame-store average occupancy grew 40 basis points in October, compared to the third quarter.\nOur suburban lease rates continue to outperform our urban lease rates, although the gap has narrowed due to the strong rebound we're experiencing in our urban portfolio.\nBlended lease rate growth was 7% for leases signed in September and over 8% for leases signed in October on an effective basis which represents a significant increase in the third quarter average.\nFor move-ins that took place during the third quarter, blended lease rate growth was 3.5% on average on an effective basis, representing a 620 basis point increase from the second quarter.\nLease rate growth for September and October move-ins and lease executions with November and December move-in dates, indicates steady and consistent improvement through year-end.\nWe expect strong lease rate growth through the winter months and into the spring and summer leasing seasons in 2022.\nRents have shown a swift recovery.\nThe inflection as indicated by the rapid weekly improvement in lease rate growth, began toward the end of June and rental rates improved rapidly through the summer.\nIn August, we started signing new leases that were above pre-COVID levels for the majority of our portfolio.\nSpecifically, the average effective rent for new leases in the third quarter was above the same month in 2019 for 17 of our 21 same-store properties.\nIn fact, new leases for our suburban portfolio were 10% above the 2019 level on average in the third quarter, highlighting how well our suburban properties performed during the pandemic.\nWe expect to see steady growth in average portfoliowide rent levels, as the market recovery works its way in our rent roll, over the next year.\nOur ability to capture this embedded growth will be slower during the winter months, as less than 25% of our leases expire between November and December.\nDuring this time, we will be focused on balancing rent growth with retention as maintaining a balance and fundamentals heading into 2022 will set us up, for anticipated exceptionally strong spring and summer leasing season.\nAs we enter the spring and summer, we will be positioned to capture both the impact of the recovery and market rent growth beyond the COVID-related recovery.\nTrove lease-up momentum continues and it is now over 85% occupied.\nWe expect Trove to be a key growth driver adding approximately $7 million of NOI in 2022 and $7.6 million of NOI in 2023.\nWe also continued to monitor demand levels at Riverside, where we have a shovel-ready opportunity to add 767 units which we put on hold when COVID hit.\nWhile lease executions of Riverside are on a positive trend, we're currently monitoring projected lease rate growth, to support this development.\nOur renovation programs are actively ramping up, after they were temporarily paused during the pandemic.\nWe have a pipeline of approximately 2,700 units in our same-store portfolio.\nAs expected, the pace of renovations picked up through the summer months, while unit turnover is seasonally high.\nIn many cases we preserve the renovation opportunity for the next turn, as we're achieving strong effective rent growth without currently having to make a capital investment.\nYear-to-date we have fully renovated over 130 units and have invested capital in upgrading 110 additional units.\nWe are securing low to mid double-digit cash on cash returns year-to-date.\nWe expect to spend $3 million in our renovation program this year ramping up to approximately $7.50 million to $8 million next year for the current same-store portfolio.\nIn the spirit of our transformation into a multifamily REIT, we have made changes to our earnings materials and non-GAAP financial metrics to be more in line with and comparable to other multifamily REITs.\nFirst, we provided a more detailed expense breakdown of both controllable and non-controllable expenses including property operating, taxes and insurance and property management.\nSecond, we've included detail of our same-store operating results by geographic region as we continue executing our strategic plan to diversify in the multiple geographic regions.\nThird, we modified our calculation of NOI to exclude property management expense which is more consistent, with the multifamily industry standard and better presents the impact of our trends in occupancy rates, rental rates and operating costs and our operating performance.\nWe retrospectively adjusted our previously reported multifamily NOI for comparability.\nAnd overall this adjustment has increased our NOI margin by 300 to 400 basis points.\nFourth, we updated our definition of NOI for residential communities to exclude NOI from ground level retail tenants.\nFifth we changed the name of the non-GAAP measure funds available for distribution or FAD to AFFO because we believe that AFFO is the more common term in the multifamily sector.\nWe do not make any change to the calculation and there is no difference in the definition of AFFO and FAD as previously labeled.\nSixth, we expanded our disclosure of same-store metrics adding operating margin and effective lease rate growth.\nAll of these adjustments are described in detail on page 14 of the third quarter earnings package.\nNow turning to financial performance.\nNet income for the third quarter of 2021 was approximately $31 million or $0.37 per diluted share compared to a net loss of $1 million or $0.01 per diluted share in the prior year.\nCore FFO was $0.20 per diluted share reflecting a year-over-year decline of $0.16 due to the impact of our commercial asset sales.\nMultifamily same-store NOI declined 40 basis points compared to the prior year driven by the impact of leases signed during the pandemic.\nAs expected, the rapid rebound in core multifamily operating trends that began toward the end of the second quarter is and will continue to have a more gradual impact on our financial performance.\nWhile new lease executions began to improve rapidly starting in June and into July those movements started to impact our results in late August and we expect the inflection in lease rates to have a greater impact on our fourth quarter results.\nFurthermore, the impact of the concession amortization peaked during the third quarter driven by the timing of the peak in concessions which occurred toward the very end of 2020 and into the first quarter of 2021.\nThe impact of concessions and amortization or in monthly NOI peaked in August and began to decline on a monthly basis in September.\nExcluding the impact of amortization related to concessions granted in prior periods same-store multifamily NOI increased 2% on a year-over-year basis during the third quarter.\nOur resident credit continues to be excellent.\nFor the small amount, of delinquent rents that we have local rent assistance programs have helped us on the margin today.\nWe collected 99% of multifamily rents during the third quarter and received $400,000 of local government rent assistance from residents.\nYear-to-date residents have received over $1.4 million of rental assistance.\nOther NOI which represents Watergate 600 declined 4.9% in the third quarter compared to the prior year primarily due to higher taxes and payroll expenses and a favorable bad debt recovery in the prior year period.\nLeasing activity at Watergate 600 has been steady, despite the challenging environment of the DC office market.\nWe signed an 8200 square foot new lease with a credit tenant during the quarter and two renewals and one expansion post quarter end.\nOur percentage leased has increased to 92% and we have activity to allow us to create further value in the asset.\nThis one remaining office asset is an iconic building with Riverfront and monument views, high-quality institutional tenants and a weighted average lease term of eight years and we continue to see opportunity to create value by owning and leasing Watergate 600.\nNow touching on our outlook for the balance of the year.\nWe are reinstating full year 2021 guidance with a core FFO range of $1.05 per share to $1.08 per share.\nWe estimate that our same-store multifamily portfolio will contribute between 90 and $90.5 million of NOI for the year.\nAt the midpoint this implies an approximate 4.5% multifamily growth rate for the fourth quarter compared to the prior year period.\nWe expect healthy same-store NOI growth in the fourth quarter and further growth in 2022.\nTrove and The Oxford are expected to contribute between $3.75 million and $4.25 million of 2021 NOI.\nWatergate 600 is expected to contribute approximately $12.75 million of NOI.\nWe completed the sale of the office portfolio on July 26th for gross proceeds of $766 million and completed the sale of retail portfolio on September 22nd for gross proceeds of $168.3 million.\nWe acquired The Oxford on August 10th, which as Paul highlighted has performed very well thus far and is tracking ahead of underwriting based on rents.\nAs we've discussed, we entered into binding agreements to acquire two communities in the Atlanta market for $106 million and are moving toward an additional binding agreement for another property $97 million.\nAll three of these transactions are expected to close during the fourth quarter.\nWe redeemed all $300 million of senior unsecured notes that previously were scheduled to mature in 2022 on August 26 and repaid $150 million of amounts outstanding under the term loan maturing in 2023 on September 27.\nWe ended the quarter with a very low net debt to EBITDA ratio of 1.4 times.\nWhile we may be in the mid to high five times net debt to adjusted EBITDA range in the first year after executing these transactions, as we progress through the second and third years of multifamily NOI growth, we would aspire to operate in the lower half of the five times to six times range.\nWe have very little debt maturing in the near term none earlier than 2023.\nAnd our equity versus debt ratio is expected to get close to 80% to 20% which will be very strong.\nWe have no secured debt in our capital structure, which provides us with flexibility to take on some agency debt or other secured debt as we acquire apartments.\nMoreover, we believe we will continue to have most of our line available.\nSo strong liquidity will be maintained.\nWe currently have approximately $1 billion of liquidity including the full availability of our $700 million line of credit, which we further extended another four years this quarter.\nWith this report, we are proud to be among the first multifamily REITs to commit to achieving net-zero carbon operations.\nWe detail a number of exciting ESG projects underway including pursuit of green building certifications for multifamily Class B assets growing our pipeline on on-site solar projects and the integration of climate risk into the company's overall enterprise risk management framework including evaluating climate risk and asset resilience as part of our underwriting process.\nOverall, we are off to a very good start progressing on our geographic expansion and have executed most of our transformation to a multifamily company.\nWe have completed the sale of our commercial segments and we have closed on one asset have two others under contract and as we said have been awarded one more asset in Atlanta.\nWe have an active pipeline of opportunities that align with our strategies and we remain confident, we can allocate this capital appropriately over the balance of this year and into early next year.\nFor the balance of 2021, we remain focused on investing our remaining capital and firming up our plan to transform and expand our operating model.\nWe expect to achieve operating efficiencies as we scale the business and execute our plan to bring property-level operations back in-house.\nWe look forward to keeping you updated on our progress as we expand our geographic footprint and transform our operating platform.\n Assistant:", "chosen": "q3 core ffo per share $0.20.\ncore ffo for 2021 is expected to be $1.05 to $1.08 per share.\n"}
{"prompt": "Human: We refer to certain of these risks in our SEC filings.\nParticipating in today's call with me will be Paul McDermott, President and Chief Executive Officer; Steve Riffee, Executive Vice President and Chief Financial Officer; Taryn Fielder, Senior Vice President and General Counsel; Drew Hammond, Vice President, Chief Accounting Officer and Treasurer; and Grant Montgomery, Vice President and Head of Research.\nI hope you and your families are keeping safe and well.\nLast evening, we released our fourth quarter earnings results, which rounded out a year, dedicated to stabilizing our operating fundamentals and maintaining and preserving future growth drivers against the backdrop of one of the most challenging operating environments in recent history.\nWith the vaccine roll-out that commenced toward the end of last year, we are seeing signs of increased activity across both our multifamily and commercial portfolios.\nFor multifamily, net applications were up 30% year-over-year in January for our urban properties, and year-to-date trends already reflect improvement in occupancy as we head into the spring leasing season.\nWe are focused on growing occupancy to begin reducing concessions and increasing rents.\nCurrently, multifamily occupancy is over 95%, excluding our two rent-controlled properties where we are not emphasizing occupancy gains as they offer limited rent growth potential in the current environment.\nMultifamily credit performance continues to remain very strong at both our urban and suburban properties and has consistently outperformed the national average by a wide margin over the past year.\nWhile multifamily lease rates declined 3.6% and 5.7% on a gross and effective blended basis during the fourth quarter, we believe that December represented the height of rental rate pressure as lease rate changes improved in January on a month-over-month basis and concession declined.\nFurthermore, new and renewal lease executions with commencement dates in February and March indicate continued improvement and effective lease rate growth.\nOur renewal rates were strong during the fourth quarter and that strength has continued into 2021.\nBoth urban and suburban renewal lease rate growth increased by 90 basis points during the fourth quarter to 1.7% and 3.1% respectively, and those renewal rate increases remained stable through January.\nThe continued pricing power that we are experiencing at our suburban assets, combined with the ability to influence lease terms with concessions, has allowed us to roll more leases into future spring and summer lease maturities at our newest multifamily assets.\nAs a result of the strategic management of our lease expiration schedule, only 20% of our leases expired during the fourth quarter and only 17% expire in the first quarter.\nWe think December marked the low point for pricing given the improving year-to-date trends that we are seeing.\nWe believe the vaccine-led recovery will lead to an inflection in 2021 heading into 2022.\nHowever, it is too early to know the precise timing and extent of this benefit in 2021.\nApproximately two-thirds of our multifamily leases expire in the stronger spring and summer months, and we anticipate that these leases will benefit from an increased number of vaccinations.\nIn the meantime, we plan to continue to focus on building occupancy and maximizing our retention rates, which continue to outperform our region.\nMoving onto commercial, our credit performance continues to hold up very well as Steve will discuss in greater detail.\nAnd we expect that the vast majority of our commercial credit losses are behind us.\nOur forecast indicates that commercial occupancy could increase by nearly 4% by year-end although there is still too much uncertainty to accurately forecast occupancy gains over the course of the year.\nHowever, our outlook is improving, and we are seeing signs that tenant decision-making is accelerating.\nLeasing activity picked up significantly in January and active long-term renewal discussions with significant tenants are progressing well.\nFor example, in January, we've received the signed LOI from Sunrise Senior Living to renew their space at Silverline, which currently represents approximately 1.5% of office revenue.\nWe also have signed LOIs with B. Riley and then an accredited third-party at Arlington Tower.\nB. Riley has a termination option in December 2022 and will exercise this option on only one of its three floors, which allow the third-party to enter into a sublease for this entire floor through 2022 and then, enter into a direct lease with us through 2029.\nB. Riley will extend the balance of their premises through 2026.\nAdditionally, in January, we signed a 45,000 square foot five-year lease renewal with Giant Food that at Takoma Park, which represents our second largest retail tenant and over 6% of other rental income.\nWe also signed a 15,000 square foot 10-year lease renewal with our grocery-anchored at Montrose Shopping Center.\nThese two lease renewals represent approximately 10% of our retail rental income.\nHeading into the recovery, our office portfolio offers substantial growth potential given that much of the available space is high-quality, move-in ready and located in our best assets.\nWe have a weighted average lease term of approximately five years, limited near-term lease expirations, and our price points and floor layouts are well positioned for our market.\nThe average tenant size in our market and the space requirement that seizes the most volume is about 4,000 to 6,000 square feet, which is both our medium tenant size and the tenant size with the highest demand in the current environment.\nWe have zero exposure to co-working operators, no co-working tenants and no single-tenant risk.\nWe continue to see good traction with Space Plus, which is our proprietary flexible office program that is managed in-house with spaces strategically located in our portfolio.\nSpace Plus represents approximately 3% of our office portfolio and is very well positioned once decision-making picks up.\nSpace Plus is move-in ready space that is private, not co-working space that allows tenants to control the health and safety of their environment and it offers more flexibility than traditional leases.\nAdditionally, Space Plus offers premium pricing compared to traditional leases and on average, has much longer terms than co-working providers achieve allowing us to participate in the increasing demand for flexible office space, while preserving our weighted average lease term, and thus our opportunities for future portfolio transformation.\nWhile uncertainty about the timing and pace of reopening remains, the resilience of our region provides relative stability compared to other major metropolitan areas.\nSince the onset of the pandemic, the Washington Metro has benefited from fewer job losses than other major metropolitan areas and has already gained back roughly 180,000 jobs or 56% of the jobs lost from February to May.\nAdditionally, those job losses have been largely contained to non-office-using sectors as office-using sector employment in the Washington Metro market declined only 2% year-over-year in 2020 according to BLS data.\nAs we continued down the path toward a vaccine-driven recovery, our region has several unique catalysts to accelerate the rebound in demand.\nThe growing, high-tech labor pool, federal investments in cloud, cyber and artificial intelligence as well as affordable office rents continue to drive information sector leasing activity in Northern Virginia.\nAmazon continues to expand their regional office footprint and remains on pace with HQ2 hiring.\nOver the course of 2020, the tech sector contributed 36% of total leasing volume and more than 800,000 square feet of occupancy growth in Northern Virginia according to CBRE.\nTech-driven leasing demand drove positive absorption for the sector in the fourth quarter and that momentum has continued into January with the announcement of Microsoft's new 180,000 square foot sales headquarters in Rosslyn, next door to Arlington Tower and strategically located at the nexus of four bridges, five major road networks and three metro lines and offers easy access to the Pentagon and Downtown DC.\nGovernment contract awards should remain at record highs in 2021 and the cloud market alone is forecasted to grow 9% to 10% annually over the next three years according to JLL.\nLot of Virginia's diversification over the past decade, blending government contracting with direct federal leasing, technology sector growth, investments in higher education, and medicine have set it up for a quicker-than-average office market recovery in 2021 and beyond according to Newmark.\nWith the arrival of our newly aligned administration, the Washington Metro market is positioned to benefit from a surge in activity.\nHistorically, alignment between the executive and legislative branches has resulted in a higher number of legislative bills passed with increased lobbying and legal presence in DC to influence, write and then implement legislation resulting in higher absorption in the DC office market.\nA historical correlation to office absorption in years with aligned [Phonetic] branches of the government is very strong.\nAdditionally, the election should have a positive effect on our local partner market and may even accelerate a shift back into the city for renters.\nData analyzed by CBRE over the past six Presidential elections indicates that on average DC Metro rent growth was more than double the US average during the six months subsequent to each election.\nFurthermore, market-level data indicates that urban submarkets, which have underperformed suburban areas during this downturn, will likely benefit the most from the boost of activity associated with the Presidential election.\nAgain these are catalysts historically unique to the Washington Metro area as opposed to other gateway metropolitan markets.\nIt has been an eventful and unexpected year and alongside the challenges that we have successfully navigated, we continue to make progress on derisking and improving our portfolio.\nThis pandemic has reaffirmed our commitment to and the direction of our capital allocation strategy as part of the WashREIT transformation.\nFollowing our fourth quarter office asset sales and including stabilized income from Trove, multifamily comprises 53% of our NOI, while office and retail comprise 41% and 6% respectively.\nI'll start off today by reviewing the balance sheet before discussing our fourth quarter and full-year financial performance and future outlook.\nIn the midst of the uncertainty that dominated the capital markets during 2020, we took steps to strengthen our balance sheet and increase our operational flexibility, which has put us in a stronger position as we head toward the recovery phase of the pandemic.\nFirst, we made sure that we had ample liquidity at the onset of the pandemic by entering into a $150 million one-year term loan with extension rights.