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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: For those of you that have not, it is available on the Investor Relations section of our website at investor.\nNon-GAAP net earnings and non-GAAP EPS, which have been adjusted for certain items which may affect the comparability of our performance with other companies.\nI'm very pleased with the strong start to 2021 and the positive momentum in revenue and margins we delivered in the first quarter, demonstrating the strong operating leverage in our business.\nConsolidated revenues increased 11.1% year-over-year in our first full quarter as a stand-alone public company.\nThe revenue increase included same-store revenue growth of 14.8% and we reported adjusted EBITDA margin that improved to 15.4% of revenues.\nThis is the first quarter in over a decade that the Company has delivered double-digit same-store revenue growth.\nOur teams in the field and our store support centers and Woodhaven are performing at a very high level and are energized and engaged.\nAs I visit Aaron's stores around the country to support our operations team, I'm seeing a strong sense of pride and optimism about our brand and our competitive position.\nOur team members and customers are embracing the innovation that we are delivering and the dynamic lease-to-own market.\nOver the last five years, we've significantly transformed the company for the goal of continuing to provide an exceptional customer and team member experience while also driving greater efficiencies in our operating model.\nI'm proud to say that as of today we have a centralized decisioning platform that provides greater control and predictability resulting in a higher quality lease portfolio.\nWe have enhanced digital payment platforms that are enabling over 75% of monthly customer payments to be made outside of our stores.\nWe have an industry-leading, fully transactional e-commerce platform that is attracting a new and younger customer, and we have a portfolio of 51 GenNext stores that is currently outperforming our expectations with many more store openings in the pipeline.\nAll of these initiatives are underpinned by the investments that we have made in enhanced analytics and when combined with our more efficient operations are enabling us to deliver strong revenue and earnings growth.\nThese transformations to our business model are contributing to our outstanding performance in the first quarter of 2021.\nWe are encouraged by the continuing improvement and the quality and size of our same-store lease portfolio, which ended the quarter up 6.2% compared to the end of the first quarter of 2020.\nThis improvement was primarily driven by strong demand for our products, few release merchandise returns, and lower inventory write-offs.\nIn addition, our customer continues to benefit from the ongoing government stimulus, one of the most meaningful contributors to our strong portfolio performance was centralized decisioning, which we implemented across all Company-operated stores in the U.S., in the spring of 2020.\nToday, nearly 70% of our portfolio is made up of lease agreements that were originated using this technology.\nCentralized decisioning delivers consistency and predictability in the performance of our lease portfolio.\nIt enables store managers the flexibility to focus their time on growth-oriented activities such as sales and lease servicing.\nWe believe our algorithms provide better outcomes for both the customer and Aaron's with the goal of having a greater number of customers achieve ownership while at the same time reducing our cost to serve.\nWe continue to refine this decisioning across our various channels, and we expect this will continue to drive greater productivity from our lease portfolio.\nAnother contributor to our strong performance in the quarter was our e-commerce channel, which represented more than 14% of lease revenues.\nOur e-commerce team has really delivered, driving traffic growth to aarons.com by 12.8% and increasing revenues by 42% in the first quarter as compared to the prior-year quarter.\nE-commerce lease originations increased as compared to the year-ago quarter despite the significant shift of customer activity through our online platform in March of 2020 as stores closed during the early days of the COVID-19 pandemic.\nIn addition, e-commerce write-offs improved by more than 50% compared to last year's quarter, primarily as a result of ongoing decisioning optimization, operational enhancements, and strong customer payment activity.\nOur e-commerce team continues to deliver ongoing improvements through our online customer acquisition, conversion, and servicing capabilities, which is leading to margin growth and continued positive momentum in this important channel.\nOur e-commerce growth in the quarter is enabled by our stores, which are not just showrooms and service centers but are also last-mile logistics hubs delivering an expanded assortment of products with same or next day delivery.\nFinally, our Real estate repositioning and reinvestment strategy is gaining momentum and we expect it will drive future growth.\nOur new GenNext stores have larger and more modern showrooms, expanded product assortment, and improved brand imaging and digital technologies.\nTo date, we have opened 51 new GenNext stores and have generated results that are meeting or exceeding our targeted internal rate of return equally as encouraging, monthly lease originations in the first quarter.\nOur plan for 2021 is to plan to open in the second and third quarters.\nWhile we're excited about both the early financial results and the infrastructure we're building to accelerate our progress, we continue to maintain a disciplined approach around our execution of this strategy.\nWe remain focused on our key strategic initiatives of simplifying and digitizing the customer experience, aligning our store footprint to our customer opportunity and promoting the Aaron's value proposition of low payments high approval rates and best-in-class service.\nFor the first quarter of 2021, revenues were $481.1 million compared to $432.8 million for the first quarter of 2020, an increase of 11.1%.\nThe increase in revenues was primarily due to the improving quality and increased size of our lease portfolio and strong customer payment activity during the quarter, aided in part by government stimulus and partially offset by the net reduction of 166 Company-operated and franchised stores compared to the prior year.\nAs Douglas called out earlier, e-commerce revenues were up 42% compared to the first quarter of the prior year and represented 14.2% of overall lease revenues compared to 11.3% in 2020.\nOn a same-store revenue basis, revenues increased 14.8% in the first quarter compared to the prior-year quarter, the first double-digit, same-store revenue growth since 2009, and our fourth consecutive positive quarter.\nSame-store revenue growth was primarily driven by a larger same-store lease portfolio and strong customer payment activity, including retail sales and early purchase option exercises.\nWe believe this growth is partially a result of the government stimulus programs passed in 2020 and 2021.\nAdditionally, the company ended the first quarter of 2021 with a lease portfolio size for all company operated stores of $128.8 million, an increase of 3.6% compared to the lease portfolio size as of March 31, 2020.\nLease portfolio size represents the next month's total collectible lease payments from our aggregate outstanding customer lease agreements.\nOperating expenses excluding restructuring expenses, spin-related transaction costs and the impairment of goodwill and other expenses, which were both recorded in the first quarter of 2020 were down $1.5 million as compared to the first quarter of last year.\nThis decrease was primarily due to a reduction in write-offs, store closures and the impact of the COVID-related reserves recorded in 2020, partially offset by higher personnel costs related to variable performance compensation, higher marketing expenses and an increase in bank and credit card related fees.\nAdjusted EBITDA was $73.9 million for the first quarter of 2021 compared with $34.7 million for the same period in 2020, an increase of $39.2 million or 112.9%.\nAs a percentage of total revenues, adjusted EBITDA was 15.4% in the first quarter of 2021 compared with 8% for the same period last year, an improvement of 740 basis points.\nThe improvement in adjusted EBITDA margin was primarily due to the items that drove the total revenues increase and a 310 basis point reduction in overall write-offs to 3.1% of lease revenues, including both improvement in the e-commerce and store origination channels compared to the prior year.\nThe improvement in write-offs was due primarily to the implementation of new decisioning technology, improved operations, the benefit of government stimulus and the impact of COVID-related lease merchandise reserves recorded in the first quarter of 2020 and not repeated in 2021.\nOn a non-GAAP basis, diluted earnings per share were $1.24 in the first quarter of 2021 compared to non-GAAP diluted earnings per share of $0.30 for the same quarter in 2020, an increase of $0.94 or 313.3%.\nCash generated from operating activities was $20.2 million for the first quarter of 2021, a decline of $36.6 million compared to the first quarter of 2020, primarily due to higher inventory purchases, partially offset by higher customer payments and other changes in working capital.\nDuring the quarter, the company purchased 252,200 shares of Aaron's common stock for a total purchase price of approximately $6.3 million.\nAs of the end of the quarter, we had approximately $143.7 million remaining under the company's share repurchase authorization that was approved by our Board on March 3rd of this year.\nThe Company's Board of Directors also declared our first quarterly cash dividend of $0.10 per share last month and we paid the dividend on April 6.\nAs of March 31, 2021 the company had a cash balance of $61.1 million, less than $500,000 of debt and total available liquidity of $295.5 million.\nTurning to our outlook, based on our performance in the first quarter of 2021 and the passage of the American Rescue Plan Act in March, we have revised our full-year 2021 outlook.\nFor the full year, we expect consolidated revenues of between $1.725 billion and $1.775 billion representing an increase in our revenue outlook of $75 million.\nWe also expect adjusted EBITDA of between $190 and $205 million, representing an increase in our adjusted EBITDA outlook of $35 million.\nFor the full year 2021, our outlook for the effective tax rate, depreciation and amortization and diluted weighted average share count are unchanged.\nWe have also increased our full-year same-store revenue outlook from a range of 0% to 2% to a range of 4% to 6%.\nSimilar to our original outlook, total revenue and adjusted EBITDA in the first half of 2021 are expected to be higher in the second half of 2021.\nThis outlook assumes no impact from the expansion and acceleration of the child tax credit payments expected to begin in July 2021.\nAdditionally, our updated outlook assumes no significant deterioration in the current retail environment or in the state of the U.S. economy, as compared to its current condition and a continued improvement in global supply chain conditions.\n",
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"content": "q1 revenue rose 11.1 percent to $481.1 million.\nq1 non-gaap earnings per share $1.24.\nsees fy revenue $1.725 billion to $1.775 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined by Tom Greco, our President and Chief Executive Officer; and Jeff Shepherd, our Executive Vice President and Chief Financial Officer.\nWe also hope that you and your families are healthy and safe.\nThe health and safety of our team members and customers has been a top priority over the past year.\nWith strength across all channels, we delivered comparable store sales growth of 24.7%, and margin expansion of 478 basis points versus the prior year.\nOn a two-year stack, our comp sales growth was 15.4%.\nAdjusted diluted earnings per share of $3.34 represented an all-time quarterly high for AAP, and improved more than 230% compared to Q1 2020.\nFree cash flow of $259 million was up significantly versus the prior year, and we returned over $203 million to our shareholders through a combination of share repurchases and our quarterly cash dividend.\nIn addition, we recently announced an updated capital allocation framework targeting top quartile total shareholder return, highlighted by operating income growth, share repurchases and an increase in our dividend.\nThis further reinforces our confidence in future cash generation and our commitment to returning excess cash to shareholders.\nAs outlined in April, we are building an ownership culture, as well as a differentiated operating model at Advance.\nOver the past few years, we've made substantial investments in our brands, our digital and physical assets, and our team.\nThese investments, along with external factors, enabled us to post a strong start to 2021.\nClearly, the federal stimulus package, along with our first real winter weather in three years, was a benefit to our industry.\nFrom a category perspective, net sales growth was led by batteries, appearance chemicals and wipers.\nGeographically, all eight regions posted over 20% growth.\nImportantly, over the past year, the Northeast, our largest region, had been below our overall reported growth rate and well below that of our top-performing regions.\nIn Q1, the gap narrowed, and in recent weeks, the Northeast has been leading our growth.\nThis was in line with our expectations as mobility is increasing in large urban markets in the Northeast, which were disproportionately impacted by COVID-19 last year.\nBoth DIY omnichannel and Professional performed well, delivering double-digit comp sales growth in the quarter.\nWe saw strong increases versus year ago with a double-digit increase in transactions and high single-digit increases in dollars per transaction in both channels.\nIn terms of cadence, DIY led the way early in Q1.\nAs the country began to reopen later in the quarter, Professional came on strong, resulting in Pro growth of over 20% in Q1, with continued momentum into Q2.\nThe changes in channel performance highlights the importance of flexibility in our operating model, as we adapt to rapid shifts in consumer behavior relative to 2020.\nThroughout AAP, our merchant, supply chain and store operations teams have been extremely agile in adjusting to this evolving environment to ensure we take care of our customers.\nWithin the Pro sales channel, our overarching focus remains to get the right part in the right place at the right time.\nThis enables us to compete on availability, customer service and speed of fulfillment, which are the primary drivers of choice for Pro-verizers [Phonetic].\nTo achieve these goals, we continued to strengthen our value proposition through improved availability as well as our Advance Pro catalog featuring tools like MotoLogic and Delivery Estimates [Phonetic].\nAs vaccinations rollout across the country, mobility is increasing across all income strata.\nAs discussed in April, this is very good for AAP, as our diverse set of assets within Pro is uniquely positioned to capitalize on this trend.\nSpecifically, WORLDPAC led our Professional growth in the quarter.\nWith the customer base that serves higher end installers and more premium vehicles, WORLDPAC gained momentum throughout Q1.\nThis is because, middle to high income motorists are becoming increasingly mobile, and in some cases, they are now returning to a daily commute.\nSaying it simply, they're driving more than they did a year ago.\nSecondly, we're seeing benefits from the own brand product offering expansion with the integration of Autopart International.\nFurther, we believe our independent Carquest stores are also well positioned.\nThey're leveraging our enterprise assortment and have excellent relationships with customers.\nThese relationships have been strengthened over the past year, given the support we provided to both independents and our Pro customers during a difficult time.\nWe continue to grow our independent store base through a combination of greenfield locations and the conversion of existing independent location.\nToday, we're extremely excited to announce that we're adding 29 new independent locations to the Pacific Northwest to the Carquest family, the single largest convergence in our history.\nBaxter Auto Parts announced that they will bring over 80 years of automotive aftermarket experience and strong customer relationships to the Carquest banner.\nThis is a testament to the strength of the Carquest Independent program, including product availability, differentiated brands, technology platforms and robust marketing plan.\nWe also grew our TechNet program across all Pro channels.\nTechNet enables independent service shops to create their own national network.\nWe now have over 13,000 North American members, and we'll continue to leverage TechNet to differentiate our Pro offering and build loyalty.\nIn summary, we expect that as our Pro installers recover, our industry-leading assortment, customized Pro solutions, and dedicated Pro banners will enable us to drive market share gain in the growing segment throughout the balance of the year.\nMeanwhile, our DIY omnichannel business led our growth for the fourth consecutive quarter.\nStepping back and as a reminder, there was a significant increase in DIY penetration across the industry beginning in Q2 2020.\nAccording to syndicated data, an estimated 4 million new DIY buyers were added.\nSpend per buyer for 2020 grew close to 9%, led by online spend per buyer.\nDIY growth was led by project, recreation and more discretionary categories as people worked on their vehicles or even learned how to work on their vehicles.\nThese trends generally continued through Q1, and the industry is now beginning to lap the significant increase from prior year in Q2.\nFrom an Advance standpoint, we grew share of wallet and overall market share in Q1, led by DieHard batteries.\nDieHard continues to have strong momentum and our advertising is clearly resonating with customers.\nWe plan to continue to invest behind this powerful brand in 2021 to further build awareness and association with Advance.\nOur loyalty program remains focused on attracting, retaining and graduating Speed Perks members.\nOur loyalty program enables us to provide personalized offers and increase share of wallet as we leverage our customer data platform.\nIn Q1, this helped drive growth in our VIP members by approximately 14% and our Elite members by 30%.\nConsistent with broader retail, during Q1, we began to see a shift back to store sales from e-commerce, given the outsized growth of the online business during the onset of the pandemic in 2020.\nOur investments in digital and e-commerce have been another differentiator for our DIY business.\nWe continue to strengthen our online experience on desktop, mobile and with our app, which recently crossed nearly 1.3 million downloads.\nThe integration of our digital and physical assets is communicated through our Advance Same Day suite of services.\nThis enables DIYers to find the right part from our industry-leading assortment, order it online, and either pick it up in one of our stores within 30 minutes or have it delivered in three hours or less.\nFinally, we're very excited about our footprint expansion and new store opening plans for the year.\nWe're targeting between 100 to 115 new stores in 2021.\nThis includes the Pep Boys leases we're executing in California.\nThe opening of the California locations will ramp up during the back half of the year and finish in 2022.\nNow, I'd like to transition to the unique opportunity we have to significantly expand our margins.\nAs we outlined in our strategic update, there are four broad initiatives: leveraging category management, streamlining our supply chain, improving sales and profit per store, and reducing corporate SG&A.\nOur largest merchant expansion initiative is leveraging category management to drive gross margin improvement.\nThis involves three components: material cost optimization, own brand expansion, and strategic pricing.\nMaterial cost optimization and strategic sourcing has been an ongoing effort for us and will continue to be a focus.\nGiven the current inflationary environment, we are leveraging these capabilities to push back on cost increases, to keep our price to the customer low.\nWe'll continue to work collaboratively with our supplier partners on managing input costs.\nOwn brand expansion as a percent of our mix is an important contributor to margin rate improvement.\nHowever, growing our DieHard and Carquest brand is not just about margin, it's also about differentiation.\nOur merchant team is building our capabilities and sourcing to develop high quality products, leveraging our strong supplier relationships.\nTwo recent examples include our DieHard robust enhanced flooded battery and our Carquest Hub Assembly.\nOnce equipped with a differentiated product, our marketing team is building the awareness and the reputation of our own brand as evidenced by our DieHardisBack advertising campaign.\nFinally, we supplement innovative quality parts and breakthrough marketing with an improved [Technical Issues] and extensive team member training.\nThis includes enhanced part, product and brand training to ensure our store team members are well positioned to provide our customers with trusted advice and an excellent in-store experience.\nSo, we're not only on track with margin expansion behind own brands, we're also leveraging these brands to enhance differentiation and improve store traffic.\nOur extensive research around customer journey highlights the role that brands play in customer purchase decisions.\nWhen a customers car won't start, we want them to think of DieHard first, such as this becomes a reason that they come to Advance.\nThis is why collaborating with our supplier partners is so important to ensure high quality for our own brands.\nWe are confident as we continue to invest in product quality, building our brands, and training our team members to drive own brands as a percent of mix, we will further deliver growth across AAP.\nThe final component of our category management initiatives is strategic pricing.\nBy investing in new tools, we're now able to competitively price on a market-by-market basis using detailed analytics to improve rate.\nWe're also realizing success in reducing discounts online through a rapid test and learn approach, which is driving significant margin expansion in key categories.\nIn total, our category management initiatives are currently on track to deliver up to 200 basis points of margin expansion through 2023.\nAs we look beyond 2023, we plan to continue building out customer data and personalization platforms to further enhance the customer experience and expand margins.\nSame with gross margin, we once again leveraged supply chain in Q1 versus both 2020 and 2019.\nDespite the current environment, we remain focused on executing our primary margin expansion initiatives while working to mitigate the impact of global supply chain challenges.\nWe expect to complete our warehouse management system implementation in 2022 with the majority of our largest buildings converted this year.\nIn conjunction with WMS, we're also rolling out our labor management system, which allows us to implement common standard operating procedures across our DC network.\nThis will also enable us to incentivize hourly team members based on their performance.\nIn terms of cross-banner replenishment, or CBR, we've converted over 70% of stores to date and expect to complete the remaining stores we originally planned by the end of Q3.\nCBR significantly reduces our miles driven, which is even more important today given rising fuel and labor costs.\nMore importantly, CBR will complete the integration of the Advance and Carquest supply chains and enables us to service our approximately 4,800 corporate Advance stores and 1,300 independent Carquest stores from a single supply chain.\nWe also continue to integrate the dedicated professional supply chain within WORLDPAC and Autopart International.\nIn the quarter, we converted another five AI stores to the WORLDPAC system and are on track to complete this integration by the end of Q1 2022.\nIn April, we discussed two additional supply chain initiatives building on what will soon be a more streamlined supply chain network.\nThis includes tiering our supply chain and transforming in-market delivery and customer fulfillment.\nOur tiered supply chain pools the slowest moving SKUs into four strategically located regional DCs.\nThis will allow us to make room for faster moving SKUs and ultimately improve the availability of our higher turnover products.\nOur second new initiative is transforming in-market delivery and customer fulfillment to improve service and productivity.\nThe new delivery management system was selected for multiple modes of transportation to move and deliver parts at lower costs.\nBoth of these initiatives are in their early stages, and we are targeting completion of these in 2023 and 2024, respectively.\nIn terms of SG&A improvements, our store operations team is executing initiatives to increase sales and profit per store.\nWe've now increased sales per store for three straight years, and we're on track to get to our target of $1.8 million average sales per store by 2023.\nIn Q1, with strong top-line growth and disciplined execution, we leveraged store payroll versus both 2019 and 2020.\nWe've also made improvements in scheduling and task management to drive efficiency, which helps with our customer experience as it enables us to schedule our most tenured and knowledgeable team members when we need them most.\nWe continued to invest in our store team members in terms of training, technology and in compensation, including our unique Fuel the Frontline stock ownership program.\nWe believe these investments have enabled us to attract the very best parts people in the business and are enabling continued improvement in primary execution metrics like net promoter score, units per transaction and ultimately sales and profit per store.\nFinally, we took steps to reduce corporate and other SG&A costs in the quarter.\nThis includes three broad territories: integration, safety, and new ways of working.\nIn terms of integration, our finance ERP is near completion and we continue to build proficiency in our global capability center at Hyderabad, India.\nI'd like to take this opportunity to recognize our India team, who stood up an entirely new operation literally in the middle of a global pandemic last year.\nWe've been working hard to support them as COVID-19 infection rates have risen in India over the past few weeks.\nThe GCC team including IT, Finance and HR team members today has certainly enabled us to reduce costs, both in terms of capex and OpEx.\nIn addition, the IT team brings new skills in the area of software engineering, data analytics and artificial intelligence.\nThese critical capabilities will help enable the successful implementation of our many tech initiatives.\nSecondly, our safety performance continues as field leaders across Advance hold their teams accountable as we build a safety culture.\nWe delivered a 9% reduction in our total recordable injury rate compared to the previous year, and reduced our lost-time injury rate 2%.\nBy focusing on people, behavior and continuous improvement, we're reducing claims and overall cost.\nThird, we recently completed a thorough review on the ways we work in our corporate offices and incorporated key learnings from working remotely for over a year.\nThe objective was to ensure our corporate team is focused on our highest value priorities, while eliminating less productive work.\nFrom this work, we announced a restructure of our corporate functions and the reduction of our corporate office footprint.\nThis will result in savings of approximately $30 million in SG&A, which will be realized over the next 12 months.\nWe also believe the streamline approach will be more effective to supporting our field and supply chain teams.\nWhile we're pleased with our Q1 performance, we're confident that there is so much more opportunity ahead.\nTo fully realize our potential, we plan to continue to invest in our brands, the customer experience, our team members and market expansion to drive top-line growth above market.\nOur entire team also remains focused on the execution of our margin expansion initiatives.\nWe're energized and focused on building on the momentum we saw in Q1 to execute our long-term strategy in the months to come.\nNow, let me pass it over to Jeff, who will go into more details on our financial results.\nIn Q1, our net sales increased 23.4% to $3.3 billion.\nAdjusted gross profit margin expanded 91 basis points to 44.8% as a result of improvement throughout gross margin, including supply chain, net pricing, channel mix and material cost optimization.\nThese improvements were slightly offset by unfavorable inventory-related costs, product mix and headwinds associated with shrink and defectives.\nOur Q1 adjusted SG&A expense was $1.2 billion.\nOn a rate basis, this represented 35.8% of net sales, which improved 387 basis points compared to one year ago.\nThe improvement was driven by sales leverage in both payroll and rent, as well as lower claim-related expenses from the Company's emphasis on safety.\nWe discussed our labor management system previously, but we really saw the benefit this quarter as we staffed our store based on customer needs, utilizing nights, weekends and an improved mix of full and part-time schedules.\nIn addition, our ongoing focus on team member safety will always remain one of our highest priorities.\nThe savings were partially offset by an increase in field bonus costs related to our improved performance.\nIn addition, as Tom outlined earlier, we invested in marketing during Q1, primarily associated with DieHard.\nThis lap marketing cuts the previous year, which were made at the onset of the pandemic.\nWe also saw an increase in third party and service contracts related to our transformational plans, primarily within IT.\nRelated to the increased COVID-19 cases we saw late in 2020 and early 2021, we incurred approximately $16 million in COVID-19 cost during the quarter, which is flat to the prior year.\nWhile the future impact of COVID-19 remains unknown, we expect these costs to subside throughout the year, assuming infection rates continue to decline.\nOur adjusted operating income increased from $113 million last year to $299 million.\nOn a rate basis, our adjusted OI margin expanded by 478 basis points to 9%.\nFinally, our adjusted diluted earnings per share was $3.34, up from $1.00 a year ago.\nOur free cash flow for the quarter was $259 million, an increase of $330 million compared to last year.\nThe improvement was primarily driven by year-over-year operating income growth, as well as improvements we achieved from working capital initiatives, including higher utilization of our supply chain financing facilities that we began to see during the pandemic last year.\nOur AP ratio improved by nearly 1,000 basis points to 84%, the highest we've achieved since the GPI acquisition.\nA portion of the improvement is attributable to the actions we took during the pandemic, and the continued partnerships we have with our suppliers.\nIn the quarter, we spent $71 million in capital expenditures versus $83 million in the prior year quarter.\nWe expect to be within our guidance for capital expenditures, as we continue to invest in our transformation initiatives.\nDuring Q1, we returned more than $200 million to our shareholders through the repurchase of 1.1 million shares and our quarterly cash dividend.\nWe expect to be within our 2021 share repurchase guidance of $300 million to $500 million.\nMiles driven are beginning to grow for the first time in over a year, and historically, this has been overall positive for our industry.\nIn addition, our Professional business is accelerating, and we expect Pro to outperform DIY for the balance of the year.\nFor these reasons, we're raising our comp sales guidance to up 4% to 6%.\nWe're also cognizant of several macroeconomic factors.\nThis includes inflationary costs in commodities, transportation and wages, along with currency headwinds.\nAs a reminder, our industry has historically been very rational and successful in passing on inflationary costs in the form of price, and that is our intention this year as well.\nAlso our Pro business carries a lower margin rate than DIY, which may partially offset the gains we expect to see in sales.\nAs a result of our top-line strength and current cost assumptions, we're updating our adjusted OI margin range to be between 9% and 9.2%.\nOur guide for comp sales is now up 3 full points, and our adjusted OI margin rate is now up 30 basis points compared to our initial guidance provided in February.\nWe remain committed to delivering against the strategy we laid out in April and are confident in our ability to execute our long-term strategic plans to deliver strong and sustainable total shareholder return.\n",
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"content": "q1 adjusted earnings per share $3.34.\nq1 sales $3.3 billion versus refinitiv ibes estimate of $3.28 billion.\nq1 same store sales rose 24.7 percent.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I am joined by Tom Greco, our President and Chief Executive Officer and Jeff Shepherd, our Executive Vice President and Chief Financial Officer.\nWe hope you're all healthy and safe amid the ongoing pandemic and recent surge of the delta variant.\nIt's because of you that we're reporting the positive growth in sales, profit and earnings per share we're reviewing today.\nIn Q2, we continued to deliver strong financial performance on both the one and two year stack, as we began lapping more difficult comparisons.\nIn the quarter, we delivered comparable store sales growth of 5.8% and adjusted operating income margin of 11.4%, an increase of 11 basis points versus 2020.\nAs a reminder, we lapped a highly unusual quarter from 2020 where we significantly reduced hours of operation and professional delivery expenses reflective of the channel shift from pro to DIY.\nAs we anticipated, the professional business accelerated in Q2 2021, and between our ongoing strategic initiatives and additional actions, we expanded margins.\nOur actions offset known headwinds within SG&A and an extremely competitive environment for talent.\nOn a two-year stack, our comp sales improved 13.3% and margins expanded 227 basis points compared to Q2 2019.\nAdjusted diluted earnings per share of $3.40 increased 15.3% compared to Q2 2020 and 56.7% compared to 2019.\nYear-to-date, free cash flow more than doubled, which led to a higher than anticipated return of cash to shareholders in the first half of the year, returning $661.4 [Phonetic] million through a combination of share repurchases and quarterly cash dividends.\nOur sales growth and margin expansion were driven by a combination of industry-related factors as well as internal operational improvements.\nOn the industry side, the macroeconomic backdrop remained positive in the quarter as consumers benefited from the impact of government stimulus.\nMeanwhile, long-term industry drivers of demand continued to improve.\nThis includes a gradual recovery in miles driven along with an increase in used car sales, which contributes to an aging fleet.\nWhile we delivered positive comp sales in all three periods of Q2 our year-over-year growth slowed late in the quarter as we lapped some of our highest growth weeks of 2020.\nOur category growth was led by strength in brakes, motor oil and filters, with continued momentum in key hard part professional categories.\nRegionally, the West led our growth benefiting from an unusually hot summer, followed by the Southwest, Northeast and Florida.\nTo summarize channel performance, we saw double-digit growth in our professional business and a slight decline in our DIY omnichannel business.\nTo understand the shift in our channel mix, it's important to look back at 2020 to provide context.\nBeginning in Q2, we saw abrupt shifts in consumer behavior across our industry due to the pandemic, resulting from the implementation of stay-at-home orders.\nThis led to more consumers repairing their own vehicles, which drove DIY growth.\nIn addition, our DIY online business surged as many consumers chose to shop from home and leverage digital services.\nFinally, as we discussed last year, our research indicated that large box retailers temporarily deprioritized long tail items, such as auto parts, in response to the pandemic.\nThese and other factors resulted in robust sales growth and market share gains for our DIY business in 2020.\nContrary to historical trends, the confluence of these factors also led to a slight decline in our professional business in Q2 2020.\nAs we began to lap this highly unusual time, we leveraged our extensive research on customer decision journeys.\nThis enabled us move quickly as customer shifted how they repaired and maintained their vehicles.\nOur sales growth and margin expansion in Q2 demonstrates the flexibility of our diversified asset base as we adapted to a very different environment in 2021.\nSpecific to our professional business, we began to see improving demand late in Q1 2021, which continued into Q2, resulting in double-digit comp sales growth.\nThis is directly related to the factors just discussed, along with improved mobility trends as more people returned to work and miles driven increased versus the previous year.\nStrategic investments are strengthening our professional customer value proposition.\nIt starts with improved availability and getting parts closer to the customer as we leverage our dynamic assortment machine learning platform.\nWithin our Advance Pro catalog, we saw improved key performance indicators across the board including, more online traffic, increased assortment and conversion rates and ultimately growth in transaction counts and average ticket.\nWe also continued to invest in our technical training programs to help installers better serve their customers.\nOur TechNet program is also performing well as we continue to expand our North American TechNet members, providing them with a broad range of services.\nEach of these pro-focused initiatives have been a differentiator for Advance, enabling us to increase first call status with both national strategic accounts and local independent shops.\nFinally, we're pleased that through the first half of the year, we added 28 net new independent Carquest stores.\nWe also announced the planned conversion of an additional 29 locations in the West as Baxter Auto Parts joins the Carquest family.\nWe're excited to combine our differentiated pro customer value proposition with an extremely strong family business, highlighted by Baxter's excellent relationships with their customers in this growing market.\nIn summary, all of our professional banners performed at or above our expectations in Q2, including our Canadian business, despite stringent lockdowns.\nMoving to DIY omnichannel, our business performed in line with expectations, considering our strong double-digit increases in 2020.\nWhile Q2 DIY comp sales were down slightly, DIY omnichannel was still the larger contributor to our two-year growth.\nDIY growth versus a year ago gradually moderated throughout the quarter as some consumers returned to professional garages.\nWithin DIY omnichannel, we saw a shift in consumer behavior back to in-store purchases, consistent with broader retail.\nWe've also been working to optimize and reduce inefficient online discounts.\nThese factors along with highly effective advertising contributed to an increase in our DIY in-store mix and a significant increase in gross margins versus prior year.\nWe remain focused on improving the DIY experience to increase share of wallet through our Speed Perks loyalty platform.\nWe made several upgrades to our mobile app to make it easier for Speed Perks members to see their status and access rewards.\nWe continue to see positive graduation rates among our existing Speed Perks members.\nIn Q2, our VIP membership grew by 8% and our Elite members representing the highest tier of customer spend, increased 21%.\nShifting to operating income, we expanded margin in the quarter on top of significant margin expansion in Q2 2020.\nThis was led by our category management initiatives, which drove strong gross margin expansion in the quarter.\nFirst, our work on strategic sourcing remains a key focus as consistent sales growth over several quarters resulted in an increase in supplier incentives.\nSecondly, we've talked about growing own brands as a percent of our total sales.\nThis has been a thoughtful and gradual conversion and we began to see the benefits of several quarters of hard work in Q2.\nThis was highlighted by our first major category conversion with steering and suspension, where we saw extremely strong unit growth for our high margin Carquest premium products.\nIn addition, the CQ product is highly regarded by our professional installers.\nWith consistent high level of quality standards, they are now delivering lower defect rates and improved customer satisfaction.\nWe also recently celebrated the one-year anniversary of the DieHard battery launch.\nFollowing strong year one share gains in DIY omnichannel, we've now extended DieHard distribution into the professional sales channel, where we're off to a terrific start.\nFurther expansion of the DieHard and Carquest brands is planned for other relevant categories.\nIn terms of strategic pricing, we significantly improved our capabilities, leveraging our new enterprise pricing platform.\nThis platform enabled us to respond quickly as inflation escalated beyond our initial expectations for the year.\nMoving to supply chain, while we're continuing to execute our initiatives, we faced several unplanned, offsetting headwinds in Q2.\nLike most retailers, we experienced disruption within the global supply chain, wage inflation in our distribution centers and an overall shortage of workers to process the continued high level of demand.\nIn addition, our suppliers experienced labor challenges and raw material shortages.\nDespite a challenging external environment, we continue to execute our internal supply chain initiatives.\nThis includes the implementation of our new Warehouse Management System or WMS, which we're on track to complete in 2022.\nIn the DCs that we've converted, we're delivering improvements in fill rates, on-hand accuracy, and productivity.\nThe implementation of WMS is a critical component of our new Labor Management System or LMS. Once completed, LMS will standardize operating procedures and enable performance-based compensation.\nWe also continue to execute our Cross Banner Replenishment or CBR initiative, transitioning stores to the most freight logical servicing DC.\nIn Q2, we converted nearly 150 additional stores and remain on track with the completion of the originally planned stores by the end of Q3 2021.\nIn addition to CBR, we're on track with the integration of Worldpac and Autopart International, which is expected to be completed early next year.\nShifting to SG&A, we lapped several cost reduction actions in Q2 2020, which we knew we would not replicate in 2021.\nWe discussed these actions on our Q2 call last year, primarily a reduction in delivery costs as a result of a substantial channel mix shift along with the reduction in store labor costs at the beginning of the pandemic.\nJeff will discuss these in more detail in a few minutes.\nIn terms of our initiatives, we continue to make progress on sales and profit per store.\nOur team delivered sales per store improvement and we remain on track to reach our goal of $1.8 million average sales per store within our timeline.\nOur profit per store is also growing faster than sales per store, enabling four wall margin expansion.\nIn addition to the positive impacts of operational improvements we've implemented to drive sales and profit per store, we've also done a lot of work pruning underperforming stores and we're back to store growth.\nIn the first half of the year, we opened six Worldpac branches, 12 Advance and Carquest stores and added 28 net new Carquest independents, as discussed earlier.\nWe also announced the planned conversion of 109 Pep Boys locations in California.\nWe're very excited about our California expansion with the opening of our first group of stores scheduled this fall.\nThe resurgence of the delta variant has resulted in some construction related delays in our store opening schedule.\nWe expect to complete the successful conversion of all stores to the Advance banner by the end of the first quarter 2022.\nFinally, we are focused on reducing our corporate and other SG&A costs, including a continued focus on safety.\nOur total recordable injury rate decreased 19% compared to Q2 2020 and 36% compared to Q2 2019.\nWe're also finishing up our finance ERP consolidation, which is expected to be completed by the end of the year.\nSeparately, we are in the early stages of integrating our merchandising systems to a single platform.\nBoth of these large scale technology platforms are expected to drive SG&A savings over time.\nThe last component of our SG&A cost reduction was a review of our corporate structure.\nIn terms of the restructuring of our corporate functions announced earlier this year, savings were limited in Q2 due to the timing of the actions.\nWe expect SG&A savings associated with the restructure beginning in Q3.\nIn summary, we're very pleased with our team's dedication to caring for our customers and delivering strong financial performance in Q2.\nWe're optimistic as the industry-related drivers of demand continue to indicate a favorable long-term outlook for the automotive aftermarket.\nWe remain focused on executing our long-term strategy to grow above the market, expand margins and return significant excess cash back to shareholders.\nNow let me pass it to Jeff to discuss more details on our financial results.\nIn Q2, our net sales increased 5.9% to $2.6 billion.\nAdjusted gross profit margin expanded 239 basis points to 46.4%, primarily as a result of the ongoing execution of our category management initiatives, including strategic sourcing, strategic pricing and own brand expansion.\nWe also experienced favorable inventory-related costs versus the prior year.\nThese benefits were partially offset by inflationary costs in supply chain and unfavorable channel mix.\nIn the quarter, same SKU inflation was approximately 2% and we expect this will increase through the balance of the year.\nWe're working with our supplier partners to mitigate costs where possible.\nYear-to-date, gross margin improved 156 basis points compared to the first half of 2020.\nAs anticipated, Q2 adjusted SG&A expenses increased year-over-year and were up $109 million versus 2020.\nThis deleveraged 228 basis points and was a result of three primary factors.\nFirst, our incentive compensation was much higher than the prior year, primarily in our professional business as we lapped a very challenging quarter in 2020 when pro sales were negative.\nSecond, we experienced wage inflations beyond our expectations in stores.\nWe remain focused on attracting, retaining and developing the very best part people in the business and we'll continue to be competitive.\nWe expect both headwinds to continue in the back half of the year.\nThird, and as expected, we incurred incremental costs associated with professional delivery and normalized hours of operations when compared to Q2 2020.\nThese increases in Q2 were partially offset by a decrease in COVID-19 related expenses to approximately $4 million compared to $15 million in the prior year.\nAs a result of these factors, our SG&A expenses increased 13.3% to $926.4 million.\nAs a percent of net sales, our SG&A was 35% compared to 32.7% in the prior year quarter.\nYear-to-date, SG&A as a percent of net sales improved 88 basis points compared to the first half of 2020.\nWhile we've seen a decrease in COVID-19 related costs year-to-date, the health and safety of our team members and customers will continue to be our top priority.\nAs the current environment remains volatile and the delta variant remains a concern, we may see increased COVID-19 expenses in the back half of the year.\nOur adjusted operating income increased to $302 million compared to $282 million one year ago.\nOn a rate basis, our adjusted OI margin expanded by 11 basis points to 11.4%.\nFinally, our adjusted diluted earnings per share increased 15.3% to $3.40 compared to $2.95 in Q2 of 2020.\nOur free cash flow for the first half of the year was $646.6 million, an increase of $338.4 million compared to last year.\nThis increase was driven in part by our operating income growth along with continued momentum in our working capital initiatives.\nOur capital spending was $58.7 million for the quarter and $129.6 million year to-date.\nWe expect our investments to ramp up in the back half of the year.\nAnd in line with our guidance, we estimate we will spend between $300 million and $350 million in 2021.\nDue to favorable market conditions along with our improved free cash flow in Q2, we returned nearly $458 million to our shareholders through the repurchase of 2 million shares at an average price of $197.52 and our recently increased quarterly cash dividend of $1 per share.\nWe're pleased with our performance during the first half of the year and moving into the first four weeks of Q3 on a two-year stack, our comparable store sales are in line with Q2.\nWe're continuing to monitor the COVID-19 situation as well as other macro factors, which may put pressure on our results, including, inflationary cost in commodities, wages and transportation.\nBased on all these factors, we are increasing our full year 2021 guidance ranges, including net sales in the range of $10.6 billion to $10.8 billion, comparable store sales of 6% to 8% and adjusted operating income margin of 9.2% to 9.4%.\nAs you heard from Tom on our new store openings, we've encountered some delays in the construction process of converting Pep Boys stores, primarily permitting and obtaining building materials related to the ongoing pandemic.\nAs a result, we're lowering our guidance range and now expect to open 80 to 120 new stores this year.\nAdditionally, given the improvement of our free cash flow and our accelerated share repurchases in the first half of the year, we are also increasing our guidance for free cash flow to a minimum of $700 million and an expected range for share repurchases of $700 million to $900 million.\nWe remain committed to delivering against our long-term strategy as we execute against our plans to deliver strong and sustainable total shareholder return.\n",
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"content": "advance auto parts q2 adjusted earnings per share $3.40.\nq2 adjusted earnings per share $3.40.\nq2 sales $2.6 billion versus refinitiv ibes estimate of $2.64 billion.\nq2 same store sales rose 5.8 percent.\nincreased full year 2021 guidance.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined today by Tom Greco, our President and Chief Executive Officer; and Jeff Shepherd, our Executive Vice President and Chief Financial Officer.\nAs always, we hope that you and your families are healthy and safe.\nTheir continued dedication to provide outstanding service to our customers allowed us to deliver another quarter of top line sales growth, adjusted margin expansion and a double-digit increase in earnings per share.\nWe've been investing in both our team and our business over multiple years to transform and better leverage Advance's assets.\nIn Q3, this helped enable us to comp the comp on top of our strongest quarterly comparable store sales growth of 2020.\nSpecifically, we delivered comp store sales growth of 3.1%, while sustaining an identical two-year stack of 13.3% compared with Q2.\nAs expected, this was led by the continued recovery of our professional business and a gradual improvement in key urban markets.\nBy putting DIY consumers and Pro customers at the center of every decision we make, we've been able to respond quickly to evolving needs.\nIn Q3, this was highlighted by an overall channel shift back to Professional and a return to stores for DIYers.\nWithin Professional, we're seeing increasing strength in certain geographies, which, like the rest of the country last year as the ongoing return to office of professional workers in large urban markets, catches up with the rest of the country.\nOur diversified digital and physical asset base has enabled us to respond rapidly to these changing channel dynamics in the current environment.\nIn addition, we also delivered significant improvements in our adjusted gross margin rate of 246 basis points, led by our category management initiatives.\nOur adjusted SG&A costs as a percentage of net sales were 209 basis points higher as we lapped a unique quarter in Q3 2020.\nAs we've discussed over the past year, our SG&A costs were much lower than normal in Q2 and Q3 of 2020.\nThis was due to an unusually high DIY sales mix and actions we took last year during the initial stages of the pandemic, which were not repeated.\nOverall, we delivered adjusted operating income margin expansion of 37 basis points to 10.4% versus Q3 2020.\nAdjusted diluted earnings per share of $3.21 increased 21.6% compared with Q3 2020 and 31% compared with the same period of 2019.\nOur year-to-date adjusted earnings per share are up approximately 50% compared with 2020.\nYear-to-date, our balance sheet remains strong with a 19% increase in free cash flow to $734 million, while returning a record $953 million to our shareholders through a combination of share repurchases and quarterly cash dividend.\nConsistent with the front half of the year, there were several industry-related factors, coupled with operational improvements, contributing to our sales growth and margin expansion in Q3.\nThe car park continues to grow slightly.\nThe fleet is aging and perhaps most importantly vehicle miles driven continue to improve versus both 2020 and 2019.\nMore broadly, the chip shortage continues to impact availability of new vehicles and is contributing to a surge in used car sales.\nThis benefits our industry as consumers are repairing and maintaining their vehicles longer.\nAs we all know, over the last 18 months, the pandemic changed consumer behavior across our industry, which led to a surge in DIY omnichannel growth in 2020, while the Professional business declined.\nHowever, as the economy continues to reopen, with miles driven steadily increasing, our Professional business is now consistently exceeding pre-pandemic levels as discussed last quarter.\nRegional performance was led by the Southwest and West.\nCategory growth was led by brakes, motor oil and filters as miles driven reliant categories improved versus the softer 2020.\nWe also saw continued strength in DieHard batteries, which led the way on a two-year stack basis.\nEach of these categories performed well as a result of the diligent planning between our merchant and supply chain teams, enabling a strong competitive position despite global supply chain disruptions.\nAt the same time, we experienced challenges in Q3 as we strategically transitioned tens of thousands of undercar and engine management SKUs to own brand.\nImportantly, these in-stock positions are now significantly improved and we're confident these initiatives will help drive future margin expansion.\nOverall, comp sales were positive in all three periods of Q3, led by Professional.\nDIY omnichannel delivered slightly positive comp growth in Q3, while lapping high double-digit growth than the prior year.\nWithin Professional, we navigated a very challenging global supply chain environment to allow us to say yes to our customers.\nThe investments we've made in our supply chain, inventory positioning and in our dynamic assortment tool help put us in a favorable position competitively.\nWe've implemented the dynamic assortment tool in all company-owned US stores as well as over 800 independent locations.\nOur MyAdvance portal and embedded Advance Pro catalog continues to be a differentiator for us, while driving online traffic.\nOur online sales to Professional customers continues to grow as we strengthen the speed and functionality of Advance Pro.\nWe remain committed to providing our industry-leading assortment of parts for all Professional customers.\nThis will help enable us to grow first call status and increase share of wallet in a very fragmented market.\nIn addition, we expanded DieHard to our Professional customers.\nFollowing a recent independent consumer survey, DieHard stake disclaims as America's most trusted auto battery.\nDuring Q3, we announced a multi-year agreement with our national customer Bridgestone to sell DieHard batteries in more than 2,200 tire and vehicle service centers across the United States.\nWith this systemwide rollout during Q3, we replaced their previous battery provider, making us the exclusive battery supplier across all Bridgestone locations.\nIn terms of our independent business, we added 16 net new independent Carquest stores in the quarter, bringing our total to 44 net new this year.\nWe continue to grow our independent business through differentiated offerings for our Carquest partners, including our new Carquest by Advance banner program, which we announced earlier this month.\nAs we continue to build and strengthen the Advance brand and our DIY business, Carquest by Advance adds DIY relevance for our Carquest-branded independent partners, while providing incremental traffic and margin opportunities.\nWe've recently enrolled this new initiative out to our independent partners and look forward to further expansion over time for both new and existing Carquest independents.\nTransitioning to DIY omnichannel, comparable store sales were slightly positive in Q3.\nAs you'll recall, our DIY omnichannel business reported strong double-digit comp sales growth in Q3 2020.\nWe continue to enhance our offerings and execute our long-term strategy to differentiate our DIY business and increased market share.\nIn Q3, we continue to leverage our Speed Perks loyalty program as VIP membership grew by 13% and our number of ELITE members, representing the highest tier of customer spend, increased 21%.\nLast year, the launch of our Advance Same Day suite of services helped enable a huge surge in e-commerce growth.\nThis year, as DIYers return to our stores, in-store sales growth led our DIY sales growth.\nPart of this was expected due to a planned reduction in inefficient online discounts, which significantly increased gross margins.\nTurning to margin expansion.\nWe again increased our adjusted operating income margin in the quarter.\nLike Q2, this was driven by category management actions within gross margin, where our key initiatives played a role.\nFirst, we are realizing benefits from our new strategic pricing tools and capabilities.\nLike other companies, we're experiencing higher-than-expected inflation.\nHowever, our team has been able to respond rapidly in this dynamic environment as industry pricing remains rational.\nBehind strategic sourcing, vendor income was positive versus the previous year with continued strong sales growth.\nFinally, double-digit revenue growth in own brand outpaced our overall growth in the quarter as we expanded the Carquest brand into new category.\nCarquest products have a lower price per unit than comparable branded products, which reduced comp and net sales growth in the quarter as expected.\nAt the same time, the margin rate for own brands is much higher and contributed to the Q3 adjusted gross margin expansion.\nShifting to supply chain.\nWe continue to make progress on our productivity initiatives.\nIn Q3, the benefits from these initiatives were more than offset by widely documented disruptions and inflationary pressure within the global supply chain.\nAs a result, we did not leverage supply chain in the quarter.\nWe completed the rollout of cross-banner replenishment, or CBR, for the originally planned group of stores in the quarter.\nThe completion of this milestone is driving cost savings through a reduction in stem miles from our DCs to stores.\nOver the course of our implementation, our team identified additional stores that will be added over time.\nSecondly, we're continuing the implementation of our new Warehouse Management System, or WMS. This is helping to deliver further improvements in fill rate, on-hand accuracy and productivity.\nWe successfully transitioned to our new WMS in approximately 36% of our distribution center network as measured by unit volume.\nAs previously communicated, we follow WMS with a new Labor Management System, or LMS, which drive standardization and productivity.\nWe are on track to complete the WMS and LMS implementations by the end of 2023 as discussed in April.\nFurther, our consolidation efforts to integrate WORLDPAC and Autopart International, known as AI, are also on track to be completed by early next year.\nThis is enabling accelerated growth, gross margin expansion and SG&A savings.\nGross margin expansion here comes behind the expanded distribution of AI's high margin owned brand products, such as shocks and struts, to the larger WORLDPAC customer base.\nFinally, as we expand our store footprint, we're also enhancing our supply chain capabilities on the West Coast with the addition of a much larger and more modern DC in San Bernardino.\nThis facility will serve as the consolidation point for supplier shipments for the Western US and enable rapid e-commerce delivery.\nIn addition, we began to work to consolidate our DC network in the Greater Toronto area.\nTwo separate distribution centers, one Carquest and one WORLDPAC will be transitioned into a single brand-new facility that will allow us to better serve growing demand in the Ontario market.\nWe continue to execute our initiatives, both sales and profit per store along with the reduction of corporate SG&A.\nAs previewed on our Q2 call, we also faced both planned and unplanned inflationary cost pressure versus the prior year in Q3.\nSG&A headwinds include higher than planned store labor cost per hour, higher incentive compensation and increased delivery costs associated with the recovery of our Professional business.\nJeff will discuss these and other SG&A details in a few minutes.\nWe remain on track with our sales and profit per store initiative, including our average sales per store objective of $1.8 million per store by 2023.\nIn terms of new locations year-to-date, we've opened 19 stores, six new WORLDPAC branches and converted 44 net new locations to the Carquest independent family.\nThis puts our net new locations at 69, including stores, branches and independents during the first three quarters.\nSeparately, we're actively working to convert the 109 locations in California we announced in April.\nHowever, we're experiencing construction-related delays, primarily due to a much slower-than-normal permitting process.\nThis is attributable to more stringent guidelines associated with COVID-19, which were exacerbated by the surge of the Delta variant.\nWe now expect the majority of the store openings planned for 2021 to shift into 2022.\nAs a result, we're incurring start-up costs within SG&A for the balance of the year, while realizing less than planned revenue and income.\nThe good news is, we remain confident that once converted, these stores will be accretive to our growth trajectory.\nThe final area of margin expansion is reducing our corporate and other SG&A costs.\nWe began to realize some of the cost benefits related to the restructuring of our corporate functions announced earlier this year, in addition to savings from our continued focus on team member safety.\nIn Q3, we saw a 22% reduction in our total recordable injury rate compared with the prior year.\nOur lost time injury rate improved 14% compared with the same period in 2020.\nOur focus on team member safety is only one component of our ESG agenda at Advance.\nOur vision advancing a world in motion is demonstrated by the objective we outlined last April to deliver top quartile total shareholder return in the 2021 through 2023 timeframe.\nWhile delivering this goal, we're also focused on ESG.\nAs part of this commitment, we launched our first materiality assessment earlier this year to help prioritize ESG initiatives.\nDuring Q3, we completed this assessment and are working to finalize the findings.\nThe results will be incorporated in our 2021 Corporate Sustainability Report, which we expect to publish in mid-2022.\nBefore turning the call over to Jeff, I want to recognize all team members and generous customers for their contribution to our recent American Heart Association campaign.\nThis year, we introduced a new technology solution in stores that allows customers to round up at the point of sale.\nThis made it even easier for customers to participate and helped us achieve a record-setting campaign of $1.7 million.\nThe mission of this organization is important to all of us across the Advance family.\nIn Q3, our net sales increased 3.1% to $2.6 billion.\nAdjusted gross profit margin improved 246 basis points to 46.2%, primarily the result of our ongoing category management initiatives, including strategic pricing, strategic sourcing, own brand expansion and favorable product mix.\nConsistent with last quarter, these were partially offset by inflationary product and supply chain costs as well as an unfavorable channel mix.\nIn the quarter, same SKU inflation was approximately 3.6%, which was part of [Phonetic] our plan entering the year and was by far the largest headwind we had to overcome within gross profit.\nWe're working with all our supplier partners to mitigate costs where possible.\nYear-to-date, adjusted gross margin improved 184 basis points compared with the same period of 2020.\nAs expected, our Q3 SG&A expenses increased due to several factors we discussed earlier in the year.\nAs a percent of net sales, our adjusted SG&A deleveraged by 209 basis points, driven primarily by labor costs, which included a meaningful cost per hour increase as well as higher incentive compensation compared to the prior year.\nIn addition, we incurred higher delivery expenses related to serving our Professional customers and approximately $10 million in start-up costs related to the conversion of our California locations in Q3.\nYear-to-date, SG&A as a percent of net sales was relatively flat compared to the same period of 2020, increasing 9 basis points year-over-year.\nWhile we've reduced our COVID-19-related costs by $13 million year-to-date, the health and safety of our team members and customers continues to be our top priority.\nOur adjusted operating income increased to $274 million in Q3 compared to $256 million one year ago.\nOn a rate basis, our adjusted OI margin expanded by 37 basis points to 10.4%.\nFinally, our adjusted diluted earnings per share increased 21.6% to $3.21 compared to $2.64 in Q3 of 2020.\nCompared with 2019, adjusted diluted earnings per share was up 31% in the quarter.\nOur free cash flow for the first nine months of the year was $734 million, an increase of 19% versus last year.\nThis increase was primarily driven by improvements in our operating income as well as our continued focus on working capital metrics, including our accounts payable ratio, which expanded 351 basis points versus Q3 2020.\nYear-to-date through Q3, our capital investments were $191 million.\nWe continue to focus on maintaining sufficient liquidity, while returning excess cash to shareholders.\nIn Q3, we returned approximately $228 million to our shareholders through the repurchase of 1.1 million shares at an average price of $205.65.\nYear-to-date, we've returned approximately $792 million to our shareholders through the repurchase of nearly 4.2 million shares at an average price of $189.43.\nSince restarting our share repurchase program in Q3 of 2018, we returned over $2 billion in share repurchases at an average share price of approximately $164.\nAdditionally, we paid a cash dividend of $1 per share in the quarter totaling $63 million.\nWe remain confident in our ability to generate meaningful cash from our business and expect to return excess cash to our shareholders in a balanced approach between dividends and buybacks.\nAs you saw in the yesterday's 8-K filing with the SEC, we recently closed the refinancing of our new five-year revolving credit facility.\nThe prior facility was set to mature in January 2023.\nAnd the bank markets have returned to pre-pandemic levels, we took the opportunity to secure our liquidity for another five years.\nThis included improved pricing and terms while also increasing the overall facility size to $1.2 billion.\nWe have strong relationships with our banks.\nAnd this commitment allows us to secure future financial flexibility.\nMore details of this facility can be found in our 8-K filings.\nTurning to our updated full year outlook.\nWe are increasing 2021 sales and profit guidance to reflect the positive results year-to-date and our expectations for the balance of the year.\nThrough the first four weeks of Q4, we're continuing to see sales strength in our two-year stack, remaining in line with what we delivered in the last two quarters.\nThis guidance incorporates continued top-line strength, ongoing inflationary headwinds and up to an additional $10 million in start-up costs in Q4 related to our West Coast expansion.\nAs discussed, the construction environment in California remains challenging, resulting in a reduction of our guidance from new store openings and capital expenditures.\nAs a result, we're updating our full year 2021 guidance to net sales of $10.9 billion to $10.95 billion, comparable store sales of 9.5% to 10%, adjusted operating income margin rate of 9.4% to 9.5%, a minimum of 30 new stores this year, a minimum of $275 million in capex and a minimum of $725 million in free cash flow.\nIn summary, we're very excited about our current momentum.\nWe remain focused on the execution of the long-term strategy, while delivering top quartile total shareholder return over the 2021 to 2023 time frame.\n",
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"content": "compname reports q3 adjusted earnings per share of $3.21.\nq3 adjusted earnings per share $3.21.\nq3 sales rose 3.1 percent to $2.6 billion.\nq3 same store sales rose 3.1 percent.\nsees 2021 capital expenditures of minimum $275 million.\nsees fy 2021 comparable store sales growth of 9.5% to 10%.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Both are now available on the Investors section of our website, americanassetstrust.com.\nWe recently released our 2019 annual report that we prepared during the first quarter of 2020 prior to the COVID-19 pandemic.\nThe theme of our annual report was being grateful.\nDuring these unprecedented times, we are even more grateful, great for our colleagues, investors, banking relationships, research analysts and our families and our great portfolio.\nWe are grateful for the first responders and healthcare workers on the front lines and the research taking place to find a grateful find a vaccine.\nWe are grateful for all the little things in life that we have often taken for granted.\nOne thing is certain that together, we will get through this period of history.\nThis question is how we will be impacted and what we will look like on the other side, we are not immune from the pandemic.\nWe too feel the bumps and bruises along the way, which Bob will talk about in more detail.\nBut overall, our expectations and confidence is that our high-quality portfolio in Coastal West Coast markets, combined with a low leverage balance sheet, will pull us through this period in history and come out better on the other side.\nReducing the dividend is heart breaking for me.\nIt's not the track record that we wanted.\nAnd we've done it with regret and humility.\nBut in the absence of caution during these periods of times, the Board thought it was the thing to do.\nWe will ask the Board of Directors to reconsider making up the shortfall in subsequent quarters as soon as we can see the retail sector starting to rebound.\nFollowing Bob Barton, our EVP and Chief Financial Officer, and will end with a quick update on the office leasing success that Steve Center, our Vice President of Office Properties is seeing.\nFrom an operations perspective, in early March, we quickly mobilized to implement our business continuity and crisis management plans to help protect the health and safety of our employees, tenants and vendors and to maintain consistent open communications, both internally and to our stakeholders.\nOur entire employee base continues to either work remotely or on-site at one or more of our properties.\nEmployees are generally only on site, if necessary, to either maintain critical building systems, ensure any essential businesses that are properties are properly accommodated and to provide resident services at our multifamily properties with skeleton rotating crews when feasible.\nEach of our properties remain open and operating, while following all local, state and federal directives and mandates.\nAcross the board, we have increased security and implemented additional health and safety protocols at our properties.\nHowever, we have scaled back other property management services to be more in balance with the current needs of those essential tenants that are opening, which we expect will help reduce property operating expenses.\nAdditionally, we have determined to delay most nonessential building improvement in common area projects, except for work already under contract.\nAs expected, we have received a myriad of rent relief request.\nThe vast majority from our retail tenants, many of which we believe to be opportunistic in nature.\nThe majority of such requests are from restaurants, salons, fitness centers, gyms and apparel stores.\nNot all tenant requests will ultimately result in rent modification agreements nor are we foregoing our contractual rights under our lease agreements.\nHowever, for those tenants that we agree to modifications or concessions, we may support them during the short term, in ways that we believe will benefit us over the longer term.\nWe are also asking for some cash or other consideration from our tenants as part of the modifications or concessions.\nFinally, we have begun preparing our return to office plans in each of our office markets so that we can quickly disseminate such information to our employees and tenants once regulatory authorities begin to lift or relax, stay at home orders and implement market-specific restrictions.\nLast night, we reported first quarter 2020 FFO of $0 56 per share and net income attributable to common stockholders of $0.20 per share for the first quarter.\nAs previously disclosed, we withdrew our 2020 guidance on April three due to the uncertainty that the pandemic would have on our existing guidance.\nAt the time we withdrew our 2020 guidance, we believe that we are on track, approximately a $7.6 million reduction in our dividend distribution from Q1.\nThe Board decided to do this out of an abundance of caution due to the uncertainty during this pandemic, even though we believe our balance sheet and current liquidity remains strong.\nThere is actually some science or math that supports the reduction that was made in the dividend.\nWhat we did was to multiply each sector's cash net operating income by the percentage of cash collected on April rents billed through April 15.\nOffice is 49% of our cash NOI, and we had collected approximately 90% of April billings.\nRetail is 31% of our cash NOI, and we had collected 43% of our April billings.\nMultifamily is 12% of our cash NOI.\nAnd and we had collected 92% of our April billings.\nWe have won 369 room hotel in our portfolio, which has been the number one performing Embassy Suites hotel in the world since we opened the doors in December 2006.\nIt is known as the Embassy Suites Waikiki that sits on a retail podium referred to as Waikiki Beach Walk.\nThe Embassy Suites Waikiki is 5% of our cash NOI, which is currently running on a skeleton crew with a minimal occupancy ranging from 5% to 15% based on Hawaii shelter in place order that has been issued through May 31.\nAccordingly, we are not expecting any increased occupancy until this order has been lifted.\nWhen you add these percentages up, it is approximately 68% of cash NOI and applied to a $0.30 dividend, it supports a revised dividend of approximately $0.20 per share.\nWe also believe that from a risk perspective, diversification is a plus and lessens the impact from uncertain times like this.\nIt is also worth noting that since our board determined our dividend in April, we have seen an uptick in April rent collections.\nSuch that we have now collected approximately 94% of office rents, 47% of retail rents, including the retail component of Waikiki Beach Walk and 94% of multifamily rents that were due in April 2020.\nOther than our One Embassy Suites hotel that represents approximately 5% of our NOI, our retail sector, which represents approximately 31% of our NOI is obviously feeling the most impact with approximately 47% of April billings collected.\nApproximately 24% of our retail tenants are considered to provide essential services and remain open during this period of time, and the balance of tenants are considered to provide nonessential services, which we are working with to create a positive outcome for both parties.\nWe expect the second quarter will be the most difficult, but we believe that we are well prepared with a strong balance sheet and strong.\nAs we look at our balance sheet and liquidity at the end of the first quarter, we had approximately $402 million in liquidity comprised of $52 million of cash and cash equivalents and $350 million of availability on our line of credit, and only one of our properties is encumbered by our mortgage.\nOur leverage, which we measure in terms of net debt-to-EBITDA was 5.6 times at the end of Q1.\nOur focus is to maintain our net debt-to-EBITDA at 5.5 times or below.\nOur interest coverage and fixed charge coverage ratio ended the quarter at 4.3 times.\nAdditionally, in early April, we drew down $100 million out of the $350 million revolving line of credit, under our line of credit for working capital and general corporate purposes and to ensure future liquidity given the COVID-19 pandemic.\nAnd finally, with respect to the $250 million of unsecured debt maturities that come due in 2021, we have options to extend the $100 million term loan up to 3 times with each such extension for one year period, subject to certain conditions.\nAnd the remaining $150 million unsecured Series A notes do not mature until October 31, 2021.\nWe have continued to drive brands and further stabilize our office portfolio.\nWe ended the quarter at over 94% leased with only 9% of the office portfolio expiring through the end of 2021.\nCity Center Bellevue remains 99% leased, but we continue to expand and extend our existing customers at much higher rates.\nWe completed a full floor renewal with a major financial firm at a starting rate that is approximately 66% above the ending rate.\nPortland has also remained very strong for us.\nOur Lloyd District office buildings remain 100% leased.\nWe recently completed a full floor lease with an energy-related company with a start rate approximately 28% above the ending rate of the prior customer.\nSimilar to the 830 building at Oregon Square, we are currently redeveloping the 710 building, a 33,276 square-foot building that we hope to deliver in early 2021.\nIn addition, due to the increased demand from our existing customers, as well as other tenants in the market, we are in the early stages of design development of two new office buildings on the two remaining blocks at Oregon Square, which we will continue to evaluate pending market conditions.\nAt First & Main, we succeeded in Gate Bridge.\nThe fully renovated approximately 102,000 square-foot building will provide an 85,000 square foot contiguous opportunity to hopefully be delivered in mid-2021.\nFinally, our San Diego portfolio stands at approximately 92% leased versus the overall Class A market at 89% leased.\ntwo of the 14 buildings at Torrey reserve represents 65% of our San Diego vacancy.\nBoth have renovations and design development, and we are aggregating spaces into larger blocks, which are scarce in UTC and Del Mar Height.\nSolana crossing now stands at over 95% leased.\nAnd Torrey point is on track to be 97% leased with a recent expansion of one customer, a pending expansion of another and AAT's move later this year.\nThe two existing towers of La Jolla Commons stay 99% leased.\nAdditionally, we hope to have a building permit in the next few months for building three, and we will evaluate commencing construction as market conditions continue to evolve.\nThat said, we remain bullish long-term on the UTC market.\nDirect vacancy in Class A buildings in UTC is just 3.3%, with only 0.5% of sublease space vacant, and we expect continued significant new demand driven by both life science and technology users.\n",
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"content": "withdrew its full year 2020 guidance that was previously issued on october 29, 2019.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Both are now available on the Investor Section of our website, americanassetstrust.com.\nThat was well done as always.\nThese have been unprecedented times that I've never seen before in my lifetime.\nWhen COVID-19 began, I honestly didn't know how that it would be.\nWe expect it to be catastrophic, but we just didn't know how bad it would be, now that the second quarter is behind us.\nI can tell you that it is not as catastrophic as our worst case projections.\nIt's still has been no fun.\nOffice has performed extremely well, unless in the shining light in our portfolio, with high credit tenants in strong markets and that we would like to continue.\nMultifamily has also performed well better than we expected.\nOccupancy has been slightly lower, but collections have been strong in the mid '90s and we expect a meaningful uptick in occupancy in August 1, as a local private university takes possession of approximately 130 units and our San Diego multi-family portfolio, at good rents by a master lease that has recently been executed.\nRetail as expected has been very tough.\nEvery deal, feels like a street fight in retail.\nWe try to balance what is best for the company and its shareholders with how to maintain the long-term [Technical Issues] of these retail tenants that are so important to our shopping centers.\nWe know that some are not going to make it.\nOf course, we are hopeful that most will make it.\nIn that factor, we're hopeful that all will make it.\nWe have a committee comprised of myself, Chris Sullivan and Adam Wyll that review every tenant requests.\nIf a tenant ask for deferral, we ask for something from a tenant and return as well.\nEach one is a negotiation and we try to make sure that we're getting something fair in return for anything less 100% on time collection of our contractual rents.\nI truly believe that our management team is second to none and has done an excellent job strategically navigating through this pandemic.\nAmerican Trust is reflective of the quality people that we have working as appreciative of the quality people that we have working in our company that are focused on creating value for our shareholders each and every day.\nLastly, I want to mention that our Board of Directors has approved increasing the quarterly dividend 25% over the second quarter 2020 dividend of $0.20 to $0.25 for the third quarter based on higher rent collections in the second quarter than we had expected, combined with the significant embedded growth that we continue to expect in our office portfolio and the recent master lease signed in our multifamily portfolio.\nA year from now, once there is a vaccine, we expect to look back and we hope this is nothing more than a bad memory.\nI believe that we came -- we come out of this, we will be as good a company or even better when all this started.\nFrom an operations perspective as coronavirus infection continue to increase in many of our markets.\nWe remain hyper-focused on the safety and well-being of our personnel tenants and vendors, as 100% of our properties remain open and accessible by our tenants.\nWe remain committed to ensuring full compliance with the ever-changing regulatory mandates from all levels of government, not to mention, staying in front of and working against proposed regulations that we think would do damage to our industry and economy.\nLike SB 939 in California, which did not pass.\nIn the proposed repeal of Prop 13 for commercial properties in California, which we believe is essentially a targeted tax increase on business, which would ultimately be passed on to tenants and customers most of whom can absorb such increases and could lead to even more business failure.\nAs Ernest mentioned, we continue to work with our tenants on rent deferments and other lease modifications to assist those tenants as best we can, whose business have been significantly impacted by COVID-19.\nWe've also renegotiated or bid out most of our vendor contracts to meaningfully reduce operating expenses, many of such reductions on a long-term basis, all the while maintaining our best-in-class properties.\nAnd we've leverage the high unemployment rates in our markets to hire top caliber associates to fill open positions at AAT.\nFinally, we appreciate more than ever, the positive impact that ESG including fostering a culture of diversity and inclusion has on the strengthening of our business, our economy and our society.\nParticularly in light of current events, our focus on human capital and physical and mental well being both within our company and in our communities, has never been stronger and represents the foundation that our culture was built on.\nFor more insight on our ESG efforts please take a look at our recently published 2019 sustainability report, which can be found on the sustainability page of our website.\nLast night, we reported second quarter 2020 FFO of $0.48 per share and net income attributable to common shareholders of $0.13 per share for the second quarter.\nLet's look at the results of the second quarter for each property segment.\nOur office property segment continues to perform well during these uncertain times.\nOffice properties excluding our One Beach Street property located on the North Waterfront in San Francisco which is under redevelopment.\nWe're at 96% occupancy at the end of the second quarter, an increase of approximately 3% from the prior year.\nMore importantly, same-store cash NOI increased 16% in Q2 over the prior year, primarily from City Center Bellevue in Washington, Lloyd District Campus, Office Campus in Oregon and Torrey Reserve Campus here in San Diego.\nOur retail properties have not fared as well during the pandemic.\nRetail properties were at 95% occupancy at the end of the second quarter, a decrease of approximately 2% from the prior year.\nHowever, retail collections have been difficult during the pandemic, as reflected in our negative same-store cash NOI.\nAdditionally, due to COVID-19, we have taken reserve for bad debts against the outstanding retail accounts receivable and straight-line rents receivable at the end of the second quarter of approximately 14% and 7% respectively.\nFrom a dollar perspective, this translates into approximately $2 million and $1.4 million respectively, for a total of $3.4 million reserve related to our retail sector, which is approximately $0.045 of FFO.\nWe intend to continue evaluating and potentially revising these reserves each quarter as we monitor the ever-changing viability and solvency of each of our retail tenants.\nOur multifamily properties we're at an 85% occupancy at the end of the second quarter, a decrease of approximately 8% from the prior year as also reflected in our negative same-store cash NOI.\nBut as Ernest mentioned, we expect this to increase back into the low to mid 90% occupancy once our master lease with a local private university commences on August 1.\nOur mixed use property consisting of the Embassy Suites Hotel and the Waikiki Beach Walk Retail is located on the Island of Oahu.\nThe State of Hawaii remains in self quarantine through the end of August, which is significantly impacted the operating results in the second quarter of 2020.\nThe Embassy Suites average occupancy for the second quarter of 2020 was 17%, compared with the prior year's second quarter average occupancy of 92%.\nA good rule of thumb in our view is that a hotel without any leverage on it needs to have approximately a 50% to 60% occupancy to breakeven.\nOur team in Hawaii forecasted earlier this month of 46% to 50% occupancy by year-end 2020.\nTo our pleasant surprise, we ended June with a 29% occupancy, much higher than the average occupancy of 17% for the quarter.\nAdditionally, in the last 15 days, we have been seeing occupancy ranging from 45% to 55% with our team in Hawaii expecting to end the month of July at 62% occupancy.\nRight now, it is our understanding there are only two hotels remained open in Waikiki.\nOne of which is our Embassy Suites hotel, which has been completely renovated and it's like a brand new hotel.\nLet's talk about billings and collections.\nOn a companywide basis, we collected approximately 83% of the total second quarter billings, which primarily consists of base rent and cost reimbursements.\nWe have also collected approximately 83% of July's billings as of the end of last week.\nWe expect those percentages to increase as we continue to work hard on collection efforts.\nIn Q2, our office rent collections were approximately 98%.\nOur retail rent collections excluding Waikiki Beach retail were approximately 62%.\nAnd by the way -- so far in July is about 70%, and our multifamily collections were approximately 95%.\nWaikiki Beach Walk Retail had an approximately 30% collection rate in Q2.\nAs Ernest noted earlier, the Board of Directors has decided to increase the quarterly dividend from $0.20 to $0.25 per share.\nThe Board took into consideration, the increase in collections over what was expected during Q2, combined with the embedded growth in cash flow from the office sector over the next several years, as well as the master lease in the multifamily sector.\nUsing the same 83% collection rate applied to our initial targeted dividend of $0.30 per quarter, it gets you to approximately $0.25 per share per quarter.\nAs we look at the liquidity on our balance sheet, at the end of the second quarter, we had approximately $396 million in liquidity, comprised of $146 million of cash and cash equivalents and $250 million of availability on our line of credit.\nAnd only one of our properties is encumbered by a mortgage.\nOur leverage which we measure in terms of net debt to EBITDA was 6.4 times on a quarterly annualized basis, resulting from the lower EBITDA from the added reserves that we took in the retail sector during Q2.\nOn a trailing 12 month basis, our EBITDA would be approximately 5.8 times.\nOur focus is to maintain our net debt to EBITDA at 5.5 times or below.\nOur interest coverage and fixed charge coverage ratio ended the quarter at 3.8 times on a quarterly annualized basis and at 4.1 times on a trailing 12 month basis.\nAnd finally with respect to $250 million of unsecured debt maturities that come due in 2021, we expect to extend the $100 million term loan up to 3 times with each extension for a one-year period subject to certain conditions and the remaining $150 million Series A Notes does not mature until October 31, 2021, which we would expect to refinance at lower rates.\nRegarding our guidance, as we previously disclosed, we withdrew our 2020 guidance on April 3 due to the uncertainty that the pandemic would have on our existing guidance, particularly in our hotel or retail sector.\nUnfortunately, the economy continues to change day by day and the current outcome remains uncertain as to impact in duration, which is why we will continue to a draw our 2020 guidance.\nAt the end of the second quarter, net of One Beach, which is under redevelopments.\nOur office portfolio stood at approximately 96% leased, with approximately 6% expiring through the end of 2021.\nWe were fortunate to renew the IRS and veterans benefits administration leases early in 2020, the First & Main in Portland in a total of 131,000 feet at start rates nearly 20% above the rates of exploration.\nGiven the quality of our assets and the strength of the markets in which they are located with technology and life science as key market drivers.\nWe continue to execute new and renewal leases at favorable run rates delivering continued NOI growth.\nWith leases already signed, we have locked in approximately $29.6 million of NOI growth comprised of $6 million in 2020, $14 million in 2021 and $9.6 million in 2022 in our office segment.\nWe anticipate significant additional NOI growth in 2022 through the redevelopment and leasing of One Beach Street in San Francisco and 710 Oregon Square in the Lloyd submarket Portland, along with the repositioning of two buildings at Torrey Reserve in the Del Mar Heights submarket of San Diego.\nIn addition, we can grow our Office portfolio by up to 768,000 rentable square feet or 22% on sites we already owned by building Tower 3 at La Jolla Commons, which is 213,000 feet and Blocks 90 and 103 at Oregon Square totaling up to 555,000 square feet.\nTower 3 at La Jolla Commons is into the city of San Diego for permits and we continue evaluating market condition, prospective tenant interest and hopefully decrease in construction costs, leading to are upcoming commencing construction.\nNext, schematic design has completed for Blocks 90 and 103 at Oregon Square with design development of 50% complete.\nWe are scheduled for our first hearing with the design review committee in Portland on August 20.\nWe currently have two active request for proposals from prospective tenants for Blocks 90 and 103 totaling 422,000 square feet, but again we will be evaluating market conditions, tenant interest and construction cost prior to commencing construction.\nWe have a stable office portfolio with little near term rollover, significant built in NOI growth and additional upside through repositioning redevelopment within our existing portfolio plus substantial new development on sites we already own.\n",
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"content": "american assets trust q2 ffo per share $0.48.\nq2 ffo per share $0.48.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Both are now available on the Investors section of our website, americanassetstrust.com.\nWe are making great progress on all fronts as we focus our efforts on our rebound from COVID-19's impact, by enhancing and amenitizing existing properties, acquiring new accretive properties like Eastgate Office Park in Bellevue, which the team will talk about more in a bit, retaining and adding new customers to our portfolio, furthering our development of La Jolla Commons of which we recently bottomed out our excavation and otherwise remain on time and on budget and of course, growing our earnings and net asset value for our stockholders.\nWe have been through hard time before, and each time we have emerged stronger, which remains our expectations in mind now.\nI want to mention that the Board of Directors has approved the quarterly dividend of $0.30 per share for the third quarter, an increase of $0.02 per share or 7% from the second quarter, which is, we believe, is supported by our increased collection efforts in the second quarter, improving traffic in Waikiki at our Embassy Suites and our expectation for operations to continue trending favorably in the near term.\nI'm also pleased to announce that the Board has appointed Adam Wyll, to the position of President in addition to his Chief Operating Officer role and title.\nAs many of you know, Adam is a valuable and hard-working member of our executive team.\nAnd this title describes the breadth of responsibilities and leadership that he has successfully taken on, prior to and during the pandemic.\nAs well as the confidence, our board and myself and our management team has in him to manage, in partnership with our excellent executive team, the day-to-day operations of AAT.\nI personally am blessed with excellent health, and this company is very important to me.\nI intend to continue my role as chairman and CEO for the foreseeable future.\nHowever, it is very important to our board, myself and shareholders that you know this company will always remain in very capable hands and that we are fortunate to have such a great management team and group of associates at AAT, all of whom work together as we continue on as a best in classes, class REIT.\nI very much appreciate the kind words and leadership opportunities, none of which would have been possible without your mentorship, not to mention the daily collaboration with such an incredible management team and top-notch team members and colleagues.\nWe continue to feel bullish about our portfolio, particularly with government restrictions lifted in all of our mainland markets in Hawaii, having lightened its reopening restrictions considerably.\nAnd we are seeing firsthand consumer behavior reverting to pre-pandemic levels with packed parking lots and tons of shoppers at all our retail properties.\nWe're already seeing many of our retailers with gross sales above pre-pandemic levels in our restaurants recovering, which is obviously very encouraging.\nOur collections have continued to improve each quarter with a collection rate north of 96% for the second quarter.\nFurthermore, we had approximately $850,000 of deferred rent due from tenants in Q2 based on COVID-19 related lease modifications.\nAnd we have collected approximately 94% of those deferred amounts, further validating our strategy of supporting our struggling retailers through the government-mandated closures.\nRemaining collection challenges at this point are primarily with a handful of local retailers at our Waikiki Beach Walk property.\nBut with Hawaii tourism back in large numbers, we think we'll have an opportunity to rebound, to be viable long term, even more so once Asian countries relax their travel restrictions to Hawaii later this year or early next.\nAdditionally, we are seeing positive activity engagement with new retailers, including mid box retailers.\nAbout half of our over 250,000 square feet of vacant retail space or in lease negotiations or LOI stage, deals that we believe we have a good likelihood of being finalized.\nAnd the vast majority of our retailers are renewing their leases at flat to modest rent increases.\nOn the multifamily front, with new management in place at Hassalo, we are currently 99% leased and asking rents are trending up almost 20% since December 2020.\nThe multifamily collections have been more challenging in Portland due to eviction protection still in place through the next month or so.\nBut we are doing everything we can to stay on top of that, which include government rental assistance programs that we expect meaningful disbursements from soon.\nIn San Diego, our multifamily properties are currently 97% leased, and we have leased approximately 90% of the 133 master lease units that expired less than two months ago and expect the remaining to be leased over the next few weeks.\nAsking rents at our multifamily properties are trending up as well in San Diego, almost 10% since December 2020.\nLast night, we reported second quarter 2021 FFO per share of $0.51 and second quarter '21 net income attributable to common stockholders per share of $0.15.\nLet me share with you several data points that support my belief.\nFirst, as Ernest previously mentioned, the Board has approved an increase in the dividend to its pre-COVID amount of $0.30 per share based on the continued improvement in our collections as expected, but the overriding factor was the strong results we are seeing at the Embassy Suites Hotel in Waikiki beginning in mid-June and increasing into July with a strong pent-up demand.\nQ2 paid occupancy was 67%, and the month of June by itself reached approximately 83%.\nThe average daily rate was $274 for Q2 and approximately $316 for the month of June.\nRevPAR or revenue per available room was $184 for Q2 and approximately $262 for the month of June.\nIt is definitely heading in the right direction.\nEffective July 8, all travellers entering into Hawaii who are vaccinated in the U.S. can skip quarantine without getting a pre-travel COVID test by uploading proof of their vaccination to the state of Hawaii safe travel website.\nThe Oahu is still under tier five of its reopening plan until Hawaii's total population is 70% fully vaccinated, which should occur in the next month or two.\nBars and restaurants in Oahu can be at 100% capacity as long as all customers show their vaccination card or a negative COVID test on entry.\nThe Japanese wholesale market had accounted for approximately 35% to 40% of our customer base pre-COVID.\nJapan is currently just 9% fully vaccinated.\nThough with its current pace of over one million vaccines a day, Japan is expected to be completing vaccinations by this November and to start issuing vaccine passports in the next 30 days, in anticipation of opening up international travel.\nIn the meantime, there is a pent-up demand from U.S. West and Canada that is expected to keep the hotel occupied and on track with this recovery.\nSecondly, looking at our consolidated statement of operations for the three months ended June 30th, our total revenue increased approximately $7.8 million over Q1, which is approximately at 9.3% increase.\nApproximately 37% of that was the outperformance of the Embassy Suites Hotel as California and Hawaii began to open up travel.\nAdditionally, our operating income increased approximately $6.3 million over Q1 '21, which is approximately an increase of 31%.\nThird, same-store cash NOI overall was strong at 23% year-over-year.\nWith office consistently strong before, during and post COVID and retail showing strong signs of recovery.\nMultifamily was down primarily as a result of Pacific Ridge Apartments at 71% leased at the end of Q2 due to the recurring seasonality of students leaving in May, including the expiration of the USD master lease and new students leasing over the summer before school starts in late August.\nGenerally, approximately 60% of our 533 units at Pacific Ridge are leased by students, with the USD campus right across the street.\nAs of this week, we are approximately 90% leased at Pacific Ridge with approximately 150 students moving in over the next several weeks in August.\nHassalo on Eighth in the Lloyd District of Oregon is a 657 multifamily campus.\nAt the end of Q1, occupancy was approximately 84% due to the lingering impact of COVID and political challenges in the prior months.\nAs of Q2, we have increased the occupancy to approximately 95%.\nBut in doing so, we had to adjust the rent and increase concessions.\nPacific Ridge and Hassalo on Eighth are the two factors that impacted our multifamily same-store this quarter.\nAs Adam mentioned, asking rates have been trending favorably on our multifamily properties recently, which we expect to provide meaningful growth going forward.\nNote that our same-store cash NOI does not include our mixed-use sector, which will return with Q3 and Q4 2021 after completing the renovation of the Embassy Suites Hotel during COVID.\nAnd fourth, as previously disclosed, we acquired Eastgate Office Park on July 7th, comprised of approximately 280,000 square foot multi-tenant office campus, in the premier I-90 corridor submarket of Bellevue, Washington, one of the top-performing markets in the nation, the Eastside market is anchored by leading tech, life science, biotech and telecommunication companies.\nThe four-building Eastgate Park is currently greater than 95% leased to a diversified tenant base with in-place contractual lease rates that we believe are 10% to 15% below prevailing market rates for the submarket.\nAdditionally, Eastgate Park recently obtained municipal approval for rezoning, increasing the floor area ratio from 0.5 to 1.0, which will allow for additional development opportunities.\nThe purchase price of approximately $125 million was paid with cash on the balance sheet.\nThe going-in cap rate was approximately 6% with an unlevered IRR north of 7%.\nWe believe this transaction will be accretive to FFO by approximately $0.05 for the remainder of 2021 and $0.10 for the entire year of 2022.\nThese four items are the data points that are pointing to the beginning of AAT's recovery story starting to unfold.\nOne last point of interest is that on page 16 of the supplemental, total cash net operating income, which is a non-GAAP supplemental earnings measure, which the company considers meaningful in measuring its operating performance is shown for the three months, ended June 30, at approximately $58.7 million.\nIf you use this as a run rate going forward, it would be approximately $234 million, which would exceed 2019 pre-COVID cash NOI of approximately $212 million.\nA reconciliation of total cash NOI to net income is included in the glossary of terms in the supplemental.\nAt the end of the second quarter, we had liquidity of approximately $718 million, comprised of $368 million in cash and cash equivalents and $350 million of availability on our line of credit.\nOur leverage, which we measure in terms of net debt-to-EBITDA was 6.0 times.\nOur focus is to maintain our net debt-to-EBITDA at 5.5 times or below.\nOur interest coverage and fixed charge coverage ratio ended the quarter at 3.7 times.\nAs far as guidance goes, we are in the middle of budget season now for 2022.\nWe hope to begin issuing formal guidance again for 2022 on our Q3 '21 earnings call.\nAt the end of the second quarter, excluding One Beach, which is under redevelopment, our office portfolio stood at approximately 93% leased with less than 1% expiring through the end of 2021.\nOur top 10 office tenants represented 51% of our total office-based rent.\nGiven the quality of our assets and the strength of the markets in which they are located with technology and life science as the key market drivers, our office portfolio is poised to capitalize on improving dynamics, especially in Bellevue and San Diego.\nQ2 portfolio stats by region were as follows, our San Francisco and Portland office portfolios were stable at 100% and 96% leased, respectively.\nCity Center Bellevue was 93% leased, net of a new amenity space under development, and San Diego is 91% leased, net of new amenity spaces being added to Torrey Reserve.\nWe had continued success in Q2 preserving pre-COVID rental rates with, 13 comparable new and renewal leases, totalling approximately 50,000 rentable square feet, with an over 9% increased over prior rent on a cash basis, and almost 15% increase on a straight-line basis.\nThe weighted average lease term on these leases was 3.6 years, with just over $7 per rentable square foot in TIs and incentives.\nWe experienced a modest small tenant attrition during the quarter due to COVID, resulting in a net loss of approximately 16,000 rentable square feet or less than 0.5 point of occupancy, none of which was lost to a competitor.\nOur outlook moving forward is one of positive net absorption with 200 proposal activity picking up significantly.\nAt this point in time, we are seeing smaller tenants willing to commit to longer-term leases at favorable rental rates.\nEven more exciting is the push to return to the office in the emerging large tenant activity and competition for quality larger blocks of space in select markets, including San Diego and Bellevue, of which we have current availability and active prospects.\nOur continued strategic investments in our current portfolio will position us to capture more than our fair share of net absorption as the markets improve.\nThe renovation of two buildings at Torrey Reserve is near completion.\nWe have aggregated large blocks of space to meet demand and take advantage of pricing power, and we have active large deals and negotiations on both buildings.\nThe final phase of the renovation will include a new state of the art fitness complex and conference center, both serving the entire 14 building Torrey Reserve Campus.\nConstruction is in full swing on the redevelopment of One Beach Street in San Francisco, delivering in the first half of 2022, and construction is nearly complete on the redevelopment of 710 Oregon Square in the Lloyd Submarket of Portland.\nOne Beach will grow to over 103,000 square feet and 710 Organ Square will add another 32,000 square feet to the office portfolio.\nAs Ernest mentioned, construction is well underway on Tower three at La Jolla Commons with expected completion in Q2, Q3 of 2023, and we are encouraged by the emerging large tenant activity and competition for quality large blocks of space and UTC.\nFinally, leasing activity is robust for our upcoming availabilities at Eastgate Office Park in Suburban Bellevue, even prior to executing the exciting renovation plans under development to take this special property to the next level of quality and customer experience.\nIn summary, our office portfolio is on offense as we move forward into the rest of 2021 and beyond.\n",
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"content": "compname reports q2 ffo per share $0.51.\nq2 ffo per share $0.51.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Both are now available on the Investors section of our website americanassetstrust.com.\nFirst and foremost, I would like to wish all of our stakeholders and their loved ones continued health and safety during these truly unprecedented times.\nWe remain optimistic that a vaccine will be forthcoming over the next six to nine months and trust me, I'm going to be one of the first in line.\nBut nevertheless, we are prepared to endure a prolonged pandemic with our solid balance sheet world-class properties and tenants, and incredibly dedicated and competent employees.\nFortunately now, the second and third quarters are behind us and I can tell you that our operations and financial results were nowhere near as catastrophic as my worst case projections that we modeled in April 2020.\nAs most of you know, for many years -- for many years many outsiders believed our asset diversification was perceived negatively relative to any of our best-in-class peers.\nHowever, we now know that our ownership of a combination of irreplaceable office, multifamily, retail and mixed-use properties as opposed to a single asset class provided us with much needed stability and protection from the risks associated with the changes in economic conditions of a particular market, industry or even economy, such as those changes created by COVID-19.\nWould we have declared a larger dividend?\nYes, probably and I would have benefited more than anywhere, but as fiduciary store stockholders and its staunch defenders of our balance sheet, we felt it's most prudent to remain conservative on our dividend until there is more visibility into a vaccine and an economic recovery.\nIn any case, a year or so from now, once there is a vaccine, we expect to look back and hope that this will be nothing but a bad memory.\nOne of our primary focuses over the past quarter has been collections in our retail segment.\nWe are pleased to have made meaningful progress on that front where we began the pandemic initially collecting approximately 40% of retail rents in April to collecting approximately 80% retail rents in the third, quarter a number that we expect to get better.\nNo doubt this was in large part due to the tireless work of our in-house collection team comprised of our property managers, lease administrators, legal staff and direct engagement by our executives with retailers.\nAnd though we remain sensitive and at times accommodating to the financial challenges of certain impact to tenants, we have certainly taken a more aggressive position with better capitalized tenants knowing the high quality of our underlying real estate and the clear rights we have embedded in our leases.\nWe expect those tenants to adhere to their contractual obligations and we continue to refuse to agree to deals that are not in the best interest of our company and our shareholders.\nAs such, we expect our third quarter collections to improve further as we continue our efforts, and in fact we know more significant checks and wires are currently in transit from tenants on account of third quarter collections.\nOur most notable collection challenges in the retail segment remain with our movie theaters, gyms and apparel stores as well as many of our retailers at Waikiki Beach Walk which until mid-October, had no incoming tourism to sustain meaningful revenue for our tenants.\nIt is likely going to take several more months or quarters for us to have better visibility -- recovery by these more challenged tenants.\nThat said, our focus continues to prioritize long-term strategic growth over the short term.\nSo, we've entered into lease modifications that have provided certain tenants relief during the pandemic by way of deferrals or other monetary concessions where necessary, provided we obtain something in return whether by lease extensions, waiver, a certain tenant-friendly lease rights or incremental percentage rent.\nOtherwise, we intend to pursue all means to enforce our rights under leases, including litigation as necessary, particularly for those unilaterally withholding rents when we believe they have the funds to pay.\nAdditionally, we are pleased to report that 100% of our properties continue to remain open and accessible by our tenants in each of our markets and anecdotally the majority of our employees are voluntarily working in person at our properties or at our corporate offices each week while taking absolutely all prudent safety precautions, despite having the flexibility to work from home.\nWe continue to firmly believe that post pandemic, being together in person will promote much better productivity, collaboration and innovation and we expect and I've heard similar sentiment from the majority of our office tenants.\nFinally, on the election front, we are closely following two propositions on the California ballot that take direct aim at commercial real estate.\nOf course, we are firmly against Prop 15 which would eliminate Prop 13 Taxpayer Protection.\nIf it passes, we would not expect it to create an immediate, meaningful impact to our company but rather would place a significant pass through financial burden on our tenants at a time when they are already struggling, not to mention the likely negative impact of those property taxes on future rent growth.\nAnd also, we are against Prop 21 which we believe is a flawed measure that would implement a significant amendment to existing rent control laws on the multifamily side, limiting landlords' rights and likely making the housing crisis in California even worse.\nWe are contributing, our resources to impose those propositions.\nWhile the challenges we face today are complex, whether relating to the pandemic, racial, [Indecipherable] technology or legislative matters to name a few, we do believe that we are well positioned to navigate through and manage these challenges with, as Ernest mentioned our best-in-class assets, our 200 talented and dedicated employees and the strength of our balance sheet.\nLast night we reported third quarter 2020 FFO of $0.44 per share and net income attributable to common stockholders of $0.08 per share for the third quarter.\nLet me begin with my perspective that I am optimistic with the overall performance of this portfolio, even in light of the pandemic we are all going through.\nWe too are feeling the bumps along the road like everyone else in our sectors.\nWhat makes me optimistic about our portfolio and its future are the following.\nNumber one, our collections of monthly recurring billings continue to improve in Q3 over Q2 with total collections of approximately 89% in Q3 versus 80% in Q2.\nNumber two, we believe we have ample liquidity to weather the storm that we are going through.\nWe prepared for the worst-case scenario by modeling a $50 million quarterly burn rate at the beginning of this pandemic, not knowing what we were going into and in Q2, our actual burn rate was approximately $6 million.\nIn Q3, we ended up with a cash surplus of approximately $9 million and this is after the operating capital expenditures and the dividend.\nWe started Q3 with approximately $146 million of cash on the balance sheet and ended Q3 with approximately $155 million of cash on the balance sheet, primarily as a result of increased cash NOI, quarter-over-quarter due to our successful collection efforts outlined earlier by Adam.\nNumber three, we have additional liquidity of $250 million available on our line of credit, combined with an entire portfolio of unencumbered properties with the exception of our only mortgage which is on City Center Bellevue.\nNumber four, we believe we have embedded growth in cash flow in our office portfolio with approximately $30 million plus of growth in the office cash NOI between now and the end of 2022 as Steve will discuss later.\nAnd lastly, once we get a vaccine, we believe our high quality West Coast portfolio will rebound.\nWe believe our Embassy Suites which is currently at approximately a break-even cash NOI will rebound based on its location and tourism.\nOn October 15, Hawaii allowed tourists to come back to the island as they can demonstrate that they have had a negative COVID tests within the last 72 hours.\nOn the first day, there were approximately 10,000 tourists that landed in Hawaii, we expect that tourism inflow to continue to increase each week and to start benefiting our Hawaiian properties over the coming quarters.\nLet's take a moment to look at the results of the third quarter for each property segment.\nOur office property segment continues to perform well, as expected during these uncertain times.\nOffice properties excluding One Beach Street in San Francisco, which is under redevelopment were at 96% occupancy at the end of the third quarter, an increase of approximately 2% from the prior year.\nMore importantly, same-store cash NOI increased 13% in Q3 over the prior year, primarily from increases in base rent at La Jolla Commons, Torrey Reserve campus, City Center Bellevue and the Lloyd District portfolio.\nOur retail properties continue to be significantly impacted by the pandemic, although the occupancy at our retail properties remain stable for the third quarter at 95% occupancy which was a decrease of approximately 3% from the prior year our retail collections have been challenging during the pandemic, as reflected in our negative same store cash NOI.\nOur multifamily properties experienced a challenging quarter, as same-store cash NOI decreased approximately 5.4% due primarily from the increase in average occupancy -- or I'm sorry, due primarily from the decrease in average occupancy at Hassalo in Portland, offset by favorable master lease signed with a private university in San Diego area at the beginning of the quarter.\nOn a segment basis, occupancy was at 87.5% at the end of the third quarter, a decrease of approximately 3% from the prior year.\nWe expect our occupancy to return to normal, stabilized levels at Hassalo as we have recently adjusted pricing and concessions.\nWith these adjustments, in the last 10 days we have already seen leasing traffic increase from a weekly average of four to six tour's per week, to 10 to 12 tours per week.\nWe have captured a total of 11 new leases in just the last week.\nOur mixed use property consisting of the Embassy Suites Hotel and the Waikiki Beach Walk Retail is located on the Island of Oahu.\nThe State of Hawaii remained in a self-quarantine throughout most of the third quarter, significantly impacted the operating results for the third quarter of 2020.\nThe Embassy Suites' average occupancy for the third quarter of 2020 was 66% compared with the average occupancy in the second quarter of 2020 of 17%.\nThe average daily rate for the third quarter of 2020 was $209, which is approximately 40% of the prior year's ADR. Waikiki Beach Walk Retail suffered considerably with virtually no tourists on the island until recently.\nWe are working daily with our tenants at Waikiki Beach Walk to formalize a recovery plan that benefits both our tenants and the company utilizing all resources necessary, including state and city grant programs and lobbying efforts.\nWe had COVID-19 adjustments amounting to 2% of what was billed in Q3 to our tenants and the balance of approximately 9% is the amount outstanding of what was billed in Q3.\nThis is compared to the second quarter collections of 81%, COVID-19 adjustments of 5% and Q2 amounts that were billed and still outstanding of 14%.\nThis is compared to a bad debt expense accounts receivable of approximately 14% of the outstanding uncollected amounts at the end of Q2 and bad debt expense of straight-line rent receivables of approximately 7% at the end of Q2.\nIt's easy to get confused on all these percentages.\nHowever, from a big picture perspective, at the end of the third quarter, our total allowance for doubtful accounts, which reflects the cumulative bad debt expense charges recorded totals approximately 39% of our gross accounts receivable and approximately 3% of our straight-line rent receivables.\nLet's talk about liquidity; as we look at our balance sheet and liquidity at the end of the third quarter, we had approximately $405 million in liquidity, comprised of $155 million of cash and cash equivalents and $250 million of availability on our line of credit, and only one of our properties is encumbered by mortgage.\nOur leverage, which we measure in terms of net debt to EBITDA was 6.7 times on a quarterly, annualized basis.\nOn a trailing 12 month basis, our EBITDA would be approximately 6.0 times.\nOur focus is to maintain our net debt-to-EBITDA at 5.5 times or below.\nOur interest coverage and fixed charge coverage ratio ended the quarter at 3.6 times on a quarterly annualized basis and 3.9 times on a trailing 12 month basis.\nAs it relates to guidance, as previously disclosed, we withdrew our 2020 guidance on April 3 due to the uncertainty that the pandemic would have on our existing guidance, particularly in our hotel and retail sectors.\nUntil we have a clear view of the economic impact of the pandemic or more certainty as to when a vaccine becomes available, we will refrain from issuing further guidance.\nAs Bob said earlier, at the end of the third quarter, net of One Beach, which is under redevelopment our office portfolio stood at over 96% leased with just under 6% expiring through the end of 2021.\nGiven the quality of our assets and the strength of the markets in which they are located with technology and life science as key market drivers, we continue to execute new and renewal leases at favorable rental rates delivering continued NOI growth in our office segment.\nThe weighted average base rent increase for our nine renewals completed during the quarter was 6.7% and it's also as Bob pointed out earlier, with leases already signed, we have locked in approximately $30 million of NOI growth in our office segment priced at approximately [Indecipherable] in 2020, $14 million in $2021 and $10 million in 2022.\nWe anticipate significant additional NOI growth in 2022 and 2023 through the redevelopment of leasing of 102,000 square feet at One Beach Street in San Francisco and 33,000 rentable square feet at 710 Oregon Square in the Lloyd submarket in Portland.\nIn addition, we have the ability to organically grow our office portfolio by up to an additional 768,000 square feet or 22% on sites we already own by building Tower 3 at La Jolla Commons, a 213,000 square foot tower that's currently into the city for permits and Blocks 90 and 103 at Oregon Square with two configuration options, one at 392,000 square feet and the other at 555,000 square feet, which we recently received the entitlements on from the Portland Design Review Commission.\nWe continue evaluating market conditions, prospective tenant interest and hopefully decreasing construction costs on these development opportunities.\nIn summary, we have a stable office portfolio, little near term rollover, significant build in NOI growth and additional upside through repositioning and redevelopment within our existing portfolio plus substantial new development on sites we already are on.\n",
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"content": "q3 ffo per share $0.44.\nqtrly earnings per share $0.08.\ncollected 89% to date of rents that were due during q3.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Both are now available on the Investors section of our website, americanassetstrust.com.\nI am pleased to report that we continue to make great progress on all fronts as we rebound from the impact of COVID-19.\nWe knew at the onset of the pandemic that we would not be impervious to its economic impact, but we were confident that the high-quality, irreplaceable properties and asset class diversity of our portfolio, combined with the strength of our balance sheet and ample liquidity would help us pull through and maybe even come out on the other side better off than at the beginning.\nWe continue to be optimistic as we meaningfully rebounded in 2021 and anticipate further growth in 2022 and beyond.\nThat's why we've aggregated the portfolio comprised of a well-balanced collection of office, retail, multifamily and mixed-use properties located in dynamic high barrier to entry markets, where we believe that the demographics, pent-up demand and local economies remain strong relative to others.\nOur properties are more resilient in our view to economic downturns as they are in the path of growth, education, and innovation and importantly can likely withstand the impact of long-term inflation, perhaps even benefit from the benefits of long-term inflation.\nAlong those lines during the past quarter, we used our liquidity to acquire two complementary and accretive office properties in Bellevue, Washington, a market that we remain very bullish on and in which we expect continued rent growth.\nMeanwhile, our development of La Jolla Commons III into an 11 story, approximately 210,000 square foot Class A office tower remains on time and on budget for Q2 or Q3 2023 delivery.\nWe are encouraged about the leasing prospects in the UTC submarket for high-quality, large blocks of space, where both tech and life science funding continues at record levels and same tenants continue to expand.\nBut we don't have specific news to share on that front at this time.\nThe same holds true for our One Beach Street development on the North Waterfront of San Francisco, which we believe to be a unique opportunity for a full building tenant with delivery expected in Q2 or Q3 of 2022.\nAdditionally, I'm happy to inform you that our Board of Directors has approved the quarterly dividend of $0.30 a share for the third quarter, which we believe is supported by our expectations for operations to continue trending positively.\nIt will be paid on December 23 to shareholders of record on December nine.\nAs we look at our portfolio, we are always reminded of the importance of owning and operating the preeminent properties in each of our markets.\nThat's why we focused on continuing to enhance our best-in-class community shopping centers to promote a better experience for our shoppers with the expectation that this will further strengthen our properties as the dominant centers in our submarkets.\nAnd we understand the importance of modern state-of-the-art amenities in our office projects, which assist our tenants in the hiring and retention of talent in what is currently a very competitive job market.\nWe feel strongly that consistently improving and monetizing our properties, including incorporating sustainability and health and wellness elements is critical to remaining competitive in the marketplace in order to attract the highest quality and highest credit tenants.\nMeanwhile, we are encouraged by our approximately 97% collection percentage in Q3, increased leasing activity across all asset classes, fewer tenant failures and bankruptcies than we expected and many modified leases hitting percentage rent thresholds sooner than expected and are collecting of approximately 96% of deferred rents due during the third quarter, all validating the strategies we implemented during COVID to support our struggling retailers through the government-mandated closures as we are fortunate to have the financial ability to do so.\nBriefly on the retail front, we've seen an improved leasing environment over the past few quarters with positive activity engagement with new retailers for many of our vacancies, including recently signed new deals with Columbia Sportswear, Williams-Sonoma, Total Wine and First Hawaiian Bank to name a few, and renewals with Nordstrom's, Petco and Whole Earth among others as well as many other new deals and renewals in the lease documentation process.\nRetailers are choosing our best-in-class locations to improve their sales, all the while we remain selective in terms of merchandising our shopping centers for the longer term.\nChris Sullivan and his team have done a tremendous job on that front despite some of the continuing headwinds at our Waikiki Beach Walk retail.\nOn the multifamily front as of quarter end, we were 96% leased at Hassalo in Portland, and 98% leased in San Diego multifamily portfolio.\nAll of the master lease units in San Diego that you've heard us discuss previously were absorbed by early August.\nThough multifamily collections have been particularly challenging in Portland due to COVID-related government restrictions, we have started receiving meaningful checks from government rental assistant programs to drive down our outstanding amounts owed and expect more checks to come.\nWe are confident that Abigail's strong leadership at San Diego multifamily and Tania's new energy at Hassalo will drive improvements at our multifamily properties, both operationally and financially.\nLast night we reported third quarter 2021 FFO per share of $0.57, and third quarter 2021 net income attributable to common stockholders per share of $0.17.\nThird quarter results are primarily comprised of the following: actual FFO increased in the third quarter by approximately 11.4% on a FFO per share basis to $0.57 per FFO share compared to the second quarter of 2021, primarily from the following four items: first, the acquisitions of Eastgate Office Park in Corporate Campus East III in Bellevue, Washington, on July seven and September 10, respectively, added approximately $0.023 of FFO per share in Q3.\nSecond, Alamo Quarry in San Antonio added approximately $0.017 of FFO per share in Q3, resulting from 2019 and 2020 real estate tax refunds received during the third quarter of 2021, which reduced Alamo Quarry's real estate tax expense.\nThird, decrease of bad debt expense at Carmel Mountain Plaza added approximately $0.005 per FFO share in Q3.\nAnd fourth, the Embassy Suites and Waikiki Beach Walk added approximately $0.012 of FFO per share in Q3 due to the seasonality over the summer months.\nLet me give you an update on our Waikiki Embassy Suites hotel.\nDue to the impact of the delta variant, Hawaiian Governor Ige made a formal announcement on the third week in August that if you have plans or are thinking of coming to Hawaii, please don't come until we tell you otherwise.\nIt was not a mandate, but it did create a detrimental impact to our visitors to Hawaii and resulted in huge cancellation starting in August and into September.\nOur results for Q3 at Embassy Suites hotel were expected to be much higher.\nOverall, occupancy, ADR and RevPAR continued to increase on heading in the right direction.\nAs of October 19, Governor Ige made another formal announcement to begin welcoming all essential and nonessential travel, starting November 1, 2021.\nWe look forward to welcoming the fully vaccinated individuals and ramping up our visitor industry.\nOn our Q2 earnings call, I mentioned that Japan, who was then approximately 9% fully vaccinated, is now over 65% fully vaccinated and is expected to hit 80% by November.\nAll emergency measures in Japan were lifted on September 30 and lifted the intensive antivirus measures.\nIt marks the first time since April that Japan is free of corona virus declarations and intensive measures.\nWe expect to start seeing the Japanese tourists beginning to slowly start revisiting the Hawaiian Islands beginning in November, including Waikiki.\nNow as we look at our consolidated statement of operations for the three months ended September 30, 2021, our total revenue increased approximately $6.5 million over Q2 '21, which is approximately a 7% increase.\nApproximately 43% of that was from the two new office acquisitions.\nSame-store cash NOI overall was strong at 14% year-over-year, with office consistently strong before, during and post-COVID and retail showing strong signs of recovery.\nMultifamily was flat primarily year-over-year as a result of higher bad debt expense at our Hassalo on eight departments in Portland, but it was still approximately 5% higher than Q2 2021.\nAs previously disclosed, we acquired Corpus Campus East III on September 10, comprised of an approximately 161,000 square foot multi-tenant office campus located just off Interstate 405 and 520 freeway interchange, less than five minutes away from downtown Bellevue, Washington.\nThe four building campus is currently 86% leased to a diversified tenant base, which we saw as an opportunity when in-place rents were compared to what we were seeing in the marketplace.\nThe purchase price of approximately $84 million was paid with cash on the balance sheet.\nThe going-in cap rate was north of 3% as a result of the existing vacancy.\nOur expectation based on our underwriting is that this asset will produce a five year average cap rate over 6% and a strong unlevered IRR of 7%.\nLet's talk about liquidity.\nAt the end of the third quarter, we had liquidity of approximately $522 million, comprised of approximately $172 million in cash and cash equivalents and $350 million of availability on our line of credit.\nOur leverage, which we measure in terms of net debt-to-EBITDA was 6.4 times.\nOur focus is to maintain our net debt-to-EBITDA at 5.5 times or below.\nOur interest coverage and fixed charge coverage ratio ended the quarter at 3.9 times.\nAs we approach year-end, we are providing our 2021 guidance.\nThe full year range of 2021 is $1.91 to $1.93 per FFO share with a midpoint of $1.92 per FFO share.\nWith that midpoint, we would expect Q4 2021 to be approximately $0.46 per FFO share.\nThe $0.11 estimated difference in Q4 FFO per share would be attributable to the following: approximately a negative $0.025 of FFO per share relating to nonrecurring collection of prior rents at one of our theaters in Q3 that will not occur in Q4 2021.\nSecondly, our mixed-use properties are expected to be down approximately $0.037 of FFO per share relating to the normal seasonality of the Embassy Suites hotel and the related parking.\nThird, Alamo Quarry is expected to be down approximately $0.02 of FFO per share relating to the nonrecurring property tax refund that was received in Q3 2021 for 2019 and 2020.\nAnd we expect G&A and interest expense to increase and therefore, decrease FFO by approximately $0.02 per FFO share.\nAdditionally, we plan to issue 2022 full year guidance subject to Board approval when we announce year-end 2021 results in February of 2022.\nHistorically, we have issued our full year guidance on the Q3 earnings call.\nWe believe resetting the issuance and cadence of our guidance to the Q4 earnings call going forward is more in alignment with our peers and also gives us more clarity as to the following year guidance.\nWe will continue our best to be as transparent as possible and share with you our analysis, interpretations of our quarterly numbers.\nOur office portfolio grew by approximately 440,000 square feet or nearly 13% in Q3 with the two new office acquisitions.\nWe brought up these assets on board at approximately 92% leased with approximately 20% rolling through 2022, which provides us with the opportunity to deliver start rates from approximately 10% to 30% over ending rents.\nAt the end of the third quarter at One Beach, which remains under redevelopment, our office portfolio is approximately 93% leased with 1.5% expiring through the end of 2021, approximately 9% expiring in 2022 with tour and proposed activity that has increased significantly.\nOur office portfolio has weathered the storm well.\nIn the second and third quarters, we executed 57,000 annual square feet of comparable new and renewal leases with increases over prior rent of 9.2% and 14.5% on a cash and straight-line basis respectively.\nNew start rates for the 2021 rollover are estimated to be approximately 17% above the ending rates.\nIn fact, we are at least documentation for over half of the space rolling in 2021 as start rates nearly 28% over ending rates.\nNew start rates for the 2022 rollovers are estimated to be approximately 18% above the ending rates.\nWe are employing multiple initiatives to drive rent growth and occupancy, including renovating buildings with significant vacancy, adding or enhancing amenities, aggregating and white boxing larger loss of space where there is a scarcity of such blocks and improving our smaller spaces to be move-in ready.\nBy way of a few examples, we are just completing renovations of two buildings at Torrey Reserve in San Diego.\nThose two buildings represent 80% of the total project vacancy.\nWe now have leases signed or in documentation for over half of that vacancy at premium rates.\nWe will be completing similar renovations Eastgate Office Park where leasing activity is already robust, but we anticipate taking this property to the next level of quality.\nWe are adding new fitness and conference facilities at Torrey Reserve, City Center Bellevue and Corporate Campus East III and will be further enhancing the employee's amenities building at Eastgate.\nWe believe that our continued strategic investments in our portfolio will position us to capture more than our fair share of that absorption at premium rents as the markets improve.\nAnd we have more to look forward to with redevelopments and development.\nIn addition to One Beach Street and La Jolla Commons previously mentioned by Ernest, construction is nearly complete on the redevelopment of seven Tower Square in the, on our market at Portland, which will add another 32,000 rentable square feet to the office portfolio.\nIn summary, our office portfolio is on us as we move forward into the rest of 2021 and beyond.\n",
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"content": "sees fy ffo per share $1.91 to $1.93.\nq3 ffo per share $0.57.\nqtrly earnings per share $0.17.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: You'll have an opportunity to ask questions after today's remarks by management.\nAmerisourceBergen has had a strong start to our fiscal '21 year.\nWe delivered exceptional results driven by differentiated commercial solutions with revenues of $52.5 billion for the first fiscal quarter, representing growth of 10% year-over-year and our adjusted earnings per share increasing 24% versus the prior year quarter.\nBuilding upon our businesses resilience, our teams executed and leveraged our capabilities to create value throughout the supply chain.\nOur purpose driven culture continues to empower our associates to think, plan and act decisively to support all of our partners and to facilitate patient access to critical medical treatments.\nIn addition to these results, as we announced in January, we entered into a strategic transaction with Walgreens Boots Alliance to acquire the majority with large healthcare business and extend and expand our existing distribution agreement.\nAs we have said, these agreements are part of the next evolution of enhancing AmerisourceBergen's ability to deliver innovative solutions for our partners, further building on our platform to deliver key distribution capabilities and value-added services to support patient access in new geographies.\nAmerisourceBergen's ongoing focus on patient access means providing innovative services and solutions to support our manufacturer partners and provide customers with our differentiated value proposition.\nWorld Courier, for example, is highly sought after for it's expertise in helping manufacturer partners navigate complexities on a global scale.\nDuring the pandemic, World Courier's proven track record as an international leader in specialty logistics have enabled us to support our customers worldwide against the backdrop of changing local restrictions, limited air traffic and additional operational challenges.\nWe have been able to facilitate direct to patient services and global clinical trials at a time when both demand and complexity for these services was understandably at its peak.\nSimilarly, we continue to support patient access to vital treatments for COVID-19.\nIn the U.S., we continue to be the distributor of antiviral and antibody therapies, which are playing an increasingly important role as more and more hospitalized patients are receiving these treatments to help them recover from COVID-19.\nIn Canada, our Innomar business is partnering with FedEx as the primary distributor for the COVID vaccine.\nOur team at Innomar is safety and security storing the vaccines in the storage facilities across Canada and packaging them to support the temperature requirements specified by the manufacturer.\nAmerisourceBergen's scale and expertise in specialty as well as our culture of delivering collaborative and innovative solutions, enabled this important work.\nWe have spent years building on and enhancing our leadership, especially distribution.\nThis continued investment in and focus on an important part of the pharmaceutical market continues to benefit both AmerisourceBergen and our partners.\nAnd over the last several months, the ability of our sourcing and commercial teams to leverage our expertise and data analytics capability is foundational to our facility to play an important role in providing the specialty distribution solutions for COVID related treatments.\nWe deliver a clear and differentiated value proposition for our partners in the U.S. healthcare system and continue to focus on building on our strengths in specialty distribution as those capabilities continue to be even more important to all our customers.\nAmerisourceBergen's strong portfolio of customers is another important differentiator for us as it is an important driver of growth across our businesses.\nOver the years, AmerisourceBergen has made it a priority to have long-term strategic relationships with manufacturers and providers that embrace and appreciate collaboration.\nAs we announced last month, we have agreed to strengthen our strategic partnership with Walgreens by extending and expanding our commercial agreements.\nThis extended and expanded partnership in the U.S. will allow us to create incremental growth and efficiency opportunities, enabling each of our enterprises to better serve our respective customers.\nTeams from both our companies have already identified new opportunities for enhanced growth and efficiency in the areas of logistics, transportation and distribution.\nAs we continue to realize the improved capabilities derived from this partnership, these initiatives will enhance our ability to create differentiated value for all of AmerisourceBergen's customers.\nOne customer group, for whom we have consistently created new incremental value, is our independent pharmacy customers including our more than 5,000 Good Neighbor Pharmacy and Elevate Provider Network members.\nThese independent pharmacies provide critical care for their communities and their fearlessness and adaptability as entrepreneurs have enabled them to rise to the challenges of the pandemic.\nWe are proud to have been able to support them with the tools they have needed to connect with their patients and keep them healthy.\nWe look forward to working as a network administrator on behalf of qualified and eligible pharmacy network partners to support vaccination efforts in their communities when we enter the broader inoculation phase here in the United States.\nIn the Animal Health segment, our MWI business has moved swiftly to deliver innovative solutions to help our customer succeed in the current environment.\nThese include ensuring that MWI associates are accessible to our customers 24/7 and bolstering our customers' abilities to offer virtual services to a pet caring clients including innovative client communication solutions and home delivery services of quality medications and pet care products.\nAmerisourceBergen's long-term focus on strong customer relationships, leadership in specialty distribution and manufacturing services and our continued ability to support innovation, has solidified our market leadership and business strength over the years.\nFrom this position of strength, we recently took a significant step to power the next evolution of enhancing our ability to provide innovative and global healthcare solutions.\nAs we announced last month, we've entered into a strategic agreement with Walgreens Boots Alliance to acquire the majority of it's Alliance Healthcare business.\nThrough this acquisition, we will extend our distribution capability into key new markets; add in depth, breadth and reach, and strengthening our global platform of manufacturer and other value-added services.\nWith expanded scale and added services, our combined business will be able to better support pharmaceutical innovation through a global footprint of broad leadership and local expertise, which further positions AmerisourceBergen as the partner of choice.\nThe pandemic has heightened both our public and private partners' awareness of the value of a strong and capable pharmaceutical supply chain and Alliance Healthcare better positions AmerisourceBergen to meet its increasingly global nature as well.\nAs our global footprint expands, so do the importance of corporate stewardship, AmerisourceBergen understand and appreciate the value of being a responsible enterprise and our recent initiatives, including continue to advance our talent and culture, accelerating workforce diversity inclusion and further investing in and supporting our associates.\nWe remain vigilant in our efforts to protect the safety and well-being of our associates as the COVID waves effect various regions and teams and the importance of the work we're doing remain unwavering.\nDriven by our purpose, we are maintaining our enhanced protection and safety protocols and appropriately compensating frontline associates.\nRemote work is still the prevailing policy for all suitable roles, we are watching the situation closely as I'm sure all of you are doing and we'll continue to prioritize the health and safety of our associates.\nUnderscoring our efforts to support and empower our associates around the world, AmerisourceBergen was recently certified as a Great Place to Work company following the survey of employees around the world.\nThe survey reveals that our associates reported a consistently positive experience with peers among leaders and in job responsibilities.\nWe saw high scores for all indicators and our overall score was significantly higher in the typical U.S. based company.\nAdditionally, for the fourth year in a row, the Human Rights Campaign has recognize AmerisourceBergen as a Best Place to Work for LGBTQ equality awarding us a perfect score on the Corporate Equality Index due to our non-discrimination policies, equitable benefits, support of an inclusive culture and focus on corporate social responsibility.\nAmerisourceBergen recognizes the business and personal importance of having a culture that is inclusive and equitable regardless of race, gender, sexual orientation or gender identity and for veterans and people with disabilities as well.\nTo this end, we are accelerating our diversity and inclusion strategy to become an even more diverse and equitable company.\nOver the past months, we have conducted a comprehensive D&I organizational assessment, initiated a global D&I strategy to support among measured and engaged workforce, formed a D&I Council led by a senior C-suite executive and signed the CEO Pledge for diversity and inclusion, which is a commitment to increased diversity and support more inclusive work environments.\nAmerisourceBergen strives to ensure that our associates feels a part of a fare inclusive and transparent workplace.\nA diverse inclusive and equitable culture is a proven enhancer of business value and these initiatives will ensure that we have the right programs and tools in place in the short term, so we can become a leader in this area in the longer term.\nOur success in advancing our progressive culture, one that is fuelled by the passion pride and dedication of our purpose driven associates, is visually embodied by our new brand, which we unveiled last week.\nThe new brand embodies a spirit of innovation for the design that is energizing, confident and inspiring, while also displaying our unity as an enterprise when we go to market.\nAs we continue to move our business forward, we remain committed to advancing a differentiated culture that inspires our associates, unites them and helps them develop and achieve their full potential.\nOur business strength is a direct result of having engaged, passionate and dedicated associates and our focus on advancing our talent and culture remains a key strategic priority.\nWe have continued to execute across our business to help us deliver innovative solutions to our partners.\nAs AmerisourceBergen continues to involve, we are empowered by our purpose and we will build upon our strengths to drive growth across enterprise.\nWe will further strengthen our portfolio of solutions and customer relationships, enhance our specialty capabilities to support both upstream partners and downstream customers, continue to focus on execution and supporting innovation and enable positive outcomes globally by facilitating market access and supporting pharmaceutical innovation.\nI continue to be inspired by, proud of and confident in our themes to rise to the many challenges and complexities that we face with courage and effectiveness.\nBy being united in our responsibility to create healthier futures, AmerisourceBergen is purpose driven and well positioned to create long-term sustainable growth.\nMy remarks today will focus on our adjusted non-GAAP financial results unless otherwise stated.\nGrowth rates and comparisons are made against the prior year December quarter.\nAs Steve mentioned, we clearly had a strong start to our 2021 fiscal year with growth across our businesses.\nAs I said back in November, we entered fiscal 2021 with strong momentum and that clearly accelerated in the quarter as our teams executed it across the entire portfolio of AmerisourceBergen businesses.\nGuided by our purpose, our teams worked diligently to support pharmaceutical innovation and facilitate patient access to vital medications.\nAmerisourceBergen's key differentiators continue to provide a platform for value creation for all our stakeholders, help me provide key solutions for our partners, both upstream and down, to ultimately ensure patient health and well-being.\nThroughout my tenure with AmerisourceBergen, I have shared my pride in being part of a company that is driven by purpose, focused on execution and unwavering and our efforts to strengthen our associate experience.\nOur associates power our success and AmerisourceBergen continues to protect, support and invest in our talent.\nTurning now to discuss our first quarter results.\nFirst, I will review our adjusted quarterly consolidated results and our segment performance.\nSecond, I will cover the upward revision to our fiscal 2021 guidance.\nBeginning with our first quarter results, we finished the quarter with adjusted diluted earnings per share of $2.18, an increase of 24%, primarily due to exceptional operating income growth across our businesses.\nOur consolidated revenue was $52.5 billion, up 10%, driven by revenue growth in both the Pharmaceutical Distribution Services segment and Other, which includes our Global Commercialization Services & Animal Health businesses.\nGross profit increased 15% to $1.4 billion, driven by increases in gross profit in each operating segment.\nIn the quarter, gross profit margin increased 12 basis points from the prior year quarter.\nThis gross margin improvement is due to growth in a number of our higher margin businesses, and in particular, a significant increase in sales of specialty products.\nThe margin improvement is also due to the gross profit portion of the tailwind related to exiting the PharMEDium business and additionally, our reversal of reserve taken in the back half of fiscal 2020 associated with forecasted inventory value writedowns that did not materialize.\nThe PharMEDium comparison and the inventory writedown reversal contributed one-third of the 12 basis point gross profit margin improvement.\nConsolidated operating income was $617 million, up $122 million or 25% compared to the prior year quarter.\nThis increase was driven by the increased gross profit in both the Pharmaceutical Distribution Services segment and our Global Commercialization & Animal Health Group, which I will discuss in more detail when I review segment level performance.\nTo support our revenue growth while protecting, supporting and appropriately compensating our frontline associates, operating expenses grew 8% to $810 million.\nOperating expenses as a percent of revenue was 1.54% which is a 2 basis point decline from the prior year quarter.\nMoving now to net interest expense, which increased $3 million to $34 million primarily due to a decrease in interest income resulting from a decline in investment interest rates.\nOur effective tax rate was 22%, up from 21%, in the first quarter of fiscal 2020.\nOur diluted share count declined modestly to 206.8 million shares.\nRegarding free cash flow and cash balance, our adjusted free cash flow was $838 million in the first quarter.\nThis strong start to the year on cash flow, positions us well after the first quarter and we are on track with our adjusted free cash flow guidance for the year.\nWe ended the quarter with $4.9 billion of cash of which $1.1 billion was held offshore.\nThis completes the review of our consolidated results.\nNow, I will turn to our segment results.\nBeginning with Pharmaceutical Distribution Services, segment revenue was $50.5 billion, up 10%, driven by increased specialty product sales, including COVID-19 therapies, as well as growth at some of our largest customers and broadly across our businesses.\nSegment operating income increased about 27% to $496 million with operating income margin up 13 basis points.\nAs a reminder, the exit of the PharMEDium business represented a $20 million tailwind to the segment's operating income, roughly half of which is in gross profit and the other half in operating expense.\nExcluding the PharMEDium tailwind, segment operating income growth would have been up 20%.\nThe strong operating income performance was driven by continued positive trends across our robust portfolio of customers and broadly across our businesses and, in particular, a significant increase in sales of specialty products.\nAmerisourceBergen's leadership in specialty distribution, led by the specialty physician services group, and our capabilities in supporting specialty sales into health systems continue to provide us the platform to deliver differentiated value for our partners through our scale, reach and expertise.\nIn the quarter, our specialty physician services group continued a strong growth as practices are prepared operationally to continue to treat their patients throughout COVID challenges.\nAdditionally, our health systems business had significant growth as we're helping to facilitate vital access to antiviral and antibody therapies for COVID-19 patients.\nThe fundamentals of the health systems business overall continue to be strong particularly as we are now also seeing increased biosimilar utilization in this customer segment.\nWhile biosimilar utilization continues to be strongest and most impactful on the specialty physician side, we are encouraged to see growing adoption trends in health systems.\nI will now turn to the Other segment, which includes businesses that focus on Global Commercialization Services & Animal Health, including World Courier, AmerisourceBergen Consulting and MWI.\nIn the quarter, total revenue was $2.1 billion, up 11%, driven by growth across the three operating segments.\nOperating income for the group was up $17 million or 16%, primarily due to growth at MWI and World Courier.\nMWI is benefiting from ongoing process initiatives and the strength of its customer relationships, particularly in the companion business where veterinarians are benefiting from increased pet ownership, increasing standards of care and adapting well virtual engagement and limited physical interaction.\nWorld Courier has continued to differentiate itself as the provider of choice in global specialty logistics as their commercial customers navigate increased complexity, the need for cell and gene solutions grows and there is an increased utilization of direct-to-patient capabilities.\nAdditionally, I will note that World Courier's growth rate in the quarter was augmented by foreign currency exchange rate.\nThis completes the review of our segment results.\nSo I will now turn to our fiscal 2021 guidance.\nThis updated financial guidance does not include any contribution from the proposed Alliance Healthcare acquisition announced in January 2021.\nAs I've just outlined, AmerisourceBergen delivered exceptional growth in the first quarter and continues to expect positive trends across our business as we move further into fiscal 2021.\nWe are also updating other financial guidance metrics for fiscal 2021.\nRevenue is now expected to be in the high single-digit percent growth range as we have seen better than expected growth in both Pharmaceutical Distribution Services and Other.\nNext, operating expenses, we now expect operating expenses to grow in the mid to high single-digit percent range.\nWe remain committed to investing in, protecting and ensuring the safety and well-being of our associates, especially those on the front lines.\nTurning now to operating income; we now expect to grow operating income in the high single-digit percent range.\nThis is a result of raising our pharmaceutical distribution operating income guidance to the high-single digit range, given the significant operating income growth in the first quarter and continued overall positive trends across the business.\nIt also reflects our improved expectation for operating income in Other, which we now believe will grow in the mid to high single-digit range as a result of positive trends in our Global Commercialization & Animal Health businesses.\nLastly, regarding shares outstanding.\nGiven the cash needs associated with the Alliance acquisition, we are narrowing our guidance from a range of 206 million to 207 million and we now expect to finish the year around 207 million shares outstanding.\nAll other financial guidance metrics for fiscal 2021 remain unchanged.\nRegarding our fiscal second quarter earnings per share expectations, while we do not provide quarterly guidance, I will note that the March 2021 quarter will be impacted by a tough comparison to the March 2020 quarter, which added significant pull forward of sales associated with increased customer purchases at the onset of COVID-19.\nIn closing, our strong customer relationships, focus on execution excellence and commitment to innovation will continue to drive our business forward while enhancing our capabilities to serve our partners and their patients.\nAmerisourceBergen is well positioned by our key differentiators and we are excited for how the Alliance Healthcare acquisition will build on our pharmaceutical centric strategy, expanding our reach and further strengthening our global platform for value-added services and solutions.\nOur work around the acquisition remains on track and we look forward to welcoming the Alliance Healthcare team.\nThese past several quarters have proven the importance of pharmaceutical innovation and access and I have spoken in great detail about the resilience of AmerisourceBergen's business.\nClearly, our results and expectations show that the word resilience understates the strength of our business as our purpose driven teams are leveraging our capabilities and expertise to provide important value-added solutions to help contribute to positive patient outcomes globally.\nWe are making positive contributions to the people, planet and communities where we live and work by being responsible business and in our upcoming Global Sustainability and Corporate Responsibility Report, we will be providing an update on our commitments in these areas to show how our business practices align with many of the leading global sustainability frameworks.\nWe know that by doing business thoughtfully and with long-term perspective, AmerisourceBergen can drive sustainable growth, while creating value for all our stakeholders and fulfilling our purpose of being united in our responsibility to create healthier futures.\n",
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"content": "q1 adjusted non-gaap earnings per share $2.18 excluding items.\nupdating its outlook for fiscal year 2021.\nrevenues of $52.5 billion for q1, a 9.7 percent increase year-over-year.\nsees fy 2021 revenue growth in high-single digit percent range, up from mid-single digit percent range.\nall other previously communicated aspects of co's fiscal year 2021 financial guidance and assumptions remain same.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm Bennett Murphy, Senior Vice President, Investor Relations.\nYou have an opportunity to ask questions after today's remarks by the management.\nBefore we discuss our results for the quarter, I want to comment on the distribution industry's recent milestone regarding the proposed settlement agreement to address opioid-related claims of U.S. state attorneys generals and political subdivisions in participating states.\nThroughout the litigation process, we have been consistent in stating our desire to address the normalcy of the opioid challenge by bringing solutions to the table.\nIf the industry's proposed agreement and settlement process leads to a final settlement, it would collectively provide thousands of communities across the United States with substantial financial support.\nClearly, the process is in an advanced stage, and we will not comment deeply at this time.\nWe take our role in the supply chain seriously and continue to close with stakeholders concerning these complex matters.\nAmerisourceBergen will continue to work diligently and, alongside partners, combat drug diversion while supporting real solutions to help address the crisis in the communities where we live, work and serve.\nTurning now to our results for the third quarter of fiscal 2021.\nAmerisourceBergen delivered yet another quarter of exceptional results driven by a high level of execution, purpose-minded team members and continued focus on delivering differentiated value.\nThese results reflect continued strong performance across AmerisourceBergen's businesses as we capitalize on our differentiated pharmaceutical-centric value proposition and as our team successfully executes on our key strategic initiatives.\nThis strength and execution continue to create value for our shareholders.\nAnd today, we are again raising our fiscal 2021 full year guidance, which Jim will discuss later in greater detail.\nI will focus my remarks today on the key strategic pillars that are driving our strong performance, as well as how, with the addition of Alliance Healthcare, AmerisourceBergen continues to be well positioned to create value for all our stakeholders.\nAmerisourceBergen remains next-minded, and we are focused on continuing to enhance our ability to provide global healthcare solutions as we support pharmaceutical innovation and access, both in the United States and internationally.\nIn the United States, our Pharmaceutical Distribution business continues to benefit from our industry-leading customer relationships, our leadership in specialty distribution and commercialization services and strong end market trends, including an earlier than expected return to pre-COVID prescription utilization trends in the June quarter.\nOur leading customer base includes our Good Neighbor Pharmacy and Elevate Provider Network members.\nThey are proving daily that community pharmacies are at the forefront of providing quality and equitable care and maintaining deep levels of trust with their patients and communities.\nIn fact, for the fifth year in a row, Good Neighbor Pharmacy was ranked highest among brick-and-mortar chain drug store pharmacies by J.D. Power.\nThis is the tenth time we have received that honor in the past 12 years, and it is a testament to community awareness of the value of the quality care and experience patients receive at GNP member pharmacies.\nWe held our annual Thoughtspot Conference last week, and I was touched and inspired by the stories that our members shared through the entrepreneurship, expertise and deep community roots, community pharmacies prove that they do more than just [draw] prescriptions.\nThey are critical promoters of health equity across the U.S., often driving above and beyond to provide holistic care and health education at the local level, particularly in under-resourced communities.\nSince beginning of the pandemic, community pharmacies have stepped up fearlessly to meet the unprecedented challenges of a global health crisis and show the world why community pharmacies are integral to our communities.\nThe value proposition of community-based care has never been clearer.\nAnother relevant example is on the animal side.\nThe growth in pet ownership has increased demand for our veterinarian customers as pets are a cherished part of the family and the care a veterinarian provides is valued.\nThis positive trend over the last year has long-term benefits for our business as MWI is well positioned with key anchor customers and services.\nOn the human health side, access to local trusted expertise care remains vital, particularly for those dealing with complex health challenges that bring them into the care of specialty physician providers.\nAs I've said from the onset of the pandemic, we are conscious of the negative impact that restricted measures have on patients when they have less access to screenings and tests that help doctors identify serious health issues.\nThis has particularly impacted patients who are used to a doctor or healthcare facility.\nBut now our customers have begun to see a normalization in new patient trends.\nAnd as a result, patients are more effectively being diagnosed and gaining access to treatment.\nThis is a clear positive for patient care.\nAs the leading provider of specialty distribution and commercialization services, we will continue to play our role in supporting pharmaceutical innovation and access as patients visit volumes continues to normalize.\nOur specialty physician services business had strong performance this quarter and continues to differentiate AmerisourceBergen with leading value-added services, such as those through our physician GPOs.\nAdditionally, bio centers continue to be a positive for our customers, our business and the healthcare system overall as they provide room for new innovative products to come to market.\nThe innovations in CAR T and cell and gene therapies and the potential applications of the new mRNA technology offers the medical community new potential tools in the treatment of serious diseases that previously alluded truly effective care.\nAmerisourceBergen is well positioned to support all these innovations through our specialty distribution and manufacturer services offerings.\nOur unique ability to provide value-added expertise in conjunction with innovative solutions and quality service enhance our partnerships and grow our business.\nWith strong partnerships, relationships and a leading portfolio of solutions to support a wide pipeline of practices and products, AmerisourceBergen is uniquely positioned to capitalize on the market opportunities provided by global pharmaceutical innovation as we drive growth in our business and help our partners tackle some of the most critical challenges based in healthcare.\nWe have a strong foundation in place across our businesses.\nAnd in June, we took another significant step forward by closing the Alliance Healthcare transaction and welcoming their talented team to the AmerisourceBergen family.\nThe acquisition of Alliance Healthcare is the next evolution of enhancing our ability to provide innovative and global healthcare solutions and is a critical component to our future success.\nAlliance Healthcare is a strong and diversified pharmaceutical distribution and manufacturer services company with leading market positions across an attractive portfolio of both established European markets and high-growth emerging markets.\nIn addition to their traditional wholesale business, Alliance Healthcare operates a range of leading higher-margin innovation businesses serving both upstream partners and downstream customers.\nThe acquisition of Alliance Healthcare extends our distribution reach built by our market-leading services capabilities and expands on our key differentiators.\nSpecifically, AmerisourceBergen's leading portfolio of key anchor customers now includes a long-term relationship with Boots in the U.K. and a network of independent pharmacies across Europe through the Alphega pharmacy network.\nSince the completion of the transaction, we have gotten the chance to know about the business and the people and Alliance Healthcare better, and we remain very positive about the opportunity that this landmark achievement provides AmerisourceBergen as we are positioned for a differentiated global growth platform.\nThis includes our dedication to further strengthen our portfolio of solutions and customer relationships to lead with market leaders in every segment and to supporting patient access wherever a prescription is needed.\nSecond, AmerisourceBergen's leadership in specialty is further enhanced with key commercialization services in new markets.\nBy leveraging the expertise and capabilities of our World Courier business, along with Alliance's Alloga and Alcura, we elevate our ability to be a differentiated solution provider for global manufacturers as they develop and commercialize pharmaceuticals around the world.\nThis is complementary to the solutions that we provide at World Courier, which continues to play a key role of providing global specialty logistics through growth traditional commercial offerings and direct-to-patient clinical trial capabilities.\nWe remain dedicated to expanding on our leadership in specialty and to enhancing our capabilities to support global pharmaceutical innovation.\nThird, AmerisourceBergen focuses on delivering best-in-class services and efficiency, and this transaction enhances our ability to develop innovation solutions that are fundamental to our success operationally and commercially.\nOur innovative mindset means that we embrace the advanced technologies, data and analytics, and now we can further support positive outcomes through our expanded global platform.\nThis fiscal quarter, we were selected as the industry leader award winner at the 2021 SAP Innovation Awards for our work in developing SAP Advanced Track and Trace for Pharmaceuticals.\nThis technology tracks millions of daily shipments at the batch level and further strengthens the pharmaceutical supply chain in the U.S. The value of a resilient and sustainable global pharmaceutical supply chain is vital and the ability to support pharmaceutical innovation to a global footprint with broad leadership and local expertise provide differentiated value for our partners.\nAmerisourceBergen stakeholders recognize the value we create, the importance of our purpose and the critical nature of the service and the infrastructure that we provide.\nFourth, AmerisourceBergen continues to build upon our history of corporate stewardship, which focuses on advancing our people and culture, protecting the company's financial health and ensuring the long-term sustainable value creation.\nWith Alliance Healthcare, we are now an even more global [Indecipherable] company, and we are committed more than ever to advancing the value of our talent and culture.\nOver the past year, we have invested in enhancing our talent and diversity and inclusion strategies to enable more growth opportunities within our increasingly inclusive workplace.\nIn the future, we plan to provide dedicated development opportunities for high-potential employees of additional underrepresented groups.\nInvesting in our leadership development and talent and culture is important to our long-term sustainable growth, which is supported by diverse and inclusive teams.\nThis focus is important to ensuring we capture the value of our collective differences and reflect our social commitment as we continue to strategically focus on delivering on all elements of ESG.\nOur ESG strategy is foundational to AmerisourceBergen, our leadership, our Board and our people.\nRecently, AmerisourceBergen joined the Science-based Targets initiative as we continue to line our business with best practice organizations around the world.\nAt the local level, we continue to be deeply committed to our communities.\nThis past year, we launched myCommunityImpact, Matching Gifts and Dollars for Doers Program, and we recently made it available to all global employees.\nOur philanthropic efforts have been recognized by DiversityInc, ranking us 8th in their annual 50 [list] in philanthropy rankings.\nWith their unwavering passion and support, AmerisourceBergen is well positioned to capitalize on our global footprint to provide leading pharmaceutical distribution services and to leverage our expertise as an innovative commercialization services provider internationally.\nWe remain confident in our pharmaceutical-centric strategy, our capabilities as partner of choice with market-leading manufacturer services and our role in continuing the acceleration of pharmaceutical innovation.\nBy providing differentiated value to our stakeholders, focusing on our customers, expanding on our leadership in specialty and executing, innovating and supporting pharmaceutical innovation globally, we are well positioned to create long-term stakeholder value as we remain united in our responsibility to create healthier futures.\nBefore I discuss our third quarter results, I want to comment on the Pharmaceutical Distribution industry's continued progress toward reaching a negotiated resolution to substantially address the nationwide opioid litigation.\nThe proposed settlement agreement represents an important step toward achieving a broad resolution of governmental opioid claims and aligns with the legal accrual the company recorded in the fourth quarter of its fiscal year ended September 30, 2020.\nAmerisourceBergen appreciates the enormity of the opioid epidemic, and this broad industry resolution is an important step toward delivering a meaningful relief to communities across the United States.\nTurning now to our business.\nAmerisourceBergen remains focused on our differentiated and innovative value proposition to deliver long-term growth and value creation to our stakeholders.\nPowered by our purpose-driven team members, we will continue to execute on our pharmaceutical-centric strategy on an enhanced global platform to serve both upstream partners and downstream customers.\nHaving joined AmerisourceBergen myself through an acquisition and experience several acquisitions during my tenure, I have seen firsthand a thoughtful and strategic approach AmerisourceBergen takes to successfully integrate acquired companies.\nWe enjoy working with our incredibly talented new team members and learning more not only about their businesses, but also about how much we culturally have in common.\nAs we have said since announcing the acquisition, Alliance Healthcare is a strong and efficient business, and we look forward to working together to continue to provide innovative solutions to our customers and stakeholders.\nMy remarks today will focus on our adjusted non-GAAP financial results unless otherwise stated.\nGrowth rates and comparisons are made against the prior year June quarter.\nFirst, I will review our adjusted quarterly consolidated results and our segment performance.\nSecond, I will cover the upward revision to our fiscal 2021 guidance.\nTurning now to discuss our third quarter results.\nWe finished the quarter with adjusted diluted earnings per share of $2.16, an increase of 17%, which was driven by the continued strong performance across AmerisourceBergen's businesses and also benefited from the one month contribution from the Alliance Healthcare acquisition.\nOur consolidated revenue was $53.4 billion, up 18%, driven by revenue growth in both the Pharmaceutical Distribution Services segment and Other, which includes Alliance Healthcare and our Global Commercialization Services and Animal Health businesses.\nConsolidated gross profit increased 32% to $1.6 billion, driven by increases in gross profit in each operating segment.\nIn the quarter, gross profit margin increased 33 basis points from the prior year quarter to 3.05%.\nThis was primarily due to the acquisition of Alliance Healthcare, which has a higher gross profit margin and increase in sales of specialty products in Pharmaceutical Distribution Services and growth in some of our higher-margin businesses.\nRegarding consolidated operating expenses, operating expenses were $996 million, up 38% year-over-year due to the addition of the Alliance Healthcare business and also includes the internal investments we are making across our business with a focus on continuing to offer innovative services and solutions to our partners.\nThese investments are important as they ensure we continue to create differentiated value and support our long-term growth.\nTurning now to consolidated operating income.\nOur operating income was $631 million, up 24% compared to the prior year quarter.\nThis increase was driven by increases in both the Pharmaceutical Distribution Services segment and Other, which I will discuss in more detail when I review segment-level performance.\nOperating income margin grew six basis points to 1.18% as a result of the contribution from the Alliance Healthcare acquisition and growth in higher-margin businesses.\nMoving now to our net interest expense and effective tax rate for the third quarter.\nThe net interest expense was $51 million, up 36% due to debt related to the Alliance Healthcare acquisition.\nOur effective income tax rate was 21%, up from 18.8% in the third quarter of fiscal 2020, which benefited from a discrete tax item.\nOur diluted share count was 208.9 million shares, a 1.6% increase due to the dilution related to employee stock comp and the weighted average saving impact of the June issuance of two million shares delivered to Walgreens as a part of the Alliance Healthcare acquisition.\nTurning now to adjusted free cash flow and cash.\nOur adjusted free cash flow was strong in our fiscal third quarter, bringing our year-to-date free cash flow number to $1.2 billion, while our cash balance was $2.6 billion.\nThis completes the review of our consolidated results.\nNow I'll turn to our segment results.\nPharmaceutical Distribution Services segment revenue was $49.3 billion, up 13% for the quarter driven by increased sales of specialty products and solid performance broadly across our Pharmaceutical Distribution businesses.\nAcross our distribution businesses, we are seeing better and earlier-than-expected utilization trends as there have been more normalized physician interaction patterns leading to new patient starts.\nPharmaceutical Distribution Services segment's operating income increased about 13% to $484 million.\nAmerisourceBergen continues to benefit in the quarter from our leadership in specialty, where there has been a notable return to pre-COVID strength and continued positive biosimilar trends.\nI will now turn to Other, which includes Alliance Healthcare MWI, World Courier and AmerisourceBergen Consulting.\nAlliance Healthcare is in our results for the month of June and had strong performance out of the gate.\nIn the quarter, Other segment's revenue was $4.1 billion, up 128%, driven by the Alliance Healthcare acquisition and growth across the remaining operating segments.\nExcluding the impact of Alliance Healthcare, Global Commercialization Services and Animal Health revenue was up 22%.\nOther segment's operating income was $147 million, up 77% primarily due to the Alliance Healthcare acquisition and strong performance at both MWI and World Courier.\nExcluding the impact of Alliance Healthcare, Global Commercialization Services and Animal Health operating income was up 21%, reflecting the solid fundamentals of the businesses.\nWorld Courier has continued its exceptional performance, providing high- specialty logistics around the globe.\nDespite challenges in global logistics due to limited international cargo space, the team has delivered industry-leading solutions and expertise to support our customers and partners.\nLooking ahead, the business is highly complementary to Alliance Healthcare's Alloga and Alcura businesses, and we are excited to offer an integrated suite of solutions on our enhanced global platform to serve our manufacturer customers.\nTurning now to MWI.\nThe pandemic has truly encouraged all of us to focus on the health and wellbeing of our communities and families.\nAnd this includes our animal companions.\nOver 12 million families in the U.S. have gained pets since the pandemic began, and since pet owners view their pets as family members, the focus on health and wellbeing is a positive market trend for our MWI companion business.\nIn the production animal market, our investments in technology solutions and the unique offering of value-added services position the business to support long-term global demand for protein.\nMWI's strong execution and customer relationships have allowed the business to remain a best-in-class provider that is well positioned to capture these positive market trends.\nThat concludes our segment-level discussion, and I will now turn to our 2021 guidance.\nFollowing the closing of the Alliance Healthcare acquisition back in June, we updated our 2021 guidance for revenue, adjusted diluted earnings per share and weighted average shares to reflect the expected contribution from Alliance Healthcare and the weighted average share count impacted the two million shares of stock that we delivered to Walgreens.\nGiven the continued strong performance of AmerisourceBergen's businesses, we are again raising our earnings per share guidance from a range of $8.90 to $9.10, up to a range of $9.15 to $9.30, reflecting growth of 16% to 18% from the previous fiscal year.\nWe are also updating other financial guidance metrics for fiscal 2021, including a meaningful increase to our expectations for consolidated and segment adjusted operating income.\nFirst, I'll begin with operating expenses.\nOperating expenses are now expected to be approximately $3.9 billion due to the Alliance Healthcare acquisition.\nAs a reminder, when you consider your models, Alliance Healthcare has higher margins for gross profit, operating expenses and operating income as evidenced by the update to our fiscal 2021 guidance for consolidated operating expenses to reflect the four months of Alliance Healthcare.\nNext, turning to operating income.\nWe now expect operating income to be approximately $2.6 billion.\nThis is a result of raising our Pharmaceutical Distribution operating income guidance to the low double-digit growth range given the strong trends we have continued to see in our business, including specialty, which was further bolstered by patient referral activity this quarter.\nThis rate also reflects our expectation for operating income in Other of approximately $610 million to $620 million.\nExcluding the contribution from Alliance Healthcare, operating income growth for Global Commercialization Services and Animal Health group is expected to be in the low double-digit range for fiscal 2021, driven by the strong performance of the World Courier and MWI.\nFinally, turning to free cash flow, we have raised our free cash flow guidance to be approximately $1.7 billion, up from approximately $1.5 billion.\nAs it pertains to fiscal 2022, our corporate planning process remains unchanged.\nWe will provide comprehensive financial guidance at the end of our current fiscal year.\nThis approach allows for guidance to be fully informed by the output of our year-end business planning process.\nThat being said, we want to remind you three important items from fiscal 2021 as you consider your models.\nFirst, through the end of June, the financial contribution from sales of COVID-19 therapies has declined in line with the expectations we have shared since the first quarter.\nCOVID therapy distribution contributes roughly $0.25 to our fiscal 2021 adjusted earnings per share guidance, and the benefit from that exclusivity is not expected to repeat in fiscal 2022.\nSecond, we will have higher interest expense in fiscal 2022 driven by the debt related to the Alliance Healthcare acquisition.\nThird, for the fourth quarter of fiscal 2021, we expect our weighted average shares to be almost 211 million shares due primarily to the fully planned impact of the two million shares of our stock delivered to Walgreens at the close of the Alliance Healthcare acquisition.\nOur share count will continue to tick higher in 2022 due to normal employee stock comp-related solution and the fact that we have committed to prioritize paying down $2 billion in total debt over the next two years and [lower] shareholder purchases.\nMoving past these modeling reminders.\nThe strength of AmerisourceBergen is undeniable and is exemplified by our continued exceptional results quarter-after-quarter.\nThis is the sixth quarter since the pandemic began and our results demonstrate the resilience and strength of our company.\nI am thoroughly impressed by the execution and performance across our businesses that has positioned us for continued success.\nOur pharmaceutical-centric foundation, market-leading talent and competitive positioning enable us to capitalize on market trends and continue to deliver strong results.\nAmerisourceBergen remains focused on creating long-term financial value, and we continue to work diligently to build our corporate stewardship initiatives to ensure the work we are doing benefits all stakeholders.\nWe are focused on continuing to build robust talent development programs so that all our team members feel they have opportunities to grow and learn.\nIn our communities, we're supporting nonprofit partners through our foundation to expand access to quality healthcare, promote health equity and provide resources to ensure prescription drug safety.\nIn addition, we aim to be environmental stewards in the communities where we live and work through initiatives like our commitment to using sustainable packaging to reduce the use of single-use plastics and working closely with our partners to optimize delivery routes to minimize our greenhouse gas emission footprint.\nWe look forward to providing further updates on our ESG progress as we continue to find ways to make a positive impact on the people, planet and communities where we live and work.\nAs we focus in on the end of our fiscal year with strong momentum and continued outperformance across our business, it is important to take a moment to reflect on the important accomplishments we have already had this year.\nFirst, our teams continue to execute and leverage our capabilities to create differentiated value for our stakeholders.\nSecond, our future growth has been further solidified by our acquisition of Alliance Healthcare.\nThird, our purpose-driven culture continues to empower our team members that think, plan and act decisively to do what is right for our people, partners and communities.\nAnd finally, we continue our long-term commitment to strategically invest in our businesses and talent to ensure that AmerisourceBergen will continue to deliver long-term sustainable value for all our stakeholders.\nAs we look to the future, I'm proud of the resilient foundation we have built while we facilitate pharmaceutical innovation and remain united in our responsibility to create healthier futures.\n",
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"content": "q3 adjusted non-gaap earnings per share $2.16 excluding items.\nadjusted diluted earnings per share guidance range raised to $9.15 to $9.30 for fiscal 2021.\nrevenues of $53.4 billion for q3, a 17.7 percent increase year-over-year.\nadjusted free cash flow for fy 2021 to be approximately $1.7 billion, up from approximately $1.5 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I am Bennett Murphy, Senior Vice President, Investor Relations.\nYou'll have an opportunity to ask questions after today's remarks by management.\nWe ask that you limit your question to one per participant in order for us to get to as many participants as possible within the hour.\nToday, we will focus our remarks on the exceptional progress that AmerisourceBergen team has made on our strategic priorities during fiscal 2021, and how we will capitalize on that momentum to continue executing and innovating in fiscal 2022.\nBefore I begin, I want to take a moment to comment on the distribution industry's recent milestone regarding the proposed settlement agreement to address opioid-related claims of U.S. State Attorney Generals and political scout divisions in participating states.\nThroughout the litigation process, we have been consistent in stating our desire to addressing the enormity of the opioid challenge by bringing solutions to the table.\nIf the industry's proposed agreement and settlement process leads to a final settlement, it would collectively provide thousands of communities across the United States with substantial financial support.\nClearly, the process is in an advanced stage, and we will not comment deeply at this time.\nWe take our role in the supply chain seriously and continue to work closely with stakeholders concerning these complex matters.\nAmerisourceBergen will continue to work diligently and alongside partners to combat drug diversion while supporting real solutions to help address the crisis in the communities where we live, work and serve.\nIn fiscal 2021, AmerisourceBergen advanced its role as a key pillar of pharmaceutical innovation and access, as we look at our purpose of being united in our responsibility to create healthier futures by supporting our partners, customers and our own team members through challenging times.\nAs the pandemic persists, the importance of our purpose in an evolving environment and an efficient global pharmaceutical supply chain is being felt by all our stakeholders.\nWe are proud to be able to offer our expertise, capabilities and infrastructure as part of the solution on facilitating the national distribution of COVID-19 therapies, to supporting the distribution of more than 75 million vaccines to patients in over 30 countries through our expanded global footprint.\nOur business has leveraged its position of market strength to become an increasingly vital partner of choice through differentiated solutions for our upstream and downstream customers.\nOur continuous investments and ongoing focus on being a strategic partner for our customers have deepened our relationships with all our stakeholders during this time of increased focus on the pharmaceutical supply chain, enhancing our position as a provider of key solutions for our customers, both big and small.\nWe also leverage our core capabilities as a leader in pharmaceutical distribution and a differentiated provider of unique solutions for manufacturers globally and healthcare providers locally.\nIn the U.S., we are a key partner for our community pharmacies, veterinarians and physician practices.\nIn community pharmacy, we are particularly proud to support our Good Neighbor Pharmacy members trusted role through our innovative tools and programs that allow independent pharmacists to optimize their operations and spend the most possible time serving their patients and communities.\nIn July, for the fifth year in a row and for the tenth year of the past 12 years, Good Neighbor Pharmacy network was ranked highest among brick-and-mortar chain drug store pharmacies by JD Colin.\nIn our Animal Health business, we support veterinarian practices in similar ways to help them manage their practices as they continue to experience increased demand for its services due to growth in pet ownership.\nThe cherished role of pets within families and increased importance based on ensuring health and well-being of all family members.\nWe also continue to differentiate ourselves as the leader in specialty distribution and commercialization services.\nThis fiscal year, we launched a variety of new services and solutions, bolting upon our historic investments to further drive our leadership in specialty with our customers and orders.\nFor example, through our ION and other value-added solutions, we form new partnerships that offer industry-leading technologies to specialty physician services customer practices, enabling them to be even more efficient on enhancing their ability to improve the patient experience and ultimately, outcomes.\nWe are also pleased to continue to support the growing adoption of biosimilar products in physician offices and community hospitals and health systems, facilitating patient access to important treatment choices, to improve their health and well-being.\nInternationally, we remain a leading provider of global pharmaceutical distribution services and differentiated solutions in key markets across the globe.\nEarlier, I mentioned the distribution of tens of millions of doses of the COVID-19 vaccines to patients in more than 30 countries.\nThrough our market-leading manufacturer solutions, including our global specialty logistics and commercialization offerings, we're also facilitating direct-to-patient clinical trials and helping manufacturers around the world navigate the ever-increasing complexities of global logistics.\nFurthermore, we are leveraging our now expanded portfolio of international relationships, partnerships and solutions to facilitate patient access to the rapidly evolving landscape of new pharmaceutical technologies.\nAs we continue to differentiate our business, we remain focused on being strategic partners with our customers as we help them achieve operational efficiencies and support growth in their businesses with innovative solutions.\nIn fiscal 2021, we completed a significant technology investment by bringing the specialty distribution business onto the SAP platform, which will help improve efficiency, increase flexibility and support continuity.\nAs a global healthcare company, we understand and appreciate the importance of ensuring our businesses have the technology they need to support their operations and enhance their capabilities.\nImportantly, an increasingly critical part of our global role and responsibility is being strong corporate stewards, that is ensuring our financial health, investing in our people culture and ensuring long-term and sustainable value creation.\nIn terms of our financial health, we continue to take a thoughtful and strategic approach to capital deployment that focuses on value creation and maintaining financial strength.\nThis includes our focus on maintaining our strong investment-grade credit ratings, and we remain on track to delivering on our commitments to the rating agencies.\nNotably, our financial and strategic position has enabled the continued enhancement of our healthcare capabilities, including the acquisition of Alliance Healthcare, which we completed in June.\nSince then, our culturally aligned teams have worked diligently to integrate our teams and businesses, conducting deep dive into strategically optimizing our operational and business development synergies to exploring ways to enhance the value we grade to our partners.\nOur financial strength also enables us to continue to invest in our people and culture.\nAt AmerisourceBergen, we know our team members are our most valuable asset, and we are committed to inspiring them to achieve their fullest potential.\nOur efforts go well beyond the table space of offering market align pay, and we understand the long-term advantage of being a fair and equitable employer, who offers competitive wages at all levels.\nWe have surveyed our team members to find out what's most valuable to them and have invested in attractive benefit programs, such as increased paid parental leave, child and dependent care, and enhanced mental health and wellness programs.\nOur team members also value a culture of flexibility, and we responded with a thoughtfully designed, new way of working that provides options for flexibility while balancing the need for in-person connection and innovation.\nOn ensuring the safety of themselves and their loved ones during the pandemic to investing in world-class learning technology and models, we understand that it is absolutely critical that our talent is cultivated and empowered to help drive our long-term growth.\nOur efforts have been recognized, and we have once again been certified as a great place to work company and named a best place to work for LGBTQ equality by the Human Rights Campaign.\nMeaningful value can also be unlocked when individuals are empowered to bring their whole selves to work, and we embrace our collective differences.\nThis year, we furthered our diversity, equity inclusion efforts with the rollout of new employee resource groups and new diverse candidate slate objectives.\nTo further align our people strategy with our business strategy, we also introduced a new leadership competency model that will be embedded throughout all of our talent programs.\nBased on the collective feedback from team members across AmerisourceBergen, the new model focuses on developing the initial competencies aligned to four key business and cultural poles, diversity, equity and inclusion, collaboration, innovation and executional excellence and purpose.\nAs a foundation for how we will recruit, engage and develop our people, this new model and the principles behind them will enable us to create value now and for the long term.\nAnother aspect of our culture, one which helps ensure sustainable value creation, is our dedication to operating in a sustainable and responsible manner and to supporting healthy and resilient communities, where we live and work.\nDuring the quarter, we are proud to have become a participant of the UN Global Compact, the world's largest corporate sustainability initiative.\nWe also held our third annual AmerisourceBergen Foundation Conference, which helps Foundation grantees connect and learn from each other and the Foundation team to help them become even more effective in their work to positively impact local communities around the world.\nOur continued progress in areas like ESG, diversity, equity inclusion and strategic planning are made possible by the expert oversight and guidance to our board as well as the ability of our management team to drive execution and operational excellence.\nLooking ahead, our key growth pillars enable us to maintain our leading market position and to solidify our differentiated value proposition in fiscal '22 and beyond.\nFirst, we are focused on our customers.\nThrough our unique partnership model, we formed long-term lasting relationships and integrate us operationally and enable us to provide value-added solutions that help further strengthen our ability to lead with market leaders.\nSecond, we are focused on expanding on our leadership in specialty by leveraging our global reach, market-leading capabilities and ability to support rapidly accelerating and global pharmaceutical innovation, we strengthened our capabilities to support both upstream partners and downstream customers.\nThird, we are focused on execution excellence.\nThis includes continuously investing in our business, which increases our flexibility, expands our suite of capabilities and enhances our customer experience.\nFourth, we are focused on supporting pharmaceutical innovation around the world.\nWith a global manufacturer services platform, we aim to be the strategic partner of choice to global manufacturers as we help them innovate, solve the complex challenges of global logistics and market access, and capture the opportunities of rapidly accelerating pharmaceutical innovation.\nDownstream, we provide data-driven insights, efficiency solutions and our unmatched scale to help optimize customer operations and support access for patients in the -- on the smallest to largest populations across all sites of care and across all classes of trade.\nAnd finally, our growth is supported by investments in our people, culture and all dimensions at ESG.\nBy investing in our people and culture, we advance our most important resource.\nBy committing to ESG, we create healthier futures around the world and unlock the added value of being a responsible and impact for enterprise, which ultimately enables a strong and healthy financial position to achieve long-term sustainable value creation for all of our stakeholders.\nAmerisourceBergen has made exceptional progress on our strategic priorities, further enhancing our differentiated value proposition and driving consistent outperformance throughout the year as we continue to capitalize on our positive momentum into fiscal 2022.\nWe remain driven by our purpose of being united in our responsibility to create healthier futures.\nNow powered by 42,000 team members globally, we remain confident in our pharmaceutical-centric strategy and capabilities as a leader in pharmaceutical distribution services and differentiated manufacturer solutions.\nFor AmerisourceBergen, fiscal 2021 was a momentous year as we celebrated the 20th anniversary of the Amerisource and Bergen Brunswick merger completed, both the acquisition of Alliance Healthcare and the extension of the Walgreens contract through 2029, and our teams delivered another year of strong performance, driven by our continued execution and strategic decisioning.\nOur pharmaceutical-centric business, robust customer relationships and leadership in specialty distribution and services position us to be a partner in supporting pharmaceutical innovation and access on a global scale.\nBefore I turn to our results, as a reminder, my remarks today will focus on our adjusted non-GAAP financial results unless otherwise stated.\nGrowth rates and comparisons are made against the prior year September quarter.\nBeginning with our fourth quarter results, we finished the quarter with adjusted diluted earnings per share of $2.39, an increase of 26.5%, which was driven by both a full quarter's worth of contribution from Alliance Healthcare and the strong performance in our Pharmaceutical Distribution Services segment.\nOur consolidated revenue was $58.9 million, up approximately 20%, reflecting growth in Pharmaceutical Distribution and Other.\nExcluding Alliance Healthcare, our consolidated revenue would have been up 9% from the prior year quarter.\nConsolidated gross profit was $2 billion, up 51%, driven by increases in gross profit in both Pharmaceutical Distribution and other, which benefited from the inclusion of Alliance Healthcare.\nThis quarter's gross profit margin of 3.4% is 71 basis points higher than the prior year quarter as we had a full quarter of Alliance Healthcare in our consolidated results.\nConsolidated operating expenses were $1.3 billion versus $795 million in the prior year period, primarily due to the addition of Alliance Healthcare as well as investments in our talent and initiatives to support the company's current and future growth.\nThis quarter's operating expense margin of 2.23% is 61 basis points higher than the prior year quarter, primarily reflecting the full quarter impact of Alliance Healthcare in our consolidated results.\nAlso as a reminder, in the fourth quarter of fiscal 2020, we had a bad debt reversal of $13 million that impacts the year-over-year comparison of operating expenses.\nTurning now to consolidated operating income.\nOur operating income was $694 million, up 31% compared to the prior year quarter.\nThis growth was driven by increases in both the Pharmaceutical Distribution Services segment and Other, which I will discuss in more detail when I review segment level performance.\nOperating income margin was 1.18%, an increase of 10 basis points as a result of the contribution from Alliance Healthcare and the continued benefit from some of our higher-margin businesses.\nMoving now to our net interest expense and effective tax rate for the fourth quarter.\nNet interest expense was $55 million, up 57% due to debt related to Alliance Healthcare.\nOur effective income tax rate was 20.3% compared to 21.7% in the prior year quarter.\nThe lower effective tax rate was due to a change in the mix of domestic and international income from the prior year quarter.\nOur diluted share count was 210.8 million shares, a 2.2% increase due to the impact of the issuance accumulated shares delivered to Walgreens as part of the Alliance Healthcare acquisition and dilution related to employee stock compensation.\nThis completes the review of our consolidated results.\nNow I'll turn to our segment results for the fourth quarter.\nPharmaceutical Distribution Services segment revenue was $51.2 billion, up 8% in the quarter, driven by increased sales of specialty products, strong execution across our Pharmaceutical Distribution businesses and overall positive prescription utilization trends.\nPharmaceutical Distribution Services segment operating income increased by 11% to $472 million.\nOperating income margin expanded by two basis points to 0.92% in the quarter.\nAmerisourceBergen's continued leadership in specialty distribution allowed us to capture the benefits of strong utilization trends during the quarter.\nI will now turn to Other, which includes Alliance Healthcare, MWI, World Courier and AmerisourceBergen Consulting.\nIn the quarter, Other revenue was $7.7 billion, up from $2 billion in the fourth quarter of fiscal 2020, driven by a full quarter's worth of contribution from Alliance Healthcare as well as growth in the global commercialization services and Animal Health businesses.\nOther operating income was $223 million, up from $105 million in the fourth quarter of fiscal 2020 due to the inclusion of Alliance Healthcare.\nThat concludes our fiscal fourth quarter discussion.\nNow I will turn to a discussion of our full year fiscal 2021 results.\nOur consolidated revenue was $214 million, up 13%, driven by growth in Pharmaceutical Distribution and Other, which includes four months of contribution from Alliance Healthcare.\nExcluding Alliance Healthcare, our consolidated revenue was up 9% from the prior year.\nConsolidated operating income grew 20% for the year to $2.6 billion, driven by strong performance across our businesses and the four-month contribution of Alliance Healthcare.\nExcluding Alliance Healthcare, our consolidated operating income increased by an exceptional 12% from the prior year, driven by growth in our higher-margin businesses, strong fundamentals across our business and the important work our team has done to support the COVID therapy distribution for hospitalized patients.\nFrom a segment perspective, Pharmaceutical Distribution Services had operating income growth of 13% due to strong performance across our portfolio of businesses and customers.\nIn fiscal 2021, we continue to capitalize on our leadership in specialty distribution, both in the physician space and health systems.\nWe saw a significant contribution from health systems as our differentiated solution set was leveraged by manufacturers to meet their complex logistics for the distribution of COVID-19 antivirals and therapies to hospitals across the country.\nAdditionally, we continue to have strong performance in Specialty Division Services this fiscal year as the healthcare system has become more accustomed to operating in the current environment.\nThis supported physician diagnosis and related testing and screening processes, resulting in more normal levels of new patient starts.\nIn Other, operating income grew 54% year-over-year to $615 million.\nOther meaningfully benefited from the four months of contribution from Alliance Healthcare results, while World Courier and MWI also delivered strong results.\nAs global logistics continue to be challenged by the pandemic, World Courier provided its expertise and innovative solutions to manufacture partners around the world, facilitating the movement of temperature-sensitive and other high-priority shipments.\nWorld Courier's direct-to-patient in home clinical trials continue to be a differentiator as patients and manufacturers saw alternative lower acuity care sites.\nMWI continued to experience strong performance in the companion animal market as pet parents maintain their focus on their pet health and the production animal market, the reopening of restaurants and return of travel boosted protein demand.\nTurning now to tax rates.\nOur adjusted effective tax rate for fiscal 2021 was 21.3% compared to 20.8% in the prior fiscal year, which has benefited from discrete tax items.\nTurning now to EPS.\nOur full year adjusted diluted earnings per share grew 17% and $9.26, primarily due to strong growth and execution across our business, including continued leadership and outperformance in specialty and the four-month contribution from Alliance Healthcare.\nAdjusted free cash flow for the year was $2.1 billion, which was better than our expectations due primarily to the timing of certain customer payments in September, a benefit that will reverse in the December quarter due to the higher supplier payables.\nThere was also better-than-expected cash flow at Alliance Healthcare.\nIf you normalize for the timing-related benefit, our adjusted free cash flow for the year would have been roughly $1.7 million.\nWe ended the year with a cash balance of $2.5 billion, excluding restricted cash of approximately $500 million.\nThat completes the review of our fiscal 2021 results.\nI will now discuss updates to our segment reporting, which will go into effect in fiscal 2022.\nFollowing the acquisition of Alliance Healthcare and the subsequent change to the geography of our business, we undertook a strategic evaluation of how we report our segments in order to provide alignment with business operations.\nFollowing this review, which concluded in October, we will begin reporting our results in two new segments in the first quarter of fiscal 2022, U.S. Health Care Solutions and International Health Care Solutions.\nThe U.S. Healthcare Solutions segment will consist of our legacy Pharmaceutical Distribution Services segment, excluding Profarma Distribution plus the following businesses, which had previously been reported in Other, MWI Animal Health, Xcenda, Lash Group, and ICS 3PL.\nThe International Healthcare Solutions segment will consist of our non-U.S.-based Pharmaceutical Distribution and Services solutions, including Alliance Healthcare, World Courier, Innomar and Profarma Distribution and Profarma Specialty.\nAs a reminder, we consolidate Profarma's results due to our ownership interest and governance of the publicly traded entity.\nProfarma Specialty was previously reported in Other.\nOur new reporting segments, like AmerisourceBergen, are built on the foundation of leading in pharmaceutical distribution and differentiated by complementary higher-margin businesses offering value-added solutions in key markets.\nTurning now to discuss our fiscal 2022 guidance.\nSo all of the following metrics are provided on an adjusted non-GAAP basis.\nWe expect consolidated revenue to grow in the high single-digit to low double-digit percent range.\nOn a segment level, we expect U.S. Healthcare Solutions revenue to be approximately $207 billion to $212 billion, representing growth of 2% to 5% year-over-year.\nIn International Healthcare Solutions, we expect revenue of approximately $26 billion to $27 billion.\nMoving on to operating income.\nWe expect consolidated operating income to grow in the mid- to high teens percent range.\nOn a segment level, we expect U.S. Healthcare Solutions operating income to be between $2.325 billion and $2.4 billion, representing growth of 3% to 6% on a year-over-year basis.\nThe only business that was included in Pharmaceutical Distribution services that is not going into U.S. Health Care Solutions is Profarma Distribution, which contributed less than 1% of revenues for Pharmaceutical Distribution Services in fiscal 2021 and roughly 1% of segment operating income.\nAs a reminder, as I said back in February and again in August, we had a significant tailwind in fiscal 2021 related to the financial contribution from sales of COVID-19 therapies.\nWe did have higher-than-expected COVID therapy sales in the fourth quarter, primarily driven by sales in the month of August with a subsequent substantial decline in September.\nThe final earnings per share benefit from COVID therapy sales for full year fiscal 2021 was $0.30, $0.14 of which was in the first quarter.\nIf you estimate the first quarter of fiscal 2022 based on even lower October trends, the contribution from COVID therapy sales would be $0.03, which means the first quarter would have an $0.11 headwind for U.S. Healthcare Solutions segment.\nWhile this reduces the segment's growth rate in the first fiscal quarter, we expect full year operating income growth of 3% to 6% in U.S. Health Care Solutions.\nWe expect International Healthcare Solutions have operating income between $685 million and $715 million.\nAlliance Healthcare represents a little over 2/3 of operating income in the segment, with World Courier making up the majority of the remainder of segment operating income.\nAs you think about your first quarter models, we expect about 25% of the International segment's operating income to occur in the first quarter.\nAs you look at fiscal 2022 for the International segments, there are a couple of things to keep in mind.\nFirst, we have agreed to sell Profarma Specialty as we focus on our core operating assets.\nThe transaction is under regulatory review and is expected to be completed in the first half of fiscal 2022.\nSuccessful completion of the divestiture is factored into our guidance and represents a 2% headwind to our International Healthcare Solutions segment's operating income.\nSecond, in fiscal 2022, we will have a step up in expenses at Alliance Healthcare that was fully contemplated when we announced the acquisition and is generally related to IT modernization.\nAs Steve said earlier, we view technology and systems as fundamental to our operations and business continuity, and this step-up in fiscal 2022 expense will help align Alliance Healthcare's business technology, operability and infrastructure with AmerisourceBergen.\nAlliance Healthcare continues to deliver on our expectations for the business, and we expect Alliance to be high teens accretive to our stand-alone adjusted diluted earnings per share in fiscal 2022.\nSince closing the transaction, our teams have engaged both in person and virtually and have furthered our strong relationships.\nMost recently, we held a deep dive with leaders across AmerisourceBergen and Alliance Healthcare, focused on Alliance Healthcare's manufacturer services businesses.\nI continue to be impressed by the strong and efficient business and team at Alliance and appreciate the collective thoughtfulness around creating long-term value for stakeholders through our innovative solutions.\nMoving on to interest expense, tax rate and share count.\nWe expect interest expense to grow in the mid-teens percent range as a result of debt related to the Alliance Healthcare acquisition.\nWe expect our tax rate to be approximately 21% to 22% for fiscal 2022, based on current tax rates in effect for fiscal 2022.\nWithout the tax rate benefit from Alliance Healthcare's operations, our range would have been 1% higher on both the top and bottom end of the range.\nFinally, we expect that our share count will increase to approximately 212 million shares as a result of the full year impact of the two million shares delivered to Walgreens as part of the closing of the Alliance Healthcare acquisition and normal dilution from stock compensation expense.\nAs a reminder, as part of our commitment to maintain our strong investment grade credit rating, we are committed to paying down $2 billion in total debt over the next two years in lieu of share repurchases.\nWe currently expect to pay down roughly half that amount toward the end of fiscal 2022.\nAs a result of these expectations, reflecting the strength of our business, we are guiding for adjusted diluted earnings per share to be in the range of $10.50 to $10.80, reflecting year-over-year growth of 13% to 17%.\nTurning now to capital expenditures and cash flow expectations.\ncapex is expected to be in the range of $500 million as we continue to invest to further advance our business or to buy Alliance Healthcare's IT infrastructure and support additional growth opportunities.\nFor adjusted free cash flow, we expect adjusted free cash flow to be in the range of $2 billion to $2.5 billion, which includes the benefit of Alliance Healthcare in our results for the entire fiscal year.\nIn closing, fiscal 2021 was another successful year for AmerisourceBergen as we continue to execute on our strategic priorities while the pandemic persisted.\nI am proud of our 42,000 team members, who worked tirelessly to support our customers, partners and patients and drove our strong financial results.\nGiven the steps we took in 2021 to advance our business, I'm excited about our 2022 fiscal year as we continue to deliver stakeholder value.\nAs we continue to drive our business forward, we will maintain our focus on our differentiated capabilities supported by our dedicated team members.\nAmerisourceBergen is guided by our purpose of being united in our responsibility to create healthier futures, built on a foundation of leadership in Pharmaceutical Distribution and differentiated by complementary higher-margin businesses that leverage our pharmaceutical scale and expertise to create unparalleled value for our manufacturer partners and healthcare provider customers.\n",
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"content": "q4 adjusted non-gaap earnings per share $2.39 excluding items.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website.\nIt is now my pleasure to hand the call over to our CEO, David Hult.\nThough our new car inventory levels continue to be challenged due to the chip shortage, our team delivered strong results and enabled us to deliver an impressive gross margin of 20%, an all-time record and an expansion of 180 basis points versus the third quarter last year.\nThese results demonstrate the resilient strength of the franchise model with its full suite of services through the car ownership journey from sales to service contributing to sustained profitability.\nWe've also stayed disciplined in managing expenses, resulting in adjusted SG&A as a percentage of gross profit of 55.3%, a 580 basis point improvement versus prior year.\nOur total revenue for the quarter was up 30% year-over-year, and total gross profit was up 43%.\nDue to this record performance and strong cash flow, our balance sheet remains strong.\nOur net leverage ratio ended this quarter at 1.2 times.\nA quick update on our five-year strategic plan.\nSame store revenue growth, assuming 2020 annualized revenue for Park Place, is up 10% and is exceeding expectations.\nRegarding Clicklane, our unit sales are pacing ahead of our projection for year one.\nAnd we've made great strides this quarter on our acquisition pillar.\nAs announced, we expect to close on the transformative acquisition of the Larry H. Miller Dealerships and Total Care Auto in the fourth quarter.\nWith their strong name and brand mix in the right states and our aligned cultures, we look forward to jointly deploying our capabilities and growing together.\nIn addition, we closed two acquisitions recently.\nGreeley Subaru in the Denver market and Kahlo Chrysler Jeep Dodge in Indianapolis and are on schedule to close Arapahoe Hyundai Genesis in the Denver market today.\nWith another acquisition still under contract and expected to close in the fourth quarter as well, in total, in 2021, we anticipate that we will close on $6.6 billion of annualized revenue from acquisitions.\nWith these results, we maintain full confidence in the execution of our growth strategy, and we will update our five-year plan during our Q1 earnings call in 2022.\nHe brings his vast knowledge of the auto retail business, along with his broad experience in finance.\nWe worked together at Group one for many years, and I'm excited to be working with him again.\nAnd finally, I would like to address all of my teammates at Asbury.\nOur ability to add quality stores, who like us care about serving our guests and being highly engaged in our communities could not have happened without you.\nYou all have given us the ability to thoughtfully grow our core business, because you align behind our vision and you are executing each and every day.\nPeople make the difference in any organization and you are making us the best place to work, do business and grow your careers.\nI will now hand the call over to Dan to discuss our operating performance.\nMy remarks will pertain to our same store performance compared to the third quarter of 2020, unless stated otherwise.\nLooking at new vehicles.\nBased on current market conditions, we continue to be focused on being opportunistic with our inventory and improving grosses to maximize profits.\nOur new average gross profit per vehicle was $4,808 up $2,369 or 97% from the prior year period.\nAll segment margins were up significantly from the prior year period.\nAt the end of September, our total new vehicle inventory was $121.9 million, and our day supply was at 12 days, down 35 days from the prior year.\nWith still no clear understanding of when production will return to a normal level, we expect the day supply to remain low throughout the remainder of the year and into 2022.\nTurning to used vehicles.\nOur used retail volume increased 27%, while gross margin was 8.4%, representing an average gross profit per vehicle of $2,402.\nAs a result of our performance, our gross profit was up 45%.\nOur used vehicle inventory ended the quarter at $236.4 million, which represents a 28-day supply, down seven days from the prior year.\nOur used to new ratio for the quarter was 113%.\nOur strong, consistent and sustainable growth in F&I delivered an increase of $155 to $1,955 per vehicle retail from the prior quarter.\nIn the third quarter, our front-end yield per vehicle increased $1,400 per vehicle to an all-time record of $5,487.\nTurning to parts and service.\nOur parts and service revenue increased 10% in the quarter.\nThough warranty revenue dropped 18%, our customer paid revenue continues its healthy recovery, posting a 13% growth.\nOverall, our total fixed gross profit increased 10%, while total fixed margin was 60.9%.\nAnd now I would like to provide an update on our omnichannel initiatives.\nOur digital marketing team continues to do an outstanding job generating traffic to our websites.\nOur commitment years ago to Google organic search continues to drive efficiencies in times where inventory is shrinking, allowing us to increase traffic without spending media dollars.\nIn Q3, we had over 6.3 million unique visitors, a 12% increase versus Q3 2020.\nAnother initiative is to increase online service appointments.\nWe achieved over 143,000 online service appointments, an all-time record and a 12% increase versus Q3 2020.\nThis component positively impacts service retention and increases the dollars per repair order.\nNow with two full quarters of Clicklane at all stores under our belt, we would like to share some performance metrics.\nWe sold 6,000 vehicles through Clicklane in Q3, of which 47% of them were new vehicles and 53% used.\n93% of our transactions this quarter were with customers that were new to Asbury's dealership network.\nAverage transaction time continues to be consistent with previous quarter, eight minutes for cash deals and 14 minutes for finance deals.\nTotal front-end yield of $5,400.\nAverage credit score is higher than the average credit score at our stores.\nTotal front-end yield of $4,396 on trades taken through Clicklane.\nWe continue to expect annualized volume through Clicklane of approximately 30,000 vehicles by year-end.\nAs expected, Clicklane customers are converting at greater rates than traditional Internet leads.\nWe remain quite excited about the performance of Clicklane thus far as it is tracking ahead of its target.\nAll of you have built tremendous organizations that properly align with our North Star of being the most guest-centric automotive retailer.\nOur future is bright, and I look forward to meeting all of you.\nYour depth of knowledge in the automotive business is already making a significant impact on our company.\nI am enjoying working with you and look forward to growing Asbury together.\nI will now hand the call over to Michael to discuss our financial performance.\nI'm excited to be part of the Asbury team and have the opportunity to work with David again.\nI look forward to working with the team on our growth journey.\nI would like to provide some financial highlights, which marked another record quarter for our company.\nOverall, compared to the third quarter of last year, our actions to manage gross profit and control expenses resulted in a third quarter adjusted operating margin of 8.5%, an increase of 109 basis points above the same period last year and an all-time record.\nAdjusted operating income increased 69% to $204.5 million, a third quarter record.\nAnd adjusted net income increased 81% to $143.6 million, another third quarter record.\nNet income for the third quarter 2021 was adjusted for acquisition expenses of $3.5 million or $0.13 per diluted share and a gain on dealership divestitures of $8 million or $0.31 per diluted share.\nNet income for the third quarter of 2020 was adjusted for a gain on dealership divestiture of $24.7 million or $0.96 per diluted share, acquisition costs of $1.3 million or $0.05 per diluted share and $700,000 or $0.03 per diluted share for a real estate-related charge.\nOur effective tax rate was 23.7% for the third quarter of 2021 compared to 24.8% in 2020.\nFloor plan interest expense for the quarter decreased by $1.5 million over the prior year, driven by lower inventory levels.\nWith respect to capital deployed this quarter, we acquired a Subaru store in Colorado, utilizing approximately $16 million of our cash on the balance sheet.\nIn addition, we spent approximately $15 million on capital expenditures, and we repaid approximately $9 million of debt.\nAlso as part of our strategy to optimize our portfolio, we divested of our BMW store in Charlottesville, resulting in proceeds of $18 million, net of its mortgage payoff.\nAs a result of our operational performance, our balance sheet is quite healthy as we ended the quarter with approximately $780 million of liquidity comprised of cash, floor plan offset accounts and availability on both our used line and revolving credit facility.\nAlso, at the end of the quarter, our net leverage ratio stood at 1.2 times, well below our targeted net leverage of three.\nWith our announced acquisitions under contract, we are working toward financing the exciting growth at Asbury.\nAs announced in late September, we plan to raise the combined -- a combination of permanent debt and equity financing prior to the closing of Larry H. Miller acquisition.\nWe are working with our supportive lender group to upsize our credit facility and syndicate the real estate mortgage financing with plans to close both ahead of our acquisition of Larry H. Miller Dealerships later this year.\nAlthough the transaction is initially expected to take our net leverage above our targeted range of three times, we believe that we can deleverage approximately three times during 2023, given the highly accretive nature of the deal combined with strong free cash flow generation.\nAs we look forward to the remainder of 2021, we anticipate similar conditions to what we have seen this quarter.\nNew vehicle inventory supplies will likely remain low and unpredictable into the next year.\nI look forward to working with you and continue to build on the strong cultures that you are bringing to Asbury.\n",
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"content": "asbury automotive group - reported total revenue for third quarter of $2.4 billion, up 30% from prior year period.\nqtrly total revenue on a same-store basis was up 16% from the prior year period.\nqtrly same-store used vehicle retail revenue increased 47%.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website.\nIt is my pleasure to now hand the call over to our CEO, David Hult.\nIn the fourth quarter, we closed on the transformative acquisitions of Larry H. Miller and Total Care Auto, powered by Landcar, Kahlo Chrysler Jeep Dodge, Arapahoe Hyundai-Genesis and the Stevinson Automotive Group, representing approximately $6.6 billion in annualized revenue.\nThese acquisitions represent the right brands in high-growth markets and are aligned with Asbury's culture.\nWe look forward to deploying our joint capabilities and growing together, and I'm excited to have our new team members as part of the Asbury family.\n2021 was an all-time record year for Asbury.\nFor the full year, we grew adjusted EBITDA by 94% and adjusted earnings per share by 112%.\nWe delivered an operating margin adjusted at 8.1%.\nWe succeeded in adding great stores in targeted high-growth markets and we completed the rollout of our online transactional tool, Clicklane to all the legacy Asbury stores.\nIn a challenging new vehicle environment, we delivered record profitability by improving our new vehicle margin, increasing our used vehicle sales and growing our parts and service business, all while maintaining our improved employee productivity levels and using our strong cash flow for acquisitions.\nOur multiple business lines allow us to adapt and continue to deliver strong earnings in any business environment.\nWe will also deploy Total Care Auto into our legacy stores and roll out Clicklane into our recent acquisitions, allowing us to further grow our earnings.\nDue to our record performance and strong cash flow, our balance sheet remains solid.\nOur adjusted operating cash flow for 2021 was $632 million, an increase of $189 million over 2020.\nOur net leverage ended this quarter at 2.7 times.\nWe will continue to use our free cash flow to manage our leverage and maximize shareholder return through share buybacks and acquisitions.\nNow, I'd like to give you a quick update on our five-year plan.\nOur same-store adjusted revenue grew almost 12% last year, exceeding expectations.\nClicklane continues to deliver impressive metrics, generating over $570 million in additional revenue for three quarters in 2021.\nDespite lower new vehicle levels, inventory levels, Clicklane contributed an incremental 7% to our same-store growth.\nAs previously noted, we had a very successful year regarding acquisitions.\nWith these results, we maintain full confidence in the execution of our growth strategy.\nBased upon our results in 2021, we will update our five-year plan during our Q1 2022 earnings call.\nI will now hand the call over to Dan to discuss our operating performance.\nWe delivered strong results, enabling us to deliver an impressive gross margin of 20.4%, an all-time record and an expansion of 370 basis points versus the fourth quarter last year.\nOur teams continue to maximize productivity per employee, resulting in adjusted SG&A as a percentage of gross profit of 54.3%, a 710 basis point improvement versus prior year.\nOur total revenue for the quarter was up 19% year over year and total gross profit was up 46%.\nWe improved our adjusted operating margins for the quarter from 6% in 2020 to 8.9% in 2021, and we'll continue to optimize our portfolio in the future.\nNow, I will turn to our same-store performance compared to the fourth quarter of 2020, unless stated otherwise.\nStarting with new vehicles.\nBased on current market conditions, we continue to be focused on being opportunistic with our inventory and improving grosses to maximize profit.\nOur new average gross profit per vehicle was $6,335, up $3,441 or 119% from the prior-year period.\nAll segment margins were up significantly from the prior-year period.\nAt the end of December, our total new vehicle inventory was $207 million and our day supply was at eight days, down 32 days from the prior year.\nWe expect the days supply to remain low as we progress into 2022, trending up moderately toward the end of the year.\nTurning to used vehicles.\nOur used retail volume increased 15%, while gross margin was 8.2%, representing an average gross profit per vehicle of $2,623.\nAs a result of our performance, our retail gross profit was up 64%.\nOur total used vehicle inventory ended the quarter at $402 million, which represents a 34-day supply, up three days from the prior year.\nOur used to new ratio for the quarter was 109%.\nOur strong, consistent and sustainable growth in F&I delivered an increase of $213 to $1,961 per vehicle retailed from the prior-year quarter.\nIn the fourth quarter, our front-end yield per vehicle increased $2,169 per vehicle to an all-time record of $6,362.\nAnd now to parts and service.\nOur parts and service revenue increased 13% in the quarter.\nThe warranty revenue dropped 19%.\nOur customer pay revenue continues its healthy recovery, posting a 17% growth.\nWe achieved over 149,000 online service appointments, an all-time record and a 16% increase over the prior-year quarter.\nSome of the benefits of increasing online service appointments include enhancement to the customer experience, higher customer retention, higher conversion rates, higher margins and higher returns to our shareholders.\nWith three full quarters of Clicklane at all legacy stores under our belt, we would like to share some performance metrics.\nWe sold over 5,000 vehicles through Clicklane in Q4, of which 47% of them were new vehicles and 53% used.\n91% of our transactions this quarter were with customers that were new to Asbury's dealership network.\nAverage transaction time continues to be consistent with previous quarter, eight minutes for cash deals and 14 minutes for finance deals.\nTotal variable front-end yield of $4,298 and F&I front-end yield of $1,846.\nAverage credit score is higher than the average credit score at our stores.\n80% of consumers seeking financing received instant approval, while an additional 10% require some off-line assistance.\n90% of those that applied were approved for financing.\n43% of Clicklane sales had trade-ins with 78% of such trades reconditioned in retail to consumers with a total front-end yield of $4,490.\nAnd 92% of our Clicklane deliveries are within a 50-mile radius of our stores, thus allowing us the opportunity to retain our new customers in our parts and service departments.\nAs expected, Clicklane customers are converting at greater rates than traditional Internet leads.\nDuring our first few months after launching Clicklane, approximately 60% of our sales were new vehicles.\nUntil inventory levels somewhat normalized, we will not be able to fully assess the full potential of Clicklane.\nWe remain quite excited about the continued growth of Clicklane.\nAll of you have built tremendous organizations that properly align with our North Star of being the most guest-centric automotive retailer.\nOur future is bright, and I look forward to meeting all of you.\nI will now hand the call over to Michael to discuss our financial performance.\nI would like to provide some financial highlights, which marked yet another record quarter for our company.\nOverall, compared to the fourth quarter of last year, our actions to manage gross profit and control expenses resulted in a fourth quarter adjusted operating margin of 8.9%, an increase of 290 basis points above the same period last year and an all-time record.\nAdjusted net income increased 89% to $163 million, and adjusted earnings per share increased 68% to $7.46.\nNet income for the fourth quarter of 2021 was adjusted for acquisition expenses and acquisition-related financing expenses of $289 million or $1.02 per diluted share.\nNet income for the fourth quarter of 2020 was adjusted for a gain on dealership divestiture of $3.9 million or $0.15 per diluted share.\nIn addition to the net income adjustments mentioned above, our fourth quarter 2021 earnings per share was negatively impacted by the interest and additional shares issued as part of the acquisition financing that was completed prior to the acquisition closing.\nIf the financing had closed simultaneously with the Larry H. Miller acquisition, our adjusted earnings per share for the fourth quarter would have been positively impacted by $0.87 as a result of lower interest expense and fewer outstanding shares.\nNow for the full year 2021 results compared to 2020.\nAdjusted operating margin was 8.1%, an increase of 240 basis points at an all-time record.\nAdjusted net income increased 120% to $549 million and adjusted earnings per share increased 112% to $27.29.\nOur effective tax rate was 23.7% for 2021 compared to 24.8% in 2020.\nThis quarter, we acquired $6.6 billion in annualized revenue.\nIn order to finance the acquisitions, we completed debt and equity offerings totaling approximately $2.1 billion, a syndicated mortgage facility of approximately $700 million and borrowed under our upsized syndicated credit facility.\nIn addition, we spent approximately $34 million of capital expenditures in the quarter.\nWe generated $632 million of adjusted operating cash flow for the year.\nOur balance sheet remains healthy as we ended the quarter with approximately $437 million of liquidity, comprised of cash, excluding cash to Total Care Auto, floorplan offset accounts and availability on both our used line and revolving credit facility.\nAlso at the end of the quarter, our net leverage ratio stood at 2.7 times, below our targeted net leverage of three times.\nAs David stated earlier, today, we announced that our board has approved an increase to our share repurchase authorization by $100 million to $200 million.\nFor 2022, we are planning for a tax rate of approximately 25% to 26% and capex of approximately $150 million.\nThis amount excludes real estate purchases and potential lease buyout opportunities that we consider to be financing transactions.\nOur key objectives are: Continue our smooth transition with all of our new value team members; execute superior allocation of capital to maximize shareholder return; continue the innovation and growth of Clicklane, rolling out this fully transactional tool coast to coast into our recent acquisitions; integrate our insurance and F&I product provider, Total Care Auto, across the entire Asbury platform of dealerships, which will allow us to expand our F&I PVR; execute our companywide training initiative to continue the development and growth of our teammates; and maintain our best-in-class operating margins and SG&A.\nI would also like to make a few comments regarding our expectations for this year.\nWe are excited about 2022.\nWe see good opportunities for automotive retail, and we expect that demand will continue to exceed supply for most of the year.\nWe do anticipate a gradual recovery in inventory levels in the second half of '22 as OEM production improves.\nAs a result, we are planning our business for a SAAR of 15.5 million to 16 million units and vehicle margins consistent with 2021.\nWe will remain nimble and vigilant to adapt as conditions evolve.\nSG&A as a percentage of gross profit should continue to benefit from active expense management and improved employee productivity.\nWe look forward to continuing to deliver strong results for our shareholders, be outstanding partners with our OEMs to steward their great brands and offer an environment where our team members can thrive while providing the most guest-centric experience in automotive retail.\nFinally, I'd like to address all of my teammates at Asbury.\nOur ability to add quality stores, who, like us, care about serving our guests and being highly engaged in our communities could not have happened without you.\nYou all have given us the ability to thoughtfully grow our core business because you align behind our vision.\nPeople make the difference in any organization and you are making us a better place to work, and you are creating an environment where people want to do business.\n",
