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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: It's posted on our website, borgwarner.com, on our homepage and on our Investor Relations homepage.\nPlease see the Events section of our Investor Relations homepage for a full list.\nOur actual results may differ significantly from the matters discussed today.\nWhen you hear us say on a comparable basis that means excluding the impact of FX, net M&A and other noncomparable items.\nWhen you hear us say adjusted, that means excluding noncomparable items.\nWhen you hear us say organic, that means excluding the impact of FX and net M&A.\nWe will also refer to our growth compared to our market.\nWhen you hear us say market, that means the change in light and commercial vehicle production weighted for our geographic exposure.\nOur outgrowth is defined as our organic revenue change versus this market.\nWe encourage you to follow along with these slides during our discussion.\nLet's start on slide five.\nWe're very pleased to share our results for the third quarter and provide an overall company update.\nThe third quarter operating environment was very challenged, both from an absolute volume perspective and in light of the production volatility we experienced throughout this quarter.\nOverall, we're doing a solid job managing the near-term environment while securing our future growth.\nWith just over $3.4 billion in sales, our third quarter revenue decreased by about 7% organically.\nExcluding the year-over-year growth in our aftermarket business, our OEM business declined 9% compared to the 22% decline in our market during the quarter as we benefited from new business and favorable mix.\nOur margin and cash flow performance in the quarter was impacted by the volatile production environment, which put pressure on near-term cost containment and drove excess inventory within our plans.\nEven with those challenges, we're still on track to delivering a near double-digit operating margin for the full year.\nAnd we still expect full year free cash flow to be among the strongest results in our history.\nAt the same time, we're very focused on ensuring that we secure our future.\nTo that end, this past quarter, we won multiple new product awards for electric vehicles, which I will speak about in a few moments.\nAs a result of these awards, along with wins in prior quarters, we are well on our way to achieving the organic electric vehicle 2025 revenue targets underlying our project CHARGING FORWARD.\nIn fact, we estimate that more than 90% of that target is already booked.\nThe market environment continues to be extremely volatile with the risk of future production disruption arising from ongoing supply constraints.\nWith that in mind, on a full year basis, we now expect our global weighted light vehicle and commercial vehicle markets to be down 2.5% to flat year-over-year.\nThis is down materially from our previous assumption, reflecting both the third quarter decline and our most recent expectations for the fourth quarter.\nAs you can see from the line chart showing the different scenario, we do expect light vehicle industry production to improve sequentially Q3 to Q4.\nUnderlying customer demand remains robust.\nHowever, just like we saw in the third quarter, industry production levels will be dependent on the varying impact of ongoing supply constraints and on the potential impact on our customer mix.\nOverall, we expect the challenging environment to continue throughout the remainder of 2021.\nAnd at this point, we think it will carry on well into 2022.\nAs we manage this challenging environment, we're also continuing to focus on securing our mid- to long-term opportunities in electric vehicle.\nAnd we did just that during this quarter, securing several awards for electric vehicle programs.\nI'm very proud of the teams.\nTwo of those awards are highlighted on slide seven.\nFirst, we secured a major award for a North American inverter with a global OEM expected to launch in 2024.\nThis high-voltage silicon carbide program is our largest inverter win to date.\nThis business award also marks the company's first major win in the North American market.\nIt will also be used in multiple battery electric vehicle platforms, including pass cars and trucks.\nOur product performance, scalability, cost competitiveness, size optimization and global manufacturing footprint, all contributed to securing this business win.\nAdditionally, we announced a new 800-volt silicon carbide inverter award with a German OEM expected to launch in early 2025.\nThis award expands our existing 400-volt inverter business with this same German customer by now adding 800-volt products.\nThis new technology offers enhanced power density, proven performance and long-term reliability.\nGiven these two new and significant inverter awards, I would like to give you an update on our positioning in the inverter market on slide eight.\nWe've had tremendous success establishing ourselves in this market.\nWhen I think about BorgWarner's competitive advantages in power electronics, it's driven by, first, the breadth of our product portfolio.\nThis allows us to be faster and more effective at bringing products to market.\nSecond, our ability to innovate, like with our Viper power module technology.\nWe can continue our innovations in part due to our vertical integration strategy.\nWe have in-house capabilities for power modules, integrated circuit development and software, which we feel are an advantage in the marketplace.\nAnd finally, I think the last driver is our ability to leverage the electronic scale that we already have across our company, and especially within our engine control units.\nThe result is that we've secured significant new business award.\nAnd as you can see by the chart on the slide, we expect the business to grow rapidly from about 500,000 units in 2021 to 2.5 million units by 2025, representing about 50% CAGR.\nWe expect this volume to drive total inverter sales of $1.7 billion by 2025 -- in 2025, sorry.\nAnd remember, these programs are already booked.\nWe continue to pursue additional inverter opportunities with production volumes in 2025 and beyond, and would expect to secure more awards in the coming quarters.\nAnd one more thing, with the business we've already won, we believe that we are positioned to be the number one noncaptive inverter producer globally by 2025.\nAs we look at our year-over-year revenue walk for Q3, we begin with pro forma 2020 revenue of just under $3.6 billion, which includes a little over $1 billion of revenue from Delphi Technologies.\nNext, you can see that foreign currencies increased revenue by about 2%.\nThen our organic revenue decline year-over-year was approximately 7% or almost 9%, excluding growth in our aftermarket segment.\nThat compares to a 22% decrease in weighted average market production, which suggests that our outgrowth in the quarter was more than 13%.\nNow with that said, the significant volatility in production schedules and the varying levels of supply disruptions among our customers are continuing to make it difficult to draw conclusions from the quarterly outgrowth figures.\nNonetheless, we were pleased that we delivered strong relative revenue performance in all three major markets despite the overall decline in revenue.\nRegionally, in Europe, we outperformed, driven by new business in small gasoline turbochargers and fuel injection products.\nIn China, we also outperformed the market, driven by the resilience in the former Delphi businesses.\nAnd in North America, we outperformed the market, primarily due to new business as well as vehicle and customer mix.\nThe sum of all these was just over $3.4 billion of revenue in Q3.\nNow let's look at our earnings and cash flow performance on slide 10.\nOur third quarter adjusted operating income was $311 million compared to pro forma operating income of $396 million last year.\nThis yielded an adjusted operating margin of 9.1%.\nOn a comparable basis, excluding the impact of foreign exchange and the impact of AKASOL, adjusted operating income decreased $79 million on $261 million of lower sales.\nThat translates to a decremental margin of approximately 30%.\nThis higher than typical decremental margin was primarily driven by $24 million of higher commodity costs, net of customer recoveries.\nExcluding these higher commodity costs, our year-over-year decremental margin was approximately 19%, which we view as a sign that we're effectively managing our operating cost performance in spite of the supply chain disruptions.\nMoving on to cash flow.\nWe consumed $10 million of free cash flow during the third quarter.\nThis was worse than our expectations going into the quarter due to lower-than-expected operating income as well as higher-than-planned inventories.\nFundamentally, when production declines this rapidly and expectedly, it's difficult to get inventory out of the system in the near term.\nWe expect inventory to improve in the coming quarters once we see less volatility in production orders, which will give us the ability to rightsize our supply chain demands accordingly.\nNow let's talk about our full year financial outlook on slide 11.\nWe now expect our end markets to be down 2.5% to flat for the year.\nNext, we expect to drive market outgrowth for the full year of approximately 1,000 basis points.\nThis contemplates the strong performance to date with a sequential step down in the fourth quarter as we expect to return to more normalized year-over-year outgrowth in Q4.\nBased on these assumptions, we expect our 2021 organic revenue to increase approximately 8.5% to 11% relative to 2020 pro forma revenue.\nThen adding an expected $425 million benefit from stronger foreign currencies and an expected $70 million related to the acquisition of AKASOL, we're projecting total 2021 revenue to be in the range of $14.4 billion to $14.7 billion.\nThis wide revenue guidance range reflects the continued production uncertainty we have in the fourth quarter.\nFrom a margin perspective, we expect our full year adjusted operating margin to be in the range of 9.6% to 10% compared to a pro forma 2020 margin of 8.3%.\nThis contemplates the business delivering full year incrementals in the low 20% range before the impact of Delphi-related cost synergies and purchase price accounting.\nFrom a cost synergy perspective, our margin guidance continues to include $100 million to $105 million of incremental benefit in 2021, the same as our prior guidance.\nBased on this revenue and margin outlook, we're now expecting full year adjusted earnings per share of $3.65 to $3.95 per diluted share.\nAnd finally, we expect that we'll deliver free cash flow in the range of $600 million to $700 million for the full year.\nThe reduction versus our prior guidance is a little larger than our projected decline in operating income as we expect inventory to remain higher than usual through the fourth quarter.\nThen once we head into 2022, we expect to start to see reductions in inventory toward more normalized levels.\nThat's our 2021 outlook.\nGiven the uncertain outlook for the remainder of 2021, we felt it appropriate to provide you with some of our initial thoughts on some key financial drivers and strategic priorities heading into 2022.\nStarting with our top line.\nAs of right now, we do expect to see supply chain challenges, particularly with respect to semiconductors, continue well into 2022.\nUltimately, where full year 2022 industry production shakes out will depend on the scope and duration of these challenges.\nBut at this point, we would still expect a modest level of growth in industry production next year.\nNext, we expect to deliver outgrowth in 2022.\nHowever, we're currently assessing the extent to which the much stronger-than-expected outgrowth in 2021 will result in any headwind to our outgrowth next year.\nFrom a cost perspective, we expect incremental Delphi-related cost synergies in the $40 million to $45 million range, and we also expect incremental restructuring savings of $40 million to $50 million.\nThese combined savings are expected to largely offset our estimated increase in R&D spending of approximately $100 million.\nWe're planning for this significant increase in R&D spending in order to support the new business wins we've achieved to date and to pursue additional EV opportunities consistent with our CHARGING FORWARD organic growth objectives.\nAnd finally, we're building our plans based on the assumption that we'll see sustained levels of commodity inflation continuing into 2022, which means we expect that to create a year-over-year headwind during the first and second quarters.\nThat's the near term.\nBut while we're managing the near term, we're also focused on securing our long-term future.\nSo consistent with our CHARGING FORWARD initiative, we have three key strategic priorities heading into next year.\nFirst, we plan to continue to pursue and secure additional electric vehicle awards for both components and systems.\nSecond, we intend to execute additional M&A to accelerate our positioning in electric vehicles.\nAnd finally, we expect to complete the disposition of approximately $1 billion in combustion revenue.\nUltimately, it's the pillars of near-term execution, securing future profitable growth and disciplined inorganic investments that will drive the success of our strategy and thus drive value creation for our shareholders.\nI'm now really excited to share an update of our progress toward our project CHARGING FORWARD targets on slide 13.\nAnd as evidenced by our program announcements over the past several quarters, including the two wins that I alluded to earlier, we're making significant progress on the organic growth in electric vehicles underlying our CHARGING FORWARD plan.\nOr to put it another way, with this booked business, we're more than 90% of the way toward our $2.5 billion organic revenue target we gave you back in March.\nThe breakdown of these programs is highlighted on the chart to the left.\nWe're excited about the mix of both components and system awards.\nPlus we expect to add to this booked business portfolio over the next quarters by securing additional EV awards with 2025 revenues.\nAnd then we will supplement this organically developed revenue with EV revenues from AKASOL and any future acquisitions.\nThe takeaway from today is this.\nIt's a challenging near-term environment.\nOnce again, BorgWarner is successfully managing the present and delivering solid financial results.\nAt the same time, we're delivering our future.\nWe're doing this by establishing product leadership and winning new business in the world of electrification.\nAnd with these wins, we are successfully executing on our long-term strategy, CHARGING FORWARD, which will deliver value to our shareholders long into the future.\n",
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"content": "sees fy adjusted earnings per share $3.65 to $3.95 excluding items.\nannounced an 800v sic inverter award with a german oem, expected to launch in early 2025.\nacquisition of akasol is expected to increase year-over-year sales by approximately $70 million.\nfull year free cash flow is expected to be in range of $600 million to $700 million.\nsees full-year 2021 net sales to be in range of $14.4 billion to $14.7 billion.\nborgwarner - fy 2021 net sales guidance under assumption that semiconductor supply issues do not worsen.\nfy 2021 net sales guidance under assumption that there are no additional production disruptions arising from covid-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: In the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G. If you did not receive a copy, these documents are available in the Investor Relations section of our website at investors.\nDuring the Q&A portion of the call, Ray Ritchey, Senior Executive Vice President and our regional management teams will be available to address any questions.\nThe BXP team is joining you today from our offices all over the country where we're beginning to see renewed signs of life as our cities reopen with increasing activity on the street, in shop and restaurants, on public transportation, and yes, even in office buildings, where building census is picking up and tour activity is accelerating.\nU.S. GDP is growing at 4.3%, over 1.6 million jobs were created in the first quarter.\nWeekly jobless claims are in decline and unemployment has dropped to 6%, only 2.5 percentage points above pre-pandemic levels of February last year.\nProfessional service employment has remained healthy, which is important given our tenancy.\nU.S. retail sales surged 9.8% in March and air travel, as measured by TSA checkpoints, is up 10 times over a year ago, but still only 50% of pre-pandemic level.\nThe U.S. and global economic recoveries continue to follow the course of the virus and vaccination rollout.\nWhile new COVID-19 cases have remained sticky at around 60,000 per day since late February, all data, including three million daily vaccinations, 43% of Americans having received at least one shot and the J&J vaccine reinstatement suggest the trajectory for a highly vaccinated population and fewer new COVID infections remains positive.\nThe U.S. economy will likely continue to surge, given the financial health of most industry sectors, the significant federal fiscal stimulus provided to individuals and small business, accommodative monetary policy and pent-up consumption sparked by the pandemic reopening.\nThis recovery is starting to bring positive momentum to the office markets and BXP's result.\nFor the buildings we can track, our census last week was, depending on the city, at or above the post-pandemic peak established last October.\nIn the first quarter, we completed 592,000 square feet of leasing, 84% of the leasing volume we achieved in the first quarter of last year and 46% of our longer-term first quarter average.\nThese leases had a weighted average term of 7.6 years.\nOur leases that commenced this quarter demonstrated a 15% roll-up of net rent for second-generation space.\nWe exceeded our FFO per share forecast for the first quarter and the tenant charges we experienced in 2020 largely disappeared.\nMore broadly, tenant requirements in our target markets in March, based on data provided by VTS, were up 33% versus the prior month and 51% versus the prior year, though we're only down -- though are still down 40% from pre-pandemic levels.\nOffice markets are lagging other asset classes because very few employers are currently mandating in-person work.\nThat is now changing rapidly as many large employers, such as Google, Goldman Sachs, JPMorgan, Ernst & Young, Facebook, Amazon, Apple and others have announced return-to-work plans for this summer.\nWe continue to see Labor Day as a key tipping point for employees returning to the office, with forecast low COVID infection rates, high vaccination levels, the end of summer and schools reopening.\nWe hear repeatedly from our clients as well as in interviews we have completed with large occupiers that the key to future success and competitiveness is to successfully reintroduce in-person work.\nUnlike most recessions, most of our clients are thriving and have not reduced headcount.\nIn our leasing activity and renewal conversations with clients, we have not seen material reduction in space requirements.\nNow moving to private equity market conditions, there were $15 billion of significant office assets sold in the first quarter, though volumes were down 37% from the first quarter of last year.\nAssets with limited lease rollover and anything life science related currently receive the best pricing, often better than before the pandemic.\nThere were again several deals of note completed in our markets, including in San Francisco The Exchange on 16th located in the Mission Bay district sold for $1.1 billion or $1,440 per square foot, a record price per square foot in San Francisco and it represented a 4.9% cap rate.\nThis 750,000 square foot recently developed building is 100% leased to a tenant trying to sublease the entire building.\nThe asset was sold to a fund manager, which may attempt a life science conversion.\nIn Seattle, 300 Pine, the Macy's building sold for $600 million or $779 per square foot and a 4.4% cap rate.\nThe majority of this 770,000 square foot asset was recently converted to office space, which is 100% leased by Amazon, and the remainder is undergoing further renovation.\nThe building was purchased by joint venture between a fund manager and a real estate operator.\nAnd in the Washington, D.C. CBD, a 49% interest in Midtown Center was sold to an offshore buyer.\nThe building comprises 870,000 square feet and is substantially leased to Fannie Mae as its headquarters.\nThe gross sale price was $980 million, $1,129 a square foot and a 4.7% cap rate.\nMoving to BXP investment activities.\nLet's start with our growing life science business.\nBXP currently has over three million square feet leased to life science clients, approximately two million square feet of current and future office to lab conversion projects, and sites for approximately four million square feet of life science ground-up development, primarily located in among the strongest life science markets in the U.S., namely Cambridge, Waltham and South San Francisco.