\nSecond, we closed and funded in December a $350 million 10-year Green Bond at 3.44%, and we used the proceeds to pay off the new $150 million term loan and our other $150 million term loan that was scheduled to expire in March of 2021.\nThese actions address all of our debt maturities through the fourth quarter of 2022 and turned out our maturity ladder.\nThird, we fully unencumbered the balance sheet, allowing us optimal flexibility as we continue to allocate capital to further multifamily growth.\nFinally, we increased our balance sheet flexibility heading into 2021 with our strategic office asset sales and issued some equity through the ATM program to be ready to continue our capital allocation when visibility into the recovery is more clear.\nIn that regard, at year-end, we only had $42 million outstanding on our fully available $700 million line of credit, underscoring that we increased our liquidity further during the pandemic.\nAll of our covenant ratios remained strong, and we maintained our Baa2 and BBB flat investment-grade ratings with Moody's and S&P.\nNow, I'll turn to our cash collection performance.\nOur multifamily collections continue to be excellent trucking well above national averages.\nWe collected 99% of cash and contractual rents during the fourth quarter, and our rent collections through January are in line with our quarterly trend.\nWe've offered deferred payment programs to residents who've been financially impacted by the pandemic and only a very small amount, about $15,000 of deferred multifamily rent remains outstanding.\nOur office and retail collections for the fourth quarter improved sequentially, continuing the trend of steady quarterly improvement since the beginning of the pandemic.\nWe collected 99% of cash rents from office rents -- from office tenants during the fourth quarter and over 99% of contractual rents, which excludes rent that has been deferred.\nWe deferred rent associated with office tenants and that amount was $1 million as of January 31.\nAnd we expect to collect approximately 75% of that rent that was deferred by year-end with the balance thereafter.\nWe collected 94% of retail cash rents in the fourth quarter and excluding deferred rent, our collection rate was approximately 97%.\nNet deferred rent associated with retail tenants was $1 million as of January 31, 2021 and we expect to collect 40% of that rent at year-end.\nOverall, we've only deferred a small portion of rent and the expected cumulative cash NOI impact is less than $0.01 per share through year-end 2021.\nNow turning to our financial performance.\nNet loss for 2020 was $15.7 million or $0.20 per diluted share, compared to net income of $383.6 million or $4.75 per diluted share in the prior year.\nThe largest decrease is primarily due to the net gains on asset sales that were executed during 2019 compared to small losses recorded on sales in 2020.\nCore FFO of $1.45 per diluted share for full-year 2020 was in line with the midpoint of our guidance range.\nOn a year-over-year basis, core FFO per share declined by $0.26 due to the strategic transactions completed during 2019 as well as the impact of the pandemic on leasing activity, parking income and credit losses.\nOverall, same NOI declined 5.4% year-over-year on a GAAP basis and 4.9% on a cash basis for the full-year 2020.\nMultifamily same-store NOI declined 0.9% and 1% on a GAAP and cash basis for the year and 7.2% and 7.3% on a GAAP and cash basis for the fourth quarter.\nThe full-year and fourth quarter declines were primarily driven by the year-over-year new lease rate declines at our urban assets, which comprise 100% of our same-store portfolio during 2020.\nThe impact of lease rate declines has an outsized impact on our same-store results during the fourth quarter as the impact of urban flight [Phonetic] on overall demand levels had a greater impact on lease rates during the winter months that were weaker.\nOur suburban properties where lease rate performance has been the best will be included in the same-store results in 2021.\nDuring the fourth quarter, we focused on maintaining occupancy and ended at 94.3%, excluding Trove.\nOffice same-store NOI declined 7.1% and 6.4% on a GAAP and cash basis for the year and 12.7% on a GAAP and cash basis for the fourth quarter.\nThe full Year and fourth quarter declines were primarily driven by lower parking income, no move-outs and increased credit losses reflected in the write-off of two isolated and specific receivables and a more significant lease intangibles related to COVID-19.\nSame-store GAAP NOI decreased for our remaining retail centers, which we report as other, by $2.1 million and $1.8 million on a GAAP and cash basis for the year and $0.7 million on a GAAP and cash basis for the fourth quarter.\nThe full year and fourth quarter declines were primarily driven by credit losses related to COVID-19, which increased in the fourth quarter primarily due to the write-off of intangibles related to two leases.\nOverall, commercial credit losses reduced our core FFO by approximately $0.02 per share this quarter, which is higher than the third quarter impact and in line with the second quarter.\nHowever, the sequential increase this quarter was primarily driven by the write-off of intangibles related to the aforementioned leases, which are not indicative of change in the credit performance of our overall portfolio, which remains very strong and stable.\nOver 60% of the credit losses related to these leases were non-cash straight-line rent write-offs as our cash losses were relatively flat on a sequential basis.\nWe believe that we've addressed the credit risks that are apparent at this point in time.\nAnd we anticipate steady improvement in credit performance over the coming year.\nTurning to leasing activity for the fourth quarter and full year, we signed approximately 9,000 square feet of new office leases and 22,000 square feet of office renewals in the fourth quarter.\nOffice rental rates declined 5% on a GAAP and 9% on a cash basis for new office leases, but increased 22% on a GAAP basis and 8% on a cash basis for office renewals.\nMore importantly, in December, the exchange of proposals and the negotiation of lease renewals picked up substantially and that momentum has carried into January.\nEarlier, Paul gave color on two of our largest renewals and extensions at Silverline Center and Arlington Tower, for example.\nRetail signed approximately 8,000 square feet of new leases and 3,000 square feet of renewals during the quarter and achieved rental rate increases of 13% on a GAAP basis for new retail leases and 3% on a GAAP basis for retail renewals.\nAnd as Paul referenced, we signed approximately 60,000 square feet of retail leases, representing 10% of our retail portfolio revenues since year-end.\nNow turning to our outlook.\nWith the development and roll-out of vaccine programs and our growth prospects heading into 2021 have improved, but the timing of when we will reach, an inflection point is still unknown.\nTherefore, the extent that vaccine roll-outs will offset the pandemic in 2021 prior to the inflection is uncertain.\nWe do, however, believe we will see rapid improvement once we get to that point and then, it will carry over into 2022 given that the embedded growth drivers that we had prior to the pandemic are still intact.\nWhile we believe the most disruptive part of the pandemic is behind us, the timing and pace of the economy reopening still remains uncertain.\nAnd we're not ready to forecast with a sufficient degree of accuracy, the timing and extent of the recovery over the course of the full year.\nJust close to quarter-end, we have enough visibility to provide FFO guidance for the first quarter.\nHowever, we do not have enough visibility to provide FFO guidance for the full year.\nWe are, however, providing full-year guidance ranges for the financial performance metrics that we believe we are able to forecast with a reasonable degree of accuracy.\nWhile we're not calling the timing of and therefore, the full impact of the pandemic prior to the anticipated inflection point, we will discuss the areas of our portfolio that we would expect to be the most responsive and to offer the most upside growth potential once the economy resumes.\nStarting with multifamily, total operating portfolio occupancy ended the year at 94.3%, which is in line with our expectations and represents a relatively stable trend since the end of the second quarter.\nOn a positive note, as Paul mentioned, we've gained occupancy since year-end and leading indicators point toward steady improvement in occupancy as we head into the strong leasing season.\nWe've increased occupancy to slightly over 95%, excluding our two rent-controlled assets, and we are seeing effective lease rates trending in the right direction.\nAdditionally, net application volumes have increased significantly on a year-over-year basis for urban properties.\nOverall, we have previously expected significant multifamily growth in 2020 and that growth is likely now going to be deferred until the economic recovery led by the greater vaccination takes hold.\nWhile we do expect the seasonal lift in the second quarter, we expect the broader inflections incur at some point in 2021 heading into 2022.\nIt's important to have a greater impact on 2022.\nWe have a five-year pipeline of value-add renovations ready to resume once conditions improve.\nAnd we still expect future NOI growth in the Trove, which I'll cover next.\nIn terms of our renovation pipeline, we're constantly evaluating the health of each of our submarkets for rent growth and renovation potential, and we are encouraged by the metrics that we're seeing, especially in our newly acquired suburban portfolio.\nCertain submarkets in the metro area are seeing the rent gaps between Class A and Class B rents widening, which is an early indicator of renovation potential, while other submarkets continue to see rent gaps tightening.\nWe are monitoring these trends, and we will resume renovations when the sub-market fundamentals allow for rent increases to deliver the appropriate ROI and we know that capital allocation is accretive.\nTrove delivered its final phase in the fourth quarter, and leasing momentum continues to increase.\nWhile lease-up has just begun when social distancing measures drew on-site touring to a halt in April, we continue to make substantial progress on lease-up and have maintained the monthly lease-up rate that is above long-term regional average against an extremely challenging backdrop.\nWe reached breakeven in December and remain on track to reach stabilization in early 2022.\nWe expect Trove to add $100,000 of income in the first quarter, ramping up each quarter to approximately $1 billion by the fourth quarter of 2021 with significantly greater growth in 2022 over 2021 levels.\nNow moving onto commercial.\nAs expected, occupancy remained relatively flat through the year-end.\nAnd while we only have a small amount, approximately 20,000 square feet of signed new leases that have not yet rent commenced and approximately 20,000 square feet of signed LOIs for new leases that are expected to rent commence during 2021, we have minimal lease expirations during 2021.\nOur 2021 office lease expirations represent less than 3% of our overall revenue.\nAnd we believe that our renewals likely over go [Phonetic] or we are under negotiation for renewal for over 60% of that space.\nWe do not have enough visibility on the timing of the inflection point for new office leasing, but it will be driven by combination of widespread vaccination roll-out, schools reopening and the general community returning to more normalized activities.\nWhen that occurs, it will impact the timing of new lease commencements.\nWe have a forecast that can result an occupancy growth of up to 4%, but that forecast is at risk if new leasing is delayed.\nFor example, that forecast includes a little over $3 million of new leasing revenue in the fourth quarter.\nThat would be at risk if the infection does not happen sooner.\nSo we're not ready to provide a guidance range yet without more visibility.\nFollowing the two retail renewals, which were executed in January and which represent 10% of our retail NOI, we have less than 3% of retail revenue expiring in 2021.\nWhile we are seeing recent signs, I've been experiencing increased activity across our office portfolio.\nOne of the most challenging calls for us to make is when sentiment will return and decision-making will pick up to even higher levels again and when those additional lease commencements will begin.\nWith that said, we believe that we are positioned well once activity improves.\nAnd we expect our office portfolio to be highly responsive to the economy reopening.\nThe majority of our vacancy is in high-quality space, some of which is in move-in ready status.\nNearly 60% of our current vacancy in Northern Virginia where job growth and absorption rates were the strongest and where we are seeing the most touring and leasing activity.\nParking revenue improved slightly over the course of 2020, driven by an increase in transient parking, but remains below normalized levels.\nCompared to other major metropolitan areas, our parking coverage is higher, which allows more of our tenants to choose to drive instead of taking public transportation.\nOur parking garages' capacity can serve over 50% of our building population prior to the pandemic on average, and we still currently have at least 50% parking capacity available, which provides an option for companies that want to encourage employees to return to the office before sentiment improves toward public transportation.\nWe are guiding to a core FFO per share range of $0.29 to $0.32 per share for the first quarter.\nWe expect multifamily NOI to range from $20.25 million to $20.75 million, office NOI to range from $17.75 million to $18.5 million and other NOI of approximately $3 million.\nG&A is projected to range from $6 million to $6.25 million; interest expense is expected to range from $10 million to $10.25 million; and development expenditures are expected to range from $5 million to $7.5 million.\nWe expect NOI to bottom in the first quarter, driven primarily by our year-end asset sales.\nFollowing the first quarter and absent any major setbacks through the current gradual pace of reopening, we expect sequential growth throughout the year to be driven by the lease-up of the Trove, the benefit of the more favorable multifamily leasing seasons coming off in the winter months, the phased resumption of unit renovations and commercial rent commencements.\nTherefore, we expect our full-year results for 2021 to be higher than the first quarter annualized results.\nSince our last earnings call, we sold two office assets and issued approximately 2 million shares through our ATM program at an average price of $23.86 per share to improve our balance sheet and position us to further strengthen our capital allocation once visibility aligns with opportunity to increase multifamily.\nCurrently, we are not planning on reinvesting those proceeds in the near term.\nThus we estimate at this time that these two initiatives, net of their interest impact, will further strengthen our balance sheet and lower full-year 2021 core FFO by approximately $0.09 per share.\nFor the full year, we expect G&A to range from $22.25 million to $23.25 million and interest expense to range from approximately $41.5 million to $42.5 million.\nThese ranges do not assume any acquisitions are completed during the year.\nAdditionally, assuming that leasing activity and utilization continues to increase and we achieve occupancy growth by year-end, we expect commercial operating expenses to increase by approximately $1 million by the fourth quarter from the first quarter expected range of $11.75 million to $12.25 million.\nWe believe that during '21, the vaccine distribution should create a positive recovery inflection point.\nAnd from that point forward, we should see improvement with more to follow in 2022.\nDuring what was a challenging and unexpected year, we supported and protected our residents and tenants, stabilized our operating fundamentals, strengthened our balance sheet and preserved long-term growth opportunities.\nWhile the timing of when we will reach an inflection remains uncertain, we believe that it will happen at some time in the second half of 2021 and that we are positioned for rapid improvement once we reach that point.\nOur region has several unique catalysts to accelerate the rebound in demand, including a strong economy and favorable demographics.\nHistorically, we have seen Washington office absorption increase significantly when the White House and both branches of Congress are aligned with one party correlating with increased legislation, lobbying and law implementation.\nThat is a promising opportunities that we will be monitoring.\nWe also expect the apartment market in the region to receive a relative boost compared to other markets over the six months based on historical patterns following Presidential elections, which should coincide with our strongest seasonal leasing months.\nLong-term, our research indicates that we should expect sustained growth in Northern Virginia, driven by government contracting, technology sector growth and investments in higher education.\nWhile we certainly have not emerged from the pandemic at this point, we are seeing signs of our multifamily occupancy strengthening, concessions starting to decline and improvement in effective lease rates, all of which are positive trends heading into our stronger, seasonal leasing months.\n Assistant:", "chosen": "qtrly nareit ffo was $26.7 million, or $0.32 per diluted share.\n"}
{"prompt": "Human: Although, we believe these statements reflect our best estimates and all available information, we cannot make any assurances that these statements will materialize, and actual results may different significantly from our expectations.\nThe company undertakes no obligation to publicly update or revise any of these statements to reflect events or circumstances that may arise after the today's call.\nAdditionally, we will refer to certain non-GAAP financial measures.\nThese measures should not be considered replacements for and should be read together with our GAAP results.\nWe're extremely proud to deliver yet another quarter of outperformance with comps of 16.9%, building to an accelerated two-year stack of 41.3% and operating margin expansion of 60 basis points.\nThese results are a function of both the advantages of our distinctive positioning in the market and our successful execution against our long-term growth strategy.\nFurthermore, our performance demonstrates that we continue to take share in a fractured market and deliver high-quality, sustainable earnings.\nAs a result, we are raising our full year outlook to reflect revenue growth of 22% to 23% and operating margins of 16.9% to 17.1%.\nCustomers are clearly responding to our products and channel strategies, and we expect to drive an outstanding finish to the year and beyond.\nOn the macro front, the industry remains large and fragmented, with more than half of its sales generated from smaller brick-and-mortar retailers.\nWe are one of the strongest market players and have incredible opportunity to capture more of an almost $1 trillion market opportunity.\nWe are at a pivotal point of change, both in the way we live and work, and we will intensely focus on our unique ability to capitalize on this change and, in turn, capture market share.\nThe housing market continues to hold strong with purchases of larger first and second homes.\nAdditionally, hybrid work arrangements continue to gain traction as a permanent work model.\nBoth of these trends result in a stronger need and desire to outfit the home for working, entertaining, and cooking.\nIn addition, another large point of disruption is the shift of the consumers to make purchases online.\nCertain factors continue to bolster the shift in behavior, including the lasting impact of the stay-at-home dynamics of the pandemic and the entrance of the millennial generation into their home formation years, a customer segment who naturally gravitates toward digital purchasing.\nIn an industry occupied by market players who have not yet made significant investment in their e-commerce capabilities and pure e-commerce players without the service element of our retail business, we believe we are uniquely positioned to benefit from this trend as a digital first, but not digital-only company.\nOur incredible store shopping experience satisfies our cross-channel customers who shop both online and in-store.\nOur customers continue to place importance on and in many instances, demands the prioritization of sustainability.\nIn fact, almost 70% of consumers today want to support brands that are purpose-driven and doing good in the world we share.\nOur company is committed to being a value-led, sustainable company and is proud to be a leader in the home furnishing industry.\nIn short, the fragmented industry, the strong housing market, the shift of the consumer online, and the consumer demand for sustainability provide specific unique and sizable opportunities for our company to continue to grow.\nAnd these macro trends are a perfect fit with our key differentiators.\nOur in-house design capabilities, along with our depth ability to value engineer our products, allow us to offer exclusive, relevant, and high-quality products.\nOur channel strategy provides a competitive edge in scaling the business into the future compared to both the retail and marketplace dominant players.\nAnd of course, our values, which are deeply rooted in sustainability, diversity, equity, and inclusion, are embedded in our products and central in our actions.\nThese principles have been and will continue to be fundamental and nonnegotiable to the customers and communities we serve.\nThis, combined with our growth strategies, not only provide for sizable opportunities to grow our core businesses, but also to drive momentum in reaching new customers, geographies, and industries.\nThis expansion and diversification of our customer base present many exciting opportunities to deliver solutions for underserved spaces and places, from B2B which brings an exciting new customer profile, to our global business which drives expansion across new geographies, to our cross-brand and marketplace opportunities which expands the reach of our current bank and to the expansion of Williams-Sonoma Home, which attends to an underserved, high-end luxury market and has massive future potential for scaling.\nWe have, in fact, many opportunities to drive our business forward into the next chapter of growth.\nSimply put, it's these macro shifts, combined with our key differentiators and our long-term growth prospects that result in us strongly believing in our ability to continue to take market share and deliver earnings well into the future.\nBefore we talk about Q3, let's take a minute to review the supply chain, which I know is top of mind for all.