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"content": "increase in company's share repurchase authorization by $100 million, to $200 million.\nqtrly used vehicle retail unit volume increased 27%; used vehicle retail revenue increased 53%.\nq4 adjusted earnings per share of $7.46 per diluted share.\nqtrly revenue of $2.7 billion, an increase of 19%.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Second quarter adjusted income from continuing operations per diluted share increased to $0.82, up nearly 37% from the year ago quarter.\nWe generated significant operating leverage with adjusted EBITDA improving 17% year-over-year to $106.6 million and adjusted EBITDA margin increasing 100 basis points to 7.1% on slightly higher revenues.\nWe are pleased to note that for the first time in five quarters, growth in four of our key segments, B&I, T&M, Education and Technical Solutions more than offset the softness in Aviation which, while improved on a sequential basis, continue to reflect the impact of the pandemic.\nIn short, our second quarter performance reflected a consistently high level of operational execution by our team amid gradually improving business conditions, in sync with the reopening of the economy.\nThis strong showing and our current visibility have enabled us to increase our full-year guidance for adjusted earnings per share, while we continue to invest to support future growth.\nConsistent with what we have discussed over the past several quarters, our customers continue to prioritize protecting their people and spaces, driving strong demand for our higher-margin virus disinfection work orders.\nEnhancedClean, our proprietary and trusted protocols for cleaning and disinfecting spaces was an important contributor to our second quarter results as well.\nWe also continue to benefit from efficient labor management as our flexible labor model enabled us to identify and capitalize on staffing efficiencies arising from the adoption of remote and hybrid work environments, particularly within our B&I segment where office occupancy in large metropolitan areas remain relatively low.\nAs employees transition back to the office, we anticipate some easing in our labor efficiency, but we expect revenue growth in the second half of the year and increased work orders to mitigate that effect.\nWith our scale, capabilities, end market diversity and breadth of services, ABM remains well positioned for continued revenue and earnings growth as the reopening momentum continues.\nThere are several key trends that support our outlook for continued strong performance in the coming quarters.\nFirst, our clients in both the office and manufacturing markets indicate they plan to continue to incorporate disinfection into their cleaning protocols as they prepare for the return of staff and workers to their offices and industrial facilities.\nIn fact, given the heightened concerns around pandemic risks and greater awareness of public health issues in general, we expect these specialized services to remain in demand and to become part of our client contracts.\nABM has been an essential partner in helping our customers navigate through the challenges of the past year and our 90%-plus retention rate, which ticked up in the second quarter speaks to the confidence our customers have in our services and capabilities.\nSecond, we expect continued sequential improvement in our Aviation segment, as pent-up demand for travel translates into higher demand for aviation services.\nAs Earl will discuss in his comments, we are transitioning our Aviation business mix to favor higher-margin contracts with airports and adjacent facilities, with less of a focus on airline services.\nThis strategic shift has created attractive growth opportunities for ABM outside of the airport, such as parking services and provides for a more consistent and more profitable business mix in our Aviation segment.\nAdditionally, we expect to see increased demand for disinfection and cleaning services in line with the pickup in travel activity.\nEarly signs of return to leisure travel have been encouraging and increased business travel is projected to follow later in the year and into next year.\nThird, school districts have accelerated the return to in-person learning.\nOur conversations with school district professionals and educational institutions indicate that with the full-time return to school expected this fall, cleaning and disinfecting will be a priority throughout the school year.\nWe expect these services to become part of the broader scope of services for new contracts and rebids, providing ABM with revenue and growth opportunities.\nFinally, the energy efficiency and retrofit solutions that we offer in our Technical Services segment, our highest margin business, provide significant operating cost savings for our customers and enable them to reduce their environmental impact.\nNow that we have greater access to client sites, we expect to increasingly work through our Technical Services backlog, which was at a record level at the end of the second quarter.\nAdditionally, this segment is well positioned to benefit from the new administration's priorities around decarbonization and energy efficiency.\nAs we look toward the second half of the fiscal year, we are confident that we can leverage our significant competitive advantages to achieve continued progress.\nYou may recall that at the very outset of the pandemic, we established 19 operational task forces or pods as we call them, to marshal our tremendous internal resources on the issues at hand, to focus on our virus disinfection offerings; our field operations; as well as finance, legal, liquidity, cash flow and human resources.\nThis task force model proved to be a fast and effective way of identifying potential business issues and utilizing cross-functional expertise to develop and implement solutions.\nGiven the success of these initiatives, we will continue to use this model to address emerging situations.\nIn fact, our human resources task force is now focused on recruiting and retention and will be instrumental in helping us manage utilization as additional staffing is required to accommodate increased occupancy levels.\nAdditionally, our strong balance sheet and robust cash flow provide us with substantial resources to fund investments to support future growth.\nWe invested in information technology initiatives during the first half of fiscal 2021 and we anticipate investing further during the second half of the year.\nThese investments in technology, data analytics and strategic initiatives are designed to strengthen our client relationships and further empower our employees.\nWhile we will speak about these initiatives later in the year, I can share that we are currently piloting client-facing solutions using sensors to generate real-time occupancy data that inform our janitorial programs and allow us to share service delivery details with our clients via digital displays.\nAdditionally, we are expanding our use of technology to workforce management with a digital test management solution that records work performed and facilitates dynamic route changes to accommodate shifting client demand.\nLastly, the ABM brand is recognized worldwide, and our recent advertising campaign has served to reinforce the scale, scope and capabilities of our organization.\nThese attributes enabled us to step in immediately to provide our branded services to clients needing a safe environment for their employees and consumers.\nThe ABM brand is synonymous with this tremendous commitment to customer service, which is supported by our ability to deliver.\nAs we enter a post-pandemic environment, we believe the ABM brand will provide us with considerable competitive advantages across our business segments.\nTurning now to the specifics of our outlook.\nGiven our strong performance in the first half and our expectations for continued year-over-year growth in the second half, we are maintaining our guidance for full-year fiscal 2021 GAAP income from continuing operations of $2.85 to $3.10 per diluted share, inclusive of a second quarter litigation reserve of $0.32.\nAt the same time, we are increasing our guidance for full-year 2021 adjusted income from continuing operations to $3.30 to $3.50 per diluted share, up from $3.00 to $3.25 previously.\nThis includes additional investments in client-facing technology and workforce management.\nWe're also increasing our outlook for adjusted EBITDA margin to a range of 7% to 7.3% from 6.6% to 7% previously.\nWe also ended the first half with robust new sales of $727 million, including $100 million associated with our EnhancedClean offerings, another first half record.\nThis supports our confidence in the Company's organic second half performance.\nAdditionally, we continue to explore acquisition opportunities where, as a strategic buyer, we would be able to drive meaningful revenue and operating synergies.\nOver the past year, we have made tremendous operational progress and have proven our value as an essential partner to our clients during these dynamic and challenging times.\nI've never been more inspired by our purpose, our team and our organization.\nAs we emerge from this difficult period, I am so pleased with our performance and are more confident than ever in our future potential.\nSecond quarter revenue was $1.5 billion, up 0.1% from last year.\nAs Scott mentioned, revenue in four of our segments grew on a year-over-year basis, offsetting the continued pandemic-related softness we've experienced in the Aviation segment.\nKey revenue growth drivers in the quarter included higher disinfection related work orders and continued strong demand for our EnhancedClean services.\nOn a GAAP basis, income from continuing operations was $31.1 million or $0.46 per diluted share.\nBy comparison, in last year's second quarter, we reported GAAP income from continuing operations of negative $136.8 million or negative $2.05 per diluted share.\nAs Scott mentioned, GAAP income from continuing operations in this year's second quarter includes a non-cash $30 million reserve for an ongoing litigation equivalent to $0.32 per diluted share.\nThis non-cash reserve relates to litigation dating back 15 years, primarily relating to a legacy timekeeping system that was phased out in full by 2013.\nYou will find additional information in our Form 10-Q, which will be filed later today.\nThe recorded reserve is based on a host of factors, considerations and judgments and the ultimate resolution of this matter could be significantly different.\nAs this litigation remains ongoing, we are unable to disclose further information at this time.\nAs a reminder, last year's GAAP loss included a $2.55 per share impairment charge.\nExcluding these charges, our adjusted income from continuing operations in the second quarter of fiscal 2021 was $55.5 million, or $0.82 per diluted share compared to $40.4 million or $0.60 per diluted share in the second quarter of last year.\nThe increase in adjusted income from continuing operations was attributable to our strong operational performance, including growth in our higher margin services as well as efficient labor management and the recapture of bad debt.\nIn addition, we benefited from favorable business mix, particularly in our Technical Solutions segment where we executed on higher-margin projects.\nExcluding items impacting comparability, corporate expense for the second quarter increased by $26.6 million year-over-year.\nApproximately $10 million of the variation was due to increased stock-based compensation, with the remaining $16 million representing investments and other-related expenses.\nThus, information technology and other strategic investments spend in the first half of fiscal 2021 was $20 million, in line with our expectations.\nNow, turning to our segment results.\nBusiness & Industry revenue grew 1.4% year-over-year to $796.2 million, driven largely by strength in demand for higher-margin disinfection related work orders and EnhancedClean services.\nAs a result, operating profit in this segment increased 44.1% to $85.3 million.\nOur Technology & Manufacturing segment continue to see upside from demand for COVID-19 related services.\nRevenue here increased 5.4% year-over-year to $246.3 million, and operating profit margin improved to 10.9%, up from 8.4% last year.\nWe benefit from the recapture of roughly $2 million of bad debt in this year's second quarter.\nBut even adjusting for this, our profit margin still showed improvement.\nThe growth in revenue and margin was fueled by a higher level of work orders and new customer contract wins for our services.\nEducation revenue grew 7% year-over-year to $214.2 million, representing the strongest growth rate among our segments in the second quarter.\nThe acceleration in revenue growth primarily reflected the positive impact from the reopening of schools and other educational facilities in the second quarter and the shift toward more in-person learning.\nEducation operating profit totaled $13.6 million, representing a margin of 6.3%, slightly down year-over-year on an operating [Phonetic] basis as a result of labor challenges in our Southern U.S. operations.\nBad debt expense was roughly $1 million lower than last year, and this was a contributing factor to the operating profit improvement we experienced in this segment.\nAlthough the specific labor costs I mentioned will not recur in the third quarter, we anticipate that the return of students to school on a full-time basis will lead to some reduction in labor efficiency within this segment in the second half.\nAviation revenue declined 19.7% in the second quarter to $148.3 million.\nAlthough reduced global travel continues to weigh on this segment, revenue improved 3.6% on a sequential basis, marking the third consecutive quarter that Aviation segment revenue has improved sequentially.\nWith industry data points indicating a progressive recovery in global travel, we are optimistic that revenue in our Aviation segment will continue to improve over the second half of fiscal 2021.\nAviation operating profit was $5.8 million, representing a margin of 3.9%.\nWhile our airline customers continue to request higher margin enhanced cleaning services such as electrostatic spraying, margin remain below normalized levels given reduced volumes.\nAs Scott mentioned, we are focused on securing more profitable overall business with airports and related facilities and have continued to de-emphasize our airline services work.\nThis strategic shift in our Aviation segment business mix had a positive revenue and margin impact on our second quarter results and should benefit future periods as well.\nTechnical Solutions revenue increased 2.6% year-over-year to $125.5 million.\nOperating margin was 8.2% in the second quarter, up significantly from 5.3% in the first quarter of fiscal 2021 due to a favorable mix of higher-margin projects.\nAs client site access improves, we remain positive on the growth trajectory of the Technical Solutions segment.\nShifting now to our cash and liquidity.\nWe ended the second quarter with $435.7 million in cash and cash equivalents compared to $394.2 million at the end of fiscal 2020.\nWith total debt of $797.9 million as of April 30th, 2021, our total debt to pro forma adjusted EBITDA, including standby letters of credit, was 1.7 times for the second quarter of fiscal 2021.\nSecond quarter operating cash flow from continuing operations was $125.9 million, down from $162.3 million in the same period last year.\nThe decline in cash flow from continuing operations during the second quarter was primarily due to the timing of cash taxes.\nFor the six month period ending April 30th, 2021, operating cash flow from continuing operations totaled $171.2 million.\nFree cash flow from continuing operations was $117 million in the second quarter of fiscal 2021 and $156 million for this year's first half.\nAs a reminder, cash flow is benefiting from payroll tax deferral related to the CARES Act.\nBeginning next year, the deferral will be paid at $66 million in each of the next two years.\nWe were pleased to pay our 220th consecutive quarterly dividend of $0.19 per common share during the second quarter, returning an additional $12.7 million to our shareholders.\nOur Board also declared our 221st consecutive quarterly dividend, which will be payable in August to shareholders of record on July 1st.\nSupported by the strength of our balance sheet, we have the financial resources to support our capital allocation priority of adding additional growth by investing organically while pursuing potential acquisitions.\nNow, I'll provide some additional color on our guidance and outlook.\nAs mentioned, our increased guidance for full year fiscal 2021 adjusted income from continuing operations is now a range of $3.30 to $3.50 per diluted share compared to $3.00 to $3.25 previously.\nOur upward revised adjusted earnings forecast reflects the strength of our first half as well as our positive view for the second half.\nAs a reminder, our third quarter has one fewer day than last year, equivalent to about $6 million and reduced labor expense.\nOn a GAAP basis, we continue to expect earnings per share from continuing operations of $2.85 to $3.10, inclusive of the $0.32 litigation reserve in the second quarter.\nWe continue to expect a 30% tax rate for fiscal 2021, excluding discrete items such as the Work Opportunity Tax Credits and the tax impact of stock-based compensation awards.\nAs we noted in our first quarter conference call in March, our expectation was to achieve cash flow above our historical range of $175 million to $200 million for fiscal 2021.\nNow having generated $171 million of operating cash flow in the first half alone, we are confident that we will achieve free cash flow for fiscal 2021 of $215 million to $240 million.\nWe are pleased with our positioning, as business across the country emerge from the pandemic and we look forward to helping our clients provide safe environment for their employees and customers.\nAnd I am personally looking forward to meeting with each of you in person, hopefully as soon as later this year and to connecting with you virtually until then.\n",
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"content": "q2 adjusted earnings per share $0.82 from continuing operations.\nq2 gaap earnings per share $0.46 from continuing operations.\nraises fy adjusted earnings per share view to $3.30 to $3.50 from continuing operations.\nq2 revenue $1.5 billion versus refinitiv ibes estimate of $1.48 billion.\nco is maintaining its guidance for fy fiscal 2021 gaap income from continuing operations.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Before we begin, I'd like to remind everyone that Earl joined less than a month ago after the fiscal year end; and although quickly acclimating himself to the business, should you have any questions after today's call, please follow-up with Investor Relations accordingly.\nIt's hard to believe we're already at the close of 2020 and covering our fourth quarter results.\nOn the other hand, we're about to discuss only the second full quarter of COVID-19's impact on our financials.\nIn Q4, we reported revenues of approximately $1.5 billion for the quarter.\nThis represents a 9.9% decline versus last year and a considerable sequential improvement when comparing to our more than 15% decline in Q3.\nOnce again, our diversified client base demonstrates the resilience of our business.\nOur Technology & Manufacturing industry group grew almost 7% and Business & Industry as well as Education posted revenue results that were only slightly down.\nAs one would expect, our Aviation segment drove the majority of our organic decline versus last year.\nTechnical Solutions also saw a large revenue decline and continued to see challenges in site access, which affected churn rates.\nPositively, the backlog of committed work in Technical Solutions is healthy and the pipeline for '21 is robust.\nSo all things considered, it was a good revenue story for the quarter.\nFrom a profit perspective, there was sustained demand for higher margin COVID-related work orders and our enhanced cleaning program, particularly in Business & Industry and Technology & Manufacturing.\nOur financial performance was protected by our variable labor model and our ability to dynamically adjust staffing based on demand, and we continue to see profit arbitrage by efficiently managing labor as we scaled and consolidated staff during the quarter.\nThis has been one of the key contributors of our financial performance through the pandemic.\nAs a result of all of these factors, we grew earnings on both the GAAP and an adjusted basis versus last year.\nIncome from continued operations grew to $53.1 million or $0.78 per share.\nOn an adjusted basis, we delivered $46.7 million or $0.69 per share.\nAdjusted EBITDA margin rose to 6.2% versus 5.6% last year.\nEven more compelling, these results incorporate a non-cash reserve we took for an entertainment-related project within our Technical Solutions segment.\nThis was a unique circumstance in client, and not a reflection of our broader project portfolio within Technical Solutions.\nThis had 120 basis point impact on our adjusted EBITDA margin as well as our earnings.\nSo even when including this distinctive event, quarter-after-quarter, our performance continues to demonstrate consistent strength and execution.\nIn so many ways, 2020 will stand out as a pivotal year for ABM.\nThe pandemic has created a shift in the public mindset as professional Class A janitorial services are now unquestionably viewed as an essential and non-discretionary service.\nFacility owners must demonstrate that they are providing clean, healthy and safe spaces that their occupants can trust.\nNot only will this be required, but it will be a reflection of their brand.\nOur response with our EnhancedClean service, gives our clients the peace of mind that comes with studied protocols and practices that keep facilities safe, and this offering creates even more distance between us and our competitors.\nAs a company that's been around for more than 110 years, ABM has withstood and grown during many global events.\nBut 2020 tested us in historic ways and I've never been more inspired by our organization.\nI want to take a moment to recap some of our team's accomplishments more specifically.\nSince March, we have been on the frontlines battling a pandemic that has disrupted nearly every industry.\nWhile navigating a constantly evolving environment as we learn more about the virus, we prioritized the health and safety of our employees and our clients above all.\nAnd when it came to PPE and our global supply chain, our procurement team did not disappoint when others in our space did, as they couldn't accommodate surging demands.\nAlso, we partnered with large cleaning contractors to form the Cleaning Coalition of America to represent our industry which played a critical role in restoring our country.\nThe Coalition plans to press for vaccine priority for our industry and developed a focused campaign on awareness around what differentiates best-in-class providers.\nAt ABM, we were particularly proud of how we proactively developed our own expert-backed certified programs to answer our client's needs with disinfection protocols, such as specialized training and signage, electrostatic spraying of disinfectant and air filtration.\nAnd all of this is being supported by one of the most comprehensive marketing campaigns we've ever developed.\nWhat shouldn't be minimized is the fact that we mobilized multiple cross-functional task forces across all the critical areas of our business that elevated our adeptness and will endure long past the pandemic.\nThese task forces led to improved operating procedures for labor management, sales and financial activities.\nAs an example, our approach to collections led us to generate more than $450 million in cash flow from operations and $420 million in free cash flow, both records for the firm.\nThis translates to nearly $1 billion of liquidity, including $400 million of cash, which is an extremely powerful position to be in during still uncertain times.\nAs we move into 2021, our intention is to capitalize on the momentum and shift from defense to offense.\nBeginning with our executive team, we recently announced several appointments to further align our internal organizational structure to our business strategies.\nEarl is a seasoned finance executive joining us from Best Buy, a leading Fortune 500 provider of consumer technology products and services with 125,000 employees in North America.\nEarl held several executive positions across finance and most recently he was responsible for leading enterprise capital project planning plus transformation and procurement as well as supporting digital and technology and global real estate.\nDuring his tenure at Best Buy, Earl also spearheaded several strategic initiatives targeting labor and logistics.\nEarl joined less than three weeks ago but is quickly immersing himself in our business.\nI'm also excited that Rene Jacobsen has been promoted to Chief Operating Officer and will lead all of our client-facing industry groups.\nSince joining ABM eight years ago, Rene has consistently driven our operational performance and service excellence and his leadership was unquestionably instrumental in our successful navigation of 2020.\nAs COO, he will provide strategic guidance for our operations and drive our financial results across all of our platforms.\nRene will also continue to work with Sean Mahoney our new President of Sales and Marketing.\nSince Sean's arrival in ABM in 2017, we've broken sales records each succeeding year and we achieved another record in 2020 with new sales at $1.2 billion, an amazing accomplishment for any year but especially in a year when so much of the economy was paused.\nWith both Rene and Sean's leadership, our operations and sales teams proved to be a powerful combination in 2020 and will undoubtedly exceed our expectations in 2021.\nSpeaking of 2021, later in the year, we will be sharing our refresh business strategy which builds on the positive changes and the acceleration we saw with our 2020 vision.\nAt that time, we will be reviewing our technology plan and path toward a digital platform for our employees and clients.\nIn fact, just as I discussed last quarter, some of our near-term investments are reengagements of IT projects that were put on hold due to the pandemic, like our ERP system and data management roadmap.\nOther investments will be new given the opportunities that arose as a result of the pandemic such as EnhancedClean and the associated build of that program.\nOn that front, from a payback standpoint, we concluded the year with over $300 million in sales for our EnhancedClean program and COVID-related activities.\nAnd we have some really exciting sales and marketing plans lined up over the next few months to continue accelerating and differentiating ourselves in the marketplace.\nOf course, we will be responsible for our investment approach given how smooth the operating environment is but we recognize that we must plan for the long-term while also keeping our maniacal focus on what the near term may bring.\nThere's no doubt that conditions remain uncertain, particularly as we operate over the winter months.\nCOVID cases continue to rise throughout the country and I'm sure you've seen or experienced various stages of closures in your own communities.\nUnfortunately, the operating environment isn't any more predictable than it was last quarter.\nClients are still generally managing for the shorter term as they react to resurgences, which caused occupancy volatility and they don't yet have the ability to predict when the workforce at large will return.\nWhile vaccine news is encouraging, the widespread availability and use is also unknown today, which could impact the timing of recoveries and reopenings.\nTherefore, our visibility remains limited and, as you would expect, we are not providing guidance for the full fiscal year in 2021.\nHowever, we are going to share our near-term expectations for the first fiscal quarter.\nThis is the only time we anticipate guiding to such a short-term view, given the uniqueness of the moment.\nFor the first quarter, we expect GAAP earnings per share of $0.53 to $0.58 in earnings per diluted share or adjusted earnings per share of $0.60 to $0.65 per diluted share.\nThese ranges compare to last year's $0.41 and $0.39 respectively, both considerable increases on a year-over-year basis.\nWe also expect adjusted EBITDA margin in the range of 6.1% to 6.4%, expanding from 4.3% last year.\nAt this time, we believe we may have seen the bottom in revenue compression as a result of COVID-19.\nSequentially, we could see similar to slightly better organic declines than what we saw in Q4.\nWe also anticipate good demand for pandemic-related work orders and EnhancedClean to continue throughout Q1.\nThe investments I discussed earlier should also continue into Q1, which you will see in both our segment profit and corporate lines.\nIn general, investments will continue throughout fiscal 2021 but the magnitude and cadence will be determined by both our long-term strategy and where we see the broader recovery going.\nEarl will go through more detail on some of the assumptions for the quarter and year, which is obviously still dynamic.\nShould we have better line of sight for the full year by Q2, we would anticipate providing full year guidance at that time.\nThis purpose has never meant more than it does today.\nOur value to clients has risen because our teams have been the ambassadors of our brands and demonstrated the operational excellence that sets ABM apart from our competitors.\nNine months ago, we couldn't have imagined how 2020 would culminate for ABM.\nWe not only exceeded our pre-COVID expectations, but actually accelerated into a long-term EBITDA margin range of 5.5% to 6%.\nOur 2020 vision journey has come to a climactic transition, leading us into the next phase of growth and excellence and building on a strong foundation to propel us into the future.\nNext year, we'll also mark our 50th anniversary on the New York Stock Exchange and we look forward to celebrating this milestone at ABM's history.\nSo, while last year was certainly a memorable one for our organization, I'm now looking forward to the opportunities that lie ahead and I am more excited than ever.\nNow, to Earl, who'll cover our financial results.\nI am so excited to be part of the ABM team.\nI recognized early on that the culture here is so special and unique.\nEven in just my first few weeks here, I have witnessed an exceptional drive to collaborate and execute that clearly sets ABM apart.\nAs I spend the next several months diving into the business, I look forward to developing and sharing my perspectives on our financial strategies over future calls.\nNow, onto our quarterly results.\nRevenue for the quarter were $1.5 billion, a total decrease of approximately 9.9% compared to last year, reflecting our second full quarter of COVID-19 revenue declines, particularly in the Aviation and Technical Solutions segment.\nPartially offsetting this revenue decline was continued demand for higher margin work orders that we have been providing for our clients through the pandemic, particularly within business and industry and technology and manufacturing.\nGAAP income from continuing operations was $53.1 million or $0.78 per diluted share compared to $48.1 million or $0.71 last year.\nThese results reflect the continuation of favorable claims trend related to health insurance reserves.\nWe saw a benefit of $21.3 million in self-insurance adjustments, of which $6.2 million was related to the current year.\nOn an adjusted basis, income from continued operations for the quarter increased to $46.7 million or $0.69 per diluted share compared to $44.7 million or $0.66 last year.\nSimilar to the third quarter, our GAAP and adjusted earnings growth versus last year was driven primarily by a significant increase in higher margin work orders as clients respond to COVID-19 as well as the continued management of direct labor to align with the demand environment for legacy services.\nPartially offsetting these results was a $17.6 million reserve for notes receivables for a project related to a unique family entertainment customer within the Technical Solutions segment.\nWe are currently working with the client to resolve this issue.\nIn addition, operational investments in such areas as our EnhancedClean program continued, which was embedded in our operating segment results.\nWe also reengaged certain corporate projects such as investments in IT, that were previously put on hold as we prioritized business continuity during the pandemic.\nThis amount was approximately $10 million for the quarter.\nOn a year-over-year basis, the fourth quarter also experienced one less workday which equates to approximately $6 million in labor expense savings.\nI'll speak about the cadence of our working days for fiscal 2021 later in the call.\nBut the number of days in the fourth quarter of fiscal 2021 will be comparable at 65 days.\nOur overall performance during the quarter led to adjusted EBITDA of approximately $92.5 million at a margin rate of 6.2% compared to $93 million or 5.6% last year.\nNow, for a discussion of our segment results.\nAs a reminder, these results reflect the ongoing impact of COVID-19 on revenue.\nOperating profit reflects the mix shift toward higher margin work orders, labor modulation on legacy service demand, as well as operational investments such as EnhancedClean.\nB&I revenues were $794.3 million, down just 1.6%.\nWe're encouraged by the sequential top line improvement compared to a decline of 6.3% last quarter.\nThe pandemic's negative impact on our parking and sports and entertainment business continued this quarter, similar to Q3.\nOffsetting this COVID compression and the loss of some lower margin business, we had consistently strong demand for higher margins pandemic-related work orders.\nThis led to a more favourable mix of B&I business that led to operating profit growth of more than 65% to $84.7 million with a margin rate of 10.7%.\nAnother very resilient segment for us during the pandemic has been our T&M business.\nRevenues were $245.5 million for the quarter, up 6.7% versus last year.\nOperating profit grew more than 30% to $23.5 million for an operating margin of 9.6%.\nThis segment is particularly comprised of essential service providers such as biopharma, logistics and industrial manufacturing.\nAs a result, demand has been driven by work order and EnhancedClean work, more than offsetting any COVID-related and other account losses throughout the year.\nIn education, we reported revenue of $212.2 million, reflecting the new school season and the adoption of hybrid models across our K-12 and higher education portfolios.\nOperating profit of $15.1 million or 7.1% margin reflects labor-related savings as a result of modified staffing at site locations during the pandemic.\nAs many of us are likely experiencing today with our own children, there remains a great deal of variability in this segment as different cities respond to resurgences, particularly ahead of the holiday season.\nWe continue to monitor developments and partner with our clients to address both day-to-day cleaning and disinfection needs, as well as longer term budget constraints, where our technical solutions offering can be compelling.\nAviation reported revenues of $141 million, and an operating profit of $3.5 million, clearly demonstrating how the pandemic continues to have a dramatic impact on the industry.\nHowever, as discussed last quarter, our goal was to achieve a breakeven position or better by the fourth quarter.\nWe are pleased to have closed the year in a profitable position.\nAnd now onto Technical Solutions, which reported revenues of $123.1 million compared to $175.5 million last year.\nAs a reminder, this segment experienced phenomenal growth last year, exceeding 25% during Q4 of fiscal '19.\nIn addition to tougher compare, site access has been disrupted by the pandemic.\nBacklog remains in our healthy zone, which we've historically defined as above the $150 million.\nWe are actively monitoring our ability to churn through these projects.\nThe operating loss of $3.6 million was driven by a reserve of notes receivables related to a single entertainment customer and associated with the client increasing credit risk resulting from the pandemic, which we continue to pursue.\nTurning to cash and liquidity.\nDuring the quarter, we generated a record $198.7 million in cash flow from operations and free cash flow of $189.6 million for the quarter.\nThis led to $457.5 million in cash flow and $419.5 million of free cash flow for the year.\nAs a reminder, these results include $101 million in deferred U.S. payroll taxes as a result of the CARES Act, which will be due in 2021 and 2022.\nEven excluding this, these are records for the year.\nDue to our strong cash position, we ended the quarter with total debt, including standby letters of credit of $883.4 million and a bank adjusted leverage ratio of 2.1 times.\nAdditionally, we ended the quarter with cash and cash equivalents of $394.2 million.\nDuring the quarter, we paid our 218th consecutive quarterly cash dividend for a total distribution of approximately $12.3 million.\nNow, for a quick recap of our annual results.\nTotal revenues were approximately $6 billion, a decrease of 7.9% versus last year.\nThe decrease in revenues was attributable to the COVID-19 pandemic's impact on business operations, predominately during the third and fourth quarters of this year.\nOur GAAP income from continuing operations for fiscal 2020 was $0.2 million.\nOn an adjusted basis, income from continuing operations for the year was $163.5 million or $2.43 per diluted share.\nAdjusted EBITDA for the year increased 6.6% to $361.9 million and we ended the fiscal year with an adjusted EBITDA margin of 6%.\nNow, turning to our guidance outlook.\nWe are providing guidance for the first quarter of fiscal 2021.\nAt this time, we expect GAAP earnings per share to be in a range of $0.53 to $0.58 and adjusted earnings per share to be in a range of $0.60 to $0.65.\nAdjusted EBITDA margin is anticipated to be between 6.1% to 6.4%.\nThis guidance outlook assumes organic growth will be sequentially flat to slightly improved versus the fourth quarter of fiscal 2020.\nWe anticipate a higher margin work orders and labor efficiencies to continue into the first quarter.\nAnd as Scott discussed extensively, we are planning to invest in fiscal 2021.\nThe first quarter will see the same level of investments that we saw during the fourth quarter of fiscal 2020 of approximately $10 million.\nThe first quarter will also have one less working day versus last year, which could lead to approximately $6 million in lower labor expense.\nHowever, we are preparing for the potential for higher payroll taxes beginning in January for SUI, FUI, as well as federal taxes such as FICA.\nWith respect to interest, based on our operating expectations for the first quarter and our current cash position, we do not anticipate an increase in borrowings compared to the fourth quarter.\nTherefore, sequentially, interest expense should decrease slightly due to the continuing amortization of our term loan.\nThe tax rate for the quarter is anticipated to be approximately 30%.\nThis rate excludes discrete tax items such as the work opportunity tax credit and a tax impact of stock-based compensation awards, the total impact of which we currently expect will be under $1 million in Q1.\nWith respect to cash flow, we assume government-related benefits in the U.K. and U.S., such as the CARES Act, will not recur.\nThis should be considered when ascertaining free cash flow for the new fiscal year.\nHowever, we drove higher free cash flow as a result of sharper operational practices in response to the pandemic.\nAnd we intend to continue to uphold these standards and disciplines.\nLastly, related to taxes, in fiscal '20, our full-year impact for the Work Opportunity Tax Credit was $4 million, reflecting the pandemic's impact on traditional hiring practices.\nCurrently, WATSI [phonetic] is expected to expire on December 31 of this calendar year.\nHowever, we are actively monitoring Congress for related action, including an extension on WATSI.\nOn the heels of such strong results for 2020, I look forward to sharing more with you over the coming quarters.\n",
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"content": "q4 adjusted earnings per share $0.69 from continuing operations.\nq4 gaap earnings per share $0.78 from continuing operations.\nq4 revenue $1.5 billion versus refinitiv ibes estimate of $1.43 billion.\nsees q1 adjusted earnings per share $0.60 to $0.65 from continuing operations.\nsees q1 gaap earnings per share $0.53 to $0.58 from continuing operations.\nexpects its on-going operational and corporate investments will extend into fiscal 2021.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Consistent with those objectives, our communities under the leadership of our field staffs have continued to operate and serve our residents while adhering to the CDC's guidelines and complying with local, municipal and state guidelines.\nOur corporate team members have also adapted well to the new work environment and have continued to support our field staffs and to advance all of our strategic business objectives.\nI truly believe that we have collectively done some of the best work in our Company's 27-year history during what has certainly been its most challenging period.\nThe next generation of ACC team members appear to be learning a lot about our business for mom and dad each day.\nAs you know, at the outset of this pandemic, consistent with our Company values and the previously mentioned eight guiding objectives, we made a pledge that no resident would go without a home because of an inability to pay rent on a timely basis.\nWe also committed to be compassionate to the financial hardships that our residents and their parents may be experiencing due to COVID and the corresponding government shutdowns.\nAnd we committed to be the best partner possible to our long-term ACE university partners.\nStaying true to our pledge and these commitments did indeed cause short-term financial impacts that are reflected in the quarter.\nAt our off-campus apartment communities and those on-campus apartment communities that American Campus leases in the open market, on a monthly average basis for April, May and June, 93.7% of our residents made their rent payments.\nFor those that were not able to meet their financial obligations due to hardship, through our resident hardship program we provided nearly $9 million of direct financial relief to more than 6,500 of our residents and their parents.\nWe also provided an additional $15 million of financial relief to students and parents at our ACE on-campus communities where leasing administration, rent collections and residence life are administered by our university partners.\nIn addition, our waiving of fees associated with the payment and collection of rent resulted in more than $2 million of budgeted revenues not being collected during the quarter.\nAs the team will discuss, this $24 million in financial relief and the waiver of fee income makes up the large majority of our diminished revenue for the quarter.\nWe were able to offset a portion of this through expense reductions that did not diminish our ability to deliver quality service to our residents.\nWith the majority of our current in-place leases ending in the weeks ahead and a new academic year about to begin at universities across the nation, unlike multifamily residents, the financial position and buying power of the student renter has the potential to improve somewhat.\nAs many of you will recall from your own college years or from being parents of college students, each year students are eligible to apply for needs-based financial aid in the form of grants, scholarships and student loans.\nIn the spring and summer of 2019, when those financial aid assessments were being completed for the current academic year, the US economy was at or near all time highs, with unemployment for nearly every demographic group being at all-time lows.\nIncomes from the favorable economic conditions were likely reflected in the students' applications for financial aid based on their and their parents' financial position at that time.\nAs such, when COVID hit in March of 2020, in the middle of this academic year, many of those students and parents saw their income significantly diminish without the benefit of financial aid support.\nBy contrast, as students have applied for financial aid in the spring and summer of 2020 for the upcoming academic year, those students and parents experiencing financial hardship due to the pandemic are now likely to qualify for more financial aid than they received in the prior year.\nWe believe this needs-based increase in financial aid likely occurs in every US recession and is perhaps one of the reasons the student housing industry has been so resilient over the years during times of macroeconomic stress.\nAs we look forward to the next academic year, while we do not believe there will be a full return to normalcy in the fall of 2020, we are cautiously optimistic at this time, given the following four variables.\nOne, universities' focus on policies and procedures to promote a safe environment in the delivery of their academic curriculum, facilitating a return to campus with some component of in-person instruction.\nAs reported in the College -- in the Chronicle -- excuse me, as it reported in the Chronicle of Higher Education, at this time, 63 of our 68 universities served are conducting some component of in-person classes.\nAnd it's worth noting, we also continue to have leasing activity of property serving the five universities that have announced predominantly online curriculum delivery, with our four same store properties at these schools being 90% leased and with potential no shows and request for reletting currently representing only 5% potential diminishment in occupancy.\nTwo, universities now having available data on how COVID impacts the 18 to 22-year-old student demographic and having an improved understanding of how modern apartment style student housing and in-suite bath residence halls facilitate a student's ability to sanitize their own living environment and to isolate in households of two to four residents in times of outbreak.\nThree, student sentiment with regard to a desire to be in the college environment with their peers versus at home with mom and dad even if instruction is being delivered predominantly online.\nAnd four, the continued incremental improvement we see in our overall leasing data, coupled with well above normal velocity compared to the same period prior year with regard to traffic, applications, leases and renewals for the last three, 10 and 20 days at our open market properties as of July 17.\nAs you saw in last night's release, with a range of five to 11 weeks left before the commencement of classes, we are now 90% pre-leased for the upcoming academic year, only 340 basis points behind the prior year.\nWhile the variance to prior year increased from the 230 basis points in our May 31 leasing update, it is worth noting that the variance to prior year at our open market leasing properties have decreased since that time.\nAnd when you review page S8 in our supplemental, the three, 10 and 20-day velocity trends in traffic, applications, leases and renewals would suggest that variance to the prior year should continue to decrease for that core category of properties.\nI'd now like to further break down our cautious optimism in terms of the ongoing risk and opportunities that may negatively or positively impact our final leasing numbers.\nFirst focusing on risk.\nThere are three normal and ordinary risk categories that we routinely manage in each and every annual lease-up.\nThose components are: one, renewal skips; two, students who have asked us to attempt to relet their accommodations so that they may be released from their financial responsibility; and three, no shows.\nIn all three of these risk categories, each year it is our goal to relet prior to the beginning of classes any accommodations that become available due to any of these three reasons.\nA renewal skip is a current period leaseholder that has also signed a renewal lease for the upcoming academic year, but has vacated their apartment and quit paying current rent, thus having skipped out on their current lease and the future lease.\nGiven the definitive actions that they have taken and the certainty that they are not returning for the next academic year, these students are actively removed from our pre-leasing statistics and are not counted as leases in our pre-leasing reports.\nThus far, throughout this lease-up, we have had 178 renewal skips, which is consistent with our historical levels.\nWith regard to potential no shows and relet request, we commenced our no show management and reletting process in late May, early June versus our normal timing in July in an attempt to ferret out, earlier than usual, the number of students who may not be planning to show up in the fall as well as to proactively identify students who wish to have us help them release their accommodations.\nThese potential no shows and relet leases are included in our pre-leasing numbers as they have always been at this time in the lease-up.\nOur normal and ordinary annual process is to diligently attempt to release accommodations subject to both no show and relet request until the very end of the lease-up process.\nAt the very end of the annual lease-up process, we then remove from our final leasing statistics any actual no shows and unsuccessful relets that also never took possession of their accommodations and essentially became a no show.\nAs we have commented to the market over the years, we typically only lose a total of 35 basis points to 60 basis points of final occupancy, with that net loss always having been reflected in the final leasing statistics we report each year.\nTo be clear, our final fall lease-up occupancy average of 97.5% over the years has always been net of the impacts of the process as we just discussed.\nWe've also often commented over the years that we believe one of the reasons our fall occupancies typically exceed the industry average by 200 basis points is our diligent administration of this process versus our peers.\nAs part of this year's efforts to expedite this process, we have undertaken an exhaustive communication process to facilitate engagement with our residents, giving them the opportunity to let us know if there is a possibility that they are not coming.\nWe do not proactively ask directly, are you going to take possession of the unit or are you planning to no show.\nBut rather, we undertake communication and discussions related to the steps and actions required with regard to roommate matching, move-in and other coordinating informational items.\nThis process includes a series of email communications to each resident and their guarantor as well as an attempt to call and actually speak to each resident guarantor.\nAt our properties leased in the open market, we currently have a total of 72,009 leases for fall, with 28,057 being returning renewal residents that have already taken -- already have possession of their units and 43,952 being new incoming leases, with this latter category representing a greater no show risk.\nIn addition to our standard email protocols, which again were implemented earlier than usual this year, we, as of this date, have made a total of 64,029 phone calls and successfully have had direct in-person dialog with 68% of our new incoming leases and 20% of our returning renewals.\nAt this time, our numbers do reflect an increase over the prior year's potential no show and requested relet activity.\nWhile we do know some portion of this increase is due to COVID, we do not yet know to what degree the increase over the same day prior year is directly due to our efforts to expedite the process.\nAs of yesterday, July 20, we have identified 689 potential no shows as compared to 135 in the prior year.\nWith regard to relet request, we currently have 1,563 for the current year as opposed to 956 in the prior year.\nThe combined current year total potential no show relet at this time represents approximately 230 basis points of potential lost occupancy versus 110 basis points in the prior year.\nIn addition, historically, the no show -- the number of no shows typically increase in the first week of August in concert with the first rent installment being due.\nAs an example, last year, the 135 potential no shows as of July 20 hit a high of 446 on August 5 of last year.\nThrough our normal processes, we successfully managed the final impact to only 38 basis points of diminishment due to actual no shows and successful reletting.\nWe will closely monitor rent payments and increases in potential no shows during the first week of August to determine if historical or above normal increases occur or if our efforts to expedite these processes did in fact accelerate identification of potential no shows and relets earlier than usual.\nWell, as of July 20, the combined no show and relet net variance to last year's is 1,161, representing 120 basis points of potential lost occupancy.\nThe ability to relet both no show and relet request in the COVID environment will likely be more challenging.\nThis year, with fewer properties being leased and in many cases -- I'm sorry, this year, with fewer properties being fully leased and in many cases not having a wait list to facilitate this process, we will have to rely mostly on increased traffic, applications and leasing velocity to the prior year that we previously discussed to backfill these potential no shows and relet requests.\nWith regard to opportunities that may further accelerate our leasing velocity beyond historical levels in the late stages of our lease-up, I'd like to discuss universities' fall housing de-densification activities due to COVID.\nAs we have discussed earlier in the summer, of the approximately 470,000 on-campus beds in the 68 owned markets we serve, over 180,000 of those beds are largely in older traditional residence halls with community bathrooms where as many as 20 to 40 students share common sinks, toilets and showers in small confined spaces, a less than ideal product with regard to consumer preference and the ability to control sanitization to minimize the spread of viruses.\nWith many universities looking to de-densify this product type by converting double bedrooms to singles, thus cutting in half the number of students sharing these common restroom and bathing facilities, the potential existed for on-campus capacity to be reduced by as much as 90,000 beds.\nBased upon our tracking of these de-densification activities by the universities we serve, at this time, 48 of the 68 universities served are de-densifying their on-campus housing, resulting in a reduction of 45,800 on-campus beds.\nIn addition, a total of 50 of the 68 universities are taking an additional 9,735 on-campus beds offline to use as quarantine housing should a second wave of coronavirus occur, resulting in an actual total reduction of more than 55,500 beds on campus this fall.\nAs universities are in the final stages of administering these plans and given the fact that to date we have not yet seen a positive variance in velocity in the 48 markets where de-densification is occurring as compared to the 20 where it is not, we are hopeful that we have yet to see the additional off-campus demand that yet may occur.\nWith regard to on-campus densification impacting our own portfolio via compliance with any mandates covering on-campus university housing, we're pleased to report that we have only 1,061 beds impacted at this time, representing only 110 basis points of capacity lost to our portfolio's designed beds.\nI'd also like to briefly touch on the average rental rate increase for the upcoming academic year.\nAt this time, the 90.1% of leases in place are at an average rent of $807 per bed for a 1.6% increase over the prior year in place average rent.\nWhether or not that rate growth increases, decreases or stays largely intact depends upon the rent levels associated with the mix of remaining vacant beds leased, the rent levels associated with leases ultimately not reflected on our final leasing statistics due to final no shows and relapse.\nAs expected, this quarter the operations team was focused on our response to and preparations for operating the portfolio under eight core objectives as outlined by Bill last quarter addressing COVID-19.\nPage S5 of the supplemental highlights our financial performance, which was impacted on the revenue side by rent relief to our residents made either directly or through our university partnerships, followed by wait fees, revenues foregone in our summer camp and conference business and increased reserves for bad debt for our residents.\nThis resulted in property same-store revenues decreasing by 14.2% which we were able to partially offset with savings and operating expenses of 5.7% for a combined NOI decrease of 20.9%.\nIn mid-March, since the virus was officially designated a pandemic, the American Campus team has been transitioning our operational systems to accommodate the new norms amid the coronavirus crisis.\nUnderstanding the different property types in our portfolio was essential to creating mitigation strategies for each properties based on how students circulate through the communities.\nOver 60% of our portfolio is garden style apartment or townhome units which typically feature exterior unit entries and by nature have less interior circulation and common area interaction.\nThe balance of our communities consist of 30% mid-rise products and 9% high-rise buildings that rely on the use of common elevator banks and single point entries which require additional mitigation.\nAs part of our COVID operational plan, we are collaborating with RB, the maker of Lysol, and implementing a comprehensive Be Safe, Be Smart, Do Your Part program.\nOur approach to operating in a pandemic environment can be broken down to four key components: material specifications, operational policies, staff and student education and the promotion of resident accountability and responsibility.\nIn addition to following CDC and EPA guidelines, ACC's collaboration with RB-Lysol will greatly enhance areas of the operational plan.\nThe Be Safe, Be Smart, Do Your Part program began with a touch point analysis of the public spaces in each of our communities.\nSimply put, our operations team evaluated every public area from the building entry throughout the community and identified the high-touch surface areas, in areas where close interaction would occur.\nThis essential analysis, which highlighted single-point entries, door handles, reception desks, elevators, public bathroom fixtures, among others, gave us the information needed to begin implementation of all aspects of the program.\nAntimicrobial surface overlays, which have a chemical response that continuously self-cleans contaminants off the surface were applied to door handles, touch-screens and elevator buttons.\nTo further minimize touch points, ACC has also incorporated door foot pools at some public restrooms, touch-less trash and recycling receptacles, touch-less paper towel dispensers and touch-less soap dispensers.\nHand sanitization stations were placed at entries, amenities and elevator lobbies while sanitization white stations were strategically placed promoting student involvement in the disinfecting of high-touch surface areas.\nThe annual operation expense on these items is approximately $2.5 million to $3 million.\nSignage has been installed to highlight policies that will promote physical distancing, maximum recommended occupancies and best practices.\nWe are also providing our residents at every community with updated rules and regulations addressing COVID-19 resident responsibilities, a student code of conduct that addresses the use of amenity spaces and education for residents to perform a daily wellness self-checklist to assess their health before leaving their student unit.\nACC has also comprehensively overhauled our cleaning policies and procedures.\nWe are proud to have co-written these cleaning policies and procedures with RB-Lysol as the US Environmental Protection Agency recently approved Lysol disinfectant spray as the first product to test effective against the virus that causes COVID-19 when used on hard nonporous surfaces.\nOur revised cleaning regimen, including the frequency of deep clean and high touch-point surface areas has customized products and procedures for each type of functional space in our student housing communities.\nAs we turn in make ready units, we will disinfect with Lysol products and prepare each student unit and bedroom according to the co-written Lysol protocols, and we will place a Lysol clean and confident room seal on the unit and bedroom doors, which will not be broken until the resident renters their unit and bedroom.\nOur operational staff have new policies for safe engagement with residents as well as each other, and have been issued masks, gloves and other equipment along with guidelines for their use.\nWe will also reach out and educate our residents through a healthy living email campaign, virtual brochures and virtual resident life programming.\nOur residence life programming initiatives will support the health and wellness and academic and personal success of our residents.\nWhile education is key to understanding the current environment, perhaps the most critical part of the Be Safe, Be Smart, Do Your Part program is promoting self-accountability and responsibility among our residents.\nAs such, the most important part of collectively mitigating the spread of the virus is the individual actions of our residents.\nFor this unprecedented fall semester, we have physical distancing, sanitization knowledge and personal responsibility practices will become the new behavioral norms for our student residents.\nAlready, we are delighted to see our residents embrace the new personal responsibility policies at our communities.\nBeginning with our 2020 owned development deliveries, I'm pleased to report that we have received all necessary permits for occupancy for all projects expected to be completed for this August, including the second phase of our Disney College Program housing and projects at San Francisco State and USC Health Sciences.\nWhile those developments are targeted to open on time and on budget despite the potential disruption from COVID-19, we are experiencing impacts to targeted occupancy for fall of 2020.\nWith regards to the Disney project, Flamingo Crossings, while Walt Disney World has reopened to limited capacity, based on discussions with Disney, we do not currently anticipate occupancy of the project in 2020 based on their current reopening schedule and labor onboarding.\nWhile the situation remains fluid, we will have 1,600 beds available in August, increasing to 2,600 beds in January 2021 ready to occupy DCP participants once the program recommences.\nThrough the terms of the ground lease, our project has a first fill provision for all DCP participants in the program.\nTo the extent the interim program continues to be suspended for a prolonged period of time, we have the right in the ground lease to open the project to all of Walt Disney World's Orlando based employees along with the additional backup provisions where we have the right to convert the project to a hotel and which Disney has the right to offer and manage as part of their hospitality portfolio.\nEach of these alternate uses has pro forma returns equal to or greater than the development's intended primary use.\nWith regards to San Francisco State University, the university officials have mandated to significantly reduce the amount of on-campus housing available for fall 2020 as part of de-densification efforts.\nOur project is operating under a marketing and license agreement, with San Francisco State performing the leasing administration duties for this academic year.\nAfter discussions with the University, we anticipate that the project will open at 60% capacity and a single occupancy configuration for this fall.\nThere remains the potential to return to fully designed bed capacity for spring and summer 2021, and we will continue to monitor the situation and work closely with the University.\nWith regards to USC Health Sciences phase two, we are currently 72% pre-leased and are working through continued leasing activity and the no show process for fall.\nWe will provide a comprehensive update on all fall deliveries on the Q3 call.\nMoving to our on-campus P3 business.\nWe have a strong pipeline of on-campus development of 10 projects in various levels of pre-development.\nFirst, we anticipate closing and commencement of construction on our third-party project at Georgetown University in Q3 of this year as originally planned.\nHowever, due to the disruptions caused by COVID-19, our third-party projects at Concordia, University of California, Berkeley, Upper Hearst and University of California, Irvine, are anticipated to be delayed until next year.\nWe currently expect to close and commence construction on all three projects in 2021, with Concordia delivering -- with Concordia targeting delivery in fall of 2022 and UC Berkeley and UC Irvine targeting delivery in fall of 2023.\nAnd we continue to make progress in the early stages of pre-development on our previously announced awards at MIT, Virginia Commonwealth University, Princeton, Northeastern, UC Berkeley and West Virginia University.\nThe final structure, scope, feasibility, fees and timing for all projects in pre-development have not yet been finalized.\nOverall, while we have seen some procurement and housing initiatives temporarily delayed and suspended through COVID-19, we continue to pursue numerous active procurements and see a vibrant future pipeline of on-campus development opportunities.\nAs Bill mentioned in his remarks, universities across the country have had to de-densify on-campus housing, with beds impacted consisting primarily of older traditional dorms with community baths.\nConsumer preferences also weighted heavily to more modern apartment and suite style accommodations that more easily allow sanitization and, if needed, isolation to occur within the unit.\nIn addition, due to de-densification, other reduced revenue streams and related financial impacts, universities will utilized off-balance sheet financing structures in order to update their housing stock, including both project based financing as well as equity based models like our ACE program.\nWe expect that the combination of these facts will further accelerate the need for the modernization of outdated on-campus housing, utilizing the P3 financing method, and believe ACC is well positioned as the established best-in-class partner to capitalize on this expanding opportunity.\nIn addition to what we believe will be an expanding opportunity on-campus, ACC is also positioning itself to execute on opportunistic investments that may arise from the COVID-19 crisis and corresponding economic environment.\nGiven that our recent cost of public equity continues to be at disconnect to private market valuations, it is prohibitive for us to execute on the many investments in the current environment.\nAs such, we are expanding our joint venture equity strategy in order to pursue external growth.\nWe have engaged [Indecipherable] financial advisor and are currently in the market to identify equity sources for joint venture or fund in which ACC would invest minimal equity or contribute existing assets as minority GP.\nIn addition to our existing partnership with Allianz, the identification of external equity partners will allow ACC to pursue external growth, off-balance sheet, while also offering further access to liquidity via dispositions if the current economic crisis continues.\nWe plan to utilize this off-balance-sheet structure to execute on our proven core competency of identifying and executing on investment opportunities that drive outsized returns for both ACC and our strategic capital partners.\nACC will benefit in the form of earnings per share and FFO growth to the generation of fees and potential promotes upon outperformance while requiring minimal equity investment to preserve our balance sheet for more accretive investments.\nWe will keep the market up to date as we make progress.\nFinally, looking forward to the fall 2021 academic year, we continue to see favorable reductions in new supply across our owned markets.\nWithin ACC's 68 markets, we are tracking 17,600 beds currently under construction for 2021, with a potential additional 1,200 beds planned, but not yet under construction, reflecting a decline of 14% to 20% in new supply off the current year's decline of 20%.\nEven if all planned beds were delivered for fall of 2021, this is the lowest number of beds delivered in our markets since 2011.\nWe will update the market with respect to these potential deliveries on our third quarter call.\nAs we reported last night, total FFOM for the second quarter of 2020 was $50.9 million or $0.37 per fully diluted share.\nAs has been discussed, Q2 was a quarter significantly impacted by the effects of COVID-19 and the associated governmental shelter in place orders put into effect across the country.\nWhile we cannot completely isolate every item related to the pandemic, we believe approximately $23 million to $24 million in FFOM was lost due to situations surrounding the pandemic this quarter.\nOverall, owned property revenue was $32.4 million negatively impacted by COVID related rent relief, lost summer camp revenue, increased bad debt and waived fees and other items.\nSomewhat offsetting the lost revenue, owned property operating expenses were $8 million lower than originally budgeted as we were able to reduce spend in each area except for the uncontrollables of insurance and property taxes.\nAs a result of the lower than originally budgeted property NOI, ground lease expense was approximately $500,000 less due to a reduction in outperformance rent being paid to our university ground lessor partners.\nAnd joint venture partners' noncontrolling interest in earnings was approximately $1.2 million lower.\nAdditionally, third-party management fee income was approximately $1 million lower and FFOM contribution from our on-campus participating properties was also almost $800,000 lower due to universities refunding a portion of spring rents at properties in both of these business segments.\nLastly, we were able to create approximately $800,000 in G&A and third-party overhead expense savings relative to our original plan for the quarter.\nDue to the continued uncertainty created by the pandemic and the ultimate effect of any actions taken by universities with regard to curriculum delivery for the 2021 academic year, we are not issuing new 2020 earnings guidance at this time.\nWe do however want to make you aware of some additional impacts of the pandemic that you should expect as we close out the current academic year in the first couple of months of the coming quarter.\nJuly will represent the last month of the current in-place leases at a substantial majority of our properties, and we expect delinquencies will not materially differ from recent months.\nWe also have some additional anticipated refunds in our on-campus ACE portfolio for the remainder of the summer term, expected to be in the range of approximately $1.5 million to $2.5 million, which should still keep us within the originally communicated range of expected refunds.\nAnd finally, with regards to other income, we continue to expect a little to no summer camp business, and we are continuing to waive late fees and convenience fees through the remainder of the current academic year, which, combined, is expected to result in the loss of $5 million to $6 million in other income in the third quarter.\nAs William discussed, we now believe it is likely that the three third-party development projects at the University of California, Irvine, Berkley and Concordia University originally scheduled to commence in 2020 will be delayed until 2021.\nThese projects were expected to contribute a combined $4 million in development fee income in 2020.\nWhile there will be some continued financial impacts of the pandemic into the immediate future, the consumer sentiment and university policies Bill discussed give us confidence that longer-term, our operating results will return to normalized levels.\nIn the meantime, we have a strong and healthy balance sheet and substantial liquidity to allow us to absorb the disruption.\nWe further improved the Company's balance sheet liquidity in June with a well-received 10 year $400 million bond offering, using the proceeds to reduce the outstanding balance on the Company's $1 billion revolving credit facility.\nAs of June 30, we had over $800 million of availability on our revolver, with no remaining debt maturities in 2020 and a manageable $167 million in secured mortgage debt maturing in 2021.\nAs detailed on page S15 of our earning supplemental, including all projects currently under development for delivery through 2023, we have only $279 million in remaining development capital needs.\nAs of June 30, the Company's debt to total asset value was 40.9% and net debt to EBITDA was 7.6 times.\nAlthough our leverage ratios are temporarily elevated at this time relative to the targets we have historically communicated due to the short-term COVID related disruption discussed, we feel confident about the capital plan we continue to lay out on page S15, which will bring the Company's debt to total assets back into the mid-30% range and debt to EBITDA back to the high-5 times to low-6 times range.\n",
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"content": "q2 adjusted ffo per share $0.37.\nq2 same store net operating income decreased by 20.9 percent versus q2 2019.\nanticipates about $1.5 to $2.5 million in rent refunds in q3 of 2020.\nno remaining debt maturities in 2020.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: As you may recall, on our Q2 call in July, we were still somewhat apprehensive as we had just surpassed last year's COVID-impacted leasing velocity and the emerging Delta variant was creating uncertainty around universities plans to move forward with in-person classes and a return of campus social activities.\nAt that time, based on historical leasing velocity data, we continued to believe that the industry's COVID recovery would not fully materialize until the fall of 2022.\nToday, just three months later, we are extremely pleased to report that students all across the nation continue to flock back to their college towns and leased well into the months of August and September, and universities continued to press forward with their plans to return to in-person activities, including full attendance at college football stadiums across America.\nThe result, the student housing industry has emerged from the COVID pandemic in the fall of 2021 with its investment thesis fully intact and with the sector having tailwinds, the like of which we haven't seen in many years.\nAs outlined in our interim update earlier this month, we're pleased that the execution of our fall '21 lease-up produced an opening fall occupancy of 95.8% for our total portfolio and rental rate growth of 330 to 380 basis points for our 2021 and 2022 same-store property groupings, respectively.\nAll these metrics are above the assumptions in the high end of our prior lease-up guidance.\nIn addition to the extremely successful lease-up, our operational and financial results also exceeded our expectations in the third quarter, with ancillary income and operating expenses beating our forecast.\nIn addition, the ongoing development and commencement of operations at Flamingo Crossings Village, our community serving the Disney College Program, are also going quite well.\nDuring the quarter, we delivered the fifth phase of development and have now achieved 85% occupancy, in line with our expectations for this fall.\nNotably, since the DCP program recommenced only five months ago, we have already executed leases with and moved in more than 4,500 residents, demonstrating the continued vibrant demand for the Disney College Program.\nOur lease-up results and recent operational outperformance allowed us to increase the midpoint of our financial guidance by 4% to $2.08 per share, which is above the high end of our prior guidance range.\nBased on the progress we've made this year, total property NOI returned to prepandemic levels this quarter, a full year earlier than we previously anticipated.\nAnd more impressively, rental revenue is expected to exceed prepandemic levels in the fourth quarter for our same-store properties from 2019.\nWe now expect to grow earnings by 3% to 7% over 2020.\nAll in all, the company's recovery and financial performance this year has certainly exceeded our expectations as cumulatively, we have exceeded our original guidance for the first three quarters of the year by $0.12 per share or almost 10%, as students continue to return to college campuses throughout the year.\nI'd like to now turn to the fundamentals of our industry.\nAs reported by owners and operators attending the NMHC Student Housing Conference earlier this month, occupancy and supply demand fundamentals of the sector are strong.\nAnd again, the industry is experiencing some of the most substantial tailwinds we've seen in many years.\nThe broader comparable sector represented by the RealPage/Axiometrics 175 returned to prepandemic occupancy levels of approximately 94%, while also producing attractive rent growth of 2.5%.\nWe saw robust admission applications at four-year public and private universities we serve and target.\nThe strength in admission applications appears to have directly led to the highest level of first year student enrollment growth we have seen.\nIn the 48 of 68 university markets for which we are able to collect first year enrollment data, there was an increase of 7.4% over fall 2020 and 6.4% above prepandemic fall 2019.\nFor perspective, for four-year public institutions, in the prior 30-year period, average first year enrollment growth was approximately 2%.\nThis level of significant growth in first year students occurring this year indicates the emerging post-COVID era demand from students wanting to attend high-quality universities in person and should provide significant recurring housing demand in the years to come.\nThe record number of first year students, the reinstatement of on-campus housing policies and the resumption of in-person campus activities will once again allow us to implement our in-person and exclusive sports marketing program activities in the 2022 leasing season.\nHistorically, these programs have been an integral part of our early leasing season velocity outperformance and our final fall occupancy outperformance as compared to our peers.\nThe significant increase in first year students led to the highest level of total enrollment growth in recent years, up over 1.5% versus academic year 2020 and prepandemic academic year 2019.\nIn 62 of the 68 ACC markets for which we've been able to collect total enrollment data, this represents the addition of over 30,000 students.\nSector tailwinds also include a reduction in national new supply, continuing at least through the 2022-2023 academic year.\nThis includes a projected decrease of over 25% in ACC markets and represents the lowest level of new supply we have seen in over a decade.\nIn total, we are tracking new supply of only 15,500 beds with only 1/3 of our NOI being produced in markets seeing new supply.\nThis compares to 55% to 67% of NOI being produced in new supply markets over the last three years.\nWe're also seeing significant demand from universities seeking to modernize their on-campus housing.\nDuring the quarter, we were awarded new third-party developments at Emory University and the University of Texas.\nAnd this month, we started a new third-party development on the campus of Princeton University.\nIn all, we are tracking more than 60 universities that are evaluating privatized residential projects, a continuing increase compared to prepandemic levels.\nIn summing it up, we're extremely pleased with the progress that we and the sector have made in managing through the global pandemic.\nFinally, with our sector's resiliency and investment thesis fully intact as we emerge from COVID, institutional capital is once again focusing on the sector, with several notable transactions recently occurring in the space.\nWe are highly confident in our ability to fund our business through strategic capital recycling and free cash flow generation, while producing attractive earnings growth for our shareholders.\nWith the sector's COVID recovery now largely complete, we believe the current transaction environment affords us the opportunity to accretively fund recent and ongoing development activity and further strengthen our balance sheet in 2022.\nAs such, we intend to accelerate $200 million to $400 million of disposition activity, which fully satisfies our projected funding needs.\nIncluding the strategic capital recycling, we believe that FFOM per share growth in the range of 12% to 15% is achievable in 2022.\nBased on the positive fundamentals in the student housing industry and the accretive contribution from our ongoing development program, we are excited about the prospects for continued growth beyond 2022.\nWe believe we are now well positioned to produce long-term earnings growth, net asset value creation and superior returns for our investors in the years ahead.\n",
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"content": "american campus communities - maintaining recently increased guidance range for year ending dec 31, 2021.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Now, turning to our business.\nIn reviewing 2020, prior to the pandemic, ACC was off to an excellent start.\nAfter delivering nearly 5% earnings growth in 2019, the Q1 delivered NOI that exceeded our expectations for each of the three months.\nAdditionally, our velocity for fall 2020 lease-up was over 3% ahead of the prior year with rental rate growth trending well relative to targets.\nNew supply for fall 2021 was also near decade lows.\nThe fundamentals in our sector were strong and all facets of our business were exceeding our internal expectations.\nWith COVID- 19 being declared a pandemic, the student housing sector like most businesses faced unprecedented and unanticipated disruptions.\nThe U.S. Higher Education System was dramatically impacted by the governmental shelter in-place orders put in place across the country.\nOver the last 3 quarters of 2020, we responded by attempting to do the right things on behalf of all of our stakeholders, while continuing to provide a central housing services to students all across America, all the while attempting to mitigate long term negative impacts to our business and providing thought leadership in action to help universities return to a sense of normalcy.\nDespite the negative financial impacts to our business in 2020, we were encouraged by students' strong desire to be physically present in their college environment, demonstrating that the desired educational experience is much more than simply attending a classroom lecture.\nUltimately fall 2020 enrollment levels at Tier 1 universities we serve remained relatively consistent with 2019, and most students returned to their college towns for the fall term, regardless of whether their university was holding in-person classes or providing them online.\nThis was evidenced by the fact that our portfolio achieved approximately 90% occupancy for fall of 2020 with the sector as a whole being over 88% occupied.\nAs we look forward, 2021 will be a year of transition on the path back to normalcy.\nWhile the virus continues to have a lingering impact on the student housing sector, we are seeing signs of improvement.\nDuring the fourth quarter, we saw an increase in collection rates, a diminished necessity for on-campus rent refunds and a reduction in request for rent relief under our resident hardship program.\nWe also had strong demand for spring leases signing over 3600 new leases commencing in the spring term, 50% more in the prior year.\nWhile the current transitionary environment causes us to believe there could be softness in our ability to backfill May-ending leases at historical levels and that we may not return our summer camp and conference business to normal levels.\nWe are cautiously optimistic regarding the 2021-2022 academic year commencing this fall.\nIn discussions with our university partners, the vast majority are indicating that admission applications are up over the last year and many are projecting strong enrollment growth for fall 2021.\nThere is also incrementally positive news in terms of universities planning to return to in-person classes for fall of 2021 as exemplified by the recent announcements by both the University of California and Cal State Systems as well as several other major universities who have been fully online in the current academic year.\nWith regard to their statements, they will be returning to in-person classes.\nAlso, Arizona State University, our largest university partner recently announced plans for full availability of in-person classes in fall of 2021 and encouraged students to register early and at this time, they expect to reinstate their on-campus housing expectation for first year students.\nAlthough, we cannot yet give you a reasonably accurate estimate of fall 2021 occupancy levels, these are certainly encouraging signs.\nAs we fully expected and consistent with what has been reported by our private peers and in third party market research, across the industry pre-leasing for the 2021-2022 academic year is tracking behind the traditional historical pace.\nWe did see accelerating leasing velocity in the weeks after students return from winter break and there will be significant acceleration in April, May and June, which we expect to compare favorably relative to those months last year when leasing activity dramatically dropped off during the height of the pandemic.\nFinally, the new supply picture continues to provide tailwind for the sector as a whole as fall 2021 deliveries are flat compared to 2020, which as I mentioned earlier was at the lowest amount of new supply in the past decade.\nTurning to our ongoing development at Walt Disney World.\nAs we discussed last quarter, with the current suspension of the Disney College Program, we did commence in earnest [Phonetic] marketing and leasing of the project at Disney cast members and employees of operating partners in late Q4.\nWith the holiday season in the start of the New Year, being a slow leasing period for conventional multifamily, we have signed 88 leases to date and anticipate the velocity will accelerate through the remainder of the year as cast members' current leases expire.\nThe original pre-COVID proforma projected Disney College Program to deliver approximately $14 million in operating income after ground rent in 2021.\nHowever, based on a standard multifamily leasing stabilization trend of 25 to 100 leases per month, we now expect 2021 to have a net operating loss after ground rent between $2.7 million and $5.4 million.\nAs Disney brings the DCP intern program back online, occupancy will increase more rapidly than the current conventional market leasing velocity.\nDisney continues to be fully committed to the full reopening of Walt Disney World as soon as possible, evidenced by their continued investment in the parks and resorts, including the continued construction of Flamingo Village Crossing Town Center, a 200,000 square feet mixed used entertainment center set to open in fall of 2021 across the street from our community.\nAnd as Disney discussed on their recent earnings call, they have significant demand for attendance at the parks and are very pleased with future bookings, and as they stated at this point, it's only a matter of the rate of public vaccination that will allow them to start to see a return to normal levels of operations at the parks with corresponding increases in cast members and ultimately DCP participants.\nAlthough the timing and velocity of the reinstatement of the Disney College Program continues to be influx at this time, we currently expect the completed project to be fully stabilized and pro forma occupancy and rents within 12 to 24 months of the originally anticipated date of May 2023 at its originally targeted stabilized yield of 6.8%.\nNow looking to transactional activity in the student housing sector.\nAs with many sectors, 2020 volumes were down significantly, with CBRE reporting student housing transactions decreasing approximately 20% versus 2019.\nWhile deep interest from capital sources looking to invest in the sector held cap rates in line with pre-COVID levels, pricing has been lower as valuations have been impacted by COVID's disruption to historical revenues and NOIs.\nBased on our discussions with the investment community, we expect transaction volume to remain low in the first three quarters of 2021, with potential improvement later in the year, as lease-ups are finalized for the upcoming 2021-2022 academic year.\nAs it relates to our capital recycling plants for '21, we will continue to monitor the market to assess the optimum timing to maximize our own asset valuations and we'll update the market at the appropriate time.\nTurning to on-campus public-private partnership, P3 opportunities, as universities are expecting a return to normalcy in the fall, they are now beginning to refocus their efforts to modernize on-campus housing.\nWe started to see progress with regard to our projects awarded pre-COVID that are in pre-development as well as a pickup in new pursuits.\nWe continue to believe that P3 opportunities on-campus may well be greater in a post-COVID environment, given the significant financial impacts universities experienced related to the de-densification and consumer rejection of older community bath residence halls coupled with the funding and budget cuts university space in the post-COVID environment.\nAs the recognized industry leader, ACC is uniquely positioned to capitalize on this expanding opportunity.\nCurrently, we are tracking over 60 universities that are evaluating potential on-campus projects.\nWith respect to guidance, while we believe the student housing sector has exhibited impressive resiliency, despite the significant disruption the pandemic has had on the universities of students we serve, and while we see many encouraging signs of a steady return to normalcy, the range of potential financial results for 2021 is still too wide for us to provide full year earnings guidance, with a reasonable and useful range.\nInstead, we'll be providing guidance for each forward quarter until we can provide an estimate further into the future, that we can stand behind.\nAs such, we're providing Q1 FFOM guidance in the range of $0.54 to $0.56 per share.\nAs we look beyond Q1, we would encourage everyone to review the normal quarterly seasonality of our business and further take into consideration some of my earlier comments, regarding the fact that the transitionary environment causes us to believe that there may be softness in our ability to backfill May-ending leases at historical levels, and that we will likely not see a return to normal summer camp and conference business in 2021.\nWe also expect to see significantly higher same-store operating expense growth levels than normal, as 2020 presents a tough comparison year given that operating expenses were approximately 6% below our original 2020 guidance for expenses.\nThis will be especially notable in Q2 and Q3, as we anticipate more normal expense levels that will be compared to the same periods in 2020, when many expense activities were halted.\nThis could lead to expense growth in the high-single digits in Q2 and Q3 of this year.\nIn closing, I'd like to convey our excitement related to the recent appointments of three new outstanding independent directors to the ACC Board.\nThese three new directors have extensive real estate and capital allocation experience and bring valuable diverse perspectives that will serve the interest of our shareholders well.\nEd has helped oversee our company's transformation from an owner of only 16 student housing properties at IPO to becoming the industry leader, and we'd also like to congratulate Ms. Cydney Donnell, who will be assuming the role of Board Chair up on Ed's departure.\n",
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"content": "sees q1 ffo per share $0.56 to $0.58.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: 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.\nAs a reminder, we closed on the sale of the Power and Civil Construction businesses in October of 2020 and January 2021, respectively, and the sale of the oil and gas maintenance and turnaround services business in January 2022.\nThe financial results of these businesses are classified as discontinued operations in our financial statements.\nOur results from discontinued operations include the oil and gas sale and adjustments to closing working capital estimates for previously completed transactions.\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.\nWe are incredibly pleased with our first quarter performance, and momentum is building across our business and our markets.\nOur success is a result of the passion and dedication that our teams bring to their work and clients every day.\nThis excellence was highlighted last week when Fortune reaffirmed our No.\n1 industry ranking on its World's Most Admired Companies list.\nThe elements for uninterrupted multiyear infrastructure and ESG investment growth are well established.\nand the global commitments by our clients to deliver on increasingly well-defined ESG objectives.\nA global infrastructure investor renaissance is beginning.\nAnd our strategy, focused on our teams, clients, communities and innovation has us better positioned than ever to win.\nThrough our expanded services, including advisory and program management, a greater share of a growing market is now addressable by AECOM, and we are working to shape the priorities of our clients and deliver value for our stakeholders.\nTurning to our first quarter's results.\nWe exceeded our expectations on every key financial metric.\nNSR increased by 5% with strong growth in both our Americas and international segments.\nImportantly, we are winning work at the highest rate in the history of our company.\nWins totaled $3.6 billion with a 1.4 book-to-burn ratio in our Americas design business, and a 1.2 book-to-burn ratio across our global design business.\nOur strong book-to-burn is worth emphasizing given our four quarters of consistent organic NSR growth.\nWe also had key wins in our construction management business, and our pipeline has never been stronger.\nThe segment adjusted operating margin increased by 60 basis points to 13.7%, reflecting continued investments in organic growth and innovation, the benefits of our highly efficient global delivery capabilities and the high value our teams are delivering for our clients.\nOur margins lead our peers, but plenty of opportunity for improvement remains.\nOur focus on deploying innovation and digital tools to transform how we deliver for clients against a backdrop of increasing demand for advisory and program management services supports our guidance for this year and our 17% longer-term margin target.\nAdjusted EBITDA increased by 10% and adjusted earnings per share increased by 44%.\nOur earnings per share is benefiting from the execution of our focused strategy, strong operational performance and accelerating organic growth as well as from share repurchases.\nIncluding $213 million of stock repurchases in the first quarter, we have now repurchased $1.2 billion of stock since September 2020, when we launched our repurchase program, or 14% of our outstanding shares.\nThis capital allocation benefit to shareholders is driven by our strong conversion of earnings to cash flow.\nIn fact, cash flow in the quarter was one of the highest in our company's history for a first quarter.\nThe attributes of our business, including a high returning and low-risk profile and a capital-light business model with a highly variable cost structure, underpin our expectations to consistently deliver strong cash flow and to deliver on our capital allocation priorities.\nReflecting this confidence, we initiated a quarterly dividend program in December and our first dividend payment occurred in January.\nIt is our intention to increase our per share dividend by a double-digit percentage annually.\nThis marks a milestone for our company's history and demonstrates our steadfast commitment to use capital allocation tools to maximize total shareholder return.\nPlease turn to the next slide for a discussion of the trends across our markets.\nBeginning in the U.S., our largest market, conditions are strong.\nOur federal, state and local clients are gearing up for several years of sustained increases in infrastructure investment, which includes the expected benefits of the $1.2 trillion Bipartisan Infrastructure Law.\nThis represents a generational investment in U.S. infrastructure and arrives at an opportune time.\nTypically, federal support for infrastructure has been inversely correlated to state and local fiscal health.\nHowever, our state and local clients, which account for nearly 25% of our NSR, are reporting record revenues and budget surpluses, which is resulting in a very favorable backdrop.\nIn addition, our public and private sector clients are increasingly prioritizing investments to advance ESG.\nToday, nearly every project proposal has an element of ESG in its scope, and our clients are demanding more holistic thinking and a broader advisory relationship to help them achieve their multi-decade ambitions.\nOur momentum and the expansion of our addressable market are apparent in our pipeline growth, which is up by double digits.\nThis is noteworthy when you consider how strong wins and backlog growth were this quarter.\nThe pipeline growth we are seeing is especially encouraging, considering the benefits of the Bipartisan Infrastructure Law aren't likely to be material until our fiscal 2023.\nInternational markets are experiencing a very similar positive trajectory.\nESG is front and center in our clients' agendas and we are seeing strong demand for our advisory services and technical expertise.\nOur pipeline increased by high single-digit percentage and our backlog increased in each of our largest international markets, highlighted by key transportation and infrastructure frameworks in the U.K., expanded program management roles in the Middle East and high win rates for key clients in the Asia Pacific region.\nLooking ahead, the strong foundation we have built and favorable end market trends have positioned us well for sustained multiyear growth.\nWe spent the last two years narrowing our focus on our higher-margin, lower-risk professional services business and implementing our think and act globally strategy.\nThe strategy is built on our leading technical capabilities, global expertise, and on bringing new ways of solving our clients' biggest and most complex challenges with innovative digital solutions.\nWe continue to advance our digital AECOM strategy, and with our success, we are accelerating our investments in this area.\nOver the course of the year as the solutions establish a market position, we will announce their launch similar to PlanEngage, which we announced last quarter.\nPlanEngage, our digital platform that reinvests the public engagement process for an infrastructure project, is quickly being introduced as the platform for community engagement across our global client base.\nAs funding from the Bipartisan Infrastructure Act in the U.S. is connected with these projects later in 2023, our PlanEngage tool will become even more valuable.\nAcross our business, one theme is constant: Our investments will expand our advantage as demand grows and labor constraints challenge the industry.\nWe are consistently winning our largest and highest priority pursuits, with our win rate at all-time high levels.\nFor example, our leadership team identified 10 global pursuits that we deem to be a top priority for strategic positioning and for delivering on our accelerating growth expectations.\nI'm very pleased to report that we've already won eight of these 10 projects, and two are still pending decisions.\nIn addition, we've had several other key wins over the past few quarters, including a nine-figure takeaway from a key competitor in an international market, a nine-figure takeaway from a key incumbent on a high-value U.S. federal environment program, and we have been selected for numerous other key pursuits that underpin our confidence.\nI can't say enough about how our culture of winning and excellence has expanded and what it means for our future.\nPlease turn to the next slide.\nI couldn't be more pleased with what we have accomplished to date and how well positioned we are for the future.\nAgainst the backdrop of strong client demand and with our foundation for success now in place, we are taking action to fully capitalize on the opportunities ahead.\nFirst, we are fostering a culture that celebrates winning.\nThis includes prioritizing our time and investments on the best growth opportunities and highest value pursuits.\nAs leaders in areas including electrification, transit systems, environmental assessment, remediation, water infrastructure, resilience, climate change and new energy, we are poised to benefit from our exposure to rapidly growing markets.\nThis is giving us the opportunity to also be selective and disciplined about the types of opportunities on which we invest time and capital with a focus on profitable growth and strong returns on capital.\nSecond, we are continuing to invest in program management and advisory capabilities.\nThrough these capabilities, we are expanding our addressable market opportunity by adding services that lead to earlier engagement with clients.\nWe have onboarded key talent to support several large wins over the past year, including the Neom and AlUla programs in Saudi Arabia.\nLooking ahead, as the scope and complexity of infrastructure and ESG initiatives expand, high-value program management and advisory will take an even more central role in helping our clients and will distinguish AECOM in the market.\nThird, we are investing in digital AECOM to develop and deliver products that extend the capabilities of our teams and transform how we engage with clients.\nOur PlanEngage tool and commercialization of DE-FLUORO, our proprietary solution for the destruction of PFAS compounds, are great examples.\nIn addition, we are advancing the development of key digital solutions in the transportation and facilities market that will offer leading parametric and iterative design tools.\nFinally and most importantly, we are investing in and building teams to deliver in a growing market, which will be increasingly important going forward.\nWe are focused on ensuring AECOM is the best place in our industry to build a career.\nAt this point, I am pleased to report that the results of our recent employee survey reflects our continued high levels of employee engagement.\nMost notably, this included further increases in the percentage of employees that would recommend AECOM as a great place to work.\nThere is no higher acknowledgment of our commitment to building a great culture than this measure, and this gives us confidence we will remain at an advantage as the overall labor market tightens.\nPlease turn to the next slide.\nWe exceeded our expectations on every key financial metric in the first quarter.\nWe delivered another quarter of positive organic NSR growth, a record first quarter margin, double-digit adjusted EBITDA and earnings per share growth and one of the highest first quarter free cash flows in our company's history.\nTax was a $0.04 benefit to earnings per share compared to our plan due to the timing and quantum of discrete items.\nWe also delivered on our capital allocation commitments, including ongoing investments in our teams and digital AECOM, more than $200 million of share repurchases and the initiation of a quarterly dividend program.\nThe dividend is a complement to our share repurchases.\nWe have a strong balance sheet and highly predictable cash flow, which allows for investments in the business as well as consistently returning all available free cash flow to our shareholders.\nImportantly, we are winning work at a high rate.\nOur pipeline across the business is up double digits, and we have not yet begun to see material benefit from the Bipartisan Infrastructure Law.\nPlease turn to the next slide.\nIn the Americas, NSR increased by 3%, highlighted by growth in both the design and construction management businesses.\nOur book-to-burn in the Americas design business was 1.4, and total backlog in design business increased by 5%, which continues to include a near-record level of contracted backlog, which provides for strong revenue visibility.\nIn addition, we are benefiting from strengthened conditions in our construction management business and believe backlog will increase over the course of the next year.\nFirst quarter adjusted operating margin was 17.7%, a 30-basis-point increase from the prior year.\nThis result reflects both ongoing investments we are making to support growth and ongoing benefits from the actions taken to operate a more streamlined organization that delivers more efficiently.\nPlease turn to the next slide.\nTurning to the international segment.\nNSR increased by 7%, with growth across all of our largest regions.\nOur wins were strong and backlog increased by 6%.\nWe continue to gain share in the U.K. public sector, are building our gains in the Middle East and have been successful on a number of key pursuits in Hong Kong and Australia.\nOur adjusted operating margin in the first quarter was 8.2%, a 110-basis-point improvement from the prior year.\nWe are realizing the benefits of the actions we have taken to eliminate inefficiencies, regain market share and better scale our cost structure, including increasing utilization of our global shared service centers.\nPlease turn to the next slide.\nTurning to cash flow, liquidity and capital allocation.\nFirst quarter operating cash flow was $195 million and free cash flow was $163 million.\nThis was better than we expected and is consistent with our focus on delivering more consistent phasing throughout the year.\nThis improves our return on capital and allowed us to execute substantial repurchases earlier in the year as a result.\nAs Troy noted, our capital allocation policy is focused on returning substantially all free cash flow to investors in order to maximize total shareholder return and returns on capital.\nThis included the milestone announcement we made during the first quarter of the initiation of a quarterly dividend program and our intent to grow our per share dividend at a double-digit annual percentage.\nOur first quarterly dividend payment was made on January 21.\nThe dividend is a testament to the steps we have taken over the past two years to reduce our financial and operational leverage, which has contributed to consistently strong earnings and cash flow.\nAs we look ahead, we continue to expect to convert our earnings to cash flow at a high rate, and we continue to expect free cash flow of between $450 million and $650 million in fiscal 2022.\nAs a reminder, our cash flow is typically weighted more strongly to the second half of the fiscal year, though we expect our first half cash flow to improve from the prior year.\nPlease turn to the next slide.\nWe are increasing our fiscal 2022 adjusted earnings per share guidance to between $3.30 and $3.50, which would reflect 21% growth at the midpoint.\nThis increase reflects operational outperformance we delivered in the first quarter, the benefits of our share repurchases completed in the first quarter and a lower-than-planned tax rate.\nAs a reminder, our adjusted earnings per share guidance only incorporates the benefit of already executed share repurchases, but we expect to continue to buy back stock as part of our capital allocation program.\nWe also continue to expect to deliver adjusted EBITDA of between $880 million and $920 million, which would reflect 8% growth at the midpoint of the range.\nBased on our strong start to the year, we are also reaffirming our expectation for organic NSR growth of 6%, a segment adjusted operating margin of 14.1% and our long-term 2024 financial targets, including adjusted earnings per share of greater than $4.75 and approximately $700 million in free cash flow.\nWe expect our full year tax rate to be 25%, which incorporates the impact of our first quarter tax rate and the expectations for approximately 28% for the rest of the year.\nLonger term, we expect our tax rate to be in the mid-20s.\n",
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"content": "qtrly revenue decreased 1% to $3.3 billion.\nsees diluted adjusted earnings per share guidance between $3.30 and $3.50 for fiscal 2022.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: 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.\nAs a reminder, we sold the Management Services business in January 2020 and we sold 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'd like to begin by acknowledging the continued great contributions of our teams globally.\nIn many parts of the world, day-to-day activities are beginning to resemble normalcy.\nHowever, the pandemic and its variants continue to impact our teams and their families.\nAgainst this backdrop, I'm proud of how we are collaborating to deliver for our clients and communities.\nAs the COVID-19 variant spread, we all need to remain agile until we reach a point where the threat from the virus is eliminated.\nWe have the best teams in the industry and our focus remains on keeping our people safe and enabling them to be successful in their careers.\nTurning to a discussion of our performance.\nFour themes are apparent across our business.\nFirst, our third quarter results, extend our track record of delivering on our financial and strategic commitments.\nAnd with our strong year-to-date performance, we are increasing our guidance for fiscal 2021 and we are increasingly confident in delivering our long-term financial targets including doubling adjusted earnings per share from fiscal 2020 to fiscal 2024.\nSecond, the success of our Think and Act Globally strategy and investments in our people and innovation are contributing to accelerating growth.\nIn fact our design business that accounts for approximately 90% of our profit, organic NSR, and backlog growth are at the top of the industry.\nAnd our strengthening pipeline pretends well for continued leadership.\nThird, we expect to deliver strong results into the future, built around secular growth themes centered on infrastructure and ESG-driven opportunities.\nWith our increased focused on advisory and Program Management, we are engaging with clients much earlier than their planning for large investments and we are advising them through the execution, which expands our addressable market.\nAnd finally, we remain committed to creating shareholder value by investing in growth and innovation and enhancing per share value by allocating substantially all available cash flow to share repurchases.\nWe believe these are the highest returning uses of capital as compared to large scale M&A were today's deal multiples are elevated and the execution and integration risks are higher.\nTurning to our results.\nWe exceeded our expectations on every key measure.\nNSR increased for second consecutive quarter including accelerating growth in our design business.\nIn addition, backlog in the design business increased by 8% and included 7% growth in contracted backlog, which is a leading indicator of revenue growth.\nOur adjusted operating margin reached a new high this quarter at 14.1%, an increase of 90 basis points from the prior year.\nWith this outperformance, we now expect to exceed our margin guidance for the full year.\nThis performance includes growth in higher margin projects and efficiencies in how we deliver and is creating the capital to invest in our teams and innovation.\nAs a result of this revenue and margin performance, adjusted EBITDA increased by 15% and adjusted earnings per share increased by 33%.\nWe are also continuing to convert our earnings to strong cash flow.\nWe delivered the highest third quarter and year-to-date free cash flow in four years.\nAnd consistent with our capital allocation policy, we repurchased approximately 12% of our shares outstanding as compared to last September when we began our repurchase program.\nTurning to our backlog and pipeline.\nFunding across our markets is improving and our investments in growth are bearing fruit.\nWe delivered $3.7 billion of wins and we had a greater than one book to burn ratio for the enterprise for the first time since the pandemic began.\nWith the strong performance, backlog in the construction management business increased sequentially, albeit modestly for the first time in several quarters.\nIn addition, our pipeline of opportunities in our Americas design business has increased by double digits since the beginning of the year and the international pipeline increased by single digits.\nThese are great signs for the health of our markets and the success of our strategy.\nThe strength is before any material contributions from previously enacted stimulus funding and we do not include any benefit in our guidance from the proposed infrastructure bill in the US.\nPlease turn to the next slide.\nOur accomplishments reflect the benefits our Think and Act Globally strategy and our focus on growth.\nOver the past several quarters, we have prioritized investments in growth markets, simplified our operating structure and eliminated inefficiencies.\nToday, we are a more agile organization and we are benefiting from stronger collaboration across the business.\nWe've also invested in our key account program to ensure we deploy the best practices to all of our clients.\nThis will be critical to outgrowing the industry.\nAll these efforts are resulting in strong NSR, backlog and pipeline growth.\nAnother key component of our strategy is leveraging our industry leading margins to invest in our people and innovation.\nDemand is accelerating in the majority of our largest markets and AECOM and others in our industry will be increasingly challenged to attract and retain the strongest talent.\nIn fact, our growth this past quarter was constrained in some areas by the pace of hiring relative to increased demand.\nAnd what is noteworthy is that this constraint is apparent even as our pace of hiring has doubled as compared to last year.\nAs a leader in our industry, we have certain advantages against this backdrop.\nFirst, our workforce is global and we can draw on this global expertise to deliver anywhere in the world due to the investments we've made in technology to enhance collaboration.\nSecond, we also invest in professional development programs so our people can grow within AECOM.\nThird, we are using technology to extend the capacity of our teams and to deliver a new and innovative ways.\nAnd finally, we've implemented flexible work policies to provide our people even greater freedom to deliver for their clients in ways that work best for them and their teams.\nAll of these efforts are centered on creating a culture where the industry's top talent can begin and build meaningful careers.\nAs we look ahead, several trends support our confidence in growth.\nFirst, we are winning and delivering critical projects that highlight our strong position in key growth markets.\nMost recently, these include the first ever digital need for compliant environmental impact statement for a transportation client in the US, showcasing our investments in innovation and digital solutions.\nAdditional wins with major metros to advance more modern and equitable transit systems, key wins to advise clients on their long-term sustainability and resilience strategies, key wins in next generation energy, a smaller but rapidly growing practice within AECOM that includes a presence in the Northeast offshore wind market.\nWins in the healthcare sector that further broaden our client base and large program management wins from multi-billion dollar programs across the globe.\nSecond, through our sustainable legacy strategy and commitment to ESG, we are distinguishing ourselves in the market as our clients' advance complex, multi-decade initiatives.\nIn fact, year-to-date there have been a record number of corporate commitments to emission reduction targets, outpacing last year's total already.\nAnd sustainable bond issuances are at an all time high.\nAECOM is a leader in advising clients and delivering technical solutions to support ESG goals.\nToday, we estimate approximately 70% of our revenue is directly related to ESG initiatives while nearly all of our revenue has at least some ESG element as a driver.\nWe are leaders in green advanced facilities design, energy efficiency, next-generation energy, sustainability, resiliency, environmental remediation, clean water systems and transit electrification.\nOur services in these markets are in high demand and our leadership in these fast growing markets underpins our confidence inorganically outgrowing the market well into the future.\nFinally, our public sector clients across the world are benefiting from strong budgets and investments in infrastructure markets where we lead.\nIn the US, strengthened state and local tax receipts, strong federal funding and ongoing stimulus measures are contributing to an improving environment for growth.\nSimilarly, our international markets are prioritizing infrastructure investments especially in our largest end market, transportation.\nIn Australia, the New South Wales government has advanced $130 billion package for four years of transportation spending.\nWell, in Canada, there is more than $20 billion of public transit and green infrastructure spending.\nAnd in Europe, the $1 trillion recovery fund requires 30% of spending to be dedicated to green and sustainable infrastructure.\nThese initiatives are before you factor in a potential US Federal Infrastructure Bill in our largest market.\nAs currently proposed nearly every line item in the current draft would be addressable by AECOM.\nIn conclusion, I want to remind, we are the Number one transportation design firm, the Number one facility design firm, the Number one environmental science and environmental engineering firm, have grown to Number two in water and lead in several other end markets all positioned for secular growth.\nNo firm is better positioned to capitalize on these opportunities.\nPlease turn to the next slide.\nWe are building momentum within the business as a result of our strengthened culture and strategic alignment.\nOne area where this is apparent is in growing demand for ESG-related services.\nIn April, we launched our Sustainable legacy strategy to ensure we embed sustainability and ESG into all elements of our business.\nThis included our commitment to achieving Science based net carbon zero by 2030, expanding diversity and inclusion across our company and advancing the impact we can have on the world by embedding carbon reduction principles into our work to clients.\nSince launching Sustainable legacies, it has been exciting to see how passionate our people are to create a positive impact in their communities and what it means for us in the market.\nFor example, we were awarded a sizable transportation project in the quarter to modernize the transit line for clients in the US.\nThe ultimate determining factor in our selection was our Sustainable legacies strategy and the community building and ESG elements of our proposal.\nThis success underscores how we are of building stronger, competitive advantages.\nWe continue to advance our Think and Act Globally strategy to ensure we focus on the highest growth and margin opportunities while investing in our people and innovation.\nWith demand for our services is increasing, we are focused on bringing new talent to AECOM and investing in our teams to create the culture Troy spoke about earlier.\nGoing forward, we are focused on ensuring we have the strongest workforce, which will be critical to recapturing the full benefits from increased demand.\nWe also continue to make investments in our digital platforms and services to extend capabilities and enhance our teams productivity.\nWe can deploy innovation at scale to enable our people to use their hours most productively for their clients.\nWe already have several hundred digital consultants within AECOM that are helping clients progress their own digital transformations.\nThis is all part of the more than 1,000 digital practitioners we have across AECOM working to ensure we remain an innovator in our industry.\nA great example of this is our plan engage platform that has enabled the first ever NEPA compliant and fully digital environmental impact statement in the US.\nOur solution streamlines engagement process and provides higher value services for our clients.\nOur investments in these digital solutions and innovation will continue to be key differentiators as demand accelerates.\nImportantly, we know we are headed in the right direction as our people and our clients are responding favorably.\nI am pleased to report that our client satisfaction scores reached the highest level in our company's history this quarter.\nAnd I have no doubt that this will translate into a continued high win rate and growth going forward.\nPlease turn to the next slide.\nOur third quarter results reflect another quarter of strong performance.\nRevenue increased and included accelerating growth in our design business.\nOur pipeline and backlog grew, margins reached a new high and continued to lead the industry and earnings increased by double digits.\nOur year-to-date performance is at the upper end of the industry.\nAnd looking ahead, our strategy inspires confidence that we will build on this lead.\nI want to touch on the margin performance.\nCompared to our fiscal 2018 margin, our third quarter segment adjusted operating margin of 14.1%, marks a 540 basis point improvement.\nWith increased delivery of higher margin work and our operational improvements, we expects to exceed our prior 13.2% margin guidance this year and we are confident in delivering our 15% by 2024 goal and longer term 17% aspirational target.\nI'm equally pleased to report that we have delivered more consistent cash flow phasing.\nThis was a real focus of ours this year, and the organization has responded.\nAs a result, we already have been able to deploy substantial capital toward share repurchases and continue to take actions that improve our cost of debt and extended the duration of our debt maturities well into the future.\nPlease turn to the next slide.\nIn the Americas, design revenue increased for second consecutive quarter.\nTotal NSR declined slightly due to expected decline in Construction Management business, where we saw the deferral of a number of projects over the past 18 months.\nHowever, this trend is improving as evidenced by our sequential backlog growth and growing pipeline of pursuits.\nImportantly, backlog in the Americas design business increased by 8%.\nOur investments in the development [Phonetic] are translating to a higher win rate on our work and our pipeline also increased by double-digits at start of the year.\nAdjusted operating margin was 18.9%, a 100 basis point increase from the prior year to a new high.\nProfitability in both the Americas design and Construction Management businesses was strong.\nPlease turn to the next slide.\nTurning to the International segment.\nOur NSR increased by 7%.\nOur adjusted operating margin in the third quarter was 7.3%, a 160 basis point improvement from the prior year and more than 500 basis point improvement since the beginning of fiscal 2019.\nThis progression provides us confidence in our ability to achieve double-digit International margin target.\nPlease turn to the next slide.\nTurning to cash flow, liquidity, and capital allocation.\nOur third quarter free cash flow of $295 million marked the highest level in four years, putting us on a strong path to achieving our full year guidance of between $425 million and $625 million.\nWith our strong cash flow, we have executed stock repurchases at attractive prices.\nSince September 2020, we have repurchased $930 million of stock, which represents nearly 19 million shares or 12% of our starting share balance.\nIn addition, we have strengthened our balance sheet through a number of actions taken to lower the cost of our debt and extend our maturity.\nDuring the quarter we completed the tender and redemption of all 2024 senior notes.\nWe now have no maturities until at least 2026 and are operating with a high degree of financial certainty while driving a benefit to the bottom line.\nFinally, while we have incurred costs related to the tender and redemption of the 2024 notes, the NPV of the transaction was very positive and accretive to earnings per share.\nPlease turn to the next slide.\nWith our year-to-date outperformance, we are raising our adjusted EBITDA guidance to between $810 million and $830 million or a 10% growth at the midpoint.\nWe are also increasing our adjusted earnings per share guidance for the full year to between $2.75 and $2.85 or 30% growth at the midpoint.\nThis is the third increase to our earnings per share guidance this year, despite the challenges posed by the pandemic and associated macroeconomic trends.\nOur teams are [Indecipherable] this guidance does not contemplate any additional repurchases, although it is our plan to continue to buy back stock.\nFinally, I should note that our fourth quarter comparisons will be impacted by the extra week we adjusted out of our growth rate in the prior year's fourth quarter.\nThis impact should be considered when modeling and analyzing year-over-year growth trends for the coming quarter.\nAn extra week is approximately 7.5% of our quarterly NSR.\n",
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"content": "q3 revenue increased by 7% to $3.4 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: As the operator just mentioned, I'm Angie Park, Managing Director and Head of Investor Relations.\nWe hope you've had an opportunity to review the news release we issued a short time ago.\nLet me quickly outline the agenda for today's call.\nJulie will begin with an overview of our results, KC will take you through the financial details, including the income statement and balance sheet along with some key operational metrics for the first quarter.\nJulie will then provide a brief update on our market positioning, before KC provides our business outlook for the second quarter and full fiscal year 2022.\nDuring our call today, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors.\nWe include reconciliations of non-GAAP financial measures where appropriate to GAAP in our news release or in the Investor Relations section of our website at accenture.com.\nOur results again this quarter reflect how you are living our purpose every day to deliver on the promise of technology and human ingenuity.\nAs more and more companies embrace compressed transformation, our clients are turning to us as their trusted partner as reflected in our outstanding growth of 27% this quarter.\nWe added 15 new Diamond clients, bringing the total to 244.\nDiamond clients are our largest relationships and to give some context, we added 13 Diamonds in all of FY'21.\nWe also had record bookings of $16.8 billion, 30% growth year-over-year with 20 clients with bookings over $100 million, and we expanded operating margin 20 basis points in Q1, with adjusted earnings per share growth of 28%, while we continue to invest in our business and people, including $1.7 billion in acquisitions and in just the first quarter, we invested $215 million in learning for our people with 8.6 million training hours for approximately 14 hours per person.\nThe extraordinary demand we see in the market reflects the imperative of digital transformation.\nCompanies are making critical decisions about who will be their strategic partner and they are selecting us because of our talented people, our deep industry and technology capabilities and our commitment to both create value and need with value.\nWe predicted back in 2013 that every business would be a digital business and we have executed a clear strategy to rotate our business to anticipate and be ready to serve our clients.\nAnd when the pandemic hit, we were ready with capabilities at scale reflected in 70% of our revenue at that time, being from digital cloud and security with strong relationships with the world's leading technology companies, which in some cases go back decades, with the focus on growing our people through learning, allowing us to rapidly reskill with an unwavering commitment to inclusion and diversity and the quality and caring for our people professionally and personally, making us a talent magnet in a tight labor market, adding 50,000 talented individuals in Q1.\nAnd it is our breadth of capabilities across strategy and consulting, interactive technology and operations which is unique in our industry that allows us to work side-by-side with our clients to deliver results, and we believe our goal to create 360 degree value for our clients, people, shareholders, partners and communities is an essential part of our success.\nCertainly, our commitment to creating a vibrant career paths for our people is an important part of this value and we just completed our annual promotion process.\nI want to congratulate our 1,030 new promotes to Managing Director, 143 new appointments to Senior Managing Directors, and the more than 90,000 people we promoted around the world in Q1, overall.\nToday, we launched our 360 Value Reporting Experience, a new way to show our progress and the value we create in all directions for all of our stakeholders.\nMore on that later.\nKC, over to you.\nWe were very pleased with our overall results in the first quarter, which exceeded our expectations, setting a new bookings record at $16.8 billion with consulting bookings exceeding the previous record by more than $1 billion.\nOur results reflected strong double-digit revenue growth across all dimensions of our business, our markets, services and industry groups, and we saw improved pricing in many parts of our business.\nBased on the strength of our first quarter results and the demand we see in the market, we are significantly increasing our full year revenue and earnings per share outlook.\nNow let me summarize a few of the highlights of the quarter.\nRevenues grew 27% in local currency, increasing more than $3.2 billion over Q1 last year and more than $600 million above our guided range, with broad-based over delivery across all markets, services and industries, with all 13 industry groups growing double-digits.\nWe continue to extend our leadership position with growth we estimate to be more than 5 times the market, which refers to our basket of publicly traded companies.\nOperating margin of 16.3% for the quarter, an increase -- with an increase of 20 basis points.\nWe continue to drive margin expansion, while making significant investments in our people and our business, including acquisitions.\nWe delivered very strong earnings per share of $2.78, up 20% over adjusted fiscal '21 results.\nFinally, we delivered free cash flow of $349 million and returned $1.5 billion to shareholders through repurchases and dividends.\nWe also invested approximately $1.7 billion in acquisitions and we continue to expect to invest approximately $4 billion in acquisitions this fiscal year.\nWith those high-level comments, let me turn to some of the details, starting with new bookings.\nNew bookings were a record at $16.8 billion for the quarter, representing 30% growth in U.S. dollars and were $800 million higher than our previous record, with an overall book-to-bill of 1.1.\nConsulting bookings were a record at $9.4 billion with a book-to-bill of 1.1.\nOutsourcing bookings were $7.4 billion with a book-to-bill of 1.1.\nWe were very pleased with our bookings this quarter, which reflected 20 clients with bookings over $100 million.\nAll of our service dimensions, strategy consulting, technology services and operations, as well as our geographic markets delivered strong double-digit bookings growth in U.S. dollars.\nTurning now to revenues.\nRevenues for the quarter were $15 billion, a 27% increase in U.S. dollars and in local currency.\nConsulting revenues for the quarter were $8.4 billion, up 33% in U.S. dollars and 32% in local currency.\nOutsourcing revenues were $6.6 billion, up 21% in U.S. dollars and in local currency.\nTaking a closer look at our service dimensions, strategy and consulting, technology services and operations, all grew very strong double-digit.\nTurning to our geographic markets.\nIn North America, revenue growth was 26% in local currency, driven by double-digit growth in public service, software and platforms and consumer goods, retail and travel services.\nIn Europe, revenues grew 28% in local currency, led by double-digit growth in consumer goods, retail and travel services, industrial and banking and capital markets.\nLooking closer to the countries, Europe was driven by double-digit growth in Germany, U.K., France and Italy.\nIn growth market, we delivered 30% revenue growth in local currency, driven by double-digit growth in consumer goods, retail and travel services, banking and capital markets and public service.\nFrom a country perspective, growth markets was led by double-digit growth in Japan and Australia.\nMoving down the income statement.\nGross margin for the quarter was 32.9%, compared with 33.1% for the same period last year.\nSales and marketing expense for the quarter was 9.7%, compared with 10.4% for the first quarter last year.\nGeneral and administrative expenses were 6.9%, compared to 6.6% for the same quarter last year.\nOperating income was $2.4 billion in the first quarter, reflecting a 16.3% operating margin, up 20 basis points compared with Q1 last year.\nBefore I continue, as a reminder, we recognized an investment gain in Q1 last year, which impacted our tax rate and increased earnings per share by $0.15.\nThe following comparisons exclude these impacts and reflect adjusted results.\nOur effective tax rate for the quarter was 24.4%, compared with an adjusted effective tax rate of 23.7% for the first quarter last year.\nDiluted earnings per share were $2.78, compared with adjusted diluted earnings per share of $2.17 in the first quarter last year.\nDays service outstanding were 42 days compared to 38 days last quarter and 38 days in the first quarter of last year.\nFree cash flow for the quarter was $349 million, resulting from cash generated by operating activities of $531 million net of property and equipment additions of $182 million.\nOur cash balance at November 30th was $5.6 billion, compared with $8.2 billion at August 31st.\nWith regards to our ongoing objective to return cash to shareholders.\nIn the first quarter, we repurchased or redeemed 2.4 million shares for $845 million at an average price of $346.19 per share.\nAt November 30th, we had approximately $5.6 billion of share repurchase authority remaining.\nAlso in November, we paid a quarterly cash dividend of $0.97 per share for a total of $613 million.\nThis represents a 10% increase over last year.\nAnd our Board of Directors declared a quarterly cash dividend of $0.97 per share to be paid on February 15th, a 10% increase over last year.\nSo in summary, we are very pleased with our Q1 results and we are off to a very strong start in FY'22.\nStarting with the demand environment.\nAs we expected, across industries and the globe, technology continues to be the single biggest driver of change, accelerating, disrupting and creating new opportunities.\nMore companies are embracing compressed transformation, underpinned by cloud and digital and are moving to build their digital core and use technology to transform how they operate and to find new ways to compete and grow as you would expect for 27% revenue growth.\nWe are seeing broad-based demand across all markets, services and industries with double-digit growth across all our strategic growth priorities, including Applied Intelligence, Cloud, Industry X, Interactive Intelligent Operations, Intelligent Platform Services, Security and Transformational Change Management.\nLet me bring this demand to life.\nFirst, compressed transformation is occurring across the globe and the key enabler is the cloud, across the continuum from public to hybrid to increasingly the edge and the move to leading SaaS platforms, along with the convergence of cloud and data.\nFor example, we are working with a leading global supplier of tires and mobility solutions to migrate to the cloud, modernize its IT platforms, use data to accelerate growth and value and shift to a digital supply chain.\nWe created a state-of-the-art systems to track inventory, sales, warranty information and returns all in the cloud, all in real time, and have already helped to increase customer satisfaction 35% with improved cost optimization and increased revenue up next.\nWe're also helping Mount Sinai Health System, New York City's largest academic medical system transform, modernize, and increase it's resilience by migrating it's clinical systems, non-clinical systems and clinical data to a stable, secure cloud-based infrastructure to proactively detect and prevent threat, adapt the business and regulatory changes, together with the potential to save millions over the next five years.\nSavings that can be reinvested to fund strategic innovative programs and help meet skilled team.\nOur deep industry expertise is helping companies find new solutions and path to growth and helping their customers.\nFor example, we are collaborating with OPay, a leading Finnish Financial Group to use automation, advanced analytics and other emerging technologies to increase business agility, reduce cost and deliver enhanced customer and employee experiences.\nOPay will adopt the intelligent automation platform Accenture myWizard to enable the company to extract greater value from its technology investment.\nWe are working with TUGA, a leading utilities provider in Germany to create and operate a game-changing meter-to-cash IT platform in the cloud.\nIt will help reduce operating cost by up to 40%, accelerate time to market and free up resources for energy transition and innovations like smart metering, helping customers make environmentally conscious decisions and energy providers stay responsive and reliable.\nAnd as we talked about last quarter, our sustainability services are focused on helping our clients across industries move from commitment to action at scale.\nWe see these services as critical to our clients' agendas.\nI'm pleased to announce that we have signed an agreement to acquire Zestgroup, a Dutch sustainability services company with a 140 employees that specializes in energy transition services and sourcing renewables and other clean energy sources.\nWe look forward to welcoming them -- welcoming them and working together to help clients move at speed to achieve net zero carbon.\nWe continue to help our clients to enter the next digital frontier of Industry X. We're excited to have completed the acquisition of umlaut and are seeing the power of our combination already.\nTogether we're working with the global technology leader to transform from a traditional engineering platform to a more agile, model based engineering platform to use the simulation and analysis from design and development, all the way through the product life cycle.\nWe are also working with an American wireless operator to help improve daily operations and transform their network security by combining our deep security risk assessment and communications industry skills.\nOf course, growth is at the heart of every clients agenda and Interactive is helping our clients capture new growth with their customers with our unique combination of creativity, technology, data, AI and industry expertise.\nFor example, we are applying our digital global capabilities to help Capri Holdings Limited, a global fashion, luxury group consisting of the iconic brands Versace, Jimmy Choo and Michael Kors translate its rich in-store luxury shopping experience to a digital experience that aligns with shifting customer behaviors and accelerate sustainable growth.\nAs a strategic partner with Volkswagen Group, a German motor vehicle manufacturer, we're helping Audi and VW to pave the way for sustainable growth to precise continuous commerce and rich experiences along the entire car buying -- car buying journey.\nWe are combining the power of AI and predictive analytics to deliver the right experiences at the right time to accelerate revenue growth through an expanded digital commerce ecosystem.\nWe're also working with VLI, a Brazilian logistics solutions company and Trato [Phonetic] its new platform business to provide a digital one-stop shop for self-employed truckers to enhance their growth to improve logistics by offering options from our profitable freight product as well as to provide them access to critical services such as insurance, loans and healthcare, all by combining [Indecipherable] analytics and AI.\nWe see an increasing demand to create the platforms that power the digital products and experiences our clients seek for their customers.\nWe're helping CLO [Phonetic] a leader in electronic payments in Latin America, become more competitive by migrating to the cloud, which will accelerate new product development and enable cutting-edge technology.\nThis will make it easier to launch innovative products, reduce time to market by two thirds and lower costs, all while enhancing their customers' experience.\nAnd of course, security is critical to all our clients.\nWe were proud to be selected by the Department of Homeland Security Cyber Security and Infrastructure Security Agency CISA in the U.S., Americas risk advisor defending against today's threats with advanced cyber services to help the Department of Homeland Security protect federal, civilian, executive branch system against cyber attacks like ransomware [Indecipherable] and malware campaigns.\nEven as companies undergo compressed transformation, exponential technology changes continue.\nWe are investing to anticipate the future and we are working with our clients to innovate and take advantage of emerging technologies to compete and win.\nOur R&D is powered by central labs and ventures and extends across every part of our business so that we can quickly translate research into real results for our clients.\nFor example, we are working with ESPN to explore how emerging technologies can enable new ways for fans to experience sports at the ESPN edge innovation center, leveraging the years of early investments we have made an extended reality.\nWe've been a key participant in shaping the innovation in enterprise, blockchain technologies across the globe with applications and financial markets, supply chain and digital identity, which now are creating value for our clients.\nFrom partnering with the Digital Dollar Foundation to explore a U.S. Central Bank digital currency, to working with Hong Kong Exchanges and Clearing Limited to build a new integrated settlement platform using digital asset modeling language smart contract.\nAnd while the metaverse [Phonetic] has recently burst into the public eye, we've been an early innovator implying the technology.\nIn fact, we often innovate on cutting-edge technologies by deploying them at Accenture first.\nWe are proud to have the largest enterprise Medivirs [Phonetic] through what we call the nth four and are deploying over 60,000 virtual reality headsets and have created one Accenture Park, a virtual campus for on-boarding and immersive learning, including meeting rooms and collaborative experiences.\nOur VR environments provide our people with a human connection and learning experiences in an immersive digital world.\nWe are also working with clients to help explore and shape their early forays into the metaverse through new digital experiences enabled by virtual reality and responding to their interest in new products enabled by NFT or non-fungible tokens in new ways to conduct commerce as the metaverse take shape.\nMany of these client examples reflect our goal to create 360 degree value.\nThis goal reflects our growth strategy, our purpose, our core values and our culture of shared success.\nIt is also how we operate Accenture and we measure our success by how well we are achieving this goal for all our stakeholders.\nAnd today we are proud to present our new 360 Degree Value Reporting Experience, a new way to share our progress, which is available on our website.\nWith this comprehensive digital tool you will find all our reporting and data in one place, measuring how we're doing.\nWe've expanded our ESG reporting with three additional ESG framework, the Sustainability Accounting Standards Board SASB, the task force on climate related financial disclosure TCFD, and the World Economic Forum International Business Council WEF, IBC metrics, while continuing to report against the Global Reporting Initiative GRI standards, the UNGC 10 principles and the Carbon Disclosure Project CDP, because we believe the transparency builds trust and helps us all make more progress.\nBack to you, KC.\nNow let me turn to our business outlook.\nFor the second quarter of fiscal '22, we expect revenues to be in the range of $14.3 billion to $14.75 billion.\nThis assumes the impact of FX will be about negative 4% compared to the second quarter of fiscal '21 and reflects an estimated 22% to 26% growth in local currencies.\nFor the full fiscal year '22 based on how the rates have been trending over the last few weeks, we now expect the impact of FX on our results in U.S. dollars will be approximately negative 3% compared to fiscal '21.\nFor the full fiscal '22, we now expect our revenue to be in the range of 19% to 22% growth in local currency over fiscal '21, which continues to assume an inorganic contribution of 5%.\nFor operating margin, we continue to expect fiscal year '22 to be 15.2% to 15.4%, a 10 basis point to 30 basis point expansion over fiscal '21 results.\nWe continue to expect our annual effective tax rate to be in the range of 23% to 25%.\nThis compares to an adjusted effective tax rate of 23.1% in fiscal '21.\nFor earnings per share, we now expect our full year diluted earnings per share for fiscal '22 to be in the range of $10.33 to $10.60 or 17% to 20% growth over adjusted fiscal '21 results.\nFor the full fiscal '22, we now expect operating -- operating cash flow to be in the range of $8.4 billion to $8.9 billion, property and equipment additions to be approximately $700 million and free cash flow to be in the range of $7.7 billion to $8.2 billion.\nOur free cash flow guidance continues to reflect a very strong free cash flow to net income ratio of 1.1 to 1.2.\nFinally, we continue to expect to return at least $6.3 billion through dividends and share repurchases as we remain committed to returning a substantial portion of cash to our shareholders.\nI would ask that you each keep to one question and a follow-up to allow as many participants as possible to ask questions.\nOperator, would you provide instructions for those on the call.\n",
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"content": "q1 earnings per share $2.78.\nq1 revenue rose 27 percent to $15 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: In addition, we discuss non-GAAP financial measures, including core funds from operations or core FFO, adjusted funds from operations or AFFO, and net debt to recurring EBITDA.\nI'm very pleased to report that we continued our strong start to the year, achieving record investment volume of more than $750 million during the first six months of 2021.\nRobust and high quality investment activity further increased our investment grade, concentration and raised our ground lease exposure to a record of nearly 13%.\nOur investment activities during the quarter were supported by more than $1 billion of strategic capital markets transactions that fortified our best-in-class balance sheet and positioned our company for continued growth in the quarters ahead.\nDuring the second quarter, we invested approximately $366 million in 59 high-quality retail net lease properties across our three external growth platforms.\n54 of these properties were originated through our acquisition platform representing acquisition volume of more than $345 million.\nThe 54 properties acquired during the second quarter are leased to 32 tenants operating in 18 distinct retail sectors including best-in-class operators in the off-price, home improvement, auto parts, general merchandise, dollar store, convenience store, craft and novelties, grocery and tire and auto service sectors.\nThe acquired properties had a weighted average cap rate of 6.2% and a weighted average lease term of 11.8 years.\nThrough the first six months of this year, we've invested a record $756 million into 146 retail net lease properties spanning 35 states in 24 retail sectors.\nApproximately $732 million of our investment activity originated from our acquisition platform.\nRoughly 75% of the annualized base rents acquired in the first half of the year comes from leading investment grade retailers, while almost one-third of annualized base rent is derived from ground leased assets.\nThese metrics demonstrate our continued focus on best in class opportunities with leading omnichannel retailers, while still achieving record results.\nGiven our record acquisition activity date and visibility into our pipeline, we are increasing our full-year 2021 acquisition guidance to $1.2 billion to $1.4 billion.\nDuring this past quarter, we executed on several unique and notable transactions, including a new small format target on the University of Georgia's campus in Athens.\nWe are extremely pleased to expand our relationship with target, as well as add another unique street retail asset to our growing portfolio.\nWe continue to invest in market dominant grocers during the quarter.\nMost significant with a five-store sale leaseback transaction with Kroger for approximately $68 million.\nThe stores are located in Texas, Michigan, Ohio, and Mississippi and each location is subject to a new 15 year net lease.\nWith this transaction Kroger moved into our top 10 tenants at 3.2% of annualized base rents.\nKroger's of course is a leader in the grocery space.\nTheir fortified balance sheet, strategic omnichannel initiatives, and significant investment in e-commerce fulfillment are emblematic of our investment strategy.\nAdditionally, we closed on the purchase of a ShopRite, which is owned and operated by Wakefern in New Rochelle, New York.\nShopRite is a tremendous operator in the real estate located at a strategic interchange of I-95 is yet another example of the diligent bottoms for analysis that we conduct on every asset that we acquired.\nFinally, as you may recall we acquired our first Wegmans Ground Lease in Chapel Hill, North Carolina during the fourth quarter of 2020.\nWe've built upon that momentum in this quarter with the acquisition of our second property ground leased to Wegmans.\nThe store located in Parsippany, New Jersey is over 100,000 square feet and was constructed at Wegmans expense.\nThrough the first six months of the year we've acquired 45 ground leases for a total investment of over $240 million.\nThe second quarter contribution to this total was 14 ground leases representing an investment volume of more than $113 million.\nAdditional notable ground lease acquisitions during the quarter included our first capital grow in Whippany, New Jersey.\nA Walmart Supercenter and Lowe's and Hooks at New Hampshire, our first Cabela's in Albuquerque, New Mexico, as well as three additional Wawa assets increasing our Wawa portfolio to 25 properties including their flagship store in Downtown Philadelphia.\nAs mentioned at quarter end, our overall ground lease exposure stood at a company record of 12.7% of annualized base rents and includes a very unique assets leased to the best retailers in the country.\nInclusive of our second quarter acquisition activity, the ground lease portfolio now derives nearly 90% of rents from investment grade tenants and has a weighted average lease term of 12.5 years.\nThe majority of the portfolio includes rent escalators that result in average annual growth of close to 1% while the average per square foot rent is only $9 and $0.65.\nThis growing portfolio continues to be a source of tremendous risk adjusted returns when reviewing the lease term, credit, underlying real estate attributes and of course the free building and improvements of a tenant wherever to vacate.\nWe look forward to continue to leverage our industry relationships and strong track record of execution to identify potential additions to this expanding and diversified sub portfolio.\nAs of June 30, our portfolio's total investment grade exposure was nearly 68%, representing a significant year-over-year increase of approximately 670 basis points.\nOn a two-year stacked basis, our investment grade exposure has improved by more than 1,300 basis points.\nThe continued growth of our ground lease portfolio and the investment grade exposure demonstrates our disciplined focus on building the highest quality retail portfolio in the country.\nMoving on to our Development and Partner Capital Solutions platforms, we continue to uncover compelling opportunities with our retail partners.\nWe had six development in PCS projects either completed or under construction during the first half of the year that represent total capital committed of more than $36 million.\nThree projects were completed during the second quarter, including a grocery outlet in Port Angeles, Washington, a Gerber Collision in Buford, Georgia, and a Floor & Decor in Naples, Florida.\nI'm pleased to announce we also commenced construction during the quarter of our second development with Gerber Collision in Pooler, Georgia.\nGerber will be subjected to a new 15 year net lease upon completion and we anticipate rent will commence in the first quarter of 2022.\nWe continue to work with Gerber Collision on additional opportunities that we anticipate announcing later this year and into next year.\nConstruction continued during the quarter on our first development with 7-Eleven in Saginaw, Michigan.\nWe anticipate delivery will take place in the first quarter of next year at which time 7-Eleven will be subject to a new 15 year net lease.\nWe remain focused on leveraging our full capabilities to grow our relationships with these leading omnichannel retailers.\nI look forward to providing an update on our continued progress in the coming quarters.\nWhile we continue to strengthen our best-in-class retail portfolio through record investment activity we're also quite active on the disposition front during the quarter.\nWe continue to reducing Walgreens exposure and as well as franchise restaurants as we sold seven properties for gross proceeds of approximately $28 million with a weighted average cap rate of 6.7%.\nIn total, we disposed of 10 properties through the first six months of the year for gross proceeds of more than $36 million with a weighted average cap rate of approximately 6.7%.\nGiven our disposition activities during the first half of the year, we are raising the bottom end of our disposition guidance to $50 million for the year, while the high-end remains at approximately $75 million.\nOur asset management team has also been proactively and diligently addressing upcoming lease maturities.\nTheir efforts to reduce the remaining 2021 maturity to just three leases representing 20 basis points of annualized base rents.\nDuring the second quarter, we executed new leases, extensions or options on approximately 209,000 square feet of gross leasable area.\nMost notably, we are extremely pleased to have executed a new 15 year net lease with Gardner White to backfill our only former Loves Furniture store in Canton, Michigan.\nAs you may recall, this was the Art Van flagship we developed prior to the company's acquisition by TH Lee.\nWe delivered the space to Gardner White in June and rent commenced in July, allowing us to recover close to 100% of prior rents with just over one month of downtime.\nI would note this is the second time we have released this asset on effectively full recovery since the Art Van bankruptcy.\nGardner White is Michigan-based family owned and operated, has been one of the preeminent furniture retailers in the state for more than a century.\nThe Company is led by Rachel Tronstein, one of the brightest minds in the retail furniture industry and a former high school classmate of mine.\nWe are extremely pleased to have Rachel and her team as partners in this flagship asset.\nI'm also pleased to announce the addition of Burlington to Central Michigan Commons in Mount Pleasant, Michigan, one of the only two remaining legacy shopping centers that we chose to retain during the transformation of our portfolio.\nTo date we have redeveloped the former Kmart Space for Hobby Lobby and Alta and added Texas Roadhouse on an outline via ground lease.\nThese transactions are emblematic of our ability to unlock embedded value within the portfolio and support our decision to hold on to this very well located legacy shopping center across from Central Michigan University's main campus.\nDuring the first six months of the year we executed new leases, extensions or options and approximately 275,000 square feet of gross leasable area and as of June 30, our expanding retail portfolio consisted of 1,262 properties across 46 states, including 134 ground leases and remains nearly 100% occupied at 99.5%.\nWith that, I'll hand the call over to Simon and then we can open it up for any questions.\nStarting with earnings core funds from operations for the second quarter was $0.89 per share, representing a record 17.3% year-over-year increase.\nAdjusted funds from operations per share for the quarter was $0.88, an increase of 15.9% year-over-year.\nAs a reminder, treasury stock is included within our diluted share count prior to settlement if and when ADCs stock trades above the deal price of our outstanding forward equity offerings.\nThe aggregate dilutive impact related to these offerings was less than half a penny in the second quarter.\nPer FactSet, current analyst estimates for full year AFFO per share range from $3.40 per share to $3.53 per share, which implies year-over-year growth of 6% to 10%.\nAs mentioned on last quarter's call, we continue to view this level of growth as achievable and expect to end the year toward the higher end of this range given current visibility into our investment pipeline and the broader operating environment.\nBuilding upon our 6% of AFFO per share growth in 2020-this implies two year stack growth in the mid-teens.\nGeneral and administrative expenses totaled $6.2 million in the second quarter.\nG&A expense was 7.6% of total revenue or 7.1% excluding the noncash amortization of above and below-market lease intangibles.\nEven as we continue to invest in people and systems to facilitate our growing business, we anticipate the G&A as a percentage of total revenue will be in the lower 7% area for full year 2021 excluding the impact of lease intangible amortization on total revenues.\nAs mentioned last quarter, G&A expense for our acquisitions team fluctuates based on acquisition volume for the year and our current anticipation for G&A expense reflects acquisition volume within our new guidance range of $1.2 billion to $1.4 billion.\nTotal income tax expense for the second quarter was approximately $485,000 for 2021.\nWe continue to anticipate total income tax expense to be approximately $2.5 million.\nMoving onto our capital markets activities for the quarter, in May we completed a $650 million dual tranche public bond offering, comprised of $350 million of 2% senior unsecured notes due in 2028 and $300 million of 2.6% senior unsecured notes due in 2033.\nIn connection with the offering, we terminated related swap agreements of $300 million that hedged for 2033 Notes receiving approximately $17 million upon termination.\nConsidering the effect of the terminated swap agreements, the blended all-in rates for the 2028 Notes and 2033 Notes are 2.11% and 2.13% respectively.\nWe used the portion of the net proceeds from the offering to repay all $240 million of our unsecured term loans, the termination costs related to early pay down of our unsecured term loans total approximately $15 million.\nGiven the one-time nature of the termination costs, these amounts have been added back to our core FFO and AFFO measures.\nThe offering in combination with the prepayment of all of our unsecured term loans extended our weighted average debt maturity to approximately nine years and reduced our effective weighted average interest rate to approximately 3.2%.\nIn June, we also completed a follow-on public offering of 4.6 million shares of common stock.\nUpon closing, we received net proceeds of approximately $327 million.\nDuring the second quarter, we entered into forward sale agreements in connection with our ATM program to sell an aggregate of roughly 1.2 million shares of common stock for anticipated net proceeds of approximately $81 million.\nIn May, we settled roughly 164,000 shares and received net proceeds of approximately $10 million.\nAt quarter-end we had approximately 3.9 million shares remaining to be settled under existing forward sale agreements which are anticipated to raise net proceeds of approximately $259 million upon settlement.\nInclusive of the anticipated net proceeds from our outstanding forward offerings cash on hand and availability under our credit facility, we had nearly $950 million in available liquidity at quarter-end.\nThe balance sheet continues to be a huge strength for us.\nAs of June 30, our pro forma net debt to recurring EBITDA was approximately 3.6 times, including our outstanding forward equity offerings.\nExcluding the impact of unsettled forward equity, our net debt to recurring EBITDA was approximately 4.5 times.\nTotal debt to enterprise value of quarter-end was approximately 25% while fixed charge coverage remained at a record five times.\nDuring the second quarter, we declared monthly cash dividends of $0.217 per share for April, May and June.\nThe monthly dividend reflected an annualized dividend amount of $2.60 per share representing an 8.5% increase over the annualized dividend amount of $2.40 cents per share for the second quarter of last year.\nOur payout ratios for the second quarter were a conservative 73% of Core FFO per share and 74% of AFFO per share respectively.\nSubsequent to quarter-end, we declared a monthly cash dividend of $0.217 per share for July.\nThe monthly dividend reflects an annualized dividend amount of $2.60 per share or an 8.5% increase over the annualized dividend amount of $2.40 per share from the third quarter of 2020.\n",
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"content": "compname reports core ffo per share of $0.89.\nagree realty corp - qtrly core ffo per share $0.89.\nagree realty corp - qtrly affo per share $0.88.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements and materials are based on many assumptions and factors that are subject to risk and uncertainties.\nOur Chief Financial Officer, Ray Young, will review financial highlights and corporate results as well as the drivers of our performance and our outlook.\nVince Macciocchi, Senior Vice President and President of our Nutrition segment will give an update on our Nutrition business and its future growth.\nLast night, we reported third quarter adjusted earnings per share of $0.89, up from $0.77 in the prior year quarter.\nAdjusted segment operating profit was $849 million, up 11% year-over-year and our trailing four quarter adjusted ROIC was 8.3%.\nOur strategic initiatives have continued to enable our teams around the world to demonstrate their expertise and skills.\nAnd I'm proud of how our colleagues are supporting customers and driving strong results.\nThe team has done a great job of handling the daily and sometimes hourly challenges that have come our way in 2020.\nThat resiliency allows us to deliver outstanding results today, while we simultaneously continue our strategic work to make our company better and advance our growth and transformation.\nLet me share with you some of our accomplishments.\nIn our optimized pillar, Ag Services & Oilseeds team continue this work to enhance returns, delivering another $100 million in invested capital reductions in the third quarter.\nSince 2017, Ag Services & Oilseeds has improved its capital position by exiting from no longer strategic assets including 71 grain origination locations, six oilseeds facilities, 14 Golden Peanut and Tree Nuts locations, and seven oceangoing vessels.\nWe've also seen first-hand however improvement initiatives have helped drive business continuity.\nIn addition to the pandemic, in recent months, we've seen multiple hurricanes in the US Gold under the retro storm that swept across the Midwest.\nIn our drive pillar, we're continuing to accelerate our 1ADM business transformation, expanding the deployment of our procurement, contract labor and sales and marketing modules, which are helping us drive efficiencies and growth and will provide us with a trove of data to support enhanced analytics and decision making.\nOur Decatur corn complex, ongoing strong performance from grind to gluten to workplace safety continues to demonstrate the benefits of our centralized operations organization.\nOur Supply Chain Center of Excellence is delivering as well using our enhanced processes and tools, as well as integrated planning between commercial, supply chain and operations we recently piloted changes at the nutrition facility that are on track to unlock a 20 plus percent increase in production capacity at that location.\nI have already resulted in enhancements in customer service, without additional capital spending.\nWe'll be rolling these kinds of improvements out to other locations.\nIn our expand pillar, we're continuing to harvest our investments.\nFor example, year-to-date, our Algar Agro acquisition has tripled its year-over-year operating profit.\nIn a very short time, Algar has grown to be an important component of the South American business.\nWe've successfully expanded production of high-quality USP grade alcohol in Peoria and Clinton to meet high demand for hand sanitizer.\nWe announced the construction of a new state-of-the-art production facility in Spain that will dramatically expand our ability to meet growing demand for probiotics and other consumer products to support health and wellness.\nWe also signed a long-term agreement with Japanese start-up Spiber Inc\nThis project taps into our innovative spirit and capabilities, creating value from across our supply chain from the corn we buy to the dextrose we make to the science and manufacturing technology we have invested in.\nAnd it meets a critical need in the marketplace for both consumer and industrial products that come from sustainable sources.\nOur transformation and growth and our confidence in the future will not be possible without readiness.\nBy the end of the third quarter, our team identified and executed on readiness initiatives that unlocked almost $1.2 billion in run rate benefits.\nAnd now, I'm pleased to announce that we are on track to achieve $1.3 billion by the end of the year.\nReadiness encompasses and supports our entire company.\nIt drives the strategic imperatives that help us fulfill our purpose, such as sustainability.\nWe are advancing our sustainability efforts on many fronts.\nSuch as our Strive 35 goals to improve our performance on greenhouse gases, energy, water and waste.\nReadiness creates growth enablers.\nFor example, we're continuing to elevate our commercial excellence with innovative tools like our consumer insight programs and virtual customer technologies.\nAnd of course, readiness is one of the key elements, powering the growth algorithm we laid out at the beginning of the year, because of its success, along with tremendous progress in our harvest and improved initiatives, we now expect to meet or exceed the high end of our $500 million to $600 million goal for targeted improvements in 2020.\nIn 2014, we started a new journey with the acquisition of WILD Flavors, and the launch of a full-service nutrition business, offering customers a broad array of products and services.\nI could not be more proud of the growth we have seen since then.\nNutrition has delivered its fifth consecutive quarter of 20-plus percent year-over-year OP growth.\nRevenue is up 5.7% on a currency-adjusted basis for the first nine months of the year.\nAnd in the years since we acquired WILD, we are nearly tripled OP in the flavors business.\nAs we've been getting more and more questions about that business and its growth potential, we decided that it was the perfect time to update and explain the business further.\nAs Juan mentioned, adjusted earnings per share for the quarter was $0.89, up from the $0.77 in the prior year quarter.\nExcluding specified items, adjusted segment operating profit was $849 million, up 11%.\nAnd our trailing four-quarter average adjusted ROIC was 8.3%, 255 basis points higher than our 2020 annual lack.\nOur trailing four-quarter adjusted EBITDA was about $3.7 billion.\nOur cash flows are strong, as we generate about $2.3 billion of cash from operations before working capital for the first nine months of the year.\nThe effective tax rate for the third quarter was a benefit of approximately 13% compared to an expense of 19% in the prior year.\nOur Q3 tax rate was impacted by our debt retirement actions as well as the sale of our Walmart shares, and higher year-over-year Walmart earnings and U.S. tax credits.\nAbsent the effect of earnings per share adjusting items, our effective tax rate was approximately 11%.\nWe expect our adjusted tax rate for Q4 to be similar to this adjusted Q3 effective tax rate.\nAs we announced at various points during Q3, we've taken several actions over the last few months to both utilize and enhance our strong balance sheet.\nThese actions were not about cash flow or liquidity as we had cash and available credit capacity at the end of the quarter of almost $10 billion.\nThey were about creating balance sheet optionality for future transactions, while maintaining a strong credit rating profile.\nWe monetized a portion of our Walmart investment through a block sale of Walmart stock, and issuance of bonds exchangeable for Walmart shares at a future date.\nAs we have indicated, we view our significant remaining Walmart stake as strategic, and we do not have any intentions to sell additional shares.\nLeveraging our strong cash position, we also rebalanced our mix between long and short-term debt, economically retiring higher coupon debt through positive NPV transactions and reducing interest payments in the future.\nCombined, these actions allow us the flexibility to make strategic investments, further bolt-on acquisitions or buyback shares when it makes sense to do so, all while continuing to make progress in deleveraging our balance sheet and maintaining our single A credit ratings.\nThese actions were also a significant driver of our tax rate.\nReturn of capital for the first nine months was $724 million, including around $115 million in opportunistic share repurchases, the vast majority of which were executed earlier this year.\nWe finished the quarter with a net debt to total capital ratio of about 27%, down from the 30% a year ago.\nCapital spending for the first nine months was about $560 million.\nWe expect capital spending for the year to be around $800 million that we previously indicated and well below our depreciation and amortization rate of about $1 billion.\nOther business results were lower than the prior year quarter, driven by lower ADM investor services earnings and captive insurance underwriting losses, including a $17 million settlement impact for the high water claim with Ag Services and Oilseeds.\nIn the corporate lines, unallocated corporate costs of $196 million were higher year-over-year, due primarily to variable performance-related incentive compensation accruals, which were low in the prior year.\nCorporate results this quarter also included $396 million related to the early debt retirement charges that I referred to earlier, which is an earnings per share adjustment item.\nNet interest expense for the quarter was similar to the prior year period.\nLooking forward, we expect unallocated corporate expenses to be in line with our initial $800 million guidance for calendar year and Q4 net interest expense to be slightly lower than Q3.\nWe also expect a loss of about $50 million in other business in Q4 due to anticipated intercompany insurance claim settlements.\nAg Services and Oilseeds results were higher than the third quarter of 2019.\nIn Ag Services, we saw extremely good execution around the globe.\nThe North American team did well to capitalize on strong industry export margins and volumes, and the global trade team had another strong quarter as they continued their focus on serving customers.\nAg Services also benefit from a $54 million settlement related to the 2019 US high water insurance claims, which is partially offset by an expense in captive insurance.\nThe crushing team also did a great job executing in a solid demand environment.\nBoth Ag Services and Crushing saw expanding margins during the quarter resulting in around $155 million in total negative timing effects, which led to lower results.\nThose timing impacts are expected to reverse in the coming quarters.\nRefined Products and Other was significantly higher year-over-year, driven by improved biodiesel margins around the globe.\nEquity earnings from Wilmar were substantially higher versus the prior year period.\nLooking ahead, we expect to see strong North American exports in global crush margins in the fourth quarter, combined to contribute to a very strong Ag Services and Oilseeds performance.\nWith results significantly higher than the third quarter of this year, though lower than Q4 of 2019, which included a $270 million benefit for two years of the retroactive biodiesel tax credit.\nCarbohydrate Solutions results were significantly higher year-over-year.\nThe Starches and Sweeteners sub-segment was substantially higher driven by strong risk management and improved net corn costs as well as a balanced ethanol industry supply and demand environment.\nReduced foodservice demand affected sweetener and flower volumes, but we're seeing good demand recovery for starches in North America.\nThe Vantage Corn Processors team did a good job executing on the wet mill fuel ethanol distribution and capitalizing on higher year-over-year industry margins, while managing the fixed costs from the two temporarily idled dry mills, increased volumes and margins on USP grade industrial alcohol to support the hand sanitizer market also contributed to higher year-over-year profits.\nLooking ahead, we expect the fourth quarter for Carbohydrate Solutions to be close to Q3 of this year and substantially higher than the fourth quarter of 2019, driven by improved year-over-year fuel ethanol margins and higher industrial-grade sales.\nWhile Sweetener and Flower volumes will still be impacted by weaker food service demand, we expect the year-over-year percentage decline to be smaller than it was in Q3.\nOn slide eight, Nutrition delivered its fifth consecutive quarter of 20-plus percent year-over-year profit growth.\nHuman Nutrition results were substantially higher versus the prior year quarter, with strength across the entire pantry, including flavors, plant-based proteins, and probiotics.\nAnimal Nutrition was also higher year-over-year, driven by continued delivery of Neovia synergies, strengthen livestock and year-over-year improvement in amino acids, partially offset by softer aquaculture feed demand as well as negative foreign currency impacts.\nLooking ahead to the fourth quarter, we expect nutrition to deliver another quarter of 20-plus percent year-over-year OP growth with a typically seasonally weaker Q4 in human nutrition, offset by seasonally stronger animal nutrition.\nI'd now like to transition to Vince Macciocchi, President of our Nutrition business for an update and overview of the business.\nVince, congratulations to you and your team for not just a great quarter, but for consistent delivery of strong growth.\nI'm proud of the team who have delivered in so many ways.\nWhen I reflect upon the growth we've made in the journey we are still taking, I keep coming back to our purpose, to unlock the power of nature, to enrich the quality of life.\nI think it's remarkable how these few words sum up, not just what we do, but why our work is so important.\nThe global population is growing, and consumer behavior is shifting in ways we couldn't have predicted only 10 or 15 years ago.\nThe scale of the change and the opportunity for ADM is enormous.\nGlobal sales of specialty ingredients across both human and animal nutrition are as much as $85 billion and growing at a rate of 5% to 7% per year.\nThese specialty ingredients, which represent the majority of the nutrition portfolio aside from fee going to the full array of consumer nutrition products for humans and animals, many of which are projected to grow significantly in the coming years.\nFor example, global market for functional beverages could be as large as $190 billion in 2024.\nThe global dietary supplement market could be worth more than $77 billion in that same time frame.\nGlobal retail sales of alternative proteins are already a $25 billion market today, with a projected growth rate of 14% per year.\nGlobal retail sales of pet food are projected to grow at 4% per year, reaching $120 billion by 2024.\nThese aren't just numbers.\nThey're indicators of significant long-term trends in how people choose food, drink and other products, driven by a global population that cares deeply about health and sustainability.\nAnd based upon the portfolio, footprint, capabilities and talent we've built, no other company is positioned to meet these needs and lead in these industries like ADM.\nIt's been six years since we started on this journey.\nIn that time, we built or expanded more than 16 facilities from our pea protein complex in the US through our network of free mix plants in China.\nWe've enhanced our science and technology capabilities, invested in market research and consumer insights and built new interactive ways to engage with customers.\nFrom our more than 50 global customer innovation centers to daily virtual innovation and tasting sessions.\nWe've made platform acquisitions, and we've added bolt-ons.\nAll in all, we have invested just over $6 billion to build our global leadership position in nutrition.\nThese investments are delivering results.\nSince 2014, we've increased our annual revenue by $3 billion.\nAnd by the end of this year, we'll have grown operating profits by more than $300 million over those six years, more than double.\nOur human nutrition business can offer customers ingredients, flavor systems or turnkey product development solutions, supporting them every step of the way to take their ideas from concept to prototype to market in record time.\nIn Animal Nutrition, only 1.5 years after we completed our Neovia acquisition, we can look back on a successful integration in which we exceeded our synergy goals and built a global business that offers a full portfolio of on-trend items from pet treats to enzymes to ingredients for aquaculture to meet evolving customer needs.\nIn our health and wellness business, which is part of our human nutrition subsegment, our scientists are expanding the universe of pro, pre and post biotics and other functional products to meet growing demand from stand-alone supplements to ingredients that help enhance our array of human and animal solutions.\nTaken together, our extremely broad portfolio of ingredients and solutions can add value for customers across both human and animal nutrition.\nFor instance, taste and color are just as important for animal nutrition customers today, as they are for food and beverage customers.\nFunctional ingredients matter in both Human and Animal Nutrition & so on across our entire pantry.\nThen we add the rest of ADM's capabilities.\nIn plant-based protein, for example, we have the unique advantage of ADM's broad and integrated value chain from sourcing and transporting the soybeans and peas to transforming them into high-protein ingredients at our own facilities.\nTo adding the colors, flavors, oils and other key elements to create just the right taste, appearance, juiciness and sizzle for delicious finished plant-based products.\nWe're proud to have come this far in six short years, but our eye is on the future.\nWe are confident in continuing our growth story.\nIt starts with the global category trends I outlined earlier.\nIt continues with our extensive and ongoing research into consumer behavior and needs.\nEarlier this week, we released our latest view of the top consumer trends of 2021 based upon research that includes our proprietary outside voice consumer insights program.\nOur findings show that the events of the past year are accelerating and deepening fundamental market shifts, including consumers taking a more proactive approach to nourishing body and mind, the microbiome as the gateway to wellness.\nContinued growing demand for plant-based foods.\nSustainability is a key driver of purchasing decisions and transparency as a building block of consumer trusts.\nThe last piece of the equation is how our team brings it all together for our customers combining unmatched customer support and service with our vast value chain to deliver ingredients, systems and solution that align perfectly with market trends and needs.\nThese are the reasons we expect to continue to lead the industry outpacing the market and operating profit growth, and we remain confident in reaching $1 billion in OP in the medium-term future.\nAnd congratulations to you and the entire ADM team for another outstanding quarter.\nAcross the enterprise, we are continuing to advance our work to enrich the quality of life and meet key needs for consumers around the globe.\nAt the time of heightened concerns around food security, ADM's bust global value chain is helping ensure that countries and families can continue to put nutritious, delicious foods on the table.\nAs consumers focus more and more on proactive approaches to health, we're expanding the frontier in groundbreaking, functional ingredients and supplements for people with conditions like migraine and atopic dermatitis.\nAnd we're paving the way to a new world of precision nutrition personalized for every individual.\nAnd as sustainability becomes a key driver of consumer decisions and business success, we're playing a leading role in the transition to a low-carbon economy for our industry.\nWe are committed to our purpose, and our team is continuing to deliver for our customers, our shareholders and all could depend on us.\nAnd that is why we are confident in a strong finish to 2020 and a positive momentum continuing through 2021.\n",
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"content": "compname reports third quarter earnings of $0.40 per share, $0.89 per share on an adjusted basis.\nq3 adjusted non-gaap earnings per share $0.89 excluding items.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Our Chief Financial Officer, Ray Young, will review financial highlights and corporate results as well as the drivers of our performance.\nAdjusted segment operating profit was $1.15 billion, 12% higher than the fourth quarter of 2019.\nFor the full year, we delivered record adjusted earnings per share of $3.59, $3.4 billion in adjusted segment operating profit, 12% higher than 2019, four straight quarters of year-over-year segment operating profit growth, and trailing four-quarter adjusted ROIC of 7.7%, almost 200 basis points above our weighted cost of capital.\nWe maintain our strong balance sheet and generating strong cash flows.\nThe team managed a wide variety of risks superbly and we achieved our strategic initiatives, exceeding our $500 million to $600 million guidance and driving our ability to deliver a steady, sustainable earnings growth.\nI'll highlight for you some of our many achievements in 2020.\nIn our Optimize pillar, around the globe, amid lockdowns, rapidly shifting demand patterns and extreme weather events, our colleagues fulfilled our purpose by adapting and innovating to keep our work environment safe from COVID-19, maintaining our operations to support the global food value chain, and delivering for our customers to provide nutrition around the world.\nBeyond that, for the year, our Ag Services and Oilseeds team delivered more than $300 million in capital reduction initiatives.\nAnd we are focusing on new ways to enhance the return structure of that business, from digital technologies like our Grainbridge joint venture to differentiated products and services that add share value for growers, customers, and ADM.\nIn our Drive pillar, our new organizational structures and business processes, like our centers of excellence and our 1ADM business transformation projects, are helping drive better decision-making and operational excellence.\nWe continued our work to support our planet and its natural resources.\nWe achieved our 15x20 environmental goals ahead of schedule and launched Strive 35, an even more ambitious plan to reduce greenhouse gas emissions, energy, water and waste by 2035.\nAnd we are partnering with farmers in their efforts to pull better outcomes, supported by the 6.5 million acres we had in sustainable farming programs over recent years.\nIn our Growth pillar, our Nutrition team exceeded our Neovia synergy targets and delivered them ahead of schedule.\nWe expanded our plant-based protein capabilities, including the launch of our PlantPlus Foods joint venture.\nAnd amid an incredibly dynamic demand environment, we utilized new innovative technologies and continued launching new products to ensure we were meeting our customers' needs.\nOur Carbohydrate Solutions colleagues moved quickly to meet changing customer needs for retail flour, industrial starches for cardboard and USP grade alcohol for hand sanitizer.\nAnd the ADM team showed its innovative spirit by partnering and supporting companies that are making food out of air, spider silk out of corn and animal feed out of insects.\nFinally, I'm proud to say we surpassed by about 10% our stretch goal of $1.3 billion in readiness runway benefits by the end of the year.\nReadiness is driving our strategic initiatives, enabling us to be more efficient and powering our growth.\nPerhaps, most importantly, today, we can say that readiness is truly embedded in our culture.\nIt's how we work.\nThis dividend will be our 357th consecutive quarterly payment, an uninterrupted record of 89 years.\nIt's been a remarkable year with achievements and results that truly demonstrate the strategic work we've been doing over the years to optimize, drive and grow.\nEven more important is how we are building for the future.\nWe've created and are now strengthening the strategic foundation to deliver steady, sustained earnings growth for years to come.\nI'll be talking about that shortly.\nAs Juan mentioned, adjusted earnings per share for the quarter was $1.21, down from $1.42 in the prior-year quarter.\nAs a reminder, the fourth quarter of last year was positively impacted by the recognition of about $0.61 per share for the retroactive biodiesel tax credits.\nAbsent this, earnings would have grown by about 49%.\nOur trailing four-quarter average adjusted ROIC was 7.7%, almost 200 basis points higher than our 2020 annual WACC.\nAnd our trailing four-quarter adjusted EBITDA was about $3.7 billion.\nThe effective tax rate for the fourth quarter of 2020 was approximately 8% compared to a benefit of 1% in the prior year.\nThe calendar year 2020 effective tax rate was approximately 5%, down from the approximately 13% in 2019.\nThe decrease in the effective tax rate for the calendar year was due primarily to changes in the geographic mix of earnings and the impact of US tax credits, mainly the railroad tax credits, which have an offsetting expense in the cost of products sold.\nAbsent the effect of earnings per share adjusting items, the effective tax rate for the fourth quarter was approximately 11% and for the calendar year 2020 was approximately 9%.\nLooking ahead, we're expecting full-year 2021 effective tax rate to be in the range of 14% to 16%.\nWe generate about $3.1 billion of cash from operations before working capital for the year, significantly higher than 2019.\nReturn of capital for the year was $942 million, including more than $800 million from dividends.\nWe finished the quarter with a net debt to total capital ratio of about 32%, up from the 29% a year ago due to higher working capital needs due to rising commodity prices.\nCapital spending for the year was about $820 million, in line with our guidance and well below our depreciation and amortization rate of about $1 billion.\nFor 2021, we expect capital spending to be in the range of $900 million to $1 billion.\nOther business results were substantially lower than the prior-year quarter.\nADM Investor Services earnings were impacted by drastically lower short-term interest rates.\nCaptive insurance results were negatively impacted by $15 million more in net intracompany settlements compared to the prior-year quarter.\nFor 2021, we expect other business results to be in line with 2020.\nIn the corporate lines, unallocated corporate costs of $278 million were higher year-over-year due primarily to increased variable performance-related compensation expense accruals, increased IT and project-related expenses and centralization of certain costs, including from Neovia.\nOther charges decreased due to lower railroad maintenance expenses, partially offset by the absence of prior-year investment gains.\nFor 2021, corporate unallocated should be overall similar to 2020.\nNet interest expense for the quarter was lower than the last year due to lower short-term interest rates and liability management actions taken in 2020.\nFor 2021, we expect net interest expense for the calendar year to be similar to or slightly lower than 2020.\nThe Ag Services and Oilseeds team capped off an outstanding year, with record adjusted operating profit in the fourth quarter.\nAg Services results were significantly higher year-over-year.\nIn North America, the team executed extremely well, capitalizing on strong global demand, particularly from China, to deliver higher export volumes and margins.\nSouth American origination was lower year-over-year after significantly accelerated farmer selling in the first half of 2020.\nGlobal trade continued to do a great job, contributing to higher results by utilizing its global reach and managing risk well to meet customer demand.\nApproximately $80 million of prior timing effects reversed in the quarter as expected.\nCrushing also delivered substantially higher results versus the prior-year period.\nThe business did a great job to capture higher margins in a continued environment of tight soybean supply and strong global demand for both meal and vegetable oils.\nThere was approximately $125 million in net negative timing in the quarter, driven by basis impacts and improved soft seed margins.\nRefined products and other results were higher year-over-year, absent the recognition of the retroactive biodiesel tax credit in the fourth quarter of last year, with good results driven primarily by solid South American margins.\nWilmar's strong performance drove our equity earnings higher versus the prior year despite our slightly lower ownership stake.\nFor the full year, Ag Services and Oilseeds delivered exceptional results of $2.1 billion, 9% higher than 2019.\nIts team achieved multiple records, including an all-time high global crush volumes.\nIn addition, we're proud of the teams that brought our reserve export facility back online safely and ahead of schedule despite dealing with multiple severe weather events this year.\nLooking ahead, we expect the first quarter of 2021 results for Ag Services and Oilseeds to be significantly higher than the prior year first quarter, driven by extremely strong North American export demand and continued healthy crush margins.\nThe Carbohydrate Solutions team again delivered substantially higher year-over-year results despite the impacts of lockdowns in key market segments.\nThe starches and sweeteners subsegment achieved significantly higher results, driven by lower net corn costs and intercompany insurance settlements.\nEarnings were partially offset by low results from corn oil and wet mill ethanol margins.\nVantage Corn Processors results were also better versus the prior year, though they continue to reflect a challenging ethanol industry environment.\nThe team delivered higher year-over-year margins as they met increased demand for USP grade alcohol, partially offset by fixed costs from the two temporarily idled dry mills.\nConsidering the impact of lockdowns in both driving miles and the food service sector, we're extremely proud of our Carbohydrate Solutions team for delivering full-year results of $717 million, 11% higher than 2019.\nThe team achieved record high operating profits from starches in the year.\nThey acted decisively by temporary idling production at our 2 VCP dry mill plans, helping address industry supply and demand balances.\nAnd the wheat milling business' modernization and optimization plan, including a new state-of-the-art mill in Mendota, Illinois helped power a significant improvement over full-year 2019 for that business.\nLooking ahead, we expect Carbohydrate Solutions results in the first quarter to be significantly higher than last year's first quarter, which was negatively impacted by corn oil mark-to-market impacts, but below the fourth quarter 2020 levels due to the challenged industry ethanol margins.\nThe Nutrition team delivered 24% year-over-year growth in the quarter.\nIn human nutrition, flavors delivered a strong quarter, driven by good sales and product mix in North America and EMEAI.\nContinued strength in plant proteins drove higher results in specialty ingredients.\nHealth and wellness delivered higher sales in probiotics and natural health and nutrition.\nPrior-year results included revenue and income related to the launch of the strategic Spiber relationship.\nHuman nutrition results for the quarter also included an intercompany insurance settlement.\nAnimal nutrition results were significantly higher year-over-year, driven by strong performances in Asia and EMEAI and improvements in amino acid results, partially offset by currency effects in Latin America.\nWe're continuing to make improvements in our amino acid business, including our announcement last month that we're discontinuing dry lysine production and transitioning to our liquid and encapsulated products in the first half of this year.\nFor the full year, Nutrition results were $574 million, 37% higher than 2019.\nThe Nutrition team grew revenue 5% on a constant currency basis and continued to expand EBITDA margins.\nWe exceeded our Neovia synergy targets and delivered them ahead of schedule.\nWe are truly seeing the benefits of our investments in Nutrition.\nLooking ahead, we expect Nutrition to solidly grow operating profits in 2021 calendar year, but the first quarter should be similar to the prior-year period due to the timing of certain expenses over the year, including investments in projects to drive organic growth.\nI'd like to congratulate the team once more on delivering great results in 2020.\nI am proud of what we achieved and I'm excited to see our work empowering us to reach even greater heights.\nIn 2020, Ag Services and Oilseeds capitalized on its unparalleled and flexible global footprint to meet the strong demand.\nIn 2021, we expect Ag Services and Oilseeds' strong execution, diverse and flexible crush capabilities, including an extensive soft seed footprint, and important strategic work to continue to drive results.\nIn addition, we expect the global demand environment for Ag Services and Oilseeds to remain strong.\nChina should continue to be a significant buyer.\nWe see continued strong global growth in mill demand and we expect increased demand for vegetable oil due to recovery in cooking oils for foodservice and growth in demand for biofuels, including renewable green diesel.\nThat is why we are confident in another outstanding performance from Ag Services and Oilseeds in 2021.\nCarbohydrate Solutions is showing how we have embedded great execution into our operational structure and culture.\nThe team is doing a great job strengthening their business by optimizing their plants and product mix.\nAnd their ability to adjust production in 2020 to quickly meet changes in demand showed how those strategic efforts are paying off.\nNow they are well positioned to use those same tools as the effect of lockdowns on the foodservice and transportation fuel sectors dissipates throughout 2021.\nWe expect solid profit growth for the year for Carbohydrate Solutions.\nNutrition continued to harvest investments, leading consumer growth trend areas and partnered with customers to bring innovative new products and solutions to market in 2020.\nBased on our current organic growth plans, we expect the Nutrition team to deliver solid revenue expansion and enter a period of an average 15% per annum operating profit growth, consistent with our strategic plan.\nAcross ADM, we are fulfilling our purpose and building on a foundation for steady, sustainable earnings growth.\nWe are growing and leading in key trend areas, including food security, health and wellness and sustainability.\nOur continued advancements of readiness is benefiting the entire enterprise, and we are making investments in exciting growth innovation platforms, which we'll be talking more about in the future.\nIn 2021, we will remain focused on the drivers under our control, adding incremental returns as we focus on organic growth, advancing operational excellence initiatives to maximize returns from every business and every asset, and continuing to generate benefits from readiness.\nWith the strong execution of these strategic initiatives and improving market conditions as the year progresses, we expect to build on a record 2020 with a strong growth in segment operating profit and another record year of earnings per share in 2021.\n",
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"content": "compname reports fourth quarter earnings of $1.22 per share, $1.21 per share on an adjusted basis, affirms earnings growth expectation for 2021.\nq4 adjusted earnings per share $1.21 excluding items.\nexpect growth in operating profit and earnings per share in 2021.\nexpect nutrition team to deliver solid revenue expansion and profit growth in 2021.\nqtrly ag services & oilseeds achieved substantially higher results year over year.\nqtrly carbohydrate solutions results were higher than q4 of 2019.\nexpect strong growth in segment operating profit in 2021.\ncarbohydrate solutions business is well positioned to generate solid profit growth in 2021.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Our chief financial officer, Ray Young, will review the drivers of our performance as well as corporate results and financial highlights.\nThen Juan will discuss our outlook.\nOur team delivered a super fourth quarter.\nAdjusted segment operating profit was $1.4 billion, 23% higher than the fourth quarter of 2020.\nOur trailing four-quarter adjusted EBITDA was $4.9 billion, $1.25 billion more than a year ago.\nAnd our trailing four-quarter average adjusted ROIC was 10%, meeting our objectives.\nThat performance represented a strong finish to an outstanding 2021.\nFor the full year, our adjusted earnings per share was $5.19, also a record.\nAnd full year adjusted segment operating profit was $4.8 billion.\nThis excellent performance was reflected across the company.\nThe Ag Services and Oilseeds team's actions to improve their business portfolio and strengthen their operating model continued to enable superior performance in a strong market environment.\nAS&O delivered full year 2021 OP of $2.8 billion, with each subsegment performing at or near historic highs.\nCarbohydrate solutions executed phenomenally well to deliver full year operating profits of $1.3 billion.\nAnd the team is continuing the evolution of carbohydrate solutions from the sale of our Peoria dry mill and the announcement of the sustainable aviation fuel MOU; to our agreement with LG Chem and the continued growth of our exciting biosolutions platform, which delivered new revenue wins with an annualized run rate of almost $100 million; to the project we announced earlier this month to further decarbonize our operations by connecting two other major processing facilities; to our vacate of carbon capture and storage capabilities.\nThe nutrition team once again delivered industry-leading revenue and OP growth, with full year revenues up 16% and full year OP of $691 million, representing a 20% year-over-year increase.\nWe also continued to enhance our nutrition business with strategic investments targeted at growing areas of demand, including soya protein, which will expand our participation in alternative proteins; PetDine, which substantially enhance our presence in pet food and treats; Deerland, which continued the expansion of our functional probiotics and enzymes portfolio within our global health & wellness business; and FISA, which enhance our flavor footprint by opening up new growth opportunities in Latin America and the Caribbean.\nLast month, at our Global Investor Day, we unveiled our strategic plan and reiterated our balanced financial framework for value creation, including using our strong cash flows to deliver both growth investments and distributions to shareholders.\nWe are confident in our plan [Audio gap] which is why we are pleased to announce an 8% increase in our quarterly dividend to $0.40 per share.\nWe are proud of our record of 90 uninterrupted years of dividends and more than 40 years of consecutive annual dividend increases, and we are pleased to continue to follow through on our commitment to shareholder value creation.\nIt's been a great year, and we're excited about what's to come.\nOur continued actions to build a better ADM and dynamically align it with the global trends of food security, health and well-being, and sustainability, and the steadfast advancement of our productivity and innovation initiatives will help propel our 2022 results.\nI will talk in more detail about the upcoming calendar year shortly.\nThe Ag Services and Oilseeds team capped off really a truly impressive year, successfully navigating through supply chain challenges to deliver results largely in line with the extremely strong prior-year quarter.\nThe Ag Services team performed well in an environment of continued strong global demand, including significantly increased export volumes for customers outside of China.\nGlobal trade was substantially higher year over year, driven by solid risk management and improved results in global ocean freight.\nOverall, Ag Services delivered strong results, just slightly off the outstanding fourth quarter of 2020 when we benefit from exceptionally high export margins.\nCrushing executed well on the continued solid demand environment for both soybean meal and vegetable oil.\nLower results in EMEA versus a very strong fourth quarter of 2020 and approximately $250 million in net negative timing impacts versus negative $125 million in the prior-year quarter drove overall results lower year over year.\nThe majority of those negative timing effects are expected to reverse in the first half of 2022.\nThe refined products and other teams delivered substantially higher results versus the prior-year period, driven by strong volumes and margins in North America for refined oils and improved biodiesel margins in North America and EMEA, which more than offset weaker South American results due to the reduced biodiesel mandate.\nEquity earnings from Wilmar were higher year over year.\nLooking ahead, we expect a strong first quarter from Ag Services and Oilseeds, higher than the first quarter of 2021 and in line with the just-ended fourth quarter.\nCarbohydrate solutions' fourth quarter results were more than double the prior-year quarter.\nIn Starches and Sweeteners subsegment, including ethanol production from our wet mills, results were lower versus the fourth quarter of 2020, driven by higher input costs, including energy costs in EMEA as well as lower wheat milling volumes, partially offset by continued strong ethanol margins.\nVolumes for North America sweeteners and starches were largely flat year over year.\nVantage corn processor results were again substantially higher year over year, driven by historically strong industry ethanol margins as a result of strong demand relative to supply as well as increased sales volumes due to production at the two dry mills that were idle in the previous year period.\nAs we look ahead, we believe the first quarter for carbohydrate solutions should be similar to or slightly above the strong first quarter of 2021.\nThe nutrition business closed out a year of consistent and strong growth, with fourth quarter revenues 19% higher year over year, 21% on a constant currency basis, with 26% higher profits year over year, and sustained strong EBITDA margins.\nHuman Nutrition had a great fourth quarter, with revenue growth of 21% on a constant currency basis and substantially higher profits.\nFlavors continued its growth trajectory, driven primarily by improved product mix in EMEAI and continued strong performance from North America, partially offset by weaker APAC results.\nIn specialty ingredients, overall profits for the fourth quarter were in line with the year-ago period as strong demand for plant-based proteins offset the impact of onetime insurance proceeds in the fourth quarter of 2020.\nHealth & wellness was higher versus the prior-year quarter as the business continued to deliver growing profits in bioactives and fermentation.\nAnimal nutrition revenue was up 21% on a constant currency basis, and operating profit was much higher year over year, driven primarily by continued strength in amino acids.\nNow looking ahead, we expect nutrition to continue to grow operating profits at a 15%-plus rate for calendar year 2022, with the first quarter similar to the first quarter of 2021 with continued revenue growth offset by some higher costs upfront in the year and the absence of the onetime benefits we saw in the first quarter of the prior year.\nNow let me finish up with a few observations from the Other segment as well as some of the corporate line items.\nOther business results were substantially higher, driven primarily by higher captive insurance underwriting results as the prior-year quarter included larger intracompany insurance settlements.\nFor calendar year 2022, we expect other business results to be similar to 2021.\nAlthough for the first quarter, we expect a loss of about $25 million due to insurance settlements currently planned.\nNet interest expense increased year over year on higher short-term borrowings.\nIn the corporate lines, unallocated corporate costs of $276 million were lower year over year due primarily to increased variable performance-related compensation expense accruals in the prior year, partially offset by higher IT offering in project-related costs and transfers of costs from business segments into centralized centers of excellence in supply chain and operations.\nWe anticipate calendar year 2022 total corporate costs, including net interest, corporate unallocated, and other corporate, to be in line with the $1.2 billion area, consistent with what I discussed at Global Investor Day with net interest roughly similar, corporate unallocated a bit higher, and corporate other a bit lower.\nThe effective tax rate for the fourth quarter of 2021 was approximately 21%, compared to 8% in the prior year.\nThe calendar year 2021 effective tax rate was approximately 17%, up from 5% in 2020.\nThe increase for the calendar year was due primarily to changes in geographic mix of earnings and current year discrete tax items, primarily valuation allowance and return to provision adjustments.\nLooking ahead, we're expecting full year 2022 effective tax rate to be in the range of 16 to 19%.\nOur balance sheet remains solid, with a net debt-to-total capital ratio of about 28% and available liquidity of about $9 billion.\nI hope most of you were able to join us on our Global Investor Day last month.\nThere, we showed that we have consistently advanced our strategy from our work to improve ROIC through capital cost and cash; to our strategic growth and margin enhancement accomplishments, including the creation of a global Nutrition business; to today's focus on productivity and innovation.\nLet me take a few moments to talk about how we see the 2022 environment.\nIn Ag Services and Oilseeds, we see a continued favorable global demand environment.\nDue to a short growth in South America, with the magnitude of the shortfall still to be determined, we expect global ag commodity buyers will rely relatively more on the U.S. market for their needs, assuming we have a normal U.S. crop later this year.\nOn the oilseeds side, we're starting 2022 with strong soy crush margins.\nAnd as we discussed at Global Investor Day, we believe that increasing demand for meal as well as vegetable oil as a feedstock for renewable green diesel should continue to support the positive environment this year, with our soy crush margins in the range of 45 to $55 per metric ton.\nAssuming these dynamics play out, we believe that Ag Services and Oilseeds in 2022 has the potential to deliver operating profit similar to or better than 2021.\nFor carbohydrate solutions, we are assuming the demand and margin environment for our starch and sweetener products will be steady versus 2021.\nWe expect the industry ethanol environment to continue to be constructive, supported by the recovery of domestic demand to pre-COVID levels, energy costs driving higher exports, and better clarity on the regulatory landscape.\nWith this in mind, we're assuming higher ADM ethanol volumes and EBITDA margins to average $0.15 to $0.25 for the calendar year.\nIn addition, we are expecting our biosolutions platform to deliver another year of solid growth as we continue to evolve the carbohydrate solutions business.\nPutting it all together, we expect carbohydrate solutions to deliver full year operating profit slightly lower than their outstanding 2021.\nIn nutrition, we're expecting continued growth in demand for our unparalleled portfolio of nutrition ingredients and systems, along with the benefits of accretion from our recent acquisitions.\nWith these dynamics, we expect 15-plus percent OP growth in 2022, revenue growth above 10%, and EBITDA margins above 20% in human nutrition and high single digits in animal nutrition, consistent with targets we set out at our Global Investor Day.\nSo as we look forward in 2022, we see a positive demand environment across our portfolio.\nAnd then we add to that thing we can do better.\nOur execution was great in 2021, but we're always identifying opportunities for improvement.\nAnd we intend to do even more to meet this growing demand in 2022.\nPut it all together, and we're optimistic for another very strong performance in 2022 as we progress toward our strategic plans next earnings milestones of six to $7 per share.\n",
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"content": "compname reports outstanding results: fourth quarter earnings per share of $1.38, $1.50 on an adjusted basis; full year 2021 earnings per share of $4.79, $5.19 on an adjusted basis.\nannouncing 8% increase in quarterly dividend.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Warner and Michael will discuss our earnings results and guidance as well as provide a business update.\nBefore we begin, let me cover a few administrative details.\nSuch statements include those about future expectations, beliefs, plans, projections, strategies, targets, estimates, objectives, events, conditions and financial performance.\nSimply put, our team continues to effectively execute our strategic plan across all of our businesses, which includes making significant investments in our energy infrastructure to enhance the reliability and resiliency of the energy grid as well as transition to a cleaner energy future in a responsible fashion.\nThese investments, coupled with our continued focus on disciplined cost management delivering significant value to our customers, communities and shareholders.\nMoving now to our second quarter earnings results, yesterday, we announced second quarter 2021 earnings of $0.80 per share.\nOur earnings were down $0.18 per share from the same time period in 2020, primarily due to a change in the seasonal electric rate design at Ameren Missouri that reduced earnings $0.19 per share.\nThe impact of this change in rate design will reverse in the third quarter of 2021 and is not expected to impact full year results.\nMichael will discuss the other key drivers of our strong quarter earnings results a bit later.\nDue to the continued strong execution of our strategy, I am pleased to report that we remain on track to deliver within our 2021 earnings guidance range of $3.65 per share to $3.85 per share.\nSpeaking of the execution of our strategy, let's move to Page five, where we reiterate our strategic plan.\nThe first pillar of our strategy stresses investing in and operating our utilities in a manner consistent with existing regulatory frameworks.\nThis has driven our multiyear focus on investing in energy infrastructure with a long-term benefit of our customers.\nAs a result and as you can see on the right side of this page, during the first six months of this year, we invested significant capital in each of our business segments, including wind generation at Ameren Missouri, which I will discuss later.\nThese investments are delivering value to our customers.\nAs I said before, our energy grid is stronger, more resilient and more secure, because of the investments we are making in all four business segments.\nConsistent with the Missouri Smart Energy Plan, we have made significant investments to harden energy grid, which has reduced outages and installed nearly 300,000 electric smart meters for customers.\nThese smart meters will help customers better manage their usage and control their overall energy costs.\nIn Illinois, we continue to execute on our electric distribution and gas modernization action plans.\nThe plans include investments to strengthen electric power poles.\nWe placed gas transmission pipelines and compression coupled steel mains as well as to implement new efficiency measures, including mobile enhanced communications and assessment capabilities for our careers.\nThese improvements, along with our investments in outage detection technology, were resulting in improvements in system reliability and millions of dollars in savings for customers.\nMoving now to regulatory matters, in late March, Ameren Missouri filed a request for a $299 million increase in annual electric service revenues and a $9 million increase in annual natural gas revenues with the Missouri Public Service Commission.\nIn our Illinois Electric business, we requested a $60 million base rate increase in our required annual electric distribution rate filing.\nThese proceedings are all moving along on schedule.\nWe will be able to provide you information on these proceedings as they develop later this summer and into the fall.\nFinally, we have remained relentlessly focused on continuous improvement and disciplined cost management, including retaining the cost savings that we realized in 2020 due to the actions we took to mitigate the impacts of COVID-19.\nMoving to Page six and the second pillar of our strategy, enhancing regulatory frameworks and advocating for responsible energy and economic policies.\nStarting in Missouri, in May, the Missouri legislator passed the bill, allowing for securitization in the state.\nThis constructive legislation which is trying by governance parsing in July give us another important regulatory tool to facilitate our transition to a cleaner energy future and a cost effective manner for our customers.\nHowever, as we have stated in the past, a robust integrated resource plan does not rely on securitization to be successful.\nOur flexible and responsible plan, which includes approximately $8 billion of investments in renewable energy through 2040, the retirement of all of our coal-fired energy centers and extending the life of our carbon-free Callaway nuclear energy center focuses on getting the energy we provide to our customers as clean as we can, as fast as we can without compromising from reliability, customer affordability and the evolution of new clean energy technologies.\nAnd as I will touch on later, I am pleased to say that we are already taking steps to implement this important plan for our customers, the State of Missouri and our country.\nMoving now to Illinois, last month, the Illinois Commerce Commission approved Ameren Illinois electric vehicle charging program.\nUnder this program, we are able to support the development of a network of charging infrastructure in Central and Southern Illinois as well as implement special time-based delivery service rates and other incentives to help encourage the use of electric vehicles.\nWe are excited about this new program, because it will drive greater electrification of the transportation sector as well as help the state of Illinois move toward its clean energy goals.\nMoving to legislative efforts, as many of you know, we have been working to enhance the regulatory framework for our Illinois Electric business.\nThe performance-based regulatory framework in place today has delivered strong value for customers and shareholders over the years.\nHowever, the framework is scheduled to sunset in 2022.\nAs a result, we have been working with key stakeholders to develop constructive long-term regulatory policies that support important investments in energy infrastructure, while enabling us to earn fair returns on those investments.\nAs you know, throughout the regulator legislative session, which ended late May, we advocated for the Downstate Clean Energy Affordability Act which was largely extended the existing framework until 2032, while putting in place provisions that would set the Ameren Illinois electric distribution ROE at the national average.\nAt the same time, many other energy-related legislative proposals from other stakeholders were proposed during the legislative session, including proposals from Governor Pritzker, labor and environmental groups, to address the closure of nuclear plants in the states, Illinois clean energy transition and the electric distribution framework going forward.\nFor months, stakeholders have been in discussion seeking to find an appropriate compromise to all these proposals.\nWhile progress is made in these issues, the regular legislative session ended on May 31 with no energy legislation being put before the Senate or House of Representatives for a vote.\nA special session was called in mid-June to further discuss draft energy legislation, but no bill was filed nor action taken.\nNeedless to say, we will continue to work with key stakeholders to find a constructive solution to this important matter.\nTurning to Page seven for an update on FERC regulatory matters, in April, FERC issued a supplemental notice of proposed rulemaking, or NOPR, on electric transmission return on equity incentive adder for participation in the regional transmission organization, or RTO.\nAs you may recall, under the NOPR, the RTO incentive adder would be removed from utilities that have been members of an RTO for three years or more, like the Ameren Illinois and ATXI.\nWe have been very clear that we disagreed with FERC proposed recommendation in this matter for a number of reasons and recently filed comments strongly posing the removal of the adder.\nOf course, we are unable to predict the ultimate outcome or timing of this matter as the FERC is under no timeline to issue a decision.\nIn addition, in June, the FERC issued an order establishing a joint federal state task force and electric transmission.\nThis order establishes a first of its kind task force to respond with state commission's transmission-related issues including how to plan and pay for transmission facilities, recognizing that federal and state regulators share authority over different aspects of these transmission-related issues.\nThe task force will be comprised of the FERC commissioners and representatives nominated by the National Association of Regulatory Utility Commissioners from 10 state commissions.\nThe first public meeting is expected to be held this fall.\nAlso last month, the FERC issued an advanced notice of proposed rulemaking related to regional transmission planning and cost allocation processes, including critical long-term planning for anticipated future generation needs.\nWe continue to asses the managed rates in the advanced NOPR and expect to file comments with the FERC this fall.\nAgain, we are unable to predict the ultimate timing or outcome of this matter as FERC is under no timeline to issue a decision.\nSpeaking to plan for future transmissions, please turn to Page eight.\nAs I discussed on the call in May, MISO completed a study outlining a potential roadmap of transmission projects through 2039, taking into consideration the rapidly evolving generation mix that includes significant additions of renewable generation based on announced utility integrated resource plans, state mandates and goals for clean imaging or carbon emission reductions, among other things.\nUnder MISO's Future one scenario, which is the scenario that resulted in an approximate 60% carbon-emission reduction below 2005 levels by 2039 MISO estimates approximately $30 billion of future transmission investment in the MISO footprint.\nFurther, MISO's Future three scenario resulted in an 80% reduction in carbon emissions below 2005 levels by 2039.\nUnder this scenario, MISO estimates approximately $100 billion of transmission investment in the MISO footprint will be needed.\nIt is clear that investment in transmission is going to play a critical role in the clean energy transition and we are well-positioned to plan and execute potential projects in the future for the benefit of our customers and country.\nWe continue to work with MISO and other key stakeholders and believe certain projects outlined in Future one are likely to be included in this year's MISO's transmission planning process, which is currently scheduled to be completed in the fourth quarter of 2021.\nHowever, it is possible the process could go into the first quarter of 2022.\nMoving now to Page nine for an update on our $1.1 billion wind generation investment related to the acquisition of 700 megawatts of new wind generation at two sites in Missouri.\nAmeren Missouri closed on the acquisition of its first wind energy center, a 400 megawatt project in Northeast Missouri in December.\nIn January, Ameren Missouri acquired a second wind generation project, the 300 megawatt Atchison Renewable Energy Center located in Northwest Missouri.\nI am pleased to report that as of the end of the second quarter, the Atchison Renewable Energy Center is now in service.\nWith both facilities now operating, it marks a key milestone as we continue to transition our energy portfolio toward a cleaner energy future.\nTurning now to Page 10 and an update on Missouri's Callaway energy center.\nAs we have previously discussed, during its return to full power, as part of its 24th refueling and maintenance outage in late December 2020, Callaway experienced a non-nuclear operating issue related to its generator.\nA thorough investigation of this matter was conducted and a decision was made to rewind the generator stator and rotor in order to safely and sustainably return to energy center to service.\nI am pleased to report that the generator project was executed very well and that the energy center returned to service on August 4.\nThe completion of this project positions Callaway for a sustainable long-term future.\nThe cost of the capital project was approximately $60 million.\nAs we have said previously, the insurance claims for the capital project and replacement power have been accepted by our insurance carrier, which will mitigate the impacts of this outage for our customers.\nIn addition, we do not expect this matter to have a significant impact on Ameren's financial results.\nTurning to Page 11, we remain focused on delivering a sustainable energy future for our customers, communities and our country.\nThis page summarizes our strong sustainability value proposition for environmental, social and governance matters and is consistent with our vision, leading the way to a sustainable energy future.\nBeginning with environmental stewardship, last September, Ameren announced its transformational plan to achieve net-zero carbon emissions by 2050 across all of our operations in Missouri and Illinois.\nThis plan includes interim carbon-emission reduction targets of 50% and 85% below 2005 levels in 2030 and 2040 respectively and is consistent with the objectives of the Paris agreement and limiting global temperature rise to 1.5 degrees Celsius.\nWe also have a strong long-term commitment to our customers and communities to be socially responsible and economically impactful.\nFinally, our strong corporate covenants is led by a diverse Board of Directors focused on strong oversight that's aligned with ESG matters.\nAnd our executive compensation practices include performance metrics that are tied to sustainable long-term performance, diversity, equity and inclusion and progress toward a cleaner, sustainable energy future.\nI encourage you to take some time to read more about our strong sustainability value proposition.\nYou can find all of our ESG-related reports at amereninvestors.com.\nTurning now to Page 12, looking ahead, we have a strong sustainable growth proposition, which will be driven by a robust pipeline of investment opportunities of over $40 billion over the next decade that will deliver significant value to all our stakeholders in making the energy grid stronger, smarter and cleaner.\nImportantly, these investment opportunities exclude any new vehemently better special transmission projects, including the potential road map of MISO transmission projects I discussed earlier, all of which would increase the reliability and resiliency of the energy grid as well as enable our country's transition to a cleaner energy future.\nIn addition, we expect to see greater focus from a policy perspective and infrastructure investments to support the electrification of the transportation sector.\nOur outlook through 2030 does not include significant event structure investments for electrification at this time.\nOf course, our investment opportunities will not only create stronger and cleaner energy grid to meet our customers' needs and exceed their expectations, but they would also create thousands of jobs for our local economies.\nMaintaining constructive energy policies that support robust investment in energy infrastructure and a transition to a cleaner energy future and is safe, reliable and affordable fashion will be critical to meeting our country's future energy needs and delivering on our customers' expectations.\nMoving to Page 13, to sum up our value proposition, we remain firmly convinced that the execution of our strategy in 2021 and beyond will deliver superior value to our customers, shareholders and the environment.\nIn February, we issued our five-year growth outlook, which included a 6% to 8% compound annual earnings growth rate from 2021 to 2025.\nThis earnings growth is primarily driven by strong rate base growth and compares very favorably with our regulated utility peers.\nImportantly, our five-year earnings and rate base growth projections do not include 1,200 megawatts of incremental renewable investment opportunities outlined in Ameren Missouri's and greater resource plan.\nOur team continues to assess several renewable generation proposals from developers.\nWe expect to file this year with the Missouri PSC for certificates of convenience and necessity for a portion of these planned renewable investments.\nI am confident in our ability to execute our investment plans and strategies across all four of our business segments, which we have an experienced and dedicated team to get it done.\nThat fact, coupled with our sustained past execution and our strategy on many fronts has positioned us well for future success.\nFurther, our shares continue to offer the investors a solid dividend, which we expect to grow in line with our long-term earnings-per-share growth guidance.\nSimply put, we believe our strong earnings and dividend growth outlook results in a very attractive total return opportunity for shareholders.\nI will now turn to Michael.\nEarnings in Ameren Missouri, our largest segment, decreased $0.18 per share, driven primarily by a change in seasonal electric rate design, resulting from the March 2020 rate order, which provided for winter rates in May and summer rates in September rather than the blended rates used in both months in 2020.\nThe rate design change decrease earnings $0.19 per share and is not expected to impact full year results.\nEarnings were also impacted by the timing of income tax expense, which decreased earnings $0.03 per share and is not expected to impact full year results.\nAs Warner mentioned, during the quarter, we remain relentlessly focused on continuous improvement and discipline cost management and have been able to largely maintained the level of operations and maintenance savings this quarter that we experienced during the year-ago period, which was significantly affected COVID-19.\nThe increase in other operations and maintenance expenses, which decreased earnings $0.02 per share, was primarily due to more favorable market returns on the cash surrender value of company-owned life insurance in the year-ago period.\nAs you can see, we have worked hard this year to control costs where we can.\nThe amortization of deferred expenses related to the fall 2020 Callaway Energy Center scheduled refueling and maintenance outage and higher interest expense primarily due to higher long-term debt balances outstanding also decreased earnings $0.02 per share.\nThese factors were partially offset by an increase in earnings of $0.05 per share due to increased investments in infrastructure and wind generation, eligible for plant and service accounting and the Renewable Energy Standard Rate Adjustment Mechanism, or RESRAM.\nHigher electric retail sales also increased earnings by approximately $0.04 per share, largely due to continued economic recovery in this year's second quarter compared to the unfavorable impacts of COVID-19 in the year-ago period.\nWe've included on this page the year-over-year weather-normalized sales variances for the quarter.\nOverall weather-normalized sales are largely consistent with our expectations outlined in our call in February as we still expect total sales to be up approximately 2% in 2021 compared to 2020.\nMoving to other segments, Ameren Transmission earnings declined $0.03 per share over year, which reflected the absence of the prior year benefit from the May 2020 FERC order addressing the allowed base return on equity, which more than offset earnings on increased infrastructure investment.\nEarnings for Ameren oil natural gas decreased $0.01 per share.\nIncreased delivery service rates that became effective in late January 2021 were offset by a change in rate design, which is not expected to impact full year results.\nAmeren Illinois electric distribution earnings increased $0.02 per share, which reflected increased infrastructure investments and a higher allowed ROE under performance-based rate making.\nAmeren parent and other results were also up $0.02 per share compared to the second quarter of 2020 primarily due to the timing of income tax expense, which is not expected to impact full year results.\nAnd finally, 2021 earnings per share reflected higher weighted average shares outstanding.\nBefore moving on, I will touch on year-to-date sales trends for Illinois Electric distribution.\nWeather normalized kilowatt hour sales to Illinois residential customers decreased 1%.\nAnd weather normalized kilowatt hour sales to Illinois commercial and industrial customers increased 2.5% and 2% respectively.\nRecall that changes in electric sales in Illinois, no matter the cause, do not affect our earnings since we have full revenue decoupling.\nTurning to Page 16, now I'd like to briefly touch on key drivers impacting our 2021 earnings guidance.\nWe're off to a strong first half in 2021.\nAnd as Warner stated, we continue to expect 2021 diluted earnings to be in the range of $3.65 to $3.85 per share.\nSelect earnings considerations for the balance of the year are listed on this page and are supplemental to the key drivers and assumptions discussed on our earnings call in February.\nI will note that our third quarter earnings comparison will be positively impacted by approximately $0.19 per share due to the seasonal electric rate design change effective in 2021 at Ameren Missouri that we discussed earlier.\nMoving now to Page 17 for an update on our regulatory matters.\nStarting with Ameren Missouri, as you recall, on March 31, we filed for a $299 million electric revenue increase with the Missouri Public Service Commission.\nThe request includes a 9.9% return on equity, a 51.9% equity ratio and a September 30, 2021 estimated rate base of $10 billion.\n[Indecipherable] will be filed in early September with the bottle testing by October 15.\nEvidence hearings are scheduled to begin in late November.\nIn addition, on March 31, we filed for a $9 million natural gas revenue increase with the Missouri PSC.\nThe request includes a 9.8% return on equity, a 51.9% equity ratio and a September 30, 2021, estimated rate base of $310 million.\nA Missouri PSC decision in both rate reviews is expected by early February, with new rates expected to be effective by late February.\nMoving down renewal -- Illinois regulatory matters, in April, we made our required annual electric distribution rate update filing.\nUnder Illinois performance-based ratemaking, these annual rate updates systematically adjust cash flows over time for changes in cost of service and true up any prior period over or under recovery of such costs.\nIn late June, the ICC staff recommended a $54 million base rate increase compared to our request of a $60 million base rate increase.\nAn ICC decision is expected in December with new rates expected to be effective in January 2022.\nMoving to Page 18.\nIn early June, Ameren published a sustainability financing framework, becoming one of the first utilities in the nation to do so.\nUnder this framework, Ameren and its issuing subsidiaries may elect to finance or refinance new and existing projects that have an environmental or social benefit through green bonds, social bonds, sustainability bonds, green loans or other financial instruments.\nGiven the amount of investment activity at Ameren and the utility subsidiaries are pursuing, that have environmental or social benefits, we expect to be a relatively frequent issuer under our sustainability financing framework.\nIn June, both Ameren Missouri and Ameren Illinois issued green bonds consistent with this new financing framework.\nMore information about this framework is available at amereninvestors.com.\nTurning to Page 19 for a financing and liquidity update, we continue to feel very good about our liquidity and financial position.\nAs I just mentioned in June, Ameren Missouri and Ameren Illinois issued green bonds with the net proceeds to be allocated to sustainable projects, meeting certain eligibility requirements under the sustainability financing framework.\nAdditional debt issuances are outlined on this page.\nFurther, earlier this year, we physically settled the remaining shares under our forward equity sale agree for proceeds of approximately $115 million.\nIn order for us to maintain our credit ratings and a strong balance sheet while we found our robust infrastructure plan, we expected to issue a total of approximately $150 million of common equity in 2021 under the at-the-market or ATM program established in May.\nThis is consistent with prior guidance provided in February and May.\nAnd to date, approximately $122 million of equity has been issued through this program.\nOur $750 million ATM equity program is expected to support our equity needs through 2023.\nFinally, Ameren's available liquidity as of July 30 was approximately $1.8 billion.\nLastly, turning to Page 20, we are well positioned to continue to execute on our plan.\nWe continue to expect to deliver strong earnings growth in 2021 as we successfully execute our strategy.\nAnd as we look to the longer term, we expect strong earnings-per-share growth driven by a robust rate base growth and disciplined cost management.\nFurther, we believe this growth will compare favorably with the growth of our regulated peers.\nAmeren shares continue to offer investors an attractive dividend.\nIn total, we have a strong total shareholder return story that compares very favorably to our peers.\n",