\nWe recently received one million square feet of new entitlements at Kendall Center in Cambridge, and our joint venture at Gateway Commons is in discussions with local authorities in San Francisco to increase entitlements by 1.5 million square feet.\nWe had a very active first quarter launching three new lab developments and redevelopment projects.\n180 CityPoint, a 330,000 square foot ground-up development and part of our larger CityPoint campus in Waltham with strong visibility from I-95.\nSecond, 880 Winter Street is a 224,000 square foot Class A office asset we acquired in 2019 for $270 a square foot, and we'll redevelop into a lab building.\nAnd 751 Gateway, a 229,000 square foot ground-up lab development as part of our Gateway Commons joint venture in which we own a 49% interest.\nThough all three projects are being commenced speculatively, we are seeing many new life science requirements in both the Waltham and South San Francisco markets and have made multiple lease proposals to potential tenants.\nA large portion of our active development pipeline is now lab and currently comprises 920,000 square feet and $560 million of projected investment for our share with projected cash yield at stabilization approximately 8%.\nBXP has a rich history of success serving the life science industry.\nWe have the land and building inventory in the strongest life science clusters in the U.S. as well as the execution skill and client relationships to make life sciences an even more meaningful component of our overall business.\nMoving to the balance of our development pipeline.\nWe delivered into service this quarter, 159 East 53rd Street with 195,000 square feet of office fully leased to NYU as well as the HU, which will open after Labor Day and serve as a unique culinary amenity for our three building, 53rd in Lexington Campus.\nWe remain on track to deliver our 100 Causeway development in Boston later this year, which is pre-leased to Verizon, and we have four additional and significant projects slated to deliver in 2022.\nThis pipeline is 86% pre-leased with aggregate projected cash yield stabilization projected to be approximately 7%.\nTo maintain our external growth, in addition to adding the three life science projects, we also are investing approximately $182 million into an observatory redevelopment project on the top of the Prudential Tower in Boston.\nWhen complete, the observatory will have three levels, comprise 59,000 square feet and will be a world-class attraction, featuring both indoor and outdoor, 360-degree viewing decks as well as exhibit an amenity spaces.\nThe project will be the only observatory in Boston, and we expect it will generate strong return to BXP after delivery in the spring of 2023.\nNet of all these movements, our active development pipeline currently stands at 10 development and redevelopment projects comprising 4.3 million aggregate square feet and $2.7 billion in total investment for our share.\nWe expect these projects, along with the lease-up of two residential buildings delivered in 2020 as well as 159 East 53rd Street to contribute 3.5% of annual and external growth to our NOI over the next three years.\nWe continue to actively pursue value-added acquisitions in our core markets in Seattle.\nDespite the impacts of the pandemic, office investment opportunities in our core markets remain highly competitive.\nTo enhance our financial resources, execution speed and returns, we have reached an agreement with two large-scale sovereign investors to pursue select acquisitions together.\nThe partners, including BXP, will commit up to $1 billion and we'll have the opportunity to invest 1/3 of the equity in each identified deal at their discretion.\nBXP will provide all real estate services and has agreed to commit its acquisition deal flow to the partnership, subject to specific carve-out.\nWe believe this venture with approximately $2 billion of investment capacity provides us the financial resources and return enhancements to be an even more nimble and competitive participant in the acquisitions market.\nWe will announce the completion of the partnership, including the participants once documentation is complete, likely in the next month.\nWe recently completed the sale of our 50% interest in Annapolis Junction, Buildings six and 7, our last two remaining properties in the Fort Meade, Maryland market.\nThe buildings totaled approximately 247,000 square feet and sold for a gross price of $66 million, which is $267 a square foot.\nWe have under contract three buildings in our VA 95 Business Park in Springfield, Virginia for a gross sale price of $70 million.\nAnd we also have under letter of intent, the sale of several stabilized suburban buildings for another approximately $190 million.\nAdditional asset sales are being evaluated, and we believe our gross disposition volume in 2021 will exceed $500 million.\nTo conclude, BXP is emerging from the COVID-19 pandemic with strength and momentum.\nLeasing volumes and requirements are rising, office collections exceed 99%.\nOur clients are healthy, if not thriving.\nTenant credit charges have largely disappeared.\nOur $30 million per quarter of lost variable revenue is poised to return with offices reopening.\nWe've launched new life science development.\nOur active development pipeline is expected to deliver strong external growth, and we've raised the war chest for new acquisitions to add even further growth.\nI remain confident in both our near-term and long-term growth prospects.\nI'm going to try and give you my best shot at describing the operating environment that we are seeing in our portfolio as we sit here in late April.\nSo as Owen said, the office tenants are deep into planning for their return to the physical in-person work environment as we approach the back half of 2021.\nAnd while there are lots of announcements, as Owen said, of relaunches, and our building census is up, we're still pretty low levels.\nAnd I think you can see that most clearly from a financial perspective, when you look at our monthly or daily parking, which was basically flat in the first quarter to where it was in the fourth quarter of 2020.\nAlthough just yesterday, as an example, we had our meeting for our California parking, and we had 67 requests for additional monthly spaces, 42 of them which are hard.\nAnd to give you a perspective, we actually lost more than half of our monthly parking over 800 monthly spaces in Embarcadero Center.\nSo things are picking up.\nWhen we spoke to you late in January, we said that the first half of '21 was going to have a low level of market leasing activity as defined by executed leases and that statement still holds.\nThe reports that are published by the commercial brokerage organizations describing broad market conditions and all the calls that are sponsored by the analysts that follow our sector, really didn't have any surprises in them.\nLeasing volumes were off their historical pace.\nThere was modestly more sublet space, which was added to the market, and that translated into some negative absorption and increased availability.\nNo surprise, no shock.\nLast quarter, I described the dynamics around sublet space, particularly opportunistic sublet space.\nAgain, this is when tenants are listing their entire premises, obviously, at no cost with an expectation that they'll decide what to do if they actually get an offer that they can actionably respond to down the road.\nBut the reality of transactioning when push comes to shove is that tenants may reoccupy, they may relocate and transact.\nAnd then they may find a way to sublet a portion of their space, but not the whole space.\nSo giving you a couple of examples.\nIn Boston, we had a 50,000 square foot tenant, two floors in our CBD portfolio list their entire space.\nThis successfully relet -- sublet one floor and then they pulled the second floor off and they are reoccupying in July.\nWe competed actually against the long-term fully furnished sublet space in Mountain View in the Silicon Valley, and the user began to negotiate on a sublease.\nBut when the prime landlord refused to agree to recognize the lease, the user quickly walked away and took direct space.\nSo I'm not going to downplay the fact that there is a lot of sublets based on the market, but a large portion of it is not actionable because of short-term unworkable existing conditions or, quite frankly, users' discomfort with the lessors profile.\nAnd when you ask what percentage is, I don't know, but it's meaningful.\nAnd yesterday, JLL came out with a report saying there was about 1.5 million square feet of New York City sublet space that was brought -- pulled from the market by those subtenants.\nNow the headwind from the sublet space are going to exist, but they're going to dissipate as companies return to in-person work.\nObviously, we are also confronting the caution that some organizations are facing as they work through how they move beyond having their employees working from their homes and only interacting on video calls that are typically scheduled days in advance.\nThis may delay decisions to increase space needs, even though companies have hired more staff as Owen said, during this COVID shutdown and now as the economy is reopening.\nThis backdrop is obviously going to add some more short-term pressure on lease economics in some markets.\nIt's not going to affect all the markets in the same way, and it's certainly not going to impact all the buildings in the same -- in those markets in the same way either.\nThe potential impact on pricing of sublet space and work from home makes a really dramatic commentary, but it's not going to be driving Boston Properties' results.\nI hope the following analysis will illustrate that point.\nSo the average gross rent on our expiring office space portfolio in 2021, 2022 and 2023, so the next almost three years, totals about 5.8 million square feet and the average expiring rent is about $65.50 per square foot.\nSo if you believe that pre-pandemic market rents on that space were $70 a square foot, and I'm just using that as an example but it's close, and you wanted to measure the impact of some kind of a decline.\nAnd this is an example, not a statement of where I think -- what we think is going on with rent, so let's use 10% as an example, then you would get to about a 4% roll down in rent or $2.50 a square foot or approximately $4.8 million per year over three years.\nThat's the impact of the decline in rents on our portfolio from weak conditions.\nAnd as a point of reference, the change in second-generation gross lease rents this quarter was positive 9.5%.\nNow that's sort of deals that started and were signed previous to this quarter.\nAs I go through my remarks, I'm going to talk about where rents are on spaces that we've physically signed leases on this quarter or that we're working on now and how those rents compare to existing in place rents.\nSo as I pivot my remarks to the Boston Properties' portfolio, I'm going to describe our level of activity, and I think it's going to be counter to weak macro market conditions that you're hearing about in macro reports.\nSo let's start with our occupancy.\nOur in-service portfolio occupancy includes a 100% of our JVs, ended the quarter 140 basis points down or 640,000 square feet.\nNow 50% of that space that was added to our vacancy this quarter provided no revenue over the last 12 months.\nThat is, it was a space that we were trying to recapture from defaulted tenants.\nIn other words, much of this drop in occupancy doesn't reflect in any future revenue decline.\nThis includes the Lord & Taylor Box, that's Prudential Center, where we are in active discussions that we expect will result in a dramatic increase in the revenue from that piece of space.\nThe office space that was given back by Ascena at Times Square Tower and their Ann Taylor retail outlets at the Prudential Center.\nNext quarter, we're going to have another one of these as we take back the ArcLight cinema space since they've officially ceased to operate.\nThat's a 66,000 square foot lease at the hub on Causeway joint venture.\nAnd again, they never paid rent.\nAlso this quarter, we took back 62,000 square feet in a recapture, so we could expand a growing tenant that we are negotiating a lease extension on and expansion at Colorado Center.\nBut that lease hasn't been executed yet to the spaces in vacancy.\nWe did have one disappointment, which was the 200,000 square foot departure at the Santa Monica Business Park.\nWe, however, today, as I sit here talking to you, have 640,000 square feet of signed leases that have yet to commence, and they are not included in our occupied in-service portfolio.\nUnless we're actually booking revenue, we don't consider it occupied.\nOn a relative basis, my view of the ranking and the activity in our portfolio.\nSo this is active lease negotiations, tours, RFPs, is as follows, from top to bottom: Boston Waltham, we don't really have any space in Cambridge, so I don't include that; Midtown Manhattan is second; the San Francisco CBD is third; Northern Virginia is fourth, followed by the Silicon Valley Peninsula, West L.A., Princeton and the D.C. CBD.\nAll of the transactions I am going to describe to you are post-COVID negotiations having begun in the latter half of 2020 or 2021.\nSo let's start in Boston, which, by the way, represents over 1/3 of the company's total revenue.\nSo during the first quarter in the Boston CBD, we did five leases totaling 37,000 square feet.\nAnd in every case, the starting rent represented a gross rent roll-up of between 12% and 25%.\nWe continue to have additional activity in the CBD portfolio, albeit it's with a preponderance of smaller tenants since we don't have much in the way of blocks available, and we are working on eight leases totaling over 60,000 square feet.\nOf the 13 leases we have done this quarter or in the works, none of those customers are contracting and five are expanding and more than doubling their footprint.\nIn the suburban portfolio, we completed 124,000 square foot of new leasing.\nThe cash rent on those leases was up by 50%.\nWe continue to have additional activity in suburban Boston.\nIn Waltham, we're negotiating six more transactions totaling over 60,000 square feet.\nIn the suburban portfolio, we have had some existing tenants expand and some contract.\nBut we will be gaining occupancy with new tenants coming into the BXP portfolio, like our new tenants at 20 CityPoint and 195 West Street in Waltham.\nAgain, those leases haven't commenced yet.\nLife science demand in Waltham continues to accelerate.\nWe announced our plans to reposition 880 Winter Street in early March and have had significant tour activity and have begun making proposals.\nThis 220,000 square-foot building will be available for tenant build-out in the second quarter of '22.\nIn New York, since the beginning of the year, we've had more physical tours than we had in the comparable period in 2020 and in 2019.\nWe completed three leases during the quarter totaling just 38,000 square feet, including a full floor expansion by a tenant at 399 Park.\nIn total, the growth rents on this space was about 5% higher than the in-place rents.\nNow I said, New York City is our second most active region, and we're negotiating 14 office leases totaling over 170,000 square feet, including a full floor lease at Dock 72 in Brooklyn.\nWe also have two other active proposals at Dock 72, each in excess of 100,000 square feet.\nThe majority of these New York City leases will be termed in excess of five years, and more than half of those tenants are new to the portfolio.\nWe've had one midtown tenant pull their space off the sublet market and another large tenant that is still has its entire space listed, has begun to repopulate.\nfive of the 14 active deals represent tenants that are negotiating expansions.\nActivity at The Street plane of our buildings is also picking up.\nWe're negotiating leases for food outlets at our 53rd Street, are eagerly anticipating the opening of the HU Culinary Collective at 601 Lex later this year, and we have a new lease negotiation for our vacancy on The Street at -- in Times Square Tower.\nIn Princeton, during the quarter, we completed four transactions and we executed a fifth at the beginning of April for a total of 28,000 square feet, and we're negotiating leases for another 29,000 square feet, all new tenants.\nActivity in the D.C. region was light during the quarter with only 50,000 square feet of office leasing.\nBut as the calendar moved to April, we signed another 170,000 square feet.\n210,000 square feet of this total leasing was completed on currently vacant space and included two large leases at Met Square in the district and an expanding tenant in Reston Town Center.\nWe have another 68,000 square feet of leases in process in the D.C. region, including 25,000 square feet in Reston from another expanding tenant.\nIn the Town Center, rents are basically flat to slightly down 1% to 2% since the relet rents have been adjusted by the fact that the current rents have been increasing contractually by 2.5% to 3% for the last five to 10 years.\nI would also note that retail activity in Reston has picked up.\nWe have now opened four new restaurants since November of '20.\nWe're negotiating leases with new food outlets totaling 27,000 square feet.\nThey're going to open in '22.\nPedestrian activity in Reston Town Center is active.\nCalifornia has finally begun to reopen and allowed for higher levels of office occupancy, although it's still way behind the rest of our markets.\nDuring the quarter, at Embarcadero Center, we settled rent arbitration on two multi-floor 5-year extensions and completed another 10-year full-floor renewal.\nThe markup on these three deals totaling 125,000 square feet was 46%.\nTour activity for small tenants, a floor or under, has picked up and grown about 40% sequentially month-to-month from January to April.\nI would characterize half of our San Francisco CBD activity is with expanding tenants and half is with tenants that are contracting.\nThe uncertain level and the lack of pedestrian activity at The Street plane, particularly in the CBD of San Francisco, has been more severe than anywhere else in our portfolio.\nThis has affected tenants' appetite for making any decisions.\nBut large tenants have started to begin to look for space.\nThere have been a number of tours on the high-quality sublet offerings south the market.\nWe see the activity and the proposals on the available sublet space we have at 680 Folsom.\nIn South San Francisco, we signed a lease of 61,000 square feet at 601 Gateway.\nThat's going to absorb about 50% of the expiration that's going to occur in the second quarter.\nWe are under way at 751 Gateway, our first lab facility development in South San Francisco and have begun responding to proposals for this early 2023 delivery.\n651 Gateway will be taken out of service in the second quarter of '22 when the final tenant vacates, and we will commence a lab conversion of that 293,000 square foot building.\nIn Mountain View, we continue to see a constant flow of medical device, alternative energy, battery storage, automotive and other R&D users looking for space.\nWe're in renewal discussions with 24,000 square foot tenant and has commenced lease negotiation with a second tenant for 30,000 square feet on market-ready vacant space, and we have a tenant ready to go on a remaining floor of 18,000 square feet at 2440 El Camino.\nThere are some large tech tenants in the market down in the valley today looking for expansion space, and we are certainly chasing those tenants if the timing were to match for our potential delivery at Platform 16.\nIn spite of the challenging COVID conditions in California and Santa Monica, we continue our renewal negotiations with a 260,000 square foot tenant at Colorado Center.\nAnd as I said at the outset, we've recaptured about 60,000 square feet that's going to roll into that tenant's expansion.\nWe've also signed a lease for 72,000 square feet at Colorado Center with Roku, who's new to the portfolio.\nAnd as you may recall, earlier late last year, we did an expansion with staff at the Santa Monica Business Park.\nSo to summarize the takeaway from my comments.\nIt's true that market fundamentals are weaker than they were a year ago.\nBut what drives our same-store portfolio performance will be occupancy pickup as well as the return of our parking income and the recovery of our retail activity in revenue.\nThere are tenants in our portfolio that are expanding in every one of our markets.\nConditions are going to vary dramatically by some market.\nRents may or may not decline depending upon the submarket, but we will still have embedded markups in our portfolio.\nThere will be a flight to quality as better buildings see more tenant demand and tenant value paying less of a premium to being the best assets, and this will improve our occupancy.\nLet me turn it to Mike.\nWe had a very busy quarter, and it impacted our results.\nAs we guided last quarter, we redeemed the $850 million of our expiring unsecured bonds that had a 4% and 8% coupon using available cash.\nBut in addition to that and not part of our prior guidance, we issued another $850 million of new 11-year unsecured green bonds at an attractive coupon of 2.55%.