\nIt is no surprise that we have been intensely focused on the supply chain bottlenecks around the world.\nLike all companies, we are not immune to the ripple effect from these short-term and long-term delays.\nI want to share with you our status and the extraordinary accomplishments of the team.\nOur upholstery lead times continue to improve and are industry leading as a result of our in-house domestic capabilities.\nOur immediate and decisive responsiveness, our strong long-term vendor relationships and our scale have all minimized production and delivery delays relative to our competition.\nAnd as a result, approximately 85% of our holiday receipts have already been received.\nAnd finally, when we have delays, customer service is our priority, which has resulted in declines in escalations, cancellations, and calls into the care center.\nAll that said, I do want to highlight some important challenges we are facing as a result of this supply chain disruption.\nFirst, as you know, we sourced a sizable amount of inventory out of Vietnam, which was recently shut down for three months.\nThis country has since reopened but is experiencing significant backlog across factories as they ramp up.\nAs a result, we are experiencing some inventory delays, particularly in our children's home furnishings businesses.\nSecond, given the ongoing strong demand we are seeing across our business and the impact of the Vietnam delays, we do not expect full recovery of our inventory levels until the middle of 2022.\nNow let's turn to the results of the third quarter, which clearly demonstrates the strength of our business and our ability to execute with all brands outperforming again this quarter.\nWest Elm delivered a 22.5% comp, with all categories driving strong growth.\nThe upholstery business was very strong, and customers responded well to new products, including best sellers in bedroom, dining, and occasional categories.\nAdditionally, new categories such as Bass, Kids and Kitchens, also contributed to incremental growth.\nPottery Barn delivered another high-performance quarter, with a comp of 15.9%, driven by strong growth in all product categories, including our seasonal decorating business.\nIn addition, we saw strength across our core lifestyle furniture category, our design services, and our furniture advantage growth initiatives such as apartment and our curated marketplace assortments.\nPottery Barn Kids and Teens grew with a comp of 16.9%.\nThe demand for our GREENGUARD Gold-certified furniture remains strong, emphasizing the importance of both our proprietary design aesthetic and our commitment to sustainability in our customers' buying decisions.\nOur baby business continues to accelerate as our customers expand their families and the response to our holiday and gifting offerings was strong with Halloween products driving record results.\nBoth our exclusive products and WS branded products continued to grow, and we saw strength in key entertaining items.\nOperationally, an intensified focus in our key vendor partnerships has allowed us to increase inventory positions in high-demand categories, despite a supply chain-constrained environment.\nAnd we believe the improvements made to our online and store experience yield momentum in the quarter.\nFinally, last week, the brand launched a new recipe app and a reserve membership program, both of which provide a new way for our customers to engage with the brand while supporting our ongoing strategic initiative to develop and deploy content distribution.\nOur Williams-Sonoma Home business is also accelerating as a result of our strategy to reposition the brand as a premium online furniture destination.\nPottery Barn, we're excited to share that our B2B growth initiative continues to produce record performance with our largest quarter ever, generating over $200 million of sales, nearly double that of last year.\nSignificant accomplishments of the business include an increase of 44% in new clients over last year, an acceleration of our contract grade lineup as businesses reopen and growth and diversification in our large project pipeline.\nThe business is also building across industries, capturing additional market share.\nThis growth initiative continues to outperform, and we see significant opportunity for this business to contribute long term.\nIn our cross-brand global business, we are focused on expansion, but through a disciplined capital-light brand-enhancing franchise model.\nThis quarter, we opened our first franchise store in India and rolled out e-commerce capabilities across that country to great success.\nAs we look forward, we see additional opportunities to lead in digital around the world.\nAdditionally, our initiatives to promote selling across our brands continue to yield results.\nCross-selling metrics, including total customers and percent of total of customers shopping across brands, are at record levels.\nNot surprisingly, the spend of a cross-brand customer is a multiple of that, a single brand shopper, and increasing our share of spend with these customers will have a significant impact on incremental volume for the long term.\nWe are excited about the many initiatives we have in place to capture this opportunity.\nAlso in this quarter, we launched our new cross-brand credit card program, where customers can apply for credit, purchase, and earn rewards any of our brands.\nThis new initiative complements our existing loyalty program for all other tenders.\nThese two tiers of loyalty programs help us acquire and retain customers irrespective of their method of payment.\nThe advantage of our loyalty program is twofold.\nFirst, as we previously shared, the multi-brand customers were two to three times more than the single brand customer.\nWe know we have an opportunity to increase our share of wallet with these customers.\nAnd with our portfolio of complementary brands, this is a tremendous competitive advantage, few, if any, have in our industry.\nSecond, our loyalty program dramatically enhances the richness of our first-party data.\nWith almost 70% of our volume derived from e-commerce, we understand the importance of first-party data in the cookie less future that is rapidly approaching.\nThe loyalty program, along with hundreds of other attributes, in our in-house file is consolidated across our brands and channels, which allows us the ability to aggregate browsing behavior, transactions, demographics, channel preferences, and many other attributes.\nThis rich first-party data, along with our own in-house advertising expertise, allows us to be prepared and equipped as privacy rules evolve across the digital space.\nAnd finally, I'd like to spend a minute on our impact initiatives.\nWe are proud to announce that in the third quarter, we raised minimum wages again to at least $15 an hour for all of our employees.\nAdditionally, we also announced new goals to both expand our purchase of next ethically handcrafted products to 50 million and to nearly double our investments in fair trade certified products to 10 million by 2025.\nAs the first home furnishings retailer to set significant ESG goals, we continue to lead the industry.\nThese actions not only positively impact people and communities that make source and distribute our products but also deliver value to our stakeholders, customers, vendors, shareholders, and our communities.\nAnd our unwavering commitment to values is gaining further recognition.\nFor example, our Pottery Barn renewed program was included in Fast Company's 2021 Innovation By Design Awards.\nWe are rated top score about the Sustainability Furnishings Council for the fourth year running.\nAnd our MSCI ESG rating was upgraded to AA, driven by our strong commitment to ethical production and our newly announced climate goals, which further distinguishes our company as a leader in sustainability.\nAs we enter the fourth quarter, we are seeing strong sales and margins continuing.\nWe are thrilled with our customers' response to our holiday and gifting assortment, and we are ready to drive an outstanding finish to the year.\nOur teams are prepared to fulfill record orders leveraging our new technological capabilities and maximizing our digital-first omni advantage to meet the outsized demand we are seeing from our customers.\nIn summary, with our strong results to date, our winning positioning in the industry and our outperforming growth strategies, we are more confident than ever in the long-term strength of our business into fiscal 2022 and beyond.\nWe continue to be confident in our outlook of at least mid- to high single-digit comps, accelerating our revenues to 10 billion by 2024, with operating margins at least that of fiscal 2021.\nTheir talent, energy, and commitment underscore all of the success that we have had.\nAnd with that, I'd like to wish you all a happy holiday season.\nWe are pleased to report another quarter of record revenues and profitability.\nIt is clear that our high-quality products and value proposition are resonating with our customers.\nOur growth strategies are outperforming, and our operating model is positioned well to continue to deliver revenue growth and profitability into the future.\nOur unique operating model has proven to be a competitive advantage and difficult to replicate.\n95% of our products are proprietary or exclusive to our brands.\nWe have a vertically integrated digital first but not digital-only operating model that is nearly 70% e-commerce in an industry that primarily consists of brick-and-mortar or pure e-commerce players, and we are a sustainable and values-led company.\nThese advantages, along with the macro trends that favor our business, a strong housing market, the permanent adoption of hybrid work, a shift to online purchasing and the demand from customers for values and sustainability in their products are clearly driving our results and will fuel our growth and profitability for the long term.\nTurning to our third quarter results in more detail.\nNet revenues grew 16% to $2.048 billion, with comparable brand revenue growth of 16.9%, with comps accelerating to 41.3% on a two-year basis.\nThis strong performance was broad-based across all brands and both channels.\nIn fact, against tougher compares, our e-commerce business accelerated to over 67% of our total revenues from the second quarter and was our highest two-year comp ever at 64%.\nBy brand, West Elm delivered a 22.5% comp, taking year-to-date revenues for the brand to over $1.5 billion.\nPottery Barn, our largest brand, drove their fifth consecutive quarter of double-digit comps with a 15.9% comp.\nPottery Barn Kids and Teen grew at a comp of 16.9% and had their highest two-year comp ever.\nWilliams-Sonoma drove a 7.6% comp accelerating from the second quarter and on top of 30.4% last year.\nAnd our emerging brands, Rejuvenation and Mark and Graham combined continue to drive significant growth at a 26.5% comp, and all brands grew nearly 40% or higher on a two-year basis.\nMoving down the income statement.\nGross margin expanded 370 basis points to 43.7%.\nOur selling margins drove 280 basis points of this expansion.\nAnd relative to 2019, our selling margins are up 430 basis points, in line with our first half results, despite higher ocean freight costs incurred during the quarter.\nThese strong margin results reflect our pricing power from our proprietary design products and the advantage of our vertically integrated sourcing and production, which allows us to engineer our product for value and to best navigate through the various macro complexities.\nWe are pleased to deliver another quarter of strong top line sales and merchandise margin expansion.\nOccupancy cost leverage was also a factor in our gross margin expansion, leveraging approximately 90 basis points, resulting from higher sales and low occupancy dollar growth.\nOccupancy costs were approximately $183 million, up 5.1% year over year and relatively in line with our second quarter growth.\nThe year-over-year increase includes a one-time impact from rent true-ups and rent abatements last year, as well as the incremental impact from our new East Coast distribution center, which gives us additional capacity to support our strong customer demand.\nWe were pleased to see another quarter of occupancy leverage reflecting the strength of our top line and the ongoing success of our retail optimization efforts.\nSG&A in the third quarter was in line with the prior quarters at 27.5% of net revenue.\nYear over year, SG&A deleveraged 320 basis points, driven by higher advertising spend coming off of our substantially reduced costs in 2020 and our decision to incrementally invest in advertising.\nAs we have said all year, given our record levels of profitability, we have been strategically and aggressively investing in high ROI advertising to drive new customer acquisition, retention, and top-line growth, which clearly is working.\nWe continue to see record new customer counts and strong demand, which has benefited our business to date and will continue to drive growth well into the future.\nFurthermore, we view it as a competitive advantage to be in a position to increase spend today while the competition may need to pull back to offset incremental supply chain costs.\nAnd despite this expected deleverage, we still delivered SG&A rates near historically low pre-pandemic levels and another quarter of record profitability.\nOperating income grew to a record $333 million, resulting in an operating margin of 16.3%, expanding 60 basis points over last year.\nThis resulted in diluted earnings per share of $3.32, up 30% from last year's record third quarter of $2.56 per diluted share.\nPut these results in context, we have not seen our performance weighing all year despite any shifts in the consumer wallet as the world reopens and being up against accelerating tougher year-over-year comparison.\nIn fact, year to date, we are tracking to a 28% comp or 41% on a two-year basis, with 400 basis points of operating margin expansion at a 16.3% operating margin and over 85% growth in earnings.\nTurning to the balance sheet.\nWe ended the quarter with strong liquidity levels and a cash balance of almost $660 million.\nThe strength of our business has generated operating cash flow of almost $790 million year to date, which is approximately $60 million over last year's elevated cash flow levels.\nThis cash flow strength has allowed us to fund the operations of the business to invest over $140 million in capital expenditures and to return almost $790 million to our shareholders in the form of over $135 million in dividends and over $650 million in share repurchases.\nThese decisions reflect our confidence in the sustainability of our growth and our commitment to maximizing returns for our shareholders.\nMoving down the balance sheet, merchandise inventories, which includes inventory and transit, were $1.272 billion, representing an increase of 13% over last year.\nInventory on hand and available for sale was up 3% year over year.\nWhile that is an improvement from where we were in the second quarter, our inventory levels are still not aligned with demand and are below optimal levels.\nOur back-order levels continue to be at record highs, driven by our strong demand and the supply chain disruptions that unfortunately continue to delay our order fulfillment, including the most recent delays out of Vietnam.\nAs Laura mentioned, our phenomenal team and their aggressive actions, combined with our scale, has enabled us to navigate through these challenges better than others.\nAnd given our ongoing strong demand, we expect a return to more normalized inventory levels by mid-2022, with back-order levels remaining elevated into the first half of 2022.\nNow let's turn to our expectations for the rest of the year and longer term.\nWe are raising our 2021 outlook to reflect revenue growth from high teens to low 20s to now 22% to 23%, and operating margins from 16% to 17% to now 16.9% to 17.1%.\nThis is our third consecutive raise this year.\nAdditionally, we are also reiterating our longer-term outlook of revenues accelerating to $10 billion by 2024, with operating margins at least in line with our raised fiscal year '21 levels, which implies at least a mid- to high single-digit comp with margins at least holding over the next three-plus years.\nWe, of course, will revisit our 2022 and longer-term outlook next quarter in more detail.\nWe are very confident in the fundamentals of the business and our strategies to sustain our growth into the future.\nIn addition to the macro trends, our key differentiators, and our successful growth initiatives, as previously mentioned, we have several other factors that give us confidence.\nFirst, our results to date.\nWe saw comps accelerating even before the pandemic as a result of our growth initiatives to a tie the 10% comp in February 2020.\nOur results during the pandemic continued to accelerate despite our retail stores being closed.\nAnd our results every quarter this year have halted a two-year comp of approximately 40%, despite accelerating tougher year-over-year compares.\nAnd we did this while pulling back on all sitewide promotions and with low levels of available inventory for sale.\nSecond, our proprietary products and vertically integrated sourcing and production, which provide us pricing power and the ability to optimize and engineer our products for value, drive strong merchandise margins in an environment with rising costs to competition.\nThird, our operating model.\nIn addition to our pricing power, our operating model provides several opportunities to drive strong operating margins.\nFrom leverage from higher sales, including the additional accretion from our growth initiatives that have a higher operating margin to an accelerating shift online, which is more profitable.\nThe continued occupancy leverage from the renegotiation of our lease agreements and further store closures, the various supply chain efficiencies, including automation and in-stock inventory levels, and the continued emphasis on overall strong financial discipline, holding costs below sales growth.\nAnd finally, our liquidity.\nWe have maintained a very strong and disciplined balance sheet with ample cash and no debt, which provides dry powder for opportunistic investments and incremental shareholder returns.\nAll of this is what gives us the confidence in our short- and long-term outlook and our ability to deliver sustainable long-term growth and profitability with strong financial returns for our shareholders in 2022 and beyond.\nHappy holidays are all on the call.\n Assistant:", "chosen": "compname reports q3 non-gaap earnings per share of $3.32.\nq3 non-gaap earnings per share $3.32.\nsees fy revenue up 22 to 23 percent.\nq3 revenues grow 16.0% with comparable brand revenue growth of 16.9%.\nqtrly comparable brand revenue growth of 16.9%.\nfor long-term, planning for annual net revenue growth of mid-to-high single digits.\n"}
{"prompt": "Human: On Slide 2 is our safe harbor statement.\nThese statements are based on our beliefs and assumptions, current expectations, estimates and forecasts.\nDuring today's call, management will make reference to non-GAAP financial measures, including organic sales growth, adjusted operating profit, adjusted operating profit margin and adjusted diluted EPS.\nI would like to begin by saying that I'm incredibly proud of how our team members across the globe have remained steadfast in our commitment to supply the much-needed components and solutions to our customers under tough circumstances.\nOur Q2 performance emphasizes the continued resolve of our talented team members, the strength of our company and the criticality of the role West plays during these unprecedented times.\nWe are in the business of helping our customers bring new medicines and treatments that improve the lives of patients, which could be more meaningful than at times like today.\nDriven by our mission, we experienced another solid quarter reinforced by the right market-led strategy to continuously deliver value for our customers and the patients we jointly serve.\nMoving to Slide 4.\nThe pandemic remains our priority.\nGiven the ever-changing situation, there's a huge sense of urgency in vaccine development.\nAs the market leader, our teams are working tirelessly with our customers to ensure we supply the right components and solutions to help resolve this pandemic.\nThe process for selecting the best high-quality packaging components for use with injectable medicines, including vaccines, is a complex one, driven by years of science, which West has pioneered.\nWe're helping our customers in the selection, testing and verification of components.\nWe're doing this in a way that prepares our customers for the future commercial scale up and launch of any successful vaccine candidates.\nAs we stated during our first-quarter earnings call, we have seen a high adoption rate of our fluoropolymer coated stoppers made by both West and our partner, Daikyo.\nThese are the industry standard for packaging-sensitive molecules with an outstanding track record of quality and reliability.\nNotably, some of our customers have selected NovaPure, as they have made this decision to use the best-in-industry component to ensure the highest degree of quality and safety.\nAs our customers' vaccine development rapidly moves into clinical trials, the entire West team has stepped up to make certain we can supply the demand for our high-value products, as well as any immediate surge in request for therapeutics.\nThe organization is also preparing for the potential volume surges that could come if and when vaccines are approved for human use.\nAll the work over the past few years across the enterprise to drive commercial and operational excellence along with globalizing West manufacturing operations has put us in the best possible position to meet the future pandemic demand.\nWe are accelerating our capacity expansion to manufacture FluroTec and NovaPure components.\nThese investments were in our five-year plan, and we have brought them forward to address the expected increase in demand the latter part of this year and into 2021.\nFrom our perspective, it is still too early to estimate how much volume could be generated by vaccine packaging.\nHowever, whether it's hundreds of millions or billions of doses, our West team is prepared and ready when the time comes.\nTurning to Slide 5 and our performance in the second quarter.\nOur financial position remains strong.\nI'm pleased to say that the growth trends we have experienced over the past several quarters have continued in the second quarter, and the outlook for the balance of the year remains positive.\nWe had 14% organic sales growth in the second quarter driven, again, by robust high-value product sales.\nAnd with HVP sales growth, we have experienced strong gross and operating profit margin expansion.\nThis resulted in a strong adjusted earnings per share for the second quarter.