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"content": "ameren q2 earnings per share $0.80.\nq2 earnings per share $0.80.\nguidance range for 2021 reaffirmed at $3.65 to $3.85 per diluted share.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Warner and Michael will discuss our earnings results and guidance as well as provide a business update.\nBefore we begin, let me cover a few administrative details.\nSuch statements include those about future expectations, beliefs, plans, projections, strategies, targets, estimates, objectives, events, conditions and financial performance.\nTo begin, I am pleased to report that our team continues to effectively execute our strategic plan across all of our businesses, which includes making significant investments in our energy infrastructure to enhance the reliability and resiliency with the energy grid as well as transition to a cleaner energy future in a responsible fashion.\nThese investments, coupled with our continued focus on disciplined cost management and delivering significant value to our customers, communities and shareholders.\nWell now do our third quarter earnings results.\nYesterday, we announced third quarter 2021 earnings of $1.65 per share.\nOur earnings were up $0.18 per share from the same time period in 2020.\nThis slide highlights the key drivers of our strong performance.\nMichael will discuss the key drivers of our third quarter earnings results a bit later.\nDue to the continued strong execution of our strategy, I am also pleased to report that we raised our 2021 earnings guidance.\nOur 2021 earnings guidance range is now $3.75 per share to $3.95 per share compared to our original guidance range of $3.65 per share to $3.85 per share.\nTurning now to page five, where we reiterate our strategic plan.\nThe first pillar of our strategy stresses investing in and operating our utilities in a manner consistent with existing regulatory frameworks.\nThis has driven our multiyear focus on investing in energy infrastructure for the long-term benefit of our customers.\nAs a result, and as you can see on the right side of this page, during the first nine months of this year, we invested significant capital in each of our business segments.\nThese investments are delivering value to our customers.\nAs I said before, our energy grid is stronger, more resilient and more secure because of the investments we are making in all four business segments.\nAs we head into the winter months, Id like to highlight some of the value these investments have created in our Ameren Illinois and Ameren Missouri natural gas businesses.\nOur natural gas transmission and distribution investments are focused on upgrading and modernizing gas main and equipment infrastructure, all the strength in safety and reliability of our system for our customers.\nBeing mindful of the gas distribution issues experienced in the industry in the past, I will note that our Ameren Illinois and Ameren Missouri natural gas distribution systems are comprised almost entirely of plastic and protected coated steel pipelines.\nThere is no cast iron pipe in our systems, and we expect to eliminate all unprotected steel pipe by the end of this year.\nThese investments are just another example of how we are putting our customers at the center of our strategy.\nMoving now to regulatory matters.\nIn late March, Ameren Missouri filed a request for a $299 million increase in annual electric service revenues and a $9 million increase in annual natural gas service revenues with the Missouri Public Service Commission.\nIn our Illinois Electric business, we have requested a $59 million base rate increase in our required annual electric distribution rate filing.\nThese proceedings are moving along on schedule.\nMichael will provide more information on these proceedings a bit later.\nFinally, we remain relentlessly focused on continuos improvement and disciplined cost management, including maintaining many of the cost savings that we realized in 2020 due to the actions we took to mitigate the impacts of COVID-19.\nMoving to page six and the second pillar of our strategy: enhancing regulatory frameworks and advocating for responsible energy and economic policies.\nOver the years, we have been successful in executing this element of our strategy by delivering value to our customers for our investments in energy infrastructure and through extensive collaboration with key stakeholders in all of our regulatory jurisdictions.\nI am very pleased to report that these efforts paid off again in the third quarter when the Illinois legislature passed the Climate and Equitable Jobs Act, or CEJA, which is later signed by Governor Pritzker.\nCEJA is a constructive piece of legislation that addresses the key objectives that we felt were important for our customers and the communities we serve.\nIt will enable us to continue to make important infrastructure investments to enhance the reliability and resiliency of the energy grid for a new forward-thinking regulatory framework.\nIt will also give us the ability to earn fair returns on those investments as well as enable us to invest in two solar and/or battery storage pilot projects.\nCEJA allows for an electric utility to opt in to a multiyear rate plan effective for four years beginning in 2024.\nWe are currently working with key stockholders and will continue to over the course of 2022, to establish specific procedures, including performance metrics to implement this legislation.\nSubject to finalizing key aspects of this rate-making framework, we anticipate filing a multiyear rate plan by mid-January 2023.\nMichael will discuss this constructive piece of legislation in more in a moment.\nShifting now to the federal level, where important energy legislation continues to be discussed.\nNeedless to say, the situation around federal legislation remains fluid and ever changing.\nOne thing that remains constant is our strong support for clean energy transition tax incentives including wind and solar production tax credits, transmission and storage investment tax credits as well as direct pay and normalization opt-out provisions.\nWe also continue to strongly support significant funding for research, design and development for new clean energy technologies, electrification of the transportation sector and grid resiliency.\nWe support these important legislative initiatives because we strongly believe they will deliver significant long-term benefits to our customers, communities and country.\nWe will continue to work with key stakeholders, along with our industry colleagues to advance constructive federal energy and economic policies that will help us transition to a cleaner energy future in a responsible fashion.\nSpeaking of our transition to our cleaner energy future, please turn to Page seven in the discussion of future transmission investment needs.\nAs we have discussed with you in the past, MISO completed a study outlining the potential road map of transmission projects through 2039.\nTaking into consideration the rapidly evolving generation mix that includes significant additions of renewable generation based on announced utility integrated resource plans, state mandates and goals for clean energy or carbon emission reductions, among other things.\nUnder MISOs Future one scenario, which is the scenario that resulted in an approximate 60% carbon emissions reduction below 2005 levels by 2039 and MISO estimates approximately $30 billion of future transmission investment would be necessary in the MISO footprint.\nUnder its Future three scenario, which resulted in an 80% reduction in carbon emissions below 2005 levels by 2039, MISO estimates approximately $100 million of transmission investment in the MISO footprint would be needed.\nIt is clear that investment in transmission is going to play a critical role in the clean energy transition, and we are well positioned to plan and execute the potential projects in the future for the benefit of our customers and country.\nWe continue to work with MISO and other key stakeholders and believe certain projects outlined in Future one are likely going to be included in this years MISO transmission planning process, which is expected to be completed in early 2022.\nMoving now to page eight and an update on litigation regarding Ameren Missouris past compliance with the New Source Review provisions of the Clean Air Act.\nAs you may recall, this litigation dates back to 2011 and the Department of Justice on behalf of the EPA filed a complaint against Ameren Missouri, alleging that in performing certain projects at the Rush Island Energy Center, we have violated the New Source Review provisions of the Clean Air Act.\nIn 2017, the District Court issued a liability ruling and in September 2019, ordered the installation of pollution control equipment at the Rush Island Energy Center as well as at the Labadie Energy Center.\nIn September of this year, U.S. Court of Appeals preferring the District Courts 2019 order requires us to install a scrubber at our Rush Island Energy Center but denied the order to install additional pollution control equipment at Labadie.\nLast month, we filed a request for rehearing with U.S. Court of Appeals.\nWhile we wait for a final decision from the courts, we continue to assess several alternatives to effectively address the court of appeals decision, including legal, operational and regulatory measures.\nIn reviewing these options, we are also carefully assessing the impact on customer costs as well as generation or transmission investments needed to maintain system reliability.\nAnd we are certainly mindful of the policies that are being considered at the federal level to help address climate change.\nShould our decision result in a material change to our integrated resource plan, we will file an updated plan with the Missouri PSC.\nTurning to page nine.\nWe remain focused on delivering a sustainable energy future for our customers, communities and our country.\nThis page summarizes our strong sustainability value proposition for environmental, social and governance matters and is consistent with our vision, leading the way to a sustainable energy future.\nBeginning with environmental stewardship, last September, Ameren announced its transformation plan to achieve net-zero carbon emissions by 2050 across all of our operations in Missouri and Illinois.\nThis plan includes interim carbon emission reduction targets of 50% and 85% below 2005 levels in 2030 and 2040, respectively, and is consistent with the objectives of the Paris Agreement and limiting global temperature rise to 1.5 degrees Celsius.\nWe also have a strong long-term commitment to our customers and communities to be socially responsible and economically impactful.\nThis slide highlights the many things we are doing for our customers and communities including being an industry leader in diversity, equity and inclusion.\nFurther, our strong corporate governance is led by a diverse Board of Directors focused on strong oversight thats aligned with ESG matters and our executive compensation practices include performance metrics that are tied to sustainable long-term performance, diversity equity inclusion and progress toward a cleaner sustained energy future.\nFinally, this slide highlights our very strong sustainable growth proposition, which is among the best in the industry.\nTurning to page 10, you will go down further on this key element.\nOur strong sustainable growth proposition is driven by a robust pipeline of investment opportunities over $40 billion over the next decade that will deliver significant value to all of our stakeholders and making our energy grid stronger, smarter and cleaner.\nImportantly, these investment opportunities exclude any new reasonably beneficial transmission projects, including the potential road map of MISO transmission projects I discussed earlier, all of which would increase the reliability and resiliency of the energy grid as well as help to enable our countrys transition to a cleaner energy future.\nIn addition, we expect to see greater focus on infrastructure investments to support the electrification of the transportation sector in the future.\nOur outlook through 2030 does not include significant infrastructure investments for electrification at this time.\nMaintaining constructive energy policies that support robust investment in energy infrastructure and a transition to a cleaner energy future in a safe, reliable and affordable fashion will be critical to meeting our countrys future energy needs and delivering on our customers expectations.\nMoving to page 11.\nAnother key element of our sustainable growth proposition is the five-year earnings-per-share growth guidance we issued in February, which included a 6% to 8% compound annual earnings-per-share growth rate from 2021 to 2025.\nThis earnings growth is primarily driven by strong rate base growth and compares very favorably with our regulated utility peers.\nImportantly, our five-year earnings and rate base growth projections do not include 1,200 megawatts of incremental renewable investment opportunities outlined in Ameren Missouris Integrated Resource Plan.\nOur team continues to assess several renewable generation proposals from developers.\nWe expect to file with the Missouri PSC for approval of a portion of these planned renewable investments this year.\nI am confident in our ability to execute our investment plans and strategies across all four of our business segments.\nThat fact, coupled with our sustained past execution of our strategy on many fronts, has positioned us well for future success.\nFurther, our shares continue to offer investors a strong dividend, which we expect to grow in line with our long-term earnings-per-share growth guidance.\nSimply put, we believe our strong earnings and dividend growth outlook results in a very attractive total return opportunity for shareholders.\nFinally, turning to page 12.\nI will wrap up with a few comments about the organizational changes we announced a few weeks ago.\nOver the past eight years, I have had the great privilege to serve as Chairman, President and Chief Executive Officer of Ameren.\nDuring this time, Ive been very fortunate to lead the team that has done an excellent job in executing our strategy and delivering strong value to our customers, communities and shareholders.\nLast month, I was humbled and honored that the Board of Directors elected me to serve as Executive Chairman effective January 1, 2022.\nAt the same time, and consistent with our robust succession planning process, I was very pleased that the Board of Directors also elected Marty Lyons to serve as President and Chief Executive Officer as well as to join the Board of Directors on January 1.\nMarty is an outstanding leader and is exceptionally qualified to lead our company as CEO during this transformation time in our industry.\nOf course, many of you know Marty very well as he spent a decade as the companys Chief Financial Officer.\nAnd during the past 20 years, Marty has demonstrated strong operational, financial, regulatory and strategic acumen.\nI must say that Im very excited about our new forward-thinking leadership structure.\nWorking closely with Marty and our strong leadership team, I will remain actively engaged in overseeing important strategic matters impacting the company, including our transition to a cleaner energy future and will also remain focused on key energy and economic policy matters, especially in my leadership roles at the Edison Electric Institute and the Electric Power Research Institute as well as engaging with key stakeholders.\nMarty will take on significant duties as a CEO, which includes leading all aspects of Ameren strategy development and execution as well as the day-to-day operational, financial, regulatory, legal and workforce matters impacting the company.\nI, along with our Board of Directors, are very confident that Marty is clearly ready to lead Ameren as its new CEO.\nIm truly grateful for and humbled by the opportunity to lead Ameren during these exciting times for our company and for our industry.\nIm also honored to follow on your footsteps Warner.\nYouve led our team to execute on a strategy that has delivered significant value to our customers and shareholders.\nWorking with his outstanding leadership team and my dedicated coworkers at Ameren, we will remain focused on successfully executing this strategy in the future.\nI look forward to engaging with all of you joining us on the call today and in the weeks and months ahead.\nI look forward to continuing to work closely with you in your new role.\nTogether, we remain firmly convinced that the continued execution of our strategy in the future will deliver superior value to our customers, communities, shareholders and the environment.\nYesterday, we reported third quarter 2021 earnings of $1.65 per share compared to $1.47 per share for the year ago quarter.\nTurning to Ameren Missouri, our largest segment increased $0.27 per share, driven primarily by a change in seasonal electric rate design, resulting from the March 2020 rate order, which provided for lower winter rates in May and higher summer rates in September rather than the blended rates used in both months in 2020.\nHigher electric retail sales also increased earnings by approximately $0.10 per share largely due to continued economic recovery in this years third quarter compared to the unfavorable impacts of COVID-19 in the year ago period as well as higher electric retail sales driven by warmer-than-normal summer temperatures in the period compared to near-normal summer temperatures in the year-ago period.\nWeve included on this page, the year-over-year weather-normalized sales variances for the quarter.\nThat said, weve seen a net benefit in margins due to residential and commercial sales coming in higher than expected and industrial sales slightly lower than expected.\nIncreased investments in infrastructure and wind generation eligible for plant and service accounting and the renewable energy standard rate adjustment mechanism, or RESRAM, positively impacted earnings by $0.07 per share.\nThe timing of tax expense, which is not expected to materially impact full year results increased earnings by $0.03 per share.\nHigher operations and maintenance expense decreased earnings by $0.04 per share in 2021 compared to the third quarter of 2020, which was affected by COVID-19 and remained flat year-to-date driven by disciplined cost management.\nFinally, the amortization of deferred income taxes related to the fall 2020 Callaway Energy Center scheduled refueling and maintenance outage also decreased earnings $0.02 per share.\nMoving to other segments.\nAmeren Transmission earnings increased $0.03 per share year-over-year, reflecting increased infrastructure investment.\nAmeren Illinois Electric Distribution earnings per share were comparable, which reflected increased infrastructure and energy efficiency investments and a higher allowed ROE under performance-based ratemaking, partially offset by dilution.\nEarnings for Ameren Illinois Natural Gas decreased $0.04 per share.\nIncreased delivery service rates that became effective in late January 2021 were more than offset by a change in rate design during the quarter, which is not expected to impact full year results.\nAmeren parent and other results decreased $0.08 per share compared to the third quarter of 2020, primarily due to the timing of income tax expense, which is not expected to materially impact full year results.\nFinally, 2021 earnings per share reflected higher weighted average shares outstanding.\nBefore moving on, Ill touch on year-to-date sales trends for Ameren Illinois Electric Distribution.\nWeather-normalized kilowatt hour sales to Illinois residential customers decreased 0.5%.\nAnd weather-normalized kilowatt hour sales to Illinois commercial and industrial customers increased 2.5% and 1.5%, respectively.\nRecall that changes in electric sales in Illinois, no matter the cause, do not affect our earnings since we have full revenue decoupling.\nTurning to page 15.\nNow wed like to briefly touch on key drivers impacting our 2021 earnings guidance.\nWe have remained very focused on maintaining disciplined cost management and well continue that focus.\nAs Warner noted, due to the solid execution of our strategy, we now expect 2021 diluted earnings to be in the range of $3.75 per share to $3.95 per share, an increase from our original guidance range of $3.65 per share to $3.85 per share.\nSelect earnings considerations for the balance of the year are listed on this page and are supplemental to the key drivers and assumptions discussed on our earnings call in February.\nMoving to page 16 for an update on regulatory matters.\nOn March 31, we filed for a $299 million electric revenue increase with the Missouri Public Service Commission.\nThe request includes a 9.9% return on equity, a 51.9% equity ratio and a September 30, 2021 estimated rate base of $10 billion.\nIn October, Missouri Public Service Commission staff and other intervenors filed a rebuttal testimony.\nMissouri PSC staff recommended a $188 million revenue increase including a return on equity range of 9.25% to 9.75% and an equity ratio of 50% based on Ameren Missouris capital structure at June 30, 2021, which will be updated to use the capital structure as of September 30, 2021.\nThe October staff recommendation was lower primarily due to lower recommended depreciation expense, which would not be expected to impact earnings.\nTurning to Page 17.\nIn addition to the electric filing on March 31, we filed for a $9 million natural gas revenue increase within the Missouri PSC.\nThe request includes a 9.8% return on equity, a 51.9% equity ratio and a September 30, 2021 estimated rate base of $310 million.\nMissouri PSC staff recommended a $4 million revenue increase, including a return on equity range of 9.25% to 9.75% and an equity ratio of 50.32% based on Ameren Missouris capital structure at June 30, 2021, which will be updated to use of the cash flow structure as of September 30, 2021.\nOther parties, including the Missouri Office of Public Counsel have also made recommended adjustments to our Missouri electric and gas rate request.\nEvidentiary hearings are scheduled to begin in late November, and the Missouri PSC decisions from both rate reviews are expected by early February with new rates expected to be effective by late February.\nMoving to page 18, Ameren Illinois regulatory matters.\nIn April, we made our required annual electric distribution rate update filing.\nUnder Illinois performance-based rate making these annual rate updates systematically adjust cash flows over time for changes in cost of service and true up any prior period over or under recovery of such costs.\nIn August, the ICC staff recommended a $58 million base rate increase compared to our request of $59 million base rate increase.\nAn ICC decision is expected in December with new rates expected to be effective in January 2022.\nTurning now to Page 19.\nAs Warner mentioned, in September, constructive energy legislation was enacted in the State of Illinois.\nThis allows Ameren Illinois the option to file a four year rate plan in January 2023 for rates effective beginning in 2024.\nThe return on equity, which will be determined by the Illinois Commerce Commission, may impacted by plus or minus 20 to 60 basis points based on the utilitys ability to meet certain performance metrics related to items such as reliability, customer service and supplier diversity.\nThe plan also allows for the use of year-end rate base and an equity ratio up to 50% with an higher equity ratio subject to approval by the ICC.\nIn addition, it calls revenue decoupling and an annual reconciliation of cost and revenues for each annual period approved in the multiyear rate plan.\nTheres a cap on the true-up, which may not exceed 105% of the revenue requirement and excludes variation from certain forecasted costs.\nThe exclusions include cross associated with major storms, changing in timing of expenditure and investment that moved the expenditure investment into or out of the applicable calendar year and changes in income taxes, among other things.\nThe true-up cap also excludes cost recovered through riders such as purchase power, transmission and bad debts.\nRate impact to customers may also be mitigated through the ability to phase in rates.\nThe legislation also allows for two utility-owned solar and/or battery storage pilot projects to be located near Peoria and East St. Louis at a cost not to exceed $20 million each.\nIt also provides for programs that encourage transportation electrification in the state.\nWe believe this framework will improve our ability to make significant investments in the State of Illinois and earn a fair return on equity.\nLooking ahead, we have the ability to opt-in to the multiyear rate plan or use the future test year traditional rate-making framework, both of which include a return on equity determined by the ICC and revenue decoupling.\nShould we choose to opt into the new multiyear rate plan, our four-year plan must be filed by January 20, 2023.\nWe anticipate continuing to use the performance-based ratemaking until we proceed with a multiyear rate plan filing or choose to move ahead with using the traditional framework.\nMoving to page 20 for a financing update.\nWe continue to feel very good about our financial position.\nWere able to successfully actually on several debt issuances earlier this year, which we have outlined on this page.\nIn order for us to maintain our credit earnings and a strong balance sheet while we fund our robust infrastructure plan and consistent with prior guidance as of August 15, we have completed the issuance of approximately $150 million of common equity through our at-the-market or ATM program that was established in May.\nFurther, approximately $30 million of equity outlined for 2022 have been sold year-to-date under the programs forward sales agreement.\nTogether with the issuance under our 401(k) and DRPlus program, our $750 million ATM equity program is expected to support equity needs through 2023.\nMoving now to page 21.\nId like to briefly touch on the recent increase in natural gas prices around the country and the potential impact it may have on customer bills this coming winter.\nBeginning with our natural gas business, heading into the winter season, Ameren is approximately 75% hedged, and Ameren Missouri is approximately 85% hedged based on normal seasonal sales.\nApproximately 60% of Illinois winter supply of natural gas was bought this summer at lower prices and is being stored in the companys 12 underground storage fields.\nBoth companies are 100% volumetrically hedged based on maximum seasonal sales.\nRegarding the electric business in Missouri, we are currently long generation and any margin made through off-systems sales flow back to customers as a benefit on their bills through the Fuel Adjustment Clause.\nGiven our low cost of generation, rising natural gas and power prices have the potential to benefit our electric customers in Missouri.\nTurning to page 22.\nWe plan to provide 2022 earnings guidance when we release fourth quarter results in February next year.\nUsing our 2021 guidance as a reference point, we have listed on this page select items to consider as you think about earnings outlook for next year.\nBeginning with Missouri, we expect the new electric service rates to be effective in 2022 as a result of our pending rate review.\nThese rates are expected to reflect recovery of and return on new infrastructure and wind generation investments, which are expected to increase earnings when compared to 2021.\nPrior to new electric service rates taking effect in late February, we expect increased investments in infrastructure and wind generation eligible for plant and service accounting and a RESRAM that positively impact earnings.\nNext, I would note, we expect to recognize earnings related to energy efficiency performance incentives from both 2021 and 2022 plan years in 2022.\nAs a result, we expect energy efficiency performance incentives to be approximately $0.04 per share higher than 2021.\nFurther, our return to normal weather in 2022 would decrease Ameren Missouri earnings by approximately $0.04 compared to 2021 results to date, assuming normal weather in the last quarter of the year.\nFor Ameren Illinois Electric Distribution, earnings are expected to benefit in 2022 compared to 2021 from additional infrastructure investments made under Illinois formula ratemaking.\nThe allowed ROE under the formula will be the average 2022 30-year treasury yield plus 5.8%.\nFor Ameren Illinois Natural Gas, earnings are expected to benefit from new delivery service rates effective late January 2021 as well as an increase in infrastructure investments qualifying for rider treatment that were in the current allowed ROE of 9.67%.\nAnd Lastly, turning to page 23, were well positioned to continue executing our plan.\nWe continue to expect to deliver strong earnings growth in 2021 as we successfully execute our strategy.\nAnd as we look to the longer term, we expect strong earnings-per-share growth driven by robust rate base growth and disciplined cost management.\nFurther, we believe this growth will compare favorably with the growth of our regulated utility peers.\nAnd Ameren shares continue to offer investors an attractive dividend.\nIn summary, we have a total shareholder return story that compares very favorably to our peers.\n",
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"content": "q3 earnings per share $1.65.2021 diluted earnings per share guidance range raised to $3.75 to $3.95 from $3.65 to $3.85.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Our actual results could significantly differ due to many risks, including those -- the risk factors in our SEC filings.\nAn audio replay will be made available on our website shortly after today's call.\nIt is now my pleasure to introduce Anant Bhalla.\nBefore we speak about second quarter results, I want to provide you with three strategy execution updates.\nFirst, we reached agreement with Brookfield on a reinsurance contract that covers both, a portion of our in force, and new business flow.\nWe have filed the agreement with our regulator for approval.\nWe look forward to receiving regulatory approval and closing on the reinsurance treaty.\nShortly after, we would expect the second anticipated equity investment from Brookfield to be completed.\nSecond, we have completed our share repurchase of 9.1 million shares since starting our buyback in the fourth quarter of last year.\nThis fully offset the impact of shares issued to Brookfield.\nThe total buyback included repurchase of 3 million shares in the second quarter for $95.1 million.\nAdditionally, for the first time in our company's history, in the second quarter, we started leveraging our asset management partnerships to invest in single-family rental homes and middle market loans, consistent with ramping toward the AEL 2.0 asset allocation strategy.\nDuring the quarter, we invested in 933 single family rental homes.\nAEL, will indirectly be the landlord to residential renters with partners who manage the property through acquisition, renovation, leasing, and sale in focus metropolitan areas, where the trends of wage growth and rental growth dynamics are robust.\nDuring the quarter, we allocated $104 million to middle market loans.\nWe expect middle market credit to be an important piece of the AEL 2.0 investment strategy.\nFinally, we continued the revitalization of our go-to-market strategy pillar, which has historically been an industry-leading at scale, annuity funding origination platform.\nThis platform slowed down in recent years.\nAnd one of the focus areas in my first year as CEO, was to revise sales by refreshing our product mix and how we go to market.\nGo to market has been trending upwards since the fourth quarter of last year.\nPreliminary estimates indicate that the second quarter of 2021 will mark the third straight quarter in which the company increased its fixed index annuity or FIA market share.\nAt American Equity Life, FIA sales were driven by the new competitive indices we introduced to AssetShield back in February.\nAt Eagle Life, the increase in FIA sales was driven by new relationships, our new income product, and an increase in our employee, wholesaler force.\nIn addition, on July 21, we announced to our independent agent distribution, the introduction of our new product EstateShield.\nEstateShield is an expansion of our income offerings in the non-guaranteed income space.\nThis sub-segment of the market is a $4 billion per year product space historically dominated by two of our competitors.\nEstateShield has received strong support from key distribution partners and we look forward to growing sales in the coming quarters.\nWe are committed to continue to introduce new products as we move through the AEL 2.0 transformation, which will help us compete effectively and grow our share of the annuity market.\nMoving onto business results for the second quarter, total sales of $1.2 billion were down sequentially as expected versus the all-time record we set of $2.4 billion in the first quarter of this year.\nAs we discussed on the last call, we are focused on our fixed index annuity products, For the second quarter, FIA sales increased 33% sequentially to $887 million.\nAs I said earlier, we believe this will be the third quarter in a row in which FIA market share increased.\nClearly, the changes that we've made in our go-to-market franchise over the last year are resonating with distribution.\nAt American Equity Life, fixed index annuity sales increased 36% to $703 million from $517 million sequentially, as the refreshed AssetShield series continued to see increased momentum, led by a sequential 206% increase in AssetShield deposits.\nIn the quarter, the three proprietary indices we introduced to AssetShield, as part of our February refresh, the Credit Suisse Tech Edge Index, the Societe Generale Global Sentiment Index, and the Bank of America Destinations Index, accounted for 77% of second quarter AssetShield deposits.\nFIA sales at Eagle Life of $185 million represented a 24% increase versus the first quarter of 2021, and a 155% increase compared to the year ago quarter.\nOur new Eagle Select, income focus, guaranteed retirement income product accounted for roughly half of the sequential quarterly increase.\nThe Eagle Life team is increasing our presence within distribution partners by updating our FIA product shelf and increasing our sales force headcount, while raising the quality of talent.\nIn addition, we are leveraging relationships with advisors, and our distribution partners, centers of influence, uncovered through multi-year fixed rate annuities to migrate toward fixed index annuity.\nAs we indicated on past calls, our plan has been to reengage with distribution with a simpler multi-year fixed rate annuity product during COVID-19, and then pivot to driving growth through a revamped fixed index annuity product portfolio.\nWe are beginning to see our plan bear results.\nAs the financial planning needs of Americans evolve, American Equity is focused on providing our clients the dignity of a paycheck for life.\nI believe our commitment to this core mission statement will become recognized and appreciated in the market over time.\nThis will help grow AEL in both our channels and open up other market access opportunities for us in the future.\nAt this time, I would also like to take a moment and share with you the conclusions of a corporate governance project undertaken by our Board of Directors.\nEarlier this year, our Board, retained a nationally recognized expertise to review its structure and operations and to advise it on governance practices.\nThe Board has completed its review and is implementing changes to refresh our corporate governance, in line with best practices and to advance our strategic evolution.\nThe Board has set a new target size of seven to nine directors.\nPlus, the CEO has set a new Director retirement age at 75 years and has modified the membership and structure of its committees.\nImportantly, on this front, our audit committee well exercise increased risk management oversight.\nThe Nominating and Corporate Governance Committee will have an expanded role in Director compensation, selection and skills training.\nThe Compensation Committee we'll have a deeper role in executive talent development and succession planning.\nWe believe these changes will make our Board even more effective in driving stakeholder value realization and in playing its essential role in the successful transformation of the company.\nCapital markets showed strong performance and the investment portfolio performed as expected in the quarter.\nThe overall credit quality remained strong with an overall rating of single A minus for long-term investments.\nThe net unrealized gain position improved by $1.2 billion in the quarter ending at $4.8 billion.\nThe strong bid for assets, combined with low treasury yields, continues to make the investment environment challenging, but we are finding good opportunities.\nWe use the strong bid to continue to reduce exposure to higher risk positions in structured assets, in select sub sectors that have the potential for future deterioration.\nThere were minimal credit losses in the quarter and the performance of our commercial loan portfolio remained strong with no new delinquencies or forbearances granted.\nFrom a liquidity standpoint, we continue to hold cash in excess of target levels and what's needed to fund the reinsurance transactions.\nAt June 30, we held $10 billion of cash and equivalents in the insurance company portfolios.\nAs Anant will discuss in a moment, the average level of cash and equivalents increased in the second quarter.\nThe current point in time yield on the portfolio, including excess cash, is still approximately 3.3%, so the pressure on investment spread will continue into the third quarter.\nAfter completion of reinsurance transactions and the redeployment of remaining cash in excess of our target, we estimate the yield on our investment portfolio would still have been approximately 4%.\nWith regards to redeployment, we expect to have substantially redeployed excess cash that's not expected to be used in the reinsurance transactions by year-end.\nWe are taking solid steps in the execution of our strategy to add $1 billion to $2 billion in privately sourced assets this year, growing to a pace of 5% or greater, of the portfolio in each subsequent year, to achieve an allocation of 30% or greater in privately sourced assets.\nYear-to-date we have allocated approximately $800 million to privately sourced assets, including residential mortgage loans, single-family rental homes, commercial mortgage and agriculture loans, and middle market loans.\nTraditional fixed income securities, continue to be part of our strategy to deploy excess cash.\nOur focus in the traditional strategy has been strong investment grade credits in the public corporate and municipal sectors.\nFor the second quarter of 2021, the expected return on long-term investments acquired net of third party investment management fees, was approximately 4.15% compared to 3.74% in the first quarter.\nWe purchased $1.1 billion of long-term fixed income securities at a rate of 3.3% and $569 million of privately sourced assets at an expected return of 5.67%.\nThe privately sourced assets include the ongoing origination of commercial mortgage and agricultural loans, as well as residential mortgage loans.\nConsistent with our long-term plans, we added privately sourced assets in new asset classes for the company, which consisted of residential real estate investments and investment in a joint venture that is sourcing middle market loans at attractive investment yields.\nNow, turning to financial results.\nFor the second quarter of 2021, we reported non-GAAP operating income of $93.8 million or $0.98 per diluted common share, compared to $93.1 million or $1.01 per share for the second quarter of 2020.\nResults were negatively affected by the transitionary effects I mentioned, both today, as well in the past, in particular the effect of cash in the portfolio in excess of target range and the level of operating expenses.\nHowever, strong index credits in the quarter, boosted operating earnings through both a lower than expected increase in reserves for guaranteed lifetime income benefits, and lower than modeled amortization of deferred acquisition in deferred sales inducement costs.\nAverage yield or invested assets was 3.51% in the second quarter of 2021 compared to 3.58% for this year's first quarter.\nThe decrease was primarily attributable to a seven basis point reduction from interest foregone due to an increase in the average amount of cash held during the quarter.\nCash and equivalents in the investment portfolio average $10 billion over the second quarter, up from $8.6 billion for this year's first quarter.\nPartnership income and other investments accounted for at fair value contributed an additional one basis points to yield, compared to the prior quarter, and eight basis points on an absolute basis.\nThe aggregate cost of money for annuity liabilities was 156 basis points, down two basis points from the first quarter of this year.\nThe cost of money in the second quarter benefited from full basis points of hedging gains compared to two basis points of gains in the first quarter.\nInvestment spread in the second quarter was 195 basis points, down five basis points from the first quarter.\nExcluding non-trendable items, adjusted spread in the quarter was 181 basis points compared to 187 basis points for the first quarter.\nIn line with yield, we would anticipate our investment spread to rise back to our expected levels once the reinsurance transactions are completed and the excess cash is redeployed.\nThe cost of options was up slightly to 147 basis points from 145 basis points in the first quarter of 2020, primarily reflecting an increase in the cost of PK options hedging our monthly point to point strategies due to the decrease in volatility over the quarter.\nMonthly point to point remains our largest hedge strategy at just over 25% of notional.\nAll else equal, we expect to see the cost of money remained relatively stable over the remainder of the year.\nShould the yields available to us decrease, or the cost of money rise, we have the flexibility to reduce our rates, if necessary, and could decrease our cost of money by roughly 58 basis points, if we reduce current rates to guaranteed minimums.\nThis is up slightly from 57 basis points we cited on our first quarter call.\nThe liability for Lifetime Income Benefit Riders, increased $34 million this quarter, after net positive experience, an adjustment of $29 million relative to our modeled expectations.\nThe better than expected results primarily reflected the benefit from historically high equity index credits in the quarter, as well as positive renewal premium experience.\nDeferred acquisition cost and deferred sales inducement amortization totaled $101 million, $31 million less than modeled expectations due to lower than model investment spread and benefit from high level of equity index credits.\nOther operating costs and expenses increased to $65 million from $56 million in the first quarter.\nOperating costs in the second quarter included $5 million of expenses associated with talent transition.\nPost refinancing our existing AG33 redundant reserve financing facility later this year, we still expect operating expenses to settle in the high 40s million dollars per quarter area.\nAs we become a new AEL, we will invest in upgrading our infrastructure and our intent is to quantify this investment spend for you in the future.\nTotal debt -- total capitalization, excluding accumulated other comprehensive income at the quarter-end was 11.9% compared to 12.2% at year-end and 14.7% in last year's comparable quarter.\nAt June 30, cash and equivalents at the holding company were in excess of our target by $330 million.\nFinally, we have $236 million of share repurchase authorization remaining under the current plan approved by the Board of Directors in October 2020.\nOnce the Brookfield Form-A is approved, we expect to actively repurchase more shares to both offset any dilution from future acquisitions to Brookfield, and to start on our plan of regularly returning capital to shareholders.\n",
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"content": "q2 non-gaap operating earnings per share $0.98.\nq2 2021 annuity sales of $1.2 billion driven by strong growth in fixed index annuity (fia) sales.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Factors that could cause the actual results to differ materially are discussed in detail in our most recent filings with the SEC.\nAn audio replay will be made available on our website shortly after today's call.\nIt is now my pleasure to introduce Anant Bhalla.\nWe enter 2021 focused on being vigilant about realization of shareholder value.\n2021 will be a transition year from the AEL 1.0 strategy to the AEL 2.0 business model.\nIt will be the execution year as we make demonstrable progress with closing of already announced reinsurance transaction plan under our capital structure pillar and start our migration to alpha active with investment management partnerships under our investment management pillar.\nI'll share more on these partnerships in a few minutes.\nFirst, the Virtuous Flywheel builds on an industry-leading at-scale annuity funding origination platform.\nSecond, adding in differentiated investment management capabilities and expertise in aligning the annuity liability funding with cross-sector asset allocation now gives us a competitive advantage over traditional asset managers as we leverage expertise for both sides of our balance sheet.\nAnd third, demonstrable success overtime on these first two using our own capital will attract third-party capital to our business and grow fee revenues for AEL.\nThese fee revenues will be generated by growing third-party assets under management in our investment management partnerships and from creation of additional side-cars reinsurance vehicles with new equity investors like the two we've announced to date with Brookfield and Varde-Agam.\nThese fees will diversify our earning streams.\nFourth, leveraging third-party capital will transform AEL into a more capital-light business.\nThe combination of differentiated investment strategies and increased capital efficiency improves annuity product competitiveness, thereby enhancing new business growth potential and further strengthening the operating platform.\nWe believe that in the foreseeable market environment, it is imperative for most asset-intensive insurers, including American Equity, to switch the source of earnings generation from traditional core fixed income investing to a blend of core fixed income and an alpha-generating private credit and real or physical assets, and over the next few years, migrate to a combination of spread and capital-light fee-based businesses.\nRegarding American Equity-specific execution.\nThe fourth quarter was the start of the turnaround of the go-to-market pillar, our strategy to enhance our ability to raise long-term client assets through annuity product sales.\nWe and our distribution partners consider American Equity's marketing capabilities and franchise to be core competitive strengths.\nThe liabilities we originate result in stable, long-term attractive funding, which is invested to earn a spread and return on the prudent level of risk capital.\nIn the fourth quarter, we reintroduced ourselves to our markets.\nWe used the fourth quarter to tell distribution that we are back and in a big way.\nDriven by the introduction of competitive three and five-year single-premium, deferred-annuity products at both American Equity and Eagle Life, we saw a substantial increase in sales, with total deposits of $1.8 billion, doubling from the prior year quarter and up 221% from the third quarter of 2020.\nFixed-rate annuities was a major driver of fourth quarter sales increase, while fixed-indexed annuities also increased, up 23% sequentially.\nTotal sales at Eagle Life were up over six fold on a sequential basis, and for the first time in its history, Eagle Life surpassed American Equity Life in total sales.\nThe competitive positioning we took in the fixed-rate annuity market benefited both the fixed-indexed annuity sales and recruiting of new producers.\nOur FIA sales in the bank and broker-dealer channel increased 76% sequentially.\nNew representatives appointed with Eagle Life during the quarter increased by nearly 1,200 to over 9,300 at year-end.\nWhile not as dramatic, we saw growth in sales at American Equity Life as well.\nTotal sales increased 103% from the third quarter, while fixed-indexed annuity sales climbed 16%.\nThe momentum that began in the fourth quarter has continued into the new year.\nPending applications when we reported third quarter results stood at 1,625.\nFor fixed-indexed annuities, we will shortly launch a revamped AssetShield product chassis to appeal to a broader market adding two new proprietary indices, the Credit Suisse Tech Edge Index and the Societe Generale Sentiment Index, in addition to the existing Bank of America Destinations Index, all of which we expect to illustrate extremely well with participation rates that cost well within our pricing budgets to meet our target pricing IRRs.\nWith the introduction of these multi-asset indices, we will offer clients a compelling single-accumulation annuity product that covers traditional equity indices as well as multi-asset custom indices focused on U.S. risk parity, global risk control asset allocation, and sector-specific allocations.\nFollowing last year's refresh of IncomeShield, we are very well situated for income.\nThe level of income offered to retail clients dominates the market in almost all the important combinations of age and deferral periods, and where we don't, we are top three, which is key to getting distribution partners' attention.\nI want to highlight management changes we've made at Eagle Life to accomplish our goals.\nIn September, we announced the hiring of Graham Day as President of Eagle Life.\nGraham has added quickly to his team from other leading annuity manufacturers, including Greg Alberti as Head of National Accounts and Bryan Albert as Head of Sales.\nEagle Life is a key piece of our expansion into being a scale player in a new channel of distribution.\nPending applications when we reported third quarter results were at 975.\nMoving onto the investment management pillar.\nIn 2021, we intend to focus on ramping up our allocation to alpha assets.\nOur first foray in this area includes our partnership with Pretium, announced in the fourth quarter, including an equity investment in the general partner.\nWith Pretium, we expect to expand our focus as both a lender and a landlord in the residential market.\nIn each new alpha asset subsector that we enter, we expect to partner with a proven industry manager with aligned economic incentives and risk management culture.\nThis allows AEL to have an open architecture asset allocation approach versus other insurers that may have a more closed architecture approach to asset allocation.\nOur focus expansion sectors include middle market credit, real estate, infrastructure debt, and agricultural loans.\nYesterday, we announced plans to enter the middle market credit space with Adams Street Partners.\nAmerican Equity and Adams Street will form a management company joint venture for co-developing insurer capital efficient assets with secured first-lien middle market credit.\nOur company will initially commit up to $2 billion of invested assets to build the joint venture, and we expect to bring this capital-efficient asset product to other insurers as well.\nAs this venture and other similar ventures in the future garner third-party assets, American Equity's mix of fee revenues will grow supporting the migration to a more sustainable higher-return business profile.\nThe capital structure pillar is focused on greater use of reinsurance structuring to both optimize asset allocation for American Equity's balance sheet and to enable American Equity to free up capital and become a capital-light company overtime.\nWe are working diligently to complete in 2021 the announced reinsurance partnerships with Varde Partners and Agam Capital Management as well as Brookfield Asset Management and the formation of our own offshore reinsurance platform.\nThese transactions will enable American Equity to generate deployable capital in order to pivot toward a greater free cash flow generative and a capital-light or ROA, return on assets, business model.\nTurning to financial results for the fourth quarter and full year.\nFor the fourth quarter of 2020, we reported non- GAAP operating income of $72 million, or $0.77 per diluted common share.\nFinancial results were significantly affected by excess cash in the portfolio as we repositioned our investment portfolio by derisking out of almost $2 billion of structured securities and $2.4 billion of corporates in the fourth quarter and build cash we expect to redeploy by transferring to Varde-Agam and Brookfield reinsurance transactions.\nOverall, 2021 is a transition year for repositioning a significant portion of our balance sheet and hence a reset year for American Equity.\nOver this year, we will explain any transaction execution driven short-term or one-time notable impacts on financial results.\nFor full year 2020, we reported non-GAAP operating income of $69.1 million or $0.75 per share.\nExcluding notable items, specifically the one-time effect of annual actuarial review in the third quarter, a tax benefit from the enactment of CARES Act, and loss on extinguishment of debt, 2020 non-GAAP operating income was $381.4 million or $4.13 per share.\nAs part of our AEL 2.0 strategy work, we executed a series of trades designed to raise liquidity to fund the Varde-Agam and Brookfield block reinsurance transactions and derisk the investment portfolio.\nAs part of this derisking, we sold nearly $2 billion of structured securities and an additional $2.4 billion of corporates where we generally focused on securities that we believed were at risk of future downgrades.\nThe sales occurred before the recent ramp up in interest rates, so our timing was fortuitous.\nAs of the fourth quarter, the fixed maturity securities portfolio had an average rating of A minus with almost 97% rated NAIC 1 or 2.\nIn addition, almost 80% of our commercial mortgage loan portfolio was rated CM1 at year-end, with 99.7% rated either CM1 or CM2.\nAll commercial mortgage loans in the portfolio were paid current as of year-end, and in the fourth quarter of 2020, there were no additional forbearances granted.\nBack on our first quarter 2020 call, we laid out an estimate of our capital sensitivity to a 12-to-18-month adverse recessionary scenario modeled on the Fed's CCAR stress test.\nThrough year-end, the portfolio performed better than expectations.\nThe impact to ratings migrations totaled 23 RBC points compared to the projection of 50 RBC points in that 12-to-18-month economic stress scenario.\nThe impact of credit losses and impairments was 10 points, which compared to a projection of 25 RBC points in the stress scenario.\nFollowing derisking activities of the fourth quarter, we would expect our capital sensitivity in an adverse economic environment to be truncated relative to our March 2020 estimates.\nLooking forward, we expect to reposition the portfolio starting this year.\nWith the completion of the reinsurance transactions with Varde-Agam and Brookfield, AEL will free up capital and then redeploy part of that capital to support a move into alpha-generating assets.\nGoing forward, we expect to operate at lower invested asset leverage than in the past.\nFourth quarter 2019 results included a $2 million, or $0.02 per share, loss from the write-off of unamortized debt issue cost for subordinated debentures that were redeemed during the period.\nAverage yield on invested assets was 3.88% in the fourth quarter of 2020 compared to 4.10% in the third quarter of this year.\nThe decrease was attributable to a 22 basis point reduction from interest foregone due to an increase in the amount of cash held in the quarter.\nCash and short-term investments in the investment portfolio averaged $4.4 billion over the fourth quarter, up from $1.7 billion in the third quarter.\nAt year-end, we held $7.3 billion in cash and short-term investments in the life insurance company portfolios yielding roughly 7 basis points.\nThe current point-in-time yield on the portfolio, including excess cash, is approximately 3.4%.\nSo the pressure on investment spread will continue in the first quarter.\nExcluding excess cash and invested assets to be transferred as part of the reinsurance transactions, we estimate the current point-in-time yield on the investment portfolio to be roughly 4%.\nAs we expect to close the reinsurance transactions in or after the second quarter, starting in March, we may partially pre-invest the assets for the reinsurance transactions, thereby offsetting some cash drag.\nWe do not expect significant benefit in the first quarter from such pre-investing.\nOn our future quarterly earnings calls, we will call out the effect of excess cash, if any, related to the reinsurance transactions.\nThe aggregate cost of money for annuity liabilities was 163 basis points, down three basis points from the third quarter of 2020.\nThe cost of money in the fourth quarter benefited from one basis point of hedging gain compared to a three basis point gain in the third quarter.\nExcluding hedging gains, the decline in the adjusted cost of money reflects a year-over-year decrease in option cost due to past renewal rate actions.\nReflecting the decline in the portfolio yield, investment spread fell to 225 basis points from 244 basis points in the third quarter.\nExcluding non-trendable items, adjusted spread in the fourth quarter was 213 basis points compared to 231 basis points in the third quarter of 2020.\nThe average yield on long-term investments acquired in the quarter was 4.46%, gross of fees, compared to 3.59% gross of fees in the third quarter of the year.\nWe purchased $152 million of fixed income securities at a rate of 3.32%, originated $142 million of commercial mortgage loans at a rate of 3.67%, and purchased $224 million of residential mortgage loans at 5.63% gross of fees.\nThe cost of options declined slightly to 139 basis points from 142 basis points in the third quarter.\nAll else equal, we would expect to continue to see the cost of money continue to decline throughout most of 2021, reflecting lower volatility and the actions taken in June of last year to reduce participation rates on $4.3 billion of policyholder funds and S&P annual point-to-point and monthly average strategies.\nThe cost of options for the hedge week ended February 9th was 143 basis points.\nShould the yields available to us decrease or the cost of money rise, we continue to have flexibility to reduce our rates if necessary and could decrease our cost of money by roughly 62 basis points if we reduce current rates to guaranteed minimums.\nThis is down slightly from the 63 basis points we cited on our third quarter call.\nThe liability for lifetime income benefit riders increased $79 million this quarter, which included negative experience of $16 million relative to our modeled expectations.\nComing out of the third quarter actuarial assumption review, we said we had expected for that quarter a $63 million increase in the GAAP LIBOR reserve based on our actuarial models, while actuarial and policyholder experience true-ups had added an additional $5 million of reserve increase.\nWe said that we thought expected plus or minus $10 million would seem reasonable.\nSo the fourth quarter of 2020 was a little bit above that range.\nThere were pluses and minuses in the fourth quarter, with the biggest differences due to a $6 million increase from lower-than-expected decrements on policies with lifetime income benefit riders and a $10 million increase as a result of lower caps and par rates due to renewal rate changes and policies having anniversary dates during the quarter.\nWe will continue to experience the impacts from the renewal rate changes made in the second quarter of 2020 and the first and second quarters of this year.\nDeferred acquisition cost and deferred sales inducement amortization totaled $113 million, $16 million less than modeled expectations.\nThe biggest items driving the positive experience were lower-than-modeled interest and surrender margins, lower-than-expected utilization of lifetime income benefit riders, and the second quarter of 2020 renewal rate changes I spoke about previously.\nThe benefit on the combined deferred acquisition costs and deferred sales inducement amortization from the second quarter 2020 renewal rate changes was $10 million, effectively offsetting the negative effect on the lifetime income benefit rider reserve.\nOther operating costs and expenses increased to $55 million from $43 million in the third quarter.\nNotable items not likely to reoccur in the first quarter of 2021, primarily advisory fees related to the unsolicited offer for the company in September totaled, approximately, $3 million with much of the remaining increase associated with the implementation of AEL 2.0.\nPost-closing of the announced reinsurance transactions with Varde-Agam and Brookfield and the creation of the affiliated reinsurance platform, we would expect the level of other operating costs and expenses to fall in the mid-to-high $40 million range.\nWe expect to complete the execution of the already announced accelerated share repurchase program in the first quarter.\nBased on current estimates, we expect an additional 520,000 shares to be delivered to us in addition to the initial 3.5 million shares delivered at the initiation.\nCombined with the 1.9 million shares we repurchased in the open market prior to the initiation of the ASR program, we will have effectively reduced the share dilution resulting from the November 30th initial equity investment of 9.1 million shares from Brookfield Asset Management by, approximately, two-thirds.\nThe risk-based capital ratio for American Equity Life was 372%, flat with year-end 2019.\nTotal debt to total capitalization, excluding accumulated other comprehensive income, was 12.2% compared to 17.7% at year-end 2019.\nAt year-end, cash and short-term investments at the holding company totaled $484 million.\nWe expect to have over $300 million of cash at the holding company even after buying back additional shares after completion of the existing ASR to fully offset Brookfield issuance related dilution.\nWe are strongly capitalized as we look to execute AEL 2.0 with ample liquidity at the holding company, low leverage ratio relative to our industry peers, and robust capitalization at the life company.\n",
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"content": "q4 non-gaap operating earnings per share $0.77.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are based upon information that represents the Company's current expectations or beliefs.\nThe results actually realized may differ materially based on risk factors included in our SEC filings.\nAs a note, due to the significant impact COVID-19 had on fiscal 2020 financial results, our first quarter fiscal 2021 results are compared to the first quarter of fiscal 2019, which we believe is a more meaningful comparison.\nI am extremely pleased with the pace of our business and the outstanding financial performance in the first quarter.\nEven as we compare to the pre-pandemic 2019, our results were truly remarkable and validate the strength of our value creation plan.\nWe exceeded expectations in essentially all areas of the business, giving us a strong start to the year.\nWe had record first quarter revenue of over $1 billion and the highest first quarter operating income in our history of $133 million, which was up 170% from 2019.\nImportantly, we saw strength across both the American Eagle and Aerie brands.\nWe ran an extremely healthy business as margins hitting the highest levels in many years.\nThe actions we took in 2020, including our strategic growth pillars, combined with the favorable external environment, are having a very meaningful impact on our business.\nStarting with our first pillar, accelerating Aerie to $2 billion, this quarter provided even more evidence that Aerie is the most exciting brand in retail today.\nOn nearly 90% revenue growth, operating earnings rose well over 700%.\nAerie is truly hitting its stride.\nWe have increased digital penetration, expanded geographically and pushed new and explosive categories like OFFLINE, leggings and additional apparel items.\nAs Jen will review, we continued to gain new customers at a fast clip.\nWe're spending more on our brand.\nAt this pace, we expect to hit our $2 billion target faster than expected, fueling significant earnings growth.\nAs I said back in January, American Eagle is a strong and highly profitable brand with significant opportunity for both growth and profit improvements.\nThe first quarter demonstrated that potential.\nWe are seeing a favorable response to our product and new marketing.\nWhile the jeans category continues to dominate, across the brand, we hit high margin rates with promotional [Indecipherable].\nI'm very proud of the great progress under Jen's leadership.\nI know we are only at the beginning of realizing American Eagle store potential.\nNext, customer-facing priorities delivered in the first quarter, fueled by our leading omni capabilities.\nDigital growth was terrific as momentum continued.\nWe also saw an improvement in our store business as consumers are starting to get out more.\nOur loyalty relaunch was a homerun and producing a stronger customer experience, positive margin contribution and higher ROI.\nThe supply chain delivered great results, even in the face of logistic headwinds.\nDeliveries were on time and we were able to successfully chase into top-performing items.\nThe multi-year investment we made in these areas continue to pay off.\nOur fifth pillar, to strengthen ROI discipline, is clearly evident in our results.\nFirst quarter growth in our profitability is a testament to the incredible collaboration across teams.\nWe have not taken our eye off the ball and remain focus on ensuring strong financial management as a top priority.\nAnd lastly, ESG initiatives.\nI'll highlight our environmental goals, where we continue to make great progress.\nWe are reducing water, utilizing more sustainable raw materials and reducing energy to ultimately achieve carbon neutrality in our own facilities by 2030.\nWe know sustainability is important to our customers and [Indecipherable] on our commitment to social responsibility and I&D, this month we awarded our first 15 Real Change scholarships for Social Justice.\nWe are excited to support educational pursuits of our amazing associates who are actively driving anti-racism, equality and social.\nBefore I turn to it Jen, clearly 2021 is off to a great start.\nI am so proud of the excellent execution across all areas of the Company.\nThe past several months truly validates my belief that we have more opportunity than at any time in the past.\nWe have two of the best brands in the industry with significant momentum, and we have the right teams and leadership in place to achieve our goals.\nThe macro environment is favorable with pent-up demand and new trends that play to our strength.\nAt this pace, we expect to achieve our 2023 goal of $550 million of operating income way ahead of schedule.\nI hope everyone is doing well.\nTo say the least, we've had an incredible start to the year across both Aerie and American Eagle.\nThere is clearly strong demand and momentum for our brands.\nOur strategies to expand into new categories, strength in product and marketing and fuel our brand platform are having a meaningful impact in our business.\nIt's truly gratifying to see strong sales and customer growth, and a very high level of profit flow-through.\nLet me begin with Aerie.\nI am thrilled by the incredible excitement and energy for Aerie and our merchandise collection.\nWe continue to set records across the brand.\nBuilding on the momentum throughout last year, the first quarter accelerated.\nSales rose an incredible 89% from 2019.\nThe consistency we are experiencing is truly amazing.\nThis was the 26th consecutive quarter of double-digit growth.\nAs aerie.com becomes a go-to destination for our customers, the online business more than doubled, posting a growth of 158%.\nStore revenue increased 36% with about one-third from new store opening.\nAerie's active customer file expanded approximately 40% as we entered new markets, and we increased engagement on social channels, including TikTok where we saw tremendous response.\nWith new customers attracted to our brand and demand for our merchandise accelerating, brand equity scores show growing awareness.\nSales metrics were strong across the board, and notably our AURs were up 50%.\nHigh demand is driving greater pricing power.\nA significant reduction in promotions contributed to an over 700% increase in operating profit and a 23.5% operating margin.\nAcross categories, we saw broad-based strength with all areas rising in the double-digit.\nIntimates was terrific as was swimwear, where product innovation and newness are fueling demand.\nAerie signature legging business is exceptional and continues to expand with the success of our new OFFLINE by Aerie activewear brand.\nRelated categories such as fleece, tanks and sports bras are also tracking very well.\nGeographic expansion is a major priority and opportunity for Aerie.\nWe opened six new stores in the quarter, including a new OFFLINE by Aerie store, bringing our running total of OFFLINE openings to five stores.\nWe are very pleased with the early results.\nAs Mike will review, we plan to continue our market expansion strategy.\nShifting gears now to American Eagle.\nAs I said at our Investor Day in January, AE has a wonderful heritage defined by individuality, purpose and heart.\nMy goal has been to harness AE's iconic image and update it for today's youth.\nHarmonizing the old with the new, we want to leverage our dominance in jeans and focus on more outfitting.\nWe are also optimizing our inventory for better margin.\nI'm so excited with the progress we've made in such a short period of time.\nWe've achieved the best margins in many years, and customer demand is strengthening across all categories.\nThis quarter, we saw a 39% increase in operating profit, with operating margins rising 20.8%.\nOur focus on inventory optimization and profit improvement drove merchandise margin expansion.\nWe made better decisions around promotional activity and drove greater full-price selling.\nWe are also pleased with the improvement in sales, led by a 20% increase in the digital business.\nCustomer engagement was up 2% with new digital acquisitions up 17%.\nDemand across our jeans and bottoms business remains very strong.\nWe continue to solidify our position as the number one brand within our demo and the number one women's brand across all ages.\nWith the new denim cycle under way, we are innovating and investing to maintain our leadership position and to offer the absolute best to our customers.\nAs silhouettes transition, I'm excited for what's in the pipeline.\nIn the first quarter, I'm pleased to report that we had our best quarter ever in fleece and graphic.\nWe plan to lean into this momentum in the back half of the year.\nAs bottoms evolve, we have the opportunity to delight our customers with new styles across tops and greater outfitting.\nJust six months into rewriting our strategy, the success we've seen reinforces my excitement for our longer-term opportunity.\nThe team is energized and I can't wait to share what's in-store for AE in the coming quarters.\nLastly, I can't say enough about the great work our teams continue to deliver.\nThe dedication and drive of the Aerie team is simply amazing.\nThey strive for greatness quarter-after-quarter.\nIt's been terrific to work with the AE as well over the past several months.\nWe have extraordinary talent, and I look forward to driving our vision together.\nI'm really proud of how quickly and enthusiastically our teams embraced our Real Power.\nThe results out of the gate in 2021 are tremendous, and they affirm that we are positioning our operations in the right way to fuel our next chapter of growth.\nAt the heart of our operating strategy is a truly customer-centric focus.\nThe investments we've made in our systems, our data analytics, omni-channel and supply chain are yielding results.\nI firmly believe that the strength of these capabilities and our ongoing investments are a unique competitive advantage.\nToday, I'm going to talk about three important areas of our business; our selling channels, our customer focus, and our supply chain transformation.\nLet me start with digital, which continues to post remarkable result.\nOur revenue rose 57% from 2019, producing incremental revenue of $150 million in the first quarter.\nOnline traffic and transaction -- transactions increased well into the double digit.\nWe achieved strong AURs and significantly higher margin.\nFurther fueling an already highly profitable channel, digital penetration increased to 40% of total revenue, up from 30% in 2019.\nAs customers continue to embrace online shopping, we are delivering an ever-improving experience.\nFor example, we recently introduced a new tab structure to provide greater ease of shopping across brands while enabling more immersive brand experiences.\nWe also introduced more personalization and enhanced curbside and in-store pickup features, which yielded great results.\nWe improved our mobile experience and redesigned our app, resulting in 70% increase in revenue from total mobile.\nStores improved in the first quarter, despite continued COVID-related traffic pressure.\nFleet optimization work is under way and we are pleased with the initial transfer rates from recent store closures, which are running well ahead of our 40% goal.\nProactive customer engagement has been a driving factor in retaining customers, transitioning them to nearby stores or online.\nOur customer base is extremely healthy and growing.\nNearly 1 million new customers have been added since 2019.\nThe average spend per customer is up in the double digits, with a greater number of customers shopping across both brands.\nThis speaks to the quality of our engagement, our product, our marketing and technology enhancements.\nThe relaunch of our loyalty program last summer has been highly successful, not only in attracting new customers but fueling more frequent engagement, more purchases and an improvement to margin.\nAcross the board, our operational teams delivered exceptional results this quarter.\nAs I've discussed before, we are highly focused on supply chain transformation aimed at improving inventory productivity, delivering efficiency and better and faster customer experience.\nThis work is yielding result.\nFor example, we reduced SKU counts across assortments to focus on the most productive styles, which resulted in faster turns and a meaningful increase in product margins in the first quarter.\nOur regional fulfillment nodes are resulting in better placed inventory, creating efficiencies and enabling faster service to both stores and to customers.\nIn the first quarter, we leveraged e-commerce delivery expense, had fewer shipments per order and delivered to customers 1.5 days faster than in the first quarter of 2019.\nOur supply chain team anticipated and successfully managed through shipping delays, with very minimal disruption to our business.\nWe also successfully executed chase strategies to replenish high demand items and supported outperformance of Aerie, OFFLINE, swimwear and a variety of fashion choices.\nThis really speaks to the strength of our team, our capabilities and our vendor partnerships.\nNow, as I look ahead, we are staying in front of ongoing supply chain challenges and we have continued to see favorability in our product cost for the remainder of the year.\nIn light of our strengthened operations, focus on driving higher margins, inventory optimization, as well as our well-positioned and growing brands, I'm very confident that we're positioning AEO for continued success.\nAnd with that, I'm going to pass the call over to Mike.\nI'll start by saying we are obviously extremely pleased with the first quarter during which we had a number of all-time highs and milestone.\nResults were well ahead of our expectations across the board.\nOur strategies are clearly working and we're making great progress on our Real Power.\nThis performance reflects a few major factors.\nOur brand is strong and our merchandise is in demand, fueling very healthy sales and KPIs.\nOur inventory optimization initiatives are working, resulting in lower promotions and significant growth in our merchandise margin.\nBoth of our selling channels are delivering positive results and our investments in our supply chain capabilities are effectively supporting our growth.\nThese factors, plus a favorable environment, led to record first quarter performance.\nRevenue of over $1 billion and operating income of $133 million marked all-time highs for the Company.\nDemand for Aerie continues at a rapid pace, driving significantly higher sales, margins and profitability.\nAmerican Eagle saw a slight topline growth and experienced one of the brand's highest merchandise margin rates on record with more runway ahead.\nAs Judy mentioned, I will review first quarter 2021 against the same period in 2019.\nConsolidated first quarter net revenue increased 17%.\nAcross brands and channels, sales metrics were exceptionally strong with our average unit retail up over 20% fueling a healthy transaction value.\nConversion rates across channels were also favorable.\nDigital revenue rose 57%, with Aerie up 158% and AE up 20%.\nThis strong growth reflects the benefits of our multi-year investments to capitalize on the customer migration to digital and omni-channel e-commerce.\nOnline sales for the quarter represented approximately 40% of our total mix, increasing significantly from 30% in the first quarter of 2019.\nStore revenue was flat, a nice improvement from the fourth quarter.\nAdditionally, U.S. stores posted positive revenue in the quarter with our stores in Canada affected more by lower traffic and store closures related to COVID-19.\nAt a brand level, AE revenue increased slightly to $728 million.\nStrong demand, lower promotions, along with inventory optimization initiatives, led to a record merchandise margin.\nAE's operating profit jumped 39% to $151 million and the operating margin expanded 570 basis points to 20.8%.\nThese results are a clear proof point of the margin opportunity for AE which we reviewed back in January.\nWhile the quarter showed great progress, the work continues.\nJen reviewed the progress in the product side, and we still have opportunities to maximize inventory productivity.\nAerie had another standout quarter with growth accelerating.\nRevenue increased 89% to $297 million.\nOperating income hit $70 million, rising over 700%.\nThe operating margin expanded to 23.5% from 5.3% in 2019.\nAs I've highlighted quite a few times now, Aerie is at an inflection point in its growth trajectory.\nWe'll continue to realize significant flow-through of incremental sales to the bottom line.\nTotal consolidated AEO gross profit dollars were up $111 million or 34% compared to the first quarter of 2019 and gross margin expanded 550 basis points to 42.2%.\nMerchandise margin expanded significantly, reflecting continued promotional discipline and benefits from our inventory optimization initiatives.\nOur product assortments were well received, which enabled higher full-priced selling.\nRent dollars were lower and leveraged significantly as a result of negotiated savings, store closures and benefits from impairments.\nOffsetting this, we saw higher delivery, distribution and warehousing costs, as well as higher incentive compensation.\nSG&A leveraged 40 basis points as a rate to sales.\nThe dollar increase of $34 million from the first quarter 2019 was due to compensation in line with our performance-based incentive program, an increase in corporate salaries and higher variable selling expenses, partly offset by lower travel expense.\nOperating income of $133 million increased 170% compared to $49 million in adjusted operating income in the first quarter 2019.\nThe operating margin of 12.9% expanded 730 basis points, marking a 14-year high for the Company.\nCorporate unallocated expense increased 29% to $88 million, primarily due to incentive compensation.\nAs a result of historically high profit delivered this quarter, incentive accruals are higher than normal and up against the minimal accrual in 2019.\nAdjusted earnings per share was $0.48 per share in the quarter, marking a record first quarter outcome for us.\nOur diluted share count was 207 million and included 34 million shares of unrealized dilution associated with our convertible notes.\nEnding inventory was up 2% compared to the end of the first quarter of fiscal 2019.\nAmerican Eagle inventory was down 15% due to continued inventory optimization initiatives and significantly reduced clearance levels.\nAerie's inventory increased approximately 50% versus 2019, supporting the strong sales growth, new stores and product expansion, including OFFLINE by Aerie.\nAcross brands, inventory is well positioned and below current demand levels.\nAs Michael said, we're comfortable with our ability to receive goods through our supply chain and have successfully chased into strong items.\nI'm very pleased with our liquidity and the health of our balance sheet.\nWe ended the quarter with $792 million in cash and short-term investments.\nEven excluding proceeds from the convertible bond issuance, our liquid, cash balance is up $36 million versus 2019.\nCapital expenditures totaled $37 million in the quarter.\nFor 2021, we continue to expect capital expenditures of $250 million to $275 million, in line with the average annual target we shared at our investor meeting.\nWe expect this to be back half loaded, given the timing of Aerie and OFFLINE new store openings.\nRegarding our store fleet, we are pleased with the transfer rates of recently closed locations and continue to expect incremental closures this year.\nWe've had productive negotiations with landlords and have continued to secure lower rents and build flexibility into the portfolio.\nThe vast majority of our 2020 renewals were short term, resulting in almost 450 leases coming to term in 2021.\nThis year, we plan to open approximately 60 Aerie stores and over 30 OFFLINE by Aerie stores, which will be a mix of stand-alones and Aerie side-by-side locations.\nNow as we look ahead, we are encouraged by our continued trend early in the second quarter.\nBoth brands continue on a healthy pace.\nThere is still uncertainty ahead, but as we reflect on our 2023 targets provided back in January of $5.5 billion in revenue and $550 million in operating profit, we believe we are on pace to achieve the profit goal this year, obviously well ahead of expectations.\nWe're excited about this prospect and what it could imply for our future profitability as we continued to implement and execute on our long-term growth strategies.\nAs a reminder, our reported second quarter 2019 results included a $40 million benefit to revenue and $38 million benefit to operating profit from the termination of our licensing partnership with a third party operator in Japan.\nWe are extremely pleased with the speed and success with which we are putting our Real Power.\nAs I said back in January, I believe we're heading into the most exciting period in our history.\nOur brand is stronger than ever, our business model is sound and our first quarter results bear testament to the quality of our strategies and strength of our execution.\n",
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"content": "digital momentum continued with revenue up 57% including aerie up 158% and ae up 20% in quarter.\nfor fiscal 2021, company expects capital expenditures to be in range of $250 to $275 million.\ndue to impact covid-19 had on fiscal 2020 financial results, q1 fiscal 2021 results are compared to q1 of fiscal 2019.\nq1 adjusted earnings per share $0.48.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are based upon information that represents the company's current expectations or beliefs.\nThe results actually realized may differ materially based on risk factors included in our SEC filings.\naeo-inc.com in the Investor Relations section.\nI hope everyone is doing well.\nI'm extremely happy with the continued strength across our business.\nIt was truly a milestone quarter in which we posted best ever third quarter results and announced an important strategic acquisition.\nI'll start with our results, which were simply outstanding.\nThis quarter, we delivered record revenue of $1.27 billion, reflecting growth at 24% from 2020, and an increase of 19% to 2019.\nHealthy sales and merchandise margins combined with cost efficiencies drove profit flow-through, which surpassed our expectations.\nRecord operating income of $210 million, reflecting a margin at 16.5%, our highest rate since 2007.\nWe are extremely pleased to see a sustained momentum across our brands and channels, which posted growth versus 2020 at pre-pandemic 2019 levels.\nCasualwear remains in high demand, and AE and Aerie are perfectly positioned to benefit.\nWe are delivering great product and sharper marketing as well as brand [Phonetic] experiences, both in-store and online that are second to none.\nAE brand is achieving exceptional results.\nUnder Jen's leadership, the product style and quality has improved remarkably and customers are noticing.\nAs back-to-school came rolling back, AE received more than its fair share of growth.\nShopping frequency and spend is up dramatically and we are acquiring and reactivating more customers.\nAt the same time, we are seeing renewed growth in categories that have been underpenetrated in recent years.\nAerie's growth continues at a fast pace, with momentum across all categories, including our new activewear brand OFFLINE by Aerie.\nCustomers who try Aerie love it and the brand is just beginning to unlock its true potential.\nHealthy acquisition retention are fueling strong sales and we are seeing nice reception as we expand into new markets.\nstrategic pillars have provided a roadmap and instilled focus across the company.\nSimply put, we are running our business better than ever.\nKey initiatives such as inventory and real estate optimization and the transformation of our supply chain are driving significant profit flow-through.\nThe processes, disciplines and capabilities we have put in place over the past 18 months will continue to set us apart, fueling strong returns and taking AEO to even greater heights.\nAs an organization, innovation is a core value and at the heart of everything we do.\nWe clearly recognize that many of the changes in our industry over the past year are here to stay.\nIn order to remain competitive today and in the years to come, we must pivot and think differently about our business.\nThat brings me to our exciting plan to acquire Quiet Logistics.\nThis acquisition marks a major milestone for our company, which I believe will be transformative.\nAcquiring Quiet allows us to build on the efficiencies we've gained over the past 12 months and position us for success as we grow our business over the coming years.\nWe also have a broader vision.\nWe expect the combination of Quiet Logistics and the recent acquisition of AirTerra to create a unique platform that revolutionizes logistics within our business and retail.\nThrough consolidation and pooled resources, the customer at Quiet and AirTerra will enjoy the agilities and efficiencies that were previously only available to the world's largest brands and retailers.\nI believe this will create an exciting new profit center with meaningful growth opportunities for AEO.\nLastly, our efforts around sustainability and building a better world through our ESG initiatives remain front and center at all times.\nWe continue to increase our most sustainable real good styles across all merchandise categories.\nAdditionally, we are investing to decrease emissions in our operations as we make progress toward becoming carbon-neutral.\nAE's outperformance year-to-date was truly remarkable and exceeded our expectations.\nThey clearly demonstrated the agility to meet unexpected challenges, while also staying the course toward our long-term goals.\nOur results continue to be fueled by a sound and meaningful strategy, resilient operations and focus on innovation and a passionate world-class team.\nStrong demand continues and we expect a strong close to 2021.\nThis was another amazing quarter for AEO.\nWe saw tremendous excitement around Aerie and AE as customers turned to their favorite brands this back-to-school.\nCustomer KPIs were very favorable as we brought in new customers and won more of their wallet.\nIt was a great set up for the holiday season, where I'm happy to note the energy has stayed just as elevated.\nStarting with Aerie, we consistently reach new heights each and every quarter.\n28% revenue growth in the third quarter following a 34% increase last year demonstrates Aerie's strong growth path.\nThis marked the 28th consecutive quarter of double-digit growth.\nProfit flow-through was also very healthy with a 16.5% operating margin, reflecting new third quarter highs for the brand.\nWe achieved this despite some unevenness of inventory flow during factory shutdowns in South Vietnam.\nThis occurred primarily in our high demand legging business, which is also one of our best margin categories.\nSales metrics in the third quarter were incredibly healthy.\nThe AUR was up in the high teens, driven by higher full price selling and more strategic decision-making around promotions.\nDemand was strong across the Aerie portfolio with our core intimates bralettes and apparel leading the charge.\nThe OFFLINE activewear brand is continuing to generate excitement as it expands its product offering.\nWe feel great about what's to come as we grow the store footprint and widen the customer base.\nMarketing is also playing a key role.\nIn August, we launched the Voices of AerieREAL.\nThis was Aerie's largest integrated marketing campaign featured across TikTok and connected TV and Snapchat.\nThis platform is giving our customers a voice and opportunity to share what makes them real.\nThe response was truly amazing, hundreds of customers shared their touching and funny real stories and will be featured in our upcoming campaigns.\nYear-to-date, Aerie's customer file has expanded 15%.\nCustomers are transacting more frequently and across more categories.\nThis is driving higher spend per customer as Aerie becomes the go-to for intimates activewear and cozy apparel.\nWe opened 29 new Aerie doors in the quarter, including a mix of new stand-alone and side-by-side formats, roughly a quarter of them are OFFLINE doors.\nMomentum heading into the holiday season remains strong.\nWe are focused on driving broad-based scale recognition of Aerie as a must-stop gifting destination, and I am so excited for what we have planned and I look forward to sharing more Aerie highlights in the upcoming quarters.\nNow, turning to American Eagle.\nI'm thrilled with the great progress we're making just 11 months into the launch of our new strategy.\nAs I shop our website and walk our stores, I have to tell you the strong AE heritage we all know and love is back.\nThe assortment has been refreshed, our advertising and messaging is reenergized and it's working.\nSales in the quarter rose 21% compared to 2020 and increased 8% to 2019.\nReigniting our brand product together with inventory optimization and promotional discipline drove strong AUR growth and merchandise margin expansion.\nThis resulted in significant profit flow-through and operating margin of 27.8% that reflected new highs.\nOur strength during back-to-school is clear -- is a clear signal that we are the destination for jeans, which continues to hit new highs.\nAE's customer file is up and, here too, customers are buying more frequently and spending more.\nAs we predicted, current trends and shifts in silhouettes are playing right into AE's strengths as the market leader.\nIn the quarter, our men's business saw tremendous growth across all categories.\nThe women's business also posted strong sales, supported by our signature denim category and a focus on outfitting.\nAE continues to explore innovative ways to reach and broaden its audience.\nI am so proud to share that AE was included in TikTok's pilot of its social commerce program this quarter.\nBeing a part of the new initiative is a true testament to the growing strength of the AE brand and its importance to customers.\nAE also launched a store on Snapchat and became the official partner of twitchgaming, a new channel created by gamers for gamers.\nThere is so much momentum across the brands as we head into the holiday season.\nThe teams did a great job getting our product out here and we're positioned to meet strong demand.\nIt's paying off in spades and I'm so happy how far we have come and how much we've accomplished in such a short period of time.\nMore to share in the coming quarters.\nI'm very pleased with how we executed this quarter.\nThe teams did a remarkable job managing through a highly disrupted operating environment.\nStrong top and bottom line results are a clear indication that our strategies are working.\nWe are making sustained progress against the strategic pillars outlined in our Real Power.\nAnd with this, we are unlocking structural benefits across our business and building a competitive edge in the industry.\nA key pillar of our strategy is to create the best brand experience for our customers and our selling channels really delivered this quarter.\nWe are pleased to see store traffic rebuild rising in the double-digits, driving a 29% increase in store revenue.\nSelling trends were robust across our factory outlets and mainline stores, with both formats also seeing significant profit improvement.\nMomentum was broad-based across all regions in the US, and all international markets also posted positive results.\nOur digital business continued at a healthy pace with revenues up 10%, successfully lapping 29% growth in the prior year.\nI am pleased to note that both our store and digital revenues and profits in the quarter surpassed levels we achieved in the third quarter of 2019.\nThis is reaffirming that we are emerging from the pandemic stronger.\nYear-to-date, digital penetration is 35%, and our trailing 12-month digital revenue is approximately $1.8 billion with very strong profitability.\nAs we prioritize enhancing the omnichannel shopping experience, we are launching new tools and technologies.\nThis quarter, we expanded our virtual selling tool, AE Live, which leverages our amazing store teams and local influencers to connect directly with customers looking for inspiration and guidance on the latest trends.\nWe also launched Afterpay in stores, enhanced our e-gifting for a more engaging experience and expanded both same-day delivery services and customer self-checkout to more geographies.\nI am very encouraged by the strength in our customer data.\nWe closed the third quarter with the highest active customer count and highest average annual spend since 2010.\nOver the past 12 and 24 months, we added almost 1.75 million and 2.25 million new customers, respectively.\nApproximately a third are engaging across both brands and spending approximately 2 times that of our average customer annually.\nFollowing a successful relaunch last summer, the royalty program is growing, with members spending more and staying longer.\nNow, shifting gears to logistics and supply chain, we continue to reap the benefits from our in-market fulfillment model.\nDelivery costs leveraged 120 basis points in the quarter.\nIn fact, delivery cost dollars were down year-on-year, led by efficiencies created in digital delivery.\nWith product located closer to stores and customers, delivery times and the average cost per shipment declined versus last year.\nAnd with greater control over inventory placement, shipments per order were also down dramatically.\nThis created enormous cost savings and efficiencies.\nAs Jay said, we are thrilled to announce the purchase of Quiet Logistics, which will allow us to increase these benefits over time.\nIn particular, the ability to drive substantially greater sales and margin on far less inventory, create more precision in our inventory allocation decisions and deliver products to customers both faster and at a lower cost.\nThis comes shortly after our acquisition of AirTerra, which we discussed on last quarter's call.\nThe combination of Quiet and AirTerra has meaningful growth potential, offering a one-stop shop for cost-effective transportation and fulfillment solutions to a growing customer base.\nA technology-led supply chain is the backbone of the successful retail business today and into the future.\nWe believe we are demonstrating the power of this and that Quiet and AirTerra are providing capabilities that are much needed in today's marketplace.\nAs we discussed in September, the global supply chain remains highly disrupted with core backlog and shifting production schedules leading to longer delivery times and higher transportation costs.\nOverall, we managed effectively through these challenges.\nIn the third quarter, the AE brand essentially had no disruption.\nHowever, as Jen discussed, Aerie's legging category experienced uneven inventory flows when factory closures in Vietnam created product delays.\nAs a result, we chose to air the product to ensure we were in stock for the holidays.\nAlthough there is a related cost that Mike will discuss in more detail, we are in a healthy inventory position and are set up for a very strong holiday.\nIn closing, I'm extremely pleased with our performance year-to-date and I'm looking forward to sharing more details on our new investments in the coming quarters.\nIn the third quarter, we built on strong momentum from the first half of the year, posting yet another record revenue and profit result.\nEven with the global operating environment still in flux, our teams executed with precision, guided by the initiatives we outlined in our Real Power.\nvalue creation plan back in January.\nWe continued to place strong emphasis on product innovation that strengthens customer affinity for our brands, inventory discipline and focus, and real estate optimization and supply chain investments that build on our leading omnichannel capabilities.\nTogether, these initiatives are fueling our performance and improving our gross margin for the long-term.\nRevenue of $1.27 billion, operating income of $210 million and adjusted earnings per share of $0.76 marked third quarter records for the company.\nGross margin of 44.3% and operating margin of 16.5% hit their strongest levels since 2007.\nGrowth across the business was also exceptional compared to the pre-pandemic 2019 period.\nConsolidated third quarter net revenue increased $242 million or 24% versus third quarter 2020 and is up $208 million or 19% from 2019.\nAcross brands, sales metrics were very favorable, strong demand, higher full price sales and fewer promotions drove the average unit retail up 15% and fueled a high single-digit increase in our average transaction value.\nAs Michael noted, our selling strategy as an omnichannel retailer continues to be a competitive advantage fueling growth across channels.\nWe offer customers the convenience they seek on where and how to shop and continue to work to optimize the costs associated with that convenience.\nFrom a brand standpoint, Aerie continued its industry-leading multiyear growth trajectory.\nRevenue rose 28% from third quarter 2020 and over 70% from third quarter 2019.\nAerie's operating profit rose 46% and the operating margin expanded to 16.5%, marking a new third quarter high.\nIncremental freight costs were $5 million or a 170 basis point headwind to brand operating margins in the quarter.\nAdditionally, uneven flow of goods, particularly in our signature leggings business put pressure on volumes as well as product mix as this is one of our highest margin categories.\nDespite these headwinds, Aerie posted a significant improvement in profitability compared to prior years, almost tripling versus third quarter 2019.\nMoving to American Eagle's brand performance, I cannot be more pleased with our results here.\nThe third quarter saw a significant profit unlock at AE as top line grew 21% and operating profit jumped 68%.\nOperating margins hit a remarkable 27.8%.\nAs Jen mentioned, with improvements across key categories, the top line grew 8% against 2019.\nWe are seeing far better profitability even beyond our expectations.\nStrong demand for our products is being met with healthier decision-making across all areas of the business, and we are truly benefiting from the inventory optimization work unveiled in January.\nWith significant progress here, we see -- still see room for further unlock moving forward.\nTotal company consolidated gross profit dollars were up 36% compared to the third quarter of 2020, reflecting a 44.3% gross margin rate.\nA strong top line allowed us to realize expense leverage and rent as we benefited from lease negotiations.\nAnd as Michael indicated, efficiencies in our distribution network fueled leverage and delivery.\nMerchandise margins also expanded due to our focus on inventory optimization, promotional discipline and higher full price selling, partially offset by higher freight costs.\nAs a result of strong sales, we saw SG&A leverage 190 basis points.\nThe dollar increase of $41 million was due primarily to higher store payroll, especially as we lapped capacity constraints last year as well as new store openings and increased advertising.\nThis was partially offset by lower incentive compensation due to accruals earlier in the year.\nRecord operating income of $210 million reflected a 16.5% operating margin, our highest third quarter rate since 2007.\nAdjusted earnings per share was $0.76 per share, marking a record third quarter.\nOur diluted share count was 205 million and included 34 million shares of unrealized dilution associated with our convertible notes.\nEnding inventory was up 32% compared to a 13% decline last year.\nThe increased freight costs had about a 10 point impact on ending inventory at cost.\nWe're really happy with our inventory position.\nI'd like to take a minute to recognize the hard work our teams put in to get our product here on time to support strong demand this holiday season.\nOur balance sheet remains healthy and we ended the quarter with $741 million in cash, up from $692 million in the third quarter 2020.\nCapital expenditures totaled $58 million in the quarter and $144 million year-to-date.\nFor 2021, we continue to capital expenditures to come in on the low end of our $250 million to $275 million guidance range, reflecting cost savings and project timing.\nWith regards to our real estate strategy, we have significant flexibility in managing our store fleet to support our revenue and profit goals.\nAs we work toward our long-term target of rightsizing AE store footprint, we are dealing with a sharp eye on maximizing profitability.\nFor Aerie, we are focused on markets with the greatest opportunity.\nDue to backlogs in building materials and fixtures, several of our third quarter store openings shifted into the fourth quarter, we expect the majority of these stores to open by the end of the year.\nWe're very excited about our recently announced acquisition of Quiet.\nThis will improve our ability to service both channels and lock in the cost benefits and overall gross margin efficiencies we've consistently seen over the past last year.\nTo wrap up, our performance year-to-date has been truly phenomenal and even more so in the context of challenges and uncertainties in our external environment.\nWe're extremely pleased with our record results year-to-date and continued progress on our strategic initiatives.\nSales trends remain strong heading into the key Black Friday and Cyber Week period.\nWe have met our goal to ensure our customers do not feel any impact from the supply chain disruptions and we're well positioned to meet holiday demand.\nHowever, that has come with additional freight costs in the range of $70 million to $80 million, which will impact the fourth quarter.\nOf course, we expect to nicely exceed $600 million of operating income for the year, well above the $550 million 2023 target.\nWe will be updating our longer-term financial targets at ICR this January.\nOur results year-to-date continue to reaffirm that the Real Power.\nvalue creation plan is working and that we're focusing on the right levers to drive financial success and returns to our shareholders.\n",
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"content": "american eagle outfitters exec sees $70 mln to $80 mln of freight cost in q4.\nin q3, co saw some unevenness of inventory flow during factory shutdowns in south vietnam.\nin q3, aerie's legging category experienced uneven inventory flows when factory closures in vietnam created product delays.\nseveral q3 store openings shifted into q4; expect majority of stores to open by end of year.\nco missed some business in aerie's leggings to the tune of an estimated $15 million in quarter.\namerican eagle exec sees $70 million to $80 million of freight cost in q4.\nqtrly earnings per share of $0.74; qtrly adjusted earnings per share of $0.76.\nqtrly total net revenue increased $242 million, or 24% to $1.27 billion.\nqtrly total digital revenue up 10%; qtrly consolidated store revenue up 29%.\nqtrly aerie revenue of $315 million rose 28%; qtrly american eagle revenue of $941 million rose 21%.\nquarter-end total consolidated ending inventory at cost increased 32% to $740 million versus 13% decline last year.\nconfident that we will exceed $600 million of operating income for year, well above $550 million 2023 target.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: 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.\nOur first quarter results put us on track to achieve our 2021 guidance and 7% to 9% average annual growth through 2025.\nGustavo will provide more color on our financial results later in the call.\nAs we spoke about on our Investor Day in early March, we see a great opportunity for growth given the momentous changes in our sector, and we are very well positioned to capitalize on the shift to low-carbon sources of energy.\nOver the past five years, we have transformed our company to be a leader in renewables, and we have invested in innovative technologies that will give us a competitive advantage for many years to come.\nAlthough it has been less than two months since our Investor Day, we had a number of significant achievements to announce, including a landmark deal with Google, which I will describe in more detail later, a strategic collaboration to develop new battery technologies between Fluence and Northvolt, the leading European supplier of sustainable battery systems, and a significant increase in LNG sales in Central America and the Caribbean to support those economies in their transition away from heavy fuels.\nFirst, let me lay out our strategic priorities for 2021 and the substantial progress that we have made year-to-date toward achieving those objectives.\nTurning to Slide four.\nOur five key goals for the year are: one, signed contracts for four gigawatts of renewables.\nTwo, launched the first 24/7 product for carbon-free energy on an hourly basis; three, further unlock the value of our technology platforms; four, continue to improve our ESG positioning through the transformation of our portfolio; and five, monetize excess LNG capacity in Central America and Caribbean.\nTurning to Slide five.\nLast year, we set and exceeded a goal of signing two to three gigawatts of PPAs for renewables and energy storage.\nThis year, we are increasing that goal by 60% to a target of four gigawatts.\nToday, I am pleased to report that year-to-date, we've already signed 1.1 gigawatts including a landmark deal with Google.\nAs you can see on Slide six, we have a backlog of 6.9 gigawatts of renewables, consisting of projects already under construction or under signed power purchase agreements, or PPAs.\nThis equates to 20% growth in our total installed capacity and a 60% increase in our renewables capacity.\nTurning to Slide seven.\nWe continue to increase our pipeline of projects to support our growth and now have a global pipeline of more than 30 gigawatts of renewable projects, roughly half of which is in the United States.\nWith increasing demand from corporate customers and a much more favorable policy environment, we expect the need for renewables to grow dramatically, and we're taking steps to ensure a continued competitive advantage.\nMoving to Slide eight.\nOur second key goal for this year is to launch the first 24/7 energy product that matches a customer's load with carbon-free energy on an hourly basis.\nTo that end, earlier this week, we announced a landmark, first of its kind agreement to supply Google's Virginia-based data centers with 24/7 carbon-free energy sourced from a portfolio of 500 megawatts of renewables.\nUnder this innovative structure, AES will become the sole supplier of the data center's energy needs, ensuring that the energy supplied will meet carbon-free targets when measured on an hourly basis for the next 10 years.\nThe carbon-free energy will come from an optimized portfolio of wind, solar, hydro and battery storage resources.\nThis agreement sets a new standard in carbon-free energy for commercial and industrial customers who signed 23 gigawatts of PPAs in 2020.\nAs we discussed at our Investor Day, the almost 300 companies that make up the RE100 will need more than 100 gigawatts of new renewables by 2030.\nThis transaction with Google demonstrates that a higher sustainability standard is possible, and we expect a substantial portion of customers to pursue 24/7 carbon-free objectives.\nBased on our leadership position, we are well placed to serve this growing market.\nAnd in fact, we've already seen significant interest from a number of large clients.\nTurning to Slide nine.\nOur third key goal is to further unlock the value of our technology platforms.\nOne of these platforms is Uplight, an energy efficiency software company that works directly with the utility and has access to more than 100 million households and businesses in the U.S. Uplight is at the forefront of the shift to low-carbon and digital solutions on the cloud.\nIn March, we announced a capital raise with a consortium led by Schneider Electric, valuing Uplight at $1.5 billion.\nNow to Slide 10.\nWe're seeing increasing value in many of our other technology platforms as well.\nFluence, our joint venture with Siemens, remains a global leader in energy storage, which is a key component of the energy transition.\nThis dynamic industry is expected to grow 40% annually, and Fluence is well positioned to capitalize on this immense opportunity through its distinctive competitive advantages, including its AI-enabled bidding engine.\nTurning to Slide 11.\nAs you may have seen, last month Fluence announced a multiyear agreement with Northvolt, the leading European battery developer and manufacturer, for assured supply and to co-develop next-generation battery technology.\nThis is an example of Fluence's continued innovation, which has been validated by their consistent rank as the number one utility-scale energy storage technology company according to Guidehouse insights.\nSimilarly, we see the rapid progress of our prefab solar solution, 5B, as you can see on Slide 12.\nThis technology doubled the energy density and cuts construction time by 2/3.\nWe now have 5B projects in Australia, Panama and Chile.\nWe will be including 5B technology in our bids in Puerto Rico, where it's proven resilience to category four hurricane winds will provide greater energy security, proving out the unique value proposition of 5B could significantly speed up the adoption of solar in cyclone prone areas.\nLastly, we continue to work toward the approval of the first large-scale green hydrogen based ammonia plant in the Western Hemisphere, in Chile.\nMoving to Slide 13.\nWe have undergone one of the most dramatic transformations in our sector.\nOver the past five years, we have announced the retirement or sale of 10.7 gigawatts of coal, or 70% of our coal capacity, one of the largest reductions in our spectrum.\nWe recognize that we have more work to do and have set a goal of reducing our generation from coal to less than 10% of total generation by 2025.\nFurthermore, we expect to achieve net-zero emissions from electricity by 2040, one of the most ambitious goals of any power company.\nAs we achieve these decarbonization targets and continuing our near-term growth in renewables, we anticipate being included in additional ESG-oriented indices.\nFinally, turning to Slide 14.\nWe see natural gas as the transition fuel that can lower emissions and reduce overall energy costs as markets work toward a future with more renewable power.\nLast month, we reached an agreement to provide terminal services for an additional 34 tera BTUs of LNG throughput under a 20-year take-or-pay contract.\nThis will bring our total contracted terminal capacity in Panama and the Dominican Republic to almost 80%.\nThere are 45 tera BTUs of available capacity remaining, which we expect to sign in the next couple of years.\nOur LNG business is focused on providing environmentally responsible LNG or green LNG as soon as feasible, which ensures the lowest levels of emissions throughout the entire supply chain.\nAs Andres mentioned, we are off to a good start this year, having already achieved significant milestones toward the strategic and financial objectives that we discussed on our Investor Day.\nWe are also encouraged by the continued economic recovery across our markets, with Q1 demand in line with pre-COVID levels.\nTurning to our financial results for the quarter.\nAs you can see on Slide 16, adjusted pre-tax contribution, or PTC, was $247 million for the quarter, which was very much in line with our expectations and similar to last year's performance.\nI'll discuss the key drivers of our first quarter results and outlook for the year in the following slides.\nTurning to Slide 17.\nAdjusted earnings per share for the quarter was $0.28 versus $0.29 last year.\nWith adjusted PTC essentially flat, the $0.01 decrease in adjusted earnings per share was the result of a slightly higher effective tax rate this quarter.\nIn the U.S., in utilities, strategic business unit, or SBU, PTC was down $27 million, driven primarily by a lower contribution from our legacy units at Southland and higher spend in our clean energy business as we accelerate our development pipeline given the growing market opportunities.\nThese impacts were partially offset by the benefit from the commencement of PPAs at the Southland Energy combined cycle gas turbines, or CCGTS.\nAt our South America SBU, PTC was down $31 million, mostly driven by lower contributions from AES and is formerly known as AES Gener, due to higher interest expense and lower equity earnings from the Guacolda plant in Chile.\nThese impacts were partially offset by higher generation at the Chivor hydro plant in Colombia.\nLower PTC at our Mexico, Central America and the Caribbean, or MCAC SBU, primarily reflects outages at two facilities in Dominica Republic and Mexico, with both already back online since April.\nResults also reflect the expiration of the 72-megawatt barge PPA in Panama.\nFinally, in Eurasia, higher PTC reflects improved operational performance and lower interest expense in our Bulgaria businesses.\nNow to Slide 22.\nWith our first quarter results, we are on track to achieve our full year 2021 adjusted earnings per share guidance range of $1.50 to $1.58.\nOur expected 2021 quarterly earnings profile is consistent with the average of the last five years.\nOur typical quarterly earnings is more back-end weighted with roughly 40% of the earnings occurring in the first half of the year and the remaining in the second half.\nGrowth in the year to go will be primarily driven by contributions from new businesses, including a full year of operations of the Southland repowering project, 2.3 gigawatts of projects in our backlog coming online during the next nine months, reduced interest expense, the benefit from cost savings and demand normalization to pre-COVID levels.\nWe are also reaffirming our expected 7% to 9% average annual growth target through 2025.\nNow turning to our credit profile on Slide 23.\nAs discussed at our Investor Day, 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.\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 achieve BBB flat credit metrics by 2025.\nNow to our 2021 parent capital allocation plan on Slide 24.\nConsistent with the discussion at our Investor Day, sources reflect approximately $2 billion of total discretionary cash, including $800 million of parent free cash flow and $100 million of proceeds from the sale of Itabo in the Dominican Republic, which just closed in April.\nSources also include the successful issuance of the $1 billion of equity units in March, eliminating the need for any additional equity raise to fund our current growth plan through 2025.\nNow to uses on the right-hand side.\nWe'll be returning $450 million to shareholders this year.\nThis consists of our common share dividend, including the 5% increase we announced in December and the coupon of the equity units.\nAnd we plan to invest approximately $1.4 billion to $1.5 billion in our subsidiaries as we capitalize on attractive growth opportunities.\nApproximately 60% of the investments are in global renewals, reflecting our success in renewables origination during 2020 and our expectations for 2021.\nAbout 25% of these investments are in our U.S. utilities to fund rate base growth with a continued focus on grid and fleet modernization.\nIn the first quarter, we invested approximately $450 million in renewables, which is roughly 1/3 of our expected investment for the year.\nIn summary, 85% of our investments are going to the U.S. utilities and global renewables, helping us to achieve our goal of increasing the proportion of earnings from the U.S. to more than half and from carbon-free businesses to about 2/3 by 2025.\nThe remaining 15% of our investment will go toward green LNG and other innovative opportunities that support and accelerate the energy transition.\nAs I have noted, we have made great progress on our 2021 and long-term strategic goals, and we are reaffirming our 2021 guidance and expectations through 2025.\nWe see a tremendous opportunity for growth, and further increasing our technological leadership as the industry transition unfolds.\nFrom advancing our renewables to unlocking the value of our new technology businesses, we have a competitive advantage that will continue to benefit our customers and investors.\n",
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"content": "aes achieves key strategic milestones reaffirms 2021 guidance and 7% to 9% average annual growth target through 2025.\naes achieves key strategic milestones; reaffirms 2021 guidance and 7% to 9% average annual growth target through 2025.\nq1 adjusted non-gaap earnings per share $0.28.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: 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.\nBefore discussing our progress since our last call, I want to introduce our new Chief Financial Officer, Steve Coughlin.\nSteve has been with AES for 14 years and has served in a variety of roles, including as Chief Executive Officer of Fluence and most recently as Head of both Strategy and Financial Planning.\nI am happy to report that we are making excellent progress on our strategic and financial goals, and remain on track to deliver on our 7% to 9% annualized growth in adjusted earnings per share and parent free cash flow through 2025.\nWe had a strong third quarter with adjusted earnings per share of $0.50, a 19% increase versus the same quarter last year.\nWe expect to deliver on our full year guidance, even with a $0.07 noncash impact from an updated accounting interpretation related to the equity units of a convert we issued earlier this year.\nSteve will provide more details shortly.\nToday, I will discuss both the growth in our core business as well as the strategy and evolution of our innovation business called AES Next.\nWe see ourselves as the leading integrator of new technologies.\nThe two parts of our portfolio are mutually beneficial to one another and enable us to deliver greater total returns to our shareholders.\nMore specifically, and as we have proven, our core business platforms provide the optimal environment for exponentially growing technology start-ups.\nAt the same time, our AES Next businesses provide us with unique capabilities that enable us to offer customers the differentiated product they seek to achieve their sustainability goals.\nTurning to Slide four.\nI will provide you with an update on our core business, including our growth in renewables and an update on the overall macroeconomic environment.\nWe continue to see great momentum in demand overall.\nAs we speak, we have senior members of our team, attending the COP26 Climate Conference in Glasgow, meeting with governments, organizations and potential customers.\nSince our last call in August, we have signed an additional 1.1 gigawatts of renewable PPAs, bringing our year-to-date total to four gigawatts.\nAdditionally, we are in very advanced discussions for another 850 megawatts of wind, solar and energy storage.\nBased on our current progress, we now expect to sign at least five gigawatts this year versus our prior expectations of four gigawatts.\nThis represents the largest addition in our history and 66% more than in 2020.\nWith our pipeline of 38 gigawatts of potential projects, including 10 gigawatts that are ready to bid in the U.S., we are well positioned to capitalize on this substantial opportunity.\nOur success is a result of our strategy of working with our clients on long-term contracts that provides customized solutions for their specific energy and sustainability goals.\nAs such, almost 90% of our new business has been from bilateral negotiated contracts with corporate customers.\nThis allows us to compete on what we do best: providing differentiated, innovative solutions.\nOne example of our work with major technology companies to provide competitively priced renewable energy netted on an hour-by-hour basis.\nAs we announced earlier this week, we signed a 15-year agreement to provide around-the-clock renewable energy to power Microsoft's data centers in Virginia.\nYear-to-date, we have signed almost two gigawatts of similarly structured contracts with a number of tech companies, integrating a mix of renewable sources and energy storage.\nOutside the U.S., we have a similar strategy of focusing on bilateral sales with corporate customers, which has enabled us to sign long-term U.S. dollar-denominated contracts with investment-grade customers.\nFor example, in Brazil, we see demand for more than 25 gigawatts of renewables, providing a significant opportunity to earn mid- to high-teen returns in U.S. dollars, while at the same time, diversifying our Brazilian portfolio of mostly hydro generation.\nTo that end, for the first time ever in Brazil, we are in very advanced negotiations to design a 300-megawatt U.S. dollar-denominated contract with a large multinational corporation for 15 years.\nTurning to Slide five.\nOur backlog of 9.2 gigawatts is the largest ever with 60% in the U.S. These projects represent one of the main drivers for our growth through 2025 and beyond.\nWith this pace of growth, we are laser-focused on ensuring that we have adequate and reliable supply chain.\nFor several years, we have anticipated a boom in renewable development that could potentially lead to inadequate panel supply.\nAnd as such, we took pre-emptive measures to ensure supply chain flexibility.\nDespite current challenges in the market, we have non-Chinese panels secured for the majority of our backlog, which is expected to come online through 2024.\nWe have benefited from a number of strategic relationships with various suppliers and a clear advantage stemming from our scale and visibility of our pipeline.\nMore generally, we continue to proactively manage potential macroeconomic headwinds, including inflation and commodity prices.\nAs part of our efforts to derisk our portfolio over the past decade, we have taken a systematic approach to risk management.\nIn fact, in places where we use fuel, it is mostly a pass-through and, therefore, we have limited exposure to changes in commodity prices.\nFurthermore, more than 80% of our adjusted pre-tax contribution is in U.S. dollars, insulating us from fluctuations in foreign currencies.\nWe not only remain committed to achieving our long-term adjusted earnings per share and parent free cash flow targets, but we also continue to improve our credit metrics and are on track to achieve BBB ratings from all agencies by 2025.\nNow to Slide six.\nWe continue to benefit from a virtuous cycle with our corporate customers, in which our ability to provide innovative solutions leads to more opportunities for collaboration and more projects.\nFor example, this quarter, we announced a partnership with Google to provide our utility customers cost savings and energy efficiency features as well as opportunities to accelerate their own clean energy goals through Nest thermostats.\nMoving to Slide seven.\nThrough AES Next, we integrate new technologies to bring innovation to the industry and work with existing and new customers.\nAES Next operates as a separate unit within AES where we develop and incubate new businesses, including a combination of strategic investments and internally developed businesses, representing approximately $50 million of gross capital annually.\nAs I mentioned, the combination of AES Next and our core business creates the optimal environment for growth, whereby we can better create solutions for customers by utilizing our industry insights and operating platforms.\nOne example of this mutually beneficial arrangement is in the combination of renewables plus storage.\nWe first combined solar and storage in 2018 in Hawaii.\nAnd today, nearly half of our renewable PPAs have an energy storage component.\nAnother example is 5B, a prefabricated solar solution company that has patented technology, allowing projects to be built in 1/3 of the time and on half as much land while being resistant to hurricane force winds.\nWe see 5B's technology as a source of current and future competitive advantage for AES, allowing us to build more projects in places where there is a land scarcity, constraints around height or soil disruption or hurricane risk.\nLikewise, 5B benefits greatly from the ability to grow rapidly on our platform, and we are currently developing projects in the U.S., Puerto Rico, Chile, Panama and India.\nI am highlighting the AES Next portion of our business because it is increasingly clear that AES essentially has two distinct business models that add value to our shareholders in very different ways.\nWith our core business, we continue to measure our success through growth in adjusted earnings per share and parent free cash flow as well as PPAs signed.\nWith AES Next, these businesses contribute value creation through their extremely rapid growth in valuation with the potential for future monetization.\nNonetheless,they are a drag on AES' earnings during their ramp-up phase.\nIn 2021, this drag on earnings is expected to be approximately $0.06 per share.\nWe assume these losses from AES Next in our 2021 guidance and our 7% to 9% annualized growth rate through 2025.\nTurning to Slide eight.\nAs you know, last week, Fluence, our energy storage joint venture with Siemens, which began as a small business within AES, became a publicly listed company with a current valuation of around $6 billion.\nSimilarly, early this year, another AES Next business, Uplight, received evaluation in a private transaction of $1.5 billion.\nThe value of our interest in these two businesses is now at least $2.5 billion or $3 per share compared to the book value of our investments of approximately $150 million.\nIn my view, this massive shareholder value creation more than justifies the temporary negative impact to earnings.\nIn summary, our strategy of being the leading integrator of new technologies on our platform has yielded great results, and we have several other innovations in development under AES Next.\nAs they mature, we will continue to take actions to accelerate their growth and show their value.\nIt's my pleasure to participate in my first earnings call as Chief Financial Officer of AES.\nI have been at AES for 14 years and feel very fortunate to work at a company that is transforming the electric sector so profoundly along so many talented people in finance and throughout the company.\nWith our strategic and financial progress to date, AES is well positioned to continue leading this transformation.\nIn my previous role, I led corporate strategy and financial planning where we developed our plan to get to greater than 50% renewables at least 50% of our business in the U.S. and to reduce our coal share to less than 10% by 2025, all while growing the company 7% to 9%.\nWe are committed to those goals, and I look forward to continue executing toward them.\nBefore I dive into our financial performance, I want to discuss the adjustment to our accounting that we made this quarter relating to the treatment of the $1 billion in equity units we issued in the first quarter this year.\nOur prior guidance assume that the underlying shares would not be included in our fully diluted share count until 2024 upon settlement of the equity units.\nThis approach was in line with industry practice and supported by our interpretation of the accounting literature and our external auditors.\nHowever, we are now subject to an updated interpretation of these instruments, and we are adjusting to include these shares in our fully diluted earnings per share calculations.\nThis adjustment results in an annual impact of roughly $0.07 this year and $0.09 in 2022 and 2023 using a full year of an additional 40 million shares.\nIt's important to keep in mind that this adjustment has no cash impact and has absolutely no impact on our business or longer-term growth rates as we had included the underlying shares in our projections for 2024 and beyond.\nPrior to this adjustment, we had expected to be in the upper half of our 2021 adjusted earnings per share guidance range, but we now expect to be at the low end of the range.\nNow I'd like to cover two important topics: our performance during the third quarter and our capital allocation plan.\nTurning to Slide 11.\nYou can see the strong performance of our portfolio in this quarter.\nAdjusted earnings per share was $0.50 for the quarter versus $0.42 for the comparable quarter last year.\nThis 19% increase was primarily driven by improvements in our operating businesses, new renewables and parent interest savings.\nThese positive drivers were partially offset by lower contributions from South America, largely due to unscheduled outages in Chile.\nThird quarter results also reflect an approximate $0.03 quarter-to-date impact from the higher share count due to the inclusion of 40 million additional weighted average shares relating to the equity units that I just mentioned.\nTurning to Slide 12.\nAdjusted pre-tax contribution, or PTC, was $428 million for the quarter, an increase of $97 million versus third quarter of 2020.\nI'll cover our results by strategic business unit over the next four slides, beginning on Slide 13.\nIn the US and Utilities SBU, PTC increased $69 million as a result of our continued progress in growing our U.S. footprint.\nThe improvement was largely driven by higher contributions from Southland, which benefited from higher contracted prices, new renewables coming online at AES Clean Energy and higher availability at AES Puerto Rico.\nIn California, our 2.3 gigawatt Southland legacy portfolio demonstrated its critical importance by continuing to meet the state's pressing energy needs and its transition to a more sustainable carbon-free future.\nIn fact, as you may have heard, last month, the State Water Resource Control Board unanimously approved an extension of our 876-megawatt Redondo Beach facility for two years through 2023 to align with our remaining legacy units.\nIf the demand/supply situation remains tight, some of our legacy portfolio could be available to meet California's energy needs beyond 2023 if state energy officials determine a need, although we have not assumed this in our guidance.\nAs you can see on Slide 14, at our South America SBU, lower PTC was primarily driven by unscheduled outages in Chile due to a blade defect impacting six turbines across our fleet that has now largely been resolved.\nOur third quarter results were also driven by lower hydrology in Brazil.\nBefore moving to MCAC, I would like to provide an update on 531-megawatt Alto Maipo hydro project, owned by a subsidiary of AES Andes in Chile.\nConstruction continues to go well, and generation is expected to begin in December of this year, with full commercial operation of the plant expected in the first half of 2022, in line with our expectations.\nAlto Maipo is in discussions with its nonrecourse lenders to restructure its debt to achieve a more sustainable and flexible capital structure for the long term.\nAES Andes has honored its equity commitment to Alto Maipo and will not be assuming any additional equity obligations.\nWe expect the restructuring to be completed in 2022.\nAnd AES Andes already assumed zero cash flow from Alto Maipo, so we don't see the restructuring impacting our guidance.\nNow turning back to our third quarter results on Slide 15.\nThe higher PTC at our MCAC SBU primarily reflects higher LNG sales in Dominican Republic and demand recovery in Panama.\nAnd finally, in Eurasia, as shown on Slide 16, higher results reflect improved operating performance in Bulgaria.\nNow to Slide 17.\nTo summarize our performance in the first three quarters of the year, we earned adjusted earnings per share of $1.07 versus $0.96 last year.\nAs I mentioned earlier, in terms of our full year guidance, we are incorporating the $0.07 per share noncash impact from the adjustment for the equity units issued earlier this year.\nPrior to this adjustment, we had expected to be in the upper half of our 2021 adjusted earnings per share guidance range, but we now expect to come in at the lower end of the range of $1.50 to $1.58.\nIt's important to note that this adjustment does not affect our longer-term growth expectations and has no impact on our cash flow.\nWith three quarters of the year behind us, our year-to-go results will benefit from contributions from new renewables, continued demand recovery across our markets, reduced interest expense and our cost savings programs.\nThese positive drivers are offset by the impact of the higher share count and the dilution from AES Next, as Andres discussed earlier.\nNow turning to our 2021 parent capital allocation on Slide 18.\nBeginning on the left hand of the slide and consistent with our prior disclosure, we expect approximately $2 billion of discretionary cash this year.\nWe remain confident in our parent free cash flow target midpoint of $800 million and the $100 million from the sale of Itabo, and we received the $1 billion of proceeds from the equity units issued in March.\nMoving over to the right-hand side.\nThe uses are largely unchanged from the last quarter with $450 million in returns to our shareholders this year, consisting of our common share dividend and the coupon on the equity units.\nWe also continue to expect almost $1.5 billion of investment in our subsidiaries, with about 60% going toward renewables globally.\nOur investment program continues to be heavily weighted to the U.S. with approximately 70% targeted for our U.S. businesses.\nThe increased focus on U.S. investments will contribute to our goal of growing the proportion of earnings from the U.S. to at least half of our base.\nFinally, as I ramp up in my new role, I've had the chance to speak with many of our internal and external stakeholders.\nIt's clear that AES continues to successfully execute on our strategy, and we remain resilient in the face of volatile macroeconomic conditions.\nContinuing to drive the successful execution and delivering on our financial goals is my top priority.\nI look forward to getting input from more of our investors and analysts and providing the information you need to understand the great future ahead for AES.\nIn summary, we have had a strong third quarter, with both our core business and AES Next doing well.\nWe are increasing our target for science renewable PPAs from four gigawatts to five gigawatts and Fluence successfully completed its $6 billion IPO.\nWe remain committed to delivering on our strategic and financial goals, including our 7% to 9% annualized growth rate in earnings and cash flow, and will continue to create greater shareholder value by being the leading integrator of new technologies.\nWith that, I would like to open up the call to questions.\n",
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"content": "aes reaffirms 7% to 9% annualized growth target through 2025; now expects to sign 5 gw of renewables under long-term contracts in 2021.\nqtrly adjusted earnings per share of $0.50.\nreaffirming 2021 adjusted earnings per share guidance range of $1.50 to $1.58; now expecting low end of the range.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These materials will be referenced during portions of todays call.\nA detailed description of these risks and uncertainties can be found in AFGs 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 in responses to questions.\nAnd as a result, it may contain factual or transcription errors that could materially alter the intent or meaning of our statements.\nAFG reported core net operating earnings of $2.39 per share, an impressive 257% increase year-over-year.\nThe increase was due to substantially higher underwriting profit in our Specialty Property and Casualty insurance operations and higher Property and Casualty net investment income.\nImproved results from the companys $1.6 billion of alternative investments were partially offset by lower other property and casualty net investment income, primarily due to lower short-term interest rates.\nAnnualized core operating return on equity in the second quarter was a strong 14.7%.\nTurning to slide four.\nYoull see that the second quarter 2021 net earnings per share of $11.70 included after-tax noncore items totaling $9.31 per share.\nThese noncore items included earnings from our discontinued Annuity operations, inclusive of an after-tax gain on the sale of $8.14 per share.\nSecond quarter 2021 noncore items also included $0.40 per share in after-tax noncore net realized gains on securities.\nBased on results through the first half of the year, we now expect AFGs core net operating earnings in 2021 to be in the range of $8.40 to $9.20, up from our previous range of $7 to $8 per share, an increase of $1.30 per share at the midpoint of our guidance.\nAs youll see on slide five, this guidance range continues to assume 0 earnings on AFGs $2.2 billion in parent company cash as we continue to consider alternatives for deployment of the remaining proceeds from the sale of the Annuity business.\nWere pleased to increase our 2021 core earnings per share guidance in such a meaningful way.\nThis guidance also excludes other noncore items such as realized gains and losses and other significant items that are not able to be estimated with reasonable precision or that may not be indicative of ongoing operations.\nFurthermore, the above guidance reflects a normal crop year and an annualized return of approximately 8% on alternative investments over the remaining two quarters of 2021.\nCraig and I will discuss our guidance for each segment of our business in more detail later in the call.\nNow Id like to turn our focus to our property and casualty operations.\nResults during the quarter were excellent.\nPretax core operating earnings in AFGs Property & Casualty Insurance segment were a record $288 million in the second quarter of 2021, an increase of $172 million from the comparable prior year period.\nIm very pleased that all three of our property and casualty groups reported strong double-digit growth in net written premiums, which was primarily the result of the economic recovery, new business opportunities and healthy renewal pricing.\nUnderwriting margins across our portfolio of businesses were excellent with each property and casualty group reporting a combined ratio in the 80s.\nThe Specialty Property and Casualty insurance operations generated an underwriting profit of $153 million in the second quarter compared to $54 million in the second quarter of 2020, an increase of 183%.\nEach of our Specialty Property and Casualty groups produced higher year-over-year underwriting profit.\nThe second quarter 2021 combined ratio was a very strong 87.9%, improving 7.3 points from the 95.2% reported in the comparable prior year period.\nSecond quarter 2021 results included 0.9 points in catastrophe losses and 5.4 points of favorable prior year reserve development.\nCatastrophe losses, net of reinsurance and including reinstatement premiums, were $11 million in the second quarter of 2021 compared to $26 million in the prior year period.\nResults for the 2021 second quarter include 0.2 points in COVID-19-related losses compared to 7.6 points in the 2020 second quarter.\nWe continue to carefully monitor claims and loss trends related to the COVID-19 pandemic.\nNumerous legislative and regulatory actions as well the specifics of each claim contribute to a highly fluid evolving situation.\nAFG recorded $2 million in losses related to COVID-19 in the second quarter of 2021, primarily related to the economic slowdown impacting our trade credit business.\nAnd we recorded favorable reserve development of approximately $4 million related to accident year 2020 COVID-19 reserves based on loss experience.\nGiven the uncertainty surrounding the ultimate number and scope of claims relating to the pandemic, approximately 66% of the $96 million in AFGs cumulative COVID-19-related losses are held as incurred but not reported reserves at June 30, 2021.\nOur claims professionals and those who support them are working tirelessly to review claims with the care and attention each deserves.\nNow turning to pricing.\nWe continue to see strong renewal rate momentum and achieved broad-based pricing increases in the quarter with exceptionally strong renewal pricing in our longer-tailed liability businesses outside of workers comp.\nAverage renewal pricing across our entire Property and Casualty Group, including comp, was up approximately 9% for the quarter.\nExcluding our workers comp business, renewal pricing was up approximately 12% in the second quarter.\nWith the exception of workers comp, were continuing to achieve strong renewal rate increases in the vast majority of our businesses.\nIn fact, this quarter marked our 20th consecutive quarter of overall Specialty Property and Casualty rate increases, which continue to be meaningfully in excess of prospective estimated loss ratio trends.\nGross and net written premiums for the second quarter of 2021 were up 26% and 22%, respectively, when compared to the second quarter of 2020.\nExcluding workers comp, gross and net written premiums grew by 30% and 26%, respectively, year-over-year.\nThe drivers of growth vary considerably across the portfolio of our Specialty Property and Casualty businesses.\nIn the aggregate, year-over-year growth in gross written premium during the first six months of 21, excluding crop, was fairly evenly split with just over half of the overall growth attributable to rate and about half attributable to net growth and change in exposures.\nMarket conditions continue to be very favorable and are among the best I recall in my 40-plus years in the business.\nProperty and Transportation Group reported an underwriting profit of $62 million in the second quarter compared to $33 million in the second quarter of last year.\nHigher underwriting profit in our crop, property and inland marine, transportation businesses were the drivers of the year-over-year increase.\nThe businesses in the Property and Transportation Group achieved a very strong 86.6% calendar year combined ratio overall in the second quarter, an improvement of 5.1 points from the comparable period in 2020.\nCatastrophe losses in this group, net of reinsurance and inclusive of reinstatement premiums, were $7 million in the second quarter of 2021 compared to $15 million in the comparable 20 period.\nSecond quarter 2021 gross and net written premiums in this group were 39% and 32% higher, respectively, than the comparable prior year period, with growth reported in all the businesses in this group.\nThe growth came primarily from our transportation businesses, primarily the result of new accounts, combined with strong renewals and increased exposures in our alternative risk transfer business and our crop insurance business, primarily the result of higher commodity futures pricing and timing differences in the writing of premiums.\nOverall renewal rates in this group increased 7% on average for the second quarter, consistent with the results in the first quarter this year.\nIm pleased to see this continued rate momentum.\nAs far as crop, we expect a normal crop year.\nCommodity futures for corn and soybeans are approximately 20% and 12% higher, respectively, than spring discovery prices, as I was looking at my monitor today.\nCrop conditions vary by geography with industry reports of 62% of corn and 60% of soybean crops in good to excellent condition.\nGenerally, crops in the eastern Corn Belt are generally in good shape and crop conditions in the Central and Southern Plains and Southeast are above average.\nIts the crop conditions in the Pacific Northwest through the Dakotas that are below average right now due to extreme drought conditions.\nAnd corn and soybean national yield estimates are currently at or near their respective trend yields.\nSo the year seems to be shaping up fine.\nSpecialty Casualty Group reported an underwriting profit of $71 million in the 2021 second quarter compared to $27 million in the comparable 2020 period.\nHigher profitability in our excess and surplus lines, excess liability, targeted markets and executive liability businesses were the key drivers.\nCatastrophe losses for this group were approximately $2 million in the second quarter of 2021 compared to $6 million in the comparable prior year period.\nResults in the second quarter of last year included $52 million of COVID-19-related losses, primarily in workers comp and executive liability businesses.\nThis group reported a very strong 87.9% combined ratio for the second quarter, an improvement of seven points from the comparable period in 2020.\nUnderwriting profitability in our workers comp businesses overall continues to be excellent.\nGross and net written premiums increased 19% and 16%, respectively, when compared to the same prior year period.\nAnd excluding comp, gross and net written premiums grew by 26% and 25%, respectively, year-over-year.\nNearly all the businesses in this group achieved strong renewal pricing and strong premium growth during the second quarter.\nSignificant renewal rate increases and new business opportunities contributed to higher premiums in our excess liability businesses, which have higher cessions than other businesses in the group.\nHigher renewal rates and increased exposures contributed to the premium growth in our excess and surplus lines business.\nAnd our executive liability and mergers and acquisition liability businesses also contributed meaningfully to the year-over-year growth.\nRenewal pricing in this group was up 11% for the second quarter.\nAnd excluding workers comp, renewal rates in this group were up a very strong 17%.\nSpecialty Financial Group reported an underwriting profit of $21 million in the second quarter of 2021 compared to an underwriting loss of less than $1 million in last years second quarter.\nImproved results in our trade credit business contributed to the higher year-over-year underwriting profitability.\nAnd results last year included COVID-19-related losses of $30 million primarily related to trade credit insurance.\nThis group continued to achieve excellent underwriting margins and reported an 86.4% combined ratio for the second quarter of 2021.\nAnd gross and net written premiums increased by 7% and 14%, respectively, in the 2021 second quarter when compared to the prior year period.\nNew business opportunities within our lender services, surety and fidelity and crime businesses contributed to the increase in the quarter.\nRenewal pricing in this group was up 8% for the quarter, consistent with results in the first quarter of 2021.\nBased on the results through the first six months, we have strengthened our guidance across the board, indicating higher expected 2021 net written premiums and stronger underwriting profit.\nWe now expect the 2021 combined ratio for the Specialty Property and Casualty Group overall between 88% and 90%.\nNet written premiums are now expected to be 10% to 13% higher than the $5 billion reported in 2020, which is an increase of three percentage points from the midpoint of our previous estimate.\nGrowth in net written premiums, excluding workers comp, is now expected to be in the range of 12% to 16%, an increase from the range of 9% to 12% estimated previously.\nAnd looking at each segment, we now expect the Property and Transportation Group combined ratio to be in the range of 87% to 90%.\nOur guidance assumes a normal level of crop earnings for the year.\nWe now 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 87% to 90%.\nOur guidance assumes continued strong renewal pricing in our E&S, excess liability and several of our other longer-tail liability businesses.\nWeve raised our projection for growth in net written premiums to a range of 5% to 9% higher than 2020 results, a change from the previous estimate of 2% to 5%.\nPremium growth will be tempered by rate decreases in our workers comp book, which are a result of favorable experience in this line.\nExcluding workers comp, we now expect 2021 premiums in this group to grow in the range of 10% to 14%, an increase of 5% from the midpoint of our previous guidance.\nAnd we now expect the Specialty Financial Group combined ratio to be 84% to 87%.\nWe now expect growth in net written premiums for this group to be between 10% and 14%, reflecting stronger underwriting results for the first half of the year and projected premium growth in our fidelity and crime and surety businesses.\nBased on the results through the end of June, we expect overall property and casualty renewal pricing in 2021 to be up 9% to 11%, an improvement from the range of 8% to 10% estimated previously.\nAnd excluding comp, we expect renewal rate increases to be in the range of 11% to 13% as indicated by the continued pricing momentum we saw through the first half of 2021.\nI now turn the discussion over to Craig to review AFGs investment performance and the successful completion of the sale of our Annuity business.\nThe details surrounding our $16.1 billion investment portfolio are presented on slides nine and 10.\nAFG recorded second quarter 2021 net realized gains on securities of $34 million after tax.\nApproximately $29 million of the after-tax realized gains pertained to equity securities that AFG continued to own at June 30, 2021.\nPretax unrealized gains on AFGs fixed maturity portfolio were $260 million at the end of the second quarter.\nWere especially pleased with the performance of our alternative investments during the quarter.\nEarnings from alternative investments may vary from quarter-to-quarter based on the 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 second quarter of 2021 was 21.1%.\nThe average annual return on these investments over the past five calendar years was approximately 10%.\nWe view our investments in real estate and real estate-related entities as 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 in desirable communities where we continue to achieve very strong occupancy and collection rates.\nThese properties represented approximately 55% of our alternative investment portfolio at June 30, 2021.\nAs you can see on slide 10, our investment portfolio continues to be high quality with 88% of our fixed maturity portfolio rated investment grade and 98% of our P&C group fixed maturities portfolio with an NAIC designation of one or 2, its two highest categories.\nOn May 28, 2021, AFG completed the sale of our Annuity businesses to MassMutual, the highlights of which are included on slide 11.\nInitial cash proceeds from the sale based on the preliminary closing balance sheet were $3.5 billion.\nAFG recognized an after-tax noncore gain on the sale of $697 million or $8.14 per AFG share upon closing.\nBoth the proceeds and the gain are subject to post-closing adjustments.\nPrior to the completion of the transaction, AFGs Property and Casualty Group acquired approximately $480 million in real estate-related partnerships, and AFG parent acquired approximately $100 million in directly owned real estate from Great American Life Insurance Company.\nCarl and I are extremely proud of the contributions the Annuity segment made to AFG over the years.\nOver the last 10 years, this business generated an internal rate of return of approximately 16%, as shown on slide 12.\nIn an industry where reported net earnings often are significantly less than reported core operating earnings, were proud of the fact that our Annuity business has produced strong net earnings that demonstrate the discipline with which we operated this business and helped to generate strong overall returns for AFG.\nAs you will see on slide 13, for the 10-year period ended December 31, 2020, AFGs Annuity segment net earnings were 108% of Annuity core operating earnings compared to only 74% for the life insurance industry overall.\nWhen we include the five months of Annuity earnings during 2021, Annuity net earnings as a percent of Annuity core operating earnings improved to 110%, demonstrating the quality of our earnings relative to the industry.\nIm very grateful to our Annuity segment management team and associates for their efforts to bring this transaction to a successful close and wish them the best as they continue their careers with MassMutual.\nThe disposition of our Annuity business sharpens our focus exclusively on the specialty P&C market and generated substantial cash and excess capital for AFG.\nIn connection with the closing of this transaction, the company declared a special onetime cash dividend of $14 per share totaling $1.2 billion, which was paid in mid-June.\nEarlier this week, we paid an additional $170 million in connection with an additional $2 per share special dividend declared in July.\nOur excess capital remains at a significant level, which 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.\nI now turn the discussion over to Brian, who will discuss AFGs financial position and share a few comments about AFGs capital and liquidity.\nWe repurchased $114 million of AFG common stock during the quarter at an average price per share of $116.13 when you adjust it for the special dividend.\nShare repurchases, especially when executed at attractive valuations, are an important and effective component of our capital management strategy.\nDuring the quarter, in addition to the share repurchases and the special dividend that Craig mentioned earlier, we returned $42 million to our shareholders through the payment of our regular $0.50 per share quarterly dividend.\nReturning excess capital to shareholders in the form of dividends is a key component of AFGs capital management strategy and reflects our strong financial position and our confidence in the companys financial future.\nWith the gain on the Annuity sale, annualized growth in adjusted book value per share plus dividends was a strong 47% in the first six months of 2021.\nOur excess capital is approximately $3.2 billion at the end of June.\nThis number included parent company cash and investments of approximately $3 billion.\nAs of June 30, AFG parent had invested approximately $500 million of the proceeds from the Annuity sale in high-quality fixed maturity investments with an average life of less than 0.5 year and a yield of approximately 1.2%.\nAs a reminder, we define excess capital as the sum of holding company cash and investments, excess capital within our insurance subsidiaries and borrowing capacity up to a debt to total adjusted capital ratio that ensures we maintain our commitments to rating agencies.\nWhile all of AFGs excess capital is available for internal growth or acquisitions, over $700 million of that excess capital can be used for share repurchases and special dividends above and beyond the nearly $1.5 billion distributed to shareholders through the $14 per share special dividend paid in June, the $2 special dividend paid Monday of this week and the $114 million in second quarter share repurchases while still staying within our most restrictive debt to capital guideline.\nWe expect to continue to have significant excess capital and liquidity throughout 2021 and beyond.\nSpecifically, our P&C insurance subsidiaries are projected to have capital in excess of the levels expected by rating agencies in order to maintain their high current ratings, and we have no debt maturities before 2026.\nWe will now open the lines for any questions.\n",
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"content": "q2 core operating earnings per share $2.39.\nq2 earnings per share $11.70.\nfull year 2021 core net operating earnings guidance increased to $8.40 - $9.20 per share.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Dan Amos, Chairman and CEO of Aflac Incorporated, will begin with an overview of our operations in Japan and the US.\nFred Crawford, President and COO of Aflac Incorporated, will then touch briefly on conditions in the quarter and discuss key initiatives, including how we are navigating the pandemic.\nMembers of our US executive management team joining us for the Q&A segment of the call are: Teresa White, President of Aflac US; Virgil Miller, President of Individual and Group Benefits; Eric Kirsch, Global Chief Investment Officer and President of Aflac Global Investments; Al Riggieri, Global Chief Risk Officer and Chief Actuary; June Howard, Chief Accounting Officer; and Steve Beaver, CFO of Aflac US.\nWe're also joined by members of our executive management team in Tokyo at Aflac Life Insurance Japan: Charles Lake, Chairman and Representative Director, President of Aflac International; Masatoshi Koide, President and Representative Director; Todd Daniels, Director and CFO; Koji Ariyoshi, Director and Head of Sales and Marketing and Assistant to Director Sales and Marketing.\nBefore we begin, some statements in this teleconference are forward looking within the meaning of federal securities laws.\nAlthough we believe these statements are reasonable, we can give no assurance that they will prove to be accurate because they are prospective in nature.\nActual results could differ materially from those we discuss today.\nWe encourage you to look at our Annual Report on Form 10-K for some of the various risk factors that could materially impact our results.\naflac.com and includes reconciliations of certain non-US GAAP measures.\nI'll now hand the call over to Dan.\nAt our first quarter conference call one year ago, we were facing the early days of the pandemic.\nAt that time, I shared with you, actions that we've taken to ensure that we protect the employees, the distribution partners, the policyholders, and the communities.\nI'm proud of our response and our ability to handle these challenging times for everyone.\nOur People First embodies the spirit of corporate culture, which we refer to as the Aflac way.\nWithin the pandemic environment, we are encouraged by the production of the distribution of the COVID-19 vaccines.\nBut we also recognize that vaccination efforts are still in the early stages around the world.\nOur thoughts and prayers are with everyone affected.\nAnd we are cautiously optimistic, while also remaining diligent.\nThere is one essential message that I continue to emphasize with our management team.\nIt is imperative that we control the factors we have the ability to control.\nAnd what we don't have the ability to control.\nWe must monitor continually to be ready to adapt.\nThis approach allows us to respond in the most effective way possible.\nIn the first quarter adjusted earnings per diluted share increased 26.4%.\nWhile earnings are off to a strong start for the year, it's important to bear in mind that they are largely supported by low-benefit ratio associated with -- excuse me associated with a pandemic condition.\nBefore covering our segments, I'll make a few comments about the overall perspective.\nPandemic conditions in the first quarter continued to impact our sales results, as well as earn premium and revenues, both in the United States and Japan.\nWe continue to expect these pandemic conditions to remain with us through the first half of 2021, but look for improvement in the second half of the year, as communities and businesses, further open-up, allowing more face to face interactions.\nDespite the fact that sales in both the United States and Japan had been suppressed considerably due to the constrained, face-to-face opportunities, we did not sit still.\nWe continue to make progress in integration of our accelerated investment in our platform, while continuing strong earnings performance.\nLooking at the operations in Japan in the first quarter, Aflac Japan generated solid overall financial results with a profit margin of 23.1%, which was above the outlook range that we provided at the Financial Analyst briefing.\nAflac Japan also reported strong premium persistency of 95%.\nSales were essentially flat for the first quarter, with the January launch of our new medical product.\nAll said, that continued impact of the pandemic conditions.\nWe are encouraged by the reception of the new medical product, by both, consumers and the Salesforce.\nIn addition, Japan Post group's announcement, to resume proactive sales in April, paves the way for gradual improvement in Aflac Cancer Insurance sales in the second half of the year.\nWe are actively working with Japan folks to ready the platform, recognizing that it will take time to return to the full string.\nWe continue to navigate evolving pandemic conditions in Japan, including the recent reestablished state of an emergency, for Tokyo, Osaka and two other prefectures, affected from April, the 25th, through May the 11th.\nRestrictions will be tightened to curb the movement of people and group activities during the major holiday known as Golden Week.\nTurning to the US, we saw a strong profit margin of 27.3%, Aflac US also reported very strong premium persistency of 80%.\nMax will cover the persistency later.\nCurrent pandemic conditions continue to notably impact our sales results, largely due to reduced face-to-face activity.\nAs expected, we saw modest sequential sales improvement in the quarter with an overall decrease of 22.1%.\nIn the US Small businesses are still in the recovery mode, and we expect that they will be that way for most of 2021.\nAt the same time, larger businesses remain focused on returning employees to the worksite rather than modifying the benefits for their employees.\nWe strive to be where the people want to purchase insurance.\nThat applies to both Japan and the United States.\nIn the past, this is meeting face-to-face with individuals to understand their situation, propose the solution and close the sale.\nFace-to-face sales are still the most effective way for us to convey the financial protection only Aflac products provide.\nHowever, the pandemic has clearly demonstrated the need for virtual means.\nIn other words, non face-to-face sales that help us reach potential customers and provide them with the protection that they need.\nEven prior to the pandemic, we've been working on building our virtual capacities.\nGiven the current backdrop, we have accelerated investments to enhance the tools available to our distribution in both countries, and continue to integrate these investments into our operation.\nIn addition, we continue to build out the US product portfolio with previously acquired businesses that serve as a base for Aflac network dental and vision and group, absence management and disability.\nWhile these acquisitions have a modest near-term impact on the top line, they better position Aflac for future long-term success in the United States.\nOur core earnings drivers, which are persistency, underwriting profits, investment income and expense ratios continue to drive strong pre-tax margins both in the United States and in Japan.\nBoth Japan and the US, we experienced sequential sales growth in the months of January, February and March.\nIn addition, provided we don't experience the setback in terms of pandemic conditions, we're forecasting a sequential increase in absolute sales in the second quarter over the first quarter in both the US and in Japan.\nAs always we placed significant importance on continuing to achieve strong capital ratios in the US and in Japan on behalf of our policyholders and shareholders.\nWe remain committed to prudent liquidity and capital management.\nWe issued our first sustainability bond in March as we seek to allocate proceeds from the issuance to reinforce our commitment to social and environmental initiatives as we balance purpose for profit.\nWe treasure our 38-year track record of dividend growth and remain committed to extending it, supported by the strength of our capital and cash flows.\nAt the same time, we will continue to tactically repurchase shares.\nFocus on integrating the growth investments we've made in our platform.\nBy doing so, we look to emerge from this period in a continued position of strength, and leadership.\nI've always said that the true test of strength is how one handles adversity.\nThis past year confirms what I knew all along, and that is that Aflac is strong, adaptable and resilient.\nWe will continue to work to achieve long-term growth, while also ensuring we deliver on our promise to our policyholders.\nBy doing so, we look to emerge from this period in a continued position of strength and leadership.\nI don't think it's a coincidence that we've achieved success, while focusing on doing the right things for the policyholders, the shareholders, the employees, the sales distribution, the business partners and the communities.\nIn fact, I believe success, and doing the right thing go hand-in-hand.\nI'm proud of what we've accomplished by balancing purpose with financial results.\nThis is ultimately translated into a strong, long-term shareholder value.\nNow I turn the program over to Fred.\nI'm going to touch briefly on current pandemic conditions in Japan and in the US, then focus my comments on efforts to restore our production platform in 2021.\nJapan has experienced approximately 575,000 COVID cases and 10,000 confirmed deaths since inception of the virus.\nThrough the first quarter of 2021 and since the inception of the virus, Aflac Japan's COVID impact has totaled approximately 10,500 claimants with incurred claims of JPY1.9 billion.\nWe continue to experience a low level of paid claims for medical conditions other than COVID, as policyholders refrain from routine hospital visits.\nThere are essentially three areas of focus in building back to pre-pandemic levels of production in Japan.\nOur traditional product refreshment activities, online sales driving productivity in the face of pandemic conditions and active engagement with Japan Post to begin the recovery process in cancer insurance sales.\nAs Dan noted, there has been a positive reception to our revised medical product.\nThis product was designed to better compete and the independent agent channel where we had seen a decline in market share heading into 2020.\nSales of medical insurance are up 34% over the first quarter of 2020 and up 8% over the 2019 quarter.\nThe new product called EVER Prime has enhanced benefits that on average result in 5% to 10% more premium per policy versus our old medical product.\nThe product also includes a low claims bonus structure that has contributed to growth among younger demographics.\nWe have technology in place to allow agents to pivot from face to face to virtual sales, and an entirely digital customer experience.\nThe agent is not removed from the process.\nThe agent can make the sale and process the policy from point of solicitation to point of issuance entirely online without face-to-face contact.\nWe introduced this capability in October of 2020 and for the month of November, we processed 1,600 applications utilizing this digital experience.\nIn the month of March that number doubled to approximately 3,200 applications.\nNot surprisingly, we are seeing higher adoption rates among younger demographics.\nOn March, 26, we launched a national advertising campaign promoting the capability and expect to see increased utilization.\nWe see this capability contributing to productivity even after pandemic conditions subside.\nOn Japan Post, as Dan noted, we anticipate sales volume will recover gradually in the second half of 2021.\nSeparate from Japan Post activities to revive sales, Aflac Japan is actively supporting recovery in the sale of cancer insurance.\nThis includes reinforcing communication on Japan Post sales policy, down to the postal branch level, training and education on our latest cancer products, and sales proposal strategies and identifying existing cancer policyholders in the Japan Post system to both explain the benefits of their current products and create an opportunity for potential upgrade.\nIt's important to remember that the Japan Post sales force has been inactive for 18 months.\nTherefore product training and sales coaching are critical efforts in the coming months.\nTurning to the US, there is approximately 32 million COVID-19 cases and 575,000 deaths as reported by the CDC.\nAs of the end of the first quarter, COVID claimants since inception of the virus has totaled approximately 38,000, with incurred claims of $130 million.\nAlong with infection rates declining from peak levels in 2020, our data suggests hospitalization rates and days in the hospital have trended lower.\nHowever infection hotspots in areas of the US remain.\nAnd as is the case in Japan, there is concern over a potential fourth wave of infection.\nExecutive orders requiring premium grace periods are still in place in nine states with six states having open ended expiration dates, persistency has improved.\nHowever, most of that improvement is attributed to the combination of state orders and lower overall sales as we typically experienced higher lapse rates in the first year after the sale.\nTurning to recovery and restore efforts, we have seen our agent channel and small business benefit franchise hurt by the pandemic.\nIt's important to note that roughly 390,000 of our 420,000 US business clients have less than 100 employees, critical areas of investment include recruiting, training, technology advancement and product development, key indicators of recovery include agent and broker recruiting, a built in average weekly producers and traction in the rollout of our dental and vision products.\nFor the first quarter, we are running at approximately 70% of the average with the producers during the same period in pre-pandemic 2019.\nTrends are positive, and we expect to narrow this gap throughout the year assuming pandemic conditions improve.\nWe are experiencing favorable recruiting numbers, have reopened training centers closed during the pandemic and veteran agents are reengaging, after a difficult year.\nWe are in the early days of our national rollout of Aflac network dental and vision.\nOur dental product is approved in 43 states, and vision in 41 states with more states coming online throughout the year.\nNetwork dental and vision is critical in the small business marketplace, and a key component to agent productivity, along with new account growth, retention and penetration or seeing more employees at a given employer.\nThis month, we are completing the national training programs, making select product refinements and reinforcing incentives to drive new dental accounts.\nIn addition, we are busy upgrading our administrative platforms to ready for increased volumes.\n2021 is the year of launch, learn and adjust, and we expect to see our pipeline, close rate and new accounts gradually increasing throughout the year.\nOur premier life and disability platform acquired from Zurich is now operating under the Aflac brand.\nWe have started to see our quoted pipeline build in the last 45 days.\nHowever, many employee -- employers are reluctant to move critical benefit plans while sorting through returning to work site and changing workforce dynamics.\nIn addition, benefit consultants often proceed with caution in a year or so after an acquisition.\nWe need to remain patient over the next few years as we settle into this new line of business.\nOur competitive calling card is the proven premier service and technology capabilities of the acquired platform, coupled with Aflac Group's core leadership in supplemental work site benefits.\nWe will not resort to winning business via relaxed underwriting and pricing standards in this highly competitive market.\nFinally, earlier this year, we launched our new e-commerce direct-to-consumer platform, Aflac Direct.\nWe offer critical illness, accident and cancer and are approved in approximately 30 states with more states and product coming online throughout the year.\nThis platform targets individuals, the self employed, gig workers and part-time employees.\nIn short, those who are not offered traditional benefit packages at the work site.\nWe are actively building out a licensed agent call center to better manage conversion rates and control overall economics.\nWith a modest amount of committed marketing dollars, we are attracting about 500,000 visitors per month to aflac.com, which has resulted in 120,000 leads for call center conversion this year.\nWe are currently experiencing a 15% conversion rate once in the call center.\nThis is a data analytics-driven business and core metrics will improve as this model matures.\nIn terms of the contribution of these businesses to overall sales in 2021, we expect these three growth initiatives will make up roughly 10% of sales in 2021 after having contributed less than 5% to 2020 sales.\nWe remain committed to the revenue growth targets discussed at our November investor conference.\nWe expect these initiatives to drive incremental revenue in excess of $1 billion over the next five to seven years.\nAs these separate initiatives mature, they leverage off each other.\nNetwork dental and vision drives agent recruitment and conversion to average weekly producers, employer paid benefits drives supplemental work site sales, and direct-to-consumer expands our addressable market, while being leveraged to funnel work site leads to our agents in the field.\nIn the future, as employees leave the work site, a digital relationship directly with Aflac helps with persistency and customer satisfaction.\nAs Dan noted, we issued our inaugural sustainability bond, raising $400 million to be invested toward our path to net zero emissions by 2050 and investments that support climate, as well as diversity and inclusion efforts.\nThe bond offering itself is an important step, in that it requires formal processes around reporting, tracking and auditing of qualified sustainable investments.\nThis rigor serves to benefit the control environment surrounding our enterprisewide ESG reporting and accountability.\nIn addition, Aflac Global Investments announced late February, a partnership with Sound Point Capital Management to create a new asset management business, focused on the transitional real estate loan market.\nAs part of that alliance, we have made an initial $1.5 billion general account allocation to the newly created Sound Point Commercial Real Estate Finance, LLC, with $500 million of that amount dedicated to providing transitional and other debt financing to support economically distressed communities, designated as qualified opportunity zones.\nAflac will hold a 9.9% minority interest in this newly created investment LLC, with the ability to grow our stake over time in line with future growth of the new venture.\nI'll now pass on to Max to discuss our financial performance in more detail.\nLet me follow my comments with a review of our Q1 performance, with a focus on how our core capital and earnings drivers have developed.\nFor the first quarter, adjusted earnings per share increased 26.4% to $1.53, with a $0.02 positive impact from FX in the quarter.\nThis strong performance for the quarter was largely driven by lower utilization during the pandemic, especially in the U.S. and a lower tax rate compared to last year.\nVariable investment income went $24.5 million above our long-term return expectations.\nAdjusted book value per share, including foreign currency translation gains and losses, grew 20.6%, and the adjusted ROE, excluding the foreign currency impact, was a strong 16.7%, a significant spread to our cost of capital.\nStarting with our Japan segment.\nTotal earned premium for the quarter declined 3.6%, reflecting first sector policies paid up impact, while the earned premium for our third sector product was down 2.2%, as sales were under pressure in 2020.\nJapan's total benefit ratio came in at 68.4% for the quarter, down 100 basis points year-over-year, and the third sector benefit ratio was down -- was 58%, also down 100 basis points year-over-year.\nWe experienced slightly higher than normal IBNR release in our third sector block as experience continues to come in favorable relative to initial.\nThis quarter, it was primarily due to pandemic conditions constraining utilization.\nPersistency remains strong, with a rate of 95%, up 50 basis points year-over-year.\nOur expense ratio in Japan was 21.3%, up 130 basis points year-over-year.\nWith improved sales activity, expenses naturally pick up in our technology-related investments into converting Aflac Japan to a paperless company continues, which also includes higher system maintenance expenses.\nAdjusted net investment income increased 6.9% in yen terms, primarily driven by favorable returns on our growing private equity portfolio and lower hedge costs, partially offset by lower reinvestment yield on our fixed and floating rate portfolio.\nThe pre-tax margin for Japan in the quarter was 23.1%, up 60 basis points year-over-year, a very good start to the year.\nTurning to the US, net earned premium was down 4.1% due to weaker sales results.\nPersistency improved 240 basis points to 80%, as our efforts to retain accounts and reduce lapsation show early positive results.\nAs Fred noted, there are still nine states with premium grace periods in place.\nSo we are monitoring these developments closely.\nBreaking down the 240 basis points persistency rate improvement further, 70 basis points can be explained by the emergency orders in place, 90 basis points by lower sales as first year lapse rates are roughly twice total in-force lapse rates.\nAnd the residual of 80 basis points includes conservation efforts executed on last year.\nOur total benefit ratio came in much lower than expected.\nAt 39.1%, a full 900 basis points lower than Q1 2020.\nIn the quarter, we experienced lower paid claims, especially in the month of January, as pandemic conditions impacted behavior of our policyholders.\nThis is in line with disclosures in 2020, indicating a negative correlation between infection levels and claims generating activities like accidents, elective surgeries and physical exams.\nThis low activity level related to non-COVID claims accounted for most of the year-over-year drop in the benefit ratio.\nOur total incurred COVID-related claims also came in lower than expected due to an IBNR release.\nWe estimated new COVID claims at approximately $42 million, and this was offset by an IBNR release of $41 million.\nAs our experience accumulates, we have refined our assumptions, and this led to this IBNR reserve release.\nWe expect the benefit ratio to increase gradually throughout the remainder of the year, with the resumption of normal activity in our communities and by our policyholders.\nFor the full year, we now expect our benefit ratio to be toward the lower end or slightly below our guided range of 48% to 51%.\nOur expense ratio in the US was 38.5%, up 10 basis points year-over-year, but with a lot of moving parts.\nWeaker sales performance negatively impacts revenue.\nHowever, the impact to our expense ratio is largely offset by lower DAC expense.\nHigher advertising spend increased the expense ratio by 70 basis points along with our continued build-out of growth initiatives, group life and disability, network and innovation and direct-to-consumer.\nThese contributed to a 110 basis point increase to the ratio.\nThe strategic growth initiative investments are largely offset by our efforts to lower core operating expenses as we strive toward being the low-cost producer in the voluntary benefit space.\nNet-net, despite a lot of moving parts, Q1 expenses are tracking according to plan.\nIn the quarter, we also incurred $6 million of integration expenses not included in adjusted earnings associated with recent acquisitions.\nAdjusted net investment income in the US was down 0.6% due to a 22 basis points contraction in the portfolio yield year-over-year, partially offset by favorable variable investment income.\nProfitability in the US segment was very strong, with a pre-tax margin of 27.3%, with a low benefit ratio as the core driver.\nWith Q1 now in the books, we are increasing our pre-tax margin expectation for the full year.\nInitial expectations were for us to be toward the low end of 16% to 19%.\nWe now expect to end up for the full year toward the high end of this range indicated at start.\nIn our Corporate segment, we recorded a pre-tax loss of $26 million as adjusted net investment income was $20 million lower than last year, due to lower interest rates at the short end of the yield curve.\nOther adjusted expenses were $7 million lower as our cost reduction activities are coming through.\nOur capital position remains strong, and we ended the quarter with an SMR north of 900% in Japan and an RBC of approximately 563% in Aflac Columbus.\nUnencumbered holding company liquidity stood at $3.9 billion, $1.5 billion above our minimum balance, excluding the $400 million proceeds from the sustainability bond that we issued in March that reinforced our ESG initiatives and believe that sustainable investments are also good long-term investments.\nLeverage, which includes the sustainability bond, increased but remains at a comfortable 23% in the middle of our leverage corridor of 20% to 25%.\nIn the quarter, we repurchased $650 million of our own stock and paid dividends of $227 million, offering good relative IRR on these capital deployments.\nWe will continue to be flexible and tactical in how we manage the balance sheet and deploy capital in order to drive strong risk-adjusted ROE with a meaningful spread to our cost of capital.\nAnd with that, I'll hand it over to David to begin Q&A.\n[Operator Instructions] Natasha, we will now take the first question.\n",
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"content": "q1 adjusted earnings per share $1.53.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: With the pandemic conditions to evolve, we remain cautiously optimistic and vigilant as the vaccination efforts continue in the face of uncertainty associated with the emerging variants.\nI am proud of our response over the last year and our ability to adapt to what has been a very challenging time for everyone, and I continue to pray each day for everyone affected.\nAdjusted earnings per diluted share, excluding foreign currency impact, increased 24.2% for the quarter and 24.5% for the year.\nWhile earnings are off to a very strong start for the first half of the year, it's important to bear in mind that they are largely supported by a low benefit ratio associated with the pandemic conditions as well as a better-than-expected return on alternative investments.\nAt the same time, sales improved year-over-year for the first time during the pandemic in the second quarter in both the United States and Japan.\nAs part of our strategy, we strive to be where people want to purchase insurance.\nThat applies to both Japan and the United States.\nFace-to-face sales are still the most effective way for us to convey the financial protection only Aflac products provide.\nHowever, the pandemic has clearly demonstrated the need for virtual means.\nIn other words, non-face-to-face sales that help us reach potential customers and provide them with the protection that they need.\nWe have continued to invest in tools from a distribution in both countries and to integrate these investments into our operation.\nRecognizing the uncertain nature of recovery from the pandemic, we expect a stronger second half of the year in both countries, especially if the communities and businesses continue to open up, which would allow more face-to-face interactions.\nI'm addressing our employees in a way that is similar to how I talk to my family, keeping them informed with the medical community by bringing doctors in but also by encouraging them to get COVID-19 vaccinations as I want people to avoid being sick or even worse, becoming a casualty of the virus or variant.\nLooking at our operations in Japan, in the second quarter, Aflac Japan generated solid financial growth results as reflected in its profit margin of 26.5%.\nThis was above the outlook range provided at the 2020 Financial Analyst Briefing.\nAflac Japan also reported strong premium persistency of 94.7%.\nSales improved year-over-year, generating an increase of 38.4% for the quarter and 15.7% for the first six months.\nThese results reflect easier comps, improved pandemic conditions and a boost from the first quarter launch of our new medical product.\nWhile sales in the first half of 2021 are at approximately 65% of 2019 levels, we continue to navigate evolving pandemic conditions in Japan.\nThe states of emergency have been in the targeted areas, especially Tokyo and Okinawa.\nHowever, cases have begun increasing in Tokyo and Osaka metropolitan area, and we expect the Japanese government to make a determination soon to expand the declaration of the state of emergency to three other prefectures surrounding Tokyo and Osaka.\nBut most importantly, these states of emergencies are less restricted and limited in scope and do not represent lockdowns as experienced in other countries.\nJapan, post-resumption of proactive sales starting in April, is contributing toward a gradual improvement in Aflac's cancer insurance sales, and we continue to work to strengthen the strategic alliance to create a sustained cycle of growth for both companies.\nIn June, for example, Aflac and Japan Post Holding, Japan Post Company and Japan Post Insurance, reached agreements to further the strategic alliance in a matter consistent with Japan Post Group's five-year medium-term management plan, which was announced in May.\nWhile we do not expect this to have an immediate impact on sales recovery, it will further position our company for long-term growth as we respond to customers' needs, provide customer-centric services and create shared value of resolving societal and local community issues.\nTurning to Aflac U.S., we saw a strong profit margin of 24.4 -- 25.4% and very strong premium persistency of 80.1%.\nAs expected, we also saw sequential sales improvement and more opportunities for face-to-face activities.\nAs a result of softer sales a year earlier and more face-to-face opportunities, sales increased 64.1% for the quarter and are at a 73% of the first half of the 2019 levels.\nIn the U.S., small businesses are still in a recovery mode, which we expect to continue through 2021.\nAt the same time, larger businesses remain primarily focused on returning employees to the worksite.\nAs I stated earlier, we will focus on being able to sell and service customers, whether in-person or virtually.\nIn addition, we continue to build out the U.S. product portfolio with previously acquired businesses, Aflac Network Dental and Vision and Premier Life and Disability.\nWhile these acquisitions have a modest near-term impact on the top line, they better position Aflac for future long-term success in the U.S. Meanwhile, strong persistency, underwriting profits and investment income continue to drive strong pre-tax margins in the United States as they do in Japan.\nAs always, we place significant importance on continuing to achieve strong capital ratios in the U.S. and in Japan on behalf of our policyholders and investors.\nWe remain committed to prudent liquidity and capital management.\nWe treasure our 38-year track record of dividend growth and remain committed to extending it, supported by the strength of the capital and the cash flows.\nAt the same time, we will continue to tactically repurchase shares, focus on integrating the growth investments that we've made in our platform.\nWe are well positioned as we work toward achieving long-term growth, while also ensuring we deliver on our promise to our policyholders.\nBy doing so, we look to emerge from this period in a continued position of strength and leadership and look forward to sharing more about the strategic and financial priorities at our financial analyst briefing on November 16, 2021.\nSo now I turn the program over to Fred.\nI'm going to focus my comments on activities to restore our production platform and progress on growth strategies.\nBeginning with Aflac Japan, we are focused on three areas in building back to pre-pandemic levels of production: product development, online or digital assisted sales and specific sales efforts within the Japan Post platform.\nWith respect to product development, we continue to see positive reception to our revised medical product, EVER Prime.\nMedical product sales for the first half of the year are up roughly 48% over the same period in 2020 and have approached pre-pandemic levels down only 4% from the 2019 period.\nWe are gaining back market share in this highly competitive medical market.\nEarlier this year, we launched our first short-term insurance product under a newly formed subsidiary called SUDACHI.\nThe product is a small amount, substandard medical product targeting customers who do not qualify for traditional medical coverage.\nIn the second quarter, we have registered close to 600 agencies with SUDACHI and issued about 230 policies.\nWe are in the very early stages of this initiative, but over time, we anticipate adding additional short-term health and income support products.\nWe are in the process of developing a new care product aimed at supplemental elderly care coverage provided by the Government of Japan.\nWe will provide strategic context and timing around this product in the coming months, but we believe this product line will mature into a meaningful driver of future third sector sales, with an aging population and in anticipation of a continued shift in financial burden from the government to individuals.\nTurning to distribution, we have technology in place to allow agents to pivot from face-to-face to virtual sales.\nOn March 26, we launched a national advertising campaign promoting this capability.\nIn the second quarter, we have processed over 14,000 online applications as compared to nearly 8,000 in the first quarter.\nOn Japan Post, proposal activity has increased month-to-month as sales training and promotion permeates the 20,000 branches that sell our insurance.\nThrough the month of June, Aflac Japan has conducted over 35,000 training sessions with Japan Post sales agents nationwide, along with providing contact information on nearly 700,000 existing cancer policyholders to inform on the latest coverage advantages.\nActivities in the third quarter include visits with regional office managers in the JP system and post office visits to reinforce the sales process.\nTurning to the U.S., our group voluntary platform continues to respond well with sales exceeding 2019 pre-pandemic levels.\nOverall, sales recovery is focused on restoring our agent-driven small business franchise hurt by the pandemic.\nCritical areas of investment include recruiting, converting recruits to weekly producers and product development.\nIn terms of recruiting, we have refocused our efforts in the past year on broker recruiting, with new appointments exceeding pre-pandemic levels.\nAppointing small business brokers takes time to convert into production but is critical to expanding our reach and gaining traction in the dental and vision markets.\nIndividual agent recruiting remains under pressure, and we are running at 70% of weekly producers we enjoyed pre-pandemic.\nAgent recruiting is impacted by onboarding and training under COVID restrictions, tight labor markets and employment subsidy programs, all of which we expect to subside later in the year.\nOur Network Dental product is approved in 43 states and Vision in 42 states, with more states coming online later in the year.\nWe are completing national training programs and have about 50% of trained agents who have quoted on our new dental and vision product offerings.\nIt's early, however, we continue to see our volume building each month, and over 50% of our dental and vision cases include voluntary benefit sales.\nWe believe this supports our strategic intent to increase access in new accounts and deepen relationships in our existing accounts.\nAs I said last quarter, our 2021 dental and vision strategy can be summed up as a year of launch, learn and adjust.\nOur Premier Life and Disability platform continues to support their key client relationships and are building a pipeline of quoted business.\nOur service model remains exceptional.\nAnd since closing, we have not lost any notable accounts and have seen early interest among some of our larger voluntary benefit clients.\nThis awarded business would not have been possible without our recently acquired group capabilities.\nWith respect to our e-commerce initiative, Aflac Direct, we offer critical illness, accident and cancer and are now approved in 45 states, including California.\nAs a reminder, this platform is focused on reaching customers outside the traditional work site.\nLike most digital sales platforms, we enjoy higher conversion rates when a digital lead is handed to a licensed call center agent.\nCurrently, most of our leads are funneled to third-party call center platforms, and we are actively building out an Aflac licensed call center.\nOur digital platform overall is experiencing a 16% conversion rate on qualified leads and generally consistent with many digital D2C insurance platforms.\nOur consumer market strategy also includes digital distribution and product partnerships, and while early in development, are designed to expand access to protection products and increase traffic to our site.\nThrough six months in 2021, these three platforms, new platforms, have combined for 5% of sales as they are in the early building and development stages.\nWe continue to forecast a strong second half based on increased activity and expect these three growth initiatives will contribute upwards of 15% to sales in the second half of 2021.\nAflac Global Investments announced last week, an investment partnership with Denham Capital.\nAflac has made a $2 billion multiyear general account commitment to launch a new debt platform focused on investing in the senior secured debt of sustainable infrastructure projects.\nAflac will hold a 24.9% minority interest in a newly created entity Denham Sustainable Infrastructure.\nWe are also making a $100 million commitment to Denham Equity Fund, focused on sustainable infrastructure investments.\nWe are pleased to partner with Denham, a recognized and leading investment firm, in the sustainable infrastructure markets.\nUnder Eric's leadership, this transaction furthers our strategy of partnering with external managers.\nWe seek alliances with firms that maintain strong track records in specialized asset classes that play an important role in our portfolio.\nWe then leverage our capital to take a minority stake to further maximize the potential benefits.\nWhen combined with our recent Sound Point capital investment, we advance our ESG efforts by investing in sustainable infrastructure and distressed communities across the U.S. I'll now pass on to Max to discuss our financial performance in more detail.\nLet me begin my comments with a review of our Q2 performance, with a focus on our core capital and earnings drivers have developed.\nFor the second quarter, adjusted earnings per share increased 24.2% to $1.59.\nThe slightly weaker yen-dollar exchange rate did not have a significant impact on adjusted earnings per diluted share.\nThis strong performance for the quarter was largely driven by lower claims utilization due to the pandemic, especially in the U.S. In addition, variable investment income ran $112 million above our long-term return expectations.\nAdjusted book value per share, including foreign currency translation gains and losses, grew 20.5%.\nAnd the adjusted ROE, excluding foreign currency impact, was a strong 17%, which is a significant spread to our cost of capital.\nStarting with our Japan segment, total earned premium for the quarter declined 3.8%, reflecting the impact of first sector policies reaching paid-up status, while earned premium for our third sector products was down 2.3% due to recent low sales volumes.\nJapan's total benefit ratio came in at 66.9% for the quarter, down 290 basis points year-over-year.\nAnd the third sector benefit ratio was 56.5%, down 305 basis points year-over-year.\nWe experienced a slightly higher-than-normal IBNR release in our third sector block as experience continues to come in favorable relative to initial reserving.\nThis quarter, the IBNR release was primarily due to pandemic conditions, constraining utilization since second quarter of 2020 and year-to-date.\nAlthough claims activity have begun to rebound, it remains below longer-term normalized levels.\nAuto claim reporting lags require up to a year to mature the data.\nAnd now with more than a year's worth of pandemic data, our estimates are more refined, which has led to increased IBNR releases.\nPersistency was down 10 basis points, yet remained strong at 94.7%.\nOur adjusted expense ratio in Japan was 20.8%, up 80 basis points year-over-year.\nWe continue our technology-related investments to convert Aflac Japan to a paperless company, which also includes higher system maintenance expenses.\nAdditional telework expenses also added to the higher expense ratio in the quarter.\nAdjusted net investment income increased 27.4% in yen terms, primarily driven by favorable returns on our growing alternatives portfolio and lower hedge costs, partially offset by lower reinvestment yield on our fixed rate portfolio.\nThe pre-tax margin for Japan in the quarter was 26.5%, up 450 basis points year-over-year, which was a very favorable result for the quarter.\nThis quarter's strong financial results leads us to expect the full year benefit ratio for Japan to be at the lower end of the 3-year guidance range of 68.5% to 71% given at Fab.\nAnd the pre-tax margin to be at the higher end of the 20.5% to 22.5% range.\nTurning to U.S. results, net earned premium was down 3.4% due to weaker sales results.\nPersistency improved 180 basis points to 80.1%.\n63 basis points of the elevated persistency in both the second quarter of this year and the prior year can be explained by emergency orders.\nSo there was no net impact for the quarter year-over-year.\n80 basis points of improved persistency in the quarter is attributed to lower sales, as first year lapse rates are roughly twice total in-force lapse rates.\nAnother 30 basis points of improved persistency is due to conservation efforts, and the remainder largely comes from improved experience.\nOur total benefit ratio came in lower than expected at 43.5% or 80 basis points lower than Q2 2020, which, itself, was heavily impacted by the initial pandemic.\nLower claims utilization impact our estimates for incurred claims as data matures over the course of the year.\nAs our data matures, we increased our reliance on raw data, and with a year of pandemic data behind us, we reduced our IBNR to reflect the lower utilization.\nThis quarter, IBNR releases amounted to 5.6 percentage points impact on the benefit ratio, which leads to an underlying benefit ratio, excluding IBNR releases, of 49.1%.\nWe expect the benefit ratio to increase gradually throughout the remainder of the year, with the resumption of normal activity in our communities and by our policyholders.\nFor the full year, we now expect our benefit ratio to be in the range of 45% to 48% versus our original guidance of 48% to 51%.\nOur expense ratio in the U.S. was 36.9%, up 160 basis points year-over-year but with a lot of moving parts.\nWeaker sales performance negatively impacts revenue, however, the impact to our expense ratio is offset by lower DAC and commission expense.\nHigher advertising spend increased the expense ratio by 60 basis points.\nOur continued buildout of growth initiatives, group life and disability, network dental and vision and direct to consumer contributed to a 170 basis point increase to the ratio.\nThese strategic growth investments are largely offset by our efforts to lower core operating expenses as we strive toward being the low-cost producer in the voluntary benefits space.\nNet-net, despite a lot of moving parts, Q2 expenses are tracking according to plan.\nIn the quarter, we also incurred $5.5 million of integration and transition expenses not included in adjusted earnings associated with recent acquisitions.\nAdjusted net investment income in the U.S. was up 9.9%, mainly driven by favorable variable investment income in the quarter.\nProfitability in the U.S. segment was very strong with a pre-tax margin of 25.4%, with a low benefit ratio as the core driver.\nWith the first half now in the books, we are increasing our pre-tax margin expectation for the full year.\nInitial expectations were for us to be toward the low end of 16% to 19%.\nWe now expect to end up slightly above the range indicated at fab.\nIn our Corporate segment, we recorded a pre-tax loss of $76 million, as adjusted net investment income was $45 million lower than last year due to low interest rates at the short end of the yield curve and amortization of certain tax credit investments, which amounted to $30 million this quarter held at the corporate level.\nUnder U.S. GAAP, we recognized a negative impact to corporate NII, but this is offset by a lower effective tax rate for the enterprise.\nThis results in a level of reported volatility to our Corporate segment, but the economic returns on these investments are above our cost of equity capital.\nTo date, these investments are performing well and in line with expectations.\nOur capital position remains strong, and we ended the quarter with an SMR above 900% in Japan and an RBC of approximately 600% in Aflac Columbus.\nUnencumbered holding company liquidity stood at $4.4 billion, which was $2 billion above our minimum balance, excluding the $400 million proceeds from the sustainability bond that we issued in March that reinforced our ESG initiatives and believe that sustainable investments are also good long-term investments.\nLeverage, which includes our sustainability bond, remains at a comfortable 22.8%, in the middle of our leverage corridor of 20% to 25%.\nIn the quarter, we repurchased $500 million of our own stock and paid dividends of $223 million, offering good relative IRR on these capital deployments.\nWe will continue to be flexible and tactical in how we manage the balance sheet and deploy capital to drive the strong risk-adjusted ROE, with a meaningful spread to our cost of capital.\nWith that, I'll hand it over to David to begin the Q&A.\n[Operator Instructions] Andrea, we will take our first question, please.\n",
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"content": "q2 adjusted earnings per share $1.59.\nq2 revenue $5.6 billion.\naflac- with respect to q2 sales results in u.s. and japan, we continued to see improvement and expect a stronger second half of year in both countries.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: With the pandemic conditions continuing to evolve, I'm proud of our response over the last year.\nI am also grateful to our team of employees and sales representatives who have empowered Aflac to adapt to what has been a very challenging time for everyone.\nDuring the third quarter, we saw a rise and then a decline in COVID cases and hospitalizations in both the United States and in Japan, but to varying degrees.\nWith that in mind, I continue to address our employees in a way that's similar to how with my own family.\nI'm keeping them informed in updates from the medical community and encourage them to get the COVID-19 vaccine because I want people to avoid being sick or even worse being a casualty due to this pandemic.\nAs we entered the fourth quarter, when the weather gets colder and indoor gatherings increase, the recovery from the pandemic remains uncertain, and we must remain diligent.\nFor the third quarter, adjusted earnings per diluted share, excluding foreign currency impact increased 10.1% for the quarter and 20.1% for the year.\nThese results are largely driven by lower-than-expected benefit ratios and higher net investment income, primarily in Japan.\nLooking at the operations in Japan in the third quarter, Aflac Japan generated solid overall financial results as reflected in the profit margin of 26.3%, which was above the outlook range provided at our financial analyst briefing for 2020.\nAs Max will explain in a few moments, Aflac Japan has reported very strong premium persistency of 94.5%.\nAflac Japan sales were essentially flat for the quarter.\nSales for the first nine months of this year were approximately 66% of 2019 level.\nWe continue to navigate evolving pandemic conditions in Japan, which include widespread state of emergencies that extended to multiple prefectures and persisted through the third quarter.\nThese states of emergency in Japan are much less restrictive and more limited in scope than lockdowns in other countries, but they have impacted face-to-face sales opportunities.\nAs we entered the fourth quarter, the ability to meet face-to-face with customers appears to be improving somewhat gradually.\nAnd the degree to which our ability to meet face-to-face continues to improve with a very key driver in the recovery of our sales.\nWe were encouraged by the September launch of our new nursing care insurance in Japan, which we view as another opportunity to meet the needs of certain consumers.\nHowever, it's still very early in the launch of this new product to determine the potential of the nursing care insurance.\nIn addition, Aflac Japan continues to work to strengthen the alliance with Japan Post, which resumed proactive sales of the cancer insurance on April 1.\nWe expect continued collaboration to further position both companies for the long-term growth and a gradual improvement of Japan Post cancer insurance sales in the intermediate term.\nNow turning to Aflac U.S.\nWe saw a strong profit margin of 22.2%.\nThis result was driven by lower incurred benefits and higher adjusted net investment income, particularly offset by the higher adjusted expenses.\nAflac U.S. also continued to have strong premium persistency of nearly 80%.\nSales increased 35% for the quarter and are at approximately 78% of sales for the first nine months of 2019.\nThese sales results reflect what we believe are improving pandemic conditions in the United States, allowing us more face-to-face meetings and enrollments than prior periods.\nIn the U.S., small businesses have gained some incremental ground toward recovery, which we expect to continue gradually.\nWithin the challenging small business and labor markets, we continue to make investments in developments of traditional independent sales agents that make up about 53% of our sales as of the third quarter of 2021.\nAt the same time, larger businesses appear to be more resilient, given their traditional reliance on online self-enrollment tools, and we continue to invest in the group platform.\nGroup business, which is being driven by broker performance is performing very well.\nExcluding our acquired platforms, group sales have generated a year-to-date sales increase of 14% over the same period for 2019.\nAs we enter historically higher enrollment periods in the United States, we remain focused on being able to sell and service customers, whether in person or virtually.\nWith an eye toward responding to the needs of consumers, businesses and our distribution, we continue to build out the U.S. portfolio with Aflac network Dental and Vision premier life and disability.\nThese new lines modestly impact the topline in the short term.\nThese new products in combination with our core products, better position Aflac U.S. for future long-term success.\nPandemic conditions have served to fuel our long-standing strategy of being where people want to purchase insurance in both the United States and in Japan.\nAnd while face-to-face sales remains the most effective way for us to convey the financial protection only Aflac products provide, the pandemic has clearly demonstrated the need for virtual avenues to help us reach potential customers.\nWe have continued to invest in tools for our distribution in both countries and to integrate these investments into our operations.\nAs always, we place significant importance on continuing to achieve strong capital ratios in the U.S. and Japan on behalf of our policyholders and investors.\nWe remain committed to prudent liquidity and capital management.\nWith the fourth quarter declaration, 2021 will mark the 39th 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 will continue to be tactical in our share repurchase and focus on integrating the growth investments we've made in our platform.\nWe are well positioned as we work toward achieving long-term growth, while also ensuring we deliver on our promise to our policyholders.\nBy doing so, we look to emerge from this period in continued position of strength and leadership and look forward to sharing more about our strategic and financial priorities at the financial analyst briefing on November 16, 2021.\nNow let me turn the program over to Fred.\nRecognizing we have our analyst and investor briefing scheduled in the next few weeks.\nI'll keep my comments brief before handing off to Max on the quarter's financial results.\nBeginning with Aflac Japan, as Dan noted, it was an unusual quarter with the states of emergency declarations across most of the country.\nDeclarations are triggered in Japan by, among other things, a combination of rates of infection and hospital utilization by prefecture.\nThe precise impact is difficult to calculate, but the practical implications include reduced face-to-face consultations, limited access to on-site workers and payroll solicitation, reduced foot traffic to the roughly 400 owned and affiliated retail shops that we sell through and restricted travel between prefectures, which further constrains sales professionals.\nWhen looking at claims experience through the third quarter and since inception of the virus, Aflac Japan's COVID impact has totaled approximately 31,000 claimants with incurred claims of JPY5.6 billion.\nWe expect conditions to improve and remain focused on what we can control, including product development and advancing our business model.\nOur medical product EVER Prime continues to do well with medical sales up roughly 14% in the quarter and 36% year-to-date over the same period in 2020.\nOur market share has improved, but we're still at roughly 85% of the medical sales enjoyed in 2019, which was also a medical product refresh year.\nSo pandemic conditions in the quarter are having an impact.\nRegarding our nursing care product.\nSince our late September launch, we have sold nearly 10,000 policies.\nThis is a strong start, but within our expectations, given the marketing support put behind the product.\nFrom a risk perspective, this is a supplemental product aligned with coverage provided by the Japanese government and targeting the mass market.\nBenefits are, therefore, less rich and capped, both in amount and duration.\nThe product is designed for protection versus savings with modest interest rate sensitivity.\nIn summary, the product has a similar risk profile to our existing third sector products.\nWe continue the development of noninsurance services that wrap our cancer and now nursing care product offerings.\nThis has become more common among the large domestic insurers and we see these services as important for both defending and building our market share.\nTurning to the U.S., pandemic conditions remain at elevated levels with the spread of the Delta strain of the virus.\nAs of the end of the third quarter, Aflac U.S. COVID claimants since inception of the virus, has totaled approximately 79,000 with incurred claims of $135 million.\nDan covered overall U.S. sales conditions.\nI'll focus my comments specifically on our buy-to-build growth platforms.\nOur 2021 Dental and Vision strategy can be summed up as a year of launch, learn and adjust.\nThis quarter, we processed over 1,600 cases, up 30% over the second quarter, as we roll out training and development to agents and launch in additional states.\nWe are focused on small- and medium-sized businesses with sold cases averaging around 95 employees.\nLooking forward into 2022, we continue building out our dental network and readying the platform for increased volumes as we move upmarket and introduce a direct-to-consumer individual product.\nOur premier life and disability team successfully renewed 100% of their current accounts, a testimony to their high-quality service model.\nWe are preparing to launch with Connecticut administering benefits for their statewide paid family and medical leave program in 2022.\nThis is an administrative-only contract leveraging our acquired leave management platform.\nWith respect to our e-commerce initiative, Aflac Direct, we currently offer products in 46 states.\nWe are actively building out a licensed call center and currently have 14 licensed agents.\nThe call center platform is in the early days of building and augments our digital-only conversion rates as well as reduces operational dependency on call center vendors.\nIn the third quarter, these three platforms accounted for roughly 13% of sales and are expected to build as a percentage of sales and earned premium in the coming years.\nBefore handing off to Max, a few comments on operations.\nIn Japan, we continue to drive volume through our online sales solution.\nYear-to-date, we have processed over 38,000 online applications with September being our largest month since launching the capability.\nWe are pushing forward on technology and digital modernization and are sizing the investment required to streamline our policyholder services platform.\nThis is the largest operating platform in Japan and a key to driving down our long-term expense ratio.\nIn the U.S., our premier life and disability platform completed a successful transition this month from Zurich on time, on budget and without client or customer disruption.\nWe are focused on migrating our voluntary business to a new group administration platform and building out critical data connections with leading benefit administration and HR systems.\nThe goal is to ensure ease of doing business, smooth onboarding and renewals and quality service and analytics.\nWhen looking at our Japan and U.S. expense ratios going forward, we continue with critical platform development despite a period of weaker revenue.\nWe expect to stay within previously guided ranges for expense ratios recognizing prolonged pandemic conditions require recalibrating the precise trajectory and timeline for reaching our ultimate targets.\nFinally, at Aflac Global Investments, performance remains strong.\nWe continue to advance our sustainable investing platform and recently refreshed our strategic asset allocation work.\nOur team will dive deeper into operations and strategic execution at next month's Analyst and Investor Briefing.\nLet me now turn things over to Max to cover financial performance.\nFor the third quarter, adjusted earnings per share increased 10.1% to $1.53, with a $0.02 negative impact from foreign exchange in the quarter.\nThis strong performance for the quarter was largely driven by lower claims utilization due to pandemic conditions, especially in Japan.\nVariable investment income ran $0.11 above our long-term return expectations.\nAdjusted book value per share, including foreign currency translation gains and losses, grew 10.1%.\nAnd the adjusted ROE, excluding the foreign currency impact, was a strong 16.2%, a significant spread to our cost of capital.\nStarting with our Japan segment.\nTotal earned premium for the quarter declined 4%, reflecting first sector policies paid-up impacts, while earned premium for our third sector products was down 2.6% due to recent low sales volumes.\nPolicy count in-force, which we view as a better measure of our overall business growth declined 1.8%.\nJapan's total benefit ratio came in at 66.1% for the quarter, down 520 basis points year-over-year, and the third sector benefit ratio was 55%, down 670 basis points year-over-year.\nWe experienced a greater-than-normal IBNR release in our third sector block, as experience continues to come in favorable relative to initial reserving.\nUtilization continues to be constrained by pandemic conditions, and we now have more than a year's worth of pandemic data.\nAnd with that, our model output is more refined, leading to increased releases.\nAdjusting for greater than normal IBNR releases and in-period experience, we estimate that our normalized benefit ratio for the third quarter to be 68.7%.\nPersistency remained strong with a rate of 94.5%, down 50 basis points year-over-year.\nConsistent with past refreshed product launches, we have experienced a slight uptick in lapse rates on our medical product, as policyholders look to update their coverage.\nOur expense ratio in Japan was 21.4%, down 30 basis points year-over-year.\nConstrained business activity lowered our expenses in Q3, which we view to be a temporary phenomenon.\nWe generally expect increased spending on key initiatives to continue and especially in Q4, as we tend to see some seasonality in spending and booking of projects.\nAdjusted net investment income increased 19.7% in yen terms, primarily driven by favorable returns on our growing private equity portfolio and lower hedge costs, partially offset by lower reinvestment yield on our fixed rate portfolio.\nThe pre-tax margin for Japan in the quarter was 26.3%, up 690 basis points year-over-year, a very good result for the quarter.\nThis quarter's strong financial results lead us to expect the full year benefit ratio for Japan to be below the 3-year guidance range of 68.5% to 71% given at FAB.\nAnd the pre-tax margin to be above the 20.5% to 22.5% range given at -- for the full year 2021.\nTurning to U.S. results.\nNet earned premium was down 1%, as lower sales results during the pandemic continue to have an impact on our earned premium.\nPersistency improved 110 basis points to 79.9%, 70 basis points of which are from lower sales, as first year lapse rates are roughly twice the level of in-force lapse rates.\nIn addition, there still remains about 40 basis points of positive impact from emergency orders.\nOur total benefit ratio in the U.S. came in lower than expected at 45.1% or 320 basis points lower than Q3 2020, which itself was heavily impacted by the initial pandemic.\nLower and deferred claims utilization impacts our IBNR held for incurred claims within a year.\nAnd as we get more data, our long-term models increased reliance on raw data leading to IBNR releases.\nThis quarter, they amounted to a 3.5 percentage points impact on the benefit ratio, which leads to an underlying benefit ratio, excluding IBNR releases of 48.6%.\nWe expect the benefit ratio to increase gradually throughout the remainder of the year with the resumption of normal activity in our communities and by our policyholders.\nFor the full year, we now expect our benefit ratio to be in the range of 43% to 46% versus original guidance of 48% to 51%.\nOur expense ratio in the U.S. was 38.9%, up 170 basis points year-over-year, but with a lot of moving parts.\nWeaker sales performance negatively impacts revenue, however, the impact to our expense ratio is largely offset by lower DAC expense.\nHigher advertising spend increased the expense ratio by 40 basis points.\nOur continued build-out of growth initiatives, group life and disability, network dental and vision and direct-to-consumer contributed to a 260 basis points increase to the ratio when isolating these investments.\nThese important strategic growth investments are somewhat offset by our efforts to lower our core operating expenses, as we strive toward being the low-cost producer in the voluntary benefits space.\nNet-net, despite a lot of moving parts, Q3 expenses are tracking according to plan.\nIn the quarter, we also incurred $7.8 million of integration expenses, not included in adjusted earnings associated with recent acquisitions.\nAdjusted net investment income in the U.S. was up 9.1%, mainly driven by favorable variable investment income in the quarter.\nProfitability in the U.S. segment remained strong with a pre-tax margin of 22.2%, with a low benefit ratio as the core driver.\nWith nine months now in the books, we are increasing our pre-tax expectation for the full year.\nInitial expectations were for us to be toward the low end of 16% to 19%.\nWe now expect to end up above the range indicated at FAB 2020.\nIn our Corporate segment, we recorded a pre-tax loss of $41 million, as adjusted net investment income was down $12 million versus last year due to low interest rates at the short end of the yield curve and change in value of certain tax credit investments.\nThese tax credit investments run through the corporate net investment income line for U.S. GAAP purposes with an associated credit to the tax line.\nThe net impact to our bottom line was a positive $5 million in the quarter.\nTo date, these investments are performing well and in line with expectations.\nIn the fourth quarter, we do expect a significant tax credit investment to fund, which will bring some volatility to the corporate NII line as well as an offsetting credit to the tax line.\nOur capital position remains strong, and we ended the quarter with an SMR in Japan of north of 900% and an RBC north of 600% in Aflac Columbus.\nUnencumbered holding company liquidity stood at $4.2 billion, $1.8 billion above our minimum balance.\nLeverage, which includes the sustainability bond issued earlier this year, remains at a comfortable 22.6% in the middle of our leverage corridor of 20% to 25%.\nIn the quarter, we repurchased $525 million of our own stock and paid dividends of $220 million, offering good relative IRR on these capital deployments.\nWe will continue to be flexible and tactical in how we manage the balance sheet and deploy capital in order to drive strong risk-adjusted return on equity with a meaningful spread to our cost of capital.\nFinally, I would like to mention that we will begin to expand our disclosures around the adoption of LDTI in our Form 10-Q and at FAB.\nAt a high level, we do not see this accounting adoption as an economic event with no impact to our regulatory financials or capital base.\nThere will be no change to how we manage the company, cash flows or capital.\nWith that, I'll hand it over to David to begin.\n",