\nThe proceeds were used to repay our $500 million unsecured term loan that was due to expire next year and we redeemed at par an expensive $200 million, 5.25% preferred equity security.\nWe incurred noncash charges during the quarter of approximately $7 million or $0.04 per share related to writing off unamortized financing costs.\nOur next bond expiration is not until early 2023, when we have $1 billion expiring at an above-market interest rate of 3.95%.\nIn advance of that in early '22, we have a $626 million mortgage expiring on 601 Lexington Avenue in New York City.\nThis loan also carries an above-market interest rate of 4.75%.\nSo turning to our earnings results for the quarter.\nFor the first quarter, we reported FFO of $1.56 per share, that was $0.01 above the midpoint of our guidance range.\nThe variances to our guidance were comprised of $0.04 per share of higher NOI from the portfolio and $0.01 per share of higher fee income, partially offset by the $0.04 per share noncash charge related to our refinancing activity.\nThe portfolio NOI outperformance included $0.02 per share of lower operating expenses during the quarter, much of which will be incurred later in the year.\nAnd on the revenue side, we collected delinquent 2020 rent from several of our retail tenants, whose rents are being recognized on a cash basis.\nThese collections drove a significant portion of our $0.02 revenue beat.\nAs we described last quarter, we believe the vast majority of our tenant credit charges are behind us.\nOur net write-offs this quarter were immaterial, and collections from our office clients continue to be consistent and very strong.\nAt the midpoint, this is $0.04 per share better sequentially from the first quarter.\nThe expected improvement emanates from lower seasonal G&A expense and the cessation of preferred dividends from our redemption.\nAlso the first quarter financing charges are not expected to recur.\nPartially offsetting this, we project lower termination income in Q2.\nAnd as Doug explained, our occupancy declined by 140 basis points this quarter, which was expected, but results in a sequential drop in portfolio NOI from the half that was paying rent before.\nWe expect another drop in occupancy next quarter, followed by a modest improvement in the back half of the year.\nDoug described 640,000 square feet of signed leases that have yet to commence occupancy.\n460,000 square feet of this will take occupancy later this year, representing over 100 basis points of occupancy pickup.\nWhile we are still not providing full year specific guidance, given the uncertainty and timing of our ancillary revenue streams, we did provide you with a framework for 2021 in our last call.\nAs you revisit your models for the full year, there are three other changes to consider.\nFirst, our financing activities during the first quarter have a net impact of increasing interest expense by $5 million for the year.\nSecond, we have a loss of rental revenue from taking 880 Winter Street out of service for redevelopment into a life science facility.\nThis has a negative impact of about $2 million.\nAnd lastly, the additional $260 million of dispositions that Owen described are expected to result in a loss of about $7 million of NOI.\nIn aggregate, these items are expected to reduce FFO for the rest of 2021 by approximately $14 million or $0.08 per share.\nLooking further ahead to 2022, we've made substantial investments in pre-leased developments that will drive earnings growth.\nWe anticipate delivering 100 Causeway Street in Boston and 200 West Street in Waltham late in 2021, representing $315 million of investment at our share that is collectively 95% leased.\nThe contribution from these two development deliveries will not be that significant to 2021, but they will be at a full run rate in 2022.\nThe bulk of the remaining pipeline is projected to deliver in 2022.\nThis includes our building for Google in Cambridge; Reston Next for Fannie Mae in Volkswagen; the Marriott Headquarters in 2100 Pennsylvania Avenue.\nThis represents delivery of $1.7 billion of investment in 2022 at our share and 2.7 million square feet that is currently 85% pre-leased.\nThis $2 billion of investment in conjunction with the recovery of our ancillary income sources and improved leasing activity post-pandemic sets us up for occupancy improvement in a period of solid future earnings growth.\nBefore we take questions, there are just the last couple of things here I'd like to mention.\nLast week, on Earth Day, we published our 2020 ESG report where we made several important commitments.\nAnd those include, we set a goal to achieve carbon neutral operations by 2025.\nIn addition, BXP had previously set a carbon emissions reduction goal in line with the most ambitious designation available under the science-based targets initiatives program.\nIn 2020, BXP was one of six North American real estate companies with this distinction and the only North American office company.\nWe also established a new board level sustainability committee to among other things, increase the board oversight of an input for our sustainability issues.\nAnd lastly, we launched an internal diversity and inclusion committee last year with the mission of pursuing greater diversity among our workforce and vendors as well as new programs supporting diversity and fairness in our communities.\nBXP is proud of its consistent recognition as an industry leader in sustainability and ESG, an area increasingly important to our clients, our communities, capital providers and employees.\nAnd then lastly, there's one important milestone that I want to mention.\nThis will be Peter Johnston's last earnings call as he's retiring from Boston Properties next month after 33 years of service.\nPeter has been an outstanding leader in our Washington, D.C. business, and he will be greatly missed by all of us.\n",
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"content": "compname reports q1 earnings per share of $0.59 and ffo per share of $1.56.\ncompname reports earnings per share of $0.59 and ffo per share of $1.56.\nq1 ffo per share $1.56.\nsees recent uptick in leasing activity.\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 the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G. If you did not receive a copy, these documents are available in the Investor Relations section of our website at investors.\nDuring the Q&A portion of our call, Ray Ritchey, Senior Executive Vice President, and our regional management teams will be available to address any questions.\nThe U.S. economy continues to exhibit strong growth as we emerge from the COVID pandemic.\nU.S. GDP grew 6.7% in the second quarter but is expected to slow in the third quarter due to the surge in infections caused by the Delta variant.\nHowever, daily COVID infection levels have dropped over 50% from highs in September, which bodes well for strong economic growth in future quarters.\nThe relatively low unemployment rate at 4.8% is being driven by both new job creation, which recently has been tepid and workers withdrawing from the workforce.\nThere are over 10 million job openings across the U.S. and virtually every employer, including BXP, is experiencing a highly competitive labor market.\nAnnual inflation remains high at 5.4% in September, driven largely by energy prices, which are up 25% versus one year ago.\nSupply chain challenges are a primary topic this earnings season for many companies, and Doug will cover BXP's experiences in his remarks.\nLastly, the 10-year U.S. treasury rate has increased approximately 40 basis points to 1.6% since our last earnings call.\nGiven the prospect of further interest rate increases, we've been very active refinancing our corporate and specific asset level debt.\nInterest rates remain extremely low relative to office cap rates and the yields we are achieving on our developments, creating the potential for lower cap rates and higher value creation in the quarters ahead.\nDXP's financial results for the third quarter continue to reflect the impact of this recovery and an increasingly favorable economic environment.\nOur FFO per share this quarter was $0.03 above market consensus and $0.04 above the midpoint of our guidance, which Mike will detail shortly.\nWe completed over 1.4 million square feet of leasing, significantly more than double the volume achieved in the first quarter, well above the leasing achieved in the second quarter and just under our long-term third quarter average.\nOur clients continue to make even longer-term commitments as the leases signed in the third quarter had a weighted average term of 9.3 years versus 7.5 years in the second quarter.\nYear-to-date, we have completed 3.3 million square feet of leasing with an average lease term of 8.3 years.\nThis success can be attributed to not only our execution but also the enhanced velocity and economics achieved in the current marketplace for premium quality, well-amenitized assets, which are the hallmark of BXP's strategy and portfolio.\nIn addition to our leasing activity, which included a 524,000 square foot long-term renewal with Wellington at Atlantic Wharf, Google purchased a 1.3 million square foot building in New York for its use.\nIn the Silicon Valley alone, Apple completed a 720,000 square foot new requirement.\nFacebook is looking for 700,000 additional square feet.\nAnd ByteDance is searching for approximately 250,000 to 300,000 square feet.\nIn the Seattle region, Facebook is pursuing a 0.5 million square foot requirement in South Lake Union and Amazon has executed on enormous growth in Bellevue.\nI could go on.\nThese examples support our repeatedly stated position that tenants are committed to the office as their location of choice to collaborate, innovate and train, all critical for their long-term success.\nMeasurable census in our portfolio also continues to improve.\nOur leading region is New York City, which hit 52% occupied last week.\nOur lagging region is San Francisco, which is increasing, but currently at 18%, and the remaining regions are in between.\nFrom watching on television, stadiums packed with unmasked people, to trying to park at busy shopping centers to experiencing difficulties in making restaurant reservations in our core markets, it appears to us, people are undoubtedly more comfortable with in-person activities.\nLiquidity fueled strong business performance, and a tight labor market are clearly factoring into remote work decisions by businesses.\nHowever, as time progresses and the shortcomings of remote work become more apparent, we increasingly hear concerns from business leaders about the decaying cultures of their companies, inadequate training and difficulties in onboarding new professionals as well as the potential for deterioration in innovation and competitiveness.\nWe believe it's only a matter of time before employers more strongly encourage their teams to return to in-person work.\nRecord levels of commercial real estate sold in the third quarter, and private capital market activity for office assets is also recovering rapidly.\n$26 billion of significant office assets were sold in the third quarter, up 38% from last quarter and up 165% from the third quarter a year ago.\nCap rates are arguably declining for assets with limited lease rollover in anything life science related given low interest rates, and activity is increasing for assets facing near-term lease expirations.\nOf note, this past quarter in all of our markets, One Canal Park, an empty 112,000 square foot office building in Cambridge sold to a REIT for $131 million or $11.70 a square foot.\nAs mentioned, Google exercised its option to purchase St. John's Terminal in New York City, which is a 1.3 million square foot office building that fully occupies and the price was $2.1 billion or $1,620 a foot.\nColeman Highline, which is a 660,000 square foot office complex under construction in North San Jose and fully leased to Verizon, sold for $775 million, which is $1,180 a square foot and a 4.2% initial cap rate to a non-U.S. buyer.\n153 Townsend Street, which is 179,000 square foot office building in San Francisco sold for $231 million or $1,290 a square foot to a local operator and fund manager.\nThis asset is fully leased to a single user, which has put the entire building on the sublease market.\nWest 8th is a 540,000 square foot office building in the Denny Triangle, Seattle, sold for $490 million or $910 a square foot to a REIT.\nThe building is fully leased, but faces significant rollover through 2023.\n49% interest in 655 New York Avenue in Washington, D.C. sold for a gross price of $805 million or $1,060 a square foot and a 4.7% cap rate.\nThe building comprises over 760,000 square feet, is 93% leased and sold to a non-U.S. investor with a domestic advisor.\nAnd lastly, The Post, which is 100,000 square foot fully leased office building in Beverly Hills, sold for $153 million, which is $1,530 a square foot and a 4.8% initial cap rate to a domestic fund manager.\nNow moving to BXP's capital market activity.\nWe closed on the acquisition of Safeco Plaza and entered the Seattle market.\nBXP will own a one third interest in the asset along with two partners in our strategic capital program.\nWe also closed the Shady Grove Bio+Tech Campus acquisition and entered the Montgomery County, Maryland life science market.\nWe're also on track to close the 360 Park Avenue South acquisition with Strategic Capital Program Partners on December 1, thereby entering the Midtown South market in New York City.\nI described the economics for all these acquisitions last quarter.\nRegarding dispositions, we completed the sale of our Spring Street Office Park in Lexington Mass this week, bringing our share of gross sale proceeds from dispositions year-to-date to $225 million.\nWe're also marketing for sale two additional buildings, which, if completed, are projected to yield approximately $200 million in gross proceeds.\nOn development activities, this quarter, we delivered 0.5 million square feet of Verizon and other tenant space at 100 Causeway and 285,000 square feet of Fannie Mae space at Reston Next.\nIn the aggregate, we have 4.3 million square feet of development underway that is 72% pre-leased.\nThese future deliveries plus the stabilization of recently delivered projects are projected to add approximately $190 million to our NOI and 3.8% to our annual NOI growth over the next few years.\nSo in summary, we had another active and successful quarter with strong leasing and financial results and entered several new geographic markets.\nWe believe BXP is about to experience a strong growth ramp, which we project to be approximately 13% in FFO per share in 2022, driven by improving economic conditions and leasing activity, recovery of variable revenue streams, delivery of a well-leased development pipeline, completion of four new acquisitions, a strong balance sheet combined with capital allocated from large-scale private equity partners to pursue additional new investment opportunities as the pandemic recedes, a rapidly expanding life science portfolio in the nation's hottest life science markets and low interest rates and decreasing capital costs.\nHilary joined BXP right after Labor Day and will become our Regional Head in New York when John Powers retires in January.\nLet me turn our remarks over to Doug.\nSo the impacts of the supply chain are both in time and money.\nSchedule is one of the criteria we use when we bid our jobs.\nAnd to-date, we've been able to award bids while maintaining the schedules necessary to get our tenants in their spaces as required.\nThe supply chain challenges have made the process much harder, but we are still able to deliver the current development pipeline on time and within budget.\nAnd as you all know, we have contingencies that are in our budget and at some point, we are using those contingencies.\nHowever, in the near term, as we look at new jobs, there are fewer material choices, and we are working closely with our consultants and our contractors to make sure that they are not specifying critical path items that could impact schedules.\nOur construction teams are working a lot harder at figuring out exactly how the key and the parts are put together.\nWe are intentionally minimizing oversea items and we're releasing our material packages as early as possible.\nTrucking issues are real.\nAnd at times, we are being forced to air freight as well as stockpile materials offsite, hence the use of some of our contingencies.\nThere's no single answer to how much more is it going to cost.\nBut when we're budgeting jobs that will start eight to 12 months from now, we're using a 5% to 6% escalation in our total construction costs.\nWe are in the process of rebidding our Platform 16 base building project, which was previously budgeted in late 2019 with an eye toward our 2022 restart.\nAnd we will have a real-time perspective in mid-November.\nBut as today, we just don't know what that's going to be.\nSupply shortages are also impacting our operating budgets.\nEnergy is a material input into our operating expenses.\nWhile our largest utility cost is electricity, we are mostly hedged for 2022, and we have been successfully increasing our procurement from Green Power.\nWe are still exposed to the marginal cost of electrical generation in the Boston region where we expect double-digit increases from last year.\nCost for security, cleaning and engineering, labor continues to increase due to labor shortages across all those trades.\nHowever, our lease contracts take two forms.\nWe have net leases, under which 100% of the operating expense and real estate taxes are paid by the tenant, and we have gross leases with a base year that is set upon the lease commencement with increases in expenses over that base year added to the rental obligation of the tenant.\nIn other words, our exposure is on our vacant space and for new or renewal leases, where we are setting a base.\nThis is a pretty small percentage of the total, so it really doesn't have a material impact on our actual operating results as we look at 2022.\nAs you saw in our supplemental, our second-generation leasing statistics were weak this quarter, and they need some finer explanation.\nThe universe of square footage that is encompassed in the statistics is about 500,000 square feet and it includes 105,000 square feet of short-term transactions, 18 to 24 months, that we signed in the heart of the pandemic with tenants that were not in a position to make a long-term commitment but they were prepared to extend for a negotiated discounted as-is deal.\nOne of those tenants has since agreed to lease space for 13 years, where the interim rent was $60 a square foot and they'll be paying $103 a square foot, and this is in a New York asset.\nIf you eliminate that 105,000 square feet, the statistics that we would have shown you changed dramatically, going from down 14% to effectively flat.\nYou should also note that our transaction costs were also significantly below our run rate since there were no TIs involved in any of these short-term deals.\nOur life science and office portfolio make up 91% of our revenues.\nAs we look toward 2022, we currently have more than 800,000 square feet of signed leases that have not commenced.\nIn 2022, lease expirations for the whole portfolio, not just our share, totaled about 2.9 million square feet, and we already have renewal conversations underway on over 25% of that space.\nHistorically, we have leased well over 1 million square feet a quarter each and every year.\nThe question will be when those new expected leases will commence?\nOccupancy should slowly edge up in 2022.\nThe changes in the quarter occupancy this quarter are due to the addition of the Shady Grove and Seattle acquisitions, not a degradation in our occupancy in our existing portfolio.\nNow let me give you a sense of what's going on in our portfolio today.\nNew York is a good place to start.\nTour activity, proposals and ultimately, leases continue to be very consistent with the commentary we've been providing during the last few quarters.\nThe high-end buildings are seeing good activity.\nBrokers that advise the small and midsized financial firms and professional services firms are very busy and their clients are taking action.\nMany of those users are incrementally increasing their space requirements as they continue to acquire people and AUM.\nSublease space continues to gradually melt from the statistics.\nYou may remember that we were asked about a 200,000 square foot sublet at 399 Park Avenue during various conference calls in 2020.\nThat space has been taken off the market as the user reoccupies.\nNow there still is significant supply of direct and sublease space in New York City and our view is that net effective rents remain down 10% to 15% from pre-pandemic levels.\nDuring the quarter, we completed eight deals totaling 113,000 square feet in the CBD portfolio.\nMany of these spaces were vacant, but the two largest had a roll up of 8% in one case and a roll down of 4% in another.\nAbout 70,000 square feet of leases are in the category of leases that will not have a revenue commencement until sometime in mid '22.\nLast week, we signed a lease at Dock 72 for 42,000 square feet.\nWe don't anticipate this tenant completing their buildout until the latter half of '22.\nWe have an additional 340,000 square feet of leases under negotiation in New York right now, including almost 200,000 square feet at Dock 72.