\nTo be clear, the majority of the organic growth in the second quarter was from our base business with some incremental growth coming from COVID-19 sales related to therapeutics.\nAs for guidance, we believe we are well-positioned for the second half of the year.\nThat said, because of the strength and resiliency of our core underlying business and the incremental opportunities being presented to support our customers with COVID-19 solutions, we are raising our guidance for the remainder of the year.\nI hope everyone continues to be healthy and safe during this time.\nSo let's review the numbers in more detail.\nWe'll first look at Q2 2020 revenues and profits, where we saw strong sales and earnings per share growth, led by strong revenue performance primarily in our biologics and generics market units and contract manufacturing.\nI will take you through the margin growth we saw in the quarter, as well as some balance sheet takeaways.\nAnd finally, we'll review guidance for 2020.\nGAAP measures are described in Slides 13 to 17.\nWe recorded net sales of $527.2 million, representing organic sales growth of 14.3%.\nCOVID-related net revenues are estimated to have been approximately $19 million in the quarter.\nThese net revenues include our assessment of components associated with treatment and diagnosis of COVID-19 patients, offset by lower sales to customers, affected by lower volumes due to the pandemic and stay-at-home restrictions, such as dental, veterinary and elective procedures.\nWe continue to see improvement in gross profit.\nWe recorded $195.1 million in gross profit, $37.2 million or 23.6% above Q2 of last year.\nAnd our gross profit margin of 37% was a 340-basis-point expansion from the same period last year.\nWe saw improvement in adjusted operating profit, with $106 million recorded this quarter, compared to $81.9 million in the same period last year for a 29.4% increase.\nOur adjusted operating profit margin of 20.1% was a 270-basis-point increase from the same period last year.\nFinally, adjusted diluted earnings per share grew 40% for Q2.\nExcluding stock tax benefit of $0.09 in Q2, earnings per share grew by approximately 38%.\nMoving to Slide 7.\nOur proprietary product sales grew organically by 13.3% in the quarter.\nHigh-value products, which made up more than 65% of proprietary product sales in the quarter, grew double digits and had solid momentum across all market units throughout Q2.\nLooking at the performance of the market units, the biologics market unit delivered strong double-digit growth.\nWe continue to work with many biotech and biopharma customers who are using West and Daikyo high-value product offerings.\nThe generics market unit experienced double-digit growth led by FluroTec and film-coated products sales.\nOur Pharma market unit saw low single-digit growth, with sales led by high-value products and services, including Westar and FluroTec components.\nAnd contract manufacturing had double-digit organic sales growth for the second quarter, led, once again, by sales of diagnostic and healthcare-related injection devices.\nSo what's driving the growth in both revenue and profit?\nOn Slide 8, we show the contributions to sales growth in the quarter.\nVolume and mix contributed $59.4 million or 12.6 percentage points of growth, including approximately $19 million of volume driven by COVID-19-related net demand.\nSales price increases contributed $7.8 million or 1.7 percentage points of growth, and changes in foreign currency exchange rates reduced sales by $9.6 million or a reduction of 2 percentage points.\nLooking at margin performance.\nSlide 9 shows our consolidated gross profit margin of 37% for Q2 2020, up from 33.6% in Q2 2019.\nProprietary products' second-quarter gross profit margin of 42.8% was 330 basis points above the margin achieved in the second quarter of 2019.\nThe key drivers for the continued improvement in proprietary products' gross profit margin were: favorable mix of products sold, driven by high-value products; production efficiencies and sales price increases, partially offset by increased overhead costs.\nContract manufacturing second-quarter gross profit margin of 19% was 470 basis points above the margin achieved in the second quarter of 2019.\nImprovement is a result of improved efficiencies and plant utilization.\nThere was approximately 180 to 200 basis points positive impact on margin, primarily due to a onetime engineering project work.\nOur adjusted operating profit margin of 20.1% with a 270-basis-point increase from the same period last year, largely attributable to our gross profit expansion.\nOne point to note, we took a onetime charge of $6.3 million for asset impairment.\nThis is included in other operating expenses.\nNow let's look at our balance sheet and review how we've done in terms of generating more cash for the business.\nOn Slide 10, we have listed some key cash flow metrics.\nOperating cash flow was $205.2 million for the year-to-date 2020, an increase of $52.5 million, compared to the same period last year, a 34% increase.\nOur year-to-date capital spending was $69.2 million, $12.1 million higher than the same period last year and in line with guidance.\nWorking capital of $735.4 million at June 30, 2020, was $18.3 million higher than at December 31, 2019, primarily due to an increase in inventory, mainly as a result of increasing our safety stock levels and accounts receivable due to increased sales activity.\nBoth DSO and DPO improved in the quarter.\nOur cash balance at June 30 of $445.9 million was $6.8 million more than our December 2019 balance, primarily due to our positive operating results.\nOur capital and financial resources, including overall liquidity, remained strong.\nSlide 11 provides a high-level summary.\nFull-year 2020 net sales guidance will be in a range of between $2.035 billion and $2.055 billion.\nThis includes estimated net COVID incremental revenues of $60 million.\nThere is an estimated headwind of $26 million based on current foreign exchange rates.\nWe expect organic sales growth to be approximately 12.5%.\nThis compares to prior guidance of $1.95 billion to $1.97 billion and growth of 8%.\nWe do expect growth in contract manufacturing to be less in H2 versus H1 as a result of tougher comps.\nWe expect our full-year 2020 reported diluted earnings per share guidance to be in a range of $4.15 to $4.25, compared to prior guidance of $3.52 to $3.62.\nAs Eric discussed, we are expanding our HVP manufacturing capacity at our existing sites to meet anticipated 2021 COVID-19 vaccine demand.\nCapex guidance has raised to $170 million to $180 million.\nThis compares to previous guidance of $130 million to $140 million.\nThere are some key elements I want to bring your attention to as you review our guidance.\nEstimated FX headwind on earnings per share has an impact of approximately $0.07 based on current foreign currency exchange rates.\nThe revised guidance also includes $0.16 earnings per share impact from our H1 tax benefits from stock-based compensation.\nSo to summarize the key takeaways for the second quarter, strong top-line growth in both proprietary and contract manufacturing, gross profit margin improvement, growth in operating profit margin, growth in adjusted diluted earnings per share and growth in operating and free cash flow.\nOur long-term construct remains at approximately 6% to 8% organic sales growth and continued earnings per share expansion.\nWe have a rich history of leading in times of great challenge.\nOur customers expect this of us, and this is what we're committed and prepared to do.\nI want to emphasize that across West, we are leveraging our global manufacturing capabilities, size and scale to innovate, lead and operate with a sense of urgency to make a positive impact in healthcare and society.\nOur performance continue to reaffirm that our market-led strategy is delivering unique value propositions to our customers.\nOur global operations team is efficiently manufacturing and delivering products with market-leading service and quality.\nAnd we're continuing to invest in our business with digital technology and automation across our operations to feel an even brighter future.\nWe remain committed to deliver value to all our stakeholders on a sustainable basis, as well as to maintain and build upon the values that make up our One West team.\nOn behalf of the team members at West, we continue to wish you good health in the days ahead.\nJosh, we're ready to take questions.\n Assistant:", "chosen": "sees fy 2020 sales $2.035 billion to $2.055 billion.\nq2 sales $527.2 million versus refinitiv ibes estimate of $496.1 million.\nraising full-year 2020 adjusted-diluted earnings per share guidance to a new range of between $4.15 and $4.25.\nwest pharmaceutical services - net sales guidance includes estimated full-year headwind of $26 million for 2020 based on current foreign exchange rates.\n"}
{"prompt": "Human: We will discuss non-GAAP financial measures, and a reconciliation of GAAP can be found in earnings materials on our website.\nExcluding a special item with a net after-tax benefit of $32 million, we earned $450 million or $0.60 per diluted share.\nIn the third quarter, we delivered strong results across each of our businesses despite weather-related disruptions, the ongoing COVID-19 pandemic and continued supply chain challenges.\nOur teams did an exceptional job navigating these headwinds, and I'm incredibly proud of their collective efforts and focus on safely operating our businesses and continuing to serve our customers.\nTruly, great execution across the entire supply chain in a difficult environment, which has resulted in record earnings and cash flow in 2021.\nYear-to-date, we've generated more than $3.4 billion of adjusted EBITDA and $2.4 billion of adjusted funds available for distribution.\nTurning now to our third quarter business results.\nI'll begin the discussion with Timberlands, on pages six through nine of our earnings slides.\nTimberlands earnings increased by $20 million in the quarter, which included a $32 million gain on the previously announced sale of our North Cascades Timberlands.\nAdjusted EBITDA decreased by $15 million compared to the second quarter.\nIn the West, adjusted EBITDA decreased by $13 million compared to the second quarter.\nWestern domestic log markets started the quarter in a favorable position despite weakening lumber prices and ample log supply.\nDemand remains elevated as mills continue to bolster log inventories during the peak of wildfire season, but weakened somewhat in September as a number of producers experienced COVID-related disruptions and finished lumber inventories increased above normal levels.\nDespite these headwinds, our third quarter domestic sales realizations were comparable to the second quarter, driven by strong domestic log prices in July and August.\nSalvage operations resulting from the 2020 Oregon wildfires continued in the third quarter.\nThe teams have done an outstanding job in managing these salvage efforts over the last year.\nTo date, we've completed approximately 80% of our planned salvage harvest and expect to conclude most of this work by year-end.\nAs expected, during the warmer and drier months in the summer, we transitioned to higher elevation and higher cost operations.\nAdditionally, although we experienced very minimal wildfire damage to our timberlands, active fires and dry conditions across the region resulted in restrictions on our harvest activity in the quarter, particularly in Oregon.\nAs a result, our fee harvest and domestic sales volumes were modestly lower in the third quarter, and per unit log and haul costs were higher.\nTurning to our export markets.\nIn Japan, demand for our logs remained strong in the third quarter.\nLumber imports from Europe into Japan continue to be restricted by the ongoing shortage of global shipping containers.\nThis dynamic is driving increased market share for our customers and robust demand for our logs.\nAs a result, our Japanese log sales realizations increased moderately compared to the second quarter, and sales volumes were comparable.\nIn China, demand for our logs remained favorable in the quarter despite seasonally lower consumption, COVID impacts to construction activity and other supply chain disruptions.\nImports of lumber and logs into China continue to be constrained by global shipping container availability as well as the ban on Australian logs.\nAs a result, sales realizations for our China export logs increased moderately compared to the second quarter, but were more than offset by higher ocean freight rates.\nSales volumes to China were comparable to the second quarter.\nMoving to the South.\nSouthern timberlands adjusted EBITDA was comparable to the second quarter.\nSouthern sawlog and fiber markets continued to strengthen as log supply was constrained and mill inventories remain lean, resulting from ongoing wet conditions and significant weather events.\nAs a result, our sales realizations were slightly higher than the second quarter.\nFee harvest and sales volumes increased slightly in the third quarter, but fell below our planned activity level as a result of persistent wet weather and operational disruptions from Hurricane Ida.\nPer unit log and haul costs increased slightly in the quarter as did forestry and road costs.\nOn the export side, we continue to see growing demand for our Southern logs.\nOur export log pricing increased substantially in the third quarter, but volumes were lower than second quarter as we continue to face challenges associated with container availability and increased freight rates.\nIn the North, adjusted EBITDA decreased slightly compared to the second quarter.\nSales volumes were significantly higher coming out of spring breakup conditions, though sales realizations were lower due to mix.\nTurning to Real Estate, Energy and Natural Resources on pages 10 and 11.\nReal estate and ENR contributed $45 million to third quarter earnings and $60 million to adjusted EBITDA.\nThird quarter adjusted EBITDA was $31 million lower than the second quarter due to timing of transactions, but comparable to the year ago quarter.\nSimilar to last year, our 2021 real estate sales activity has been heavily weighted toward the first half of the year.\nThird quarter earnings more than doubled compared to the third quarter of 2020 due to the mix of properties sold.\nWe continue to capitalize on strong demand for HBU properties, resulting in high-value transactions with significant premiums to timber value.\nMoving to Wood Products, pages 12 through 14.\nWood Products earnings and adjusted EBITDA decreased by approximately 60% compared to the prior quarter as lumber and OSB pricing declined substantially from record levels earlier in the year before stabilizing later in the quarter.\nAdditionally, weather events in the U.S. South, including Hurricane Ida, resulted in temporary downtime and lost production in our lumber business.\nAnd together with COVID-related staffing disruptions, further exacerbated transportation challenges in the region.\nDespite these headwinds, our teams performed well and delivered strong results.\nOur EWP business established a new quarterly EBITDA record in the third quarter and the overall Wood Products segment has achieved year-to-date adjusted EBITDA of more than $2.8 billion.\nLumber markets began the third quarter with elevated home center and treater inventory levels due to softening do-it-yourself repair and remodel activity.\nAs a result, pricing continued its downward trajectory in July and for much of August.\nThe market began to strengthen later in the quarter as home centers and treaters work through excess inventories and consumer spending shifted back to do-it-yourself repair and remodel activity after Labor Day.\nWhen combined with solid demand from new home construction and professional repair and remodel activity, each of which remain healthy throughout the third quarter.\nAdjusted EBITDA for our lumber business decreased $686 million compared to the second quarter.\nOur sales realizations decreased by 52% in the third quarter while the framing lumber composite pricing decreased by 61%.\nOur sales volumes increased moderately in the third quarter and log costs increased slightly, primarily for Canadian logs.\nThe OSB market weakened significantly at the outset of the third quarter with the softening of do-it-yourself repair and remodel activity.\nThis dynamic drove lower sales activity and higher inventories at the home centers.\nAs a result, we experienced a rapid decline in pricing from the peak record prices that we reached in July.\nPricing then stabilized above the historical average in August, as demand from strong new home construction activity continued and the market faced supply constraints resulting from ongoing resin availability and transportation challenges.\nThis dynamic, along with late quarter improvement in do-it-yourself repair and remodel demand, drove prices gradually higher through September.\nAdjusted EBITDA for our OSB business decreased by $128 million compared to the second quarter.\nOur sales realizations decreased by 24% in the third quarter while the OSB composite pricing decreased by 43%.\nThis relative outperformance was largely a result of our higher percentage of premium OSB products.\nOur sales and production volumes improved modestly in the third quarter due to less downtime for planned maintenance.\nUnit manufacturing costs increased slightly, primarily for resin costs.\nEngineered Wood Products adjusted EBITDA increased $23 million compared to the second quarter, a 43% improvement.\nSales realizations improved significantly across most products, and we continue to benefit from previously announced price increases for solid section and I-joist products.\nThis was partially offset by higher raw material costs for OSB webstock, resin and veneer.\nSales and production volumes were moderately lower for most products as a result of planned annual maintenance during the quarter.\nIn Distribution, adjusted EBITDA decreased by $53 million compared to the second quarter.\nDespite lower sales volumes for most products and significantly lower margins resulting from the commodity price correction, our teams did a great job navigating these challenges and delivered $22 million of adjusted EBITDA in the third quarter.\nI'll begin with our key financial items, which are summarized on page 16.\nWe generated $659 million of cash from operations in the third quarter, bringing our year-to-date total to nearly $2.7 billion, our highest year-to-date operating cash flows on record.\nAdjusted funds available for distribution or adjusted FAD, for year-to-date, third quarter 2021 totaled over $2.4 billion, as highlighted on page 17.\nYear-to-date, we have returned $382 million to our shareholders through the payment of our quarterly base dividend, and we will supplement the base dividend each year with an additional return of cash to achieve the targeted 75% to 80% of adjusted FAD.\nFor this year, we intend to achieve this entirely through a variable supplemental cash dividend.\nThough in future years, we may also utilize opportunistic share repurchase for a portion of this cash return.\nThe supplemental dividend will normally be paid in the first quarter of each year based on prior year cash flow.\nHowever, as a result of the record year-to-date performance, we accelerated a portion of the supplemental dividend by returning $375 million to our shareholders through our previously announced $0.50 per share interim supplemental dividend earlier this month.\nWe look forward to returning the remaining portion of the supplemental dividend with a significant payment in first quarter 2022.\nDuring the third quarter, we also returned $26 million to shareholders through share repurchases.\nFurther, as previously announced, we authorized a new $1 billion share repurchase program.\nAnd as always, we'll look to repurchase shares opportunistically under circumstances when we believe it will create shareholder value.\nTurning to the balance sheet.\nWe ended the quarter with approximately $2.3 billion of cash and just under $5.3 billion of debt.\nSubsequent to quarter end, we repaid our $150 million or 9% note at maturity, which brings our debt balance to $5.1 billion.\nAfter this repayment, we have no additional maturities until 2023.\nLooking forward, key outlook items for the fourth quarter are presented on page 18.\nIn our Timberlands business, we expect fourth quarter earnings and adjusted EBITDA will be comparable to the third quarter.\nTurning to our Western Timberland operations, although domestic log inventories ended the third quarter higher than normal, takeaway of finished lumber and log demand have improved following a brief pullback in September.\nWe anticipate this dynamic continuing for most of the fourth quarter.\nAs a result, we expect our domestic sales realizations to improve from the lower levels experienced in September.\nFor the fourth quarter, we anticipate our average domestic sales realizations to be moderately lower than the elevated third quarter levels.\nAs Devin discussed, we have made great progress within our salvage operations in Oregon and expect our salvage volumes to decrease in the fourth quarter.\nAs a result, we expect fourth quarter fee harvest volumes to be moderately higher with lower per unit log and haul costs.\nMoving to the export markets.\nIn Japan, log demand remains favorable.\nWe anticipate our fourth quarter sales realizations to be comparable to the elevated third quarter levels, partially offset by moderately lower sales volumes due to the timing of vessels.\nIn China, despite elevated log inventories at the ports, demand for our logs is expected to remain favorable as construction activity increases seasonally and imports of lumber and logs continue to be constrained from other countries.\nWe expect our fourth quarter sales volumes to be higher than the third quarter, partially offset by slightly lower sales realizations.\nElevated freight costs and labor to load ships continue to be headwinds.\nIn the South, weather conditions improved at the outset of the fourth quarter.\nAs a result, we anticipate slightly higher fee harvest volumes compared to the third quarter.\nLog demand continues to be favorable as mills work to bolster lean inventories, resulting from persistent wet conditions and reduced log supply.\nAs a result, we anticipate slightly higher sales realizations during the fourth quarter.\nWe expect this will be offset by slightly higher per unit log and haul costs as well as a moderately higher forestry and road costs as a portion of our planned activities in the third quarter were deferred due to weather disruptions.\nAs a result of persistent wet conditions in 2021 and significant weather events in the third quarter, we now expect full year Southern fee harvest volumes to be comparable to 2020.\nIn the North, sales realizations are expected to be slightly lower due to mix and fee harvest volumes are also expected to be slightly lower compared to the third quarter.