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"content": "q3 adjusted earnings per share $1.53.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: In evaluating Farmer Mac, you should consider these risks and uncertainties, as well as those described in our 2019 annual report on Form 10-K filed with the SEC in February as updated to discuss risks related to COVID-19 pandemic and our quarterly report on Form 10-Q filed with the SEC yesterday.\nIn analyzing its financial information, Farmer Mac sometimes uses measures of financial performance that are not presented in accordance with Generally Accepted Accounting Principles in the United States, also known as non-GAAP measures.\nI'd like to start by recognizing that this is really an extremely challenging time for all of us.\nAnd our thoughts are especially with those most affected by COVID-19, particularly those on the front line of this crisis.\nAt Farmer Mac, our immediate priorities are to support American agriculture and rural communities and to provide a safe, secure work environment for employees.\nI believe that if we focus on these priorities such as the financing of producers and processors of food on the front line, we can and will be a positive force in helping the nation get through this terrible pandemic.\nI'm happy to report that Farmer Mac has been successfully operating uninterrupted with 100% of our employees working remotely, and we've been doing that since March 12.\nLike all businesses, our leadership team has challenged ourselves to communicate and collaborate in new ways, and we've been successful, I think.\nOur business continuity plan has been functioning as designed in support of all functions of the organization.\nAnd recent investments in technology have allowed us to stay in communication within our organization and with our customers and our suppliers.\nOur Board has also remained very active in its oversight role.\nThey've done that through weekly teleconference meetings.\nAnd we have been working effectively and cooperatively with our regulators and our debt capital market investors to help ensure the continued safety, liquidity and soundness of Farmer Mac.\nLet me now turn to results.\nOur strong underlying fundamentals and resilient business model has really enabled us to successfully continue operations and execute on our mission.\nWe provided $1.3 billion of new credit to rural America that ultimately is to people in the first quarter of 2020.\nThe challenges presented beginning in March 2020 required Farmer Mac to respond dynamically.\nWe pivoted our customer outreach approach and fine-tuned some of our products in order to continue fulfilling our mission.\nIn a few minutes, Zack Carpenter is going to go into more details on how we've done that.\nOur access to capital markets has remained strong despite the ongoing market volatility.\nWe have continued to issue debt on a daily basis and to maintain our disciplined asset liability management policies and practices that have long been in place.\nWe have remained well capitalized with a strong liquidity position that has been at or above $1 billion for most of the last couple of months.\nThis strong liquidity position enables us to meet any unexpected cash flow need with minimal operational disruption.\nAs we have previously noted, we indefinitely suspended our $10 million share repurchase program in early March to preserve capital and liquidity and as additional precautionary measure.\nTurning to credit, despite the normal seasonal uptick in delinquencies in the first quarter, our credit quality has remained healthy.\nWe have maintained the same consistent underwriting guidelines for credit approvals and are closely monitoring the impact of COVID-19 on new applications.\nWhile we are not subject to any regulatory requirements that would require forbearance of loan payments, we are working closely with those borrowers that have been impacted by COVID-19 and we've been providing flexibility on payment terms to them as needed.\nMore specifically, we have approved 71 payment deferment requests related to COVID-19 through May 1 with a total principal balance of $78.9 million.\nThat's less than 0.5% of outstanding credit.\nWe do expect to see an increase in these deferment requests over the next quarter, and we're continuing to work closely with our servicers to provide appropriate relief to impacted borrowers.\nWe remain focused on serving the needs of our rural customers and are challenging ourselves to find more efficient and effective ways to provide our customers with the flexibility and assistance their borrowers need as they adapt to this new norm.\nAnd with that introduction, I'd like to now turn to Zack, our Chief Business Officer, to give you an update on customer and market developments.\nIn the wake of this unprecedented global pandemic, we know that companies around the world are enacting new measures to ensure that they continue to offer their services, but even more importantly, to protect the wellbeing of their customers and employees.\nWhile we have transitioned to alternative operation, our team continues to work diligently to remain flexible and adaptable to meet our customers' financing needs and help mitigate any challenges their borrowers may face.\nTo that end, we have taken specific steps to support our customers during this time.\nThese initiatives include: loan closing flexibility and extended rate lock optionality for approved loans to provide customers the ability to navigate challenges due to office closures and social distancing requirements; continuing to offer competitive prices for all available Farmer Mac products and risk management solutions, given our ability to maintain [Phonetic] continued and uninterrupted access to the capital markets during this volatile environment; as well as providing rural borrowers impacted by the pandemic [Technical Issues] for principal and interest payments, as well as supporting customer deferral requests for loans backing guaranteed securities and long-term standby purchase commitment products.\nWe will continue to assess and incorporate initiatives that allow Farmer Mac to serve our customers, rural borrowers and rural America as a stable source of capital during this unprecedented environment.\nNow, turning to business volume, 2020 is off to a good start for Farmer Mac, as all four lines of business contributed to net outstanding business volume growth of $421.4 million this quarter.\nThis reflects loan purchase net volume growth in Farm & Ranch, USDA and Rural Utilities of a combined $303.3 million, which was partially offset by a sequential decrease in net growth in long-term standby purchase commitments and guaranteed securities of $137.8 million.\nWe also saw increases in institutional credits, which grew $255.9 million, largely driven by our ability to provide short-term liquidity for two of our largest counterparties during the most volatile capital markets environment during the month of March.\nThis growth is a testament to Farmer Mac's ability to be competitive in price, while also being effective in execution to meet the needs of these customers.\nIn our Rural Utilities lines of business, loan purchase net volume grew $118.4 million in the first quarter of 2020 compared to $490.3 million in the same period last year.\nIt is important to note that loan purchase net volume growth in the first quarter of 2019 included one large unique transaction, the purchase of a $546.2 million portfolio of participations in seasoned Rural Utilities loans from CoBank.\nExcluding the impact from the unique CoBank transaction, Farmer Mac's loan purchase net volume decreased in the first quarter of 2019.\nThe strength of growth during the first quarter of 2020 reflects steady loan purchase demand from CoBank and their other primary counterparty in the rural utilities line of business, National Rural Utilities Cooperatives Finance Corporation.\nLoan purchase net volume growth in our foundational Farm & Ranch and USDA lines of business was $184.9 million for the first quarter of 2020 versus a net volume decline of $64.7 million for the same quarter in 2019.\nThe strong first quarter of 2020 primarily reflects the results of Farmer Mac's customer acquisition and retention initiatives, competitive interest rates across our product set, and efficient and effective loan approval and onboarding execution by our underwriting and closing teams.\nFarm & Ranch loan purchases had net volume growth of $142.1 million during the quarter, overcoming one of our largest prepayment quarters of over $260 million, primarily related to the January 1 payment date, as well as increased scheduled principal amortization levels, given our larger portfolio.\nLooking ahead, our pipeline remains robust as we continue to build upon a more dynamic and responsive business model that has transformed the way we deliver upon our mission and improved customer satisfaction, volume retention and penetration in existing and new markets.\nAs I've mentioned on prior calls, enhancing our infrastructure is crucial in order for us to continue to provide consistent and reliable capital to both existing and new markets.\nI'm excited to announce that we successfully launched our new customer portal platform yesterday.\nThis portal provides an enhanced interface with elevated security features for our Farm & Ranch and USDA customers and will serve as the foundational platform to launch future innovative products and initiatives as we continue to drive incremental capital of the core sectors we serve.\nLater this fall, we will launch through this customer portal a new streamlined origination platform for Ag Express score card loan product.\nThis origination platform will provide increased efficiency, enhanced technology and faster loan approval and funding for Ag Express score card loans.\nOur continued investment in our infrastructure does not stop with these two enhancements.\nWe have several initiatives slated for 2021 and beyond and that continuing to elevate our infrastructure.\nWe look forward to providing more details on future calls.\nLastly, I would like to take a moment to recognize the Farmer Mac team for all their hard work and dedication to help meet the credit and liquidity needs of our customers and rural communities nationwide.\nEven during these times of uncertainty, it is imperative that we continue to execute upon our strategic priorities and remain dynamic and flexible in supporting our customers in rural America.\nAnd I just like to note that to be able to execute and deliver this kind of loan growth as well as to launch a major new technology initiative while working under our business continuity plan, basically working from home, I think is a real testament to both the commitment as well as effectiveness to the Farmer Mac team.\nI'd now like to turn to Jackson to give you an update on the current agriculture environment.\nYou've heard a lot, read a lot of headlines in the press.\nNow, Jackson will fill in some of the detail and provide the Farmer Mac perspective.\nThe COVID-19 pandemic has disrupted nearly all aspects of the global economy.\nEnergy consumption has fallen precipitously in the last few months as drivers abandoned the roads and travelers shelved their passports.\nThis demand decline caused dramatically lower oil and fuel prices.\nIncreased market volatility and uncertainty also resulted in a significantly stronger US dollar in March, as well as elevated credit spreads for most borrowers, both corporate and retail.\nThe agricultural sector has not been immune to the wide reaching effects of COVID-19.\nSchools, hotels and restaurants are all significant buyers of wholesale dairy products, animal protein products and fresh produce.\nWithout this important demand pool for our food supply system, many farmers have abandoned milk and fresh produce due to the excess supply and perishable nature of these commodities.\nAnimal protein processors have been challenged by the indirect economics of hospitality business closures, but also more directly confronted by COVID-19 outbreaks at individual plants.\nApproximately 40 animal protein processing plants have temporarily closed for parts of March and April and over 40% of hog and 30% of cattle processing was offline in early May.\nThis drop in gasoline demand translated to reduced ethanol usage as well, prompting ethanol producers to take nearly half of all capacity offline.\nEthanol typically consumes between 30% and 40% of annual US corn production.\nSo lower corn demand is pressuring grain prices.\nFinally, a stronger US dollar and lower global economic growth creates headwinds for agricultural exports.\nAgricultural exports through March were down from 2019 levels, driven by a 15% drop in corn and soybean sales.\nFarmers and ranchers are pivoting production as a result of rapidly evolving information.\nFood processors and agribusinesses are enhancing already strong food and worker safety protocols to stay open or reopen during this challenging time.\nIn April, USDA announced $16 billion in direct emergency aid, targeting cattle, dairy, hog, specialty crop and grain producers, and an additional $3 billion in food purchases for donation and distribution.\nAdditionally, the CARES Act signed in March authorized a $14 billion replenishment of the Commodity Credit Corporation for possible direct farm and ranch aid later this year.\nThe CARES Act also created several small business administration programs that could cover payroll, mortgage interest and other general expenses.\nAccording to data released by the SBA, the first round of Paycheck Protection Program payments delivered nearly $3 billion to small businesses involved in agriculture, forestry, fishing and hunting.\nFinally, lower fuel, feed, fertilizer and interest expenses provide a needed offset to those lower commodity prices.\nWhile Farmer Mac's credit portfolio contains exposure to affected industries, initial indicators of credit performance show only minor signs of degradation.\nThe Farm & Ranch portfolio has no direct credit exposure to hog or cattle processing facilities, and only $40 million or 0.5% in hog production and only $21 million or 0.3% in dairy processing as of March 31.\nWe do have exposure to several indirectly affected commodities like corn and soybeans at $2.4 billion or 30% of the Farm & Ranch portfolio, ranch cattle and calves at $672 million or 9% of the portfolio and dairy at $538 million or 7% of the portfolio as of March 31.\nHowever these exposures are extremely well diversified by both borrower and geography.\nFor example, the corn and soybean portfolio is spread across more than 5,000 loans in 601 counties in 41 states.\nLoans past due by 90 days or more increased in the first quarter of 2020 to 1.02% of the outstanding Farm & Ranch portfolio or 0.37% across all four lines of business.\nThis increase was driven by a handful of larger exposures, but the percentage of loan count is also increasing.\nThere were no delinquencies in any of the other portfolios, including rural infrastructure, institutional credit or USDA guarantees.\nIndividual loan risk ratings held steady in the first quarter of 2020, with substandard loans totaling $317 million across all loans and guarantees.\nThis volume is spread across 56 commodities in 212 counties in 36 states.\nThese metrics are near historical averages as a percentage of Farm & Ranch, as well as total loans and guarantees.\nBut there still exists considerable uncertainty around the full impacts of COVID-19 on agriculture and rural communities.\nThe disruption could significantly alter the trajectory of the related economic cycles.\nFortunately, there exist strong support mechanisms to help augment any financial disruption and give rural communities time to heal.\nFarmer Mac had a very good start to the year, with our results for the quarter divided into two distinct macroeconomic periods.\nJanuary and February were characterized by rising markets and a stable and positive economic outlook.\nMarch, however, proved to be unprecedented for everyone.\nAs the COVID-19 virus spread globally and shelter-in-place orders became common, we saw significant volatility and market dysfunction in the latter half of March, and this coincided with national and global lockdowns.\nWe continue to have, though, strong access to capital markets and were able to issue across various price point and tenors remaining well within GSE spread issuances.\nWhile there was initial strain and widening at the longer end of the curve in the latter half of March, we worked with our existing investor and dealer base and issued bonds in a flexible way that was tailor-made to meet end investor needs.\nDuring the period through which COVID-19 has been declared a national emergency, we issued long SOFR bonds.\nIn fact, one of them was the longest GSE SOFR issuance and $285 million in structures, 10 years of greater, with total medium-term note issuances of approximately $2.5 billion to date.\nOur strong liquidity position, as Brad mentioned, and market access also enabled Farmer Mac to call higher-cost issuances, provide funding to business lines for new assets and add over $160 million in high-quality liquid assets to our investment portfolio.\nLet me now provide an overview of our financial results.\nCore earnings were $20.1 million for first quarter 2020 compared to $22.2 million in first quarter 2019.\nNet effective spread was $44.2 million in first quarter 2020 compared to $38.8 million in the same period last year.\nNet effective spread in percentage terms remained stable at 89 basis points for both periods.\nThe $2.1 million year-over-year decrease, though, in core earnings was primarily due to a $3.3 million after-tax increase in the total provision for losses and a $2.7 million after-tax increase in operating expenses.\nThese were partially offset by the higher net effective spread.\nThe increase in the total provision for losses reflects the adoption and implementation of the new standard Current Expected Credit Losses, or CECL, and the immediate impact of updated economic factor forecast, particularly higher credit spreads and expected higher unemployment as a result of the COVID-19 pandemic and the resulting economic volatility that I mentioned that had an impact on CECL model results.\nOf the $3.8 million loss provision during the first quarter, approximately $3.5 million was attributable to factors related to COVID-19.\nOperating expenses increased by 26% in first quarter 2020 compared to first quarter 2019.\nThis primarily was due to increased compensation and benefit expenses, including higher cash bonus payments to employees under our short-term annual bonus plan, as well as onetime payments to an executive who resigned during the quarter.\nIt's important to note that these additional compensation expenses are seasonal and they do not reflect a recurring trend for the rest of the year.\nGeneral and administrative expenses also increased compared to the prior year due to Farmer Mac's ongoing investment in various growth and strategic initiatives that were highlighted by both Zack and Brad.\nThese ongoing investments in infrastructure will enable Farmer Mac to more efficiently meet its customer needs and will ultimately enable greater revenue retention over time.\nAs of March 31, 2020, total allowance for losses were $19.1 million, an increase of $6.5 million from December 31, 2019.\nThe total allowance for losses represents 9 basis points of Farmer Mac's $21.5 billion portfolio, and we continue to compare very favorably to industry peers.\nAs I previously mentioned, the adoption and implementation of CECL on January 1, 2020, as well as the corresponding increase in reserves under these macroeconomic conditions were the primary drivers of this increase.\nBefore moving on to capital, I did want to note one item regarding the adoption of CECL, which is the impact that it's had on our Rural Utilities line of business.\nUnder the previous accounting standard, which estimated incurred losses based on historical loss rates, Farmer Mac's Rural Utilities line of business did not require an allowance as Farmer Mac had never experienced a loss in its Rural Utilities line of business.\nHowever, under the CECL accounting standard, the highly specialized nature of power generation and transmission utilities results in significant losses, given default estimates that drive our model assumptions, even though the actual probability of default remains very low.\nIt is therefore important to note that as of March 31, 2020, Farmer Mac's $2.4 billion in outstanding Rural Utilities loan purchases and long-term standby purchase commitments have no historic or current delinquencies.\nTurning to capital, we continue to remain very well capitalized, which puts us in a position of strength as we entered this challenging time and will serve us well as we move forward.\nFarmer Mac's $815.1 million of core capital as of March 31, 2020 exceeded our statutory requirement by $165.8 million or 25%.\nThis compares to $815.4 million of core capital as of December 31, 2019, which exceeded our statutory requirement by $196.7 million or 32%.\nThe slight decrease in excess capital from the prior quarter is primarily due to net growth in Farmer Mac's outstanding business volume and the coinciding decrease in retained earnings related to various factors.\nHowever, from an overall liquidity standpoint, we are comfortable with our current cash position, which is hovering around $1 billion and which was at $1.2 billion on March 31, 2020.\nThis level resulted in 202 days of liquidity and it's far exceeded our regulatory requirements by approximately 112 days.\nApril, likewise, continued to be strong with a daily average cash position also around $1 billion, accompanied by strong levels of liquidity, which have continued through today.\nAs Brad noted, the higher-than-mandated levels of cash and liquidity allow us to weather any unexpected cash flows, adequately fund deferments to meet our customer needs, while retaining the flexibility to maintain low but still ample levels as market conditions change.\nSo in conclusion, Farmer Mac's underlying financial fundamentals, reflecting a well-capitalized balance sheet, stable core earnings, disciplined asset liability management and strong capital markets access, positions us to continue to successfully deliver upon a critical mission and navigate these uncertain times effectively.\nMore complete information about Farmer Mac's first quarter 2020 performance is in the 10-Q we filed yesterday with the SEC.\nFarmer Mac was created in response to crises back in the 1980s and is intended to be a resource for financial institutions serving rural America.\nThis is especially true during times of economic pressure and uncertainty.\nWe are proud to play a vital role as a source of credit and liquidity for America's farmers, ranchers and rural utilities that comprise one of the most resilient sectors of this economy.\nOur ongoing commitment to invest in technology and business infrastructure has played a critical role in our ability to reach our customers, and we will continue to work diligently to ensure that remains the case as we look ahead.\nWe're encouraged by the fact that we've been operating the Company remotely over the last two months.\nIn closing, I'd like to express how proud I am of our team's efforts during this very difficult time to identify new and creative ways to connect with those who we serve.\nThis includes the hardworking farm and ranch families who continue to be the most efficient, innovative producers of food in the world even in the face of challenges of trade, weather, labor and transport.\nIt includes the people who process, transport and distribute our food, who are facing new safety challenges and who are adjusting to new distribution channels.\nIt includes the people who produce and distribute electricity and provide rural infrastructure, who are having to adjust to fluctuating demand and safety and other issues.\nIt certainly includes the network of financial institutions who are Farmer Mac's partners in serving all of these people.\nOur team, our employees at Farmer Mac have shown remarkable resilience, in large part because of the character and their belief in the purpose and the mission of Farmer Mac.\nAnd now, operator, I'd like to see if we have any questions from anyone on the line today.\n",
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"content": "provided $1.3 billion in liquidity and lending capacity in q1 2020.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm pleased to say that in the first quarter of 2021, we continue to benefit from the value proposition that our financial guaranty provides in challenging times, which was further recognized last year as well.\nDriven by our highest first quarter new business production in U.S. public finance since we acquired AGM in 2009, Assured Guaranty generated $86 million of PVP, 69% above last year's first quarter PVP and more than in all but one first quarter since 2009.\nKey shareholder value measures also reached new highs at quarter end of $79.44 for adjusted operating shareholder's equity per share and $116.56 for adjusted book value per share, as we continued our successful capital management program.\nAdditionally, adjusted operating income per share of $0.55 was 53% higher than in the first quarter of 2020.\nThe first quarter of this year is the fourth consecutive quarter in which we saw our total net par outstanding increase, demonstrating fundamental organic growth in our core business.\nThis is a positive sign for our effort to restore the size of our insured portfolio and the related predictable base of future earnings embedded in our insured transactions.\nWe generally expect to see an upward trend in our portfolio size as quarterly run-off diminishes and we continue to originate new business.\nThe U.S. municipal bond market was very strong in the first three months of 2021.\nPar volume sold in the primary U.S. municipal bond market reached its highest first quarter level since the Great Recession, $104.5 billion, which industry insured par neared $8.5 billion, setting a 12-year record for first quarter insured volume.\nStrong demand for bond insurance led to a 76% more insured par sold than in the last year's first quarter, significantly outperforming the 19% increase in total municipal issuance.\nThe insurance penetration rate of 8.1% during the first quarter of 2021 was higher than the 2020 full year rate of 7.6% and higher than every first quarter and annual penetration rate since 2009.\nAssured Guaranty widen its lead in new issue market share during the first quarter.\nOur 65% share of insured market municipal -- insured municipal par sold was better than our market share in any quarter since 2014.\nThe $5.5 billion of new issue par sold with our insurance in the quarter was the highest amount we insured in any first quarter since 2010.\nIt was almost 2.5 times our insured par in last year's first quarter and our primary market transaction count of 252 was up 57%.\nThese year-over-year quarterly comparisons were influenced by the pandemic-related market disruption in the first quarter of 2020; but it would be -- but what may be a more meaningful comparison, our first quarter insured par sold was almost 20% higher than in the fourth quarter of 2020.\nDuring this year's first quarter, we insured $100 million or more on eight different transactions, with aggregate insured par totaling $2.25 billion.\nLarge transactions tend to attract institutional investors and our leadership in this category reflects a growing appetite for Assured guaranteed insurance in the institutional market.\nEven as there have been signs of a recovering economy and better than expected municipal revenues, the persistence of the global pandemic and what it has taught the market about economic unpredictability have shown that investors have good reasons to remain concerned about downgrade risk, trading value stability and liquidity, which our guarantee has the potential to address.\nWe believe those concerns combined within a appreciation of our overall value proposition were behind our ability in the first quarter to ensure $1.5 billion of par on 27 transactions we signed AA underlying ratings by at least one of the two leading rating agencies.\nThe stable outlooks on Assured Guaranty's owned AA ratings provide an extra level of comfort for investors in these high-quality bonds.\nIn international infrastructure finance during the first quarter, we executed two international transactions, neither which created any new risk exposure.\nOne transaction was an extension of the debt service reserve guarantee that we provided through Welsh Water in 2019 as a substitute for their bank liquidity facility.\nThe other involved converting a convention center project financing that we insured years ago into a direct obligation of a sub-sovereign.\nAdditionally, we made progress on important new transactions, two of which have already closed since quarter-end, generating over $23 million of international PVP in the second quarter.\nWhile the pandemic delayed a number of projects, it also had the effect of widening credit spreads, and therefore creating opportunities for us.\nWe believe the UK and other governments' efforts to provide stimulus through infrastructure investment will require a significant amount of private financing to be fully successful, and that we will have a part to play in that.\nWe have a robust pipeline of potential infrastructure opportunities and have been receiving an increased variety of new business inquiries.\nWe also believe investor appetite for our product remain strong in our international markets.\nWe've continued our efforts to maintain and expand our relationships.\nOur Structured Finance and international underwriting groups are collaborating on various portfolio guarantee transactions.\nWe believe this is an area we can help institutions optimize the capital associated with their infrastructure portfolios using principles that could be applied to other asset types as well.\nAdditionally, the Structured Finance Group is currently processing or in discussions for potential transactions in diverse categories, including real assets, trade receivables, life insurance, CLOs, equipment leases and subscription finance facilities for private equity funds.\nImportantly, and relates to our financial strength and stability, our disciplined and diversified approach to writing new business along with our loss mitigation activities has helped to reduce the below investment grade percentage of our insured portfolio to just 3.2% of net par outstanding.\nAbout half of our big exposures to Puerto Rico are [Indecipherable] and there have been considerable positive news out of Puerto Rico.\nAs I mentioned on our last call, we conditionally agreed in February to support a revised GO and Public Buildings Authority Plan Support Agreement with the Oversight Board and other creditors of the Commonwealth and PBA.\nWe did so with the express understanding that the government parties would work with us to make that agreement part of a more comprehensive solution that also addressed related Puerto Rico credits, including what are known as the clawback credits such as revenue bonds of the Highways and Transportation Authority and Convention Center District Authority.\nA big step toward such a resolution took place on April 12th when we, the Oversight Board and others agreed in principle to a framework for settling our insured exposures to the HTA and CCDA credits, subject to definitive documentation of an HTA/CCDA Plan Support Agreement.\nWe have now finalized that documentation as announced on May 5th and have reaffirmed our support for the GO/PBA PSA.\nIt will still be months until the plan of adjustment incorporating these PSAs and the PREPA RSA are approved and implemented.\nBut with these settlements, we have agreed to terms on over 93% of our Puerto Rico net par exposure.\nOutside of these agreements, the Company has only $241 million of additional Puerto Rico net par exposure, almost all of which relates to credits that have not missed any principal or interest payments.\nLastly, once again, we reassess the potential impact of COVID-19 on our insured portfolio, especially in light of the $1.9 trillion federal stimulus package enacted during the first quarter.\nAnd that review further indicated that the pandemic has not given us a reason to establish significant new loss reserves, and we do not expect any ultimate losses from first time municipal bond insurance claims that arise specifically from COVID-19.\nIn addition to having a great quarter in the financial guarantee business, we made good progress in the asset management business.\nThe CLO market blossomed during the first quarter with total supply, including new issues, revise, resets and reissues setting quarterly records of $106.3 billion in the United States and EUR26 billion in Europe.\nAssuredIM issued one CLO in each of those markets during the period, we also reset a CLO which extended its life, and therefore it's fees, and we sold 71 million of CLO equity from our legacy funds.\nWe reduced our total non-fee earning CLO AUM to $2.4 billion from the $3.6 billion three months earlier, while increasing total CLO AUM by almost $0.5 billion to $14.3 billion.\nCLO management fees for the quarter were more than double of those of last year's first quarter.\nThe outlook for this business is positive.\nWe recently opened three CLO warehouses and remain focused on raising more third-party capital.\nThey bring variety -- varied backgrounds as leaders in Public Finance, Structured Finance and Investment Management, and their insights and wealth of experience will be off great value to our Board's strategic decision making.\nLooking toward the rest of the year, we expect strong investor demand for municipal bonds, exemplified by the approximate $30 billion of inflows that municipal bond mutual funds and ETFs took in during the first quarter.\nWe believe high demand for municipal bonds are likely to be met by issuers' needs to raise more capital for infrastructure development in order to amplify the benefit of infrastructure funding likely to come from Washington, as well as by their desire to refinance and borrow while the interest rates remain low.\nAs long-term yields rise, long-term municipals may become an attractive and safer alternative to corporate bonds, especially for high net worth investors wary of potential tax increases.\nWe believe this mix of market conditions will provide us with many public finance opportunities, large and small.\nAs finance activities revive around the world, we have already seen a pick up since quarter-end in our international financial guarantee business, and we expect to complete some large Structured Finance transactions as the year progresses.\nWe also believe you will see significant growth in our Asset Management business.\nWe've been through a lot in the last -- past 14 months.\nWe believe the challenges of this period have made the market even more aware of the resilience of our business model, the dedication and professionalism of our employees and the benefits of our financial guarantees.\nAs always, we are committed to creating value on behalf of our shareholders, as well as for our clients and the investors who place their trust in our credit discipline and financial strength.\nI would like to start by highlighting our two key metrics for new business production: PVP and third-party inflows of assets under management.\nAs Dominic mentioned, first quarter U.S. public finance PVP was our strongest first quarter since 2009 and was the largest component of our $86 million first quarter PVP.\nStrong PVP results over the last several quarters have helped us maintain our deferred premium revenues, our storehouse or future premium earnings at approximately $3.8 billion since the end of 2019.\nIn the Asset Management segment, total third-party inflows of $873 million was primarily driven by CLO issuance, which helped to increase our fee earning AUM by 11% in the first quarter of 2021 from $12.9 billion to $14.4 billion.\nIn terms of adjusted operating income, we earned $43 million or $0.55 per share in the first quarter of 2021 compared with $33 million or $0.36 per share in the first quarter of 2020.\nWhile this represents a 30% increase year-over-year, I want to highlight that our first quarter 2021 results include a one-time $13 million after-tax write-off of an intangible asset attributable to the insurance licenses of MAC, or Municipal Assurance Corp.\nMAC was our U.S. muni-only insurance subsidiary until we merged it into our larger New York insurance subsidiary Assured Guaranty Municipal Corp, or AGM, on April 1, 2021.\nExcluding this write-off, first quarter 2021 adjusted operating income would have been $56 million, representing an increase of 70% over first quarter 2020.\nThe restructuring simplifies our capital and organizational structure, eliminates the cost of maintaining an additional legal entity, and is expected to increase future statutory net investment income and the regulatory dividend paying capacity of the remaining U.S. insurance subsidiaries over the next few years.\nThe Insurance segment's first quarter contribution to adjusted operating income was $79 million compared with $85 million in the first quarter of 2020.\nExcluding the MAC license write-off, adjusted operating income would have been $92 million or an increase of $7 million.\nWithin the Insurance segment, total income from investment portfolio increased by $18 million or 24%.\nThe investment portfolio generates net investment income from its fixed maturity portfolio and equity in earnings from investees from alternative investments carried under the equity method.\nOur fixed maturity and short-term investments account for the largest portion of the portfolio, generating net investment income of $73 million in first quarter 2021 compared with $83 million in first quarter 2020.\nThe decrease in net investment income was primarily due to lower average balances in the externally managed fixed maturity investment portfolio, which declined due to dividends paid by the insurance subsidiaries that were then used for AGL share repurchases, lower short-term interest rates and lower income from our loss mitigation securities.\nEquity in earnings of investees primarily include AssuredIM Funds and several other alternative investments managed by third parties.\nThe AssuredIM Funds, primarily the CLOs and asset-based funds, generated a gain of $10 million in first quarter 2021 compared with a loss of $10 million in the first quarter of 2020.\nAlternative investments, managed by the third parties, generated gains of $9 million in the first quarter 2021.\nAs a reminder, equity in earnings of investees is a function of mark-to-market movements attributable to these short IM Funds, and therefore more volatile than the net investment income on the fixed maturity portfolio and will fluctuate from period to period.\nAs we shift our current fixed maturity long-term assets into these alternative investments, the related net investment income may decline.\nHowever, over the long term, we expect the enhanced returns on the alternative investment portfolio to be over 10%, which exceeds the returns on the fixed maturity portfolio.\nScheduled net earned premiums weren't consistent -- were consistent at $107 million year-over-year as recent new business production substantially offset the decline in earnings on Structured Finance transactions.\nFirst quarter 2021 refundings resulted in accelerations of $16 [Phonetic] million compared with $50 million in the first quarter 2020.\nLoss expense was $30 million in first quarter 2021 compared with $18 million in first quarter 2020.\nFirst quarter 2021 includes loss expense on both public finance, particularly Puerto Rico, as well as U.S. RMBS exposures.\nFirst quarter 2020 expenses consisted mainly of Puerto Rico loss expenses, offset by a benefit on U.S. RMBS, due in large part to increase excess spread.\nNet economic loss development of $13 million in the first quarter of 2021, primarily consists of $11 million in loss development on U.S. RMBS, which was mainly attributable to lower excess spread offset by benefits due to changes in discount rates and improved performance and recoveries on previously charged off loans in certain second lien transactions.\nThe economic loss -- the economic development attributable to change in discount rates for all transactions was a benefit of $48 million for first quarter 2021.\nOur expected losses as of first quarter 2021 reflect, in our scenarios, the terms of the Puerto Rico settlement agreement reached this week, which should also significantly reduce the future volatility of these reserves.\nThese agreements, in addition to our previous PREPA agreement represent over 93% of our net Puerto Rico par outstanding or 46% of total below investment grade net par outstanding.\nTurning to the Asset Management segment.\nAdjusted operating income was a loss of $7 million in the first quarter 2021 compared with a loss of $9 million in first quarter 2020.\nOur long-term view of the Asset Management segment is optimistic.\nSince the acquisition of AssuredIM, we have made great progress in advancing our strategic goals: we have liquidated assets in wind-down funds; increased fee earnings CLO AUM through the issuance of new CLOs and the sale of CLO equity from legacy funds; raised capital for new opportunities funds; and achieved attractive returns on the funds we have established since the acquisition.\nIn first quarter 2021, the increase in management fees from CLOs and opportunity and liquid strategies more than offset the decline in fees from our wind-down funds as our core strategies pick up momentum after a difficult 2020.\nThe Corporate division mainly consists of interest expense on the U.S. holding company's debt, as well as Board of Directors and other corporate expenses.\nAdjusted operating loss for the Corporate division was $29 million in first quarter 2021 compared with $39 million in the first quarter of 2020.\nFirst quarter 2020 included losses related to an investment impairment charge and a loss on the extinguishment of debt.\nOn the consolidated adjusted operating income basis, the effective tax rate may fluctuate from period to period based on the proportion of income in different tax jurisdictions.\nIn first quarter 2021, the effective tax rate was $15 million -- I'm sorry, 15% compared with 24.7% in first quarter 2020.\nTurning to our capital management strategy, in the first quarter of 2021, we repurchased 2 million shares for $77 million at an average price of $38.83 per share.\nSince then, we have continued the program and repurchased an additional 600,000 shares for $28 million.\nSince the beginning of our repurchase program in January of 2013, we returned $3.8 billion to shareholders, resulting in 64% reduction in total shares outstanding.\nAccumulative effect of these repurchases was a benefit of approximately $30 in adjusted operating shareholder's equity and $53 in adjusted book value per share, which helped drive these metrics to new record highs of over $79 in adjusted operating shareholder's equity and over $116 million in adjusted book value per share.\nFrom a liquidity standpoint, the holding companies currently have cash and investments of approximately $218 [Phonetic] million, of which $60 million resides in AGL.\nThese funds are available for liquidity needs or for the use in pursuit of our strategic initiatives to either expand our business or repurchase shares to manage our capital.\n",
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"content": "q1 adjusted operating earnings per share $0.55.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are subject to change due to new information or future events.\nFor the first time in our history, Assured Guaranty's adjusted book value has surpassed $100 per share and both shareholders' equity per share and adjusted operating shareholders' equity per share were also new records.\nWe achieved this milestone while producing our best direct new business insurance production for second quarter since the acquisition of AGM in July of 2009.\nOur financial guaranty, guaranty PVP of $96 million was 71% higher than in last year's second quarter.\nOur success reflects the tremendous work we did over several years to prepare for the unexpected.\nOur people were extremely effective, operating 100% remotely in unprecedented economic and market conditions.\nWe had the technology, processes, and training in place to help us excel during this pandemic and we did excel, proving again not only the competence and dedication of our employees, but also the resilience of our business model and the benefits of our value proposition.\nWith the virus creating market and economic uncertainty, bond yields had increased by the beginning of the quarter and credit spreads widened.\nInvestors turned more of their attention to credit quality for which our financial guaranty insurance is a solution and also to ratings durability, trading value stability and market liquidity, to all of which our product tends to add value.\nThe result has manifested in heightened demand for bond insurance.\nAs a result, we saw the best second quarter and first half direct U.S. public finance production in more than a decade, driving direct PVP of $60 million and $89 million, respectively.\nAnd I can tell you that with our July municipal insured par volume exceeding $2 billion, the surge in demand for our guaranty has not let up.\nAt the industry level, more than $9.1 billion of U.S. public finance primary market par was sold with bond insurance in the second quarter, the most for any quarter since mid-2009 and industry insurance penetration reached 8.7% of total new issue par sold, the highest quarterly level since 2009.\nSix months industry insured volume is 43% higher than in the first six months of 2019.\nIn this strengthened municipal bond insurance market, Assured Guaranty was selected to ensure 63% of the insured new issue par sold in the second quarter.\nCompared with the second quarter of last year, Assured Guaranty's primary market production was up 58% to $5.8 billion in insured par sold and up 22% to 318 new issue in transaction count.\nHe heightened par volume was partly driven by large transactions, but we continue to be the insurer of choice.\nWe insured large tax exempt and taxable deals across a variety of sectors and underlying rating categories, including, for example, A healthcare issues and AA general obligations.\nWe guaranteed 11 transactions of over $100 million in insured par during the quarter, the largest of which was a $385 million school district transaction with the dormitory authority of the state of New York, rated double AA3 by Moody's and AA minus by Fitch.\nThe high value that investors place in our guaranty was visible among credits with underlying S&P or Moody's ratings in the AA category, where we insured more than $1 billion of primary market par in the second quarter.\nWe are also seeing heightened demand for our secondary market insurance.\nDuring the second quarter, we insured $533 million of secondary market par compared with $233 million for the first quarter of the year and $327 million for the second quarter of 2019.\nIn aggregate for the primary and secondary markets, Assured Guaranty provided insurance on $6.3 billion of municipal bonds, 58% more than in last year's second quarter.\nAlthough by quarter end, municipal yields have trended close to historic lows seen in March, credit spreads generally remain wider than the pre-pandemic levels and that is one reason along with very strong issuance volume for the successful performance we are seeing.\nWe also had a great second quarter in our international infrastructure business, where we generated $28 million of direct PVP, over 3 times last year's second quarter PVP and the second highest quarterly direct PVP in the sector, since before the Great Recession.\nNotable transactions included our third solar bond wrap in Spain, the modification of terms of existing investment grade insured transaction to provide additional flexibility to the issuer and a secondary market guarantee to a European financial institution for a public sector credit.\nThe impact of COVID-19 has been mix for the international business.\nOn one hand, fewer transactions are coming to especially in transport and social infrastructure.\nAnd some transactions in our pipeline have been delayed though nine have been canceled.\nOn the other hand, credit spreads widen materially have not fully return to the previous tighter levels, which increases the value of our guarantees.\nAlso, we continue to see an increased variety of incoming new transaction inquiries, some of which are a direct result of COVID related investor concerns.\nOur global structured finance business also performed well in the second quarter contributing $8 million of PVP from a variety of transactions, including an insurance securitization and two whole business securitizations.\nThe pandemic has slowed both asset backed issuance and the progress in some of our transactions and development, but it has also widened credit spreads and created new opportunities.\nWe are seeing an increased number of investors led opportunities relating to portfolios of corporate credit exposure.\nOn our last call, I explained in detail our insured portfolio is in good shape to weather this economic disruption.\nWe have continued our due diligence and reached out to almost all the obligors we identified in the vulnerable section to learn how they plan to manage their resources.\nBased on our research and the additional information provided by obligors, we continue to expect no material pandemic related liquidity claims.\nTo-date, we have not been asked by any financial guarantee claims that we attribute to COVID-19 pandemic.\nFor below investment grade insured obligations, which we have identified is already under stress, we have updated assumptions to take into account the added stress of the pandemic.\nWe continue to believe that for the remainder of the portfolio, the 96% of par exposure that is investment grade, there should be no material losses caused by the pandemic.\nIn any case, as I said before, we have proven the resilience of our business model.\nFor example from 2008 through second quarter 2020, we paid $11 billion in gross claims, $5 billion in net and returned more than $4.3 billion to shareholders through share repurchases and dividends.\nYet our claim paying resources were virtually the same at the end of the period compared with the beginning.\nMeanwhile, we have dramatically reduced our par -- total par exposure and cut our insured leverage by more than half, measured by a variety of ratios.\nWe are in better shape today than before the Great Recession.\nI hope you will take a look at two -- at the two reports S&P published since the pandemic began.\nI mentioned one on our last call, S&P's April 3rd report on the bond insurance industry.\nThe second was S&P's annual review of Assured Guaranty that came out on July 16th.\nThe common theme of these reports was that, notwithstanding the current macroeconomic environment.\nS&P assess the risk profile to be low for both the bond insurers as an industry and for Assured Guaranty, a very positive conclusion.\nS&P affirmed the ratings of all of our business units -- of all of our insurance units at AA with a stable outlook in June.\nIn the annual review that followed S&P reiterated how our strong capital position, exceptional liquidity and proven business model support our financial strength rating.\nAdditionally, S&P recognized the increased demand for Assured Guaranty's products since the spread of COVID-19.\nWriting that investors flight to quality and wider credit spreads should continue to provide us with primary and secondary market underwriting opportunities.\nIn U.S. public finance it attribute the strong secondary market demand we've experienced to institutional investors finding the economics of bond insurance appealing as a tool for risk mitigation.\nIn the same report S&P said it ran a COVID-19 sensitivity stress test and even under the increased loss assumptions in that scenario our capital adequacy assessment would still be excellent, S&P also described our financial risk profile is very strong and wrote that during periods of economic stress, our insured exposures outperforms relative to the market segments in which we underwrite, due to our underwriting and risk management guideline.\nS&P does not published a figure for our excess capital under their AAA depression stress model.\nWe estimate that we have $2.6 billion of capital in excess of S&P's AAA requirement as of year-end 2019.\nAnd this incorporates the impact of our capital management program, the acquisition of BlueMountain, our elimination of an excess of loss credit facility and the continued payment of Puerto Rico debt service claims.\nAnother report I was reading was issued by Kroll Bond Rating Agency on July 30th.\nThey provided a detailed discussion of the recent increased activity in demand for bond insurance.\nIn the report, KBRA also makes a positive observation that it believes the pandemic should remain largely a liquidity event for bond insurers, with the exception of Puerto Rico.\nOn the subject of Puerto Rico, we continue to pursue a consensual resolution of the situation, while defending our rights in the Title III bankruptcies.\nCOVID-19 and the pending gubernatorial election may be slowing progress somewhat.\nIn recent news, PREPA hired a private U.S. Canadian consortium to operate its electricity transmission and distribution system.\nThis appears on the face to be a step in the right direction, but the essential step to restore and improve the power system is to complete the restructuring support agreement that all appropriate parties have agreed to.\nWe agree with the Oversight Board that quote as long as PREPA remains in Title III, the utility will not have an effective access to capital markets to fund the critical grid modernization and improvement plans.\nTitle III Court refused the lift to stay on our ability to assert our property rights with respect to Highways and Transportation Authority Revenue bonds.\nWe will appeal this ruling.\nAt least two members of the Oversight Board announced their immediate resignations -- imminent resignation and all members are subject to replacement or renomination.\nWe hope congressional leadership and the President choose Board members more familiar with municipal government and finance.\nLastly, supply chain management has become a significant issue on Capitol Hill, creating an opportunity for legislation that could allow the country to take full advantage of Puerto Rico's long history and well-established capabilities in the production of pharmaceuticals, medical supply to medical devices.\nThis would have solved the current public health crisis and improve the nation's security and preparedness for the future.\nWhile at the same time revive a key portion of the island's manufacturing base and provide impetus to its economic recovery.\nComing from the financial guaranty business to asset management, Assured Investment Management benefited from a strong rally in the credit markets during the second quarter and profitably monetize CLO debt tranches.\nWith CLO, issuance gaining steam, we acquired newly issued investment grade CLOs and in June Assured Management and Investment Management priced its first CLO issuance since the market dislocation.\nFor the current market environment as delay the realization of this business lines potential for the short-term, we remain confident in its diversification strategy.\nYesterday we announced an important change within the leadership of our Asset Management business.\nAndrew Feldstein, Chief Investment Officer and Head of the Asset management has decided to leave the company.\nDavid Buzen, BlueMountain's Deputy Chief Investment Officer will assume Andrew's responsibility as CEO and CIO of BlueMountain and Head of Asset Management and CIO at Assured Guaranty.\nAndrew will continue to serve on the boards of BlueMountain funds and to support a smooth transition.\nHe'll remain with the company as Senior Advisor to David through the end of October 2020.\nWe are confident in the long-term prospects of our Asset Management business under the leadership David Buzen and the talented senior management team.\nI want to emphasize that this leadership transition reflects no change in Assured Guaranty's strategy with respect to Assured Investment Management.\nWe continue to support the growth of the business and have allocated $1 billion of our investment portfolio to investment it manages, with the goal of generating even greater value for our investors and policyholder.\nI look forward to seeing our Asset Management business, making a significant contribution to the value of Assured Guaranty and I am certain Dave is the right person to lead this effort.\nHe was lead executive in our acquisition of BlueMountain and has been involved in every aspect of our Asset Management strategy and operations.\nHe is a consummate financial professional, who has served in top executive roles at a number of financial companies.\nAs we worked with David for a long time has over 30 years of experience includes senior positions at ACE Financial Solutions, which required Capital Re when David was its CFO and which is a company we now know as Assured Guaranty Corp.\nWe are in the middle of a unique year, in which a previously unknown disease has effective means of people, caused hundreds of thousands of deaths and disrupted economies worldwide.\nCongress, the administration and the Fed have taken action to provide money to people in need, inject monetary liquidity of businesses survive and support Capital market.\nState and local governments are tackling the challenges of providing essential services, administering social programs and meeting financial obligations and made sharp reductions in revenues.\nThey deserve additional direct federal assistance to provide -- to prevent large scale lay-offs of government employees and a potential cascade of economic hardships.\nWe've been impressed by the determination of our insured issuers, public officials to maintain essential services, while recognizing imperative to meet debt obligations to preserve their access to the capital market.\nAs a company, Assured Guaranty is better positioned than most to thrive in this environment.\nBy definition, our main product is designed to confident investors when the future is uncertain.\nCredit conscious investors have driven increased demand for our guaranty, giving issuers a way to reduce the cost of financing when they most need to do so.\nWe have abundant capital liquidity, supporting a 96% investment grade insured portfolio, consisting of transactions carefully selected to perform better under economic stress than others in their respective sectors.\nWith our ability as a guarantor to work with issuers facing short-term liquidity problems, or requesting reasonable amendments or waivers, we can help them in very serious financial trouble and we have now clearly demonstrated that we can be highly productive, while prioritizing the safety of our employees and clients.\nI'm very pleased with our results and progress on our strategic initiative this quarter.\nDespite the continued market turmoil, our business model proved resilient, we made significant progress in all three areas of our strategic focus.\nIn our Insurance segment, we had strong new business development, which is replenishing our unearned premium reserve and offsetting the scheduled amortization of the existing book of business.\nIn the Asset Management segment, we launched a new liquid asset strategy and restarted CLO issuance toward the end of the second quarter.\nIn terms of capital management, we are ahead of our plan, relative to the number of shares repurchased, which helped us to propel our adjusted book value per share to over $100, a record high.\nTurning to second quarter 2020, adjusted operating income was strong coming in at $190 million or $1.36 per share.\nThis consists of $154 million of income from our Insurance segment, a $9 million loss from our Asset Management segment and a $26 million loss from our Corporate division, which is where we reflect our holding company interest and other corporate expenses.\nStarting with the Insurance segment, adjusted operating income was $154 million compared to $161 million in the second quarter of 2019.\nNet earned premiums and credit derivative revenues in the second quarter 2020 were $125 million compared with $127 million in the second quarter of 2019.\nStructured finance net earned premiums and credit-driven revenues decreased to total of $13 million, due to the decline in this portfolio.\nOn the other hand, public finance net earned premiums increased in the second quarter 2020 compared to the second quarter of 2019, due to higher accelerations as well as a modest increase in scheduled net earned premiums, which is a result of increased premium writings in the last few quarters.\nIn total, accelerations due to refundings and terminations were $32 million in the second quarter 2020 compared with $29 million in the second quarter of 2019.\nAlso contributing to our increasing unearned premiums reserve was the reassumption of a previously ceded book of business from our largest reinsurer.\nThis reassumption resulted in the $30 million -- $38 million commutation gain.\nNet investment income for the Insurance segment was $82 million in the second quarter of 2020 compared with $110 million in the second quarter of 2019.\nThe decrease was primarily due to a large non-recurring benefit in 2019 from the favorable settlement of a troubled insurance transaction, that decreased the size of the loss mitigation portfolio.\nProceeds from the settlement were reinvested in lower yielding assets.\nThe average balance of the externally managed portfolio also declined, in part, because of a shift into alternative investments, including Assured Investment Management funds, which recorded at fair value in a separate line item, as opposed to net investment income.\nSecond quarter 2020 Insurance segment adjusted operating income also includes a $21 million after-tax mark-to-market gain on our investments in Assured Investment Management funds.\nThese investments are mark-to-market each reporting period with changes in the fair value recorded as a component of adjusted operating income in the line item equity and earnings of investees.\nThe fair value gains on the investments in Assured Investment Management funds in the second quarter of 2020 were driven by the overall market rebound.\nAs of June 30, 2020, the insurance companies had authorization to invest up to $500 million in funds managed by Assured Investment Management, of which $354 million have been invested as of June 30, 2020.\nGoing forward, we expect adjusted operating income will be subject to more volatility than in the past, as we shift investments from fixed income securities.\nOur long-term view of the enhanced return from the Assured Investment Management funds remains positive.\nLoss expense in the Insurance segment was $39 million in the second quarter of 2020 and was primarily related to economic loss development on certain Puerto Rico exposures.\nIn the second quarter of 2019, we recorded a benefit of $50 million primarily related to higher projected recoveries for previously charged up loans for second lien U.S. RMBS.\nAn increase in excess spread, improved performance and loss mitigation efforts offset in part by economic loss development on certain Puerto Rico exposures.\nThe net economic development in the second quarter 2020 was $34 million, which primarily consisted of loss development of $30 million in the U.S. public finance sector, primarily attributable to Puerto Rico exposures.\nNet economic loss development in U.S. RMBS of $1 million mainly consisted of increased delinquencies, offset by higher projected excess spread across both third and second lien transactions.\nIn the Asset Management segment, adjusted operating income was a loss of $9 million.\nWe had previously announced our strategy to transition the investment focus and business model of our Assured Investment Management platform core strategies, including the orderly wind down of certain hedge funds and legacy opportunity funds.\nPrior to the current market disruptions, we had made good progress on the winding down of legacy funds, with outflows of $541 million in the second quarter.\nWe expect the restructuring to continue throughout 2020, but depending on the duration and market impact of the pandemic, the execution of our strategy may take longer than originally anticipated.\nToward the end of the second quarter 2020, we launched a new liquid asset strategy, with initial funds focused on investments in municipal securities.\nIn addition, in second quarter of 2020, AGM, AGC and MAC entered into investment management agreement, with Assured Investment Management to manage a portfolio of their general account municipal obligations and CLOs.\nAs of June 30, 2020, the insurance subsidiaries have together allocated $250 million to the municipal obligation strategies and $100 million to CLO strategies, with authorization to allocate an additional $200 million to CLO strategies.\nWe believe the effect of the pandemic on market conditions and increased volatility may present attractive opportunities for the alternative asset management industry that Assured Investment Management may be able to capitalize on.\nAnd so our long-term outlook for the asset management platform remains positive.\nIn our Corporate division, the holding companies currently have cash and investment available for liquidity needs in capital management activities of approximately $70 million, of which $80 million resides in AGL.\nAdjusted operating loss for the Corporate division was a loss of $26 million in both second quarter 2020 and second quarter 2019.\nThis mainly consists of interest expense on the U.S. holding companies, public long-term debt and intercompany to the insurance companies, which were primarily used to fund the BlueMountain acquisition.\nIt also includes Board of Directors and other corporate expenses.\nOn a consolidated basis, the effective tax rate may fluctuate from period to period, based on the proportion of income in different tax jurisdictions.\nIn second quarter 2020, the effective tax rate was 14.2%, compared with 21% in the second quarter of 2019.\nTurning to our capital management strategy, in the second quarter of 2020, we repurchased 6 million shares for $164 million, for an average price of $27.49 per share.\nSince the end of the quarter, we have purchased an additional 800,000 shares for $90 million, bringing our year-to-date repurchases as of today to over 10 million shares.\nSince January 2013, our successful capital management program has returned $3.5 billion to shareholders, resulting in a 60% reduction in total shares outstanding.\nAs always future share repurchases are contingent on available free cash, our capital position and market conditions.\nThe cumulative effect of these repurchases was a benefit of approximately $23.56 per share in adjusted operating shareholders' equity and approximately $42.76 in adjusted book value per share, which helped drive these important metrics to new record highs of $71.34 in adjusted operating shareholders' equity per share and $104.63 of adjusted book value per share, which both represent record high.\n",
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"content": "compname reports q2 adjusted operating earnings per share of $1.36.\nq2 adjusted operating earnings per share $1.36.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: In our financial guaranty business, Assured Guaranty is having our best year for direct new business production in more than a decade based on direct PVP results since 2009 for both the third quarter and first nine months of 2020.\nAdditionally on a per share basis, Assured Guaranty's adjusted book value, shareholders' equity, and adjusted operating shareholders equity reached new highs.\nAs part of our capital management strategy, we have purchased more shares in nine months of this year than we did in all of 2019.\nAnd our Board of Directors has authorized additional share repurchases of $250 million.\nAlso on October 1st, S&P Dow Jones Indices announced that Assured Guaranty would become a component stock of the S&P SmallCap 600 index on October 7th.\nBoth the price and trading volume of our shares increased on the news.\nPresumably, because index funds and ETFs attract the S&P 600, as well as actively managed funds benchmark to the index began accumulating positions in our shares.\nKBW estimated that has the funds that track the S&P 600 will need to purchase 8.7 million shares.\nI think it's safe to say that certain passive investors and active small cap mutual funds and ETFs now form an additional base of AGO shareholders.\nThere are more than 2000 funds in the SmallCap investment category.\nTurning to U.S. product public finance production, we wrote $93 million of PVP in the third quarter, more than double our third quarter 2019 PVP and an 11 year record.\nIn terms of insured par sold, we continue to lead the industry guaranteeing 64% of the $11.9 billion of primary market insured par sold in the third quarter, which was the industry's highest quarterly insured par amount since mid-2009 and 82% higher than in last year's third quarter.\nBond insurance penetration reached 8.3%, up from last year's third quarter penetration of 5.7%.\nThe 7.7% penetration for the first three quarter, municipal bond insurance industry is likely to see its best annual market penetration in the insured par volume in over a decade and this is still in a very low interest rate environment.\nWe benefited from credit spreads that are wired than at the beginning of the year, but this is still a market where AAA benchmark yields have been below 2% almost all year.\nWall Street Journal has called this increase in penetration, a renaissance in the municipal bond insurance industry.\nDriven by the heightened demand for insurance, combined with a 35 [Phonetic] year-over-year increase in quarterly issuance, Assured Guaranty's third quarter originations totaled $7.5 billion of primary market par sold, essentially double the amount during the third quarter of 2019.\nOne of the new issues sold with our insurance in the third quarter was Assured Guaranty's largest U.S. public finance transactions since 2009, a $726 million of insured par for the Yankee Stadium project.\nThis transaction closed in October so it's PVP and par exposure will be reflected in the fourth quarter results.\nIt refunded $335 million of our previous exposure, so our net exposure to this credit increased by $391 million.\nThis is one of 19 new issues that utilize $100 million or more of our insurance during the third quarter.\nFor the first nine months, we provided insurance on $100 million or more of par on 32 individuals issued -- individual new issues, more than in any full year over the past decade.\nOur significant capital resources and strong trading value on larger transactions are important competitive advantages.\nWe believe two types of investors have driven our increase in larger transactions.\nThe first our institutions investing in the traditional tax exempt market, which are attracted by our strong balance sheet and broad proficiency and credit analysis.\nThe others are non-traditional investors in the growing taxable municipal bond market, including international investors to internal resources to evaluating surveil U.S. municipal credits may be limited.\nActual issuance represented approximately 30% of the muni market's total new issue par volume during the first nine months of 2020 compared with 5% to 10% in recent years.\nAnd 35% of our par insured on new issues sold in the period was taxable.\nDuring those nine months, the par amount we insured on taxable new issues totaled $5.5 billion compared with $1.5 billion in the first nine months of 2019.\nIn case of credits with underlying S&P or Moody's ratings in the AA category, we insured a total of $806 million of par for the quarter and during the first nine months more than $2 billion of par.\nThis year-to-date par volume is greater than our par volume of such AA credits in all of 2019.\nThis reflects the strength of our value proposition and the market's view of our financial strength.\nYear-to-date through September, we provided insurance on $15.7 billion municipal new issue par sold, of which $1 billion -- which is $1 billion more than in all of 2019.\nCombining primary and secondary market activity for the first nine months, we guaranteed $16.6 billion of municipal par, $6.2 billion more than in the same period last year, a 60% increase.\nIn international infrastructure finance, we completed the best third quarter origination since 2009's acquisition of AGM, producing $24 million of PVP, 52% more than in last year's third quarter.\nOur guaranty is now a mainstream solution and widely accepted option for efficiently financing infrastructure development.\nThe flow of transaction inquiries is much stronger than it was just a few years ago and little over a year's time we guaranteed four solar power transactions in Spain, including the most recent one in August.\nThese transactions are good examples of how our guaranty makes the financing of renewable energy projects more cost efficient.\nAnother significant third quarter transaction was a GBP90 million private placement to finance improvements to students accommodations at Kingston University in the United Kingdom.\nThe high insured ratings and associated lower investment -- investor capital charges as well as the long tenure of many infrastructure bonds we guaranty makes them an attractive for institutions seeking to optimize long-term asset liability matching.\nThe impact of COVID-19 has temporary slowed the new issued transaction flow.\nIt is also creating conditions that we expect to provide significant international opportunities.\nWe believe downgrades with a potential for them could make our guaranty more valuable for even a broader range of essential investment grade infrastructure financings, such as airports that are crucial for the region's economies.\nIn the medium term, we expect a massive global policy initiative to invest in infrastructure and renewables.\nAdditionally, we see opportunities where guaranty has been underutilized.\nIn Australia for example, we are ramping up our business development and advertising efforts and working with the local origination consultant to help us expand our network of relationships on the ground.\nOur international and structure finance groups often collaborate when it comes to bilateral risk transfer transactions that allow large asset portfolios to be managed more efficiently, whether from the perspective of capital efficiency, capital management, or risk mitigation.\nTransactions of these types are a strategic focus of our structured finance underwriting group.\nThese tend to be large transactions requiring significant due diligence and the timing regular.\nWe have a number of them in progress and expect to close in the fourth quarter or next year.\nIn other aspects of structured finance, we continue to explore opportunities to add value to a variety of securitizations, including for example, those for whole business revenues, tax credits and consumer debt.\nNow, let me provide some insight into the ability of our insured portfolio to weather today's unique economic circumstances.\nWe have continued to take a deep dive analytically into our highly diversified universe of insured exposures, especially in the sectors we view as the most potentially vulnerable to the consequences of pandemic such as mass transits, stadiums and hospitality among others.\nWhat we found is that the underwriting we did to select the credits we've insured and the structural protections we've required in order to be able to guaranty those transactions and work the way they were intended.\nWe again model performance of transactions in vulnerable sectors under economic stress test, assuming no Federal assistance beyond what was already authorized before September as well as significant reductions in future revenues.\nHaving updated that analysis, we remain confident that we do not expect first time claims arising from the pandemic that will lead to material ultimate losses.\nOn some transactions that were already classified as below investment grade, prior to the pandemic, we did make marginal reserve adjustments.\nAs of now, we have paid no claims that we believe were due to credit stress arising specifically from COVID-19.\nLast week, KBRA wrote that it used the pandemic as primarily a potential liquidity event for Assured Guaranty, it expressed that view in its ratings affirmation and release for our insurance companies last week, which were AA plus for AGM, MAC and our U.K. and French subsidiaries and AA for AGC.\nWe taken active role in managing risk at the transaction level.\nThis year, we have worked with some of our insured issuers to take advantage of low interest rates to reduce or to further debt service over the near-term through refinancings.\nThese transactions also typically benefit us by accelerating our premium earnings and generating new premium on refunding bonds that we insure.\nI won't say a lot about Puerto Rico today because a new Commonwealth Administration will be starting soon and the composition of the Oversight Board is in flex.\nSub-Board members have resigned and new Board members joined and others may be reappointed or replaced.\nI'll just repeat that achieving a consensual restructuring without further delay is the best thing that could happen for the people of Puerto Rico.\nThe recently announced release of $13 billion in federal assistance helped to improve the conditions for reaching such an agreement.\nThe integration of BlueMountain Capital, which we acquired last year is progressing.\nIn September we rebranded it, Assured Investment Management and rolled out the new branding on a newly launched Investment Management website.\nThese changes reflect the close alignment of our Investment Management business with our overall corporate strategy.\nAssured Investment Management currently manages $1 billion of our insured companies investable assets.\nThroughout the company, we are actively developing synergies between our Insurance division credit underwriting and surveillance skills and the Investment Management division's ability to structure and market investment products.\nWe want our Investment Management business to grow, as we continue to leverage our capital through the strategic business diversification.\nI believe that Assured Guaranty is in good position, both in the market and financially.\nI expect a strong finish for 2020, our U.S. public finance, international infrastructure and global structured finance businesses are strong pipelines of potential originations.\nAssured Guaranty is fortunate to be a company designed from the ground up to be resilient and succeed in difficult times, which we proved during the previous recession.\nAs the effectiveness of our remote operations and the diligence and commitment of our employees made it possible for us to perform well and operating safely in challenging times, allowing us to continue to working toward protecting investors and securities we insure during uncertain economy, assisting issuers and funding public services and manage their fiscal challenges and building a greater value for Assured Guaranty shareholders.\nThis quarter we have continued to make progress on our strategic initiatives.\nIn our Insurance segment, our strong premium production is replenishing our unearned proved reserve, offsetting the amortization of the existing book of business, which will be accretive to future earnings.\nIn terms of capital management, year-to-date at September 30th, we have already repurchased 11.4 million shares, which is well over our initial plan of approximately 10 million shares.\nAs for our third quarter 2020 results, adjusted operating income was $48 million or $0.58 per share.\nThis consists primarily of $81 million of income from our Insurance segment, a $12 million loss from our Asset Management segment and a $18 million loss from our Corporate division which -- where we reflect our holding company interest expense as well as other corporate income and expense items.\nStarting with the Insurance segment, adjusted operating income was $81 million compared to $107 million in the third quarter 2019.\nThis includes net earned premiums and credit derivative revenues of $113 million compared with the $129 million in the third quarter of 2019.\nThe decrease was primarily due to lower net earned premium accelerations from refundings and terminations, offset in part by an increase in scheduled earned premiums due to higher levels of premiums written in recent periods.\nIn total, accelerations of net earned premiums were $18 million in the third quarter 2020 compared with $38 million in the third quarter of 2019.\nNet investment income for the Insurance segment was $75 million compared with $89 million in the third quarter of 2019, which do not include mark-to-market gains related to our Assured Investment Management funds and other alternative investments.\nAs we shift to alternative investments and continue our share repurchase program, average balances in the fixed maturity portfolio have declined.\nAs of September 30, 2020, the insurance companies have authorization to invest up to $500 million in funds managed by Assured Investment Management, of which over $350 million had been deployed.\nIncome related to our Assured Investment Management funds and other alternative investments are recorded at fair value in a separate line item from net investment income.\nThe change in fair value of our investments in Assured Investment Management funds was a $13 million gain in the third quarter 2020 across all strategies.\nThese gains were recorded in equity and earnings of investees, along with an additional $7 million gain on other non-Assured Investment Management alternative investments with a carrying value of almost $100 million.\nThis compared to only $1 million in fair value gains in the third quarter of 2019.\nGoing forward, we expect adjusted operating income will be subject to more volatility than in the past.\nAs we shift assets to alternative investments.\nLoss expense in the Insurance segment was $76 million in the third quarter 2020 and was primarily related to economic loss development on certain Puerto Rico exposures.\nIn the third quarter of 2019, loss expense was $37 million also primarily related to Puerto Rico exposures, but was partially offset by a benefit in the U.S. RMBS transactions.\nThe net economic development in the third quarter 2020 was $70 million, which mostly consisted of $56 million in loss development for the U.S. public finance sector principally Puerto Rico exposures.\nThe Asset Management segment adjusted operating income was a loss of $12 million.\nThe impact of the pandemic continues to challenge the timing of distributions out of our wind-down funds and of new CLO issuance.\nAdditionally, price volatility and down grades have triggered over-collateralization provisions in CLO transactions that resulted in the third quarter 2020 management fee deferrals of approximately $3 million.\nIn the third quarter 2020, AUM inflows were mainly attributable to the additional funding of a CLO strategy under the intercompany investment management agreement, which we executed last quarter.\nThese represent assets in our insurance company subsidiaries' fixed maturity investment portfolios.\nOur long-term view of the enhanced returns from the Assured Investment Management funds remains positive.\nWe believe the ongoing effect of the pandemic on market conditions and increased market volatility may present attractive opportunities for Assured Investment Management and for the alternative asset management industry as a whole.\nAdjusted operating loss for the Corporate division was $18 million for the third quarter of 2020 compared with $28 million for the third quarter of 2019.\nThis mainly consists of interest expense on the U.S. holding company's public long-term debt as well as inter-company debt to the insurance companies that was primarily used to fund the BlueMountain acquisition.\nIt also includes Board of Directors and other corporate expenses and in the third quarter of 2020, it also include a $12 million benefit in connection with the separation of the former Chief Investment Officer and Head of Asset Management from the company.\nFrom a liquidity standpoint, the holding company currently have cash and investment available for liquidity needs and capital management activities of approximately $82 million, of which $20 million reside AGL.\nOn a consolidated basis, the effective tax rate may fluctuate from period-to-period, based on the proportion of income in different tax jurisdictions.\nIn the third quarter 2020, the effective tax rate was a benefit of 32.7% compared with a provision of 16.3% in the third quarter 2019.\nThe tax benefit in the third quarter of 2020 was primarily due to a $17 million release of reserves for uncertain tax positions upon the closing of the 2016 audit year.\nTurning to our capital management strategy, in the third quarter of 2020, we repurchased 1.9 million shares for $40 million for an average price of $20.72 per share.\nSince the end of the quarter, we have purchased an additional 1.7 million shares for $46 million, bringing our year-to-date share repurchases as of today to over 13 million shares.\nSince January 2013 our successful capital management program has returned $3.6 billion to shareholders, resulting in a 61% reduction in total shares outstanding.\nThe cumulative effect of these repurchases was a benefit of approximately $25.43 per share in adjusted operating shareholders' equity and approximately $45.48 in adjusted book value per share, which helped drive these important metrics to new record highs of $73.80 in adjusted operating shareholders' equity per share and over $108 million of adjusted book value per share.\nFinally, in connection with the capitalization of AGM French subsidiary, AGM's third quarter 2020 investment income increased due to dividends received from its U.K. subsidiary, which increased AGM's 2020 dividend capacity to its holding company parent.\nHowever, as always future share repurchases are contingent on available free cash, our capital position and market conditions.\n",
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"content": "q3 adjusted operating earnings per share $0.58.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are subject to change due to new information or future events.\nIn a successful third quarter of 2021, Assured Guaranty's new business production generated $96 million of PVP.\nThis is our second highest result for a third quarter in the last decade.\nAt the nine months mark, our year-to-date PVP totaled $263 million, which puts us on pace with last year's outstanding production.\nThe business was well distributed across our U.S. public finance, international infrastructure and global structured finance markets for both the third quarter and nine months.\nIn terms of shareholder value as of September 30, 2021 on a per share basis, shareholders' equity, adjusted operating shareholder's equity and adjusted book value all reached record highs of $88.42, $82.89 and $122.50 respectively.\nYear-to-date Assured Guaranty is earned $197 million of adjusted operating income, about the same as in last year's first three quarters notwithstanding a $138 million after-tax loss on debt extinguishment.\nThis accelerated recognition of an expense resulted from the voluntary early redemption of certain senior notes.\nThese redemptions and the issuance of lower coupon debt will reduce next year's debt service by $5.2 million.\nRob will provide more detail on the debt issuance later.\nDuring the third quarter total municipal bond issuance was strong with $121 billion of new par issued, the second highest third quarter volume in a dozen years.\nFor the first three quarters, new par issue of $343 billion exceeded that of the comparable period in 2020 which was a record year.\nInsurance penetration continued its upward trend, reaching 8.5% for both the third quarter and nine months, the highest level for a third quarter in any nine month period in more than a decade.\nThis was achieved even though the interest rate environment remained challenging, although benchmark yields moved a bit higher during the quarter, they remain low by historical standards and credit spreads compressed to the tightest levels in a decade.\nIn this environment, Assured Guaranty continue to lead the municipal bond insurance industry with the third quarter market share of almost two-thirds of the insured par sold in the primary market as we guarantee 270 transactions for a total of $6.7 billion in insured par.\nAt the nine month mark, we would guarantee more than 60% of insured new issue par sold this year.\nThe $17.9 billion we insured in the primary market was 90% higher than in the first nine months of 2020 and 88% more than in the first nine months of the most recent pre-pandemic year 2019.\nIt was in fact our highest primary market insured par for the first nine months in a decade.\nWe have continued to benefit from institutional investors preference for Assured Guaranty's insurance on larger transactions.\nDuring the third quarter, we insured 17 transactions with $100 million or more in insured par, which brings our total year-to-date transaction count in this category to 38 just one deal short of the number we insured in all of 2020.\nAlso in the third quarter, we continue to add value on AA credits ensuring $836 million of par on 27 deals, that each has at least one rating in AA category from either S&P or Moody's.\nThe 83 municipal issues we insured in this category through September of this year aggregated to more than $3 billion of insured par compared with $2 billion in the first nine months of last year.\nIt was public finance usually generates a large percentage of our PVP each quarter and it's $55 million of third quarter PVP is no exception.\nBut we have a uniquely diversified approach to producing new business.\nOur international infrastructure business has been a reliable contributor to our production in every quarter for more than five years.\nIt produced $17 million of PVP in the third quarter of 2021.\nOne significant transaction was a GBP113 million student accommodation issued by the University of Essex.\nWe have a substantial pipeline of high and medium probability transactions for the rest of this year and the first half of next.\nIn the transaction inquiries we are receiving our increasingly diverse.\nOver the longer term, we believe infrastructure will continue to be a significant international market for us.\nIn the U.K. alone, the government has put out a paper anticipating as much as GBP650 billion of public and private infrastructure spending over the next 10 years.\nIn Global Structured Finance, third quarter PVP was very strong $24 million bringing the year-to-date total to $35 million.\nWe closed on a large insurance securitization in the third quarter and our CLO activity has been accelerating.\nWe guaranteed two euro denominated CLOs in the quarter, our guarantees of CLOs attract new investors, which might otherwise be discouraged by the higher capital requirements on uninsured CLOs, and we are seeing more opportunities to help investors reduce the capital consumed by both existing structured finance exposures and new investments.\nOverall, the quality of our insured portfolio continue to improve as a below investment grade portion of our insured portfolio declined by $300 million during the quarter as within sight of falling below 3% of net par exposure.\nPuerto Rico issues account for almost half of our below investment grade net par outstanding, and there have been important positive developments in the efforts to complete debt restructurings under PROMESA.\nNegotiated agreements with these restructurings apply to 95% of our par exposures to Puerto Rico entities with the balance of our exposures remaining current on debt service payments.\nThe large end was broken on October 28 when the oversight Board agreed that the recently passed Commonwealth Legislation intended to authorize issuance and new exchange securities as part of the Commonwealth restructuring met the Board's condition and a revised plan of adjustment could move forward to the confirmation hearing, which is scheduled to start in November 8th, three days from now.\nMeanwhile, the Commonwealth revenues have exceeded expectations and billions more have been received or are expected from Federal Coronavirus Relief and Disaster Relief allocations.\nAnd the other may benefit further from pending federal physical infrastructure bill and build back better reconciliation bill.\nOn our last call, I mentioned SPs affirmation in July were AA stable outlook.\nFinancial strength ratings decides to our insurance subsidiaries.\nThis has been followed in October by KBRA's affirmation of a AA plus rating of AGM, Assured Guaranty U.K. and Paris Assured Guaranty Europe.\nImportantly it also upgraded AGC to AA plus based on AGC's strength and capital position relative the KBRA's conservative stress loss modeling along with separate analysis of AGC's Puerto Rico, RBS and certain other exposures.\nKBRA also noted AGC's decreased insurance leverage, the substantial de-risking of its insured portfolio and the positive movement toward resolution of Puerto Rico's Title 3 process.\nAll the ratings have stable outlooks, by the way the Puerto Rico settlement agreements were also deemed credit positive by Moody's in its credit opinion about AGM published in July.\nOn the asset management side of our business, we have been participating in a very active CLO market.\nWe increased fee earning CLO assets during the third quarter largely by launching one CLO which brought the number of CLOs we issued during the first nine months to four.\nThese new CLOs were responsible for a $1.7 billion of the one -- of the $3.8 billion increase in fee earning CLO assets since the year began.\nThe remaining $2.1 billion of the increase resulted primarily from selling CLO equity previously held in AssuredIM Funds and converting AUM from non-fee earning to fee earnings during the year.\nWe have shared virtually all of the CLO equity held by AssuredIM legacy funds and 96% of our CLO AUM is fee earning now.\nWe expect the CLO market to remain strong through year-end.\nWe reset or refinance three CLOs in the United States this quarter, adding up to the total of four CLOs in the U.S. and three CLOs in Europe that were reset or refinanced for the year through third quarter.\nFor these transactions are managed on a sub-advisory basis.\nAfter the third quarter end, in October we closed a new CLOs in the United States.\nIn addition, we currently have two open CLO warehouses, one in the U.S. and one in Europe, we are planning to open one additional CLO warehouse in the U.S. before the end of the year.\nThose CLOs and ongoing AssuredIM Funds overall have performed well.\nI look forward to a successful finish for Assured Guaranty this year.\nOur track record proves that our company is built to stand severe disruption in the financial markets.\nAnd our recent results strongly suggest that a great number of investors appreciate the resilience of our business model, understand our value proposition and recognize our financial strength.\nThose investments will be a source of our success for years to come as we continue to protect our policyholders and create value for our clients and shareholders.\nThis quarter, we continue to make great progress on our capital management strategies.\nAfter issuing $500 million of 10-year senior notes at a rate of 3.15% in May, I'm pleased to report that AGUS Holdings issued another $400 million of 30-year senior notes in August at an attractive rate of 3.6%.\nMost of the proceeds of these debt offerings were used to redeem $600 million of long-dated debt obligations, and the remaining proceeds were designated for general corporate purposes including share repurchases.\nThe redemptions included $430 million of debt we assumed in 2009 as part of the FSAH acquisition with coupons ranging from 5.6% to 6.9% and remaining terms of approximately eight years, as well as $170 million of AGUS 5% senior notes due in 2024.\nThese debt refinancings had several benefits to the company.\nFirst, we reduced the average coupon on redeemed debt from 5.89% to 3.35% which will result in a $5.2 million annual savings until the next debt maturity date.\nWe expect continual annual interest savings after that.\nSo the amount of such savings will depend on the interest rate environment and the refinancing decisions we make at the time.\nSecond, we reduced our 2024 debt refinancing need from $500 million to $330 million.\nAnd lastly, the debt proceeds, we borrowed in excess of those used for redemptions will provide flexibility to execute other strategic priorities including share repurchases without significantly affecting our leverage or interest coverage ratios.\nThese debt redemptions resulted in a pre-tax loss on debt extinguishment of $175 million or $138 million on an after-tax basis, consisting of two components.\nFirst, $176 million acceleration of unamortized fair value adjustments that were originally recorded in 2009 as part of the FSAH acquisition, and second, a $19 million make whole payment to debt holders of the redeemed AGUS 5% senior notes.\nIt is important to note that $156 million of the $175 million loss was a non-cash expense.\nThe amortization of these purchase adjustments had been slowly amortizing into interest expense since 2009 and we're scheduled to continue to amortize into interest expense for another eight years.\nThe redemption of this debt merely accelerated the timing of that expense.\nDespite this charge, our third quarter 2021 adjusted operating income was $34 million or $0.45 per share.\nThe loss on debt extinguishment reduced adjusted operating income by $1.87 per share.\nIn the Insurance segment however, adjusted operating income was significantly higher at $214 million for the third quarter 2021 up from $81 million in the third quarter of 2020.\nThe increase is primarily due to favorable loss development, which was a benefit of $94 million in the third quarter of 2021.\nThe largest component of the economic benefit was attributable to a $65 million benefit in U.S. RMBS exposures that was mainly related to a benefit from a higher recoveries and second lien charged-off loans in deferred first lien principal balances.\nIn addition, there was a $31 million benefit on public finance transactions due to mainly the refinement of the mechanics of certain terms of the Puerto Rico support agreements.\nThe economic development attributable to changes in discount rates across all transactions was not significant in the third quarter of 2021.\nOther components of the Insurance segment also performed well in third quarter 2021.\nThe investment portfolio generated total income of $102 million, an increase from $95 million in third quarter 2020.\nThe increase was mainly due to the performance of the alternative investment portfolio including AssuredIM funds which collectively generated $33 million in the third quarter of 2021 compared with $20 million in the third quarter of 2020.\nSince the establishment of AssuredIM, the insurance subsidiaries have invested $380 million in AssuredIM Funds which now have a net asset value of $465 million and have produce inception to-date return of almost 20%.\nAs a reminder, equity in earnings of investees is a function of mark-to-market movements attributable to the short IM funds and other alternative investments.\nIt is more volatile than the net investment income on the fixed maturity portfolio and will fluctuate from period-to-period.\nOur fixed maturity and short-term investments account for the largest portion of the portfolio generating net investment income of $69 million in third quarter 2021 compared with $75 million in third quarter 2020.\nThe decrease in net investment income was primarily due to lower average balances in the loss mitigation investment portfolio.\nAs we shift fixed maturity assets into alternative investments, net investment income from fixed maturity securities may decline.\nHowever, over the long term, we are targeting enhanced returns on the alternative investment portfolio of over 10%, which exceeds the projected returns on the fixed maturity portfolio.\nIn terms of premiums, scheduled net earned premiums were consistent relative to third quarter 2020.\nAnd accelerations due to refundings and terminations were $15 million in third quarter 2021 compared with $18 million in the third quarter of 2020.\nIn the Asset Management segment, we have continued to make great progress in advancing our strategic goals.\nThis quarter, we increased fee earnings CLO AUM with the issuance of $598 million in new CLOs.\nWe continue to liquidate assets and wind down funds and now have less than $1 billion of legacy AUM in those funds.\nAnd using a short IM's investment management expertise, we have expanded investment strategies in the insurance segment.\nTo-date, we have recorded strong mark-to-month results on the fund established by short IM.\nIn the Asset Management segment, adjusted operating loss was $7 million in the third quarter 2021 compared to an adjusted operating loss of $12 million in the third quarter of 2020.\nHowever, asset management revenues increased 38% in third quarter 2021 compared with third quarter 2020 due mainly to the increase in CLO fee earning AUM and the recovery of previously deferred CLO fees in 2021.\nThe COVID-19 pandemic and downgrade in loan markets had triggered overcollateralization provisions in CLOs in the second and third quarters of 2020, resulting in the deferral of CLO management fees.\nHowever, as of September 30, 2021, none of the short IM CLOs were triggering over collateralization provisions, and therefore, none of the short IM CLO fees were being deferred.\nFees from opportunity funds were also up as AUM increased to $1.6 billion as of September 30, 2021 from $1 million as of September 30, 2020.\nFees from the wind-down funds decreased as distributions to investors continued, and as of September 30, 2021, the AUM of the wind-down funds was $809 million compared with $2.3 billion as of September 30, 2020.\nThe corporate division typically consists mainly of interest expense on U.S. holding company's debt and corporate operating expenses.\nThis quarter, it also includes a debt extinguishment charge, which brought third quarter corporate results to a net loss of $169 million.\nIn third quarter 2021, the effective tax rate was a benefit of 57% and compared with the benefit of 33% in the third quarter of 2020.\nThe overall effective tax rate on adjusted operating income fluctuates from period to period based on the proportion of income in different tax jurisdictions.\nThe loss on extinguishment of debt in the third quarter 2021 reduced income in the U.S. compared to other jurisdictions, resulting in the low rate for the quarter, while third quarter 2020 benefited from the release of a reserve for uncertain tax positions.\nTurning back to our ongoing capital management strategies.\nWe repurchased 2.9 million shares for $140 million in third quarter of 2021 at an average price of $47.76 per share.\nThis brings year-to-date repurchases to $305 million as of September 30, 2021.\nThe continued success of this program helped to drive our per share book value metrics to record highs.\nSubsequent to the quarter close, we repurchased an additional 1.5 million shares for $77 million.\nSince the beginning of our repurchase program in January 2013, we have returned $4 billion to shareholders under this program, resulting in a 67% reduction in total shares outstanding.\nThe cumulative effect of these repurchases was a benefit of over $33 in adjusted operating shareholders' equity per share and $58 in adjusted book value per share, which helped drive these metrics to new record highs of more than $82 in adjusted operating shareholders' equity per share and $122 in adjusted book value per share.\nFrom a liquidity standpoint, the holding companies currently have cash and investments of approximately $272 million, of which $86 million resides in AGL.\nThese funds are available for liquidity needs or for use in the pursuit of our strategic initiatives to expand our business or repurchase shares to manage our capital.\nAs of today, we have $220 million of remaining share repurchase authorization.\n",
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"content": "q3 adjusted operating earnings per share $0.45 including items.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: The extraordinary circumstances of 2020 tested Assured Guaranty's business model, operations, and people once again and we delivered remarkably strong results in a year marked by a public health crisis and economic crisis, volatile financial markets, a tumultuous social and political environment.\nWe prepared well for the technological and organizational challenges of operating remotely and safely during the COVID-19 pandemic and our employees showed the dedication and capability to achieve strong results.\nMost importantly, we saw the clear success of our efforts over many years with several in insured portfolio that would perform well in a severely distressed global economy.\nThe year's challenges made our 2020 accomplishments all the more impressive.\nOur new business production totaled $389 million of direct PVP exceeded by $75 million -- the direct PVP we produced in every year but once since 2010.\nThe sole exception was the $553 million of direct PVP we produced in 2019 making the last two years direct production our best in this decade.\nThese strong results compare to a reliable base for future earnings for years to come.\nIn our core business, U.S. municipal bond insurance we guaranteed more than $21 billion of foreign primary and secondary markets, generated $292 million of PVP, both 10-year records for direct production.\nWe again set new per share records for shareholders' equity and adjusted operating shareholder's equity with totals at year-end of $85.66, $78.49 respectively.\nDuring the year, our adjusted book value per share exceeded $100 for the first time.\nAt $114.87 year end of adjusted book value per share reflected the greatest single year increase since our IPO $17.88 and the second highest growth rate of 18%.\nWe retired a total of 16.2 million common shares mainly through highly accretive share repurchases at an average price of $28.23.\nWe spent 11% less in 2022 repurchase.\nWe repurchased 31% more shares than in 2019.\nWe returned a total of $515 million to shareholders through repurchases and dividends.\nWe also repurchased $23 million of outstanding debt.\nOur Paris-based subsidiary Assured Guaranty SA was awarded ratings of AA by S&P and AA+ by KBRA and underwrote its first new transactions allowing us to seamlessly continue our continental European operations in the wake of Brexit.\nWe also transferred our portfolio of transactions insured by our UK subsidiary to the French company.\nAnd we successfully integrated our asset management business in its first full year of operations and rebranded it Assured Investment Management.\n2020 was a profitable year where we earned $256 million in adjusted operating income or $2.97 per share.\nBut our most compelling news of 2020 was our performance in U.S. public finance where conditions were volatile.\nThe benchmark 30 year AAA municipal market data interest rate began the year at 2.07%, jumped in March as high as 3.37%, bottomed down in August at a historic low of 1.27%.\nIn early spring investors were shocked by the potential scale of the pandemic's economic impact, municipal bond funds experienced method outflows.\nAt that time for PO analysts of any were predicting that 2020 will see $452 billion of municipal bonds issued the greatest annual par value on our volume on record.\nThis action by the Federal Reserve to help stabilize financial markets by maintaining short-term interest rates near zero and supporting the federal loan program.\nThese included $500 billion municipal liquid facility which reassured the bond market by providing a backup source of liquidity for states and municipal.\nInvestors returned to the municipal market with a heightened focus on credit quality, trading value stability and market liquidity all concerned to drive demand for our bond insurance.\nAnd investment grade credit spreads widened significantly before [Indecipherable] BBB credits.\nAs a result bond insurance penetration rose to 7.6% of par volume sold in the primary market, almost a full percentage point above the past decade's previous high.\nAssured Guaranty led this growth with a 58% share of insured new issue par sold.\n$21 billion of U.S. public finance par we insured in 2020 was 30% more than in 2019 and included taxable and tax exempt transactions in both primary and secondary markets.\n2020 PVP was up 45% year-over-year.\nMany issuers took advantage of lower interest rates to refund existing issues in many cases using taxable bond for advanced refunding.\nCorrespondingly, taxable issues widened the investor base in non-traditional investors both domestically and internationally.\nMany of these investors could particularly benefit from our guarantee because of our greater familiarity with the municipal bond structures and credit factors.\nWe insured $6.8 billion of forum taxable municipal new issues in 2020, up from $3 billion in 2019, $1.5 billion in 2018.\nWe also guaranteed $2.5 billion of par the new issues that had underlying ratings in the AA category from S&P or Moody's, which was $1 billion more than in 2019.\nWhile investors had no reason to see default risk in such high quality credits many believe the risk, the rating downgrades had increased in all rating categories.\nThis gave investors an additional incentive to prefer our insured bonds over uninsured bonds.\nThere are Demonstratable cases where after [Indecipherable] bonds we had insured saw underlying downgraded or its credit viewed as distressed the insured bonds sell at market value better than the comparable uninsured bonds.\nThe increase in institutional demand for our guarantee was evident in 39 new issues, up from 22 in 2019 where we provided insurance in $100 million or more of par.\nThese include one of our largest U.S. public finance transactions in many years, $726 million of insured refunding bonds issued by Yankee Stadium, LLC.\nOur production in Healthcare Finance made a strong contribution during 2020 as we guaranteed $2.7 billion of primary market par on 25 transactions.\nAs the only provider of bond insurance in the healthcare sector Assured Guaranty had 9.7% of all healthcare revenue bond par issued in 2020.\nAdditionally we guaranteed for $164 million of healthcare par across 39 different secondary market policies.\nAnother highlight was our reentry after seven years into the private higher education bond market where we insured a total of $690 million of par for Howard, Drexel and Seton Hall Universities.\nFor Howard University we insure two issues totaling $320 million in par in insured par.\nOur International Public Finance business produced $82 million of PVP during 2020 even though a number of opportunities were delayed due to pandemic conditions.\nHowever the pandemic also had the positive effects of widening credit spreads.\nWe executed significant transactions including three solar energy transaction in Spain, student accommodation financing for Kingston University in the United Kingdom.\nWe have developed a strong pipeline for 2020.\nIn our Worldwide Structured Finance business, we executed a diverse group of transactions in the asset-backed securities, insurance capital management and other structured finance sectors and generated $16 million of PVP during 2020.\nEven though pandemic conditions constrained our marketing activities we were able to lay the groundwork for a variety of potential transactions in 2020.\nThe efficacy of our underwriting and risk management was evident in the overall performance of our insured portfolio.\nThis credit quality changed little even as necessary efforts to control the endemic disrupted the economy.\nOur par exposure to credit review below investment declined by $531 million, a 6% decrease and ended the year at less than 3.5% of net par outstanding.\nOur surveillance professionals reacted to the early news of the pandemic by properly identifying the insured portfolio sectors most likely to weaken evaluating the vulnerability of each of these sectors obligations, reaching out directly to issuers in many cases.\nIn general what we found was reassuring.\nWe have paid only relatively all first-time insurance claims we believe were due at least in par to credit stress rising specifically from COVID-19.\nWe currently project full reimbursement of these claims.\nU.S. municipal bonds make up about three quarters of our insured portfolio, asset class they are well structured to protect bond holders with most of our transactions containing covenants that requires issuers to increase tax rates, fees and charges, make sure they are adequate funds to meet their service requirements.\nAnd many also require remaining to debt service reserve funds with up two year's worth of debt service coverage.\nMunicipalities generally improved their financial condition in the decade since the Great Recession, which further prepared them to handle the market disruption caused by the pandemic.\nRegarding Puerto Rico, we announced earlier this week that we have agreed to conditionally support their revise GO of public bidding authorities plan support agreement with the Oversight Board and other creditors of Puerto Rico in the PBA.\nAs we have said all along we support it consensually, negotiated and comprehensive approach to resolving Puerto Rico's current financial challenges.\nWe have conditionally supported this agreement with the express understanding that the affected parties will work with us in good faith to make this agreement part of a more comprehensive solution one that respects our legal rights and ultimately achieves the goal of bringing the Title 3 process to adjust an expeditious conclusion.\nWe will continue to work diligently and sharply toward the resolution of any remaining issues the GO and the PBA credits as well as other Puerto Rico credits such as salary and transportation bonds, prevention authority bonds and others.\nThis effort is taking place amid occurred during economic news, significant federal assistance has been unlocked, Commonwealth revenues continue to exceed the expectations underlying the Oversight Board's fiscal plans resulting in aggregate Commonwealth balances tripling over the last three years to more than $20 billion at year-end 2020 and reaching as high as almost $25 billion mid-year.\nOur total net par exposure to Puerto Rico decreased in 2020 by $545 million including $372 million of water and sewer bonds that were redeemed without any claims having been made on our policy.\nTurning to asset management, our corporate strategy for any new business -- for entering new business was to diversify our business profile by building a fee-based revenue source that complements our risk-based premium revenues utilizing our core competency of credit evaluation.\nAssured Investment Management also gives us a in-house platform to generally improve investment returns -- to generate improved investment returns.\nOur Asset Management subsidiary accomplished a number of strategic objectives.\nAssuredIM issued two new CLOs, opened a European CLO warehouse during the year.\nIt also created a specialized investment advisor that launched new healthcare opportunity funds and continued its planned strategy of unwinding certain legacy funds.\nAssuredIM sold CLO equity positions in those bonds to third parties.\nEven though AssuredIM assets under management in the wind down funds were reduced by $2.4 billion its total AUM changed very little declining by less than 3% to $17.3 billion.\nAssured Guaranty's insurance companies have allocated $1.1 billion of investments from AssuredIM to manage, of which, almost $600 million was funded as of year-end.\nAs of October 1, 2020, we were pleased to learn that Assured Guaranty would become a competitor of the Standard & Poor's Small Cap 600 Index.\nWe believe there are thousands of passive and active small cap mutual funds and exchange-traded funds, attractive benchmark to this Index and therefore are likely to hold our shares for the long term.\nThese investors' appetite for our shares was reflected in a 31% increase in our share price the week following the announcement.\nOur share price continue to grow and in the year 44% higher than on October 1 almost doubling through February 25 of 2021.\nInclusion in the Index changed the composition of our shareholder base to be somewhat more heavily weighted toward the index focused asset managers including our second- and fourth-largest shareholders which together hold approximately 20% of our shares at year-end.\nTimes like these are no substitute for financial strength, experience and judgment.\nThese are qualities that enables Assured Guaranty to stand the test of time to more than three decades of market cycles and unexpected economic shocks.\nThey are attributes that enables us to help borrowers of public finance, infrastructure and structured finance markets as well as financial institutions, pension funds, insurance companies, retail investors to navigate the current economy.\nWe are optimistic about 2021.\nOn the whole U.S. municipal revenues have fared much better than the market originally feared from the pandemic.\nThey remain under stress.\nBut we believe few investment grade credits will default least of all those that we have selected to insure.\nWe are confident in the quality of our insured portfolio, our financial strength and our financial liquidity.\nAnd many investors have a renewed appreciation of our value proposition.\nAs infrastructure spending increases in our markets to address deferred needs and provide economic stimulus we expect to continue to find opportunities to assist issuers managing their financing costs.\nLonger term, we believe 2020 was a pivotal year that's likely to leave a lasting impression the great value our guarantee provides when something as unexpected and distressing as COVID-19 occurs.\nWe continue to work to create value through a thriving financial guarantee business and a growing asset management arm.\nWe will never lose sight of our role as stewards of capital where we are committed to managing efficiently protect policyholders, to reward our shareholders and our clients.\nLet me start by highlighting this year's achievements against our long-term strategic initiatives.\nIn 2020 we had strong PVP results, particularly in the U.S. public finance sector which replenished enough deferred premium revenue to offset scheduled amortization and refundings.\nWe also retired 16.2 million shares, mainly through share repurchases which helped to boost adjusted book value per share to a new record of over $114 per share.\nIn our Asset Management business, we increased fee earning AUM from $8 billion to $12.9 billion or 62% across CLO opportunity and liquidity strategies.\nAs of yearend 2020 Assured Guaranty insurance companies had $1.1 billion of invested assets that is managed by Assured Investment Management of which $562 million is through an investment management agreement and $522 million is committed to Assured Investment Management funds, which had a total return of 15.6% on the invested balances.\nTurning to our fourth quarter 2020 results, adjusted operating income was $56 million or $0.69 per share compared with $87 million or $0.90 per share in the fourth quarter of 2019.\nThe contribution from our insurance segment for fourth quarter 2020 was $109 million compared with $133 million in fourth quarter 2019.\nWhile loss expense was higher in fourth quarter 2020 primarily related to our Puerto Rico exposures, our earned premiums and income from the investment portfolio both increased on a quarter-over-quarter basis.\nNet earned premiums and credit derivative revenues increased $30 million to $159 million in fourth quarter 2020 compared with the $129 million in fourth quarter 2019.\nThese amounts include premium accelerations of $65 million and $39 million respectively.\nTotal income from the insurance segment investment portfolio consists of net investment income and equity earnings of investees totaling $94 million in fourth quarter 2020 and $84 million in fourth quarter of 2019.\nNet investment income represents interest income when fixed maturity and short-term investment portfolio and with $70 million in fourth quarter 2020 compared with $85 million in the fourth quarter of 2019.\nThe decrease was primarily due to lower average balances in the externally managed fixed maturity investment portfolio due to dividends paid by the insurance subsidiaries and were used for AGL share repurchases and the shift of investments to Assured Investment Management funds and other alternative investments as well as lower short-term interest rates.\nEquity in earnings of investees represents our investment in the Assured Investment Management funds as well as earnings from our strategic investments.\nThis component of investment earnings is more volatile and the net investment income on the fixed maturity portfolio and will fluctuate from period-to-period.\nIn the fourth quarter 2020 equity earnings was $24 million compared to a negligible amount in fourth quarter 2019.\nAs of December 31, 2020 the insurance subsidiaries investment in Assured Investment Management funds was $345 million, compared with only $77 million as of December 31, 2019.\nThe insurance companies have authorization to invest up to $750 million in Assured Investment Management funds of which over $43 million has been committed including $177 million that has yet to be funded.\nIn addition, the company has a commitment to invest an additional $125 million in unrelated alternative investments as of December 31, 2020.\nAs we shift assets into these alternative investments, average balances in the fixed maturity investment portfolio and the related net investment income may decline.\nHowever, the long-term we expect the enhanced returns on the alternative investment portfolio to be approximately 10% to 12%, which exceeds the returns on the fixed maturities portfolio.\nIn the Asset Management segment adjusted operating income was a loss of $20 million compared with a loss of $10 million in fourth quarter 2019.\nThe additional net loss was mainly attributable to $5 million in placement fees associated with the launch of new healthcare strategy and an impairment of a right of lease -- right of use asset of $13 million related to the relocation of Assured Investment Management offices to 1633 Broadway, Assured Guaranty's primary New York City location.\nOur long-term view of the Asset Management segment remains positive based on our recent success in increasing fee earning AUM by 62% and launching a $900 million healthcare strategy with significant third-party investment.\nIn addition, we believe the ongoing effect of the pandemic on market conditions may present attractive opportunities for Assured Investment Management and for alternative asset management industry as a whole.\nAdjusted operating loss for the corporate division was $28 million in the fourth quarter of 2020 compared with $32 million in the fourth quarter of 2019.\nThe corporate division mainly consists of interest rate expense on U.S. holding company's debt.\nIt also includes Board of Directors and other corporate expenses in fourth quarter 2019 also included transaction expenses associated with the BlueMountain acquisition.\nOn a consolidated basis the effective tax rate may fluctuate from period-to-period based on the proportion of income in different tax jurisdictions.\nIn fourth quarter 2020 the effective tax rate was a provision of 12.7% compared with a benefit of 3.5% in fourth quarter 2019.\nThe benefit in fourth quarter 2019 was primarily due to the favorable impact of a new regulation related to base erosion in anti-abuse tax.\nMoving on to the full-year results, adjusted operating income was $256 million in 2020 compared with $391 million in 2019.\nThe variance was mainly driven by the Insurance segment and Asset Management segment adjusted operating income, which declined $83 million and $40 million respectively on a year-over-year basis.\nPlease note asset Management full-year results are not comparable between 2020 and 2019 as 2020 includes a full year of operating results while 2019 includes only one quarter as the BlueMountain acquisition occurred on October 1, 2019.\nThe insurance segment had adjusted operating income of $429 million in 2020 compared with $512 million in 2019.\nFull year insurance results were lower, primarily due to a large benefit in our RMBS exposures in 2019 that did not recur in 2020, partially offset by a commutation gain in 2020 on the reassumption of a previously ceded portfolio.\nNet earned premiums and credit derivative revenues were $504 million in 2020 compared with $511 million in 2019 including premium accelerations of $130 million -- and a $130 million respectively.\nAlso, noteworthy is that public finance scheduled earned premiums increased 5% in 2020 compared with 2019.\nThe corporate division had adjusted operating loss of $111 million in both 2020 and 2019.\nTurning to our capital management strategy, in the fourth quarter of 2020 we repurchased 4.3 million shares for $126 million at an average price of dollars and $28.87 per share.\nThis brings our full-year 2020 repurchases to 15.8 million shares or $446 million at an average price of $28.23.\nSo far in 2021 we have purchased an additional 1.4 million shares for $50 million.\nSince January 2013, our successful repurchase program has returned $3.7 billion to shareholders, resulting in a 63% reduction in total shares outstanding.\nThe cumulative effect of these repurchases was a benefit of approximately $29.32 per share in adjusted operating shareholder's equity and $51.48 in adjusted book value per share, which helped drive these metrics to new record highs of $78.49 in adjusted operating shareholder's equity per share and $114.87 of adjusted book value per share.\nFrom a liquidity standpoint, the holding company currently has cash and investments of approximately $204 million of which $133 million resides in AGL.\nThese funds are available for liquidity needs or for use in the pursuit of our strategic initiatives through to expand the asset management business or repurchase shares to manage our capital.\n",
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"content": "q4 adjusted operating earnings per share $0.69.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are subject to change due to new information or future events.\nAssured Guaranty's insurance production loss mitigation and capital management strategies combined to deliver outstanding results in 2021.\nWe had many notable accomplishments during the year, we earned $470 million of adjusted operating income, 84% more than in 2020.\nWe more than doubled adjusted operating income per share to $6.32 per share.\nWe brought all three of our measures of shareholder value to new highs.\nOver the year, shareholder's equity per share grew 9% to $93.19.\nAdjusted operating shareholder's equity per share increased 13% to $88.73, and adjusted book value per share rose 14% to $130.67.\nWe repurchased $10.5 million common shares, or approximately 14% of our shares outstanding at December 31, 2020, at an average price of $47.19.\nThose repurchases totaled $496 million, with the addition of $66 million of dividends, we returned a total of $562 million to shareholders.\nThrough strong new business production in each of our financial guarantee markets, U.S. public finance, international infrastructure finance and global structure finance, we generated a total of $361 million of PVP in 2021.\nDirect PVP exceeded $350 million for the third consecutive year, compared with an average annual direct PVP of $210 million from 2012 to 2018, making the last three years our best in more than a decade for direct new business production.\nWith a more than 60% share of new issue insured par sold, we led the U.S. public finance bond insurance industry to its highest penetration, market penetration in a dozen years.\nAnd taking advantage of exceptionally low interest rates are U.S. holding company issued a total of $900 million, a 3.15% 10-year and 3.60% 30-year senior debt to refinance $600 million of debt with higher coupons ranging from 5% to almost 7%.\nAs a result, annual debt service savings will be $5.2 million through the next maturity date.\nOur financial guarantee production was well-diversified across all of our markets.\nU.S public finance PVP of $235 million included in its second best direct production in at least a decade, surpassed only by the previous year's result, or $79 million of international infrastructure PVP marks the fourth year out of the last five that we have exceeded 75 million of direct PVP in that sector.\nGlobal structure finance PVP at $47 million was the second best and direct production since 2012.\nOur markets and economic environment offered both opportunities and challenges during 2021, issuance of U.S. municipal bonds reached a record par amount of $457 billion in 2021.\nThis partly reflected investors increased demand for taxes on paper in expectation of higher tax rates and continued limitations on state and local tax deductions at the federal level.\nAdditionally, -- issuers were eager to take advantage of extremely low municipal interest rates to refinance bonds issued in the path of higher rates, with the option to execute tax exempt advance refunding still off the table.\nMany issuers also turned to the taxable market to replace higher coupon tax exempt debt.\nTotal insured market volume increased to 8.2% of par issued, the highest annual rate over the past 12 years, and up from 7.6% during 2020 and 5.9% during 2019.\nWe believe this increased penetration in 2021 indicates that the risk of unpredictable developments, which is brought home by the onset of the COVID-19 pandemic in 2020, has made a lasting impression on investors.\nWe have also seen that Assured Guaranty has the underwriting and risk management skills to construct an insured portfolio that experienced minimal claims from the economic disruption caused by the pandemic, most of which have already been reimbursed.\nThe $37.5 billion of insured par in 2021 represented a 10% annual increase, on the heels of a 43% increase the prior year, resulting in a 57% growth of the insured market in just two years since 2019.\nAssured Guaranty's production was a leading force behind this growth, as we enjoyed over 58% of new issue insured par sold in 2020, and more than 60% in 2021.\nOur highest annual market share since 2013, Our $23 billion of insured new issue volume in 2021 was almost $3 billion more par than we insured in 2020, and was generated by more than 8,000 individual transaction.\nAn important trend in recent years has been the use of our guarantee to help launch some of the municipal bond markets largest transaction, which indicates growing institutional demand for the security, relative price stability and significant market liquidity our guarantee can provide.\nWe guaranteed $100 million or more on each of 48 large issues launched in 2021, up from 39 transactions in 2020 and 22 in 2019.\nSignificantly, we continue to add value on credits with underlying ratings in the double aid category from one or both of S&P and Moody's, ensuring a 109 such AA transactions totaling more than $3.5 billion of insured par.\nU.S. public finance, forms the largest part of our uniquely diversified financial guarantee strategy.\nOur three pronged strategy also targets insurable transactions in both infrastructure finance outside the United States and structured finance throughout the world.\nThis helps us in times when one market or another shows temporary weaknesses, and it drives great results in years like 2021, when we are thriving in all three of our markets.\nFurther demonstrating the diversity of our business, in 2021, we guaranteed financing of a Spanish solar power facilities and UK higher education and healthcare projects.\nAdditionally, we work with the UK water company to extend a debt service reserve guarantee, which is a unique product we developed as an alternative to bank liquidity facilities.\nWe also provided a number of secondary market guarantees.\nOur European business was historically based in the UK, which previously allowed us to do business throughout the European Union.\nWe have long been active and where we continue to believe that plentiful and diverse opportunities.\nOur Paris subsidiary, which we opened in 2020 to serve continental Europe more effectively, especially now that the UK has left the European Union, further grew its business around originations in 2021.\nA global structured finance and important part of our business is to provide institutions like banks and insurance companies with tools to optimize the capital utilization of their asset portfolios.\nDuring the year, we guarantee large insurance securitizations and significantly increase our CLO activity.\nOur guarantees of CLOs attract new investors who might otherwise be discouraged by the higher capital requirements on uninsured Clos.\nWe are seeing more opportunities to help investors reduce the capital consume of both existing structured finance exposures and new investment.\nThe new business we rode across all of our markets in 2021, enabled us to increase the year-end net par amount of our insured portfolio for the first time in many years.\nWe believe the trend going forward will be to continue increasing the par amount of our insured portfolio, and increase our deferred premium revenue, which will further stabilize and grow our future earnings.\nWe have continued to reduce the risk in our insured portfolio, and believe we can continue to do so as we continue to write new investment grade business.\nThe below investment grade portion of our insured portfolio declined to barely more than 3% as of December 31, 2021.\nAlmost half of our below investment grade net par exposure is to Puerto Rico, and we expect that with the court approved settlements pertaining to the GO and certain other credit scheduled to occur on March 15th of this year, that figure should drop below 2.5%, and continue to fall as more of our Puerto Rico settlements are executed.\nAfter years of twists and turns related to the restructuring of Puerto Rico debt, decisive progress occurred in 2021, we and the other creditors, along with the Commonwealth, agreed to support the final revision of the Oversight Boards restructuring plan for the central government, which the Title III court approved in January of this year.\nAs a result, the Commonwealth government's exit from bankruptcy is expected to begin in mid-March.\nThe Title III court also laid the groundwork for favorable consideration of additional agreements that support certain other Puerto Rico restructurings, such as for highways and transportation authority.\nAll this means that Puerto Rico's long awaited resolution of its unpaid debt is proceeding well, and the island is positioned for years of fiscal stability, according to the Oversight Board's latest fiscal plan.\nIn addition to our success in the financial guarantee business in 2021, we also made significant progress toward our goals for the asset manager business.\nOur overall investment performance was strong as one of the top 25 collateralized loan obligation managers by assets under management.\nWe were well-positioned to participate in this CLO market that reached a record level of interest issuance.\nDuring 2021, we launched six new CLOs representing $2.5 billion of assets under management, more than double what we issued in 2020, and we converted non-fee earning AUM to fee earning at AUM by selling substantially all this CLO equity still held by a Assured IM legacy funds, where we had been rebating management fees.\nThrough these efforts, we increased CLO management fees in 2021 to $48 million from $23 million in 2020.\nAdditionally, we reset a refinance 10 CLOs in the United States and Europe.\nIn the asset backed sector, we closed a continuation fund holding an auto finance investment.\nAdditionally, the healthcare portfolio managed by Assured healthcare partners continue to grow as capital was deployed.\nLooking back on the year, we believe much of Assured Guaranty success reflected the market's growing appreciation of the reliability of our financial strength and the security we provide investors, while also delivering financial benefits and first class service to bond insurers and other clients, the responsibility embodied in our careful underwriting, discipline risk management, and tireless loss mitigation.\nThe proven resilience or financial guarantee business model and our strategic approach to capital management to protect policyholders and create value for shareholders.\nIn our view, this heightened recognition of our guarantees value could help to drive demand higher as interest rates rise.\nWe expect market conditions in 2022 and beyond to be very different from those of 2021, as the Fed strives to contain inflation, the economic and social impact of the COVID-19 recedes, developing geopolitical events continue to disrupt markets, and municipal governments prepare for the end of extraordinary federal support.\nRising interest rates, widening credit spreads, and the accompanying volatility tend to increase financial guarantee demand.\nWe believe Assured Guaranty is better positioned for the long-term success than in any time in our history.\nOur financial strength has never been stronger.\nThe credit challenges in our legacy insured portfolio are largely behind us.\nOur markets are large.\nOur opportunities are diverse.\nOur human capital exceptional.\nAnd our business model proven through decades of economic cycles.\nWe look forward to fulfilling the high expectations of our policyholders, clients and shareholders.\nI am very pleased to report that our fourth quarter 2021 adjusted operating income was $273 million, or $3.88 per share, a significant increase over the adjusted operating income of the fourth quarter of 2020, which was $56 million, or $0.69 per share.\nThe primary driver of the increase in fourth quarter 2021 total adjusted operating income was the insurance segment where adjusted operating income increased 134% over fourth quarter 2020 from $109 million to $277 million.\nMuch of this benefit came from our loss mitigation strategies, particular for our Puerto Rico exposure.\nAfter many years of negotiation and other loss mitigation efforts, we are close to resolving $1.4 billion in gross par associated with our Puerto Rico GO, PBA, CCDA and PREPA exposures.\nThe increased certainty of the settlement and Puerto Rico's improved economic outlook, combined with the increased value of our actual and expected recoveries under the settlement agreements, were the primary drivers of the $186 million economic benefit in the fourth quarter of 2021.\nDuring the fourth quarter of 2021, we sold a portion of our salvage and subrogation recovered bulls associated with certain matured Puerto Rico GO and PREPA exposures, resulting in proceeds of $383 million, thereby realigning some of our expected recoveries early.\nIn 2022, we continued to sell portions of our GO, PBA and PREPA salvage and subrogation recoverable, resulting in an additional proceeds of $133 million.\nThe prices at which we crystallized these recoveries, as well as observed market pricing for other similar instruments and the forward interest rate environment, are reflected in the updated assumptions of the value of the remaining recovery bonds and contingent value instrument that we project receiving in the various Puerto Rico settlements.\nOther components of the insurance segment also performed well in the fourth quarter of 2021.\nTotal income from investments, which consists of net investment income on the fixed maturity portfolio and equity in earnings on short Im funds and other alternative investments, was $111 million, an increase from $94 million in the fourth quarter of 2020.\nCollectively, the investments in Assured IM funds and alternative investments generated $44 million in equity in earnings of investees in the fourth quarter of 2021, compared with $24 million in the fourth quarter 2020.\nWith the increase mainly attributable to a large fair value gain on a specific investment in a private equity fund.\nAs a reminder, equity in earnings and investees is a function of mark-to-market movements attributable to the Assured IM funds and other alternative investments.\nIt is more volatile than the net investment income on the fixed maturity portfolio and will fluctuate from period-to-period.\nOur fixed maturity and short-term investments account for the largest portion of the portfolio, generating net investment income of $67 million in the fourth quarter of 2021, compared with $70 million in the fourth quarter of 2020.\nAs we shift fixed maturity assets into alternative investments, net investment income from fixed maturities may decline, however, over the long-term, we are targeting enhanced returns on the alternative investment portfolio of over 10%, which exceeds our projected returns on a fixed maturity portfolio.\nIn terms of premiums, scheduled net earned premiums decreased slightly in the fourth quarter of 2021 to $91 million, compared with fourth quarter 2020 of $94 million.\nPremium earnings due to refundings and terminations were $20 million in fourth quarter 2021, compared with $65 million in the fourth quarter of 2020, when two large transactions refunded.\nThe asset management segment adjusted operating loss was $3 million in the fourth quarter of 2021, compared with $20 million in the fourth quarter of 2020.\nThe improvement in asset management segment results is primarily attributable to increased management fees in the strategies we launched since the 2019 Blue Mountain acquisition, and a non-recurring impairment of a lease right of use asset of $13 million in 2020.\nAsset management fees on a segment basis were $21 million in the fourth quarter of 2021, compared with $20 million in the fourth quarter of 2020.\nHigher fees from healthcare opportunity funds and CLOs more than offset the decrease in fees from wind down funds as distributions to investors continue.\nAs of December 31, 2021, AUM of the wind down funds was $582 million, compared with $1.6 million as of December 31, 2020.\nIn the fourth quarter of 2021, the effective tax rate was 15.1%, compared with 12.7% in fourth quarter 2020, which included the release of a reserve for uncertain tax positions.\nThe overall effective tax rate on adjusted operating income fluctuate period-to-period based on the proportion of income in different texture jurisdictions.\nOverall, the fourth quarter capped off a year of successful execution of our strategic initiatives.\nThese achievements are reflected in our 2021 full year adjusted operating income of $470 million, which includes a loss on extinguishment of debt of $175 million pre-tax, or $138 million after tax.\nDespite the debt extinguishment charge, full year 2021 adjusted operating income represents an 84% increase compared with 2020 adjusted operating income of $256 million.\nThe primary driver of this increase was the insurance segment, with 722 adjusted operating income in 2021, compared with $421 million in 2020.\nU.S public finance benefited from the increased recovery assumptions, the Puerto Rico exposures that I mentioned earlier and the U.S. RMBS benefit this primarily a function of home price appreciation.\nEconomic loss development, which excludes the effects of deferred premium revenue, was a benefit of $287 million in 2021.\nAcross the whole portfolio, loss expense in 2020 was $204 million, and was primarily attributable to Puerto Rico.\nOn a full year basis, total income from the investment portfolio was $424 million in 2021, compared with $371 million in 2020.\nThe investment returns on the portion of the portfolio invested in Assured IM funds demonstrates an important component of the benefits of the asset management segment, not only as a fee earning business but as an investment advisor for our insurance segments.\nAssured IM funds in which the insurance subsidiaries invest generated gains of $80 million in 2021, compared with gains of $42 million in 2020.\nThe gains were across all strategies, particularly healthcare, CLOs, and asset based, and generated a year-to-date return of 20.8%.\nThe third party alternative investments also generated gains of $64 million in 2021, compared with $19 million in 2020.\nThese gains more than offset reduced net investment income on the available -- sale fixed maturity portfolio, which was $280 million in 2021, down from $310 million in 2020.\nLower average balances, the fixed maturity portfolio reinvestment yields an income -- loss mitigation securities were the primary drivers of the year-over-year variance.\nTotal net earned premiums in credit driven revenues were $438 million in 2021, compared with $540 million in 2020, including premium accelerations of $66 million and $130 million, respectively.\nIn the asset management segment, we have continued to make great progress in 2021.\nWe raised new third party capital in our CLO, healthcare and asset base strategies.\nWe increased for earning for CLO AUM to the issuance of $2.8 billion in CLOs and the sale of CLO equity out of the legacy funds, and we continue to liquidate assets in the wind down funds.\nThe improvement in the asset management segment operating loss from $50 million in 2020 to $90 million in 2021, was primarily attributable to an increase in management fees from $59 million in 2020 to $76 million in 2021.\nHigher free -- fees from CLOs and -- turning funds more than offset the decline in fees from wind down funds.\nThe increase in -- opportunity fund fees was primarily attributable to the new healthcare funds launched in late 2020, which raise additional third party capital in late 2021.\nThe corporate division had adjusted operating loss of $253 million in 2021, including a loss on debt extinguishment of $175 million, or $138 million on an after tax basis.\nWhich resulted from a $600 million in debt redemptions that Dominic mentioned earlier, this charge is simply an acceleration of expenses that would have occurred over time.\nIn the prior year, corporate division adjusted operating loss was $111 million.\nThe debt redemptions were financed with the proceeds from the issuance of $900 million in new 10-year and 30-year debt, which resulted in a reduced average coupon and redeemed debt from 5.89% to 3.35%, and $170 million -- reduction in our 2024 debt refinancing needs.\nIn addition to debt refinancing has generated annual debt service savings of $5.2 million until the next maturity date and provided flexibility to continue share repurchases.\nWe were able to accomplish all of this without significantly affecting our debt leverage or interest coverage ratios, the additional $300 million of proceeds from the debt issuances were used primarily for share repurchases.\nIn the fourth quarter 2021, where we purchased $3.7 million shares for $192 million at an average price of $51.47 per share.\nThis brings full year 2021 purchases to $10.5 million shares, or $496 million, which represents 14% of the total shares outstanding at the beginning of the year.\nThe continued success of this program helped to drive by our per share book value metrics to record highs as of December 31, 2021.\nSubsequent to the quarter close, we repurchased an additional $1.7 million shares for $91 million.\nSince the beginning of our repurchase program in January 2013, we have returned $4.2 billion to shareholders under this program, resulting in a 69% reduction in total shares outstanding.\nThe cumulative effect of these purchases was a benefit of over $37 an adjusted operating shareholder's equity per share and $65 in adjusted book value per share, which helped drive these metrics to new record highs.\nFrom a liquidity standpoint, the holding companies currently have cash and investments of approximately $274 million dollars, of which $124 million resides in AGL.\nThese funds are available for liquidity needs or for use in the pursuit of our strategic initiatives to [Inaudible] our business or repurchase shares to manage our capital.\nThis week, the Board of Directors authorized the repurchase of an additional $350 million of common shares.\nUnder this and previous authorizations, the company is now authorized to purchase $364 million of its common shares.\nIn addition, we declared a dividend of $0.27 per share, which represents an increase of 13.6% over the previous dividend of $0.22 per share.\nAs we look to 2022 and beyond, we are optimistic that our largest single BIG exposure, Puerto Rico, will be substantially resolved by the end of this year.\nThe interest rate environment will be more conducive to new insurance business production and that the asset management segment and alternative asset strategies will continue to contribute to the company's progress toward its long-term strategic goals.\n",
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"content": "q4 adjusted non-gaap operating earnings per share $3.88.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: And the 10-Q for the quarter will be filed later today after the call.\nDavid McElroy, CEO of general insurance; and Kevin Hogan, CEO of life and retirement; will be available for Q&A.\nThese statements are not guarantees of future performance or events and are based on management's current expectations.\nActual performance and events may materially differ.\nFactors that could cause results to differ include the factors described in our 2020 annual report on Form 10-K and our other recent filings made with the SEC.\nAdditionally, some remarks may refer to non-GAAP financial measures.\nI will then review results from general insurance and the significant progress we've made with our portfolio, which allowed us to pivot from remediation to grow heading into 2021.\nFollowing that, I will review first-quarter results for life retirement.\nI will then provide an update on the work we're doing on the separation of life retirement from AIG.\nAnd lastly, I'll provide an AIG 200 update.\nMark will give you more details on the financial results and then we will take questions.\nAIG had an excellent start to the year and we have significant momentum across the entire organization.\nIn the first quarter, we delivered an outstanding performance in general insurance.\nWe saw continued solid results in life retirement.\nWe made meaningful progress on the separation of life retirement from AIG and we significantly advance AIG 200 with the transformation remaining on track to deliver $1 billion in savings by the end of 2022 against the cost to achieve $1.3 billion.\nIn addition, our balance sheet and financial flexibility remain exceptionally strong allowing us to focus on profitable growth across our portfolio, prudent investments in modern technology and digital capabilities, separating library retirement from AIG in a manner that maximizes value for our stakeholders and positions both companies for long-term success, and returning capital to our shareholders when appropriate.\nWe ended the first quarter with parent liquidity of $7.9 billion and we repurchased $92 million of common stock in connection with warrant exercises and an additional $207 million against the $500 million buyback plan we mentioned on our last call.\nWe expect to complete the additional $230 million of that buyback plan by the end of the second quarter.\nTurning to general insurance, net premiums written increase approximately $600 million year over year, or approximately 6% on an FX constant basis, driven by nearly $1 billion, or a 22% year-over-year increase in our global commercial businesses.\nThis 22% increase in global commercial was driven by higher retentions; excellent new business production, particularly in international; strong performance in first-quarter portfolio repositioning; and continued rate momentum.\nNorth America commercial net premiums written grew by approximately 29%, an outstanding result due to a variety of factors including increased 1/1 writings on the balance sheet, continue strong submission flow in Lexington, rate improvement, strong retention and higher new business and segments we have been targeting for growth.\nIn addition, as a result of the improved quality of our North American commercial portfolio and our improved reinsurance program, which now includes lower attach points in North America, we did not need to purchase as much CAT reinsurance limit in 2021.\nThe benefits of which will come through in future quarters.\nThe international commercial had an exceptionally strong first quarter with the year-over-year growth in net premiums written of approximately 13% on an FX constant basis.\nIncreases were balanced across the portfolio with the strongest growth in international financial lines followed by our specialty business.\nLooking ahead, we expect overall growth in net premiums written for the remainder of 2021 to be higher than the 6% we saw in the first quarter of this year with more balance in growth across our global commercial and personal portfolios.\nWith respect to rate, momentum continued with overall global commercial rate increases of 15%.\nNorth America's commercial rate increases were also 15%, driven by improvements in Lexington casualty with 36% rate increases, excess casualty with 31% rate increases, and financial lines with rate increases over 24%.\nInternational commercial rate increases maintain strong momentum at 14%in the first quarter of 2021, which is typically the largest quarter of the year for our European business.\nThese increases were driven by energy with 26% rate increases, commercial property with 19% rate increases, and financial lines with 20% rate increases.\nTurning to global personal insurance, net premiums written in the first quarter declined 23% on an FX constant basis due to our travel business continuing to be impacted by the pandemic as well as reinsurance sessions to Syndicate 2019.\nOur partnership with Lloyd's.\nAdjusted for these impacts, global personal insurance, net premiums written were down only 1.6% on an FX constant basis.\nWe expect to see strong year-over-year growth for the remainder of the year with a rebound in global personal insurance as the effects of COVID subside, the repositioning and reunderwriting this portfolio nears completion, and a full year of reinsurance sessions relating to Syndicate 2019 will be complete.\nWe are very pleased with the continued improvement in our combined ratios, including and excluding CATs.\nI don't need to remind everyone where we were when I outlined our turnaround strategy three years ago.\nIn the first quarter of this year, the adjusted accident year combined ratio was 92.4%, a 310-basis-point improvement year over year, driven by a 440-basis-point improvement in our adjusted commercial accident year combined ratio.\nThe adjusted accident year loss ratio improved 160 basis points, to 59.2%, driven by a 330-basis-point improvement in global commercial.\nThe expense ratio improved 150 basis points reflecting the impact of AIG 200 savings and continued expense discipline.\nWe expect to continue to improve the expense ratio throughout 2021, particularly as we deliver on our AIG 200 programs.\nTo provide further color on combined ratio improvements, in North America, the adjusted accident year combined ratio improved to 95.6%, 210-basis-point improvement year over year.\nThis reflects a 370-basis-point improvement in the North American commercial lines adjusted accident year combined ratio, which came in at 93.9%.\nIn international, the adjusted accident year combined ratio improved to 90.2%, a 340-basis-point improvement year over year.\nThis reflects a 490-basis-point improvement in the international commercial lines adjusted accident year combined ratio, which came in at 86.8%, 150-basis-point improvement in the international personal lines adjusted accident year combined ratio which was 94%.\nWith respect to catastrophes, first quarter 2021 was the worst first quarter for the industry in over a decade in terms of weather-related cap losses largely due to winter storms in Texas.\nNet cap losses in general insurance are $422 million primarily driven by the Texas storms and do not include any new COVID-related estimated losses for the first quarter.\nNow let me touch on reinsurance assumed.\nAs I noted, Validus Re saw strong 1/1 renewals across most lines with attractive levels of risk-adjusted rate improvement.\nThe team focuses on prudent capital deployment and portfolio construction while improving technical ratios and reducing volatility.\nWith respect to April 1 renewals, within the international property, rate adjustments varied from mid-single-digits to upwards of 30% and loss impacted accounts and our Japanese renewals were very successful with 100% client retention, net limits largely similar year over year, and risk-adjusted rate increases, which were in the high single-digits.\nBefore moving on, I want to highlight the quality and the strength of our general insurance portfolio.\nOf course, optimization work will continue but the magnitude of what was accomplished over the last three years is worth reflecting on because the first quarter of 2021 was an important inflection point for our team.\nOur focus pivoted from remediation to driving profitable growth.\nThese are a couple of concrete examples of how we have repositioned the global portfolio.\nGrowth limits and global commercial will reduce by over $650 billion.\nNorth America excess casualty removed over $10 billion in mid-limits and increased writings in mid-excess layers in order to achieve a more balanced portfolio.\nAnd in Lexington, we reposition this business to focus on wholesale distribution.\nThe team grew the top line in 2020 for the first time in over a decade.\nThe portfolio is now more balanced and the submission flow has increased over 100% over the last couple of years.\nThe enormity of the turnaround and the complexity of execution that was accomplished cannot be understated.\nWe now have a disciplined culture that is grounded in underwriting fundamentals, a well-defined and articulated risk appetite, we remain laser-focused on terms and conditions, and obtaining rate above loss cost.\nAnd we have an appropriate reinsurance program in place to manage severity and volatility.\nOur global portfolio is poised for improving profitability and more predictable results.\nWhile all this was taking place in general insurance, our colleagues in life retirement did an excellent job maintaining a market-leading position in the protection and retirement savings industry and, together with our investment colleagues, consistently delivered a solid performance against the backdrop of persistent low-interest rates and challenging market conditions.\nTurning to life retirements first quarter.\nThis business also had strong results.\nAdjusted pre-tax income in the first quarter was $941 million, an adjusted return on common equity was 14.2% reflecting our diversified businesses and high-quality investment portfolio.\nThe sensitivities we provided last quarter generally held up with respect to equity markets, 10-year reinvestment rates, and mortality although first-quarter results were toward the higher end of our mortality expectations of reinsurance and other offsets.\nWe continue to actively manage impacts from the low-interest rate and tighter credit spreads environment and the range we previously provided for expected annual spread compression of 8 to 16 basis points has not changed.\nOur high-quality investment portfolios well-positioned to navigate uncertain environments as demonstrated by our steady performance through the macroeconomic stress and high levels of volatility in 2020.\nAnd our variable annuity hedging program has continued to perform as expected, providing offsetting protection during periods of volatile capital markets.\nWe believe life retirement is positioned to deliver strong, sustainable financial results due to the quality of its balance sheet, diversified product offerings and distribution, effective hedging programs, and disciplined risk management.\nWith respect to the separation of life retirement from AIG, we continue to work diligently and with a sense of urgency toward an IPO of about 19.9% of the business.\nWe've made significant progress on several fronts including preparing stand-alone audited financials and having an independent party conduct a thorough actuarial review.\nNo concerns have been raised about the life retirement portfolio as a result of this work.\nAs I noted on our last earnings call, we did receive a number of credible increases from parties interested in purchasing a minority stake in life retirement and our investment management group.\nWe conducted a robust evaluation of those opportunities to determine if they offered a better long-term outcome for our stakeholders than an IPO.\nAt this time, we believe an IPO remains the optimal path forward to maximize value for our stakeholders and to position the business for additional value creation as a stand-alone company.\nIn addition, an IPO allows AIG to retain maximum flexibility regarding the operations of the business, as well as the separation process.\nOverall, I'm pleased with the progress we've made.\nTurning to AIG 200, all 10 operational programs are deep into execution mode.\nOur transformation teams continue to perform exceptionally well despite the continued remote-work environment.\nRecent progress on IT modernization has enabled us to reach the halfway point or $500 million of our run-rate savings target.\n$250 million in cumulative run-rate savings has been realized in APTI through the first quarter of this year with $75 million of incremental savings achieved within the first-quarter income statement.\nKey highlights on our progress include the successful transition of our shared services operations and over 6,000 colleagues to Accenture at year-end 2020.\nThis partnership is going extremely well with KPIs at or better than pre-transition levels.\nWe also negotiated a multi-year agreement with Amazon Web Services to execute on an accelerated cloud strategy, which is a significant step forward in modernizing our infrastructure.\nAnd with a new highly experienced leader in Japan, we made significant progress during the first quarter on our AIG 200 strategy in Japan and are on track to finalize target outcomes as we modernize this business by developing digital capabilities with agile product innovation.\nThe last year in particular brought unimaginable stress and tragedy across the world.\nAnd for our colleagues, it came during a time of significant and foundational change.\nYet they never lost sight of our purpose at AIG and continue to be focused and dedicated to the important work we do, each other, and the communities in which we live and work.\nI could not be prouder of what we've achieved together.\nWe are in great businesses, a global scale, loyal clients, exceptional relationships with distribution of reinsurance partners, world-class experts and industry veterans, and we strive to be a responsible corporate citizen with a diverse and inclusive workforce that delivers value to our shareholders and all other stakeholders.\nI am confident AIG is on its way to becoming a top-performing company in everything that we do.\nSince Peter has already provided a good overview of the quarter, I'll just add that we've posted a 7.4% annualized adjusted return on common equity at the AIG level, an 8.2% adjusted return on tangible common equity at the AIG level, an 8.5% adjusted return on segment common equity for general insurance, and a 14.2% adjusted return on segment common equity for life and retirement.\nNow moving to general insurance, first-quarter adjusted pre-tax income was $845 million, up $344 million year over year, primarily reflecting increased underwriting income in international, as well as increased global net investment income driven by alternatives.\nCatastrophe losses totaled $422 million pre-tax or 7.3 loss ratio points this quarter, compared to 6.9 loss ratio points in the prior-year quarter.\nThe CAT losses were mostly comprised of $390 million related to the winter storms, primarily impacting commercial lines including AIG rate.\nThe net impact of the winter storms reflects the benefit of our commercial reinsurance program and changes to our PCG portfolio as a result of syndicate 2019.\nOverall, prior-year development was $56 million favorable this quarter, which included $58 million of net favorable development in North America, driven by $52 million of favorable development from the ADC amortization, and $2 million of net unfavorable development in international.\nIt's worthwhile to note that general insurance still has $6.6 billion remaining of the 80% quota share ADC cover.\nThere was also, embedded within these figures, $33 million of unfavorable development related to COVID-19 claims that relate back to 2020 loss occurrences or a movement of less than 3%, emanating primarily from Validus Re and Talbot or Lloyd's syndicate.\nOur general insurance business continued to materially improve, driven largely by strong accident year 2021 ex-CAT showings in both North America and international commercial lines.\nSo, rather than double up on facts that Peter has shared, the main drivers of the attrition with underwriting gain improvements were for North America commercial, Lexington, financial lines, and excess casualty.\nAnd from international commercial, the main drivers of improvement stemmed from property, Talbot, and financial lines.\nAs Peter, noted on a global-commercial-lines basis, the accident year combined ratio, excluding CAT was 90.4%, which represents a 440-basis-point improvement over the prior year's quarter with 75% of that improvement attributable to a lower loss ratio and 25% of the improvement attributable to a lower expense ratio.\nTurning to personal insurance, starting in the second quarter of this year, meaning next quarter, our year-over-year comparisons will begin to improve, given the timing of the initial COVID-19 impacts and the formation of syndicate 2019 in May of 2020.\nAlthough North American personal lines had a 74% drop in net premiums written as Peter highlighted, it's also important to understand that the other units within the segment which represented nearly 50% of the quarter's net written premium is comprised mostly of warranty and personal A&H business had their net premium only fall marginally.\nOur international personal lines business, which by size dominates our overall global personal insurance business, continues to perform well with 150-basis-points improvement in the accident year ex-CAT combined ratio, reflecting an improved loss ratio and expense discipline.\nNow, to expand on some of Peter's marketplace commentary, various areas continued to accelerate the adequacy of achieved rate beyond that of prior quarters.\nFor example, the level of excess casualty rate increases continues and in many units, exceeds prior results such as CAT excess coverage out of Bermuda, North America corporate, and national admitted excess, and the Lexington.\nThe increase achieved in the first quarter of 2020 and compounded in the first quarter of 2021 alone, ignoring prior to 2020 rate increases, exceeded 150% for Bermuda-based capacity business, which makes sense given recent years' price deficiency on these capacity excess layers, and approximately 115% for the other mentioned units.\nfinancial lines on the same compound basis has seen in excess of 80% increases for the staples of D&O and EPLI.\nInternationally, the 14% first-quarter overall rate increase saw continued rate expansion in key markets, such as the U.K. at plus 23%, global specialty at plus 15%, Europe and the Middle East at 14%, Latin America at 13%, and Asia Pacific also at 13% when excluding the tempering influence of predominantly Japan at 3%.\nLastly cyber achieved our highest rate increase yet at 41% for the quarter.\nThese increases are clearly broad-based by region and line of business all around the world.\nI'd now like to spend a few minutes on two observations.\nOne, the impact of net rate change versus gross rate change.\nAnd two, some examples of new business rate adequacy relative to a renewal rate adequacy.\nSo, first, our achieved North America commercial rate change for the quarter on a net basis is now estimated to be at least 150 basis points stronger than the corresponding growth rate change, largely due to our increased net positions across selected product lines.\nLast year much of the achieved growth rate increase was being ceded to reinsurers, where now there is much less so.\nThe shift to higher net positions resulted directly from our prior-stated strategy of improving the gross book such that we had increased competence to retain the appropriate amount of net, and because we could not take a higher net position previously because of the legacy imbalance of very large limits written.\nNow, moving on to relative rate adequacy, we see continuing indications in North America of new business having stronger relative rate adequacy over renewal rate levels in most lines of business.\nThis likely doesn't reflect different class mixes, but instead an additional margin for a lesser-known exposure.\nHowever, this should be expected and is also historically supported given where we are in the underwriting cycle as new business is less established with an insurer versus an existing client renewal relationship.\nA further related item involves renewal retentions.\nAs general insurance implemented revised underwriting standards, renewal retentions predictably would have been impacted, especially in the target lines.\nNow, even with superior risk selection rate and term condition changes that have been achieved, renewal retentions have improved to the mid-80% in the aggregate across all commercial lines in both North America and across internationally.\nWe also see improvement in the Lexington, where E&S has lower industry retentions based on the nature of the business, and this is very positive for the book.\nAnd we see it across specialty lines and across most admitted retail books.\nThis is indicative of the reunderwriting actions being successful, having settled down, and now with general insurance being comfortable with the underlying insured exposures that meet our risk appetite.\nBased on current market conditions and our view of the foreseeable future, we continue to anticipate earned margin expansion throughout 2021 and into 2022 resulting from AIG's favorable underwriting actions taken, favorable global market conditions, maturely improved terms and conditions, and a more profitable, less volatile business mix.\nAs a result, I would like to reconfirm our outlook for a sub-90% accident year combined ratio excluding CAT by the end of 2022.\nGlobal commercial lines are very nearly at the sub-90% level now and global personal lines is running at 96% for the first quarter.\nGiven our portfolio composition, and market conditions, and our strategic repositioning of North America personal, we anticipate greater continued margin expansion within commercial lines than personal lines.\nWe are highly confident that we will achieve our sub-90% target and have several pass to help us get there.\nSome by a mix, some by a reasonable market conditions persisting, and some via expense levers.\nNow, I'd also like to unpack some of Peter's high-level net written premium growth comments for 2021 with an emphasis here on next quarter, second quarter.\nNorth America commercial is expecting to see growth of approximately 10% for the second quarter of 2021 relative to the prior-year quarter, driven mostly from Lexington across a host of product lines and admitted casualty both primary and excess.\nThis growth will be two-pronged as growth on the front end will be coupled with lower reinsurance sessions, especially from those lines subject to the casualty quota share.\nNorth America personal is expected to see significant second-quarter 2021 growth, but it is driven by the syndicate 2019 reinsurance session change that we've been signaling.\nYou will recall, North American personal had a negative $150 million net written premium in the second quarter of 2020 due to many syndicate 2019 treaties becoming effective, including an unearned premium cover for the PCG high-net-worth book.\nThat distortive spike in sessions, which is not repeatable in the second quarter of 2021 will give the appearance of considerable growth, but instead will provide a PCG net premium that is more stable on an ongoing basis.\nSo, overall, for North America, both personal and commercial combined, we anticipate net written premium growth between 35% to 40% for the second quarter over the second quarter of the prior year.\nInternational commercial in the second quarter of 2021 is expected to be roughly plus 7% net written premium growth, driven by global specialty, financial lines, and Talbot, and international purpose -- personal is expected to be approximately flat relative to the prior-year quarter.\nNow, turning to life and retirement, adjusted pre-tax income increased by 57% or $340 million compared to the first quarter of 2020 with favorable equity markets driving higher private equity returns, lower deferred acquisition and cost amortization, a rebound in most areas of sales, and higher-fee income.\nThe increase also reflects favorable short-term impacts from tighter credit spreads driving higher call and tender income and higher fair value option bond returns.\nThis increase was partially offset by adverse mortality as U.S. COVID-related population death of approximately 205,000 in the first quarter were higher than or earlier anticipated which was also reflected in our own experience.\nIn terms of premiums and deposits, we continue to see encouraging improvement in retail sales.\nIndividual retirement premium and deposits grew 8% from the prior-year quarter, which we consider a pre-COVID quarter as the sales pipeline carried through March of last year with index and variable annuities, both exceeding prior-year levels.\nIn group retirement, group acquisition deposits increased significantly from prior year, although both periodic and nonperiodic deposits declined, leading to a marginal reduction in overall gross group premiums and deposits of 2%.\nIn life insurance, premiums and deposits grew 6% overall with year-over-year growth in both the U.S. and international.\nFinally, while institutional markets did not conclude any significant pension risk transfer transactions in the quarter, the pipeline of direct and reinsurance transactions going into the second quarter is very strong, particularly with many defined benefit plans nearing fully funded status.\nTurning to net flows and related activity.\nOur portfolio reflects the dynamic environment quarter by quarter of the last year.\nIndividual retirement net flows improved by approximately $1 billion over the first quarter of 2020 driven by variable annuities and retail mutual fund.\nAnd yet when excluding retail mutual funds, net flows were positive, led by index annuities rebounding to be plus 1 billion for the quarter, which is virtually identical to one year ago, but with steady progress from a low of 439 million in the second quarter of 2020 to the plus 1 billion this quarter.\nSurrender rates were up slightly over the last few quarters within individual retirement for fixed and index, whereas variable annuity surrender rates have been more comparable as have for group retirement.\nSimilarly, the life business has seen consistently lower lapse and surrender rates over the last four quarters than prior.\nLife and retirement continue to actively manage the impacts from the low-interest rate and tighter credit spread environment, and the previously provided range for expected annual spread compression has not changed.\nNew business margins generally remain within our targets at current new money returns due to active product management, disciplined pricing approaches, and our significant asset origination and structuring capabilities.\nMoving to other operations.\nAdjusted pre-tax loss was 530 million, which was inclusive of 176 million of losses from the consolidation and eliminations line, which principally reflects adjustments, offsetting investment returns in the subsidiaries by being eliminated in other operations.\nSo it wouldn't be double counting.\nBefore consolidation and eliminations, adjusted pre-tax loss was $354 million, which was $481 million better than the first quarter of 2020, which included a $317 million adjusted pre-tax loss related to Fortitude and a $30 million one-time cash grant given to employees to help with unanticipated costs when the global pandemic began last March.\nThe first quarter also reflects lower corporate interest expense and lower corporate general expenses, and we expect this to continue throughout 2021.\nHowever, one might expect some continued volatility within the consolidation and eliminations line, which can fluctuate based on investment returns.\nNow, shifting to investments.\nNet investment income on an APTI basis was 3.2 billion or 492 million higher than the first quarter of 2020.\nAdjusting first-quarter 2020 for Fortitude's investment income to make the comparison apples to apples, this quarter's net investment income on an APTI basis was actually 611 million higher than the prior year, or plus 23%, reflecting strong private equity and real estate returns, as well as bond tender and call premiums, which more than offset the lower income on the AFS fixed income portfolio.\nWe continue to have a high-quality investment portfolio that is positioned well under any market conditions.\nTurning to the balance sheet.\nAt March 31, book value per common share was $72.37, down 5.3% from year-end, reflecting net unrealized mark-to-market losses on the investment portfolio.\nAdjusted book value per share was $58.69, up nearly 3% from December 31.\nAt quarter-end, AIG parent, as Peter noted, had cash and short-term liquidity assets of $7.9 billion, and we repaid our March debt maturity of $1.5 billion and repurchased the $362 million of shares, as Peter outlined.\nOur GAAP debt leverage at March 31 was 28.4%, flat to year-end given downward fixed income market movements negatively impacting AOCI despite the repaid debt maturity mentioned earlier.\nOur primary operating subsidiaries remain profitable and well-capitalized.\nFor general insurance, we estimate the U.S. pool fleet risk-based capital ratio for the first quarter to be between 465% and 475%, and life and retirement fleet is estimated to be between 435% and 445%, both well above our target ranges.\nAnd Jake, I think we're ready to start Q&A.\n",
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"content": "book value per common share was $72.37 as of march 31, 2021, down 5.3% from dec 31, 2020.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I will start today's remarks in an overview of AIG's outstanding consolidated financial results for the second quarter.\nThen I will review results for General Insurance and Life and Retirement in more detail.\nAnd following that, I will provide an update on the progress we're making on AIG 200 and the operational separation of Life and Retirement from AIG.\nNext, I will provide details on our strategic partnership with -- we announced with Blackstone in July, which represents a significant milestone for AIG and a major step forward toward the IPO of Life and Retirement.\nLastly, I will provide you an update on our capital management strategy where our near-term priorities remain the same as what I've outlined in the past: debt reduction, return of capital to shareholders in the form of share repurchases, and investment in organic growth.\nMark will provide additional details on the quarter and we'll then take questions.\nStarting with the consolidated results, I'm pleased to report that AIG had an outstanding second quarter.\nWe have sustained the significant momentum we had coming into 2021 through the first half of the year and that we delivered exceptional performance in General Insurance with strong top line growth and this significant improvement in our combined ratios.\nOur pivot to growth and focused on demonstrating our leadership in this marketplace accelerated through the second quarter as we continued to prioritize underwriting discipline, portfolio optimization, reducing volatility and growing in segments where our market conditions are really favorable in fall and within our risk appetite.\nWe also saw very good results in our Life and Retirement business, primarily driven by improved investment performance.\nLife and Retirement's adjusted pre-tax income increased 26% year over year and the business delivered a return on adjusted segment common equity of 16.4%.\nWe continue to advance the AIG 200 with transformation remaining on track to deliver $1 billion in run rate savings across our company by the end of 2022 against a cost to achieve of $1.3 billion.\nAnd turning to our financial results, I'll start with General Insurance.\nGrowth in net premiums written was strong in the second quarter, accelerating from the first quarter and continuing the trend that began in 2020 as the heaviest remediation efforts we've -- that's nearing completion.\nNet premiums written increased 24% year over year to $6.9 billion or approximately 20%, excluding foreign exchange.\nGrowth was strong across both Global Commercial and Personal.\nOur Global Commercial net premiums written increased 13%, excluding foreign exchange, reflecting growth in areas with attractive risk-adjusted returns, improving renewal retentions and really more than that 25% increase in the new business compared to the prior-year quarter and overall rate increases of 13%.\nNorth America Commercial net premiums written increased 15%, excluding foreign exchange, including our strong growth in Excess Casualty, Financial Lines, Retail Property, AIG Re and Lexington.\nNew business increased 25% from the prior year quarter, led by Financial Lines and Lexington wholesale.\nRenewal retentions also improved in 300 basis points over this same period.\nIt's worth noting that Lexington had its strongest quarter of new business since we fully repositioned its operating model to also focus on the wholesale distribution of Excess & Surplus Lines.\nThis business has significant momentum, which we expect will continue for the foreseeable future.\nShifting to International Commercial.\nNet premiums written grew 10%, excluding foreign exchange, and primarily driven by Financial Lines across the U.K., EMEA and Asia Pacific, global specialty, particularly marine and energy, and Talbot, our Lloyd's syndicate.\nNew business increased 26% from the prior year period, led by Financial Lines, marine, energy and Talbot.\nAnd renewal retentions increased by 500 basis points over this same period.\nIt's important to emphasize that the growth we are achieving across Commercial is also aligned in our risk appetite that we have been executing against over the past three years.\nWe continue to prudently deploy limits, including with respect to the new business with an intense focus on risk aggregation.\nAnd in addition to strong retention, growth is being driven by exceptional new business, which in Global Commercial was $1 billion in the second quarter.\nWith respect to Personal Insurance, as we discuss this on last quarter's call, the unusually high growth in net premiums written was largely reflective of the creation of the Syndicate 2019 in second-quarter 2020 and the reinsurance cessions associated with creating that syndicate.\nMomentum continued with overall Global Commercial rate increases of 13%.\nNorth America Commercial rate have increased 13% with the most notable improvements in Excess Casualty, which was up 20%; Lexington Casualty, which was up 19%; and Lexington wholesale property, which was up 15%.\nInternational Commercial rate also increased 13%, driven by Financial Lines, which was up 21%; property, which was up 18%; and energy, which was up 16%.\nAcross the global portfolio, the largest rate increases were in cyber, where rates were up almost 40% and the strongest rate increases in North America.\nWe continue to carefully reduce cyber limits and are obtaining tighter terms and conditions to address increasing cyber loss trends, the rising threat associated with ransomware and the systemic nature of the cyber risk.\nGenerally, underwriting excellence, thoughtful risk selection, tighter terms and conditions and improving rate adequacy have been core areas of focus as we transformed our portfolio.\nThe General Insurance accident year combined ratio ex CAT improved for the 12th consecutive quarter coming in at 91.1%, an improvement of 380 basis points for the second quarter of 2020 and an improvement of 990 basis points from the second-quarter 2018.\nThis improvement was comprised of 160-basis-point improvement in accident year loss ratio ex CAT and a 220-basis-point improvement in our expense ratio at AIG 200 and the benefits of premium growth continued to contribute to profitability.\nGlobal Commercial achieved an accident year combined ratio ex CAT of 89.3%, an improvement of 500 basis points year over year.\nThis is the best result Commercial has reported in the last 15 years.\nIn Personal Insurance, the accident year combined ratio ex CAT was 95.1%, a 70-basis-point improvement over the prior-year quarter.\nNow with just a quick comment on reinsurance purchased across General Insurance, we continue to evolve our reinsurance program to reflect our significantly improved underlying portfolio.\nAnd in the second quarter, we were very active in the market with 25 specific layers on a variety of treaties placed.\nNotably, in nearly every instance, we were able to enhance our terms and the conditions of our placements were at equivalent or improved pricing in a reinsurance market that is experiencing tighter terms and conditions and rate increases.\nSo with respect to property CAT program in particular, we took this opportunity in the second quarter to further reduce the per occurrence attachment point of North America through several buy-down CAT layers for peak zone exposures.\nLastly, on General Insurance, we remain confident we will achieve a sub-90% accident year combined ratio ex CAT by the end of 2022.\nBased on the progress that I've now seen in our underwriting, the ongoing efforts in optimizing our portfolio, the terrific execution of AIG 200 and the significant momentum we've developed, I'm optimistic we'll get there sooner.\nAnd as we move through second half of the year and get further into AIG 200 in separation execution, we will provide you further comments on our combined ratio expectations.\nNow let me turn to AIG Re, which oversees our global assumed reinsurance business.\nNet premiums written across all lines increased more than 30% of -- the second quarter compared to the prior-year period.\nWritings were balanced across multiple lines of business with risk-adjusted returns and underwriting ratios improving across the portfolio.\nproperty CAT, we saw rate improvements across all U.S. property business sectors; increases range from the mid-single digits to upwards of 25%, and depending on geography and loss-affected accounts; in Florida, Validus Re net limits at June 2021 were reduced by more than 40% in coordination with AlphaCat.\nSince the acquisition of Validus Re in 2018, we reduced the overall limit in Florida of more than 65% or approximately $400 million of annual limit, demonstrating that Validus Re's continued discipline and focus on volatility reduction.\nFurther, Florida-specific firms represent less than 2% of Validus Re's total premiums written.\nOur focus remains on regional and nationwide firms in the U.S. as well as international diversification.\nAnd in addition to 2020 and through the second quarter of 2021, less than 25% of AIG Re's net premiums written came from property lines.\nBuilding on our retrocessional purchase on 1-1 of worldwide aggregate protection, Validus Re secured further retrocessional protections in June.\nSpecifically, we purchased more peak zone coverage for U.S. wind, Asia wind and California earthquake for the 2021 season.\nOverall, we have also substantially enhanced the portfolio despite the heightened competition, and we're really pleased with how AIG Re has evolved.\nWe have exceptionally strong intermediary market support as well as strong client relationships, which have resulted in the significant renewal retention and signings we have.\nIn addition, we've upgraded talent across the board and have broadened skill sets of our leaders.\nWe believe this business is much more prepared now to assess and opportunistically respond to the market conditions.\nTurning to Life and Retirement, this business once again delivered very strong results.\nLife and Retirement's broad leadership position across products and channels has enabled us to take advantage of significant rebound in retail annuity sales with our -- with total annuity sales of significantly across our entire annuity offering.\nOur strong sales resulted in positive Individual Retirement annuity net flows during the quarter.\nGroup Retirement deposits were higher compared to the first-quarter 2021 levels.\nSecond-quarter 2021's new planned participant enrollments also increased 20% year over year, as demonstrated regularly in recent quarters.\nOur high-quality investment portfolio is well positioned to navigate these uncertain environments.\nOur variable annuity hedging program has continued to perform as expected, providing downside protection during prolonged periods of volatility.\nAnd finally, this strategic partnership with Blackstone further positions Life and Retirement to expand its distribution relationships, enhance its product offerings, and the business will benefit from Blackstone's significant capabilities.\nNow let me turn to AIG 200 in our global multiyear effort to position AIG for the long term.\nAIG 200 is continuing with a sense of urgency for all 10 of the operational programs deep into execution mode.\nWe're 18 months into this transformation and we have a clear execution path to $1 billion in run rate cost savings of $550 million already executed or contracted, $355 million of which has been recognized already to date in the income statement.\nAIG 200 continues to build a strong foundation across the company and instill a culture of operational excellence.\nTurning now to the separation of Life and Retirement, we made considerable progress in the second quarter with a focus on speed execution with minimal business disruption.\nSeparation management office has identified day 1 requirements for Life and Retirement to become a stand-alone company and multiple work streams are underway.\nThis work also includes the alignment our investments unit with Life and Retirement and preparing the Blackstone partnership close.\nWith the speed with which our colleagues have moved -- would not have been possible without the foundational work that's been done as part of AIG 200.\nAnd as I've discussed on prior calls, our IPO of up to 19.9% of Life and Retirement was our base case since we announced our intention to separate this business from AIG last October.\nWe continue to believe that an IPO will maximize value for our stakeholders and the position of the business for additional value creation as a public company.\nI also noted on our last call that following our announcement, we have received several credible inquiries from different parties that are interested in purchasing a minority stake in Life and Retirement as well as our entire investment management group.\nOne of those parties with Blackstone.\nWe've decided not to pursue this original proposed transactions because we determined that selling the entire investment management group was not in the long-term interest of Life and Retirement.\nSome of the proposals also contemplated significant reinsurance transactions ahead of an IPO, which we didn't believe would optimize this outcome for our shareholders at this stage in the process.\nIn June, Blackstone reengaged with us to determine if we could find a mutually beneficial way to partner that would further our goals for the separation of Life and Retirement.\nThese discussions have led to the announcement of our strategic partnership with -- we entered into in mid-July.\nWe continue to work with a sense of urgency toward an IPO of the Life and Retirement business.\nFollowing the 9.9% equity investment by Blackstone, this IPO will likely be the first in the quarter of 2022 event, subject to required regulatory approvals and market conditions.\nWe previously viewed the fourth quarter of this year as the earliest in IPO would occur within the first quarter of 2022 as our more likely outcome.\nSo our timeline is essentially unchanged even if -- with the announcement of the Blackstone transaction.\nAdditionally, the gain on sale of Affordable Housing, coupled with other factors, provides us with great flexibility to sell beyond the 19.9% as we now expect to fully utilize our foreign tax credits in 2022.\nThis development facilitated our partnership with Blackstone and, as a result, made it more compelling compared to structures we considered since our separation announcement last October.\nWe believe we are better positioned to accelerate with this operational separation.\nAnd as a result, Life and Retirement will be more comprehensively established as an independent company when the IPO occurs.\nNow let me provide additional detail on the Blackstone partnership, which represents this significant milestone for AIG and provides meaningful momentum for the IPO of Life and Retirement.\nAs I mentioned, this partnership represents the culmination of discussions that took place over the last year on several strategic initiatives, which we view it as very beneficial for AIG and Blackstone.\nBlackstone's leadership has indicated this for some time that insurance is a key strategic priority for their firm.\nThe investment Blackstone is making in our Life and Retirement business is the single largest corporate investment the firm has made in its 35-year history.\nAnd Life and Retirement is now Blackstone's single largest client.\nThis substantial commitment by Blackstone highlights the strength of Life and Retirement's business, Blackstone's belief in the value of the investment, its validation of Life, and Retirement's market-leading position.\nFurthermore, Jon Gray, President and COO of Blackstone, was directly involved in the negotiations.\nHe has been a great partner throughout and will join the board of directors of the IPO entity at the closing of our equity investment, which we expect to occur in September.\nLet me recap some of terms of the transactions and how we're thinking about this future for capital structures for AIG and Life and Retirement as stand-alone businesses.\nBlackstone will acquire a 9.9% cornerstone equity stake in the holding company for AIG's Life and Retirement business for $2.2 billion in an all-cash transaction.\nThe purchase price is equivalent to a multiple of 1.1x target pro forma adjusted book value in $20.2 billion.\nOur adjusted book value also reflects that the combined book value of our Life and Retirement business and a majority of our investments unit as well as the financing arrangements to be undertaken and the amounts to be paid from that entity to AIG just prior to the IPO.\nAs we look to the structure of the IPO entity, we will raise debt at this entity, consistent with its ratings and peer leverage ratios.\nThe new debt will be used to pay down AIG debt such that debt stack at AIG and the IPO entity will both be in line with each of the companies' firm and what we view as the optimal debt-to-total capital ratio for each company.\nLife and Retirement will also enter into separately managed account agreements, or SMAs, with Blackstone -- whereby we at Blackstone will manage $50 billion of specific asset classes with that amount growing to $92.5 billion over a six-year period.\nLastly, and as I alluded to earlier, we sold some -- certain of Affordable Housing assets to Blackstone Real Estate Income Trust for $5.1 billion in an all-cash transaction, which is expected to close by year-end 2021.\nTurning to capital management, we ended the second quarter with $7.2 billion of parent liquidity.\nThe net proceeds from the Blackstone transactions resulted in an additional liquidity of $6.2 billion to AIG by year-end 2021.\nThrough the remainder of this year, we plan to pay down the $2.5 billion AIG debt and buy back about -- at least $2 billion of the common stock.\nSo together, these capital management actions demonstrate our commitment to delever and return capital to shareholders.\nIn addition, the strength of our overall capital position leaves us with ample capacity to continue to invest in growth, and particularly in General Insurance, where our market conditions continue to be extremely favorable.\nFor the second quarter of 2021, AIG reported adjusted pre-tax income, or APTI, of $1.7 billion and adjusted after-tax income of $1.3 billion.\nWe produced an annualized return on adjusted common equity of 10.5% for AIG, 12.3% for General Insurance and 16.4% for Life and Retirement.\nThe annualized return on adjusted tangible common equity was 11.6% to the quarter.\nOn a GAAP basis, AIG reported $91 million of net income with principal difference between GAAP and adjusted after-tax income of $1.3 billion being the accounting treatment of Fortitude, net investment income, and associated realized gains and losses.\nBefore I move to General Insurance though, I'd like to add to Peter's remarks on the Blackstone SMA that this arrangement incorporates specific specialty asset classes, comprised mostly of private credit, alternatives and structured products, where Blackstone is a world leader in sourcing and origination and has a demonstrated track record of delivering yield profit and not public fixed-income securities.\nThe fee structure is 30 basis points on the initial $50 billion of AUM, increasing to 45 basis points for the annual new AUM of $8.5 billion, starting four quarters later as well as for the reinvested run-off AUM.\nTherefore, fee should rise from 30 basis points initially toward 43 basis points by the end of the initial six-year contractor for Blackstone's share of the assets.\nFor this part of our portfolio, it's fair to expect that fees will somewhat precede the benefits of the impact of enhanced origination and differentiated asset classes and recognition of related yield uplift.\nWe believe this SMA arrangement is unique and that L&R maintains control over its overall asset allocation, asset liability management, liquidity and credit profile, and the nature of individual investment structures.\nIn addition, Life and Retirement has the opportunity to enhance overall investment management, focusing on improving efficiencies and asset classes that are not part of the SMA as well as optimizing performance across our whole portfolio.\nWe believe the combination of these efficiencies, together with the Blackstone focus on maximizing the performance of SMA assets and growth opportunities on the overall AUM, should drive net yield uplift.\nBefore leaving the Blackstone transaction, I want to note that a GAAP loss on sale is anticipated with a 9.9% equity purchase by Blackstone as well as with subsequent IPO sell-downs due to the inclusion of OCI and GAAP book value.\nGiven that OCI in future periods is also subject to some market fluctuations, the impact cannot be fully estimated at this time.\nAs respects Affordable Housing, note that the $5.1 billion purchase price translates to an approximate $3 billion after-tax gain on sale, which will benefit book value and provides approximately $4 billion of cash to parent with the minority proportion held back in a regulated Life and Retirement entity to further strengthen an already historically strong RBC level.\nThis transaction is expected to close by year-end 2021.\nMoving to General Insurance, second-quarter adjusted pre-tax income was $1.2 billion, up $1 billion even year over year, primarily reflecting increased pre-tax underwriting income of over $800 million, along with $200 million and change of increased pre-tax net investment income, driven primarily by equity returns.\nCatastrophe losses of $118 million were significantly lower this quarter, compared to $674 million in the prior-year quarter.\nPrior-year development was $51 million favorable this quarter, compared to the favorable development of $74 million in the prior year quarter.\nThis included $58 million of net favorable development in North America and $7 million of net unfavorable development in International, both of which reflect some marginal changes in the underlying operations.\nAs usual, there is net favorable amortization from the adverse development cover, which amounted to $49 million this quarter.\nIt's important to note in context, though, the recent strength of the property and casualty market and how General Insurance has executed within this environment.\nAnd as Peter mentioned in his remarks, the book has had nearly three turns at correction since 2018.\nRisk appetite and risk selection have been materially sharpened, complementary and properly evolving reinsurance programs have been implemented.\nCertain lines and segments were exited or massively reduced.\nClearer and broader distribution has been embraced.\nLexington has stood up as a major E&S platform, all of this was accomplished while simultaneously achieving the significant rate in excess of lost cost trends with materially better terms and conditions.\nThese actions formed the foundation as to why General Insurance has shown material improvement in the underlying accident year ex CAT combined ratios in both the historically underperforming North America Commercial segment in the International Commercial segment as well.\nNorth America Commercial has shown a 620-basis-point improvement in the accident year ex CAT combined ratio over the prior-year quarter.\nThe International Commercial segment has continued to improve profitability with 370 basis points improvement compared to the prior-year quarter.\nThis shows demonstrable margin improvement stemming from the totality of the actions enumerated earlier.\nAnd this level of Global Commercial improvement is also noteworthy Global Commercial made of 71% of worldwide net premiums written through the first half of 2021.\nAdditionally, the Global Commercial book is increasingly becoming a global specialty book comprised of below-frequency, high-severity coverages.\nAs a result, General Insurance Commercial, although large and global in scope, it's not a mere index of the market, but instead an underwriting company, where risk selection and business mix are important factors in achieving profit and growth while mitigating volatility.\nTurning to Personal Insurance.\nAs we noted on our first quarter earnings call, our year-over-year net premium written comparison for the second quarter would improve, given the timing of the initial COVID-19 impact and distortions from Syndicate 2019 that's being reflected also during the second quarter of 2020.\nGlobal Personal Lines net premiums written grew by approximately 45% or 41% on a constant dollar basis, aided by the Syndicate 2019 comparison.\nElsewhere within this segment, the second quarter of 2021 North America Personal Insurance saw premiums in travel and warranty business increase.\nThis was driven by a rebound in travel activity and increased consumer spending but not yet back to the pre-pandemic levels.\nOur outlook for net premiums written for the next six months in North America Personal Insurance is between the $450 million and $500 million per quarter.\nWe continue to anticipate earned margin expansion throughout 2021 and into 2022, resulting from AIG's favorable underwriting actions we've taken in global market conditions involving the strong rate increases well above loss trend, improved terms and conditions and a more profitable, less volatile mix.\nGiven the specific market dynamics of where we choose to play, we don't foresee any material slowing-down in the cheaper rate levels throughout the balance of the year.\nAnd now I'd like to comment a bit on inflation, which one needs to think about in terms of both economic and social inflation.\nBased on the Consumer Price Index and the Producer Price Index, headline inflation that indicates an annualized runrate of about 5.5% to 7.5%, which has accelerated in March.\nSome components of the indices have become worrisome, such as used cars and trucks being up about 45% and energy commodities being north of 40%.\nBut medical care services, whose impact now stretches across most casualty, auto, workers' compensation and excess placements, although higher, are much more tame than the headline inflation that would indicate with physician services up about 4% recently and hospital services up about 2.5%.\nCosts involving labor, materials, construction and related services are up and will impact property coverages and CAT claim costs in the near term.\nThese indications demonstrate that the inflationary impact on any given insurer is a direct function of the products and the mix they write and where they play within our insurance program.\nSocial inflation, however, is much more of a U.S.-centric phenomenon, driven by a highly litigious culture.\nSome social inflation also has correlations to the social change initiatives that are -- including income inequality and changing sentiments toward business, to name a few.\nBeing further away from risk though is a meaningful inflation counter.\nAnd AIG's General Insurance has taken strong pre-emptive action in that regard by minimizing lead umbrellas in favor of higher positions within insurance programs.\nFor example, our Excess Casualty average attachment points for national and corporate U.S. accounts have also increased approximately 3.5 times and 5.5 times, respectively, since 2018.\nThis significantly increased distance from attaching is a key overall portfolio benefit.\nview toward the total inflation rate of 4% to 5% is arguably reasonable for the near to medium term.\nOur second-quarter rate increases, together with our view of pricing for the rest of the year provide continued margin in excess of this loss cost trend.\nNow turning to Life and Retirement.\nWhen compared with the prior year, favorable equity markets drove higher alternative investment returns, principally higher than private equity returns, which reflect the impact of the one quarter lag on the period.\nLife Insurance continues to reflect the COVID-19-related mortality provision that has dropped relative to the prior quarters.\nWe estimate our exposure to the population is approximately $65 million to $75 million per 100,000 population deaths.\nMortality, however, exclusive of COVID-19 continues to be favorable compared to pricing assumptions.\nWithin Individual Retirement, excluding the Retail Mutual Fund business, net flows were positive for the quarter and favorable by over $1.2 billion when compared within second-quarter 2020, led by the Index Annuities rebounding to be higher by approximately $700 million with Variable Annuity net flow of about $365 million stronger year over year.\nGroup Retirement premiums and deposits were up with net flows being relatively flat while also experiencing an improved surrender rate sequentially.\nThe Life business has seen consistent premiums and the lower lapse [Inaudible] rates over the last four quarters than prior.\nAnd for Institutional Markets, premiums and deposits were up compared to the prior year and sequentially.\nGIC issuance was also higher but sequentially and year over year.\nAnd we executed several large pension risk transfer transactions during the quarter.\nThe pipeline for pension risk transfer opportunities, both direct and through reinsurance, we remain very strong in both the U.S. and in the U.K.\nWe continue to actively manage the impacts from the low interest rate and tighter credit spread environment.\nIn our earlier provided range for expected annual spread, compression has not changed as our base investment spreads for the second quarter were within our annual eight to 16-point guidance.\nFurther, new business margins have generally remained within our targets at current new money returns due to active product management and a disciplined pricing approach.\nLastly, post June 30th, we closed on the sale of our Retail Mutual Fund operation.\nAs you are aware, Retail Mutual Funds has contributed to he negative flows over the last two years.\nAnd the drag from this will now cease.\nMoving to Other Operations.\nThe adjusted pre-tax loss was $610 million, inclusive of $94 million from consolidation and elimination entries, which principally reflect adjustments offsetting investment returns in the subsidiaries, which are in alignment at Other Operations.\nBefore consolidations and eliminations, the adjusted pre-tax loss was $516 million, $184 million worse than the second quarter of 2020.\nBut that quarter included two months of Fortitude Re results of $96 million.\nAnd in addition, during the second quarter of 2021, we also increased prior-year legacy loss reserves by a net $65 million that's driven mostly by Blackboard exposures.\nAnd we increased our incentive program accrual to reflect the strong performance year-to-date, whereas in 2020, we began adjusting our incentive program accrual in the third quarter.\nAfter applying for these adjustments, we -- the comparison is actually favorable year over year.\nShifting to investments, our overall net investment income on APTI basis was $3.2 billion.\nThat's virtually flat from the second quarter of 2020 but again, adjusting the second quarter of 2020 for Fortitude net investment income of over that two-month period, this quarter's net investment income was $362 million higher than the prior year, reflecting our strong private equity returns at an annualized 27% return rate for the quarter.\nAnd hedge fund results at a 21% annualized return rate for the quarter, along with stable interest and dividend income.\nTurning to the balance sheet, at June 30th, book value per common share was $76.73, up 7% from one year ago.\nAdjusted book value per common share was $60.07 per share, up 7.5% from one year ago, driven primarily by strong operating performance.\nAdjusted tangible book value per common share was $54.24, up 8.1% from a year ago.\nAs Peter noted, at quarter end, AIG parent liquidity was $7.2 billion.\nTreasury in connection with some certain tax settlement agreements emanating from pre-2007 as well as completed debt tenders for an aggregate purchase price of $359 million.\nOur debt leverage at June 30 was 27% even, down 140 basis points from the end of 2020 and down 360 basis points from June 30th of one year ago.\nOur primary operating subsidiaries remain profitable and well capitalized.\npool fleet risk-based capital ratio for the second quarter to be between 460% and 470% and Life and Retirement is estimated to be between 440% and 450%, both in -- above the target range.\nLastly, as respect to tax, I want to reiterate that the remaining net operating loss or NOL portion of AIG's DTA at the time of deconsolidating L&R for tax purposes will still then be available for offset of future General Insurance and/or AIG taxable income through their natural expiration.\nAs of June 30, that portion of the DTA totaled $6.3 billion and is available to offset up to $30 billion of taxable income.\nSo upon tax deconsolidation, what we'll see is the ability to utilize up to 35% of Life Insurance company income against NOLs or any remaining FTCs.\nOperator, we'll go to question and answer.\n",
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"content": "qtrly total general insurance net premiums written $6.86 billion , up 24%.\nqtrly gi accident year combined ratio, as adjusted, excluding catastrophe losses and related reinstatement premiums, was 91.1 versus 94.9.\nas of june 30, 2021 book value per common share was $76.73 versus $ 71.68.\nas of june 30, 2021 adjusted book value per common share was $ 60.07 versus $ 55.90.\nin h2 2021, expect to repurchase at least $2 billion in common stock and reduce debt outstanding by $2.5 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are not guarantees of future performance or events and are based on management's current expectations.\nActual performance and events may differ materially.\nFactors that could cause results to differ include factors described in our third quarter 2021 report on Form 10-Q, our 2020 annual report on Form 10-K and other recent filings made with the SEC.\nAdditionally, some remarks may refer to non-GAAP financial measures.\nI'm pleased to report that AIG had another outstanding quarter as we continue to build momentum and execute on our strategic priorities.\nWe continue to drive underwriting excellence across our portfolio.\nWe're executing on AIG 200 to instill operational excellence in everything we do.\nWe are continuing to work on the separation of life and retirement from AIG.\nAnd we're demonstrating an ongoing commitment to thoughtful capital management.\nI will start my remarks with an overview of our consolidated financial results for the third quarter.\nI will then review our results for general insurance, where we continue to demonstrate market leadership in solving risk issues for clients while delivering improved underwriting profitability and more consistent results.\nI'll also comment on certain market dynamics, particularly in the property market, as well as recent CAT activity and related reinsurance considerations as we approach year-end.\nNext, I'll review results from our life and retirement business, which we continue to prepare to be a stand-alone company.\nI will also provide an update on the considerable progress we're making on the operational separation of life and retirement from AIG and our strong execution of AIG 200.\nI will then review capital management, where our near-term priorities remain unchanged from those I have outlined in the past: debt reduction, return of capital to shareholders, investment in our business through organic growth and operational improvements.\nFinally, I will conclude with our recently announced senior executive changes that further position AIG for the long term.\nThese appointments were possible due to the strong bench of internal talent and significantly augment the leadership team across our company.\nStarting with our consolidated results.\nAs I said, AIG had another outstanding quarter, continuing the terrific trends we've experienced throughout 2021.\nAgainst the backdrop of a very active CAT season and the persistent and ongoing global pandemic, our global team of colleagues continue to perform at an incredibly high level, delivering value to our clients, policyholders and distribution partners.\nAdjusted after-tax income in the third quarter was $0.97 per diluted share compared to $0.81 in the prior-year quarter.\nThis result was driven by significant improvement in profitability in general insurance, very good results in life and retirement, continued expense discipline and savings from AIG 200 and executing on our capital management strategy.\nIn general insurance, global commercial drove strong top line growth.\nAnd we were especially pleased with our adjusted accident year combined ratio, which improved 280 basis points year over year to 90.5%.\nThese excellent results in general insurance validate the strategy we've been executing on to vastly improve the quality of our portfolio and build a top-performing culture of disciplined underwriting.\nOne data point that I believe demonstrates the incredible progress we have made is our accident year combined ratio for the first nine months of 2021, which was 97.7%.\nThis represents a 770-basis-point improvement year over year, with 600 of that improvement coming from the loss ratio and 170 from the expense ratio.\nIn life and retirement, we again had solid results primarily driven by improved investment performance and increased call and tender income.\nThis business delivered a return on adjusted segment common equity of 12.2% for the third quarter and 14.3% for the first nine months of the year.\nAnd we recently achieved an important milestone in the separation process by closing the sale of a 9.9% equity stake in life and retirement to Blackstone for $2.2 billion in cash.\nWe continue to prepare the business for an IPO in 2022 and we'll begin moving certain assets under management to Blackstone.\nWe ended the third quarter with $5.3 billion in parent liquidity after redeeming $1.5 billion in debt outstanding and completing $1.1 billion in share repurchases.\nYear-to-date, we have reduced financial debt outstanding by $3.4 billion and have returned $2.5 billion to shareholders through share repurchases and dividends.\nWe expect to redeem or repurchase an additional $1 billion of debt in the fourth quarter and to repurchase a minimum of $900 million of common stock through year-end to complete the $2 billion of stock repurchase we announced on our last call.\nThrough these actions, we've made clear our continuing commitment to remain active and thoughtful about capital management.\nNow, let me provide more detail on our business results in the third quarter.\nI will start with general insurance, where, as I mentioned earlier, growth in net premiums written continued to be very strong and we achieved our 13th consecutive quarter of improvement in the adjusted accident year combined ratio.\nAdjusting for foreign exchange, net premiums written increased 10% year over year to $6.6 billion.\nThis growth was driven by global commercial, which increased 15%, with personal insurance flat for the quarter.\nGrowth in commercial was balanced between North America and International, with North America increasing 18% and International increasing 12%.\nGrowth in North America commercial was driven by excess casualty, which increased over 50%; Lexington Wholesale, which continued to show leadership in the E&S market and grew Property and Casualty by over 30%; financial lines, which increased over 20%; and Crop Risk Services, which grew more than 50% driven by increased commodity prices.\nIn international commercial, financial lines grew 25%, Talbot had over 15% growth and Liability had over 10% growth.\nIn addition, gross new business in global commercial grew 40% year over year to over $1 billion.\nIn North America, new business growth was more than 50% and in International, it was more than 25%.\nNorth America new business was strongest in Lexington, financial lines and retail property.\nInternational new business came mostly from financial lines and our specialty businesses.\nWe also had very strong retention in our in-force portfolio, with North America improving retention by 200 basis points and International improving retention by 700 basis points.\nStrong momentum continued with overall global commercial rate increases of 12%.\nIn many cases, this is the third year where we have achieved double-digit rate increases in our portfolio.\nNorth America commercial's overall 11% rate increases were balanced across the portfolio and led by excess casualty, which increased over 15%.\nFinancial lines, which also increased over 15% and Canada, where rates increased by 17%, representing the 10th consecutive quarter of double-digit rate increases.\nInternational commercial rate increases were 13% driven by EMEA, excluding specialty, which increased by 22%.\nU.K., excluding specialty, which increased 21%.\nFinancial lines, which increased 24% and Energy, which was up 14%, its 11th consecutive quarter of double-digit rate increases.\nTurning to global personal insurance.\nWe had a solid quarter that reflected a modest rebound in net premiums written in travel and warranty, offset by results in the private client group due to reinsurance cessions related to Syndicate 2019 and non-renewals in peak zones.\nShifting to underwriting profitability.\nAs I noted earlier, general insurance's accident year combined ratio ex CAT was 90.5%.\nThe third quarter saw a 150-basis-point improvement in the accident year loss ratio ex CAT and a 130-basis-point improvement in the expense ratio, all of which came from the GOE ratio.\nThese results were driven by our improved portfolio mix, achieving rate in excess of loss cost trends, continued expense discipline and benefits from AIG 200.\nGlobal commercial achieved an impressive accident year combined ratio ex CATs of 88.9%, an improvement of 290 basis points year over year and the second consecutive quarter with a sub-90% combined ratio result.\nThe accident year combined ratio ex CAT for North America commercial and international commercial were 90.5% and 86.8%, respectively, an improvement of 370 basis points and 210 basis points.\nIn global personal insurance, the accident year combined ratio ex CATs was 94.2%, an improvement of 220 basis points year over year driven by improvement in the expense ratio.\nGiven the significant progress we have made to improve our combined ratios and our view that the momentum we have will continue for the foreseeable future, we now expect to achieve a sub-90% accident year combined ratio ex CAT for full year 2022.\nAfter three years of significant underwriting margin improvement, we believe that the sub-90% accident year combined ratio ex CAT is something that not only will be achieved for full year 2022, but that there will continue to be runway for further improvement in future years.\nAs I said earlier, the third quarter was very active, with current industry estimates ranging between $45 billion and $55 billion globally.\nWe reported approximately $625 million of net global CAT losses with approximately $530 million in commercial.\nThe largest impacts were from Hurricane Ida and flooding in Europe, where we saw net CAT losses of approximately $400 million and $190 million, respectively.\nWe have put significant management focus into our reinsurance program, which continues to perform exceptionally well to reduce volatility, including strategic purchases for wind that we made in the second quarter.\nReinsurance recoveries in our International per occurrence, private client group per occurrence and other discrete reinsurance programs also reduced volatility in the third quarter.\nWe expect any fourth quarter CAT losses to be limited given that we are close to attaching on our North America aggregate cover and our aggregate cover for rest of the world, excluding Japan.\nWe have each and every loss deductibles of $75 million for North America wind, $50 million for North America earthquake and $25 million for all other North America perils and $20 million for international.\nOur worldwide retention has approximately $175 million remaining before attaching in the aggregate, which would essentially be for Japan CAT.\nSince 2012 and excluding COVID, there have been 10 CATs with losses exceeding $10 billion.\nAnd nine of those 10 occurred in 2017 through the third quarter of this year.\nAverage CAT losses over the last five years have been $114 billion, up 30% from the 10-year average and up 40% from the 15-year average.\nAnd through 2021, catastrophe losses exceed $100 billion and we're already at $90 billion through the third quarter.\nThis will be the fourth year in the last five years in which natural catastrophes have exceeded this threshold.\nI'll make three observations.\nFirst, while CAT models tended to trend acceptable over the last 20 years, that has not been the case over the last five years.\nSecond, over the last five years, on average, models have been 20% to 30% below the expected value at the lower return periods.\nIf you add in wildfire, those numbers dramatically increase.\nThird, industry losses compared to model losses at the low end of the curve have been deficient and need rate adjustments to reflect the significant increase in frequency in CATs.\nTo address these issues, at AIG, we've invested heavily in our CAT research team to develop our own view of risk in this new environment.\nwind, storm surge, flood as well as numerous other perils in international.\nWe will continue to leverage new scientific studies, improvements in vendor model work and our own claims data to calibrate our views on risk over time to ensure we're appropriately pricing CAT risks.\nAcross our portfolio, our strategy and primary focus has been and will continue to be to deliver risk solutions that meet our clients' needs while aligning within our risk appetite, which takes into consideration terms and conditions, strategic deployment of limits and a recognition of increased frequency and severity.\nThe significant focus that we've been applying to the critical work we've been doing is showing through in our financial results as you've seen over the course of 2021 with improving combined ratios, both including and excluding CATs.\nNow, turning to life and retirement.\nEarnings continue to be strong and in the third quarter were supported by stable equity markets, modestly improving interest rates relative to the second quarter and significant call and tender income.\nAdjusted pre-tax income in the third quarter was approximately $875 million.\nIndividual retirement, excluding retail mutual funds, which we sold in the third quarter, maintained its upward trajectory with 27% growth in sales year over year.\nOur largest retail product, Index Annuity, was up 50% compared to the prior-year quarter.\nGroup retirement collectively grew deposits 3% with new group acquisitions ahead of prior year but below a robust second quarter.\nKevin and his team continued to actively manage the impacts from a low interest rate and tighter credit spreads environment and their earlier provided range for expected annual spread compression has not changed as base investment spreads for the third quarter were within the annual 8 to 6 points guidance.\nWith respect to the operational separation of life and retirement, we continue to make considerable progress on a number of fronts.\nOur goal is to deliver a clean separation with minimal business disruption and emphasis on speed execution, operational efficiency and thoughtful talent allocation.\nWe have many work streams in execution mode, including designing a target operating model that will position life and retirement to be a successful stand-alone public company, separating IT systems, data centers, software applications, real estate and material vendor contracts and determining where transition services will be required and minimizing their duration with clear exit plans.\nWe continue to expect an IPO to occur in the first quarter of 2022 or potentially in the second quarter, subject to regulatory approvals and market conditions.\nAs I mentioned on our last call, due to the sale of our affordable housing portfolio and the execution of certain tax strategies, we are no longer constrained in terms of how much of life and retirement we can sell on an IPO.\nHaving said that, we currently expect to retain a greater than 50% interest immediately following the IPO and to continue to consolidate life and retirement's financial statements until such time as we fall below the 50% ownership threshold.\nAs we plan for the full separation of life and retirement, the timing of further secondary offerings will be based on market conditions and other relevant factors over time.\nWith respect to AIG 200, we continue to advance this program and remain on track to deliver $1 billion in run rate savings across the company by the end of 2022 against a cost to achieve of $1.3 billion.\n$660 million of run rate savings are already executed or contracted, with approximately $400 million recognized to date in our income statement.\nAs with the underwriting turnaround, which created a culture of underwriting excellence, AIG 200 is creating a culture of operational excellence that is becoming the way we work across AIG.\nBefore turning the call over to Mark, I'd like to take a moment to discuss the senior leadership changes we announced last week.\nHaving made significant progress during the first nine months of 2021 across our strategic priorities and in light of the momentum we have heading toward the end of the year, this was an ideal time to make these appointments.\nI'll start with Mark, who will step into a newly created role, global Chief Actuary and Head of Portfolio Management for AIG on January 1.\nAs you all know, over the last three years, Mark has played a critical role in the repositioning of AIG.\nHe originally joined AIG in 2018 as our chief actuary.\nAnd this new role will get him back into the core of our business, driving portfolio improvement, growth and prudent decision-making by providing guidance on important performance metrics within our risk appetite and evolving our reinsurance program.\nShane Fitzsimons will take over for Mark as chief financial officer on January 1.\nShane joined AIG in 2019 and his strong leadership helped accelerate aspects of AIG 200 and instill discipline and rigor around our finance transformation, strategic planning, budgeting and forecasting processes.\nHe has a strong financial and accounting background having worked at GE for over 20 years in many senior finance roles, including as Head of FP&A and chief financial officer of GE's international operations.\nShane has already begun working with Mark on a transition plan and we've shifted his AIG 200 and shared services responsibility to other senior leaders.\nWe also announced that Elias Habayeb has been named chief financial officer of life and retirement.\nElias has been with AIG for over 15 years and was most recently our Deputy CFO and Principal Accounting Officer for AIG as well as the CFO for general insurance.\nElias has deep expertise about AIG.\nAnd his transition to life and retirement will be seamless as he is well known to that management team, the investments team that is now part of life and retirement, our regulators, rating agencies and many other stakeholders.\nOverall, I am very pleased with our team, our third quarter results and the tremendous progress we're making on many fronts across AIG.\nI am extremely pleased with the strong adjusted earnings this quarter of $0.97 per share and our profitable general insurance calendar quarter combined ratio, which includes CATs, of 99.7%.\nThe year over year adjusted earnings per share improvement was driven by a 750-basis-point reduction in the general insurance calendar quarter combined ratio, strong growth in net premiums written and earned and a related 280-basis-point decrease in the underlying accident year combined ratio ex CAT.\nlife and retirement also produced strong APTI of $877 million, along with a healthy adjusted ROE of 12.2%.\nThe quarter's strong operating earnings and consistent investment performance helped increase adjusted book value per share by 3% sequentially and nearly 9% compared to one year ago.\nThe strength of our balance sheet and strong liquidity position were highlights in the period as we made continued progress on our leverage goals with a GAAP debt leverage reduction of 90 basis points sequentially and 350 basis points from one year ago today to 26.1%, generated through retained earnings and liability management actions.\nShifting to general insurance.\nDue to our achieved profitable growth to date, together with demonstrable volatility reduction and smart cycle management, makes us even more confident in achieving our stated goal of a sub-90% accident year combined ratio ex CAT for full year 2022 rather than just exiting 2022.\nShifting now to current conditions.\nThe markets in which we operate persist in strength and show resiliency.\nAIG's global platform continues to see rate strengthening internationally, which adds to our overall uplift unlike more U.S.-centric competitors.\nAs you recall, international commercial rate increases lagged those in North America initially.\nBut beginning in 2021, as noted by Peter in his remarks, International is now producing rate increases that surpass those strong rates still being achieved in North America and in some areas, meaningfully so.\nThese rate increases continue to outstrip loss cost trends on a global basis across a broadband of assumptions and are additive toward additional margin expansion.\nIn fact, for a more extensive view, within North America over the three year period, 2019 through 2021, product lines that achieved cumulative rate increases near or above 100% are found within excess casualty, both admitted and non-admitted.\nProperty lines, both admitted and non-admitted and financial lines.\nWe believe these levels of tailwind will continue driving earned margin expansion into the foreseeable future.\nIn the current inflationary environment, it's important to remember that products with inflation-sensitive exposure bases, such as sales, receipts and payroll, act as an inflation mitigant and furthermore are subject to additional audit premiums as the economy recovers.\nLast quarter, we provided commentary about U.S. portfolio loss cost trends of 4% to 5% and in some aspects were viewed as being near term.\nWe believe that this range still holds but now gravitates toward the upper end given another quarter of data.\nAnd in fact, our U.S. loss cost trends range from approximately three and a half percent to 10%, depending on the line of business.\nFrom a pricing perspective, we feel that we are integrating these near-term inflationary impact into our rating and portfolio tools.\nAnd we are not lowering any line of business loss cost trends since lighter claims reporting may be misconstrued as a false positive due to COVID-19 societal impacts.\nIt's also worth noting that all of our North America commercial Lines loss cost trends, with the exception of workers' compensation, are materially lower than the corresponding rate increases we are seeing.\nThis discussion around compound rate increases and loss cost trends collectively give rise to the related topic of current year loss ratio picks or indications and the result in bookings.\nThe strong market that we now enjoy, in conjunction with the significant underwriting transformation at AIG, has driven other aspects of the portfolio that affect loss ratios.\nIn many lines and classes of business, the degree that cumulative rate changes have outpaced cumulative loss cost trend is substantial.\nAnd these lead to meaningfully reduced loss ratio indications between 2018 and the 2021 years.\nUnfortunately, this is where most discussions usually cease with external stakeholders.\nHowever, in reality, that is not the end of the discussion but merely the beginning.\nSome other aspects that can have material favorable implications toward the profitability of underlying businesses are, one, terms and conditions, which can rival price in the impact.\nTwo, a much more balanced submission flow across the insured risk quality spectrum, thereby improving rate adequacy and mitigating adverse selection.\nThree, strategic capacity deployment across various layers of an insurance tower, which can produce preferred positioning and ongoing retention with the customer.\nAnd fourth, reinsurance that tempers volatility and mitigates net losses.\nAccordingly, even if modest loss ratio beneficial impacts are assigned to each of these nuances, they will additionally contribute to further driving down the 2021 indicated loss ratio beyond that signaled by rate versus loss trend alone.\nAnd these are real and these are happening.\nSo why are product lines booked at this implied level of profitability by any insurer?\nWell, there is at least four reasons.\nFirst, insurers assume the heterogeneous risk of others and each year is composed of different exposures, rendering so-called on-level projections to be imperfect.\nSecond, most policies are written on an occurrence basis, which means the policy language can be challenged for years, if not decades, potentially including novel series of liability.\nThird, many lines are extremely volatile and even if every insured is underwritten perfectly -- even if every insured is underwritten perfectly.\nAnd fourth, booking an overly optimistic initial loss ratio merely increases the chance of future unfavorable development.\nTherefore, these types of issues require prudence in the establishment of initial loss ratio picks for most commercial lines of business.\nShifting now to our third quarter reserve review.\nApproximately $42 billion of reserves were reviewed this quarter, bringing the year-to-date total to approximately 90% of carried pre-ADC reserves.\nI'd like to spend a little time taking you through the results of our quarterly reserve analysis, which resulted in minimal net movement, confirming the strength of our overall reserve position.\nOn a pre-ADC basis, the prior-year development was $153 million favorable.\nOn a post-ADC basis, it was $3 million favorable.\nAnd when reflecting the $47 million ADC amortization on the deferred gain, it was $50 million favorable in total.\nThis means that our overall reserves continue to be adequate, with favorable and unfavorable development balanced across lines of business, resulting in an improved yet neutral alignment of reserves.\nNow, before looking at the quarter on a segment basis, I'd like to strip away some noise that's in the quarter so we don't get overly lost in the details.\nOne should think of this quarter's reserve analysis as performing all of the scheduled product reviews and then having to overlay two seemingly unrelated impacts caused by the receipt of a large subrogation recovery associated with the 2017 and 2018 California wildfires.\nThe first of these two impacts is the direct reduction from North America personal insurance reserves of $326 million, resulting from the subrogation recoveries.\nAs a result, we also had to reverse a previously recorded 2018 accident year reinsurance recovery in North America commercial Insurance of $206 million since the attachment point was no longer penetrated once the subrogation recoveries were received.\nThese two impacts from the subrogation recovery resulted in a net $120 million of favorable development.\nSo excluding their impact restates the total general insurance PYD as being $70 million unfavorable in total rather than the $50 million of favorable development discussed earlier.\nThis is a better framework to discuss the true underlying reserve movements this quarter.\nThis $70 million of global unfavorable stems from $85 million unfavorable in global CAT losses together with $50 million favorable in global non-CAT or attritional losses.\nThe $85 million unfavorable in CAT is driven by marginal adjustments involving multiple prior-year events from 2019 and 2020.\nThe $15 million non-CAT favorable stems from the net of $255 million unfavorable from global commercial and $270 million of favorable development, predominantly from short-tail personal lines businesses within accident year 2020, mostly in our International book.\nConsistent with our overall reserving philosophy, we were cautious toward reacting to this $270 million favorable indication until we allow the accident year to season.\nNorth America commercial had unfavorable development of $112 million, which was driven by financial lines' strengthening of approximately $400 million with favorable development and other lines led by workers' compensation with approximately $200 million, emanating mostly from accident years 2015 and prior and approximately $100 million across various other units.\nNorth America financial lines were negatively impacted by primary public D&O, largely in the more complex national accounts arena and within private not-for-profit D&O unit, in addition to some excess coverage mostly in the public D&O space, with 90% emanating from accident years 2016 to 2018.\nInternational commercial had unfavorable development of $143 million, which was comprised of financial lines' strengthening in D&O and professional indemnity of approximately $300 million led by the U.K. and Europe, but the accident year impacts are more spread out.\nFavorable development was led by our specialty businesses at roughly $110 million with an additional favorable of approximately $50 million stemming from various lines and regions.\nNow, as Peter noted, the changes we've made to our underwriting culture and risk appetite over the last few years, coupled with strong market conditions, are now showing through in our financial results.\nU.S. financial lines, in particular, through careful underwriting and risk selection has meaningfully reduced our exposure to securities class actions or SCA lawsuits over the last few years.\nEvidence of this underwriting change is best seen through the proportion of SCAs for which the U.S. operation has provided coverage.\nIn 2017, AIG provided D&O coverage to 67 insurers involved in SCAs, which represents 42% of all U.S. federal security class actions in that year.\nWhereas in 2020, that shrunk to just 18% and through nine months of 2021 is only 15 insurers or 14%.\nThis is significant because roughly 60% to 70% of public D&O loss dollars historically emanate from SCAs.\nThe North America private not-for-profit D&O book has also been significantly transformed.\nThe policy retention rate here between 2018 and 2021, which is a key strategic target, is just 15%.\nAnd yet it should also be noted that the corresponding cumulative rate increase over the same period is nearly 130%.\nThis purposeful change in risk selection criteria away from billion-dollar revenue large private companies and nonprofit universities and hospitals to instead a more balanced middle market book will also drive profitability substantially.\nInternational financial lines has implemented similar underwriting actions with comparable three year cumulative rate increases, along with a singular underwriting authority around the world as respect U.S.-listed D&O exposure through close collaboration with the U.S. Chief Underwriting Office.\nIn summary, our reserving philosophy remains consistent in that we will continue to be prudent and conservative.\nThis is evidenced by our slower recognition of attritional improvements in short-tail lines from accident year 2020 and from the sound decision to strengthen Financial Line reserves, even though there are some interpretive challenges stemming from a difficult claims environment, changes within our internal claims operations over the last couple of years and potential COVID-19 impacts on claim reporting patterns.\nAll of these underwriting actions we've taken over the last few years make us even more confident in our total reserve position across both prior and current accident years.\nMoving on to life and retirement.\nThe year-to-date ROE has been a strong 14.3% compared to 12.8% in the first nine months of last year.\nAPTI during the third quarter saw higher net investment income and higher fee income, offset by the unfavorable impact from the annual actuarial assumption update, which is $166 million pre-tax, negatively affected the ROE by approximately 250 basis points on an annual basis and earnings per share by $0.15 per share.\nThe main source of the impact was in the Individual retirement division associated with fixed annuity spread compression.\nlife insurance reflected a slightly elevated COVID-19-related mortality provision in the quarter.\nBut our exposure sensitivity of $65 million to $75 million per 100,000 population deaths proved accurate based on the reported third quarter COVID-related deaths in the United States.\nMortality exclusive of COVID-19 was also slightly elevated in the period.\nWithin Individual retirement, excluding the Retail Mutual Fund business, net flows were a positive $250 million this quarter compared to net outflows of $110 million in the prior-year quarter largely due to the recovery from the broad industrywide sales disruption resulting from COVID-19, which we view as a material rebound indicator.\nPrior sensitivities in respect to yield and equity market movements affecting APTI continue to hold true.\nAnd new business margins generally remain within our targets at current new money returns due to active product management and disciplined pricing approach.\nMoving to other operations.\nThe adjusted pre-tax loss before consolidations and eliminations was $370 million, $2 million higher than the prior quarter of 2020, driven by higher corporate GOE primarily from increases in performance-based employee compensation, partially offset by higher investment income and lower corporate interest expense resulting from year-to-date debt redemption activity.\nOverall net investment income on an APTI basis was $3.3 billion, an increase of $78 million compared to the prior-year quarter, reflecting mostly higher private equity gains.\nBy business, life and retirement benefited most due to asset growth, higher call and tender income and another strong period of private equity returns.\ngeneral insurance's NII declined approximately 6% year over year due to continued yield compression and underperformance in the hedge fund position.\nAlso, general insurance has a much higher percentage allocation to private equity and hedge funds, which is likely to change moving forward.\nAs respect share count, our average total diluted shares outstanding in the quarter were 864 million and we repurchased approximately 20 million shares.\nThe end-of-period outstanding shares for book value per share purposes was approximately 836 million and anticipated to be approximately 820 million at year-end 2021 depending upon share price performance, given Peter's comments on additional share repurchases.\nLastly, our primary operating subsidiaries remain profitable and well capitalized, with general insurance's U.S. pool fleet risk-based capital ratio for the third quarter estimated to be between 450% and 460%.\nAnd the life and retirement U.S. fleet is estimated to be between 440% and 450%, both above our target ranges.\nOperator, we'll take our first question.\n",