\nWe don't anticipate revenue commencement on 65% of that space until 2023.\nOne of the themes for next year is going to be a pickup and sign leases with contribution to occupancy or revenue flow-through occurring when tenants complete their installations in late '22 or '23, and we don't necessarily control those times.\nAt Carnegie Center, down in Princeton, we did eight leases for 38,000 square feet and have another 106,000 square feet in active lease documentation.\nOne final note on New York before I turn to the other markets.\nOur culinary collective, The Hugh, has opened at our 53rd Street campus in 601 Lex.\nThis is as good an example of placemaking as we can point to in our portfolio.\nAs users who want to encourage their employees to come back to work, this type of experience will dramatically enhance their physical space offering.\nIt's why we do what we do.\nIn Northern Virginia, our leasing team is seeing a consistent flow of inquiries, tours, lease proposals and -- ultimately -- completed transactions.\nDuring the quarter, we completed seven leases totaling 70,000 square feet in Reston, and we're in lease negotiation on another seven deals totaling 125,000 square feet.\nThe tech tenants that have identified the DC metro market as a fertile area for workforce expansion are continuing to grow, and their growth is going to be in Northern Virginia.\nIn addition, the contractors that service the Defense and the Homeland Security are also expanding.\nThere are significant vacancy in northern Virginia.\nBut the urban market core Reston is under 10% vacant, and it continues to dramatically outperform with starting rents in the high 40s to low 50s gross.\nAnd with our Reston Next project opening up this week, the rents are starting to hit the low 60s.\nThe Reston Next development is welcoming Fannie Mae into the building this month, and we are actively marketing and leasing the remaining 160,000 square feet of available space.\nOur Reston Town Center retail placemaking is also very active.\nDuring the quarter, we completed a lease with a new theater operator for 50,000 square feet.\nLast week, we signed a 20,000 square foot lease with a local restaurant distillery and yesterday, a new 20,000 square foot fitness operator.\nWe have three more restaurants totaling 22,000 square feet that are close to execution.\nThis 115,000 square feet of leased retail is not expected to have any revenue contribution until 2023.\nIn the District of Columbia, we continue to chip away at our current availability at Net Square 901 New York Avenue and Market Square North.\nWe completed seven leases for 49,000 square feet during the third quarter and have signed another 32,000 square feet during October.\nJust as an aside, we completed a major repositioning of Net Square this year.\nAnd year-to-date, we've signed 162,000 square feet over eight transactions.\nWhen we do our work, our buildings lease.\nThe urban downtown recovery in San Francisco continues to lag our other markets.\nVery few businesses have commenced their return to work, downtown streets remain quiet, much of the ground plane remains closed, and the city has had a very restrictive mass mandate.\nAs Owen pointed out, daily consensus continues to be significantly below all our other urban markets.\nThere's been a reduction of sublease space in the market stemming from active lease commitments and reoccupancy plans, but overall availability continues to be elevated.\nThis description while accurate overlooked important subtleties in the market.\nPre-pandemic, there was very little available space in high-quality, multi-tenanted buildings, particularly those with views.\nBroadly speaking, those conditions still exist for that segment of the market.\nThe bulk of the demand in the last 18 months has come from traditional financial asset management and professional services firms that have focused on the best space in the best buildings.\nThis has resulted in very little change to leasing economics in the best buildings, particularly in spaces we've used.\nWe've discussed this on recent calls, and it continues today.\nThis quarter, we've completed over 100,000 square feet of leases, including full floor transactions in Embarcadero.\nThe average starting rent was just over $100 a square foot on those full floor deals, a 21% increase over expiring rents.\nWe are negotiating leases on another 106,000 square feet right now.\nAnd from what we've seen, these experiences are being repeated in a competitive set north of market.\nIn contrast, sublet transactions are being closed at significant concessions to pre-pandemic economics, but with no capital.\nLife science activity at our Gateway development continues to be healthy.\nThe BXP ARE joint venture has signed an LOI with a full building user for 751 Gateway, 230,000 square feet and we're actively responding to proposals for our anticipated redevelopment of 651 Gateway, about 300,000 square feet, which won't commence until the third quarter of next year.\nFurther down the Peninsula and Mountain View, activity has picked up in the last 30 days.\nThis quarter, we completed two full building deals totaling 58,000 square feet.\nWe're seeing less information gathering exercises and a lot more active tours with RFPs and the need for immediate occupancy or early 2022 occupancy.\nThere are, as Owen said, large tech requirements active in the Silicon Valley.\nFor those of you who saw that the Tesla announcement that they're moving their headquarters to Texas, you may have missed that they leased 325,000 square feet in Palo Alto contemporaneously with that announcement.\nHigh-quality new construction availability is very limited in the valley, and we're actively considering when we should restart the construction of Platform 16 next to Diridon Station and the future of Google development in San Jose.\nFinally, let's touch on Boston.\nIn the high-end market in the Boston CBD, particularly in the Back Bay, there is currently limited availability, particularly with used space.\nRents have remained at pre-pandemic levels and concessions are only marginally higher.\nAs we move closer to 2023, there will be additional new construction supply entering the market in the CBD, but not the Back Bay.\nAs Owen mentioned, the big lease for the quarter was the early renewal with Wellington.\nThey agreed to expand by 70,000 square feet at Atlantic Wharf, and we're going to terminate 156,000 square feet at 100 Federal Street in 2023.\nThe space we're getting back is leased at a rate that's below market, so we're optimistic that we can create additional value through this relet.\nWe completed an additional 73,000 square feet of leases in our Back Bay portfolio, and we have about 50,000 square feet of leases under negotiation today in that same group of properties.\nThe Boston retail portfolio is also very active.\nWe have signed an LOI for the 118,000 square feet formerly occupied by Lord & Taylor, as well as 40,000 square feet of in-line space that's currently vacant or in default.\nThis 158,000 square feet will likely commence paying rent in early '23.\nAs we move to the suburbs, life science is dominating our activities.\nLast week, we signed our first lease at 880 Winter Street, our lab conversion that we started four months ago, 37,000 square foot deal, which we'll deliver in the middle of next year, and we are in the final stages of negotiation on another 128,000 square feet, which will bring that 224,000 square foot building to 74% leased, and we have active dialogue on the rest of the space.\nAnd during the quarter, we signed over 105,000 square feet of leases with life science tenants at 1,000 Winner, 1,100 Winner and Reservoir Place traditional office buildings.\nAs we move into '22, we're developing plans to convert additional available office space in Waltham into lab space.\nSo to summarize, we've seen a recovery in employment, as Owen discussed.\nEmployers are aggressively looking to hire, capital raising in the venture world is breaking through levels never seen and IBO takeouts are at a historically high levels.\nConditions are right for recovery in office absorption.\nEmployers are going to want to use their physical space to encourage their teams to be together.\nOur mantra has been to create great places and spaces to allow our customers to use space as a way to attract and retain their talent.\nIf you believe that employees may be spending less time in their offices, it's even more important to have the right space in place when they're present.\nAnd I'll stop there and give it over to Mike.\nBefore I jump into the details of our third quarter earnings as well as our 2021 and 2022 guidance, I want to touch on our recent financing activities.\nThis quarter, we took advantage of the low interest rate environment and very attractive credit spreads to issue $850 million of 12-year unsecured green bonds when the underlying 10-year treasury rate was 1.3%.\nWe achieved a coupon of 2.45%, the lowest in the company's history.\nWe utilized the proceeds to redeem $1 billion of 3.85% unsecured notes on October 15.\nThose notes were scheduled to expire in early 2023 and represented our largest debt maturity through 2025.\nThe early prepayment will result in a redemption charge of $0.25 per share in the fourth quarter of 2021.\nWe will benefit from the 140-basis point drop in the relative debt cost, and we are thrilled to issue such attractive long-term financing.\nThe only other significant debt maturity we have in the next 18 months is our $620 million mortgage on 601 Lexington Avenue in New York City that expires in April of next year.\nSimilar to the bond we redeemed, this loan also carries an above-market interest rate of 4.75%.\nGiven the increase in the cash flows from the building, owing partially to the redevelopment we completed earlier this year, we anticipate that we will be able to increase the size of the financing and reduce the interest rate substantially.\nWe're working on this now, and our assumptions include closing before the end of 2021.\nThe impact of these financing activities will be accretive to our 2022 earnings through a meaningful drop in our interest expense from 2021 that I will touch on in a minute.\nFirst, I'd like to describe our third quarter 2021 results.\nFor the third quarter, we announced FFO of $1.73 per share, that's $0.04 per share higher than the midpoint of our guidance and $0.03 ahead of consensus estimates.\nOur outperformance came from better portfolio NOI with $0.02 of higher rental and parking revenue and approximately $0.02 of lower-than-projected operating expenses.\nLooking at our parking revenues, they've started to accelerate sequentially as clients and visitors increase driving days into our properties.\nAs Owen described, we're seeing building census grow and the results are evident in our parking.\nOur share of this quarter's parking revenue totaled $22 million.\nThis compares to a comparable pre-COVID quarterly result from the third quarter 2019 of $28 million.\nAt the bottom, in the second quarter of 2020, our share of parking revenue was $14 million, so we are over 50% of the way back.\nOn an annualized basis, using the third quarter run rate, we have about $25 million of revenue or $0.14 per share to recover before we are back to pre-COVID annual parking levels of $113 million.\nOur Kendall Square hotel was profitable for the first time in six quarters contributing about $1 million of positive NOI.\nGiven the hotel's location in the heart of Cambridge and adjacent to MIT, we expect that it will ultimately restabilize at or above the $15 million annual NOI generated in 2019, though certainly not in 2022.\nThe third leg of our ancillary income is our retail income.\nOther than in San Francisco, nearly all of our retailers have returned to paying previous contract rents.\nThis quarter, our share of retail rental revenue was $43.6 million.\nOn an annualized basis, this is $16 million less than our share of 2019 retail revenue, which totaled $190 million.\nAnd as Doug mentioned, we have some vacancy in our retail due to the pandemic, but we're negotiating leases now on significant portions of that space.\nIf you combine and annualize our third quarter hotel NOI and our share of parking and retail revenues, we have the opportunity to gain approximately $52 million or $0.30 per share to return to 2019 full-year levels.\nWe believe that all three of these income streams will fully recover and ultimately exceed prior peaks over time.\nLooking at the rest of this year, we released fourth quarter 2021 guidance of $1.50 to $1.52 per share and full-year 2021 guidance of $6.50 to $6.52 per share.\nOur fourth quarter guidance includes the $0.25 share redemption charge related to our bond refinancing.\nExcluding the charge, our fourth quarter guidance would be sequentially higher than third quarter results by $0.03 per share at the midpoint.\nThe improvement is primarily from Verizon taking occupancy of its 440,000 square foot lease at the Hub on Causeway office development this quarter and lower interest expense after our refinancing.\nAnd while we expect our same property portfolio NOI will also grow sequentially, the growth is partially offset by the FFO dilution from the sale of our Spring Street office campus in suburban Boston that closed for $192 million this week.\nTurning to our assumptions for 2022.\nLast night, we released our 2022 FFO guidance.\nWe have three major drivers that are all headed in the right direction, that provide for very strong FFO growth of 13% at the midpoint over 2021.\nThe drivers include delivering a significant volume of leased new developments and acquisitions, growth in our same property portfolio, and our refinancing activities that lower our interest expense.\nThe first growth driver is developments and acquisitions.\nWe're delivering five of our development properties over the next four quarters totaling $1.6 billion of investment.\nThese projects totaled 3 million square feet of additions to our portfolio and are 92% leased.\nThey include the Hub on Causeway in Boston that is leased to Verizon, 325 Main Street in Cambridge that is leased to Google, the 200 West Street Life Science development in Waltham that is leased to Translate Bio; Marriott's new headquarters facility in Bethesda, Maryland; and Reston Next that is leased to Fannie Mae and Volkswagen in Reston.\nIt is also possible that our Life Science conversion at 880 Winter Street in Waltham will begin to contribute in late 2022.\nIn total, we expect our development deliveries to contribute an incremental $65 million to $70 million to our FFO in 2022.\nAdditionally, we've layered in several acquisitions that we completed this year, most notably Safeco Plaza in Seattle and our Life Science project we acquired in Waltham.\nWe expect these acquisitions will add $7 million to $10 million to our share of NOI next year.\nThe second growth driver for 2022 is the projected growth in our same property portfolio NOI.\nOur guidance assumes that our share of same-property NOI will grow between 2% and 3.5% next year.\nThe growth is expected to come from higher parking revenues, improvement in occupancy and pricing in our residential portfolio, higher NOI from our hotel and increased occupancy in our office portfolio.\nOur leasing velocity has picked up in the last two quarters where we've leased 2.7 million square feet of signed leases.\nGiven the length of the typical leasing cycle, many of these leases we've signed or are negotiating will take occupancy either in late '22 or '23.\nWe expect the improvement in our headline office occupancy to be gradual.\nAs Doug described, we have several larger leases in the works for vacant space where we anticipate occupancy will occur in 2023.\nOn a cash basis, we expect our share of 2022 same-property NOI growth to be much stronger at between 5.5% and 6.5% over 2021.\nThis equates to between $90 million and $100 million of incremental cash NOI to 2022.\nMuch of our cash NOI growth is coming from approximately $50 million of free rent that is burning off in contractual leases.\nOur third FFO growth driver is coming from lower interest expense.\nAs I mentioned earlier, we will incur a debt redemption charge of $0.25 per share in the fourth quarter of '21.\nWe do not expect that this will recur.\nAlso, we are aggressively refinancing loans that were placed five to 10 years ago in a higher interest rate environment with low-cost current market financing.\nPartially offsetting this, we do expect to see higher interest expense in our joint venture portfolio.\nThis is because we will cease capitalization of interest on the Marriott and Hub on Causeway projects when they are delivered into service.\nIn aggregate, we expect that 2022 interest expense will be $52 million to $60 million less than in 2021.\nThat equates to $0.30 to $0.34 of incremental positive impact on our 2022 FFO.\nSo to summarize, our guidance for 2022 FFO was $7.25 to $7.45 per share.\nThe midpoint of our range is $7.35, which is 13% or $0.84 a share higher than the midpoint of our 2021 guidance.\nAt the midpoint, the incremental growth is coming from $0.43 from development and acquisitions, $0.25 from our same property portfolio and $0.32 from lower interest expense.\nThis will be offset by $0.06 of dilution from our 2021 disposition activity, $0.06 of lower termination income and $0.04 of higher G&A.\nThe past 18 months have brought challenges and uncertainty to so many, including our team at BXP.\nThese past few months, it's been heartening to see our cities reopen, our colleagues and our clients starting to return to their offices and office leasing volumes picking up.\nAs I spelled out, we anticipate very strong FFO growth in 2022 and beyond 2022, we have more developments underway that will deliver additional FFO.\nPlus, we have the highest quality portfolio of office buildings that we believe will generate higher occupancy rates and earnings in the future.\nOperator, that completes our remarks.\n",
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"content": "compname reports earnings per share of $0.69 and ffo per share of $1.73.\nq3 ffo per share $1.73.\nsees fy ffo per share $6.50 to $6.52.\nfull year 2021 projected earnings per share and ffo includes an expected charge of $0.25 in q4 of 2021.\nrevenue grew more than 5% to $730.1 million for quarter ended september 30, 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: In the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G. If you did not receive a copy, these documents are available in the Investor Relations section of our website at investors.\nDuring the Q&A portion of our call, Ray Ritchey, Senior Executive Vice President and our regional management teams will be available to address any questions.\nToday, I'm going to depart from my typical organizational remarks and instead summarize all the reasons why we are confident in Boston Properties' future prospects and enthusiastic about the company's growth potential at this unique point in time.\nAs part of my comments, I will address accomplishments and challenges of the past year, current capital and property market's conditions as well as Boston Properties' capital allocation decisions and strategy.\nI will begin with three points on Boston Properties' potential for income growth, both in the short and long term from where we closed out 2020.\nFirst, our variable income streams will recover.\nOver the next 24 months, Boston Properties will likely enjoy one of its most significant and predictable improvements in economic conditions and leasing activity as we witness the end of the COVID-19 pandemic.\nTwo vaccines with high efficacy rates have been FDA approved, 5.8% of Americans have already received at least one dose of the vaccine.\nThe more easily refrigerated Johnson & Johnson vaccine is near approval and health authorities are advising that anyone who wants to be vaccinated will be accommodated by this summer.\nThe Biden administration is aggressively pursuing a more rapid vaccine rollout as well as economic stimulus to help bridge the economic damage caused by the pandemic.\nGiven the herd immunity created by a high percentage of the population either recovered from infection and/or vaccinated, infections will likely drop precipitously in the middle of the year.\nWe are all anxious to come out of isolation and return to our normal lives.\nSo as the infection rate drops, the economy will reopen and individuals will return to offices, restaurants, shops, theaters and travel.\nApproximately $97 million of Boston Properties' FFO decrease in 2020 came from the variable income streams of parking, our single hotel and retail customers, all of which were devastated by the lockdowns.\nAnd we will likely see a strong recovery in these variable income streams in the near term as the economy reopens.\nSecond, Boston Properties' office portfolio is stable.\nWe have been collecting through the pandemic over 99% of our office rents owed demonstrating the quality of our buildings and office tenants.\nOnly 7.1% of our leases roll over this year, and we experienced 20% roll-ups on average the last three years, providing a cushion for decreases in market rent caused by the pandemic.\nWe have signed over 600,000 square feet of leases on currently vacant space that will experience rent commencement in 2021.