\nTurning to our Real Estate, Energy and Natural Resources segment.\nFourth quarter earnings and adjusted EBITDA will be significantly lower than third quarter due to timing of transactions.\nWe continue to predict full year 2021 adjusted EBITDA will be approximately $290 million, and we now expect basis as a percentage of real estate sales to be approximately 25% to 30% for the full year.\nFor our Wood Products segment, new residential construction activity remains strong and demand from the repair and remodel segment continues to strengthen following the improvement in do-it-yourself activity in September.\nThis dynamic should continue for most of the quarter before weakening seasonally into winter.\nExcluding the effect of changes in average sales realizations for lumber and oriented strand board, we expect fourth quarter earnings and adjusted EBITDA will be higher than the third quarter.\nFor lumber, production volumes are expected to be comparable to the third quarter.\nHowever, our sales volumes are expected to be modestly lower, resulting from the inventory drawdown we experienced in the third quarter.\nWe anticipate this will be offset by slightly lower log costs and improved unit manufacturing costs.\nAs shown on page 19, our current and quarter-to-date realizations for lumber are slightly higher than the third quarter average.\nFor oriented strand board, we anticipate moderately higher sales volumes and improved unit manufacturing costs, primarily due to less downtime for planned maintenance during the fourth quarter.\nWe expect this will be partially offset by moderately higher fiber costs.\nAs shown on page 19, our current and quarter-to-date realizations for oriented strand board are significantly lower than the third quarter average, but still elevated compared to historical standards.\nFor engineered wood products, we expect sales realizations for solid section and I-joist products will be comparable, while realizations for plywood will be lower.\nWe anticipate this will be more than offset by significantly lower raw material costs, primarily for OSB webstock.\nFor our distribution business, we're expecting higher adjusted EBITDA in the fourth quarter, primarily due to improved commodity margins, partially offset by seasonally lower sales volumes.\nI'll wrap up with a couple of additional items or comments on our total company financial items.\nWe now anticipate our full year outlook for capital expenditures to be slightly below our previous guidance of $460 million as a result of supply chain and contract labor constraints with $15 million to $25 million potentially at risk.\nThe $90 million tax refund associated with our 2018 pension contribution was approved during the second quarter.\nHowever, we are still awaiting the refund.\nWe expect to receive it by the end of fourth quarter 2021.\nExcluding this refund, we now anticipate our full year cash taxes will be slightly lower than tax expense.\nNotwithstanding a slight decrease from the prior quarter, U.S. housing activity remained strong in the third quarter, with total housing starts and permits averaging around 1.6 million units on a seasonally adjusted basis.\nAlthough housing starts in 2021 continue at a strong pace, the cycle time between starts and completions has extended as homebuilders continue to experience supply chain and labor availability challenges.\nDespite these headwinds, our customers tell us they continue to expect strong demand for new home construction for the balance of 2021.\nThe latest new home sales number released earlier this week further reinforces our positive view on the current state of the housing market.\nWith favorable long-term demand fundamentals, including a decade of underbuilding, favorable demographics, we continue to have a bullish outlook on U.S. housing activity well into the future.\nTurning to repair and remodel.\nWe've continued to see strength in large professional projects over the course of 2021 and expect that to continue for the balance of the year and into 2022.\nAnd while we did see some softening in the smaller do-it-yourself segment during the summer, demand has improved significantly coming out of Labor Day, and we've continued to see strong demand from the repair and remodel segment through October.\nOverall, we continue to have a favorable long-term outlook for repair and remodel activity, supported by numerous demand drivers, including an aging housing stock, rising home equity and low interest rates.\nFinally, we hope you have the opportunity to participate in our virtual Investor Day on September 22, where we outlined a series of multiyear strategic growth targets, including growing our Timberlands portfolio, growing our new Natural Climate Solutions business and organically growing our lumber business.\nWe also announced several capital allocation actions and enhanced our ESG leadership by releasing our carbon record and announcing new greenhouse gas emission reduction targets.\nOur strategy, as we outlined at Investor Day, is simple.\nWe intend to grow the value of our portfolio, improve our cash flows, build on our competitive advantage in the marketplace and solidify Weyerhaeuser as a premier ESG investment opportunity.\nThese actions will ensure that we drive superior returns for our investors, including returning meaningful amounts of cash to shareholders through a growing base dividend, a variable supplemental dividend and opportunistic share repurchases, all while continuing to invest in our businesses and maintain an appropriate capital structure.\nWe're excited about the future of Weyerhaeuser, and we're well positioned to capitalize on strong macro trends driving continued growth and demand for our products and new opportunities for our businesses.\nWe're greatly appreciative of Beth's contributions to our IR function and look forward to our next opportunity at the company.\nWith Beth's transition, Andy Taylor has assumed the lead role of our Investor Relations program.\nAndy joined Weyerhaeuser in October of last year after an 18-year career in the energy industry, where he served in numerous leadership roles, including Investor Relations.\nHe's been a great addition to the Weyerhaeuser team, and we're really excited to have him taking on this new role.\n Assistant:", "chosen": "q3 sales $2.3 billion.\nq3 earnings per share $0.60 excluding items.\nexpects q4 earnings and adjusted ebitda will be comparable to q3 for timberlands.\nsees q4 earnings and adjusted ebitda will be higher than q3 for wood products.\nsees q4 earnings, adjusted ebitda significantly lower than q3 due to timing of transactions for real estate, energy & natural resources.\n"}
{"prompt": "Human: We are looking forward to discussing our record third quarter performance and the enhancements to our capital allocation priorities announced yesterday, as well as providing an update on our strategy execution.\nJoining me on todays call is U.S. Steel President and CEO, Dave Burritt; Senior Vice President and CFO, Christie Breves; and Senior Vice President and Chief Strategy and Sustainability Officer, Rich Fruehauf.\nI would now like to turn the conference call over to U.S. Steel President and CEO, Dave Burritt, who will begin on slide four.\nAs Kevin just mentioned, we delivered record performance in the third quarter, record net earnings, record EBITDA, record EBITDA margin and record quality and reliability.\nOur record-setting performance in the third quarter and throughout 2021 has truly transformed our business and demonstrates the progress we are making in pursuit of best.\nBy year-end, we will have transformed the balance sheet by repaying over $3 billion of debt, achieving our deleveraging target ahead of schedule.\nWe expect to have total liquidity of approximately $5 billion, creating the foundation to confidently execute our strategy and invest in our competitive advantages and we will have put the business in position to deliver another strong year in 2022.\nOur transformed balance sheet, the ability to prefund critical strategic investments, and continued optimism for our business gives us confidence to return capital to stockholders while executing the next phase of our Best for All strategy.\nWe believe the market is significantly undervaluing the progress weve made and the value our strategy is creating and now is the time to be more balanced in our capital allocation priorities.\nOur strategy is truly best for all, of course, including our stockholders.\nWere delivering strong performance year-to-date.\nContinued bullish outlook for 2022 and beyond and expectations for a super cycle continuing put us in a position to move faster on the next phase of our strategy execution while beginning to reward stockholders with direct returns.\nOur biggest challenges remain lowering our capital and carbon intensity.\nInvestments in mini mill steelmaking, like the construction of a second mini mill, while investing in our competitive advantages can deliver on these objectives and reposition the company for the future.\nThe solution is to continue moving toward a more balanced capital allocation strategy by successfully executing our Best for All strategy with mini mill number two and an electrical steel line and coating line at Big River Steel.\nWe are moving quickly on our path forward by expanding our competitive advantages through strategic investments that help us achieve our strategic objectives aligned with long-term value creation, improved through cycle earnings and cash flow and reduced capital and carbon intensity.\nWhether youre looking only at next year or our ability to build long-term value, we believe that investors are undervaluing our progress and potential.\nBut not our customers.\nThey are noticing the transformation thats taking place at U.S. Steel and the importance of a regional supply chain.\nOur industry-leading finishing line capabilities are increasing our value proposition and customers are excited about the opportunities we are creating together.\nWhether it is advanced high-strength steels, differentiated electrical steels or green and sustainable steels, discussions with customers continue to shift from transactional to strategic.\nWe continue to create longer-term value with customers by prioritizing innovation, differentiation and strategic goals, and we look forward to building deeper relationships that unlock the value of U.S. Steel for our customers and provide them the certainty of a regional supply chain.\nslide six further emphasizes our progress and performance.\nWe are encouraged by our record-setting performance, performance that is outpacing even those records being achieved by direct competitors.\nBut there is more we can do.\nAs we said, our goal is to be the best steel competitor.\nAnd while there is certainly much more opportunity ahead, weve clearly come a long way quickly.\nAs we always say at U.S. Steel, safety first, and Im so pleased with the U.S. Steel team for continuing to prioritize safety and for embodying our steel principles each day.\nMoving to our margin performance.\nOur enterprise EBITDA margin reflects the disciplined, value-focused approach weve taken to our footprint.\nWith revenues of nearly $6 billion in the quarter, the quality of our earnings demonstrates a business model that is increasingly built upon capability and cost differentiation.\nFrom our iron ore advantage to our integrated assets and from the newest mini mill in the country to the most efficient mill in Eastern Europe, our diversified footprint is extracting significant value from todays stronger for longer market.\nWhile the competition isnt standing still, the actions weve taken over the past several years to invest in our assets, streamline our footprint and add capabilities have created significant value, leading to out-performance versus peers this quarter.\nOur mini mill performance also continues to be the industry leader, further widening its performance versus other mini mill producers.\nOur position as a mini mill leader creates the perfect platform for high-return investments in capabilities that expand our margins, reduces our carbon and capital intensity and furthers our customer value proposition for sustainable green steel solutions.\nThose investments continue to be supported by strong liquidity, and we are moving forward with investments that create enduring value while rewarding stockholders for the progress weve made so far.\nslide seven expands on what makes U.S. Steel unique and why Best for All will continue to grow the competitive advantages of U.S. Steel.\nWe are investing to get better, not bigger, and expanding our three competitive advantages that differentiate us versus the competitors.\nFirst, low-cost iron ore; second, lower greenhouse gas emission mini mill steelmaking; and third, best-in-class finishing capabilities.\nThose competitive advantages are built on a foundation of research and innovation and deep customer relationships.\nWe are pleased to report the first step in our metallic strategy, which pivots our iron ore advantage in Minnesota toward our growing fleet of EAFs.\nWe are finalizing an agreement with a strategic partner to produce up to 500,000 tons annually of pig iron at Gary Works.\nUnder the contemplated deal, our potential partner would fund, install and operate pig iron production assets, which we would supply with excess liquid iron production.\nThis potential partnership would further enhance the cost structure of Big River Steel by in-sourcing high-value metallics while driving blast furnace efficiencies at Gary Works.\nThe permitting process has begun, and we expect pig iron production at Gary to begin in early 2023.\nThis is an efficient and quick way to expand our iron ore advantage to our mini mills, and we continue to evaluate other opportunities to extract additional value from iron ore.\nslide nine provides some additional context on our mini mill number two investment.\nLast month, we commenced the site selection process to build a new state-of-the-art mini mill.\nThis new mini mill will provide differentiated steelmaking supported by a comprehensive suite of finishing assets, including advanced high-strength steel galvanizing, hot-rolled galvanizing, painting and slitting.\nWe are expanding our mini mill steelmaking capability as we continue to transition toward sustainable, lower greenhouse gas emission steelmaking.\nThis investment is a platform to provide our customers with more of the Greens deal they expect from like-minded partners like U.S. Steel.\nWere in the process of filing permits in multiple states and are on track to begin construction as early as the first half of 2022.\nMini mill number two will be built by the same experienced construction team who built Phase 2A of Big River Steel, ahead of schedule, under budget and fully ramped in record time.\nWe expect the value-added capabilities of mini mill number two to drive an approximately $650 million of incremental EBITDA contribution from this investment once fully ramped.\nAlso yesterday, we announced plans to build a new coating line at Big River Steel.\nslide 10 has the details.\nThis line will have 325,000 tons of annual capability and will sustainably produce both Galvalum and galvanized product.\nWe expect the investment to contribute another $60 million of annual run rate EBITDA to Big Rivers already industry-leading results.\nWe expect the line to produce a mix of 75% Galvalum and 25% hot-dip galvanizing.\nGalvalum capabilities create opportunities to target the higher value construction market, including exposed building panels.\nHot dip galvanizing capabilities create additional opportunities to serve the appliance, automotive and construction markets.\nThe investments we are making at Big River are natural extensions of the Big River campus and further utilize the state-of-the-art capabilities of the facility as we provide customers with sustainable steels to help meet their own decarbonization objectives.\nAs we continue to demonstrate our industry-leading position at Big River, were excited to expand the mini mill footprint, invest in downstream capabilities and further enhance the commercial mix of our business model.\nThe progress we have made in 2021 is undeniable.\nOver the past several quarters, weve transformed our balance sheet.\nWhen we closed on the Big River Steel acquisition at the start of the year, we carried $7 billion of debt and expect to end the year with $3.9 billion.\nWeve extended the maturity profile and expect next years run rate cash interest expense to be approximately $225 million.\nOur pension plan is overfunded, an enviable position that others in our industry are not close to achieving.\nWe are in a clear position of strength.\nSo while well continue to look at the ability to delever further as debt becomes callable, we are very confident that this level of debt puts us in a sustainable and manageable position to support investments in our business.\nNext, we continue to believe the highest source of long-term value creation is from investing in expanding competitive advantages that reshape our earnings profile and reduce our capital and carbon intensity.\nOur cash and liquidity position more than supports these high-return projects and allows us to execute with confidence.\nAnd today, given the undeniable progress weve seen over the past several quarters, we are announcing enhancements to our capital allocation priorities that begin to directly reward stockholders with the improvements weve made to the business.\nWe believe the market is not rewarding us for the strong performance we expect in 2022 and is not yet recognizing the long-term value creation potential of our Best for All strategy.\nOur strong financial performance and the significant returns we believe we can generate by buying our own stock is the reason we are accelerating direct returns to stockholders.\nReinstating the $0.05 per share quarterly dividend and moving quickly on a $300 million stock buyback demonstrates our commitment to ensuring our strategy is indeed best for all.\nOur goal is to ensure direct returns become an enduring part of our capital allocation strategy, and we believe there are catalysts that could drive additional buybacks in the future.\nAside from additional free cash flow generation, we believe there are near-term opportunities to divest noncore assets, primarily real estate, which could further accelerate or increase further authorizations.\nIn addition, the option for Stelco to acquire 25% of Minntac remains in place through January of 2027 and presents an opportunity to return up to $500 million of incremental capital to stockholders.\nChristie will now provide details into our quarterly performance before I provide some thoughts on 2022.\nIll begin on slide 12.\nAs Dave mentioned earlier, the third quarter was a quarter of records.\nWe delivered adjusted EBITDA and EBITDA margin of over $2 billion and 34%, respectively.\nThis represents a nearly $750 million or a 58% increase over the second quarter.\nAdjusted earnings per share in the quarter was $5.36 per diluted share.\nWe also generated approximately $1.3 billion of free cash flow in the quarter, including a $400 million investment in working capital.\nWe expect another quarter of strong free cash flow generation in the fourth quarter.\nNext, let me expand on some key points related to the balance sheet.\nYear-to-date, we have repaid approximately $2.7 billion of debt and expect to end the year with $3.9 billion of debt on the balance sheet, an amount we are confident is sustainable and supports the investments we are making in our business.\nWe ended the quarter with net debt to last 12 months EBITDA of 0.6 times and expect to end the year at 0.2 times.\nWith the balance sheet strengthened, 80% of our remaining debt due in 2029 and beyond and a fully funded pension plan, we are well positioned for a future of value creation.\nLet me now transition into the individual segments, including expectations for the fourth quarter.\nOur Flat-Rolled segment delivered record EBITDA and EBITDA margin of over $1.1 billion and 32%, respectively.\nThis represents an approximately 60% improvement versus the second quarter.\nHigher selling prices flowing through our contract structure in the third quarter will likely continue to be a tailwind in the fourth quarter.\nWe expect lower volumes from our planned blast furnace outage at Gary Works and higher energy costs to be an offset.\nWe currently expect fourth quarter Flat-rolled EBITDA to be near our record third quarter performance.\nOur mini mill segment also delivered record EBITDA and EBITDA margin.\nThird quarter EBITDA was $464 million or an industry-leading 42% EBITDA margin.\nHigher prices continue to be reflected in the segment results, partially offset by higher scrap and other metallics cost.\nIn the fourth quarter, we expect higher prices to continue to flow through the segments, primarily monthly contracts.\nWe currently expect the fourth quarter to be another record for our mini mill segment, potentially exceeding $500 million of EBITDA in the fourth quarter.\nUSSK also posted record EBITDA and EBITDA margin in the third quarter.\nEBITDA was $418 million in the quarter or 33% EBITDA margin.\nA 60-day outage planned on number one blast furnace will begin in November through the remainder of the year.\nThis will remove approximately 250,000 tons of lost steel equivalent capacity from the market in the fourth quarter.\nOperational headwinds as a result of the planned outage, modestly lower shipments and changes to the pricing dynamic in Europe are expected to result in reduced fourth quarter EBITDA versus the third quarter.\nI also want to take a moment to recognize and congratulate the USSK team for completing Slovakias first revolving credit facility containing sustainability-related performance targets.\nThe new EUR300 million unsecured sustainability-linked credit agreement reinforces our commitment to creating profitable solutions for sustainable steelmaking and replaced the previous EUR460 million credit facility.\nOur Tubular segment reported similar quarter-over-quarter results.\nImproved commercial performance was largely offset by higher scrap and energy costs and continued high levels of imports.\nImports continue to capture roughly half of the U.S. tubular market.\nAnd earlier this month, we and the USW filed new OCTG trade cases.\nWe expect fourth quarter performance to be similar versus the third quarter as higher selling prices are offset by elevated scrap costs for the Fairfield EAF and continued high import levels.\nWe expect enterprise earnings in the fourth quarter to continue to reflect the strong market conditions we are seeing as we exit the year and we currently believe that our fourth quarter results will be near our record third quarter performance.\nWere entering 2022 in a great position to both create value for our stockholders and deliver value to our customers.\nWe are executing a robust contract process with customers, in most instances, having begun discussions 90 days sooner than we have historically.\nOur strategy is paying dividends.\nAssuming the forward curve, which we believe to be a pessimistic view of spot prices, we fully expect average selling prices to be higher in 2022 than 2021 for our Flat-rolled segment.\nWeve also listened to our customers and in some instances, have signed agreements beyond 12 months.\nThis creates longer uplift and supply continuity while fostering collaborative product development opportunities to solve their most difficult challenges.\nFinally, we continue discussions on commercial terms for more than just price.\nLeveraging continued strong interest in advanced high-strength steels, our planned NGL electrical steel line and other future sustainable steel offerings from U.S. Steel.\nCustomers value domestic supply chain and we value their partnership.\nWe are delighted to hear from multiple auto customers who are foreshadowing that the trough of the chip shortage could be behind us.\nThey are beginning to add to the fourth quarter and first quarter build schedules and indicating to us increasing usage rates starting as early as next week.\nKevin, lets move to Q&A.\nWe ask that you each please limit yourself to one question and a follow-up so everyone has the opportunity to ask a question.\n Assistant:", "chosen": "q3 adjusted earnings per share $5.36.\n"}