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"content": "compname reports qtrly adjusted after-tax earnings per share $0.97.\nqtrly total general insurance net premiums written increased 11% to $6.6 billion from prior year quarter.\nqtrly total general insurance underwriting income was $20 million compared to an underwriting loss of $423 million in prior year quarter.\nqtrly earnings per share $1.92; qtrly adjusted after-tax earnings per share $0.97.\nas of sept 30, 2021, book value per common share was $77.03, an increase of 1% fromdecember 31, 2020.\nrepurchased $1.1 billion of aig common stock and redeemed $1.5 billion of debt in quarter.\nas of sept 30, 2021, adjusted book value per common share was $61.80, an increase of 8%from december 31, 2020.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are not guarantees of future performance or events and are based on management's current expectations.\nActual performance and events may differ materially.\nFactors that could cause results to differ include the factors described in our third quarter 2021 report on Form 10-Q and our 2020 annual report on Form 10-K and other recent filings made with the SEC.\nAdditionally, some remarks may refer to non-GAAP financial measures.\nShane Fitzsimons, who became AIG's CFO on January 1st, will be available for Q&A, along with David McElroy and Kevin Hogan.\nToday, I will cover four topics: First, an overview of General Insurance fourth quarter and full year performance, where we continue to drive meaningful underwriting profitability improvement.\nI will also briefly touch on the 1/1 reinsurance renewal season.\nSecond, I will review results from our life and retirement business, which continues to be a meaningful contributor to our overall results.\nThird, I will provide an update on our progress toward an IPO of life and retirement and operational separation of the business from AIG.\nAnd fourth, I will review our current plans regarding capital management.\nBefore turning to those topics, I want to take a few minutes to highlight some noteworthy achievements in 2021, which were significant for AIG.\n2021 was a pivotal year and one in which our team executed on several strategic priorities.\nWe produced strong liquidity throughout 2021, which provided flexibility and allowed us to return $3.7 billion to shareholders through share repurchases and dividends.\nWe also repurchased $4 billion of debt, which reduced our debt leverage by 380 basis points to 24.6%.\nNotwithstanding these actions, we ended 2021 with $10.7 billion in parent liquidity.\nAs I said on prior calls, the path we've taken to improve AIG and our portfolio in general insurance, in particular, with a significant undertaking.\nIn general insurance, given the portfolio we started within 2018, we needed to make fundamental changes.\nWe quickly overhauled our underwriting standards and developed a culture of underwriting excellence, including significantly reducing gross limits.\nTo give you a sense for the magnitude of what we needed to do, we reduced gross limits by over $1 trillion in our property, specialty, and casualty businesses.\nIn addition, we took a conservative approach to volatility by reducing net limits and exposure through strategic implementation of reinsurance.\nAs a result of this strategy, since 2018 and through 2021, we've been able to grow net premiums written in commercial by over $3 billion, while ceding an additional $2 billion of reinsurance premium to further reduce volatility and protect the balance sheet.\nAt the same time, we improved the combined ratio, excluding CATs by 1,000 basis points.\nSimply put, today, we have a different portfolio with a markedly different risk profile, which we believe is significantly stronger by all measures.\nTurning to life retirement, we again had solid and consistent results throughout 2021, benefiting from product diversity within the business.\nReturn on adjusted segment common equity was 14.2% for the full year.\nThroughout 2021, we also made tremendous progress on the separation of life retirement from AIG.\nWe're executing on multiple workstreams to operationally separate the business, and we closed on the sale of 9.9% equity stake and transferred $50 billion of assets under management to Blackstone.\nAdditionally, we achieved significant milestones at AIG 200 and remain on track to deliver $1 billion in run-rate savings by the end of 2022 against the spend of $1.3 billion.\nI could not be prouder of what the team has accomplished.\nWhile we still have plenty of work ahead of us, it would be remiss of me not to recognize these accomplishments and the significant momentum we have heading into 2022.\nNow let me turn to our business results in general insurance for the fourth quarter of 2021.\nMark is going to go into more detail, but we had a terrific quarter to close out the year.\nIn the fourth quarter, general insurance net premiums written increased 8% overall on an FX-adjusted basis, with another strong quarter of 13% growth in commercial, which was tempered somewhat by a slight contraction in Personal, with a 1% reduction in net premiums written.\nThe growth in commercial lines was balanced with 11% in North America and 16% in international.\nPersonal lines net premium growth contracted by 1% in the quarter due to a 5% reduction in international, driven by our repositioning of the Personal Property portfolio in Japan, offset by 17% growth in North America, which largely reflects less year-over-year ceded reinsurance.\nLooking at fourth quarter profitability, I'm very pleased with the accident year combined ratio ex CATs, which improved 310 basis points year over year to 89.8%, the first sub-90% quarterly result since the financial crisis.\nThis improvement was driven by commercial, which achieved an accident year combined ratio ex CATs of 87.9%, a 380 basis point improvement year over year and the third consecutive quarter below 90%.\nPersonal report 130 basis points of improvement in the accident year combined ratio ex CATs to 94.3%.\nPivoting to the full year 2021, we made enormous progress in improving the quality of the underwriting portfolio and driving growth throughout the year.\nNet premiums written grew 11% on an FX-adjusted basis, driven by global commercial growth of 16%.\nGrowth in commercial was particularly strong in both North America at 18% and international at 13%.\nWe had very strong retention in our in-force portfolio with North America improving by 300 basis points and international improving by 500 basis points for the full year.\nGross new business in Global Commercial grew 27% year over year to over $4 billion, with 24% growth in international and 30% in North America.\nOverall, global commercial saw increases of 13%, and strong momentum continued in many lines.\nIn global personal, we had some growth challenges in this segment, but accident and health performed very well, and overall, we had a solid year with net premiums written up 1% on an FX-adjusted basis.\nThese results also reflect less reinsurance cessions in our high net worth business and some growth in warranty.\nTurning to underwriting profitability for full year 2021.\ngeneral insurance's accident year combined ratio ex CATs was 91%, an improvement of 310 basis points year over year.\nThe full year saw 140 basis point improvement in the accident year loss ratio ex CATs and 170 basis point improvement in the expense ratio, split evenly between the GOE ratio and the acquisition ratio.\nThese positive results were driven by our improved portfolio mix, net earned premium growth, achieving rate in excess of loss cost trends, continued expense discipline, and the benefits we are receiving from AIG 200.\nGlobal commercial achieved an impressive accident year combined ratio ex CATs of 89.1%, an improvement of 410 basis points year over year.\nThe accident year combined ratio ex CAT for North America commercial and international commercial were 91% and 86.7%, which reflected improvements of 450 basis points and 340 basis points, respectively.\nIn global personal, the accident year combined ratio ex CATs was 94.9%, an improvement of 120 basis points year over year, driven by improvement in the expense ratio.\nThese notable combined ratio improvements across general insurance reflected improved higher-quality global portfolio driven by the strategic underwriting actions and strong execution, which have enabled us to shift our focus toward accelerating profitable growth in areas of the market where we see attractive opportunities.\nWe are very pleased with these materially improved results, which provide tangible evidence of our successful underwriting strategy and the significant progress we have made.\nTurning to January 1 renewals with respect to our ceded reinsurance, we were very pleased with the outcome of our reinsurance placements.\nWhile the markets presented significant challenges across the industry, with retrocessional limited along with other capacity issues, our reinsurance partners recognize the strength of our improved underwriting portfolio and reduced aggregation exposure, which translated to many improvements in our reinsurance structures, along with better terms and conditions.\nIt's important to keep in mind that we placed over 35 treaties at 1/1, with over 65 discrete layers and over $12 billion of limit placed and we cede over $3 billion of premium in the market.\nAs you can imagine, we're not an index of market pricing because of the significant improvement in the portfolio, along with the size and complexity of our placements.\nWe continue to maintain very strong relationships with our reinsurance partners.\nAnd the support we receive in the marketplace is evident in the quality of the overall reinsurance program.\nWe continue to make meaningful improvements to our core placements in every major treaty on January 1, and as a result, continue to reduce volatility in our portfolio.\nFor our Property CAT treaty, we improved the per occurrence structure and improved our aggregate structure for our global commercial businesses.\nFor the North America per occurrence property CAT treaty, we lowered our attachment point to $250 million for all perils, which is a reduction from our core 2021 program that had staggered attachment points, depending on apparel, that range from $200 million to $500 million.\nAnd we maintained our per occurrence attachment points in international, which are $200 million for Japan and $100 million for the rest of the world.\nFor our global shared limit aggregate cover, we were able to reduce our attachment point in every region across the world, most notably, $100 million reductions in the attachment point in North America.\nOur global shared limit, each and every deductible remain the same or reduced in every global region, most notably $25 million reductions in North America-named storms.\nOur attachment point return periods are the same or lower in every region across the world when compared to our 2021 core reinsurance program, and our exhaustion period returns are higher in every instance across the world on an OEP and AEP basis.\nAnd we achieved these significant improvements while modestly reducing the total aggregate reinsurance CAT spend.\nOn our core casualty treaty, we reduced our net limits on our excess to loss treaty in both North America and international.\nOn our proportional core North America placement, we maintained the same session amount while improving our ceding commission by 400 basis points, which represents an 800 basis point improvement over the last 24 months, reflecting our significantly improved underwriting and recognition from the reinsurance market.\nLastly, we renewed our cyber structure at 1/1, with additional quota share seed increasing from 60% to 70% and the aggregate placement attaching at 85% versus a 90% loss ratio.\nGiven the tight terms and conditions and discipline in our portfolio, along with significant rate increase we achieved during the year, we were able to secure more quota share authorization, which is a great example of the reinsurance market's flight to quality.\nAs we discussed on last earnings call, we've spent considerable time through AIG research and our chief underwriting office analyzing the impact of climate change and the increased frequency and severity of natural catastrophes.\nA few observations about 2021.\nIt was the sixth warmest year on record since NOAH began tracking global temperatures in 1880.\nHurricane Ida estimated at $36 billion of insured loss was the third largest hurricane on record.\nIn North America, $17 billion of winter weather losses was the largest on record for this peril.\nAnd $13 billion of insured loss for European flooding was the costliest disaster on record for the continent.\nWhile we've been working over the past few years to reposition our portfolio to limit exposure and dampen volatility, changing weather patterns and increased density of risk in peak zones have caused stress on aggregation and anchored the ability of property underwriters to make appropriate risk-adjusted returns on capital deployed.\nThese changes have caused us to look deeper into the exposures we are underwriting in several lines of business.\nAn example of a business that needs further attention and strategic repositioning is our high net worth property portfolio within our personal insurance segment.\nBy the nature of the business, it's exposed to peak zones and is susceptible to increased frequency and severity.\nThis reality, together with secondary perils that have become primary perils in the underwriting and modeling process, as well as secondary perils and modeling, have all driven up loss costs, creating a significant issue that needs to be addressed.\nWhen analyzing the portfolio over the last five years, we've seen catastrophe levels that are 10 times the level the portfolio dealt with in the prior 10 years for losses in excess of $50 million.\nThe inability to reflect emerging risk factors, the effects of changes to modeling, increased loss costs from cats has put the profitability of the business under pressure.\nIn addition, when you consider the increased exposure in most peak zones in the United States over the last few years, with significantly increased total insured values, in some cases, greater than 100%, more density, supply chain issues, reinsurance availability, and increased reinsurance costs, and all this with heightened complexity the pandemic has caused, along with the impact of demand surge post-CATs, not being tested, the business model simply needs to change.\nRecognizing these realities, after careful review, we decided to take meaningful steps to address this risk issue in our high net worth business, which will allow us to continue to offer comprehensive solutions to our clients that are more consistent and sustainable.\nAggregation and profitability challenges led us to the conclusion that we have to offer the property homeowners product as an example, through excess and surplus lines on a non-admitted basis in multiple states.\nFor example, in December, we announced that we would no longer be offering admitted personal property homeowners policies in the state of California.\nWe cannot maintain our current level of aggregation in the state nor have we been able to achieve any profitability from this line of business.\nBeing a prudent steward of capital, these actions will enable us to segment the portfolio, achieve an acceptable return, reduce volatility, and offer clients more comprehensive policy wordings and services.\nNow turning to life retirement.\nFull year results were driven by improved equity markets, strong alternative investment income, higher interest rates, higher call, and tender income, and higher fee income, partially offset by elevated mortality and base spread compression across products.\nAdjusted pre-tax income in the fourth quarter and full year was $969 million and $3.9 billion, respectively.\nThe full year growth of 11% was driven by strong alternative investment and fee income.\nFull year sales were strong with premiums and deposits increasing 15% year over year to $31.3 billion.\nSales within our individual retirement segment grew 34% across our three product lines for the year.\nAssets under management were $323 billion, and assets under administration increased to $86 billion, benefiting both from strong sales activities and favorable economic conditions.\nWe also made excellent progress with Blackstone in the fourth quarter, completing the initial $50 billion asset transfer, incorporating them into our asset-liability management process, finalizing the investment guidelines, and developing initial product offerings based on Blackstone's origination platform.\nLastly, having analyzed our exposure to long-duration target improvements, or LDTI accounting, based on the current interest rate and macro environment, we expect the transition impact of LDTI is well within Life Retirement's current balance of AOCI.\nMark will provide more detail on this topic in his remarks.\nTurning to the separation and IPO of life retirement.\nIn addition to closing Blackstone transactions, we also continue to make significant progress on operationally separating life retirement from AIG, both with respect to what can be done by the IPO and longer-term to transition service agreements.\nWe are applying the same rigor and discipline to our separation workstreams as we have with our AIG 200 transformation program, but with a clear focus on speed to execution.\nWe continue to work toward an IPO in the second quarter of this year, subject to regulatory approvals and market conditions.\nAs I mentioned on our last call, due to the sale of our affordable housing portfolio in the fourth quarter, and the execution of certain tax strategies, we are not constrained in terms of how much of life retirement we can sell in an IPO.\nHaving said that, the size of the IPO will be dependent on market conditions.\nWe continue to expect to retain a greater-than-50% interest immediately following the IPO and to continue to consolidate life retirement's financial statements at least until such time as we fall below the 50% ownership threshold.\nFinally, turning to capital management.\nWe've been giving significant thought to both life retirement as a stand-alone business and AIG as we continue the path to separation.\nWith respect to life and retirement, our goal remains to achieve a successful IPO of a business with a capital structure that is consistent with its industry peers.\nLife and retirement has a strong balance sheet and limited exposure to legacy liabilities, and its insurance operations have a history of strong cash flow generation.\nWe expect that over time, this business will sustain a payout ratio to shareholders of 60% to 65% between dividends and share repurchases on a full calendar year basis.\nWe also expect that post IPO, life and retirement will pay an annual dividend in the range of $400 million to $600 million, which equates to roughly a 2% to 3% yield on book value.\nAdditionally, as part of the separation process, in the fourth quarter of 2021, life and retirement declared a dividend payable to AIG in the amount of $8.3 billion, which will be funded by life and retirement debt issuances and paid prior to the IPO.\nOur expectation is that a vast majority of this dividend payment will be used to reduce debt at AIG, and therefore, the overall amount of debt across our consolidated company will remain relatively constant at the time of the life retirement IPO.\nPost deconsolidation, we expect life retirement to maintain a leverage ratio in the high 20s, with AIG maintaining a leverage ratio in the low 20s.\nRegarding our current capital management plan for AIG, ending 2021 with $10.7 billion in parent liquidity provides us with a significant amount of flexibility.\nOur capital management philosophy will continue to be balanced to maintain appropriate levels of debt and to return capital to shareholders through share buybacks and dividends, while also allowing for investment in growth opportunities across our global portfolio.\nThis will also be true post-IPO and over time as we continue to sell down our stake in life retirement.\nWith respect to share buybacks, we have $3.9 billion remaining under our current authorization and expect to complete this amount in 2022, weighted more toward the first half of this year.\nWe do not expect the life retirement IPO to impact AIG's dividend and expect to maintain our current annual dividend level at $1.28 per share.\nWith respect to growth opportunities, our priorities will be to allocate capital in general insurance, where we see opportunities to grow and further improve our risk-adjusted returns.\nWe believe there are excellent opportunities for continued growth in global commercial Lines, which Mark will cover in more detail in his remarks.\nAs we move through 2022 and are further along with the IPO and separation of life retirement, we will continue to provide updates regarding capital management.\nAs you can see, we made significant progress in 2021 and had a terrific year.\n2022 will be another busy and transformational year for AIG.\nWe started 2022 with a significant amount of momentum, and our colleagues continue to demonstrate an ability to execute on multiple fronts as we continue our journey to be a top-performing company.\nGiven Peter's comments, I will head directly into the fourth quarter results.\nDiluted adjusted earnings per share were $1.58, representing 68% growth over the prior year.\nThis material improvement in adjusted earnings per share was driven by an over 1,000 basis point reduction in the general insurance calendar quarter combined ratio; 9% growth in net earned premiums, led by global commercial with 13% net earned premium growth; and an improvement in the underlying accident year combined ratio ex CATs to 89.8%, as Peter mentioned, our first sub-90% quarterly results since before the financial crisis, which also represented a 310 basis point improvement from the prior-year quarter.\nLife and retirement delivered another quarter of solid returns and remained well-positioned, with a 13.7% return on adjusted segment common equity for the fourth quarter and 14.2% for the full year 2021.\nThe strength of our operating earnings and capital actions in the quarter helped drive a near 10% adjusted annualized ROE and growth in adjusted tangible book value per share of nearly $7, which represents a sequential increase of 12% and a full year increase of 23%.\nWe fulfilled our capital management commitments and finished the year with a GAAP leverage ratio of 24.6%, a reduction of 150 basis points in the quarter and 380 basis points over the course of the year, which is another milestone, as we stated, our goal was to be at or under 25% on this important metric.\nThis improvement was driven by approximately $4 billion of debt and hybrid retirement, along with $2.6 billion of share repurchases, nearly $2.1 billion of which occurred in the second half of 2021, which was slightly above our guidance.\nMoving to general insurance.\nCatastrophe losses of $189 million were significantly lower this quarter, compared to $545 million in the prior-year quarter.\nThis quarter's main drivers were the Midwest tornadoes and the Colorado wildfire.\nPrior year development was $44 million favorable in the fourth quarter compared to unfavorable development of $45 million in the prior-year quarter.\nAs usual, there was net favorable amortization from the ADC, which was $45 million this quarter.\nSo PYD was essentially flat without this amortization.\nOn a full year basis, net favorable development amounted to $201 million relative to $43 billion in net loss and loss adjustment expense reserves.\nIn 2020, we released $76 million of net favorable development.\nShifting to premium growth.\nOverall global commercial Insurance net premiums grew 13% on a reported and constant dollar basis for the quarter, and growth in North America commercial was 11%, driven by casualty, which increased 50%; Lexington, which increased 14%; and financial lines, which increased over 10%.\nIn international commercial, growth was 16% on an FX-adjusted basis.\nAnd by line of business, global specialty, which is booked in international, grew over 25%.\nTalbot had 20% growth, and property grew by 13%.\nOverall growth in the fourth quarter was driven by strong incremental rate improvement, higher renewal retentions, and strong new business volumes.\nCommercial retention improved by 300 basis points year-over-year in North America to 80% and by 400 basis points in international to 86% in the period.\nThis increase in wholesale business in North America commercial brings with it lower channel retention ratios in addition to purposefully lower retentions in cyber and private D&O.\nExcluding these items, the retention ratios between North America and international commercial are comparable.\nCommercial new business grew by 33% in the fourth quarter with 41% growth in North America and 25% growth in international.\nTurning to rate, where overall global commercial Lines saw increases of 10% in the quarter, we achieved the third straight year of double-digit increases.\nStrong momentum continued across most lines, and we continue to achieve rate above loss cost trends.\nNorth America commercial's overall 11% rate increases were balanced across the portfolio and led by financial Lines, which increased by 15%; excess casualty, which increased by 14%; retail property, which was up 13%; and Lexington, which increased by 11%.\nInternational commercial rate increases in the aggregate were 9%, driven by EMEA, which increased by 18%; the U.K., which increased by 12%; financial lines, which increased 18%; and energy, which was up 11%, which is also its 11th consecutive quarter of double-digit rate increases.\nShifting now to a calendar year combined ratio comparison.\nGeneral insurance produced a 95.8% combined ratio for 2021, an improvement of 850 basis points over 2020 and nearly 1,600 basis points better from 2018's 111.4% calendar year combined ratio.\nPeeling back a bit more, the combined CAT and prior period development improvement has been 720 basis points since 2018, indicating both a material CAT exposure reduction, in line with the movement we have shown in our PMLs, and a much stronger loss reserve position than three years ago.\nTurning to additional pricing.\nRate increases continue to be favorable and outpaced loss cost trends in most areas of the portfolio.\nWith the level of rate that we have achieved in just the last 12 months, we expect that margin expansion will continue at least through 2022 and likely into accident year 2023.\nGetting more specific for illustrative purposes, we have communicated written rate changes during prior earnings calls and will continue to do so.\nHowever, since earned rate changes more directly impact reported results, and given recent discussions around the inflation component of loss cost trend, I thought I'd go over a few areas on an earned rate basis for full year 2021.\nIn North America commercial, for example, excess casualty business that focuses on our national and corporate accounts has achieved an approximate earned rate increase approaching 40% in 2021 over 2020's earned rate level, as has cyber.\nD&O and non-admitted casualty achieved earned rate increases in the mid-20s.\nAnd importantly, retail and wholesale property achieved earned rate increases during 2021 in the low 20s.\nThis is noteworthy because property is getting most of the inflation attention, and yet the level of earned rate that was achieved is, in my view, still materially ahead of property and loss cost trend.\nAnd the same could be said for both excess casualty and D&O.\nRecent property written rate increases are still in the low teens, and looking into policy year 2022 should keep them above loss trend even with an inflationary spike.\nProperty pricing needs to remain firm to cover these increased costs of labor, materials, and transportation.\nTurning to international commercial.\nSimilar to North America, there are large areas of material earned rate increases for full year 2021.\nInternational financial Lines achieved a 23% earned rate increase over 2020's earned rate level.\nThe international property book achieved an 18% earned rate increase, and the energy book achieved earned rate increases in the mid-20s.\nLet's now step back and look at the last three years of cumulative written rate increases achieved at a high level during 2019 through 2021.\nNorth America commercial across all lines of business had a 47% cumulative written rate increase, and international commercial's cumulative written rate increase during that same time period was 40%.\nThese measures, although they don't take into account improved terms and conditions and other difficult-to-track impacts, indicate, on their own, a significant ingredient of margin improvement as evidenced by the material reduction in our reported accident year results.\nAs we think about moving forward into calendar year 2022 and 2023, we need to be cognizant about the absolute, significantly favorable impact on combined ratios over the last three years and realize that most lines of business are well into the green.\nAlthough there are several opposite forces that work, such as economic and social inflation, my sense is that the 2022 market will continue to produce tight terms and conditions and strong pricing to sustain additional margin expansion into calendar 2023.\nAs we think about 2022, major areas of growth for North America would be accident and health as the economy is expected to begin rebounding, and Lexington on a non-admitted basis.\nAnd on the international side, we see growth in our global specialty operations, A&H as well and select casualty and financial Lines areas around the globe, whereas AIG Re sees growth mostly in casualty business.\nThe AIG Re portfolio strategically took the opportunity to further derisk and rebalance the portfolio away from property CAT due to our view of less-than-adequate returns in that space and expanded further into casualty and specialty Lines and expects to continue that trend.\nzone PML down meaningfully across most points in the return period curve.\nMoving to life and retirement.\nPremiums and deposits grew 19% in the fourth quarter, excluding retail mutual funds, relative to the comparable quarter last year.\nGrowth was driven by individual retirement and $2.1 billion of pension risk transfer activity.\nAPTI for the quarter was $969 million, down 6%, driven primarily by lower net investment income and unfavorable COVID-19 base mortality, although non-COVID-19 mortality returned to being better than pricing expectations.\nOn a full year basis, APTI increased to $3.9 billion, reflecting higher net investment income and fee income, partially offset by adverse mortality.\nOur investment portfolio and hedging program continued to perform extremely well for both the quarter and the year.\nComposite base spreads across individual and group retirement, along with institutional markets, compressed 12 basis points during 2021 within the sensitivity guidance we've previously provided.\nWithin individual retirement, Index Annuities continued to be the net flows growth engine with $880 million of positive net flows for the quarter and $4.1 billion of the full year.\nAPTI was essentially flat for full year 2021 over full year 2020, but premiums and deposits were up 34% and AUM was up 2% year over year to $159 billion.\nGroup retirement had APTI of $314 million for the fourth quarter, virtually flat with last year's comparable quarter, but was up 27% on a full year basis, with premium and deposits up roughly 4% and assets under administration up over 7.5% on a full year basis to $140 billion.\nLife insurance APTI was a negative $8 million in the fourth quarter, but had a gain of $106 million for the full year.\nPremiums and deposits grew 4% from fourth quarter of 2020 and over 5% for the full year to $4.7 billion.\nAdditionally, total insurance in-force grew to $1.2 trillion, representing over 3% growth.\nInstitutional markets grew premiums and deposits by 74% relative to last year's comparable quarter, primarily due to the significant pension risk transfer sales.\nMoving to other operations.\nThe adjusted pre-tax loss before consolidation and eliminations was $178 million, a $250 million improvement versus the prior-year quarter, with the primary drivers being higher net investment income of $237 million; a lower corporate interest expense on financial debt of $51 million, resulting from our debt redemption activities; partially offset by higher corporate GOE of $12 million, which include increases in performance-based compensation.\nHeading to Peter's comment about AIG 200, $810 million of run-rate savings are already executed or contracted toward the $1 billion run rate savings objective, with approximately $540 million recognized to date in our income statement and $645 million of the $1.3 billion cost to achieve having been spent to date.\nTotal cash and investments were $361 billion, and fourth quarter net investment income on an APTI basis was $3.3 billion, which was essentially the same both sequentially and year over year and was aided by higher alternative investment income, particularly within private equity.\nNII for the full year of $12.9 billion was up over $600 million from 2020.\nPrivate equity returns were nearly 32% for the full year, up from approximately 10% last year.\nHedge funds returned approximately 14% each year, and mortgage loan returns were stable at 4.2%.\nWe ended the year with our primary operating subsidiaries being profitable and well capitalized, with general insurance's U.S. pool fleet risk-based capital ratio for the fourth quarter estimated to be between 460% and 470%.\nAnd the life and retirement [Inaudible] is estimated to be between 440% and 450%, both well above the upper bound of our target operating ranges.\nWith respect to share count, our average total diluted shares outstanding in the fourth quarter were 847 million, a reduction of 2%, as we repurchased approximately 17 million shares in the quarter.\nThe end-of-period outstanding shares for book value per share purposes was approximately 819 million at year-end 2021.\nNow I'd like to address the forthcoming LDTI accounting changes affecting our life and retirement business.\nFirst, this is a GAAP-only accounting standard, and there should not be impacts to cash flow or statutory results.\nAs this continues to be a work in progress for us and the industry at large, I'd like to provide a range toward the transitional balance impact at January 1, 2021, as being between $1 billion and $3 billion decrease to shareholders' equity, with our current point estimate being toward the lower end of this range.\nThis decrease represents a netting between an increase to retained earnings and a decrease to AOCI.\nOnce again, life and retirement's breadth of product offerings provides value as the LDTI impact of old traditional products covered by FAS 60 involving mortality are roughly offset by the elimination of historical AOCI adjustment associated with certain longevity products.\nAlso, current GAAP accounting for living benefits is at fair value, and changes go through the income statement, whereas under LDTI, a portion of that charge will be recorded in AOCI, pertaining to the company's own credit spreads, which, for that piece, will help to dampen some volatility.\nBut mortality benefits will now also be at fair value and will act as an offset to take volatility in the other direction within the GAAP income statement.\nTurning now to the recent S&P capital model changes.\nThe deadline to respond has been extended to March of 2022, and S&P will presumably conclude shortly thereafter.\nBoth the property, casualty, and the life retirement insurance industries will likely see higher capital charges for in insurance exposures as well as for asset credit and asset market risks.\nAdditionally, reduced benefits of holding company cash liquidity and lower levels of accessible debt leverage is an indicated outcome, but all with material offsets due to increased diversification benefits.\nWe have spent considerable time on the analysis of this proposal so far, but it is probably premature to make any predictions at this point before S&P in the industry have had more time to land upon the exact details of the final framework.\nNow in conclusion, by virtually all measures, growth, profitability, returns, margin expansion, adjusted book, adjusted tangible book value, debt leverage reduction, EPS, adjusted pre- and after-tax income, and net income all point to an outstanding year for AIG.\nWhen you also factor in our global platform, our marketplace actions and impact, the strength of our loss reserves, a robust reinsurance program, and massive portfolio reconstruction AIG is exceedingly well-positioned as we look to the separation of L&R, completing AIG 200, maintaining our path toward increasing profitable growth and for whatever else the future holds.\n",
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"content": "qtrly earnings per share $4.38; qtrly adjusted earnings per share $1.58.\nqtrly general insurance net premiums written increased 7% from prior year quarter to $5.96 billion.\nas of december 31, 2021, book value per common share was $79.97, up 5% from december 31, 2020.\nqtrly general insurance underwriting income of $499 million included $189 million of catastrophe losses, net of reinsurance mainly from tornadoes in southern u.s., wildfires.\nreturn on common equity and adjusted roce were 23.0% and 9.9%, respectively, on an annualized basis for q4 2021.\nco sees ipo of life and retirement unit in q2 of 2022.\ncompleted initial asset transfer of $50 billion to blackstone.\nco continues to make significant progress towards separating life and retirement unit.\nco sees ipo of life and retirement unit in second quarter of this year.\nsize of life and retirement unit's ipo will depend on market conditions but aig will retain over 50% stake immediately after ipo.\nco expects that over time, life and retirement unit will sustain an annual payout ratio to shareholders of 60% to 65% between dividends and share repurchases.\nco believes life and retirement unit will pay an annual dividend in the range of $400 million to $600 million post ipo.\n$8.3 billion dividend paid by life and retirement business to aig will be used to reduce debt.\npost deconsolidation, co expects life and retirement unit to maintain a leverage ratio in the high 20s.\nco does not expect life and retirement ipo to impact aig's dividend.\nco expects to complete in 2022 the $3.9 billion remaining under current share buyback authorization.\nwill prioritize allocating capital in general insurance segment.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm pleased to report that we started the year strong, delivering another solid quarter.\nBoth segments got off to a good start.\nAs a company, we achieved $222 million in revenues and excellent bottom line performance, with GAAP earnings per share of $0.85 or $0.87 per share on an adjusted basis.\nOur cash flow generation was particularly good for first quarter.\nAnd we continue to pay down debt and have a healthy balance sheet, which enables investment in future growth.\nI'm particularly proud of how our employees continue to perform through the pandemic.\nEven while following our COVID-19 protocols and safety procedures, our operating teams are driving process improvements with Lean Kaizen.\nOur R&D teams are working on the next generation of materials and products, and we continue to do a great job for our customers in delivery, quality and service.\nOur Machine Clothing segment had its strongest quarterly top line performance since 2015, with revenues up nearly $12 million year-over-year and good order activity in Q1, which bodes well for this year.\nIn fact, other than the secular decline in publication grades, Machine Clothing end market demand in packaging, tissue, pulp and engineered fabrics were all positive in Q1.\nIn addition to a solid backlog, our engineering teams are hard at work developing new technology belts for our customers, which is critical to our success and value proposition.\nWe have seen some instances of isolated supply constraints impacting raw material pricing and delivery timing in this segment, and we continue to actively manage our supply chain, securing the materials we need to support our customers' demand.\nIn summary, our Machine Clothing segment continues to perform well.\nserving customers around the world as the recognized global leader supplying these critical consumable components to the paper industry.\nThis success is the result of a disciplined execution of our long-term strategy.\nIn Aerospace, as we reported last quarter, our Engineered Composites segment will be grinding through a year of destocking of excess inventory in the channels for LEAP, Boeing 787 and F-35 products.\nThat said, Engineered Composites is on track with their plan and ready for the upturn as commercial air transport improves, inventory in the channels is consumed and our production is back in sync with aircraft OEM production.\nWe're on good platforms that we expect will recover, and we continue to do this as a time to further improve our operations.\nWe're ready and looking forward to the upturn.\nWe're working closely with Safran to coordinate our operations as the LEAP engine production ramps up, supporting the Airbus A320neo and Boeing 737 MAX.\nWith domestic air travel recovering first and fueling demand for narrow-body aircraft, A320neo and Boeing 737 MAX are in the sweet spot of the air transport recovery.\nIn Engineered Composites, looking beyond our current portfolio of programs, our opportunity pipeline is as full as it's ever been.\nWe're developing a breadth of capability to be the next-generation supplier of advanced composite materials.\nThis ranges from our proprietary 3D woven composites currently used on LEAP engine fan blades and hand cases to automated fiber placement composite wing skins for Lockheed Martin's F-35 Joint Strike Fighter to complex components on the Sikorsky CH-53K helicopter.\nWe continue to develop applications for the Wing of Tomorrow program with Airbus Industries, and we're investing more this year in R&D projects with new customers and new platforms using advanced materials such as our 3D woven composites on a range of exciting applications, including unmanned hypersonic and electric aircraft.\nThe sum of these efforts furthers our goal to diversify and grow our customer base and broaden our material science capabilities.\nAs I mentioned, we have a strong balance sheet and good free cash flow generation.\nThese allow us to sustain our investment in the technology and customer programs that expand and broaden our competitive positioning in both segments.\nOur first priority for capital allocation is to invest in organic growth programs across both business segments and then to seek acquisitions that fit our long-term strategy.\nOur reputation for reliability, service and technical excellence is well established in the Machine Clothing segment, and our brand is growing in aerospace as a reliable supplier and engineered materials partner, and we're optimistic about the long-term opportunities in both segments.\nI will first talk about the results for the quarter and then comment on the outlook for our business for the balance of the year.\nFor the first quarter, total company net sales were $222.4 million, a decrease of 5.7% compared to the $235.8 million delivered in the same quarter last year.\nAdjusting for currency translation effects, net sales declined by 8.2% year-over-year in the quarter.\nIn Machine Clothing, also adjusting for currency translation effects, net sales were up 4.9% year-over-year, resulting in the highest Q1 revenue for the segment since 2015, as Bill had mentioned.\nThe increase was driven by growth in all major products -- all major grades of product other than publication grades.\nThe revenue from publication declined by 10% in the quarter and represented only 16% of MC's revenue this quarter.\nCurrency-neutral revenue in both packaging and tissue grades reflected a high single-digit growth rate in the quarter, driven by the high orders we had seen in the fourth quarter of last year.\nEngineered Composites net sales, again, after adjusting for currency translation effects, declined by $26.2 million, primarily caused by significant reductions in LEAP and Boeing 787 program revenue, partially offset by growth on the F-35 and CH-53K platforms.\nDuring the quarter, the ASC LEAP program generated a little under $27 million in revenue, a slight improvement over the roughly $24 million delivered in Q4 of 2020, but down significantly from roughly $39 million delivered in Q1 of last year.\nFirst quarter gross profit for the company was $88.5 million, a reduction of 1% from the comparable period last year.\nThe overall gross margin increased by 190 basis points from 37.9% to 39.8% of net sales.\nWithin the MC segment, gross margin declined from 53.2% to 51.5% of net sales, principally due to higher fixed costs and lower absorption.\nWithin AEC, the gross margin declined from 17% to 16.4% of net sales, driven primarily by the impact of changes in the estimated profitability of long-term contracts.\nLast year, during the first quarter, we recognized a net favorable change in the estimated profitability of long-term contracts of close to $1 million.\nWhile this year, the net change in the estimated profitability of long-term contracts for the first quarter was insignificant.\nFirst quarter selling, technical, general and research expenses declined from $49.2 million in the prior year quarter to $46.7 million in the current quarter and were roughly flat as a percentage of net sales at about 21%.\nThe reduction in the amount of expense reflects the absence of severance costs recognized in the prior year, the impact of additional accounts receivable reserves we recorded in Q1 of 2020 when the pandemic began and lower travel expenses, partially offset by lower foreign exchange gains.\nAs expected and consistent with our full year plans, R&D expenditures in both segments increased this quarter.\nTotal operating income for the company was $41.8 million, up from $39.6 million in the prior year quarter.\nMachine Clothing operating income increased by $3.2 million driven by higher gross profit, partially offset by higher STG&R expense, and AEC operating income fell by $4.7 million, caused by lower gross profit.\nOther income and expense in the quarter netted to an expense of $600,000 compared to an expense of $15.6 million in the same period last year.\nLast year's results included a significant charge related to a foreign currency revaluation loss.\nThe income tax rate for this quarter was 26.7%, compared to the unusually high 62.1% rate we recorded last year.\nThe primary driver of the reduction in the tax rate was the nondeductibility of last year's foreign currency revaluation loss.\nApart from that, in this quarter, favorable income tax adjustments reduced income tax expense by $1.3 million compared to an increase of $5.1 million from similar adjustments in the same quarter last year.\nNet income attributable to the company for the quarter was $27.6 million, an increase of $18.5 million from $9.1 million last year.\nThe increase was primarily driven by the absence this year of last year's foreign currency revaluation loss and by higher operating income.\nEarnings per share was $0.85 in this quarter, compared to $0.28 last year.\nAfter adjusting for the impact of foreign currency revaluation gains and losses, restructuring expenses, expenses associated with the CirComp acquisition and integration and severance costs in the prior year period, adjusted earnings per share was $0.87 this quarter compared to $0.78 last year.\nAdjusted EBITDA grew 2.6% to $60.7 million for the most recent quarter compared to the same period last year.\nMachine Clothing adjusted EBITDA was $54.9 million or 37.1% of net sales this year, up from $49.2 million or 36% of net sales in the prior year quarter.\nAEC adjusted EBITDA was $16.7 million or 22.6% of net sales, down from last year's $22.1 million or 22.3% of net sales.\nTurning to our debt position.\nTotal debt, which consists of amounts reported on our balance sheet as long-term debt or current maturities of long-term debt, declined from $398 million at the end of Q4 2020 to $384 million at the end of Q1 2021.\nAnd cash declined by just over $3 million during the quarter, resulting in a reduction in net debt of over $10 million.\nThe first quarter is typically our lowest quarter for cash flow generation due to working capital seasonality and the incentive compensation payments made during the quarter.\nThis year, we performed better than we would typically expect and delivered free cash flow, defined as cash flow from operations less capital expenditures, of $21.1 million, compared to a use of over $19 million in the same quarter last year, driven primarily by improvements in AEC working capital.\nWe were pleased with the cash flow performance of the AEC segment this quarter, which swung from a significant use in the same quarter last year to significant cash generation this year.\nCapital expenditures in Q1 of each year were approximately $13 million.\nOur absolute net leverage ratio is now 0.65, providing us with a very strong balance sheet, allowing us to take advantage of organic and acquired growth opportunities.\nAs we look forward to the balance of 2021, the outlook for the Machine Clothing segment remained strong.\nCompared to the same quarter last year, MC orders were down 2%.\nHowever, as you may recall, near the end of Q1 in 2020, orders spiked from customers who are concerned about the availability of supply in light of the emerging pandemic.\nFurther, from a backlog perspective, we are in a stronger position entering Q1 in 2021 than we were in 2020.\nSo overall, we are feeling good about our previously issued guidance of revenue for the segment of between $570 million and $590 million.\nFrom a margin perspective in Machine Clothing, we delivered another strong quarter, with adjusted EBITDA margins north of 37%.\nI should note that some of the headwinds we projected this year, most notably a return to normal levels of travel and the absence of the foreign exchange benefits we enjoyed during the middle last year, have yet to impact our comparative results.\nThat said, we are pleased with our performance for the quarter.\nWhile we are maintaining our adjusted EBITDA guidance for the segment of $195 million to $205 million, we are currently trending toward the upper portion of that range.\nTurning to Engineered Composites.\nWe are seeing the expected impact of the 787 frames channel destocking in our top line results.\nDuring the quarter, we generated less than $1 million of revenue from the 787 frames program compared to over $12 million in the same quarter last year.\nI already noted that the ASC LEAP program was also down by about $12 million during the quarter.\nThese two programs account for almost all of the year-over-year decline in AEC revenue that we saw during the quarter.\nAs a result of these declines, the share of AEC revenue derived from defense programs grew to over 48% during the quarter.\nThat said, we will still see the previously disclosed revenue impact from F-35 channel destocking in the second and third quarters.\nSo I would expect the defense program share of AEC revenues to dip somewhat over the next couple of quarters.\nThis will also make the second and third quarters quite challenging for the segment overall.\nThe year is shaping up in line with expectations for the segment, and we are maintaining our guidance range of $275 million to $295 million for segment revenues.\nFrom a profitability perspective, our performance to date is broadly in line with our expectations, and we are maintaining our AEC adjusted EBITDA guidance of $55 million to $65 million.\nWe are also maintaining all of our previously issued guidance ranges for company-level performance, with the exception of guidance for GAAP earnings per share, which has been updated to reflect non-GAAP adjustments recorded in Q1.\nCurrent guidance is as follows: revenue of between $850 million and $890 million; effective income tax rate of 28% to 30%; depreciation amortization of between $70 million and $75 million; capital expenditures in the range of $50 million to $60 million, GAAP earnings per share of between $2.38 and $2.78, down slightly from prior guidance of $2.40 and $2.80; adjusted earnings per share of between $2.40 and $2.80; and adjusted EBITDA of between $195 million and $220 million.\nOverall, we are very pleased with how the year is progressing and hope to see a continued progression to normalcy in the balance of the year.\nOver to you, Greg.\n",
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"content": "compname reports q1 earnings per share of $0.85.\nq1 sales fell 6 percent to $222.4 million.\nq1 adjusted earnings per share $0.87.\nq1 earnings per share $0.85.\nreiterating our guidance for 2021.\nupdated 2021 gaap earnings per share guidance.\nsees 2021 gaap earnings per share $2.38 - $2.78 and adjusted earnings per share of between $2.40 -$2.80.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm pleased to report that we delivered another strong quarter with excellent performance in both segments.\nOur operations continue to do a great job for our customers with best-in-class delivery, quality and service.\nI'm really proud of our employees and how they stayed focused on safety, productivity, cost savings in Lean Kaizen process improvements.\nAs a company, we delivered $235 million in revenue in the second quarter, growing revenues both year-over-year and sequentially and we achieved near record levels of profitability.\nGross margins of 43% and operating margins of 21%, our second highest quarterly margin performance.\nWe achieved GAAP earnings per share of $0.97 for adjusted earnings per share of $1.1 [Phonetic] and our best free cash flow quarter in the company's history, generating over $50 million in free cash flow in the second quarter.\nWe did face supply chain challenges in materials, cost inflation and logistics that our teams were able to manage through and successfully offset some of their impact on the bottom line and we'll keep an eye on these going forward.\nWe continue to pay down debt and have a healthy balance sheet, which enables investment in future growth.\nAs we've mentioned before, we're increasing our investment in research and technology across the company.\nIn general, we're encouraged by the economic recovery in key markets coming out of the pandemic slowdown.\nWe're cautiously watching how the delta variant might affect this recovery, particularly international air travel in the less-vaccinated regions of the world.\nThat said, long-term secular trends are favorable and Albany's market positions global footprint and product development take advantage of these trends.\nIn our Engineered Composites segment.\nAs domestic airline travel recovers, we expect to benefit from our position on narrow-body aircraft with LEAP engines in our partnership with Safran.\nAs we mentioned last quarter, we're working closely with Safran to coordinate ramping production as LEAP demand picks up on recovering narrow-body OEM production.\nOur plans include hiring additional workers and preparing for increased production in our three LEAP facilities as we exit 2021 grow in the future.\nWe're very excited about Safran's recent announcement with GE to partner and development in the next generation RISE engine.\nWe view Safran as an important long-term customer and partner.\nAs we previously mentioned, we're investing more this year in R&D projects, particularly with new customers and new products, using advanced materials such as our 3D-woven composites, with the goal to diversify and grow our customer base, broaden our material science capabilities.\nThis ranges from our proprietary 3D-woven composites currently used on LEAP engine, fan blades and fan cases, to automated fiber placement composite wing skins for Lockheed Martin's F-35 Joint Strike Fighter to complex components on the Sikorsky CH-53K helicopter.\nWe continue to develop applications for the Wing of Tomorrow program with airbus industries and along these lines, we are pleased to announce earlier this month our technology collaboration with Spirit AeroSystems to develop advanced 3D-woven composite applications for hypersonic vehicles.\nThis collaboration capitalizes on the unique capabilities of both companies to achieve superior hypersonic design solutions and efficient manufacturability using Albany's proprietary 3D-woven composite technologies, and it builds on our demonstrative ability to manufacture 3D-woven composites at commercial scale.\nThis is an exciting example of the types of new business and advanced technology programs we're investing in today to help secure our future long-term growth.\nIn the Machine Clothing segment, we're optimistic about recovering global growth, expect to benefit from long-term secular trends, which should underpin the demand for paper products.\nOur Machine Clothing business has benefited as a leading supplier in the industry since we're well-positioned globally, particularly in the growing end markets for packaging and tissue products.\nOur product development strategies, operational improvements and technical service continue to target these higher growth end markets.\nOur operating teams have been firing on all cylinders and we expect to continue our strong execution in the second half of the year.\nLet me say a few words about Machine Clothing's end markets.\nPackaging, tissue, corrugated products, pulp and building products, end markets have remained the strongest sub-segments with packaging benefiting from increasing online shopping as retail goes through a fundamental shift worldwide.\nIn tissue, we may be in a transition phase whereby at-home demand settles down and people return to school, restaurants, offices, vacations, et cetera.\nWe have yet to see a pickup however, in the away-from-home paper markets for our belts, which should eventually improve.\nNot surprisingly, publication grades continue their decline and only represented 16% of MC revenues in the second quarter.\nMarkets in North America and China robust while emerging economies are still grappling with COVID and low vaccination rates likely requiring more time to rebound.\nIn summary, our Machine Clothing segment continues to perform well, our operations are strong, taking advantage of the higher growth sub-segments and serving customers well around the world as a recognized global leader in the industry.\nThis success is a result of disciplined execution of our long-term strategy.\nAs I mentioned, we have a strong balance sheet and good free cash flow generation, which allows us to continue investing in the technologies and customer programs that expand and broaden our competitive position in both segments.\nOur first priority for capital allocation is to invest in organic growth programs across both business segments and then to seek acquisitions that fill our long-term strategy.\nOur reputation for reliability, service and technical excellence is well-established in Machine Clothing and our brand is growing in aerospace as a reliable supplier and engineered materials partner.\nWe're optimistic about the long-term opportunities in both segments.\nI'll talk first about the results for the quarter and then comment on the outlook for our business for the balance of the year.\nFor the second quarter, total company net sales were $234.5 million, an increase of 3.8% compared to $226 million delivered in the same quarter last year.\nAdjusting for currency translation effects, net sales rose by 1% year-over-year in the quarter.\nIn Machine Clothing, also adjusting for currency translation effects, net sales were up 0.8% year-over-year, driven by increases in packaging grades and engineered fabrics, partially offset by declines in all other grades.\nPublication revenue declined by over 7% in the quarter and as Bill mentioned, represented only 16% of MC's revenue this quarter.\nTissue grades also declined over year-over-year due to a more normal level of demand for grades to support customer production for at-home use, resulting in the decline from the highs for those grades that we saw last year without significant recovery to date in the away-from-home product grades.\nEngineered Composites net sales, again after adjusting for currency translation effects, grew by 1.3%, primarily driven by growth on LEAP and CH-53K, partially offset by a decline on the 787 platform.\nDuring the quarter, the ASC LEAP program generated little over $25 million in revenue.\nComparable to the first quarter of this year, but up over $10 million from the second quarter of last year.\nAt the same time, we reduced our inventory of LEAP-1B finished goods by over 20 engine shipsets in the quarter, leaving us with about 170 LEAP-1B engine shipsets on the balance sheet at the end of the second quarter.\nAs you will recall, we previously recognized revenue on these engine shipsets and their value was reported under contract assets on our balance sheet.\nAlso during the most recent quarter, we generated about $3 million in revenue on the 787 program, up from less than $1 million in the first quarter, but down from almost $14 million in the second quarter of last year.\nSecond quarter gross profit for the company was $101.7 million, a reduction of 1% from the comparable period last year.\nThe overall gross margin decreased by 220 basis points from 45.6% to 43.4% of net sales.\nWithin the MC segment, gross margin declined from 54.5% to 52.9% of net sales principally due to foreign currency effects, higher input costs and higher fixed costs, partially offset by improved absorption.\nFor the AEC segment, the gross margin declined from 26.7% to 23% of net sales, driven primarily by a smaller impact from changes in the estimated profitability of long-term contracts.\nDuring this quarter, we recognize the net favorable change in the estimated profitability of long-term contracts of just over $4 million.\nBut this compares to a net favorable change of over $7 million in the same quarter last year.\nThe favorable adjustment this quarter was principally due to a reduction as a result of changes in volume expectations to previously established loss reserves on a couple of specific programs and is therefore not necessarily reflective of ongoing enhancements to profitability.\nIn fact, as we previously discussed, the expected revenue declines this year in some of our fixed price programs are leading to headwinds to long-term program profitability this year.\nSecond quarter selling, technical, general and research expenses increased from $47.4 million in the prior year quarter to $51.8 million in the current quarter and also increased as a percentage of net sales from 21% to 22.1%.\nThe increase in the amount of expense reflects higher incentive compensation expense, higher R&D spending, higher travel expenses and higher foreign currency revaluation losses.\nTotal operating income for the company was $50 million, down from $52.7 million in the prior year quarter.\nMachine Clothing operating income fell by $600,000, caused by higher STG [Phonetic] in our expense, partially offset by higher gross profit and lower restructuring expense.\nAnd AEC operating income fell by $1.1 million, caused by lower gross profit and higher STG in our expense, partially offset by lower restructuring expense.\nThe income tax rate for this quarter was 30%, compared to 32.1% in the same quarter last year.\nThe lower rate this year was caused by the generation of a lower share of our global profits in jurisdictions with higher tax rates, partially offset by a higher level of unfavorable discrete income tax adjustments.\nNet income attributable to the company for the quarter was $31.4 million, reduction of $1 million from $32.4 million last year.\nThe reduction was caused primarily by the lower operating profit, partially offset by the lower tax rate.\nEarnings per share was $0.97 in this quarter compared to $1 last year.\nAfter adjusting for the impact of foreign currency revaluation gains and losses, restructuring expenses and expenses associated with the CirComp acquisition and integration, adjusted earnings per share was $1.01 this quarter, compared to $1.09 last year.\nAdjusted EBITDA declined by 5.8% to $69.4 million for the most recent quarter compared to the same period last year.\nMachine Clothing adjusted EBITDA was $63 million, essentially flat compared to the prior year quarter and represented 39.4% of net sales.\nAEC adjusted EBITDA was $19.3 million or 25.9% of net sales, down from last year's $22.8 million or 31.4% of net sales.\nTurning to our debt position.\nTotal debt, which consists of amounts reported on our balance sheet as long-term debt or current maturities of long-term debt declined from $384 million at the end of Q1 2021 to $350 million at the end of Q2 and cash increased by just over $15 million during the quarter, resulting in the reduction in net debt of about $50 million.\nCapital expenditures in the quarter were approximately $11 million compared to $9 million in the same quarter last year.\nThe increase was caused primarily by higher capital expenditures in Machine Clothing.\nAs we look forward to the balance of 2021, the outlook for the Machine Clothing segment remains strong.\nCompared to the same period last year, MC orders were up 10% in the second quarter and up over 3% year-to-date.\nWe are also seeing some foreign currency tailwinds to our MC revenue, primarily driven by the strong Euro, although the recent strength in the dollar versus the euro means that we are unlikely to see the same foreign currency tailwinds in the back half of the year.\nOverall, we are raising our previously issued guidance of revenue for the segment to between $585 million and $600 million, up from the prior range of $570 million $590 million.\nFrom a margin perspective in Machine Clothing, we delivered another strong quarter with adjusted EBITDA margins of almost 40%.\nWe saw some increase in the level of travel during the quarter, but we are still not back to a normal level of travel and the segment's travel expense in the quarter was still almost $2 million, below the level in the same quarter in 2019.\nSo, we may see some additional pressure from that in the balance of the year as we continue with the return to normal.\nWe have also seen some pressure from increased input expenses both raw materials and logistics and expect these pressures to continue through the balance of the year.\nWe continue to work to offset the impact of these cost increases to the greatest extent possible by driving down our production cost through continuous improvement initiatives.\nHowever, we do expect to see overall margin pressures in the back half of the year, driven by both increasing travel expenses and rising input costs.\nAt the start of the year, we had anticipated seeing foreign currency exchange rate pressures on MC profitability, particularly caused by the recovery in the Mexican peso and Brazilian real as the devaluation of both of those currencies in the middle of 2020 has provided us a bottom line benefit since we've more expenses than revenues in those currencies.\nYear-to-date, we have not seen as much headwind from those currencies as we had expected and we have also benefited from the strong euro, a currency where we have more revenues than expenses.\nAs a result, overall year-to-date, foreign exchange rates have actually provided us with a modest adjusted EBITDA benefit compared to the same period last year.\nHowever, based on current exchange rates, we will not see the same comparable foreign currency benefit in the back half of the year.\nWe are also cautious about the effects of a potential resurgence in COVID cases on segment results in the back half of the year.\nAs a result of all of these factors and the increase in revenue guidance, we are increasing our adjusted EBITDA guidance for the MC segment to a range of $210 million to $220 million, up from the prior range of $195 million to $205 million.\nTurning to Engineered Composites.\nWe delivered a strong quarter aided by the net favorable adjustment to long-term contract profitability.\nAbsent that pickup, our Q2 results were consistent with what we had indicated last quarter, down from Q1, representing of what we had expected to be the trough for the year.\nHowever, given the impact of the net favorable adjustment on the second quarter results, we now expect that Q2 will be the quarter with the highest segment profitability this year as we expect Q3 and Q4 profitability to be more in-line with what we delivered in Q1.\nFor the full year, we still expect 787 program revenue to be down over $40 million from the roughly $50 million generated on that program last year.\nWith Boeing's recent announcement of a reduction in 787 build rate, all but eliminating the possibility for any upside on that program later in the year.\nWe also still expect LEAP revenue to be in-line with prior expectations and roughly flat to last year.\nHowever, on a more positive note, while F-35 revenue was down slightly in the second quarter compared to the same period last year, recent order volume has given us confidence that we will not see the full-year decline in F-35 revenue that we had previously expected.\nOverall, due to the increased confidence in F-35 revenue, the adjustments to long-term contract profitability this quarter and improvements in several other areas, we are raising our guidance for segment revenues to be between $290 million and $310 million, up from the previous range of $275 million to $295 million.\nFrom a profitability perspective driven by the same factors, we are raising our AEC adjusted EBITDA guidance to be between $65 million and $75 million, up from the prior range of $55 million to $65 million.\nWe are also updating our previously issued guidance ranges for company-level performance including revenue of between $880 million and $910 million, increased from prior guidance of $850 million to $890 million; effective income tax rate of 28% to 30%, unchanged from prior guidance; depreciation and amortization of approximately $75 million, the top end of prior guidance; capital expenditures in the range of $40 million to $50 million, down from prior guidance of $50 million to $60 million; GAAP earnings per share of between $2.84 and $3.14 increased from prior guidance of $2.38 to $2.78; adjusted earnings per share of between $2.90 and $3.20, increased from prior guidance of $2.40 to $2.80; and adjusted EBITDA of between $225 million and $240 million, increased from prior guidance of $195 million to $220 million.\nOverall, we continue to be very pleased with the performance of both segments.\nBoth face challenges -- primarily rising input cost for Machine Clothing and recovering commercial aerospace market for the Engineered Composites segments, but both segments are overcoming the challenges and delivering strong results, which is a testament for the hard work by all of our employees across the globe.\n",
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"content": "albany international raises 2021 guidance.\nsees fy adjusted earnings per share $2.90 to $3.20.\nsees fy gaap earnings per share $2.84 to $3.14.\nq2 adjusted earnings per share $1.01.\nq2 earnings per share $0.97.\nsees fy revenue $880 million to $910 million.\nq2 revenue $235 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: that contain a number of risks and uncertainties, among which are the potential effects of the COVID-19 pandemic on our operations, the markets we serve and our financial results.\nWe're pleased to report another good quarter of results.\nWe executed well and we continue to do a great job for our customers on many fronts in quality, delivery service, and our technology partnerships.\nOur supply chain teams work 24/7 to overcome unprecedented logistics challenges and material shortages to keep our factory supplied.\nAnd I am most pleased that we achieved a record level of performance and safety something our teams have been working hard at in all of our plants around the world.\nAs a company, we delivered GAAP earnings per share of $0.95, $0.83 on an adjusted basis on $232 million in revenue, an increase of nearly 10% from Q3 last year.\nOur Machine Clothing segment continues to fire on all cylinders and grew sales by 11% compared to Q3 last year with excellent profitability and free cash flow generation.\nEngineered composites delivered top-line growth of nearly 7% and performed well, as we work toward the upturn in commercial aerospace.\nOur profitability was solid with gross margins of 40%, operating margins of 19%, and adjusted EBITDA margins of 26% and we continued our strong free cash flow generation, over $40 million in the quarter.\nWe have low debt and a healthy balance sheet, and we look forward to continuing solid performance from our Machine Clothing segment and gradual recovery in commercial aerospace.\nAs we mentioned last quarter, long-term secular trends are favorable and Albany's market positions, global footprint, and product development take advantage of these trends.\nIn our Engineered Composites segment, we expect commercial aerospace to gradually improve with narrow-body aircraft demand improving before wide-body demand.\nConsequently, we're hiring employees and planning for a ramp-up in LEAP production driven by Airbus A320neo and Boeing 737 MAX growth.\nWe are coordinating with Safran to expand production in our three LEAP facilities in the US, France, and Mexico.\nWe see positive signs in international travel bookings as borders reopen and people have begun to travel internationally, although we don't expect any near-term pickup in wide-body production demand such as for our Boeing 787 composite frames line as there still inventory in the system and international travel has been slow to recover.\nOur AEC businesses continue to perform well on our military platforms Sikorsky CH-53K helicopter, Lockheed Martin's F-35 Joint Strike Fighter, and Jazan missile programs.\nWe're fortunate to be on excellent programs and our teams are executing well.\nWe also continued our pursuit of new customers and new applications for advanced composites.\nDuring the quarter, we announced our technology collaboration with Spirit AeroSystems to apply our advanced 3D woven composite technology to hypersonic vehicles and take advantage of our proprietary 3D woven composites in a high-temperature environment providing both structural robustness and thermal protection, and building on our proven ability to industrialize 3D woven composites at high volumes.\nThis is an example of the intense collaboration our teams are good at, working closely with our technology partners in the design, development, and commercialization of the most advanced composite applications.\nIn addition to working on engine component applications with our partner Safran, we continue development of Wing applications with Airbus Wing of Tomorrow program and other composite programs in commercial and defense applications.\nOur Machine Clothing segment continue to perform exceptionally well.\nOur engineers and sales and service teams in MC work closely with key customers to develop the next generation of belt materials for improved operational efficiency, performance, and durability.\nAnd customers value our service technical expertise and innovation.\nWe saw a good demand in the quarter for new products and all product lines.\nDemand in MC's end markets has been resilient and particularly strong in packaging in the Americas.\nTissue markets have held up although demand is mixed and flat overall as tissue machine utilization is below long-term averages and tissue producers are working through distortions caused by the pandemic's effect on away-from-home paper markets.\nThis should improve as workers go back to offices and students are back in school.\nIn other end markets, demand was strong in the quarter for corrugators, nonwovens, and building products.\nEven publication was better this quarter, likely a pause in the longer-term secular decline of printing and writing grades of paper.\nWe are seeing significant logistics challenges and price inflation on various raw materials and wages.\nSo far, supply chain management and operations teams have done an excellent job.\nThey've been able to secure the materials we need to run our operations that only moderate increases in cost.\nIn general, we strive to offset inflationary costs through productivity savings.\nThis time may be different, as we don't see inflationary pressures abating anytime soon.\nIf anything, conditions grew more challenging during the third quarter.\nLet me make a few comments on corporate governance and capital allocation before turning the call over to Stephen.\nIn early August, the company move closer to a single-class share structure following the secondary offering of nearly all of the Standish Family's ownership in the company with our few remaining shares converted to Class A common stock.\nAs a result, today, there are more than 32.3 million shares of Class A common stock outstanding and less than 1,200 shares of Class B stock outstanding, which are held by two former employees.\nThe transaction effectively created a conventional single-class governance structure for our shareholders.\nAs we mentioned in the past, our priority is to use our balance sheet first for organic growth investments where we can add value for our customers.\nAnd then acquisitions that fit our strategy enable us to build on our technology, leadership, and market positions in both segments.\nAdding to these options, Albany's Board of Directors has authorized a $200 million share repurchase program, expanding the set of capital allocation alternatives we have at our disposal.\nWe continue to look for acquisitions that advance our technology and market position at a fair price and we're focused on value creation from both an organic and inorganic investment perspective.\nIn summary, we had another good quarter.\nOur businesses are executing well, we continue to push the envelope in our technology development with new products in both segments, and secular trends in our end markets are favorable.\nSo with that, I'll hand the call over to Stephen for more detail on the financials.\nI will talk first about the results for the quarter and then comment on the outlook for our business for the balance of the year.\nFor the third quarter, total company net sales were $232.4 million, an increase of 9.6% compared to the $212 million delivered in the same quarter last year.\nAdjusting for currency translation effects, net sales rose by 8.8% year-over-year in the quarter.\nIn Machine Clothing also adjusting for currency translation effects, net sales were up 9.9% year-over-year.\nAll major grades of product led by engineered fabrics and packaging grades contributed to the year-over-year increase in net sales.\nEngineered composites' net sales, again, after adjusting for currency translation effects, grew by 6.7% primarily driven by growth on LEAP and CH-53K partially offset by expected declines on the 787 and F-35 platforms.\nDuring the quarter, the ASC LEAP program generated about $25 million in revenue, comparable to the first two quarters of this year, but up about $9 million from the third quarter of last year.\nWe are pleased with the reduction in our inventory of LEAP-1B finished goods.\nDuring the most recent quarter, we reduce that inventory by over 30 engine shipsets down to about 140 engine shipsets on hand.\nGiven the current rates of the inventory consumption on that program, we would not plan to have that inventory level drop below about 100 engine shipsets, so we can see the light at the end of the tunnel in terms of inventory destocking.\nI'm looking forward to an earnings call for I no longer have to discuss LEAP-1B inventory at all.\nWe hope to return to a more normal levels of production on LEAP-1B on par with the current production rates for LEAP-1A early in 2022.\nHowever, we do have some concern with the rate of which Boeing is destocking its inventory of finished 737 MAX aircraft, so there is still some lack of clarity around 2022 build rates.\nWe will hopefully have better insight for you on our fourth quarter call.\nAlso during the quarter, we generated under $3 million of revenue on the 787 program down slightly from the second quarter, but down from almost $9 million in the same quarter last year.\nThird quarter gross profit for the company was $92 million, an increase of over 5% from the comparable period last year.\nThe overall gross margin decreased by 160 basis points from 41.2% to 39.5% of net sales.\nWithin the MC segment, gross margin was flat at 51.5% of net sales as the benefit from improved absorption was offset by the impact of year-over-year foreign currency changes and rising input costs.\nFor the AEC segment, the gross margin declined from 21.6% to 16.1% of net sales caused by a smaller impact from changes in the estimated profitability of long-term contracts, a change in program mix, and lower fixed cost absorption due to the lower 787 and F-35 revenues, and the impact of sharing with our customer base a portion of The Aviation Manufacturing Jobs Protection grant received during the quarter.\nThe $5.8 million benefit of this grant appears in the corporate portion of the results while the reduced profitability caused by sharing a portion of the grant with our customer base is reported in the segment results.\nDuring the quarter, we recognized a net favorable change in the estimated profitability of AEC's long-term contracts of about $2 million but this compares to a net favorable change of about $3.5 million in the same quarter last year.\nThird quarter Selling, Technical, General, and Research expenses were $47.4 million in the current quarter, down slightly from $47.8 million in the prior year quarter and were down as a percentage of net sales from 22.6% to 20.4%.\nWhile R&D was up over $4 million -- over $1 million this quarter and while we also incurred higher travel expenses, these were more than offset by a foreign currency revaluation gain this quarter compared to a foreign currency revaluation loss in the same quarter last year.\nTotal operating income for the company was $44.5 million, up from $38.8 million in the prior year quarter.\nMachine Clothing operating income rose by $9.8 million, driven by higher gross profit and lower STG&R expense.\nAnd AEC operating income fell by $3.9 million caused by lower gross profit and higher STG&R expense partially offset by lower restructuring expense.\nThe income tax rate for this quarter was 29.4% compared to 24.7% in the same quarter last year.\nThe higher rate this year was caused by the generation of a higher share of our global profits in jurisdictions with higher tax rates and by less favorable discrete income tax adjustments.\nWe reported over $2 million in expense under other income expense this quarter primarily due to a true-up of indirect taxes in a foreign jurisdiction.\nNet income attributable to the company for the quarter was $30.9 million, an increase of over $1 million from $29.6 million last year.\nThe increase was caused primarily by the higher operating profit, partially offset by higher interest expense and the higher tax rate.\nEarnings per share were $0.95 in this quarter compared to $0.92 last year.\nIn addition to the normal non-GAAP adjustments we typically make to cover the impact of foreign currency revaluation gains and losses, restructuring expenses, and expenses associated with the CirComp acquisition and integration, this quarter, we are also adjusting out the impact of The Aviation Manufacturing Jobs Protection grant as we do not believe it is reflective of ongoing profitability.\nAfter making these non-GAAP adjustments, adjusted earnings per share was $0.83 this quarter compared to $0.96 last year.\nAdjusted EBITDA declined by 2.6% to $60.2 million for the most recent quarter compared to the same period last year.\nMachine Clothing adjusted EBITDA was $59.2 million or 38.4% of net sales, up from $52.6 million or 37.9% of net sales in the prior year quarter.\nAEC adjusted EBITDA was $16.3 million or 20.8% of net sales, down from last year's $19.5 million or 26.6% of net sales.\nTurning to our debt position.\nTotal debt, which consists of amounts reported on our balance sheet as long-term debt or current maturities of long-term debt remained steady at $350 million.\nWe have a floating to fixed interest rate swap in the place of debt level for the life of the current credit agreement and currently, we do not intend to pay down total debt below that level.\nCash increased by about $33 million during the quarter resulting in a reduction in net debt by the same $33 million.\nCapital expenditures in the quarter of about $9 million were roughly the same as incurred in the same quarter last year.\nFrom a capital deployment perspective, as Bill mentioned, our priorities are unchanged.\nThe first priority is organic investments followed by disciplined and targeted acquisitions followed by returning capital to shareholders.\nOur fundamental strategy has not changed.\nHowever, given our modest leverage and strong free cash flow outlook, the Board of Directors has authorized a $200 million share repurchase program.\nWe believe that such a program will be the most efficient, effective and value-additive approach to returning additional capital to our shareholders.\nWhile there is no guarantee that we will execute all or even any of this authorization, it is the company's intention to make use of this authorization subject to prevailing market conditions and while recognizing the inherent limitations on how quickly we can execute such a significant program.\nFully executed, the share repurchase program would increase our net leverage a little under one turn of EBITDA leaving us with sufficient dry powder for additional strategic actions.\nAs we look forward to the balance of 2021, the outlook for the Machine Clothing segment remains strong.\nQ3 revenues were up over 11% compared to last year partially aided by some currency tailwinds to revenue, primarily due to strong euro.\nPackaging and tissue grades remain the primary drivers of long-term growth.\nWhile we also saw a nice recovery in publication revenue in the third quarter, driven by a return to office and schools, a continuation of this recovery is in jeopardy as a result of the Delta Varian surge which at par has paused some return to office efforts.\nAlso, after we get through the pandemic effects, we do not expect any change in the long-term secular decline in the publication market.\nI would also like to note that the growth rate for the MC segment this quarter was unusually high driven by timing of customer needs.\nSegment orders year-to-date are up about 6% compared to last year and backlog entering Q4 is only modestly higher than at the same time last year.\nWe typically generate about 23% to 25% of the segment's revenue in the fourth quarter, and we expect this year to be broadly similar to that.\nAs a result, we are raising our previously issued guidance of revenue for the segment to between -- to be between $600 million and $610 million, up from the prior range of $585 million to $600 million.\nFrom a margin perspective in Machine Clothing, we delivered another strong quarter, with adjusted EBITDA margins of almost 39%.\nWe are seeing increased pressure from input expenses of all types particularly logistics and expect these pressures to continue to increase through the balance of the year.\nHowever, as previously discussed, many of these cost increases began in Q2 and accelerated in Q3, have yet to materially impact our results due to both the terms of our supply agreements and the roughly six-month lag between procuring raw materials of the higher cost and those cost being reflected in the segment's cost of goods sold.\nWe will see more impact from these cost pressures in Q4, but we will not see the full impact until 2022.\nIn addition, late in the third quarter and early in the fourth quarter, we have seen some relaxation of travel restrictions in certain regions and are beginning to see our level of visits to customers increase, which will result in somewhat higher STG -- oh, sorry.\nSG&A in the fourth quarter.\nDriven primarily by the strong revenue performance, we are increasing our adjusted EBITDA guidance for the segment to a range of $215 million to $225 million, up from the prior range of $210 million to $220 million.\nTurning to Engineered composites.\nWe delivered a strong quarter, very much in line with expectations.\nLast quarter, we indicated that we expected Q3 profitability to be similar to that delivered in Q1 and it was within a few hundred thousand dollars of that level.\nWe were very pleased to be awarded an Aviation Manufacturing Jobs Protection grant during the quarter of $5.8 million which recognizes the challenges that we, along with the rest of the industry have experienced due to the COVID pandemic.\nHowever, as I already noted, we have adjusted the effects out of both Q3 adjusted results and segment guidance for the year as it is not reflective of continuing operational performance.\nWhile unlikely to have any material impact on the balance of 2021, we are concerned about the slow recovery of the Boeing 787 program where Boeing has indicated that they will continue to produce at a low rate for the foreseeable future.\nAs of the end of the third quarter, we had the equivalent of about five shipsets of 787 product in either finished goods or WIP which is not unusually high.\nHowever, significant quantities of our finished goods exist in Boeing's overall supply chain, which combined with Boeing's low level of production will likely lead to very low levels of production for us, for the foreseeable future and may even lead to significant production gaps.\nAny impact in 2021 would be modest as we are not anticipating any significant recovery on the program this year, but it will likely delay any meaningful recovery on the program until beyond 2022.\nAs you know, our production levels on the F-35 have been uncertain this year, as our customer has dealt with issues elsewhere in the supply chain over the last 18 months and with lower depot consumption of aftermarket parts.\nWe are confident in our outlook for the balance of the year, but I will note that Lockheed Martin and its government customer have established a new outlook for program production that plateaus at 156 aircraft in 2023, a lower rate, and an earlier date than the previously planned plateau.\nThe F-35 remains a very good and profitable program for us.\nThis programmatic change has no impact on this year, but it will likely temper the revenue upside in the program for us in future years.\nOverall for the AEC segment, the year is progressing largely as we expected when we last issued guidance, although we are now less concerned about downside risk.\nTherefore we are raising the lower end of our guidance range for segment revenues resulting in the range of between $310 million, up from the previous range of $290 million to $310 million.\nFrom a profitability perspective, given the year is progressing largely as expected, we are maintaining the previously issued guidance range for AEC adjusted EBITDA of between $65 million and $70 million.\nWe are also updating our previously issued guidance ranges for company-level performance, including revenue of between $900 million and $920 million increased from prior guidance of $880 million to $910 million.\nEffective income tax rate of 28% to 30%, unchanged from prior guidance.\nDepreciation and amortization of about $75 million, unchanged from prior guidance.\nCapital expenditures in the range of $40 million to $50 million also unchanged from prior guidance.\nGAAP earnings per share of between $3.23 and $3.38 increased from prior guidance of $2.84 to $3.14.\nAdjusted earnings per share of between $3.15 and $3.30 increased from prior guidance of $2.19 to $3.20 and adjusted EBITDA of between $230 million and $240 million increased from prior guidance of $225 million to $240 million.\nOverall, while the pandemic is not yet behind us and risks still remain across our business, we are very pleased to be able to raise guidance yet again, reflecting the hard work and dedication of our teams across the globe.\nThe coming years will continue to be a challenge as we and the rest of the industry slowly recover from the severe downturn in commercial aviation and as the machine clothing market searches for its new post-pandemic normal.\nWe also recognize of our risks ahead in terms of supply chain constraints and inflationary pressures, should the recent and current increases be more than transitory.\nHowever, our track record of operational excellence and continuous improvement positions us well to address these challenges.\n",
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"content": "compname reports q3 adjusted earnings per share of $0.83.\nsees fy adjusted earnings per share $3.15 to $3.30.\nsees fy gaap earnings per share $3.23 to $3.38.\nq3 adjusted earnings per share $0.83.\nq3 earnings per share $0.95.\nsees fy revenue $900 million to $920 million.\nq3 revenue rose 9.6 percent to $232 million.\non october 25, co's board authorized company to repurchase shares of up to $200 million.\nshare repurchase program does not have an expiration date.\nsees full-year 2021 capital expenditures in range of $40 to $50 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Let me provide highlights on our 2020 performance, share my expectations for 2021 and comment on our strategy going forward.\nAnd then Stephen will cover our fourth quarter results and guidance for 2021 in more depth.\nWe finished the year strong with fourth quarter results much better than expected.\nWe delivered another solid quarter in a pandemic year that was challenging and unpredictable.\nOur operations demonstrated agility and a relentless focus to deliver great bottom line results, despite pressure on the top line and downturns in some of the end markets that we serve.\nAnd this was our story throughout the year.\nBeginning in early 2020, we took swift action to ensure the safety and well-being of our employees.\nOur teams worked tirelessly to reset our manufacturing and supply chains at many times during the year to meet our customers' needs as they changes.\nWe did a great job for customers and continue to drive efficiency and productivity improvements.\nWe took early action to manage our costs well.\nAnd consequently, we were able to deliver outstanding margins for our shareholders and generate solid free cash flow and add to our strong balance sheet.\nAlso notable, our customer performance metrics are at record levels for service, on-time delivery and quality.\nOur safety performance ended the year as the best in the history of the company.\nOur factory productivity and supply chain initiatives contributed to our bottom line success.\nAnd we managed to launch a number of employee training and development initiatives.\nI'm most proud of how our employees found ways to work safely and how they've innovated to not only do our work, but to improve how we do it.\nIt's not an accident that we completed well over 100 Lean Kaizen improvement projects in 2020 despite the restraints of social distancing, working remote and following precautions for COVID-19.\nIn December, we recognized these accomplishments by our employees, and we're pleased to award all of our employees around the world, excluding the executive team, with a $1,000 bonus of gratitude.\nAs I've said, I'm proud of how our employees pulled together to support one another and work safely during this pandemic and continue to do a great job for customers.\nNow let me make a few comments about the outlook for this year and beyond.\nOur Machine Clothing segment's end markets appear to be gaining strength.\nWe exited last year with a solid order book, which bodes well for this year and beyond as the global economy improves.\nAs a leader in machine clothing, we're well positioned to grow with our customers, especially in the higher growth areas of tissue and packaging.\nOur long-standing strategy of continuous investment in technology and product development, along with our operating discipline, has served us well during the worst market downturn in more than a decade.\nConsider this: in the middle of a global pandemic recession, our MC segment expanded its adjusted EBITDA margin by 170 basis points in 2020.\nAnd more impressive, since 2015, our MC segment has expanded its adjusted EBITDA margin by more than 500 basis points.\nWe're also optimistic about our Engineered Composites segment's future, although it's longer term since 2021 still portends to face headwinds from the pandemic and the downturn in commercial aerospace and airline travel.\nThrough 2021, we're planning for slower production on some lines in AEC because of excess inventory in our facilities and inventory and the supply chain of our customers, particularly for components for the Boeing 737 MAX, the 787, and to a lesser degree the F-35.\nTo continue managing our costs, and because of the recent downward revision by Boeing for 787 demand, we just yesterday implemented a reduction in our Salt Lake City workforce where we produce 787 frames.\nWhile 2021 is expected to be slower because of inventory destocking, we expect growth in Engineered Composites to resume longer term.\nWe're well positioned in both military and commercial markets with solid programs such as the CH-53K, the JASSM missile, the F-35 and LEAP.\nAnd our position on LEAP engines with Safran should see early growth in the recovery since narrow body aircraft, which the LEAP engine powers, are expected to lead commercial aerospace out of the recession as domestic air travel is expected to recover first.\nNext, let me say a few words about our strategy.\nAlbany International has a 125-year history of innovation and developing new materials that add value for our customers.\nWe're committed to continuing this legacy with a focus on developing the next generation of engineered materials and advanced composites to help our customers improve their products and production processes.\nOur Machine Clothing segment is the leader in PMC because it offers a full range of the most advanced material belts used on paper machines, which operate at high speeds in a severe environment.\nWe've earned a reputation for constantly improving our belt's technology, durability and performance.\nAnd because of our advancements, our customers are able to produce higher quality paper products reliably at lower overall cost of production under demanding conditions.\nThis is a technology-intensive collaborative partnership that our customers value.\nIn our Engineered Composites segment, we continue to advance the state of the art in advanced composites, including our proprietary 3D woven composite material used in the LEAP engine, fan blades and fan cases.\nIn 2020, despite the pandemic, we worked closely with Safran to continue improving our 3D woven composite materials and to reduce our cost of manufacturing them so as commercial aerospace rebounds, we'll be even more competitive.\nWe also expanded our collaboration with new customers and for new applications to diversify our customer base and develop future growth areas.\nOur technology development on the Wing of Tomorrow program with Airbus has continued through the pandemic.\nWhile this program is longer term, it's imperative that we get an early seat at the table and bring our technology to design the next generation of aircraft.\nIn the medium and near term, we have other ongoing R&D development efforts, what I call incubator projects, in both military and commercial areas.\nFor example, our R&D team is supporting a major prime OEM in the development of next-generation hypersonic materials and structures using our proprietary 3D woven composite materials.\nWe also have projects in unmanned vehicles, higher temperature materials and thermal plastics.\nWe believe the current downturn in commercial aerospace is transitory and that market forces in the long term will drive energy efficiency and ongoing replacement of metallic components with lighter composites.\nThis trend will gain in importance as the industry seeks to reduce its environmental impact with the next generation of more efficient aircraft.\nOur 3D woven composite technology is commercially proven can meet the need for lighter weight and high strength, and we intend to grow our participation in the most demanding structural applications in aerospace.\nAs a company, we remain committed to investing in technology and product development of advanced materials for organic growth.\nIn fact, we're increasing our R&T budgets in both segments in 2021.\nAnd this is a critical part of our capital allocation strategy.\nOrganic growth has been driven by not only our investment in hard capital such as new products, tooling and production equipment, but also by our investment in intellectual capital, the expertise, the time and effort that are necessary for successfully developing new products and process know-how over time.\nWe're disciplined in how we invest in the criteria we use to measure success.\nWe guide our capital investment decisions based on expected returns to shareholders, and we direct capital to those programs with the best risk-adjusted returns.\nIn summary, we're optimistic about the future.\nWe have a solid balance sheet and strong free cash flow generation, which enables continued investment to grow.\nSo with that, I'll hand it over to Stephen.\nI will talk first about the results for the quarter and then about our initial outlook for our business in the coming year.\nFor the fourth quarter, total company net sales were $226.9 million, a decrease of 12% compared to the $257.7 million delivered in the same quarter last year.\nAdjusting for currency translation effects, net sales declined by 13.6% year-over-year in the quarter.\nIn Machine Clothing, also adjusting for currency translation effects, net sales were down 6.6% year-over-year, driven by declines across most major grades of product, partially offset by growth in engineered fabrics.\nOnce again, the most significant decline of over 21% on a constant currency basis was in publication grades, which represented about 17% of our MC sales in the quarter.\nHowever, we do see signs of a generally improving machine clothing market.\nFirst, while we did see year-over-year declines in packaging and tissue grades in the quarter, driven by the same factors that we discussed on our third quarter call, the year-over-year declines we saw on those grades in the fourth quarter were considerably smaller than we had seen in the third quarter.\nSecond, segment net sales in the fourth quarter were sequentially higher than the third quarter and modestly exceeded our expectations.\nEngineered Composites net sales, again, after adjusting for currency translation effects, declined by 23.5% compared to last year, primarily caused by significant reductions in LEAP and Boeing 787 program revenue, partially offset by growth on the F-35 and CH-53K platforms.\nDuring the quarter, the ASC LEAP program generated revenue of a little under $25 million compared to $48 million in the same quarter last year.\nHowever, this quarter's ASC LEAP revenue was up significantly on a sequential basis, 48% higher than the third quarter, driven by the fact that all three of our ASC LEAP facilities were operational for the full fourth quarter.\nFourth quarter gross profit for the company was $91.3 million, a reduction of 5.5% from the comparable period last year.\nThe overall gross margin increased by 280 basis points from 37.5% to 40.3% of net sales.\nWithin the MC segment, gross margin improved from 50.2% to 50.9% of net sales, driven by favorable foreign currency exchange rates, increased efficiencies and product mix.\nAEC gross margin improved from 19.6% to 21.7% of net sales, driven primarily by a favorable mix in program revenues, partially offset by a lower net favorable change in the profitability of long-term contracts.\nWhile we did recognize a net favorable change in the estimated profitability of long-term contracts this quarter of about $500,000, this compares to a $3.3 million improvement recognized in the fourth quarter of 2019.\nFourth quarter selling, technical, general and research expenses increased from $51.3 million in the prior year quarter to $54.8 million in the current quarter and increased as a percentage of net sales from 19.9% to 24.1%.\nThe increase in the amount of the expense was driven primarily by higher incentive compensation expense and an increase in foreign currency revaluation losses from $1.4 million in Q4 of 2019 to $3.0 million this quarter.\nThese items were partially offset by lower travel expenses in the fourth quarter of 2020 compared to the same period in 2019.\nI would like to note that the higher incentive compensation expense that we recorded in both the third and fourth quarters of 2020 included accruals at corporate totaling $3.9 million across both quarters combined for the special $1,000 employee bonus that Bill referenced.\nTotal operating income for the company was $35.0 million, down from $43.6 million in the prior year quarter.\nMachine Clothing operating income decreased by $4.9 million, caused by lower gross profit, higher STG&R expense and higher restructuring expense, while AEC operating income fell by $2.1 million, caused by lower gross profit and higher STG&R expense, partially offset by lower restructuring expense.\nOther income and expense in the quarter netted to about income of $490,000 compared to an expense of about $350,000 in the same period last year.\nThe improvement was driven primarily by a more beneficial foreign currency revaluation effect in the quarter.\nThe income tax rate for this quarter was 13.5% compared to 24.8% in the prior year quarter.\nAs a result of a foreign currency revaluation gain at an entity where no tax provision is required, the tax rate associated with our adjusted earnings per share is somewhat higher at 17.8%.\nThat 17.8% tax rate is significantly lower than the tax rate for the full year.\nIn 2020 as a whole, our tax rate, excluding discrete items, was 28.4%, which compares to 28%, excluding discrete items, for 2019 as a whole.\nThe lower rate this quarter, due mainly to a true-up of earlier quarters' provisions, increased adjusted earnings per share by $0.12 this quarter.\nHad we known the final full year rate earlier in the year, that $0.12 would have been recognized as additional adjusted earnings per share in those earlier quarters.\nNet income attributable to the company for the quarter was 27.5% (sic) $27.5 million, a reduction of 5.5% from $29.1 million last year.\nThe reduction was primarily driven by the lower operating income, partially offset by the lower tax rate and improved other income and expense.\nEarnings per share was $0.85 in this quarter compared to $0.90 last year.\nAfter adjusting for the impact of foreign currency revaluation gains and losses, restructuring expenses, pension curtailment charges and expenses associated with the CirComp acquisition and integration, adjusted earnings per share was $0.89 this quarter compared to $0.97 last year.\nAdjusted EBITDA fell 10.4% to $57.3 million for the most recent quarter compared to the same period last year.\nMachine Clothing adjusted EBITDA was $50.9 million, or 35.3% of net sales this year, down from $52.8 million, or 35.1% of net sales, in the prior year quarter.\nAEC adjusted EBITDA was $21.3 million, or 25.7% of net sales, down from last year's $24.2 million, or 22.6% of net sales.\nTurning to our balance sheet.\nNet debt declined by about $46 million during the fourth quarter.\nAs a result, our absolute leverage ratio declined from 0.89 at the end of Q3 to 0.74 at the end of Q4.\nThe reduction in net debt was principally caused by strong operating cash flow generation in the Machine Clothing segment and lower capital expenditures during the quarter, due principally to a reduction of capital expenditures on the LEAP program.\nI would now like to turn toward the coming year by comparing it to 2020 and by providing our resulting initial financial guidance for 2021.\nWe expect to deliver another strong year -- another year of strong performance in the Machine Clothing segment.\nFor the full year 2020, we delivered net sales of about $573 million, down 5% from about $601 million in 2019.\nOrders in the fourth quarter of 2020 were up about 6% compared to the fourth quarter of 2019.\nThis was a marked change from the first three quarters of the year when cumulative orders in the segment had been down compared to the same period in 2019.\nThis gives us some comfort as we head into 2021.\nIn particular, we do expect that sales in Q1 of 2021 will be up compared to the relatively low level of sales delivered in Q1 of 2020.\nWe are providing initial net sales guidance for the segment of $570 million to $590 million.\nFrom a profitability perspective, Machine Clothing had a very strong year in 2020, delivering $216 million of adjusted EBITDA.\nHowever, there are three effects that will make it hard to replicate those results in 2021.\nFirst, as we have previously disclosed, we benefited from very favorable foreign exchange rates in 2020, particularly with respect to the weakness of the Brazilian real and Mexican peso, both of which are currencies in which we are short in that we have more expenses than revenues in both.\nOverall, net favorable foreign exchange rates contributed over $6 million of adjusted EBITDA in 2020 compared to the prevailing foreign exchange rates in 2019.\nHowever, some of those favorable effects had dissipated by the end of the year.\nFor example, the Mexican peso had weakened from under 20 pesos per U.S. dollar in Q1 of 2020 to almost 25 pesos per dollar in Q2, but by the end of the year, the rate was back under 20 pesos.\nSecond, in 2020 due to the COVID-19 pandemic, we incurred a significantly lower level of travel expense in the segment than in prior years.\nWhile this helped the bottom line to the tune of about $6 million, this was not ideal from a business perspective, as we depend on strong customer relationships to develop insight into customer needs and to drive product development and support.\nWe are expecting to resume our prior level of travel during 2021, although in Q1, travel will likely continue to suffer from some COVID effects.\nThird, we continue to see pressure on input costs, particularly right now with respect to logistics where sea, rail and air freight costs are all considerably higher than they were 12 months ago.\nIn the typical year, we see over $4 million of input cost pressure, and there is reason to believe that in 2021, this could be higher.\nWhile as is typical, we believe that we will be unlikely to be able to recover all of that increased cost through pricing increases.\nWe will, of course, work to implement cost improvement initiatives to offset as much of the remainder as possible.\nNotwithstanding these three pressures on profitability, we expect the Machine Clothing segment to deliver another strong year of profit performance and are providing initial adjusted EBITDA guidance for the segment of $195 million to $205 million.\nTurning to Engineered Composites, 2020 was a challenging year for the segment from a revenue perspective.\nOverall, revenue in the segment declined by about $125 million in 2020 compared to 2019, driven principally by lower sales on LEAP, 787 and other commercial programs, offset by growth in military programs.\nUnfortunately, in 2021, we are going to see a continuation of some of the same trends with 2021 shaping up to be a year of finished goods inventory destocking across our customers' supply chains.\nOn the ASC LEAP program, we expect to continue to produce components for the LEAP-1B variant, which powers the 737 MAX, at very low levels.\nWhile the 737 MAX is now reentering service, there is considerable finished goods inventory in the channel at Boeing, at Safran and in our own facilities on which we have already recognized revenue as we recognize revenue at the time of production, not delivery.\nIn 2021, we currently expect to make components for fewer than 150 LEAP-1B engines, far below the 1,000-plus engine shipsets we would expect to deliver annually in the long term.\nOn LEAP-1A, there is a much lower level of finished goods inventory in the channel, and we expect to produce components for well over 500 engine shipsets in 2021.\nOverall, while the total number of ASC LEAP engine shipsets produced in 2021 is expected to be somewhat higher than that produced in 2020, this is offset by the absence of certain recoverable nonrecurring expenses that were recognized as revenue in 2020, resulting in roughly flat revenues for ASC from 2020 to 2021.\nOur next largest commercial program to produce frames for the Boeing 787 also has finished goods inventory destocking challenges.\nIn 2020, we had already seen some effect from Boeing's decision to reduce the 787 build rate, and our revenues from the program in 2020 were down over 20% from 2019.\nHowever, as Boeing reduced the 787 build rate further, there has been an increased buildup of our finished goods in Boeing supply chain, resulting in drastic reductions in order quantities for delivery in 2021.\nIn addition, we expect our start-up of production of the 787 aft fuselage frames will now shift from late 2021 into mid- 2022 as it will take longer to consume the parts already in the supply chain that were produced by the previous supplier.\nOverall, in 2021, we expect our revenues on the 787 frames program to be $30 million to $35 million lower than we recognized in 2020.\nOn the military side, we support the Lockheed Martin F-35 through several contracts for different parts, including wing skins, edge seals and engine components at both our Salt Lake City and Boerne locations.\nF-35 has been and remains a very important platform for us.\nIn 2020, we recognized over $85 million of revenue on the platform overall, up more than 25% from what was recognized in 2019.\nHowever, during 2020, Lockheed Martin produced finished F-35s at a rate lower than they had originally predicted due to supply chain issues caused by the pandemic and consumed fewer sustainment parts.\nAs a result, during 2020, there was a buildup of our finished goods in the F-35 supply chain; a situation that we expect will reverse itself in 2021.\nThis year, to rebalance the supply chain, we expect that our build rate will be lower than the rate at which Lockheed Martin is completing aircraft.\nWe now expect our F-35 revenues in 2021 to be more than $15 million lower than we recognized in 2020.\nWe see similar patterns in several smaller commercial programs across the segment where the revenue on those programs in 2021 will be close to $15 million lower than recognized in 2020.\nAll of these reductions will be offset by growth on other programs, most notably on the CH-53K.\nOverall for the Engineered Composites segment, we are providing initial guidance for net sales of $275 million to $295 million.\nTurning to the Engineered Composites segment profitability, 2020 was a strong year with adjusted EBITDA margins of over 26%, largely enabled by three factors: one, strong operating performance in the period as evidenced by about $10 million in net favorable adjustment to long-term contract profitability; two, a sales mix benefit as the majority of the revenue declined from 2019 to 2020 was on the ASC LEAP program, which is a lower than average profit margin; and 3, despite the decline in revenue, there was limited loss of fixed cost absorption as the cost-plus nature of the ASC LEAP program allowed us to still recover all of the fixed costs of operating our three ASC facilities.\nUnfortunately, those factors will not help us again in 2021.\nFirst, the lower revenue in 2021 at our non-ASC facilities, most notably our Salt Lake City operation where all of our 787 work and the bulk of our F-35 work is performed, will create upward pressure on plant overhead rates.\nWhile, as Bill mentioned, we have announced a workforce reduction of our Salt Lake City facility, that alone will not offset these rate pressures.\nIn such an environment, it will be difficult for us to achieve the lower unit production costs required to deliver significant improvements to long-term contract profitability.\nThis is a change from the past few years when a growing revenue base at our non-ASC facilities created a tailwind to long-term contract profitability.\nSecond, in 2021, we will see a product mix hit as a roughly $40 million to $50 million revenue decline we expect this year is on fixed price programs, which have a higher than average profit margin.\nAnd third, unlike 2020, we will suffer from a loss of fixed cost absorption due to the fixed price nature of the programs with declining revenues.\nAs a result, the decremental margins will be much larger than the average margins on those programs.\nIn fact, it is not atypical for our fixed price programs to have EBITDA contribution margins in the 30% to 40% range.\nAs a result of the impact of those three factors in 2021, not only do we expect the top line reduction I discussed earlier, but we also expect the EBITDA margins for the segment to fall from the 26.1% level delivered in 2020 into the low 20s.\nTherefore, we are providing initial 2021 guidance for Engineered Composites adjusted EBITDA of $55 million to $65 million.\nAt the total company level, we are providing initial 2021 guidance as follows: revenue of between $850 million and $890 million; effective income tax rate of 28% to 30%; depreciation and amortization of between $70 million and $75 million; capital expenditures in the range of $50 million to $60 million; GAAP and adjusted earnings per share of between $2.40 and $2.80; and adjusted EBITDA of between $195 million and $220 million.\nWhile we are not providing explicit cash flow guidance for 2021, we do expect that the free cash flow we generate in 2021 will be well above the roughly $100 million generated in 2020.\nI would also like to note that in 2021, we expect R&D expenses to be more than 25% higher than they were in 2020, reflecting the ongoing investments in both segments that Bill referenced earlier.\nReturning to the present, we are very pleased with how the company performed in 2020 overall.\nDespite the challenging operating environments, both segments met our customers' needs and delivered outstanding performance, all while maintaining a safe working environment.\nWhile it does appear that we have one more year of channel destocking ahead of us before we return to growth in the Engineered Composites segment, we remain very excited about the future prospects for both segments.\n",
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"content": "q4 earnings per share $0.85.\nq4 sales fell 12 percent to $226.9 million.\nq4 adjusted earnings per share $0.89.\nsees fy 2021 revenue $850 million to $890 million.\nsees 2021 gaap and adjusted earnings per share of between $2.40 and $2.80.\nsees 2021 capital expenditures in range of $50 million to $60 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I appreciate you joining us today to discuss our first quarter fiscal year 2021 results.\nBefore reviewing the quarter, I would like to express my continued gratitude to AAR's employees.\nThe majority of our people have continued to come to work every day throughout the pandemic to ensure AAR's uninterrupted support of its customers, and I'm grateful for their dedication and commitment, and proud of our team's ability to continue to navigate a truly unprecedented decline in commercial passenger flying.\nTurning to the results.\nOur sales for the quarter decreased 26% from $542 million to $401 million and our adjusted diluted earnings per share from continuing operations decreased 70% from $0.57 per share to $0.17 per share.\nOur total sales to commercial customers decreased 48% from the prior year, while sales to government and defense customers increased 10%, reflecting new contract awards and significant shipments out of our Mobility business against the previously announced $125 million Cargo Pallets contract.\nFor the quarter, sales to government and defense customers were 56% of the total.\nIn response to the current environment, we have taken a number of actions to align our costs with the lower levels of demand.\nBut we've also gone further to position the company for improved margins as demand recovers.\nOver the last three years, we have consolidated -- three quarters, we have consolidated three facilities, a permanent reduction to our fixed and variable costs, and exited or restructured several underperforming contracts.\nWe have also taken steps to focus on our core aviation services offering by completing the divestitures of our Airlift and Composites businesses.\nAll of these actions have simplified our portfolio, improved efficiency in our operations and set us up to drive higher returns on capital.\nIn addition to this progress, we continue to win new business during the quarter.\nWe announced a three-year contract with the Royal Netherlands Air Force to repair F-16 jet fuel starters.\nWe also announced two new contracts won by our Airinmar subsidiary, which provides component repair cycle management and aircraft warranty solutions.\nWe were selected by both Frontier Airlines and Air Methods, the world's largest civilian helicopter operator to provide a full suite of warranty and value engineering services.\nIn addition to the wins this quarter, we saw stabilization in certain of our businesses.\nOur order volume in trading and distribution were consistent throughout the quarter at a level above what we saw in April and May, but well below pre-COVID levels.\nIn our MRO business, as we head into the fall, we incurred -- we are encouraged by the loading we expect to see in our hangars.\nWhile our customers continue to operate in an uncertain environment and their maintenance schedules could change, the early indications are positive relative to our earlier expectations.\nWe are in a constant contact with our commercial customers globally and are continuing to look for ways to support them during this difficult time.\nIn our Government business, where we saw growth during the quarter, we continue to pursue new opportunities and the pipeline remains full.\nAs John mentioned, we continue to take action to reduce our costs and exit underperforming activities in the quarter.\nThese actions and other items resulted in predominantly non-cash pre-tax charges of $37.3 million.\nAlso, as previously disclosed, we received financial aid under the CARES Act in the quarter.\nThe total amount received was $57.2 million, of which $48.5 million was a grant and $8.7 million was a low interest pre-payable loan.\nIn the quarter, we utilized $8 million of the CARES Act grant and $3 million of other non-U.S. government labor subsidies for a total of $11 million.\nThis amount is included in the GAAP income statement but excluded from adjusted earnings.\nAs of the quarter-end, the unutilized portion of the grant was $40.8 million, which was recorded as a current liability.\nThis amount will flow through the P&L, as it is utilized, which we expect to be complete by mid-Q4.\nTurning to some additional financial detail in the quarter.\nSG&A expense was $45.3 million for the quarter.\nOn an adjusted basis, SG&A was $39.7 million, down $10.5 million from the prior year quarter, which reflects the reduction of our overhead cost structure.\nIn the quarter, adjusted SG&A as a percentage of sales was 9.9%.\nNet interest expense for the quarter was $1.6 million compared to $2.1 million last year, which reflects the lower interest rate in the period.\nDuring the quarter, we generated $39.8 million of cash in our operating activities from continuing operations.\nThis includes the $48.5 million grant portion of the CARES Act funding and a net use of cash of $18.6 million, as we reduce the level of our accounts receivable financing program.\nExcluding the CARES Act and accounts receivable financing program impacts, cash flow provided by operating activities from continuing operations was $9.9 million.\nAdditionally, as we are focused on lowering our working capital, we were able to reduce inventory by $19 million during the quarter.\nAlso, we repaid $355 million of our revolving credit facility during the quarter.\nWe had previously drawn the full balance as a precautionary measure.\nOur net debt at quarter-end was $149.3 million and unrestricted cash was $107.7 million.\nOur balance sheet remains strong with net leverage of 1.1 times and availability under our revolver of approximately $355 million and we have no near-term maturities.\nIn light of the current macro environment, we are pleased with our Q1 performance.\nOur Government business continues to be healthy, our cargo end markets continue to generate demand and our balance sheet remains strong.\nAs discussed on the Q4 call, given the uncertainty in the market, at this stage, we are not providing guidance for the rest of the year.\nHaving said that, looking forward more generally, although, the trajectory of the recovery remains uncertain, we expect the aftermarket to recover faster than the OEM market.\nWithin the aftermarket, we expect used serviceable material, in which AAR is the global leader, to be prioritized by operators over higher cost alternatives.\nWe also expect to see more material become available to support this demand as aircrafts are permanently retired and parted out.\nThis, along with the maintenance deferrals occurring for both airframe and engine, should drive an increased need for services out of our Trading, Distribution and MRO businesses as the commercial market recovers.\nWhile the timing of the recovery is unknown, we believe that the actions we have taken and are continuing to take to adjust our cost structure and reposition our portfolio, combined with the strength of our team, the airlines' need for lower cost solutions and our balance sheet, uniquely position us to benefit from an eventual return of demand and to emerge an even stronger and more profitable company.\n",
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"content": "q1 adjusted earnings per share $0.17 from continuing operations excluding items.\nq1 sales $401 million versus refinitiv ibes estimate of $381.7 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I appreciate you joining us today to discuss our fourth quarter and full-year fiscal 2021 results.\nBefore I comment on the results, I would like to take a moment to reflect on the last fiscal year.\nThe reduction of commercial passenger air travel to nearly zero shortly before our fiscal year began and the persistently depressed levels of commercial traffic throughout the year tested our industry and our company to agree that was previously hard to imagine.\nAt AAR, we have a strong set of values, one of them is to Every Day, Find a Way.\nThat has never been more important than it has been over the last 16 months, and I'm proud of the results we have delivered.\nAnd I'm pleased to be able to say that we are now emerging from this crisis an even stronger, more focused company.\nTurning to our results.\nSales for the year decreased 20% from $2.07 billion to $1.65 billion, and our adjusted diluted earnings per share from continuing operations decreased 39% from $2.15 per share to $1.31 per share.\nThese results reflect the impact of COVID-19 on the demand for commercial air travel, but also our team's ability to reduce costs and increase efficiency to mitigate that impact.\nAs you may recall, our Q4 of last year was only partially impacted by COVID as our hangars completed work on aircraft that were already in the hangar when the pandemic began.\nAs such, I'm particularly pleased to report that sales for the fourth quarter were up 5% from $417 million to $438 million, and I'm even more pleased to report that adjusted diluted earnings per share from continuing operations were up 81% from $0.26 per share to $0.47 per share.\nOur sales to commercial customers increased 3%, and our sales to government and defense customers increased 7%.\nSequentially, our total sales growth was 7% and our adjusted diluted earnings per share growth was 27%.\nThe earnings per share growth was driven by our operating margin, which was 5.2% for the quarter on an adjusted basis, up from 3.2% last year and 5% in the third quarter.\nWe saw strong performance in our MRO operations as airlines performed maintenance in advance of the anticipated return to summer leisure travel as well as the strong performance in our government programs' contracts.\nNotably, we have not seen much of a recovery in our commercial parts supply businesses as operators continue to consume their existing inventory.\nParts supply is one of our higher margin activities, and the performance in the quarter did not yet reflect the recovery of that business.\nIt was another strong quarter, as we generated $23.5 million from operating activities from continuing operations.\nWe also continue to reduce the usage of our accounts receivable financing program.\nExcluding the impact of that AR program, our cash flow from operating activities from continuing operations was $33.3 million.\nThe results for the year reflect our accomplishments in three key areas.\nFirst, we moved quickly at the outset of the pandemic to reduce costs and optimize our portfolio for efficiency.\nWe did this by consolidating multiple facilities, making permanent reductions to our fixed and variable costs, exiting or restructuring several underperforming commercial programs' contracts and completing the divestiture of our Composites business, which had been unprofitable in recent quarters.\nSecond, we continued to win important new business.\nIn particular, we created a partnership with Fortress to supply used serviceable material on the CFM56-5B and -7B engine types.\nWe were awarded a follow-on contract from the Navy that extended and expanded our support of its C-40 fleet.\nWe expanded our distribution relationship with GE subsidiary Unison.\nWe entered into a 10-year agreement with Honeywell to be an exclusive repair provider for certain 737 MAX components.\nAnd most recently, we signed a multi-year agreement with United to provide 737 heavy maintenance in our Rockford facility.\nFinally, we focused on our balance sheet and working capital management, which allowed us to generate over $100 million of cash from operating activities from continuing operations, notwithstanding the investments that we made to support new business growth.\nWe demonstrated that we can generate cash even in a downmarket.\nAnd as a result, we are now well under one times levered and exceptionally well positioned to fund our growth going forward.\nThere are very few companies in commercial aviation that are emerging from the pandemic with a debt level that is actually lower than when they entered.\nOur sales in the quarter of $437.6 million were up 5% or $21.1 million year-over-year.\nSales in our Aviation Services segment were up 6.5%, driven by continued strong performance in government, as well as the recovery in commercial.\nSales in our Expeditionary Services segment were down slightly, reflecting the divestiture of our Composites business.\nGross profit margin in the quarter was 16.4% versus 8.7% in the prior year quarter.\nAnd adjusted gross profit margin was 16.5% versus 13.6% in the prior year quarter.\nAviation Services gross profit increased $32.9 million, and Expeditionary Services gross profit increased $2.5 million.\nGross profit margin in our commercial activities was 13.4%.\nThis reflects the relative strength in MRO where we've been able to drive margin improvement through the efficiency actions we have taken.\nAs the commercial market continues to recover, we would expect higher overall commercial gross margins.\nGross profit margin in our government activities was 19.7%, which was driven by continued strong performance as well as certain events that occurred during the quarter.\nThe adjustments in the quarter include $2.1 million related to the closure of our Goldsboro facility, which had supported our Mobility business within Expeditionary Services.\nWe have completed our consolidation of those operations into Mobility's Cadillac, Michigan facility, and the adjustment reflects our current estimate of sale proceeds from the building.\nLooking forward, subsequent to the end of Q4, one of our commercial programs' contracts was terminated.\nAs a result, we expect to recognize impairment charge of between $5 million and $10 million in the first quarter of fiscal '22.\nThis contract had been underperforming for us in recent quarters.\nAnd with this termination, our restructuring actions in commercial programs are largely complete.\nAs John described, we have taken steps over the last year to rationalize certain underperforming operations, including the divestiture of our Composites business, the closure of our Duluth heavy maintenance facility and the exit or restructuring of certain contracts.\nThese activities, along with the terminated contracts I just described, collectively contributed approximately $140 million of annualized pre-COVID sales, which will not return as commercial markets recover.\nHowever, the absence of these operations is now part of what's driving our increasing profitability.\nSG&A expenses in the quarter were $48.8 million.\nOn an adjusted basis, SG&A was $46.7 million, up only $0.2 million from the prior year quarter despite the increase in sales.\nAs a reminder, SG&A in the prior year quarter already reflected our cost reduction actions.\nFor fiscal year '22, we would expect a modest increase in SG&A compared to FY '21 as we invest in certain initiatives such as digital that will drive improved performance in future years.\nWe continue to focus on driving SG&A as a percent of sales to 10% or lower as our top line recovers.\nAs John indicated, we generated cash flow from our operating activities from continuing operations of $23.5 million as we continued to reduce our inventory balance.\nIn addition, we reduced our accounts receivable financing program by $9.8 million in the quarter from $48.4 million to $38.6 million.\nAs a result, our balance sheet remains exceptionally strong with net debt of $83.4 million versus $197.3 million at the end of last year.\nAnd our net leverage as of year-end was only 0.7 times.\nLooking forward, we are optimistic that the significant recent increase in US domestic leisure flying is both enduring and a leading indicator of return to business in international travel.\nWe've seen a nice recovery in heavy maintenance and expect that performance to continue.\nOn that note, while we are aware of the tight labor market, we believe that the labor-related programs that we have established to recruit, train and retain skilled technicians will continue to serve us well, particularly when those programs are coupled with our ongoing investment in innovation to drive efficiency and differentiation inside of our hangars.\nAlso, although the commercial parts supply business has lagged behind the recovery, we have recently seen some early and modest signs of a rebound in that market as well, both in our USM and new parts activities.\nOn the government side, which has been very strong for us, we do expect a moderation in the pace of growth as buying under previous administration normalizes and some of our programs come to a natural completion, such as the C-40 aircraft procurement program for the Marine Corps, but the valuable past performance that we have continued to build and the cost reduction actions that we've taken put us in a strong position to continue to take market share, and our government pipeline remains strong.\nThe path and pace of the commercial air travel recovery continue to remain uncertain, which is underscored by the emergence of the delta variants.\nAs such, we are not issuing full-year guidance.\nHowever, in the immediate term, we expect to see performance in Q1 that is similar to or modestly better than Q4.\nAs you know, Q1 is typically our slowest quarter, whereas Q4 is typically our strongest quarter.\nSo normally, you would see a decline from Q4 to Q1.\nHowever, this year's expectation of similar performance reflects our belief that our commercial markets will continue their recovery.\nOver the medium and longer term, we are exceptionally well positioned, we are stronger today than where we were when we entered the pandemic, and we are excited to leverage our efficiency gains, optimize portfolio and strong balance sheet to continue to drive growth and margin expansion going forward.\n",
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"content": "q4 adjusted earnings per share $0.47 from continuing operations.\nq4 sales $438 million versus refinitiv ibes estimate of $422.6 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: 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.\nWe appreciate you joining us and hope you're doing well.\nI'll start today with some perspective on our first quarter results, current industry conditions, and company-specific opportunities.\nDave will follow with more specific detail on the quarter's performance and provide some additional color on our outlook and guidance.\nAnd then, I'll close with some final thoughts.\nIn the early fiscal 2022, we are executing well and making progress on our strategic initiatives.\nWe reported record first quarter sales, EBITDA and earnings per share, as well as another strong quarter of cash generation despite greater working capital investment year-to-date.\nAs widely evident across the industrial sector, inflationary pressures and supply chain constraints are presenting challenges as industrial production and broader economic activity continues to recover.\nNonetheless, we are in a strong position to handle these conditions and believe the current backdrop is reinforcing our value proposition and long-term growth opportunity.\nAs it relates to the quarter and our views going forward, I want to emphasize a few key points that continue to drive our performance.\nFirst, underlying demand remains positive.\nSecond, our industry position, operational capabilities, and internal growth initiatives are supporting results.\nAnd third, we continue to benefit from efficiency gains and effective channel execution.\nIn terms of underlying demand, trends remain favorable across both our segments during the quarter.\nIndustrial supply chain constraints are having some impact on the timing of demand flowing through to sales, though solid execution and our favorable industry position, still drove an over 16% organic increase in sales versus prior year levels.\nAnd stronger growth on a two-year stack basis relative to recent quarters.\nThis positive momentum has continued into our fiscal second quarter with organic sales month-to-date in October up by a mid-teens percent over the prior year.\nAs it relates to customer in markets, trends during the quarter were strongest across technology, chemicals, lumber and wood, pulp and paper and aggregate verticals.\nIn addition, we continue to see stronger order and sales momentum across heavy industries, including industrial machinery, metals and mining, providing incremental support to our sales growth in the early fiscal 2022.\nForward demand indicators also remain largely positive.\n[Technical Issue] activity across our service center network is holding up well, despite sector wide supply chain pressures.\nWe believe this partially reflects the diversity of our customer mix, as well as sustained MRO demand as customers catch up on required maintenance activity, provide greater facility access, and continue to gradually release capital spending.\nOur ability to provide strong technical and local support, inventory availability and supply chain solutions, places our service center network in a solid position to address our customers' evolving needs near term, while helping them prepare and execute growing production requirements over the intermediate to long-term.\nIn our Fluid Power and Flow Control segment, we continue to see strong demand from the technology sector.\nThis includes areas tied to 5G infrastructure and cloud computing, as well as direct solutions we are providing to semiconductor manufacturing.\nCustomer indications and related outlooks across the technology end market remained robust, reflecting various secular tailwinds and production expectations continue with an ongoing recovery and longer and later cycle markets such as industrial OE and process flow.\nWe believe the underlying demand backdrop across our fluid power and flow control operations remains favorable.\nIn addition, we're seeing strong growth indications across our expanding automation platform.\nThe current tight labor market, combined with evolving production considerations post the pandemic, is driving greater customer interactions and related order momentum for our automation solutions.\nWe remain focused on expanding our automation reach and capabilities, both organically and through additional M&A.\nDuring the quarter, we announced the tuck-in acquisition of RR Floody Company, a regional provider of advanced automation solutions in the U.S. Midwest.\nThe transaction further optimizes our footprint and strategy across next generation technologies, including machine vision and robotics.\nOverall, the demand environment remains positive and we're seeing ongoing contribution from our internal growth initiatives.\nThat said, we expect supply chain constraints to persist across the industrial sector near term.\nLead times remain extended across certain product categories, driving component delays and an increase in fulfillment timing.\nWe saw greater evidence of this across both our segments during the quarter.\nOur teams are effectively managing through these issues to date, as reflected by our first quarter results, as well as our ability to increase operational inventory levels in the U.S. by 6% during the quarter.\nOur products are primarily sourced across North America, limiting our direct exposure to international freight and supply chain dynamics.\nOur technical scale, local presence and supplier relationships are key competitive advantages in the current backdrop, providing a strong platform to gain share as the cycle continues to unfold.\nThe broader supply chain backdrop is also increasing inflationary pressures across our business, both through the products we sell and the expense we incur to support our competitive position and growth initiatives.\nWe saw ongoing supplier price increases develop during the quarter, with indications of additional increases in coming quarters.\nOur price actions, strong channel execution and benefits from productivity gains are helping offset current inflationary headwinds, as reflected by solid EBITDA growth and EBITDA margin expansion during our first quarter.\nWe continue to take appropriate actions to offset these headwinds.\nOverall, we are encouraged by our ongoing execution.\nFirst quarter results highlight the strength of our position and company-specific earnings potential despite broader challenges industrywide, and reinforce our ability to progress toward both near term and long-term objectives in any operational environment.\nCombined with a strong balance sheet, increasing order momentum exiting the quarter, and greater signs of secular growth tailwinds across our business, we remain positive on our potential going forward.\nThis will serve as an additional reference for you as we discuss our most recent quarter performance and outlook.\nTurning now to our results for the quarter.\nConsolidated sales increased 19.2% over the prior year quarter.\nAcquisitions contributed 2.1 percentage points of growth, and foreign currency drove a favorable 80 basis point increase.\nThe number of selling days in the quarter was consistent year-over-year.\nIn many of these factors, sales increased 16.3% on an organic basis.\nOn a two-year stack basis, [Technical Issue] positive in the quarter and strengthened from fiscal '21 fourth quarter trends.\nAs it relates to pricing, we estimate the contribution of product pricing on a year-over-year sales growth was around 140 basis points to 180 basis points in the quarter.\nAs a reminder, this assumption only reflects measurable topline contribution from price increases on SKUs sold in both periods, year-over-year.\nOn a two-year stack basis, segment organic sales were up nearly 2%, an improvement from fiscal '21 fourth quarter trends.\nAnd markets such as lumber and forestry, open paper, chemicals, aggregates, and food and beverage had the strongest growth on a two-year stack basis during the quarter, while our primary metals, machinery, and mining are showing greater improvement, both year-over-year and sequentially.\nIn addition to solid sales performance in our U.S. service center operations, we saw favorable growth across our international operations, which contributed to the segment's topline performance in the quarter.\nWithin our Fluid Power and Flow Control segment, sales increased 24% over the prior year quarter with acquisitions contributing 6.6 points of growth.\nOn an organic basis, segment sales increased 17.4% year-over-year and 6% on a two-year stack basis.\nSegment sales continue to benefit from strong demand within technology end markets, as well as across life sciences, chemical and agricultural end markets.\nSales trends within primary metals and refinery end markets, also improved nicely during the quarter, partially offset by moderating trends across certain transportation vertical.\nBy business unit segment, growth was strongest across fluid power and automation.\nIn addition, demand across our later and longer cycle flow control operations continues to improve, with customer quote activity and order momentum building through the quarter.\nExtended supplier lead times and inbound component delays had some effect on segment sales growth during the quarter, though the overall impact remains limited and manageable to date.\nMoving to gross margin performance, as highlighted on page eight of the deck.\nGross margin up 28.6% declined 22 basis points year-over-year.\nDuring the quarter, we recognized LIFO expense of $3.6 million compared to $1.1 million of expense in the prior year quarter and a $3.7 million LIFO benefit in our fiscal '21 fourth quarter.\nThe net vital headwind had an unfavorable 25 basis point year-over-year impact on gross margins during the quarter.\nLIFO expense was higher than expected during the quarter, reflecting supplier product inflation and a greater level of strategic inventory expansion year-to-date.\nExcluding the impact of LIFO, gross margins were relatively unchanged year-over-year, and up sequentially, reflecting strong channel execution, pricing actions, and ongoing progress with internal margin initiatives.\nTurning to our operating cost.\nSelling, distribution and administrative expenses increased 10.6% year over year, or approximately 7% on an organic constant currency basis.\nSG&A expense was 20.3% of sales during the quarter, down from 21.9% in the prior year quarter.\nWe had another solid quarter of SD&A expense control, reflecting our leaner cost structure following business rational vision [Phonetic] taken in recent years, as well as benefits from our operational excellence initiatives, shared services model, and technology investments.\nThese dynamics are helping mitigate the impact from inflationary pressures, higher employee-related expenses, lapping a prior year temporary cost actions, and normalizing medical expense.\nCombined with improving sales and effective price cost management, EBITDA grew 31% year-over-year, while EBITDA margin of 9.9% was up 89 basis points over the prior year.\nIncluding reduced interest expense and a slightly lower tax rate, reported earnings per share of $1.36 was up 52% from the prior year.\nMoving to our cash flow performance and liquidity.\nCash generated from operating activities during the first quarter was $48.6 million, while free cash flow totaled $45 million or 85% of net income.\nWe had a strong quarter of cash generation considering creating greater working capital investment year-to-date, including a strategic inventory build during the quarter to support growth and address supply chain constraints.\nWe continue to benefit from our working capital initiatives and solid execution across our business.\nOur cash performance and outlook continues to support capital deployment opportunities.\nDuring the quarter, we deployed a total of $36 million on share buybacks, debt reduction, dividends, and acquisitions.\nWith regards to share buybacks, we repurchased nearly 77,000 shares for approximately $6.5 million.\nWe ended September with just over $247 million of cash on hand and net leverage at 1.7 times adjusted EBITDA, which is below the prior year level of 2.1 times and the fiscal '21 fourth quarter level of 1.8 times.\nOur revolver remains undrawn with approximately $250 million of capacity and an additional $250 million accordion option.\nCombined with incremental capacity on our AR securitization facility, an uncommitted private shelf facility, our liquidity remains strong.\nTurning now to our outlook.\nThis includes earnings per share in the range of $5 to $5.40 per share based on sales growth of 8% to 10%, including a 7% to 9% organic growth assumption, as well as EBITDA margins of 9.7% to 9.9%.\nWe are encouraged by our year-to-date operational performance and remain focused on our growth, margin, and working capital initiatives.\nCombined with our favorable industry position, ongoing order momentum, and forward demand indications, our fundamental outlook and underlying earnings potential remain firmly intact.\nThat said, as previously highlighted, LIFO expense year-to-date is running higher than our initial expectations, assuming fiscal Q1 LIFO expense levels of $3.6 million sustained for the balance of the year.\nThis would result, in LIFO expense representing an approximate 40 basis point year-over-year headwind on EBITDA margins, compared to our initial expectation up 20 basis points to 30 basis points.\nCombined with ongoing uncertainty from industrial supply chains and inflationary pressures, we currently view the midpoint of earnings per share guidance as most reasonable from a directional standpoint pending additional insight into how the year progresses.\nIn addition, based on month-to-date sales trends in October, and considering slightly more difficult comparisons in coming months, we currently project fiscal second quarter organic sales to grow by a low double-digit to low teen percentage over the prior year quarter.\nWe expect gross margins will be down slightly on a sequential basis during the second quarter, assuming a similar level of LIFO expense as the first quarter.\nThis would be directionally aligned with normal seasonal trends.\nFurther, we expect SD&A expense will be flat, to up slightly on a sequential basis, compared to first quarter levels of approximately $181 million.\nLastly, from a cash flow perspective, we continue to expect free cash flow to be lower year-over-year in fiscal 2022 compared to fiscal 2021 as AR levels continue to cyclically build and we replenish inventory.\nThat said, we are encouraged by our first quarter cash flow performance and continue to drive working capital initiatives as a partial offset across our business.\nOverall, we are encouraged by how we started the year and what we see entering our fiscal second-quarter.\nOrder momentum remains firm across our businesses, our fluid power backlog is at record levels, and we are effectively building inventory to support our growth opportunities.\nOur increased exposure to technology end markets is driving greater participation in secular growth tailwinds, while our later cycle Flow Control business is seeing increased activity across key market verticals.\nWe're also making great progress in building our automation platform, including organically as customer and supplier relationships continue to develop and broaden across new industry verticals, and within our legacy end markets.\nCustomer outlooks on underlying demand and capital spending, remain largely favorable over the intermediate term and we're on track to achieve our initial guidance provided in mid-August.\nAs is common across the industry right now, we're dealing with inflationary pressures, supply chain constraints, and lingering COVID related impacts.\nAs our historical track record and first quarter results show, we know how to execute in any environment.\nIn addition, I believe our strategy on our ongoing initiatives will prove out further in this environment as the industrial economy continues to evolve both cyclically and structurally.\nThe breadth and availability of our products, combined with our leading technical solutions and localized support, is a significant competitive advantage right now.\nWe look to leverage these capabilities across our expanded addressable market during these dynamic times and in years to come.\nAt the same time, our balance sheet and liquidity provide strong support to pursue strategic M&A opportunities.\nWe maintain a disciplined approach to M&A and are actively evaluating opportunities primarily across key priority areas of fluid power, flow control and automation.\nThere remains significant potential to further scale our leading technical industry position across these areas.\nWe're eager to demonstrate what we're fully capable out in the years ahead as we continue to leverage our position as the leading technical distributor and solutions provider across critical industrial infrastructure.\n",
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"content": "applied industrial technologies q1 earnings per share $1.36.\nq1 earnings per share $1.36.\nq1 sales rose 19.2 percent to $891.7 million.\napplied industrial technologies - fiscal 2022 guidance maintained including earnings per share of $5.00 to $5.40.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: 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.\nWe appreciate you joining us and hope your new year is starting well.\nI'll begin today with some perspective on our second quarter results, current industry conditions and our position going forward.\nDave will follow with a summary of our financials and some specifics on our second quarter and outlook, and then I'll close with some final thoughts.\nWe're pleased to report a solid and productive quarter for Applied, along with positive momentum building as we enter the second half of our fiscal year.\nOur team executed extremely well during the second quarter and we saw a sustained sequential improvement in customer demand following the initial recovery highlighted last quarter.\nWe are leveraging our industry position and generating incremental traction from our strategic growth initiatives.\nThese include addressing customer's early cycle, technical MRO needs, as well as playing a vital role in supporting efficiency and performance initiatives across their critical industrial infrastructure.\nWe believe these customer initiatives will be increasingly relevant giving a greater focus on operational risk management and supply chain considerations.\nWe are capturing these initial tailwinds while remaining disciplined with controlling cost as sales continue to recover.\nCost accountability and execution have always been key to our culture and remain integral to our operational focus going forward.\nThis is supplemented by operating efficiencies gained from optimizing processes, systems and talent across the organization in recent years.\nWhile additional expense restoration will occur in the second half of our fiscal year, we expect these counter elements to provide further balance to our cost trajectory near-term and support our long-term EBITDA margin expansion potential as the demand recovery continues to unfold and we leverage our operational network.\nI'm also encouraged by the strong cash generation we continue to see across the business.\nYear-to-date, free cash is up over 60% from prior-year levels and over 200% of adjusted net income.\nWhile influenced by the counter-cyclical nature of our model, cash flow is ahead of our expectations and up meaningfully from prior-year levels.\nThis highlights the progress we continue to make with regard to expanding our market position while optimizing our margin profile and working capital management.\nOur first-half cash generation and balance sheet flexibility leave us well-positioned entering the second half of our fiscal year.\nAs it relates to the broader demand environment, underlying trends remain below prior-year levels during our fiscal second quarter, but continue to improve sequentially despite the recent rise in COVID rates.\nWe saw greater break-fix and maintenance-related demand across our service center network on rising production activity, greater spending authorizations and enhanced sales momentum across strategic accounts.\nCustomers are remaining productive in the current environment as established safety protocols are proving effective and providing support.\nDemand across our Fluid Power and Flow Control segment was also encouraging, with order activity and backlog momentum building.\nThis partially reflects firm demand from our leading service and engineered solutions capabilities as secular growth tailwinds continue across various industries.\nCombined, the year-over-year organic sales decline of 10.5% in the quarter, improved from 13.5% decline last quarter.\nYear-over-year trends improved each month, while sequential trends in daily sales rates were seasonally strong.\nAreas such as food and beverage, aggregates, technology, lumber and wood, chemicals, and pulp and paper continue to show positive momentum.\nAnd while year-over-year weakness remains greatest across heavy industries such as machinery, metals and oil and gas, demand within these verticals continues to gradually improve and related indicators suggest further recovery could emerge in the coming quarters.\nThe positive sales momentum has continued into the early part of fiscal third quarter with organic sales through the first 17 days of January down a mid-single digit percent over the prior year.\nIt's important to note that visibility remains limited and uncertainty persists as customers continue to manage through a challenging macro and pandemic outlook near-term.\nLike many, we are hopeful the business environment continues to recover as vaccines are deployed further in coming months, but we remain cognizant of the potential impact from research and COVID cases, timing of mass vaccine distribution and possible fiscal policy changes from the new administration.\nAs we have shown in recent quarters, we know how to manage and execute in this uncertain business environment.\nIn addition, I firmly believe our value proposition and company specific growth potential is the greatest in Applied's history.\nThere is evidence of this emerging across the organization.\nFor example, we're playing a key part in the recent vaccine rollout and related COVID-19 response.\nOur flow control offering and support team are providing critical products and solutions for vaccine production.\nThis includes hygienic diaphragm valves, water for injection pumps, and cleaning place flows systems used to clean and regulate material flow and temperature as the vaccine is manufactured.\nWe're proud and grateful to be participating in this historic moment which highlights our expanding position and capabilities across essential industries.\nWe're also seeing positive momentum across our fluid power operations as more customers integrate new technologies into their equipment and critical assets in order to optimize productivity, safety and energy costs, while reducing broader business and supply chain risk.\nIn addition, demand tailwinds tied to 5G infrastructure, cloud computing and other growing technologies are driving demand for pneumatic and electronic automation systems.\nOur leading fluid power service and engineered solutions capabilities provide us a strong position to capture these growth opportunities, as reflected in our growing backlog in recent months.\nOur technical position and long-term opportunity is further supplemented by the progress we are making in expanding our next-generation automation solutions following three acquisitions in the past 16 months.\nThis includes our recent acquisition of Gibson Engineering in late December.\nOur growing automation footprint and offering focused on robotics, machine vision, motion control and digital technologies is being recognized across our industries and presents a significant growth opportunity longer-term, as we address customers' operational technology, needs in an improving industrial sector.\nOverall, from critical break-fix MRO applications to emerging technologies and specialized engineering services, our value proposition is evident, and we continue to see greater demand as industrial production ramps.\nThese are positive developments and we are benefiting as customers themselves benefit from the value we bring to these opportunities.\nUnusual items in the quarter include a $49.5 million pre-tax non-cash impairment charge on certain fixed, leased and intangible assets, as well as non-routine costs of $7.8 million pre-tax related to an inventory reserve charge, facility consolidations and severance.\nThese charges are the result of weaker economic conditions and resulting business alignment initiatives across a portion of our Service Center segment locations exposed to oil and gas end markets.\nWe remain focused on appropriately aligning cost and resources with current demand levels across our organization, following a pandemic-driven downturn over the past year.\nThese business alignment actions are consistent with our internal initiatives and strategic focus going forward and will drive additional cost savings in the back half of our fiscal year.\nNow turning to our results, absent these in our non-routine charges during our second quarter, consolidated sales decrease 9.9% over the prior year quarter.\nAcquisitions contributed a half point of growth and foreign currency was favorable by 0.1%.\nNetting these factors, sales decreased 10.5% on an organic basis with a light number of selling days year-over-year.\nWhile still down as compared to the prior year quarter, sales exceeded our expectations with average daily sales rates at nearly 3% sequentially on an organic basis and above the normal seasonal trends for the second straight quarter.\nFollowing a slow start to the quarter in early October, sales activities strengthened sequentially and remained firm late in the quarter, despite typical seasonal slowness and rising COVID cases across the U.S. Comparative sales performance was relatively consistent across both segments as highlighted on slide 6 and 7.\nSales in our Service Center segment declined 10.4% year-over-year or 10.5% on an organic basis when excluding the modest impact from foreign currency.\nThe year-over-year organic decline of 10.5% improved notably relative to the mid-teens to low 20% declines we saw of the prior two quarters, while the segment's average daily sales rates increased nearly 4% sequentially from our September quarter and over 8% from the June quarter.\nThe sequential improvement primarily reflects greater customer maintenance activity and break-fix demand across our core U.S. service center network.\nPositive momentum has been relatively drive-based, though end markets such as food and beverage, aggregates, pulp and paper, lumber and forestry, and rubber our leading to recovery.\nHeavier industries are also starting to show positive signs while ongoing growth across our Australian operations has provided additional support.\nWithin our Fluid Power and Flow Control segment, sales decreased 8.5% over the prior year quarter, with our recent acquisition of ACS contributing 1.6 points of growth.\nOn an organic basis, segment sales declined 10.1%, reflecting lower demand across various industrial, off-highway mobile and process-related end markets.\nThis was partially offset by firm demand within technology, life sciences, transportation and chemical end markets.\nIn addition, as Niel mentioned, we are seeing encouraging demand for fluid power solutions tied to electronic control integration, equipment optimization and pneumatic automation.\nThis is supporting backlog, which was up both sequentially and year-over-year at the end of the quarter.\nMoving to gross margin performance, as highlighted on Page 8 of the deck, adjusted gross margin of 28.9% declined 8 basis points year-over-year, or 19 basis points when excluding non-cash LIFO expense, $0.9 million in the quarter and $1.9 million in the prior year quarter.\nOn a sequential basis, adjusted gross margins were largely unchanged.\nOverall, adjusted gross margin trends were in line with our expectations and continue to reflect some volume-driven headwinds year-over-year, as highlighted last quarter, which were partially offset by the ongoing benefit from our internal initiatives.\nTurning to our operating costs.\nOn an adjusted basis, selling, distribution and administrative expenses declined 11.2% year-over-year or approximately 12% when excluding incremental operating cost associated with our ACS acquisition.\nThe year-over-year decline reflects the ongoing benefit of cost actions taken in recent quarters to align expenses with volume.\nAs discussed in prior calls, this includes a mix of both structural and temporary actions.\nWhile we have restored a portion of the temporary cost actions, our team continues to demonstrate great discipline in controlling cost.\nThese results highlight the resiliency of the Applied team and our operating model as well as efficiency gains from operational excellence initiatives, leverage of our shared services model and technology investments made in recent years.\nYear-over-year comparisons also benefited from this amortization expense, following the asset impairment charge we took during the quarter.\nFor your reference, our second quarter depreciation and the amortization expense of $13.5 million is a good quarterly run rate to assume going forward.\nOverall, our strong cost control combined with improving sales trends during the quarter resulted in mid-single digit decremental margins on adjusted operating income or high-single digit decrementals when excluding depreciation and amortization expense.\nGoing forward, we will remain prudent and disciplined in managing our cost structure as we continue to roll off temporary cost actions to align with our recent performance and a more constructive outlook.\nSince the start of our fiscal year, we have gradually eliminated the temporary cost actions as the business environment has slowly recovered and expect to discontinue the vast majority of the remaining temporary cost actions during this current fiscal third quarter.\nAdjusted EBITDA in the quarter was $68.3 million, down 8.4% compared to the prior year quarter, while adjusted EBITDA margin was 9.1%, up 14 basis points over the prior year or virtually flat when excluding non-cash LIFO expense in both periods.\nOn a GAAP basis, we reported an operating loss of $0.14 per share, which includes the previously referenced non-cash impairment and non-routine charges.\nOn a non-GAAP adjusted basis, excluding these items, we reported earnings per share of $0.98, which compared to $0.97 in the prior year quarter.\nOur adjusted tax-rate during the quarter of 18.6% was below prior year levels of 23%, as well as our guidance of 23% to 25%.\nThe adjusted tax rate during the quarter includes several discrete benefits related to income tax credits and stock option exercises.\nWe believe the tax rate of 23% to 25% for the second half of fiscal 2021 is appropriate assumption near-term.\nMoving to our cash flow performance and liquidity.\nCash generated from operating activities during the second quarter was $77.5 million, while free cash flow totaled $72.7 million or approximately 190% of adjusted net income.\nThis was up from $55 million and $48 million respectively, as compared to the prior year quarter and represents record second quarter cash generation.\nYear-to-date, free cash generation of $151 million is up over 60% for prior year levels and represents a 206% factor of adjusted net income.\nThe strong cash performance year-to-date reflects solid operational execution, significant ongoing contribution from our working capital initiatives and that counter-cyclical cash flow profile of our business model.\nGiven the strong free cash flow performance in the quarter, we ended December with approximately $289 million of cash on hand.\nOf note, this is after utilizing cash during the quarter with two acquisitions.\nNet leverage stood at 2.1 times adjusted EBITDA at quarter-end, consistent with the prior quarter and below the prior year level of 2.5 times.\nIn addition, our revolver remains undrawn with approximately $250 million of capacity and an additional $250 million accordion option.\nCombined with incremental capacity under our uncommitted private shelf facility, our liquidity remains strong.\nThis provides flexibility to fund incremental working capital requirements in coming quarters as customer demand continues to improve as well as to pursue strategic M&A and fund other 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.\nThis represents the 12th dividend increase since 2010 and under-stores our strong cash generation and commitment to delivering shareholder value.\nTransitioning now to our outlook.\nBased on month-to-date trends in January and assuming normal sequential patterns, we would expect fiscal third quarter 2021 organic sales to decline by 3% to 4% on a year-over-year basis.\nThis includes an assumption of low-single digit organic declines in our Service Center segment and mid-single digit organic declines in our Fluid Power and Flow Control segment.\nAgain, this direction is meant to provide a starting framework on how third quarter sales could shape up if trends follow normal seasonality going forward.\nIn addition, we expect our recent acquisitions at ACS and Gibson Engineering to contribute approximately $10 million to $11 million in sales during our fiscal third quarter.\nWe expect gross margins to remain relatively unchanged sequentially into the second half of fiscal 2021.\nWe continue to see some incremental price announcements from suppliers, so the magnitude of the increases are not materially different from what we've seen over the past year.\nOur history highlight strong management of supplier inflation and price cost dynamics reflecting our industry position, internal initiatives and positive mix opportunities.\nAs it relates to operating costs, based on the 3% to 4% organic sales decline assumption, we would expect selling, distribution and administrative expense of between $170 million and $175 million during our fiscal third quarter.\nIn addition, if sales follow normal sequential patterns for the balance of the year, we would expect a similar to slightly higher SD&A range in our fiscal fourth quarter.\nThis represents an increase from second quarter levels and partially reflects the ongoing roll off of temporary cost actions.\nAs indicated, we will continue to take a mindful and balanced approach to managing our operating costs going forward.\nWe were encouraged by our cost and margin execution year-to-date, which is providing a strong position to further discontinue temporary cost actions as we take an offensive approach to an emerging recovery and our strategic growth targets.\nLastly, from a cash flow perspective, we expect free cash to moderate in the second half relative to first half levels.\nWorking capital will likely become a use of cash as their level start to cyclically build, and we begin to replenish inventory in support of our growth opportunities, and the recovery as the year moves forward.\nWe remain confident on our cash generation potential and reiterate our normalized annual free cash target of at least 100% of net income over a cycle.\nApproximately three quarters ago, during the initial weeks of the pandemic, I stated my belief that Applied has never been in a better position to manage through the current environment and exit the pandemic-driven downturn in an even stronger position.\nOur performance since then provide strong confirmation of disposition, the tremendous team we have at Applied, and the earnings potential that lies ahead.\nThis includes record cash generation and a 30% reduction in our net debt, our strong cost execution supporting relatively stable EBITDA margins despite the meaningful end market slowdown.\nDuring this time, we also completed two acquisitions, supplementing our long-term growth profile, while advancing other key growth initiatives, including optimizing our cross-selling opportunity and strategic end-market positioning.\nWe are delivering on our requirements and commitments while moving the organization toward our longer-term next milestone financial objectives of $4.5 billion of revenue and 11% EBITDA margins.\nWe remain cognizant of ongoing end-market uncertainty, but we're eager to demonstrate what we're fully capable of in the years ahead as we continue to leverage our differentiated industry position as the leading technical distributor and solutions provider across critical industrial infrastructure.\n",
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"content": "q2 adjusted non-gaap earnings per share $0.98 excluding items.\nq2 loss per share $0.14.\nwould project fiscal 2021 q3 sales to decline 3% to 4% year over year on an organic basis.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Hope you're all doing well.\nBoth 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.\nWe appreciate you joining us, and hope you're doing well.\nI'll start today with some perspective on our third quarter results, current industry conditions and our position going forward.\nDave will follow with a summary of our most recent quarter performance as well as some specifics on our forward outlook, and then I'll close with some final thoughts.\nOverall, we had a strong third quarter.\nThat highlight solid execution and a number of positive trends developing across the business.\nI want to recognize the entire Applied team through the foundation of the strong results you see materializing across our company today.\nTheir perseverance and operational focus over the past year reflects our one Applied culture and puts us in a great spot entering a period of significant potential for the company.\nAs it relates to the quarter's performance, I want to emphasize four key points that stand out.\nFirst, we saw a sustained recovery in demand that accelerated into March.\nSecondly, our technical and solutions focused value proposition is driving incremental growth opportunities.\nThird, we are managing supply chain and channel dynamics very well.\nAnd our final key point, we are benefiting from a leaner cost structure.\nWith regard to the broader demand recovery, underlying trends improved across the business as the quarter progressed, driving daily sales above normal seasonal patterns and our expectations.\nCombined with the initial lapping of prior year pandemic-related weakness, sales returned to modest year-over-year growth following double-digit declines over the past three quarters.\nTrends were strongest in March and have sustained positive momentum into the early part of our fiscal fourth quarter with organic sales through the first 19 days of April up approximately 10% over the prior year.\nSo with the last quarter, we're seeing greater break fix and recurring maintenance activity across our Service Center customer base as production continues to ramp and capacity comes back online.\nThe rebound in activity is currently greatest among larger strategic accounts.\nSo we're seeing encouraging signs across local accounts as well.\nDemand across our Fluid Power & Flow Control segment is also building, with orders and backlog up sequentially and year-over-year during the quarter.\nWhen looking across our customer end markets, areas such as food and beverage, aggregates, technology, lumber and wood, chemicals and pulp and paper remain the strongest.\nAnd we are seeing improved order momentum across heavy industries, including metals, mining and machinery, where sequential sales trends improved from last quarter.\nGiven the break-fix intensity and related service requirements of these heavier industries, the improvement is a favorable development.\nWe're also seeing greater growth opportunities tied to various secular trends in our technical position.\nIn our Service Center segment, we believe our local presence, scale and service capabilities are increasingly valuable post the pandemic as customers address their increasing production and labor requirements while adhering to new facility protocols and mitigating supply chain risk.\nIn our Fluid Power & Flow Control segment, we continue to see strong demand tailwinds tied to 5G infrastructure, cloud computing and other growing technologies, including providing solutions across the semiconductor manufacturing channel.\nCustomers are proactively investing in solutions that optimize the productivity, safety and efficiency of their production infrastructure and equipment.\nThis is driving demand for our leading Fluid Power service and engineered solutions capabilities as well as encouraging organic growth and backlog across our expanding automation business, focused on vision, robotics and digital solutions.\nOur automation team is making solid early progress connecting their premier engineering and application expertise across our growing footprint and legacy customer base.\nOverall, the current demand backdrop and forward indicators, including commentary from our sales teams, is encouraging and leaves us optimistic on the near-term outlook.\nThat said, inherent risks and uncertainties still exist as the recovery remains early, following in an unprecedented downturn.\nWe're keeping a close eye on emerging supply chain constraints across the industrial sector.\nWhile consistent with typical early cycle dynamics, lead times are extending across certain product categories.\nA greater number of suppliers are highlighting component delays, as broader production capacity and logistics catch up to the demand recovery.\nThe direct impact to our operations and performance has been modest to date.\nHowever, we expect a tighter industrial supply chain to persist as industry capacity and labor adjust following the pandemic.\nWe believe our strong industry position, local presence, sourcing capabilities and strategic supplier relationships put us in a solid spot to manage these dynamics well and meet our customers' critical supply chain needs.\nIn addition to encouraging top line performance, the improving demand environment, combined with our strong channel execution, drove gross margin expansion during the third quarter.\nWe are seeing greater number of suppliers announced price increases in recent months.\nTo date, supplier price increases aligned with our broader early cycle expectations, though the backdrop remains fluid as suppliers deal with higher raw material and supply chain costs.\nWe have an established track record of effectively managing supplier inflation through the cycle.\nThis reflects our industry position, exposure to break-fix activity and engineered Solutions and systems mix as well as ongoing self-help gross margin opportunities.\nWe remain highly focused on our requirements as well as leveraging our channel position as we look to optimize with our suppliers and serve customers' growth and supply chain initiatives.\nOur third quarter results also reflect emerging benefits from a leaner cost structure, following business rationalization in recent years and operational efficiencies gained from processes, systems and talent across the organization.\nCombined with our cost discipline, we grew adjusted EBITDA firmly above the rate of sales growth and expanded margins in the quarter.\nWhile growth requirements will influence our operating cost trajectory going forward, third quarter results are encouraging and provide insight into our operational leverage and EBITDA margin expansion potential as the demand recovery continues to unfold.\nAnd then lastly, our balance sheet is in a very solid position, following record cash generation year-to-date.\nWe believe our margin expansion potential and ongoing working capital initiatives will allow us to drive stronger cash conversion through the cycle relative to history, enhancing our ability to accelerate growth and enhance stakeholder returns.\nOur M&A pipeline remains active, and a primary focus for capital deployment as we look to further expand our automation, fluid power and flow control offerings.\nNow turning to our results for the quarter.\nConsolidated sales increased 1.2% over the prior year quarter.\nAcquisitions contributed 1.8 points of growth, and foreign currencies increased quarter sales by 0.6%.\nThis was partially offset by one less selling day over the prior year period, typically impacted sales by 1.6%.\nNet these factors, sales increased 0.4% on an organic daily basis.\nAverage daily sales rates increased over 8% sequentially on an organic basis versus the prior quarter, which was higher than our normal seasonal trends.\nExcluding some weather-related disruption during February, underlying sales activity strengthened sequentially as the quarter progressed, including accelerating trends during March.\nSales performance was relatively consistent across both segments, as highlighted on Slides six and seven.\nSales in our Service Center segment increased 0.4% year-over-year on an organic daily basis when excluding the impact from foreign currency and one less selling day in the quarter.\nThis represents a notable improvement from the double-digit declines in the recent quarters and partially reflects easier comparisons as we begin to lap the onset of the pandemic in March.\nThe segment's average daily sales rate has now improved over 18% from the fiscal '20 June quarter.\nUnderlying demand improvement was broad-based during the quarter, though end markets such as food and beverage, aggregates, pulp and paper, lumber and forestry and chemicals remain most productive right now.\nAs Neil mentioned, we are also seeing improved sequential trends from heavier industries, while growth across our international operations has provided additional support.\nWithin our Fluid Power & Flow Control segment, sales increased 4.5% over the prior year quarter with our recent acquisitions of ACS and Gibson Engineering contributing 5.9 points of growth.\nOn an organic daily basis, segment sales increased 0.2%.\nThe segment benefited from favorable demand within technology, life sciences and chemical end markets as well as improving trends across off-highway mobile applications.\nThis benefit was partially offset by ongoing year-over-year declines across certain industrial and process-related end markets, albeit an improved rate.\nWe are seeing greater demand for our Fluid Power solutions tied to electronic control integration, equipment optimization and automation.\nIn addition, demand across our emerging automation platform is showing positive momentum with related organic sales, orders and backlog, all growing during the quarter.\nMoving now to gross margin performance.\nAs highlighted on Page eight of the deck, gross margin of 29.4%, improved 43 basis points year-over-year or 29 basis points when excluding noncash LIFO expense of $0.8 million in the quarter and $2 million in the prior year quarter.\nOn a sequential basis, gross margins improved over 50 basis points.\nThe improvement primarily reflects strong channel execution, effective price cost management, the improving demand environment and the benefit of ongoing internal initiatives.\nTurning to our operating costs.\nOn an adjusted basis, distribution and administrative expenses declined 3.4% year-over-year or approximately 6% when excluding incremental operating costs associated with our ACS and Gibson Engineering acquisitions.\nAdjusted SG&A excludes $2.6 million of nonroutine income recorded in the third quarter of fiscal 2021 and $3.9 million of nonroutine expense in the prior year quarter.\nThe year-over-year decline primarily reflects our ongoing discipline and controlling cost as well as the benefit of a leaner cost structure following business rationalization executed over the past several years.\nAnother key driver of SG&A productivity is the efficiency gains we continue to realize from operational excellence initiatives, leverage of our shared services model and technology investments, while T&E, bad debt and amortization expense were also lower year-over-year.\nThese dynamics more than offset the elimination during the quarter of various temporary cost actions, which we had implemented this time last year in response to the pandemic.\nOverall, our strong cost control, combined with improving sales and gross margin, drove favorable operating leverage in the quarter.\nAs a result, adjusted EBITDA grew over 14% year-over-year and 27% sequentially, while adjusted EBITDA margin was 10.3%, up 119 basis points over the prior year.\nOn a GAAP basis, we reported earnings per share of $1.42, which includes the previously referenced nonroutine income.\nOn a non-GAAP adjusted basis, excluding this item, we reported earnings per share of $1.37, which compared to $1.02 in the prior year quarter.\nOur adjusted tax rate during the quarter of 18%, was below prior year levels of 23.3% and our guidance of 23% to 25%.\nThe adjusted tax rate during the quarter includes several discrete benefits related to income tax credits and stock option exercises.\nExcluding this benefit, as we move into our fourth quarter, we believe a tax rate of 23% is an appropriate assumption near term.\nMoving to our cash flow performance and liquidity.\nCash generated from operating activities during the third quarter was $44.1 million, while free cash flow totaled $40.3 million.\nDespite emerging growth and related working capital investments, cash flow in the quarter exceeded our expectations, primarily reflecting ongoing benefits from our operating working capital management initiatives, including cross-functional inventory planning, enhanced collection standard work and leverage of our shared services model, all supported with recent investments in technology.\nYear-to-date, we have generated record free cash of $191 million, which is up 25% from prior year levels and represents 150% of adjusted net income.\nGiven the strong cash flow performance of the quarter, we ended March with approximately $304 million of cash on hand.\nNet leverage stood at 1.9 times adjusted EBITDA at quarter end below the prior year level of 2.5 times in fiscal '21 second quarter level of 2.1 times.\nIn addition, our revolver remains undrawn with approximately $250 million of capacity and additional $250 million accordion auction.\nCombining with incremental capacity on our recently expanded AR securitization facility and uncommitted private placement shelf facility, our liquidity remains strong.\nThis provides flexibility to fund incremental working capital requirements in the coming quarters as customer demand continues to improve as well as pursue strategic M&A, fund other growth initiatives and pay down additional debt where appropriate.\nIn addition, given our improved outlook and solid liquidity position, we will look to deploy excess cash through opportunistic share buybacks and dividends as the cycle recovery continues to unfold.\nTransitioning now to our outlook.\nBased on month-to-date trends in April and assuming normal sequential patterns, we would expect our fiscal fourth quarter 2021 organic sales to increase by 12% to 13% on a year-over-year basis.\nThis includes an assumption of double-digit to low-teen organic growth in our Service Center segment and high single-digit to low double-digit organic growth in our Fluid Power & Flow Control segment.\nAs a reminder, we will be fully lapping prior year weakness from the pandemic, which resulted in an 18.4% organic sales decline in last year's fiscal fourth quarter.\nIn addition, this direction is meant to provide a starting framework on how fourth quarter sales could shape our trends followed almost seasonality going forward.\nWhile year-to-date sales trends have exceeded normal seasonality as the recovery has unfolded, we believe a prudent approach remains warranted as we continue to recover from an unprecedented downturn.\nIn addition, as Neil highlighted earlier, we remain mindful of increasing supply chain constraints across the industrial sector, which could influence the cadence and trajectory of activity near term.\nBased on the 12% to 13% organic sales growth assumption, we believe a low double-digit to mid-teen incremental margin is an appropriate benchmark to use for our fourth quarter.\nThis assumes gross margins moderate slightly on a sequential basis into the fourth quarter but continue to expand year-over-year.\nThe sequential moderation primarily reflects considerations throughout Service Center segment mix as sales from larger strategic accounts continue to recover at a faster pace as compared to local accounts near term as well as slightly higher LIFO expense.\nWe remain focused on our internal margin initiatives and deploying countermeasures, including pricing actions in response to increasing supplier inflation.\nAs it relates to operating expense, we expect SG&A to increase sequentially, reflecting higher incentive compensation, additional growth-related investment and the ongoing normalization of medical cost.\nWe also have one additional payroll day in our fiscal fourth quarter this year versus our recent third quarter.\nWe continue to take a balanced approach to managing our operating costs.\nOur expense margin execution year-to-date is encouraging and provides strong indication of our potential going forward, including our target of mid- to high-teen incremental margins on average over an up cycle.\nThat said, keep in mind that our incremental margins could vary over the next several quarters and into fiscal 2022 as we look to support our growth initiatives and we face the ongoing normalization of medical and selling-related expenses.\nLastly, from a cash flow perspective, we expect free cash to moderate into the fourth quarter as AR levels cyclical build and we replenish inventory at a greater pace in support of our growth opportunities and the recovery.\nWe remain confident in our cash generation potential and reiterate our normalized annual free cash target reach to 100% of net income over a cycle.\nAs we close out fiscal 2021, I'm encouraged by what I see developing across our company.\nOur value proposition, technical industry focus and expansion into emerging industrial solutions provides a clear path for favorable growth going forward.\nWe have the most comprehensive portfolio and technical service capabilities, premier engineered solution expertise and greatest track record of consistency and commitment to this vital space.\nOur local presence and ongoing talent investment provides further support to this foundation.\nNow more than ever, these attributes are critical to suppliers and customers as they accelerate growth investments and solidify supply chains ahead of a potential extended up cycle.\nEmerging signs of reshoring and investment in industrial infrastructure are promising and could represent notable tailwinds for our business, if they fully materialize, while our expanding automation footprint is presenting new growth opportunities in faster-growing and higher-margin industrial applications.\nAnd lastly, our cross-selling initiative remains in the early innings, but is gaining momentum with related business wins increasing and broader teams engaged.\nConsidering our embedded customer base, and addressable market exceeding $70 billion and growing, we believe this initiative represents a significant opportunity that should expand our share across both legacy and emerging market verticals in coming years.\nCombined with our self-help margin initiatives and strong balance, we have great potential to accelerate our earnings power and stakeholder returns long term.\n",
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"content": "q3 adjusted non-gaap earnings per share $1.37 excluding items.\nq3 earnings per share $1.42.\nq3 sales rose 1.2 percent to $840.9 million.\nproject fiscal 2021 q4 sales to increase 12% to 13% year over year on an organic basis.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: 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 brief operational update, including our ongoing actions in response to the COVDI-19 pandemic, as well as what we're seeing across our business in this fluid environment.\nDave will follow with a summary of our financials and some specifics on our fourth quarter and outlook, and then I'll close with some final thoughts.\nI'm proud of what we've accomplished and how we've responded.\nParticularly over the past several months as we face an unprecedented environment from the pandemic and manage to slower demand, within our core end markets.\nIt's inspiring to see how we've stepped up to the challenge collectively, and remain focused on driving value across our customer and supplier base.\nOur top priority remains the well-being of our associates, customers, suppliers and business partners, as the COVID-19 pandemic continues to evolve.\nWe have quickly adapted our operations, and embedded various safety measures, allowing us to swiftly adjust to our customers' requirements and solidify our supply chain.\nAll our operations and facilities have remained open, and fulfillment at our distribution centers and local service centers remains efficient.\nOur operating model and sales team has shown tremendous flexibility.\nEffectively leveraging virtual communication platforms, system investments made in recent years, and our multi-channel capabilities.\nThe resilient nature of our value proposition is apparent across many facets of our company.\nFrom the motion control products we provide for critical break-fix MRO applications throughout essential industries, such as food and beverage, agriculture, and pulp and paper, to leading fluid power solutions, including electronic control integration, driving greater safety and precision, as well as pneumatic solutions supporting various areas of technology, life sciences and sustainability.\nOur position is further strengthened by our team at Olympus Controls, who are addressing greater safety and productivity requirements in the COVID-19 environment, through leading next generation automation solutions.\nWe are also gaining traction with our cross-selling opportunity, focused on further penetrating our fluid power, flow control, automation and consumable solutions across our legacy service and our customer base.\nOf note, we are experiencing greater quoting activity, and sales of flow control products and solutions across our service center network over the past several quarters.\nWe're also encouraged by initial progress in identifying and developing opportunities aimed at connecting Olympus Controls' automation capabilities across traditional industries.\nOur cross-functional teams are laying a foundation that is driving greater customer awareness at various strategic accounts, particularly as the environment cycles and customers look to consolidate spend with fewer more capable providers, that are already critical to their direct production infrastructure.\nWe're still in the early innings of this cross-selling opportunity, which we believe is meaningful and should drive the incremental growth into fiscal 2021 and beyond.\nImportantly, through the evolving backdrop over the past several months, our business and entire Applied team has shown powerful durability.\nOur operating discipline and prompt cost actions have allowed us to quickly align expenses and manage working capital within the slower environment, driving mid teen decremental margins, record cash generation and improved liquidity during our fiscal fourth quarter.\nWe are encouraged by the execution across our team in recent months, which provides solid footing entering fiscal 2021.\nAs expected, the broader demand environment remain challenging throughout our fourth quarter, as customers implemented shelter in-place orders, reduced production, closed facilities, and deferred project activity.\nBy month, organic daily sales declined by a high-teens percentage rate year-over-year during April and May, followed by a low 20% decline during June, despite a slight sequential improvement in daily sales rates.\nOrganic sales to-date in our fiscal first quarter of 2021 or down by mid-teens percentage year-over-year.\nWhen considering prior-year comparisons by month and typical seasonal progression, we would characterize underlying sales as generally stable to slightly stronger, since [Technical Issues].\nWeakness remains pronounced across many of our core manufacturing end markets.\nThis includes heavy industries, such as machinery metals, oil and gas and transportation.\nWhile more customers are bringing facilities back online following shutdowns in recent months, the pace remains gradual and balanced by adjustments to production schedules and working capital discipline.\nIn addition, while we are selling greater amounts of safety and janitorial supplies to customers, given COVID-19, this product category represents a small portion of our business and was less than 5% of our overall sales during fiscal 2020.\nThere are however some positive signs in recent weeks, worth noting.\nIn particular, order rates have gradually improved across our service centers since early July.\nWe are starting to see greater maintenance activity and break-fix demand from heavy industry customers, as production gradually ramps and safety buffer stock is depleted, following what we believe was some unusual pandemic driven pre-buying during April.\nCombined with our increased orders across our consumables business and improving industrial sentiment, such as indicators like PMI, which typically lead our core business.\nWe believe industrial activity is firming, is behind us.\nUltimately, as industrial production regains momentum, we believe our customer requirements will be meaningful, following a prolonged period of idle production and maintenance deferrals on critical equipment and infrastructure.\nThat said, visibility remains limited and uncertainty still exists around the speed of recovery, as customers continue to manage operations around a still evolving pandemic and macro outlook.\nAs such, we remain focused on managing expenses, and are extending various cost actions we outlined last quarter into early fiscal 2021.\nThese actions include temporary pay reductions and furloughs, as we align to current business conditions, while preserving jobs.\nWe understand our requirements and will remain disciplined, as the cycle continues to evolve.\nThat said, these actions are not easy, and we intend to proactively reverse them where appropriate, as soon as possible, given the inherent value our associates bring to this organization and to our growth opportunity going forward.\nWith our business model showing durability in our fourth quarter, our balance sheet in a strong position, and initial signs of a recovery ahead, we will take an offensive approach into fiscal 2021.\nBefore I begin, I will remind everyone that a supplemental investor deck, which recaps key financial performance and discussion points, is available on our investors site for your additional reference.\nTo provide more detail on our fourth quarter results, consolidated sales decreased 17.9% over the prior year quarter.\nAcquisitions contributed 1.5% growth, partially offset by an unfavorable foreign currency impact of approximately 1%.\nNetting these factors, sales decreased 18.4% on an organic basis, with a like number of selling days year-over-year.\nTurning to sales performance by segment, as highlighted on slide 7 and 8 in the deck, sales in our service center segment declined 22.3% year-over-year or 21.1% on an organic basis.\nLower industrial production activity and customer facility closures from COVID-19 precautions drove reduced MRO needs across the majority of our service center customer base during the quarter.\nWeakness was particularly acute within metals, mining, oil and gas, machinery and transportation end markets, partially offset by more resilient demand within food and beverage, pulp and paper, forestry, electronics and chemical industries, as well as growth in our Australian operations.\nWithin our fluid power and flow control segment, sales decreased 6.8% over the prior year quarter, with our August 2019 acquisition of Olympus Controls contributing 5 points of growth.\nOn an organic basis, segment sales declined 11.8%, reflecting lower fluid power sales within industrial OEM, and mobile off-highway applications, as well as weaker flow control sales from slower project activity.\nThis was partially offset by fluid power sales growth within the technology end-market during the quarter.\nMoving now to margin performance, as highlighted on page 9 of the deck, gross margin of 28.7% declined approximately 40 basis points year-over-year or roughly 70 basis points, when excluding non-cash LIFO expense of $0.8 million in the quarter.\nThis compared favorably to prior year LIFO expense of $3.4 million.\nGross margin performance was largely in line with our expectations, with year-over-year declines, primarily reflecting unfavorable mix, tied to softer sales across our local service center accounts, coupled with a greater mix of lower margin project business in our Canadian operations, as well as lower levels of vendor support, attributed to softer volumes.\nThese headwinds were partially balanced by our margin expansion initiatives, stable price cost dynamics, and positive fluid power and flow control segment performance.\nWhile we expect some of these 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 from our technical service oriented solutions, and initiatives to expand business across our local customer base.\nTurning to our operating costs; on an adjusted basis, selling, distribution and administrative expenses declined 13.8% year-over-year, excluding $1.5 million of non-routine costs in the quarter, $1 million of which was recorded in our service center segment and $0.5 million in our fluid power and flow control segment.\nThese costs include severance and facility exit cost related to actions implemented in response to the weaker demand environment.\nAdjusted SG&A expense declined nearly 16% over the prior year on an organic basis, when excluding operating costs associated with our Olympus Controls acquisition.\nAs highlighted last quarter, we implemented various actions to align expenses with slower demand.\nThese include restricting T&E, over time, temporary labor and consulting spend.\nas well as staffing alignments, implementation of furloughs and pay reductions and the temporary suspension of the company's 401(k) match.\nWhile materially difficult, our team displayed great discipline and swiftly executed these requirements across the organization.\nAs a reminder, this includes a mix of both structural and temporary cost actions, as we continue to assess the environment.\nWith the demand outlook still soft and uncertain, we remain focused on managing costs near term and have extended the temporary cost actions into our current fiscal first quarter of 2021.\nThat said, we will be balancing these cost alignments into our fiscal first half, as we look to execute our strategic growth initiatives and requirements to ramp and effectively respond as recovery continues to unfold.\nAdjusted EBITDA in the quarter was $64.8 million, down roughly 26% compared to $87.6 million in the prior year quarter, while adjusted EBITDA margin was 8.9% or 9%, excluding non-cash LIFO expense in the quarter.\nOn a GAAP basis, we reported net income of $30 million or $0.77 per share, which includes the $1.5 million of previously referenced non-routine costs on a pre-tax basis.\nOn a non-GAAP adjusted basis, excluding these costs, we reported net income of $31.1 million or $0.80 per share, down $39.8 million or $1.02 per share respectively in the prior year quarter.\nMoving to our cash flow performance and liquidity; during the fourth quarter, cash generated from operating activities was $127.1 million, while free cash flow was $123.2 million, or nearly four times adjusted net income.\nFor full year fiscal 2020, we generated record free cash flow of $277 million, representing 186% of adjusted net income and up over 70% from $162 million in the prior year.\nThe strong cash performance during the quarter and the full year reflects ongoing contribution of our working capital initiatives, as well as the countercyclical cash flow profile of our business model.\nGiven the strong cash flow performance in the quarter, we ended June with nearly $269 million of cash on hand, with over 80% of that unrestricted U.S. held cash.\nOur net debt is down 22% over the prior year, and net leverage stood at 2.3 times adjusted EBITDA at quarter end, below the prior quarter level of 2.5 times and the prior year level of 2.6 times.\nWe are in compliance across our financial covenants, with cushion at the end of June, following the solid quarter of cash flow performance.\nDuring July, we utilized excess cash to pay off a $40 million private placement note that came due.\nThe paydown of the note, which had a 3.2% fixed rate, will drive additional cash interest savings into fiscal 2021.\nWe have now paid down roughly $170 million of debt since early 2018, including $55 million within the past seven months.\nIn addition, our revolver remains undrawn, with approximately $250 million of capacity, and additional $250 million accordion option, combined with incremental capacity on our uncommitted private shelf facility, we remain in a positive liquidity position.\nCapital deployment near term will continue to focus on preserving liquidity and opportunistically paying down debt, though our M&A initiatives and related pipeline remain active.\nOur focus remains on smaller bolt-on targets, that align with our growth priorities including fluid power, flow control and automation opportunities.\nVisibility remains limited on how customers will proceed with operations, particularly if an additional wave of infections materializes into the fall and winter months.\nAs such, we believe it more productive to be transparent on how our operations are trendy to date, and provide near term directional guidance as appropriate, pending greater clarity on a macro trajectory, particularly when considering the unique nature of this downturn.\nWith that as a backdrop, assuming underlying demand remains consistent with July and early August trends for the remainder of the quarter, we expect fiscal first quarter 2021 sales to decline 17% to 18% organically year-over-year.\nThis includes an assumption of high teens organic declines in our service center segment and mid-teen declines in our fluid power and flow control segment.\nAs a reminder, we will have roughly a half a quarter of inorganic contribution from Olympus Controls, which was acquired in mid-August of 2019.\nAt this sales level, we believe high teen decremental margins is still an appropriate benchmark to use near term.\nThis takes into consideration, cost actions and emerging growth and operational requirements, as we position around the recovery.\nIn addition, to provide a frame of reference and some direction for your full year modeling, assuming sequential daily sales patterns are consistent with average historical trends, this would imply year-over-year sales declines do not materially improve, until the second half of our fiscal year, with a return to year-over-year organic growth in our fiscal fourth quarter.\nAgain, this assumes sequential trends in the daily sales rates that are similar to historical seasonal patterns, and can certainly vary, depending on the direction of the industrial cycle, the broader economy, and execution of our growth initiatives going forward.\nLastly, we believe an effective tax rate of 23% to 25% remains an appropriate assumption near term.\nFrom a cash flow perspective, keep in mind our free cash generation is typically softer in the first half of our fiscal year, reflecting modest seasonality.\nAs such we expect, moderation from record fourth quarter level sequentially near term.\nWe also expect potentially greater working capital requirements in the fiscal 2021, as we look to support growth and the recovery, as the recovery of the year plays out.\nOur capital and capex requirements remain limited, with fiscal 2021 targeted at $15 million to $20 million of capital spend.\nOverall, we are encouraged by our fiscal 2020 cash performance, which provides further evidence of our strong cash flow profile, including benefits from working capital initiatives, and improving margin profile in recent years.\nWe remain confident in our cash generation potential going forward, and reiterate our normalized annual free cash target of at least 100% of net income.\nAs we enter fiscal 2021, we see a significant opportunity ahead, as we leverage our industry position, as a leading technical distributor around new and emerging growth opportunities.\nWhile we are facing a challenge as the industrial economy transitions from a generational pandemic, we have a remarkably strong business model, that generates cash and adapts well throughout the cycle, as we demonstrated in our fourth quarter.\nThis foundation will provide significant support to navigate through the near term headwinds, while staying focused on our strategic initiatives, aimed at positioning and adapting the company for stronger organic growth, relative to our legacy trends, greater free cash generation, and improved returns on capital in the coming years.\nI strongly believe our greatest opportunity is now in front of us, considering our cross-selling potential, customers' increasing technical needs, potential greater U.S. industrial production requirements, and likely ongoing, if not accelerated industry consolidation in coming years.\nOur value proposition puts us in a unique position to emerge, as a leading growth beneficiary from these tailwinds.\nWe plan to leverage our comprehensive suite of technical products and solutions, as we expand into emerging areas of growth from an ever more sophisticated, automated, and connected industrial supply chain.\nThese growth opportunities, combined with our operational excellence initiatives, expansion of our shared services model and leveraging our systems investments, will further solidify our ability to expand margins in coming years.\nLong term, we remain committed to our financial targets of $4.5 billion in sales and 11% EBITDA margins.\nWhile the timing of these goals is dependent on the industrial cycle trajectory, I believe they are within Applied's reach and provide the framework for significant value creation, as we execute our strategy going forward.\nTo our customers and suppliers, our message is clear, we are the leading stand-alone distributor of industrial motion power and technologies, with growing capabilities across next generation automation and industry 4.0 solutions.\nWe have the most comprehensive portfolio and technical service capabilities, premier engineered solution expertise, and greatest track record of consistency and commitment to this vital space.\nWe are investing for the future, developing best-in-class talent and focused on solidifying Applied, as the eminent return enhancing channel for your critical industrial supply chain products and solutions.\nWe are here to serve and partner with you during these unique times, and what will be fast-moving and dynamic environment going forward.\n",
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"content": "q4 adjusted non-gaap earnings per share $0.80.\nq4 earnings per share $0.77.\napplied industrial technologies - due to ongoing uncertainty from covid-19 pandemic, co refraining from providing formal financial guidance for fy 2021.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: 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.\nWe appreciate you joining us and hope you're doing well.\nI'll start today with some perspective on our fourth quarter results, current industry conditions and company-specific opportunities.\nDave will follow with more detail on the quarter's performance and our forward outlook including fiscal 2022 guidance.\nAnd then I will close with some final thoughts.\nOverall, we ended our fiscal 2021 with strong fourth quarter performance that exceeded our expectations and highlights our favorable competitive position as the industrial recovery and internal initiatives continue to gain traction.\nOur associates' teamwork, dedication and invaluable contributions turned these challenges into opportunities.\nThis includes being a critical partner across essential industries and now supporting the growth requirements customers face as we enter what could be a prolonged period of favorable industrial demand.\nCombined with our strong cost discipline and the resilient nature of our model, we persevered and generated record earnings in fiscal 2021, while remaining fully invested in our long-term strategy.\nIn a year, unlike any other, we appalled and often exceeded our commitments to customers, suppliers and all stakeholders.\nAnd we now look to build on this momentum going forward.\nAs it relates to the quarter and our views going forward, I want to reemphasize several key points that continue to drive strong performance across our business.\nFirst, we are seeing sustained demand recovery.\nSecond, our industry position and strategic initiatives are driving growth opportunities beyond the cycle recovery.\nThird, we are benefiting from a leaner cost structure and effective channel execution.\nAnd our final key point, we enter fiscal 2022 in a strong financial position with ample liquidity.\nIn terms of underlying demand, we saw continued improvement across both our segments as the quarter progressed, driving daily sales above normal seasonal patterns and our expectations.\nCombined with the lapping of prior year pandemic related weakness, sales increased nearly 20% on an organic basis over prior year levels and we're positive on a two-year stack basis.\nTrends were stronger in the second half of the quarter versus the first half as break fix and maintenance activity continued to ramp.\nIn addition, we saw the release of larger capital spending during the quarter, including across our Fluid Power and Flow Control segment, where shipments accelerated following strong order activity in recent months with backlog remaining at record levels.\nThis positive sales momentum has continued into early fiscal 2022 with first quarter organic sales through mid August up by a high teens percent over the prior year across both our Service Center segment and Fluid Power and Flow Control segment.\nWhen looking across our customer end markets on a two-year stack basis, the strongest areas include lumber and wood, food and beverage, aggregates, technology, chemicals, transportation, mining and construction.\nWe're also seeing improved order momentum across other heavy industries including machinery, as well as stronger demand within our longer cycle specialty flow control market verticals after lagging some in recent quarters.\nImportantly, we believe our sales improvement goes beyond the current end market recovery and reflects building momentum across our internal growth initiatives.\nIn our Service Center segment, we are supplementing our technical scale with more robust analytics, digital solutions and customer development initiatives.\nWe're also benefiting from past and ongoing talent development initiatives centered on our best team wins culture while our consistent strategy and local presence is strengthening relationships across our customer and supplier base, as they look to execute their growth initiatives with more capable channel partners.\nIn addition, we're leveraging a growing cross-selling opportunity.\nLegacy embedded service center customers are increasingly recognizing our full capabilities across fluid power, flow control, automation and consumable solutions.\nWe believe this drives greater customer penetration and new business wins as customers adhere to new facility protocols and mitigate supply chain risk.\nIn our Fluid Power and Flow Control segment, we continue to see strong demand tailwinds across the technology sector, including areas tied to 5G infrastructure, cloud computing and semiconductor manufacturing.\nOur exposure across this area has been supplemented in recent years through the ongoing build out of our automation platform, focused on advanced facility automation through machine vision, robotics, motion, and industrial networking technologies.\nRelated organic sales across this automation offering were up over 30% year-over-year in the fourth quarter with order activity remaining strong in recent months.\nOur growing automation offering also aligns with the related trends and solutions we offer across our legacy operations.\nThis includes areas within fluid power where our capabilities in electronic integration, software coding, pneumatic automation and smart technology applications are driving new growth opportunities as customers increasingly focus on machine technology advancements and data analytics.\nCombined with an accelerating demand recovery in longer and later cycle markets such as industrial OE, process flow and construction segment sales were up 8% organically on a two-year stack basis during the fourth quarter with positive trends continuing in recent months.\nOverall, the momentum we see building from our industry position and initiatives leaves us optimistic heading into fiscal 2022.\nWe remain cognizant of ongoing supply chain constraints across the industrial sector, which has been widely conveyed throughout the industry in recent months.\nLead times remain extended across certain product categories driven by component delays and an increase in fulfillment timing.\nHowever, the backdrop does not appear to be getting materially worse and the direct impact to our operations and performance remains relatively modest to date.\nOur technical scale, local presence and supplier relationships have been and will continue to be a competitive advantage in managing through current supply chain dynamics and driving share gain opportunities as the cycle continues to unfold.\nOur team is also doing a great job of managing broader inflation through price actions, strong channel execution and benefits from productivity gains.\nCombined with a leaner cost structure, our EBITDA increased over 46% year-over-year in the quarter.\nSD&A expense as a percent of sales was the lowest in 10 years, and EBITDA margins are at record levels.\nWhile we expect ongoing inflationary headwinds going forward, our cost and margin execution provides strong evidence of the company-specific margin expansion opportunity, we continue to see unfolding in coming years.\nLastly, our balance sheet is in a solid position following strong cash generation in fiscal 2021.\nWe ended the year with net leverage of 1.8 times, the lowest in four years, an ample liquidity heading into fiscal 2022.\nOver the past two years, we deployed nearly $340 million on debt reduction, dividends, share buybacks and acquisitions during an uncertain and challenging operating environment, further highlighting the strength of our team and business model.\nWe also entered fiscal 2022, with an active M&A pipeline across our focused areas of automation, flow control and fluid power that could present additional value creating growth opportunities going forward.\nOverall, I'm encouraged by our ongoing execution and position.\nThese are exciting times at Applied as our differentiated value proposition and growth strategy are engaging our internal team and driving increased recognition across our legacy and emerging industry verticals.\nAnd just another reminder before I begin.\nNow, turning to our results for the quarter.\nConsolidated sales increased 3.6% over the prior year quarter.\nAcquisitions contributed 2.1 percentage points of growth and foreign currency drove a favorable 1.7% increase.\nThe number of selling days in the quarter were consistent year-over-year.\nNetting these factors, sales increased 19.8% on an organic basis.\nWhile partially benefiting from easier comparisons driven by prior year pandemic related headwinds, we note the two-year stack year-over-year organic change was positive in the quarter.\nIn addition, average daily sales rates increased 6% sequentially on an organic basis in the third quarter, which was approximately 600 basis points above historical third quarter to fourth quarter sequential trends.\nAs it relates to pricing, we estimate the overall contribution of product pricing and year-over-year sales growth, was around 80 to 100 basis points in the quarter.\nThe segment's average daily sales rates improved 4% sequentially from the prior quarter, which likewise was above normal seasonal patterns.\nUnderlying demand improvement was broad based during the quarter, though end markets such as lumber and forestry, food and beverage, chemicals, aggregates, pulp and paper, and mining reflected the strongest growth on a two-year stack basis.\nIn addition to the strong sales performance across our U.S. service center operations, we saw favorable growth across our C class consumables and the international operations, which contributed to our top line performance in the quarter.\nWithin our Fluid Power and Flow Control segment, sales increased 26.1% over the prior year quarter with our acquisitions of ACS and Gibson Engineering contributing 6.4 points of growth.\nOn an organic basis segment sales increased 19.7% year-over-year and 8% on a two-year stack basis.\nUnderlying demand across the segment strengthened through the quarter, with segment sales benefiting from ongoing favorable demand within technology end markets, as well as with life sciences and chemical end markets.\nWe are also seeing strong order activity across off-highway mobile and industrial fluid power applications, while process related end markets have picked up following a slower recovery in recent quarters.\nLastly, demand across our expanding automation platform continues to show strong organic growth trends.\nAs we have previously indicated, we see sustained favorable growth dynamics across the segment given various secular tailwinds and company-specific opportunities tied to our leading technical industry position.\nMoving to gross margin performance.\nAs highlighted on Page 8 of the deck, gross margin of 29.4% improved 63 basis points year-over-year.\nDuring the quarter, we recognized a net LIFO benefit of $3.7 million compared to LIFO expense of $0.8 million in the prior year quarter.\nThe net LIFO benefit relates to year end LIFO adjustments for inventory layer liquidations and had a favorable 52 basis points year-over-year impact on gross margins during the quarter.\nExcluding the LIFO impact in both periods, gross margins still expanded year-over-year, reflecting strong channel execution and effective management to supplier cost inflation with price cost dynamics neutral during the quarter.\nGross margins declined sequentially reflecting some normalization from record third quarter performance, as well as timing of price adjustments.\nTurning to our operating costs.\nSelling, distribution and administrative expenses increased 13.9% year-over-year compared to adjusted levels in the prior-year period or approximately 9% on an organic constant currency basis.\nYear-over-year comparisons exclude $1.5 million of non-routine expense recorded in the prior year quarter.\nSD&A expense was 20.3% of sales during the quarter, down from 22% in the prior year quarter.\nStrong operating leverage in the quarter reflects the benefits of a leaner cost structure following business rationalization initiatives executed over the past several years.\nIn addition, we continue to realize benefits from our operational excellence initiatives, shared services model and technology investments while bad debt and amortization expense were also lower year-over-year.\nThese dynamics and our culture of cost control and accountability, positive balance, incremental growth related investments, higher incentive expense and the lapping of prior year temporary cost actions.\nOur strong cost control combined with improving sales and firm gross margins resulted in EBITDA growing approximately 46% year-over-year when excluding non-routine expense in the prior year period or 39% when excluding the impact of LIFO in both periods.\nIn addition, EBITDA margin was 10.6% up 165 basis points over the prior year, which includes a favorable 52 basis point year-over-year impact from LIFO.\nCombined with the reduced interest expense and a lower effective tax rate, reported earnings per share of $1.51 was up 89% from prior year adjusted earnings per share of $0.80.\nSimilar to recent quarters, the tax rate during our fourth quarter included discrete benefits related to stock option exercises.\nMoving to our cash flow performance and liquidity.\nCash generated from operating activities during the fourth quarter was $38.3 million, while free cash flow totaled $34.6 million.\nFor the full year, we have generated free cash up $226 million, which represented 121% of adjusted net income.\nWe had another strong year of cash generation in fiscal 2021 following our record performance in fiscal 2020.\nOver the past few years, we have generated over $500 million of free cash flow.\nWhile partially reflecting the countercyclical nature of our model, our free cash generation is up over prior peak levels, reflecting our increased scale and enhanced margin profile, as well as ongoing benefits from our working capital initiatives, including cross-functional inventory planning, enhanced collection standard work and leverage of our shared services model, all supported with recent investments in technology.\nGiven the cash performance and confidence in our outlook, we deployed excess cash through share buybacks during the quarter, repurchasing 400,000 shares for approximately $40 million.\nIn addition, we paid down $106 million of debt during fiscal 2021, including $24 million during the fourth quarter.\nWe ended June with approximately $258 million of cash on hand and net leverage at 1.8 times adjusted EBITDA, below the prior level of 2.3 times and the fiscal 21 third quarter level of 1.9 times.\nOur revolver remains undrawn with approximately $250 million of capacity and an additional $250 million accordion option combined with incremental capacity on our AR securitization facility and uncommitted private shelf facility, our liquidity remained strong.\nTurning now to our outlook.\nFor fiscal 2022, we're introducing earnings per share guidance in the range of $5 to $5.40 per share based on sales growth of 8% to 10%, including a 7% to 9% organic growth assumption, as well as EBITDA margins of 9.7% to 9.9%.\nOur sales outlook assumes a relatively steady industrial demand environment from current trends.\nOn a segment basis, the sales outlook assumes high single digit organic growth in our Service Center segment and high single to low double-digit organic growth in our Fluid Power and Flow Control segment.\nIn addition, based on quarter-to-date sales trends through mid August, we currently project fiscal first quarter organic sales to grow by a mid-teens percentage over the prior year quarter.\nFrom a margin and cost perspective, we assume ongoing inflationary headwinds, including greater LIFO expense in fiscal 2022, as well as normalizing personnel expense, including the impact of our annual merit pay increase effective January 1.\nWe expect higher LIFO expense will result in gross margins declining sequentially in our first fiscal first quarter following the LIFO benefit we recognized during our fourth quarter.\nBased on these dynamics, as well as the lapping of prior year temporary cost actions and the impact of ongoing internal growth investment, we currently project incremental margins and operating income in the low double-digit range for fiscal 2022.\nWe continue to take a balanced approach to managing our operating cost, while our expense and margin execution in recent quarters, provides strong indication of our potential going forward, including our target of mid-to-high teen incremental margins on average over an up cycle.\nIn addition, while the macro backdrop has improved over the past several quarters, there remains lingering uncertainty related to COVID-19 transmission rates, labor constraints and supply chain headwinds, which could influence the cadence and trajectory of industrial activity as the year progresses.\nWe have attempted to capture these variables within our initial guidance, which we believe is prudent as we continue to recover from an unprecedented downturn.\nLastly from a cash flow perspective, we expect free cash flow to be lower year-over-year in fiscal '22 compared to fiscal 2021 as AR levels continue to cyclically build and we replenish inventory at a greater pace in support of our growth opportunities and the recovery.\nOver the past several years, we've deployed strategic investments and initiatives that have positioned Applied for stronger growth relative to our legacy trends and improved returns on capital in the coming years.\nWhile near term macro trends continue to face a number of variables as we transition away from an unprecedented downturn, I believe we remain early in a potentially prolonged industrial cycle considering the breadth of tailwinds we see developing today.\nThese include emerging capex spending following multiple years of under investment, as well as greater industrial production across North America, as customers reduce reliance on long distance global supply chains.\nIn addition, increasing signs of investment in U.S. infrastructure are promising, which could represent a notable tailwind given our participation in industrial machinery, metals, aggregates, chemicals, mining and construction.\nWe also enter fiscal 2022 with a record backlog and strong order growth across some of our longer cycle businesses, which have expanded in recent years including Fluid Power, Flow Control and now automation that focus on engineered solutions and tied to our customers core growth initiatives and capital investments.\nWhile supply chain tightness across the industry is partially influencing backlog right now, we see ongoing demand creation as Applied's technical position is called upon to address customers' greater operational and supply chain requirements.\nThis includes improving demand across our higher margin specialty flow control operations, which should benefit further into fiscal 2022 from pent-up maintenance and service activity, as well as a greater focus on higher environmental and safety standards.\nWe're also expanding our flow control focus across attractive industry verticals such as life sciences and hygienics.\nFurther, we'll continue to expand into new and emerging areas of growth across the industrial supply chain.\nOf note, following the initial investment and build out of our next generation automation offering, we are now a leading distributor and solutions provider across several product focus areas including advanced machine vision, as well as collaborative and mobile robotic technologies.\nWe're also investing in digital capabilities that complement our local presence and continue to evaluate and develop new commercial solutions that fully leverage our technical capabilities and application expertise as legacy Industrial Infrastructure converges with new emerging technologies.\nLastly, our cross-selling initiative is gaining momentum, with related business wins increasing and broader teams engaged.\nConsidering our embedded customer base across our core service center network, an addressable market exceeding $70 billion and growing, we believe this initiative represents a significant opportunity that should expand our share across both legacy and emerging market verticals into fiscal 2022 and beyond.\nOverall, these growth initiatives combined with value creating M&A potential, a leaner cost structure, operational excellence initiatives and expansion of our shared services model, provide a strong runway to drive above market growth and EBITDA margin expansion in coming years.\nIn the interim, we're focused on achieving our financial targets of $4.5 billion in sales and 11% EBITDA margins.\nWhile the timing of these goals remains dependent on the industrial cycle trajectory, I believe they're within Applied's reach and provide the framework for significant value creation as we execute our strategy going forward.\n",