\nWe expect the noncash charges experienced in 2020 for accrued rent balances to diminish, if not cease in 2021.\nWe are now recognizing rent on a cash basis for all theater and co-working tenants as well as the vast majority of retail credits we consider at risk.\nWe will also be delivering in whole or part three assets into service this year, 100 Causeway, 159 East 53rd Street and 200 West Street, just under one million square feet in the aggregate and 95% leased.\nThird, Boston Properties has significant external growth drivers, which are readily quantifiable over the next four years.\nWe currently have under development and redevelopment seven projects comprising 3.7 million square feet and $2.2 billion in total investment.\nThese projects are 88% pre-leased, fully funded with cash on our balance sheet and projected to generate cash yields on cost at stabilization of approximately 7%.\nIn addition, we recently delivered three Class A urban apartment complexes in Boston, Reston and Oakland, with an aggregate of 1,350 units that are only 56% leased and have substantial income upside as the economy reopens.\nWe expect the income from delivering this development pipeline to add 3.4% annually to our FFO growth over the next four years.\nWe also anticipate starts this year of over $800 million, the majority of which are new life science developments and conversions.\nAnd lastly, we own or control land aggregating over 16 million square feet of potential office, lab and residential development, which we will commence as dictated by market conditions.\nNow my next points relate to our business model and strategy.\nA core strategic principle for Boston Properties is to build, acquire and own high-quality buildings.\nOur portfolio is dominated by Class A urban assets many among the leading buildings in their respective markets, such as Salesforce Tower, the General Motors Building, 200 Clarendon Street and Kendall Center.\nHigher quality buildings stay more occupied and perform better in times of recession, as certain customers take advantage of lower rents to upgrade their space.\nFor example, VTS reported from their database that tours for Class A buildings in New York City went from 38% of total before the pandemic to 54% during the pandemic.\nAnother hallmark of our quality strategy is market selection as we believe in the long-term health and attractiveness of our coastal gateway markets.\nBut we remain confident in the attractiveness of our target markets for two basic reasons: the clustering of knowledge workers and increased barriers to new supply.\nThe cities where we currently and aspire to operate, New York, San Francisco, Boston, Washington, D.C., Los Angeles and Seattle, have unmatched educational, cultural and civic resources which attract the leading clusters of knowledge workers in the U.S., particularly in computer science and life sciences.\nKnowledge workers have more job opportunities and are more productive when working with others in clustered environments.\nFuture job growth and office demand is going to be driven in the technology and life science fields where our target markets have a distinct clustering advantage.\nTo create value in office real estate as an owner, you need rental growth, which is driven by both job growth and barriers to supply.\nOur markets have built in obstacles to new development, including a dearth of available sites difficulty in permitting, antidevelopment local ordinances and cost and complexity in construction.\nMy last point on business model is Boston Properties' fully integrated operating capability and quality of execution.\nIn 2020, we were able to lease 3.7 million square feet with a weighted average lease term of 8.6 years, which is around 60% of our recent annual leasing averages, while the leasing activity in our markets was approximately 40% of recent annual averages.\nIn all our core cities, we are a market-leading participant providing advantages in assessing new investment opportunities, procurement and attracting and retaining talent.\nWe are an industry leader in ESG performance as measured by GRESB, the EPA, USGBC, Energy Star, Fitwel and others and were recently recognized as the leading office company and second best property company in Newsweek's 2021 Most Responsible Companies ranking.\nMy next points relate to valuation.\nBecause of the pandemic and the variability in our parking, retail and hotel income streams, Boston Properties' FFO dropped approximately 15% the last three quarters of 2020 versus prepandemic levels, which is clearly disconnected from our stock price, which has dropped 37% over the same period.\nThe gap is caused by expectations, specifically concerned about Gateway markets addressed earlier and the impact of work-from-home on office demand.\nI will reiterate that we think more remote work is here to stay after the pandemic, but concerns over the impact to office space demand are overblown.\nBusiness leaders want their employees back in the office to foster culture, collaboration, teamwork and mentoring and to provide more supervision.\nIn a recent employee survey completed by Gensler, workers want to return to the office as well, where they believe they are most productive and collaborative.\nBut 52% want a hybrid model with more time to work-from-home for convenience and safety from COVID-19, fears of which should dissipate over time.\nHowever, 90% of those employees surveyed won an assigned workstation when in the office.\nAnd while only 21% of those surveyed had a private office layout, 47% wanted it.\nThough employees may be working remotely more in the future, it will be difficult for employers to translate lower census into space savings due to employees' desire for more privacy and a fixed workstation.\nThere is also a disconnect between where the private real estate market is valuing Class A office assets in Gateway markets and where the public market is valuing Boston Properties.\nAt our current share price, the look-through cap rate on our portfolio is 5.9%.\nHigh-quality office assets comparable to much of Boston Properties' portfolio are trading at sub-5% cap rates.\nThough office transaction volumes were down materially in the last three quarters of 2020 from the prior year, activity improved each quarter as investors return to the market.\nVolumes were down 45% in the fourth quarter versus the fourth quarter in 2019, but were up 59% sequentially from the third quarter.\nOffice was no more out of favor than other asset classes after the pandemic as office transaction volume was 29% of total commercial real estate volume, both in 2019 and the last three quarters of 2020.\nThere continues to be a robust market for life science real estate as well as quality office buildings and technology-driven markets with more limited leasing exposures.\nJust in life science, life science is a portfolio dominated by a leasehold interest in University Park in Cambridge sold for $3.4 billion, around $1,500 a square foot and a mid-4% cap rate with roll-up potential.\nAnd a partial interest in Discovery Park in Cambridge was sold for $720 million, representing $1,190 a square foot and a 4.7% cap rate.\nAnd in office, 410 10th Avenue in New York City sold for $950 million, which equated to $1,490 a square foot and a 4.5% cap rate.\nAnd 510 Townsend and 505 Brannan streets in San Francisco sold for a combined $570 million, $1,280 a square foot and a 5% cap rate.\nThough both buildings are leased long term, one is being sublet in full by its user.\nAnd in the Seattle CBD, a leasehold interest in 2NU sold for $700 million, $1,020 a square foot and a 4.7% cap rate and 1918 8th Avenue sold for $625 million, $940 a square foot and also a 4.7% cap rate.\nThere is material investment activity in like assets to Boston Properties.\nAnd with interest rates forecast to remain low and the economic recovery described earlier, we expect transaction activity to increase and cap rates potentially to tighten for well-leased assets.\nAnd lastly, Boston Properties has the balance sheet and access to capital to take advantage of opportunities that will present themselves as a result of the pandemic.\nWe currently have $3.2 billion in liquidity.\nAnd after the redemption of our unsecured bonds and fully funding our current development pipeline, we'll have $1.5 billion of liquidity remaining.\nWe have been more actively monetizing in-service assets, having completed $570 million in gross sales in 2020, and we expect a similarly elevated level of activity this year.\nWe have access in size at attractive terms to the unsecured debt market, if needed, and have been developing increasingly formalized relationships with large-scale private equity partners to help us fund acquisitions.\nWe have a reasonable pipeline of potential new opportunities in our core markets in Seattle and continue to look for investments that require leasing and/or redevelopment to take advantage of our operating skills and to create higher returns.\nAs mentioned, we also intend to invest more aggressively into life science real estate and have 5.8 million square feet of new development and redevelopment projects under our control located primarily in the life science hubs of Cambridge, Waltham and South San Francisco.\nSo in conclusion, the COVID-19 pandemic continues to create a very challenging environment for many sectors of the U.S. economy and commercial real estate, including office assets.\nHowever, the end of the pandemic is approaching and we are confident Boston Properties will emerge with strength and momentum given our portfolio quality, income stability, growth potential, access to capital and highly engaged management team.\nDoug, over to you.\nI thought about just sort of stopping right there and starting with questions, but I guess I'll make some remarks and give some time for Mike as well.\nAs we sit here in January of '21, we are shifting from COVID, COVID, COVID as the obstacle to a pickup in activity to vaccine, vaccine, vaccine as the signal to rejuvenate tenant conversations about bringing staff back to the office and starting the leasing transaction processes.\nThere is no question that the rapid increase in COVID cases over the last six weeks of 2020 and the beginning of 2021 suppressed leasing tours in discussions during that period of time.\nBut in the last two weeks, two large Boston companies have announced their expected return-to-work dates.\nWe signed an LOI for a 70,000 square foot tenant that's going to need space in December of 2021.\nAnd just yesterday, Amazon announced in Boston that they are committing to another 630,000 square feet to be built office building and bringing 3,000 additional jobs to the Boston CBD.\nSo while the first half of '21 is expected to be quiet, we are cautiously optimistic that we've been through the worst of the pandemic and that the latter part of '21 will have a discernible pickup in leasing transaction volume, parking revenue and retail sales.\nThe year-end market leasing reports that are published by the commercial brokerage organizations held a few surprises, as you probably heard through many of the analyst calls.\nLeasing volumes were way off their historical pace and with the significant sublet space added to the market, we saw negative absorption and increased availability everywhere.\nIt's important to remember that there are two types of sublet space.\nFirst, space that comes from users that have had changes in their employee headcount and are clearly no longer going to need all that space.\nAnd then there's a second group.\nTenants that are being opportunistic, listing their entire premises, by the way, at no cost to them, with an expectation that they'll decide what to do if they get an acceptable actionable offer down the road.\nThey may reoccupy, they may relocate and transact or they may find a way to sublet a portion of their space, we just don't know.\nBut based on all the conversations we have had with our technology, our life science, our professional service, our legal, our financial firms as well as the leasing brokers that are responsible for these listings, a change in workplace strategy, aka, we're going to work from home, where we're going to go to a disaggregated workforce, that's not what's driving the bulk of the sublet activity.\nOne thing is sure, not all the sublet space is actually available.\nYou might find the following illustrative at.\nIn Midtown Manhattan, after the Great recession, according to CBRE, from 2008 to 2009, about 24 million square feet of space was put on the sublet market.\nBetween 2009 and 2010, 13.6 million or 57% of that was withdrawn from the market.\nNot all space is available.\nThe Boston Properties' office portfolio ended the year at 90.1% occupied.\nThe quarterly sequential drop is entirely due to the addition of Dock 72 at 33% leased into the in-service portfolio.\nAs Owen said, we have 600,000-plus square feet of signed leases, 134 basis points in our in-service portfolio that has not yet commenced revenue and hence is still defined as vacant, but it has been leased.\nWe completed another 1.2 million square feet of leasing during the quarter.\nOn a relative basis, my view of the ranking activity on our portfolio, active lease negotiations, tours, RFPs in our markets is as follows, starting with the best and moving to the least.\nBoston Waltham, by the way, we don't have any available space in Cambridge.\nNorthern Virginia, Midtown Manhattan, Princeton, Los Angeles, the Peninsula Silicon Valley, DC and, finally, the CBD of San Francisco.\nDuring the fourth quarter, in the Boston CBD, we did five leases, including another full floor new tenant at Atlantic Wharf.\nThe cash starting rent on this full floor lease will be 34% higher than the expiring rent, and there are future rent increases.\nThe cash rents on the other four leases had a weighted average increase of about 30%.\nWe continue to have additional activity in our CBD Boston portfolio, albeit with a number of smaller tenants under 10,000 square feet.\nA few are looking for incremental growth, and a few were considering letting their 2021 leases expire and are now actively engaged in short-term renewal conversations.\nI also want to note that we finally obtained possession of the 120,000 square foot 2-story former Lord & Taylor Building on Boylston Street during the early part of this month.\nThis was a big win as we believe we can find a far more productive use for this box that has been under leased since the mid-1960s to Lord & Taylor.\nIn our suburban Boston portfolio, we completed 226,000 square feet of new leasing, including all of the remaining space at 20 CityPoint, first generation.\nThis is in addition to the life science lease we did at 200 West Street.\nThe cash rent on the second-generation leases, about 150,000 square feet was up an average of 23% on a cash basis.\nWe continue to have additional activity in suburban Boston.\nIn Waltham, we're negotiating a 60,000 square foot lease extension, a lease with a new tenant for a 63,000 square foot block of space and we're responding to a number of large life science lab requirements.\nAt the moment, we don't have any ready-to-go vacant lab space, but we hope to begin our conversion of 880 Winter Street 220,000 square feet during the second quarter.\nAnd our 300,000 square foot 180 CityPoint lab building has been fully designed, fully permitted, and we are simply waiting final construction bids over the next few months.\nTurning to Northern Virginia.\nThis quarter, we completed six renewals at our VA 95 single-story park, totaling about 218,000 square feet.\nIn addition to the VW commitment in Reston Next, we completed another 82,000 square feet in the town center in Reston.\nIn total, in 2020, we completed 1.15 million square feet of leasing in Reston Town Center.\nWe still have more work to do.\nBut we have a good start to 2021 with lease negotiations ongoing for an additional 60,000 square foot block of space.\nIn Reston Town Center, rents are basically flat to slightly down 1% to 2% on the relet, since the expiring cash rents have been increasing contractually by 2.5% to 3% for the last 10 years, and they will continue to do so on a going-forward basis.\nOur D.C. CBD exposure rests in our JV assets.\nBut here too, activity in our portfolio has picked up.\nWe completed 24,000 square feet of leasing during the quarter, and we're negotiating over 120,000 square feet of leases as we speak.\nIn New York City, we executed our lease with Ascena at Times Square Tower for about 132,000 square feet of office space.\nWe completed two floor deals in the New York City market, each 31,000 square feet at 601 Lex, one was a one-year extension, and the second was a 10-year renewal and the cash rent decreased about 8% on that renewal.\nWe also did four small transactions at 250 West 55th Street in Time Square Tower totaling 26,000 square feet, three were short term and one was a 10-year deal.\nWe're negotiating a full floor of transaction at 399 Park on a space that's not expiring until the end of 2021.\nWhile we didn't do much leasing in Princeton during the quarter, we have a number of active discussions ongoing that we believe tenants will be making decisions to expand or relocate in late '21 and are strongly considering Carnegie Center.\nWhen we talk about California, you need to appreciate the fact that the state has been strongly discouraging tenants from asking their employees to go to their offices for the last 11 months.\nThe uncertainty level and the lack of pedestrian activity at the Street plane, particularly in the CBD of San Francisco, has been more severe than anywhere else in our portfolio.\nAnd this has affected tenant's appetite for making any decisions.\nJust to put this year in perspective, from 2017 to 2019, there were, on average, 10 -- excuse me, 14 tech company leases per year in excess of 100,000 square feet.\nIn 2020, there were none.\nOur San Francisco assets are 95% leased, and we have 280,000 square feet expiring in '21.\nThe third quarter produced just three transactions totaling about 23,000 square feet at EC.\nAnd during the fourth quarter, we did another four leases, all renewals, up about 18% on a cash basis totaling 20,000 square feet, it's pretty slow there.\nIn South San Francisco, our Gateway JV is planning the construction commencement of 751 Gateway, a 230,000 square feet ground up lab development to begin over the next few months, followed by the conversion of 651 Gateway, which will be a renovated building, if we're able to relocate the existing tenant there.\nThere's more activity in the Silicon Valley Mountain View area than the rest of the Bay Area.\ntwo technology companies did 100,000 square foot plus expansions during the quarter, and there are three active requirements right now in the market in excess of 200,000 square feet.\nThere continues to be a slow resurgence of medical device, alternative energy, automotive, the hardware side of technology that are all out looking for space.\nWe are seeing a few of these organizations looking at our Mountain view single-story product, which is plug-and-play ready.\nIn Santa Clara, we're going to be taking our 218,000 square foot Peterson Way building out of service when the lease expires in the second quarter of '21.\nThis was a covered land play and contributed about $4.8 million of revenue in 2020.\nWe have entitlements for a 630,000 square foot campus, permitted and improved, ready to go.\nIn spite of the challenging COVID-related conditions in California, in Santa Monica, we continue our renewal negotiations with our 2021 expirations.\nAnd as I said at the outset, we signed a 70,000 square foot LOI at Colorado Center from a new tenant.\nYou may recall earlier this year, we actually did an expansion with another technology company at the Santa Monica Business Park.\nI purposely didn't make any comments about market rents during my remarks.\nWith very limited activity, any conjecture about where rents will settle out is pure opinion.\nWhat I can tell you is that there will be large differences between deals cut on sublet space and direct space.\nSublet landlords will have less appetite for capital and more leeway with lowering face rents or giving free rent.\nThere will be tenants, however, that simply don't want the risk of sublet space.\nWill that prime tenant actually pay their rent for the full term?\nIs that a risk worth taking?\nOr the as is conditions and other issues associated with that may make them very uncomfortable with those risks?\nThere will be a very wide gap between the bid and the ask on direct space at the outset until we have a meaningful amount of direct deal comparable transactions for the market to understand.\nLandlords with vacant space that are according tenants that want a new installation will use capital to entice users to this space, not necessarily space rent.\nAnd landlords working on renewals will be more aggressive with swing space where it can be made available or lower contractual rates if the installation that's there currently works for the user.\nHowever, there will be a flight to quality and the better buildings as tenants see value in paying less of a premium to be in the best assets in these markets.\nConditions are going to value -- are going to vary submarket by submarket.\nI'm going to stop there and yield the rest of our time to Mike.\nSo I'm going to cover the details of our earnings for the fourth quarter.