{"prompt": "Human: I hope you are all well and safe.\nJoining me virtually today are Bryan Hanson, our President and CEO; and CFO, Suketu Upadhyay.\nJust given the backdrop of COVID, let me just start by saying that I certainly hope that all of you are doing well and staying safe and continuing to, as much as it's frustrating I'm sure by now, continuing to social distance and wear your masks.\nI think at this point we're all pretty good at it so let's make sure that we continue to do it.\nAnd as a result of that continue to deliver for our customers and our patients and move with our mission forward.\nAnd I'll just continue to be very proud of everything this team has accomplished against a significantly challenging backdrop in 2020.\nSo I'm proud of you and glad to see what you've been able to do, and I'm looking forward to what you can do in 2021.\nAnd here we are, right?\nWe're in 2021 and there's going to be challenges.\nWe've seen already early on in 2021, but I'm confident that we're ready to deal with the challenges as ZB, and I'm pretty confident we're going to see real opportunities for 2021 as well.\nAnd there's just a lot of updates that I want to share with you today, but I'm going to keep my comments to a minimum, if possible.\nI really want to make sure that we have time for Suketu to get into a little more detail on Q4 and then, ultimately, say how that's going to translate into 2021.\nNow we're not going to give too many specifics on 20201, but he'll give you some color on what we're seeing from Q4 and, again, the impact we think that's going to have on 2021.\nSo for today I'm going to kind of keep it to three main topics.\nThe first is really how we're continuing to navigate COVID-19 and, to continue inside of that, to ensure that we're executing against our strategy.\nThe second one is really going to talk about the ongoing transformation of the company.\nWe really are making sure that we're moving forward with active portfolio management, and, obviously, we're taking the next steps there with the planned spin-off of our Spine and Dental business.\nSo we'll talk a bit about that.\nAnd then third, I want to make sure that we again touch upon our long-term growth strategy and how it positions us to drive growth, obviously as a company, but also value for you and value for us.\nAnd so, let's start again navigating the challenges and executing here in the short-term.\nThere's just no doubt that COVID, unfortunately, remains a challenge.\nComing out of Q4, we're seeing the pandemic pressure and the surges continue and, frankly, worsen across pretty much all of our regions and markets.\nThere's clearly more lockdown measures that we're seeing throughout Europe, Middle East and Africa; to a far lesser extent but still impacting Asia-Pacific as well.\nAnd certainly, in the Americas, we're all seeing it in the U.S.\nIt may be different by state, but clearly seeing increased pressure as a result of surges in the pandemic so all of that is kind of the backdrop that we saw coming out of Q4.\nAnd, unfortunately, this pressure, in the corresponding decline and elective procedures, grew throughout Q4 and actually was worse at the end of December.\nAnd at this point, we expect that increase in pressure will continue throughout Q1 at least and will impact all three of our regions.\nAs a matter of fact, we're actually seeing this probably increase in pressure coming out of Q4.\nSo we would expect Q1 to be a little more challenging than even what we saw in Q4.\nBut even given that backdrop, I'd say that I'm optimistic.\nWe're currently rolling those out around the world.\nWe do believe the vaccines are going to change the COVID-19 dynamic, and we're going to see positive impact as a result of it.\nAs soon as we start to see the surges stop, we see the impact of COVID end, and we're confident that the recovery's going to mean that the normal patient flow is going to start again and we're going to have the pull-through effect of a sizable patient backlog that's been created over the past number of quarters.\nWe expect that when that recovery occurs, we're going to see a period of what I would define as normal market growth augmented by deferred procedures that will be coming in as well.\nAnd we're going be ready for that, and we're excited about that.\nSo as much as it's going to be a little rocky in the short-term and potentially more challenging than what we saw at the fourth quarter, we see a light at the end of the tunnel.\nAnd that's a good thing.\nThe big question is when?\nWhen is that going to happen?\nWe know the vaccine is going to have the impact.\nThe big question is when.\nAnd that's certainly going to be the key variable we're going to be looking at as we try to predict what 2021 is going to look like.\nSo while I would just say, against this backdrop of COVID, what is clear to us is we can't control when the vaccines allow the surges to stop, but what we can control inside of that is how we execute; how we execute our strategy.\nAnd I have confidence we're going to continue to move it forward.\nOur core business is strong.\nOur execution is on point.\nI would just say momentum around our key commercial launches and programs continues to be strong, and I would say that, overall, our commercial confidence is better than it has ever been.\nSo I'll just give a few examples of this.\nI can say it all day long, but unless we talk about it and actually it reflects in the numbers, who cares.\nSo let's first start with ROSA Knee.\nObviously, this is something that everyone is going to be paying attention to.\nCertainly, I am, and on note, we said we're going to hit between 200 to 300 cumulative placements by the end of 2020.\nObviously, you know that we were in that range as of Q3.\nSo I'm happy to report that not only did we achieve that goal, we achieved the high-end of that goal.\nAnd I would tell you that the momentum is strong coming into 2021.\nQ4 was actually our strongest quarter as of the date of launch of ROSA Knee.\nSo we've had some pretty strong quarters in the past.\nQ4 was our best, and we're on the high-end of the goal that we set for the year.\nAnd as I've said before, with some of the new launches that we have coming, specifically associated with [Indecipherable], I feel pretty confident that 2021 is going to continue to show that kind of resilience and strength for ROSA Knee.\nOn the percent of revision side, again, this product continues to be very successful for us.\nWe now showed that in Q4, we actually had the strongest quarter-over-quarter growth that we've seen since launch.\nWe did realize our 2020 expectations of $100 million in gross revenue and almost $40 million in net of cannibalization revenue during the year.\nAnd I would just tell you that that's just the beginning because Persona Revision serves as a really compelling tip of the spear product for our commercial team.\nOnce we get Persona Revision in, we've got an opportunity to hunt for the typical primary knee as well.\nSo we're very excited about that launch and it continues to be strong.\nOn the hip side, Avenir Complete continues to be a strong one for us.\nEven in the pandemic, it continues to beat our expectations.\nAnd if I just look at Q4 specifically, we grew about 30% over Q3, again, even with the increased pressures of the pandemic in Q4, so very excited with what we're able to do with Avenir Complete.\nAnd we expect big things to continue with this product throughout 2021.\nAnd as you obviously know, we also expect at the end of 2021 to launch the ROSA Hip, which again gives us a lot of confidence in the Hip category for our business.\nAnd then finally for Signature ONE Planner, we demonstrated this again, strong sequential growth with registrations up nearly 25% in Q4 over Q3.\nAnd we expect utilization to continue to expand significantly in 2021 with really a goal of having more than 50% of our shoulder procedures using pre-surgical planning.\nAnd that's important for a lot of reasons.\nRemember the pre-surgical plan creates stickiness with the customer, but it also enhances our ability to get more guides and augments using the procedure, which can really take-up the ASP for that procedure.\nSo again, exciting stuff for Signature ONE Planner as well.\nSo all-in we continue to execute -- we continue to execute as a team.\nThe way we're showing up every day, the way we're showing up in the market frankly versus our peers gives me confidence in our business as does our continued innovation and our product launches.\nWe're going to see more this year, some pretty pivotal innovation that we're going to see this year.\nAs I mentioned before we're going to see ROSA Partial Knee, we're going to see ROSA Hip and we're also going to see the first smart implant, Persona-IQ, launched this year so definitely exciting for us from an innovation standpoint in 2021.\nWe continue the transformation of ZB.\nThat's been the goal since I got here.\nYou've heard me talk about our three phases of transformation.\nFirst was the hearts and minds and the execution challenges that we had in the very beginning.\nIt's what we talked about a lot in the beginning.\nThe second phase of this was really building a more robust longer-term strategy, making sure that we brought innovation to the market and getting our execution straight.\nWe're clearly well into that phase.\nAnd third is our portfolio transformation, and that's the goal of active portfolio management to change the complexion of the organization so that we can have better goal of sustained mid-single-digit growth.\nAnd I'm proud to say that we're squarely positioned in Phase III now as well.\nAnd as you've seen by our recent announcement, we're going to continue to move this forward.\nWe have the portfolio management strategy and the process in place and to have built a pretty strong capability to move us forward in this area.\nLate last year, we executed a number of smaller, but still important, M&A deals to fill portfolio gaps and to better position us in higher-growth areas that we do believe we have a right to win in.\nI truly believe by separating out these businesses, we're going to create two stronger companies, two companies that are going to be better positioned to meet customer needs and improve patient lives.\nAnd ultimately, and very importantly, deliver greater value to you, our shareholders.\nLet me give you a bit more detail on why we believe this is an opportunity for value creation and really why we think it delivers value for ZB and NewCo.\nFirst of all, the transaction increases our management focus and resource prioritization.\nWe truly do believe for both companies, we think about NewCo and we think it's going to thrive as an independent company with prioritized capital allocation to pursue strategies and growth opportunities and truly investments inside of Spine and Dental.\nThat has not been a focus for ZB.\nIt will absolutely be a focus for NewCo.\nAnd for Zimmer Biomet, the transaction is an important next step in our transition into a more streamlined company with sharper focus and greater and more optimized resource allocation toward innovation in those core businesses that we are committed to, that are profitable for us, where we see attractive markets with a right to win in those markets and be market leaders.\nAnd really the second thing is it's going to drive increased growth and efficiency for both companies.\nWe really do believe that.\nAnd simply put, we expect that these two companies with their simplified operating models and just reduced complexity and increased focus will be able to grow revenue, margin and earnings per share faster than they would if we remain combined as one company.\nAnd Suke's going to talk more about the specific financial impact that we expect in just a few minutes, but just know it's positive for both organizations, financially speaking, as we separate the organizations.\nAnd third, it's going to enhance value creation for our patients and our providers and all of our key stakeholders including our own team members.\nThis is the next step in ZB's transformation, and it underscores our commitment to ensuring long term priorities remain aligned with shareholders' best interest.\nIt's going to drive the business forward to meet customer needs and advance our mission to alleviate pain and improve the quality of life of people around the world.\nWe think we can do it better as two separate organizations, OK?\nSo that's the backdrop of the spin.\nAnd today obviously is just day one in terms of announcements around this process.\nYou can absolutely expect that we're going to continue to provide updates as we move forward, as NewCo takes shape, and as we move toward the transaction close, which we're currently expecting to be around mid-2022, OK?\nSo we're confident in these steps we're taking and our ability to keep executing and in our overall ZB strategy, and that brings me really to the third and really the final topic that I have for these remarks.\nAnd it's our plan to drive long-term growth and ultimately as a result of that deliver increased value for you, and to do that, we remain fully committed and confident in ZB's long-term growth and margin expansion expectations.\nIn fact, the spin-off transaction that we're going to do over the next year serves to de-risk if not accelerate our path to that 4% to 5% growth rate that we have talked about and our 30% operating margin profile by the end of 2023.\nAnd to get there, to be able to deliver on both of those, we're going to have to be committed to our priority growth areas.\nAnd we've talked about these in the past.\nI'm going to remind you of them again.\nThe key areas of concentration for us would be Knee, Hips and S.E.T. If we think about Knees first and foremost, we need to be able to grow above market rates here.\nAnd we're going to continue to focus on the fastest growth sub-markets of Knees, for us that's going to be robotics, data and informatics, and cementless and Revision.\nWe feel we have plenty of innovation and momentum here to continue to grow sustainably above market rates in Knee.\nFrom a Hip perspective, it's a little less ambitious in the beginning.\nWe just said that we need to grow at market in the short-term with the idea that over that over the long-term, particularly after ROSA Hip is launched, that we will grow above market in Hip as well.\nAnd I can tell you, based on our performance so far and the ROSA Hip application being launched later in 2021 and the Avenir Complete momentum that we have, we feel confident we're going to be able to do that as well.\nAnd as far as S.E.T. goes, we just want to grow at market, if not the higher end of market, and to do that we're going to focus on the most attractive sub-elements of S.E.T. for us.\nAnd that's, for us, again, going to be sports, medicine, and extremities.\nThose are key areas of concentration for us that we're going to invest internally, we're going to look for external ways to build scale, and we're going to build commercial infrastructure as well.\nSo let me close by saying that I continue to be more confident about ZB's future than ever.\nI know I say that a lot recently, but I really do feel the momentum right now.\nI truly believe that we are well-positioned for success and that our strategy is absolutely working.\nAnd our transformation is well under way, and our proven ability to rise to challenges and face adversity, I think, has prepared us well for navigating the current environment and really, for that matter, any environment in front of us.\nIt was your focus on our mission, our strategy and how we show up and execute every day is unmatched.\nIt's what makes ZB and what makes me confident that we're going to continue to deliver.\nBefore jumping into the details, I'd like to summarize the quarter as one where we made significant progress across a number of strategic and operational fronts, all in the backdrop of heightened market pressure.\nWhile revenue and profitability were challenged due to the pandemic, we executed extremely well against the things we can control, positioning ourselves to win for an eventual market recovery and beyond.\nNet sales in the fourth quarter were $2.085 billion, a reported decrease of 1.9% and a constant currency decrease of 3.7% versus 2019.\nWe did not experience any material day rate differences in our year-over-year comparisons.\nOur consolidated regional results were in line with expectations despite deepening pandemic pressure on global elective procedures as we exited the year.\nWhile the market softened through the quarter, execution remained strong across all regions.\nBeginning with Asia-Pacific, the region grew 2% versus Q4 2019 with growth across all three of our largest markets of Japan, China and Australia/New Zealand.\nWhile COVID pressure on elective procedures increased toward the end of the quarter the impact is less pronounced than what we have been seeing in EMEA and the Americas.\nWe are excited about the uptake we're seeing in ROSA in the region, and with the solid performance across our Knee and Hip businesses.\nAs expected, the EMEA region was hardest hit by COVID-19, decreasing 17.5% versus 2019, with all sub-regions in decline.\nSurges in the virus leading to policy actions and government lockdowns negatively impacted elective procedures across the region.\nLastly, the Americas region was about flat, decreasing 0.3% compared to 2019, driven by continued COVID headwinds in Latin America, in tandem with a softening U.S. market.\nThe U.S. was flat despite increased pressure on elective procedures.\nPerformance was buoyed by continued strong demand for recent innovative product introductions.\nStrong execution by our commercial organization and some favorable impact related to the order timing and year-end purchases as some accounts increased their buying patterns to utilize remaining 2020 budgets.\nTurning to our business performance for Q4, the Global Knee business declined 4.8% negatively impacted by the ongoing pressures in EMEA.\nHowever, the U.S. Knee business continued to grow, increasing 1.8%, and Asia-Pacific Knee business returned to growth, increasing 2.9%.\nOverall, execution was strong, with continued momentum for Persona and ROSA Knee.\nOur Global Hip business decreased 3.4%, again driven by declines in EMEA.\nBoth U.S. Hips and APAC Hips continued their growth trends, increasing 1.4% and 1.3% respectively.\nSports, Extremity, and Trauma sales declined 3.3%.\nDental, Spine and CMFT continued to deliver better execution, increasing 0.8%, and finally, our Other category was down 9.3%.\nMoving to the P&L, we reported GAAP diluted earnings per share of $1.59 and adjusted diluted earnings per share of $2.11.\nOn an adjusted basis, with revenue down 3.7%, earnings per share was down about 10% driven by a lower operating margin and a higher share count, which more than offset the favorable tax rate in the quarter.\nLower adjusted operating margin was driven by lower revenue and an expected year-over-year decline in gross margins.\nAdjusted gross margin was 71.3%, sequentially better than Q3, but lower than Q4 2019.\nVersus the prior-year, favorable geographic mix was more than offset by lower volumes, ongoing pricing pressure and the impact from prior period deferred costs.\nOpex was down versus the prior-year as we implemented several cost containment initiatives as part of our response to the pandemic, in addition to the realization of our transformation programs that were ultimately reinvested back into R&D and commercial infrastructure to help drive consistent above-market growth in priority areas.\nBased on our performance versus market over the recent quarters, our reinvestment of efficiency savings is translating into strong returns.\nThe Q4 adjusted tax rate of 15% was better than the previous year due to geographic mix of income and certain discrete benefits in the quarter, related to recent audit settlements.\nTurning to cash and liquidity in the quarter, free cash flow totaled $329 million, higher than the same period in 2019, driven by better working capital and lower capital expenditures, and we utilized better-than-expected cash flow to pay down $250 million of debt ahead of schedule, ending the year with cash and cash equivalents of approximately $800 million.\nNow moving to 2021, due to the ongoing uncertainty related to COVID-19 and its impact on elective procedures, we will not be providing full-year financial guidance at this time.\nWe recognize that this is challenging for you as you build your 2021 models; however, we will reserve financial guidance until we have more certainty around the outlook of elective procedures relative to COVID surges and related vaccine adoption.\nWe strive to be credible and transparent, and to that end, I will provide additional quarterly details and broader full year shaping as an interim measure.\nSo far, through January, we've seen COVID pressure continuing to intensify from the end of December.\nBased on what we've seen so far in the quarter, and in tandem with our latest estimates for procedure cadence, we project that Q1 revenue will be down in the low-single-digit to mid-single-digit percentage range versus Q1 2020.\nNow we have optimism and confidence that we'll see a positive vaccine impact on elective procedures this year, and once we do, we expect elective procedure volumes to return to pre-pandemic levels and the sizable patient backlog to serve as a tailwind to underlying market growth.\nAs we turn to the P&L, we expect that the impact of COVID-19 on sales volumes will put pressure on adjusted operating margins and earnings leverage until we return to consistent pre-COVID revenue levels and growth rates as I just discussed.