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"content": "compname reports q4 earnings per share $1.51.\nq4 earnings per share $1.51.\nsees fy earnings per share $5.00 to $5.40 including items.\nsees fy sales up 8 to 10 percent.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are subject to certain risks and uncertainties, a description of which can be found in our SEC filings.\nActual results may differ materially from what may be discussed today.\nWe will also discuss certain non-GAAP financial measures such as AFFO and FFO.\nWe have a lot to talk about.\nThird quarter was filled with unusual challenges and a great many successes.\nHere are three headlines.\nAimco operations does well in difficult times.\nAimco reduces leverage by a $1 billion.\nAnd Aimco unlocked shareholder value, reducing risk, leverage, and costs by separating into two entities.\nHere's the rest of the story.\nThe challenges were the continued effects of the pandemic.\nFollowing the second quarter collapse of the economy, third quarter GDP rebound strong but uneven.\nMany sectors remain at historic lows.\nFor example, many universities are now virtual and many office buildings stand empty as workers now work from home.\nFor apartments, we are now subject to unprecedented government regulation of rent setting and rent collections.\nIn many of our markets, we've experienced rioting, violence in camps for the homeless, targeting of police, and a general challenge to public order.\nAnd the public health outlook continues uncertain with COVID-19 cases spiking across the country, including several of the markets in which we operate.\nThrough it all, Keith and his team worked hard and successfully to provide homes for the individuals and families who live in Aimco apartment homes.\nThey provide safety and refuge from the virus, good neighbors, respectful treatment for all and a helping hand to those in need.\nAs Keith and Paul will discuss later in detail, the economy took its toll.\nAs in previous recessions, some residents could no longer afford their rent.\nWith their departures, occupancy dropped and bad debt increased.\nIn other instances, and this is unprecedented, local ordinances gave residents the option to live rent free.\nTwo-thirds of Aimco bad debt in the third quarter is owed by residents who've lived rent free for the past six months.\nWhile cautious about a second spike in the pandemic, it seems that the worst is behind for Aimco.\nFor example, lease space is up and available to let is dramatically down.\nThe rate of new delinquencies has been steadily declining.\nSome important properties in urban settings remain impacted but the largest portion of our portfolio is returning to its normal performance and steady improvement.\nAs we move forward, we'll benefit from Keith's disciplined adherence to providing world-class customer service as graded by our customers and maintaining this customary high standards for selecting customers who will be good neighbors and stay longer.\nNotwithstanding the turbulence, Wes and his team advanced our long cycle redevelopments and found a few new opportunities for future growth including acquisition of a bayfront community in Miami and formation of an interesting venture with IQHQ, a dynamic life science campus developer.\nPatti Fielding sold a minority joint venture stake at a portfolio of 12 California properties to a passive institutional investor.\nThe $2.4 billion joint venture was priced in September at 4.2% cap rate equal to 97% of Aimco's pre-COVID estimated value, validating Aimco's published net asset value and taking an important step to rebalance the Aimco portfolio.\nThe same JV was also the source of funds to reduce leverage by a $1 billion, significantly improving Aimco's strong and flexible balance sheet.\nWith personal and family concerns from the pandemic in school closings and with the business challenge of difficult markets and changing regulations, the Aimco team maintained their focus and did excellent work.\nI'm proud of their successes and grateful for the chance to work together.\nThe Aimco board of directors was, as always, highly engaged.\nWhile total shareholder returns for past one, three and five years have been competitive with coastal peers, the board would like them to be better and seized the share price discount to net asset value is offering the opportunity for outperformance.\nThe board goal is to create a simple, transparent and low-cost public vehicle to invest in stabilized multifamily properties.\nThe board plan is to simplify the business and reduce execution risk, allocate to a second entity roughly 10% of total capital for development, redevelopment and nontraditional assets, and hold 90% of Aimco capital in the high-quality diversified portfolio of stabilized apartment communities, to reduce financial risk, by lowering leverage by $2 billion sourced from the joint venture and from the separation, to increase FFO and dividends per share by substantial reductions in vacancy loss and G&A costs related to redevelopment, and to replenish the tax bases to reduce the need for future stock dividends and enhance our flexibility in capital allocation.\nAfter the separation, shareholders were on the same asset before and after.\nBut shareholders will then have the ability to make individual allocations to the entity owning only stabilized apartment communities to be known as AIR and to the entity with more complicated longer cycle development and redevelopment and nontraditional assets to be known as Aimco or New Aimco.\nFull SEC descriptions of these plans are expected in Form 10 filings expected to be published in the next few days.\nUntil then, I'll not be able to add much on this subject beyond what I've already said.\nThe third quarter brought in mix of challenge, uncertainty and promise.\nEncouraging signs make us highly optimistic about recovery and the long-term outlook for our business.\nNew leasing pace rebounded and was up 20% year-over-year.\nAs a result, lease percentage, our best forward indicator of occupancy increased by more 6% from July 1 to today.\nAnd our units to lease have been cut in half.\nOur high standards for resident selections are paying dividends, as collections have been consistently high since April.\nOur customer service remains world-class with residents giving its 4.3 stars on 19,000 service.\nAnd at the same time, we achieved 2.6% rate growth on renewals, this all despite an environment with constant changes in employment, schools, courts, and regulations.\nOne measure of the health of our core businesses is residential net rental income.\nSimply put, this is our occupancy in average rate of apartment homes, which was down 2.5% in the third quarter.\nAverage daily occupancy was 93.9%, down 280 basis points from last year, blended lease rates were down 3% with new lease rates down 7.6% and renewals up 2.6%.\nBad debt expense was 190 basis points, including 130 basis points attributable to court closures in recent Los Angeles regulations.\nSame-store revenues declined 4.9% in the third quarter, while expenses were down 1.3% due to increased efficiencies from our team and lower net utility costs as our energy initiatives drive value.\nAs a result, same-store third quarter net operating income decreased 6.3% year-over-year.\nWith that said, results in the quarter depended on geography.\nIn our stable suburban markets, operations were largely business as usual.\nThese communities distributed across the country totaled 19,100 units.\nOur occupancy was 95.7%.\nBlended rates were nearly flat.\nAnd residential net rental income was up 60 basis points.\nIn our 8,500 units located in urban areas, demand was down and lease rates were more frequent, leading to turnover of 47%.\nOccupancy of 89.5% and blended lease rates were negative 6.7% and residential net rental income was down 7.1%.\nIn each urban neighborhood, cumulative local conditions led to this performance and the reversal of those conditions will fuel growth next year.\nIn Philadelphia, University City felt the impact when new UPENN and Drexel announced the fall semester was virtual.\nIn Center City, many offices were empty including both Comcast Towers.\nWe expect Philadelphia to turn around shortly when students return to class and employees return to their office.\nIn Mid-Wilshire in West Los Angeles, the interruptions to the entertainment industry and shutdown of the city nearly eliminated demand in the spring.\nWhile rate remains pressured and losses were compounded by local laws allowing residents to live rent free, we see blue skies coming with leasing up 44% year-over-year in the third quarter and up 150% in October.\nOccupancy is anticipated to fully recover by year-end.\nOn the Peninsula in Northern California, work-from-home policies of tech companies changed the demand for apartments.\nThe Pacific neighborhood weakened and has since stabilized while San Mateo and Redwood City continue to face challenges with demand and rate and will likely remain tough in 2021.\nOur exposure to these submarkets is limited and our diversified portfolio in Northern California includes solid performances in San Jose, Marin and East Bay.\nIn October, business continues to improve, leasing pace is still running ahead of last year, average daily occupancy for the month is 94.2% and we expect further increases through the end of the year and into 2021.\nPricing remains challenged with new lease rates down 10%, renewals up 1.4% and blended lease rates down 6.7%.\nFor some context on new lease rates, we've signed 95% of our leases for the year and in our suburban market rates are healthier and improving.\nIn our urban markets, rates have been tough but we've also seen them stabilize.\nAnd with our suburban markets full, urban leasing has made up an increasing share of the transaction dollars each month since July.\nWe anticipate that these three trends will hold through the winter months as we believe we've reached the bottom.\nLastly, October collections were consistent with recent months.\nNew delinquencies are slowing with more of our accounts receivable growth coming from residents who have been delinquent since the beginning of the pandemic.\nWe anticipate an improvement in bad debt once local emergency ordinances and closures unwind sometime next year.\nIn a moment Paul will provide more details on our collections and bad debt.\nWe continue to focus on the long game, keeping a steady hand on the wheel and building sustainable revenue growth for the coming year.\nWe have a strong operational architecture in place today with smart home technology in every unit.\nArtificial intelligence is delivering productivity and improved results, a centralized team driving consistent execution, relentless innovation enabling us to hold our expenses flat, in-depth analytics guiding our decision-making, and most importantly our field team members that consistently deliver exceptional service and outstanding results.\nAmid this year's challenges, the Aimco team has sourced new investment opportunities, advanced construction on our major projects, and worked hard to fill newly delivered apartment homes with high-quality residents.\nFirst, I'll touch on new investments made during the quarter and we'll then turn to our redevelopment and development activities.\nIn August, Aimco acquired Hamilton on the Bay located in Miami's Edgewater neighborhood for a price of $90 million.\nThe acquisition included a waterfront apartment building containing 271 units averaging over 1,400 square feet plus an adjacent development site.\nCombining the parcels will allow for more than 380 additional residential units under the current zoning.\nWe are planning to invest as much as $50 million and a substantial redevelopment of the existing building and the second phase focused on unlocking the value of the available development rights is being explored.\nAlso during the quarter, Aimco made a $50 million commitment to invest in IQHQ, a premier life sciences real estate development company.\nIn addition to our investment in the company, Aimco secured the right to collaborate on the multifamily portions of future IQHQ development sites.\nPost-separation, we expect these new investments will be strong contributors to the growth of Aimco's development business, and we are actively pursuing additional opportunities with plans to further grow our pipeline.\nNow, turning to our ongoing redevelopment and development projects; here are some highlights as of the end of October.\nAt Parc Mosaic in Boulder, Colorado, where construction was completed earlier in the year, Keith and his team have leased 97% of the apartment homes.\nOur townhouse project in Elmhurst, Illinois is now substantially complete, with all 58 homes delivered and 57 of those being leased.\nAt 707 Leahy in Redwood City, we've delivered 60 homes, over 80% of them leased, and the remaining 50 are scheduled to complete before year-end.\nAt The Fremont on the Anschutz Medical Campus, just over 100 homes have been delivered, here too, 80% have been leased and the remainder will be completed in the coming months.\nOur final two long cycle projects, Prism in Cambridge, and the North Tower at Flamingo in Miami Beach, remain on track for initial delivery in early and mid-2021 respectively.\nInitial rental rate performance on those projects currently in lease-up has averaged 98% of our original expectations.\nHowever, we believe that NOI yields will meet or exceed our underwriting as the impacts of continuing onsite construction and strained local market conditions lift.\nToday, I will discuss Aimco's balance sheet, third quarter financial results, rent collections and bad debt, and then wrap up with a brief discussion of Aimco's previously announced special dividend.\nAs Terry mentioned, in 2020, we expect to reduce leverage by $2 billion, $1 billion from the September closing of the California joint venture and a $1 billion from the separation transaction.\nThe $1 billion leverage reduction reduced third quarter leverage-to-EBITDA on a trailing 12-month basis to 7.0 times.\nNow, on the Aimco financial results; third quarter pro forma FFO of $0.61 per share was down $0.03 or 5% year-over-year.\nWe estimate lower occupancy and other COVID-related impacts reduced third quarter FFO by $0.09 year-over-year.\nOffsetting the COVID-related impacts was $0.04 of increased interest income associated with the Parkmerced mezzanine loan and $0.03 of lower offsite costs.\nThe remaining $0.01 decline is attributable to the net impact of property sales and lower interest expense.\nNext, I'd like to spend a minute discussing Aimco rent collections and bad debt.\nResidential revenue includes apartment rents and also such items as storage rents, parking rents and related fees owed by residents.\nIn the third quarter, Aimco recognized 98.1% of all residential revenue.\nOf the 98.1%, 96.7% was paid in cash, 30 basis points better than the second quarter's collection percentage as of the same date.\n60 basis points is subject to recovery by offset against security deposits and $1.6 million or 80 basis points is considered collectible based on Aimco review of individual customers' credit.\nAimco does not expect to collect, and therefore did not recognize revenue on 190 basis points of third quarter billings.\nThese amounts are reflected as bad debt in our quarterly financial statements.\nThe majority of this amount, approximately 130 basis points, is attributed to residents who have not paid April and subsequent rents.\nPrior to the enactment of restrictive city ordinances and closed courthouses, these residents would have been evicted in ordinary course, and therefore the bad debt would not have continued for the past six months.\nThe remaining amount, approximately 60 basis points, reflects residents, whose initial delinquency occurred during the third quarter.\nThis is elevated reflecting stress in the economy, but the rate of initial delinquencies has been steadily declining since July.\nWe expect the decline to continue until reaching a more normal 30 basis points in 2021.\nAs we look forward, we also expect the emergency ordinances that allow residents to live rent-free to unwind, providing us with the opportunity to rerent these apartments to rent-paying residents.\nLastly, as previously announced, the Aimco board of directors declared a special dividend on October 21 to distribute the taxable gains resulting from the partial sale of assets in the California joint venture and other 2020 dispositions.\n$8.20 per share dividend consists of 10% cash or $0.82 per share, which covers Aimco's regular scheduled quarterly dividend and the acceleration of the next dividend typically paid in February.\nThe remaining 90% will be paid in common stock.\nShareholders of record on November 4 allowed the option to elect to receive either cash or shares of common stock.\nIf either option is oversubscribed, the shareholder will receive a prorated amount of cash and common stock.\nSpecial dividend will be payable on November 30, concurrent with the reverse stock split effectively neutralizing the per share impact of the additional common shares issued in the dividend.\nPost-separation, it is expected that the need for special dividends to distribute taxable gain on sale at AIR will be reduced or eliminated due to the refreshed tax basis.\nRocco, I'll turn over to you for the first question.\n",
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"content": "aim q3 pro forma ffo per share $0.61.\nq3 pro forma ffo per share $0.61.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We look forward to discussing our first quarter 2021 results with you today.\nJoining me for Assurant's conference call are Alan Colberg, our President and Chief Executive Officer; and Richard Dziadzio, our Chief Financial Officer.\nYesterday after the market closed, we issued a news release announcing our results for the first quarter 2021.\nThe release and corresponding financial supplement are available on assurant.com.\nWe'll start today's call with brief remarks from Alan and Richard before moving into a Q&A session.\nDuring today's call, we will refer to non-GAAP financial measures, which we believe are important in evaluating the Company's performance.\nAs we continue to shift to a more fee income capital-light business mix, we introduced adjusted EBITDA as part of our restated financial statements in April.\nThis is another important financial metrics for the Company, reflective of our go-forward Global Lifestyle and Global Housing business.\nWe're very pleased with our results for the first quarter.\nWe delivered double-digit earnings growth, driven by favorable non-catastrophe loss experience, including improved underwriting in Global Housing as well as continued profitable growth in our Global Automotive, Multifamily Housing and Connected Living businesses.\nOnce again results demonstrated the attractiveness of our market leading Specialty P&C and Lifestyle offerings distributed across multiple channels.\nThis is in addition to the compelling growth opportunities emerging across mobile, auto, and renters.\nTogether, these businesses represent what we refer to as the connected world.\nIn 2020, our Connected World offerings represented two-thirds of our net operating income excluding catastrophes and in combination with our Specialty P&C businesses will enable us to continue to expand our innovative offerings and deliver a superior and seamless customer experience.\nGenerating over $1 billion of adjusted EBITDA in 2020, our business portfolio is well positioned to sustain above market growth and strong cash flows over time.\nAnd as we look ahead, we are continuously investing to bring innovation to market to build a more sustainable future for all of our stakeholders.\nTo that end, we recently published our 2021 Social Responsibility Report highlighting the many ways we are delivering on our commitment as a purpose-driven company.\nWe are continuing to advance our ESG efforts, specifically within our strategic focus areas of talent, products, and climate.\nFurther integrating ESG within our business operations will be critical as we look to create an even more diverse, equitable, and inclusive culture that promotes innovation enhances sustainability and minimizes our carbon footprint for the benefit of all stakeholders.\nRecent notable examples include, we are increasing all US hourly wages to at least $15 per hour by July, which supports the financial well-being of our employees.\nWe've launched in assessment of our carbon footprint, including our investment portfolio and supply chain as a critical step to setting a future long-term carbon emissions reduction goal.\nAnd we further integrated sustainability into our offerings such as rolling out electric vehicle products globally and extending the mobile device lifecycle through trading services.\nWith HYLA, we recently passed a significant milestone repurposing our 100 million device.\nThis has extended the life of devices, put billions of dollars back into consumers hands and prevented additional e-waste from ending up in our landfills supporting Global Sustainability.\nWe are pleased with our progress and are proud of the recognitions we have received, including our inclusion in the Bloomberg Gender Equality Index and America's Best Employers for Diversity by Forbes.\nAs well as being awarded the Best Place to Work in several of the key markets we operate.\nSustainability and innovation go hand-in-hand.\nRecently, we surpassed $100 million invested through Assurant Ventures, our venture capital arm.\nThis quarter several high-quality investments in our portfolio announced back transactions, including Cazoo, a fully digital UK car sales company and smart rent, a smart home automation provider.\nGiven current attractive valuations, these investments have the potential to generate strong returns while also providing strategic insight that support our connected world businesses, creating value-added partnerships, and piloting new innovations.\nNow, let me share some first quarter highlights for each of our operating segments.\nWe continue to see strong growth in Global Lifestyle, increasing earnings by 7% year-over-year.\nOver the years, we continuously invested in mobile capabilities such as same day local repair or come-to-you to repair for mobile devices, which provide another opportunity to drive value for our clients and the end consumer.\nMost recently in Connected Living, we further strengthened our product capabilities and customer experience through the acquisition of TRYGLE in Japan.\nTRYGLE develops and operates a mobile phone app that allows consumers to manage the lifecycle of their devices and centrally organizes digital product manuals for all connected products.\nCollectively, all of our investments have helped lead the 15 new client program launches in 2015.\nThis includes partnerships with several US cable providers including Xfinity and Spectrum as well as large mobile carriers in Japan like KDDI and Rakuten.\nRecently, we've expanded our global partnership with Samsung through the launch of Samsung Care+, a smartphone protection program in Brazil and Mexico.\nWe expect to further extend this partnership globally.\nWe will continue to build on the strong momentum we have with our global multi-product and multi-channel strategy bolstered by the additional investments we are making.\nAs an example HYLA Mobile added scale and technology capabilities to our global trade-in and upgrade business and has been performing even better than our initial expectations.\nWe're now providing over 30 trading programs around the world.\nThe acquisition positions us to benefit from favorable tailwinds in the global mobile market, including the upcoming 5G smartphone upgrade cycle and new client relationships.\nIn Global Automotive, we continue to benefit from our scale and expertise as we now cover over 50 million vehicles.\nAlready this year, we've seen a significant increase in auto production versus pre-pandemic first quarter levels.\nIn the year since acquiring AFAS, we've combined our award winning training programs to create the Automotive Training Academy by Assurant.\nThese expanded in-person and virtual programs will allow us to scale faster and adapt to the changing needs of dealers and automotive professionals.\nWithin Global Financial Services, we've added a number of embedded card benefit clients recently, including the previously announced partnership with American Express.\nWe look forward to enhancing these partnerships and building on our existing suite of products.\nMoving to Global Housing.\nNet operating income excluding reportable catastrophes grew 17% as we benefited from favorable non-GAAP loss experience, including improved underwriting results.\nWithin our Lender-placed business, we continue to play a vital role in supporting the mortgage industry as we track over 31 million loans.\nThe business remains well positioned and we expect to benefit from investments in our superior customer platform over the long-term.\nMultifamily housing increased policies by 9% year-over-year to almost $2.5 million as we continue to grow through our affinity partnerships and PMC channel, including seven of the top 10 largest PMCs in the US.\nWe've also continued to grow our sharing economy offerings, which include car sharing, on-demand delivery, and vacation rental.\nOver the last two years through our partnership with market leaders and on-demand delivery, we tripled the number of deliveries we protect over 1 billion deliveries.\nWhile it is too early to gauge whether the pandemic has fundamentally changed consumer demand for these services.\nWe're encouraged by our momentum and the potential for future products and services in the gig economy.\nNow let's move to our first quarter results and our 2021 outlook.\nNet operating income excluding cats grew by 13% to $182 million and earnings per share increased 16% to $3.03, demonstrating improved results in Global Housing and continued momentum in Global Lifestyle.\nGiven our strong performance in the first quarter and current business trends, we are increasing our full-year outlook for 2021.\nWe now expect 10% to 14% growth in operating earnings per share excluding catastrophes versus our initial expectation of 9% earnings per share growth.\nEPS expansion from the $9.88 in 2020 will be driven by high single-digit earnings growth mainly from Global Lifestyle and the lower corporate loss.\nResults will also benefit from share repurchases, including the completion of our three-year $1.35 billion objective in the initial return of net proceeds from the Global Preneed sale.\nOur increased outlook largely reflects Global Housing's favorable non-catastrophe loss experienced in the first quarter.\nAs such Housing's earnings are expected to be down only modestly year-over-year from what was a strong 2020.\nLooking at adjusted EBITDA, excluding catastrophes, the first quarter generated $302 million, an increase of 15% year-over-year.\nWe expect adjusted EBITDA will grow at a modestly higher rate than net operating income in 2021.\nWe ended March with $332 million of holding company liquidity, after returning $80 million to shareholders through common stock dividends and buybacks during the quarter.\nAnd we expect to deliver on all of our commitments, sustaining our strong track record of capital return.\nIn addition, throughout the year, we will continue to make strategic investments in our portfolio to position us well for sustained long-term growth.\nAs Alan noted, we are pleased with our first quarter performance as our results across Global Lifestyle and Global Housing remains strong.\nBefore getting into our first quarter performance, I want to provide a quick update on the sale of our Preneed business.\nIn March, we announced our plan to sell the business for $1.3 billion to CUNA Mutual Group.\nSince signing, we have completed the necessary regulatory filings and we remain on track to close the transaction by the end of the third quarter.\nNow let's move to segment results for Global Lifestyle.\nThis segment reported net operating income of $129 million in the first quarter, an increase of 7% driven by Global Automotive and Connected Living.\nIn Global Automotive, earnings increased $7 million or 18%, results included a $4 million one-time benefit as well as a gain on investment income related to a specialty asset class from our TWG acquisition, which we don't expect to recur.\nYear-over-year, underlying performance was driven by another quarter of global organic growth from US CPA and international OEMs as well as some favorable loss experience.\nConnected Living grew earnings by 3%.\nHowever, this was muted by a $7 million favorable client recoverable with an extended service contracts in the prior year period.\nUnderlying performance was driven by mobile subscriber growth in Asia Pacific and North America.\nHigher trading results from increases in volume and contributions from our HYLA acquisition.\nFor the quarter Lifestyle's adjusted EBITDA increased 11% to $193 million, four points above net operating income growth.\nThis reflects this segment increased amortization related to higher deal related intangibles for more recent acquisitions in Global Automotive and Connected Living.\nIT depreciation expense also increased, stemming from higher investment.\nLifestyle revenue decreased by $85 million.\nThis was driven mainly by a $98 million reduction in mobile trade-in revenue, primarily due to the contract change we disclosed last year.\nExcluding this change, revenue for this segment was flat.\nFor the full year, we continue to expect Lifestyle revenues to be in line with last year at approximately $7.3 billion.\nAs expected overall trade-in volumes, which flow through fee income increased year-over-year and sequentially.\nThis was driven by four elements.\nNew phone introductions last year, greater device availability, carrier promotions and contributions from HYLA.\nWhile the first quarter did benefit from strong mobile trade-in volumes, we do expect it to be a high watermark for the year, given historical seasonal patterns.\nSince year-end, we've increased covered mobile devices by 600,000 subs driven by continued growth in North America and Asia-Pacific.\nThis year, we continue to expect covered mobile devices to grow mid single-digits compared to 2020, as we go subscribers in key geographies like the US and Japan.\nAs a reminder, we expect the growth rate of earnings to exceed the growth rate of covered mobile devices over time.\nAs we benefit from offering additional products and services to our clients and their end consumers.\nFor 2021, we still expect Global Lifestyle's net operating income to grow in the high single-digits compared to the $437 million reported in 2020.\nGrowth will come from all lines of business particularly Connected Living.\nAdjusted EBITDA for this segment is expected to grow double-digits year-over-year.\nMoving now to Global Housing.\nNet operating income for the first quarter totaled $67 million compared to $74 million in the first quarter of 2020.\nThe decrease was largely due to $22 million of higher reportable catastrophes mainly related to the extreme winter weather particularly from areas like Texas.\nExcluding catastrophe losses, earnings increased $50 million or 17%.\nMore than two-thirds of the increase was from favorable non-cat loss experience mainly in our specialty offerings, including sharing economy products.\nWe estimate that approximately half of the favorable loss experience in the first quarter was from underwriting improvements, with the remainder of the benefit, driven by favorable loss experience, which we don't expect to recur.\nIn addition, we saw continued growth in multifamily housing.\nLender-placed results were up modestly, higher premium rates, and favorable non-Cat loss experience were mostly offset by declining REO volumes from ongoing foreclosure moratoriums.\nLooking at the placement rate, the modest sequential increase to 1.6% was attributable to a shift in business mix and is not an indication of a broader macro housing market shifts.\nRevenue decreased 2% related to a reduction in our specialty product offerings, which included the impact from the exit of small commercial as well as lower REO volume.\nThis decrease was partially offset by growth in multifamily housing, which grew 8% year-over-year, driven mainly by our affinity partners.\nWe now expect Global Housing's net operating income excluding Cat to be down modestly compared to 2020.\nThis reflects our stronger first quarter and the assumption of a modest increase in our expected non-Cat loss ratio to more normalized levels for the remainder of the year.\nWe are also monitoring the REO foreclosure moratoriums in any additional extensions that may be announced.\nAs we position for the future, we will continue to invest in some of the business to sustain and enhance our competitive position.\nAt Corporate, the net operating loss was $22 million, which was flat year-over-year.\nFor the full year, we continue to expect the Corporate net operating loss to improve to approximately $90 million as we eliminate enterprise support costs associated with Global Preneed.\nAs we think about the remainder of the year for all of the Assurant, we are beginning to plan for a phase reentry of our workforce post-COVID and we are evaluating our real estate footprint to align with new business and employee need as we adapt to the future of work.\nThis may result in additional expenses throughout the year.\nI also wanted to provide a quick comment on our investment portfolio.\nWith Preneed moving to discontinued operations, our investment portfolio is now approximately $7.9 billion, excluding cash and cash equivalent.\nGiven Preneed's relatively longer average duration of around 10 years compared to the rest of our business, following the sale of Preneed, our go-forward duration will drop to between 4.5 years to 5 years.\nAs a result our interest rate sensitivity will be reduced by approximately two-thirds.\nTurning to holding company liquidity, we ended the first quarter with $332 million, which is $107 million above our current minimum target level.\nIn the first quarter, dividends from our operating segments totaled $183 million.\nIn addition to our quarterly corporate and interest expenses, we also had outflows from three main items.\n$42 million of share repurchases, $43 million in common and preferred stock dividends, and $10 million mainly related to the acquisition of TRYGLE and Assurant Venture Investments.\nAlso in January, we redeemed the remaining $50 million of our March 2021 note.\nAnd our mandatory convertible shares converted to approximately 2.7 million common shares during the quarter.\nFor the year overall, we continue to expect dividends to approximate segment earnings subject to the growth of the businesses and rating agency and regulatory capital considerations.\nWe've now completed over 70% of our $1.35 billion capital return objective from 2019 to 2021 and remain confident that we will meet this objective by the end of this year.\nIn addition, we expect to begin incremental buybacks prior to closing the Preneed transaction in the third quarter.\nThe total buybacks associated with the net proceeds from the sale are expected to be returned within one year of the transaction closed.\nIn the second quarter through April 30, we repurchased an additional 95,000 shares for $14 million.\nIn summary, our first quarter results demonstrate the strength of our business and our capital liquidity position.\nWe remain focused on completing the sale of Global Preneed and delivering on our 2021 financial objectives.\n",
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"content": "increases 2021 outlook to deliver double-digit earnings per share growth.\nreportable catastrophes, per diluted share $3.03.\nassurant - for fy 2021, expects net operating income, excluding reportable catastrophes, per diluted share, to increase about 10% to 14%.\nqtrly total revenues $2,432.6 million versus $2,448.7 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We look forward to discussing our second quarter 2021 results with you today.\nJoining me for Assurant's conference call are: Alan Colberg, our Chief Executive Officer; Keith Jennings, our President; and Richard Dziadzio, our Chief Financial Officer.\nYesterday after the market closed, we issued a news release announcing our results for the second quarter 2021.\nThe release and corresponding financial supplement are available on assurant.com.\nWe will start today's call with remarks from Alan.\nKeith and Richard before moving into a Q&A session.\nDuring today's call, we will refer to non-GAAP financial measures, which we believe are important in evaluating the company's performance.\nWe are very pleased with our second quarter results.\nOur performance so far this year across our Global Lifestyle and Global Housing businesses demonstrates the power of our strategy to support consumers' connected lifestyle and continues to give us strong confidence in the future growth prospects for Assurant.\nPrior to reviewing our progress against our 2021 financial objectives, I wanted to take a moment to express my deep gratitude to our employees around the world, specifically for their continued dedication and support for all of Assurant stakeholders during my tenure as CEO and especially over the last 18 months of the pandemic.\nOur talent is a great enabler of our company's growth and progress and Keith Jennings' appointment as my successor is evidence of that.\nWith a 25-year-long career at the company, he has a clear track record of success and personifies the values and integrity that are emblematic of Assurant's culture and is a natural choice as our next CEO.\nHis deep operational experience and strong engagement with clients has been instrumental in guiding Assurant's growth across the enterprise.\nAs CEO, Keith will drive innovation through our Connected World and Specialty P&C businesses.\nThe completion of the sale of Global Preneed to CUNA Mutual Group marks another important milestone for Assurant, as it enables our organization to further deepen our focus on our market-leading Lifestyle and Housing businesses.\nAs we look to the convergence of the connected mobile device, car and home, we believe our Connected Living, Global Automotive and Multifamily Housing businesses will continue their compelling history of strong growth into the future.\nNot only do our Connected World businesses have a history of profitable growth, more than tripling earnings over the last five years, were also characterized by partnerships with leading global brands; broad multi-channel distribution that provides consumers a choice, value and exceptional service and the track record of innovative offerings that have become industry standards.\nESG is core to our strategy, ensuring we'll build a more sustainable Assurant for all of our stakeholders, focusing on talent, products and climate.\nDuring the quarter, we continue to advance our ESG efforts as we work to create an even more diverse, equitable and inclusive culture that promotes innovation, and enhances sustainability and minimizes our carbon footprint.\nWe recently completed our 2021 CDP Climate Survey, our sixth annual scoring submission expanding this year to include Scope 3 greenhouse gas emissions across several categories.\nThe CDP survey is an important climate change assessment, which many of our key stakeholders rely on each year.\nOur efforts have led to a recognition that we're proud of.\nDuring the quarter, Assurant was recognized as a 2021 honoree of The Civic 50 by Points of Light, thus claiming [Phonetic] Assurant as one of 50 most community-minded companies in the U.S.\nWe are proud of our progress and believe the future of Assurant is bright.\nTogether, Lifestyle and housing should continue to drive above-market growth and superior cash flow generation, with the ability to outperform in a wide spectrum of economic scenarios and ultimately continue to create greater shareholder value over time.\nYear-to-date, excluding reportable catastrophes, net operating income per share was $6.02, up 14% from the first half of last year and net operating income was $366 million, an increase of 30%.\nAdjusted EBITDA increased 12% to $600 million.\nThese results support our full-year outlook of 10% to 14% growth in net operating income per share excluding affordable catastrophes.\nWhile we expect earnings growth in the second half on a year-over-year basis, our outlook for the full year assumes a decline in earnings from the first half, reflecting increased investments to support long-term growth in our Connected World businesses, lower investment income and increased corporate and other expenses due to timing of spending.\nFrom 2019 through June of this year, we've returned to shareholders over 88% or almost $1.2 billion of our three-year $1.35 billion objective.\nIn July, we repurchased an additional 737,000 shares for $150 million and declared our quarterly common stock dividend for the third quarter, essentially completing our objective when paid.\nIn addition to completing this objective, we expect to return $900 million in net proceeds from the sale of Global Preneed within the next 12 months and therefore expect buybacks to continue at a higher-than-usual level throughout the remainder of the year and into 2022.\nThrough his strategic vision and intense focus on the evolving needs of our clients and end consumers, Alan and our team have solidified market-leading positions in our Connected World and Specialty P&C businesses, help Assurant establish a strong growth capital-light service-oriented business model where our Connected World offering is now comprised approximately two-thirds of our segment earnings and ultimately work together to unlock the power of our Fortune 300 organization -- prioritizing resources against initiatives with the highest growth potential and standing of key enterprise capabilities and functions, which we can now leverage across our growing client and customer base.\nAs a result, Assurant is on track to deliver our fifth consecutive year of strong profitable growth.\nAs I continue to work closely with Alan over the coming months.\nI'm also engaging with many of our key stakeholders, including shareholders and analysts who shared valuable perspectives as we define our multi-year plan.\nAs I identify key focus areas, I will prioritize developing and recruiting top talent, investing strategically to sustain and accelerate growth through product innovation and new distribution models, differentiating us further from our competition through continuous improvement in our customer service delivery, and supporting the investment community in better-understanding our portfolio as we look to drive further value creation.\nOur long-term goal will continue to be to deliver sustained growth and value to all of our stakeholders.\nOur ability to deliver on these ambitions will require additional innovation and investments to ultimately provide a superior customer experience and deepen our client relationships.\nInnovation will continue to be a key differentiator for Assurant, especially as we evolve with the convergence of the connected consumer.\nAs part of our ongoing commitment to delivering a superior customer experience with a range of service delivery options, we will be further building out our same-day service and repair capabilities for which there is growing demand.\nThis requires upfront investments, which we expect to accelerate in the second half of this year as we look to provide additional choice and convenience for the end consumer.\nAs we look to continue our culture of innovation.\nYou may have seen, we recently announced two key leadership changes to support those efforts.\nManny Becerra, a 31-year veteran of Assurant who was instrumental in driving the growth of our mobile business was appointed to the newly created role of Chief Innovation Officer.\nGiven his many contributions to our success including the development of our mobile protection and training and upgrade business, he will bring dedicated resources to accelerate innovation across the enterprise to capitalize on the rapid convergence across our home, automotive and mobile products.\nBiju Nair will now lead our Connected Living business as its President.\nHis strong track record of delivering profitable growth and client service excellence, combined with his depth of experience, particularly of the former CEO of Hyla Mobile makes him the perfect choice.\nA prime example of how innovation has allowed us to deepen and expand client relationships, as well as create new revenue streams is our long-standing partnership with T-Mobile.\nOver the past eight years, we have worked together to offer their customers innovative device protection, trade-in and upgrade programs, while further developing our supply chain services to support their mobile ecosystem.\nWe are happy to announce that T-Mobile has extended our partnership as their device protection provider.\nWhile we are currently finalizing contract terms, we are excited about the multi-year extension of our relationship and our ability to continue to expand our services to deliver a superior customer experience.\nIn addition to our innovation efforts, or investments over the past several years has supported our growth through the success of new and strengthened client relationships.\nAfter an initial investment in 2017, this quarter, we purchased the remainder of Olivar, a provider of mobile device lifecycle management and asset disposition services in South Korea.\nWhile small in size, this acquisition enhances our global asset disposition capabilities and deepened our footprint in the Asia-Pacific region while complementing the recent acquisitions of Alegre in Australia and Hyla Mobile.\nThese investments have enhanced our technology, operational capabilities and partnerships in the trade-in and upgrade market, positioning us to capitalize on the 5G upgrade cycle over the next several years.\nAlthough this year the growing availability of 5G smartphones combined with trade-in promotions demonstrate increasing momentum for the upgrade cycle.\nFor carriers, retailers, OEMs and cable operators, 5G offers an opportunity to drive additional revenue and gain market share.\nStrong trading and upgrade promotions have also led to higher trading volumes for Assurant as well as higher net promoter scores and net subscriber growth within our client base.\nOur focus on our client relationships, combined with our willingness to innovate to enhance the end consumer experience continue to create momentum for our businesses.\nOver the last few months, we have delivered several new partnerships and renewals throughout the enterprise including the renewal of two key European mobile clients representing 7,000 subscribers; renewal of eight global automotive partnerships representing over 10 million policies across our distribution channels; renewal of three Multifamily housing property management companies including two of the largest in the U.S. as we continue to grow the rollout of our Cover360 product; renewal of three clients and two new partnerships in lender-place as we provide critical support for the U.S. mortgage market.\nIn summary, I'm very excited to lead our 14,000 employees into the future and build on the tremendous momentum created under Alan's leadership.\nWe're pleased with our second quarter performance, especially when compared to our strong results last year.\nFor the quarter, we reported net operating income per share excluding reportable catastrophes of $2.99, up 12% from the prior year period.\nExcluding cats, net operating income for the quarter totaled $184 million and adjusted EBITDA amounted to $298 million, a year-over-year increase of 12% and 10% respectively.\nOur performance across Lifestyle and Housing remains strong and we also benefited from a lower corporate loss and higher investment income, primarily related to the sale of a real estate joint venture partnership.\nNow let's move to segment results, starting the Global Lifestyle.\nThe segment reported net operating income of $124 million in the second quarter, a year-over-year increase of 2%.\nThis was driven by growth in Global Automotive and more favorable claims experience in Global Financial Services.\nDiving deeper into earnings.\nIn Global Automotive, earnings increased $7 million or 16% from continued strong year-over-year growth related to our U.S. clients across various distribution channels.\nResults within auto also included a $4 million increase from the sale of the real estate joint venture partnership.\nAbsent this gain, investment income in auto was down.\nConnected Living earnings decreased by $9 million compared to a strong prior-year period.\nThe decline was primarily driven by less favorable loss experience in our extended service contract business.\nMobile earnings were modestly lower.\nThe less favorable loss experience and service contracts in mobile was primarily related to our European and Latin American businesses.\nThese regions benefited from lower claims activity in the prior year period due to the pandemic.\nOur underlying mobile business continue to grow in North America and Asia Pacific from enrollment increases that mobile carriers and cable operators, with an increase of over one million covered devices in the last year.\nIn addition, contributions from acquisitions such as Hyla Mobile benefited results.\nFor the quarter, Lifestyle's adjusted EBITDA increased 6% to $186 million.\nThis reflects the segments increased amortization related to higher deal-related intangibles for more recent transactions in mobile in Global Automotive.\nIT depreciation expense also increase stemming from higher investments.\nAs we look at revenues, Lifestyle increased by $169 million or 10%.\nThis was driven mainly by continued growth in Global Automotive and Connected Living.\nWithin Global Automotive, revenue increased 13% reflecting strong prior period sales of vehicle service contracts.\nIndustry auto sales continue to increase during the quarter with April seeing record levels in the U.S.\nThis was reflected in our net written premiums of roughly $1.3 billion in the quarter, the highest quarter ever recorded.\nConnected Living revenues were up 7% for the quarter.\nIn addition to growth in service contracts, mobile fee income was driven by strong trading volumes, including contributions from Hyla.\nFor the full year, Lifestyle revenues are expected to increase modestly, compared to last year's $7.3 billion, mainly driven by year-to-date Global Auto and Connected Living growth.\nWe continue to expect to cover mobile devices to grow mid-single digits in 2021 as we increased subscribers in key geographies like the U.S. and Japan.\nThis also reflects the reduction of 750,000 mobile subscribers related to a European banking program that moved to another provider in the second quarter.\nAs we previously outlined.\nThis is not expected to significantly impact our profitability.\nFor 2021, we still expect Global Lifestyle's net operating income to grow in the high-single digits compared to the $437 million reported in 2020.\nWhile we expect earnings growth year-over-year for the second half, earnings in the second half of the year are expected to be lower compared to the strong first half performance primarily due to two items: first, investments will increase across Connected Living in the second half of the year, including our same-day service and repair capabilities.\nWhile these investments will mute earnings growth in the short term, they are expected to generate growth over the long term; and second, the investment income will be lower as we are not expecting gains from real estate joint venture partnerships that benefited the second quarter in auto.\nAdjusted EBITDA for the segment is still expected to grow double-digits year-over-year at a faster based in segment net operating income.\nMoving now to Global Housing.\nNet operating income for the quarter totaled $94 million, compared to $85 million in the second quarter of 2020 due to $10 million of lower reportable catastrophes.\nExcluding catastrophe losses, earnings were relatively flat as growth within lender-placed and higher investment income was offset by the expected increase in non-cat loss experience across all lines of business.\nInvestment income included a $4 million increase from the sale of a real estate joint venture referenced earlier.\nRegarding the non-cat loss ratio, the second quarter 2020 benefited from unusually low non-cat losses, including impacts from the pandemic.\nAs anticipated, we saw an increase in the frequency and severity of claims in the second quarter.\nWe also increased reserves related to the cost of settling run-off claims within our small commercial book.\nIn Multifamily housing, underlying growth was offset by increased investments to further strengthen our customer experience including our digital-first capabilities.\nWithin lender-placed, higher revenues and investment income were partially offset by unfavorable non-cat loss experience and declining REO volumes from ongoing foreclosure moratoriums.\nLooking at loans track, the $1.5 million sequential loan decline was mainly attributable to a client portfolio that rolled off in the second quarter.\nHowever, the decline in loans track should be partially offset by two new client partnerships in the quarter, which should enable us to onboard approximately 700,000 loans by year-end.\nWe also continue to reduce risk within housing.\nAt the end of June, we completed our 2021 Catastrophe Reinsurance program.\nTo mitigate multi-event risk, we added a flexible limit that can be used to reduce our retention from $80 million to $55 million in certain second and third events, or increase the top-of-the-tower $50 million in excess of $950 million in the rare case of a 1 in 174-year event.\nWe also increased our multi-year coverage to over 50% of our U.S. tower.\nIn terms of revenue, Global Housing's revenue increased 5%, primarily due to double-digit growth in Multifamily housing, as well as higher revenue in lender-placed including higher premium rates and average-insured values.\nAs a result of the strong first half, we now expect Global Housing's net operating income excluding cats to be flat compared to the $371 million in 2020.\nThis is above our initial expectations that earnings would be down this year.\nEarnings in the second half are expected to be lower than the first half of the year, primarily related to three items: first, lower net investment income, particularly considering the real estate joint venture gain in the second quarter; second, lower results in our Specialty P&C offerings after our strong first half; and third, continued investments in the business, particularly in Multifamily housing to sustain and enhance our competitive position.\nWe also continue to monitor the REO foreclosure moratoriums and any additional extensions that may be announced.\nAt corporate, the net operating loss was $12 million, compared to $29 million in the second quarter of 2020.\nThis were driven by two items: first, lower employee-related expenses and third party fees, which we expect to increase in the second half of the year; and second, we had $6 million of favorable one-time items including a tax benefit and income from the sale of the real estate joint venture partnership.\nWe also anticipate higher spending in the second half of the year compared to the first half due to an increase in recruiting and moderate travel and related expenses as we expect to begin a phased reentry of our workforce.\nIn addition, third-party expenses are expected to increase due to acceleration and timing of investments.\nFor the full year of 2021, we now expect the Corporate net operating loss to be approximately $85 million.\nThis compares to our previous estimate of $90 million.\nTurning to holding company liquidity.\nWe ended the second quarter with $353 million, which is $128 million above our current minimum target level.\nThis excludes both the $1.2 billion in net proceeds from the sale of Preneed and the net proceeds from the second quarter debt offering, which were used for the July redemption of senior notes due in 2023.\nIn the second quarter, dividends from our operating segments totaled $243 million.\nIn addition to our quarterly corporate and interest expenses, we also had outflows from three main items: $191 million of share repurchases, $42 million in common stock dividends and $17 million mainly related to mobile acquisitions including Olivar and Assurant venture investments.\nFor the overall year, we continue to expect dividends to approximate segment earnings, subject to the growth of the businesses, rating agency and regulatory capital requirements, investment portfolio performance and any impact on a potential change in corporate U.S. tax rates.\nIn summary, our strong performance for the first half of the year positions us nicely to meet our full year financial commitments, while continuing to invest in our long-term growth.\n",
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"content": "q2 operating earnings per share $2.99 excluding items.\ncontinue to expect to grow eps, ex.\ncatastrophes, by 10 to 14 percent for 2021.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We look forward to discussing our third quarter 2021 results with you today.\nJoining me for Assurant's conference call are Alan Colberg, our Chief Executive Officer; Keith Demmings, our President; and Richard Dziadzio, our Chief Financial Officer.\nYesterday, after the market closed, we issued a news release announcing our results for the third quarter 2021.\nThe release and corresponding financial supplement are available on assurant.com.\nWe'll start today's call with remarks from Alan, Keith and Richard before moving into a Q&A session.\nDuring today's call, we will refer to non-GAAP financial measures, which we believe are important in evaluating the company's performance.\nOur third quarter results were strong, driven by double-digit operating earnings growth in Global Lifestyle.\nThe strength of our Global Automotive and Connected Living offerings continue to validate our long-term strategy of focusing on our higher growth fee-based and capital-light businesses.\nWe continue to make progress in building a more sustainable company for all stakeholders.\nDuring the quarter, a few key highlights included.\nFor the first time, Assurant was awarded a Bronze accreditation by EcoVadis, one of the largest sustainability ratings companies, ranking Assurant among the top 50% of all 75,000 participating companies.\nIn addition, this quarter we provided additional transparency to track our progress on our journey to build a more diverse and inclusive Assurant, with the recent disclosure of our EEO-1,which provides gender, race and ethnicity data by job category for our U.S.-based employees.\nWe believe a diverse and inclusive workforce will best foster innovation, a key ingredient to sustaining our outperformance longer-term.\nLooking at our financial performance year-to-date, net operating income per share excluding reportable catastrophes was $8.75, up 12% compared to the first nine months of last year.\nNet operating income and adjusted EBITDA also excluding cats, both increased by 10% to $528 million and $862 million, respectively.\nThese results support our full year outlook of 10% to 14% growth in net operating income per share excluding reportable catastrophes, marking our fifth consecutive year of strong profitable growth.\nGiven year-to-date results and our expectations for the fourth quarter, we would expect to end the year closer to the top half of this range.\nWe've also now completed our three-year $1.35 billion capital return objective from our 2019 Investor Day, a quarter ahead of schedule.\nFollowing the close on the sale of Global Preneed in August, we've also made meaningful progress in returning an additional $900 million to shareholders.\nOur 2021 earnings per share outlook is driven by at least high single-digit net operating income growth, excluding cats, as well as share repurchases.\nTurning to our business performance.\nIn Global Lifestyle, we are on track to grow adjusted EBITDA by double digits in 2021 from $637 million in 2020, driven by Global Automotive and Connected Living.\nWe have benefited from the stable recurring revenue stream of our installed base of mobile subscribers and our success in launching additional offerings and capabilities for mobile carrier, cable operator, OEM and retail clients globally.\nAdditionally, our mobile trade-in upgrade business and expanded service delivery options are increasingly important to our profitability and also on providing a differentiated and superior customer experience.\nWithin Global Automotive, we benefited from increased scale, growing the number of vehicles we protect by 20%, over 52 million since The Warranty Group acquisition in 2018.\nWe believe Auto will continue to be one of our key growth businesses in the future.\nIn Global Housing, we continue to be on track for another year of better than market returns, with an annualized operating ROE of nearly 15% for the first nine months of this year.\nThis includes $113 million of catastrophe losses, which further demonstrates the superior returns of this differentiated business.\nOur counter-cyclical lender placed insurance business remains an integral part of the mortgage industry framework in the U.S. Within lender placed, as we renew existing clients and add new partners, we will continue to enhance the experience through the ongoing rollout of our single source processing platform.\nOur Multifamily Housing business now supports over 2.5 million renters across the U.S. and has more than doubled earnings since 2015 through our strong partnerships with our affinity and property management company clients.\nOur investments in digital capabilities, such as our cover 360 property management solution continues to drive more value for our partners and an enhanced customer experience.\nOverall, we believe our portfolio of high growth, fee based capital-light offerings and high return Specialty P&C businesses sets us apart as a long-term outperformer and sustained value creator for our shareholders.\nMost of all, I'm humbled by our 15,000 employees, who through their dedication to serve our clients and our 300 million customers worldwide have successfully transformed Assurant.\nTogether, we have significantly strengthened our Fortune 300 company that should continue to deliver above-market growth and superior cash flow.\nWith our President, Keith Demmings, succeeding me as CEO in January, I'm confident Assurant will accelerate our strategy and continue to differentiate our superior customer experience will further deepen in client relationships.\nI've been fortunate to have had a front-row seat and a role in supporting Alan's vision and the transformation of Assurant.\nImportantly, he has continued to evolve the purpose of our company to drive value for all stakeholders, customers, employees, communities and shareholders.\nThe impact he has had on our people and the overall culture of our company has been exemplary.\nAnd I appreciate Alan personal mentorship and partnership and wish him the very best in his retirement.\nAs we build on Assurant's momentum over the long-term, I believe our talent and innovation will be critical factors to achieving success and growth, especially as we focus more on the convergence around the connected consumer.\nFrom a talent perspective, Assurant has developed a deep and diverse bench of internal leaders.\nA few weeks ago, I announced our refreshed Management Committee effective in January, including two new leadership appointments illustrating our strong bench.\nFirst, Keith Meier, our current President of International will succeed Gene Mergelmeyer as Chief Operating Officer, as Jim will be retiring at year-end.\nGene's significant contributions to Assurant over the last 30 plus years, including as COO over his last five years have been instrumental in creating market-leading positions, producing profitable growth and transforming the organization.\nIn succeeding Gene, Keith Meier brings nearly 25 years of experience at Assurant to the COO role.\nSince 2016 as President of Assurant International, he has driven growth across our global markets, most recently with strong success in Asia Pacific.\nIn this new role, Keith will be focused on advancing Assurant's business strategy and market leadership positions as well as identifying additional opportunities to deliver a superior customer experience.\nSecond, Martin Jenns, will become President of Global Automotive.\nWith over 30 years of experience, he currently leads the transformation and growth strategy for Auto and has been instrumental in our introduction of innovative new products like EB-1, our electric vehicle warranty protection.\nIn addition to emerging opportunities and innovation, Martin will be focused on driving growth and improving the customer experience, including working with our partners to deliver best-in-class dealer training.\nThese two new appointments along with recent appointments of Biju Nair as President of Connected Living and Manny Becerra as our Chief Innovation Officer, as well as the other management committee members represent a strong team to help lead us into the future.\nIn addition to talent, innovation is an important strength of the organization.\n, not only the development of new digital products and offerings for our clients, but also through new path to grow and scale Assurant's businesses.\nWithin Connected Living, innovation was a significant theme this quarter through ongoing enhancements of our mobile service delivery options.\nAs part of the recently finalized multi-year contract extension with T-Mobile, we're expanding the services Assurant provides to continuously improve the customer experience for millions of T-Mobile customers.\nAs of November 1st, Assurant is partnering with T-Mobile to begin the nationwide rollout of in-store device repair services to approximately 500 stores, provided by Assurant's industry certified repair experts.\nIn addition, we have also transitioned all of the legacy Sprint protection subscribers to the new T-Mobile Device protection offering.\nAs a result, this significantly adds to our mobile device count, now at roughly 63 million as of November 1st.\nOverall, the expansion of our service delivery options is critical to sustaining our competitive advantage.\nWe also recently signed a multi-year renewal with Spectrum Mobile, continuing to provide a comprehensive and Pocket Geek mobile [Technical Issues] on-device diagnostic tool.\nWith the renewal, we will also be expanding the offering to include Pocket Geek privacy, which enables consumers to better protect and manage their personal information online through various features.\nThis is another example of how we're able to grow by adding services and capabilities to existing clients.\nIn addition, the mobile business continues to see strong attachment rates given the increased reliance on mobile devices as well as rising device prices.\nOur fee-driven trade-in and upgrade business, including the previous acquisitions of Hyla and Alegre have performed extraordinarily well already this year as we enter the early innings of the 5G upgrade cycle.\nIn fact, almost a year after the transaction of Hyla closed, I'm happy to report the acquisition has performed better than expected, ahead of the low-teens forward EBITDA the acquisition was valued on.\nWith the growing availability and popularity of 5G-enabled smartphones, we expect to see our 30 plus trade-in and upgrade programs continue to grow.\nOur progress is demonstrated through our ability to manage large scale programs with superior technology.\nThis is further supported by increasing our attach rates for trade-in programs as our clients promotional efforts encourage consumers to upgrade.\nOverall, we have processed nearly 18 million devices so far this year, reducing e-waste and increasing digital access with high quality, affordable phones.\nThrough the scale and capabilities of our trade-in and upgrade programs, we benefit from an additional source of profits and improved client economics and customer retention.\nThis quarter, we are pleased to announce that we have signed a multi-year contract extension with AT&T to manage their device trade-in program.\nThis includes providing analytics as well as device collection and processing for all of their sales channels, including retail, B2B, dealer and direct to consumer.\nAT&T was the key client added with the Hyla acquisition and we look forward to continuing to do business with them, specifically as we help support the growing adoption of 5-G-enabled devices.\nIn Global Automotive, policies increased by $4 million or 8% year-over-year and production is well above pre-pandemic levels as we continue to take advantage of our scale and talent.\nSo far this year, the business has also the benefited from strong used car growth which tends to earn faster than new car sales.\nThis along with the fact that earnings from the business are recognized over a multi-year period provides good visibility into future performance of the business.\nAs we drive innovation within Auto, we continued the global rollout of EV-1, an electric vehicle and hybrid protection product to North America.\nEV-1 has now been rolled out in seven countries.\nWhile the electric vehicle market is still in its infancy, our EV-1 product will allow Assurant an opportunity to better evaluate customer demand and leverage our learnings to position us well for the expected increase in electric vehicle adoption in the future.\nOur Multifamily Housing business grew policies by 7% year-over-year from growth in our affinity partners as well as our PMC relationships, where we continue the rollout of our innovative cover 360 product.\nIn addition, we have seen other digital investments create opportunities for future growth.\nOur newly designed digital sales portal, which makes it faster and easier for residents to sign up for a policy is driving significantly higher product attachment rates.\nOur new portal has seen an increase in conversion rates versus our legacy website since it was first introduced last year.\nIn summary, our ability to strengthen insurance talent and innovation, supported by critical investments has and should continue to drive momentum for the future.\nAs Alan noted, we are pleased with our third quarter performance as our results reflect strong growth across Global Lifestyle and solid earnings in Global Housing.\nFor the quarter, we reported net operating income per share excluding reportable catastrophes of $2.73, up 5% from the prior year period.\nExcluding cats, net operating income and adjusted EBITDA for the quarter, each increased 4% to $162 million and $262 million, respectively.\nNow let's move to segment results, starting with Global Lifestyle.\nThis segment reported net operating income of $124 million in the third quarter, continued earnings expansion within Connected Livings mobile business.\nIn Global Automotive, earnings increased $8 million or 21% from continued global growth in our U.S. national dealer and third-party administrator channels, including contributions from our AFAS and international OEM channels.\nBetter loss experience in select ancillary products and higher investment income also supported earnings growth in the quarter.\nConnected Living earnings increased by $6 million or 9% year-over-year.\nThe increase was primarily driven by continued mobile subscriber growth in North America and better performance in Asia Pacific, as well as higher trading volumes, led by contributions from our Hyla acquisition and carrier promotions.\nThis quarter, Global Automotive and Connected Living results also included a modest one-time tax benefit that improved earnings.\nFor the quarter, Lifestyle's adjusted EBITDA increased 17% to $177 million.\nThis reflects the segments increased amortization resulting from higher deal related intangibles from more recent transactions in mobile in Global Automotive.\nIT depreciation expense also increased, stemming from higher investments.\nAs we look at revenues, Lifestyle revenues increased by $158 million or 9%.\nThis was driven mainly by continued growth in Connected Living and Global Automotive.\nWithin Connected Living, revenue increased 10% boosted by mobile fee income that was driven by strong trade-in volumes, including contributions from Hyla.\nTrade-in volumes were supported by new phone introductions and carrier promotions from the introduction of new 5G devices.\nHigher revenue from growth in domestic mobile subscribers was offset by declines in run-off mobile programs.\nMobile subscribers were up slightly year-over-year and flat year-to-date as mid-single digit subscriber growth in North America was offset by declines in other geographies mostly due to three factors.\nFirst, the 750,000 subscribers related to a run-off of European banking program previously mentioned, which is not expected to be a significant impact in our profitability.\nSecond, subscriber growth for existing programs moderating in Asia Pacific.\nAnd third, a slower than expected recovery from the pandemic in Latin America.\nIn Global Automotive, revenue increased 8%, reflecting strong prior period sales of vehicle service contracts.\nIndustry auto sales remained elevated in the third quarter and we benefited from this trend as reflected in the year-over-year growth of our net written premium by 12%.\nWe have though seen this trend begin to normalize beginning into the fourth quarter.\nFor the full year, Lifestyle revenues are expected to increase modestly compared to last years $7.3 billion, mainly driven by Global Auto and Connected Living growth.\nFor all of 2021, we still expect Global Lifestyle's net operating income to grow in the high single digits compared to 2020.\nAdjusted EBITDA for the segment is expected to grow double digits year-over-year, which continues to grow at a faster pace in segment net operating income.\nAs previously reported, we began our investment in the [Technical Issues] capability this quarter.\nHowever, due to the timing of the rollout, most of our associated start-up costs will occur in the third quarter.\nThese costs primarily relate to technician hiring and parts sourcing.\nWe do expect these costs to meaningfully impact Connected Livings profitability as we end the year.\nIn addition, we expect our effective tax rate to return to a more normal level, approximately 23%.\nLooking ahead to 2022, we expect earnings expansion to continue, but more likely at more moderated levels as we continue to invest for growth including additional implementation start-up costs for in-store service and repair.\nMoving to Global Housing, net operating income excluding catastrophe losses was $81 million for the third quarter, including the $78 million of pre-announced catastrophe losses mainly from Hurricane Ida, net operating income totaled $3 million.\nExcluding catastrophe losses, earnings decreased $19 million due to anticipated higher non-cat losses, which returned to levels more in line with historical averages.\nAs a reminder, favorable non-CAT losses in 2020 were not representative of historical trends and third quarter 2020 marked the lowest point of last year, mainly driven by loss experience within lender placed and specialty products.\nThe year-over-year earnings decline was nearly all driven by unfavorable non-cat loss experience from several factors.\nThe largest driver which contributed close to half of the increase was from the expected normalization of the non-cat loss ratio.\nThe balance of the decline was split relatively evenly between increased reserves related to our Specialty P&C offerings, primarily in our on-demand sharing economy business as well as higher claims severity.\nClaims severity included moderate impacts from inflationary factors such as higher labor and material costs.\nWhile there is always a lag.\nIf this trend continues, we would expect higher loss cost to be offset by increased rates over time.\nIn Multifamily Housing, underlying growth was offset by increased investments to further strengthen our customer experience, including our digital first capability.\nGlobal Housing revenue decreased slightly year-over-year from lower Specialty P&C revenues as well as a cat reinstatement premium resulting from Hurricane Ida and lower REO volumes in lender placed.\nThis was partially offset by higher average insured values and premium rates in lender placed and growth in Multifamily Housing.\nWe continue to expect Global Housing's net operating income excluding cats to be flat for the full year compared to 2020.\nFor the fourth quarter and into 2022, we would expect non-cat losses to continue to be above 2020, but in line with year-to-date 2021 experience, which is consistent with long-term trends.\nWe also continue to monitor the REO foreclosure moratoriums and any additional extensions that may be announced.\nAt Corporate, the net operating loss was $21 million, an improvement of $4 million compared to the third quarter of 2020.\nThis was driven by two items.\nFirst, lower employee-related expenses and third-party fee.\nAnd second, expense savings associated with reducing our real estate footprint.\nIn the fourth quarter, we do anticipate a higher loss due to the timing of spend.\nFor the full year 2021, we now expect the Corporate net operating loss to be approximately $80 million, driven by favorable year-to-date results mainly from the one-time tax and real estate joint venture benefits in the second quarter.\nThis compares to our previous estimate of $85 million.\nAs we look forward to 2022, we would expect our net operating loss in Corporate to be closer to $90 million, more in line with historical trends.\nTurning to the holding company liquidity, including the net proceeds from the sale of Preneed in August, we ended the third quarter with over $1.3 billion, well above our current minimum target level.\nIn the third quarter, dividends from operating segments totaled $127 million.\nIn addition to our quarterly corporate and interest expenses, we also had outflows from three main items, $323 million of share repurchases, $39 million in common stock dividends and $11 million mainly related to Assurant ventures investment.\nIn addition to completing our 2019 Investor Day objective of returning $1.35 billion to shareholders from 2019 through 2021, we have also completed roughly one-quarter of our objective to return $900 million in Global Preneed sale proceeds through share repurchases.\nFor the year overall, we continue to expect dividends to approximate segment earnings subject to the growth of the businesses, rating agency and regulatory capital requirements and investment portfolio performance.\nI also want to provide a quick update on the Assurant Ventures, our venture capital arm.\nIn the third quarter, three investments in our portfolio went public via SPACs.\nWe are pleased with the results as the three investment exceeded a 7 times multiple on investment capital under their respective SPAC transaction terms.\nThese transactions combined with strong performance in the broader ventures portfolio led to a $75 million after-tax gain flowing through net income in the quarter.\nIn addition to strong returns, these investments also provide key insights into emerging technologies and capabilities within our Connected Consumer businesses.\nIn addition to positioning Assurant for long-term success and growth, he has created an environment of inclusion in community, truly representative of our core values, common sense and common decency.\nAlan, I wish you all the very best in retirement, well deserved.\n",
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"content": "qtrly net operating income, ex.\nreportable catastrophes, per diluted share $2.73.\nqtrly total revenues $2,637.8 million versus $2,376.7 million.\nassurant - sees for 2021, assurant net operating income, ex.\nreportable catastrophes, per diluted share, to increase about 10% to 14% from 2020.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We had an excellent second quarter.\nThe team delivered on all four of our long-term operating priorities to drive shareholder value.\nWe grew through acquisitions, improved our productivity, all while raising our quality and maintaining our unique Gallagher culture.\nFor our combined Brokerage and Risk Management segments, we posted 17% growth in revenue, 8.6% organic growth, but it's over 10% when adjusted for timing, which Doug will spend some time on in a few minutes.\nNet earnings margin expansion of 107 basis points, adjusted EBITDAC margin expansion of 30 basis points, and we completed eight new mergers in the quarter with more than $70 million of estimated annualized revenue.\nMost importantly, our Gallagher culture continues to thrive.\nJust a fantastic quarter on all measures.\nNow before I discuss how each of our businesses performed in more detail, let me comment briefly about the termination of our agreement to purchase certain Willis Towers Watson brokerage operations.\nWe were excited about the opportunity.\nI would have loved to complete the transaction.\nThere are a lot of great people at Willis, and they would have been a great addition to our team.\nBut here's the key point.\nWith or without this, we remain very well positioned to support our clients, compete for new ones and ultimately drive value for all of our stakeholders.\nWe're in the greatest business on earth, our culture is stronger than ever, and I'm excited about our future.\nBack to our quarterly results, starting with our Brokerage segment.\nReported revenue growth was strong at 16%.\nOf that, 6.8% was organic revenue growth, a little better than our June IR Day expectation and closer to 9% adjusted for timing.\nOur net earnings margin moved higher by 53 basis points, and our adjusted EBITDAC margin expanded by 23 basis points, highlighting our continued expense discipline.\nAnother excellent quarter from the Brokerage team.\nLet me walk you around the world and break down our organization by geography, starting with our PC operations.\nFirst, our domestic retail operations were very strong with more than 8% organic.\nNew business was excellent, nicely above second quarter 2020 levels.\nRisk Placement Services, our domestic wholesale operations, grew 12%.\nThis includes nearly 25% organic in open Brokerage and 6% organic in our MGA programs and binding businesses.\nNew business and retention were both better than 2020 levels.\nOutside the U.S., our U.K. operations posted more than 9% organic.\nSpecialty was 10% and retail was excellent at 9%, bolstered by new business production.\nCanada was up an outstanding 16%, fueled by rate and exposure growth on top of solid new business and retention.\nAnd finally, Australia and New Zealand combined grew nearly 4%, benefiting from good new business and stable retention.\nMoving to our employee benefit brokerage and consulting business.\nSecond quarter organic was up about 4%, which is also ahead of our June IR Day commentary and another sequential step-up over first quarter 2021 and the second half of 2020.\nAs business activity improves, we're seeing more favorable growth in our core health and welfare, fee-for-service and retirement consulting businesses, which is encouraging -- it's an encouraging sign for the second half of the year.\nSo when I combine PC at 9-plus percent and benefits around 4%, total Brokerage segment organic was pushing 9% but with timing reported 6.8%.\nEither way, another really strong performance.\nNext, I'd like to make a few comments on the PC market.\nGlobal PC rates remain firm overall, and at the same time, we are seeing increased economic activity across our client base.\nCustomers are adding coverages and exposures to their existing policies, and monthly positive policy endorsements are trending higher than pre-pandemic levels.\nAnd overall, second quarter renewal premium increases were similar with the first quarter.\nMoving around the world.\nU.S. retail was up about 8%, including double-digit increases in professional liability.\nCanada was up 9%, driven by increases in professional liability and package.\nNew Zealand was flat and Australia up 6%.\nMoving to the U.K., retail was up about 8%, with most classes of specialty business over 10%.\nAnd finally, within RPS, wholesale open brokerage was up 12%, while our binding operations were up 4%.\nSo clearly, premiums are still increasing across nearly all geographies.\nLooking forward, it feels that the current renewal environment will persist for some time.\nCarriers that cut back capacity in some of the less profitable lines of business like property, professional liability, umbrella and cyber have yet to budge on terms or conditions or haven't reverted back to offering more limits or lower attachment points.\nAnd elevated natural catastrophes, continued impacts of the pandemic, social inflation and low investment returns are all continuing to pressure rates.\nAnd on top of this, the potential for increased claim frequency as economies recover and carriers are making a strong case, the rate increases are likely to persist for some time.\nWe, too, see the global PC environment remaining difficult for our clients, and that is likely to remain for the foreseeable future.\nMoving to our benefits business.\nOur customer base is returning toward pre-pandemic levels a little more slowly than headline-grabbing sectors like retail, leisure and hospitality.\nSo we are expecting even better organic in the second half.\nFurther, our HR consulting units are very well positioned to deliver solutions as clients and prospects pivot away from controlling costs to growing their businesses and attracting, motivating and retaining their workforce in 2021 and beyond.\nSo as I sit here today, I think second half Brokerage organic will be better than the first half and could take full year 2020 organic toward 8%.\nThat would be a terrific step-up from the 3.2% organic we reported in 2020.\nMoving on to mergers and acquisitions.\nWe completed seven Brokerage and one Risk Management merger during the second quarter, representing over $70 million of estimated annualized revenues.\nAs I look at our tuck-in merger and acquisition pipeline, we have more than 40 term sheets signed or being prepared, representing around $300 million of annualized revenues.\nOur platform continues to attract entrepreneurial owners looking to leverage our data, expertise, tools and market relationships to grow their businesses.\nAnd we expect that our U.S. pipeline will grow in the second half of the year given the potential changes in capital gains taxes.\nSo 2021 is setting up to be another successful year for our merger strategy.\nNext, I'd like to move to our Risk Management segment, Gallagher Bassett.\nSecond quarter organic growth was pushing 20%, better than our June IR Day expectations of mid-teens, and our adjusted EBITDAC margin exceeded 19%.\nWe benefited from a revenue lift related to our 2020 new business wins, increased new arising claims within core workers' compensation and an easier pandemic-era comparison.\nLooking forward, the rebound in employment, economic activity and our solid new business should lead to third and fourth quarter organic nicely in double digits.\nFor the year, we expect organic to be just over 10% and our EBITDAC margin to remain above 19%.\nSo what an exciting time to be part of Gallagher.\nAnd that's because of our 35,000-plus employees and our unique Gallagher culture.\nIt's our culture that keeps us together during the depths of the pandemic.\nAnd as we open offices around the globe yet preserving the flexibility we mastered over the last 16 months, I'm hearing the excitement about being back together.\nUltimately, it's our employees that wake up every day and decide to do things the right way, the Gallagher way.\nThat's what makes us different.\nIt makes us special as a franchise.\nIt attracts the very best people and merger partners and ultimately clients.\nI believe our culture has never been stronger.\nSo with two quarters in the books, 2021 is shaping up to be an excellent year.\nAs Pat said, an excellent quarter and first half of the year.\nToday, I'll spend a little extra time on organic and then give you our current thinking on expenses and margins.\nThen I'll walk you through some of the items on our CFO commentary document, and I'll finish up with some comments on cash, liquidity and capital management.\nHeadline all-in organic of 6.8%, excellent on its own, but as Pat said, really running closer to 9%.\nThere's two reasons for that.\nFirst, recall that we had some favorable timing in our first quarter related to contingent commissions that caused a little unfavorable timing here in the second quarter.\nCall that 70 basis points.\nSecond, also recall that we took our 606 revenue accounting adjustment in the first quarter of 2020.\nWe then adjusted that in the second quarter of 2020.\nSo that creates a more difficult compare this year second quarter.\nCall that about 150 basis points.\nThese two items combined for about 220 basis points of a headwind here in the second quarter.\nWe don't expect similar headwinds in the second half.\nLet's go to Page six to the Brokerage adjusted EBITDAC table.\nYou'll see that we expanded our EBITDAC margin by 23 basis points here in the second quarter.\nConsidering last year's second quarter was in the depth of the pandemic and our Brokerage segment saved $60 million in that quarter, to post any expansion at all this quarter is terrific work by the team.\nIt shows we are indeed holding a lot of our savings.\nSo the natural question is, when you levelize for the $60 million of pandemic savings last year's second quarter and about $15 million of costs that came back this second quarter, what was the underlying margin expansion?\nAnswer to that is about 125 basis points, which on 6.8% organic feels about right.\nThat $15 million mostly relates to higher utilization of our self-insurance medical plans, a modest tick-up in T&E expenses and incentive comp.\nSo we held $45 million of cost savings this quarter, and that's really terrific.\nLooking forward, we continue to think we can hold a lot of our pandemic period savings, perhaps more than half.\nBut naturally, some of those costs will come back.\nAs of now, we think about $20 million of cost returned in the third quarter and $30 million return in the fourth quarter.\nBoth of those numbers are relative to last year's same quarters.\nSo again, the natural question might be, what organic do you need to post third and fourth quarter to overcome those expenses and still have margin expansion?\nMath would say about 7%, which is really the real story.\nRecall at the beginning of the year, after expanding margins 420 basis points in 2020, we were looking at just holding margins flat.\nNow we're looking at a full year margin expansion story.\nSo even with the return of the expenses and again, let's say, assuming for illustration a full year organic of 7%, math would show another full point of margin expansion in 2021.\nThat would mean our cumulative 2-year margin expansion would be well over 500 basis points.\nThat really highlights the improvements in productivity that are now ingrained in how we do business and how we operate.\nWhat a great story.\nLet's move on to the Risk Management segment EBITDAC table on Page 7.\nAdjusted EBITDAC margin of 19.7% in the quarter is fantastic.\nAnd we continue to expect the team to deliver margins above 19% for the full year, showing that our Risk Management segment can also hold some of the pandemic-induced cost savings, meaning that the 2020 step-up in margin can be sustained in 2021.\nLet's move now to Page four of the CFO commentary document that we posted on our website.\nComparing second quarter results in the blue section to our June IR Day estimate in the gray section, interest and banking is in line.\nAccordingly, we are increasing our full year net earnings range to $75 million to $85 million on the back of the second quarter upside.\nYou'll also notice two non-GAAP adjustments.\nOne related to the costs associated with the terminated Willis Towers Watson acquisition, and the other is a onetime deferred tax revaluation charge related to the statutory increase in the U.K.'s 2023 corporate tax rate.\nWhen you control for those two items, it shows that adjusted M&A and corporate lines were both pretty close to our June 17th estimates.\nLooking ahead to the third quarter, and that's in the pinkish section, you'll see non-GAAP after-tax adjustment for $12 million to $14 million.\nThis charge is mostly related to redeeming $650 million of debt.\nThat's the 10-year senior notes we issued in mid-May.\nThis should also lead to lower third and fourth quarter adjusted interest and banking expense, savings maybe of $2 million to $3 million after tax each quarter.\nIf you turn now to Page five of the CFO commentary, go to the peach-colored section.\nJust another reminder of what we've been discussing in these calls and during our IR Days for the last couple of years.\n2021 is the last year our clean energy investments will show GAAP P&L earnings.\nRather, beginning in 2022, we will show substantial cash flows through our cash flow statement, call it $125 million to $150 million a year for, say, six to seven years.\nI know I've highlighted this a lot, but I just want to make sure you consider this as you build your 2022 models and beyond.\nSo next, let's go to the balance sheet on Page 14, the top line cash.\nAt June 30, cash on hand was $3.2 billion, and we have no outstanding borrowings on our credit facility.\nWe'll use that first to redeem the $650 million of debt I just discussed.\nAnd also today, we announced a $1.5 billion share repurchase program.\nThat would leave us with about $1 billion of cash.\nThen add to that about $650 million of net cash generation in the second half.\nThat's after dividends, capex, interest, taxes, et cetera.\nAnd we would also have another $600 million to $700 million of borrowing capacity.\nMeans we have upwards of $2.5 billion for M&A.\nWhen I look at the pipeline and if a capital gains tax rate change gets momentum, I think we'll have plenty of opportunities to put that capital to work at really fair multiples.\nThose are my comments, an excellent quarter, an excellent first half, a bright outlook for the second half and a really terrific cash position.\nBack to you, Pat.\nLaura, I think we can take some questions now.\n",
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"content": "arthur j gallagher authorized repurchase of up to $1.5 billion of common stock.\nauthorized repurchase of up to $1.5 billion of common stock under a new plan.\narthur j gallagher - if economic conditions continue to improve, may see favorable revenue benefits in brokerage, risk management segments in q3, q4.\narthur j gallagher - if economic conditions continue to improve, may see favorable revenue benefits in clean energy investments in q3, q4.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: My name is Theresa Wang.\nI'm a summer intern in our finance department.\nYou may ask further questions by reinserting yourself into the queue and we will answer as time permits.\nAs you can see from this quarter's results, several of the trends that we have discussed on past calls are now showing up in our earnings performance.\nSo today, I'll spend a few minutes discussing how these trends are positively impacting our business and then we'll delve into the details.\nFirst of all, retailer demand continues to accelerate and it continues to broaden.\nAs we've noticed noted on past calls, while leasing activity was initially weighted to the necessity and Suburban portions of our portfolio, we're now seeing a meaningful pivot from lockdown-oriented necessities to more discretionary spending.\nWe're also seeing retailers once again focusing on the key street locations in the major markets that we're active, and while we're seeing solid performance throughout our portfolio, one of the key differentiators of our company is our ownership of street retail in key gateway markets, a differentiator that certainly cause legitimate concern during COVID.\nSo, let me spend a few minutes on the street retail segment of our portfolio.\nAs you know, roughly 40% of our Core Portfolio NOI consists of street retail and about half of that is in the highest density corridors of the major gateway markets.\nDuring the early days of COVID, this half of our Street retail was hardest hit.\nWhether it was Soho in New York, the Gold Coast in Chicago and Street in Georgetown, retailers were facing an existential crisis of unknown duration.\nAnd that's understandably, in the early days of the lockdown, it was the other half of our street retail in the lower density markets such as Greenwich Avenue in Connecticut, our Armitage Avenue in Chicago as well as other necessity and Suburban components of our portfolio that had the most retailer activity.\nAnd while this lower density component continues to perform well, we are seeing a shift in attention by our retailers that to the higher density corridors, and we're seeing this much sooner than we expected.\nIn the luxury segment for example, many retailers are not only staying in their flat locations, but they are expanding their footprints especially in key must have markets.\nThis is evidenced by our second-quarter lease with wire sales at our Gold Coast location at Rush and Walton in Chicago, where they are expanding their existing store by over 50% and they entered into a new 10-year lease.\nAcross the street from us, yours is expanding their space as well, providing further evidence of this sub-markets rebound from 12-months ago.\nAnd this is certainly not just a Gold Coast phenomenon.\nThis trend is playing out and so how as well as other key markets and it's not just luxury retailers.\nBridge an aspirational retailers are also beginning to show up as well.\nFor example, in Melrose Place in Los Angeles, after the end of the quarter, we extended a lease with one of our retailers there for another five years at a double-digit lease spread showing the strength of this corridor and retailer confidence in Los Angeles.\nNow let me clear, retailers are still being selective on which markets they are choosing to expand into, and it is still a tenants market.\nBut what recently felt like a decade's worth of vacancy is quickly being absorbed and while retailers and landlords are climbing out of several years of headwinds, headwinds that predated COVID.\nTheir recovery is encouraging with vacancies being leased up and COVID discounts are heavily structured leases quickly being replaced with real deals that are approaching or in some cases exceeding pre-COVID rents.\nThat along with luxury retailers, we're seeing the digitally native and other up and coming direct to consumer retailers stepping up.\nRetailers influence seems to go far beyond their physical footprint.\nOnly a few years ago, these retailers debated the need for physical stores.\nThat debate is over.\nWhether it's Warby Parker or Allbirds, the best in class digital retailers are seeing the significant benefit of physical stores.\nFor instance, on M. Street in Georgetown last quarter, we added digitally native retailer ever linked to our portfolio.\nAnd this is encouraging because Georgetown is still in the early stages of reopening and the fact that tenants such as Albertsons, Ball Mason, my family's favorite Levain bakery are arriving on M. Street.\nAll of this is further evident of the support for this corridors.\nAnd it's not just retailers hoping to capture a future rebound tenant sales performance, is already confirming the recovery.\nFor several retailers in our portfolio or in our corridors, they are beginning to post sales performance that is already comping positive to pre-COVID sales.\nAnd, this is before the return of international tourism and before a full reopening.\nEven in markets that have been slow to reopen such as San Francisco despite all of the headlines, we're beginning to see positive activity.\nAnd as these key streets continue to activate, we are entering into what is setting up to be a nice multi-year rebound.\nNot only are rent significantly below prior peak, but it appears clear now that retailers are committed to connecting directly with our customer both digitally, but also through these important stores.\nSo whether it's LVMH or Warby Parker, we are seeing the increased recognition of the importance of these locations in an omnichannel world.\nAs John will discuss, even before taking into account, anticipated additional market rent growth.\nWe should be able to drive above trend NOI growth at higher levels for the next several years.\nFor instance in Soho, notwithstanding the huge gut punch over the past 18-months.\nWe forecast our Soho portfolio NOI to nearly double over the next few years.\nAnd then, assuming that this rebound continues, the growth could be even better in the street retail component of our portfolio, where we have more opportunities to mark to market our leases than in our suburban portion of our portfolio since fair market value resets are much more common in our street portfolio than in our suburban.\nThen from a capital markets and investment perspective, while there has been less actionable distress than one might have thought in the early days of the crisis, the interesting and actionable deal flow is increasing.\nIn terms of our Fund V investing as Amy will discuss, we are seeing a nice increase in acquisition opportunities and this is due to the fact that in the private markets, retail real estate still remains somewhat out of favor.\nNow, we expect that this will shift over time given that in the debt markets borrowing cost and debt proceeds have returned to pre-COVID rates and levels and in the public markets we have seen significant compression and implied cap rates over the past year, but for a variety of reasons.\nIt may take some time for the private markets to catch up and in the interim, we will continue to deploy capital opportunistically.\nSo with respect to Fund V, we're continuing to selectively buy out of favor properties with unleveraged yields of about 8% than lever them two to one with borrowing costs well below 4% and clip a mid-teens current cash flow.\nThat it doesn't ignore the fact that the United States is over-retail.\nFor that, achieving real net effective rental growth is going to take hard work.\nIt's going to take some work.\nBut these acquisitions don't require significant growth, they just require stability and if we see cap rate compression, commensurate with the public markets, which certainly seems likely over the next couple of years, the opportunity that asymmetrical upside feels pretty compelling.\nThen, with respect to our Core Portfolio investments, our acquisition pipeline is also heating up.\nAs you know, our focus here has been to selectively acquire assets in the highest barrier entry markets where we can achieve superior long-term growth.\nObviously, COVID and related issues were a real gut punch for many of the Carter's we're active in.\nFirst, rents in many key streets that we're active in are at a cyclical low point.\nSecond, many of the tenants we do business with have now successfully navigated the so-called retail apocalypse and are in a much stronger position to succeed in an omnichannel world.\nAnd third and finally, the consumer is in very healthy shape and returning to discretionary spending.\nGiven the amount of disruption, we have seen in the major markets, it's understandable that deal flow initially slowed, but sellers are beginning to return.\nAnd given the roller coaster ride, they went through.\nWe are seeing sellers being realistic on rental growth and other assumption.\nSo, while it is still a bit early based on the improving deal flow we are currently involved with, and what we are seeing in the pipeline, we expect to be able to require best-in-class retail properties in the key high barrier to entry corridors where retailers are going to continue to cluster.\nAnd while in the second quarter, we began to put some dollars to work accretively.\nWe are confident to that as meaningful buying opportunities arise, we will be in a position to capitalize.\nAnd while our strong embedded internal growth, certainly means we can afford to be disciplined and we can afford to be patient.\nAre relatively small size means that every $100 million of acquisitions as about 1% to our earnings base.\nSo to conclude, we are pleased to see our quarterly results reflect the rebound in leasing and operating trends.\nIt is also encouraging to see retailer stepping up again for the unique must have locations that dominate our portfolio.\nAnd then most importantly, it is exciting to think about the potential opportunities in front of us, especially for management teams like ours with access to multiple types of capital and a proven track record of deploying it.\nI'll start off with a discussion of our second quarter results followed by an update on our Core NOI growth expectations and then closing with our balance sheet.\nStarting with the quarter, FFO came in above our expectations at $0.30 a share, and this was driven by a combination of 2 items.\nFirst, rent commencement on new street leases, including in Chicago with Veronica Beard on Rush and Walton along with J. Crew and Lincoln Park and in New York City with Watches of Switzerland and Soho and consistent with what we had observed last quarter, we are continuing to see leases commence earlier than we had initially anticipated as retailers expedite their store openings in an effort in an effort to capture the extraordinary consumer demand.\nAnd secondly, we are continuing to see significant improvements in our credit reserves.\nThe improvements this quarter was driven by increased cash collections.\nWe collected 96% of our pre-COVID rents during the second quarter and saw continued consistency within our Street Urban and Suburban portfolios.\nAnd that a 96% cash collection rate, our quarterly reserve should trend in the $2 million range or $0.02 or $0.03 a share.\nAdditionally, during the second quarter, we recognized a one-time benefit of approximately $0.02 from cash collections on past due rents.\nThe majority of this benefit came from our German theater tenants that represent approximately 4% of our core ABR.\nAs outlined in our release, given the continued growth and conversion of our pipeline into executed leases along with a significantly improved outlook on our operations, we have once again raised our full-year FFO guidance with an updated expectation of $5 to $14 and this represents a 7% increase at the low end of our original guidance.\nAnd in terms of our FFO outlook for the second half of the year, we are anticipating that our quarterly FFO should trend in the 25% to 27%.\nAnd this is before any possible benefits from cash basis tenants or the sale of Albertsons shares.\nAs it relates to Albertsons specifically, we have revised our 2021 guidance to reflect an updated range of zero to $7 million or $0.00 to $0.08 a share for potential share sales.\nAnd as a reminder, irrespective as to when the shares are actually sold, given that our cost basis in our Albertsons stock is zero.\nIt's simply a question of when, not if that this upside shows up in our earnings.\nUsing today's share price, we have over $20 million of profit representing am excess of $0.20 a share of FFO.\nIn terms of timing, while a share sale is still possible this year, that decision with our partners is based upon a variety of factors.\nAnd for purposes of modeling 2021 earnings, it may be prudent to push any realized gains into next year.\nSo not only are we incredibly pleased with the performance of our portfolio this quarter, we are also increasingly optimistic about the much more impactful Core NOI growth that we believe is still in front of us.\nThis growth is being driven by the recovery in our street and urban portfolio and if our business continues to perform in line with our expectations, this should provide us with meaningful multi-year internal growth, which in summary has us growing our Core NOI between 5% to 10% annually through 2024 with an expectation of more than $25 million of incremental NOI over 2020 that we believe gets us to $150 million in 2024.\nSo, while it's premature to provide multi-year FFO guidance at this point, given the leasing progress we have made to date, and the acceleration of recovery within our portfolio, not only are we anticipating meaningful FFO growth in 2022, but we are well positioned for strong FFO growth for the next several years.\nAnd that's even before we layer in the impact of any accretive redevelopments, external growth or the profitable transactions that we anticipate should continue to rise from our Fund business.\nThe three key drivers of this growth include first, profitable lease up of our Core Portfolio.\nSecond, further stabilization of our credit reserves and lastly contractual rent growth.\nNow, I'll provide a bit more granularity on each of these pieces.\nFirst, on the lease-up.\nAs outlined in our release, we have approximately $14 million of pro rata ABR in our core pipeline with more than half or approximately $7.5 million dollars of that already executed.\nAnd to further highlight the recovery that we see playing out within our street in urban markets, 60% of our executed leases have come from our street and urban portfolio with New York City alone representing nearly 40% on our current pipeline.\nIn terms of the pipeline itself, you may recall when we initially started discussing it in the second half of last year, it stood at $6 million.\nSo with the $7.5 million of leases that we have signed to date, not only have we signed 125% of our original pipeline, but we have also more than doubled in a short period of time.\nAnd this is providing us with an increased confidence on both our ability to successfully execute profitable deals and equally important, the strong and increasing demand for our prime street and urban locations.\nAnd these leases that have been executed are starting to meaningfully show up in our metrics.\nThe spread between our physical and leased occupancy grew over 100 basis points during the quarter to 260 basis points with our New York metro portfolio leading the way with a pro rata physical to lease spread of approximately 700 basis points at June 30.\nThe $14 million pipeline represents our pro rata share of ABR and is comprised of over 400,000 square feet of space with approximately 70% of the $14 million being incremental to our 2020 NOI.\nIn terms of the timing as to when we expect that our pipeline will impact earnings, we anticipate that about 2 million this will show up in 2021 as compared to our initial expectation of $800,000 with an incremental $6 to $8 million in 2022 and the balance coming in during 2022.\nThe second drive of our NOI growth involves our expectation of ongoing stabilization of our credit reserves.\nAs I mentioned earlier, at a 96% cash collection rate, this translates into quarterly reserves in the $2 million range or $8 million when annualized equating to $0.09 of FFO.\nWe anticipate that of the $8 million in annualized reserves that approximately 75% or $6 million when annualized will ultimately revert back to full rents with the remaining 25% or $2 million annualized ultimately not making it to the other side, providing our leasing team with the opportunity to profitably retanating space into what we are currently experiencing as a very robust leasing environment.\nAnd the last piece of our growth comes from contractual rent growth.\nDriven by the higher contractual rent steps built into our street leases, this blends to about 2% a year across our portfolio and contributes approximately $3 million of incremental annual NOI.\nAs a reminder, given the impact of straight-lining rents, contractual growth doesn't increase our FFO.\nBut nonetheless, is an important driver of our NOI and ultimately NAV growth.\nAs an update on near-term expirations, consistent with the tenant rollover assumptions that we provided on our last call, our NOI forecast continues to assume that we get back approximately $9 million of ABR at various points over the next 18 months from our remaining 2021 and 2022 these expirations.\nThis $9 million includes approximately $4 million of ex of ABR expiring within the next six months from two tenants located in some of our best locations and we have meaningful traction to profitably retenant these locations with a portion of the space already reflected in our pipeline.\nNow, moving onto our balance sheet.\nDuring the second quarter, we successfully closed on a $700 million unsecured credit facility with an accordion feature enabling us to upsize it to $900 million.\nThis new facility significantly increased our liquidity, along with extending our maturities for five additional years and we saw incredible support on this deal.\nThe transaction was oversubscribed with all of our existing banks remaining in the facility and we successfully added four additional banks.\nThe successful execution of this transaction gives us further confidence in our ability to pursue and execute external investment opportunities.\nAdditionally, through improved operations and deleveraging, we have also brought our core debt-to-EBITDA down to the mid-sixes and are on track to get into the fives in 2022 as we begin to see the meaningful NOI growth show up in our results.\nLastly, as outlined in our release, we raised approximately $46 million through our ATM at an average issuance price of 20 to 37 and we were able to accretively redeploy these proceeds to the funding of investments and repayment of debt.\nIn summary, we had a strong quarter, we came in ahead of our expectations and have continued optimism as we look forward in the next several years.\nAnd with the additional liquidity that we generated this past quarter, we are well positioned to pursue an aggressive external growth strategy.\nToday, I'd like to provide a brief update on each of our four active funds, beginning with Fund V. First, we are pleased to report that fund deal flow is kicking in with our fully discretionary capital finally getting the credit it deserves.\nWe currently have approximately $170 million of Fund V acquisitions under contract or under agreements in principle.\nThis includes the $100 million we previously reported as of the first quarter.\nConsistent with Fund V existing investments, this committed pipeline is comprised of higher yielding suburban shopping centers.\nFor stable properties, pricing remains at approximately an 8% unleveraged yield.\nIn fact, private cap rates for these types of suburban shopping centers have remained at this level since at least 2016 when we began leaning into the strategy with Fund IV.\nAt this going in cap rate, we have been able to maintain an approximate 400 basis point spread to our borrowing costs, enabling us to equip a mid-teens leveraged yield on our invested equity.\nMore recently, we are also seeing new acquisition opportunities with some immediate value added releasing, which plays to our strengths as retail operators.\nAt the beginning of the year, we had allocated 60% of Fund-V $520 million of capital commitments.\nIncluding our committed acquisition pipeline, we are now approximately 75% allocated, and we have until August of 2022 to fully deploy the rest of our dry powder.\nDue to our selectivity at acquisition, our existing Fund V assets have navigated the pandemic well with the collections rate that is now in the mid '90s consistent with our Core Portfolio.\nAnd notably, throughout the pandemic, this carefully selected portfolio has delivered a consistent mid-teens leveraged returns.\nOver the life of our investments, we expect to generate most of our return from operating cash flow.\nThat said, there is a tangible opportunity for outsized performance due to cap rate compression.\nAfter all, real estate borrowing costs have returned to their pre-pandemic levels and public market cap rates for retail real estate have also compressed while private market cap rates remain the same.\nAs a result, we believe that signals are pointing to reversion to the mean in the private markets to over the next few years.\nAnd every 50 basis points of cap rate compression would add 250 to 300 basis points to our projected IRRs.\nGiven the amount of capital on the sidelines and recovering retail fundamentals, this is also a good time to opportunistically harvest properties.\nOne area of focus is our grocery anchored properties, which have gotten a pandemic boost and remain in favor in the capital markets.\nTo that end, during the second quarter, we completed the sale of four grocery anchored properties all located in the State of Maine.\nThese were part of Fund IV in Northeast grocery portfolio.\nAt one property, we had recently completed the installation of a new junior anchor and at two others, the supermarket anchors had recently exercised their next five-year options providing enhanced cash flow stability and finance ability for the next buyer and better exit pricing for us.\nFinally, turning to Fund II and City Point, we continue to see positive momentum at this iconic property with shopper traffic and tenant sales both continuing to increase.\nRecall that City Point is located at the epicenter of a development boom in Downtown Brooklyn, which has resulted in the completion of nearly 16,000 new residential units since 2004, and another 13,000 units either under construction or in the development pipeline.\nAmong on New York city neighborhoods, Downtown Brooklyn, now ranks 13th for median home price up nearly 80% year-over-year to 1.4 million.\nThis should all in order to the benefit of our mixed-use project.\nOn the City point leasing front, we've seen strong interest in the former Century 21 space from both traditional retail users and commercial tenants.\nThere is also strong interest in the concourse level which is anchored by our decal market hall.\nAnd we're pleased to announce that we recently executed a lease with Sphere physical therapy for a 2000 square feet space fronting Gold Street and the New York City development of a new one acre park.\nWith all these positive indicators, this is the perfect time for us to go to market to refinance this project over the next 12 months.\nSo in conclusion, our fund platform remains well positioned with the successful capital allocation strategy and a portfolio of existing investments that continue to march toward stabilization.\n",
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"content": "acadia realty trust quarterly ffo before special items $0.30 per share.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Additionally, transactional activity continues to pick up.\nSo, before I turn over the call to John and Amy to delve into the details of the progress that we made last quarter, I want to reflect on an interesting inflection point that we find ourselves.\nBecause after a couple of years of meaningful headwinds for retail real estate.\nFirst, from the so-called retail apocalypse and then from the impact of COVID, we're now at a point where not only are we seeing solid leasing fundamentals that should provide strong internal growth for the next several years, but the other drivers of our business, most notably our external growth engines, both from our on-balance sheet investing as well as through our fund platform are in a position to add important growth as well.\nIn short, we have the potential to be hitting on all cylinders in a way that we have not seen in a very long time.\nSo, let me walk through the key drivers of this trajectory.\nFirst, there's internal growth.\nNOI growth is poised to be well above trend for the next several years.\nNow granted, some of this growth is from the rebound from the short-term setbacks from COVID.\nBut we positioned ourselves to not just recapture past income, but then to grow nicely past that benchmark.\nThis growth is going to come from a few key components.\nFirst, we anticipate taking our occupancy back to approximately 95% from the current level of approximately 90%.\nNow occupancy for us is a very rough and very imprecise proxy but, however you choose to measure it, the growth associated with the restabilization is going to be impactful and we're seeing this take hold.\nYear-to-date, we have signed over $11 million of leases and considering our initial pipeline with $6.5 million this is a pretty good start.\nAnd the growth is coming across the board but notably, it is showing up in our key streets that were boarded up and left for dead a year ago and now they're coming back.\nFor example, we recently signed a lease with FILA sportswear for the corner of Prince and Broadway in SoHo and notwithstanding the dire predictions as to the future of SoHo.\nThe economics of this lease provided a positive spread and was largely consistent with our pre-COVID expectations.\nThen the next driver of growth is coming from the contractual growth and lease roll in our portfolio.\nNow trees never grow to the sky and not all leases roll up, but the green shoots that we are seeing in SoHo are beginning to take hold in other markets as well.\nWe recently achieved positive lease spreads in Melrose Place in Los Angeles and in Armitage Avenue in Chicago, both at rents that were in excess of our pre-COVID expectations.\nAnd importantly, tenant sales, as John will highlight, are supporting this trend.\nMany retailers are already comping positive to pre-COVID sales in many of the corridors that we're active in.\nNow this fact is so different from what most of us expected during the early days of the pandemic.\nIn fact, if COVID has commonly been viewed as an accelerant of trends, what it has really been for retail real estate is a cleansing and a validating mechanism.\nCleansing in that the retailers who have made it through the storm seem to be in a much better position in terms of balance sheet strength and in terms of productivity and then validating in that the importance of the physical store has clearly been validated in the post pandemic omnichannel world that we are in.\nAnd this is true not only for the Target and Walmarts of the world who validated the importance of the store in their omnichannel success.\nBut it's also true for luxury and bridge apparel, where you are seeing tenants, recognizing the power of their stores as critical in connecting directly with their customer, especially in the must-have streets where we own.\nAnd it's also true for the digitally native retailers, where our tenants like Warby Parker and Alberts are making it clear that the physical store is essential to their growth and essential to their profitability.\nAnd keep in mind, as recently as a year ago, many wondered whether these retailers would even want stores on these streets.\nAnd while everyone was wondering, the retailers doubled down.\nThen along with our growth from lease-up, we will add additional internal growth from a series of redevelopments that are actionable and profitable.\nIt's a bit early to update our progress on this front right now, but we should have some worthwhile updates by our next quarterly call.\nThen complementing our internal growth are the multiple components of our external growth engine.\nFirstly, we are doing on-balance sheet investing to add to our existing core portfolio accretively.\nDeal flow during the pandemic was quiet as most owners hunkered down, and most lenders were highly accommodative.\nDistressed opportunities were underwhelming in almost every segment of real estate other than stock prices.\nAnd frankly, we did not have a cost of capital that enabled us to be competitive, but sellers are once again emerging.\nAnd as we look around, there are certainly fewer well capitalized and knowledgeable competitors for our areas of focus.\nAnd we're beginning to see a recovery in the debt and equity markets such that we should have a cost of capital to accretively acquire, and it should be a good period to put dollars to work.\nThen along with on-balance sheet investing beginning to heat up, our fund platform is in a position to continue to add to our growth.\nWe can add to our fund acquisitions, both similar to Fund V or similar to other successful value-add or opportunistic initiatives that we've done in the past.\nIn terms of Fund V, and as Amy will discuss, we are continuing to buy out of favor [Indecipherable] 10:23 open air retail at substantial discounts to replacement cost with attractive mid-teens yields.\nThese investments have proven stable through COVID and while I think we may have a couple more years of buying these yields at a discount, we're also seeing signs of cap rate compression.\nAnd if and when cap rates do compress we'll have well over $1 billion of retail in Fund V alone, clipping mid-teens yields, while we wait and keep in mind, buying out of favor existing cash flow is just one of the many ways we have created value in our fund platform over the years, whether it's buying retailers with significant embedded real estate value, such as our investment in Albertsons and the rest of our RCP activity or opportunistic acquisitions where we saw significant rent bumps and then monetized opportunistically as was the case in Lincoln Road and Miami or a variety of redevelopments and value-add projects where tenant demand warrants it.\nOur team and our balance sheet are built to do multiples of this volume, and we're starting to see the stars align.\nFinally, keep in mind, at our size, roughly every $100 million of new investments, whether core or fund, adds about 1% to our earnings.\nSo to conclude, as we are climbing out of the horrors of the global pandemic and recognizing that the impact that was felt was especially hard on so many of our assets the rebound is becoming clearer every day.\nAnd it's also becoming clearer that our company, both in size and ability is well positioned for accelerated growth from this recovery.\nThe combination of strong embedded internal growth and the ability to drive external growth, both on balance sheet and then through our funds, should enable us to maximize value in multiple different ways.\nI will start off with a discussion of our third quarter results, followed by an update on our continued progress on the $25 million of anticipated internal core NOI growth and then closing with our balance sheet.\nStarting with the quarter.\nOur third quarter earnings of $0.27 a share exceeded our expectations, landing us in the upper end of the $0.25 to $0.27 range that we had guided toward on our most recent call.\nAnd this was driven by rent commencement on new leases, continuous improvements in our cash collections, along with some accretion from the approximately $140 million of external investments that we completed during the quarter.\nIn terms of near-term FFO expectations, we continue to anticipate $0.25 to $0.27 of quarterly FFO, excluding any potential Albertson sales for the next few quarters.\nIn terms of Albertsons, as I shared on the prior call, although a sale of shares before the end of the year is possible, we continue to believe that it's prudent to assume that the realized gains start showing up in 2022.\nAnd as a reminder, keep in mind that these gains are simply timing.\nSo whether it's next quarter or next year, using Albertson's most recent share price, a sale of our position would result in a gain in excess of $30 million or in excess of $0.30 a share of FFO.\nHowever, I think it's worth drilling into the components.\nAs it actually represents a beat in excess of 10% off of our initial midpoint.\nAs you'll recall, within our initial range of $0.98 to $1.14, we had incorporated $0.05 to $0.13 of core and fund transactional activity, which, as we highlighted, was primarily attributable to the sale of Albertson shares in 2021.\nSo after adjusting for the $0.05 to $0.13 of transactional income, we had guided toward $0.93 to $1.01 for a midpoint of $0.97.\nAnd given our expectation of near-term FFO of $0.25 to $0.27, this gets us in the [Indecipherable] 15:04 106, 108 in range for 2021, and that's without any Albertson shares, which is more than 10% above the midpoint of our initial range as well as 5% to 7% above the high end of our range.\nAnd as I had updated on our progress throughout the year, this beat was largely driven by approved fundamentals within our core business around lease-up and credit improvements and not onetime accounting adjustments related to reserves taken in prior periods.\nIn terms of cash collections, we received over 97% of our core billings during the quarter.\nAnd as a reminder, each 1% increase in collections equates to increased earnings of approximately $500,000 per quarter or $2 million, representing over $0.02 of FFO when annualized.\nWhile we are virtually back to pre-pandemic collection rates, the remaining portion of our uncollected billings is largely coming from the small population of quick service restaurants in our portfolio.\nI now want to spend a moment on what we are seeing on our tenant sales productivity.\nGiven the high-quality inventory we have available to lease, we are closely watching the sales productivity of our new tenants, particularly those recently leased street locations as this educates us not only on the level of future tenant demand, but more importantly, the potential upside to drive rents beyond the $25 million of core internal NOI growth that we are anticipating.\nBoth we and our tenants are incredibly pleased with their performance to date.\nIn fact, Art Street tenants are seeing sales well in excess of their internal projections.\nFor example, some of our recent openings in Chicago and New York Metro are already seeing early results trending in the $2,000 a foot range.\nAnd keeping in mind, this is even before the return of international tourism, back to office and the lingering pandemic concerns.\nNow moving on to our same-store NOI.\nSame-store NOI also came in above our expectations at approximately 7%, and this was driven by improving occupancy and a continued reduction in our credit reserves.\nIt's also worth highlighting that the 7% is a pretty clean number.\nAs we had highlighted in our release, the vast majority of prior period adjustments that were recognized this quarter arose from a property that was not included in our same-store pool.\nAnd as Ken mentioned, we are seeing actionable rental rates returning, and in some instances, actually exceeding pre-COVID rents across our market.\nIn fact, this was evident in our leasing spreads this quarter as we saw a cash increase of approximately 11%, along with a GAAP increase of 19%.\nAnd this was driven by our street leasing during the quarter, including a cash spread in excess of 20% on one of our key street locations on Melrose Place in Los Angeles.\nIt's worth highlighting that this rent substantially exceeded our initial underwriting for this space, which, as a reminder, we closed on our acquisition of Melrose Place just before the onset of COVID in the fourth quarter of 2019.\nAdditionally, as Ken mentioned, we are seeing similar trends on Armitage Avenue in Chicago, with recent trends in excess of 30%, which is also well above our initial underwriting.\nNow it's also worth mentioning the structural differences between our street and suburban leases and why the point in time lease spreads that are disclosed in our quarterly results are often not really comparable when evaluating deal profitability or more importantly, future growth expectations, given that we tend to reset our street leases to market every five years or so as compared to 10 to 15 years or often much longer on a suburban lease.\nCoupled with the fact that street rents contractually increase 3% annually as compared to 1% of suburban lease.\nAnd just to illustrate the difference, if we were to assume that a street lease grows contractually 3% a year and achieves a fairly modest 5% spread every five years.\nIn order for our 10-year suburban lease that has grown at 1% to achieve an identical CAGR, it would need to achieve a spread of approximately 25%.\nI now want to provide an update on the internal core NOI growth that we see playing out over the next few years.\nAnd as a reminder, we anticipate growth of $25 million by year-end 2024, resulting in over $150 million of core NOI.\nAnd as it relates to the short term, we remain on track, if not ahead of our previously announced expectation of achieving our pre-COVID NOI by late 2022 or early 2023.\nAs a reminder, the three key drivers of our approximately $25 million or 20% increase in our core NOI off of our 2020 NOI include: first, net absorption, which is the profitable lease-up of our core portfolio and is offset by anticipated tenant expirations over this period.\nAnd we are anticipating that this generates us $10 million to $15 million of incremental NOI, representing $0.11 to $0.16 of FFO.\nSecond piece is further stabilization of our credit reserves, contributing $5 million to $6 million of incremental NOI or $0.05 to $0.06 of FFO; and lastly, contractual rental growth of $8 million to $10 million.\nIn terms of the most impactful are the $10 million to $15 million of net absorption, I want to provide some insights on how we see it playing out over the next few years.\nGiven the significant volume and profitability of the new leases signed to date and using our anticipated rent commencement dates on these executed leases, this should largely replace the NOI of the previously discussed tenant expirations at 565 Broadway in SoHo and 555 nine Street in San Francisco for the first half of 2022.\nAs previously discussed, the impact of these two expirations, which occurs in October 2021 for 555 nine and January 22 for 565 Broadway is approximately $4 million or roughly $4.6 million of annual NOI when factoring in recoveries.\nAs Ken discussed, we have already profitably leased 565 Broadway several months in advance of the current lease expiration, thus significantly minimizing any downtime with an anticipated rent commencement date in the second half of '22.\nSo when coupled with the remaining portion of our $16 million lease pipeline coming online, this sets us up for solid NOI growth in the $2 million to $3 million range in the second half of 2022, with the balance of that remaining growth coming from positive absorption split fairly evenly between '23 and '24 as the balance of our pipeline kicks in.\nThe second driver of our NOI growth expects our ongoing stabilization of credit reserves.\nAt a 97% cash collection rate, we are continuing to incur charges in the $1.5 to $2 million range or $6 million to $8 million when annualized.\nAssuming the continued momentum of reopening and retailer strength, we are optimistic that the majority of this should largely return in the second half of '22.\nAnd the last piece comes from internal growth of contractual rental increases.\nWe are continuing to see the 3% contractual growth in our street leases.\nSo when blended across our suburban and urban assets, this averages to about 2% a year, contributing approximately $3 million of incremental annual NOI.\nSo given the significant progress our team has made this year and accelerated recovery within our portfolio, we are anticipating meaningful NOI and FFO growth for the next several years, and that's before we layer in the impact of any accretive redevelopments, external growth or the profitable transactions that we anticipate will continue to occur within our fund business.\nNow moving on to our balance sheet.\nWe have not issued any equity since our most recent call.\nAs Ken mentioned, given our size, each $100 million of investments, whether it be core fund, should result in FFO accretion of approximately 1%, and our balance sheet is well positioned to capture this accretion with ample liquidity available in our corporate facilities, along with the cost of capital that we believe enables us to accretively transact on a growing external investment pipeline.\nSo in summary, we had another strong quarter as the recovery continues to play out across our portfolio, and we are feeling increasingly optimistic on our internal growth outlook as we look forward the next several years.\nToday, I'd like to provide a brief update on our fund platform, beginning with Fund V. First, we are pleased to report that fund deal flow is kicking in.\nLike the balance of our Fund V portfolio, these two properties were acquired at a substantial discount to replacement cost.\nIncluding land, our blended cost basis for these two centers is approximately $130 per square foot.\nIn comparison, the cost to construct a new suburban shopping center is approximately $200 to $250 per square foot, and that's excluding land cost.\nAdditionally, both properties rank number one in their respective markets based on foot traffic, consistent with our best game in town acquisition strategy.\nThe resiliency of Fund IV stems from our needle in a haystack approach to acquiring these types of centers.\nDue to our selectivity at acquisition, we've seen a Fund V collections rate that is now in the high 90s, consistent with our core portfolio and a stable mid-teens leverage return, which we're able to achieve given our use of 2/3 leverage in our fund platform.\nEven during the pandemic, our cash-on-cash yields only dipped to approximately 13%.\nLooking ahead, we expect to be back to 15% relatively quickly.\nSimilarly, on an unlevered basis, our 8% yield dipped to approximately 7% during the pandemic and is now on a projected path back to 8%.\nOver the life of our investment, we expect to generate most of our return from operating cash flow.\nThat said, as previously discussed, there is a very tangible opportunity for outsized performance due to cap rate compression and thus property appreciation.\nHere are a couple of indicators we're watching.\nFirst, real estate borrowing costs have returned to their pre pandemic levels in the mid-3% range.\nAdditionally, public market cap rates for the shopping center REITs are approaching a decade low level.\nWhile private market cap rates for the type of product we're targeting have remained flat at approximately 7.5%.\nIn fact, transactional cap rates in the private market are at a historically widespread to underlying borrowing costs.\nAs a result, we believe that signals are pointing to a reversion to the mean in the private markets too over the next few years and when that happens, we will have aggregated a $1 billion portfolio, where every 50 basis points of cap rate compression would add 250 to 300 basis points to our projected IRRs, increasing overall fund profitability and in turn, our GP incentive compensation.\nIn the meantime, we are continuing to clip attractive returns and selectively adding to this portfolio.\nTo date, we've allocated approximately 75% of our Fund V capital commitments, and we have until August of 2022 to deploy the balance.\nGiven the amount of capital on the sidelines and recovering retail fundamentals, this is also a good time to opportunistically harvest properties in our older vintage funds.\nOne area of focus is our grocery-anchored properties, which have gotten a pandemic boost and remain in favor in the capital market.\nLast quarter, as previously discussed, we completed the sale of four grocery-anchored properties in Fund IV.\nLooking ahead, we anticipate that our disposition volume will be focused on this product type.\nFinally, turning to Fund II and City Point.\nWe continue to see positive momentum at this iconic property with shopper traffic and tenant sales both continuing to increase and the recent opening of BASIS Independent and Elementary School in approximately 60,000 square feet in Phase III.\nOn the leasing front, we're pleased to report that last week, we executed a lease with an international retailer for 70% of the space formerly occupied by Century 21.\nWe look forward to sharing more details over the next several weeks, but in the meantime, know that we are excited by this addition, which nicely complements our existing merchandise mix.\nThe new lease replaces nearly all of Century 21's prior rent obligations with 30% of the space still remaining to be leased.\nConstruction is anticipated to commence shortly, and the retailer is expected to open in the second half of 2022.\nWith all these positive indicators, this is an appropriate time for us to go to market to refinance this project over the next several months.\nSo in conclusion, our fund platform remains well positioned with a successful capital allocation strategy and a portfolio of existing investments that continue to march toward stabilization.\n",
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"content": "q3 ffo per share $0.27 excluding items.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Before we delve into the details of the last quarter, I'd like to spend a few minutes on some of the trends we saw last year and what we're seeing looking into 2021 and 2022.\nWhile we're still working through an ongoing health crisis and ensuing economic headwinds, there is clearly light at the end of the tunnel.\nLooking at our collection rate in the fourth quarter, our leasing activity, our discussions with our retailers, it's comforting to see both stability with respect to current operations and then, more importantly, very encouraging green shoots in terms of new leasing activity, in terms of existing retailer performance and our collections as John will discuss.\nCollections throughout our portfolio have stabilized to above 90%.\nInitially, this was driven by the more essential and suburban components of our portfolio, but more recently, the street retail component has begun to restabilize as well.\nAnd while the range of potential outcomes remains very wide, and I suspect focus on monthly collections will continue for another few quarters.\nThere are a few worthwhile trends that are beginning to emerge.\nOne of the more notable trends we saw in the fourth quarter and accelerating to date is that tenants are looking past the pandemic and positioning themselves for the reopening of the economy in the second half of the year.\nRetailers are showing up, and most recently, not just in the suburban portion of our portfolio, but also in the street and urban components.\nIn terms of our current leasing pipeline, which we mentioned on the last call as being approximately $6 million and now it has grown to over $8 million.\nAnd this number is relevant because this pipeline already represents a rebound of about half of the 10% short-term hit to our NOI that we estimated as a result of COVID.\nThis pipeline has rebuilt faster than we had initially expected and has continued to improve over the past month.\nTo date, we have executed $3 million of leases in this pipeline, we are at lease for another $3 million and then the balance is at the letter of intent stage.\nLeasing activity in our pipeline is now weighted fairly proportionate to our portfolio weighting, meaning that while initially the activity was weighted to our suburban and necessity portion of our portfolio, looking forward in our pipeline, our deal flow is now rebalancing, and about 70% is in street and urban.\nNow, given that the street portion of our portfolio represents about 40% of our core portfolio and is a key area of differentiation for us, I think it's worth spending a few minutes on the encouraging rebound we're seeing there.\nAfter a very scary and quiet couple of quarters, retailers are actively touring and going to lease in these markets.\nThe early movers we saw for the street component, they were in the half of our street portfolio located in the less dense markets that were generally quicker to reopen for business.\nFor example, in Greenwich and Westport, Connecticut, in the last few weeks, we have finalized leases in both of those markets.\nRents there are approaching pre-COVID levels.\nBut even more encouraging in terms of street retail trends is the recent activity in the more dense gateway markets.\nWe are finalizing several leases in Manhattan including in Soho, several leases in Chicago including in the Gold Coast.\nAnd here, we're seeing a variety of retailers stepping up in these markets from luxury leaders to up and coming digitally native brands, all preparing for a post COVID economy and using these stores to further differentiate themselves in an omnichannel world as these retailers focus on the shifting channel of distribution.\nOur retailers are looking past the harsh short term realities that we're facing this winter, as well as the oversimplified longer term narrative around retail real estate.\nAnd based on the number of retailers touring, and many of them signing leases, our retailers are making it clearer every day that the key markets in our portfolio will remain long term must have locations.\nNow starting rents compared to pre-COVID rates are going to vary space by space and street by street and they are certainly well off of their 2017 peaks.\nBut we have built our portfolio to avoid some of these peaks and valleys.\nAnd these leasings -- leases will be compelling especially if the long-term rents are consistent with our pre-COVID goals and so far, they are.\nAnd our retailers are telling us that the ratio of rents to their anticipated sales performance looks compelling from their perspective, which is also essential for this recovery.\nIt's still early, but if these trends hold, the street portion of our portfolio will be a key driver of our longer-term growth metrics.\nWe recognize that the significant portion of our portfolio both urban and suburban that is weighted with necessity and value-based tenants like Target and TJ Maxx.\nThat provided us a very important ballast to weather a truly 100 year storm.\nBut it is becoming clearer that the longer-term growth will come from our mission critical locations for a few reasons.\nFirst of all, our releasing potential here is of uniquely high quality locations and we were -- are working off of decades low occupancy level.\nSecond, the contractual rental growth rate in our street portfolio is a 100 basis points to 200 basis points higher than in the other components of our portfolio.\nAnd finally, from an AFFO perspective, since the cost of retenanting in these higher rent markets is substantially less as a percentage of rent, the net effective rent growth will be stronger than in the lower rent portions of our portfolio.\nNow this is not ignoring some of the longer-term trends that are playing out in our industry, the accelerated move to digital commerce, the reality that the U.S. is over retailed in general, and that some formats are facing functional obsolescence.\nNor does ignoring a workforce that's pondering where they might live, how they might work.\nThese are real challenges.\nChallenges that our industry is being forced to adapt to on an accelerated basis.\nBut notwithstanding these challenges, we are seeing signs of recovery and our portfolio is well positioned for that.\nAnd some of this rebound in hindsight, will look obvious.\nFor example, it's important to keep in mind that the consumer in general and especially that segment of the consumer that is shopping at the stores in our portfolio, that consumer is climbing out of this recession in a much different spot than prior recessions.\nNow for that significant portion of the population that could not shift to remote work, that is living paycheck to paycheck or worse, the impact of this crisis is heart-wrenching.\nBut for that portion of the economy that has been able to shift to remote work, that has seen their house values and their stock portfolios rise, for those consumers, their savings rate and disposable income is much stronger than when they were climbing out of the global financial crisis.\nBut to date, spending by this segment has been down as the short-term trend has been on necessities, on essentials, on pajamas, almost irrespective of the financial condition of that specific consumer.\nNot because of fear or belt tightening by the affluent as much as just the realities of the lockdown.\nAnd as we move past this lockdown, our retailers are expecting shifts in consumer spending as well.\nAnd our retailers are seeing not just short term pent-up demand, but longer-term trends and are planning accordingly.\nFrom a capital market's perspective, both the debt markets and the equity markets are slowly beginning to rebuild albeit selectively.\nThe retail real estate industry is still working through the drama around the collection crisis of last spring.\nAnd while that is abating, the aftershocks are still with us in many of the traditional and found metrics that our industry has historically used to evaluate location quality have paused.\nLast spring, for instance, property level collection rates trumped credit quality, and credit quality trumped location quality.\nNow during the darkest days of the crisis, this might have made sense.\nBut longer term, location quality tends to win out.\nAnd while this trend is beginning to resolve, it's going to take time.\nAdditionally, many institutional investors are overweight retail due to their mall holdings, and even investors who are not overweight retail are looking for clarity.\nClarity, as to what the cost to restabilize assets will be, clarity as to when and what level will rents and tenant performance stabilize.\nAnd then finally, what will the longer-term growth rates look like?\nNow, I get that providing this clarity sounds like a tall order; it always does at this point in the cycle.\nAnd then the rebound happens usually, faster than most of us predict.\nIn terms of our investment activity with our stock at a discount to NAV, and our cost of capital being elevated, we don't anticipate acquisitions in our core in the short term.\nIn fact, we'll be opportunistically monetizing assets as we recently did with a freestanding Home Depot in New Jersey, where the net lease retail market is still robust and properties are trading at peak pricing.\nBut we are hopeful that as significant buying opportunities arise, we'll be in a position to capitalize on them.\nGiven that retail is in such disfavor and many folks who previously dabbled in it are gone, there will be less competition.\nAnd our expertise will be in demand and it will be of value.\nAnd while we wait for the public markets to rebalance, fortunately, as Amy will discuss, we have our discretionary fund, where we still have plenty of dry powder and deal flow is finally picking up after a quiet year.\nSo to conclude, we are pleased to see tenants stepping up.\nAnd while it's hard to predict when the capital markets will also respond and kind, when they do, a portfolio like ours dominated by unique must have locations with stability and then strong prospects for growth, we'll once again become compelling.\nAnd management teams like ours, with access to multiple types of capital and a proven track record of deploying it, we'll be well positioned to execute on the opportunities in front of us.\nI know that it felt like at times that the earth stopped spinning around its axis.\nI assure you, it didn't.\nAnd your efforts and your commitment not only helped us get through this treacherous period and survive, but helped us plant the seeds going forward for our ability to thrive as well.\nI will start off by providing an update on our cash collections, along with our fourth quarter results, followed by a discussion of our 2021 guidance and then closing with our balance sheet.\nNow starting with collections.\nIn hindsight, the initial and immediate impact of the pandemic was staggering, with our April 2020 results barely achieving a 50% collection rate.\nBut over the course of the year, we quickly saw improvement, not only with the collections at current rent, but also in past due amounts.\nIn fact, as we look back over the course of the pandemic, we actually ended up collecting over 86% of our billings during the three quarters in 2020 and over 90% when we looked at the third and fourth quarter alone.\nAnd as that we outlined in our release, we are now consistently collecting in excess of 90% of our rents.\nAnd as we experienced throughout the pandemic, our collection percentages remain consistent throughout our street, urban and suburban locations, given the relatively comparable credit that exists across our portfolio.\nAs I discussed last quarter, our balance sheet continues to reflect our collection efforts.\nNot only did we see our net tenant receivables decline from the prior quarter, in fact they're actually even lower than they were as compared to the fourth quarter 2019.\nIn terms of tenant deferral agreements, we have approximately $3 million on our books at December 31st, and as our approach was to largely focus our deferral efforts on credit tenants, we remain on track for full repayment in 2021.\nMoving on to quarterly earnings.\nOur FFO as adjusted for special items was $0.24 a share for the fourth quarter.\nWe anticipate that our quarterly FFO prior to any transactional items should remain around the current level for the next few quarters, give or take a few pennies in other direction as we navigate through the pandemic.\nAs we highlighted in our release, we have provided our 2021 guidance with a range of $0.98 to $1.14 of FFO before special Items.\nNow, we continue to expect ongoing variable in our results for at least the first half of 2021.\nWe've not attempted to predict the impact of this within our guidance, but as we've done throughout the pandemic, we will continue to point out any significant items in our quarterly results and will update our expectations accordingly.\nAdditionally, although we didn't include any specific NOI assumptions, I want to provide a bit more color as to how we're thinking about it.\nConsistent with what we experienced the past couple of quarters, we expect that our quarterly pro rata core and fund NOI should trend in the low to mid $30 million range for at least the first half of 2021.\nAnd this is based on our assumption of maintaining a 90% collection rate along with no meaningful tenant expirations or no leases coming online.\nIn terms of overall occupancy, as we've said in the past given the wide range of rents that exist within our portfolio, the percentage change in and of itself is generally not particularly well correlated to the NOI impact.\nOur expectation is that our physical occupancy percentage drops a bit further in Q1 and Q2 primarily to natural lease expirations within our suburban portfolio, before it begins climbing in the second half of the year.\nIt's worth highlighting that our current spread between physical and leased occupancy is in excess of 1% and given the velocity as to which our leasing team is building the pipeline and executing leases, we anticipate this spread, particularly in our street and urban locations to continue to expand throughout the year.\nNow, as we move into the latter half of 2021, we anticipate that our quarterly NOI run rate will increase by approximately $1 million to $3 million.\nAnd this is coming from a combination of reduced credit losses along with the additional NOI from the leasing efforts beginning to come online.\nNow in terms of rent commencement on those new leases.\nOf the $8 million pipeline that Ken mentioned, approximately 40% of this involves -- or $3 million involves executed leases, and we expect about $800,000 of that will show up in the second half of 2021 and the remaining portion coming online at various points throughout 2022.\nAnd as I will touch on shortly, we are becoming cautiously optimistic that this will be the start of what we believe is a meaningful, multi-year NOI growth trajectory.\nIn terms of other assumptions within our fund and transactional side of our business, I want to point out a few things.\nConsistent with our past practice, we will continue to exclude any changes in value from our unsold Albertsons shares.\nRather, we will only include the realized gains if the shares are sold.\nAnd as I mentioned on prior calls, we expect that the remaining Albertsons shares should be sold over the course of the next 18 months to 24 months.\nAs a reminder, we own on a pro rata basis, approximately 1 million shares, which are subject to certain lockup arrangements.\nAnd based upon the current share price, this equates to approximately $16 million of gains as the shares are sold.\nAdditionally, we have guided toward $2 million to $5 million of a temporary reduction in fund fees.\nThis is primarily a result of the pandemic-driven timing delays and our acquisition and leasing activities, and we anticipate these fee should revert back to more normalized levels in 2022.\nI also want to point out and Amy will discuss further, we have approximately 40% remaining in Fund V to deploy.\nAnd if we invest that consistent with the Fund V returns to date, this provides us with an additional $0.05 to $0.06 of incremental FFO on an annual basis.\nNow in terms of the multi-year core NOI growth trajectory.\nNot only does our base case model have us returning to pre-COVID levels by late 2022, early 2023, we are also starting to see the building blocks forming to grow above and beyond that, and we are becoming increasingly optimistic that this shows up within the next few years.\nThe key drivers of that return to pre-COVID, core NOI and the ongoing growth beyond that are expected to come from two primary sources.\nFirst, a reduction in credit losses.\nAnd we estimate that should result in roughly $7 million of annual NOI.\nWe continue to estimate that about half of our non-paying tenants get to the other side of the pandemic and revert back to contractual rents.\nIn terms of timing, as I mentioned in my guidance, we expect to see some improvement beginning in the second half of 2021 with stabilization at some point in '22.\nSecondly, lease up and more specifically, lease up in our street and urban portfolio.\nOur overall core occupancy is at a decade low occupancy of 90% with the street and urban portion at 87% in some of our best locations available.\nIn terms of timing of lease-up, as Ken mentioned, our team has made strong progress in this past several months with building out an $8 million pipeline, the majority of which is coming from street and urban locations.\nSo we certainly have a lot of hard work in front of us.\nWe are encouraged at the leasing activity we have seen and continue to see and the opportunities it presents for meaningful and profitable multi-year NOI growth.\nNow moving onto the balance sheet.\nI want to highlight just a few items along with an update on our dividend.\nWe continue to maintain ample liquidity between our cash on hand and available liquidity under our various facilities with no material near-term core capital needs.\nAnd at a 90% cash collection rate, coupled with a breakeven below 50%, we are continuing to retain cash flow.\nIn terms of the dividend, as we highlighted in our release, we expect to initially reinstate our dividend at $0.15 a share.\nOur initial payout was conservatively determined based upon what we currently expect will be the minimum payout required to maintain recompliance.\nAnd at this level, we should be able to generate meaningful amounts of liquidity and to set ourselves up for strong dividend growth over the next several years, as we execute on the lease-up opportunities within our portfolio.\nIn summary, while we are still in the midst of the pandemic, we are starting to see the green shoots.\nAnd while our earnings will continue to feel the impacts of the pandemic for the next couple of quarters, we are starting 2021 with increased optimism and a positive outlook as we look forward.\nWhile I usually discuss all our funds on these calls, today, I will focus my remarks primarily on Fund V which is our current fund vehicle for new investments.\nWhen we launched this fund in 2016, we were already facing disruption in the retailing industry and knew we were late cycle.\nIn response, we chose to focus this fund on selectively acquiring out of favor suburban shopping centers where most of our return comes from existing cash flow.\nOur thesis was, buy it in 8% cap rate, leverage at two-thirds, in our case at a sub 4% interest rate and then clip a mid-teens coupon.\nWe did not anticipate any material growth in NOI, nor was it required to make an attractive return at an 8% going in yield.\nThis thesis proved to be prudent.\nWhile the events of the past year were certainly unexpected, consistent with our original expectations for our Fund V portfolio, the properties have largely been performing consistent with plan.\nFor example, last year at the property level, we achieved roughly a 14% leveraged yield on invested equity including deferred rents.\nLooking ahead, we expect 2021 and 2022 to achieve similar mid teens returns reflecting continued growth in NOI, but also continued investment of equity as we complete various leasing activities.\nSecond, collections have rebounded since April and May and are now roughly at or above the 90% level.\nThird, our team has built a strong leasing pipeline which has enabled us to maintain our NOI.\nPost COVID outbreak, our Fund V leasing pipeline has 32 leases, aggregating annual base rent or ABR of $5.1 million of which 20 leases and approximately $2.6 million of ABR have already been executed.\nThese metrics provide further evidence of our acquisition selectivity and our overall careful approach to capital allocation.\nI'd also like to share a couple of examples at the property level.\nFirst, since recapturing a 95,000 square foot Kmart at Frederick County Square in Maryland, last February, we have successfully pre-leased 83% of that box to Lidl, Ollie's Bargain Outlet and Harbor Freight Tools together with our partners at DLC management.\nWe are also negotiating a lease to the remaining 17,000 square feet.\nThe blended rents for the four new leases is more than five times Kmart's rent.\nNext, consistent with our core portfolio, we monetized two parcels at Family Center at Riverdale in Utah.\nThe parcels located at the back of the shopping center generated $10 million of gross sale proceeds.\nGiven the strength of the net lease market, we were able to achieve roughly a 200 basis point spread between the allocated cap rate in our underwriting and our actual exit cap rates.\nThis translates into about $2.5 million to $3 million of profit on these two sales alone.\nLooking ahead to new transactional activity, we have approximately $200 million of discretionary equity available to invest, which gives us approximately $600 million of buying power on a leveraged basis.\nWe are still seeing opportunities consistent with Fund V's existing high yield strategy and hope to close several more of these types of deals this year.\nThe good news is, we're seeing an increasing appetite among our vendors to finance these types of properties.\nOn the other end of the risk spectrum, we are also focused on the acquisition of more deep distressed and opportunistic investments ranging from buying distressed debt to restructurings to heavier lifting, value add projects, all areas where we have successfully invested in the past.\nThese opportunities have been for a variety of reasons slower to emerge, but they are clearly coming.\nMost importantly, we will make sure that we are being rewarded appropriately for the risks we're taking.\nGiven the success of Fund V and the long-standing support of our investors, we remain confident that we will have the time we need to put the balance of the fund to work.\nAt the same time, we continue to proactively mine our existing fund portfolio for disposition opportunities, be they smaller transactions, less reliant on debt or large levels of debt or traditional shopping centers with a larger share of essential retailers.\nFinally, on the debt front, during and subsequent to quarter end, we successfully extended approximately $150 million of loans across our fund's platform at a weighted average duration of 17 months.\nIn conclusion, our fund platform remains well positioned with a successful capital allocation strategy and ample dry powder to continue to execute on it.\n",
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"content": "q4 ffo per share $0.24 excluding items.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These results were above our internal expectations for the current quarter and align with our ability to achieve our 2021 full year earnings guidance range of $3 to $3.30 per share.\nIn a few minutes, Steve and Bob will provide additional information on the quarter and insights in the key financial drivers for the remainder of the year.\nFirst, I'd like to highlight ALLETE sustainability and action strategy, a strategy we developed to address the effects of climate change.\nAs many of you know, ALLETE was an early mover to significantly decarbonize its energy sources.\nAnd as a result, we have been recognized as a leader in our nation's transition to a carbon-free energy future.\nAt ALLETE, we're committed to answering our nation's call for clean energy with all of our stakeholders in mind: our customers, our communities, our employees, and our shareholders.\nWe couldn't be more excited about the future as we successfully position our businesses to continue to thrive and grow.\nWe'll begin with an update on our largest business Minnesota Power, which has made significant progress on key initiatives foundational to ALLETE's sustainability and action strategy.\nIn late October, Minnesota Power filed its second ever integrated distribution plan.\nThis IDP details Minnesota Power's five-year investment plan and 10-year outlook for its distribution system.\nThe clean energy transition requires investment in infrastructure and related technology to ensure continued reliability of our essential services.\nOur plan focuses on creating a more resilient grid to ensure the safe and reliable delivery of energy to our customers, and advances new technologies that will provide customers with even more control over their energy use.\nThe comment period will begin in the coming weeks and we expect to receive final approval later next year.\nSimilar to the IDP but with a broader scope, Minnesota Power filed its Integrated Resource Plan with the Minnesota Public Utilities Commission in February of this year.\nThe IRP outlines our plans to further transform Minnesota Power's energy supply to 70% renewable by 2030 and to be coal-free and 80% lower carbon by 2035.\nAll of these plans lay the strong foundation for our vision to provide 100% carbon-free energy to customers by 2050.\nJust last week, the Minnesota Department of Commerce requested a three-month extension on initial IRP comments.\nAnd assuming the MPUC approves, comments will be due March 1st of next year.\nThroughout this process, we will continue our close and transparent engagement with our many stakeholders and we anticipate the commission's decision later in 2022.\nThese important milestones are a key part of Minnesota Power's Energy Forward Initiative, a journey of thoughtful positioning in a transforming energy landscape to ensure safe, reliable, and affordable service to our customers.\nWe know that this service comes at a cost.\nAnd to achieve the best outcomes for all, we've worked closely with our regulators and other stakeholders emphasizing that a constructive rate review environment is critical to our ability to continue our energy transformation.\nThroughout its clean energy transition, Minnesota Power has maintained residential electric rates that are among the lowest in the state of Minnesota.\nOur Minnesota Power team has worked thoughtfully with low-income customer advocates to provide affordability discounts through our care program, energy efficiency support through our Energy Partners program and a special rate for qualified low-income customers that will continue to support our most economically vulnerable customers with some of the lowest monthly bills in the state.\nWhile we advance our vision of a carbon-free energy supply by 2050, we will continue to make affordability a priority.\nAt the same time, a reasonable rate of return is essential to keeping our company financially healthy and ensuring value for our shareholders.\nTo that end, on November 1st, Minnesota Power filed a general rate case supporting an increase in base retail electric rate.\nThis request is important to Minnesota Power's financial health and ability to continue its clean energy transformation while delivering the safe, resilient, and reliable service that powers people's lives and businesses throughout northern northeastern Minnesota.\nMinnesota Power has completed only three rate cases in the past 25 years, with our last completed rate case back in 2016, five years ago.\nThe core of our current request is simple, recovery of prudent costs and investments that support our clean energy transition, a more resilient grid, and our customer's desire to control their energy use.\nOur request also reflects the risk and volatility that come with our unique customer mix and allows the opportunity for our investors to earn a reasonable rate of return.\nSteve will share more details on the rate case filing in a moment.\nIn a creative effort to help customers, Minnesota Power filed a petition with the Minnesota Public Utilities Commission for approval to sell land surrounding several reservoirs on its hydro electric system.\nThe land is not required to maintain operations and has an estimated value of approximately $100 million.\nSo Minnesota power proposed to give the net proceeds from the land sales to our customers either through a credit in a future rate case or through the renewable resources rider to help mitigate future rate increases.\nAt a hearing last month, the MPUC approved the methodology to allow the land sales to begin with certain conditions and required compliance filing.\nWe are pleased to offer this innovative and meaningful rate mitigation for our customers and we appreciate the MPUC's approval.\nThe MPUC also recently approved a new demand response product for Minnesota Power's large industrial customers that facilitate those customers making their capacity available in exchange for fair compensation.\nThe additional capacity these large customers make available can be critical to maximizing the efficiency and ensuring the resiliency of our overall system during extreme weather events such as the polar vortex earlier this year.\nTurning to our second largest business in the ALLETE family, ALLETE Clean Energy with 100% renewable generation is making progress on its multifaceted strategy focused on portfolio optimization, new projects, and plans for expanding service offerings beyond wind to include solar and storage solutions.\nIn addition, the company is executing on plans to optimize its existing PTC safe Harbor turbine inventory and enhancing the returns of its existing projects.\nThe renewables industry continues to grow rapidly, attracting significant capital and investor interest, as well as strong bipartisan policy support in Congress.\nALLETE Clean Energy is well positioned to capitalize on customer's desire to expand renewable energy as the economy decarbonizes and the focus on sustainability accelerates.\nThe ALLETE Clean Energy team is deep into the evaluation of avenues to add renewable capabilities beyond wind and we anticipate sharing more information on our expansion into solar and storage in the coming quarters.\nToday, ALLETE reported third quarter 2021 earnings of $0.53 per share on net income of $27.6 million.\nEarnings in 2020 were $0.78 per share and net income of $40.7 million.\nThe third quarter results for 2021 did exceed our internal expectations by approximately 25%.\nThe third quarter is typically the lowest quarter for consolidated earnings.\nA few details from our business segments.\nALLETE's regulated operations segment, which includes Minnesota Power, superior water light and power, and the company's investment in the American Transmission Company recorded net income of $32.9 million compared to $42.4 million in the third quarter of 2020.\nThird quarter 2021 earnings reflected lower net income at Minnesota Power, primarily due to increased operating and maintenance and property tax expenses.\nIn addition, the recording of income tax expense resulted in a negative impact of approximately $5 million or $0.10 per share for the quarter as compared to 2020.\nThe accounting for income taxes varies quarter to quarter based on an estimated annual effective tax rate.\nResults in 2021 reflected higher kilowatt hours sales to residential commercial and municipal customers and higher industrial sales, partially offset by lower sales to the idled Verso Paper facility.\nALLETE Clean Energy recorded a net loss of $800,000 in the third quarter of 2021, compared to net income of $1.1 million in 2020.\nNet income in 2021 reflected lower wind resources and availability than our internal expectations.\nAs foreshadowed in the second quarter disclosures, ALLETE Clean Energy's wind facilities continued to be impacted by lower wind resources than expected and were 7% below expectations for the quarter.\nThe impact of lower wind resources was partially offset by lower operating costs resulting from ALLETE Clean Energy's expense management efforts.\nKeep in mind that although seasonal wind patterns can vary throughout the year, wind production is typically the lowest in the third quarter and at the highest in the first and fourth quarters of the year.\nOur corp and other businesses, which includes BNI Energy and ALLETE properties recorded a third quarter net loss of $4.5 million in 2021, compared to a net loss of $2.8 million in 2020.\nThe increased net loss is primarily due to higher expenses.\nI'll now turn to our 2021 earnings guidance, which remains unchanged from our original range of $3 to $3.30 per share.\nConsistent with our disclosures in the second quarter, we anticipate our regulated operations segment will be at the higher end of our guidance range of $2.30 to $2.50 per share.\nThis is primarily driven by Minnesota Power's tack and a customer's operating at higher levels than our original projections, and is expected to remain at near full production levels throughout the fourth quarter.\nWe continue to expect that ALLETE Clean Energy and our corporate other businesses to be at the lower end of our guidance range of $0.70 to $0.80 per share.\nThis is primarily due to the negative impacts of the extreme winter weather event in the first quarter of 2021 at the Diamond Spring wind energy energy facility of approximately $0.10 per share and lower than expected wind resources and availability throughout 2021.\nThese negative impacts are partially offset by a 16% after tax gain recorded in the fourth quarter of 2021 for the sale of a portion of the Nemadji Trail Energy Center by South Shore Energy, ALLETE's non-rate regulated Wisconsin subsidiary.\nThe sale, which closed on October 1, 2021 was reflected in our second quarter guidance as we had anticipated the closing of the transaction in the second half of the year.\nAs noted in previous quarters, the timing of income tax expense has negatively impacted year-to-date results compared to internal expectations.\nWe estimate that approximately $3 million or $0.6 per share is expected to reverse in the fourth quarter.\nOn November 1st, Minnesota Power filed the retail rate increase request with the MPUC seeking an increase of $108 million in total additional annual revenue.\nThe filing seeks a return on equity of 10.25% and a 53.81% equity ratio.\nInterim rates of $87 million would begin January 1, 2022, with approval by the MPUC.\nInterim rates are subject to refund.\nAt this time, we anticipate final rates would be implemented sometime in late 2023.\nThe rate case assumes taconite production of approximately 34 million tonnes, which is in alignment with the long-term average production levels for taconite.\nIn addition, Minnesota Power has included a proposal to address and mitigate the financial impacts related to operational volatility of its large-power customers.\nThis proposal includes a sales true-up mechanism offering a simple and balanced method to align risks and benefit of large-power load volatility that can occur between rate cases.\nWe will share procedural updates as the filing progresses in future quarterly updates.\nI'm pleased to report that our trajectory for improved earnings per share growth remains on track and I'm confident in our ability to achieve our long-term annual average earnings-per-share growth objective of within a range of 5% to 7%.\nThis growth will come from a continued disciplined focus on efficient operations and high quality clean energy investments with strong operating cash flow characteristics, further supporting our strong credit ratings and future dividends.\nAs we have consistently characterized throughout the year, 2021 has been a transitional year and I'm particularly pleased about the progress we have made around initiatives that are aimed at improving our business unit returns at both our rate regulated and non-regulated business segments while ensuring we provide an excellent value proposition for our customers.\nIn terms of new investments, we have been busy planning and planting seeds for advancing our clean energy sustainability and action strategy, which will translate into some exciting new opportunities as we go forward.\nIndeed in our year-end conference call in February, we will be providing our 2022 guidance, along with enhanced visibility into investment opportunities across our business platforms.\nThese updates will reflect our latest views on the IRP, the IDP, ACE clean energy expansion into the solar storage segments and transmission development opportunities.\nIn addition, we expect that developments around federal spending and tax reform, including clean energy tax incentives, will be better known.\nIn terms of current initiatives, perhaps one of the most important is our recently filed November 1 general rate case proceeding.\nAs Bethany noted earlier, this rate case is critical to ensure the company is able to recover costs associated with our ongoing safe, reliable operations, clean energy transition, and to ensure we earn a reasonable rate of return required to maintain our credit ratings and attract investment capital.\nIn terms of our continued clean energy transition, perhaps one of the most exciting opportunities lies in the transmission and distribution areas.\nAs we have been highlighting for several years, transmission and delivery needs are accelerating and the needed infrastructure to accommodate the clean energy buildout is greatly lagging across the entire country, especially in the upper Midwest.\nSpecifically our Mysore region includes key corridors that are not currently sufficient to handle the rapid expansion of renewable energy on the grid.\nOur planned expansion of our 550 megawatt DC transmission line, participation in the grid North partners initiative, and our increasing investment in the American Transmission Company are clearly of significant strategic value to ALLETE.\nIn aggregate, we believe this part of our business will be ALLETE's second fastest growing segment in the next decade.\nIn addition to strategic position in initiatives gaining traction at our regulated business, ALLETE Clean Energy is on the verge of completing its construction of Caddo wind project located in Oklahoma, which will serve additional Fortune 500 customers under long-term contracts, and is comfortably on track to be online before the end of this year.\nThis is the second large scale wind facility built and placed and serviced by ALLETE Clean Energy in just two years.\nIn total, Oklahoma-based Caddo and Diamond Spring projects represent over $800 million of investment and will provide its large C&I customers with over 2.1 million megawatt hours of carbon-free wind generation.\nALLETE Clean Energy's investment and safe harbor wind components remains a competitive advantage in the development of new wind projects such as Caddo and Diamond Spring, and in further optimization efforts of its existing wind portfolio.\nRegarding optimization initiatives underway, the 92 megawatt Red Barn build order transfer project with Wisconsin Public Service Corporation and Madison Gas and Electric will utilize some of our Safe Harbor turbines while expanding our customer base and presence in another geographic region of the country.\nALLETE Clean Energy is finalizing development and plans to begin a complete construction of this facility in 2022.\nAn extension of this project and a testimony to our strong relationships with optionality to serve the C&I and/our utility space, the approximately 68 megawatt whitetail development project is advancing with its advanced transmission Q position, landowner relationships, and for either a long-term PPA or build order transfer project.\nSpeaking of strengthening our development pipeline to leverage is ACE's safe harbor turbines, we continue to advance the 200 megawatt [Inaudible] wind project in North Dakota and are working with state regulators and the Federal Aviation Administration on permitting and siting for this facility.\nWe are encouraged by North Dakota Governor Burgum's call for the state to be carbon neutral by 2030.\nAnd this and additional clean energy projects are part of this ambitious vision.\nRegarding the up to 120 watt -- megawatt Northern Wind project with Xcel Energy, construction will begin upon receiving permitting approval from the MPUC.\nThis project involves a repowering expansion and planned sale of our Chanarambie and Viking wind facility.\nThis project also remains on track to advance with completion expected in late 2022.\nWe were pleased that Xcel Energy received MPUC approval to acquire the project from ALLETE Clean Energy earlier this year.\nCash received from these optimization efforts will be deployed into new opportunities related to our solar and storage expansion strategy, reducing the potential for future equity needs.\nIn summary, ALLETE's sustainability and action strategy remains on track and we anticipate sharing more successes in the near future as we execute our clean energy growth initiatives.\nThis multifaceted unique clean energy strategy is well on its way to providing a differentiated value proposition to investors while serving the needs of many other stakeholders with strong metrics on the environmental, social, and corporate governance front.\nI'll now hand it back to Bethany.\nAs demonstrated by ALLETE's significant clean energy projects, transformational decarbonization efforts, and development and expansion of infrastructure that's critical to the transmission and delivery of carbon-free energy, we are actively addressing climate change in all the right spaces.\nWe are a company and a team that cares for our customers, our communities, our employees, and our shareholders.\nWe have a well-earned reputation of being on the forefront with transforming clean energy investments and we anticipate significant investments in ALLETE's regulated and non-regulated businesses in the coming years.\nWe believe we will be well aligned with still to be finalized national and state clean energy goals.\nOur sustainability and action strategy is a balanced approach that moves the needle while allowing time for advances in technology and an equitable transition to a secure and carbon-free energy economy.\nOn Slide 9, there are several links to important information about our company, especially the second linked document, ALLETE's corporate sustainability report.\nA guiding principle of ALLETE's sustainability and action strategy is communication and transparency.\nAnd we've updated our corporate sustainability report to include 2020 data that was unavailable at the time of the initial march publication as well as updates on climate policy and ALLETE board composition.\nI encourage you to review our CSR in its entirety as it describes ALLETE's accomplishments and our strong commitment to sustainability in all its forms.\nWe'll continue to track industry, political, and regulatory trends to ensure our future reports consider any evolving climate-related risks and opportunities.\nWe're focused on meeting our nation's accelerating needs for cleaner, more efficient, and more resilient energy.\nOur strategy sets ALLETE apart and we're committed to continue on this journey as a strong steward of all of our stakeholder's interests.\nDoing the right things in the right way is nothing new here at ALLETE, and we are proud of the progress our company is making.\nIt's also important to note that ALLETE sustainability commitments align with the commitments our customers are making.\nFor example, all of Minnesota Power's largest customers have now committed to reduce carbon emissions in their products and their operation.\nThe fact that Minnesota Power serves these customers with 50% renewable energy today directly contributes to the sustainability of their current operations.\nAnd our carbon-free energy vision for the future also supports these customer's longer term goal.\nAs a result of this focus on sustainability, we've seen Minnesota Power's largest mining customers invest in new ways of utilizing the abundant iron resource in our region to support continued sustainability improvements for what is already some of the cleanest steelmaking in the world.\nIn addition, in the forest products sector, we are looking forward to a new customer that is investing in an idled paper plant to utilize recycled fiber for tissue production and another new customer that will leverage sustainably harvested Minnesota timber to produce advanced building panels.\nThese are just a few examples of how our ALLETE companies and our customers are aligned in our commitments and are actively advancing sustainability in many ways, building an even better and brighter future for us all.\n",
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"content": "qtrly diluted earnings per share $0.53.\nsees fy 2021 earnings per share to be in range of $3.00 to $3.30.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This past year was a time of great challenges, as well as incredible accomplishments at ALLETE.\nALLETE not only weathered the global pandemic through a tremendous amount of hard work by our team.\nWe also delivered solid financial and operational results, which Steve Morris will describe later in the call.\nAnd we did so while keeping the safety and health of our coworkers, our families, our customers, and our communities, our highest priority.\nI'm so grateful to our employees across our family of businesses in many different states, all of whom demonstrated their incredible resilience and steadfast commitment to our customers, our communities, and each other during this most challenging time.\nWe certainly saw this past year that we truly are stronger together.\nAs I shared with you last quarter, we know that especially during trying times like these, our commitment to transparency is even more important to all of our stakeholders.\nLast quarter, we reiterated our commitment to ALLETE's long-term five-year objective of achieving consolidated average annual earnings-per-share growth of 5% to 7%.\nWhile on that conference call, we were transparent regarding the challenges we were seeing with our October 2020 projections falling slightly below that range.\nAs Bob will discuss in more detail later in the call, we're very pleased to report that we are now projecting growth within our average annual 5% to 7% earnings per share objective range.\nSo as we move on from 2020, ALLETE is well-positioned for the future.\nWe intend to build on our strong foundation of integrity, our extensive track record of success, and our long-standing reputation as a company trusted by our many stakeholders.\nThrough our sustainability and action strategy, we will continue to deliver value to our customers, our communities, and our investors while providing opportunities for our employees as together, we build a clean energy future.\nA significant step forward in this commitment is Minnesota Power's recently announced vision to deliver 100% carbon-free energy to customers by 2050.\nWe're proud that Minnesota Power is already the first Minnesota utility to provide 50% renewable energy.\nBut as we said when we reach this exciting milestone in December, we have more work to do.\nWe're taking concrete actions to address climate change while working to ensure the reliable and affordable energy that our customers and our communities expect.\nThe IRP was developed through a best-in-class process with strong engagement over the past year from a broad range of stakeholders, from customers to consumer and environmental advocates, to communities, to regulators, to employees, and many others.\nIn the IRP, we identified plans to increase Minnesota Power's renewable energy supply to 70% by 2030 and to achieve a coal-free energy supply and 80% less carbon by 2035.\nThese steps include adding an estimated 400 megawatts of additional wind and solar energy; retiring Boswell Energy Center Unit 3 by 2030; transforming Minnesota Power's Boswell Unit 4 to be coal-free by 2035; and investing in a modern, flexible transmission and distribution grid.\nThese are significant and meaningful changes to Minnesota Power's entire system, and it's critically important to us that this transition truly be sustainable.\nMeaning it goes above and beyond addressing climate change to care for our customers, our communities, and our employees throughout this transition.\nThis plan and our 2050 vision allow time for advances in technology and for our communities and our employees to transition to a secure and carbon-free energy future.\nAlso making significant progress in ALLETE's sustainability and action strategy is our second largest company in the ALLETE family.\nWith current operations in seven States, ALLETE Clean Energy is well-positioned to drive additional clean energy sector growth, as Al Rudeck will discuss in a moment.\nAs highlighted in our third-quarter conference call, ALLETE Clean Energy's growth has exceeded our original expectations from when we founded the company just 10 years ago.\nBuilding on ALLETE Clean Energy's reputation and its strong track record of success, we believe it is the optimal time to expand its focus beyond wind to additional opportunities within the clean energy space.\nObviously, for competitive reasons, we can't share too many details right now, but we're confident that our strategy to expand and diversify the business through new geographic regions, customers, and clean energy technologies will extend and grow our earnings as part of ALLETE's value proposition for investors.\nThe combination of our regulated businesses, significant initiatives, and those already completed and under way at ALLETE Clean Energy will further advance ALLETE as a leader in sustainability.\nWe've been an early mover in this transition, and we're well-positioned for the clean energy future.\nToday, ALLETE reported 2020 earnings of $3.35 per share, a net income of $174.2 million.\nEarnings for 2019 were $3.59 per share on net income of $185.6 million.\nResults for the year ended 2020 were negatively impacted by lower sales due to the ongoing COVID-19 pandemic and related disruptions.\nNet income in 2020 also included reserves for interim rates of $8.3 million or $0.16 per share due to the resolution of Minnesota Power 2020 General Rate Case.\nA few details from our business segments.\nALLETE's regulated operations segment, which includes Minnesota Power, Superior Water, Light and Power, and the company's investment in the American transmission company, recorded net income of $136.3 million, compared to $154.4 million in 2019.\nEarnings reflected lower net income at Minnesota Power primarily due to lower megawatt-hour sales to retail customers due to the COVID-19 pandemic; lower revenue resulting from the expiration of certain municipal and power sales contracts; higher depreciation expense; and lower fuel adjustment clause recoveries with the adoption of a new fuel adjustment clause methodology in 2020.\nOverall, we estimate that the COVID-19 pandemic negatively affected revenues by approximately $0.25 per share for the year ended 2020 from our expectations.\nThese decreases were partially offset by eight months of higher retail rates resulting from Minnesota Power's 2020 rate case settlement.\nALLETE Clean Energy recorded 2020 net income of $29.9 million, compared to $12.4 million in 2019.\nNet income in 2020 reflected additional production tax credits, increased earnings from Glen Ullin, South Peak, and Diamond Spring wind energy facilities, and higher megawatt-hour sales due to higher wind resources as compared to 2019.\nOur corporate and other businesses, which includes BNI Energy, our investment in Nobles 2, and ALLETE properties, recorded net income of $8 million in 2020, compared to net income of $19.9 million in 2019.\nNet income in 2020 included earnings from the company's investment in the Nobles 2 wind energy facility, which commenced operations in December of 2020.\nNet income in 2019 included the gain on the sale of U.S. Water Services of $13.2 million.\nI'll now turn to our 2021 earnings guidance.\nToday, we initiated 2021 earnings guidance of $3 to $3.30 per share on net income of $160 million to $175 million.\nThis guidance range is comprised of our regulated operations within a range of $2.30 to $2.50 per share and ALLETE Clean Energy and corporate and other businesses within a range of $0.70 to $0.80 per share.\nA few comments on our regulated operations outlook for 2021.\nOur 2021 guidance reflects a full year of the Minnesota Power retail rate increase from last year's rate case settlement compared to eight months in 2020.\nMinnesota Power's 2021 Industrial 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 estimated industrial sales reflect a partial recovery of the domestic steel industry, which has rebounded from the 2020 impact of various industry shutdowns and idling due to this ongoing COVID-19 pandemic.\nHowever, steel production rates remain nearly 10% below pre-pandemic level.\nWe are pleased to begin the year with full production nominations through April for all of our large power industrial customers with the exception of Verso Duluth paper mill, which we expect to remain idled all year.\nOur 2021 guidance reflects continued impacts from the ongoing COVID-19 pandemic affecting commercial, other industrial, and municipal sales.\nMinnesota Power will also realize lower revenue due to a power sales agreement that expired in April of 2020.\nWe expect slightly higher operating and maintenance expense of approximately 3% as compared to 2020 and higher depreciation and property tax expenses due to additional plant in service.\nWe expect slightly lower net income at Superior Water, Light, and Power due to additional operating and maintenance expense, as well as slightly lower earnings from our investment in the American Transmission Company, as 2020 earnings included a favorable MISO ROE outcome and related true-ups.\nOur guidance for our regulated operations assumes we will achieve reasonable outcomes in regulatory proceedings.\nA few highlights from our 2021 guidance regarding ALLETE Clean Energy.\nALLETE Clean Energy expects approximately 3.2 million megawatt hours in total wind generation in 2021, with the expectation of normal wind resources compared to 2.1 million megawatt hours in 2020.\nOur guidance includes South Peak and Diamond Spring in service for a full year.\nThese facilities were in service in April and December of 2020, respectively.\nWe anticipate the Caddo wind project to be completed by the end of 2021, with no impact to earnings this year.\nOur 2021 guidance does not include the impacts, if any, of possible acquisitions of renewable energy facilities, additional construction and sale projects, or additional requalification projects.\nAt a high level, we view 2021 as a transition year with lingering economic impacts from the ongoing COVID-19 pandemic, having the most notable effect on our regulated operations.\nLooking forward to 2022, ALLETE also provided its preliminary 2022 estimated earnings guidance range of $3.70 to $4 per share, which ALLETE anticipates formally initiating in early 2022.\nThe we expect Minnesota Power will follow a general rate case in November of 2021 based on a 2022 test year, with interim rates expected in the beginning of 2022.\n2020 was, without question, a very challenging year, rooted in the impacts of the global pandemic.\nOur successful track record and ability in managing severe economic downturns was directly evident again by the strong results that Steve just shared with you, and I'm very proud of our team.\nAlthough we are all not out of the woods yet and will remain diligent in 2021, we are very optimistic about the future and believe ALLETE is very well-positioned to execute and deliver a solid value proposition for our customers and investors alike over the long run.\nI am particularly proud of our employees who work hard to ensure our essential services were provided in a reliable and safe manner across our eight-state footprint, something we achieved in space.\nAt the same time, we did not lose focus or momentum, in advancing our clean energy growth strategy and associated investments.\nIndeed, 2020 represented one of the largest capital programs in our history with more than $650 million being invested, including the completion of approximately 500 megawatts of new wind farms in the Great Northern Transmission Line.\nOverall, our execution and discipline was outstanding, especially when considering the challenges created by the pandemic.\nWe entered 2021 with a strong balance sheet, conservative capital structure at approximately 39% total debt and now generate in excess of $300 million in total operating cash flow.\nThis positions us well as we continue to advance our sustainable clean energy strategy.\nA notable achievement on the financing side was our ability to secure approximately $400 million in tax equity financing under very competitive terms.\nThese key financings were related to the South Peak, Nobles 2, and Diamond Spring wind projects, which came online at the end of the year.\nNow, I would like to turn to 2021 and beyond.\nALLETE is highly focused on providing reliable and competitive services to our customers, and we work hard every day to ensure our operations are efficient and safe.\nAt the same time, we are also keenly aware of the need to provide an attractive value proposition for our investors to ensure the company has continued access to low-cost capital to fund its operations.\nToward that end, several years ago, we established an average annual long-term earnings per share growth objective of 5% to 7%, which, when combined with a competitive dividend, would provide an attractive total return proposition to investors.\nI want to be clear upfront that we remain committed to that objective.\nConsistent with last year, this growth target is comprised of 4% to 5% from the regulated utility businesses and at least 15% for the nonregulated businesses.\nIn third quarter of last year, however, I caution that meeting our growth objectives may be challenged in the short term, given the significant impact COVID-19 was having on a regulated utility business, and competitive pressures we were beginning to see in the wind segment of our renewable business.\nIn full transparency, I indicated that the five-year average annual earnings per share growth outlook for our consolidated operations, using 2019 as a base year, was currently below the 5% to 7% range at approximately 4%, with the regulated utility growth closer to approximately 3% versus the 4% to 5% targeted rate.\nAt positive note, I also indicated at that time that our nonregulated business segment, which is comprised primarily of ALLETE Clean Energy, was expected to continue to significantly exceed our 15% growth objective.\nAnd that, even despite some potential challenges in the wind segment longer term, we were confident that this highly successful platform would be able to leverage its reputation, scale, and strong capabilities into new, complementary, and higher returning segments of the clean energy market.\nAnd we committed to you, we will be providing investors an update in early 2021 and upon conclusion of our strategy development work.\nWith this anchoring in mind, I will now provide an update on our financial outlook for each of the major business segments.\nBefore I dive into the details, however, I'm pleased to report that our consolidated company 5-year outlook using 2019 as a base year, is projecting growth, which is now back within the average annual 5% to 7% targeted range.\nThough our regulated operations are still projected to grow approximately 3% on average, our ALLETE Clean and corporate and other businesses are now projecting average annual growth in the 30% to 40% range, well above the 15% target originally established.\nThe actual growth of our regulated operations will be impacted by three main drivers.\nThe first of these are the Minnesota Power's energy forward initiatives detailed by Bethany earlier.\nObviously, there are sensitive and confidential details to these plans yet to finalize, but we anticipate sharing what we can regarding size, scope, and timing with these projects and keeping you paced on our progress as the IRP moves forward.\nMake no mistake, however, that the transformation of our generation fleet into cleaner forms of energy is truly historic in size and scope for our company.\nAnd will require significant investment, not only on the generation side but in supporting transmission and distribution over the next decade or so.\nSecondly, we will seek out other regulated opportunities, particularly in the transmission area as the MISO region continues to be challenged with constraints on the grid as renewable generation continues to expand.\nOur planned expansion of our 550-megawatt DC transmission line is a prime example of that type of investment.\nObviously, the ultimate timing of all such investments described will have a material impact on our growth in coming years, and we will continue to navigate this clean energy transition as we have in the past with customer rates and overall competitiveness in mind.\nA final major driver of our regulated utility performance is dependent on our ability to achieve acceptable rates of return.\nDespite our best efforts to manage our costs and improve efficiencies, COVID-19 has had a material impact on our business and our ability to earn our authorized 9.25% rate of return at Minnesota Power.\nWith COVID impact and the health of our customers in mind, we decided to act quickly and settle the Minnesota Power 2020 rate case.\nThis provided an important relief in the form of an interim rate refund of approximately $12 million in 2020.\nGiven our expectation that COVID impacts will continue to be material to our customers in 2021, we have also decided to delay a much-needed rate filing from March of 2021 to November of 2021.\nThough we continue to believe those actions were merited and will be key to helping our customers regain a solid footing, it has had a very material impact on our 2021 earnings outlook with returns well below authorized levels.\nAs a result, we will be working closely with our state regulators on a fair and reasonable outcome in our next rate filing, which will enable the company to achieve earnings outcomes more in line with authorized return levels.\nOn our nonregulated businesses, which is predominantly made up of ALLETE Clean Energy, we have made significant progress over the past few quarters, assessing various strategic options for expanding the business and diversifying its clean energy product offerings.\nIndeed, we are very excited about the new chapter ahead as we expand into utility-scale solar, storage, optimize our current wind portfolio, and pursue other potential service offerings.\nThis strategy work, which will be further described by Al Rudeck in a few moments, was supported by outside advisors and was ultimately approved by the ALLETE board in early February.\nThe strategy is highly actionable, complementary to our existing offerings, and leverages unique capabilities of the business.\nMoreover, we are confident it will result in even higher annual rates of growth beyond the 30% projection inherent in our wind-only strategy.\nHence, we are expanding our average annual earnings per share growth outlook to as high as 40% growth over the next five years.\nThe nature of investments contemplated by the new strategy will provide for attractive rates of return and by virtue of the recurring or contracted nature of the revenues, plus strong cash flows, will support our strong credit ratings.\nOur execution of the new strategy is in full swing already as evidenced by yesterday's announcement of an agreement with a subsidiary of Xcel Energy to sell 120-megawatt wind energy facility for approximately $210 million.\nThis transaction will involve us repowering the 100-megawatt Chanarambie and Viking wind projects, as well as developing an additional 20-megawatt fleet.\nThe project is expected to be completed in late 2022, subject to regulatory approval by the MPUC and receipt of permits.\nCash received from the transaction will be reallocated to opportunities presented by the new strategy, thereby reducing the potential for future equity needs, another classic example of ALLETE's disciplined approach to capital allocation and action.\nIn closing, we were pleased in our ability to increase our annual dividend to $2.52 per share from $2.47 per share, even despite the challenges we see in 2021.\nAll based on strong confidence in our 2022 and beyond outlook.\nWe are very bullish about ALLETE's strategic positioning and overall growth prospects and are particularly proud of how this growth will continue to advance our sustainability objectives across our company.\nI'll now hand it off to Al Rudeck for his update and outlook for ALLETE Clean Energy.\nI would refer you to Slide 8, which illustrates how we at ALLETE Clean Energy are driving growth by leveraging our strong platform and capabilities in a growing clean energy market to meet customer demands for more sustainable energy products and services.\nI'm excited to share our view of the market, and specifically why we, at ALLETE, believe the company is so well-positioned for future growth and to diversify its position as a leader in the clean energy landscape.\nWe are now entering the next stage of America's energy transformation as our country continues to be fertile ground for additional clean energy innovation, opportunity, and investment.\nALLETE Clean Energy sizes of strength because we are nimble and able to adapt to the markets and tailor our solutions to give customers what they want.\nAs importantly, a small percentage of the market share delivers meaningful growth for ALLETE.\nThe ability to establish and maintain relationships as a hallmark of hall ALLETE Clean Energy succeeds in the market, as seen by our repeat transactions and consistent positive feedback from our community host and landowner partners.\nThrough these partnerships and our combined capabilities of project development, construction, long-term operation, and asset optimization are differentiators enable us to secure high-quality investments.\nAs introduced in ALLETE's third-quarter 2020 conference call, we have been crafting a strategy to deliver more comprehensive energy solutions for our customers.\nI will refer you to Slide 9, which outlines the core elements of our growth, vision, and strategy.\nALLETE Clean Energy's new strategy will expand our capabilities, our technologies, and our market investments likely to move to solar, storage solutions, and related energy infrastructure investments and services.\nWe believe that our customers and industry relationships, diverse portfolio of assets located in some of the best wind resources in America, and a creative and adaptable team will provide a strong foundation for growth.\nYou'll see more from us in the coming quarters as these plans unfold.\nALLETE Clean Energy will continue to optimize its existing wind portfolio and seek development for our remaining safe harbor qualified equipment and explore other renewable energy opportunities to expand our service offerings to provide more solutions that customers demand and frankly deserve.\nThe northern wind repowering expansion project with Xcel Energy announced yesterday is a prime example of our strategy in action, delivering sustainability on many levels, going beyond the environment to include supporting communities and the people where we do business.\nThis project meets all of our sustainability goals while also supporting ALLETE's future investments in new clean energy projects.\nBusinesses and communities with ambitious climate action commitments are raising demand for renewable energy solutions, and leak energy strategy is designed to meet those growing needs, while also continuing to service our traditional utility and cooperative and even federal power customers.\nThe 300-megawatt Diamond Spring project became operational in the fourth quarter of last year and is already serving three new Fortune 500 customers: Walmart, Starbucks, and Smithfield Fluids.\nAnd represents its largest single renewables project investing in leads history, successfully completed during the global pandemic.\nDiamond Spring is projected to generate more than 1 million-megawatt hours of energy annually and provide great diversity to our northern tier projects that is currently operating and expands coast to coast.\nWe found Oklahoma to be a friendly business environment and welcoming to new investments.\nIt represents a key part of our strategy to diversify ALLETE into the Southwest Power Pool market and expand operations into the wind-rich Southern Great Plains region.\nSimilarly, as Steve mentioned, we're pleased with our ongoing progress of the 300-megawatt Caddo wind project located in Caddo County, Oklahoma.\nLast week, we announced that Hormel and Oshkosh as our newest customers at Caddo, this project is on track to be online by the end of 2021.\nWe're excited and see renewable energy growth opportunities across multiple regions of the country and can be selective and strategic in when and where we invest.\nToday, ALLETE Clean Energy's portfolio operates in five North American electric markets, and we're looking to either build or add new PTC qualifying projects or repower projects and/or require existing operating assets while expanding products and services in solar, storage, and related clean energy services.\nWe are confident ALLETE Clean Energy will become a comprehensive national clean energy solutions provider, as our country is clearly on an expedited path to advance cleaner and more efficient energy forms.\nI appreciate being here with you today and look forward to sharing more details on our strategy and on our success in the future.\nAnd now, I'll hand it back to Bethany.\nWe're pleased with all that our team has accomplished in 2020 and look forward to another year of strong execution of our sustainability and action strategy.\nAs Al and Bob stated, we're especially excited to share more with you as we execute ALLETE Clean Energy's growth strategy beyond wind.\nWe're confident that ALLETE Clean Energy will play an increasingly important role in ALLETE's success well into the future.\nSustainability in all of its dimensions has long been a foundation of ALLETE's strategy.\nWe recognize that if not addressed, climate change poses physical and transitional risks.\nWe've taken and will continue to take concrete actions not only to mitigate these risks but to build a clean energy future through just and meaningful change.\nAs Society's energy needs and expectations evolve ALLETE's family of businesses is well-positioned for the future.\nConsistent with our commitment to transparency, in the coming months, we plan to release a corporate sustainability report that is aligned with the Sustainability Accounting Standards Board, or SASB, and Task Force on Climate-related Financial Disclosures, or TCFD, reporting requirements.\nThis report will also contain additional information regarding our commitment to diversity, equity, and inclusion in our workforce, our supply chain, and our communities.\nIt will mark the first of many reports over the years as we work to effectuate what is personally important to us at ALLETE and to meet and exceed expectations for sustainability disclosures and increased transparency.\nAs I've shared with you in previous quarters, we are committed to providing value to our customers and our investors and as part of that commitment, we have a responsibility to do what we can to make the regions where we operate, even better places to live and to work for everyone.\nFor all of us at ALLETE that is sustainability in action.\n",
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"content": "compname reports 2020 earnings of $3.35 per share; initiates 2021 earnings guidance; anticipates further improvement in 2022.\nallete inc - expects continued impacts of covid-19 pandemic in 2021.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Dan Malone, our CFO, will begin our call with a review of our financial results for the first quarter of 2021, and I will then provide a few more comments on the results.\nThe key takeaways from our first quarter 2021 results are.\nRecord first quarter net income and earnings per share up over 12% from the prior first quarter on a GAAP basis and up nearly 3% on an adjusted basis.\nFirst quarter sales down 1% from the prior year first quarter.\nFirst quarter operating income essentially flat to the adjusted prior year result.\nFirst quarter and trailing 12-month EBITDA also flat to the comparable adjusted prior period performance.\nFirst quarter cash flows reflected working capital needs driven by high order backlog and a record order backlog of $453 million, up 95% over the prior year quarter and up nearly 28% since year-end 2020.\nFirst quarter 2021 net sales of $311.2 million were 1% lower than the prior year first quarter.\nWhile we continue to see a strong rise in order rates and backlog, the COVID-19 pandemic continued to negatively impact our manufacturing efficiencies and inbound supply chain during the quarter, delaying some shipments.\nIndustrial division first quarter 2021 net sales of $211.9 million represented a 7.9% decrease from the prior year first quarter due to pandemic-related impact on customer demand and disruptions to our supply chain and operations.\nAgricultural division first quarter 2021 sales were $99.3 million up 17.5% from the prior year first quarter.\nDuring the quarter, we continued to see strong organic sales growth across this division.\nThe immediate top line benefit of the surge in customer demand was somewhat constrained by the negative impact of the pandemic on inbound supply chain and manufacturing efficiencies, as previously mentioned.\nNet income for the first quarter 2021 was $17.5 million or $1.47 per diluted share, up over 12% from the prior year first quarter.\nExcluding the Morbark inventory step-up expense from the prior year result, first quarter net income was up 2.9% over the adjusted prior year result.\nLower interest expense, favorable income tax provision adjustments and lower operating expenses more than offset the nonrecurrence of prior year foreign currency and property disposition gains to produce this result.\nOperating income for the first quarter 2021 was $25.4 million or 8.2% of net sales, which is up from $23.9 million or 7.6% of net sales in the prior year period but essentially flat to the adjusted prior year result that excludes the $2 million of Morbark inventory step-up expense.\nLower operating expenses were enough to offset an unfavorable gross margin comparison.\nGross margin for the first quarter of 2021 was $76.4 million or 24.6% of net sales compared to $78.9 million or 25.1% of net sales in the prior year first quarter.\nExcluding the Morbark inventory step-up expenses, the prior year first quarter gross margin was $80.9 million or 25.7% of net sales.\nIn the first quarter of 2021, we saw a compression of gross margins due to rising material costs that were not fully offset by favorable product mix and pricing actions.\nAlso, an expected positive impact from higher customer demand on operating leverage has been somewhat limited by the uneven distribution and timing of new order growth across our business units as well as COVID-19 operational and supply chain disruptions, as previously discussed.\nFirst quarter 2021 EBITDA was $36.7 million, down slightly from the prior year first quarter adjusted EBITDA.\nTrailing 12-month EBITDA was $145 million was essentially flat to adjusted 2020 EBITDA.\nFirst quarter 2021 EBITDA was 11.8% of net sales, which is also flat to the prior year first quarter adjusted results.\nFavorable product mix, pricing actions and other cost containment measures offset material cost inflation and the negative pandemic impacts.\nDuring the first quarter 2021, we saw an $8.6 million net use of cash for operating activities compared to a $5.6 million net provision of cash from operations in the prior year first quarter.\nWhile a first quarter build in working capital is seasonal for many of our business units, high current year order backlogs will continue to drive higher working capital investment to support the top line growth.\nWe ended the first quarter with a record $453 million in order backlog, an increase of 95% since the prior year first quarter and nearly 28% higher than year-end 2020.\nDuring the quarter, we saw an acceleration of customer demand across the entire range of our industrial and agricultural products.\nWe finished the first quarter of 2021 with order backlogs well above prior year quarter levels in both divisions and for all of our business units.\nTo recap our first quarter 2021 results, record first quarter net income and earnings per share, up over 12% from the prior first quarter on a GAAP basis and up nearly 3% on an adjusted basis.\nFirst quarter sales down 1% from the prior year quarter.\nFirst quarter operating income essentially flat to the adjusted prior year result.\nFirst quarter and trailing 12-month EBITDA also flat to the comparable adjusted prior period performance.\nFirst quarter cash flows reflected working capital needs driven by high order backlog.\nAnd a record order backlog of $453 million, up 95% over the prior year first quarter and up nearly 28% since year-end 2020.\nI appreciate the financial update.\nThere's an old Chinese curse that I think says \"may you live in interesting times\".\nAnd so I mean, we are certainly living in interesting times.\nBut I'm glad that for Alamo Group, we actually are managing our way through this nicely and as our first quarter results showed, where we had strong sales and record earnings.\nBut there are certainly many challenges that are ongoing.\nMany of these -- most of these are the repercussions from the ongoing COVID pandemic, which is still very much an unresolved issue that is affecting our company, our workforce and the world economy in general.\nAnd the many other issues we are facing, including supply chain challenges, logistical disruptions and inflationary pressures, are basically almost extensions of the pandemic.\nWe are certainly not alone in this as nearly all industrial manufacturing companies that we know of are facing these same issues.\nBut despite these issues and distractions, we're very pleased with the way our company has performed in this environment, and we remain diligent in managing these issues to deliver ongoing solid results.\nWe're glad to see that the markets for our products are holding up well and have mostly returned to pre-pandemic levels and in some cases, even better.\nThis is most evident in our bookings and backlog, which are at record levels.\nAnd even though if not for these challenges, we could have shipped more in the first quarter, but we would have still finished the quarter with record backlog.\nLike I said, I think if we didn't have quite as many supply chain issues, our sales would have been a record for the first quarter instead of being down 1%.\nBut even with that, we would have still finished with record backlogs.\nCertainly, our agricultural division showed the strongest results in the first quarter 2021 as this market not only remains steady, that market has actually remained steady throughout most of this COVID situation and has further benefited from some pent-up demand in the farming sector as a result of several years of weak market conditions and low farm incomes.\nAnd this current market strength has also been aided for us by sort of lower levels of dealer inventories going into this time and above-average farm subsidies in the U.S. And even with -- even if subsidies aren't quite as strong this year as they were last year, we think higher agricultural commodity prices and strong demand for equipment will continue to be good.\nThe fundamentals of the market are good for not only the rest of 2021, but the next several years as well look very promising.\nAnd even though supply chain issues, logistical problems and inflationary pressure, all limited our results in the first quarter in our ag sector and continue to impact us today, these should impact us a little less than the second half of the year based on our pricing and the input we're getting from our suppliers.\nSo we're pleased that the outlook is improving.\nWe are also pleased that while our North American ag units are certainly performing the strongest, it is very reassuring to note that our European units are all showing improvement as well as are our Brazilian and Australian operations.\nSo with a good market, record backlogs, the outlook for Alamo's agricultural division is very positive.\nThe same can actually be said for Alamo's industrial division.\nWhile our results were not quite as good in the first quarter of 2021 as our ag division on a relative basis, it was still a solid quarter.\nIt started off weak in January as budget issues continued to constrain governmental entities, which is our single biggest market for this division's infrastructure maintenance equipment.\nBut momentum built during the quarter, and we ended with very strong results in March that are continuing on into the second quarter of 2021 as well.\nWe are continuing to benefit by improved governmental budgets as revenues at city, county and state levels, all of which seem to be showing better-than-anticipated results.\nAnd our bookings and backlog in this sector reflect these improved fundamentals with governmental budgets and with basically the financial health of our customers.\nAs with our agricultural division, our industrial results were constrained by COVID-related operational challenges internally and with the supply chain and logistical issues, preventing ourselves from reaching the record levels, which they could have been without this.\nHowever, we believe these issues will be less evident again in the second half of 2021 and feel optimistic that the full year results for the -- for our industrial division should be at record levels for Alamo Group.\nCertainly, getting operations back to pre-pandemic levels is key to this outlook.\nBut getting -- but we're also really -- a big contributor is getting the full benefit of the high level of acquisitions we completed in 2019.\nThis is what really should drive the record results that we anticipate.\nThese acquisitions of Morbark, Dutch Power and Dixie Chopper have all performed well, but we have really -- due to the pandemic of 2020, we have really not achieved their full potential.\nAnd with that, I mean, we feel very -- on a combined basis, very optimistic about Alamo Group.\nAnd it's good to see that in general, business is returning to more normal levels of activity, among other things, including things such as our acquisition activities, which were definitely curtailed for most of the last 12 months.\nI mean we're actually starting to see opportunities and look at opportunities.\nSo which -- since acquisitions are definitely key part of our ongoing strategy, I think it's -- we're glad to see that.\nWe also -- I mean, during the last year, we really constrained our capital spending as we focused on cost control and paying down debt, which we're very pleased both were very successful initiatives.\nBut with the strong bookings and record backlog, we need to improve our operational capabilities.\nAnd we are starting to invest more in better manufacturing technologies that will allow us to be more efficient and grow our margins and meet this increased demand as evidenced by our bookings and backlogs.\nSo while we are optimistic about the outlook for Alamo Group, we are also very cognizant that the COVID pandemic is still not fully resolved.\nIt is certainly good to see the growing availability of vaccines, but unfortunately, the number of new cases is still a concern.\nAnd while we are pleased our markets are showing steady improvement, the supply chain and logistical challenges are ample evidence that COVID is still affecting us all.\nWe hope this situation and feel it will continue to show steady improvement, but we will continue to monitor our operations and monitor our markets and remain ready to respond to changes, good or bad, that could affect our company.\nAnd actually, we believe this responsiveness has helped us navigate through this and other periods of economic upheaval and are committed to reacting quickly as conditions warrant.\nAnd really, that is why we feel optimistic about the outlook for Alamo Group.\nThere are always challenges, and we certainly are living in interesting times.\nBut by staying focused on our strategy, we feel we can prosper even in challenging times and continue to grow at above-market rates over the long term.\nAnd lastly, while, as most of you know, I will soon be retiring as CEO of Alamo Group, I remain very optimistic about the outlook for the company.\nMy replacement, Jeff Leonard, and the whole Alamo team are more than capable to continue along the path of success we have followed.\nAnd I look forward to following their continued progress and staying active as a member of the Board of Directors.\nIt's certainly been a great trip.\n",
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"content": "q1 sales fell 1 percent to $311.2 million.\nq1 earnings per share $1.47.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Dan will begin our call with a review of our financial results for the third quarter of 2021.\nI will then provide more comments on the results.\nThe key takeaways from our third quarter 2021 results are: total company net sales of $338 million were up 16%.\nIndustrial Division net sales of $219 million, were up 12%, Agricultural Division net sales of $119 million, were up 25%.\nOperating income of $30 million was down 3%, net income of $17.5 million or $1.49 per diluted share was down 13%, adjusted net income of $18.9 million or $1.59 per diluted share was down 8%.\nAdjusted EBITDA was flat to the prior year third quarter and remained up 7% from full year 2020.\nTotal debt outstanding was reduced by $20.7 million during the third quarter and was down 21% from the prior year third quarter.\nOur -- and our backlog increased to $645 million, which is up 154% over the prior year third quarter.\nThird quarter 2021 net sales of $338 million, was 16% higher than the prior year third quarter.\nWe continued to benefit from strong order rates and recent pricing actions, but supply chain constraints and labor capacity issues are still limiting our ability to ship finished product.\nIndustrial Division third quarter 2021 net sales of $219 million, represented 12% increase from the prior year third quarter.\nDespite stronger customer demand, this division's top line result was particularly hit hard by truck chassis availability as well as other supply chain disruptions.\nAgricultural Division third quarter 2021 sales were $119 million, up 25% from the prior year third quarter.\nDuring the quarter, favorable agricultural market conditions, low dealer inventories and pricing actions continued to drive organic sales growth in this division which was also affected by port delays and other supply chain constraints.\nGross margin for the third quarter of 2021 was $86.3 million or 25.5% of net sales compared to $78.6 million or 27% of net sales in the prior year third quarter.\nThe favorable gross margin impact we would normally expect from higher volume and aggressive pricing actions was more than offset by continued material inflation, production inefficiencies resulting from supply chain and labor capacity constraints and a less favorable mix of service part sales.\nOperating income for the third quarter of 2021 was $30 million or 8.9% of net sales, which was down 3% from the prior year quarter.\nThe gross margin effects already mentioned were offset by a more normal level of operating expenses compared to the reduced spending levels of the pandemic affected prior-year period.\nAs mentioned last quarter, while our recent pricing actions have been aggressive, the effective impact of these actions continued to lag rising cost.\nOn a positive note, September was the first month and over a year that we didn't see a rise in published mill pricing -- mill prices for hot-rolled steel.\nNet income for the third quarter 2021 of $17.5 million or $1.40 per diluted share was down 13% from the prior year third quarter.\nIf we exclude from the current year quarter, $1.4 million of after-tax charges stemming from accelerated stock award vesting related to the retirement of our former CEO as well as Morbark inventory step-up expense from the prior year quarter, third quarter adjusted net income of $18.9 million, was down 8% from the prior year result, while income before taxes was up $0.3 million over the prior year third quarter, mainly due to lower interest expense.\nNet income was lower due to an income tax provision for stock-based compensation in anticipation of a 28% full year effective income tax rate as well as the non-deductibility of compensation expenses related to the retirement of our former CEO.\nThird quarter 2021 adjusted EBITDA was flat to the prior year third quarter adjusted result as trailing 12 month adjusted EBITDA of $155.3 million remained flat to the trailing 12-month results that we reported at the end of the second quarter 2021.\nThis remains 7% above the adjusted 2020 EBITDA.\nDuring the third quarter of 2021, we continued to delever the balance sheet by further reducing debt $20.7 million on the flat adjusted EBITDA performance.\nWe ended the third quarter of 2021 with a record high order backlog of $645 million which was an increase of 154% over the prior year third quarter.\nWe continued to see strong customer order rates and no significant order cancellations, despite supply chain induced shipping delays.\nTo recap our third quarter 2021 results.\nTotal company net sales of $338 million were up 16%, Industrial Division net sales of $219 million were up 12%, Agricultural Division net sales of $119 million were up 25%, operating income of $30 million was down 3%, net income of $17.5 million or $1.49 per diluted share was down 13%, adjusted net income of $18.9 million or $1.59 per diluted share was down 8%, adjusted EBITDA was flat to the prior year third quarter, but remained up 7% from full year 2020, total outstanding debt was reduced by $20.7 million and was down 21% from the prior year third quarter and our backlog increased to $645 million, up 154% over the prior year third quarter.\nBefore discussing our results for the quarter, I'd like to offer a brief update regarding COVID-19.\nI'm pleased to report that during the third quarter, we experienced very few cases of COVID-19 among our employee population.\nWhile the direct impact of COVID was far or less this quarter than what we've experienced during the last several quarters, the lingering indirect effects of the pandemic significantly impacted our operations during the third quarter.\nOur markets remained strong during the quarter duely across the board and our order bookings for the quarter increased sequentially again as they've done every quarter of this year.\nIn the agricultural market, prices for corn, soybeans and livestock while off from their previous peaks remained at historically attractive levels.\nTractor sales were also modestly higher than they were a year ago, although recent demand growth has been skewed to the larger tractors that are somewhat less meaningful to Alamo Group's sales of attachments.\nActivity in our governmental markets also remains strong.\nState, county and municipal governments continue to invest in equipment to update their right of way maintenance fleets.\nIn addition, demand for our industrial products from industries such as steel, cement and mining also continued to rebound.\nFinally, demand for our forestry and tree care products has been very strong as we anticipated when we acquired the Morbark, Rayco and Denis Cimaf brands late in 2019.\nThe increased pace of order bookings brought our backlog to a new all-time record of $645 million by the end of the quarter.\nTo-date we have not observed any signs that the momentum of our markets will change in the near term nor have we experienced any meaningful order cancellations due to the extended lead times we are currently experiencing.\nSo long as dealer inventories remain at the current low levels, we expect demand for our Agricultural Division's products will remain strong with minimal risk that orders will be canceled or postponed.\nGovernmental agencies by their nature don't purchase equipment on speculation or warrant [Phonetic] advance of known fleet renewal requirements, so we don't foresee significant risk of order cancellations from these customers.\nNon-governmental buyers of our industrial products including operators of our forestry and tree care equipment, place orders to meet expanding demand for their own products and also in anticipation of their current equipment reaching the end of their expected lifecycle.\nWhile there is some risk that these customers could cancel orders in the event of a recession, we do not anticipate this recurring in the near term -- this occurring in the near term.\nTurning now to Alamo Group's operations in the third quarter.\nWe experienced significant disruption in our normal manufacturing process flows during the third quarter as a result of instability in the supply chain.\nWe experienced extended delivery times for a wide variety of components we required to manufacture our products, including shortages and delivery delays of truck chassis, industrial engines, gearboxes, cutting blades, hydraulic components and even such relatively mundane items as wiring harnesses and specialty assembly hardware.\nOur operations depend on reliable and timely supplies of these kinds of components to operate efficiently.\nWhen the supply chain is significantly disrupted as we experienced broadly in the third quarter, our workforce is less productive as they have to shift production priorities frequently based on what products can be completed with the materials on hand.\nWhen a component needed to assemble -- needed for the assembly of our products is delayed, our work in process inventory also increases beyond what is normally expected as orders increase.\nInput cost inflation was also a significant issue during the third quarter.\nWhile our teams have been closely monitoring supplier cost changes and adjusting our prices regularly, there is a lag effect until these pricing actions materialize in our margins.\nOur Agricultural Division has had success renegotiating pricing for orders and backlog.\nHowever, it's not really possible for our Industrial Division to renegotiate prices for orders and backlog from governmental customers.\nShortages of skilled labor were also more impactful during the third quarter than we had experienced earlier in the year.\nWhile we've been able to partly address the shortage of welders by increasing the pace of our deployment of robots, skilled assembly technicians with experience in electronics, hydraulics and pneumatics remain difficult to recruit, although this was certainly less impactful to our results in supply chain bottlenecks, it also has contributed to restraining sales growth in some of our operations.\nTransportation costs were another headwind we encountered during the third quarter, particularly costs associated with inbound shipments.\nWhile transportation costs were higher across the board, we also incurred additional costs to expedite inbound shipments of components to complete production in order to achieve the earliest possible deliver dates to our customers.\nAs a result of the cost pressures I've described, our margins in the third quarter were lower than they were in the third quarter of 2020.\nHowever, our margins were actually slightly higher in the third quarter than they were in the second quarter of this year and I think this indicates that better pricing in the backlog is beginning to flow through.\nFinally, sales, general and administrative costs were higher in the third quarter.\nAs expected, selling costs increased as COVID related travel restrictions eased and our sales teams were able to travel more regularly to serve our customers in-person and to attend trade shows, many of which were suspended last year.\nWith our higher sales in the quarter, commission expenses also increased.\nThe increase in administrative expense, primarily involved non-recurring costs related to the retirement of our previous CEO.\nOur effective tax rate in the third quarter was 37% compared to 27% in the third quarter of 2020.\nThe higher tax rate was primarily the result of a provision for stock-based compensation and an anticipation of a full year 2021 tax rate of 28%.\nSo as you can see, there was a lot going on during the third quarter, and this is reflected in our results.\nAt the moment there is no clear evidence that the external business climate will be meaningfully different or better during the fourth quarter.\nOne positive note is that we've recently seen steel prices begin to stabilize, albeit at higher levels than we would like.\nOtherwise inflation generally seems to be gradually gaining momentum at least in the United States.\nIn spite of this, I remain optimistic about the future prospects for our company.\nOur strong record high backlog gives us confidence and good visibility to allow us to make appropriate investment plans concerning the development of our people, our products and our facilities.\nI was also very pleased to announce the acquisition of Timberwolf Limited last week.\nAlthough this is a small company, they are a UK market leader with a very nice range of brush and limb chippers.\nThey have a comprehensive dealer network spanning the UK, Europe and other areas that will provide important access points into these markets for our full range of forestry, tree care and recycling products.\nAt the same time, Timberwolf Chipper products fill an important product offering gap in Morbark's range that will complete and strengthen our tree care offering in North America.\nFinally, I want to take this opportunity to remind the investor community that commencing in the fourth quarter, we will report our business through two new segments, namely Vegetation Management and Industrial Equipment.\nAll of Alamo's products that cut or process organic material will be organized under Vegetation Management.\nThis division combines all of the brands of our former Agricultural Division with the governmental mowing, forestry and tree care operations that had previously been part of our former Industrial Division.\nMore specifically, this means that our Alamo Industrial Tiger Mowers, Morbark, Rayco and Denis Cimaf brands will be reported as part of Vegetation Management going forward.\nOur Industrial Equipment division includes our excavator, vacuum trucks, street sweeper, leaf removal and snow removal brands.\nI believe this structure brings improved strategic clarity and more closely balances the size and scope of our two operating divisions.\n",