\nI'll also explain our guidance for the first quarter that we provided and some insight into our expectations for the full year 2021.\nWe've reinstated quarterly FFO guidance, which we hope will be helpful and serve as an indicator of our increased confidence in the operating environment.\nOur office tenant collections remain strong, and we believe the write-offs are largely behind us.\nWe also continue to execute on new and renewal office lease requirements as evidenced by the 1.2 million square feet of leasing in the fourth quarter and the 3.7 million square feet of leasing in 2020 overall, despite the pandemic-related shutdowns.\nWe're encouraged by the rollout of the vaccine and are confident we will see a return of workers to the office in mass, but there remains uncertainty with respect to timing.\nWe anticipate our ancillary revenues, such as parking and retail will continue to be weak until the population increases.\nOnce we have better visibility into the timing, we expect to restore full year guidance as well.\nOur fourth quarter results contained two charges that I would like to explain.\nThe first is a $60 million noncash impairment of our equity investment in Dock 72.\nOur 670,000 square foot development we put into service in the Brooklyn Navy Yard.\nThis investment is held in an unconsolidated joint venture, where we own 50%.\nBecause the investment is unconsolidated, GAAP requires a mark-to-current fair value.\nAlso, while the $0.35 per share charge is a deduction from net income, it is added back to arrive at FFO.\nSo it has no impact on our reported FFO pursuant to NAREIT's definition.\nDock 72 is only 33% leased, as Doug said.\nAnd while we had some promising leasing activity pre-COVID, there's little activity today and the market conditions in Brooklyn have weakened.\nWe have increased our projected costs to stabilize as well as modified and extended our anticipated lease-up.\nAnd the combination of this has resulted in a lower current fair value for the property.\nThe extension of timing to achieve stabilization has a meaningful impact on fair value.\nWe see Dock 72 as a unique situation, and we do not anticipate any additional impairments in the portfolio.\nThe rest of our development pipeline is very well leased at 88%, our in-service portfolio is over 90% leased and, honestly, most of the assets have significant embedded gains.\nThe second charge is a $38 million or $0.22 per share noncash charge to net income and FFO for the write-off of all accrued rental income for tenants in the co-working industry.\nWhile these tenants are paying rent today, we believe the ongoing length of the pandemic is stressing the sector's revenue and liquidity.\nAs such, we do not believe they meet the standard to maintain an accrued rent asset on our balance sheet.\nAs we discussed in both our second and third quarter earnings calls, co-working is the remaining tenant sector that we've been monitoring closely.\nIt is possible we could face a few individual credit situations this year due to the impact of the pandemic across the portfolio, but we don't anticipate additional significant accrued rent write-offs to other sectors of tenants like we've experienced with retail and with co-working in 2020.\nFor the fourth quarter, our reported FFO was $1.37 per share.\nIf you exclude the accrued rent charge, our fourth quarter FFO would have been $1.59 per share and in line with consensus and the expectations that we shared with you last quarter.\nNow I'd like to look forward to 2021.\nWe have provided first quarter 2021 guidance for FFO of $1.53 to $1.57 per share.\nAt the midpoint, this is $0.04 per share lower than our fourth quarter 2020 FFO before charges.\nThe decline is entirely due to approximately $0.10 per share of seasonally higher anticipated G&A.\nThe first quarter is always our highest quarter for G&A due to accounting for compensation.\nIf you look back historically, we typically recorded 30% of our annual G&A expense in the first quarter.\nThe increase in G&A expense is anticipated to be partially offset by higher revenue contribution from our portfolio, including the commencement of revenue for a portion of the signed leases that Doug described.\nWe also expect lower interest expenses.\nWe are redeeming our $850 million bond issuance in mid-February with cash on hand.\nThese bonds have a yield of 4.3%, and there will be no prepayment charge.\nWe're currently earning close to 0 on our cash.\nSo we will see the full benefit of lower interest expense for the second half of this quarter and for the rest of 2021.\nSo as we think about the full year 2021, there's a few things to consider.\nIf you simply annualize the midpoint of our first quarter guidance, you get to about $6.20 per share.\nBut that does not account for the seasonality of our G&A, the reduction of interest expense from our bond redemption or the incremental impact of leased developments coming online during the year.\nFor modeling purposes, we suggest you consider adding the following to the Q1 annualized FFO of $6.20 per share: $0.19 per share for the impact of lower G&A for the rest of the year; $0.08 per share from lower interest expense due to the bond redemption; and $0.05 per share of incremental FFO from new developments coming online, including 159 East 53rd Street, which is 96% leased to NYU and where we expect to commence revenue in the second quarter; 100 Causeway Street in Boston, which is 94% leased with projected revenue phasing in starting in the third quarter; and 200 West Street, our life science development in Waltham, which is 100% leased and is projected to deliver in December.\nSo adjusting our first quarter annualized run rate for these known items gets to approximately $6.52 per share for 2021.\nThat said, we are not providing full year guidance for FFO because there remains uncertainty than our variable income streams, including our ancillary income and our same-property leasing, both of which impact revenues and occupancy.\nThe timing of recovery from the pandemic is still unknown.\nIt could have a material impact on the recovery of revenues from our parking, retail and hotel.\nCurrently, these income streams are depressed.\nTheir contribution is nearly $30 million lower on a quarterly basis than what we saw prepandemic.\nWe are hopeful that a portion of this revenue will start to return in the back half of 2021, but the timing is really reliant on the success of the COVID vaccines and return to a safe and healthy environment in our cities.\nWe also have lease expirations in 2021 that will impact our occupancy and same-property NOI.\nOur rollover for 2021 is 3.2 million square feet.\nAs Doug described, we already have 610,000 square feet of leases signed that will take occupancy of currently vacant space this year.\nWe're also actively working on over one million square feet of new leases and renewals across the portfolio.\nOverall, we expect our year-end 2021 occupancy to be flat to down 100 basis points compared to current occupancy.\nIt's also worth noting that we have a meaningful amount of free rent that burned off in 2020 that will boost our cash same-property performance and AFFO in 2021, specifically at 399 Park Avenue, we had 450,000 square feet of space in build out and under free rent for nine months in 2020 that is now in cash rent.\nAnd at the General Motors Building, 160,000 square feet of office space and a portion of our retail was under free rent for most of 2020 and are now paying cash rent.\nThis showed up in our results in the fourth quarter with a $10 million increase in same-property cash NOI sequentially from Q3 to Q4.\nIn summary, we're excited about the prospects for revenue and FFO growth.\nOur portfolio cash flow is expected to grow in 2021.\nThe success of the vaccine program should give rise to the recovery of our ancillary revenue streams.\nAnd we have $2.2 billion of leased developments coming online over the next couple of years, all of which should drive future earnings growth and value.\nThat completes our formal remarks.\n",
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"content": "compname reports earnings per share of $0.05 and ffo per share of $1.37.\nq4 ffo per share $1.37.\nsees q1 ffo per share $1.53 to $1.57.\nsigns 1.2 million square feet of leases 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: There are certain risks and uncertainties, including those disclosed in our filings with the SEC that may impact our results.\nDuring our call today, we'll make reference to non-GAAP financial measures.\nOur first quarter results reflect an exceptional performance by our company and our entire team as the momentum that began in the third quarter of last year continued throughout our business.\nOn a companywide basis, we achieved an all-time EBITDAR record of $292.6 million.\nWhile this is up considerably from the prior year, we also exceeded our first quarter 2019 performance by more than 30% and surpassed our previous record by over 20%.\nCompanywide margins for the quarter were 38.8%.\nThis is nearly 1,200 basis points better than the first quarter of 2019 and 220 basis points higher than the previous record we set in the third quarter of 2020.\nWe also achieved new EBITDAR records in each of our two largest operating segments.\nIn the Las Vegas Locals segment EBITDAR exceeded our previous record by 11% and was up 22% over 2019.\nAnd when excluding The Orleans, which is heavily reliant on destination business, our same-store locals EBITDAR was up 46% from 2019 levels.\nOperating margins in our Las Vegas Locals segment were nearly 50% for the quarter, 360 basis points higher than the record we set just two quarters ago.\nIn our Midwest and South region, EBITDAR grew nearly 40% over 2019 beating the previous record by almost 20%.\nSegment margins were nearly 40% this quarter and overall gaming revenues were up more than 2% from 2019 levels.\nMost important, this operating segment -- this operating strength was broad-based as 15 of our 17 properties in this segment grew EBITDAR at a double-digit pace over their 2019 performance.\nThroughout the quarter, strengthening consumer confidence, limited entertainment options and our disciplined operating strategy, all contributed to produce record results across our portfolio.\nStarting in January and February, business returned to the levels we saw in the third quarter.\nBut it was March where we really benefited from improving trends.\nFrom February to March, daily rated play increased over 18% across all age and worth segments and was up nearly 25% in our 65 and up segment.\nAs vaccinations continue to roll out, customers are clearly growing more comfortable with resuming their pre-pandemic activities including regular visits to our properties.\nWe also experienced an impressive increase in unrated play, which grew more than 33% on a comparable basis from February to March, a reflection of a strengthening consumer confidence across the country.\nThis strong unrated play is providing us the opportunity to grow our database as we leverage our enhanced tools and capabilities to identify high-value unrated players on our gaming floors and then enroll them into our B Connected loyalty program.\nIn the first quarter, new player sign-ups rose 35% over the fourth quarter.\nBut beyond the sheer increase in quantity, it is the quality of these guests that is far more impressive.\nOn an overall basis, the worth of our first quarter sign-ups was over 50% higher than the first quarter of 2019.\nAcross the business, the strong trends of March are continuing into April.\nRated guest counts are running well ahead of the third and fourth quarters of 2020 and unrated play remains at very high levels.\nWhile we are very encouraged by April's business trends as other entertainment options become increasingly available, we do expect unrated play levels will normalize.\nBut even as unrated play normalizes, we are confident we can keep delivering strong performances as we pursue additional growth opportunities within our growing rated customer base.\nOne of these opportunities is the 65-and-over segment.\nWhile we have seen strong growth from this demographic in the last several months, many are still on the sidelines.\nAnd as our country continues to make progress against the pandemic, we are confident that more of these guests will return to our properties as the year progresses.\nWe also see opportunities to grow our destination business.\nWhile business from local guest segments remain strong, guest counts from destination travelers remain well below pre-pandemic levels.\nThe softness has been particularly noteworthy at The Orleans, which draws a significant amount of business from destination travelers.\nThis has also impacted our downtown Las Vegas segment, where visitation from our core Hawaiian customers has been severely restrained by travel restrictions.\nAs COVID vaccinations continue to roll out and restrictions lift, we expect visitation among our rated destination customers to improve.\nWe also expect to see improvements in midweek business as restrictions on conventions and meetings are eased and capacity limits are increased.\nOver the last several weeks, we've started to see the first indications that this destination business is returning.\nHotel reservations have increased to their highest level in more than a year.\nAnd our booking window is rapidly improving.\nAt the same time, we are experiencing growing demand for non-gaming amenities.\nWe are encouraged by the opportunity for growth on the non-gaming side of the business and we'll take a thoughtful and disciplined approach in reintroducing these amenities.\nWe remain committed to our disciplined operating strategy that has delivered outstanding results over the last several quarters.\nOn top of organic growth opportunities within our portfolio, we continue to make progress with our strategic growth initiatives.\nFor example, our interactive gaming presence and offerings continue to expand.\nAfter introducing Stardust as our social casino brand last year, we have now entered the world of real money online gaming launching our first Stardust online casinos in Pennsylvania and New Jersey last week.\nWe're also excited by the performance and the ongoing potential of our partnership with FanDuel Group.\nTogether, we have established market-leading sports betting products in Pennsylvania, Illinois, Indiana, Iowa and Mississippi with significant future opportunities yet to come in states like Ohio, Louisiana, Missouri and Kansas.\nAnd with our recently announced partnership with the NFL, FanDuel's brand will be significantly enhanced through its association as one of the League's official sports wagering partners for this coming football season.\nFanDuel will have rights to include endgame and postgame highlights directly into its Sportsbook app further separating our partner from the competition in a crowded sports betting landscape.\nWe are also making good progress on the Wilton Rancheria Tribes Resort near Sacramento, California.\nConstruction is now under way on the Sky River Casino and the project is set to go vertical next month.\nI had the pleasure of joining the Tribal council, community leaders and hundreds of tribal members for groundbreaking in early March.\nThis was a true celebration by the entire Wilton community as they saw their vision of self-sufficiency finally come to life.\nWe are proud to call the Wilton tribe our friends and are honored to be their partners in this project.\nWe look forward to joining them and opening the doors with Sky River Casino in the second half of 2022.\nBefore concluding, I wanted to take a note -- to take note of our company's ongoing progress on our corporate responsibility initiatives.\nLast week, we were honored to be recognized as the highest rating gaming company in Forbes Magazine's listing of America's Best Employers for diversity.\nWe are a company that takes pride in promoting a welcoming culture for all team members.\nBeing recognized by Forbes as a leader in workplace diversity is a great honor and reflects our ongoing efforts to create and support an environment where team members feel valued and appreciated.\nWe also released our company's first comprehensive environmental, social and governance report last week.\nWhile our company has been committed to the principles of ESG for decades, this report is the first time we have compiled this information into a single document.\nWithin this report, you will see detailed data on the progress we are making to conserve natural resources, reduce our carbon footprint, enhance the lives of our team members, build strong communities and promote good corporate governance.\nWe are pleased with our performance against key ESG benchmarks to-date and look forward to sharing our continued progress with you in the future.\nIn conclusion, this was truly an outstanding quarter for our company.\nOur business model is allowing us to make the most of an improving environment by delivering exceptional EBITDAR growth and margin improvement throughout the portfolio.\nThroughout the country, our property leaders are successfully maintaining higher margins and a disciplined operating philosophy as restrictions lift and visitation grows, and we continue to make significant progress on our strategic initiatives.\nThroughout all of this, our team members have kept their commitment to delivering personal and memorable service to our guests.\nThat service is what makes Boyd Gaming stand out from the competition, and it will continue to draw customers back to our properties as the pandemic recovery continues.\nTogether we are achieving new heights as a company and it is an honor to be part of such an incredible team.\nBefore I provide comments on the quarter, I want to point out that we have included our 2019 results and the financial tables accompanying today's release.\nWe believe that 2019 is a more relevant comparison period to this year's results since our entire property portfolio was closed during the second half of March of last year.\nAs Keith noted, this was an incredible quarter for our company.\nAs you have seen from our results in the third and fourth quarter of last year, our operating strategy delivers on growing EBITDAR with enhanced margins.\nAnd this was also the case in January and February.\nJanuary and February were very good months, and resembled third quarter of last year in terms of business levels and margins.\nCompared to 2019, revenues were down nearly 11% during the February year-to-date period, while companywide EBITDAR after corporate expense rose 34% and margins improved nearly 1,200 basis points.\nThe month of March was even stronger.\nMarch benefited from our more efficient operating model, but was enhanced by stronger revenues particularly from higher-margin unrated play.\nIn March revenues were down just 6% from 2019 levels, while companywide EBITDAR margins after corporate expense approached 44%.\nDuring the first quarter, guest counts and spend both increased from the levels we saw in the third and fourth quarter of last year.\nWe saw improvements across all age and worth segments including the 65-and-over age segments.\nIn terms of gaming revenues, our Midwest and South segment rose more than 2% from 2019.\nWhile on the Las Vegas Locals segment, gaming revenues were up approximately 4% from 2019.\nIn addition, we are experiencing increased demand for non-gaming amenities and growing demand for hotel capacity from both rated and unrated customers.\nLooking forward, we believe there is continued opportunity to grow our business among upper age segments of our database that have yet to fully return, as well as destination business.\nAnd we have the opportunity to build relationships with higher worth customers we have added to our database during the last several quarters.\nOur enhanced tools and capabilities combined with a more disciplined operating philosophy have allowed us to execute our business with much greater efficiency.\nThis philosophy will continue to be our focus, as customer demand continues to return and we successfully -- selectively restore additional amenities.\nWe believe that our operating strategy is sustainable, and we are confident that we can maintain a significantly more efficient business model over the long run.\nTouching on a few additional points from the quarter.\nWe generated over $200 million in cash during the quarter, resulting in approximately $730 million of cash on the balance sheet at quarter end.\nAnd we currently have no borrowings outstanding under our $1 billion revolving credit facility.\nAs we continue to grow out of this pandemic, we believe, it is most prudent to maintain our financial flexibility with respect to our cash balances and our free cash flow.\nIn terms of our online business, we continue to be excited by the opportunity represented by sports and iGaming.\nAs we previously indicated we expect to generate over $20 million in EBITDAR from online this year.\nAnd we are on track to achieve that result.\nWe believe our strategic partnership and equity stake in FanDuel is the right approach, generating positive cash flow in a highly promotional capital-intensive and competitive landscape.\nAnd as more states legalize sports betting and FanDuel leads the way as one of the long-term winners in this space, our 5% equity stake will only continue to grow in value for our shareholders.\nWe are also continuing to expand our online gaming presence under the Stardust brand that leverages our customer database and geographic distribution.\nWe just launched the Stardust brand in New Jersey and Pennsylvania.\nAnd we continue to explore opportunities to expand and grow our capabilities and presence online, particularly in the iGaming space.\nSo in summary, this was a great quarter.\nJanuary and February were good.\nMarch was exceptional and that strength is continuing into April.\nGoing forward, we will stay firmly committed to our operating strategy, driving increased EBITDAR, as a result of a continued operating discipline and a tight focus on the right customer.\nAnd finally, our strategic partnership with FanDuel and our online iGaming business will be growing components of our business.\nMatt that concludes our remarks and we're now ready to take any questions.\n",