\nDespite this near-term pressure, our confidence in the market recovery and the longer-term financial profile of the company is driving continued investment into priority areas of the business.\nWe expect that adjusted gross margin will stabilize in 2021 with quarterly margin levels broadly in-line with what we saw in the back half of 2020.\nWe could see some fluctuation from quarter-to-quarter depending on a number of variables including volumes, price, foreign currency, mix and other drivers that can change results over time.\nRegarding operating expenses, sequentially versus the fourth quarter of 2020, we expect non-commission spending in Q1 to be modestly lower with increases in future quarters opex investments as the impact of the pandemic abates.\nWe expect interest expense to increase in the mid-single-digit versus 2020 as the benefit from lower debt balances is more than offset by the renewal of net investment hedge positions.\nOur tax rate is expected to be modestly higher than the full year 2020 rate and could fluctuate over the year as a result of variability and geographic mix of income due to the pandemic.\nAlso, we are not projecting any material U.S. corporate Tax Reform to be implemented in 2021.\nWe project that the full year share count in 2021 will continue to increase modestly versus Q4 of 2020 and we are not planning for any share buybacks in the year.\nAnd in terms of capital allocation, we remain committed to maintaining our investment-grade rating and are planning to pay down an additional $500 million of debt in 2021.\nNow, let's turn to today's announcement related to our intent to spin the Spine and Dental businesses into an independent, publicly traded company.\nThe transaction will be structured with tax redistribution of newly issued new co-shares to ZB shareholders.\nAs Bryan mentioned, we believe that this tax-efficient transaction, which is expected to close in mid-2022, subject to certain conditions, will drive greater focus for each company with enhanced prioritization of capital allocation while accelerating growth and providing the platform for greater shareholder value.\nIn terms of the NewCo financial profile, 2019 and 2020 pro forma revenues totaled approximately $1.022 billion and $897 million respectively and is supported by a diversified geographic base with real opportunities for enhanced growth and margin expansion.\nWe expect NewCo to have a financial profile generally in-line with its peer group and a capital structure supportive of innovation and investment over time.\nImportantly, the transaction will empower NewCo to pursue a more-focused investment and execution strategy.\nZB delivered 2019 and 2020 pro forma revenue of $6.96 billion and $6.128 billion respectively.\nFor post-spin ZB, the transaction is expected to deliver an improved growth profile with accretion to our revenue growth of approximately 50 basis points over the course of our five-year strategic planning period.\nWe also expect that it will expand our adjusted EBITDA and operating margins on a pro forma basis by approximately 125 basis points.\nWith that, you should have even greater confidence in our operating margin expansion goals.\nWe remain committed to at least 30% adjusted operating margins by the end of 2023, and with this transaction we have the opportunity to accelerate the timing of that goal.\nHowever, we will continue to balance margin acceleration against investment opportunities to accelerate durable top-line growth.\nUltimately, this transaction provides greater optionality to invest more in the business while delivering a leading margin profile and that's an incredibly powerful lever.\nIn the terms of capital structure, post-spin we will prioritize proceeds toward debt pay down to maintain our investment-grade rating.\nWe're truly excited about this transformational opportunity to increase value for investors and will continue to provide more details as execution of the spin progresses.\nTo summarize, while the pandemic continued to pressure our growth and earnings profile in the quarter, we made substantial progress on many fronts, including, very strong performance versus the market, progress on our efficiency programs that enabled the increased investment for growth, free cash flow generation that was ahead of revenue growth, strengthening of our balance sheet through early pay down of debt, integrating our strategic and accretive tuck-in M&A deals, and positioning ourselves to execute the spin-off of our Spine and Dental business as a platform for greater value.\nI'm truly proud of what the ZB team accomplished in the quarter and throughout 2020.\nBefore we start the Q&A session, a reminder to please limit yourself to a single question and one follow up so that we can get through as many questions as possible during the call.\nWith that, operator, may we have the first question, please?\n Assistant:", "chosen": "compname announces q4 adj earnings per share of $2.11.\nq4 adjusted earnings per share $2.11.\nq4 earnings per share $1.59.\nq4 sales $2.085 billion versus refinitiv ibes estimate of $2.08 billion.\nnot providing financial guidance at this time.\n"}
{"prompt": "Human: I'm joined today by Kristin Peck, our Chief Executive Officer; and Glenn David, our Chief Financial Officer.\nOur remarks today will also include references to certain financial measures, which were not prepared in accordance with generally accepted accounting principles, or U.S. GAAP.\nWe also cite operational results, which exclude the impact of foreign exchange.\nI hope you and your loved ones remain safe and healthy as the COVID-19 pandemic continues to affect all of our professional and personal lives.\nIn the second quarter, we delivered better-than-expected results given uncertainty around the COVID-19 pandemic.\nIn terms of numbers, our revenue grew 4% operationally, with the U.S. segment up 6% and International up 3%.\nOur companion animal products continue to drive our business performance, with 13% operational growth, while livestock products declined 5%.\nOur adjusted net income increased 4% operationally in the second quarter.\nWe have built a very strong companion animal portfolio over the last several years based on our internal innovation.\nAnd these products helped offset some of the deeper market challenges in the livestock market today.\nOur recently launched parasiticides, Simparica Trio, ProHeart 12 and Revolution Plus as well as our key dermatology portfolio of Apoquel and Cytopoint, provide a solid foundation that has continued to perform well this year.\nWe continue to be very pleased with the performance of our new triple-combination parasiticide for dogs, Simparica Trio as well as the strength of the overall Simparica franchise.\nGlenn will share more details in his remarks.\nOur continued focus on meaningful innovation and the diversity of our portfolio across species, products and geographies remain core advantages for Zoetis during times of economic uncertainty.\nAnd we've also seen the essential nature of animal health playing an important role in the resiliency of our business and our industry at this time.\nIn terms of COVID-19, our veterinary and producer customers are under increased pressure to deliver critical animal care and maintain a reliable global food supply, and we are fortunate to be able to support them in this mission.\nWe continue to put the safety of our colleagues and customers first during this pandemic, and we've been very pleased with our team's ability to maintain productivity, even with safety and social distancing adjustments at our facilities as well as the ongoing use of remote work arrangements for the majority of our colleagues.\nOur field force has returned to meeting with customers in many geographies based on local guidance and practices.\nWe monitor and adapt these plans on a daily basis based on local feedback and adjustments in markets that may be experiencing increased COVID-19 cases.\nOur teams are excited to be back out with our customers, but we're also preserving the lessons we have learned from effective online interactions, webinars and e-commerce to evolve our sales and support.\nIn terms of supply chain, Zoetis has maintained a reliable inventory of critical medicines, vaccines and diagnostics to our customers and distributors in more than 100 markets around the world.\nAnd our research development programs remain on track in terms of filings, clinical trials and interactions with regulatory agencies.\nWe remain confident in the progress of regulatory reviews of our monoclonal antibody candidates for pain in cats and dogs.\nOur submissions are proceeding as expected.\nThis year continues to be uncharted territory due to COVID-19 and the related trends affecting our customers.\nHowever, the underlying demand for healthy pets and a reliable source of protein remains fundamental to the global economy.\nIn the second quarter, we benefited from the veterinary clinics in the U.S. recovering much more quickly from the COVID-19 impact than we anticipated.\nVeterinary practices in the U.S. adapted quickly to curbside visits and mobile clinics to deliver critical care and maintain relationships with their customers.\nWe also saw an acceleration of companion animal product sales through e-commerce channels as a result of the lockdowns in many states.\nVeterinarians and pet owners are adapting more quickly to these online options as a way to fill prescriptions for parasiticides and other medicines.\nWe also know people are spending more time at home with their pets.\nThey may be observing conditions such as itchiness or pain, which have previously gone unnoticed.\nAnd so we are actually seeing an increase in spend per visit in U.S. clinics.\nMeanwhile, outside the U.S., companion animal veterinary clinic performance has been in line with expectations despite wide market-by-market variations based on local dynamics.\nFor Zoetis, we expect our overall revenue growth for the remainder of the year to be driven largely by companion animal products, especially our parasiticides and key dermatology portfolio.\nWe plan to continue investing in direct-to-consumer advertising and digital marketing to support these products.\nLivestock is a very different picture and remains very challenged by the pandemic, especially in the U.S. Producers are adjusting to new market demands and distribution needs from foodservice and restaurant channels to more grocery and retail channels, while also managing ongoing labor, safety and trade issues.\nAs expected, U.S. livestock in the second quarter saw a significant downturn as we expect that to remain a challenge for the rest of the year.\nThe pace of return to more foodservice and restaurant demand, along with increased export opportunities, will be the most significant factors in the recovery of livestock producers in the U.S. Internationally, livestock grew and performed in line with expectations across a diverse set of markets.\nWe saw very positive results in places like China, where they're further along in their COVID-19 recovery, but we will be sensitive to see how Latin America and markets like Brazil perform in the remainder of the year due to COVID.\nAs we look ahead, we remain focused on advancing our five key priorities to ensure our long-term success, driving innovative growth, enhancing customer experience, leading in digital and data analytics, cultivating a high-performing organization and championing a healthier, more sustainable future.\nWe've continued to make important investments in products and innovations across the continuum of care from prediction and prevention to detection and treatment of disease, Supporting successful launches as well as new life cycle innovations and expansions of major products into new markets continue to be the cornerstones of our durable and steady performance.\nIn the second quarter, we expanded major vaccine franchises with the approval of our Vanguard B Oral for dogs in Brazil and our Fostera Gold PCV MH and Fostera Gold PCVMetastim for vaccines for pigs in Australia.\nWe also continue to strengthen our diagnostic and digital capabilities, building on recent acquisitions in point-of-care and reference labs, along with additional investments.\nWe plan to launch a new diagnostic platform for pet care in the third quarter called VetScan Imagyst.\nWe are very excited about the potential for this disruptive innovation, which will be the first system to bring clinical pathology right to the point of care.\nThis new multipurpose platform uses a combination of image recognition technology, algorithms and cloud-based artificial intelligence to deliver rapid testing results to the clinic.\nIts first indication will be for testing fecal samples for parasites, making it quick and easy to test and treat pets in the same visit.\nWe'll have more to say in the coming weeks as we prepare for a global launch.\nWe also view diagnostics as playing an important role in the continuum of care for fish.\nIn the second quarter, we acquired Fish Vet Group to add more diagnostic tools to our aquaculture portfolio, including environmental testing, which is critical to fish farming.\nFinally, at Zoetis, our key priority around high-performing teams is tied to creating a culture where all colleagues feel valued and included and is reflected in our commitment to promoting inclusion, diversity and equity across our organization.\nOur leadership and Board are dedicated to being a force for positive change across the globe to drive greater equity and inclusion.\nAnd we have dedicated financial and people resources to do so.\nNow let me hand off to Glenn, who will speak more about our second quarter results and updated guidance for the full year.\nI hope everyone is safe, healthy and adapting to what is certainly an unprecedented time for all of us.\nToday, I will provide additional commentary on our Q2 financial results, provide an update on our liquidity position and review our improved full year 2020 guidance.\nBeginning with the second quarter results.\nWe generated revenue of $1.5 billion, which was flat on a reported basis and 4% growth operationally.\nAdjusted net income of $427 million decreased 2% on a reported basis and increased 4% operationally.\nForeign exchange in the quarter had an unfavorable impact of 4% on revenue.\nThis was driven primarily by the U.S. dollar strengthening against the Brazilian real, Australian dollar, Mexican peso and euro.\nOperational revenue growth of 4% was driven by 2% price and 2% volume.\nVolume growth of 2% includes 3% from new products, 3% from key dermatology products, 1% from acquisitions and a decline of 5% in other in-line products.\nCompanion animal products led the way in terms of species growth, growing 13% operationally, while livestock declined 5% operationally.\nCompanion animal performance was driven by our parasiticide portfolio, which includes sales of Simparica Trio in the U.S., Canada and certain European markets and our key dermatology products, Apoquel and Cytopoint.\nRevenue from the acquisition of Platinum Performance and its nutritional products, acquired in the second half of 2019, drove the growth in equine.\nLivestock declines in the quarter were driven by challenges to our U.S. livestock portfolio.\nSupply chain disruptions caused by reduced animal processing capacity and shifts in consumer demand from restaurant and foodservice to grocery stores affected our customers' purchasing decisions.\nThis decline was partially offset by strong performance internationally with growth in swine, fish and poultry.\nNew products contributed 3% to overall growth in the quarter, driven by Simparica Trio, ProHeart 12, Revolution Plus and our Alpha Flux parasiticide for salmon in Chile.\nWe remain excited by the launch of Simparica Trio and are reaffirming the range of $100 million to $125 million for full year incremental revenue.\nTrio have been more robust and cannibalization of Simparica has been less than we anticipated.\nGlobal sales of our key dermatology portfolio were $224 million in the quarter, growing 24% operationally and contributing 3% to overall revenue growth.\nRecent acquisitions contributed 1% growth this quarter, which includes Platinum Performance and our reference lab expansion strategy.\nNow let's discuss the revenue growth by segment for the quarter.\nU.S. revenue grew 6%, with companion animal products growing 19% and livestock products declining by 18%.\nCompanion animal growth in the quarter was driven by sales of the Simparica franchise, our key dermatology products and the impact of recent acquisitions.\nU.S. key dermatology sales were $160 million for the quarter, growing 26%.\nThe continued strength of this portfolio was driven by expanded usage of both Cytopoint and Apoquel benefiting from our direct-to-consumer campaign, uptake in e-commerce channels and pet owners spending more time with their pets as a result of COVID-19.\nSimparica Trio performed well in the U.S. with sales of $36 million despite challenging market conditions in Q2.\nWe are observing several positive trends, including rapid uptake in clinics that have adopted Trio, smaller-than-expected cannibalization of Simparica, sales coming from new patients to the category and taking share from current oral flea and tick competitors.\nDiagnostic sales increased 18% in the quarter, largely driven by our reference lab acquisitions.\nIn addition, previous instrument placements created a solid foundation for consumables growth in the second quarter.\nU.S. livestock declined 18% in the quarter, driven by lower sales across all species.\nIn the second quarter, we faced challenges with significant declines in feedlot placements, reduced demand from the foodservice industry and the effects that had throughout the food supply chain and our customers, in addition to increased competition.\nTo summarize, U.S. performance was strong in a difficult market environment.\nAnd the diversity of our portfolio, again, proved beneficial as growth in companion animal offset the challenges faced in the U.S. by our livestock portfolio.\nOur International segment had operational revenue growth of 3% in the second quarter, with more balanced performance across our companion animal and livestock portfolios.\nCompanion animal operational revenue growth was 2% and livestock operational growth was 4%.\nIncreased sales in companion animal products was a result of growth in our key dermatology portfolio and our Simparica franchise, including the launch of Simparica Trio in Canada.\nWhile European markets were impacted significantly by COVID-19, the decline was offset by significant growth in other markets, including Japan and China.\nDiagnostics had a difficult quarter as wide-scale clinic closures resulting from COVID-19 limited the ability to place instruments and negatively impacted consumable usage.\nInternational livestock growth in the quarter was driven by swine, fish and poultry.\nSwine grew double digits in the quarter, primarily driven by China, which grew 25%, as key accounts continue to expand their herds and production shifts from smaller farms to larger-scale operations.\nOur fish portfolio delivered another strong quarter.\nWe saw favorable conditions in Chile and Norway that resulted in vaccinations being accelerated into Q2.\nIn addition, we continue to see an uptake of the Alpha Flux parasiticide in Chile.\nOverall, our international segment was again a positive contributor to revenue growth, with performance in swine, companion animal, fish and poultry more than offsetting decline in cattle resulting from the COVID-19 pandemic.\nNow moving on to the rest of the P&L.\nAdjusted gross margin of 71.1% increased slightly on a reported basis compared to the prior year due to price, favorable manufacturing costs and product mix, which were partially offset by foreign exchange, recent acquisitions and higher inventory charges.\nAdjusted operating expenses were flat operationally.\nThe incremental advertising and promotion expenses related to Simparica Trio, recent acquisitions and R&D increases were largely offset by reductions to T&E and compensation-related costs as a result of COVID-19.\nThe adjusted effective tax rate for the quarter was 22.3%.\nThe increase versus prior year is driven by the jurisdictional mix of earnings and the impact of discrete tax benefits recorded in Q2 2019.\nAdjusted net income for the quarter grew 4% operationally, primarily driven by revenue growth, and adjusted diluted earnings per share grew 6% operationally.\nNext, I'd like to cover our liquidity position and our capital allocation priorities.\nWe ended the second quarter with approximately $3.4 billion in cash and cash equivalents, including the proceeds from our $1.25 billion long-term debt issuance in May, of which $500 million is earmarked for repayment of our November 2020 maturity.\nWe have access to a $1 billion revolving credit facility and a coinciding commercial paper program, both of which remain undrawn.\nGiven our strong cash flow and balance sheet, we remain committed to our capital allocation priorities for internal investment, M&A and returning excess cash to shareholders.\nConsistent with what I mentioned last quarter, we still anticipate elevated capital expenditures this year to support investments in manufacturing, information technology to support our recent acquisitions and capabilities in digital and data analytics.\nWith regard to returning excess cash to shareholders, we remain committed to our 2020 dividend, which represents a 22% increase over 2019.\nIn Q1, we repurchased $250 million in Zoetis shares before suspending the program in the second quarter in order to conserve cash.\nWe have approximately $1.4 billion remaining under our multiyear share repurchase program.\nNow moving on to our updated guidance assumptions for 2020.\nOur past performance has always given us confidence that the essential nature of our business, our diverse portfolio and the innovation we consistently bring to our customers would position us well during difficult market conditions.\nAfter assessing recent trends and our performance in the second quarter, we are further refining and raising our full year 2020 guidance.\nWe expect recent positive companion animal trends in the U.S. will continue, although vet clinic revenue may moderate somewhat as pent-up demand works its way through the system.\nThe more recent resurgence of COVID-19 cases in parts of the U.S., and expanding rates of infection in international markets continues to create uncertainty around the duration, scope and economic impact of the pandemic.\nPlease note that our guidance reflects foreign exchange rates as of mid-July.\nAnd given our global footprint, movement in foreign exchange has had an impact on revenue and adjusted net income since we issued our prior guidance in May.\nOur current guidance includes favorable foreign exchange revenue of approximately $50 million and approximately $10 million at adjusted net income versus May guidance.\nFor revenue, we are raising and narrowing our guidance range with projected revenue now between $6.3 billion and $6.475 billion and operational revenue growth of between 3% and 6% for the full year versus a negative 2% to positive 3% we had in our May guidance.\nAdjusted net income is now expected to be in the range of between $1.685 billion and $1.765 billion, representing operational growth, a positive 1% to positive 5% compared to our prior guidance of negative 9% to negative 2%.\nAdjusted diluted earnings per share is now expected to be in the range of $3.52 to $3.68 and reported diluted earnings per share to be in the range of $3.14 to $3.32.\nIn closing, while the COVID-19 pandemic has certainly presented a set of challenges we have not seen in the past, we are extremely proud of our colleagues and the commitments they have shown toward our customers, our company and animal healthcare.\nDuring this time, we have demonstrated the diversity and durability of our portfolio, the resiliency of our industry.\nAnd we have confidence in our ability to continue to execute on our strategy during these uncertain times.\n Assistant:", "chosen": "sees fy 2020 earnings per share $3.14 to $3.32.\nsees fy 2020 revenue $6.3 billion to $6.475 billion.\nq2 revenue $1.5 billion versus refinitiv ibes estimate of $1.36 billion.\nsees fy 2020 adjusted earnings per share $3.52 to $3.68.\nlooking ahead, expect overall revenue growth for remainder of year to be driven largely by companion animal products.\n"}