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"content": "q3 adjusted earnings per share $1.59.\nq3 sales rose 16 percent to $338.3 million.\nqtrly backlog of $645.1 million, up 154% compared to prior year q3.\nalamo group - expect to continue to experience headwinds associated with cost inflation, supply chain disruptions and skilled labor shortages in q4.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Before turning the call over to Ron, I'd like to make a few comments about forward-statements.\nDan Malone, our CFO, will begin our call with a review of our financial results for the fourth quarter and the year-end 2020, and I will then provide a few more comments on these results.\nThe key takeaways from our fourth quarter and full year 2020 results are: fourth quarter sales were down 3.8%, record full year sales were up 4% with the help of acquisitions, but down 11% without.\nFourth quarter net income and earnings per share were down 16% from the prior fourth quarter on a GAAP basis and down about 6% on an adjusted basis.\nFull year net income and earnings per share were down 10% from prior year on a GAAP basis, but increased more than 2% year-over-year on an adjusted basis.\nFull year adjusted EBITDA was up 11.6% from the prior year and essentially flat to the third quarter trailing 12-month result with adjusted EBITDA margins expanding by nearly 100 basis points over prior year.\nRecord full year operating cash flow of $184.3 million was up 108% over prior year, and fourth quarter operating cash flow exceeded an unusually strong operating cash flow performance in the prior year quarter.\nOutstanding debt was reduced by $158.6 million in 2020, and our debt net of cash position improved by $166.5 million during the year.\nRecord backlog of $354.1 million was up 35.6% over the prior year-end.\nFourth quarter 2020 net sales of $288.6 million or 3.8% lower than the prior year quarter.\nWhile we saw a strong rise in order rates and backlog, the COVID-19 pandemic continued to negatively impact our manufacturing efficiencies and inbound supply chain during the quarter.\nAlso the timing of these new orders and the fact that strong customer demand hasn't been consistent across all of our business segments has limited the immediate top line impact.\nFull year 2020 net sales of $1.16 billion were a Company record and 4% higher than the prior year with the contribution of the Morbark and Dutch Power acquisitions.\nWithout these acquisitions, organic sales were down 11% from prior year.\nNet income for the fourth quarter was $8 million or $0.68 per diluted share compared to prior year fourth quarter net income of $9.6 million or $0.81 per diluted share.\nExcluding the Morbark inventory step-up expense, severance cost related to a plant closure, one-time acquisition transaction cost and acquisition-related amortization expense, adjusted fourth quarter 2020 net income was $13 million or $1.10 per diluted share compared to $13.8 million or $1.18 per diluted share in the prior year quarter.\nNet income for full year 2020 was $56.6 million or $4.78 per diluted share compared to net income of $62.9 million or $5.33 per diluted share for the prior year.\nExcluding the full year impact of the adjustments I just mentioned in the quarter comparison, adjusted full year net income was $70.3 million or $5.94 per diluted share compared to $68.4 million or $5.80 per diluted share in the prior year.\nIndustrial Division fourth quarter 2020 net sales of $202.7 million represented an 8.9% decrease from the prior year quarter due to the pandemic-related impact on customer demand and disruptions to our supply chain and operations.\nWhile this division ended the year with higher backlog than the previous year-end, the surge in orders that created this favorable comparison is largely concentrated in forestry and tree care products.\nOther business units, notably those serving the municipal government sector, finished the year with order backlog below pre-pandemic levels.\nAgricultural Division fourth quarter 2020 sales were $85.9 million, up 10.5% from the prior year fourth quarter.\nDuring the quarter, we continued to see strong organic growth across this division.\nThe immediate top line benefit of the surge in customer demand was constrained by the negative impact of the pandemic on inbound supply chain and manufacturing efficiencies, as previously mentioned.\nFull year 2020 adjusted EBITDA was $145.2 million, up $15.1 million or about 11.6% over the prior year and was essentially flat to the third quarter trailing 12-month results.\nOur adjusted 2020 EBITDA as a percentage of net sales improved by nearly 100 basis points over prior year.\nHigher Morbark margins, favorable product mix, the benefits realized from facility consolidations and other cost containment measures more than offset the negative impact -- the negative pandemic impact previously mentioned.\nDuring 2020, we generated $184.3 million of operating cash flow compared to $88.8 million in the prior year, an increase of 108%.\nStrong operating cash flows continued during the most recent quarter, as we exceeded an unusually strong operating cash generation in the prior year fourth quarter and we further delevered our balance sheet.\nWe ended the fourth quarter with a record $354.1 million in order backlog, an increase of over 35% since the prior year-end.\nDuring the fourth quarter, we saw an acceleration of customer demand, particularly for our forestry and agricultural products, while demand has grown overall for the Company and all of our units have seen improvements in customer demand since the pandemic impacted the second quarter.\nOrder rates for some of our businesses are still below pre-pandemic levels.\nTo recap our fourth quarter and full year 2020 results, fourth quarter sales down 3.8%; record full year sales, up 4%, but down 11% without acquisitions; fourth quarter net income and earnings per share down 16% on a GAAP basis and down 6.8% on an adjusted basis; full year adjusted EBITDA up 11.6% from prior year and essentially flat to the third quarter trailing 12-month result with adjusted EBITDA margins expanding by nearly 100 basis points over prior year; record full year operating cash flow, up 108% over prior year with favorable comparisons continuing in the fourth quarter; full year debt reduction of almost $159 million and debt net of cash improvement over $166 million; and record backlog, up more than 35% over the prior year-end.\nWe're particularly pleased to see that the momentum, which we have -- which has been building for the last several quarters, really since the slowness in the -- the end of this -- in the second quarter and -- but it's built in the third, continued into fourth and with strong bookings and a record backlog at the end of the year, and I'm pleased that this trend has continued even into the first quarter of 2021 with our backlog continuing to grow even further, and now it's over $400 million.\nHowever, there were also issues related to the pandemic that impacted our operations in the fourth quarter.\nThese included sporadic cases of COVID that, while not large and not at a lot of locations, were -- always had a follow-on effect that like you could have one person that went home sick and then suddenly we close down the whole department for several days while we clean it and get things better and ready to make sure everybody else in there is OK.\nWe've always had [Phonetic] a couple of things like that.\nWe are also experiencing more supply chain issues, but again can be small.\nYou cannot ship a product as you have -- are missing a [Indecipherable] O-ring, but that's the kind of ripple effect these can have.\nAll of this together caused shipments in the fourth quarter to be a little below our expectations, but still good.\nAnd margins were even better, particularly when adjusted for the non-cash charges that were above average in the fourth quarter for 2020.\nThe two major non-cash charges were the inventory step-up charge related to the acquisition of Morbark and the reorganization reserve related to the proposed plant consolidation we've announced in the Netherlands.\nWe are not finished with the inventory step-up charges at Morbark, which affected us every quarter since we bought them.\nBut as of the end of the fourth quarter, all goals are now finished and should not be affecting our results going forward.\nAnd the plant consolidation in Europe, we're actually -- even though we took a charge in the fourth quarter, it's actually -- the timing was a little bad because that actually, within the next year, will have a projected payback of less than one year on that investment -- on that the plant consolidation.\nSo, it's a very positive move in the long term, even though it impacted the fourth quarter results.\nBut net of these two items, net income from the quarter was just below the previous year's -- adjusted net income was just below the previous year's adjusted net income, despite soft sales and less organic sales and certainly the ongoing COVID issues.\nSo, all in all, we're pleased.\nOn top of this, we were extremely pleased with our efforts in the fourth quarter and throughout 2020 in controlling cost and managing our assets, which, as Dan pointed out, resulted in very strong levels of cash generation, record EBITDA and reductions in outstanding debt, ensuring the Company's solid financial stability despite the certainly challenging economic environment, which we are all operating.\nIn addition, we are pleased that even with the limitations imposed on us during most of the year 2020 that certainly restricted our travel and caused many of our office personnel to have to work remotely for some periods of time, we were able to complete many of our operational developments that we already had planned for the year.\nThese include most of the integration initiatives related to the 2019 acquisitions of Morbark and Dutch Power.\nWe also completed the construction of a new manufacturing plant for our Super Products unit in Wisconsin that allowed us to consolidate three facilities into one modern efficient facility, and we were able to complete that project totally in 2020.\nAnd there was continuous progress on a range of other product development and operational improvement initiatives ongoing throughout the year.\nSo, actually, we really made a lot of progress in a very challenging year.\nAlamo Group's Industrial Division performed well in both the fourth quarter of 2020 and for the full year, even though for us, they probably had the most market challenges due to COVID.\nThe biggest end user of their products are governmental entities, most of which struggled with budgetary issues during the year and are still being impacted today.\nYet while organically, our sales were off, they still held up well due to the stable nature of demand for our types of products that continued to be used through the year for infrastructure maintenance.\nAnd we're pleased bookings, which were very soft in the second quarter and gradually and steadily increased each quarter since then, have continued this trend as we moved into 2021.\nAs Dan pointed out, some of it's a little spotty.\nSome units are doing better than other units.\nBut certainly in total, they're up.\nAnd it's interesting like -- say like Morbark, one of our new units, they were probably hurt the most early on COVID, and yet, they have come back the most -- the strongest, as things have continued to build back up.\nSo, it had been a little spotty but in total, as I said, it continues to be good and strong.\nCertainly, our Agricultural Division has held up even better and actually showed a small increase in sales for the year and margins did even better.\nWe were -- I think the ag sector in general was helped by increased subsidies to farmers during the year, and actually we started -- COVID [Phonetic] period started with fairly low levels of dealer inventories going into the year 2020 due to the weak agricultural industry of the last several years.\nSo as a result, at the end of the year, as I said, we have record backlogs.\nDealer inventories are still fairly on the low end, so there's still more upside potential there.\nBut we're also seeing improved commodity prices in the ag industry.\nSo, the outlook for further growth in this division is very positive as we move into 2021.\nIn fact, we believe the positive trends we are seeing in both of our divisions bode well for Alamo Group's outlook for 2021, though the pandemic and its repercussions, as well as all the impacts it has had on the global economy are still far from over.\nFor us specifically, ongoing COVID infections are spotty, but certainly are still causing challenges.\nSupply chain issues are affecting us and many -- almost everybody in our industry.\nEverything from truck chassis, tractors and all are out -- the lead times on them have nearly doubled for many of our key inputs.\nCertainly, even the adverse weather conditions of the last several weeks, especially in Texas, not only were a couple of our plants closed for couple days, but we saw like one major supplier that -- they said they were closed four days, and so now they are two weeks later than their plan.\nSo, that's causing some issues.\nAnd we're also seeing a few inflationary pressures too in this which -- I think with our reactions to that, that will -- most of that will flow through fairly quickly.\nBut in the short term, it can have some effect on our -- all of our operations.\nSo, all these issues together will certainly dampen our first quarter performance, but we actually feel quite good about the year 2021 in total.\nThere is positive momentum in our markets.\nThere is stable demand for our types of products, which continue to be used daily in maintenance and operations and are wearing out on a regular basis.\nIn addition, contributions from recent acquisitions, ongoing operational improvement initiatives, as I've said, such as the plant consolidation initiatives we've taken on, altogether make the outlook for the full year of 2021 very bright for Alamo Group.\nAnd we certainly hope that the greater availability of the new COVID vaccines will start to take -- have a impact on the pandemic and will begin to abate and we can all return to a little bit more conditions.\nBut regardless, we actually feel quite good about the outlook for Alamo for 2021.\n",
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"content": "compname reports q4 earnings per share of $0.68.\nq4 earnings per share $0.68.\nq4 sales $288.6 million versus refinitiv ibes estimate of $289.8 million.\nq4 net sales of $288.6 million, down 3.8%.\nbacklog at $354.1 million at quarter end, up 35.6% compared to year end 2019.\nqtrly acquisition adjusted diluted earnings per share non-gaap $1.10.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Information on risk factors that could affect our business, can be found in our SEC filings.\nWe will also refer to certain non-GAAP financial measures such as adjusted earnings and unit costs, excluding fuel.\nOver to you, Ben.\nIn 2021, Alaska has established a track record of leading the industry in the recovery from the pandemic.\nThis has been enabled by the strength of our business model, our measured approach to capacity and our financial discipline.\nOur 2.4% pre-tax margin in the fourth quarter continues that trend, especially considering the disproportionate impact that severe weather had on our hubs, and the Omicron-related impacts we began to face at the end of the year.\nWhile I'll discuss the impact of weather on our fourth quarter and the impact of Omicron on our first quarter, let me start by saying, both of these are temporary challenges that do not deter my confidence in our underlying business model and its ability to outperform the industry.\nStarting with recent events.\nThe combination of severe snow, multiple consecutive days of sub-freezing temperatures in our Pacific Northwest hub and stacking disruptions caused by the Omicron variant, resulted in one of the challenging holiday travel periods we have ever experienced.\nOur completion factor was extremely challenged at the end of the year, which resulted in flying approximately 1 point less than our expected capacity in the quarter and 2.5 points less than we planned to operate in December alone.\nIn terms of the financial impact of these events, they were material.\nOur fourth quarter result was worse by approximately $70 million, and our pre-tax margin was reduced by 3.5 points.\nEven with this outsized impact, Alaska was profitable in Q4 and strongly led the industry in pre-tax performance over the second half of 2021.\nIn response to the ongoing impacts of Omicron in early January, we proactively reduced our remaining Q1 scheduled client by about 10%.\nI am pleased to report that Omicron absences are down significantly, and our operation is once again stable.\nOmicron has not only impacted our ability to operate fully and has dampened closer to the mainline substantially as well.\nAndrew will provide more detail on the demand environment.\nBut the silver lining is that demand for travel from presence date and beyond, remain strong and booking trends have rebounded week over week since their low point in early January.\nWe expect the bulk of the Omicron impact to be felt in the first quarter, specifically in January and February, as revenue has reduced and as unit costs are pressured, given lower ASM production and higher staffing-related costs.\nHowever, as I opened with, this will be short term in nature and has not changed our expectations about the overall recovery.\nClearly, this was a tough way to end a year that otherwise had progress worth celebrating.\nFirst, our revenues recovered to $6.2 billion or 70% of 2019 levels, and we achieved this while flying less capacity than many of our peers, who had similar revenue-recovery results.\nSecond, while the full year adjusted pre-tax loss was $342 million, we recorded $282 million of adjusted pre-tax profit during the second half of the year.\nOur second-half adjusted pre-tax margin was over 7%, clearly outperforming the industry, even though West Coast travel has recovered slower than much of the country.\nThird, with decent demand recovery and disciplined cost management, we returned to positive operating cash flows.\nExcluding any CARES funding, we generated more than $100 million in operating cash flow for the year, which reflects $100 million pension contribution we funded in the third quarter.\nFourth, as profits and cash flow returned to positive territory, we have essentially repaired our balance sheet.\nWe closed the year with a 49% debt-to-cap ratio, 12 points lower than prior year and within our target range.\nAnd lastly, given we were able to meet or exceed several of our recovery goals, our employees earn the industry's highest bonus pay through our incentive-based pay program.\nFor the average employee, this payout amounts to about 6.2% on top of their annual pay.\nAll told, I'm really pleased to report that our bonus programs will pay out $151 million to our employees for the year.\nIn addition to these financial milestones, we also cemented several critical strategic decisions during 2021 that will help drive our success well into the future.\nWe made the decision to return to a single fleet of Boeing aircraft, which will drive revenue and cost benefits.\nThe remaining 27 Airbus A320s that are flying today, will be retired by the end of 2023, enabled by our Boeing MAX order of 93 firm and 52 options.\nWe joined oneworld and launched our West Coast international alliance with American Airlines, which will unlock additional revenues and loyalty across our West Coast hubs, especially in Seattle.\nWe announced sustainability goals, committed to net zero carbon emissions by 2040 and further embracing a sustainability mindset by linking a portion of our annual performance-based pay plan for all employees to the carbon intensity of our operations.\nWe also integrated this goal into our executive compensation targets.\nLet me close with a brief look ahead at 2022.\nLike our industry peers, Q1 will clearly be impacted by Omicron, both for revenues and unit costs.\nWe do believe that virus will move to endemic status and that demand will ultimately stabilize.\nAnd when it does, our business model is set to outperform.\nNotwithstanding a challenging first quarter, we expect to be profitable for the month of March and for the remainder of the year.\nWe remain committed to returning to pre-COVID capacity by the summer and plan to grow from there.\nI expect full year capacity to be up versus 2019, between 2% and 6%, dependent on demand.\nThis guidance reflects first-half capacity that is flat, to slightly up and second-half capacity that could be up as much as 10% versus 2019.\nAs we did throughout 2021, we will continue scaling our business back in a measured way, leveraging our strong balance sheet and running our operation to produce consistent, industry-leading financial performance in 2022.\nI hope you'll join us at our upcoming investor day.\nWe plan to share our long-term expectations, including comprehensive 2022 guidance.\nThis event is set for March 24 in New York.\nIt is no secret that this is a tough business, but the pandemic has surprised and challenged even the most seasoned in our industry.\nThe strength of our company comes from our people and culture of care, our focus on safety and operational excellence, our reputation for customer service and our financial discipline.\nI am confident these strengths will serve us well again in 2022.\nFourth quarter revenues totaled $1.9 billion and were only down 15% versus 2019, which was better than our guide.\nAnd with flowing capacity also down 15%, our fourth quarter unit revenues were flat in 2019.\nAs Ben mentioned, end-of-quarter weather disruptions were significant, impacting revenue by approximately $45 million.\nEven with these setbacks, our revenue recovery improved by 3 points from what we viewed was a relatively strong third quarter.\nLoad factors showed continued improvement throughout the quarter as well, progressing from 75% in October to 80% in November and 83% in December, signaling demand for travel continues to move in the right direction.\nThe strength of this demand clearly played out in our November revenue results.\nNovember revenues were down just 7% versus 2019 on 12% less capacity.\nMy take from that result is that our fundamental revenue results were better this November than in 2019.\nEven though we've not seen anywhere close to a full business demand recovery, the full impact of our oneworld and American partnerships or a complete West Coast recovery.\nOur network is well-positioned for recovery.\nAnother encouraging indicator of yields, which ended the quarter up 3% versus 2019.\nThis was driven by the strength of holiday bookings and solid demand management by our RM team, despite the Delta and Omicron variants bookending the quarter.\nFor the winter holiday period, we were on pace for flat-to-positive load factors and double-digit yield gains, prior to the impact of the winter disruption.\nThey came together as a fully integrated team and did a tremendous job stimulating demand and welcoming guests back to flying, managing loads and yields and taking care of guests during disruptions.\nThe net result of all of this was posting the best unit revenue performance in the industry for the second half of 2021 is down just 0.5%.\nAs we've seen all year, guest preference for our first- and premium-class products remained strong in the fourth quarter.\nFirst-class-paid load factor ended the quarter up 2 points and premium-class-paid load factor was up 8 points, both versus the fourth quarter of 2019.\nRoyalty strength also carried through year end, particularly from our credit card program.\nOur bank card remuneration reached record levels in the fourth quarter, up 13% versus the fourth quarter of 2019.\nWe have a tremendous partner in Bank of America, who issued our co-brand card.\nAnd we're excited about the highly engaged cardholder base that we've established together.\nLooking ahead, while the impact of Omicron will be transitory, each successive variant has been expensive for our business.\nImpacts also blend in the February 3 Presidents Day, but at a much reduced rate from January.\nWe estimate Q1 bookings lost to this way by approximately $160 million.\nAs Ben mentioned, we've seen bookings start to recover from down 40% versus 2019 in the first week of January, to around 25% today.\nMarch loads and yields are strong.\nAnd we expect them to remain this way, as the negative impact of the variant continues to subside.\nGiven the abrupt softening of close-in demand, we've moderated our capacity plans in the first quarter.\nWe will fly approximately 10% to 13% below the same period in 2019.\nWith the lost bookings in January and February, we expect total revenues in Q1 to be down 14% to 17% from 2019 levels.\nQ1 is our seasonally weakest quarter.\nAnd while it's unfortunate, it will be significantly impacted by Omicron, I prefer Q1 was impacted versus any other quarter.\nWe do anticipate that when Omicron moves behind us, demand will snap back to recovery path we were seeing, leading into the holidays.\nAs that has been the trend after prior waves, spring and summer travel should be strong on the leisure side and benefit from further unlocking of business and international travel.\nI look forward to quantifying our expectations for the full year, but we're saving many of those details for our upcoming investor day.\nThat said, I do want to speak in a bit more detail about our '22 capacity plans.\nAs Ben shared, we're targeting to return to pre-COVID capacity by the summer and the growth through the back half of the year for full year 2022 capacity growth of between 2% and 6%, depending on demand.\nIn Seattle, we are already above pre-COVID capacity.\nA material portion of our planned growth in the back half of 2022 will be from our Pacific Northwest hubs, as we look to continue to enhance relevance and scale, mostly through scheduled debt.\nCalifornia demand has recovered more slowly than the rest of the network.\nBut as we bring California fully back in '22, I'm excited about the opportunities that await us.\nThis must be brought onboard a new regional vice president of California, Neil Thwaites, who will be a pivotal part of growing our presence in the state, from both a business and leisure perspective.\nFrom a commercial perspective, I'm anxious to capitalize on a full recovery.\nI believe, we have the right cost structure, the right commercial offerings and the right balance sheet to allow us to grow versus 2019, as the recovery continues to unfold.\nWe have flexibility to adjust our capacity as needed to match supply with demand, and we are looking at the back half of 2022 as a period that pivots from capacity recovery to one of capacity growth.\nAnd as we plan for growth across our West Coast hubs, we're eager to maximize the potential of our Loyalty program and leverage the international capabilities of our oneworld partners to provide our guests with global access.\nBeginning summer of 2022, British Airways will fly non-stop service from Portland to London, Heathrow, and Finnair is set to launch non-stop flight from Seattle to Helsinki.\nThis summer, Alaska partners will have over 100 non-stop flights per week of the West Coast to Europe.\nWe've been navigating the ups and downs of this pandemic for nearly two years now.\nAnd while we know the first quarter will be weaker than we expected just a month ago, I'm very optimistic about how we are positioned for March and beyond.\nAnd with that, I'll pass it to Shane.\nI'll start, as I always do with an update on cash flow, liquidity and our balance sheet.\nWe ended the year with $3.5 billion in total liquidity, inclusive of on-hand cash and undrawn lines of credit, which is essentially unchanged from Q3 and reflects $112 million in debt repayments during the quarter.\nOur Q4 cash flow from operations was $129 million, above our previous guidance, largely driven by stronger demand recovery than anticipated, given we were dealing with the now old news Delta variant, as we came into the quarter.\nOur balance sheet remains a bright spot in point of differentiation within the industry.\nThis year, our debt-to-cap ratio fell to 49%, 12 points below year-end 2020, placing us within our stated target range and as Ben said, essentially back to our pre-COVID balance sheet strength.\nIn fact, in a period marked by increasing debt across the industry, our adjusted net debt ended the year 40% lower than 2019.\nWe're pleased to have received a credit upgrade in late December as well, moving us one step closer to an investment-grade rating.\nThe weighted average effective rate of our outstanding debt is 3.3% and our debt service is entirely manageable going forward.\nContractual debt repayments in 2022 are about $370 million with $170 million in Q1.\nGiven the low-cost nature of our debt, we don't plan to make any significant prepayments during 2022.\nRounding out the strength of our balance sheet, our pension plans ended the year at 98% funded, the highest level we've achieved since 2013.\nOur strong balance sheet and ample liquidity put us in a terrific position to pay cash for the 32 737-9 aircraft deliveries we have in 2022.\nWe feel very comfortable with our liquidity position, especially given our belief that we are back to annual profitability and consistent annual positive cash flow generation.\nBy the end of 2022, I expect our total liquidity will step down to around $2.5 billion.\nOur net debt-to-EBITDA to settle around two times or less.\nTurning to the P&L, our 2.4% pre-tax profit was a solid outcome, given the circumstances in the quarter.\nAndrew spoke to the revenue results, and I'll dive into our cost.\nOur non-fuel costs were $1.4 billion in the fourth quarter, inclusive of approximately $25 million of unexpected costs from the December disruption.\nThis was driven by approximately $18 million for overtime and wage premiums, as we worked to stabilize the operation from staffing disruptions, and $7 million incurred for passenger remuneration, EIC and other related costs.\nTypical bad weather event for Alaska might last a couple of days and impact a single hub.\nThe December event lasted an entire week, impacted both Seattle and Portland and was exacerbated by the start of a surge in Omicron-related staffing shortages.\nIn short, a literal perfect storm.\nAs Andrew indicated, the revenue impact of our cancellations was $45 million.\nAnd given the $25 million in incremental cost, this event alone raised $70 million of profit from the December month and quarter.\nThe combination of lower ASM production and higher costs, resulted in our CASMex being up 12% versus 2019 outside the high end of our range.\nAbsent the disruption, our cost results would have been in line with our guide.\nLooking ahead on costs, our commitment to returning to 2019 CASMex levels remains unchanged.\nWe know we've got our work cut out for us.\nOur business model drives some predictability and execution.\nAnd it is obvious that COVID has inserted a level of volatility into our industry that makes managing a high fixed-cost business more difficult.\n2022 will start off very challenged, but we fully expect it to sequentially improve materially, as the year progresses.\nFor the first quarter, Q1 CASMex is expected to be up 15% to 18% and capacity down 10% to 13% versus 2019.\n7 points of this is purely driven by our late pull down of first-quarter capacity.\nWhile the reduction will help ensure our ability to operate the flights we sell, given Omicron's impact on staffing, and as a hedge against lower-closing demand.\nThe reality is, we cannot pull out most cost.\nAbsent the capacity pull down, our unit cost guide would have been up 8% to 11%.\nIn addition, our costs in Q1 include two items contributing another 3.5 points of pressure that are worth detailing.\nFirst, approximately 2.5 points of our Q1 unit cost increase is related to lease return expenses for our Airbus aircraft.\nAs previously noted, given the speed with which we plan to return to a single fleet, we will be incurring significant costs associated with returning these leased Airbus aircraft, primarily over the next two years.\nI currently expect the total waste return expense to be between $200 million and $275 million in total with more than half of that being recorded this year.\nThese transitory return costs begin in earnest in the first quarter of 2022 will peak by Q4 of this year and will then taper through 2023, as the last A320 leaves the fleet.\nSo while a headwind right now, it will become a tailwind to our cost structure in the next eight quarters, which will be further helped as we replace the 150-seat Airbus with the 178-seater, cost-efficient Boeing 737-9 aircraft.\nSecond, approximately one point of our expected Q1 unit costs are being driven by incremental trading costs and wages of newly hired employees, as we prepare to recover to pre-COVID capacity by the summer.\nTo move from 80% to 85% of pre-COVID flying to 100% and then beyond, we must staff up early, given the throughput capacity of our hiring and training infrastructure.\nWe expect fuel prices to be between $2.45 and $2.50 per gallon in Q1, also increased from the last quarter.\nDespite this quarter's cost guide, largely driven by the late pull down of capacity that I noted, we expect significant sequential improvement in unit cost, as we recover capacity throughout the year.\nWe expect full year 2022 unit costs inclusive of lease return expense, to be up 3% to 6%, and on an ex-lease return basis, to be up 1% to 3%.\nThis estimate implies returning to our pre-COVID cost structure during the second half of the year.\nThis entire pandemic and our recovery has been, obviously, unpredictable, but I'm excited about what lies ahead for Alaska.\nI truly believe we've set up our business to deliver superb results, as demand fully stabilizes.\nWith continued focus on our cost initiatives, fleet transition and our commercial opportunities, we have valuable levers that set us up for a great next couple of years.\n",
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"content": "alaska air group delivers strong fourth quarter 2021 and full-year results.\nalaska air group sees q1 capacity (asms) change versus 2019 down 10% to 13%.\nsees q1 capacity (asms) change versus 2019 down 10% to 13%.\nsees q1 total revenue % change versus 2019 down 14% to 17%.\nsees q1 cost per asm excluding fuel and special items change versus 2019 up 15% to 18%.\nin late dec, early jan, omicron drove significant increase in employee absences, having acute impact on ability to fully operate.\nproactively reduced our q1 scheduled flying.\nclose-in demand also weakened amidst the omicron surge, specifically impacting january and february bookings.\nhave recently seen demand start to recover, with bookings strengthening for presidents day and beyond.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Yesterday, following the close of the market, we issued our news release and investor supplement and posted related materials to our website at allstateinvestors.com.\nOur management team is here to provide perspective on these results.\nLet's start on slide two.\nSo this is Allstate's strategy on the left-hand side, which we've talked about before.\nWe have two components: increase personal property-liability market share and expand the protection solution.\nThose are the two ovals you see on the left with the intersection between them.\nThe key third quarter results are highlighted on the right-hand panel.\nProperty-Liability policies in force increased by 12.5%.\nAllstate Protection Plans continue to grow rapidly by both broadening its product offering and expanding the network of retail providers.\nAs a result, we now have almost 192 million policies in force across the enterprise.\nFinancially, the results were more mixed.\nRevenues were up substantially, but net income and adjusted net income declined from the prior year quarter.\nUnderwriting income declined primarily due to higher loss costs in settling auto insurance claims.\nWe've implemented price increases to proactively respond to the sharp rise in loss cost, and Transformative Growth continues to position us for long-term success, both of which we'll talk about in a couple of minutes.\nThis was partially offset by the benefits from our long-term risk and return programs that include significant reinsurance recoverables.\nThey were primarily related to Hurricane Ida, and a substantial increase in performance-based investment income.\nCapital deployment results were excellent, with $1.5 billion of cash returned to shareholders in the quarter.\nWe also completed the divestitures of our two largest life and annuity businesses, one in October and then one just earlier this week.\nSo let's go to slide three.\nRevenues of $12.5 billion in the quarter increased 16.9% compared to the prior year quarter, and that reflects both the higher earned -- National General acquisition, Allstate brand, homeowners premium growth and higher net investment income.\nProperty-Liability premiums and policies in force increased 13.5% and 12.5%, respectively.\nNet investment income was $764 million, and that's up almost about $300 million compared to the prior year quarter, reflecting strong results from the performance-based portfolio.\nNet income was $508 million in the quarter, and that's compared to $1 billion in the prior quarter as lower underwriting income was partially offset by the higher investment income.\nAdjusted net income was $217 million or $0.73 per diluted share, and it's decreased $683 million compared to the prior year quarter, reflecting the lower underwriting due to the higher auto and homeowners insurance loss costs.\nNet income for the first nine months of 2021 was below the prior year, and that's largely due to the loss on the sale of the life annuity business, which we reported earlier in the year.\nAdjusted net income was $10.70 per share for the first nine months, and that was above the prior year as higher investment income and lower expenses [Technical Issues] more than offset higher loss costs.\nWhat I would do is put the pandemic in a longitudinal perspective because this created volatility for our results, and it obviously requires us to adapt quickly, which we do.\nBut before we go through the impact on the third quarter results of the supply chain disruption, let's talk about the initial and subsequent impact of the pandemic.\nSo in 2020, the economic lockdown resulted in fewer miles being driven and promoted -- and prompted an aggressive economic support response from, really, governments around the world.\nThe impact on auto insurance was a dramatic drop in the number of accidents.\nAnd of course, due to this unprecedented driver in frequency, we proactively provided our customers with some money back, which increased customer retention.\nSince then, since there was less road congestion and fewer accidents that occurred during commuting hours, the average speed and severity of auto claims increased, offsetting some of the frequency benefit.\nNevertheless, underwriting margins improved dramatically, so we introduced a temporary Shelter-in-Place payback rather than take a permanent rate reduction and took some modest overall reductions in rate levels.\nThis year, as you can see from the right-hand column, the story has been just the opposite as it relates to frequency with large percentage increases.\nAnd while the overall level of accident frequency for the Allstate brand is still below prepandemic levels, the national and general nonstandard business is back to the levels before the pandemic.\nAuto severity this year, however, has been dramatically impacted by the supply chain disruption, and price increases on used cars and original equipment parts, and Mario will take you through that in a couple of slides.\nFrom a pricing perspective, this results in moving from modest rate reductions to significant increases in auto insurance prices.\nFrom a growth standpoint, at the onset of the pandemic, we began to see a material increase in the consumer acceptance telematics, and we've really leaned into that with our Milewise product, which is really the only national product out there to pay for the mile, and that's led to substantial increase in our telematics product.\nNow the pandemic has also had a significant impact on the investment portfolio, and this is the tale of the beginning and the end as well.\nSo early in the crisis, equity valuations were down, and this had a negative impact on investment results.\nThen, of course, on -- and we have a broad-based long-term spread out over a decade really investing in these kinds of funds.\nAnd so we do it on a long-term basis, whether that's three, five or 10 years.\nBut -- so what's happened this year, of course, is we've had the opposite happen, which is with the economic stimulus, we've had equity valuations going up, and our returns have come back strongly.\nIn the market-based portfolio, lower interest rates at the onset of this pandemic did lead to an increase in the unrealized gains in the portfolio.\nBut of course, what that does is reduce future interest rate income, which you see slight decline in this quarter.\nAnd many of our other businesses have been impacted some positively, some negatively, but it's our ability to adapt and seize the opportunities that are presented that create shareholder value.\nSo Mario will now go through the third quarter results in more detail and how Transformative Growth positions of Allstate for continued success.\nLet's move to slide five to review Property-Liability margin results in the third quarter.\nThe recorded combined ratio of 105.3 increased 13.7 points compared to the prior year quarter.\nThis was primarily driven by increased underlying losses as well as higher catastrophe losses and non catastrophe prior year reserve reestimates.\nThe chart at the bottom of the slide quantifies the impact of each component in the third quarter compared to the prior year quarter.\nAs you can see, the personal auto underlying loss ratio drove most of the increase due to higher auto accident frequency and the inflationary impacts on auto severity.\nHigher catastrophe losses shown in the middle of the chart had a negative 1.4 point impact on the combined ratio as favorable reserve reestimates recorded in 2020 from wildfire subrogation settlements positively impacted the prior year quarter.\nGross catastrophe losses were higher but were reduced by nearly $1 billion of net reinsurance recoveries following Hurricane Ida, demonstrating the benefits of our long-term approach to risk and return management of the homeowners insurance business and our comprehensive reinsurance program.\nNoncatastrophe prior year reserve strengthening of $162 million in the quarter drove an adverse impact of 0.8 points primarily from increases in auto and commercial lines.\nThis also included $111 million of strengthening in the quarter related to asbestos, environmental and other reserves in the runoff Property-Liability segment following our annual comprehensive reserve review.\nThis was partially offset by a lower expense ratio when excluding the impact of amortization of purchased intangibles primarily due to lower restructuring and related charges compared to the prior year quarter.\nMoving to slide six.\nLet's go a bit deeper on auto insurance profitability.\nAllstate brand auto insurance underlying combined ratio finished at 97.5 for the quarter and 89.7 over the first nine months of 2021.\nThe increase to the prior year quarter reflects higher loss cost due to higher accident frequency, increased severity and competitive pricing enhancements implemented in late 2020 and earlier this year.\nWhile claim frequency increased relative to prior year, we continue to experience favorable trends relative to prepandemic levels.\nAllstate brand auto property damage frequency increased 16.6% compared to 2020 but decreased 16.8% relative to 2019.\nThe chart on the lower left compares the underlying combined ratio for the third quarter of 2019 to this quarter to remove some of the short-term pandemic volatility.\nThe underlying combined ratio was 93.1 in 2019, which generates an attractive return on capital.\nFavorable auto frequency in the third quarter of 2021 lowered the combined ratio by 6.4 points compared to 2019.\nIncreased auto claim severity, however, increased the combined ratio by 12 points versus two years ago, as you can see from the red bar.\nThe cost reductions implemented as part of Transformative Growth reduced expenses by 1.3 points, which favorably impacted 2021 results.\nAs Tom mentioned, early in the pandemic, the severity increases were driven by higher average losses due to a reduction in low severity claims.\nThis year, the increase reflects the impact of supply chain disruptions in the auto markets, which has increased used car prices and enabled original equipment manufacturers to significantly increase part prices.\nThe chart on the lower right shows used car values began increasing above the CPI in late 2020, which accelerated in 2021, resulting in an increase of 44% since the beginning of 2019.\nSimilarly, OEM parts have also increased in 2021, roughly twice as much as core CPI.\nThis has resulted in higher severities for both total loss vehicles and repairable vehicles.\nSince these increases were accelerating throughout the second and third quarters of the year, we increased expected loss costs for the first two quarters of 2021, and this prior quarter strengthening shows up in the combined ratio for the third quarter.\nIncreases in report year severities for auto insurance claims during the first two quarters of 2021 increased the third quarter combined ratio by 2.6 points, as you can see by the green bar on the lower left.\nSo let's flip to slide seven, which lays out the steps we're taking to improve auto profitability.\nAs you can see from the chart on the top, Allstate has maintained industry-leading auto insurance margins over a long period of time, with a combined ratio operating range in the mid-90s, exhibiting strong execution and operational expertise.\nTo maintain industry-leading results, we are increasing rates, improving claims effectiveness and continuing the lower costs.\nAfter lowering prices in early 2021 to reflect in part Allstate's lower expense ratio, we have proactively been responding with increases in the third quarter, with actions continuing into the fourth quarter and into 2022.\nThe chart on the right provides selected rate increases already implemented in the third and fourth quarter as well as publicly filed rates that have yet to be implemented in the fourth quarter.\nThose states denoted with the caret are top 10 states in terms of written premium as of year-end 2020.\nIn the third quarter, we've received rate approvals for increases in 12 states, primarily in September.\nWe adapted quickly to higher severities in the fourth quarter, with plans to file rates in an additional 20 states.\nWe have already implemented rate increases in eight states during the fourth quarter, with an average increase of 6.7% as of November 1.\nLooking ahead, we expect to pursue price increases in an additional 12 locations by year-end.\nWe are working closely with state regulators to provide detailed support and decrease the lag time between filing, implementation and premium generation.\nAs we move into next year, it is likely auto insurance prices will continue to be increased to reflect higher severities.\nWe also continue to leverage advanced claims capabilities and process efficiencies.\nCost reductions as part of Transformative Growth will also continue to be implemented.\nAs you can see by the chart on the bottom of the slide, we've defined a new non-GAAP measure this quarter referred to as the adjusted expense ratio.\nThis starts with our underwriting expense ratio, excluding restructuring, coronavirus-related expenses, amortization and impairment of purchased intangibles and investments in advertising.\nIt then also adds in our claim expense ratio, excluding costs associated with settling catastrophe claims, which tend to be more variable.\nWe believe this measure provides the best insight into the underlying expense trends within our Property-Liability business.\nThrough innovation and strong execution, we achieved 2.6 points of improvement when comparing 2020 to 2018, with further improvement occurring through the first nine months of 2021.\nOver time, we expect to drive an additional three points of improvement from current levels, achieving an adjusted expense ratio of approximately 23 by year-end 2024.\nThis represents about a 6-point reduction relative to 2018 or an average of one point per year over six years, enabling an improved price position relative to our competitors while maintaining attractive returns.\nFuture cost reductions center around continued digital enhancements to automate processes, enabling the retirement of legacy technology, operating efficiency gains from combining organization -- combining organizations and transforming the distribution model to higher growth and lower costs.\nTransitioning to slide nine, let's go up a level to show how Transformative Growth positions us for long-term success and how the components of Transformative Growth work together to create a flywheel of profitable growth.\nAs you know, Transformative Growth is a multiyear initiative to increase personal Property-Liability market share by building a low-cost digital insurer with broad distribution.\nThis will be accomplished by improving customer value, expanding customer access, increasing sophistication and investment in customer acquisition and deploying a new technology ecosystem.\nWe've made significant progress to date across each component.\nStarting at the top of the flywheel visual, our commitment to further lower our costs, improves customer value and enables a more competitive price position while maintaining attractive returns.\nEnhancing and expanding distribution puts us in a position to take advantage of more affordable pricing.\nIncreasing the analytical sophistication of new customer acquisitions lets consumers know about this better value proposition.\nNew technology platforms, lower costs and enable us to further broaden the solutions offered to property liability customers.\nThis flywheel will enable us to increase market share and create additional shareholder value.\nTurning to slide 10.\nLet's look at the changes to the distribution system, which are also underway.\nAs you can see in the chart on the left side of the slide, Property-Liability policies in force grew by 12.5% compared to the prior year quarter.\nNational General, which includes Encompass, contributed growth of four million policies, and Allstate brand Property-Liability policies increased by 231,000 driven by growth across personal lines.\nAllstate brand auto policies in force increased slightly compared to the prior year quarter and sequentially for the third consecutive quarter, including growth of 142,000 policies compared to prior year-end, as you can see by the table on the lower left.\nThe chart on the right shows a breakdown of personal auto new issued applications compared to the prior year.\n[Technical Issues] 38% increase in the direct channel more than offset a slight decline from existing agents and volume that would have normally been generated by newly appointed agents.\nAs you know, we've significantly reduced the number of new Allstate agents being appointed beginning in early 2020 since we are developing a new agent model to drive higher growth at lower cost.\nThe addition of National General also added 502,000 new auto applications in the quarter.\nMoving to slide 11.\nProtection Services continues to grow revenue and profit.\nRevenues, excluding the impact of realized gains and losses, increased 23.3% to $597 million in the third quarter.\nProtection Plans and net written premium increased by $139 million due to the launch of the Home Depot relationship focusing on appliances.\nOur quarterly net written premium is now 5.5 times the level of when the company was acquired in 2017.\nArity expanded revenues due to the integration of LeadCloud and Transparent.\nly, which were acquired as part of the National General acquisition as well as increased device sales driven by growth in the Milewise products.\nPolicies in force increased 12.5% to 150 million driven by growth in Allstate Protection Plans and Allstate Identity Protection.\nAdjusted net income was $45 million in the third quarter, representing an increase of $5 million compared to the prior year quarter driven by higher profitability at Allstate Identity Protection and Arity.\nThis was partially offset by higher operating costs and expenses related to investments in growth.\nNow let's shift to slide 12, which highlights our investment performance.\nNet investment income totaled $764 million in the quarter, which was $300 million above the prior year quarter, driven by higher performance-based income, as shown in the chart on the left.\nPerformance-based income totaled $437 million in the quarter, as shown in gray, reflecting increases in private equity investments.\nAs in prior quarters, several large idiosyncratic contributors had a meaningful impact on our results.\nThese results represent a long-term and broad approach to growth investing, with nearly 90% of year-to-date performance-based income coming from assets with inception years of 2018 and prior.\nMarket-based income, shown in blue, was $6 million below the prior year quarter.\nThe impact of reinvestment rates below the average interest-bearing portfolio yield was somewhat mitigated in the quarter by higher average assets under management and prepayment fee income.\nOur total portfolio return was 1% in the third quarter and 3.3% year-to-date, reflecting income and changes in equity valuations, partially offset by higher interest rates.\nWe take an active approach to optimizing our returns per unit risk for appropriate investment horizons.\nOur investment activities are integrated into our overall enterprise risk and return process and play an important role in generating shareholder value.\nWhile the performance-based investment results continue to be strong in the third quarter, we manage the portfolio with a longer-term view on returns.\nOn the right, we have provided our annualized portfolio return in total and by strategy over various time horizons.\nConsistent with broader public and private equity markets, our portfolio has experienced returns above our historical trend over the last several quarters.\nWhile prospective returns will depend on future economic and market conditions, we do expect our performance-based returns to moderate in line with our longer-term results.\nNow let's move to slide 13, which highlights Allstate's strong capital position.\nAllstate's balance sheet strength and excellent cash flow generation provides strong cash returns to shareholders while investing in growth.\nSignificant cash returns to shareholders, including $1.5 billion through a combination of share repurchases and common stock dividends, occurred during the third quarter.\nCommon shares outstanding have been reduced by 5% over the last 12 months.\nAlready in the fourth quarter, we successfully completed the acquisition of SafeAuto on October one for $262 million to leverage National General's integration capabilities and further increased personal lines market share.\nWe also recently closed on the divestitures of Allstate Life Insurance Company and Allstate Life Insurance Company in New York.\nThese divestitures free up approximately $1.7 billion of deployable capital, which was factored into the $5 billion share repurchase program currently being executed.\nTurning to slide 14.\nLet's finish with a longer-term view of Allstate's focus on execution, innovation and sustainable value creation.\nAllstate has an excellent track record of serving customers, earning attractive returns on risks and delivering for shareholders, as you can see by the industry-leading statistics on the upper right.\nF Innovation is also critical to the execution, and our proactive implementation of Transformative Growth has positioned us well to address the macroeconomic challenges facing our business today and in the future.\nSustainable value creation also requires excellent capital management and governance.\nAs an example, Allstate is in the top 15% of S&P 500 companies and cash returns to shareholders by providing an attractive dividend and repurchasing 25% and 50% of outstanding shares over the last five and 10 years, respectively.\nExecution, innovation and long-term value creation will continue to drive increased shareholder value.\n",
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"content": "qtrly adjusted earnings per share $0.73.\ntotal revenues of $12.5 billion in the third quarter of 2021 increased 16.9% compared to the prior year quarter.\ncompname reports q3 revenue of $12.5 billion.\nq3 adjusted earnings per share $0.73.\nq3 revenue $12.5 billion.\nauto insurance had underwriting loss in quarter as supply chain disruptions drove rapid price increases for used cars and original equipment part.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Earlier today, we published our results for the first quarter of 2021.\nThis includes, without limitation, statements regarding our future operations and performance, revenues, operating expenses, stock-based compensation expense and other income and expense items.\nThese statements and any projections as to the company's future performance represent management's estimates for future results and speak only as of today, May 6, 2021.\nIn addition, certain financial measures we may be using during the call such as adjusted net income before income taxes, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on equity are non-GAAP measures.\nThis release can be found in both the Investors and Press section of our website at www.\nUnauthorized recording of this conference call is not permitted.\nMore than a year has passed since the state -- start of the COVID-19 pandemic, and we are beginning to see recovery in sight.\nWe're optimistic that as vaccine rates rise, travel restrictions are eased and as countries work independently and collectively to develop initiatives to enable free movement, we will see a further resurgence of air travel.\nWith that said, most of our airline customers are still grappling with the strain and limitations resulting from the ongoing pandemic.\nToday in our comments, I hope it will be clear how we are growing and further differentiating our platform, while also supporting our airlines and how we see that benefiting us as we move forward.\nFor the first quarter of 2021, we are reporting $475 million in total revenues and diluted earnings per share of $0.70 a share, down 7% and 40%, respectively, compared to the prior year's prepandemic first quarter.\nOur results this quarter were impacted by approximately $86 million of rental revenues we did not recognize in the quarter due to cash versus accrual basis revenue recognition and lease restructurings.\nGreg will walk you through more specifics in his remarks.\nWe took delivery of approximately $600 million in new aircraft in the quarter, which is $200 million more than we originally anticipated.\n87% of these deliveries by dollar value occurred in the last seven business days of March, providing minimal rental contribution for the quarter, but providing long-term rental contributions thereafter.\nOur cash collections and lease utilization rate remained solid in the first quarter at 84% and 99.6%, respectively, albeit both slightly lower than what we saw in Q4.\nTo date, we have agreed to accommodations with approximately 63% of our lessees, with deferrals totaling approximately $243 million.\nImportantly, however, our total deferrals, net of those that have already been repaid continues to improve.\nAs of today, our net deferrals stand at $131 million as compared to $144 million as of our last call in February, and almost half of all the deferrals we have granted to date have been repaid.\nOur net deferrals represent less than 2% of our available liquidity at the end of the first quarter.\nFurthermore, our overall cash flow from operations actually increased slightly this quarter compared to last year's prepandemic first quarter.\nThe pace of request for rent deferrals and lease restructuring from our airline lessees has slowed meaningfully.\nWe remain fully committed to helping our airline customers get through this pandemic, and our customer relationships are growing even stronger because of our help and commitment.\nSo in spite of short-term headwinds impacting our first quarter results, we remain long-term partners to the airlines, and our business is positioned to benefit.\nIn many cases, airlines have differentiated ALC from peers by choosing to continue operating Air Lease aircraft while, at the same time, rejecting leases of other lessors and returning their aircraft.\nOther airline customers have chosen to defer their own orders and instead opt to lease aircraft from ALC, which remain -- will remain core to the airline's long-term fleet strategy for years to come.\nAs such, our lease placements remain strong at 95% of our order book placed on long-term leases for aircraft delivery through 2022 and 80% through 2023.\nSo looking ahead, we technically have OEM-contracted commitments to take delivery of 64 aircraft in the remainder of 2021.\nBut given continued OEM and pandemic delays, we currently expect to deliver approximately 44 aircraft, and that number could change.\nWe expect a range of approximately $3 billion to $4.3 billion in aircraft investments for the full year 2021.\nAs of today, we are anticipating approximately $1.2 billion of these deliveries to occur in the second quarter.\nWe continue to evaluate supplemental aircraft investment opportunities outside of our order book that are profitable and makes sense for ALC over the long term.\nWe're pleased that 787 deliveries have resumed.\nAnd in the first quarter, we delivered one 787 to Air Premia in South Korea.\nAnd more recently, we delivered two 787s to China Southern in April.\nAs you saw from our quarterly fact sheet release, we also delivered four 737-8MAX aircraft this quarter.\nAs it relates to the recent grounding notice issued regarding the electrical power system on the 737 MAX aircraft, we did have six aircraft delivered to our customers, subject to this order.\nBoeing is working with the FAA to conclude the process required for operators to return the aircraft to service.\nThe actual work involved to accomplish the mandated service bolt-ons is expected to take just a few days per aircraft.\nUntil this process with the FAA is concluded, we may experience further delivery delays of the 787.\nDespite these recent developments, we do have several customers who have expressed a desire to reactivate taking delivery of several MAX aircraft that we previously canceled with Boeing pursuant to our cancellation rights.\nWe're working with Boeing and those airline customers to reactivate those specific deliveries under favorable pricing and delivery terms.\nAs to aircraft sales in our management business, we do anticipate a resumption of our aircraft sales program targeting the second half of the year.\nHowever, we anticipate our overall sales in 2021 will not reach prepandemic level.\nAs always, we are taking a disciplined approach to sales, analyzing the aircraft portfolio sales environment and the contemplated gains on those sales as against keeping these good earning assets for a bit longer as they approach six to eight years of age.\nAnd as we advised last quarter, we are growing our aircraft management business nicely.\nIn fact, in just a 100-day period, we sourced in the secondary market over $600 million of aircraft suited specifically for Blackbird Capital II, of which two delivered in the first quarter and the remaining aircraft will deliver over future quarters.\nFurthermore, we have entered into another management platform agreement with one of the previous investors in Thunderbolt to acquire aircraft and have sourced seven new aircraft for that investor through airline sale-leaseback transactions for forward deliveries.\nThis is an additional attractive and growing management platform that dovetails exactly what we told you last quarter in mirroring or coupling sale-leaseback transactions with direct placements from ALC's order book.\nMost recent example of this was the placement of four new A320neos with Volaris in Mexico, two from ALC's order book and two from sale-leasebacks, a transaction we announced on April 26.\nAnd finally, as we look around the world, we are mindful of our social and environmental responsibilities, and we are taking active steps on these fronts.\nThe scope and magnitude simply defy description.\nAs such, I'm proud to announce that ALC is donating $100,000 to the relief efforts in India.\nWe are expanding such initiatives.\nIn fact, our ESG committee has several projects and efforts under consideration that we believe will further aid our planet and the human condition.\nOver the last decade, Air Lease has focused on growing our company organically to now over $25 billion in assets, and our fleet and order book are comprised of the aircraft we personally selected.\nThere's been a lot of attention in recent weeks to size and scale and to interplay that with our ability to deal and negotiate with the manufacturers and airlines.\nThere is not one right answer for what is the right size for an aircraft lessor.\nBut what has been validated during the pandemic is that ALC has the asset strategy that aligns to the industry needs and desires.\nAnd that our existing fleet size and order book, together with our deep knowledge of the assets and fleet planning expertise and the relationships that we've built over multiple decades, makes us a valued partner to our customers and the OEMs. And this gives us tremendous confidence in our future.\nLooking at the airline landscape.\nAs you can take away from the daily headlines at recent public reporting from us and many other companies, the current operating environment is very dynamic.\nWhile deferrals and restructuring agreements are not ideal in any environment, we are pleased to say that it is clear from our conversations that airlines want to keep our aircraft as the backbone of their fleets.\nAnd as such, we are working together to come to commercial arrangements on how to proceed.\nNot every leasing company is in the same advantageous position as ALC in this regard, and it is an important differentiator in this type of environment.\nWe remain very focused in the coming months and years as the outlook for the return of air travel driving airline decisions today.\nEven though many countries are still trying to gain control of the pandemic, we are moving in the right direction in comparison to where we were a year ago.\nFor us here in North America, there's no better example than what we're seeing on the heels of increased vaccination rates.\nIn the United States last year, at this time, TSA was seeing below 200,000 passengers a day.\nAnd as of this last Sunday, the TSA had over 1.6 million passengers pass through their security checkpoints.\nAnd this is with very limited international and business travel.\nWe believe that this will be further propelled if vaccinated Americans can travel to the EU this summer, as was mentioned by the President of the European Commission a few days ago.\nOutside of this broader announcement, while certain parts of Europe are still under vast restrictions, we are beginning to see individual countries change course selectively and carefully, announcing dates for reopening subject to negative test results prior to entry, in some cases, vaccination and other criteria.\nFor example, Greece recently announced that it is reopening its doors to COVID-free tourists from more than 30 countries as they take the so-called baby steps back to normalcy.\nWe recently heard from our friends at United, Delta and American that they will be introducing flights to capture the pent-up demand for travel to many of these destinations that are opening up.\nWe've seen similar announcements from countries like Iceland, allowing tours from certain countries and Croatia, allowing vaccinated travelers that are incoming.\nOutside of Europe, places like Israel and selected countries in Asia have also announced that they will allow limited groups to start arriving at the end of May and early June, subject to certain requirements.\nCountries are also working bilaterally to find ways to allow the flow of air travel despite of the pandemic.\nFor example, in mid-April, Australia and New Zealand opened a quarantine-free travel corridor.\nAnd you're hearing similar agreements being discussed by other countries.\nFor instance, the United Kingdom and Israel have mentioned a possible green travel corridor, while similar talks are now in process between the U.S. and the United Kingdom.\nIn addition, countries are exploring ways to digitize and simplify proof of COVID-19 vaccination or negative test results or both, sometimes referred to as a vaccine passport.\nThis scheme would allow travelers to satisfy entry requirements more easily.\nWe believe that these initiatives and others will be vital to restoring intercontinental leisure travel and gradually business travel as the year progresses.\nImportantly, as the world emerges from the pandemic and people can travel more freely, many millions will have the means to do so.\nIt was recently reported that consumers around the world had accumulated an extra $5.4 trillion of savings since the pandemic has begun, and we've heard executives across a broad spectrum of industry discussing pent-up demand that they believe exists.\nSince our last call alone, we have delivered a number of aircraft customers around the world who are modernizing their fleets and rightsizing their fleet composition in anticipation that air travel will recover over the coming several quarters.\nFor example, John mentioned the two 787-9 aircraft that we recently delivered to China Southern and Air Premia in Korea took another 787-9s.\nIn addition, we delivered the first of what will be five new 737 aircraft to Belavia, the national carrier of Belarus.\nThese aircraft will replace the airlines aging Boeing 737-300 and 737-500 aircraft.\nWe also delivered our third 737-8 to Cayman Airways in the Caribbean, the national flag carrier of Cayman Islands, which is retiring its last 737-300 aircraft and replacing it with our new 737-8 model, and the first of which, 10 737-8 aircraft that we just delivered to Blue Air in Romania.\nBlue Air is a ULCC carrier in Eastern Europe, which is also accelerating the retirement of their classic fleet of 737-300s and 500s in favor of more environmentally friendly and economic narrow-body aircraft.\nOn the Airbus side of the equation, we delivered one new A321neo LR aircraft to Air Astana, the flag carrier of the Republic of Kazakhstan.\nThis is the airline's fifth new A321LR on lease from ALC.\nIn addition, we delivered one new A321neo LR also to Air Arabia, which is now operating six A321-200neo LRs on lease from ALC.\nThese illustrate examples to show a broad range of customers taking delivery of our aircraft and how they are utilizing these aircraft to adjust and modernize their fleets.\nLooking forward, we're also starting to see an uptick in lease rentals on certain desirable aircraft types, particularly the A321neo, of which ALC is the largest order book of any aircraft lessor.\nThe A321neo and its longer-range variants, the A321LR and soon to enter service, the XLR, are taking place of smaller twin-aisle aircraft on transatlantic and intercontinental medium-haul routes, in addition to expanding basic route networks of many LCC and ULCC operators.\nWe have also placed our first 15 Airbus A220-300 aircraft from our 50 aircraft per motor of that type.\nOur A220 deliveries will commence in the second quarter of 2022.\nWhile wide-body aircraft remains somewhat challenged, let me emphasize what I said at the beginning of my remarks.\nSpecifically, that our young, fuel-efficient aircraft have a definitive advantage and that a number of airlines have kept our wide-body aircraft as the backbone of their wide-body fleet at the expense of other lessors.\nRecent examples include Aeromexico, Malaysian Airlines and Virgin Atlantic.\nOur forward placements and deliveries of wide-bodies are proceeding on track with airlines such as Delta and a number of international carriers.\nIn fact, ALC only has one unplaced A330neo from our order book and a very small number of A350s and 787s, which are now in process for future placement.\nOn the used aircraft side, our young fleet of 777-300ERs and A330-200s and 300s remain well placed with our customers, with only a modest number of lease expirations in the next 12 to 24 months, all of which are manageable.\nWe've also successfully extended the leases on a number of our 777-300 aircraft in the last six months.\nFinally, let me add one additional comment to John on the 737 MAX program.\nThe recertification of the MAX by China and Russia is still pending.\nChina, in particular, is a very large marketplace for the 737 family and the MAX.\nRussia is also an important customer in this regard.\nRecovery of the Boeing 737 program will not be complete until these countries certify and can obtain clearances to operate the 737 MAX in their country and for overflights.\nALC has several 737s on future delivery where our lessees require Russian and/or Chinese certification.\nALC remains fully committed to the 737 program, but I do feel compelled to point out that these remaining obstacles, including the very frustrating current grounding, need to be overcome by Boeing with haste.\nThe progress of U.S.A. and European summer traffic growth will also play a role in the pace of new 737 absorption by airlines for the remainder of 2021.\nThe U.S.A. looks well positioned for domestic summer travel recovery, while the extent of Europe aircraft and traffic recovery over the summer remains less certain.\nBut in the next coming weeks, we will have more visibility on that.\nI know it's been a long year and that the longevity of this pandemic has exceeded all expectations.\nHowever, I'd like to point out that I firmly believe that like other downturns in our industry, which has been experienced, recovery will recur and, in fact, is occurring in phases by domestic and international travel, by country and by region.\nWe at Air Lease Corporation have not underestimated the impact of the pandemic, and you are seeing that in how we are managing our business and dealing with our trusted airline customers.\nBut at the same time, we're also not losing sight of what lies ahead and how we best position our business for the months and years to come.\nLet me expand a bit on the details underlying our financial results for the first quarter.\nI'd like to remind everyone that for comparison purposes, the first quarter of 2020 was relatively unaffected by the COVID-19 pandemic.\nAs you would expect, the following COVID-related factors have continued to impact our performance in the first quarter of 2021.\nAs John mentioned, revenues were impacted by $86 million from the lease restructuring agreements and cash basis accounting, of which $49 million came in from lessees on a cash basis, where the lease receivables exceeded the lease security package and collection was not reasonably assured.\nThis compares to $25 million in the third quarter and $21 million in the fourth quarter of last year.\nIn total, our cash basis lessees represented 15.3% of our fleet by net book value as of March 31, as compared to 7.8% as of December 31.\nThe increase in rental revenue not recognized for the first quarter was primarily driven by a few customers with whom we are working forward -- working toward reaching a resolution.\nAlthough we will not be going into details on these specific customers, it is important to note that one of our larger customers in this group has committed that they will repay our receivable balance.\nI want to reiterate the fact that we are receiving cash payments from all of our cash basis lessees and that a majority of them are in some form of restructuring, and have expressed that they desire to keep our aircraft.\nWe remain hopeful that the remaining lessees will emerge from their restructurings in the not-too-distant future and that we can return to recognizing revenue on an accrual basis.\nIt remains very difficult to predict the cash collections from these customers.\nAnd notably, the first quarter was more challenging than we expected.\nHowever, we continue to believe that this recovery will be closely tied to improving passenger traffic and rising ticket sales.\nThe remaining $37 million is from lease restructuring agreements, the majority of which went into effect in 2020.\nOur lease restructurings are focused on situations where we believe the merits of the restructurings, including lease extensions and other considerations, outweigh these associated adjustments being made.\nOur total deferrals, net of repayments to date, is approximately $131 million, of which is down 9% from $144 million as of our last call in February.\nSince our last call, repayment activity has continued, with total repayments of $112 million or 46% of the gross deferrals granted and is reflected in our operating cash flow.\nI also want to reiterate that we believe our accommodations remain manageable and relative to our liquidity position.\nA final note regarding aircraft sales was that we sold new aircraft in the first quarter of this year as compared to three aircraft that we sold in the prior year as part of our Thunderbolt III transaction.\nAs John indicated, we anticipate that the resumption of our sales program is at a reduced scale during the second half of the year.\nInterest expense increased year-over-year, primarily due to the rise in our average debt balances, driven by the growth of our fleet and an increase in our liquidity position, partially offset by a decline in our composite cost of funds.\nOur composite rate decreased to 3% from 3.2% in the first quarter of 2020.\nDepreciation continues to track the growth of our fleet, while SG&A remained relatively low compared to last year, down 5%, representing 5.7% of total revenues.\nThe primary driver here is the continued low operating and transactional-related expenses, which continue to remain constrained in the current environment.\nWhile this quarter's results continue to be impacted by the pandemic, we do see light at the end of the tunnel.\nDespite the current stresses in the marketplace, we continue to generate positive margins and returns on equity, which should improve as our customers come off cash basis as the world continues to recover from the pandemic.\nTurning to capital allocation.\nWe have maintained our dividend policy and our Board has extended our share buyback authorization of $100 million through the end of December 2021.\nAlthough we have not repurchased any shares to date, we continue to look at the best opportunities to generate long-term results for our shareholders by evaluating all of our capital deployment options.\nLastly, I want to touch on financing, which continues to provide us a significant edge over our competition.\nWe are dedicated to maintaining an investment-grade balance sheet.\nUtilizing unsecured debt is our primary form of financing and have $23.7 billion in unencumbered assets at quarter end.\nAnd we ended the year with a debt-to-equity ratio of 2.5 times.\nIn addition to the senior unsecured note issuances we completed in January at a record low of 0.7%, we returned to the preferred market in February for our second raise in the space, issuing $300 million of perpetual preferred stock at a rate of 4.65%.\nPreferred equity is attractive as a component of our overall funding mix, offering favorable rates for long-term capital in support of our fleet growth, funding diversification and favorable rating agency treatment.\nFinally, as just announced last week, we extended the final maturity of our bank revolver to 2025 and upsized the facility by an additional $200 million, bringing our total revolving unsecured line of credit to $6.4 billion.\nWe continue to anticipate maintaining elevated levels of liquidity until the broader aviation market recovers, and we are well positioned from an opportunistic aircraft investments as opportunities arise.\nAs mentioned, ALC continues to have a robust liquidity position with $7.5 billion of available liquidity at the end of the first quarter and continue to access the investment-grade markets.\nAs we have always commented, our investment-grade credit ratings are sacrosanct to us.\nAnd you have seen our commitment to the investment-grade rating via how conservatively we run our business.\nWith that in mind, we are pleased to report that in early April, S&P reaffirmed our BBB rating and changed our outlook to stable from negative.\nAs I shared in the past, our balance sheet was originally designed to support $6 billion in aircraft investments annually, and we are well above what we anticipate taking in 2021, leaving us plenty of dry powder to explore further opportunities.\nBefore I conclude, I would like to note that we expect to file a new shelf registration statement in the upcoming days to renew our expiring shelf.\nTo be clear, this upcoming filing is being made to renew our existing shelf that expires under SEC rules next week.\nConsistent with previous filings, the new shelf will primarily allow us to continue to make opportunistic bond issuances.\nThis concludes management's remarks.\n",
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"content": "qtrly earnings per share $0.70.\ntook delivery of 10 aircraft from our orderbook, representing approximately $602 million in aircraft investments in q1.\ndo not anticipate that aircraft sales activity will return to pre-pandemic levels during 2021.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Earlier today, we published our results for the second quarter of 2021.\nThis includes, without limitation, statements regarding our future operations and performance, revenues, operating expenses, stock-based compensation expense and other income and expense items.\nThese statements and any projections as to the company's future performance represent management's estimates for future results and speak only as of today, August 5, 2021.\nIn addition, certain financial measures we may be using during the call, such as adjusted net income before income taxes, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on equity are non-GAAP measures.\nThis release can be found in both the Investors and Press section of our website at www.\nUnauthorized recording of this conference call is not permitted.\nSince our last call with you, the recovery of air travel has varied significantly by geography based on the status of the pandemic in each location, vaccine availability and travel restrictions.\nIn other countries including many in Asia, there remain headwinds to recovery with lower vaccination rates and more aversion to opening borders.\nOverall, given the Delta variant surge, we intend for you to hear from us today as always our balanced view on the state of the industry.\nOur optimism is rooted by the rebound in air travel we've all seen and the conversations we have with our airline customers, who are adjusting to and planning for ongoing revival of passenger traffic.\nAt the same time, given COVID-19 complexities and uncertainties, which vary by country, we are realistic that we do have airline customers continuing to struggle with the most prolonged downturn in our industry's history, and that has continued to impact our results.\nFor the second quarter of 2021, we're reporting $492 million in total revenues and diluted earnings per share of $0.75 a share, down 6% and 41%, respectively, compared to the prior year's second quarter, which, for the most part, was a pre-pandemic quarter.\nOur results this quarter were primarily impacted by approximately $87 million of rental revenues we did not recognize in the quarter due to cash versus accrual basis revenue recognition and lease restructurings.\nI'll discuss this more momentarily.\nWhile we took delivery of about $1 billion in new aircraft in the second quarter, that was $200 million less than we originally anticipated, and 50% of these deliveries took place in the month of June, providing a minimal contribution to the full quarter, but providing long-term rental contribution thereafter.\nWe're pleased that our collection rate improved in the second quarter to 87% as compared to 84% in the first quarter and our lease utilization rate was strong at 99.7%.\nImportantly, our net deferrals balance continues to decline to $115 million today -- as of today from $131 million as of early May when we last spoke, with now more than half of the deferrals granted to date having been repaid.\nThe decline in our deferrals balance contributed to the increase in our operating cash flow, which is up nearly 30% for the first six months of 2021 versus 2020.\nNow as I highlighted earlier, revenues were impacted by $87 million from cash basis accounting and lease restructuring agreements.\n$42 million of this quarter came from lessees on a cash basis where the lease receivables exceed the security package, and collection was not reasonably assured.\nIt's important to note that approximately 2/3 of the $42 million is attributable to one customer, Vietnam Airlines, where we have 12 young A321neos and four 787-10s on lease with one of those Neos being owned by one of our management vehicles.\nWhile we did receive a subsequent payment from Vietnam in July, we expect reduced level of rental payments to continue during 2021 as we work through these matters with the airline.\nWe believe the country of Vietnam and the airline have a bright future despite the significant impacts that pandemic has had on them to date, and that is in the best long-term interest of ALC for us to continue working with the airline toward payment and resolution.\nThe remaining $45 million of the $87 million was related to lease restructurings.\nAs I said in my initial comments, the recovery and health of our airline customers vary significantly by country and region.\nAnd as such, we expect that we may need to continue working with our airline customers on accommodation requests, including restructurings.\nHowever, as I told you last quarter, the frequency of these requests is declining meaningfully.\nWe're very pleased to report that in the second quarter, we successfully sold our unsecured claim in the Aeromexico bankruptcy.\nNow Greg will elaborate further on this in his remarks.\nBut consistent with the original expectations we shared with you months ago, our 737 and 787s remain at Aeromexico as these young aircraft combine the backbone of the airline fleet.\nIn fact, we have three more 737-9s yet to go in future delivery to Aeromexico.\nAs in this case, with others and many in our customer profile, our relationship with the airline and modern aircraft that they have on lease from ALC remains a key differentiator.\nOur lease placements remained strong with 90% -- 93% excuse me, of our order book placed on long-term leases for aircraft delivering through 2022 and 80% through 2023.\nAnd our order positions continue to position us very well for the future.\nI want to remind all of you that ALC has $27.1 billion in rental commitments on our current fleet and forward order book placements.\nWe're having robust discussions with our airline customers on new aircraft placements.\nSpecifically, we've seen increased interest in our new single-aisle aircraft, including the A321neo, and now placements of our A220s.\nIn addition, we're seeing additional demand for the MAX, and in fact, have reinstituted previously canceled MAX aircraft for a few of our customers.\nImportantly, lease rates for new single aisles are showing improvements.\nMany of you probably read, in fact, about the European Green Deal Legislative Package known as \"Fit for 55\", which aims to cut 2030 net greenhouse gas emissions by 55% compared to 1990 levels.\nAn important proposal within this package is the integration of advanced sustainable aviation fuels, which can reduce emissions by up to 80% as compared to traditional jet fuel.\nOur young modern aircraft are equipped to handle sustainable aviation fuels.\nAnd when combined with the benefits already achieved by operating new aircraft, including lower maintenance costs, lower fuel burn, lower NOx emissions, smaller noise footprint.\nThese elements only further aid an airline's business case to operate a young, modern aircraft like those in our fleet and order book.\nLooking ahead, although we have OEM contractual commitments to take delivery of 52 aircraft in the second half of 2021, you're all aware of Boeing's delivery pause on the 787.\nAs the commitment table in our 10-Q shows, we were scheduled to take delivery of 10 787s through the end of the year.\nIt is unclear at this juncture how many 787s we will take for the remainder of this year.\nBut our best estimate today is approximately three of these aircraft.\nFurthermore, we have recently been notified by Airbus of some slippage in our A321neo deliveries attributable to COVID or supply chain issues.\nGiven these OEM delays, we currently expect to take delivery of approximately 36 aircraft out of the 52 contracted aircraft stream, and that translates to approximately $1 billion of deliveries to occur in the third quarter and $1.6 billion to occur in the fourth quarter of 2021.\nGiven these OEM delivery delays, we will significantly scale back our aircraft sales for the remainder of this year, and possibly into early 2022.\nAnd for our growth and to help fill this shortfall in aircraft investments, we see the current environment continuing to favor buying attractive assets versus selling them.\nI want to end my comments as I begin by saying that we are encouraged by the resurgence in air travel occurring throughout many parts of the world, and believe the aviation industry is well set for ongoing recovery.\nWe will continue to work through any customer challenges, which are to be expected, given that the Delta variant may temporarily dampen or prolong the recovery and many countries are still battling through this pandemic.\nHowever, we strongly maintain our long-term view that international air traffic will follow the lead we've seen from domestic travel recovery and that over time, global air travel will recover back to levels witnessed pre-pandemic driven by the need and desire of people to travel around the world.\nReflecting this continued confidence, our Board of Directors has declared another dividend of $0.16 per share for the second quarter of 2021.\nWe're all encouraged by what we've witnessed over the last several months, which indicates that the traveling public is eager to get back in the air once they feel safe and they're allowed to do so with minimum limitations.\nAs we look around the world, there seems to be very much a 2-tier recovery occurring.\nThe first is in the developed versus emerging markets, with countries and regions with the highest incomes getting vaccinated as much as 30 times faster than those with the lowest income brackets.\nAs the vaccination rates across the globe increase, we should see a steady reopening of air travel.\nIATA has cited research for medical organizations around the world, which has shown that vaccinated travelers pose less risk to local populations, and data shows that pre-flight testing can help reduce risks associated with unvaccinated travelers.\nIn a study also conducted by IATA, 85% of the respondents agreed in some regard that they will not travel if there's a chance of quarantine at their destination.\nYet at the same time, 86% said we're willing to undergo COVID-19 test as part of the overall travel process.\nSo to the extent governments can further move past broad border closures and quarantines and allow vaccinated travelers or those with a negative test, this could significantly benefit the further rebound in air travel.\nWe are hopeful that increased vaccination rates in key markets will ultimately drive reopening in other locations even if the vaccination rates in those areas are lower than in the most developed countries.\nThe second recovery tier is domestic versus international travel with domestic travel improving more quickly and international travel growth is lagging.\nDomestic travel has certainly been afforded the opportunity of late to capture demand that international travel has not as many travel restrictions remain in place.\nAnd we have seen proof of that in the latest travel data for the last two or three months.\nPer IATA's latest release for June 2021, traffic industrywide domestic RPKs were down only 22% as compared to June of 2019.\nWhereas international, they were down 81% versus June of 2019.\nIf we look at even more information from EUROCONTROL, the same trend exists.\nFor example, in the United States, one of the most recently reported week, U.S. domestic passenger airline departures were down only 18% as compared to 2019 levels, whereas international was down 37%.\nSimilarly, in China, domestic traffic recorded an increase of 7% above January 2020 levels, whereas international flights were suppressed at nearly 70% below January 2020 levels.\nIn Europe, domestic demand is driving traffic volumes within countries, including Spain, France and several others.\nObviously, we're eager to see how the progress, as the summer comes to an end, will develop.\nAnd we would be naive to think that recovery will not continue to go on waves depending on the evolution of COVID variants and government policies impacting reopenings.\nHowever, these data points reinforce our views that there is significant pent-up demand for air travel seen via domestic travel recovery.\nFor the year 2019, global scheduled airline passengers were over four billion, one-way trips.\nAnd IATA forecasts that by the end of '23, we should be -- or could be at 105% of 2019 levels.\nWe believe that the rebound in passenger traffic will ultimately be driven by continued vaccine rollout and the continuous removal of travel barriers and that we could see this forecast ultimately surpass perhaps even more quickly.\nOur airline customers are witnessing the same trends as we are.\nAnd as a result, we are having productive discussions with them on new lease placements, and our deliveries are ongoing.\nIn the second quarter, we delivered new single-aisle 737 and A320, A321neo aircraft in Europe, Middle East and Latin America, and new wide-body aircraft to China, Europe and the United States.\nWe also continue to lease used aircraft.\nThese are the aircraft we agreed to purchase from Alaska Airlines when we placed the new MAX aircraft contract with Alaska in late 2020.\nWe leased them back to Alaska, and the young A320s will become a meaningful component of Allegion's fleet in 2022 and 2023.\nAirlines are continuing to choose to operate younger aircraft like those in ALC fleet, and delivering from our order book.\nIn fact, as of the end of June, industry information indicates that 88%, I repeat, 88% of the aircraft under the age of five years were back in service.\nAnd 78% of aircraft in the age range of five to 15 years old were in service, whereas only 63% of aircraft over the age of 15 were back in service.\nAs John mentioned earlier, with sustainability initiatives front and center, we believe operation of modern, fuel-efficient aircraft will continue to be the trend on a global scale.\nYou are seeing this with announcements from airlines throughout the world.\nUnited Airlines recently placed an order for over 270 Boeing MAX and Airbus A321neo aircraft, which will replace older aircraft in their fleet and lead to significant improvement in fuel efficiencies, reduction in carbon emissions as they strive to reduce greenhouse gas emissions, 100% by 2050.\nYou have also seen similar announcements on the tackling of sustainability initiatives by the utilization and purchase of new aircraft from airlines, including Korean Airlines, which committed to reducing greenhouse gas by introducing new generation aircraft like the 787-10.\nKorean has a number of 787-10 aircraft delivery from ALC over the next several years.\nAlaska Airlines also recently placed a direct order for a substantial number of new 737 aircraft to achieve better fuel efficiency, and the airline is also leasing 13 new 737-9 MAX aircraft from ALC with deliveries beginning in the fourth quarter of this year.\nWhile the pandemic to some degree, temporarily overshadowed the industry's commitment to advancing sustainability initiatives, it is still very much in the forefront in the minds of our airline customers making our young fleet and order book of modern technology aircraft even more critically needed than ever before.\nI believe, over time, our industry will continue to evolve to tackle the critical changes we need in terms of fleet modernization, infrastructure investment, etc, to better our environmental footprint, lower aircraft operating costs and increase overall operating efficiency.\nI want to expand on the details, underlying our financial results for the second quarter.\nAnd I would like to remind everyone that for comparative purposes, the second quarter of last year was not fully impacted by the pandemic.\nOver the past year, despite the pandemic, we have made over $3 billion in aircraft investments, which has benefited our revenue line.\nHowever, as John mentioned, revenues in the quarter were negatively impacted by $87 million from lease restructuring agreements and cash basis accounting, of which $42 million came from lessees on a cash basis.\nThis compares to $49 million in the first quarter and $21 million in the fourth quarter of last year.\nHopefully, we'll have a favorable resolution with Vietnam and other cash basis lessees by the end of the year.\nBut until then, we expect that our cash basis numbers will remain under pressure.\nIn total, our cash basis lessees represented 10.9% of the net book value of our fleet as of June 30, which compares to 15.3% in the first quarter of '21 with improvements stemming from the resolution we reached with Aeromexico.\nI think it's important to expand upon John's commentary on the sale of our Aeromexico bankruptcy claim.\nThe sale represents a full recovery of our past due receivables.\nSo while our earnings were negatively impacted in prior periods, we were able to recoup these losses through the sale.\nIt is important to note that not all situations will end in this result, but we are pleased with this outcome.\nAdditionally, I want to highlight our rationale behind keeping customers on cash accounting instead of rushing to enter into restructuring agreements, while the earnings impact in a given quarter would be reduced if simply -- if we simply accepted a lower restructured lease rate and return to accrual accounting.\nBut that would typically come at the cost of lower economic returns over the life of the new agreement.\nWe prefer to negotiate rather than to settle, which we believe gives us a better chance at a higher financial outcome in the restructuring process, but this typically takes more time.\nSo while cash accounting has been a meaningful drag on results.\nWe are, in effect, taking short-term pain for the long-term gain and preserving economic returns and maximizing shareholder value.\nAs John mentioned, rental revenues were negatively impacted by $45 million in the second quarter, much of which was attributable to restructuring that took place in prior quarters.\nFinally, as of today, our total deferrals net of repayments are $115 million, which is a 12% decline from $131 million we reported on our last call.\nRepayment activity has continued with the total repayments aggregating $127 million or 52% of the gross deferrals granted.\nThese receipts are reflected in our operating cash flow, which has increased significantly and reflects the continued recovery of our airline customers.\nLooking at aircraft sales, trading and other activity, you will recall that we noted -- that we were not going to sell any aircraft in the second quarter.\nThis compares to $18.5 million in gains recognized from the sale of four aircraft and repurchase of $185 million in short-term debt maturities below par in the second quarter of 2020.\nInterest expense increased year-over-year, primarily due to the rise in our average debt balances driven primarily by the growth of our fleet, partially offset by the decline in the composite cost of funds.\nOur composite rate decreased to 2.9% from 3.2% in the second quarter of 2020.\nDepreciation continues to track the growth of our fleet, while SG&A remained largely flattish compared to last year.\nOverall, I think it's important to note that despite the continued challenges, we are generating positive margins and returns on equity, which should improve as our customers come off cash accounting as the world continues to recover from the pandemic.\nFinally, I want to touch on financing, which continues to provide us a significant competitive advantage over our peers.\nWe are dedicated to maintaining a investment-grade balance sheet, utilizing unsecured debt as a primary source of financing, and have over $24 billion in unencumbered assets at quarter end.\nWe ended the period with a debt-to-equity ratio of 2.5 times on a GAAP basis.\nWe raised $1.8 billion in debt capital during the second quarter, beginning with a $1.2 billion senior unsecured issuance at 1.875%, which represents a record low for our company for a 5-year issuance.\nAdditionally, we raised another $600 million of floating rate senior unsecured notes at LIBOR plus 35 basis points, which represents another record low for ALC.\nWe anticipate maintaining elevated levels of liquidity until the broader aviation market recovers.\nThis concludes management's remarks.\n",
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"content": "air lease q2 earnings per share $0.75.\nq2 earnings per share $0.75.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: A detailed discussion of the risks and uncertainties that may affect our future results is contained in AMETEK's filings with the SEC.\nI'll now turn the meeting over to Dave.\nAMETEK delivered outstanding results in the second quarter.\nStrong sales growth and outstanding operating performance led to a high quality of earnings that exceeded our expectations.\nWe established record levels of sales, orders, operating income and adjusted earnings per share in the quarter.\nThis performance comes as we are still early in our economic recovery and reflects the outstanding efforts of our teams.\nWe also ended the quarter with a record backlog driven by exceptionally strong and broad-based orders growth, providing strong visibility across our mid- and long-cycle business profile.\nThe five acquisitions we completed earlier this year are integrating nicely and are well positioned to drive strong growth.\nGiven our second quarter results and our outlook for the back half of 2021, we have increased our sales and earnings guidance for the year.\nNow let me turn to our second quarter results.\nOur businesses saw robust, broad-based sales growth in the quarter.\nOverall sales were a record $1.39 billion, up 37% over the same period in 2020.\nOrganic sales growth was 25%.\nAcquisitions added 10 points to growth, while foreign currency added two points.\nOverall orders in the quarter were a record $1.91 billion, a sharp increase of 92% over the prior year, while organic orders were an impressive 44% up in the quarter.\nWe ended the quarter with a record backlog of $2.5 billion, which is up over $700 million from the start of the year.\nOur business has also delivered exceptional operating performance in the quarter.\nWhile global supply chains remain tight, our businesses are doing a fantastic job managing through these challenges as is reflected in our results.\nSecond quarter operating income was a record $317 million, a nearly 40% increase over the second quarter of 2020.\nAnd operating margins expanded 40 basis points to 22.8%.\nExcluding the dilutive impact of acquisitions, core margins -- core operating margins expanded an exceptional 160 basis points to 24%.\nEBITDA in the quarter was $387 million, up 34% over the prior year's second quarter, with EBITDA margins of 27.9%.\nThis operating performance led to earnings of $1.15 per diluted share, up 37% over the second quarter of 2020 and above our guidance range of $1.08 to $1.10.\nOur businesses also generated strong cash flows in the quarter, which position us well to continue investing in our businesses and on strategic acquisitions.\nIn the second quarter, operating cash flow was $287 million, and free cash flow conversion was 114% of net income.\nLet me provide some additional details at the operating group level.\nBoth our Electronic Instruments Group and Electromechanical Group delivered strong organic sales growth with excellent core margin expansion in the quarter.\nSales for EIG were a record $934 million, up 44% over last year's second quarter.\nOrganic sales were up 27%.\nRecent acquisitions added 16%, and foreign currency added nearly two points.\nEIG's second quarter operating income was $227 million, up 42% versus the same quarter last year.\nAnd operating margins were 24.3%.\nExcluding acquisitions, EIG's core margins were 26.3%, expanding an impressive 170 basis points over the comparable period.\nThe Electromechanical Group also delivered strong sales growth and outstanding operating performance.\nEMG's second quarter sales increased 24% versus the prior year to $452 million.\nOrganic sales growth was 21%, and currency added three points to the quarter.\nGrowth was broad-based across our EMG businesses with particularly strong growth in our Advanced Motion Solutions business.\nEMG's operating income in the second quarter was a record $112 million, up 33% compared to the prior year period.\nAnd EMG's operating margins expanded an exceptional 170 basis points to a record 24.9%.\nNow switching to our acquisition strategy.\nAs we noted during our previous call, we completed the acquisitions of Abaco and NSI-MI at the beginning of the second quarter.\nThese acquisitions as well as the first quarter acquisitions of Magnetrol, Crank Software and EGS are performing very well, and the integration work for these businesses is progressing as expected.\nAMETEK's strong cash flow generation continues to bolster our capacity for capital deployment, including investment in strategic acquisitions.\nOur M&A teams continue to work diligently through a robust pipeline of attractive acquisition opportunities, and we expect to remain active over the balance of the year.\nAdditionally, we're continuing to make key investments in support of our organic growth initiatives.\nWe remain committed to investing in research, development and engineering of our advanced technology products and to continue to providing our customers with innovative solutions and maintaining our leading positions in niche markets and applications.\nIn the second quarter, we invested $72 million in RD&E.\nAnd for the full year, we now expect to invest more than $300 million or approximately 5.5% of sales.\nFor all of 2021, we now expect to invest approximately $100 million in incremental growth investments.\nIn addition to RD&E, this total investment includes our front-end sales and marketing functions, along with investments to help drive our digital transformation and allow our businesses to accelerate growth.\nAs noted, operating performance in the second quarter was outstanding with strong core margin expansion despite having to absorb the return of temporary costs into our cost structure.\nWhile we are seeing higher levels of inflation due to the tightness of the global supply chain, we are capturing higher levels of price given our differentiated solutions and allowing us to maintain a healthy price versus inflation spread.\nAdditionally, we continue to see the benefits of our various operational excellence initiatives.\nFor the full year, we now expect approximately $145 million of operational excellence savings.\nNow moving to our updated outlook for the remainder of 2021.\nGiven our strong performance in the second quarter, along with our orders momentum and record backlog, we have again raised our 2021 sales and earnings guidance.\nFor the full year, we now expect overall sales to be up approximately 20% and organic sales up approximately 10% over 2020.\nDiluted earnings per share for 2021 are now expected to be in the range of $4.62 to $4.68, an increase of 17% to 18% over 2020's comparable basis and above our prior guide of $4.48 to $4.56 per diluted share.\nFor the third quarter, we anticipate that overall sales will be up in the mid-20% range versus the same period last year.\nThird quarter earnings per diluted share are now expected to be between $1.16 to $1.18, up 15% to 17% over last year's third quarter.\nIn summary, AMETEK's second quarter results were superb, with excellent sales and orders growth and high-quality earnings growth exceeded expectations.\nOur strong operating performance through the first half of the year shows the strength and flexibility of the AMETEK Growth Model.\nOur differentiated technology solutions and market-leading positions across diverse niche applications have allowed us to navigate through difficult economic cycles and emerge as a stronger company each time.\nThe proven sustainable nature of the AMETEK Growth Model continues to drive long-term success for all of AMETEK's stakeholders.\nAs Dave highlighted, AMETEK delivered outstanding results in the second quarter with strong sales and orders growth, excellent operating performance and a high quality of earnings.\nLet me provide some additional financial highlights for the quarter.\nSecond quarter general and administrative expenses were $22.5 million, up $5.6 million from the prior year largely due to higher compensation expense.\nAs a percentage of total sales, G&A was 1.6% for the quarter versus 1.7% in the same period last year.\nFor 2021, general and administrative expenses are now expected to be approximately $15 million -- or expected to be up approximately $15 million on higher compensation costs.\nThe effective tax rate in the second quarter was 20.6% compared to 19.5% in the same quarter last year.\nThe higher rate was driven by the impact of a U.K. rate change and the associated remeasurement of our deferred tax liabilities.\nFor 2021, we continue to expect our effective tax rate to be between 19% and 20%.\nAnd as we've stated in the past, actual quarterly tax rates can differ dramatically either positively or negatively from this full year estimated rate.\nOur businesses continue to manage their working capital exceptionally well.\nFor the quarter, working capital was 13.9% of sales, down an impressive 570 basis points from the 19.6% reported in the second quarter of 2020.\nCapital expenditures in the second quarter were $23 million, and we continue to expect capital expenditures to be approximately $120 million for the full year.\nDepreciation and amortization expense in the second quarter was $75 million.\nFor all of 2021, we continue to expect depreciation and amortization to be approximately $300 million, including after-tax, acquisition-related intangible amortization of approximately $141 million or $0.61 per diluted share.\nAs Dave highlighted, our businesses continue to generate strong levels of cash given our asset-light business model and strong working capital management.\nIn the second quarter, operating cash flow was $287 million and free cash flow was $264 million, with free cash flow conversion in the quarter a very strong 114% of net income.\nTotal debt at quarter end was $2.96 billion.\nOffsetting this debt was cash and cash equivalents of $390 million.\nAs Dave noted, we've been very active on the acquisition front.\nDuring the second quarter, we deployed approximately $1.58 billion on the acquisitions of Abaco Systems and NSI-MI.\nThis was in addition to the acquisitions of EGS, Crank Software and Magnetrol, which were completed in the first quarter of the year.\nCombined, we have deployed approximately $1.85 billion on five strategic acquisitions thus far in 2021.\nAt quarter end, our gross debt-to-EBITDA ratio and our net debt-to-EBITDA ratio were 1.9 times and 1.6 times, respectively.\nWe remain well positioned to deploy additional capital and invest in our acquisition strategy given our strong financial capacity and flexibility.\nAt quarter end, we had approximately $2 billion of cash and existing credit facilities to support our growth initiatives.\nTo summarize, our businesses delivered excellent results in the second quarter that outperformed our expectations.\nThe performance of our businesses through the first half of the year, along with our strong balance sheet, tremendous cash flow generation and the dedication of our world-class workforce, has positioned the company exceptionally well for meaningful growth in 2021 and beyond.\nMichelle, we're ready to take questions.\n",
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"content": "q2 adjusted earnings per share $1.15.\nq2 sales $1.39 billion versus refinitiv ibes estimate of $1.33 billion.\nfor 2021, now expect overall sales to be up about 20%.\n2021 adjusted earnings per diluted share expected to be in range of $4.62 to $4.68.\nexpect overall sales in q3 to be up in mid-20% range compared to q3 of 2020.\nq3 adjusted earnings per diluted share anticipated to be in range of $1.16 to $1.18.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: A detailed discussion of the risks and uncertainties that may affect our future results is contained in AMETEK's filings with the SEC, including in our 10-Q, which we file later today.\nI will now turn the meeting over to Dave.\nAMETEK delivered a strong third quarter, despite ongoing challenges presented by the COVID-19 pandemic.\nWhile sales continue to be impacted by the pandemic, the demand environment shows solid improvements from the second quarter, as customers return to work and travel restrictions began to slowly ease.\nIn addition, our businesses delivered outstanding operating performance, allowing us to expand margins, generate excellent cash flow and drive earnings ahead of our expectations.\nI continue to be impressed by the strength of our workforce and the dedication to our mission of solving our customer's most complex challenges.\nWe remain vigilant and focused on our employees' safety.\nOur site and country level pandemic coordinators are doing an excellent job adapting to the shifting guidelines provided by the CDC, and local health and safety agencies.\nThe flexibility our teams have shown in implementing new processes and protocols to ensure a safe working environment has been excellent.\nNow let me turn to our results for the quarter.\nThird quarter sales were $1.13 billion, down 12% compared to the third quarter of 2019.\nOrganic sales were down 14%.\nWith the recent acquisitions contributing five points to growth, the divestiture of Reading Alloys a three point headwind and foreign currency adding one point.\nAs expected, our commercial aerospace business, which is less than 10% of the overall company, experienced the largest impact from COVID, with sales down approximately 35% versus the prior year.\nOur businesses continue to drive operational excellence initiatives to help mitigate demand weakness.\nThese efforts lead to excellent operating results in the quarter.\nThird quarter operating income was $270 million and operating margins were a record 24%, up 40 basis points compared to last year's third quarter, while decremental margins were an impressive 20% in the quarter.\nEBITDA in the third quarter was $332 million and EBITDA margins were a record 29.5%, up 210 basis points over last year's comparable period.\nThis led to earnings per diluted share of $1.01, down just 5% compared to the third quarter of 2019.\nFurthermore, our businesses generated a strong level of cash flow.\nOperating cash flow in the quarter was $310 million and free cash flow conversion was an impressive 146% of that income.\nNext, let me provide additional details at the operating group level.\nOur Electronic Instruments Group performed very well in the quarter, despite end-market weakness, delivering outstanding operating performance resulting in strong margin expansion.\nSales in the third quarter for EIG were $748.4 million, down 8% from the comparable period in 2019.\nAs expected, we saw solid and wide-spread sequential sales improvements from the second quarter.\nOrganic sales were down 15% year-over-year, with the acquisitions of Gatan and IntelliPower contributing six points and foreign currency contributing one point.\nCommercial aerospace remains a largest driver of organic sales weakness in EIG.\nEIG's third quarter operating income was $203.7 million and operating margins were an impressive 27.2%, up 30 basis points compared to the same quarter last year.\nOur Electromechanical Group also saw sequential sales improvement and mitigated a weak demand environment with solid operating performance.\nEMG sales were $378.6 million, down 18% from last year's third quarter, driven in part by the impact of the Reading Alloys divestiture.\nOrganic sales were down 13%, with a divestiture of 8-point headwind, the acquisition of PDT added two points and foreign currency adding one point.\nEMG's operating income was $84.3 million and operating margins were solid at 22.3% for the quarter.\nLet me comment briefly on end-market dynamics for some of our businesses.\nOverall, we saw solid sequential sales improvements across all markets in the third quarter.\nWe expect continued sequential improvements in the fourth quarter for all businesses other than customer aerospace, where we expect largely flat conditions sequentially.\nOur strongest market remains defense, where we continue to be well-positioned with content across a wide range of important defense platforms.\nWe are also very well-positioned with our medical and healthcare businesses.\nAlthough, they experienced a delay in the return of electro procedures during the third quarter, which offsets solid COVID-driven demand.\nAnd our most challenging market remains commercial aerospace remain cautious of a trajectory of a recovery given the uncertainty caused by COVID-19.\nGiven the uncertain and challenging end-market dynamics, our businesses remain highly focused on driving operational excellence initiatives, both structural and temporary, to manage topline weakness, while ensuring we maintain our investments and key growth initiatives across the company.\nAMETEK's asset-light operating model provides us with the flexibility to do both.\nOur ability to expand margins and generate strong levels of cash flow during this pandemic is evidence of the strength of our operating model.\nIn the third quarter, we generated $70 million in total cost savings, which was at the high end of our expectations, with $40 million in structural savings and $30 million in temporary cost reduction savings.\nLooking ahead to the fourth quarter, we expect a slightly higher level of structural savings, while temporary savings will be reduced from the third quarter levels, as we add back additional temporary costs during the quarter.\nAs a result, we expect approximately $55 million in our total cost savings in the fourth quarter, with $45 million in structural and $10 million in temporary cost savings.\nAnd for the full year, we expect approximately $230 million in total cost savings, with $140 million in structural savings and $90 million in temporary savings.\nOur businesses continue to implement new and innovative ways to reach our customers around the world in new markets.\nThrough virtual meeting platforms, augmented reality product demonstrations and service, and enhanced digital marketing initiatives, our businesses have adapted quickly to the new landscape.\nSeeing our businesses adopt these new ways of doing business quickly and effectively has been very impressive.\nOur businesses are also collaborating across platforms.\nAs an example, AMETEK Land and AMETEK Rauland recently partnered together to help support Rauland's reopen schools safely campaign for their Telecenter U solution.\nRauland is the leading provider of critical communications, workflow and safety solutions for hospitals and schools.\nTheir Telecenter U solution connects classrooms and educational facilities to district offices for emergencies, event management and everyday communications.\nAs I mentioned on our last earnings call, AMETEK Land, a leading manufacturer of non-contact temperature measurement solutions, recently developed their new VIRALERT three system for rapid detection of elevated skin temperatures at points of entry to various facilities, including schools.\nThrough this collaborative effort, Rauland was able to incorporate Land's VIRALERT three technology into their Telecenter U solution to help their customers safely reopen their schools by allowing for temperature screening of students and faculty.\nIn return, AMETEK Land will reach thousands of new potential customers through Rauland's well-established network of school districts.\nThe result was a valuable solution for our customers.\nCongratulations to the AMETEK and the AMETEK Rauland team for the success on this project.\nWe are also finding ways to support our customers through new product innovation.\nThroughout the pandemic, we continue to invest meaningfully in our research and development initiatives, and we are seeing great success from these efforts.\nOur Vitality Index, which measures the amount of sales generated from new products introduced during the last three years was very strong at 25% in the quarter.\nDuring the quarter, Creaform, a worldwide leader in 3D measurement solutions, unveiled its R-Series 3D scanning solution that is designed for automated dimensional quality control applications.\nThe suite of R-Series solutions includes the new robot-mounted MetraSCAN 3D scanner with CUBE-R, a turnkey industrial measuring cell that is designed to be integrated into factories for at-line inspections.\nTogether, the solution provides customers with much faster cycle times, more accurate and repeatable results, higher resolution and operational simplicity, to increase productivity by measuring more dimensions on more parts without compromising on accuracy.\nCongratulations to the Creaform team for launching this outstanding new solution.\nNow shifting to acquisitions.\nWhile deal flow during the second quarter and third quarter has been impacted by the pandemic, we are starting to see a healthy pickup in activity.\nOur pipeline is strong and conversations with acquisition targets are accelerating.\nAs Bill will highlight in a moment, over the last two quarters, we have further strengthened our balance sheet and liquidity position, and remain poised to deploy significant capacity -- capital on strategic acquisitions.\nWe will remain active, yet disciplined, in our acquisition process.\nWe continue to focus on acquiring niche technology leaders with attractive growth profiles with opportunities for us to add value commercially and operationally.\nNow turning to our outlook for the remainder of the year.\nWhile the global economy continues to present challenges and uncertainties, visibility has improved across most markets.\nAs a result, we are providing guidance for the fourth quarter.\nOverall sales in the fourth quarter are expected to be down high-single digits with a similar level of organic sales decline.\nDiluted earnings per share are expected to be in the range of $1 to $1.04, down 4% to 7% versus the prior year.\nFourth quarter decremental margins are expected to remain solid in the low 20%s.\nTo summarize, our businesses delivered a solid quarter in a difficult environment.\nAMETEK continues to manage this global crisis well to the proven strength of the AMETEK growth model and with a talented workforce.\nOur cost mitigation efforts have allowed the company to weather this ongoing storm and we are confident that we will overcome these challenges with a bright future.\nI'd like to echo Dave's comments on the quarter, as we saw outstanding operating performance driven by the tremendous efforts of our team in a very challenging economic environment.\nLet me provide some additional financial highlights for the quarter.\nThird quarter general and administrative expenses were down $4.5 million, compared to the same period of 2019, primarily due to lower compensation costs and other discretionary spending cuts.\nAs a percentage of sales, general and administrative expenses were 1.5% of sales in the quarter, down from 1.7% last year.\nThe effective tax rate in the third quarter was 17.5%, down from 19.5% in the same period last year.\nThe lower tax rate in the quarter was due to returned provision adjustments and a lower tax rate on foreign earnings.\nFor 2020, we now expect our effective tax rate to be between 19% and 19.5%, and as we have stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively from this full year estimated rate.\nOperating capital and working capital was an impressive 17% in the third quarter, down sequentially from the second quarter's 19.6% on outstanding working capital management.\nCapital expenditures in the quarter were $10 million.\nWe now expect full year capital expenditures to be approximately $80 million, which is $5 million higher than our full year expectations last quarter, as we are investing in incremental growth opportunities.\nOur full year capital expenditures estimate remains below our initial expectations to start the year of $100 million.\nDepreciation and amortization expense in the quarter was $63 million.\nFor the full year, we expect depreciation and amortization to be approximately $255 million, which includes after-tax, acquisition-related intangible amortization of approximately $117 million or $0.51 per diluted share.\nOur businesses continue to generate strong levels of cash flow, despite the challenges presented by the pandemic.\nOperating cash flow in the quarter was $310 million, free cash flow was $300 million and free cash flow conversion was excellent at 146% of net income.\nTotal debt at the end of the quarter was $2.8 billion, up slightly from $2.77 billion at the end of 2019 and down $68 million from the end of the second quarter.\nOffsetting this debt is cash and cash equivalents of $1.3 billion.\nOur gross debt-to-EBITDA ratio at the end of the third quarter was 2.1 times, as we are intentionally holding higher than normal cash balances.\nThis was comfortably below our debt covenants of 3.5 times and our net debt-to-EBITDA ratio was 1.1 times at quarter end, which improved by two -- 0.2 turns in the quarter.\nWe remain well-positioned to manage this economic downturn with approximately $2.3 billion in liquidity to support our operations and growth initiatives.\nThis includes approximately $1 billion in available revolver capacity.\nAs we have highlighted on previous calls, AMETEK has a robust balance sheet with no material debt maturities due until 2023.\nIn summary, our businesses continue to manage through the pandemic exceptionally well, delivering strong operating results and high levels of cash flow.\nThe dedication of our world-class workforce to serving our essential customers has truly been impressive.\nWe remain well-positioned to manage ongoing economic challenges, while investing in our long-term growth initiatives.\nAndrew, we are ready to take questions.\n",
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"content": "q3 adjusted earnings per share $1.01.\nq3 sales $1.13 billion versus refinitiv ibes estimate of $1.12 billion.\nsees q4 adjusted earnings per share $1.00 to $1.04.\nametek - for q4, expect solid sequential improvements in sales versus.\nq3 with y-o-y sales down high single digits on a percent basis compared to last year's q4.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: A detailed discussion of the risks and uncertainties that may affect our future results is contained in AMETEK's filings with the SEC.\nI'll now turn the meeting over to Dave.\nAMETEK had another outstanding quarter, with better than expected sales growth, strong operating performance, and earnings above our expectations.\nWe established records for sales, EBITDA, operating income, and earnings per share in the quarter.\nDemand remained strong across our diverse set of end markets, leading to robust order growth, and a record backlog.\nWhile the global supply chain and logistics networks remain challenging, our businesses are doing a tremendous job navigating these issues and delivering results which exceeded our expectations.\nGiven our results in the third quarter and outlook for the fourth quarter, we are again increasing our sales and earnings guidance for the full year.\nThis strong overall performance reflects the exceptional work of all AMETEK colleagues, as well as the strength, flexibility, and sustainability of the AMETEK growth model.\nAMETEK's proven business model is central to our focus on creating a sustainable future for all stakeholders.\nWe are very proud of the important steps we're taking to further sustainability across AMETEK.\nAnd last week, we published our latest Corporate Sustainability Report to highlight our efforts in this area.\nThis report provides information on our sustainability initiatives, the strong progress we have made, and the commitments we are making to create a better future.\nNow let me turn to our third-quarter results.\nThird-quarter sales were a record $1.44 billion, up 28% over the same period in 2020, and above our expectations.\nOrganic sales growth was 17%, acquisitions added 11 points, and foreign currency was a modest benefit in the quarter.\nOverall orders in the third quarter were $1.55 billion, an increase of 37% over the prior-year period.\nWhile organic orders were up an impressive 30% in the quarter.\nWe ended the quarter with a record backlog of $2.62 billion, which is up over $800 million from the start of the year.\nThird quarter operating income was a record $338 million, a 25% increase over the third quarter of 2020, and operating margins were 23.4%.\nExcluding the dilutive impact of acquisitions, core operating margins were 24.7%, up 70 basis points versus the third quarter of 2020.\nEBITDA in the third quarter was a record $415 million, up 25% over the prior year, with EBITDA margins of 28.8%.\nThis outstanding performance led to record earnings of $1.26 per diluted share.\nUp 25% over the third quarter of 2020, and above our guidance range of $1.16 to $1.18.\nWe continue to generate strong levels of cash flow, with third-quarter operating cash flow of $307 million, and free cash flow conversion of 109% of net income.\nOverall tremendous results in a challenging operating environment.\nNext, let me provide some additional details at the operating group level.\nFirst, the Electronic Instruments Group.\nSales for AIG were a record $982 million, up 31% over last year's third quarter.\nOrganic sales were up 15%, acquisitions added 16%, and foreign currency was a modest headwind.\nWhile growth remains broad-based, growth was particularly strong across our Ultra Precision Technologies, and our Power and Industrial businesses.\nAIG's third-quarter operating income was a record $245 million, up 20% versus the same quarter last year, and operating margins were 25%.\nExcluding acquisitions, AIG's core margins were excellent at 27.2% in line with prior year margins.\nThe Electromechanical Group also delivered outstanding sales growth and excellent operating performance.\nThird-quarter sales increased 21% versus the prior year to $459 million.\nOrganic sales were up 20%, and currency added one point to growth.\nGrowth remained strong across all of the MG, with our automation businesses again delivering notably strong growth in the quarter.\nEMG's operating income in the quarter was a record $115 million, up a robust 36% compared to the prior-year period.\nEMG's operating margins expanded an exceptional 270 basis points to a record 25%.\nNow, switching to our acquisition strategy.\nAMETEK has had an excellent year with a record level of capital deployment, leading to the acquisition of 5 highly strategic businesses.\nAMETEK is supported, approximately $1.85 billion on acquisitions, thus far this year, reflecting the strength of AMETEK's acquisition strategy and our ability to identify and acquire highly strategic companies.\nOur proven operating capability allows us to drive meaningful improvements across our acquired companies, resulting in outstanding returns on capital.\nGenerating strong returns on capital deployed is critical to long-term sustainable growth, an important element of AMETEK strategy.\nAMETEK's strong cash flow generation continues to support our capital deployment strategy, our acquisition pipeline remains very active, our M&A team continue to work diligently, identifying attractive acquisition opportunities, and we expect to remain busy over the coming quarters.\nWe also remain focused on investing back into our businesses to support their organic growth initiatives, including in support of their new product development efforts.\nIn the third quarter, we invested over $75 million in RD&E.\nAnd for all of 2021, we now expect to invest approximately $300 million or approximately 5.5% of sales.\nThrough these investments, our businesses develop unique and highly differentiated solutions that help solve our customers' most complex challenges.\nOne such example is a new product introduction from AMETEK Gatan.\nGatan is a leading provider of direct detection technology, for Elektron microscopy [phonetic], supporting high-end research and materials and life sciences applications.\nGatan recently introduced The Stela hybrid pixel camera, the only fully integrated hybrid pixel electron detector with the Gatan microscopy [phonetic] suite.\nThis new product reinforces Gatan's leadership position, providing the highest quality TEM diffraction camera, allowing the user to perform 4D stem analysis for the rapid speed and high dynamic range.\nGatan's new camera builds on a long history of disruptive and award-winning technology.\nIn August, The Stela Cameron was awarded the 2021 [indecipherable] today Innovation Award, and called one of the ten game changing products and methods.\nI would like to congratulate the team at Gatan for the recent launch of The Stela camera, and further support of important research applications.\nNow, let me touch on the supply chain issues.\nThe global supply chain remains challenging, we see extended lead times for a broad range of materials and components with logistics issues, and labor availability adding to the complexity.\nWhile these difficulties exist, we exceeded our sales estimates for the quarter, and are navigating the challenging environment well, given our agile operating approach.\nThe supply chain issues are leading to higher inflation.\nHowever, given our differentiation, we're able to more than offset this inflation with higher pricing, leading to a strong price inflation spread.\nWhile we expect these challenges will continue into 2022, we remain well positioned to navigate the issues, given the strength and flexibility of the AMETEK growth model.\nMoving to our updated outlook for the remainder of 2021.\nGiven our strong performance in the third quarter, and the continued strong orders momentum and record backlog, we have again raised our 2021 sales and earnings guidance.\nFor the full year, we now expect overall sales to be up in the low 20% range, versus our previous guide up approximately 20%.\nOrganic sales are now expected to be up low-double digits on a percentage basis over 2020, as compared to our previous guides of approximately 10%.\nDiluted earnings per share for 2021 are now expected to be in the range of $4.76 to $4.78, an increase of approximately 21% over 2020 is comparable basis, and above our prior guide of $4.62 to $4.86 per diluted share.\nFor the fourth quarter, we anticipate that overall sales will be up in the low 20% range versus last year's fourth quarter.\nFourth-quarter earnings per diluted share are expected to be between $1.28 to $1.30 of 19% to 20% over last year's fourth quarter.\nIn summary, AMETEK's third-quarter results were excellent.\nOur teams continue to execute, and our businesses are performing well.\nOur performance through a challenging environment shows the resilience and strength of the AMETEK growth model.\nThe asset-light nature of our businesses, our leading positions in attractive niche markets, and our world-class workforce will continue to drive long-term sustainable success.\nThe proven nature of the AMETEK growth model continues to drive long-term success for all of AMETEK's stakeholders.\nAs Dave highlighted, AMETEK delivered excellent results in the third quarter, with continued strong sales growth, and orders growth, and outstanding operating performance.\nLet me provide some additional financial highlights for the quarter.\nThird-quarter general and administrative expenses were $22.1 million dollars, up $4.8 million from the prior year, largely due to higher compensation expenses.\nAs a percentage of total sales, G&A was 1.5% for the quarter, unchanged from the prior year.\nFor 2021, general and administrative expenses are expected to be up approximately $18 million, driven by higher compensation costs were approximately 1.5% of sales, also unchanged from the prior year.\nThird-quarter other income and expense was better by approximately $4 million versus last year's third quarter, driven by a $6 million or approximately $0.02 per share gain on the sale of a small product line in the quarter.\nThis gain on the sale was more than offset by a higher effective tax rate in the quarter of 19.5%, up from 17.5% in the same quarter last year.\nFor 2021, we now expect our effective tax rate to be between 19.5% and 20%, actual quarterly tax rates can differ dramatically, either positively or negatively from this full-year estimated rate.\nWorking capital in the quarter was 14.9% of sales, down 210 basis points from the 17%, reported in the third quarter of 2020, reflecting the excellent work of our businesses, and managing working capital.\nCapital expenditures in the third quarter were $26 million, and we continue to expect capital expenditures to be approximately $120 million for the full year.\nDepreciation and amortization expense in the third quarter was $75 million, for all of 2021 we expect depreciation and amortization to be approximately $295 million including after-tax, acquisition-related intangible amortization of approximately $138 million or $0.60 per diluted share.\nWe continue to generate strong levels of cash given our asset-light business model and working capital management efforts.\nIn the third quarter, operating cash flow was $307 million, and free cash flow was $281 million.\nWith free cash flow conversion, 109% of net income.\nTotal debt at quarter-end was $2.65 billion, up less than $250 million from the end of 2020, despite having deployed approximately $1.85 billion on acquisitions, thus far in 2021.\nOffsetting this debt with cash and cash equivalents of $359 million?\nIn the quarter-end, our gross debt to EBITDA ratio was 1.6 times, and our net debt to EBITDA ratio was 1.4 times.\nWe continue to have excellent financial capacity and flexibility with approximately $2.25 billion of cash and existing credit facilities to support our growth initiatives.\nTo summarize our businesses drove outstanding results in the third quarter, and throughout the first 9 months of 2021.\nOur balance sheet and tremendous cash flow generation, have positioned the company for significant growth in the coming quarters, and years.\n",
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"content": "q3 adjusted earnings per share $1.26.\nq3 sales rose 28 percent to $1.44 billion.\nsees q4 overall sales to be up in low 20% range compared to q4 of 2020.\nsees q4 adjusted earnings per share to be in range of $1.28 to $1.30, up 19% to 20% over same period in 2020.\nsees fy 2021 adjusted earnings per share to be in range of $4.76 to $4.78, increase of 21% over prior year comparable basis.\nsees fy 2021 overall sales to be up in low 20% range with organic sales up low double digits on a percentage basis versus 2020.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: A detailed discussion of the risks and uncertainties that may affect our future results is contained in AMETEK's filings with the SEC.\nI'll now turn the meeting over to Dave.\nAMETEK concluded 2020 with a strong fourth quarter, delivering record operating results despite ongoing challenges presented by the pandemic.\nOur businesses saw solid sequential sales and order improvements in the quarter while year-over-year growth turned positive across several of our businesses.\nWe also drove exceptional operating performance in the quarter, leveraging our broad set of operational excellence initiatives.\nThese efforts led to record backlog, margins and cash flow as well as the high quality of earnings that exceeded our expectations, positioning us extremely well as we look ahead to 2021.\nThe safety of our employees remains our number 1 priority.\nWe continue to adjust our practices and enforce our safety protocols across our businesses to help limit the possible spread of the virus.\nWhile we are cautious in the short term given COVID-19 and ongoing travel restrictions, we are highly confident in the strength of our businesses and our ability to deliver exceptional growth and shareholder returns over the long term.\nThe AMETEK growth model continues to provide the framework for long-term sustainable success and our performance in 2020 was a testament to the strength and flexibility of the model.\nNow let me return to our results for the quarter.\nSales in the quarter were $1.2 billion, down 8% compared to the fourth quarter of 2019.\nOrganic sales were also down 8% with the divestiture of Reading Alloys, a three point headwind, the acquisition of IntelliPower contributing one point to growth and foreign currency added two points.\nAs we saw in prior quarters, our commercial aerospace business was the most impacted by the pandemic with sales down approximately 35% in the quarter.\nOrders continued to improve with our book-to-bill at 1.07 for the fourth quarter.\nThis led to a record backlog of $1.8 billion, providing us with a positive line of sight into 2021.\nOperating income in the fourth quarter was $298.1 million, up slightly from the fourth quarter of 2020, and operating margins were a record 24.9%, up an impressive 210 basis points compared to the prior year period.\nEBITDA in the fourth quarter was a record $360.7 million and EBITDA margins were also a record of 30.1%, up a robust 300 basis points over the fourth quarter of 2019.\nThis operating performance led to earnings per diluted share of $1.08, matching last year's fourth quarter results and comfortably ahead of our guidance for the quarter.\nOur business has also delivered outstanding cash flow during the quarter.\nWith operating cash flow up 13% to a record $386 million and free cash flow conversion, exceptional 158% of net income.\nNow let me provide additional details at the operating group level for the fourth quarter.\nThe Electronic Instruments group delivered superb operating performance despite challenging market conditions.\nEIG sales in the fourth quarter were $819.4 million, down 7% from the prior year and in line with our expectations of solid sequential improvement.\nOrganic sales were down 10%, with the acquisition of IntelliPower contributing 2%, and foreign currency contributing 1%.\nCommercial aerospace remained the largest driver of the sales weakness while other EIG businesses saw improvements versus prior quarters.\nOur Materials Analysis division returned to growth in the fourth quarter, while other EIG businesses, including Zygo and Telular, also generated year-over-year growth.\nDespite the overall sales decline, EIG's operating income in the fourth quarter increased 3% over the prior year to a record $236 million, and operating margins reached a new high of 28.8%, expanding an exceptional 270 basis points over the same period in 2019.\nOur Electromechanical Group also delivered strong operating results in the quarter.\nEMG sales were $379.5 million, down 11% from the fourth quarter in 2019, driven in large part by the divestiture of Reading Alloys.\nOrganic sales were down 4%, with the divestiture an 8-point headwind, and foreign currency adding two points.\nIn addition to continued strong growth across our defense businesses, we are pleased to see our automation business generate solid organic growth in the quarter.\nFourth quarter operating income for EMG was $79.8 million, and operating margin expanded an impressive 110 basis points to 21%.\nNow for the full year results.\nDespite very difficult end market conditions and meaningful top line headwinds in 2020, AMETEK was able to expand full year operating margins while delivering record levels of operating and free cash flow, truly outstanding performance.\nOverall sales for the year were $4.5 billion, down 12% from 2019.\nOrganic sales declined 13%, with acquisitions adding 4%, the divestiture of Reading Alloys a 3% headwind, and foreign currency flat for the year.\nOperating income in 2020 was $1.1 billion and operating margins were a record 23.6%, expanding 80 basis points over 2019.\nEBITDA for the year was $1.32 billion and EBITDA margins were a record 29.2%, up 230 basis points from last year.\nThis led to full year earnings of $3.95 per diluted share, down 6% versus the prior year.\nAs Bill will highlight, our businesses did a fantastic job managing our working capital, which helped drive a record level of cash flow with full year operating cash flow up 15% to $1.28 billion.\nIn summary, while 2020 was very challenging, I'm extremely proud of the way AMETEK colleagues managed through the pandemic and delivered tremendous results.\nBefore I cover the outlook for 2021, I wanted to highlight certain key elements of the AMETEK growth model and how each position us for long-term success.\nFirst and foremost, AMETEK's proven operational acumen stood out in 2020, with our businesses doing an incredible job driving our operational excellence initiatives.\nIn the fourth quarter, we generated $60 million in total cost savings with $50 million of structural savings and $10 million in temporary savings.\nAnd for the full year, total incremental savings versus the prior year were $235 million, with approximately $145 million of structural savings and $90 million in temporary savings, including furloughs, travel reductions and temporary pay actions.\nAs we look ahead to 2021, we expect a much more modest level of temporary savings versus 2020 as the economy continues to recover from the worst of the pandemic and we continue to add back these temporary costs.\nHowever, we do expect to drive meaningful incremental structural savings across our various operational excellence initiatives including across our global sourcing activities.\nFor the full year 2021, we expect approximately $140 million of incremental operational excellence savings.\nShifting to new product development.\nEven through this downturn, we remain committed to investing in new products and solutions that help our customers solve their most complex challenges.\nIn 2020, we invested $246 million in research, development and engineering, approximately 5.5% of sales.\nThese investments led to outstanding innovation and dozens of new product launches.\nIn the fourth quarter, our vitality index or the percent of sales generated from products introduced over the last three years was an impressive 25%.\nIn 2021, we expect to invest approximately $270 million or 5.5% of sales in research, development and engineering to enhance our position as a global technology leader.\nThis is a 10% increase over 2020 RD&E spend.\nFinally, I want to touch on our acquisition strategy.\nPrior to the onset of the pandemic last year, we acquired IntelliPower, a leading provider of high reliability, ruggedized, uninterruptible power systems for mission-critical defense and industrial applications.\nIntelliPower has integrated nicely into our Power Systems and Instruments division and is performing well.\nWhile deal flow in 2020 was impacted by the pandemic, we are seeing continued improvements in the M&A markets and are managing a strong pipeline of acquisition targets across a broad set of markets.\nAs Bill will discuss shortly, AMETEK has significant balance sheet capacity and, when combined with our robust cash flow generation, provides us with meaningful capital to support our acquisition strategy, which remains our number 1 priority for capital development -- deployment.\nNow shifting to our outlook for the year ahead.\nWhile we remain cautious in the short term, given the uncertainty of the timing and pace of the recovery, we are confident in the strength of our businesses and our ability to manage through these uncertain times.\nWe continue to manage our businesses safely and prudently while ensuring continued investments in key growth initiatives.\nFor the year, we expect both overall and organic sales to be up mid-single digits versus 2020.\nDiluted earnings per share for the year are expected to be in the range of $4.18 to $4.30, up 6% to 9% compared to 2020.\nFor the first quarter, we anticipate continued year-over-year impact from the pandemic, with overall sales down low to mid-single digits and first quarter earnings of $0.97 to $1.02 per share, flat to down 5% versus the prior year.\nIn summary, the strength of the AMETEK growth model, the asset-light nature of our businesses, our leading positions in attractive niche markets and our world-class workforce will continue to drive long-term sustainable success.\nI'm confident that we are emerging from this unprecedented economic environment even stronger than we were before.\nAs Dave highlighted, AMETEK had an outstanding finish to 2020 with record operating performance and a high quality of earnings in the fourth quarter.\nThe way our teams persevered through the challenges of the past year was truly impressive.\nWith that, I will provide additional financial highlights for the fourth quarter and the full year and will also provide some additional guidance for 2021.\nFourth quarter general and administrative expenses were $17.7 million, up modestly from the prior year.\nFor the full year, G&A was down 11% from 2019 due to lower compensation costs and other discretionary cost reductions and, as a percentage of total sales, was 1.5% in both years.\nFor 2021, general and administrative expenses are expected to be up approximately 10% due primarily to the return of temporary costs, including compensation.\nThe effective tax rate in the fourth quarter was 20.1%, up from 17.6% in the fourth quarter of 2019.\nThe difference in tax rate was due primarily to the finalization of tax returns in each of the years.\nFor 2021, assuming the current tax regime, we anticipate our effective tax rate to be between 19% and 20%.\nAnd as we've stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively, from this full year estimated rate.\nOur businesses continue to manage their working capital exceptionally well.\nOperating working capital was an impressive 14% in the fourth quarter, down 330 basis points from the 17.3% reported in the same quarter last year, reflecting the outstanding work by our teams.\nCapital expenditures were $37 million in the fourth quarter and $74 million for the full year.\nCapital expenditures in 2021 are expected to be approximately $110 million.\nDepreciation and amortization in the quarter was $65 million and for the full year was $255 million.\nIn 2021, we expect depreciation and amortization to be approximately $260 million, including after-tax, acquisition-related intangible amortization of approximately $117 million or $0.50 per diluted share.\nAs Dave highlighted, our businesses continue to generate tremendous levels of cash flow.\nOperating cash flow in the quarter was a record $386 million, up 13% over last year's fourth quarter.\nFree cash flow was also a record at $349 million, up 16% over the same period last year, resulting in a free cash flow conversion of 158% of net income.\nCash flow for the full year also set new record levels.\nOperating cash flow for 2020 was $1.28 billion, up 15% over the prior year, and free cash flow was $1.21 billion, a year-over-year increase of 19%.\nFull year free cash flow conversion was 158% of net income adjusted for the Reading Alloys gain.\nTotal debt at December 31 was $2.41 billion, down from $2.77 billion at the end of 2019.\nOffsetting this debt is cash and cash equivalents of $1.2 billion.\nOur gross debt-to-EBITDA ratio was 1.8 times and our net debt-to-EBITDA ratio was 0.9 times at year-end.\nWe entered 2021 with approximately $2.6 billion in liquidity to support our growth initiatives.\nThis liquidity, along with our strong balance sheet and no material debt maturities until 2024, enables us to manage the continued effects of the economic downturn while also deploying meaningful capital on strategic acquisitions.\nTo conclude, our businesses performed exceptionally well in the fourth quarter and throughout the year, delivering a high quality of earnings in a very challenging environment.\nOur outlook for 2021 and beyond remains positive given our strong financial position, our proven growth model and our world-class workforce.\nAndrew, we're now ready to take questions.\n",
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"content": "q4 sales $1.2 billion versus refinitiv ibes estimate of $1.2 billion.\nfor 2021, expect overall sales to be up mid-single digits on a percentage basis compared to 2020.\nq4 adjusted earnings per share $1.08.\nfor 2021, adjusted earnings per diluted share are expected to be in the range of $4.18 to $4.30.\nsees q1 2021 adjusted earnings per share $0.97 to $1.02.\nfor q1 2021, overall sales are expected to be down low to mid-single digits.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: AMG entered 2021 in a position of strength, and our first-quarter results reflect the momentum that continues to build in our business.\nEconomic earnings per share of $4.28 improved 35% year over year and represented the strongest first quarter in our history, primarily driven by EBITDA growth of 23% and ongoing share repurchase activity.\nBuilding on our strong start to the year and looking ahead to the second quarter and full year of 2021, we expect the growth in our business to accelerate, given the excellent affiliate investment performance, the ongoing contributions of the strategic actions we have taken and most significantly, heightened activity and new investments.\nWith our increasing free cash flow and available capital in a favorable environment to establish new partnerships, we have a tremendous opportunity to invest in high-quality firms operating in areas of secular growth such as our recent investments in OCP Asia and Boston Common.\nThe disciplined execution of our strategy, including the simultaneous return of excess capital to our shareholders, will further compound our earnings and free cash flow generation, and we are confident in our ability to create substantial shareholder value over time.\nOver the past year, our affiliates built on their long-term performance records, once again demonstrating their ability to distinguish themselves during periods of volatility.\nExcellent investment performance during this period generated meaningful first-quarter performance fees, increased asset levels and enhanced organic growth.\nAs performance-driven improvements in organic growth trends continue across our business, we are also seeing investors rerisking portfolios as economies reopen worldwide.\nInvestors are increasing allocations to high-quality active managers, especially independent firms to help navigate market volatility, protect capital and generate superior outcomes.\nIn addition to ongoing growth and flows in private markets, specialty fixed income and wealth management, AMG is benefiting from growing demand for fundamental equities and liquid alternatives, particularly in our top-performing value-oriented affiliates and in our active ESG strategies.\nAs these trends continue, and as we add new affiliates operating at secular demand areas, we expect ongoing improvement in our organic flow profile.\nFurther supporting this improving profile, AMG-led distribution efforts are adding incremental growth and momentum to our affiliates' new business activity.\nNearly 20 years ago, we began developing AMG-led distribution resources to complement the existing sales efforts of our affiliates.\nAnd over the past two years, we strategically evolved our platform for the benefit of our affiliate partners and their clients, focusing on the largest growth opportunities while also better aligning our affiliates' in-demand products with the success of AMG distribution efforts.\nwealth distribution, consistent with our institutional distribution strategy.\nThis change provides a more competitively priced, higher quality and more differentiated set of strategies exclusively managed by AMG affiliates.\nWith this repositioning now behind us, our distribution platforms are even more strategically compelling to both existing and new affiliates as well as our clients given the increased focus, resources and alignment.\nAnd as part of our strategy, we will continue to evolve our AMG-led distribution resources to reflect the composition and needs of our affiliates and their clients over time.\nAMG's enduring business model, providing a permanent solution for independent firms, enables us to be a true strategic partner to our affiliates distinct from any institutional competitor in the market today.\nOur partnership model is simple.\nWe enhance our affiliates' ability to grow across generations, while preserving investment independence and operating autonomy.\nWe provide a uniquely broad set of partnership solutions to independent firms having expanded our solution set over the years beyond succession planning to include minority investments, growth capital and centralized distribution services on behalf of our affiliates.\nAs a result of this evolution, and given our strong competitive position, AMG's partnership approach today is even more attractive to a broader array of independent firms around the world.\nOur new investment strategy is generating both growth and return.\nNot only does our partnership approach self-select for growing firms, our discipline in structuring new investments generate meaningful returns for our shareholders across a range of business outcomes.\nOver the past two years, we have meaningfully stepped up our focus and resources devoting to identifying and executing new partnerships with independent firms.\nAdditionally, we have concentrated our prospecting efforts on independent firms operating in areas of strong secular growth and client demand, including private markets, fixed income alternatives, the Asia Pacific region, ESG and multi-asset solutions.\nWith this enhanced focus, we expect new investments to be a significant source of forward earnings growth.\nAs we continue to execute on our growing opportunity set over the course of 2021, each new affiliate will add immediately to our earnings.\nAnd the full impact of AMG's earnings power and growth profile will only fully materialize starting in 2022.\nEvidencing the momentum we are seeing in new investments, last week, we announced our second partnership this year.\nRecognized as the leader in Asian private credit, OCP Asia, has consistently generated excellent returns for its clients.\nThe cultural alignment between AMG and OCP Asia is very strong, and the key principles of OCP were attracted to our partnership approach and the opportunity to expand and extend our client reach through our global distribution capabilities.\nThis new partnership enhances and diversifies our exposure both to private markets and to Asia, where we see increasing allocation.\nWe are excited to partner with Stu, Teall, Dan and the broader team as they continue to provide differentiated investment returns and capitalize on their growth initiatives.\nFinally, as I said last quarter, the contributions from the strategic and growth investments that we have made over the past two years are not only materializing in our results today, but will also more fully manifest in the coming quarters.\nSince the beginning of 2019, we have invested in six new affiliates.\nWe've invested in the growth of our existing affiliates.\nWe have broadened our partnership solution set.\nWe've enhanced our strategic capabilities.\nWe have realigned our distribution platform.\nWe have significantly enhanced our capital position and we repurchased nearly 20% of our shares outstanding.\nWe have achieved all of this while reinvigorating AMG's entrepreneurial culture in reestablishing an ownership mindset across the organization.\nLooking ahead, we have significant momentum on our business, and we see AMG's growth accelerating.\nWith strong affiliate investment performance and improving organic growth profile and increasing opportunities to invest in excellent partner-owned firms, we are confident in our ability to execute on our substantial opportunity set and continue to create shareholder value.\nAs we discussed on our fourth-quarter call, focused execution against our strategy is producing significant growth, as was once again evidenced by our strong first quarter.\nOur earnings power and cash flow generation continue to increase, and our unique ability to deploy capital across our broad opportunity set to grow EBITDA and earnings per share is a key differentiator.\nLooking forward, the value proposition we offer independent partner-owned firms, together with an increasingly favorable environment for active managers, position AMG well to compound earnings growth over time and generate meaningful shareholder value.\nOur first-quarter results reflect the significant momentum we're seeing across our business.\nAdjusted EBITDA of $247 million grew 23% year over year, driven by strong affiliate investment performance and the impact of our growth investments.\nEconomic earnings per share of $4.28 grew 35% year over year further benefiting from share repurchase activity.\nNet client cash flows for the quarter improved meaningfully versus prior periods, and flows representing the vast majority of our EBITDA turned positive, excluding certain quantitative strategies.\nOngoing strength in private markets, specialty-fixed income and wealth management strategies continue to drive strong flows.\nIncreased demand for fundamental equity and liquid alternatives, particularly top-performing value and impact-oriented strategies, also contributed, as clients continue to position portfolios for a post-pandemic world.\nTurning to performance across our business and excluding certain quantitative strategies.\nIn alternatives, fundraising remains strong at Pantheon, Baring, EIG and Comvest as clients continue to steadily increase private market allocations globally, and we reported net inflows of $2.8 billion in the first quarter.\nPerformance in this category is excellent, as our affiliates have been deploying dry powder into attractive return opportunities, including across Asia private equity, global secondaries, coinvestments and credit.\nOverall, our private markets book remains a significant source of earnings growth, accounting for nearly 20% of management fee EBITDA with increasing future carried interest potential.\nWe continue to add high-quality partnerships in the sector, including our investment in OCP Asia, which I'll elaborate further on in a moment.\nWithin liquid alternatives, our affiliates are posting strong performance across relative value fixed income in light of ongoing volatility in bond markets as well as in concentrated long-only strategies.\nWe are seeing increased client interest in this category as clients look for alternative sources of yield and return.\nCapula, Garda and ValueAct continue to generate excellent investment performance, translating to strong performance fees and demonstrating the attractiveness and resiliency of these strategies.\nMoving to fundamental equities.\nWe continue to see strong performance across a range of affiliates.\nIn U.S. equities, we reported net inflows of $300 million.\nThe outperformance of value strategies following decade-long headwinds is leading to increased conversations with clients and are focused on the highest quality independent firms in the industry, benefiting affiliates like River Road and Yacktman.\nIn global equities, net outflows of $3.9 billion were driven by redemptions in regionally focused strategies.\nAffiliates continue to deliver strong investment performance across a range of strategies, including at Harding Loevner, Veritas and Artemis.\nMulti-asset and fixed income strategies continue to produce steady long-duration inflows, and we anticipate ongoing client demand trends will support future growth.\nThese strategies generated $900 million in net client cash flows during the quarter, primarily driven by ongoing demand for muni bond strategy at GW&K and stable growth across our wealth management affiliates.\nOverall, affiliate investment performance and flow trends continue on a positive trajectory as clients increasingly turn to independent active managers to deliver superior investment outcomes.\nAnd we continue to pivot our business toward areas of secular growth through investments in existing affiliates and new affiliates, which will further enhance our organic growth profile going forward.\nNow, turning to financials.\nFor the first quarter, adjusted EBITDA of $247 million grew 23% year over year, driven by strong affiliate investment performance.\nAdjusted EBITDA included $42 million of performance fees, reflecting outstanding performance in certain liquid alternative strategies.\nEconomic earnings per share of $4.28 grew by 35% year over year, further benefiting from share repurchase activity.\nNow moving to specific modeling items for the second quarter.\nWe expect adjusted EBITDA to be in the range of $210 million to $220 million based on current AUM levels, reflecting our market blend, which was up 3% as of Friday.\nOur estimate includes performance fees of up to $10 million and the impact of our newest investments in OCP Asia and Boston Common.\nAs a reminder, the second and third quarters are typically lower performance fee quarters due to the timing of performance fee crystallization.\nOur share of interest expense was $27 million for the first quarter, and we expect interest expense to remain at a similar level for the second quarter.\nControlling interest depreciation was $2 million in the first quarter, and we expect the second quarter to be at a similar level.\nOur share of reported amortization and impairments was $41 million for the first quarter, and we expect it to be $35 million in the second quarter.\nOur effective GAAP and cash tax rates were 24% and 20%, respectively, for the first quarter, and we expect similar levels for the second quarter.\nIntangible-related deferred taxes were $9 million in the first quarter, and we expect an $11 million level in the second quarter.\nOther economic items were negative $15 million and included the mark-to-market impact on GP and seed capital investments.\nIn the second quarter, for modeling purposes, we expect other economic items, excluding any mark-to-market impact, on GP and seed to be $1 million.\nOur adjusted weighted average share count for the first quarter was $43.2 million, and we expect our share count to be approximately $42.4 million for the second quarter.\nFinally, turning to the balance sheet and capital allocation.\nOur balance sheet remains in an excellent position with significant access to liquidity and a flexible long-duration debt profile, and we continue to look for ways to further enhance our capital structure.\nWe are generating strong and growing free cash flow and are well-positioned to invest our capital through the disciplined execution of our strategy, including through new investment partnerships that create significant value over time.\nFirst, we are focused on investing in high-growth businesses in areas of secular demand.\nSo new investments are generally growing faster than our existing business in terms of both flows and revenues, enhancing our organic growth profile and our EBITDA growth.\nNext, new investments not only contribute immediately to our EBITDA, but we can also debt finance a portion of our purchase price and often achieve incremental tax benefits, enhancing the returns we deliver to our shareholders.\nAnd finally, as we execute on our strategy, we continue to take a disciplined approach to pricing and structure, targeting risk-adjusted returns well in excess of our cost of capital across a range of potential outcomes.\nTaken together, new investments generate immediate earnings and organic growth and are strategically important to the long-term growth and sustainability of our business.\nOur most recent investment in OCP Asia is a great example of the value of investing in new affiliates.\nWe took a minority interest in the business through a revenue share, with a structure designed to minimize earnings volatility.\nThe business is growing at double digits organically and is priced to deliver attractive returns across a range of outcomes.\nWe expect the business to contribute $0.20 of incremental economic earnings per share in 2021 and $0.33 in 2022, including $16 million of EBITDA in 2022.\nOur renewed focus on disciplined capital allocation ensures that every dollar we invest runs through a common framework so that we are making growth investments that clearly meet our risk and return criteria and then returning excess capital to our shareholders through repurchases.\nIn the first quarter, we repurchased $210 million of shares and now have repurchased nearly 20% of our shares outstanding over the past two years.\nWe are focused on continuing to reduce our share count through repurchases over time, and we remain on track to repurchase $500 million of shares this year.\nAs always, this is subject to change based on market conditions and the timing of new investments.\nWe are well-positioned to compound earnings growth over time through new investments, investment performance, flows and share repurchases.\nThe momentum in our business is accelerating and the combination of our strategy, our capital position and a favorable environment to invest for growth underscore the many reasons to be excited about AMG going forward.\n",
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"content": "qtrly economic earnings per share of $4.28.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Specifically, during the call, you will hear references to various non-GAAP financial measures, which we believe provide insight into the company's operations.\nReconciliation of non-GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website at www.\nOn slide three, you see our GAAP financial results at the top of the page for the first quarter.\nBelow that, you see our adjusted operating results, which management believes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitates a more meaningful trend analysis.\nMany of the comments that management makes on the call today will focus on adjusted operating results.\nAs you saw in yesterday's release, Ameriprise is off to a strong start in 2021.\nWe're continuing the positive momentum from the past several quarters, as you can see in our first quarter metrics and financial results.\nRegarding the environment, equity markets continue to rally in the first quarter as vaccinations increased and activity accelerated with the U.S. beginning to open back up.\nThe economy is gaining strength with the further fiscal stimulus as well as better employment data.\nWith this backdrop, key for us is that we remain focused on serving our clients.\nEngagement is high, activity is strong, and we're bringing in record client flows across the business.\nWe ended the quarter with assets under management and administration of 36% to $1.14 trillion, a new high.\nIn addition, we recently announced the strategic acquisition of the BMO EMEA Asset Management business.\nTaking a step back, and looking at Ameriprise overall, I feel really good.\nWe're executing well and delivering on our strategy for growth that we discussed with you.\nWe continue to transform Ameriprise with Wealth Management and Asset Management now representing over 75% of operating earnings.\nYou've seen the financials.\nRevenues are up 10% to over $3 billion.\nEarnings per share also increased nicely in the quarter of 27% ex the NOL benefit a year ago, even with low short-term interest rates this year versus last year's quarter, and ROE remains very strong at 30%.\nWhile we continue to invest strongly in the business, we are managing expenses thoughtfully.\nWith our strong financial foundation and free cash flow generation, we returned more than $490 million to shareholders in the quarter through dividends and our ongoing repurchase program, which is comparable to the last few quarters.\nYesterday, we announced another 9% increase in our quarterly dividend, our 17th increase since becoming public 16 years ago.\nLet's discuss Advice & Wealth Management, where we've been executing well and driving growth.\nWe're benefiting from the strategic investments we've been making to deliver a differentiated client/advisor experience built on advice.\nWe've been on a multiyear journey to take our client experience to the next level.\nA big part of that is the training and support we provide advisors and ensuring that the new digital tools and capabilities are fully integrated within their technology ecosystem.\nOne of our more significant investments, our CRM platform, is increasingly serving as the hub for advisors allowing them to collaborate with clients while driving efficiencies.\nAnd we've seen good uptake as advisors integrate these capabilities into their practices.\nThis strong engagement is helping to drive good client activity, excellent flows and new client acquisition as we continue to build on our momentum from last year.\nOur total client net flows was strong at $9.3 billion in the quarter, with total client assets of 36% to $762 billion.\nOur investment advisory business continues to grow nicely.\nIn the quarter, wrap net inflows were more than $10 billion, up 55% over last year.\nThis is another record for us and reinforces our excellent client advisor engagement and focus on organic growth.\nTransactional activity continued gaining strength in the first quarter, picking up 12% over last year, with good volume across a range of product solutions.\nEven with clients putting more of the cash back to work, client cash balances remain elevated at more than $40 billion.\nAnd advisor productivity was strong, up 8%, adjusting for interest rates.\nAnd we're bringing on new advisors.\nOur virtual recruiting program is driving good results with 93 advisors joining us in the quarter.\nAdvisers recognize what we have to offer in terms of our culture, technology and high level of support.\nAnd as more states reopen their businesses and economies, we're looking forward to connecting with more advisors in person as we move through the balance of the year.\nWe also continue to build out the Ameriprise Bank, where total assets grew to $8.8 billion in the quarter.\nAs we discussed, we plan to move additional deposits to the bank over the course of this year.\nPledge and margin loan volumes increased nicely in the quarter as our advisors engage with their clients with our lending solutions from a liquidity perspective.\nWrapping up AWM, even with interest rates at all-time lows, AWM margin increased 90 basis points sequentially, ending the quarter at a strong 20.7%.\nTurning to our Retirement and Protection Solutions business, we're off to a good start and continue to adapt to the low interest rate environment.\nWe have been very proactive in this climate as we serve client needs and prudently manage the business.\nVariable annuity sales increased nicely, up 33%, driven by our success of structured product, as well as our annuities without living benefits.\nAs a result, the percentage of VA sales without living benefits grew to 64% of total sales in the quarter.\nWith regard to insurance, our focus has been on our flagship VUL product rather than IUL.\nIn fact, VUL sales were up 76%.\nWe're focused on making sure we have the right product for this rate environment while maintaining strong underwriting.\nOverall, I feel good about how the Retirement Protection Solutions business is performing in this challenging environment.\nAs part of this strategy, we are actively pursuing a reinsurance transaction for the remaining closed block of fixed annuities, and we feel we can execute it in the near term.\nTurning to Asset Management, we're generating strong results.\nOur team is engaged, serving clients' evolving needs well and driving profitable growth.\nI'll speak to the strength of the quarter and then comment on BMO's EMEA acquisition.\nWith the continuation of positive flows in markets, assets under management were up significantly, increasing 32% to $564 billion.\nWe're investing in the business, including in transforming how we use data.\nThis is both within investments in terms of our use of data and our research as well as in distribution.\nIn addition, and also key, is the thought leadership we provide and how we are targeting the right advisors to drive meaningful engagement.\nRegarding investment performance, our teams consistently generate strong performance for our clients.\nIt's across all categories: equities, fixed income and asset allocation strategies.\nAs an active manager, our research expertise is a key differentiator.\nI'd highlight that Columbia Threadneedle ranked in the top 10 and over the one, five and 10-year time frames in the recent Barron's Best Fund Family ranking, one of only two firms that ranked in the top 10 across all-time periods.\nWe also won seven Lipper Awards in the U.S. this year and over 22 awards in EMEA over the last year.\nThis level of performance bodes very well in terms of earning future flows.\nThis shows the breadth and strength of our product lineup.\nSo with this type of investment performance and the strong execution of our plan, you saw that flows continue to be quite strong.\nIn the quarter, we had net inflows of $4.9 billion, an improvement of $7.3 billion from a year ago.\nExcluding legacy insurance partner outflows, net inflows were $6.2 billion.\nGlobal retail net inflows were $4.6 billion, largely driven by the traction we've seen in North America.\nWe're driving high engagement with clients and intermediaries, including with the larger broker-dealers and independents.\nSales and flows traction is broad, and we're working hard to maintain that.\nIn the quarter, we had nine funds that generated over $250 million in net inflows, including five equity and four fixed income funds.\nIn EMEA, we've seen good flows in Continental Europe in a number of key markets.\nIn the U.K., we remained in outflows.\nHowever, we saw improvement in the quarter as the economy started to reopen there more fully, and we're hopeful that investor sentiment will strengthen.\nIn terms of Global Institutional, we had net inflows of $1.6 billion ex legacy partner outflows, driven by our results in EMEA.\nWe've made considerable progress in strengthening our consultant relations and client service globally.\nConsultants have increased their ratings on a number of key strategies in recent quarters.\nThis is important in terms of our ability to gain additional mandates from existing clients and grow our sales pipeline.\nAs you saw earlier this month, we announced our strategic acquisition of BMO's EMEA asset management business.\nThe acquisition is right in line with our strategy that we consistently discuss with you.\nIt will add complementary capabilities and solutions with their established strengths in responsible investing, liability-driven investing, fiduciary outsource management and European real estate.\nIt will also expand our scale in other traditional asset classes, especially in European fixed income, and recent flow trends in their EMEA business have been favorable.\nIn addition, post close, BMO's North American Wealth Management clients will have the opportunity to access a broad range of Columbia Threadneedle investment management solutions.\nFrom an asset management perspective, we gained important geographic diversity.\nUpon close, EMEA's AUM will increase significantly to 40% of total AUM at Columbia Threadneedle, which provides a good balance to the U.S. business.\nWe've always been a disciplined acquirer, and we expect this transaction will add to our strategic growth and generate a good return over time.\nImportantly, as we executed, the team will remain focused on maintaining our strong business momentum.\nSo, for Ameriprise overall, we're in an excellent position.\nThe business is performing really well and delivering strong results.\nBased on the current environment, we feel comfortable that we'll continue to generate strong returns with a strong balance sheet and substantial free cash flow.\nAmeriprise delivered a strong quarter of financial results and excellent business metrics, which are a direct result of our continued execution of the strategic priorities.\nWe continue to demonstrate strong performance in our core growth businesses of Advice & Wealth Management and Asset Management, driven by ongoing organic growth and expense discipline.\nAt the core, we remain focused on accelerating our mix shift through specific actions.\nFor example, our recently announced strategic acquisition of BMO's EMEA asset management business will expand key capabilities in attractive and growing market segments, while also adding to traditional asset classes.\nThis provides a larger combined capability to meet client needs.\nWe have high confidence in the financial benefits from the acquisition as well.\nIt will be accretive on a cash and operating basis by 2023, generating a 20%-plus IRR and have a payback period consistent with the Columbia acquisition of eight years.\nIn addition, we have established a strong partnership with BMO in North America, which we expect to generate strong profits.\nWe are actively engaged in a fixed annuity reinsurance process and anticipate finalizing the transaction shortly.\nLastly, we continue to effectively manage our risk profile and continued profit mix shift to lower risk and higher-margin retirement and protection solution offerings.\nOur diversified model continues to generate robust-free cash flow and strong balance sheet fundamentals.\nWe remain on track to return approximately 90% of adjusted operating earnings to shareholders in 2021.\nAmeriprise's strong underlying business performance and activity levels in our core growth businesses continue to neutralize headwinds from short-term interest rates.\nAs a reminder, this will be the last quarter where we have a reduction in short rates, sorting the year-over-year comparison.\nExcluding the impact from interest, Ameriprise adjusted net operating revenue grew 13%.\nAdvice & Wealth Management and Asset Management businesses' profitability continues to increase, with adjusted pre-tax operating earnings up 35%.\nGeneral and administrative expenses continue to be well managed.\nExcluding the impact of share price appreciation on compensation, G&A expenses were up 2% as we remain disciplined executing reengineering initiatives.\nIn total, we delivered excellent underlying earnings per share growth of 27%, excluding the net operating loss tax benefit and very strong margins in the quarter.\nTurning to slide seven.\nAs Jim mentioned, Advice & Wealth Management continued to deliver excellent organic growth during the quarter, with total client assets up 36% to $762 billion.\nIn response to the request from many of you, we are now disclosing total client flows, which increased 21% to $9.3 billion.\nFrom a product perspective, we had a terrific growth in our wrap flows, up 55% to $10.4 billion.\nCash balances remain elevated at $40.4 billion, with a substantial opportunity for clients to put cash back to work in the future.\nOn page eight, financial results in Advice & Wealth Management were strong, with underlying adjusted operating earnings up 30% to $389 million after the $78 million interest rate headwind.\nAdjusted operating net revenues were up 16% to $1.9 billion, driven by client flows, improved transaction activity and higher market levels.\nOn a sequential basis, revenues increased 6% from strong performance despite fewer fee days in the current quarter.\nExpenses remain well managed and we continue to exhibit strong expense discipline.\nG&A expense increased only 2% including higher volume-related expenses, bank expansion, investments for future growth and elevated share-based compensation.\nPretax adjusted operating margin was 20.7%.\nAdjusting for interest rates, the margin would have been 215 basis points higher.\nOn a sequential basis, pre-tax operating earnings increased 11% and pre-tax adjusted operating margin expanded 90 basis points.\nTurning to page nine.\nThe significant growth in asset management was due to our investment engine that is driving revenue growth through consistent investment performance and compelling thought leadership leading to increased client engagement.\nNet inflows in the quarter was $6.2 billion, excluding legacy insurance partners, an $8 billion improvement from a year ago.\nAdjusted operating revenues increased 21% to $828 million, reflecting cumulative benefit of inflows, favorable mix shift toward equity strategies and market appreciation.\nThe prior year quarter included an unfavorable impact from a performance fee adjustment.\nGeneral and administrative expenses grew 12% from higher compensation expense related to strong performance, Ameriprise share appreciation, as well as the costs associated with increased activity levels.\nAdjusted for compensation-related expense, G&A increased a more moderate 5%.\nPutting this together, pre-tax adjusted operating earnings grew 45% with a 43.9% margin.\nWe continue to be very encouraged by the continuation of positive flow trends and strong profitability.\nLet's turn to page 10.\nRetirement and Protection Solutions continue to perform in line with expectation in this market and rate environment.\nWhile we have a strong book of business from a risk perspective, we continue to execute our strategy to improve it further.\nIn the quarter, 64% of retirement product sales did not have living benefit guarantees.\nThis sales shift is already having an impact on our in-force block, with the account value of living benefit riders down from 65% to 63%.\nIn protection, sales were flat, as we continue to see a meaningful increase in higher-margin VUL and a significant decline in index universal life.\nThese mix shifts are expected to continue going forward.\nFinancial results continue to be in line with expectations.\nPretax adjusted operating earnings increased 10% to $183 million.\nWe had a steep drop-off in claims following January's high level, and we were approaching pre-COVID levels of claims by the end of March.\nThis business is very well managed.\nNet amount at risk remains among the lowest in the industry, and our hedging remains very effective.\nLet's turn to page 11.\nIn total, the corporate and other segment had a $21 million loss in the quarter, which was a $29 million improvement from the prior year.\nExcluding closed blocks, the loss in the corporate segment was $63 million, which included a $15 million investment gain, largely offset by $11 million of higher share-based compensation expense.\nThe year ago quarter had $11 million benefit from Ameriprise share price depreciation.\nLong-term care had $46 million of earnings in the quarter.\nThe high COVID-related mortality and terminations that we saw in January declined in February and March and were approaching pre-COVID levels by the end of March.\nThis benefit was partially offset by the COVID claims level on life insurance.\nFixed annuities had a $4 million loss related to the low interest rate environment.\nAs I mentioned, we are making good progress on our fixed annuity reinsurance transaction.\nNow let's move to the balance sheet on the last slide.\nOur balance sheet fundamentals remain extremely strong.\nIncluding our liquidity position of $2.3 billion at the parent company, substantial excess capital of $2 billion, 96% hedge effectiveness in the quarter and a defensively positioned investment portfolio.\nAdjusted operating return on equity in the quarter remained strong at 30%.\nWe returned $491 million to shareholders in the quarter through dividends and buyback.\nWe just announced a 9% increase in our quarterly dividend, and we are on track with our commitment to return 90% of adjusted operating earnings to shareholders this year.\n",
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"content": "increased its quarterly dividend 9 percent to $1.13 per share.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Specifically, during the call, you will hear references to various non-GAAP financial measures, which we believe provide insight into the company's operations.\nReconciliation of non-GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website.\nOn slide 3, you see our GAAP financial results at the top of the page for the second quarter.\nBelow that, you see our adjusted operating results, which management believes enhances the understanding of our business by reflecting the underlying performance of core operations and facilitates a more meaningful trend analysis.\nAs you saw in our release, Ameriprise had another strong quarter and I feel good about how we're performing at this point in the year.\nThe environment in the US continues to improve as the economy reopens more fully and equity markets remain strong.\nRecent spikes in the virus are putting some pressure on Europe's recovery.\nBut overall, there is a lot to be hopeful for, as we look ahead.\nAs I consider this landscape, we are executing well across our businesses, driving growth through our lower capital fee-based businesses and freeing up capital to generate shareholder value.\nWe delivered another quarter of excellent organic growth in wealth and asset management and strong productivity across our system.\nThis included strong client flows with more than $16 billion of inflows in Wealth Management and Asset Management in the quarter, and we ended with assets under management and administration of 28% to $1.2 trillion, another new high.\nWith regard to recent strategic moves, we completed the RiverSource Life's fixed annuity reinsurance transaction.\nThis further advances our mix shift to capital-light businesses and frees up approximately $700 million of excess capital.\nAnd our acquisition of BMO's EMEA asset management business, which we announced in April is on track to close in the fourth quarter.\nLet's turn to our adjusted operating results for the quarter.\nMomentum in the business continues with revenues coming in strongly at $3.4 billion or 22% fueled by organic growth in markets.\nEarnings increased 34% excluding the reversal of the NOL a year ago with earnings per share up 39% reflecting strong business growth and capital return and ROE remains exceptionally strong at 37.5%.\nAs always, we continue to manage expenses well.\nLet's move to Advice and Wealth Management, where we are consistently generating good growth.\nOur strategic investments continue to be an important part of what we're doing.\nPeople are coming to Ameriprise for a high-quality advice experience backed by leading-edge technology.\nClient satisfaction remains high and clients are engaging with us personally and through our extensive digital capabilities.\nImportantly, our advisors are embracing our training, coaching, and powerful suite of tools that are fully integrated with our CRM platform, and we continue to add capabilities, including testing a new e-meeting tool that helps advisors prepare for client meetings in minutes.\nOur ongoing investments in the technology ecosystem are helping advisors connect with more clients and prospects and run their practices more efficiently.\nThis high level of engagement is leading to really good client activity, asset flows, and client acquisition.\nTotal client inflows were up 54% to $9.5 billion and that continue the positive trends we are seeing over the past several quarters.\nConsistent with strong client flows, wrap net inflows were $10 billion continuing a very strong run rate.\nTransactional activity also grew nicely, up nearly 30% over last year with good volume across a range of product solutions.\nAll of this momentum along with positive markets drove nice growth in advisor productivity up 14% adjusting for interest rates to a record of 731,000 per advisor.\nOn the recruiting front, we had 42 experienced advisors join us in the quarter, a bit below where we've been.\nWe're hearing that advisors have been focused on all that comes with reopening and some held off on transitioning firms of delayed the start dates.\nThat said, people are getting back to a more normal rhythm.\nWe are now hosting in-person meetings that complement our virtual recruiting, and we feel good about our pipeline for the third quarter.\nTurning to the bank, total assets grew to $9.7 billion in the quarter, we continue to move additional deposits to the bank, and we have adjusted our investment strategy to extend duration a bit.\nWe are also seeing a good pickup in demand for our lending solutions.\nLoan volumes are steadily increasing led by our pledge product, which represents a nice opportunity for future growth.\nWrapping up, AWM on metrics and financials remain very strong.\nMargin increased 380 basis points year-over-year and in the quarter at 21.4% showing consistent expansion since the Fed cut short-term rates a year ago.\nMoving to retirement and protection solutions, results were good and we continue to advance our strategic initiatives.\nWith regard to annuities, we had strong variable annuity sales with total sales up 88% from a year ago.\nThis was driven by increased demand for both our structured variable annuity product and our RAVA product without living benefits.\nTogether, this represented over two-thirds of sales in the quarter, a continuation of the shift that we're driving.\nOn the insurance side,Life and Health insurance sales approximately doubled driven by our VUL product which is appropriate product to this rate environment.\nNow let's discuss Asset Management, where we continue to grow the business consistent with our plans.\nAssets under management rose to $593 billion, up 25% over last year from strong business results and positive markets.\nRegarding investment performance, the team continues to generate excellent performance for clients across equity, fixed income, and asset allocation strategies with more than 80% of funds above median over the longer-term time frames on asset weighted basis.\nThis quarter, we had net inflows of $6.7 billion, an improvement of $4.1 billion from a year ago.\nExcluding legacy insurance partner outflows, net inflows were $8.1 billion.\nThese results build upon the favorable net flows we saw over the past several quarters.\nGlobal retail net inflows were $4.2 billion, driven by another quarter of strong results in North America.\nEngagement with clients and intermediaries remain excellent.\nSales and flows traction is broad based with 15 of our investment capabilities generating over $100 million of net inflows in the quarter and in EMEA, retail sales have been weaker given the risk off environment.\nAs I said, we're hopeful that EMEA flows will strengthen in the second half as the post pandemic reopening and economic recovery continue.\nIn terms of Global Institutional, we saw a nice improvement with net inflows of $3.9 billion ex legacy partner outflows with wins across equity and fixed income strategies in both North America and EMEA.\nI feel good about our sales pipeline.\nTurning to BMO, as we discussed with you, the acquisition will add important capabilities and build on our reach in EMEA.\nThe business remains in positive flows, and we continue to receive good feedback from clients and institutional consultants.\nAs I mentioned, we're on track to close in the fourth quarter.\nIn terms of the balance sheet, our capital management is excellent.\nThe business continues to generate substantial free cash flow, and we're freeing up additional capital.\nIn fact, the approximately $700 million of our reinsurance deal largely pays for the BMO acquisition giving us additional flexibility to return capital to shareholders at an attractive rate.\nIn summary, Ameriprise is in a terrific position.\nWe are performing well and generating strong results.\nOur team is serving more clients and deepening relationships.\nWe are delivering an excellent organic growth in both Wealth and Asset Management, and the BMO transaction will add an additional growth opportunity, and we're accelerating our business mix shift with the reinsurance of the fixed annuity block.\nI'd like to close by talking about our team.\nOur people have been coming back to the office a few days a week this summer and reacclimating.\nIt's been great to be together again in person.\nWe're looking forward to be in more fully back to school where conditions are safe to do so while maintaining a level of flexibility.\nAmeriprise delivered very strong financial results across the firm with adjusted operating earnings per share up 39% to $5.27.\nWe continue to demonstrate excellent metrics, earnings growth, and margin expansion in our core growth businesses of Advice and Wealth Management and Asset Management.\nSales of our retirement and protection products were up significantly from last year, and we're focused in low risk and higher margin offerings.\nWe are already seeing a shift in our enforced block and expect this to continue going forward.\nAs Jim mentioned, in the quarter, we continue to advance our strategic priorities to expand our growth businesses and reduce our risk profile.\nWe remain on track to close the acquisition of BMO's EMEA asset management business in the fourth quarter, which will expand our core geographic and product capabilities in attractive and growing market segments.\nAdditionally, we entered into an agreement to reinsure approximately $8 billion of fixed annuities and closed on the RiverSource Life transaction in early July.\nAs noted, we will free up approximately $700 million of capital, and we will have a marginal projected impact on fixed annuity profitability.\nIn addition to the reinsurance transaction, we continue to effectively manage our risk profile through product mix shift to lower risk and higher margin retirement and protects solution offerings.\nOur diversified model generates robust free cash flow and strong balance sheet fundamentals.\nWe returned 92% of adjusted op earnings to shareholders in the quarter, aligning us to our projected 90% target for the full year.\nIn the quarter, Ameriprise's adjusted operating net revenues grew 22% and PTI increased 35%, reflecting continued excellent business performance.\nRevenue and earnings in our capital-light businesses of AWM and asset management drove nearly 80% of the total, excluding corporate and other, a significant shift from a year ago even normalizing for the unusually high earnings in RPS last year.\nWe remain disciplined on expenses.\nG&A expenses were well managed, up 6% given the strong business growth in the quarter.\nOverall, we delivered another excellent quarter that underscores the strength of the business model that continues to yield robust profitable growth.\nTurning to slide 7.\nAdvice and Wealth Management delivered another quarter of excellent organic growth with total client assets up 28% to $807 billion.\nTotal client flows were $9.5 billion, the third consecutive quarter of total client flows at or above $9 billion, demonstrating the sustainability of our organic growth.\nOur focus is not only on growth, but profitable growth.\nIn the quarter, our pre-tax adjusted operating margin was 21.4%, an increase of 380 basis points from the prior year and an increase of 70 basis points sequentially despite continued low interest rates.\nOn page 8, financial results in Advice and Wealth Management were very strong with pre-tax adjusted operating earnings of $423 million, up 56%.\nAdjusted operating net revenues grew 29% to 2 billion, fueled by robust client flows and a 29% increase in transactional activity in addition to strong market appreciation.\nOn a sequential basis, revenue increased nicely to 5%.\nAmeriprise Bank continues to grow at a solid pace reaching nearly $10 billion in the quarter after adding $700 million of sweep cash to the balance sheet.\nExpenses remain well managed, and we continue to exhibit strong expense discipline.\nG&A expense increased 3%, reflecting increased activity and the timing of performance-based compensation expense.\nGoing forward, we remain committed to managing expense and margin in a disciplined manner.\nTurning to page 9, Asset Management delivered another strong quarter, driven by excellent investment performance and sustained inflows, resulting in an outstanding financial results.\nNet inflows were 8.1 billion, excluding legacy insurance partners, which is a continuation of an improved solid flow trends.\nAdjusted operating revenues increased 32% to $879 million, a result of the cumulative benefit of net inflows and market appreciation.\nOn a sequential basis, revenues were up 6%.\nOur fee rate remained strong at 52 basis points reflecting the strong momentum we are seeing across the board with strength in both equity and fixed income strategies.\nExpenses remain well managed and in line with expectation given the revenue environment.\nG&A expenses grew 12%, primarily from the timing of compensation expense related to strong business performance as well as foreign exchange translation and higher volume related expenses.\nAs with AWM going forward, we will manage expense tightly.\nPre-tax adjusted operating earnings grew 79%, and we delivered a 45% margin.\nMoving forward, we expect strong financial performance to continue and anticipate that margins will remain in the mid 40% range over the near term driven by current robust equity markets.\nLet's turn to page 10, retirement and protection solutions continue to perform in line with expectation in this environment.\nPre-tax adjusted operating earnings were $182 million.\nSales in the quarter were up significantly off a low base in the prior year driven by the pandemic.\nSales were above pre COVID levels resulting in an increase in distribution expense in the quarter.\nAdditionally, earnings in the prior year were positively impacted by the lower surrenders and withdrawals relating to the pandemic environment.\nImportantly, we continue to reduce our risk profile by growing sales of retirement products without living benefits.\nRetirement sales increased 88% during the quarter with two-thirds of the sales and products without living benefits.\nThis has shifted in the overall book and now only 62% of our block has living benefit riders, down over 200 basis points from a year ago.\nIn protection, sales nearly doubled as we continue to see a meaningful increase and higher margin in VUL and a significant decline in IUL.\nThis mix shift in both Retirement and Protection products are expected to continue going forward.\nNow let's move to the balance sheet on the last slide.\nOur balance sheet fundamentals remain extremely strong, including our liquidity position of $3 billion at the parent company and substantial excess capital of $2 billion, which does not include the capital release from the recently announced fixed annuity transaction.\nAdjusted operating return on equity in the quarter remained strong at 37.5%.\nWe returned $585 million to shareholders in the quarter through dividends and buyback, and we are on track with our commitment to return 90% of adjusted operating earnings to shareholders for the year.\n",
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"content": "q2 adjusted operating earnings per share $5.27.\nquarter-end assets under management and administration were up 28% to $1.2 trillion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Specifically, during the call you will hear references to various non-GAAP financial measures, which we believe provide insight into the company operations.\nReconciliation of non-GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website.\nOn slide 3, you see our GAAP financial results at the top of the page for the third quarter.\nBelow that, you'll see our adjusted operating results followed by operating results excluding unlocking, which management believes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitates a more meaningful trend analysis.\nWe completed our annual unlocking in the third quarter.\nMany of the comments that management makes on the call today will focus on adjusted operating results.\nAnd with that, I'll turn over to Jim.\nAs you saw, Ameriprise delivered another excellent quarter building on a strong year.\nWe continue to perform extremely well.\nThe environment in the U.S. is largely positive as the economy continues to show solid growth, equity markets remain strong and have recovered from a weaker September.\nInflation has picked up given demand and there remains some headwinds due to the pandemic.\nIn Europe, conditions continue to improve.\nAs you consider this backdrop, we're executing well and consistently generating important organic growth and shareholder value.\nOur differentiated results reflect the strategic investments we've made in the business and a culture built on performance and a high level of care for our clients and team.\nOur growth businesses are delivering strong client flows and nearly $14 billion of inflows in the wealth management and asset management businesses in the quarter.\nSo with these positive flows and markets, assets under management and administration are up 21% to $1.2 trillion.\nTurning to our financials.\nThe excellent results we delivered in the quarter reflect the high level of performance we've generated this year.\nAdjusted operating results for the quarter excluding unlocking, revenues came in strongly at $3.5 billion, up 17%, fueled by continued organic growth and attractive markets.\nEarnings rose 32% with earnings per share up 38% reflecting strong business growth and capital management and ROE is exceptional at nearly 48% compared to 35.5% a year ago.\nLet's move to Advice and Wealth Management where we continue to deliver meaningful and consistent growth.\nWith the strategic investments we've made over many years coupled with our expertise and planning we are delivering a differentiated and referable advice experience.\nClients are actively engaged with us.\nThey are turning to Ameriprise and our advisors for comprehensive advice and solutions and they are leveraging our extensive digital capabilities to track and achieve their goals.\nOur client experience is sophisticated, personalized, and supported by our integrated digital technology and backed by our strong reputation.\nIn fact, Investor's Business Daily recently named Ameriprise the number 1 most trusted wealth manager.\nWe've earned this impressive credential based on how consumers rate Ameriprise for how we serve them, the quality of our products and services, our commitment to ethical practices, fair prices and protecting personal data.\nTo be number one in trust is high praise and we're honored.\nThis type of recognition and client satisfaction doesn't happen without an industry-leading advisor force that's highly engaged.\nOur advisors are benefiting from our training, coaching, and suite of tools to build and deepen client relationships, track prospects, and run and grow their practices through our fully integrated platform.\nThis positive momentum and engagement are leading to robust client activity, asset flows, and client acquisition.\nOur results reflect the traction in our organic growth that we've consistently demonstrated.\nTotal client inflows were up 64% to $10 billion continuing the positive trend we've seen over the past several quarters.\nwrap net inflows were excellent at $9.4 billion, up 65%.\nTransactional activity grew for another quarter up nearly 16% over the last year with good volume across a range of product solutions.\nAdvisor productivity reached another new high up 18% adjusted for interest rates to a record $766,000 per advisor.\nI'd highlight that our advisors continued to be recognized across the industry, including in top national rankings from Barrons, Forbes, and Working Mother.\nWe have long focused on driving productivity growth for advisors and we're generating some of the highest growth rates in the industry.\nAt the same time, we complement this with targeted recruiting of experienced productive advisors who are attracted to our brand and value proposition.\nIn the quarter, recruiting picked up nicely and another 104 experienced advisors joined us.\nWe're getting a great response from our in-person events and virtual recruiting activities and importantly the quality of our recruits is very good.\nLet's turn to the bank with total assets grew to nearly $11 billion in the quarter.\nThe trends we've been discussing with you remain consistent.\nWe continue to move additional deposits to the bank and we're seeing a growing demand for our recently introduced lending solutions, especially our pledged loan product that is getting good initial traction.\nTo wrap up Advice and Wealth Management, our metrics and financials are very strong.\nPretax income was $459 million, up 43% and margin was strong at 22.4%, up 320 basis points, which compares very well in the industry.\nNow I'll turn to Asset Management, where we continue to build on our momentum and results.\nAssets under management increased 17% to $583 billion.\nOur outstanding researches quarter our business and our ability to consistently generate excellent investment performance for clients.\nThat's across equity, fixed income, and asset allocation strategies with more than 85% of our funds above the medium on an asset weighted basis on a 3 year, 5 year, and 10 year basis.\nIn fact, compared to the broad group of U.S. peers we track, we perform at or near the top of the Lipper rankings for multiple time periods.\nFlows remained strong given our excellent investment performance, client experience, and continued support we provide advisors and our partner firms.\nWe had net inflows of $3.9 billion in the quarter.\nThis is an improvement of nearly $5.5 billion from a year ago.\nGlobal retail net inflows were $1.8 billion driven by North America, while overall industry sales were a bit weaker in the quarter given the summer months, overall, our flow traction is good.\nWe continue to have good sales and equity strategies and consistent with our plans, we are gaining traction within fixed income and that's across multiple channels and structures.\nI'd note that we expanded our successful suite of strategic beta fixed income ETFs in the quarter with the launch of the Columbia short duration bond ETF.\nIn EMEA, retail, market conditions remain challenging, and while we experienced some net outflows flows have improved from the second quarter.\nIn terms of global institutional excluding legacy insurance partners net inflows were $3.5 billion.\nThe team is working hard to generate wins across equity and fixed income strategies in each of our 3 regions.\nIn fact, we've seen a number of current clients adding to their positions.\nOf course, we recognize there will be shifts in flows quarter to quarter given the size of certain institutional mandates.\nOur client service and consulting relation teams have good traction and we're making considerable progress expanding our consultant ratings which position us well for growth.\nAs I look at the year, thus far for institutional we're making good progress.\nThat includes expanding our presence in APAC where we announced the opening of our new Japan office that complements our other locations in the region.\nTurning to our BMO EMEA acquisition.\nWe look forward to closing the transaction shortly, pending final regulatory approval.\nI feel good about how we're tracking.\nWe'll be able to provide more details after we close and when we release 4th quarter results in January.\nTo wrap up asset management, we are serving clients well, while maintaining our attractive organic growth and profitability.\nMoving to Retirement and Protection Solutions.\nOur results continue to be strong.\nThese are high quality businesses that generate solid earnings and excellent free cash flow.\nWe continue to focus on non-guaranteed retirement and asset accumulation protection products that deliver benefits to clients and our shareholders.\nConsistent with this strategy, the majority of our annuity sales in the quarter did not include living benefit guarantees.\nSales increased 28% and have shifted to both our structured variable annuity product and our RAVA products without living benefits.\nOn the insurance side, Life and Health insurance sales increased 77% driven by our VUL product, appropriate given the current low rates.\nWe've also seen good response to our DI products reflecting our financial planning approach.\nTo summarize Ameriprise has built a differentiated book of business over many years that deliver superior financial results that are sustainable, it starts with providing clients with solutions that meet their long-term retirement needs, have appropriate benefits and generate good risk-adjusted returns for the company.\nNow let me highlight why Ameriprise is clearly differentiated in financial services.\nIn terms of our balance sheet, our capital management remains the real strength.\nOur Advice and Wealth Management and Asset Management businesses are performing very well and generating excellent growth, margins, and returns, we compared quite favorably across the industry and our Retirement and Protection business is valuable and high quality generating good free cash flow and returns.\nIt's entirely focused on our channel and differentiated from anything else out there.\nListen, we're generating some of the strongest returns in the industry and have been for quite some time and we're able to do it with lower volatility.\nImportantly, we've returned capital to shareholders at very attractive levels.\nIn fact we consistently returned nearly all of our operating earnings to shareholders annually and if you look at that over the last 5 years we reduced our average weighted diluted share count by 28%.\nThis is all while we're consistently investing in the business and maintaining a sizable excess capital position that gives us flexibility.\nIn closing, Ameriprise is positioned well, our team is focused on key priorities to drive organic growth and we're delivering for our clients.\nIn fact, I was just with our top advisors last week to recognize their achievements and discuss our growth priorities.\nIt was terrific being together.\nAs I think about all of the enterprise, it's great to have people back in the office more in person again, as we focus on finishing the year strong.\nIn fact we reached new record levels for revenue, pre-tax adjusted operating earnings and return on equity in the quarter.\nWe delivered strong flows, earnings growth, and margin expansion in our core wealth and asset management businesses.\nResults in the quarter are continuation of the excellent trends we have been seeing this year as we successfully execute our growth strategies.\nThis is driving our business mix shift with Wealth and Asset Management representing about 80% of earnings.\nRetirement and Protection performed well and we remain focused on optimizing our risk return trade-offs in this environment.\nWe generated robust free cash flow across all our businesses.\nOur balance sheet fundamentals are excellent with significant excess capital.\nCombined this allows Ameriprise to consistently return substantial capital to shareholders with 95% of adjusted operating earnings returned in the quarter, putting us on track to achieve our 90% target for the full year.\nWe are seeing excellent AUM growth of 21% to $1.2 trillion from flows and markets.\nFlows in these businesses have improved substantially up over 200% from a year ago and up nearly 140% on a year-to-date basis, representing the successful execution of our growth strategies in each of these businesses.\nRevenues in Wealth and Asset Management grew 23% to nearly $3 billion with pre-tax operating earnings of $744 million, up 44%.\nImportantly, earnings growth from wealth and asset management outpaced revenue growth, demonstrating the operating leverage of the business and the blended margins for these 2 businesses expanded 370 basis points from last year, with wealth management up 320 basis points and asset management up 500 basis points further illustrating our ability to deliver profitable growth.\nTurning to slide 8.\nThis chart clearly illustrates our success executing our growth and business mix shift strategy, specifically the wealth and asset management businesses are driving about 80% of the earnings over the past 12 months.\nThis is coupled with a stable $700 million contribution from Retirement and Protection Solutions.\nWith that as an overview, let's review the individual segment performance beginning Wealth Management on slide 9.\nThe strategies we have in place to support advisors and improve their productivity using integrated industry leading tools, technology, and training has resulted in increased flows and transactional activity.\nTotal client assets were up over 25% to $811 billion over the past 2 years.\nOur advisor force continued to deliver exceptional productivity growth across market cycles.\nRevenue per advisor reached a new high of 766,000 in the quarter up 24% over the past 2 years.\nImportantly over the past 2 years, the annualized organic growth rate for Wealth Management flows improved to 6% compared to 4% in 2019.\nThis is coming from advisors penetrating their existing client base and adding new clients complemented by recruiting experienced advisors, and we are pleased that our strategies are translating to this level of organic growth.\nOn page 10, you can see that we are delivering growth, as well as excellent financial results in Wealth Management, in fact revenue and earnings for Wealth Management also reached record levels this quarter.\nAdjusted operating net revenues grew 23% to over $2 billion fueled by robust client flows, a 16% increase in transactional activities and market appreciation.\nWealth management pre-tax adjusted operating earnings increased 43% to $459 million.\nAmeriprise Bank is adding to the growth in wealth management primarily by allowing us to pick up incremental spread cash deposits.\nIn total, the bank has nearly $11 billion of assets after moving in an additional $1.1 billion of sweep cash onto our balance sheet in the quarter.\nIn the quarter, the average spread on the bank assets was 144 basis points compared to off-balance sheet cash earnings of 28 basis points.\nIn addition, we are seeing good growth in banking products including pledge lending that has gained substantial traction with our advisor base since the product was launched in the 4th quarter of 2020.\nExpenses remain well managed, G&A expense increased 1% as higher activity based expenses and performance-based compensation are largely offset by expense discipline.\nIn the quarter, our pre-tax adjusted operating margin was 22.4%, an increase of 320 basis points from the prior year and 100 basis points sequentially.\nLet's turn to Asset Management on Slide 11 where significant success is also being realized.\nOver the past 2 years, asset under management increased 18%.\nWe also saw a net flow shift from outflows in 2019 to a 5% organic growth rate this year.\nAs Jim mentioned, we are seeing positive flows across both retail and institutional distribution channels supported by excellent investment performance and like the industry, we saw a bit of a slowdown during the summer months though our relative position among our peers remain strong.\nThe operating leverage in asset management is significant with margins put a trailing 12 months of 44.6%, up 830 basis points over the past 2 years.\nTurning to Page 12, you see these trends generated excellent financial performance in Asset Management.\nAdjusted operating revenues increased 24% to $915 million, a result of the cumulative benefit of net inflows, market appreciation, and performance fees on a sequential basis, revenues grew 4%.\nImportantly, our fee rate remained strong and stable at 53 basis points, expenses remain well managed in line with expectation giving to revenue growth.\nG&A expenses were up 14% primarily from compensation expense and other variable costs related to strong business performance as well as foreign exchange translation.\nPre-tax adjusted operating earnings grew 44% to $285 million and we delivered a 49% margin.\nMoving forward, we expect strong financial performance to continue and anticipate that margins will remain in the mid 40% range over the near term driven by the continued flow momentum and equity markets at these levels.\nAs Jim mentioned, we are on track to close the BMO EMEA transaction in the 4th quarter.\nThis acquisition will add significant capabilities from a strategic perspective and drive improved business fundamentals going forward.\nLet's turn to page 13.\nRetirement Protection Solutions continued to reflect excellent on the line business performance, differentiated risk profile and a continued generation of substantial free cash flow.\nPre-tax adjusted operating earnings were $192 million excluding unlocking down from $206 million a year ago.\nCurrent year results reflect lower profitability from increased sale levels whereas results in the prior year benefited from lower sales as well as lower surrenders and withdrawals.\nIn total unlocking impacts in the quarter were immaterial resulting from consistent client behavior and interest rates that were in line with prior year estimates.\nWe saw a strong pickup in sales of Retirement and Protection products in the quarter with a continued mix shift toward non-guaranteed retirement products.\nDuring the quarter, the variable annuity sales increased 28% from last year with 72% of sales and products without living benefit guarantees.\nAccount value with living benefits represent only 62% percent of the overall book now down another 200 basis points in the past year.\nWe have similar trends in protection with sales up 77% driven by higher margin VUL sales.\nThis mix in sales and account values for both retirement protection products are expected to continue.\nYou will observe, that the business continues to perform in line with expectations from a claims perspective, the policy count continues to decline as the book ages and we are garnering additional premium rate increases, now approximately 90% of the book has extensive or substantial credible experience and I will note that we did not incorporate recent improvements in mortality and morbidity related to COVID-19 into our long-term assumptions.\nOverall, our actual performance continues to be in line with expectations.\nIn the quarter, you have seen transactions announced in insurance and annuity space.\nIn light of these announcement, I thought it would be helpful to provide additional context as it relates to how we view our business.\nAs Jim has indicated, we believe our I&A business is a highly valuable asset with a client solution driven capability that has generated sustainable and predictable financial results and free cash flow generation coupled with a low risk profile.\nThe driver of this is our prudent approach in building all aspects of this business, resulting in a proven track record of superior value creation.\nThe behavior of our clients has been consistent reflecting the nature of the product sale as part of the financial plan.\nWe have taken a conservative approach to product features including guarantees and crediting rates as well as requiring asset allocation for living benefits.\nWe have maintained consistent sales level and industry market share over the last decade, avoiding the arms race seen from time to time in the industry.\nAnd our economic hedging program has performed well across market cycles with 97% effect in this over the past 5 years.\nFinally, we have taken prudent and appropriate actions to manage the risk profile of the business, for example we stopped sales of LTC in 2002 and have successfully implemented premium rate actions and increased protection with our LTC reinsurance partner.\nWe also sold our Auto & Home Business, reinsured our fixed annuity businesses and have reduced living benefit sales.\nThis consistent and prudent approach has resulted in a stable earnings with 24% percent margins and a pre-tax return on capital exceeding 50% with consistent free cash flow generation.\nOur balance sheet fundamentals are strong with a high quality investment portfolio and strong risk-based capital ratio.\nThis performance is best in class in the industry over many years.\nWe have demonstrated superior return on capital, dividends paid and capital ratios, and our net amount at risk is substantially lower than peers.\nIn summary, this is a very valuable business and we are well positioned.\nIt is now only 20% of our earnings, we have demonstrated that the exposure profile is well managed, and we completed our annual unlocking with very minor updates.\nWith that being said, we will continue to evaluate options from a position of strength to make the best decisions to drive all aspects of shareholder value creation.\nNow let's move to the balance sheet, another area we have delivered strong results.\nOur balance sheet fundamentals and risk management capability are cornerstones of what we do.\nIt starts with how we manage the business to generate substantial free cash flow in each of our segments.\nWe had holding company available liquidity of $3.7 billion, an excess capital of 2.7 billion at the end of the quarter.\nWe prudently manage credit risk where we maintain an overall AA minus credit quality in our investment portfolio and have a highly effective hedge strategy.\nThese strong fundamentals allow us to deliver a consistent and differentiated level of capital return to shareholders.\nAs I mentioned, we returned 95% of earnings to shareholders in the quarter and we are on track to hit our 90% target for the full year.\nWe have executed our capital return consistently over the years.\nOur share count declined 28% over the past 5 years, even with issuing shares to fund share based compensation programs.\nOver the past year alone, the share count declined 5%.\nIn summary, strong fundamentals across our businesses delivered substantial free cash flow.\nWe manage the balance sheet conservatively and we have substantial liquidity and capital flexibility.\nCombined these attributes, position us to continue delivering a differentiated level of capital return to shareholders going forward.\n",
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"content": "quarter end assets under management and administration was $1.2 trillion, up 21 percent.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: And then Rod Smith, our executive vice president, CFO, and treasurer, will discuss our Q3 2021 results and revised full year outlook.\nExamples of these statements include our expectations regarding future growth, including our 2021 outlook, capital allocation, and future operating performance; our expectations regarding the impacts of COVID-19; and any other statements regarding matters that are not historical fact.\nConsistent with our prior Q3 calls, my comments today will center on the key trends driving our business now and how we think the technological landscape will develop in the future.\nI'll touch on how we are positioned to benefit as 5G deployments accelerate in cloud-native applications in the edge of all, particularly in the United States.\nAdditionally, I'll spend some time discussing our European markets, where we now have a scaled presence and are poised to create further value as technology evolves there, and then briefly cover what we are seeing in our earlier-stage international markets.\nFinally, I'll outline some of the progress we've made in some of those same emerging markets and the platform expansion side, particularly with respect to our investments in sustainability and renewable energy as we continue to lead the industry into a greener future.\nAt a high level, much of my commentary today will sound familiar to those of you who have listened in on prior technology-focused calls, and we view that as a positive.\nTechnology is evolving and advancing right in line with our expectations.\nIn the long-term secular trends that have driven and continue to drive, our business remains strong.\nThere are also new developments in the marketplace around the overall digital ecosystem that we are excited about and our tenants continue to power ahead with their network augmentation and expansion activities.\nTaken together, this is a backdrop that we expect will lead to sustained attractive growth for us over the long term.\nCentral to this belief is the view that our core global macro tower business will be the foundation of our success and the main driver of our cash flows for the foreseeable future, as macro towers should remain the most cost and technology efficient network deployment solution in most topographies worldwide.\nOur conviction in this regard has only grown stronger over time supported by our customers' significant investments in new spectrum assets, record levels of wireless capex spending in markets like the United States, and numerous public statements by them indicating their intention to utilize macro sites to drive aggressive deployments of 5G and other wireless technologies globally.\nWe continue to view mid-band spectrum, which includes the recently auctioned C-band and the two and a half gig band currently being deployed in the U.S., as the workhorse of the true 5G experience, and we believe to be the fundamental enabler of the immersive next-generation 5G applications and use cases that are set to emerge as coverage improves and advanced devices penetrate the market.\nImportantly, we continue to expect the propagation characteristics of the sub-6 gig frequencies, compared to traditionally deployed mobile spectrum to necessitate significant network densification over the long term supporting a multiyear period of strong growth on our tower sites.\ntoday, generating record services revenues, driven by all of the major carriers as they accelerate the early stages of their respective 5G deployments.\nFurther, application volumes within our property business are strong, supported by expected wireless capex spend in the mid-$30 billion range this year.\nIndustry experts anticipate that these elevated levels of capital spending will be sustained for a number of years, driven by a mobile data usage growth CAGR of more than 25% over the next five years.\nAmazingly, this follows a more than 25% CAGR for the last five years, and cumulative growth of approximately 7,500% over the last decade.\nThis compelling demand backdrop, coupled with the long-term noncancelable leases that comprise our more than $60 billion global contractual backlog, gives us confidence in our ability to drive organic tenant billings growth in the mid-single-digit range on average in the U.S. through 2027, and to drive higher growth rates abroad in that same period.\nI'll touch on this further in a few minutes.\nBut as a quick reminder, these baseline growth expectations exclude any material contributions from our various platform expansion initiatives.\nWhat they do include are expectations for an extended period of solid growth in our European markets, where we are seeing similar network growth trends to the United States with early stage 5G deployments set to accelerate in the coming years.\nWe expect that our newly scaled European presence will allow us to drive long-term value creation as the explosion of mobile data usage across the region continues and the need for communications infrastructure accelerates as a result.\nAcross Germany, Spain, and France, where 5G mobile subscriptions currently make up less than 5% of the total user base, we expect mobile data usage per smartphone to grow by more than 25% annually for the next five years, similar to the United States, and consequently expect capex spend across the three markets to exceed $11 billion annually over a similar time period.\nAnd as happened in the United States, we are already seeing this acceleration in network investment translate into elevated activity.\nIn fact, in the third quarter, normalizing for the impacts of the Telxius deal co-location and amendment contributions to European organic tenant billings growth rose by around 200 basis points year over year.\nAlthough we expect a significant portion of initial 5G investments to be focused in urban locations across our European footprint where roughly 80% of the population resides, we anticipate urban-oriented consumer demand to be complemented by an ongoing push from European regulators to deliver rural connectivity, which will represent another opportunity for us to drive colocation on our tower sites in those areas.\nWe believe our balance of rural and recently expanded urban assets positions us well to capture significant market share of upcoming 5G deployments over the next decade.\nFinally, in our earlier stage markets across Latin America, Asia, and Africa, we continue to see solid demand for our critical infrastructure largely driven by deployments of legacy network technologies, particularly 4G.\nWhether looking at Brazil, Mexico, India, or Nigeria, consumers are rapidly increasing their utilization of smartphones, thereby driving mobile data usage growth higher.\nIn many of these regions, existing network infrastructure is insufficient to support this deluge of usage as cell site performance is challenged with increased levels of network load.\nIn response to these trends, we are aggressively marketing our existing assets and continue to look for additional acquisition opportunities to bolster our footprint in these markets.\nBut at the same time, we have significantly ramped up our new build program given the tremendous need for entirely new infrastructure.\nIn fact, if you take the nearly 5,900 sites we built last year and add our expected 7,000 sites at the midpoint of our outlook to be constructed this year, it would represent almost as many sites as the previous five years combined.\nAnd as we laid out a few quarters ago, we are targeting the construction of up to 40 to 50,000 new sites over the next five years.\nWith day one NOI yields on these builds continuing to average above 10%, we are excited about deploying significant capital to these initiatives going forward as we capitalize on the advancement of network technology across the emerging world while helping to connect billions of people.\nIn addition to the core secular growth trends driving our global tower business, we are seeing indications, particularly in more mature markets like the United States, of a broad evolution within the overall wireless ecosystem.\nThis evolution is closely intertwined with 5G and includes an increased prevalence of cloud-native network solutions, more emphasis on the various permutations of the network edge and an ever-increasing intersection of the wired and wireless portions of today's converged network architecture.\nAs networks virtualize, O-RAN or Open RAN, it's expected to become a more important option to improve their economics.\nWe are now starting to see this phenomenon with DISH in the United States, and in Germany, where one and one has spoken extensively about its intent to utilize this technology.\nBy utilizing O-RAN, carriers have the potential to optimize network design and drive cost efficiencies, freeing up incremental capital to invest in densification and other network enhancements that help drive growth in site deployments and colocations.\nImportantly, the role of the tower in this evolving network design is as critical as ever.\nWhile base station functionality will likely continue to evolve to be cloud native software agile, the radio equipment that is placed on the tower itself, which has always driven our revenue, will continue to reside on the tower.\nImportantly, we believe we can leverage our extensive global distributed real estate portfolio to not only drive continued strong growth in our core tower business but also to take advantage of other emerging opportunities as networks virtualize.\nThis may include multi-access edge computing and potential other edge cloud permutations of neutral host infrastructure.\nAt the end of the day, modern software-driven networks are becoming smarter, faster, more capable, and more dynamic, and we are focused on ensuring that American Tower has a meaningful role to play in this context on the infrastructure and real estate side of the equation.\nOne of the areas we focused on is the development of the network edge or, more accurately, the development of multiple layers of the network edge.\nWith the need for lower latency expected to become more and more critical over time with applications like AR, VR, telemedicine, real-time analytics, autonomous driving, entertainment, streaming, you name it, and many others are beginning to emerge, we continue to believe that this could be a meaningful opportunity for American Tower.\nAs we've done more work on the evolution of the edge, the concept of multiple edge layers has come into better focus.\nToday, for example, by far the most prevalent layer is the regional metro edge owned, for the most part, by the large data center companies where vast amounts of data processing is then centralized.\nThese locations provide access to cloud on-ramps and are absolutely critical within today's networks.\nWe expect this need to be the case for the foreseeable future.\nIn fact, as the volume of data carried across networks continues to explode, we anticipate the demand for these types of large-scale facilities will only grow.\nThe upside of these locations is their size and capacity.\nThe downside, to this point, hasn't been all that relevant, is the fairly significant network transit costs and latency built into reaching these central compute functions as the data often has to travel hundreds of miles to reach these destinations.\nThese transit costs and latency considerations, which we expect to become more important in the future, will necessitate more edge locations as uplink data increases from IoT use cases and demands for distributed computing advance.\nThe next layer beyond the metro edge, in our view, will be the aggregation edge.\nHere, you're likely to post C-RAN hubs and future MEC applications as network virtualization advances, along with distributed data processing, AI inferencing, and other compute functions which will need reduced latency.\nThe major hyperscalers continue to evolve their edge cloud platforms so that they can extend computing capabilities deeper into the mobile access network at the aggregation edge.\nThe next layer beyond this, which we turn the access edge is where our existing tower sites are located today, offering an opportunity to meaningfully enhance the value of our legacy real estate.\nWe expect to eventually see vRAN and O-RAN network functions, AI inferencing, data caching, and a variety of other next-generation AR and VR cloud-native ultra-low-latency applications residing at these locations.\nFinally, we've also identified the on-premise edge, which would lie beyond even our tower sites and could eventually help support private networks, smart factories, and a host of other applications located at the end-user site.\nAt the end of the day, our 20,000-foot view is that all of these edge elements will need to fit together to provide a cohesive framework for full-scale 5G across the network ecosystem.\nThe goal for us is to figure out what the optimal linkages between the layers look like, who are the key players will be and what elements of the edge we may want to own in order to further enhance the strong long-term growth we expect from our core existing business.\nTo date, as we seek to connect the dots, we've been active with a number of trial edge compute sites at the access edge while also operating our Colo ATL metro data center interconnection facility in Atlanta.\nThrough these investments, we have built relationships with key existing and potential future customers, have learned a tremendous amount about key demand trends and have had a front row seat for the beginning stages of the convergence of wireless and wireline networks that I alluded to earlier.\nMore recently, we acquired DataSite, a data center company, consisting of two multi-tenant data centers in the Atlanta area and in Orlando.\nIn addition to strengthening our existing position in Atlanta, the addition of a network dense carrier hotel facility in Orlando provides us with a strong Southeastern presence with the profile and characteristics that we believe will be critical in the early evolution of the metro edge as we evaluate its role in the mobile networks of the future.\nWe expect these facilities, which have 18 megawatts of combined power, an additional four and a half megawatts of expansion capacity, to effectively complement Colo ATL and enable us to enhance our ability to develop neutral-host, multi-operator, multi-cloud data centers to support the broader core to edge connectivity evolution in the United States.\nWe continue to believe that while a scaled application-driven edge-oriented business model is still likely several years away, it has the potential to be a sizable market opportunity with meaningful potential upside, not only in the United States, but also on a global basis.\nLeading global MNOs are now positioning their networks with released 16 5G stand-alone core features to explore edge cloud opportunities.\nAnd with our distributed macro side presence key markets around the world, we think we are well positioned to potentially be a provider of choice on the edge, particularly for large multinational MNOs and other categories of customers who may be looking for a multi-market solution.\nSwitching gears a bit.\nWhile we believe edge compute will eventually also be relevant in emerging markets, it is unlikely to happen in the immediate future.\nConsequently, we have focused our platform expansion efforts across our developing regions and other areas, most notably on increasing the sustainability and efficiency of power provisioning in our sites.\nAs we highlighted in our recently published 2020 corporate sustainability report, we've continued to make progress toward our goal of reducing diesel-related greenhouse gas emissions by 60% by 2027 from a 2017 baseline.\nIn 2020, we achieved an additional 8% reduction from 2019, reaching 53% of the 10-year goal.\nWe are continuing to make solid progress in 2021 with an expectation to spend an additional $80 million toward energy-efficient solutions, primarily in lithium ion and solar power across our Africa footprint, which will bring our cumulative spend to nearly $250 million.\nAnd as we announced earlier this week, we are furthering our commitment to combat climate change by adopting science-based targets, which we expect to help inform our future investments in sustainability.\nIn addition to the positive environmental benefits from these investments, we are also delivering shareholder value through AFFO per share accretion.\nLithium ion batteries provide significant energy efficiency, density, and lifespan improvements over legacy solutions.\nAnd while, to date, AFFO benefits to American Tower have largely come through fuel savings we anticipate over time that our yields on these investments will further expand as we are able to lengthen battery and generator replacement cycles.\nHaving already expanded our lithium ion-powered site count from 4,500 in 2019 to 6,700 in 2020, we are targeting another 8,000 sites by the end of 2022 and recently signed a multimillion dollar bulk battery purchase agreement in Africa in support of this goal.\nImportantly, we believe that energy efficiency, the use of renewables, and sustainability in our broader sense can represent an important competitive advantage for us, not only from the flow-through to AFFO, but also the differentiation in service quality for our customers.\nWe continue to view sustainability as a critical component of our company culture, and we'll be highlighting our continued progress in future sustainability reports, which I encourage all of you to read by the way.\nIn closing, our excitement around 5G on a global basis continues to grow.\nConsumers and enterprises are using more advanced devices for more things, resulting in consistent elevated growth in mobile data usage, which, in turn, strains existing wireless networks and necessitates incremental densification and network improvement.\nConsiderable new spectrum is being deployed.\nNew entrants in select markets are building greenfield networks, and our macro tower-oriented portfolio remains well positioned to capture a significant portion of wireless investment activity.\nIn addition, through our platform expansion strategy, we are focused on ensuring that the company benefits from the ongoing convergence of wireless and wireline and the associated expansion of virtualization in cloud-native applications throughout the network ecosystem.\nImportantly, as we optimize our core business and look for ways to further enhance our growth path in the broader digital infrastructure world, we are as committed as ever to driving profitability, sustainability, and recurring growth.\nWe're energized by the future and are excited to be in a vibrant industry that is helping to connect the world.\nI hope you and your families are well.\nQ3 was another quarter of strong performance for us.\nAnd as you heard from Tom, we are as encouraged as ever by the technological trends that underpin our long-term growth potential.\nBefore digging into the details of our results and raised outlook, I'd like to touch on a few highlights from the quarter.\nFirst, we closed on our strategic partnership agreements with CDPQ and Allianz, through which they purchased an aggregate of 48% of our ATC Europe business for a total consideration of around EUR 2.6 billion.\nIn addition, we closed the remaining 4,000 Telxius communication sites in Germany back in August.\nWith the transaction now fully closed and funded, our teams are working to rapidly integrate the assets, and we are already seeing encouraging activity on the portfolio.\nSecond, we continued to strengthen our balance sheet, raising roughly $3 billion in senior unsecured notes, including our euro offering earlier this month.\nThrough our financing transactions, we have been able to maintain an attractive weighted average cost of debt while also continuing to extend our maturities.\nAs a result of this activity, along with the benefit from a nonrecurring advance payment received from a tenant during the quarter, we finished Q3 with net leverage of 4.9 times.\nWhile we expect net leverage to increase back into the low 5 times range in the fourth quarter, we are right on track with our overall post-Telxius delevering path.\nAnd lastly, we saw another quarter of record services activity in the U.S. as carriers accelerated 5G-related projects.\nWe view this as a leading indicator of strong levels of gross leasing in our property segment as we head into 2022 and beyond.\nAs you can see, our consolidated property revenue grew by over 19% year over year or over 18% on an FX-neutral basis to nearly $2.4 billion.\nThis included U.S. and Canada property revenue growth of around 10% and international property revenue growth of over 31% or 13% when excluding the impacts of the Telxius acquisition.\nThis strong performance is indicative of a continuation of the long-term secular trends driving demand for our infrastructure assets across the globe.\nMoving to the right side of the slide, we also had a solid quarter of organic tenant billings growth throughout the business.\nOn a consolidated basis, organic tenant billings growth was nearly 5% for a second consecutive quarter.\nand Canada segment of over 4%.\nContributions from colocation and amendments were more than 3%.\nEscalators came in at 3.2%, and churn was just over 2%.\nMoving to our international operations.\nWe drove organic tenant billings growth of nearly 6%, reflecting a sequential acceleration of around 60 basis points.\nAfrica was our fastest growing region in the quarter, posting organic tenant billings growth of well over 9% led by Nigeria, where we continue to see 4G investments driving both colocation activity and new site construction.\nWe also saw a consistent quarter in Latin America, where organic tenant billings growth was right around 7%, driven by solid new business and higher escalators primarily in Brazil.\nMeanwhile, European organic tenant billings growth accelerated by around 100 basis points sequentially to nearly 5.5% as expected.\nExcluding impacts from the Telxius acquisition, organic tenant billings growth in the region would have been over 4.5% in the quarter, more than 200 basis points higher than the year-ago period, driven primarily by new business contributions.\nThis positive trend reflects both ongoing 4G activity and early 5G investments leading to solid growth from both colocations and amendments.\nLooking to Germany, in particular, we saw a more than 300-basis-point increase in colocation and amendment contributions in our legacy business, as compared to the prior year period, resulting in organic tenant billings growth of over 5.5%, up from 5.2% in the second quarter.\nFinally, in Asia Pacific, we saw organic tenant billings growth of 0.7%, up roughly 200 basis points as compared to Q2.\nThis reflects a modest acceleration in gross new business activity, coupled with a more than 2% sequential decline in churn, which was in line with our expectations.\nTurning to Slide 7.\nOur third quarter adjusted EBITDA grew more than 19% or over 18% on an FX-neutral basis to nearly $1.6 billion.\nAdjusted EBITDA margin was 63.2%, which was down compared to Q3 2020 as a result of adding new lower initial tenancy assets to our portfolio, which we believe will drive strong organic growth and, therefore, margin expansion in the future.\nCash SG&A as a percent of total property revenue was around 7.3%, a roughly 40-basis-point sequential improvement.\nMoving to the right side of the slide, consolidated AFFO growth was over 13% with consolidated AFFO per share of $2.53, reflecting a per share growth of nearly 11%.\nThis was driven by strong performance in our core business, contributions from new assets and around $13 million in year-over-year FX favorability.\nOur performance also reflected the benefits of our commitment to driving efficiency throughout our operations and minimizing financing costs despite growing the portfolio by nearly 38,000 sites over the last year.\nAnd finally, AFFO per share attributable to AMT common stockholders was $2.49, reflecting a year-over-year growth rate of nearly 12%.\nLet's now turn to our updated outlook for the full year.\nI'll start by reviewing a few of the key updated assumptions.\nFirst, our expectations for organic growth across the business are consistent with our prior outlook.\nCarriers continue to deploy meaningful capital as they invest in network quality, and we are seeing numerous bands of spectrum being deployed for both 4G and 5G.\nWe are also slightly increasing our expectations for services revenue for the year to around $235 million as a result of an outsized third quarter, although this implies that services volumes will moderate somewhat in Q4.\nSecond, as a result of our focus on operational efficiency and cost controls, along with some onetime benefits, we expect to be able to take some costs out of the business as compared to our prior expectations.\nCombined with the current services gross margin outperformance, this will drive our adjusted EBITDA margin expectations higher for the balance of the year.\nThird, in India, we are encouraged by recent regulatory reforms, which we believe can provide some much-needed breathing room for capital-constrained carriers in the marketplace and improve the telecom environment overall.\nWhile we believe this is a clear positive first step toward market recovery, we continue to expect flat 2021 organic tenant billings growth in the region as we further evaluate the long-term impacts of these developments on the sector.\nFinally, incorporating the latest FX projections, our current outlook reflects negative FX impacts of $30 million for property revenue, $20 million for adjusted EBITDA, and $15 million for consolidated AFFO as compared to our prior expectations.\nWith that, let's move to the details of our revised full year outlook.\nLooking at Slide 8, as expected, leasing trends remained strong across our global business, and as a result of an increase in pass-through together with some modest core property revenue outperformance, we are raising our property revenue outlook by $10 million.\nThis represents 14% year-over-year growth at the midpoint and includes $30 million in unfavorable translational FX impacts as compared to our prior outlook.\nMoving to Slide 9.\nYou'll see that we are reiterating our organic tenant billings growth expectations of approximately 4% on a consolidated basis.\nThis includes roughly 3% growth in our U.S. and Canada segment where 5G deployments are driving solid activity levels as we exit the year.\nAs a reminder, we expect the first and largest tranche of contractual Sprint churn to hit our run rate in the fourth quarter of this year.\norganic tenant billings growth rate of negative 1%, as we communicated previously.\nOn the international side, we continue to anticipate organic tenant billings growth in the range of 5 to 6% as carriers continue to focus their efforts on enhancing and densifying wireless networks in the face of ever-rising mobile data demand.\nMoving to Slide 10.\nWe are raising our adjusted EBITDA outlook by approximately $50 million and now expect year-over-year growth of nearly 16%.\nThis increase reflects continued strength in our services segment, where we now expect to see roughly $145 million in services gross margin for the year, up from the 123 million implied in our prior guidance with year-over-year growth of more than 180%.\nOn the cost side of the equation, we continue to maintain cost discipline globally, helping to drive adjusted EBITDA margins up by around 40 basis points for the full year as compared to prior expectations.\nTurning to Slide 11.\nWe are also raising our full year AFFO expectations and now expect year-over-year growth in consolidated AFFO of roughly 15% with an implied outlook midpoint of $9.64 per share.\nThe flow-through of incremental cash-adjusted EBITDA, coupled with the continued cash tax and net cash interest benefits as compared to the prior expectations are being partially offset by around $15 million in negative translational FX impacts.\nOn a per share basis, we now expect growth of approximately 14% for the year consistent with our long-term growth ambitions that we highlighted at the start of the year.\nFinally, AFFO attributable to ATC common stockholders per share is expected to grow by nearly 12% versus 2020, incorporating the minority interest impacts of our strategic partnership with CDPQ and Allianz in Europe.\nMoving on to Slide 12.\nLet's review our capital deployment expectations for 2021.\nAs you can see, we remain focused on deploying capital toward assets that drive strong sustainable growth in AFFO per share coupled with a growing dividend, providing our investors with a compelling combination of growth plus yield.\nWorking our way through the specific categories, our first priority remains our dividend.\nFor the full year, we continue to expect to distribute $2.3 billion, subject to board approval, which implies a roughly 15% year-over-year per share growth rate.\nAs a reminder, our dividend growth will continue to be driven by underlying growth in our REIT taxable income, incorporating the impacts of M&A and other moving pieces in the business.\nConsistent with our prior comments, we anticipate growing our dividend by at least 10% annually in the coming years.\nMoving on to capex.\nWe reiterate our expectations of spending nearly $1.6 billion at the midpoint with nearly 90% being discretionary in nature.\nDriving a good portion of this discretionary capex is our continued expectation to construct 7,000 sites at the midpoint this year with the vast majority in our international markets.\nIncluding contributions from minority partners, we have deployed around $10 billion so far this year primarily for the Telxius transaction.\nas well as for smaller transactions, including DataSite.\nIn total, of our nearly $14 billion in expected capital deployment for the year, we expect over 80% to be composed of discretionary growth capex and M&A.\nMoving to the center of the slide.\nYou can see the composition of our $35 billion in cumulative capital deployments since the start of 2017, including our 2021 full year expectations.\nWe continue to augment our developed market presence, which we believe positions us optimally to drive value from accelerating 5G deployments and next-generation technology evolutions, as Tom laid out earlier.\nWe are also allocating capital toward higher growth earlier-stage markets that are typically at least five years behind the U.S. and Europe in their network deployments.\nTaken together, we believe that our global footprint positions us to capture multiple waves of investments across the globe over a sustained period of time.\nFinally, you can see that more than a quarter or around $9.5 billion of our deployed capital in the last five years has been distributed to shareholders in the form of dividends and share repurchases.\nWe continue to view these components as critical to total shareholder returns.\nMoving to the right side of the chart.\nSupporting this phase of significant investment and growth has been our investment-grade balance sheet.\nWe believe that our access to low-cost, diversified sources of financing has been a key differentiator and are proactively working to extend this critical competitive advantage into the future.\nIn fact, incorporating our latest financing efforts, we now have a weighted average cost of debt of around 2.4%, a weighted average tenor of debt of approximately seven years, and over 85% of our balance sheet locked into fixed rate instruments.\nFinally, on Slide 13, and in summary, in Q3, we continue to capitalize on a strong global demand backdrop, delivering our highest quarter of consolidated AFFO per share on record.\nThis was driven by solid organic growth, record-setting services volumes, disciplined cost controls, strategic balance sheet management, and accretive portfolio expansion.\nAs we look ahead, we believe our existing global real estate portfolio is well positioned to drive long-term recurring growth as carriers augment and extend their networks.\nAnd with the strength of our investment-grade balance sheet and diversified pool of funding sources, we expect to continue to deploy capital toward accretive investments that can enhance our growth path and enable us to create additional value.\nGiven our positioning at the intersection of real estate and technology in an ever more interconnected world, we are excited to continue to deliver connectivity to billions of people worldwide in a sustainable way while driving compelling total returns for our shareholders.\n",