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"content": "boyd gaming - as economic conditions improve, vaccinations roll out, seeing increased visitation, growing spend-per-visit across every customer 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: There are certain risks and uncertainties, including those disclosed in our filings with the SEC that may impact our results.\nDuring our call today, we'll make reference to non-GAAP financial measures.\n2021 was a record-breaking year for our company, and the fourth quarter was certainly no exception.\nFor the fourth time in a row, we set new quarterly record for EBITDAR and operating margins on a companywide basis.\nEBITDAR increased 65% to $347 million as we posted companywide operating margins of 39.5%, once again proving our ability to deliver strong operating margins.\nOur fourth-quarter operating margin was almost 640 basis points ahead of the fourth quarter record we set 12 months ago and was up more than 1,200 basis points from the fourth quarter of 2019.\nJust as importantly, our continued operating efficiency did not come at the expense of top line results.\nRevenues grew more than 38% year over year and were up nearly 6% from the fourth quarter of 2019.\nEvery segment of our business contributed to this exceptional performance with 24 of our 27 open properties growing revenues at a double-digit rate during the quarter.\nAnd 26 of our properties achieved double-digit EBITDAR increases.\nThe sole exception was our property in Shreveport where we are contending with the new smoking ban.\nIn Las Vegas Locals business, revenues rose 46% over the prior year.\nEBITDAR was up 76% and margins exceeded 52%.\nThis marks the fourth straight quarter that we have achieved margins of 50% or greater in our locals business.\nDowntown Las Vegas had an equally impressive performance, posting record EBITDAR of $20.2 million and margins of nearly 38% for the quarter.\nAnd in our midwest & south segment, revenues grew more than 29%, EBITDAR was up over 42% and margins increased approximately 350 basis points to more than 38%.\nOn a full year basis, we achieved record companywide revenues of nearly $3.4 billion, EBITDAR of almost $1.4 billion and operating margins of 40%.\n2021 marked the first time that our EBITDAR exceeded the $1 billion mark, surpassing our previous annual record by nearly $500 million.\nAnd at 40.5%, our companywide margin was more than 1,250 basis points higher than the prior annual record set in 2020.\nThis strong performance is the direct result of our operating team's incredible efforts over the past 18 months.\nBy streamlining our cost structure, enhancing our capabilities and focusing on our core customers, we have been able to consistently deliver exceptional results since reopening.\nIn terms of more recent trends, while we have seen some slowing in late December and January due to the Omicron surge and winter weather, this has improved as we moved through the month of January with both revenue and EBITDAR exceeding the prior year for the month of January.\nWhile our 2021 results set a high bar for us going forward, we expect our business to continue to perform from a position of strength in 2022 as we have a number of organic growth opportunities available to us.\nOne of the more significant opportunity is an increased hotel occupancy in the gaming revenue associated with these incremental rooms.\nToday, we are unable to fulfill -- or -- I'm sorry, today, we are unable to fully accommodate the demand from our customers due to labor constraints.\nSo as the labor market recovers, we expect we will be able to drive incremental growth from these customers.\nWe also expect to see further growth in our operations as meeting and convention business and midweek travel continue to recover.\nLooking beyond 2022, we expect to drive additional growth from several development projects now underway across the country.\nIn Northern California, Sky River Casino remains on budget and on schedule to open early this fall.\nThe building structure is now complete, and our focus has turned to completing the interior and the infrastructure for this operation.\nConveniently located to south of Sacramento, we believe Sky River will be ideally positioned to become one of the region's top-performing tribal casinos.\nAs a reminder, we have entered into a seven-year management agreement with the Wilton Tribe and will receive a management fee typical for these types of arrangements.\nNext, in Louisiana, we will soon begin work on a $95 million project that will convert Treasure Chest Casino into a fully land-based facility, meaningfully enhancing this property's performance after its projected opening in late 2023.\nWe will be expanding and enhancing the gaming experience and our food and beverage offerings, adding meeting facilities and greatly improving the accessibility and convenience of our partner.\nIn all, this project will significantly improve the Treasure Chest experience for our loyal customers, and it will give newcomers a compelling reason to visit us for the first time.\nFinally, in Downtown Las Vegas, we've begun work on a renovation and upgrade of our Fremont property.\nThis $50 million project will upgrade Fremont's food and beverage offerings while expanding and enhancing its gaming floor.\nBased on the demand we are already seeing at Fremont today, we expect to see excellent returns from this investment following its completion in early 2023.\nIn addition to growth investments in our properties, we believe there is also a considerable potential from our online business.\nAcross the country, our partnership with FanDuel continues to grow.\nOver the last two months, we opened FanDuel Sportsbooks in each of our five Louisiana properties, and we launched mobile sports betting in Louisiana last week.\nWith the addition of Louisiana, we have now expanded the FanDuel sports betting partnership to six of our nine regional states.\nNext to come as Ohio, which passed sports betting legislation in December, and is expected to go live toward the end of 2022.\nWhile online and retail sports betting are increasingly important parts of our business, we see a more compelling digital opportunity in online casino gaming.\nWe view iGaming as an attractive complement to our existing land-based operations and an opportunity to engage our customer base by integrating online gaming with our existing player loyalty program.\nWe took the first steps toward this vision last April with the launch of the Stardust branded online casinos in Pennsylvania and New Jersey.\nAnd we have further strengthened our digital presence through Stardust Social Casino, which has allowed us to establish a digital foothold in states that do not allow real money online gaming today.\nCurrently, online casino is still in its infancy, only six states have legalized gaming so far, though a number of states have introduced legislation in recent months.\nIn 2021, our digital operations generated approximately $24 million in EBITDAR for our company, and we expect EBITDAR to exceed $30 million in 2022 from our online operations.\nAnd as iGaming continues to expand in new markets across the country, we believe the upside could become even more significant for the years ahead.\nSo in all, as we look back on 2021, we delivered outstanding results for our shareholders by every measure.\nAnd with continued growth opportunities still ahead we are optimistic about 2022.\nAs a result of our strong financial performance, our company is generating more free cash flow than ever before.\nWe have put this free cash flow to work by significantly delevering our balance sheet and beginning a robust program to return capital to our shareholders.\nEarlier today, we announced that our board has approved a $0.15 per share dividend starting this April.\nThis dividend is more than double the amount we were paying pre-pandemic.\nThis dividend is in addition to the $300 million share repurchase program our board approved in October.\nTo date, we have bought back $150 million in stock since we resumed our share repurchase program.\nThis capital return program reflects the strength of our business, our confidence in the future and our commitment to pursue a balanced approach in creating long-term shareholder value.\nWhile we are proud of our operational successes and what we are delivering for our shareholders, we have always believed that our mission goes beyond financial performance.\nAnd we remain committed to responsible corporate citizenship through our ESG programs.\nWe look forward to sharing more with you about these initiatives when we publish our next ESG report this spring.\nBefore I conclude, I want to take a moment to again recognize our team members across the country, who truly made this exceptional year possible.\nLike all employers, we have contended with a very tight labor market over the past year.\nAnd that has made it more challenging to hire team members and to fill openings.\nYet our team members have continued to deliver outstanding guest service, going above and beyond to serve our customers.\nI'm tremendously proud of what they have been able to accomplish and it is a pleasure to be part of such a dedicated team.\nOur team members have always been the foundation of our success.\nAnd together, we have achieved incredible results in 2021.\nAnd as we look ahead to 2022, I am as confident as ever in the direction of our company and our ability to continue creating long-term value for our shareholders.\nOur operating teams generated record results in 2021.\nWe finished the year with EBITDAR approaching $1.4 billion, more than 50% higher than the previous record set in 2019.\nAs a result of our strong operating performance, our leverage has declined significantly from pre-COVID levels.\nWith EBITDA increasing since the end of 2019 by approximately $500 million and debt balances reduced during that same period of time by approximately $850 million, our leverage has been reduced by half from pre-COVID levels.\nOur current leverage is approximately 2.4 times, and lease-adjusted leverage is 2.8 times.\nAs of the end of 2021, our NOL balance was $7 million.\nAs a result, beginning in 2022, we'll be a cash taxpayer.\nOur expected tax rate is 23.5%.\nWe expect our 2022 capital program to be approximately $250 million, which includes amounts for hotel room renovations and conversions of space previously utilized for buffets.\nWe also expect to spend in 2022 an additional $50 million for the Treasure Chest and Fremont projects.\nBased on the current outlook for our business, we believe after these capital investments, we will have ample free cash flow to return capital to our shareholders.\nAs Keith mentioned, our board authorized the resumption of our quarterly dividend of $0.15 per share, which is more than double our previous quarterly amount.\nAlso in late October, our board approved a $300 million share repurchase authorization that was in addition to $61 million remaining from our previous authorization.\nSince last October, we have repurchased $150 million in stock, representing approximately 2.5 million shares.\nWe have approximately $210 million remaining under our current repurchase authorizations.\nFor this year, assuming our business continues to perform at these levels and subject, of course, to board approval, we currently plan to repurchase on a recurring basis of approximately $100 million per quarter.\nAs was the case in the past three months, we may have additional opportunistic repurchases as well.\nSo in total, with our planned share repurchases and the announced dividend, we expect to return approximately $500 million to shareholders this year.\nAs we move forward, we will remain focused on maintaining our strong operating performance, remaining disciplined in our execution, and growing our business organically through thoughtful investment in our existing portfolio and growing our online presence.\nBethany, that concludes our remarks, and we're now ready to answer any questions from participants on the call.\n",
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"content": "board reinstates quarterly dividend, increases payout to $0.15 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: New factors emerge from time to time and it is simply not possible to predict all such factors.\nOn our call today Allan will review highlights from the first quarter, explain the basis of our confidence in the new home market, and discuss our improving expectations for fiscal 2021.\nHe will also describe two significant commitments we recently made as part of our ESG strategy.\nI will cover our first quarter results in greater depth, and provide detailed expectations for the second quarter and full year of fiscal 2021.\nI will then update our expectation for continued growth in our land position, followed by a wrap up by Allan.\nWith an acute focus on health and safety, we generated outstanding operational and financial results in the first quarter.\nOperationally, orders were up more than 15% year-over-year, driven by a sales pace that was up more than 40%.\nIn fact, both orders and our sales pace reached their highest first quarter levels in more than a decade, even as we intentionally slowed sales with price increases.\nWe also expanded our lot supply, creating a path for future growth.\nFinancially, we delivered big improvements in gross margin, adjusted EBITDA and net income.\nThe strength in demand for new homes has exceeded our expectation over the past six months.\nWe have known that pent-up demand was building, based on the disconnect between demographics and strong affordability on the one hand, and anemic housing starts for most of the last decade on the other.\nWhat we did not anticipate was, that a pandemic would be a catalyst for that demand to begin to materialize.\nMany consumers are now focused on improving their living situation.\nWhether their motivation is more space, better space, outdoor space or an entirely new location, demand for housing has been excellent.\nThe question on everyone's mind is how long will this strength last?\nWell, we believe it's likely to persist for some time.\nFrom a supply perspective, our industry has delivered far fewer homes in the last 10 years, than job growth and household formation would have predicted.\nWe think this cumulative deficit is conservatively well above 1 million homes, which means that a few good quarters are unlikely to exhaust the need for new homes.\nSo what about the durability of demand?\nWell, to buy a home, perspective homeowners typically need two things, income security in the form of a job, and homes for sale that they can afford.\nWith vaccines at hand, we are optimistic that economic and job growth may resume as soon as this spring.\nIn that case the concern about the durability of demand may be better seen as a question about affordability.\nAffordability ultimately boils down to mortgage rates and home prices, however the Fed is on record is supporting low rates for an extended period, we know we have to work hard to keep home prices within the reach of most buyers, and that is exactly why our positioning is so important.\nWe believe we're in the right markets, with the best job growth.\nWe're targeting the largest buyer segments baby boomers and millennials, and we focus on delivering exceptional value at an affordable price, not competing primarily on price.\nUltimately this positioning gives us confidence that our pivot toward growth will allow us to fully participate in a strong housing market over the next several years.\nAs we enter this springs' selling season we have an unusually high degree of visibility and therefore confidence in our likely full-year results.\nThat's because the dollar value of our backlog is up nearly 60% compared to last year.\nSo today, we are increasing our expectations for each of the objectives we outlined for fiscal 2021.\nDave will provide more precise figures in his comments, but we now expect higher earnings and increased land activity this year, while exceeding earlier debt repayment objectives.\nIn summary, we're going to make significant progress on our balanced growth strategy, which is designed to grow profitability faster than assets and revenue from a more efficient and less leveraged balance sheet.\nAlthough ESG is receiving increased attention, it isn't something new at Beazer.\nWe have been addressing all three facets of ESG for years, because we see it as fundamental to fulfilling our purpose statement which we've included on Slide 7.\nToday, I'd like to draw your attention to the significant commitment we announced in our most recent proxy statement, that will result in a reduction in greenhouse gas emissions.\nIn short, we have committed that by the end of 2025, every home we build will be Net Zero Energy Ready.\nIn numeric terms, it means all of our homes will achieve a Home Energy Rating System or HERS rating of 45 or less, which is an energy conservation standard that is far beyond most existing Building and Energy codes.\nAt this level our homes will generate as much energy as they consume by attaching a properly sized alternative energy system.\nUnderscoring this commitment, we're a proud builder partner of the Department of Energy's Zero Energy Ready Homes Program and we're the first national production builder to commit to building 100% of our homes in accordance with the program.\nImproving energy efficiency is so important that we've made it a part of our long-term compensation plans as well.\nBefore turning the call back over to Dave, I want to talk about one more aspect of our ESG strategy, namely our commitment to social responsibility.\nWe have a long-standing relationship with Fisher House Foundation, an organization that build homes where military and veteran families can stay free of charge, while a loved one is in the hospital.\nOur work with Fisher House has had a profound impact on our employees, our customers and our partners and that's caused us to want to do more.\nTo fund this ambition, last year we started a title insurance agency called Charity Title, that will donate 100% of its profits to charity.\nBy creating an innovative, dedicated funding source for our philanthropic efforts, we expect to be able to expand both our contribution levels and the number of organizations we can support.\nWe encourage you to review the ESG materials contained in our proxy statement in 2020 annual report, which are available in the Investor Relations section of our website.\nLooking at the first quarter compared to the prior year, new home orders increased 15% to 1,442, despite a lower community count.\nSales pace was up over 40% to 3.5 sales per community per month.\nHomebuilding revenue increased about 2% to $424 million on flat closings.\nOur gross margin, excluding amortized interest, impairments and abandonments was 22.1%, up approximately 230 basis points.\nSG&A was down approximately 60 basis points as a percentage of total revenue to 12.7% driven by controlling overhead expenses.\nThis led to adjusted EBITDA of $43.6 million in the quarter, up nearly 50% and exceeding 10% of revenue.\nTotal GAAP interest expense was down about 3%.\nOur tax expense for the quarter was about $4.1 million, for an effective tax rate of 25.5%.\nAs a reminder, on a cash basis, our deferred tax assets offsets substantially all of our tax expense.\nTaken together, this led to $12 million of net income from continuing operations or $0.40 per share, up over 3 times versus the same period last year.\nLooking at the second quarter, we expect the following versus the prior year.\nNew home orders should be down slightly.\nWhile we expect sales pace to be up, we do not expect it to fully offset our reduced community count, as we focus on increasing margin and returns.\nClosings are likely to be up 10% to 15%.\nThere are couple of factors impacting our expectation for closings next quarter.\nFirst, given the strength in demand, we have fewer spec homes to sell and close this quarter.\nAnd second, we are balancing cycle time pressures with our commitment to delivering an exceptional customer experience.\nOur ASP is expected to be approximately $390,000.\nWe note that the change in our ASP isn't reflective of our pricing power or margin opportunity, as we are constantly adjusting features and product mix to retain affordability.\nIn fact, this quarter we had two segments with lower ASPs and substantially higher margins.