{"prompt": "Human: I am joined today by Kristin Peck, our Chief Executive Officer; and Glenn David, our Chief Financial Officer.\nOur remarks today will also include references to certain financial measures, which were not prepared in accordance with Generally Accepted Accounting Principles or U.S. GAAP.\nWe also cite operational results, which exclude the impact of foreign exchange.\nI hope you and your loved ones are all staying healthy.\nAs we all know, we're still experiencing hard times in many regions as COVID cases continue, and new variants of the virus emerge.\nBut I hope you share my optimism that with progress in vaccinations and continued adherence to safety protocols, better days are ahead.\nThe year 2020 will be remembered for COVID-19, but for Zoetis, it also reaffirms the resilience of our business, the essential nature of animal health and the agility and dedication of our colleagues in the face of industry and personal challenges.\nThroughout the year, we successfully ensured colleague safety and maintained reliable supply for our customers.\nWe kept driving innovation and strengthening our diverse portfolio of 13 blockbusters and more than 300 product lines across eight species and seven major product categories.\nWe successfully launched our triple combination parasiticide, Simparica Trio.\nWe also achieved approvals for the first ever long-acting monoclonal antibodies for osteoarthritis pain in dogs and cats.\nWith Librela's authorization for dogs in the European Union and several other markets, and Solensia's authorization for cats in Switzerland.\nWe also continue to build on our vaccine portfolio in livestock with the approval of our CircoMax Myco swine vaccine in the European Union.\nMeanwhile, in diagnostics, we successfully launched VetScan Imagyst, a breakthrough platform using cloud based artificial intelligence for veterinary clinics.\nWe were able to do all this while staying anchored to our purpose and advancing the five long-term priorities, that I set out at the beginning of the year, including sustainability, where we made important progress in our ESG programs and metric reporting.\nWe look forward to sharing our long-term ESG goals in the coming weeks.\nAnd finally, we delivered financial results for 2020 that were in line with the guidance we provided last February, before the impact of the global pandemic was known.\nFor the full year, we generated 9% operational growth in revenue primarily based on new products in our companion animal business, the continued strength of our key dermatology portfolio and growth in China.\nAnd as part of our long-term value proposition, we once again grew revenues faster than the anticipated growth for 2020, and faster than the historical industry rates of 4% to 6%.\nAs part of our value proposition, we also delivered on growing our adjusted net income faster than revenue.\nFor the full year, we delivered operational growth of 10% in adjusted net income while adapting our operations in the pandemic and continuing investments in our pipeline and new product launches.\nWe generated strong fourth quarter results which Glenn will discuss in a minute, and these performance trends give us confidence in our growth drivers and strong momentum for 2021.\nWe expect to continue growing revenues faster than the market in 2021, driven by ongoing strength in petcare, continued expansion in markets outside the U.S., most notably China, and acceleration of our diagnostics portfolio penetration.\nWe are guiding operational growth of 9% to 11% in revenue for full year 2021.\nPositive pet care trends during the pandemic, based on increased adoptions and people spending more time with their pets, should continue driving market growth in the near-term.\nData in the U.S., shows visits to veterinary clinics have rebounded and the average revenue per visit has continued to increase.\nOver the long term, we see these trends moderating as adoption rates normalize and people eventually return to the workplace.\nThe Specialty Care regimens and chronic care treatments that began in the pandemic should continue, and our innovative portfolio across dermatology, parasiticide, pain, vaccines and diagnostics have us well positioned for continued growth and capturing share as these shifts occur.\nIn terms of livestock market, we expect low single digit market growth in 2021 as the impact from COVID-19 will still be felt, and a number of products experience loss of exclusivity.\nWe expect Zoetis to grow in line with the market even as we faced increased headwinds from generic competition for DRAXXIN, our leading anti-infective product.\nWe are confident we can leverage our lifecycle innovation strategies together with the overall diversity of our livestock portfolio, including swine product sales in China to help us address the loss of exclusivity for DRAXXIN and maintain livestock growth that will support our 2021 guidance.\nLonger term, we will continue to invest in livestock innovations and data driven animal agricultural solutions.\nAs we continue through 2021, we will be building on the progress against our five priorities.\nDriving innovative growth, enhancing customer experience, leading in digital and data analytics, cultivating a high performing organization and championing a healthier, more sustainable future.\nOur investment plans and focus on growth for 2021 include, continuing the successful launch of Simparica Trio in the U.S. and other markets as well as the ongoing adoption of other new parasiticides, Revolution Plus and ProHeart 12, driving growth in dermatology through increased use of direct-to-consumer advertising and disease awareness campaigns in the U.S. and globally.\nOur focus remains on growing this market and increasing customer loyalty through our innovative treatments, which we expect to help us top $1 billion in annual sales for the first time.\nAs noted earlier, we will be investing in the launch of the first monoclonal antibodies for osteoarthritis pain in dogs and cats in Europe in the first half of 2021, and advancing the regulatory process in the U.S. and other markets.\nWhile we remain confident in the eventual U.S. approval of these products based on the safety and efficacy data we submitted, at this point, we believe it is unlikely we will receive approvals for Solensia or Librela in the U.S. in 2021.\nWe continue to work through regulatory reviews and manufacturing inspections with the FDA and we will continue to keep you updated on this progress on future calls.\nAnd finally, we're continuing our development of digital and data solutions that will support more individualized animal care and more efficient and sustainable operations for producers.\nIn conclusion, I'm incredibly proud of what our people accomplished in the face of such uncertainties during 2020, and it gives me great confidence in our continued success and full-year guidance for 2021.\nAs we navigate through recovery from the global pandemic, and capitalize on the growth opportunities we see ahead, my optimism comes from what drove us over the last year.\nThe resilience and essential nature of animal health industry, the diversity, innovation and market leadership of our portfolio, and the agility and passion of our colleagues to face any challenge.\nNow, let me hand it off to Glenn who will speak more about our fourth quarter results and guidance for the full year 2021.\nWe had another exceptional year with revenue of $6.7 billion and adjusted net income of $1.8 billion, both exceeding the high end of our November full-year guidance range.\nFull year revenue grew 9% operationally and 7% on a reported basis with adjusted net income increasing 10% operationally and 5% on a reported basis.\nGoing deeper into the numbers, price contributed 2% to full year operational revenue growth with volume contributing 7%.\nVolume growth consisted of 3% from new products, 3% from key dermatology products and 1% from acquisitions, with other in-line products flat for the year.\nWe again saw broad-based revenue growth with the U.S. growing 11% and International growing 7% operationally.\nThe innovation we brought to the market and the diversity of our portfolio was key to our strong performance, as companion animal grew 17% while livestock was flat on a year-over-year basis.\nPerformance in companion animal was led by our parasiticide portfolio, bolstered by the launch of Simparica Trio which generated revenue of $170 million.\nThis added approximately $150 million of incremental revenue and exceeded our expectations set prior to the pandemic.\nSales of Simparica also grew double-digits for the year with operational revenue growth of 16%.\nOur key dermatology portfolio demonstrated continued strength in 2020 growing 23% operationally, generating revenue of $925 million and increasing more than $170 million versus prior year.\nThe COVID-19 pandemic created a difficult market environment for livestock.\nHowever, we are encouraged by the resiliency displayed in 2020.\nWe remain optimistic that global livestock will return to modest growth in 2021 as the recovery from African swine fever in China continues and consumption patterns normalize.\nOperational growth and adjusted net income of 10% were driven mainly by strong revenue growth and operating margin expansion.\nNow, moving on to our Q4 financial results where we posted another strong quarter with revenue of $1.8 billion representing an increase of 9% operationally and 8% reported.\nAdjusted net income of $438 million is an increase of 3% operationally and flat on a reported basis.\nOperational revenue grew 9% with 2% from price and 7% from volume.\nVolume growth of 7% consisted of 4% from new products, 3% from key dermatology products, 1% from acquisitions and a decline of 1% from other in-line products.\nCompanion animal products led the way in terms of species growth, growing 25% operationally, while livestock declined 5% operationally in the quarter.\nCompanion animal parasiticides grew 52% in the quarter, gaining market share in the U.S. of more than 7% within the flea, tick and heartworm segment, versus the same period in the prior year.\nThis includes the continued adoption of Simparica Trio which generated sales of $60 million in Q4.\nOur key dermatology products, Apoquel and Cytopoint again had significant global growth in the quarter with $257 million of revenue, representing 27% operational growth versus an extremely difficult comparative period in which key derm grew 29% for the fourth quarter of last year.\nOur diagnostics portfolio again made positive contributions to revenue with reference lab expansion and double-digit growth in consumables and instrument revenue.\nThe recovery in wellness visits continued to be a catalyst for growth following the slowdown from social distancing restrictions earlier in the year.\nAs we noted on our previous earnings call, the early fall cattle run pulled a portion of fourth quarter sales into the third quarter, leading to a weaker quarter in cattle than we would typically expect.\nThis was the primary driver of the 5% operational decline in livestock for the fourth quarter.\nFor the remainder of the livestock portfolio, swine posted a second consecutive quarter of growth with the herd rebuild continuing key accounts, as the market recovers from African swine fever in China.\nOur aquaculture business grew high single digits in the quarter, and along with swine partially offset the decline in cattle and poultry.\nNow moving on to revenue growth by segment for the quarter, U.S. revenue grew 11% with companion animal products growing 30% and livestock sales declining by 15%.\nFor companion animal, the positive trends at the vet clinic continued in Q4 with patient visits up 2% and revenue per visit increasing by 13%.\nCompanion animal growth in the quarter were driven by sales of our Simparica franchise as well as key dermatology products.\nWe maintained an increased investment in direct-to-consumer advertising in both therapeutic areas and continue to see a good return on that investment.\nSimparica Trio performed well again in the quarter with sales of $56 million.\nWe remain extremely encouraged for the future growth of our product and the growth of the overall market segment as a material portion of Trio sales came from new patients to the category.\nKey dermatology sales were $176 million for the quarter, growing 32% with significant growth for Apoquel and Cytopoint.\nOur investments to support the franchise have been instrumental in driving more patients into the clinics.\nCompanion animal diagnostic sales increased 22% in the quarter as a result of reference lab expansion and growth in point-of-care instruments and consumables.\nU.S. livestock declined 15% in the quarter driven primarily by cattle, which had a portion of Q4 sales pulled into the third quarter as a result of the earlier movement from pasture to feedlot.\nThe remaining species declined as well with COVID-19 and pricing pressure negatively impacting our swine business.\nPoultry declines are largely attributed to product rotation and less producer profitability, leading to reduced usage of our premium products.\nTo summarize U.S performance, innovation and return on investment once again drove exceptionally strong growth in companion animal.\nWhile livestock was down in the quarter, the results were in line with our expectations.\nRevenue in our International segment grew 7% operationally in the quarter.\nCompanion animal revenue grew 17% operationally and livestock revenue grew 2% operationally.\nIncreased sales of companion animal products resulted from growth in our parasiticide portfolio, vaccines and key dermatology products.\nParasiticide growth in the quarter was again driven by the Simparica franchise with further adoption of Simparica Trio.\nIn Q4, we observed a series of favorable market trends, such as increased pet ownership and medicalization rates in Asia.\nOverall, companion animal grew in every major market except Italy and the U.K., which had arguably the strictest lockdown protocols.\nCompanion animal diagnostics grew 16% in the quarter, led by an increase in point-of-care consumable usage.\nSwine revenue grew 14% operationally, posting a third consecutive quarter of double-digit growth.\nSwine sales in China grew in excess of 100% for the second straight quarter.\nKey accounts expanded their use of vaccines and other products as they continue to rebuild herds from smaller farms to large-scale operations.\nChina total products grew 45% operationally in the quarter and 34% operationally for 2020.\nBrazil was also a significant contributor to international growth in the quarter, growing 18% operationally.\nFor the fourth quarter and full year 2020, Brazil delivered double-digit growth in all species except poultry which modestly declined.\nOverall, our International segment delivered strong results despite the challenges presented by COVID-19.\nOur diversity across products and geographies enabled our international segment to again be a significant driver of growth.\nNow moving on to the rest of the P&L for the quarter.\nAdjusted gross margin of 67.7%, fell 80 basis points on a reported basis compared to the prior year resulting from other manufacturing costs, inventory charges, recent acquisitions and elevated freight expense.\nThis was partially offset by favorable product mix and price increases.\nAdjusted operating expenses increased 10% operationally, resulting from increased advertising and promotion expense for Simparica Trio and Apoquel, partially offset by T&E savings.\nReturn on investment from our DTC campaigns has been very favorable and we remain -- and will remain an important investment to support future growth of the business.\nThe adjusted effective tax rate for the quarter was 13.5%, a decrease of 70 basis points, driven by the impact of net discrete tax benefits, partially offset by the jurisdictional mix of earnings.\nAnd finally, adjusted net income and adjusted diluted earnings per share for the quarter grew 3% operationally.\nIn December, we announced 25% annual dividend increase, continuing our commitment to grow our dividend at or faster than the growth in adjusted net income.\nIn addition, we resumed our share repurchase program in January with $1.4 billion of remaining capacity under the current authorization.\nNow moving on to guidance for 2021, please note that guidance reflects foreign exchange rates as of late January.\nFor 2021, we are projecting revenue between $7.400 billion and $7.550 billion representing 9% to 11% operational growth.\nWe are expecting foreign exchange favorability in 2021 of approximately 200 basis points.\nWe expect companion animal to be the primary driver of growth in 2021 with the continued strength of our diverse parasiticide portfolio which includes full year Simparica Trio sales.\nWe believe market dynamics for companion animal will remain strong in 2021 allowing for further expansion of our key dermatology products as well as our diagnostics offerings, which we anticipate will grow faster than the overall animal health market.\nWhile we expect the pace of certain trends that accelerate in 2020 to moderate, such as increased spend per visit, our view is that 2020 has a status [Phonetic] of the higher base for future growth.\nWe anticipate livestock will return to global growth in 2021, primarily driven by more normalized food consumption patterns.\nGeographically, we expect total Company sales growth to be relatively balanced between our U.S. and International segments.\nHowever, we do expect continued and meaningful growth in China and other emerging markets.\nI'd like to touch upon the key assumptions that underpin our expectations for revenue growth.\nBeginning with dermatology, our guidance does not assume a meaningful competitive entrant in 2021 and with continued investment behind the franchise, we believe revenue will exceed $1 billion for the full year.\nWe also do not assume a triple combination product will launch in the U.S. in 2021 to compete against Simparica Trio.\nWe're extremely excited about our monoclonal antibodies for pain with both Librela and Solensia having long term blockbuster potential.\nHowever, as Kristin mentioned, while both products will launch in the first half of 2021 in the EU and other international markets, we do not currently expect either product to receive approval in the U.S. this year.\nFor the remainder of the P&L, adjusted cost of sales as a percentage of revenue is expected to be approximately 30% which is relatively consistent with our cost of sales in 2020.\nAdjusted SG&A expenses for the year are expected to be between $1.775 billion and $1.85 billion with the increase from 2020 focused on supporting primary drivers of revenue growth, including recent and future product launches, key brands and recent acquisitions and reference lab expansion in diagnostics.\nAdjusted R&D expense for 2021 is expected to be between $500 million and $520 million as we remain committed to investing in pipeline opportunities for new therapies and lifecycle innovation.\nAdjusted interest and other income deductions is expected to be approximately $260 million with the increase over 2020 driven by increased interest expense as well as lower interest income.\nOur adjusted effective tax rate for 2021 is expected to be approximately 20%.\nThe increase in 2021 is primarily related to the impact of favorable non-recurring discrete items that occurred in 2020.\nAdjusted net income is expected to be in a range of $2.08 billion to $2.13 billion, representing operational growth of 9% to 12%.\nOur guidance reflects our value proposition of growing revenue in line with or faster than the market and growing adjusted net income faster than revenue, during a year when we'll be making meaningful investments to support future growth.\nConsistent with 2020, we are anticipating elevated capital expenditures in 2021 to support investments in manufacturing, focused on internal sourcing of API, capacity increases and facilities to support pipeline opportunities.\nWe're also investing in information technology to support our recent acquisitions as well as digital capabilities and data analytics.\nFinally, we expect adjusted diluted earnings per share to be in the range of $4.36 to $4.46, and reported diluted earnings per share to be in the range of $4.02 to $4.14.\nWhile guidance represents full year expectations, we do anticipate growth will be more heavily weighted toward the first half of the year.\nThis is largely due to full year Simparica Trio sales and a favorable comparison versus Q2 2020 as a result of COVID-19.\nTo summarize, 2020 was another exceptional year in which we delivered 9% operational revenue growth and 10% operational growth in adjusted net income.\nIn the year that presented a unique set of challenges.\nOur guidance for 2021 highlights our ability to grow revenue organically above the market and grow adjusted net income faster than revenue, even during times of elevated investment.\nBefore turning it over to Q&A, I'd like to express how proud I am of our colleagues and all we've accomplished amid an unprecedented set of circumstances.\nWhile there is no assurance that the new year will be without similar challenges faced in 2020, we cannot be more excited about the opportunity to again deliver on our long-term shareholder value proposition.\n Assistant:", "chosen": "q4 revenue $1.8 billion versus refinitiv ibes estimate of $1.73 billion.\nsees fy 2021 earnings per share $4.02 to $4.14.\n"}