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"content": "as of oct 28, does not anticipate significant impacts to underlying operating results in 2021 as result of covid-19 pandemic.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: abercrombie.com, under the Investors section.\nA detailed discussion of these factors and uncertainties is contained in the Company's filings with the Securities and Exchange Commission.\nIn addition, we will be referring to certain non-GAAP financial measures.\nI'm excited to be here today to share our recent results and provide insights into the start of our back-to-school season.\nWe entered Q2 well positioned to realize ongoing benefits from the work that we had done heading into and during the pandemic.\nThis included: growing our digital channel, which carries a higher four-wall operating margin in stores; rightsizing our store fleet; expanding our digital and technology teams; adding to our vendor and regional carrier networks; and investing in marketing with an emphasis on digital and social.\nThroughout the late spring and summer, our customers took advantage of the warm weather and an increase in social activities.\nWe were there for all their outfitting needs.\nProduct acceptance was strong across brands, continuing momentum from the past several quarters.\nOnce again, we reduced markdowns and promotions, tightly managed inventories, and made strategic investments across marketing, technology and fulfillment to support near- and long-term growth.\nOur proven playbook worked and we achieved our best second quarter operating income and operating margin since 2008.\nBefore I turn to results, just a quick PSA.\nAs we continue to lap significant impacts from COVID, we will be providing comparisons to both second quarter 2020 and 2019 where applicable.\nAnd due to temporary COVID-driven store closures last year, we do not plan to disclose comparable sales.\nSecond quarter total sales rose 24% to last year and we were up 3% compared to Q2 2019.\nOur largest market, the US, led with sales up 31% on a one-year and 11% on a two-year basis.\nResults speak to customer retention and spend and to new customers discovering our brands.\nBy channel, total global store sales rose 55% from last year and we're down 20% from 2019.\nI'm very proud of our stores performance, which was achieved despite permanent closures as well as ongoing restrictions in EMEA.\nAs a reminder, during fiscal 2020, we proactively closed 137 locations, removing 1.1 million under productive gross square feet from our store base.\nWe continue to execute against our number one transformation initiative, Global Store Network Optimization, to further align with our customers' shifting shopping behaviors.\nEven with aggressive store sales growth, digital did not skip a beat and remained a solid as stores reopened.\nDigital sales held steady to 2020 levels and grew 52% from 2019.\nResults are further proof of our ongoing evolution into a digital-first global omnichannel retailer and should yield sustainable operating margin benefits.\nOur total sales growth has been healthy as evidenced by our significant gross margin expansion.\nFor the quarter, we achieved our best Q2 gross margin rate since 2009.\nOur total Company gross margin rate increased 450 basis points on a one-year and 590 basis points on a two-year basis.\nWe reduced the depth and breadth of promotions compared to last quarter and last year.\nWhile customer reaction to products has continued to be strong, we have not and will not step away from our inventory discipline.\nThis is one of the key COVID learnings we will continue to apply going forward.\nReflecting our strong top line and gross margin performance, combined with ongoing tight expense controls, our operating margin rate was over 1,100 basis points compared to last year and 1,800 basis points compared to Q2 2019.\nThough we benefited from a good consumer environment, especially in the US, our results also reflect the body of work done by our global teams to dramatically improve our product, voice and experience.\nSince I became CEO in 2017, our brands have evolved with our customers and we have focused on being there and supporting them for all their lifestyle needs.\nSpeaking of those lifestyle needs, let's take a moment to talk about some major fashion wins that applied companywide.\nMany have asked me about the current denim cycle.\nThere is a ton of newness and interest in jeans and it has been great for our brands, especially as it is one of our top three categories on an annual basis and even more important in the back half of the year.\nOur teams have done an absolutely amazing job staying on top of current denim trends.\nWe are viewed as a premier denim destination with newer styles representing over 40% of our jeans volume, up from 25% last year, and our customer is not waiting for sales to get what they want.\nIn the second quarter, we reduced promotions within this category well below 2020 and 2019 level.\nWe have [Phonetic] high-rise, wider legs, including mom, dad, straight and flare; skinny is still there, although becoming a smaller part of the total; and there are new and upcoming trends like '90s inspired low-rise; something for everyone.\nAnd lengths are changing too.\nFollowing years of angle, we are starting to see interest in full.\nWe're encouraged that these changes are not limited to one gender.\nCustomers are also responding to the wider leg openings in men, which represents another significant opportunity as it's been a long time since we've updated his silhouette.\nOf course, our customer needs tops to go with their new jeans.\nIn Women's, we continue to see customers gravitate to swim and crop tops and oversize and bodysuits, which further reinforces the proportion play in bottoms.\nDresses, skirts, shorts and swim were also popular.\nAs product acceptance is built, our teams have been meeting our customers where they are in the digital landscape.\nWe are firmly committed to our test and learn strategy and to new and emerging technology trends and engage in opportunities.\nIt was certainly a busy and exciting quarter for both technology and engagement and I want to take a moment to discuss some of the highlights.\nWe introduced an evolved Gilly Hicks brand purpose and positioning; we launched our newest brand Social Tourist; we accelerated investments in testing across influencer, paid media and digital, reaching both core and new audiences; and we hired a Chief Digital and Technology Officer to further evolve and accelerate our digital-first model.\nStarting with Gilly Hicks.\nOn July 15th, we took a huge leap forward in our growth strategy by relaunching the brand globally with an evolved purpose and position to bring our customer to their happy place.\nGiven our Gen-Z customer is most stress generation, the updated purpose is very important.\nIn addition, we opened our first stand-alone store Easton Town Center in Columbus, Ohio, and introduced updated side-by-side with an Hollister store experiences.\nThis included 20 refreshes to existing side-by-side formats in three new locations, all of which incorporate elements from the stand-alone store.\nWell, what can I say, what an absolutely phenomenal moment for the Gilly team, we are truly feeling the love.\nCustomer feedback has been overwhelmingly positive and the brand is resonating with our Gen Z customer and their mindset.\nEarly results from the brand relaunch and the new store concept have been very encouraging.\nTaking a step back, our customers already responding well to the product and the brand, which gave us confidence to make the necessary investments to accelerate this exciting growth vehicle.\nIn the second quarter, sales rose approximately 30% year-over-year, with growth across digital and store channels.\nThis is the fifth consecutive quarter of double-digit total sales gains.\nLoungelette match backs, sleep, underwear and our active collection Gilly Go continue to resonate with our customer.\nPost-launch, our guys [Phonetic] product and matching collections also been well received.\nTurning to Social Tourist.\nIt's hard to believe it's only been three months since we've taken Hollister's successful partnership with TikTok superstars Dixie and Charli D'Amelio, who combined have over 270 million followers across social platforms to the next level with the launch of our fifth brand.\nSocial Tourist is a great example of how we are approaching our business differently.\nMeeting our customer where they are and pushing boundaries of social commerce in new and exciting ways.\nSince the launch, the brand has had over 700 million impressions and views, and we continue to build awareness.\nFor the first collection, we had several Instagram exclusive pieces.\nAnd for the second, we hosted a live TikTok fashion show, featuring the D'Amelios and other social stars, which would be TikTok benchmarks.\nWith Social Tourist, we have learned so much in a short period of time that up and coming fashion trends, social commerce and the growth of the TikTock platform.\nWe are optimistic about Social Tourist and its future and have several more exciting events happening throughout the remainder of the year.\nNow onto our remaining brands.\nStarting with our largest brand, Hollister, which includes Gilly Hicks and Social Tourist, sales rose 20% in the quarter and we achieved our highest Q2 sales in Company history, congrats to the entire Hollister team.\nOur focus on voice and experience clearly complements our product, helping to drive higher average transaction values on strong average unit retail growth.\nFrom a marketing perspective, we launched the Hollister Creator Collective, a year long influencer program.\nIn July, we sponsored the Lago Vista Snapchat series, featuring 21 non-skippable Hollister commercials.\nWe rounded out our efforts to the new monthly Instagram Live Shopping series with influencers.\nHollister site and app also got a refresh during the quarter, further improving the customer experience.\nGilly Hicks and Social Tourist now have dedicated tab, allowing users to shop between all three brands with a shared checkout.\nIn addition, Gilly Hicks and Social Tourist launched their own unique app and we also update our membership loyalty program.\nSo, the customers can earn points, redeem rewards across all three brands.\nAs we look to the remainder of the back-to-school season, we are focused on continuing to win in jeans.\nWe have sterling pop-ups in key markets where we have been engaging with local teams and ceding product and thus far has been highly successful.\nWe will also have influencers and affiliates in the US and EMEA, amplify denim across Instagram and TikTok.\nAt Abercrombie Adults, our influencer, affiliate and editorial programs remain one of our top priorities.\nIn the second quarter, we grew associated sales by over 70% year-over-year and increased our already sizable network of digital brand advocates.\nWe also launched a Capital series with top affiliate creators and took part in Facebook's Live Shopping alpha test, which had fantastic engagement and insights.\nDuring the quarter, we continued to leverage TikTok content.\nOn a year-over-year basis, we doubled our new-to-file visits, grew new-to-file orders and sales by over 80%, and continued to break TikTok's benchmarks for paid media.\nI can't wait to see what the future holds on this important platform.\nAfter all, according to POPSUGAR, Abercrombie is TikTok's favorite fashion brand, and we are proud to hold that title.\nAll the hard work connecting to our customers certainly paid-off.\nOn our last earnings call, I said Abercrombie Women's had a breakout moment.\nDuring the second quarter, that momentum built with women's achieving its best Q2 sales since 2012.\nIn total, Abercrombie, which includes kids, grew sales 30% in the quarter.\nSimilar to Hollister, Abercrombie registered higher average transaction values and strong average unit retail growth.\nHeading into fall, our team is energized.\nWe recently launched our Denim Your Way campaign, which features Abercrombie customers from Instagram casting call.\nWe also collaborated with wedding and events experts, The Knot, on a best dress guest collection.\nIn addition, we teamed up with Zappos as our exclusive domestic third party e-commerce provider for a limited selection of jeans and tops and a footwear collaboration.\nAt Abercrombie kids, if report cards were given out during summer, I would say, they received an A. We were highly focused on driving customer acquisition through expansion to new platforms and releasing new products and content franchises.\nThe Ultimate Summer Outfit campaign contributed to sales growth in shorts and swim, which are two important seasonal categories, while the release of the Cool Stuff collection and the launch of our active assortment both had over 70% new-to-file shop rates and average order values that were over 70% above our goal.\nA common theme across the Company has been our focus on digital, which is critical for future growth.\nAs we continue our transformation into a digitally led operating model, we have made investments in technology and talent.\nIn the second quarter, the US benefited from government stimulus and reopening, as customers resumed many of their activities.\nInternationally, the reopening in many countries, including our largest market the UK, lagged the US, reflecting ongoing COVID-related restrictions.\nAs we think about Q3, while global uncertainties remain, we are cautiously optimistic.\nWe've been pleased with the US back-to-school season to date, and believe our customers highly engaged and actively looking to refresh their wardrobe.\nWe are expecting to see an elongated season as many of our larger markets have yet to return.\nIn EMEA, the environment is improving and we have yet to start the back-to-school season.\nLooking ahead, we will continue to execute our proven playbooks.\nWe will focus on controlling what we can control and remain on offense.\nWe are proactively managing through industrywide issues around inflation, production and transportation delays.\nWith our solid foundation and strong balance sheet, as well as our long-standing relationships with our global vendor and supply chain partners, we are well positioned to be winners in the back half and expect to surpass our previously stated 5.8% operating margin goal this year.\nAs Fran mentioned, we will be providing comparisons to both second quarter 2020 and 2019 where applicable, and will not be disclosing comparable sales.\nTurning to our results, in the second quarter, we delivered total net sales of $865 million, up 24% to last year.\nOn a two-year basis, sales were up 3%.\nWe ended the quarter with all of our 733 stores open.\nThis compares to 92% of our base open at the end of the first quarter.\nAs of yesterday, all stores remain open.\nStore sales rose 55% on a one-year basis and were down 20% on a two-year basis.\nWe recouped a significant amount of lost sales due to COVID-driven store closures last year.\nAt the same time, total digital sales dollars remained steady compared to last year and grew 52% to Q2 2019, representing 44% of total sales this quarter.\nBy brand, net sales increased 20% for Hollister, which includes Gilly Hicks and Social Tourist, and 30% for Abercrombie, which includes kids.\nAs compared to Q2 2019, net sales increased 2% for Hollister and 4% for Abercrombie.\nBy region, net sales in the US were up 31% and 11% on a one- and two-year basis, respectively, despite having roughly 129 fewer stores and over 22% less square footage in our US store base as compared to Q2 2019.\nIn EMEA, sales rose 11% on a one-year basis, but were down 5% on a two-year basis.\nCustomers responded well to localized product, voice and experience, which allowed us to reduce promotions in region.\nWe were pleased with results in light of permanent store closures and ongoing COVID-related restrictions.\nSince Q2 2019, we have closed 17 stores, including eight flagships, as we continue to reposition to a smaller and wider store network focused on local customers.\nDuring the quarter, the region as a whole remained influx as we experienced intermittent temporary closures and reduced operating hours.\nAs a reminder, in region, our penetration is highest in the UK, while Germany and France are also meaningful.\nIn APAC, sales were down 1% to last year and down 39% to Q2 2019.\nWe experienced continued traffic challenges in the region.\nIn our largest market, China, we are encouraged by customer response to new products, including APAC exclusive collections.\nOn Tmall, we saw stabilized sales trend and improved profitability, as we continued to reduce promotional activity.\nGlobally, we continue to see lower store traffic levels relative to Q2 2019, but sequential improvements of Q1.\nFrom an omnichannel perspective, we were pleased with year-over-year improvements in conversion and average transaction values.\nMoving on to gross profits.\nOur rate of 65.2% was up 450 basis points to last year and 590 basis points to Q2 2019, driven by higher AUR across brands on reduced promotions and markdowns, partially offset by higher AUC, reflecting increased transportation costs.\nInventories control and current ending the quarter down 8% to last year.\nReflecting well documented industry-related challenges, we did see delivery delays increase over the quarter as global shipping congestion continued, and there were renewed COVID restrictions across several of our production countries.\nWe are managing through delays of one to three weeks on average, by pulling forward deliveries, employing fabric platforming and leveraging air deliveries as necessary.\nAlso we are working through an extended closure of factories in Southern Vietnam, which have been further delayed, and are now expected to open in the first week of September at the earliest.\nWe have and will continue to leverage our strong vendor partnerships in a similar playbook already used in other countries to ensure we get product as quickly as possible upon reopening.\nI'll cover the rest of our Q2 results in an adjusted non-GAAP basis.\nExcluded from our non-GAAP results are approximately $800,000 and $8 million of pre-tax asset impairment charges for this year and last year, respectively.\nOperating expense excluding other operating income was up 11% compared to last year, while operating expense as a percentage of sales decreased to 52% from 57.8%.\nIn Q2, we saw an increase in stores distribution expense of 5% compared to 2020, and a reduction of 13% compared to 2019.\nCompared to 2019, store occupancy was down approximately $50 million related to square footage reductions and renegotiated leases and included approximately $9 million of benefits associated with rent abatements and a flagship lease-related item.\nThese savings were partially offset by increased shipping and fulfillment expenses.\nMarketing, general and administrative expense rose 27% from last year and 7% compared to 2019, primarily driven by increased marketing spend and higher performance-based compensation expense.\nWe delivered operating income of $116 million compared to operating income of $22 million last year.\nAs Fran noted, this was our best second quarter operating income and operating margin since 2008.\nThe effective tax rate was approximately negative 6%.\nIn the quarter, we released approximately $30 million of previously established valuation allowances on certain deferred tax assets, primarily in the United States, Germany and the Netherlands.\nAdditionally, the quarter reflected a discrete benefit of approximately $4 million for UK rate change enacted in the quarter, which increased the value of deferred taxes in the UK.\nNet income per diluted share on adjusted non-GAAP basis was $1.70 compared to $0.23 last year.\nThe current quarter includes the benefit of approximately $0.53 related to the tax items mentioned.\nOur strong financial position continues to enable us to both invest in the business and return excess cash to shareholders.\nWe ended the quarter with cash and cash equivalents of $922 million and total liquidity of approximately $1.2 billion.\nDuring the quarter, we repurchased approximately $2.4 million shares for $100 million, bringing the year-to-date total share repurchases to about 3.5 million shares and $135 million.\nAt the end of Q2, we had approximately 6.5 million shares remaining under our previously authorized share repurchase program.\nIn addition, we spent $47 million to purchase $42 million at par value of our senior secured notes on the open market, as a way to deleverage the balance sheet and deploy excess cash.\nLooking ahead, we will continue to focus on returning excess cash to shareholders, primarily through share repurchases, pending market conditions, share price and our ability to accelerate investments.\nLooking ahead, we continue to expect fiscal 2021 capex to be approximately $100 million, with about half of that related to digital and technology and the other half related to real estate and maintenance items.\nDuring the quarter, we opened 14 new stores, bringing the total to 18 for the year-to-date period and closed 12 for a total of 20 year-to-date.\nIn the back half, we expect to open roughly 20 stores, bringing the total for the year to approximately 40.\nThis year, we have about 240 leases up for renewal.\nWe look forward to having thoughtful conversations with our landlord partners to find stores that are the right size in the right location at the right economics.\nI'll finish up with how we are planning the remainder of the year.\nWe will stay on offense and leverage a portion of our structural cost savings to support top-line growth, including investments in marketing across brands, the digital experience and growing Gilly Hicks and Social Tourist.\nReflecting ongoing global uncertainty, we will continue to maintain inventory discipline as we managed through supply chain disruptions and the cost and delays associated with it, as well as read reenact the operating environment in each market around the world.\nRecently, we have been encouraged by back-to-school results in the US, where we expect to see an extended back-to-school season.\nWe are excited for some of our largest school districts, including New York to return in the weeks to come.\nFor the third quarter, we are planning as follows, using 2019 as our comparison period.\nNet sales to be up 2% to 4% from 2019 level of approximately $863 million.\nWe expect the US to continue to outperform EMEA and APAC.\nAt this point, our plan assumes a modest impact on sales due to supply chain constraints, with the larger impact coming from cost inflation, which I'll cover momentarily.\nWe will work to manage through disruption using all available tools in our toolkit, including airing inventory and shifting production as necessary, and if possible.\nGross profit rate to be up at least 300 basis points to 2019 level of 60.1%, including an expected negative impact of approximately 300 basis points to 400 basis points of freight cost pressure.\nWe remain cautiously optimistic in our ability to drive AUR improvements through lower promotions and clearance activity to offset this headwind.\nOperating expense excluding other operating income to be up low-single digits to 2019 adjusted non-GAAP level of $494 million.\nLower store expenses will be partially offset by higher fulfillment costs.\nWe also plan to increase marketing spend compared to 2019 as we look to further drive momentum in social and digital media across brands.\nWe expect to see benefits from this marketing throughout the back half and into 2022.\nAnd the tax rate to be in the low-20%.\nNet sales to be up low to mid single digits to 2019 level of $3.6 billion.\nGross profit rate to be up around 300 basis points to 2019 level of 59.4%.\nOperating expense excluding other operating income to be down 3% to 4% to 2019 adjusted non-GAAP level of $2.07 billion.\nAssuming we deliver against these expectations, we would expect operating margin at or above 9% for the full year, which is well above our 2018 Investor Day target of 5.8%.\nWe are excited about the significant progress we have made on our operating model and cost structure.\nWhile plenty of hard work remains, we are optimistic about our future and will provide additional detail on our 2022 assumptions on our year end earnings call.\n",
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"content": "q2 sales $865 million versus refinitiv ibes estimate of $879.2 million.\nqtrly adjusted earnings per share $1.70.\nqtrly digital net sales of $376 million decreased 3% as compared to last year.\nhave had a strong start to u.s. back-to-school season.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: abercrombie.com under the Investors section.\nA detailed discussion of these factors and uncertainties is contained in the Company's filings with the Securities and Exchange Commission.\nIn addition, we will be referring to certain non-GAAP financial measures.\nWe will also be providing financial comparisons to the corresponding periods of fiscal 2020 and 2019 where applicable and due to temporary COVID driven store closures last year, we will not be disclosing comparable sales.\nI am excited to share our third quarter results, which benefited from a strong back to school and discuss the fourth quarter which is off to a good start.\nTogether, we actively navigated factory closures and transportation delays, reduced our promotions and markdowns, manage expenses and made strategic investments across marketing, technology and fulfillment to drive our business forward.\nDue to that hard work and our ongoing commitment to delivering against our key strategic pillars, including fleet optimization, digital and omnichannel enhancements, stature [Phonetic] concept to customer life cycle and improved customer engagement.\nWe delivered our best third quarter operating profit and margin in close to a decade.\nTotal sales rose 10% to last year and were up 5% to Q3 2019 and we achieved our highest Q3 sales since 2014 despite industry wide supply chain constraints and removal of 1.1 million gross square feet from our store base last year.\nOur largest and most established market, the U.S. outperformed with sales up 17% on a one-year and 12% on a two-year basis.\nIt was wonderful to have more kids return to school and as social activities resume for our kid, teen and millennial customer.\nWe executed well against the back to school and fall calendar, providing seasonally appropriate newness and outfitting options.\nWith compelling interpretations of the latest fashion trends including water leg silhouettes, vegan leather and seamless bodysuits, all while maintaining the quality, fit and value that we have become known for.\nOur customers were highly engaged as illustrated by our average basket size and lapsed customer rate of return, both of which improved in the double-digit percent range.\nIn addition, we also acquired roughly 2 million new customers globally, all very positive signs regarding the health of our brands.\nBy channel, store sales rose 11% from last year and declined 20% from 2019.\nDigital, which for us, carries a significantly higher four-wall margin than stores grew 8% on a one-year and 55% on a two-year basis, representing 46% of total sales.\nResults speak to higher AUR across brands and channels on reduced markdowns and promotions and improved full price sell-throughs.\nQ3 marked the sixth consecutive quarter of AUR improvement as our customers continue to adopt a buy it when you see it attitude.\nThis represents a major shift in mindset that has been years in the making as we have evolved each brands conditioning, purpose, perception and execution.\nLooking ahead, we will build on our solid foundation and believe there's ongoing AUR opportunity at all of our brands.\nThird quarter AUR improvements were offset by higher supply chain related costs.\nIn spite those pressures, we grew our operating margin rate by 80 basis points on a one-year basis and 640 basis points on a two-year basis.\nAnd while we don't talk about it often publicly, we could not have achieved these results without our corporate purpose of being there for you on the journey to being a becoming who you are, which serves as our North Star.\nIt ensures our associates and partners feel comfortable sharing their thoughts and evolving with us and that we listen and speak to our customers authentically, providing inclusive options for all of their lifestyle needs.\nPart of that evolution was the recent hiring of a leader to drive our comprehensive ESG efforts forward.\nSimply put, purpose is woven into all that we do, including our critical pillars of product, voice and experience.\nStarting with product, during this third quarter we had strong new wins that is hard to name just a few.\nDenim, which is one of our most important categories continue to be on fire, posting record breaking Q3 sales.\nWe received a tremendous amount of positive media headlines and publications that have billions of impressions and thousands organic social media tags across the platform, all devoted to the fit, quality and comfort of our assortment.\nMomentum built-in non-skinny and water leg styles including the mom, dad, straight and flare for women, while slim, straight and tapered gained popularity for guys as we continue to refresh his wardrobe.\nImportantly, promotions were once again down across brands with higher full price selling.\nIn addition to denim, other top-performing categories included dresses, shorts, pants and knit tops and bottoms.\nWe are thrilled with the progress we've made with our products, which goes hand in hand with amplifying our voice and experience.\nOur marketing teams are leaders in a rapidly evolving digital space and are embracing new and emerging technology trends and engagement opportunities using voices and platforms that are authentic to each of our brands.\nAcross the company, we continue to lean into the power of social selling and refining strategies are tailor made for each of our brands and their target customer.\nThis includes live shopping events on TikTok and Instagram, exclusive social product launches, in-app storefronts across platforms, augmented reality campaign for Snapchat and robust affiliate influencer program and our customer is responding.\nOur unrelenting focus on digital is intertwined with providing the best omnichannel experience for our global customers by meeting them whenever, wherever and however they choose to interact with us.\nThis focus is what inspired us to open our New West Coast DC and introduced same-day delivery.\nIt is all what drove one of our major internal initiatives to know them better and squall them everywhere, which is about transforming our ways of working to ensure that everything we do is data driven and aligns the moments that are most important to our customer and a world of endless ideas and rapid innovation.\nNow, moving onto the brands.\nHollister sales, which includes Gilly Hicks and Social Tourist rose 10% to last year and 1% to 2019.\nIn the U.S., sales rose 17% on a one-year and 7% on a two-year basis.\nI am proud that Hollister global Q3 sales were the strongest since 2013 and that U.S. sales were the strongest since 2012, especially given that Hollister and Gilly saw an outsized impact on inventory receipts due to higher exposure to Vietnam production, importantly sales were healthy with nice AUR growth.\nDuring the quarter, we continue to authentically speak to our Gen Z customer about the topics they care about the most, including our diverse backgrounds and identities, mental wellness and one of their most passionate -- biggest passions gaming.\nIn September, Hollister formally announced the launch of the Hollister good deeper perspective, a long-term program dedicated to supporting rising Latinx creators from the fashion, music and comedy verticals of TikTok and Instagram and authentically amplifying their voices.\nThis first of its kind collective is meaningful given Hollister's large Latinx customer base and is a testament to the fundamental shift in how we engage our customers.\nThe launch, which generated over 20 million PR impressions included the bilingual made for TikTok album produced by the collective music creators.\nThe following month Hollister named Fortnite World Cup Champion, Bugha, its first chief gaming scout.\nThe announcement made waves across the gaming new cycles garnering over 125 million PR impressions.\nThe partnership included a collection with Hollister's highly successful all day gameplay assortment featuring a match including and sweat pants that he co-created with the fans via social.\nThe collaboration boosted sentiment across our social channels and saw strong sell-throughs.\nLooking ahead, Bugha worked with Hollister to scout rising gamers for team Hollister, our new up incoming gamer program.\nWe are looking forward to a charity livestreaming during GivingTuesday with proceeds going back to the Hollister confidence project, an initiative dedicated to promoting confidence and mental wellness in teams worldwide.\nAt Gilly Hicks, our updated brand purpose of bringing our customer to their happy place is resonating.\nOur recently introduced men's products have been well received, which is exciting giving us a completely new and untapped customer for us.\nAt the same time, our existing customers continue to come to us for her must haves including Go Active, which grew to over 20% of sales.\nResponse to our stand-alone in '23 updated side-by-side locations have been encouraging.\nWe see runway to open additional stand-alone and side-by-sides globally and to refresh the Gilly Hicks experience that lived within Hollister as we embark on our next phase of growth.\nIn addition to Gilly Hicks, we've also please with results at our newest brand Social Tourist, which we view as another one of our growth vehicles.\nAs a reminder, Social Tourist was launched in May.\nIt's a multi-year exclusive apparel partnership with social media super stars Charli and Dixie D'Amelio.\nIn the third quarter, the D'Amelio series aired on Hulu.\nIn this show Charli, Dixie and their family wore Social Tourists into their daily lives.\nThe highly viewed series, which Hollister sponsored, drove meaningful social impressions and engagement, spikes in search demand and major PR buzz.\nHollister also partnered with Hulu on an ad by which drove roughly 90 million ad impressions.\nWe've also continued to apply learnings in Social Tourists, particularly as it relates to TikTok and social selling to other areas of the company making us even smarter, faster and more creative.\nTurning to Abercrombie, which includes kids, Q3 sales rose 12% compared to last year and 10% to 2019, representing our highest sales volume since 2015 and best gross margin since 2013.\nIn the U.S., sales rose percent on a one-year and 18% on a two-year basis.\nIt has been absolutely amazing to experience a turnaround of this brand, which is in a remarkably different place than it was just a few short years ago.\nAt kids, we had a great back-to-school season.\nWe combined insight driven marketing and paid media, entered the stress and guesswork out of shopping for parents by providing product that shine from both the fashion and a quality perspective.\nWe also found power and leveraging affiliate parents voices with its first ever many collection, spanning both the adult and kids brands that contain stylish, cool and A&F essentials for fall and was an immediate hit.\nAt adults, we launched our highly successful denim your way campaign in early August.\nThis was a combination of work that's first again in January when we put out a call on social media to catch our customers in the campaign.\nAfter receiving thousands of submissions, which was 10 customers and brand fans to help drive fit and design decision and to be predominantly featured in our denim your way marketing.\nThe campaign and the company assortment receiving glowing reviews as a perfect example of how we are listening to our customer to create product for their lifestyle needs.\nThroughout the quarter, we also continue to leverage our relationship with TikTok, a highlight was our women's fall outfitting campaign, flashes of fall, which generated over 140 million impressions.\nIn addition our Abercrombie influencer team double down their efforts to maintain their leadership in the world at social selling.\nNow looking to the fourth quarter.\nOur customer is responding well to our assortments, especially our cold weather offerings including cozy and outerwear, as well as occasion dressing and denim.\nWe have seen some early holiday shopping and also a fair amount of self purchasing, as the weather has become more seasonal and our customer gears up for a turn to holiday activities and events.\nWith the delays in the supply chain, we expect to deliver newness leading up to the holiday peak, which will be a great learning around future flows and strategies.\nOn the delays, I'm proud of our season supply chain team for helping us navigate these challenges.\nOn top of our great products, I'm also excited about the social strategies we have in place.\nOur stores and DCs are well staffed and ready to go and I'm confident that our store network and expanded suite of omni capabilities, including same day shipping, will enable our customers to do their shopping whenever, wherever and however they choose.\nWe are ready to compete and win for holiday and I'm confident in our ability to deliver an operating margin between 9% and 10% this fiscal year, which will be our best annual operating margin since 2008.\nLooking beyond holiday, we continue to see significant growth opportunities across our portfolio brands and we look forward to sharing more on our strategic vision of how we will scale our business at our next Investor Day, which we are planning for the first half of fiscal 2022.\nStay tuned as we finalize the details.\nIn the third quarter, we delivered strong results across brands and across the P&L.\nOur profitability continued to benefit from the transformative moves we made in our operating model and expense structure last year as the shift to digital accelerated.\nFor Q3, total net sales were $905 million, up 10% to last year and up 5% to pre-pandemic levels.\nWhile transportation delays increased during the quarter, our teams were able to maximize the inventory on hand to deliver sales above our expectations.\nStore sales rose 11% on a one-year basis and were down 20% on a two-year basis.\nAt the same time, total digital sales increased 8% compared to last year and grew 55% from 2019, representing 46% of total sales this quarter, compared to 31% in 2019.\nBy brand, net sales increased 10% for Hollister, which includes Gilly Hicks and Social Tourist and 12% for Abercrombie, which includes Kids.\nAs compared to Q3 2019, net sales increased 1% for Hollister and 10% for Abercrombie.\nBy region, we continue to see strong results in the U.S. with net sales up 17% and 12% on a one and two-year basis respectively.\nDespite having roughly 140 fewer stores and over 20% less square footage in our U.S. store base as compared to Q3 2019.\nIn the U.S., Hollister was up 17% to 2020 and up 7% to 2019, while Abercrombie was up 19% and 18% respectively.\nOutside of the U.S., we continue to see a slower recovery with EMEA down 6% to last year and 7% to Q3 2019.\nOur business was strongest in our largest European market, the U.K., where we experienced sequential sales improvements.\nThe UK customer has responded well to product and has embraced our latest A&F location on Regent Street, which opened in September and is a fraction of the size and cost of our recently closed flagship.\nThis was offset by continued COVID driven restrictions and impacts across key Western European countries, including two of our largest markets, Germany and France.\nIn APAC, sales were down 12% to last year and down 32% to 2019 as we face traffic headwinds due to ongoing COVID cases inside China and Hong Kong and slow vaccination progress in Japan.\nAdditionally, we believe the China was impacted further by overall geopolitical climate.\nWe continue to view international as a long-term growth opportunity and are encouraged by the customer response to regional marketing and product distortions in both the EMEA and APAC markets.\nMoving on to gross profit.\nOur rate of 63.7% was down 30 basis points to last year and up 360 basis points to 2019.\nThe result exceeded our expectations and included approximately 300 basis points of impacts from higher freight costs and air utilization, which was at the low end of our 300 to 400 basis point expectation.\nWe continue to see AUR growth across brands compared to 2020 and 2019 on reduced promotions and markdowns, while maintaining initial tickets.\nWe ended the quarter with inventory approximately flat to last year.\nInventory on hand was lower than plans coming out of Q3 and was offset by higher in-transit due to the extended Vietnam closures and increasing transit times.\nRelated to Vietnam, all factories are open and operating.\nWe are using air to catch up on these receipts and are encouraged by recent improvements moving product through the U.S. ports.\nI'll cover the rest of our Q3 results on an adjusted non-GAAP basis.\nExcluded from our non-GAAP results are approximately $6.7 million and $6.3 million of pre-tax asset impairment charges for this year and last year respectively.\nOperating expense excluding other operating income was up 8% compared to last year and up 1% to 2019, coming in at the low end of our expectation of up low-single digits.\nAs we saw better-than-expected store and distribution expense and shifted a portion of our marketing spend to Q4 to better align with inventory flows.\nIn Q3, we saw an increase in store and distribution expense of 2% compared to 2020 and a reduction of 7% compared to 2019.\nCompared to 2019, store occupancy was down approximately $43 million related to square footage reductions and renegotiated leases.\nThese savings were partially offset by increased shipping and fulfillment expenses on higher digital sales.\nMarketing, general and administrative expenses rose 21% from last year and 28% to Q3 2019, primarily driven by increased marketing investments.\nAs Fran mentioned, we continue to drive strong customer engagements across our brands and we expect to continue reinvesting a portion of our occupancy savings into digital media in Q4.\nWe delivered operating income of $79 million compared to operating income of $65 million last year and $27 million in 2019.\nThis is our best third quarter operating income and operating margin since 2012.\nThe effective tax rate was approximately 25%.\nNet income per diluted share on an adjusted non-GAAP basis was $0.86 compared to $0.76 last year.\nAs we continue to benefit from the evolved operating model and the resulting higher profitability level, we are in a strong position to both invest in the business and return excess cash to shareholders.\nWe ended the quarter with cash and cash equivalents of $866 million and funded debt of $308 million.\nDuring the quarter, we repurchased approximately 2.7 million shares for $100 million, bringing year-to-date total share repurchases to about 6.1 million shares and $235 million.\nRecently, our Board of Directors approved a new share repurchase authorization of $500 million, replacing the February 2021 share repurchase program.\nIn the fourth quarter, we expect to repurchase at least $100 million worth of shares pending market conditions and share price.\nWe continue to expect fiscal 2021 capex to be approximately $100 million, with about half of that related to digital and technology and the other half related to real estate and maintenance items.\nDuring the quarter, we opened five new stores, bringing the total to 23 for the year-to-date period and closed three stores for a total of 23 year-to-date.\nFor the full year, we expect the store count to remain roughly flat to last year, pending ongoing negotiations with landlords.\nI'll finish up with our thoughts on Q4, which we are planning as follows using 2019 as our comparison period: net sales to be up 3% to 5% from 2019 level of approximately $1.185 billion.\nWe expect the U.S. to continue to outperform EMEA and APAC.\nOn inventory, we are optimizing AURs on current inventory and our distribution center teams are quickly replenishing as inventory flows in.\nWhile the inventory receipt pattern will be different than the past, we have and we will continue to work diligently to minimize the impact on sales for the quarter.\nGross profit rate to be around flat to the 2019 level of 58.2%, including an expected negative impact of approximately $75 million of freight cost pressure due to rising ocean and air rates as well as higher air deliveries necessary to catch up on the Vietnam factory closures.\nBased on early customer response to holiday, we are optimistic in our ability to continue to reduce markdowns and promotions to drive AUR improvements to offset this headwind.\nOperating expense excluding other operating income to be up low to mid single digits to 2019 adjusted non-GAAP level of $565 million.\nWe expect to continue to see lower store expenses, partially offset by higher fulfillment costs.\nSimilar to Q3, we plan to increase marketing spend compared to 2019 as we look to maximize holiday sales and build momentum heading into 2022.\nFinally, we expect the tax rate in the low 20s.\nAssuming we deliver against these expectations, we expect the full-year operating margin to be in the 9% to 10% range, our highest since 2008.\nIn closing, we are excited to have delivered another quarter of profitable growth in Q3 and are laser focused on executing our strategies for holiday and beyond.\nWe will provide additional detail on our 2022 assumptions in our year-end earnings call.\n",
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"content": "q3 sales rose 10 percent to $905 million.\nqtrly adjusted earnings per share $0.86.\nqtrly digital net sales of $413 million increased 8%.\ncompname announces board of director's approval of $500 million share repurchase program.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Please ensure that your [Technical Issue] Leading 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 quarterly results with earnings per share of $5.12, an increase of 115% compared to adjusted earnings per share of $2.38 last year.\nThis marks AutoNation's sixth consecutive all-time record quarter, driven by strong performance across both variable and fixed operations.\nOur third quarter same-store revenue of $6.4 billion was up 18% compared to the prior year as well as the third quarter of 2019.\nConsumer demand continues to outpace supply, driven by consumer desire for personal transportation and ongoing manufacturer supply chain disruption.\nWe expect this to continue well into 2022.\nNew vehicle sales are currently constrained by reduced production volume, low inventory levels leading to even more pent-up demand and should support sales for the foreseeable future.\nIn our used vehicle business, our strong self-sourcing capability, digital tools and customer-focused sales processes are competitive advantage that has allowed us to outperform our peers and the broader used vehicle market.\nIn the third quarter, we self-sourced 90% of our pre-owned vehicle retail sales and our same-store used vehicle revenue increased 63% year-over-year.\nWe see additional opportunity to capture used vehicle market share to our AutoNation USA expansion.\nThis week, we opened our eighth AutoNation USA store and our second store in the Denver market and we expect to open two additional stores in Phoenix and Charlotte before year end.\nOur rollout schedule remains on track with 12 additional stores planned for 2022 and over 130 stores by the end of 2026.\nToday, we announced that we signed an agreement to acquire Priority 1 Automotive Group, adding $420 million in annual revenue.\nTogether with our previously announced acquisition from Peacock Automotive Group, AutoNation has announced $800 million in annual revenue from acquisitions this year.\nWe also continue to buy back our shares during the third quarter.\nOver the last 12 months, through the end of the third quarter, we repurchased 27% of our shares outstanding from September 30 last year.\nOur strong execution and cash flows have positioned us well to continue our disciplined, opportunistic capital allocation strategy.\nI'm going to start the same place as Mike opened.\nToday, we reported net income of $362 million or $5.12 per share versus adjusted net income of $212 million or $2.38 per share during the third quarter of 2020.\nThis represents our sixth consecutive all-time high quarterly earnings per share and 115% increase year-over-year.\nAs Mike mentioned, consumer demand for personal transportation remained strong, while new vehicle inventory is at historically low levels.\nIn this environment, we continue to focus on optimizing new vehicle margins and procuring used vehicle inventory to support sales.\nWe expect these trends with demand exceeding supply to continue well into 2022.\nFor the quarter, same-store variable gross profit increased 42% year-over-year, driven by an increase in total combined units of 4% and an increase in total variable PVR of $1,709 or 39%.\nA decline in new units of 11% was more than offset by growth in used units of 20%.\nOur customer care business has recovered with same-store customer care gross profit increasing 8% on a year-over-year basis and 6% compared to the third quarter of 2019.\nTaken together, our same-store total gross profit increased 29% compared to the prior year and 45% compared to the third quarter of 2019.\nWe also continued to deliver significant SG&A leverage due to strong cost discipline and robust vehicle margins.\nThird quarter SG&A as a percentage of gross profit was 56.9%, a 750 basis point improvement compared to the year ago period on an adjusted basis.\nAs measured against gross profit on an adjusted basis, our metrics improved across all key categories, with overhead decreasing 390 basis points, compensation decreasing 290 basis points and advertising decreasing 70 basis points.\nWe expect SG&A as a percentage of gross profit to remain below 60% for the fourth quarter and the full year 2021.\nFloorplan interest expense decreased to $5 million in the third quarter of 2021, due primarily to lower average floorplan balances.\nThis, combined with a lower effective tax rate and fewer shares outstanding generated a record EPS.\nTurning to the balance sheet and liquidity.\nOur cash balance at quarter end was $72 million, which combined with our additional borrowing capacity resulted in total liquidity of approximately $1.8 billion.\nWe continue to leverage our strong balance sheet and robust cash flows to invest in our business.\nAs Mike mentioned, this week we opened our eighth AutoNation USA store in Denver, Colorado.\nWe remain on track to open two additional stores in the fourth quarter and 12 more in 2022.\nAgain, as Mike mentioned, longer term we continue to target over 130 stores by the end of 2026.\nIn addition to organic growth initiatives, today we announced the acquisition of Priority 1 Automotive Group.\nWe will continue to look for additional acquisitions that complement our portfolio and meet our return thresholds.\nWe have also continue to repurchase our own shares.\nDuring the third quarter, we purchased 7.9 million shares for an aggregate purchase price of $879 million.\nThis represents an 11% reduction in shares outstanding for the fourth quarter alone.\nToday, we announced that our board has authorized an additional $1 million for share repurchase.\nWith this increased authorization, the company has approximately $1.3 billion available for additional share repurchase.\nAs of October 19, there were approximately 66 million shares outstanding.\nDespite our significant capital deployment, we maintained ample capacity on our balance sheet.\nAt the end of the third quarter, our covenant leverage ratio of debt to EBITDA was 1.4 times, up slightly from 1.2 at the end of the second quarter, but still well below our historical range of 2.0 to 3.0 debt to EBITDA.\nWe continue to demonstrate strong operational execution and disciplined capital allocation.\nGoing forward, we will remain focused on leveraging our balance sheet and strong cash flows to drive long-term shareholder value.\nIt's been my honor to serve in a leadership position of AutoNation for the past 22 years.\nWe've built an exceptional brand.\nWe are America's most admired and respected automotive retailer.\nWe provide a peerless customer experience from coast to coast.\nAnd we have made a difference in people's lives with DRIVE PINK and our efforts to beat cancer.\nHe is one of the world's most respected, admired automotive executives, and we are thrilled to have him as our new CEO.\nAnd AutoNation has an even brighter future.\n",
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"content": "compname reports qtrly gaap earnings per share from continuing operations of $5.12.\nqtrly gaap earnings per share from continuing operations $5.12.\nqtrly same store revenue $6.4 billion, up 18%.\ncompname announces agreement to buy priority 1 automotive group, representing about $420 million in annual revenue.\nauthorized repurchase of up to additional $1 billion of common stock.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Leading 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 quarterly results with adjusted earnings per share from continuing operations of $2.43, an increase of 94% compared to last year.\nDuring the fourth quarter, same-store revenue increased $265 million or 5% compared to the prior year, a solid growth and new used and customer financial services revenue was partially offset by decline in customer care which has experienced a slower recovery correlated with lower miles driven.\nNew vehicle inventory levels remain constrained and we expect demand to exceed supply for an extended period.\nGiven these dynamics, we remain focused on optimizing our business in the current operating environment.\nWe expect industry sales to approach $16 million in 2000 -- 2021 with strong retail sales growth compared to last year.\nWe've seen a solid growth in '21 with January trends in line with our annual forecast.\nFor the quarter, same-store total variable gross profit per vehicle retailed increased $765 or 21% compared to the prior year.\nSame-store new vehicle gross profit per vehicle retailed increased $919 or 50% and same-store used vehicle gross profit per vehicle retail increased $127 or 9% compared to the prior year.\nWe drove significant SG&A leverage in the quarter, adjusted SG&A as a percentage of gross profit was 63.8% for the quarter, representing an 820 basis point improvement compared to the fourth quarter of 2020.\nWe remain committed to operating below 68% SG&A as a percent of gross profit on a long-term basis.\nWe continue -- our continuing our opportunistic capital allocation strategy that balances investing in our business and returning capital to shareholders.\nWe expect to allocate capital toward the AutoNation USA expansion share repurchase and franchise acquisitions.\nToday, we announced our Board authorized an additional $1 billion of share repurchase from October 22 through February 12.\nWe bought back 6 million shares or 7% of our outstanding shares.\nWe remain on track to open five new AutoNation USA stores by the end of this year.\nThe stores will be located in Austin, Phoenix and San Antonio and two stores in Denver.\nWe are also entered the planning phase to open an additional 10 AutoNation USA stores in 2022.\nThese stores will benefit from the AutoNation brand and its proven customer friendly processes.\nWe have set the long-term goal of selling over 1 million combined new and used retail units per year.\nWe recently announced that we have enhanced AutoNation Express, our integrated retailing solution that provides customers with a seamless and intuitive omnichannel shopping and purchase experience.\nAutoNation Express is powered by real-time customer insights that provide a highly personalized mobile optimized step-by-step digital experience.\nAs Mike highlighted, today we reported adjusted net income from continuing operations of $213 million or $2.43 per share versus $113 million or $1.25 per share during the fourth quarter of 2019.\nThis represents an all-time high quarterly earnings per share and a 94% increase year-over-year.\nThe results were driven by solid growth in new used customer Financial Services profitability, partially offset by a decline in customer care.\nDuring the quarter, new vehicle demand continued to exceed supply while our We'll Buy Your Car program supported our used vehicle inventories.\nFourth quarter 2020 adjusted results exclude a non-cash accounting loss of $62 million after tax or $0.70 per share associated with our equity investment in Vroom.\nMoving to the balance sheet and liquidity.\nOur cash balance at quarter end was $570 million which combined with our additional borrowing capacity resulted in total liquidity of approximately $2.3 billion at the end of December.\nNote, in January of this year, we paid the maturity of our $300 million, 3.35% senior notes from available cash on our balance sheet.\nOur covenant leverage of debt-to-EBITDA declined to 1.8 times at the end of the fourth quarter, down from 2.0 times at the end of the third quarter, including cash and used floorplan availability, our net leverage ratio was 1.3 times at year-end.\nDuring the fourth quarter, we sold 3.1 million shares of our equity investment in Vroom for proceeds of $105 million.\nEarly in 2021, we sold the remaining shares of Vroom for proceeds of $109 million.\nSo in total, we realized a cash gain of $165 million on our investment.\nAutoNation remains committing -- committed to delivering shareholder value through capital allocation, which includes attractive organic growth opportunities, a disciplined acquisition strategy, an opportunistic share repurchase.\nOur AutoNation USA expansion provides an attractive growth opportunity and we remain on track to open five new AutoNation USA stores in 2021, an additional 10 in 2022 as Mike addressed earlier.\nDuring the fourth quarter, we repurchased 4.7 million shares of common stock for an aggregate price of $302 million.\nYear-to-date in 2021 through February 12, we repurchased an additional 1.3 million shares for an aggregate purchase price of $95 million.\nToday, as Mike mentioned, we also announced that our Board has increased our share repurchase authorization by an additional $1 billion.\nWith the increased authorization, the company has approximately $1.1 billion available for additional share repurchase.\nAnd as of February 12, there were approximately 82 million shares outstanding, excluding the dilutive impact of certain stock awards.\n2020 was an unimaginable year but our associates came together and delivered record results.\nWe sold our 13 million vehicle in December, the only automotive retail in history to do so.\nWe have raised over $25 million in the fight against cancer.\nWe create the largest and most recognized automotive retail brand and we did it one sale, one service, one vehicle, at a time.\nThe acknowledgment and brand awareness continue on AutoNation was recognized for the third year in a row.\nAccording to Reputation.com, and is having the number one reputation score for public auto retailers.\nIn '21 we are celebrating 25 years of leadership, innovation, excellence and recognition as the most admired -- as one of the most admired companies in the world by Fortune Magazine.\nAutoNation was the highest-ranked automotive retailer on the list.\nCongratulations to all 21,000 AutoNation associates for achieving such tremendous success.\n",
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"content": "compname reports qtrly adjusted earnings per share from cont ops $2.43.\nqtrly adjusted shr from continuing operations $2.43.\nboard authorized repurchase of up to an additional $1 billion of co's common stock.\nqtrly same store new vehicle gross profit per vehicle retailed was $2,775, up 50%.\nqtrly revenue $5,785.1 million, up 4%.\non track to extend footprint with five new autonation usa stores by end of 2021, 10 additional new stores in 2022.\nset long term goal of retailing over 1 million combined new and used vehicles units per year.\nqtrly same store used vehicle gross profit per vehicle retailed was $1,565, up 9%.\nplans to build over 100 autonation usa pre-owned vehicle stores, with over 50 completed by end of 2025.\nautonation usa store expansion will include extending co's coast to coast footprint with new markets.\nqtrly same store revenue $5,776.1 million, up 5%.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Please ensure that your lines are muted until the operator announces your turn to ask a question.\nLeading our call today will be Mike Manley, 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.\nBut as this is my first call, I was also trying to think about what may be helpful for me to touch on in addition to the financial results.\nAnd I thought that, firstly, I'm going to give a brief overview of some of the things that I've been doing over the last three months.\nAnd then I'm going to go through the highlights of the group's performance and hand over to Joe who will give you more of the fine detail.\nAfter that, I'm going to touch on a number of the key topics I gained attention over the last few weeks.\nAnd in closing, before our Q&A, I thought I may give a knock to the future, which will albeit just a summary of some of my preliminary observations.\nSo as you can imagine, when you join in the organization, particularly one that has a broad national footprint of retail locations and over 20,000 people in the field, you spend quite a lot of time traveling around the country.\nAnd today, I have the opportunity to visit a number of our franchise dealerships, including our most recent acquisitions, many of our AutoNation USA stores, our auction sites and a number of our collision centers from coast to coast.\nNow obviously, I knew from our previous life that AutoNation was the largest automotive retailer in the United States, and that it also begun to build additional brand businesses and capabilities at scale.\nBut I have to genuinely say that reading about it on paper actually doesn't do it justice to what has been built and the talent that the organization possesses, that could actually see, feel, and get a sense of by actually visiting the locations.\nI think when you get the opportunity to travel to our dealerships and businesses, you really start to recognize the incredible assets that the group has been able to build, acquire and develop.\nWhen I think about the 330 franchises in our dealerships, not only do the brands we represent account for 99% of all new vehicles sold in the U.S., but we're also fortunate to have a superbly balanced portfolio of the best automotive brands in the world.\nAnd they are located in some of the most exciting franchise territories.\nIn addition to visiting our retail businesses, I've also met with a number of our OEM partners.\nAnd I have to say, unfortunately, I haven't been able to get around all of them.\nSo for me, this is a big clear to do and finish list.\nAnd I'm looking forward to meeting with our partners that I haven't met yet.\nBut I have to say the ones and have now been incredibly encouraged by our conversations.\nWe've had what I would consider very frank exchange of views.\nAnd very importantly, I've been able to see the brand and the product plans for the future.\nAnd for me, just makes representative fantastic brands even more exciting when you understand what's actually coming through the pipeline.\nNow obviously, our franchise dealerships is an important core part of our group, and our scale gives us significant opportunities.\nBut it's also clear that we're also developing businesses and platforms that will significantly expand our reach, and I think give us the opportunity to take advantage of things as they unveil in the future.\nAs you know, we're building a strong focus used car brand with AutoNation USA.\nAnd as Joe will tell you in a minute, all of the stores we have, including those added in 2021, are up and running.\nThey're profitable, ahead of our expectations, and adding happy customers to our growing family on a daily basis.\nAnd finally, and I think this is really important, the one thing you really do get a true feel of once you're on the inside on a day-to-day basis is the quality and the passion of the AutoNation team.\nIt doesn't matter where I've been, either in our dealerships, our collision centers and our corporate office, I think there's really a clear will to win and a customer and community-focused culture.\nSo on this point, as a reality check, I do have to say I've never heard an incoming CEO say anything bad about the team he or she walked into.\nCertainly, not at least on the first.\nBut and you know doubt probably expected me to complement our people.\nBut my comment actually goes well beyond platitudes.\nBecause you can imagine, our strong performance, how pleased I am with the team's delivery of the seventh consecutive record quarter.\nAnd I think we have to remember, this is still delivered during very unusual times, with significant disruption from lack of supply, winter COVID spikes and competition everywhere.\nAnd my comments actually go beyond that.\nThey're made as much for the performance the team delivered as they are for the less visible selfless work they do in our communities and the fight against cancer.\nAutoNation's Drive Pink campaign was a true revelation to me.\nNot in the center, an organization was involved in social and community projects or charity works, because actually, I think that's what organizations are supposed to do.\nBut I was amazed to see just how many of our associates get involved on their own time to support Drive Pink and drive out cancer.\nToday, the people of AutoNation have raised over $30 million, which has been plowed into research, treatment and care.\nNow that is a team that I can tell you, I'm already very proud of.\nSo just give you a brief flavor of my first three months, and now I'm going to turn to our results.\nSo you've seen from the numbers, we delivered another outstanding quarter and a very strong year.\nAnd today, as I already mentioned, we report our seventh consecutive record quarterly results with adjusted earnings per share of $5.76, which is an increase of $137, and revenue increasing by $797 million or 14% compared to the prior year.\nNow this was driven by robust growth in used vehicle sales, consumer finance services and aftersales.\nTotal units for the quarter declined by 1%.\nAnd that was driven by new vehicle sales, down 20%, which was largely offset by an increase in 21% of used vehicle volume compared to the prior year.\nAnd with strong consumer demand, we continue to focus on our sourcing capabilities to used vehicles, which further strengthened both our franchise dealerships and our AutoNation USA businesses.\nWhen I look at that, nearly 90% of all pre-owned vehicles retailed in the quarter were self-sourced prior acquisition strategy, which obviously includes all of the trade-ins, but now increasingly, our we buy your car program, which processes directly from customers.\nAnd as a result, used vehicle revenue increased 55% for the quarter.\nNow as I previously mentioned, AutoNation USA is a successful part of our plan.\nAnd in November, we opened AutoNation USA Avondale and Phoenix and recently entered the new market with our 10 AutoNation store, USA store in Charlotte.\nNow each new store opened in 2021 has exceeded expectation, and as I said, profitable in the first four months of operation.\nAnd we remain on target to open 12 additional new stores over the next 12 months.\nI think our focus on margin expense control significantly contributed to our performance as strong new used finance and insurance margin per unit, up significantly year over year and in the quarter, and continued our improvement in our after sales business, which delivered an 11% increase in gross profit.\nI know it's been discussed over, the ongoing expense control, something which, frankly, I consider structural in the business now helped contribute to an overall increase in total store profits by over 150%.\nNow with that, I'm going to hand you over to Joe, who's going to take you through the detail of the financials.\nToday, we reported fourth quarter total revenue of $6.6 billion, an increase of 14% year over year, driven by impressive growth in used vehicles of 55% as well as double-digit growth in both customer financial services and aftersales.\nThis was partially offset by a 7% decline in new vehicle revenue due to the continuing supply chain disruption to new vehicles production.\nStrong consumer demand and tight new vehicle inventories continued to support new vehicle margins in the fourth quarter.\nWe expect demand to continue to achieve supply well into 2022.\nIn addition, many consumers have shifted to used vehicles due to limited availability of new, which has been very beneficial as we continue to demonstrate exceptional growth, supported by our self-sourcing capabilities and ongoing expansion of our AutoNation USA footprint.\nFor the quarter, total variable gross profit increased 49% year over year, driven primarily by an increased total variable PBR of $2,026 or 50% increase, with a slight decline in total units of 1%.\nAs Mike mentioned, 21% growth in used units year over year largely offset a 20% decline in new units over the same period.\nWe also demonstrated strong growth in aftersales gross profit, which increased 11% year over year.\nTaken together, our total gross profit increased 34% compared to the fourth quarter of 2020.\nFourth quarter adjusted SG&A as a percentage of gross profit was 56.7%, a 710 basis point improvement compared to the year ago period.\nAs measured against gross profit on an adjusted basis, our metrics improved across all key categories, with overheads decreasing 370 basis points, compensation decreasing 230 basis points and advertising decreasing 110 basis points year over year.\nLonger term, we expect normalized SG&A to gross profit to be in the mid-60% range, well below our pre-pandemic levels that were consistently above 70%.\nThis improvement is the result of structural changes that we have made to our business model.\nFloor plan interest expense decreased to $5 million in the fourth quarter of 2021 due primarily to lower average floor plan balances.\nCombined with the lower effective tax rate and fewer shares outstanding, we reported adjusted net income of $380 million or $5.76 per share, a 130% increase year over year.\nThis results our seventh consecutive all-time high full earnings per share result.\nOur strong operating performance and cash flow generation continue to provide us a significant capacity to deploy capital.\nDuring the fourth quarter, we closed on the previously announced acquisition of Priority 1 Automotive Group, adding $420 million in annual revenue.\nWe remain focused on identifying additional acquisitions that allow us to expand our current portfolio and offer attractive long-term financial returns.\nAs Mike discussed, we continue to see a tremendous opportunity to capture a larger share of the used vehicle market by leveraging our sourcing capabilities, rich data analytics and AutoNation USA growth strategy.\nWe recently opened our 10th AutoNation USA store in Chile, North Carolina and expect to open 12 more stores over the next 12 months.\nLonger term, we continue to target over 130 stores by the end of 2026.\nWe also continued to repurchase our own shares.\nDuring the fourth quarter, we repurchased 3.1 million shares for an aggregate purchase price of $382 million.\nThis represents a 5% in shares outstanding from the end of the third quarter.\nThe company has approximately $776 million available for additional share repurchase at this time.\nAs of February 15, there were approximately 62 million shares outstanding.\nWe ended the fourth quarter with total liquidity of approximately $1.5 billion.\nAnd our covenant leverage ratio of debt-to-EBITDA of 1.5 times remains well below our historical range of two to three times.\nLooking ahead, we will continue our disciplined capital allocation strategy, leveraging our strong balance sheet and cash flows to invest in our business and drive long-term shareholder value.\nSo strong results, as you can see.\nAnd again, congratulations to all of the AutoNation team, and their delivery is fantastic.\nSo I do just want to add a couple of points I think are important.\nWhen I step back and think about the business and our results, I look to understand which of the key profit drivers are, let's say, circumstantial to varying degrees and which are the drivers are now structurally embedded in the group.\nAnd I think this is important because it's clear to me that some are mistakenly discounting all of the improvements in performance is totally temporary.\nAnd they're preferring to rely on 2019 as a more reliable baseline.\nAnd I think this is wrong.\nBecause now, you can see there are clearly structural improvements that should translate into long-term value.\nSo the business drivers that I consider in that category are improvements in F&I performance, which is more driven by a focus on product penetration rather than rate, by used volume, which is more related to sales effectiveness, operational focus as well as additional USA stores, and finally, the SG&A control that Joe just mentioned again.\nAnd we can clearly see the benefits of that coming through in our net income margin.\nAnd in my view, we should continue to translate into value and not be so quickly discounted as situational at this time.\nSo obviously, that leads one of the biggest variables, which is clearly new vehicle margin.\nAnd naturally, there's a lot of debate where this may go in the future.\nAnd I remember in my previous life, on quarterly discussions on calls like this, we spent a lot of time talking about breakeven points and what level of SAAR can you still make a profit or level of SAAR can't you make a profit.\nAnd if you look at the fourth quarter, we delivered a SAAR around that $13 million from my estimate, well below anyone would have been able to forecast.\nAnd the levels of profitability for both OEMs and dealers clearly show the benefits of selling vehicles at MSRP.\nAnd what a concept, right, selling at MSRP.\nSo if that's the learning, I think, has got to do that.\nBy the way, while we're on the subject of retail price, we've seen a number of comments about vehicles being sold above MSRP, quoting the potential adverse impacts on brands and customers, which I understand.\nAnd by the way, last year, less than 2% of all the new vehicles sold by AutoNation were above MSRP.\nBut this discussion on MSRP branded customers actually also adds to my optimism regarding new vehicle margins going forward.\nBecause I think it's equally clear that significant discounting and high incentives can also damage a brand, which is another reason for our industry to balance appropriately supply and demand, and another reason why we may expect higher new vehicle margins than we have historically seen pre-COVID.\nSo finally, let me briefly turn to the future.\nI think everybody recognizes the industry will go through a significant transformation.\nAnd that's not just in terms of product and powertrain, but in many other ways as well.\nWhen COVID is behind us, we'll see the emergence of additional mobility models and choices.\nWe'll see changes in the way customers approach vehicle ownership and usage.\nAnd we will progressively see changes in how dealers and OEMs are traditionally competed.\nAnd for me, this is an exciting time and offers many more opportunities and downsides.\nAnd now I'm more convinced than ever, having seen under the hood of AutoNation, that the group can be well placed and positioned to continue to grow and thrive.\nAutoNation in the past has been known for its innovation and progressive approach.\nAnd you can be certain we're going to be taking this approach to the next level.\nAs we see it today, we have over 11 million customers in our family already, and every year, an additional three million interactions.\nSo we have the opportunity not only to leverage our brand, our scale, our strong bricks and mortar footprint, but also to build on our growing digital capabilities and expand our business model to ensure we have greater autonomy and control in our future.\nSo obviously, a lot more to come in the coming months.\nBut I'd like to make one announcement that will help indicate some of what the future may hold for AutoNation.\nAnd that is, I'm now creating a new executive role.\nAnd I'm delighted to announce Gianluca Camplone will be joining the group from March 1 and assuming the position of EVP, head of mobility, business development and strategy, and COO of Precision Parts.\nThis role will report directly to me.\nGianluca will sit on our executive committee.\nAnd I'm sure several of you will already know Gianluca Camplone.\nBut for those who do not know him, he joined AutoNation from McKinsey, where he was most recently serving as senior partner and leader of the advanced industry global practice and private equity industrial practice in North America.\nGianluca orchestrated a companywide $1 billion digital business building program.\nAnd he spearheaded a global team on multiple billion-dollar mergers in the automotive sector.\nHe's led a major dealer performance transformation at a leading North American commercial vehicle manufacturer.\nAnd in addition, very relevantly, he redesigned the multibillion dollar used car business and multichannel environment for a global auto manufacturer.\nSo as you can tell, I'm incredibly excited about the future.\nI'm absolutely delighted that Gianluca has agreed to join our executive team.\nAnd I think, as you can tell, it bodes well for some of the things that I'm certain AutoNation and we can do that not only will give us a great future, but as I said, give us a lot more autonomy and control over where we're going.\nSo let me close.\nI think demand for vehicles continues to be strong.\nUsed vehicle growth is robust.\nAnd the -- we are going to continue, as Joe said, AutoNation USA store expansion.\nAnd obviously, we're going to look aggressively opportunities to expand our customer-centric personal transportation solutions.\n",
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"content": "compname reports q4 revenue was $6.6 billion, up 14%.\nq4 revenue was $6.6 billion, up 14%.\nq4 earnings per share $5.87; q4 adjusted earnings per share $5.76.\nq4 new vehicle revenue declined 7% and used vehicle revenue increased 55%.\nexpect consumer demand for personal vehicle ownership to remain strong for the foreseeable future.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined by Christa Davies, our CFO; and Eric Andersen, our President.\nI'd like to start by acknowledging the tremendous work of our colleagues across the firm.\nOur team continues to find ways to get back, not just to normal, but even better than before.\nAs we like to call it, the new better.\nThe idea of the new better started in the second half of last year with a series of regional and local client coalitions.\nThere are now 10 coalitions of leading companies around the world that we formed to export the societal and economic implications of the pandemic.\nThe Group rejects the idea of accepting a sub-optimal new normal and is working to find new better.\nThe work is ongoing and continues to offer meaningful insights into how leading organizations will work, travel, and convene in the year ahead.\nAnd we're translating those insights into new solutions that are designated and designed to accelerate recovery from COVID-19.\nFor instance, we know that widespread global vaccine distribution is a key part of the solution and one that Aon is enabling, let me describe.\nRecognizing limitations with current supply chain solutions, Aon colleagues from Commercial Risk, Rein [Phonetic] Health Solutions collaborated with insurance, reinsurance, InsurTech, and supply chain industry partners to develop a groundbreaking solution that uses sensors and analytics in the transportation and storage of vaccines.\nThe centers provide transparent real-time data and alerts if the temperature of a vaccine shipment falls outside the manufacturers' range, potentially allowing for mitigation efforts and helping to maximize the number of doses administered to the public.\nIt's just another example of how we're creating innovative solutions to move our industry and society forward.\nWe're also donating all 2021 revenue from the solution to an international organization working to help end the human and economic toll caused by the pandemic.\nTurning now to financials.\nOur global team delivered outstanding results across each of our key financial metrics, including 6% organic revenue growth, a very strong start to the year on top of 5% organic in Q1 2020.\nSubstantial operating margin expansion of 170 basis points, 16% earnings per share growth, and 91% free cash flow growth.\nWithin organic revenue, we continue to see strength in our core, driven by strong retention and net new business generation, and overall growth within more discretionary areas of revenue, with some areas coming back faster than others.\nCommercial Risk delivered 9% organic, an outstanding result with very strong new business growth and growth in project-related work and double-digit growth in transaction liability.\nReinsurance delivered 6% growth with strong net new business in treaty and double-digit growth in facultative placements.\nRetirement Solutions delivered 5% growth, and I would highlight strength in core retirement and double-digit growth in Human Capital.\nHealth Solutions growth of 4% was driven by strength in the core, offset by pressure in project work.\nOne of the areas we're seeing a little slower bounce back.\nAnd data and analytics continue to see pressure from the travel and events practice globally, resulting in a 2% organic decline, so against the prior Q1 quarter of pre-pandemic results.\nThese results are an improvement from our Q4 earnings call outlook.\nDuring the quarter, we saw better-than-expected macroeconomic growth, which positively impacted client buying behavior.\nLooking forward, if macroeconomic conditions continue to be strong, we would expect mid-single-digit or greater organic revenue growth for the full year 2021.\nAnd while our Q1 results demonstrate that our Aon United strategy is driving innovative solutions that address our client's biggest challenges, we keep seeing signs that we must move faster.\nWe see our clients justifiably focused on the economic impact of COVID-19, but they're also increasingly focused on other challenges, like climate change, supply chain disruption, reimagining, and reconfiguring how and where work gets done, the growing health-wealth gap, and cyber.\nOur recent cyber risk reports highlighted findings from our proprietary cyber quotient evaluation, a comprehensive assessment of cyber risk maturity.\nThe 2020 data tells us that organizations across regions and industries are only maintaining a basic level of cyber readiness.\nSpecifically, only two in five organizations report they are prepared to navigate new exposures, and only 17% report having adequate application security measures in place.\nAnd on a recent Grey Swan report, we look back at 40 years of corporate crisis, analyzing 300 examples that show the significant impact on shareholder value due to lack of preparedness.\nThe total impact represents $1.2 trillion in destroyed value and in 10% of the events, 50% of shareholder value was lost.\nThese risks and challenges are exactly what we want to help our clients assess and prepare for.\nIn another great example, our Human Capital and Commercial Risk teams realize that their client in the life sciences and med-tech space had not done an assessment or quantification of cyber risk for their business or products.\nOur team analyze risks across infrastructure, technology, vendor, and digitally enabled products and quantified potential losses or impacts as reputation business interruption, or [Indecipherable] revises.\nIn response to this prioritized and quantified risk assessment, our client strengthened their own security measures and changed their insurance coverage, increasing their preparedness and reducing potential future volatility to their business.\nA topic that's more critical than ever for companies in the life sciences industry.\nLooking forward, this is a process and a solution offering that makes innovative cyber solutions more accessible to our clients in the life sciences space.\nAs we look to our pending combination with Willis Towers Watson, we're confident their insights and capabilities will be a compelling catalyst to this work.\nAs we brought together the executive committee that will be in place after the close of the combination, the potential is clear than ever.\nWe have an opportunity to be more relevant to clients at a time when they need us the most.\nAnother example, our Aon team is currently advising a client on the integration of their largest transaction to date, a complex global merger that's moving very quickly.\nColleagues from Data Analytics, Retirement, Health and Benefits, and Human Capital came together to advise our client on harmonizing their people programs while balancing synergies and deal objectives to drive employee engagement and retention, as well as a shared vision from day one.\nOur client is relying on Aon to help them protect their greatest asset, their people.\nWe know that the combination with Willis Towers Watson will enable us to bring together our combined capabilities and then each company’s client insight around health, retirement, and engagement will improve and accelerate our ability to deliver projects like these for clients.\nIn summary, our first quarter results demonstrate the continued success of our strategy and position us with momentum to drive improvement on our key metrics over the course of the year, building on the track record of progress that we've delivered over the past decade.\nThe events in 2021 continue to highlight unmet need and growing demand from clients around their biggest challenges, which we know are best addressed by our One Firm Aon United strategy.\nOur ability to address client need and accelerate innovation will only get better in our pending combination with Willis Towers Watson, which continues to increase our commitment and excitement to the potential of the combined firm.\nAs Greg mentioned, we delivered a strong operational and financial performance in the first quarter to start the year, highlighted by 6% organic revenue growth that translated into double-digit growth in operating income, earnings per share, and free cash flow.\nOur Aon United strategy has enabled continued growth across our key financial metrics.\nWe look forward to building on this momentum through the rest of 2021 and in our pending combination with Willis Towers Watson.\nAs I further reflect on the quarter, we delivered organic revenue growth of 6%, driven by ongoing strength in our core business with an uneven recovery in our more discretionary areas.\nI would also note that total reported revenue was up 10% including the favorable impact from changes in FX, primarily driven by a weaker U.S. dollar versus the euro.\nSecond, we delivered strong operational improvement with operating income growth of 15% and operating margin expansion of 170 basis points to 37.4%.\nStepping back, our goal is to deliver sustainable operating margin expansion over the course of the full year, as there can be volatility quarter to quarter given the seasonality of our business and timing of expenses, including long-term investment in growth.\nIn Q1, margin expansion was helped by two factors.\nFirst, organic revenue growth exceeded our Q4 outlook due to the impact of macroeconomic factors and client buying behavior.\nSecond, Q1 2020 had higher expenses in areas like T&E and investments in the business, which made for an easier comparable when compared to our expectations for the rest of 2021.\nLooking to the rest of 2021, we anticipate investment in the business and some potential resumption of T&E later in the year.\nLooking forward to quarterly patenting of expenses for the balance of 2021.\nAs we described last year, we reduced certain discretionary expenses at the onset of the pandemic, given the significant macroeconomic uncertainty.\nAnd then returned to somewhat more normalized levels of spend in the back half of the year, as macroeconomic conditions improved and the outlook stabilized.\nIn 2021, compared to 2020, we expect approximately $200 million less expense to be recognized in the fourth quarter, offset by approximately $135 million more expense in Q2 and $65 million more expense in Q3.\nPut another way, we expect $135 million of expense to move from Q4 to Q2 and $65 million of expense to move from Q4 to Q3 when comparing to our expectations for the remainder of 2021 to prior year results, prior to any growth occurring.\nThis shift, representing about 2% of our annual cost base is primarily due to the actions we took and highlighted last year, including the reduction of certain discretionary expenses, including variable compensation in Q2 and Q3 of 2020.\nThis shift also spreads our expense base more evenly across quarters, though we still do expect the occasional variability and lumpiness in expenses.\nThis change will have an impact on quarterly margins, reducing margins in Q2 and Q3, and increasing them in Q4.\nHowever, it does not change our expectation of full-year margin expansion for 2020-2021.\nAs we stated previously, our goal is to deliver sustainable margin expansion over the course of each full year, driven by accelerating revenue growth, portfolio mix shift to higher growth, higher margin businesses, and leverage from Aon Business Services.\nAon Business Services is focused on innovation, as well as effectiveness.\nRecently our Aon business services team saw an opportunity to improve premium accounting with a blockchain solution.\nThe team works with a carrier partner and the insurance industry's standard-setting group to design and develop the clearing house to premium transactions.\nThis process has been live since the 1st of January 2021 and has over 13,000 transactions executed.\nIt's already improving the speed at which errors are identified and resolved.\nOver time, we expect our major carrier partners and other brokers to join the platform.\nWe see this as a significant opportunity to improve the client experience with higher quality and reduce inefficiencies across the industry.\nAs with other Aon Business Services process improvements, efficiencies in this new blockchain process enable our colleagues to spend more time with clients and on higher value-added activities.\nTurning back to the results of the quarter.\nWe translated strong operational performance into earnings per share growth of 16%.\nAs noted in our earnings material, FX translation was a favorable impact of approximately $0.18 in the quarter.\nIf currency to remain stable at today's rates, we'd expect a $0.04 per share favorable impact in Q2, a $0.02 per share favorable impact in Q3, and a $0.01 per share favorable impact in Q4.\nFinally, moving to cash and capital allocation.\nFree cash flow increased 91% to $532 million, primarily driven by strong operational improvement, a decrease in restructuring cash outlays, and a decrease in capex.\nI would note that we do expect capex for the full year to increase modestly as we invest in technology to drive business growth.\nLooking forward, we expect to drive free cash flow growth over the long term, building on our 10-year track record of 14% CAGR growth in free cash flow, including 64% growth to $2.6 billion free cash flow in 2020.\nWe remain incredibly excited for the long-term cash flow potential of the pending combination.\nWe make capital allocation decisions based on our ROIC framework, highlighted by $50 million of share repurchase in the first quarter.\nAs a reminder, Q1 is our seasonally smallest quarter for free cash flow, due primarily to incentive compensation payments.\nWe also repaid $400 million of term debt in February.\nLooking forward, we expect to remain highly focused on closing and then successfully integrating our combination with Willis Towers Watson.\nFollowing that, we expect to continue to invest organically and inorganically in innovative content and capabilities in priority areas to service our client's unmet needs.\nWe remain very confident in the strength of our balance sheet and manage liquidity risk through a well-laddered debt maturity profile.\nIn the near term, we expect to continue to manage our leverage ratios conservatively and return to our past practice of growing debt as EBITDA grows over the long term.\nAs I look towards our pending combination with Willis Towers Watson, we remain incredibly excited about the potential for growth in innovative solutions to clients and the shareholder value creation opportunity.\nWe are continuing to work collaboratively with the appropriate regulators to gain approvals and we've offered remedies.\nWe continue to anticipate $800 million of cost synergies, taking into account the remedies offered.\nWe would expect to allocate any divested proceeds according to our ROIC framework in which share buyback continues to be our highest return on investment.\nWe are working toward the close in the first half of 2021 subject to regulatory approval.\nIn summary, our first quarter results reflect continued progress building on a decade of momentum, driven by our Aon United strategy and underpinned by our Aon Business Services operational platform.\nWe remain incredibly excited about closing out the pending combination and beginning the integration process with Willis Towers Watson, which will continue to enable long-term shareholder value creation.\n",
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"content": "q1 revenue rose 10 percent to $3.5 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined virtually by Christa Davies, our CFO; and Eric Andersen, our President.\nOver the last year plus, certainly, every organization around the world has wrestled with how to best support employees, how to manage record volatility and how to deliver more value to customers.\nAt Aon, our colleagues have led through all this while also preparing for a substantial integration.\nWhat our team has accomplished is extraordinary.\nToday, we move forward with the benefit of all that work without the constraint of regulatory uncertainty.\nMy remarks will cover our outstanding financial performance in Q2 and year-to-date, provide some observations on the termination of our combination with Willis Towers Watson, then speak to our go-forward plan to continue delivering great service and innovation on behalf of clients, enabling growth for colleagues and delivering excellent return to shareholders.\nIn Q2, our global team delivered outstanding results across each of our key financial metrics, and I'd note particular strength across the top and bottom line with 11% organic revenue growth, driven by mid-single-digit or greater organic revenue growth from every solution line, highlighted the particular strength in commercial risk at 14%, which translated into 17% adjusted earnings per share growth in Q2 and 13% free cash flow growth for the first half.\nOur 8% organic revenue growth for the first half reflects mid-single-digit or greater organic revenue growth from four of our five solution lines.\nOur Aon United strategy is delivering net new business generation and ongoing strong retention.\nWe also saw double-digit growth overall in the more discretionary portions of our business, including transaction liability, human capital and project-related work within Commercial Risk Solutions.\nOne fantastic Aon United client example in the quarter was around cybersecurity organization design.\nAon colleagues came together across solution lines to address a significant yet common client challenge.\nOur client cyber risk was increasing, while our security organization faced the rapidly increasing cost in attracting and retaining top talent to execute their cyber defense strategy.\nColleagues from our cyber solutions group within commercial risk and from our rewards practice within human capital, combined with our unique expertise in cyber risk, with best practices and benchmarking around talent and compensation.\nThe results for our client was an organizational design solution that aligns their HR and technology teams to manage their cyber risk in a more cost and efficient way.\nThe result for Aon is a repeatable offering that helps address the common need for many of our clients in an area of growing risk.\nI would also note that we saw strong global macroeconomic conditions in the quarter, but we continue to assess three key factors as we have since the beginning of the pandemic.\nThose factors are the virus and vaccine rollout, including the potential impact of the delta variant; as well as government stimulus; and overall GDP growth.\nThese macro conditions do affect our clients and our business.\nFor example, we continue to see impact to our travel and defense practice within Data & Analytic Services.\nConsidering the current outlook for these factors, we continue to expect mid-single-digit or greater organic revenue growth for the full year 2021 and over the long term.\nTurning now to the termination of our combination with Willis Towers Watson.\nWe recently announced our mutual agreement to move forward as two independent companies.\nWe have the utmost respect for them and have truly enjoyed getting to know the team.\nThe combination had significant regulatory momentum, including, notably, approval from the European Commission as well as approval from many jurisdictions globally who had thoroughly evaluated and vetted the transaction, with the exception of the United States.\nThe demands made by the U.S. Department of Justice on our U.S. business would have stifled innovation and reduced our client-serving capability.\nMeeting these demands would have significantly impacted our existing U.S. business with potential shareholder value creation as a combination, and our ability to continue to drive ongoing progress against our key financial metrics.\nSimilarly, the path forward on litigation was untenable because current courts appear to take us well into 2022, and we could not accept that level of delay.\nUltimately, the choice was clear.\nWe simply would never compromise colleague and client priorities to close the combination.\nOur decision to end the combination and pay the termination fee creates certainty and clarity about how we move forward.\nAnd we're confident this is the right decision for our firm, for our colleagues, our clients and our shareholders.\nWe move forward with energy and applied confidence in our ability to continue delivering new and innovative solutions for clients, exceptional opportunity for colleagues and financial performance for shareholders.\nAs we look forward, there are three important points that were clear when we announced the combination and are equally, if not more, important now.\nFirst, the world is becoming more volatile, and clients need a partner capable to accelerate innovation on their behalf.\nJust look at the socioeconomic impact of the pandemic, the rise of state-sponsored cyber hack, the floods in Eastern Europe, the fires in Western America and the challenges globally of working remotely.\nSecond, the events of the past 16 months have honed the power of Aon United and our ability to work together to deliver new sources of value to clients.\nOver this time, we crystallized our operating model and cemented our one firm mindset.\nWe've uncovered countless new growth, investment and efficiency opportunities.\nAnd at this point, we're better connected across our firm with all the value of this work and none of integration distractions.\nThird, we're moving forward with a proven platform and are operating from a position of strength and momentum, as demonstrated by our client feedback and colleague engagement stores at/or approaching their highest levels for the past decade.\nOur colleagues are delivering client retention and net new business generation across all solution lines, driving 8% organic revenue growth over the first half and 11% organic revenue growth this quarter, our strongest performance in almost two decades.\nAnd our Aon Business Services operating platform is digitizing our firm, improving the client experience and enabling efficiency, as demonstrated by operating margin expansion and 13% free cash flow growth in the first half.\nAon has never been in a better position to propel top and bottom line growth and build on over a decade of progress on our key financial metrics.\nIn summary, our second quarter results demonstrate the successful momentum of our Aon United strategy.\nWe're operating from a position of strength, and we've never been better positioned to deliver for clients, support our colleagues and generate shareholder value.\nWe delivered continued progress for both the quarter and year-to-date, including an impressive 11% organic revenue growth in Q2.\nThrough the first half of the year, we translated strong organic revenue growth into double-digit operating income, earnings per share and free cash flow growth, demonstrating the power of our Aon United strategy.\nAs I further reflect on our performance for the first half of the year, as Greg noted, organic revenue growth was 11% in the second quarter and 8% year-to-date.\nWe continue to expect mid-single-digit or greater organic revenue growth for the full year 2021 and over the long term.\nI would also note the total reported revenue was up 16% in Q2 and 12% year-to-date, including the favorable impact from changes in FX rates, driven by a weaker U.S. dollar versus most currencies.\nOur strong revenue growth and ongoing operational discipline contributed to adjusted operating income growth of 11% in Q2 and 14% through the first half of the year.\nTurning to expenses and margins.\nThere are two key points I wanted to describe further.\nFirst, I want to speak to the impact of our previously communicated repatterning of expenses as compared to COVID-impacted spend in 2020, which I'll describe before any 2021 growth.\nAs we communicated in Q1, the timing of expenses is changing year-over-year such that $135 million of expenses moved into Q2 from Q4.\nThis impact is due to the actions we took and highlighted last year as we reduced discretionary expenses to be prepared for the potential impact of COVID-19 and potential macroeconomic distress.\nThe $135 million is approximately 1.5% of our total 2020 expense base.\nIn Q2, this repatterning negatively impacted margins by approximately 470 basis points, resulting in Q2 operating margin contraction of 100 basis points.\nExcluding this impact, margins would have expanded by 370 basis points in Q2 and 250 basis points for the first half of 2021.\nAs we said before, we expected a further $65 million to move from Q4 into Q3 for a total of $200 million of expenses moving out of Q4.\nA second key factor impacting margins has been the relative speed of revenue growth and investment.\nIn Q2, excluding the impact of repatterning, our strong revenue growth significantly outpaced expense growth.\nWe continue to evaluate investments using our ROIC framework.\nWhile we made deliberate investments in people, operations and technology to enable long-term growth, the expenses associated with these investments were not fully incurred in Q2 and will ramp up during the second half of the year.\nWe also anticipate some potential resumption of T&E and modest potential increase in real estate costs as more colleagues return to the office.\nCollectively, the headwind from expense repatterning and tailwind from slower investment as compared to growth were the main factors driving 100 basis points of margin contraction in Q2 and the 40 basis points of margin expansion in the first half of 2021.\nLooking forward, as we've said historically, we expect to deliver full margin expansion for 2021 and over the long term.\nTurning back to the results in the quarter.\nWe've translated strong operating income growth into adjusted earnings per share growth of 17% in Q2 and 16% year-to-date.\nAs noted in our earnings material, FX translation was a favorable impact of approximately $0.04 in Q2 and $0.22 year-to-date.\nIf currency to remain stable at today's rates, we'd expect a $0.02 per share favorable impact to Q3 and $0.01 per share favorable impact in Q4.\nAs Greg mentioned, Aon and Willis Towers Watson mutually agreed to terminate our business combination agreements and move forward immediately as two independent firms.\nIn accordance with the business combination agreement, we have paid the $1 billion termination fee to Willis Towers Watson.\nWith respect to the termination of fee.\nOur U.S. businesses were the primary focus of the Department of Justice's challenge, and we paid this fee to defend that business from additional remedy divestitures that are essential to our ability to serve clients as well as the continuing delay in uncertainty in completing the combination.\nAs part of the termination, we also expect to incur approximately $350 million to $400 million of additional charge in Q3 related to transaction costs and compensation expenses as well as a small number of actions related to further steps on our Aon United operating model.\nThese charges are related to costs to terminate and conclude the combination, including related divestitures.\nThey will all be incurred in Q3 as part of a clean break with Willis Towers Watson.\nGiven the outstanding work our colleagues have done over the last past 16 months, we've taken steps internally to ensure our colleagues share in the growth potential of the firm going forward, and this includes those who are previously offered retention bonuses in connection with the combination.\nThe majority of the cash relating to these charges will be paid in Q3 and Q4.\nAside from these transaction costs, we do not expect any further significant impacts from the termination of the transaction on our financials going forward.\nExcluding the termination fee, our performance and outlook for free cash flow growth in 2021 and going forward remains strong.\nFree cash flow increased 13% year-to-date to $1.3 billion, driven primarily by strong operating income growth and a decline in structural uses of cash.\nWe continue to expect to drive free cash flow growth over the long term, building on our long-term track record of 14% CAGR over the last 10 years, based on operating income growth, working capital improvements and reduced structural use of cash.\nAs we communicated in Q1, we continue to expect capex for the full year to increase modestly year-over-year as we invest in technology to drive business growth.\nGiven our outlook for long-term free cash flow growth, we expect share repurchase to continue to remain our highest return on capital opportunity for capital allocation.\nIn the second quarter, we repurchased approximately 1.1 million shares for approximately $240 million.\nWe also expect to continue to invest organically and inorganically in innovative content and capabilities to address unmet client needs.\nOur priority areas of investments are focused on: addressing new forms of volatility like cyber; helping clients build a resilient workforce, with better solutions around engagement and employee benefits; rethinking access to capital, such as within intellectual property solutions; and addressing the underserved with digital solutions like CoverWallet.\nOur M&A pipeline is focused on bringing innovation at scale to our clients' biggest challenges, delivered by the connectivity of Aon United.\nNow turning to our balance sheet and debt capacity.\nWe remain confident in the strength of our balance sheet and manage liquidity risk through a well-laddered debt maturity profile.\nOur financial profile has improved over the past 18 months.\nAnd considering our June 30 balance sheet and the payment of the termination fee, we estimate we have $1.5 billion of additional debt capacity for discretionary use in the second half as we return to historical leverage ratios while maintaining our current investment-grade credit rating.\nOver the long term, we expect to return to our past practice of growing debt as EBITDA growth.\nFurther, I'd note that free cash flow generation in the second half is seasonally stronger than the first half, and we intend to allocate this cash to our highest and best use based on return on capital.\nIn summary, we ended the second quarter in a position of strength as our Aon United strategy and investments in long-term growth are driving strong top and bottom line performance.\nWhile the termination of our combination with Willis Towers Watson was not the outcome we originally intended, the opportunity for Aon has only grown.\nOur disciplined approach to return on capital, combined with our expected long-term free cash flow growth and increased debt opportunity, provides financial flexibility to unlock significant shareholder value creation over the long term.\n",
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"content": "q2 revenue rose 16 percent to $2.9 billion.\ntotal operating expenses in q2 increased 16% to $2.2 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined by Christa Davies, our CFO; and Eric Andersen, our president.\nOur strong performance in 2021 is the direct result of deliberate steps we've taken that are enabling us to win more, do more and retain more with clients.\nWe're driving top and bottom-line results and are exceptionally well positioned to continue to deliver ongoing performance in 2022 and over the long term.\nMost important, we want to express deep gratitude to our Aon colleagues around the world for their performance and results this year and for everything they've done for clients and for each other.\nOur colleagues delivered a fantastic Q4 and a very strong finish to an outstanding year.\nWe achieved organic revenue growth of 10% in the fourth quarter, with double-digit growth in commercial risk and reinsurance, driven by net new business generation and client retention.\nIn commercial risk, we saw strength across the world, driven by net new business and retention in the core.\nWe also saw strength in more discretionary areas of the portfolio as economic growth and client activity continued to increase, including double-digit growth in project-related work and in transaction solutions as our teams responded to M&A deal flow and increased client demand.\nWithin health and wealth solutions, we saw double-digit growth in priority areas that we've been disproportionately investing in in the last several years, including voluntary benefits in health solutions and in delegated investment management in wealth solutions, which remains an essential part of our portfolio.\nOur full year organic revenue growth of 9% reflects the strength and momentum of our Aon United strategy, which is designed to drive top and bottom-line results.\nTo that point, operating income increased 17% year over year.\nFull year operating margins expanded 160 basis points to 30.1%, with margins of 32.8% in the fourth quarter, reflecting ongoing efficiency improvements, net of investment and long-term growth.\nEarnings per share increased 22% for the full year, free cash flow exceeded $2 billion and we completed $3.5 billion of share buyback in 2021, a strong indication of our confidence in the long-term value of the firm.\nLooking forward to 2022 and beyond, we continue to expect mid-single digit or greater organic revenue growth, margin improvement and double-digit free cash flow growth.\nLooking back on the year, we would offer three observations that drove performance in '21 and reinforce our continued strong momentum in 2022.\nFirst, as complexity and uncertainty has increased around the world, clients are demanding a partner capable of providing them greater clarity and confidence to make better decisions that will protect and grow their businesses.\nIn 2021, organizations and individuals continue to face the ongoing challenges of COVID and resulting effects in supply chain, growing concerns over climate change, commercial property, retirement readiness, regulatory changes, cyber and workforce resilience.\nAgainst that backdrop, our decade-plus focus on Aon United and the content capability it allows us to deliver has never been more relevant.\nSecond, our colleagues feel that relevance and they take great pride in our ability to deliver existing and new sources of value to clients.\nThey recognize that these external challenges facing our clients create opportunity for them to bring better solutions and grow professionally.\nWe know this is what engages our colleagues and why they're feeling more relevant, more connected and more valued.\nAnd we're seeing the impact of this focus.\nIn our recent all-colleague survey, engagement levels remain at all-time highs, in line with top-quartile employers.\nUltimately, we know that by creating an exceptional colleague experience or ensuring a better client experience, both of which translate into better performance for the firm.\nAnd third, we continue to accelerate our innovation strategy by using our Aon United operating model to replicate successful solutions and applying those capabilities to new client bases, paving the way for innovation at scale.\nWe're incorporating our data, analytics and insight to direct existing capabilities to previously unmet client needs.\nThis allows us to serve existing clients in new and customized ways, bring existing solutions to new clients and expand our addressable market.\nLet me highlight a few examples that demonstrate how we scale innovation to help our clients, both in new ways and from new sources.\nHistorically, you heard us talk about Aon Client Treaty, pre-underwritten insurance capacity we established at Lloyd's that we used to offer clients more easily and efficiently access capital for their placements.\nWhen we designed this program over five years ago, we analyzed every historic placement, quantified the risk parameters around business replacement on Lloyd's and then prearranged capital to back those risks.\nAon Client Treaty provides more efficient access to capital for clients and insurers and we see ongoing opportunity to apply this concept to different geographies and risk classes using the same proprietary data and analytics backbone supported by Aon Business Services.\nOne new offering derived directly from this capability is a solution the team designed called Marilla, which enables reinsurers and investors to invest across our global reinsurance client portfolio.\nThis provides a broad entry point into global reinsurance risk that benefits our clients by enabling capital to access markets more efficiently.\nThis first of its kind solution could not have been designed without a proprietary analytic capability and we see important opportunities to build on this platform for future growth across Aon.\nAnother example to highlight is within voluntary benefits, where we're developing innovative solutions at scale and driving double-digit growth.\nThe offering combines user insight around enrollment from our active healthcare exchanges and capabilities from acquisitions like Univers and Farmington.\nOur analytics platform and dashboards assess and illustrate planned features, product usage, claims experience and overall plant performance, providing insight into employee demand and satisfaction.\nThis work has been formed by 20 years of enrollment data from over 4 million participants, which enables us to rapidly develop bespoke solutions for our clients that strengthen their total rewards offering and reinforce their human capital strategy at a time when this has never been more essential.\nThese examples demonstrate how we help our clients access capital end markets in ways that never existed before.\nWithin that backdrop of increasing and changing risk, we're not only bringing our clients better solutions, we're also working more closely with them to understand their biggest challenges which in turn guides further innovation.\nOur focus on building innovative capabilities that scale across Aon to better meet our clients' needs is also highlighted by our recent appointment of Jillian Slyfield as our chief innovation officer.\nJillian's digital experience and deep connections with Aon and across the industry position her exceptionally well to ensure that we're rapidly distributing new solutions to clients.\nTo summarize, 2021 was a year of incredible performance and a year that positions us for growth, innovation and momentum for 2022.\nAs we look forward, this momentum is further reinforced by global economic and societal trends and the resulting challenges and opportunities for our clients, which means that our Aon United strategy becomes even more relevant as we help clients make better decisions to protect and grow their businesses.\nThe capability and track record that we've built gives us confidence in our ability to drive further value for our clients, colleagues, society and shareholders.\nAs Greg highlighted, we delivered another strong quarter of performance across our key metrics to finish the year.\nIn the quarter, we delivered 10% organic revenue growth, the third consecutive quarter of double-digit organic growth, which translated into double-digit adjusted operating income and adjusted earnings-per-share growth, continuing our momentum as we head into 2022.\nAs I reflect on full year results, first, organic revenue growth was 9%, including double-digit growth in commercial risk solutions and health solutions.\nI would note that total revenue growth of 10% includes a modest favorable impact from change in FX, partially offset by the impact of certain divestitures completed within the year.\nMost notably, the retiree healthcare exchange business, as we continue to shift our portfolio toward our highest growth and return opportunities.\nAs we look to 2022, we're continuing to monitor various macroeconomic factors, including the underlying drivers of GDP, asset values, corporate revenues and employment, inflation, government stimulus and the impacts of COVID variants, all of which impact our clients and our business.\nWe continue to expect mid-single-digit or greater organic revenue growth for 2022 and over the long term.\nMoving to operating performance.\nWe delivered substantial operational improvement, with adjusted operating income growth of 17% and adjusted operating margin expansion of 160 basis points to a record 30.1% margin.\nThe investments we have made in Aon Business Services give us further confidence in our ability to expand margins, building on our track record of approximately 100 basis points average annual margin expansion over the last decade.\nWe previously described the repatterning expenses that incurred within 2021, which have no impact on year-over-year margins.\nWhile certain expenses may move from quarter to quarter, we do not expect further repatterning.\nWe expect the 2021 expense patterning to be the right quarterly patterning going forward before an expense growth.\nDuring the year, as we previously communicated, we saw revenue growth outpace expense growth and investments.\nWhile we do expect expenses to increase in 2022 due to certain factors such as increased investments in colleagues and a modest reduction of T&E, we think about growing margins over the course of the full year.\nWe expect to deliver margin expansion in 2022 as we continue our track record of cost discipline and managing investments and long-term growth on an ROIC basis.\nWe translated strong adjusted operating income growth into double-digit adjusted earnings per share growth of 22% for the full year, building on our track record of double-digit adjusted earnings per share growth over the last decade.\nAs noted in our earnings materials, FX translation was an unfavorable impact of approximately $0.03 in the fourth quarter and was a favorable impact of roughly $0.23 per share for the full year.\nIf currency will remain stable at today's rates, we would expect an unfavorable impact of approximately $0.16 per share or approximately $48 million decrease in operating income in the first quarter of 2022.\nIn addition, we expect noncash pension expense of approximately $11 million for full year 2022 based on current assumptions.\nThis compares to the $21 million of noncash pension income recognized in 2021.\nTurning to free cash flow and capital allocation.\nWe continue to expect to drive free cash flow growth over the long term based on operating income growth, working capital improvements and structural uses of cash enabled by Aon Business Services.\nIn 2021, free cash flow decreased 23% to $2 billion reflecting strong revenue growth, margin expansion and improvements in working capital, which were offset by $1 billion termination fee payment and other related costs.\nI'd observe that excluding the $1 billion termination fee payment, free cash flow grew $400 million or approximately 15% from $2.6 billion in 2020.\nOur outlook for free cash flow growth in 2022 and beyond remains strong.\nGiven this outlook, we expect share repurchase to continue to remain our highest return on capital opportunity for capital allocation as we believe we are significantly undervalued in the market today, highlighted by the approximately $2 billion of share repurchase in the quarter and $3.5 billion of share repurchase in 2021.\nOver the last decade, we've repurchased over a third of our total shares outstanding on a net basis.\nIn 2022, we expect to return to more normalized levels of capex as we invest in technology and smart working.\nWe expect an investment of $180 million to $200 million.\nAs we've said before, we manage capex like all of our investments on a disciplined return on capital basis.\nWe also expect to invest organically and inorganically in content and capabilities to address unmet client needs.\nOur M&A pipeline is focused on our highest priority areas that will bring scalable solutions to our clients' growing and evolving challenges.\nWe continue to assess all capital allocation decisions and manage our portfolio on a return on capital basis.\nWe ended 2021 with a return on capital of 27.4%, an increase of more than 1,500 basis points over the last decade.\nTurning now to our balance sheet and debt capacity.\nWe remain confident in the strength of our balance sheet and manage liquidity risk through a well-laddered debt maturity profile.\nIn addition, we issued $500 million of senior notes in Q4.\nAs we said before, growth in EBITDA, combined with improvements in our year-end pension and lease liability balances, increases the capacity we have to issue incremental debt while maintaining our current investment-grade credit ratings.\nOur net unfunded -- funded pension balance improved by nearly $500 million in 2021, reflecting continued progress and a result of the steps we've taken over the last decade to derisk this liability and reduce volatility.\nThis reduction in volatility is significant for many of our clients, who still have pension obligations on their balance sheets.\nCurrent market conditions and funding status are giving many clients a chance to reduce the risk of future volatility related to funding status or regulatory changes.\nOur retirement team's insight and analytics in this space can help our clients access new capital to efficiently reduce their risk, often with a partial pension risk transfer, creating a long-term opportunity for us to help our clients manage their balance sheet risk effectively.\nIn summary, 2021 was another year of strong top and bottom-line performance, driven by the strength of our Aon United Strategy and Aon Business Services.\nWe returned nearly $4 billion to shareholders through share repurchase and dividends in 2021.\nThe success we achieved this year provides continued momentum as we head into 2022.\nWe believe our disciplined approach to return on invested capital, combined with expected long-term free cash flow growth, will unlock substantial shareholder value creation over the long term.\n",
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"content": "q4 revenue rose 4 percent to $3.1 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Undoubtedly these are unprecedented times.\nWith safety and well-being of our employees as the highest priority I am extremely proud of our entire team supporting our customers with the central water heating and water treatment products to combat this virus.\nAs a result of the COVID-19 pandemic and in support of continuing our manufacturing efforts during this time we have undertaken numerous meaningful in some cases extraordinary steps at our manufacturing plants to protect our employees.\nThese steps include plant accommodations and reconfigurations to maintain social distancing mask availability to all employees deep cleaning quarantining individuals with positive tests or potential exposure to the virus for 14 days and restricting access to facilities among others.\nWhile these steps result in lower manufacturing efficiencies in some cases our focus is on safety first.\nThe majority of our office personnel have been working from home and have done a great job in maintaining productivity and support of the business.\nAs offices have reopened in China and will soon in other countries and in the U.S. we have implemented return to office protocols which include bringing back office staff in waves over a two month period making maks available more frequent cleaning of common areas sanitizing stations throughout the office areas and limiting use of conference rooms for small group meetings to maintain social distancing.\nOur long-term relationships in many cases decades-long and strength of our partners within various channels including wholesale distributors DIY retail hardware stores plumbing supply and independent reps are particularly important as we provide the essential water heating and water treatment products critical to uninterrupted operations of hospitals clinics grocery stores food service companies and many more including the households that many are now using to conduct business and education.\nOur global supply chain management team proactively monitors and manages the ability to operate effectively and identify bottlenecks.\nTo date we have not seen any meaningful disruption in our supply chain.\nWe engaged in ongoing communication with our supply chain partners to identify and mitigate risk including multi-sourcing and managing inventory at higher levels.\nOur recent implementation of SAP has provided improved management tools and visibility into our supply chain.\nAdditionally we have improved our manufacturing flexibility as a result of water heater tank standardization projects over the last five years.\nStandardization greatly improves our ability to shift manufacturing from one plant to another should the need arise.\nThe stability afforded by the replacement component in residential and commercial water heater and boiler demand which we estimate at 85% of the U.S. unit volume puts us in a position of strength as we navigate through this pandemic.\nWe estimate replacement demand is 40% to 50% in China.\nWhile we are in a position of strength similar to 2008 and 2009 time frame we expect to see lower demand for the majority of our products and have been proactive in managing costs.\nWe have increased our cost-reduction programs in China and we continue to monitor the North American environment and customer demand to potentially take further actions such as furlough programs and other restructuring.\nA. O. Smith is in a solid financial position with positive cash flow and a strong balance sheet.\nWhile A. O. Smith has a strong balance sheet and capital position we are proactively managing our discretionary spend and cash position.\nTo that end we suspended our share repurchase program in mid-March in addition while we continue to focus on strategic investments including new products and production efficiency.\nWe have reprioritized and reduced our capital spend plans for 2020 by approximately 20%.\nThrough April we have completed $200 million of dividends out of China and we have repatriated $125 million to the U.S. As of April 30 2020 we had approximately $850 million in liquidity consisting of cash cash equivalents marketable securities and borrowing capacity on our credit facility which remains in place throughout 2020 and 2021 expiring in December 2021.\nWe continue to focus on rightsizing the cost structure of our China business.\nWe have achieved a 20% headcount reduction compared with December 2018 and we will continue to assess the need for additional workforce reduction.\nWe are targeting 1000 net store closures this year in China along with further cuts in advertising and other costs.\nTotal savings are expected to total $55 million an increase of $10 million from our estimate in January of which $30 million was achieved in 2019.\nOur debt maturity schedule is shown on slide five.\nThe next major maturity date is at the end of next year in December 2021 when our revolving credit facility expires.\nWe are in compliance with all covenants in our credit facility.\nOur leverage ratio is 17.5% gross debt to total capital at the end of March was significantly below the 60% maximum dictated by our credit and various long-term facilities.\nI will begin comments about the first quarter on slide six.\nFirst quarter 2020 sales of $637 million declined 15% compared with the first quarter of 2019.\nThe decline in sales was largely due to a 56% decline in China local currency sales driven by the COVID-19 pandemic.\nAs a result of lower sales in China first quarter 2020 net earnings of $52 million and earnings per share of $0.32 declined significantly compared to the same period in 2019.\nSales in our North America segment of $533 million increased 2% compared with the first quarter of 2019.\nIncremental sales of $16 million from the Water-Right acquisition purchased in April 2019 organic growth of 17% in North America water treatment products and higher water heater volumes drove sales higher.\nThese factors were partially offset by water heater sales mix composed of more electric models which have a lower selling price and lower contractual formula pricing associated with a portion of water heater sales based on lower steel costs.\nRest of the World segment sales of $110 million declined 53% with the same quarter in 2019.\nChina sales declined 56% in local currency related to weak consumer demand driven by the pandemic.\nChina channel inventories declined slightly from the levels at the end of 2019 and remained in the normal range of two to three months.\nOn slide eight North America segment earnings of $127 million were 10% higher than segment earnings in the same quarter in 2019.\nThe improvement in earnings were driven by lower steel costs incremental profit from Water-Right and improvement in the profitability of the organic water treatment sales which were partially offset by the mix skew to electric water heaters and lower contractual pricing.\nAs a result first quarter 2020 segment margin of 23.9% improved from 22.2% achieved in the same period last year.\nRest of the World loss of $42 million declined significantly compared with 2019 first quarter segment earnings of $12 million.\nThe unfavorable impact to profits from lower China sales and a higher mix of mid-price products which have lower margins more than offset the benefit to profits from lower SG&A expense.\nAs a result of these factors the segment margin was negative with compared with 5.3% in the same quarter in 2019.\nOur corporate expenses of $15 million and interest expense of $2 million were essentially flat as last year.\nOur effective tax rate of 23.6% in the first quarter of 2020 was higher than the 20% tax rate in the first quarter of 2019 primarily due to geographical differences in pre-tax income.\nCash provided by operations of $54 million during the first quarter of 2020 was higher than $22 million in the same period of 2019 as a result of lower investment in working capital including timing of certain volume incentive payments which was partially offset by lower earnings compared with the year ago period.\nOur liquidity and balance sheet remained strong.\nWe had cash balances totaling $552 million and our net cash position was $209 million at the end of March.\nDuring the first quarter of 2020 we repurchased approximately 1.4 million shares of common stock for a total of $57 million.\nDuring April we saw differing levels of impact from the pandemic across our major product lines and geographies.\nIn North America our average daily orders for residential water heaters declined low single digits compared with the first quarter pace.\nCommercial average order rates in April were down 30% to 35%.\nIt is difficult to interpret order rates in April as customers are likely adjusting inventory levels as they manage their inventory investment dollars.\nIn China the pandemic had a significant impact on our volume in the first quarter.\n50% of our sales volume occurred before the Chinese New Year shutdown on January 24.\nWith manufacturing government offices restaurants and schools now largely reopened and the majority of installers able to access apartments in China we have seen sequential improvement in sellout and orders in April compared with February and March.\nConsumers remain cautious and it's too early to determine when consumers will return to normal levels in retail environments.\nA portion of the improvement could be pent-up demand.\nIn North America demand for residential boilers has remained soft following a warm winter.\nAnd we have delayed our early buy incentive program in this environment.\nOur commercial condensing boiler backlog has doubled from levels at this time last year but some orders have extended delivery dates.\nWith construction sites closed in some states timing of delivery is difficult to project.\nSafety and security of drinking water is a high priority for consumers during this time.\nThe North America water treatment end market strength we saw in the first quarter continued in our direct-to-consumer product portfolio which skews to lower price easier-to-install products.\nIn April we experienced some challenges in parts of the country with installed in-home products.\nIn India our water treatment products are considered essential.\nBut our manufacturing plant is closed as worker transportation is difficult in this environment.\nWe believe the current environment does not allow for the forecast of performance with reasonable precision.\nAnd as a result we continue to suspend our 2020 full year guidance.\nAs the depth of the disruption and pace of recovery in our end markets become clearer we look to return to our practice of providing a current year outlook.\nIn Mexico similar to other companies we temporarily suspended operations as governmental agencies continue to sort through the industries designated as essential and allow to continue operate as well as the conditions and safety measures under which businesses deem essential are allowed to operate.\nWe temporarily shifted manufacturing from Mexico to the U.S. to minimize disruption of our customers.\nEach day we move closer to an understanding of when we'll resume production and believe that we will be in a week or two and at a reduced manning and capacity.\nThese lower rates coupled with the U.S. output are expected to support demand for customers over the coming months.\nOur global supply chain team has been proactive from early in the first quarter and continues to monitor and manage availability of components.\nAgain to date we have experienced minimal disruptions in our global supply chain.\nOur largest suppliers in Mexico which are in different states than our boilers plant are now reopened but at reduced capacity.\nWhile the disruption has been minimal we have experienced reduced safety stock levels on certain items and our supply team is in ongoing communication with our suppliers to mitigate operational risk and manage inventory levels.\nWe believe replacement demand for water heaters and boilers in the U.S. is approximately 85%.\nIn 2006 through 2009 which captured the Great Recession peak to trough industry shipments of residential water heater volumes declined 18%.\nThe decline was primarily driven by a $1.5 million decline in new homes constructed.\nDuring that period we were able to flex our operations to maintain margins.\nAt 1.3 million new homes in 2019 we do not anticipate the new home construction impact will be as great as the Great Recession.\nThe replacement base of our core U.S. products provides a stabilizing buffer to the economic downturn expected in the remaining three quarters of 2020.\nAfter being closed for several weeks in February in compliance with local orders our three plants in China are open and operating.\nFoot traffic in our retail network in China remains low and we are building to order at lower-than-normal operating capacities.\nOur suppliers are open and we are now and we are not experiencing disruptions.\nCustomers continue to prefer products with fewer features continuing the trend we saw last year as you would expect in this environment.\nOur mid-price products are positioned for this trend.\nDespite reduced headcount retail footprint and advertising costs we continue to invest in R&D in the region.\nProduct development continues with a focus on taking costs out of our most popular new products to improve contribution margins.\nProduct development has been one of the pillars to our success in China and we are committed to our investment in engineering resources in China and around the world.\nAfter a hard closure of the economy in the first quarter China is slowly returning to business.\nWhile we have seen April orders and -- incrementally improve from February and March it's too early to predict if the recent improvement is the result of pent-up demand or by consumers slowly returning to the market.\nIn North America we have previously experienced in weathering through difficult economic conditions most recently in the 2008 recession.\nHowever with the massive and abrupt impact to jobs and end markets like restaurants hotels and hospitals it is difficult to predict this current state of shelter-at-home and state-by-state closures will play out similarly to the 2008 recession.\nWhile we would expect that our replacement business in both water heating and boilers will provide a buffer in the same manner as we have seen before the impact to construction and discretionary spend and closure of certain job site activity is difficult to predict for the remainder of 2020.\nIn India it is clear that our targets breakeven in 2020 will be pushed out as the country battles COVID-19.\nWe believe that particularly in these uncertain times A. O. Smith is a compelling investment for a number of reasons.\nWe have leading market share in our major product categories.\nWe estimate replacement demand represents approximately 85% of U.S. water heater and boiler volumes.\nWe have a strong premium brand in China a broad product offering in our key product categories broad distribution and a reputation for quality and innovation in that region.\nOver time we are well positioned to maximize favorable demographics in both China and India to enhance shareholder value.\nWe have strong cash flow and balance sheet supporting the ability to continue to invest for the long term with investments in automation innovation and new products as well as acquisition and return to cash and returning cash to shareholders.\nWe will continue to proactively manage our business in this uncertain environment as we've seen consumer demand trends emerge in China where we were first impacted by the pandemic and now in North America as the current economy begins to reemerge after the economic shutdown.\nWe have a strong team which has navigated successfully through prior downturns.\nI'm confident in our ability to execute through COVID-19.\n",
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"content": "a. o. smith suspends 2020 outlook.\nq1 earnings per share $0.32.\nsales in quarter ended march 31 were approximately 15 percent lower.\n2020 outlook suspended.\ncompany suspended its 2020 full year outlook.\nbelieves it is in a solid financial position with sufficient liquidity to navigate through today's challenging business environment.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I am Pat Ackerman, Senior Vice President, Investor Relations, Corporate Responsibility and Sustainability and our Treasurer.\nAlso as a courtesy to others in the question queue, please limit yourself to one question and one follow-up return.\nIf you have multiple questions, please rejoin the queue.\nOur global A.O. Smith team delivered first quarter earnings per share of $0.60 on a 21% increase in sales, demonstrating solid execution, despite pandemic and weather-related challenges in our supply chain and operations, along with rapidly rising material costs.\nI greatly appreciate the diligence of our team to keep each other healthy and safe.\nOutside of India, where COVID-19 cases have recently surged, I am pleased that we have experienced steady improvement in this area since the beginning of the year.\nNorth America water treatment grew 12%, driven by continued consumer demand for home improvement products, which provides safe drinking water in the home.\nThe direct-to-consumer channel with our Aquasana brand and the dealer channel contributed to solid growth to start 2021.\nBoiler sales grew 12%, as we have seen strong demand, particularly within commercial boilers, as a result of completed projects carried over from 2020, as well as a resilient replacement demand.\nOur volumes of US tank residential water heaters declined in the first quarter, due to weather disruptions at our facility, supply chain constraints, which limited production.\nIf not for limited production based on our surge in customer orders in the quarter, our US residential shipments would have increased compared with 2020.\nStrong orders in the quarter were largely due to extended lead times, our second price increase, which was effective April 1, and announced third price increase effective in June.\nDue to continued pandemic-related disruptions in restaurant and hospitality new construction and replacement demand, our commercial water heater volumes declined in the first quarter, largely in line with our expectations coming into the year.\nIn China, sales increased over 100% in local currency, driven by higher consumer demand and the easy comparison compared with the pandemic disrupted first quarter of 2020.\nFirst quarter sales of $769 million increased 21%, compared with 2020, largely due to significantly higher China sales.\nAs a result of higher sales, first quarter net earnings increased 89% to $98 million or $0.60 per share compared with $52 million or $0.32 per share in 2020.\nSales in the North America segment of $553 million increased 4% compared with the first quarter of 2020.\nHigher commercial boiler service parts and tankless water heater sales in the US, improved water heater sales in Canada, a 12% price -- 12% growth in water treatment sales and inflation related price increases on water heaters in the US were partially offset by lower US residential and commercial water heater volumes.\nRest of the World segment sales of $222 million increased over 100% from the first quarter of 2020 driven by stronger consumer demand in each of our major product categories in China.\nPandemic-related lockdowns and weak end market demand in the first quarter of 2020 provided an easy comparison for the first quarter of 2021.\nCurrency translation of China sales favorably impacted sales by approximately $14 million.\nOn slide 6, North America segment earnings of $130 million increased 3% compared with the first quarter of 2020.\nThe impact to earnings from higher sales and inflation-related price increases on water heaters was partially offset by higher material costs and freight costs and lower water heater volumes in the US.\nSegment operating margin of 23.6% was slightly lower than the first quarter of 2020.\nRest of the World segment earnings of $12 million increased significantly compared with the first quarter of 2020, which was negatively impacted by the pandemic.\nIn China, higher volumes and lower selling and administrative costs contributed to higher segment earnings.\nAs a result, segment operating margin of 5.3% improved significantly from negative 38.3% in the first quarter of 2020.\nOur corporate expenses of $15 million were similar to the first quarter of 2020.\nOur effective tax rate of 22.5% was 110 basis points lower than the prior year largely due to geographical differences in pre-tax income.\nCash provided by operations of $104 million increase -- or during the first quarter was higher than the first quarter of 2020, primarily as a result of higher earnings in 2020 compared with the prior year.\nOur cash balances totaled $660 million at the end of the first quarter and our net cash position was $559 million.\nOur leverage ratio was 5% as measured by total debt to total capital at the end of the first quarter.\nWe completed refinancing our $500 million revolver credit facility on April 1st of this year.\nWe currently have no borrowings on this facility.\nDuring the first quarter, we repurchased approximately 1.1 million shares of common stock for a total of $67 million.\nThe midpoint of our range represents an increase of 20% compared with the 2020 adjusted results.\nWe expect cash flow from operations in 2021 to be between $475 million and $500 million compared with $560 million in 2020.\nWe expect higher earnings in 2021 will be more than offset by higher investments in working capital than in our prior year.\nOur 2021 capital spending plans are between $85 million and $90 million and our depreciation and amortization expense is expected to be approximately $80 million.\nOur corporate and other expenses are expected to be approximately $52 million, which is similar to 2020.\nOur effective tax rate is assumed to be approximately 23% in 2021.\nAverage outstanding diluted shares of 160 million assumes $400 million worth of shares are repurchased in 2021.\nOur businesses continue to navigate through supply chain and logistic challenges.\nThe first quarter was particularly challenging for our North America water heater business.\nSevere weather impacted our Ashland City and Juarez facilities resulted in a weak production at each plant in the quarter.\nSupply chain constraints limited our ability to make up the lost production within the quarter.\nAs a result of a surge in orders approximately 30% higher than the first quarter last year, our lead-times have further extended.\nWe are working with customers on managing orders along with our operations and supply chain teams working diligently to meet demand.\nHowever, we expect to be catching up throughout the second quarter and into the third quarter.\nOur outlook for 2021 includes the following assumptions.\nWe have not changed our outlook for full year US residential heater industry volumes and continue to project a full year volume will be down 2% or 200,000 units in 2021, a small retracement from the record volume shipped in 2020.\nWe expect commercial industry water heater volumes will decline approximately 4% as pandemic impacted business delay or defer new construction and discretionary replacement installation.\nWe continue to experience inflation across our supply chain, particularly steel and logistics costs.\nSteel has increased 25% since we announced our April 1st water heater price increase.\nWe announced a third price increase in late March on water heaters effective June 1 at a blended rate of 8.5%.\nIn China, it is encouraging to see sales of our products continue to remain strong through April.\nOur strategy continues to expand distribution to Tier 4 through 6 cities is on track.\nWe see improvement in consumer trends toward trading up for higher priced products across all product categories, driven by differentiated new products launched in the last 12 to 24 months.\nWe expect year-over-year increase and local currency sales between 18% to 20% in China.\nWe assume China currency rates will remain at current levels adding approximately $50 million and $3 million to sales and profits over the prior year respectively.\nWe have nearly doubled our growth projections and our outlook for our North America boiler sales for mid-single-digit growth to approximately 10% growth based on a strong first quarter, strong backlog, and visibility into coating activity.\nOur expectations are based on several growth drivers.\nWe believe pent-up demand from the declines last year will drive growth.\nThe transition to higher energy efficient boilers will continue particularly as commercial buildings improve their overall carbon footprint.\nIn 2020, condensing boilers were 39% of the commercial boiler industry.\nThat represents our addressable market, which provides continued opportunity for our leading market share commercial condensing boilers.\nNew product launches including improvements to our flagship Crest commercial condensing boiler with a market differentiating oxygen center, which continuously measures and optimizes boiler performance, an introduction of a one million BTU light-duty commercial Knight FTXL.\nWe continue to project 13% to 14% full year sales growth in our North America water treatment products, similar to that which we have seen in the first quarter.\nWe believe the mega trends of healthy and safe drinking water, as well as a reduction of single-use plastic bottles will continue to drive consumer demand for our point-of-use and port of entry water treatment systems.\nWe believe margins in this business could grow by 100 to 200 basis points higher than the nearly 10% margin achieved in 2020.\nIn India, first quarter 2021 sales were nearly double the prior year.\nWhile India is challenged with recent COVID case resurgence, we project 2021 full year sales to increase over 20%, compared with 2020 to incur a smaller loss of $1 million to $2 million.\nWe project revenue will increase between 14% to 15% in 2021, as strong North America water treatment, boiler and China sales, enhanced by pricing action, more than offset expected weaker North America water heater volumes.\nOur sales growth projections include approximately $50 million of benefit from China currency translation.\nWe expect North America segment margin to be between 23% and 23.5% and Rest of World segment margins to be between 7% and 8%.\nI'm on slide 11.\nOur operations faced continued challenges in the first quarter.\nAnd while we expect continued headwinds in supply chain and logistics in the near term, I have confidence in our teams to continue to navigate through this environment.\nAlong with the strength of our people, I believe A.O. Smith is a compelling investment for numerous reasons.\nWe have leading share positions in our major product categories.\nWe estimate replacement demand represents 80% to 85% of US water heater and boiler volumes.\nWe have a strong brand, premium brand in China, a broad product offering in our key product categories, broad distribution and a reputation for quality and innovation in that region.\nOver time, we are well positioned to maximize favorable demographics in both China and India to enhance shareholder value.\nWe are excited for the opportunity we see in our North America water treatment platform.\nWe have strong cash flow and balance sheet, supporting the ability to continue to invest for the long term, with investments in automation, innovation and new products, as well as acquisitions and return cash to shareholders.\n",
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"content": "compname reports q1 earnings per share $0.60.\nq1 earnings per share $0.60.\nq1 sales rose 21 percent to $769 million.\nsees fy 2021 revenue up 14 to 15 percent.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: On Slide 3, in order to provide improved transparency into the operating results of our business, we provided non-GAAP measures adjusted net earnings, adjusted earnings per share, and adjusted segment earnings that exclude the severance and restructuring charges related to aligning our business to current market conditions.\nAlso, as a courtesy to others in the question queue, please limit yourself to one question and one follow-up question per turn.\nIf you have multiple questions, please rejoin the queue.\nBefore I summarize the quarter and Chuck goes through the results, I want to express how proud I am of our global team.\nWe faced challenges and complexities to our business that we have never faced before.\nOur number one goal was and remains to keep our employees safe while delivering our essential products to our customers.\nI say confidently that our team met and often exceeded my expectations.\nYou truly make A. O. Smith a remarkable company.\nThe business performed in the second quarter is largely in line with what we saw in April.\nContinuing the pace of growth we saw in the first quarter, our North America water treatment business organically grew 19%.\nDirect-to-consumer and retail sales were particularly strong as consumers became more health conscious during the pandemic and the shelter-in-place orders confined many of us to our homes.\nAs expected, industry volumes of residential water heaters in the U.S. held up notably well.\nBased on our June shipments, we estimate industry volumes were flat to slightly up [Phonetic] in the quarter compared to last year.\nDue to construction project delays and postponements in North America, we saw commercial water heater and boiler volumes decline, in line with our estimates of the industry declines of 20% to 25% in the quarter compared with last year.\nConsumer demand for our products in China was flat to slightly positive compared to the second quarter of 2019 as restaurants and shopping malls reopened and retail foot traffic increased.\nWe remained operational with no significant disruptions.\nOur Juarez, Mexico plant, which we voluntarily closed in April, reopened in May and ramped up production over the latter portion of the quarter.\nWe have taken numerous and meaningful steps to protect our employees, suppliers, and customers in the pandemic.\nThese important steps, in many cases reduced efficiencies, and include continuous communication and training to our employees on living and working safely in a COVID-19 world, client [Phonetic] accommodations and reconfiguration to maintain social distancing, masks for all employees, implementation of sanitizing stations, temperature taking, and regular proactive deep cleaning and sanitization of our facilities.\nOur global supply chain remain operational.\nWe continue to monitor and manage our ability to operate effectively as tariffs and the evolving nature of the COVID-19 pandemic and the related stresses on the supply chain and periodic marketplace disruptions impact our operation.\nTo align our business with current market conditions, primarily in China and to a lesser extent in North America, we reduced headcount and incurred other restructuring costs totaling $6 million in the second quarter.\nSecond quarter 2020 sales of $664 million declined 13% compared to the second quarter of 2019.\nThe decline in sales was largely due to lower water heater volumes in China and lower commercial water heater and boiler volumes in North America driven by the COVID-19 pandemic.\nAs a result of lower sales, second quarter 2020 adjusted earnings of $73 million and adjusted earnings per share of $0.45 declined significantly compared with the same period in 2019.\nSales in our North America segment of $481 million declined 8% compared to the second quarter of 2019.\nOrganic growth of approximately 19% in North America water treatment sales was more than offset by lower commercial water heater volumes, lower boiler volumes, and a water heater sales mix composed of more electric models which have a lower selling price.\nRest of the World segment sales of $190 million declined 24% compared to the same quarter of 2019.\nChina sales declined 20% in local currency related to higher mix of mid-price products and further reductions in customer inventory levels.\nConsumer demand for our products in China was flat to slightly positive compared with the second quarter of 2019.\nChina currency translation negatively impacted sales by approximately $6 million.\nOur sequential sales in China improved through the quarter and China was profitable in May and June.\nIndia sales declined significantly as the economy was shut down during a majority of the quarter to minimize the spread of the virus.\nOn Slide 7, North America adjusted segment earnings of $108 million were 12% lower than segment earnings in the same quarter in 2019.\nThe decline in earnings was driven by lower volumes of commercial water heaters, lower boiler volumes, and a mix skew to electric water heaters.\nCertain costs directly related to the pandemic including temporarily moving production from Mexico to the U.S., paying employees during temporary plant shutdowns, facility cleaning, paying benefits for furloughed employees and other costs were $5.5 million in the second quarter.\nAdjusted earnings exclude $2.2 million in pre-tax severance costs.\nAs a result, second quarter 2020 segment -- adjusted segment margin of 22.4% declined from 23.5% achieved in the same period last year.\nRest of the World adjusted segment loss of $2 million declined significantly compared with 2019 second quarter segment earnings of $22 million.\nThe unfavorable impact to profits were lower China sales and a higher mix of mid-price products which have lower margins more than offset the benefits to profits from lower SG&A expenses.\nThese results exclude $3.9 million in pre-tax severance and restructuring costs.\nAs a result of these factors, adjusted segment margin was negative compared with 9% in the same quarter of 2019.\nOur corporate expenses of $10 million and interest expense of $3 million were similar to last year.\nCash provided by operations of $179 million during the first half of 2020 was higher than $144 million in the same period of 2019 as a result of lower investment in working capital, including deferral of our April estimated federal income tax payment to July, which was partially offset by lower earnings compared with the year ago period.\nOur liquidity and balance sheet remained strong.\nWe had cash balances totaling $569 million and our net cash position was $288 million at the end of June.\nOur leverage ratio at the end of the second quarter was 14.5% as measured by total debt to total capital.\nWe had $332 million of undrawn borrowing capacity on our $500 million revolver.\n[Technical Issues] the second quarter and our share repurchase activity continues to be suspended.\nDuring the first half of 2020, we repurchased approximately 1.3 million shares of common stock for a total of $57 million.\nOur 2020 adjusted earnings per share guidance excludes $0.03 per share in severance and restructuring costs included that were incurred in the second quarter.\nOur adjusted guidance assumes the conditions of our business environment and that of our suppliers and customers is similar for the remainder of the year to what we are currently experiencing and does not deteriorate as a result of further restrictions or shutdown due to the COVID-19 pandemic.\nWe expect our cash flow from operations in 2020 to be approximately $350 million compared with $456 million in 2019, primarily due to lower earnings.\nOur 2020 capital spending plans are between $60 million and $70 million and our depreciation and amortization expense is expected to be approximately $80 million.\nOur corporate and other expenses are expected to be approximately $47 million in 2020, slightly higher than 2019 primarily due to lower interest income on investments.\nWe expect our interest expense to be $9 million in 2020 compared with $11 million in 2019.\nOur effective income tax rate is expected to be between 23% and 23.5% in 2020.\nOur assumptions assume no additional share repurchase resulting in an average diluted outstanding shares in 2020 of approximately 162.5 million.\nOur outlook for 2020 includes the following assumptions.\nWe project U.S. residential water heater industry volumes will be flat in 2020 driven by resilient replacement demand and similar levels of new home constructions as last year.\nWe expect commercial industry water heater volumes will decline approximately 10% as job sites and business closures due to the pandemic delay or defer new construction and discretionary replacement installation.\nIt is encouraging to see consumer demand for our China product similar, if not a little higher than last year over the last four months.\nWe are also seeing sequentially quarterly improvement in market share both online and offline for water heater and water treatment products driven by our mid-price range products.\nWe took additional charges in Q2 for further restructuring of the business.\nWe believe these restructuring charges are largely behind us.\nWe continue to target closure of 1,000 existing stores while targeting to open 500 small store relationships in Tier 4 through 6 cities.\nCost actions and restructuring activity are projected to result in $35 million of savings in 2020 over 2019, $15 million of which will be realized in the second half of 2020.\nWe expect year-over-year declines in local currency sales of 18% to 20% and protract sequential quarter-over-quarter growth in the second half of the year as China appears to be making sustainable progress in reopening their economy and keeping the virus in check.\nWe expect our North America boiler sales will decline approximately 10% for the full year.\nCommercial boilers represent 65% to 70% of our boiler sales.\nWith many job sites temporarily closed during the second quarter, we believe as job sites reopen, the orders will sequentially improve in the second half of the year.\nWe project 20% to 22% sales growth in our North America water treatment products which include incremental Water-Right sales.\nWe ended 2019 with a $2.6 million loss in India and expect a similar loss in 2020 as a result of the pandemic.\nPlease advance to Slide 11.\nWe project revenue will decline by 7% to 8% in 2020 as strong organic North America water treatment sales and resilient North America residential water heater volumes are more than offset by weaker North America commercial water heater and boiler volumes and lower China sales, largely due to the pandemic.\nWe expect North America segment margin to be between 22.5% and 23% and Rest of World segment margins to be negative 1% to negative 2.5%.\nWe believe particularly in these uncertain times A. O, Smith is a compelling investment for a number of reasons.\nWe have leading share positions in our major product categories.\nWe estimate replacement demand represents approximately 80% to 85% of U.S. water heater and boiler volumes.\nWe have a strong premium brand in China, a broad product offering in our key product categories, broad distribution, and a reputation for quality and innovation in that region.\nOver time, we are well positioned to maximize favorable demographics in both China and India to enhance shareholder value.\nWe have strong cash flow and balance sheet supporting the ability to continue to invest for the long-term with investments in automation, innovation, and new products as well as acquisitions and returning cash to shareholders.\nWe will continue to proactively manage our business in this uncertain environment.\nWe see improving consumer demand trends emerge in China where we were first impacted by the pandemic and see China operations pivot to profitability for the remainder of the year.\nIn North America, as the economy begins to reemerge after [Phonetic] the economic shut down, persistent COVID-19 cases and related potential implications to returning to a more stable environment in the market, workplace and supply chain will continue to be challenging throughout the remainder of the year.\nWe have a strong and dedicated team, which has navigated successfully through prior downturns and I'm confident in our ability to execute similarly through COVID-19.\n",
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"content": "suspended its share repurchase program in mid-march 2020 and repurchased no shares in q2 of 2020.\nforecasts capital expenditures between $60 and $70 million in 2020.\ncontinues to strategically invest in its business for long-term.\nq2 adjusted earnings per share $0.45.\nqtrly sales were 13 percent lower than sales of $765.4 million reported in same quarter of 2019.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Please advance to Slide 3.\nIn order to provide improved transparency into the operating results of our business, we provided non-GAAP measures, adjusted net earnings, adjusted earnings per share and adjusted segment earnings that exclude the severance and restructuring charges related to aligning our business to current market conditions.\nAlso as a courtesy to others in the question queue, please limit yourself to one question and one follow-up question per turn.\nIf you have multiple questions, please rejoin the queue.\nBefore we begin discussing our results and outlook, I want to send my deepest gratitude to the thousands of A. O. Smith employees who've been working under less than ideal conditions and we continue to keep our operations running, offices open and customers in hot and treated water.\nTo recap 2020, better than expected fourth quarter results drove our 2020 performance above our expectations.\nNorth America water treatment grew 14% organically, driven by continued consumer demand for products promoting a safe home.\nThe direct-to-consumer channels with our Aquasana brand, retail outlets with their A.O Smith brand and the dealer channel all contributed to solid 2020 growth.\nWe believe industry shipments of U.S. residential water heaters, including tankless surge to a record, exceeding 10 million units or 8% growth over the prior year.\nThis assessment is based on our strong December shipments.\nWe believe the overall positive tone to new residential and safe at home remodel construction activity, including an increase in proactive replacement demand and channel inventories stocking related to extended lead times resulted in above trend growth in 2020.\nDue to construction project delays and postponements in North America as well as pandemic-related weakness in restaurant and hospitality, new construction and replacement demand, we saw commercial water heater and boiler industry volumes declined by 8% to 10%.\nWe maintained our market share in both of these categories.\nProgressive year-over-year improvement in consumer demand for our products in China continued in the fourth quarter.\nAs a result of higher volumes and diligent efforts by our team to reduce cost and reorganize, high single-digit margins were achieved in the second half of the year.\nIn North America, aside from the voluntary closure of our Mexican facility for several weeks in the second quarter, we remained operational throughout 2020 with no significant disruptions within our plants and our supply chain.\nPandemic-related safety protocols have been in place in our facilities and our offices.\nDue to strong residential water heater demand coupled with soft quarantine-related absenteeism, our lead times remained above normal.\nWe continue to use temporary workers, swing shifts and expedited logistics in some cases to take care of our customers.\nI would now like to turn the conference over to your host, Ms. Patricia Ackerman, Senior Vice President, Investor Relations, CRS and Treasurer.\nYou may begin again.\nI believe you heard the introduction that I gave.\nThis may be redundant, but we think it's important to start from the beginning.\nBefore we begin discussing our results and outlook, I want to send my deepest gratitude to thousands of A.O. Smith employees who have been working under less than ideal conditions and we continue to keep our operations running, offices open and customers in hot and treated water.\nTo recap 2020, better than expected fourth quarter results drove our 2020 performance above our expectations.\nNorth America water treatment grew 14% organically, driven by continued consumer demand for products promoting a safe home.\nThe direct-to-consumer channel with our Aquasana brand, retail outlets with our A.O. Smith brand and the dealer channel all contributed to solid 2020 growth.\nWe believe industry shipments of U.S. residential water heaters, including tankless, surge to a record, exceeding 10 million units or 8% growth over the prior year.\nThis assessment is based on our strong December shipments.\nWe believe the overall positive tone to new residential and safe at home remodel construction activity, including an increase in proactive replacement demand in channel inventory stocking related to extended industry lead times resulted in above trend growth in 2020.\nDue to construction project delays and postponements in North America as well as pandemic-related weakness in restaurant and hospitality, new construction and replacement demand, we saw commercial water heater and boiler industry volumes declined by 8% to 10%.\nWe maintained our market share in both of these categories.\nProgressive year-over-year improvement in consumer demand for our products in China continued in the fourth quarter.\nAs a result of higher volumes and diligent efforts by our team to reduce costs and reorganize, high single-digit margins were achieved in the second half of the year.\nIn North America, aside from the voluntary closure of our Mexican facility for several weeks in the second quarter, we remained operational throughout 2020 with no significant disruptions within our plants and our supply chain.\nPandemic-related to safety protocols remain in place in our facilities and offices.\nDue to strong residential water heater demand coupled with self quarantine-related absenteeism, our lead times remain above normal.\nWe continue to use temporary workers, swing shifts and expedite logistics in some cases to take care of our customers.\nAll of these efforts result in inefficiencies and incremental costs.\nTo align our business with current global market conditions, we reduced headcount and incurred other restructuring costs, totaling approximately $6 million after tax in 2020.\nThe majority of these actions took place in China.\nWe published our second Corporate Responsibility and Sustainability Report in January and great proud of our accomplishments since our first report, particularly in employee engagement, safety, research reduction in our facilities and a product portfolio that both some of the most efficient products in their respective categories.\nWe introduced our first ever public greenhouse gas emission goal.\nWe strive to reduce GHG emissions by 10% by 2025.\nFull year sales of $2.9 billion declined 3% compared with 2019, largely due to significant weakness in the China business in the first half of 2020.\nAs a result of lower sales, adjusted earnings declined 3% to $351 million or $2.16 per share compared with $370 million or $2.22 per share in 2019.\nSales in our North America segment of $2.1 billion increased 2% compared with 2019.\nHigher residential water heater volumes, growth in water treatment as well as full year of Water-Right sales were partially offset by lower U.S. commercial water heater volumes, lower boiler sales and our water heater sales mix composed of more electric models, which have a lower selling price.\nRest of the world segment sales of $800 million declined 14% from 2019.\nPandemic-related lock downs and weak end market demand primarily in China in the first half of the year and a higher mix of mid-priced products resulted in lower sales.\nCurrency translation of China sales favorably impacted sales by approximately $9 million.\nIndian sales were also negatively impacted by the pandemic-related economic disruption and declined to $31 million compared with $39 million in 2019.\nOn Slide 7, North America segment adjusted earnings of $506 million increased 4% compared to 2019.\nThe increase in earnings was driven by favorable impact to earnings from higher residential water heater volumes, growth in water treatment sales, full year of Water-Right sales and lower material costs.\nThe impact to earnings from lower volumes of boilers and commercial water heaters and the mix skew to electric water heaters partially offset these factors.\nAdjusted segment earnings exclude $2.7 million in pre-tax severance costs.\nAs a result, adjusted operating margin of 23% is slightly higher than in 2019.\nRest of the world adjusted segment earnings of $5 million declined significantly compared with 2019.\nIn China, the unfavorable impact from lower sales and the higher mix of mid-priced products which have lower margins than higher-priced products more than offset reductions in SG&A costs and temporary waivers for required social insurance contributions.\nAs a result of these factors, adjusted segment operating margin of 0.6% decline from 4.3% in 2019.\nOur corporate expenses of $52 million were higher than in 2019, primarily driven by lower interest income.\nTurning to Slide 8.\nRecord fourth quarter sales of $835 million increased 11% compared with the fourth quarter of 2019.\nThe increase in sales was largely due to higher residential water heater volumes in North America and higher sales in China.\nAs a result of higher sales and cost reduction initiatives earlier this year, fourth quarter earnings of $120 million or $0.74 per share increased significantly compared with 2019.\nPlease advance to Slide 9.\nRecord fourth quarter sales in North America segment of $561 million increased 7% compared with the same period in 2019, primarily driven by higher residential water heater volumes.\nRest of the world fourth quarter segment sales of $279 million improved 19% compared with the fourth quarter of 2019.\nCurrency translation of China sales favorably impacted sales by approximately $14 million.\nConstant currency China sales improved 15% driven by mid single-digit growth in end market demand led by water treatment, replacement water treatment filters and gas tankless water heaters and a favorable mix between product categories compared with the fourth quarter of 2019.\nOn Slide 10, record fourth quarter North America segment earnings of $138 million increased 7% from the same period in 2019.\nThe increase in earnings was primarily driven by higher residential water heater volumes in North America and lower steel costs.\nThese factors were partially offset by logistic costs.\nAs a result, fourth quarter segment margin of 24.6% was slightly higher than 24.5% in 2019.\nRest of the World segment earnings of $31 million improved significantly from $1.5 million in the same quarter in 2019.\nIn China, higher volumes, reductions in SG&A costs and lower material costs drove higher earnings.\nAs a result of these factors, fourth quarter segment margin improved to 11.2% compared with 0.6% in 2019.\nOur corporate expenses of $16 million in the fourth quarter were higher than the same period of 2019, primarily due to an increase in long-term incentives and lower interest income in the 2020 fourth quarter.\nAdvancing to Slide 11.\nCash provided by operations of $562 million during 2020 was higher than 2019.\nLower investments in working capital in 2020 were partially offset by lower earnings compared with the prior year.\nOur liquidity and balance sheet remained strong.\nOur cash balances totaled $690 million at the end of 2020 and our net cash position was $576 million.\nAt the end of 2020, our leverage ratio was 6% as measured by total debt to total capital.\nWe are in the process of refinancing our $500 million revolving credit facility, which expires at the end of the year.\nWe currently have no borrowings on this facility.\nWe expect to repurchase $400 million worth of share in 2021 through a combination of 10b5-1 program and open market purchases.\nRecently, our Board increased the authorized shares on our share repurchase authority by 7 million shares.\nTurning to Slide 12.\nThe midpoint of our range represents an increase of 13% compared with our 2020 results.\nOur guidance assumes the conditions of our business environment and that of our suppliers and customers are similar in 2021 to what we have experienced in recent months and does not deteriorate as a result of further restrictions or potential shutdowns due to the COVID-19 pandemic.\nWe expect cash flow from operations in 2021 to be between $450 million and $475 million compared with $560 million in 2020, primarily due to higher earnings offset by higher investments in working capital than in prior year.\nIn 2021, capital spending plans are between $85 million and $90 million and our depreciation and amortization expense is expected to be approximately $80 million.\nOur corporate and other expenses are expected to be approximately $51 million, slightly lower than in 2020.\nOur effective tax rate is assumed to be between 22.5% and 23% in 2021.\nAverage outstanding diluted shares of 160 million assumes $400 million worth of shares are repurchased in 2021.\nOur businesses and the countries in which we do business continue to navigate through pandemic-related challenges, particularly in supply chain and logistics.\nOur outlook for 2021 includes the following assumptions.\nWe project U.S. residential water heater industry volumes will be down 2% or 200,000 units in 2021.\nWe are encouraged by the positive tone in the new construction market.\nAlthough, we believe some destocking will occur during 2021 as we expect industry lead times to improve throughout the year.\nThe timing of the destocking is difficult to predict as we have two price increases announced, one effective in February and the second one in April.\nDestocking activity could be delayed until mid-year due to the pre-buy orders in advance of the price increases.\nFurther note on the 2021 price increases.\nWe have seen inflation our cost of supply chain, particularly steel and logistic costs.\nSteel has increased nearly 50% since we announced our February 1 water heater price increase of 5% to 9%.\nWe announced a second price increase last week on water heaters effective April 1st, also between 5% to 9% depending on the type of water heater.\nWe expect commercial industry water heater volumes will further decline approximately 4% as pandemic impacted business delay, order for new construction and discretionary replacement installations.\nIn China, it is encouraging to see consumer demand for our China products progressively improve in 2020 and into January of 2021.\nWe accomplished much in China in 2020, which will allow us to profitably grow in 2021.\nThose accomplishments include closing of 1,000 stores in Tier 1 and 2 cities, while efficiently expanding in Tier 4 through 6 cities, implementing programs to save $30 million in SG&A, which will carry over into 2021.\nWe've lapped a negative impact to earnings from mid-priced products.\nWe expect positive mix in 2021 from new products.\nAnd we execute programs to result in a stronger and more nimble distributors.\nWe expect year-over-year increases in local currency sales between 14% and 15%.\nWe assume China currency rates remain at current levels, adding approximately $45 million and $3 million to sales and profits over the prior year respectively.\nWe expect our North America boiler sales will increase by mid single-digits in 2021.\nOur expectations are based on several growth drivers.\nFirst, industry growth of 3% to 4%.\nWe assume some pent-up demand after the industry decline in the low-teens levels in 2020.\nThe CAGR for commercial condensing boilers, which is over 50% of the boiler revenue, was 5% to 6% prior to 2020.\nWe believe replacement demand is still 85%.\nA potential government stimulus package targeting infrastructure investment may free up some jobs that were postponed or halted in 2020.\nThe transition to a higher energy efficient boilers will continue, particularly as commercial buildings improve their overall carbon footprint.\nIn 2020, condensing boilers were 39% of the commercial boiler industry that represents our addressable market, which provides continued opportunity for our leading market share commercial condensing boilers.\nNew product launches including improvements to our flagship CREST commercial condensing boiler with a market differentiating oxygen sensor which continuing measures and optimizes boiler performance and the introduction of be 1 million BTU light duty commercial night FTXL boiler.\nWe project 13% to 14% sales growth in our North America water treatment products.\nWe believe the mega trends of health and safe drinking water as well as a reduction of single use plastic bottles will continue to drive consumer demand for our point of use and our point of entry water treatment systems.\nWe believe margins in this business could grow by 100 to 200 basis points, higher than the nearly 10% margin achieved in 2020.\nAnd in India, fourth quarter sales were similar to the prior year.\nWe project 2021 full year sales to increase over 20% compared with 2020 and to incur a small loss of $1 million to $2 million.\nAdvance to Slide 14.\nWe project revenue will increase by approximately 10% in 2021 as strong North America water treatment and China sales enhanced by growth in boiler sales more than offset expected weaker North America water heater volumes.\nOur 10% growth rate projection includes approximately $45 million of benefit from China currency translation.\nWe expect North America segment margins to be between 23% and 23.5% and Rest of World segment margins to be between 7% and 8%.\nTo Slide 15 please.\n2020 was a challenging year.\nWe are pleased with our performance through the pandemic.\nParticularly in these uncertain times, we believe A. O. Smith is a compelling investment for numerous reasons.\nWe have leading share positions in our major product categories.\nWe estimate replacement demand represents approximately 80% to 85% of U.S. water heater and boiler volumes.\nWe have a strong premium brand in China, a broad product offering in key product categories, broad distribution, a reputation for quality and innovation in that region.\nOver time, we are well positioned to maximize favorable demographics in both China and India to enhance shareholder value.\nWe are very excited for the opportunity we see in our North America water treatment platform.\nWe have strong cash flow and balance sheet supporting the ability to continue to invest for the long-term with investments in automation, innovation and new products as well as acquisitions and return cash to shareholders.\n",
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"content": "q4 earnings per share $0.74.\nremained operational with no significant covid-19-related disruptions within its plants or supply chain in recent quarter.\nnoted stability in its north america water heater manufacturing lead times in q4.\nencouraged by resiliency of our north america water heater replacement demand.\nexpect tailwinds behind north america water treatment product sales driven by drinking water health and safety concerns.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This is Craig Lampo, Amphenol's CFO.\nAnd I'm here together with Adam Norwitt, our CEO.\nI will provide some financial commentary and then Adam will give an overview of the business as well as current trends.\nThen we will take questions.\nIn addition, as a result of our previously announced two for one stock split effective on March 4, 2021, all share and per share data discussed on this earnings call is on a post-split basis.\nThe company closed the first quarter with sales of $2.377 billion and GAAP and adjusted diluted earnings per share of $0.53 and $0.52, respectively.\nSales were up 28% in U.S. dollars, 25% local currencies and 23% organically compared to the first quarter of 2020.\nSequentially, sales were down 2% in U.S. dollars, 3% in local currencies and 4% organically.\nOrders for the quarter were $2.734 billion, which was up 27% compared to the first quarter of 2020 and up 9% sequentially, resulting in a very strong book-to-bill ratio of 1.15:1.\nBreaking down sales into our two segments.\nThe interconnect business, which comprised 96% of sales, was up 28% in U.S. dollars and 25% in local currencies compared to the first quarter of last year.\nOur cable business, which comprised 4% of our sales, was up 17% in U.S. dollars and 18% in local currencies compared to the first quarter of last year's.\nAdam will comment further on trends by market in a few minutes.\nOperating income was $465 million in the first quarter of 2021.\nOperating margin of 19.6% was down 100 basis points sequentially compared to the fourth quarter of 2020 adjusted operating margin and up a strong 260 basis points compared to the first quarter of 2020.\nThe year-over-year improvement in operating margin was primarily driven by normal operating leverage on the higher sales volumes, combined with the benefit of a lower cost impact resulting from the COVID-19 pandemic, partially offset by the impact of a more challenging commodity and supply chain environment.\nThe sequential decline in operating margin was driven by normal conversion on the reduced sales levels as well as a more challenging commodity and supply chain environment.\nFrom a segment standpoint, the interconnect segment -- in the interconnect segment, margins were 21.5% in the first quarter of 2021, which increased from 19.1% in the first quarter of 2020 and decreased 100 basis points sequentially.\nIn the cable segment, margins were 8.8%, which increased from 7.6% in the first quarter of 2020 and decreased from 10.3% in the fourth quarter.\nGiven the continuing challenges posed by the COVID-19 pandemic, we are very proud of the company's performance.\nOur team's ability to effectively manage through 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, which has enabled us to capitalize on the many opportunities for incremental sales, while driving strong operating performance in this very dynamic market environment.\nThe company's GAAP effective tax rate for the first quarter was 23.9%, which compared to 15.9% in the first quarter of 2020.\nOn an adjusted basis, the effective tax rate was 24.5% in the first quarter of both 2021 and 2020.\nOn a GAAP basis, diluted earnings per share increased by 33% to $0.53 compared to $0.40 in the prior year period.\nAdjusted diluted earnings per share increased by 49% to $0.52 from 35% -- $0.35 in the first quarter of 2020.\nThe company continues to be an excellent generator of cash.\nCash flow from operations was $321 million in the first quarter or 97% of GAAP net income.\nAnd net of capital spending, our free cash flow was $243 million or 74% of net income.\nFrom a working capital standpoint, inventory days, days sales outstanding and payable days were 85, 73 and 59 days, respectively, all within their normal ranges.\nDuring the quarter, the company repurchased 2.4 million shares of common stock for approximately $153 million.\nAnd during the month of April, the company repurchased a small amount of remaining stock authorized under our existing stock repurchase plan.\nThe elevated level of cash on hand at the end of the first quarter was driven by borrowings under the company's U.S. commercial paper program in anticipation of the MTS closing in early April.\nTotal debt was $4.6 billion, and net debt was $2.3 billion.\nTotal available liquidity at the end of the quarter was $4.1 billion, which included total cash and short-term investments on hand.\nFirst quarter 2021 EBITDA was $559 million, and our net leverage ratio was 1.0 times.\nFollowing the close of the quarter, on April 7, we completed the acquisition of MTS, which Adam will discuss in more detail in a moment.\nThe MTS acquisition was funded by a combination of cash and cash equivalents on hand as well as additional borrowings under the company's U.S. commercial paper program.\nOn a pro forma basis, including the MTS acquisition and the anticipated divestiture of the test and simulation business, total available liquidity and net leverage at March 31, 2020 would be $3.2 billion and 1.4 times, respectively.\nUntil the divestiture of the MTS test and simulation business has closed, we will account for and report the test and simulation business as a discontinued operation.\nAs such, the expected sales and earnings of the test and simulation business are not included in our guidance.\nOur guidance also excludes cash and noncash expenses that will be expensed in the second quarter related to the MTS acquisition.\nThese expenses, which we expect to total approximately $85 million or $0.12 per share, include costs related to the early extinguishment of debt, noncash purchase accounting-related expenses, external transaction expenses, severance and other costs.\nIn conjunction with the divestiture of the test and simulation business, the company will also incur certain additional cash tax-related and other acquisition-related costs, which will not be included in income from continuing operations.\nOur guidance does incorporate the expected results of the MTS Sensors business, which as previously announced, is expected to generate $350 million in sales and $0.05 in diluted earnings per share in the first 12 months after closing.\nAnd I certainly hope that you, your family, your friends and all of your colleagues are continuing to stay safe and healthy.\nAs Craig mentioned, I'm going to highlight some of our achievements in the first quarter.\nI'll then discuss our trends and our progress across our diversified served markets.\nAnd then finally, I'll make a few comments on our outlook for the second quarter.\nAnd of course, we'll have time for Q&A at the end.\nOur results in the first quarter were substantially better than we had expected coming into the quarter as we exceeded the high end of our guidance in sales as well as adjusted diluted earnings per share.\nSales grew a very strong 28% in U.S. dollars and 25% in local currencies.\nAnd on an organic basis, sales increased by 23%.\nAnd we had organic growth in nearly all of our end markets and driven particularly by growth in the automotive, mobile devices, industrial and IT datacom markets.\nAnd I'll talk about each of those markets in a few moments.\nCraig mentioned, we booked record orders in the quarter of $2.734 billion, and that represented a very strong book-to-bill of 1.15:1.\nDespite continuing to face a range of operational challenges related to the ongoing pandemic as well as increased costs related to commodities and supply chain pressures, our operating margins were very healthy in the quarter, reaching 19.6%, which was a 260 basis point increase from last year's levels.\nCraig mentioned our adjusted diluted earnings per share grew a very robust 49% from prior year, which is again an excellent reflection of the Amphenol organization's strong execution.\nWe generated operating and free cash flow of $321 million and $243 million in the first quarter, respectively, both clear reflections of the high quality of the company's earnings.\nI just want to say how proud I am of our team this quarter.\nAnd our results once again reflect the discipline and agility of our entrepreneurial organization as we continue to perform well amid the very dynamic and challenging environment.\nAnd I'd like to make a few comments on our acquisitions in the quarter.\nFirst, as we announced on April 7, we were very pleased to close on the acquisition of MTS Systems earlier than originally anticipated.\nAlso, as previously announced, we had signed an agreement to sell the MTS test and simulation business to Illinois Tool Works for a sale price of $750 million.\nAnd that is -- that remains subject to certain post-closing adjustments and excludes transaction-related expenses.\nWe expect this sale to close following the receipt of all required regulatory approvals.\nWe especially look forward to the strength of the combined breadth of our company's highly complementary sensor product portfolios, which, we believe, will enable us to offer our customers an expanded array of innovative technologies across multiple end markets.\nWe expect the MTS Sensors business to add approximately $350 million of sales and $0.05 in adjusted diluted earnings per share in the first 12 months after closing.\nMore importantly, though, we look forward to realizing the long-term benefits of the opportunities created by the collective strengths of Amphenol and MTS Sensors for many years to come.\nWe're truly excited about this significant acquisition, which ultimately has positioned Amphenol as one of the broadest and most diversified sensor companies in the industry.\nIn addition to the MTS acquisition, we also closed on two other small acquisitions during the first quarter.\nIn February, we acquired Euromicron, a manufacturer of highly engineered fiber optic interconnect solutions for the mobile networks and IT datacom markets.\nBased in Germany, with annual sales of approximately $25 million, Euromicron represents a great addition to our interconnect product offering for customers across the European communications market.\nAnd then in March, we completed the acquisition of Cabelcon from Corning Inc. Cabelcon, which also has sales of approximately $25 million, is a Denmark-based designer and manufacturer of high-technology connectors and interconnect assemblies, primarily for customers in the European broadband market.\nOur ability to identify and execute upon acquisitions and then to successfully bring these new companies into Amphenol remains a core competitive advantage for the company.\nNow turning to our trends across our served markets.\nI would just comment that we remain very pleased that the company's balanced and broad end market diversification continues to create great value.\nWe believe this diversification mitigates the impact of the volatility of individual end markets while continuing to expose us to leading technologies wherever they may arise across the electronics industry.\nThis diversification has become ever more valuable given the many market dynamics related to the COVID-19 pandemic.\nNow turning first to the military market.\nThe military market represented 11% of our sales in the quarter.\nAnd as we had expected coming into the quarter, sales grew by 3% from prior year and were essentially flat organically with growth in naval, unmanned aerial vehicles, communications and vehicle ground systems, offset by declines or flat performance in other applications.\nSequentially, our sales were modestly down by about 3%.\nLooking into the second quarter, we expect sales to grow in the low double digits from these first quarter levels as we benefit from the addition of MTS Sensors together with the increased demand for interconnect products.\nWe're especially excited by the addition of the sensors products of MTS to our military product offering.\nTogether with our already leading interconnect products as well as our broad exposure across virtually all defense programs, we look forward to supporting the continued adoption of next-generation electronics into a wide array of military hardware.\nThe commercial aerospace market represented 2% of our sales in the quarter.\nAnd not surprisingly, and as expected, sales were down significantly, declining by 47% from prior year as the commercial aircraft market continued to experience unprecedented declines in demand for new aircraft due to the ongoing pandemic-related disruptions to the global travel industry.\nSequentially, our sales were a bit better than expected, moderating by just 3% from the fourth quarter.\nAnd looking into the second quarter, we do expect a sequential improvement in sales as we benefit from our recently completed acquisitions.\nRegardless of the ongoing challenging environment in commercial air, our team working in this market remains committed to leveraging the company's strong interconnect and sensor technology position across a wide array of aircraft platforms and next-generation systems integrated into those airplanes.\nThe industrial market represented 24% of our sales in the quarter.\nSales in industrial in the first quarter were better than expected, growing a very strong 33% in U.S. dollars and 33% organically.\nThis was driven by robust growth in battery and electric heavy vehicle applications, rail mass transit, heavy equipment, instrumentation, factory automation, alternative energy and medical, really a broad performance across many of the segments.\nOn a sequential basis, sales grew by a better-than-expected 6% versus the fourth quarter.\nLooking into the second quarter, we expect the industrial market to once again grow in the low teens versus the first quarter.\nAnd as we benefit from the addition of MTS Sensors, while continuing to gain momentum in many segments of the industrial market.\nThe acquisition of MTS Sensors has expanded our range of sensors sold into the industrial market, adding position, vibration, force and shock sensors that are used in a wide array of industrial applications.\nTogether with our existing sensor operations, we now have a diversified range of sensors supporting virtually all of the segments of the industrial market that we serve.\nI remain truly proud of our team working across the industrial market around the world.\nOur high-technology interconnect antenna and sensor offering positions us strongly with customers who are accelerating their adoption of electronics, no matter the application.\nThe automotive market represented 22% of our sales in the quarter, and sales in this market were also much stronger than we expected, growing 52% in U.S. dollars and 44% organically, as our team was able to execute strongly in the face of a robust and broad recovery in the automotive market.\nIn particular, we saw very strong growth of our products that are used in electric and hybrid electric vehicles in the quarter.\nA great confirmation of our global team's long-term efforts at designing in high-voltage and other interconnect and sensor products into these important next-generation platforms.\nSequentially, our sales increased by 6% from the fourth quarter.\nNow as has been widely reported, there are a variety of supply chain challenges facing the automotive industry.\nAccordingly, as we look toward the second quarter, we do expect a modest sequential decline in sales as the global supply chain disruptions temporarily impact certain pockets of new vehicle production.\nI'm extremely proud of our team working in the automotive market.\nThey have really demonstrated their agility and resiliency through these most turbulent times and thereby, have secured the company's position with our customers across the automotive market.\nWe look forward to benefiting from their efforts long into the future.\nThe mobile devices market represented 12% of our sales in the quarter.\nSales in this market increased by a better-than-expected 51% from prior year, with strength across all product types, including particularly in wearables and laptops.\nSequentially, our sales declined by 35%, which was a bit better than our expectations coming into the quarter and is within the typical range of first quarter seasonality that we have seen traditionally in the mobile devices market.\nLooking at the second quarter, we anticipate a further high single-digit sequential sales decline, which is also not atypical for this market in the second quarter.\nWhile mobile devices will always remain one of our most volatile markets, our outstanding and uniquely agile team is poised as always to capture any opportunities for incremental sales that may arise in 2021 and beyond.\nOur leading array of antennas, interconnect products and mechanisms continues to enable a broad range of next-generation mobile devices, thereby positioning us well for the long term.\nNow turning to the mobile networks market.\nThis market represented 6% of our sales in the quarter, and sales did grow from prior year by 4% in U.S. dollars and 1% organically, as strength from products sold to OEMs was offset in part by a moderation of our sales to network operators.\nWe were encouraged, though, to realize a better-than-expected sequential growth of 19% in the mobile networks market in the quarter as mobile network operators increased their spending on next-generation networks.\nLooking to the second quarter, we do expect a modest increase in sales from these first quarter levels, helped by the addition of Euromicron, which expands our offering for mobile networks operators in Europe and positions us well to support future network upgrades.\nOur team continues to work aggressively to expand our position in next-generation equipment and systems around the world.\nAnd as our customers ramp up the investment of these advanced networks, we look forward to benefiting from the increased potential that comes from our unique position with both original equipment manufacturers as well as mobile network service providers.\nThe information technology and data communications market represented 19% of our sales in the quarter.\nSales in the quarter were stronger than expected, rising 25% in U.S. dollars and 24% organically from prior year, really on broad-based strength across networking, storage and server applications.\nWhile we had expect sales to decline coming out of the fourth quarter, we were pleased to realize actually a sequential growth of 6% as customers continue to increase their demand for our high-technology products, use service providers and in data centers around the world.\nLooking to the second quarter, we expect a further increase of sales in the mid-single digits from these levels as customer demand continues to accelerate.\nWe remain very encouraged by the company's outstanding technology position in the global IT datacom market.\nOur customers around the world, no doubt about it, are continuing 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 with our unique, high-speed, power and other interconnect products.\nFinally, the broadband market represented 4% of our sales in the quarter, and sales grew by a very strong 16% from prior year as broadband spending levels remained elevated.\nOn a sequential basis, sales grew slightly from the fourth quarter.\nWe do expect a high-teens sequential sales increase in the second quarter as customers continue to upgrade the capacity of their networks to support the significant increase in demand for bandwidth and as we benefit from our recent acquisitions, including Cabelcon.\nThe addition of Cabelcon expands our offering for broadband customers in the European market, which enables us to provide a more diversified range of products for their next-generation networks and the related upgrades.\nWe look forward to continuing to offer this expanded product offering to broadband service operators around the world, all of whom are working to increase bandwidth to support the expansion of high-speed data applications to homes and businesses.\nNow turning to our outlook, and given the current still dynamic market environment as well as assuming no new material disruptions from the COVID-19 pandemic and constant exchange rates.\nFor the second quarter, we now expect sales in the range of $2.415 billion to $2.475 billion and adjusted diluted earnings per share in the range of $0.53 to $0.55.\nThis would represent strong sales growth of 22% to 25% and adjusted diluted earnings per share growth of 33% to 38% compared to the second quarter of last year.\nAnd I would just note that the second quarter of last year, as you will recall, was already a strong recovery quarter for the company coming out of the first quarter.\nI remain confident in the ability of our outstanding management team to adapt to the ongoing challenges that are in the marketplace and to capitalize on the many future opportunities to grow our market position and expand our profitability.\nThe entire Amphenol organization remains committed to delivering long-term sustainable value, all while prioritizing the continued safety and health of each of our employees around the world.\nAnd with that, operator, we'd be happy to take whatever questions there may be.\n",
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"content": "q1 adjusted earnings per share $0.52.\nq1 gaap earnings per share $0.53.\nq1 sales $2.377 billion.\nsees q2 adjusted earnings per share $0.53 to $0.55 from continuing operations.\nsees q2 sales $2.415 billion to $2.475 billion.\nsees q2 sales up 22 to 25 percent.\non april 27, 2021, co's board approved a new three-year, $2 billion open market stock repurchase plan.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO.\nI will provide some financial commentary, and then Adam will give an overview of the business as well as current trends, and then we'll take some questions.\nThe company closed the second quarter with record sales of $2.654 billion and GAAP and adjusted diluted earnings per share of $0.59 and $0.61, respectively.\nSales were up 34% in U.S. dollars, 30% in local currencies and 22% organically compared to the second quarter of 2020.\nSequentially, sales were up 12% in U.S. dollars and in local currencies and 7% organically.\nOrders for the quarter were a record $3.120 billion, which was up 58% compared to the second quarter of 2020 and up 14% sequentially, resulting in a very strong book-to-bill ratio of 1.18:1.\nBreaking down sales into our two segments.\nThe interconnect segment, which comprised 96% of our sales, was up 34% in U.S. dollars and 30% in local currencies compared to the second quarter of last year.\nOur cable segment, which comprised 4% of our sales, was up 27% in U.S. dollars and 24% in local currencies compared to the second quarter of last year.\nAdam will comment further on trends by market in a few minutes.\nGAAP and adjusted operating income were $476 million and $532 million, respectively, in the second quarter of 2021.\nGAAP operating income includes $55 million of transactions, severance, restructuring and certain other noncash costs related to the MTS acquisition.\nAnd the company also incurred $34 million related to the extinguishment of outstanding MTS senior notes that in accordance with GAAP was recorded as an increase to goodwill in the second quarter and therefore had no impact on the second quarter earnings.\nExcluding these acquisition-related costs, adjusted operating margin was 20%, which increased by a strong 200 basis points compared to the second quarter of last year and increased by 40 basis points sequentially.\nThe year-over-year improvement in adjusted operating margin was primarily driven by normal operating leverage on the higher sales volumes and a lower cost impact from the COVID-19 pandemic, partially offset by the impact of the challenging commodity and supply chain environment that we experienced in this year's quarter.\nThe sequential increase in adjusted operating margin was driven by the normal conversion on the increased sales levels, partially offset by the impact of MTS Sensors business, which is currently operating below the company's average operating margin.\nFrom a segment standpoint, in the interconnect segment, margins were 22% in the second quarter of 2021, which increased from 20% in the second quarter of 2020 and increased 50 basis points sequentially.\nIn the cable segment, margins were 6.1%, which decreased from 9.4% in the second quarter of 2020 and 8.8% in the first quarter.\nThese lower margins in the cable segment are directly related to the rapid increases in the prices of certain commodity and logistics costs, which we have not yet been able to offset with pricing actions.\nGiven the dynamic market environment, we are very proud of the company's performance.\nOur team's ability to effectively manage through the current market challenges 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.\nThe company's GAAP effective tax rate for the second quarter was 17.5%, which compared to 20.7% in the second quarter of 2020.\nOn an adjusted basis, this effective tax rate was 24.5% in the second quarter of both 2021 and 2020.\nGAAP diluted earnings per share was $0.59, an increase of 40% compared to $0.42 in the prior year period.\nAnd adjusted diluted earnings per share was a record $0.61, an increase of 53% compared to $0.40 in the second quarter of 2020.\nThe company continues to be an excellent generator of cash.\nOperating cash flow was $411 million in the second quarter or 109% of adjusted net income.\nAnd net of capital spending, our free cash flow was $307 million or 81% of adjusted net income.\nFrom a working capital standpoint, inventory days, days sales outstanding and payable days were 85, 71 and 60 days, respectively, all excluding the impact of acquisitions in the quarter and within our normal range.\nDuring the quarter, the company repurchased 2.5 million shares of common stock for approximately $167 million at an average price of approximately $67.\nAt the end of the quarter, total debt was $5.2 billion and net debt was $4 billion.\nTotal liquidity at the end of the quarter was $2.3 billion, which included cash and short-term investments on hand of $1.2 billion plus availability under our existing credit facilities.\nSecond quarter 2021 GAAP EBITDA was $597 million, and our net leverage ratio was 1.6 times.\nOn a pro forma basis, after giving effect to the sale of MTS test and simulation business, net leverage at June 30, 2021 would have been 1.3 times.\nAs previously discussed, due to the pending sale of the MTS test and simulation business, that business is being reported as a discontinued operation.\nAnd therefore, its expected results are excluded from our Q3 guidance.\nIn addition, in conjunction with the divestiture of the test and simulation business, the company will incur certain additional cash tax-related and other acquisition-related costs in the third quarter, which will not be included in income from continuing operations and therefore are not included in our guidance.\nAnd I hope that you, your family, friends and colleagues continue to stay safe and healthy and indeed are able to enjoy the summer so far.\nAs Craig mentioned, I'm going to highlight some of our achievements in the second quarter.\nI'll then get into a discussion of the trends and our trends and progress across our served markets.\nOur results in the second quarter were substantially better than expected as we exceeded the high end of our guidance in sales and adjusted diluted earnings per share.\nCraig already mentioned, our sales grew a very strong 34% in U.S. dollars and 30% in local currencies, reaching a new record of $2.654 billion.\nOn an organic basis, our sales increased by 22%, with growth driven in particular by the automotive, military, industrial and broadband markets as well as contributions from the company's acquisition program.\nWe're very pleased to have booked record orders in the quarter of $3.120 billion and that represented a very strong book-to-bill of 1.18:1.\nDespite facing operational challenges in certain geographies related to the ongoing pandemic as well as continued increases in costs related to commodities and supply chain pressures, we were very pleased to deliver very strong adjusted operating margins of 20% in the quarter.\nThis was a 200 basis point increase from last year's levels and a 40 basis point improvement sequentially.\nAdjusted diluted earnings per share grew a very significant 53% from prior year to another new record of $0.61.\nAnd just an outstanding reflection of our continued strong execution.\nAnd finally, the company generated operating and free cash flow of $411 million and $307 million, respectively, in the second quarter.\nI just can't emphasize enough how proud I am of our organization around the world.\nThese results once again reflect the discipline and agility of our entrepreneurial organization as we have continued to perform well amid what is a very dynamic and challenging environment.\nVery pleased that in the quarter, we closed on the acquisition of Unlimited Services.\nUnlimited is based in Oconto, Wisconsin, but also with operations in Mexico and has annual sales of approximately $50 million.\nThis is a great manufacturer of cable assemblies for the industrial market, primarily with a particular focus on heavy vehicles.\nThe addition of Unlimited broadens our already strong position in value-add interconnect products that are integrated into a wide array of industrial applications.\nIn fact, our ability to identify and execute upon acquisitions and then to successfully bring these new companies into Amphenol remains a core competitive advantage for the company.\nNow turning to our served markets.\nI just would comment once again how pleased we are that the company's broad and balanced end market diversification continues to create real value for us.\nWe believe that ultimately, this diversification mitigates the impact of the volatility of individual end markets while also giving us broad exposure to leading technologies and the innovations of those technologies wherever they may arise across the broad scope of the electronics industry.\nNow turning to the military market.\nThe military market represented 11% of our sales in the quarter.\nAnd as expected, sales grew a strong 45% from the COVID impacted prior year second quarter and were up 30% organically.\nAnd this was really driven by broad strength across virtually all segments of the military market.\nOn a sequential basis, sales increased by 12%, also very strong.\nAs we look into the third quarter, we remain -- we expect sales to remain at these current elevated levels.\nAnd we continue to be very excited by the strength of our position in the military market.\nAnd that position is really based upon our industry-leading breadth of high-technology interconnect and now sensor products, together with our support of essentially all major military programs.\nThis gives us great confidence for our long-term performance in this important area.\nThe commercial air market represented 2% of our sales in the quarter.\nSales grew by 7% versus prior year, really with the benefit of the contributions of our recent acquisitions.\nOn an organic basis, sales were down by about 14% as the commercial aircraft market continued to experience declines in demand for new aircraft production.\nSequentially, however, our sales did increase by better than expected 19%.\nAnd that's really from the benefit of the MTS acquisition as well as some organic progress.\nAs we look ahead, we expect a slight seasonal moderation in sales in the third quarter, which we would typically see in commercial air.\nAnd regardless of the ongoing difficult environment, our team working in this commercial aerospace market remains committed to leveraging the company's strong interconnect and sensor technology position across a wide array of aircraft platforms and next-generation systems that are integrated into those planes.\nAs personal and business travel continues to recover from the pandemic, we look forward to jet manufacturers beginning to expand their production levels.\nThe industrial market represented 27% of our sales in the quarter, and our performance in the second quarter in industrial was really much stronger than expected with sales increasing by 54% in U.S. dollars and 28% organically.\nThis growth was broad-based across most areas of the worldwide industrial market and was driven in particular by organic strength in the transportation, battery and heavy electric vehicle, marine and energy generation segments, together with the contributions from our acquisitions that have been completed over the past year.\nOn a sequential basis, sales increased by a very strong 26% from the first quarter really with the benefit of acquisitions as well as strong organic performance.\nLooking into the third quarter, we expect sales to remain at these elevated levels despite what would typically be a seasonally lower quarter.\nI can't say enough how proud I am of our team working in the industrial market.\nAnd we've had a long-term strategy to expand our high-technology interconnect, antenna and sensor offering, both organically as well as through complementary acquisitions.\nAnd that strategy has positioned us strongly with industrial customers around the world who are accelerating their adoption of electronics.\nThe acquisition of Unlimited Services further bolsters our leading value-add capabilities in this important market, and we look forward to realizing the benefits of this strategy for many years to come.\nThe automotive market represented 20% of our sales in the quarter.\nAnd I can just say that sales were higher than our expectations, growing a very strong 134% in U.S. dollars and 117% organically as our team was able to execute strongly in the face of a robust and broad recovery in the automotive market.\nIn particular, we once again drove very strong growth of our products used in electric and hybrid electric vehicles this quarter, which confirms again for us our global team's long-term efforts at designing in high voltage and other interconnect and sensor products into these important next-generation platforms.\nDespite an increase in production disruptions among our automotive customers due to the widely reported global supply chain issues, we were able to achieve a small sequential increase in our sales, which was a bit better than we had expected coming into the quarter.\nNo doubt about it, though, there continues to be a range of widely reported supply chain challenges that are arising within the automotive industry, and this is impacting overall demand from vehicle manufacturers around the world.\nAccordingly, as we look toward the third quarter, we do expect a modest sequential decline in our sales.\nI remain extremely proud of our team working in the automotive market.\nThey continue to demonstrate a high degree of agility and resiliency in both driving a significant recovery from last year's reduced production levels while expertly navigating the myriad of supply chain challenges that the entire automotive industry is still facing.\nWe look forward to benefiting from their efforts long into the future.\nTurning to the mobile devices market.\nThat market represented 10% of our sales in the quarter.\nOur sales to customers in the mobile devices market declined from prior year by 4% in U.S. dollars and 6% organically as declines in handsets and laptops more-than-offset growth in wearables.\nI would just remind you that our last year's second quarter did include a significant sequential recovery and really a catch-up from the COVID impacted first quarter of 2020, which made the comparison versus prior year, a little more challenging.\nSequentially, our sales fell by 6% from the first quarter, which was modestly better than our expectations.\nLooking to the third quarter, we now expect an approximately 25% increase in sales from these second quarter levels as we benefit from the seasonally typical higher demand in the mobile device market as customers launch a range of new products.\nWhile mobile devices remains the most volatile of Amphenol's end markets, our outstanding and agile team is poised as always to capture any opportunities for incremental sales that may arise in the second half of 2021 and beyond.\nOur leading array of antennas, interconnect products and mechanisms continues to enable a broad range of next-generation mobile devices, thereby positioning us well for the long term in this exciting market.\nThe mobile networks market represented 5% of our sales in the quarter.\nSales were flat to prior year and down 4% organically as sales to both OEMs and wireless service providers moderated.\nOn a sequential basis, however, our sales increased by 5% compared to the first quarter, which was in line with our expectations coming into the second quarter.\nAnd as we look toward the third quarter, we expect a further increase in sales as Mobile Networks customers ramp up their investments in next-generation networks.\nOur team around the world continues to work aggressively to realize the benefits of our efforts at expanding our position in such next-generation networks and the equipment that populates them around the world.\nAnd as customers ramp up these investments of such 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.\nThe information technology and data communications market increased by 21% in the second quarter.\nSales in the second quarter rose by 5% in U.S. dollars and 3% organically from the very significant levels in last year's second quarter.\nOur strength this quarter was driven, in particular, by robust sales to web service providers, which was partially offset by some weakness in sales to networking equipment OEMs. Sequentially, our sales grew a very strong 20% from the first quarter, which significantly outperformed our original expectations.\nLooking now into the third quarter, we expect sales to increase modestly from these very high levels.\nWe remain very encouraged by the company's outstanding position in the global IT datacom market.\nOur OEM and web service provider customers around the world continue to drive their equipment and networks to ever higher levels of performance in order to manage the continued dramatic increases in demand for bandwidth and processor power.\nIn turn, our team is singularly focused on enabling this continuing revolution in IT datacom with industry-leading high-speed power and fiber optic interconnect products.\nAnd we look forward to realizing the benefits of our leading position for many years to come.\nTurning finally to the broadband market.\nThis market represented 4% of our sales in the quarter, and sales increased by 12% from prior year and were flat organically as we benefited from our recent acquisition of Cablecon.\nOn a sequential basis, sales increased by 7% from the first quarter, which was a bit lower than we had anticipated coming into the quarter.\nFor the third quarter, we expect sales to moderate from current levels as operators digest the really high levels of spending that they have exhibited over the recent quarters.\nAnd regardless of this more muted outlook, we continue to look forward to supporting our broadband service operator customers around the world, all of whom are working to increase their bandwidth to support the expansion of high-speed data applications to homes and businesses.\nNow turning to our outlook.\nAnd I would just note that given the current dynamic market environment, and of course, assuming no new material disruptions from the COVID-19 pandemic as well as constant exchange rates, in the third quarter, we expect sales in the range of $2.640 billion to $2.700 billion, and adjusted diluted earnings per share in the range of $0.60 to $0.62.\nThis would represent sales growth of 14% to 16% and adjusted diluted earnings per share growth of 9% to 13% compared to the third quarter of last year.\nI remain confident in the ability of our outstanding entrepreneurial management team to adapt to the continued challenges in the marketplace and to capitalize on the many opportunities to grow our market position and expand our profitability.\nI had to say that our entire organization remains committed to delivering long term and sustainable value, all while prioritizing the continued safety and health of each of our employees around the world.\nAnd with that, operator, we'd be very happy to take any questions that there may be.\n",
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"content": "compname reports q2 earnings per share of $0.59.\nq2 adjusted earnings per share $0.61.\nq2 gaap earnings per share $0.59.\nq2 sales $2.654 billion versus refinitiv ibes estimate of $2.48 billion.\nsees q3 adjusted earnings per share $0.60 to $0.62 from continuing operations.\nsees q3 sales up 14 to 16 percent.\n",
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