\nAs we described last quarter, increases in lumber prices in September and October would create a modest headwind on gross margin for the second quarter.\nDespite this, we expect gross margin to be up slightly versus the same quarter last year.\nSG&A as a percentage of total revenue should be down at least 50 basis points, reflecting the benefit from top-line leverage.\nWe expect EBITDA to be up more than 20%.\nInterest amortized as a percentage of homebuilding revenue should be in the low 4s.\nOur tax rate is expected to be about 25%, and combined, this should drive net income and earnings per share up more than 60%.\nAt the start of our fiscal year we provide our expectation for our full-year results.\nGiven our first quarter performance, as well as our positive outlook, we are now able to increase each of those expectations.\nFirst, we previously expected EBITDA to be up slightly versus the prior year.\nWe now expect EBITDA to grow at a double-digit rate to over $220million, much faster than the growth in assets or revenue.\nThis improvement is largely driven by increased profitability, as we expect gross margin to be up at least 50 basis points versus the prior year in the second half of fiscal 2021.\nSecond we targeted double-digit earnings-per-share growth on our last call.\nAt the low end this would have represented earnings per share of less than $2 per share.\nWe now expect earnings per share of at least $2.50.\nAnd finally, we committed to reduce debt by more than $50 million last quarter.\nWe now intend for that to be closer to $75 million.\nWe expect to end fiscal 2021 with a book value per share in excess of $22.\nOur expected level of profitability, our return on average equity for the full year should be approximately 12%, and if you exclude our deferred tax assets, which don't generate profits, our ROE should be over 17%.\nDuring the quarter, we spent $110 million on land acquisition and development and ended with nearly $500 million of liquidity, up more than $200 million versus the prior year.\nWe expect land spending to accelerate in the remaining quarters of 2021, ultimately exceeding the $600 million we initially anticipated, funded by our cash from this liquidity and cash from operations.\nOn Slide 12, we depict our expectations for near-term community count, which we still anticipate will likely trough in the 120s later this year.\nWe expect community count growth will be evident in fiscal 2022, as we benefit from our increased land spending.\nLast quarter we said 2021 would be an important inflection here as we allocated more capital to growth and expanded our use of options.\nThe initial results of this effort were evident in the first quarter as we grew our active lots by about 8% to over 18,000, and importantly, we control 42% of our active lots through options at quarter end, a 7 point sequential increase.\nGiven our current pipeline of deals, we expect to continue to grow our land position as we move through the remainder of the year.\nThe first quarter of fiscal 2021 was very productive for Beazer, as we increased our sales pace, grew our backlog and improved both gross margins and SG&A, while expanding our lot position in a highly efficient manner.\nEven better, we expect this operational momentum to persist through the fiscal year in the new home market, characterized by healthy demand and constrained supply.\nIn November, we described fiscal 2021 as an inflection year, where we expected to modestly improve profitability, while investing for future growth.\nIn fact it is shaping up to be much more than that, allowing us to raise our expectations for profitability investment and debt reduction, ultimately one should demonstrate our opportunity to improve shareholder returns from our balanced growth and ESG strategies.\nI'm confident that we have the people, the strategy and the resources to create durable value over the coming years.\n",
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"content": "compname reports q1 earnings per share $0.40.\nq1 earnings per share $0.40.\nnet new orders for q1 increased to 1,442, up 15.3% from prior year.\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: New factors emerge from time to time and it is simply not possible to predict all such factors.\nOn our call today, Allan will review highlights from the second quarter, and discuss the supportive macro environment.\nHe'll then provide a preview for the remainder of the year and outline our expectations for growth in fiscal 2022.\nI'll then provide more details and our results projections and balance sheet.\nWe will conclude with a wrap up by Allan.\nWe had an extraordinary quarter, highlighted by an unprecedented increase in our sales pace, and significant growth in our gross margin, EBITDA and net income.\nAt the same time, we invested for the future, grew our share of lots, controlled by options and continued to reduce debt.\nIn some, we had a nearly perfect balanced growth quarter, with profitability growing faster than revenue, while operating from a less leveraged and more efficient balance sheet.\nPerhaps the best news is that our team is poised to translate continuing strength and market conditions into even better results in the quarters ahead.\nAs I'm sure you've heard, the strength in new home demand has contributed to both longer cycle times and higher construction costs.\nTo-date, we have successfully adapted to this environment by raising prices, limiting sales paces and extending delivery dates on sold homes.\nAs we work through these issues, our objectives remain the same.\nWe expect to create value for customers, partners, employees and shareholders by delivering great homes on time and at the margin we intended when we made the sale.\nOur commitment to creating value for our stakeholders can also be seen in our recent accomplishments and goals on the ESG front as summarized on slide five.\nThis quarters highlights included being named an ENERGY STAR Partner of the Year for the sixth consecutive year, representing another significant step toward our goal of having every home we build Net Zero Energy Ready by 2025.\nWe believe the strength in the housing market will prove to be pretty durable.\nAnd the reasons are simple, strong demographic demand, exceptionally limited supply and the recovering economy.\nOn the demand side, we expect many of the COVID housing norms to be persistent, namely the desire for more space, better space and outdoor space, even as we return to offices and schools, our homes have clearly taken on new roles in our lives, couple that with a great awakening of Millennials to the benefits of homeownership and the desire of many boomers to simplify, you have a recipe for depth and breadth of demand that isn't likely to disappear anytime soon.\nOn the supply side, the shortage of owner occupied homes we described on our call in January turns out to be even more acute than we suggested.\nOn that call, we conservatively estimated that the deficit was more than one million homes.\nIn recent weeks, Freddie Mac published a deeply research report, which demonstrated the housing shortage is closer to four million homes.\nThere's simply no way for our industry to accelerate entitlement, development and construction to make a serious dent in that number anytime soon.\nFinally, on the economy, while there are still many COVID related challenges, there's ample evidence about job growth and wage growth, which bode well for consumer spending and housing.\nIn sum, our industry is in a highly advantageous position, with demographically driven demand in a recovering economy, faced with seriously constrained supply beyond 2021.\nTurning now to our expectations, with our sold and already started backlog up more than 50% and continuing strength in lead and traffic trends, our visibility and confidence in fiscal 2021 results is quite high.\nDave will provide details on our outlook for the third quarter and full-year.\nBut I'm happy to share that we're raising our expectations again.\nThe headline is that we now expect full-year earnings per share to be above $3.\nLooking beyond this year, our balanced growth strategy is a longer-term approach to generating shareholder value while carefully managing risk.\nOver the past several years, our strategy has yielded a big jump in profitability, even bigger improvements in our returns and a meaningful reduction in debt.\nAnd we're not done.\nWell, it's too early for us to give any type of detailed guidance for next year, there are three factors that give us confidence that we can again improve profitability and returns in fiscal 2022.\nFirst, our current backlog already contains nearly 700 homes scheduled to close in the first quarter of next year, that's more than half of our typical first quarter closings.\nWith our normal cycle times, most of these homes would have closed this year.\nBut these aren't normal times.\nSo instead, we have a great start on next year.\nSecond, community count growth is coming.\nCredibly strong sales over the past six months in the depth in our community count arrived a little sooner than we previously anticipated.\nBut next year, the positive progression in our community count will be evident.\nAnd remember, these communities were tied up six to 12 months ago, before the recent run-up in home prices.\nAnd third, we'll finally see real interest savings.\nWe have dramatically deleveraged our balance sheet in recent years, but haven't really benefited from a reduction in interest expense in our earnings.\nThat's because of the timing difference between the immediate cash benefit of much lower interest costs and the non-cash GAAP expense that arises from previously capitalized interest.\nNext year, we expect to realize a multimillion dollar reduction in our GAAP interest expense based on actions we have already taken.\nThese factors and our confidence in the industry supply and demand equation should yield another successful year for our balanced growth strategy.\nBefore closing, I'd like to again express our appreciation for the scientists, doctors, first responders and essential workers who saw us through what appears to be the worst of the pandemic in a position to our country to begin to recover.\nLooking at the second quarter compared to the prior-year, new home orders increased approximately 12% to 1,854 as our sales pace was up more than 40% to 4.7 sales per community per month.\nHomebuilding revenue increased about 12% to $547 million on 9% higher closings.\nOur gross margin, excluding amortized interest, impairment and abandonment was 22.2% up approximately 140 basis points.\nSG&A was down 100 basis points as a percentage of total revenue to 11% as we benefited from improved overhead leverage.\nAdjusted EBITDA was $64.2 million up over 45%.\nOur EBITDA margin was 11.7%, the highest second quarter level in the past 10 years.\nInterest amortized as a percentage of homebuilding revenue was 4.4% down 20 basis points, and that led to net income from continuing operations of $24.6 million, yielding earnings per share of $0.81, more than double the same period last year.\nWith the strength of our current backlog and positive macro outlook, we're in a position to once again increase our financial expectations for fiscal 2021.\nWe now expect EBITDA to be up over 20% or more versus the prior-year, a significant increase from the previous guidance.\nThis level of improvement implies EBITDA growth of more than 10% in the second half of this year, with greater year-over-year growth expected in the third quarter.\nOur full-year EBITDA guidance equates to earnings per share above $3 up from last quarter's guidance of at least $2.50.\nWe now expect our return on average equity for the full-year to be approximately 14%.\nIf you exclude our deferred tax asset, which doesn't generate profits, our ROE would be over 20%.\nThe current production environment is going to impact both sales and closings in the third quarter as a second quarter progressed in the face of the elongating cycle times, we deliberately slowed home sales to provide a better experience for customers and increase the value of our communities.\nMany of these restrictions remain in place and as such, we anticipate new homeowners to be down 10% to 20%.\nOn the closing side, because of the challenging production environment, it is difficult for us to predict the timing and mix of closings between the third and fourth quarter of this year.\nWe're focused on delivering great homes, not maximizing third quarter closings.\nEven with this caution, we still expect closings to be up in the high single digits in the third quarter year-over-year.\nOur ASP should be above $400,000 for the first time ever, gross margin should be up over 100 basis points.\nSG&A as a percentage of total revenue should be down at least 20 basis points.\nOur interest amortized as a percentage of homebuilding revenue should be around 4% and our tax rate will be about 25%.\nCombined, this should drive a sequential increase in quarterly earnings per share.\nWe ended the second quarter with over $600 million of liquidity more than double this point last year, with unrestricted cash in excess of $350 million and no outstanding draws in our revolver.\nDuring the quarter, we retired approximately $10 million of our senior notes.\nAnd with two remaining terminal repayments, we're on a clear path to achieve our goal of bringing our total debt below $1 billion by the end of fiscal 2022.\nDuring the quarter, we spent almost $100 million on land acquisition and development.\nBased on land pipeline and approvals, we expect our land spend to accelerate in the remaining quarters of fiscal 2021, resulting in over $600 million of total land spend for the year.\nWe also increased our option percentage in the second quarter and now control more than 45% of our active lots or options up from less than 30% in the same period last year.\nWe still anticipate community count troughing around 120 later this year, but we expected to grow steadily from there in fiscal 2022 as we benefit from our increased land spending.\nThe second quarter of fiscal 2021 was very successful for us as we maintain the momentum of the last several quarters highlighted by very strong new home orders and substantially improved margins, while also improving the efficiency of our balance sheet.\nThese results and continued strength in the market have enabled us to raise our expectations for the year.\nPerhaps more importantly, our performance should help investors understand the longer-term opportunity for value creation embedded in our balanced growth strategy and our ESG leadership.\nI'm confident that we have the people, the strategy and the resources to create durable value over the coming years.\n",
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"content": "compname reports q2 earnings per share of $0.81.\nq2 earnings per share $0.81.\ndollar value of homes in backlog as of march 31, 2021 increased 54.9% to $1,386.4 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: New factors emerge from time to time and it's simply not possible to predict all such factors.\nOn our call today, Allan will review highlights from the third quarter, discuss our view of the current macroeconomic environment and outline how we have strategically positioned for continued growth in fiscal '22 and beyond.\nI will cover our third quarter results in greater depth, our expectations for the fourth quarter and full fiscal year and update our expectation for continued growth in our land position followed by a wrap up by Allan.\nWe had a very successful third quarter, generating financial results that met or exceeded our expectations, positioning us for a strong end of the fiscal year.\nOur sales pace in the third quarter was one of the highest levels that we've generated in the last five years.\nAnd in fact, this pace would have been even higher if not for our deliberate efforts to proactively slow sales to align with our production capacity and limit our exposure to raw material price inflation.\nWe delivered substantial gains in operating margin, EBITDA and net income as we benefited from increased pricing and improved overhead leverage.\nOn the balance sheet, we expanded both our total lot position, share of lots controlled by option, while retiring $14 million in debt.\nTogether, these results perfectly demonstrate our long-standing balanced growth strategy, which is a multiyear plan to grow profitability faster than revenue from a less leveraged and more efficient balance sheet.\nWith these results and confidence in our expectations for the fourth quarter, we are once again raising full year guidance, highlighted by earnings per share of at least $3.25.\nCollectively, these factors have led to significant home price appreciation, which has clearly outpaced wage and income growth.\nIn the coming quarters, we do not expect this level of price appreciation to continue.\nOur view is that disciplined mortgage underwriting will effectively limit the extent of home price appreciation.\nThat's entirely healthy and gives us confidence that we won't experience the kind of pricing accesses about a painful correction in the future.\nThe demand and supply characteristics of our industry remain highly compelling.\nAspiration for homeownership among millennials and changing homeownership expectations among baby boomers provide a durable source of demand for new homes, particularly with enduring work from home expectations.\nAnd the significant deficit of new homes simply can't be addressed quickly with the supply chain, land use and entitlement barriers that exist.\nUltimately, our industry's challenge will be to ensure that labor and material cost expectations in the supply chain remain tethered to affordable home prices.\nThat's where we believe our market positioning will prove advantageous.\nWith three strong customer-facing differentiators, we have a lot of tools to work with to enable us to deliver extraordinary value at an affordable price in a highly competitive environment.\nLast quarter, we provided initial visibility into our expectations for profitability growth in fiscal '22, and our confidence has only increased since then.\nFirst, at the end of our third quarter, we had more than 1,500 homes in backlog scheduled to close next year, nearly double the level at this time last year.\nAnd importantly, these homes have higher prices and higher margins.\nSecond, even as our ASP has increased, we have remained focused on carefully managing our overhead costs.\nThis will drive SG&A leverage, pushing SG&A below 11% next year.\nAnd finally, our deleveraging efforts continue to reduce our cash interest expense, setting us up for reductions in GAAP interest over time.\nNext year, we expect at least $5 million in GAAP interest savings with further reductions in subsequent years.\nTaken together, we're confident that these factors will allow us to achieve our goal of generating double-digit earnings-per-share growth in fiscal '22.\nFirst, over the past six months, we've experienced exceptional demand in gatherings, our 55-plus active adult business.\nWhile traffic and engagement among this buyer segment was particularly impacted during the early part of the pandemic, the strength in the resale market and the availability of vaccines have contributed to much higher sales activity.\nThis is a growing part of our business with communities underway in Atlanta, Dallas, Houston, Nashville and Orlando.\nSecond, the roll out of charity title, our title business committed to contributing 100% of its profits to charity continues to gain momentum.\nIn fiscal '21, we expect to provide title insurance for more than a third of our closings.\nNext year, we expect to provide title for two-thirds of our customers, which should generate philanthropic resources of over $1 million a year on a run rate basis.\nThis will allow us to expand our efforts with Fisher House and support local charities in each of our markets.\nI'm incredibly proud of our team's innovative strategy to develop a dedicated funding mechanism that aligns our customers, employees and partners in supporting our communities.\nLooking at our third quarter results compared to the prior year, new home orders decreased approximately 13% to 1,199 as a higher sales pace helped to offset a reduction in average community count.\nHomebuilding revenue increased nearly 7% to $567 million on 1% higher closings and a 6% higher average sales price.\nOur gross margin, excluding amortized interest, impairments and abandonments was 24.2%, up approximately 300 basis points to the highest level in more than a decade.\nSG&A was down 60 basis points as a percentage of total revenue to 11.1% as we benefited from improved overhead leverage.\nAdjusted EBITDA was $78.8 million, up over 45%.\nOur EBITDA margin was 13.8%.\nInterest amortized as a percentage of homebuilding revenue was 4%, down 10 basis points.\nAnd net income from continuing operations was $37.1 million, yielding earnings per share of $1.22, more than double earnings per share for the same period last year.\nGiven our continued performance and substantial backlog, we are able to increase our financial expectations for fiscal '21.\nWe now expect EBITDA to be over $250 million.\nOur full year EBITDA guidance equates to earnings per share of at least $3.25, up from last quarter's guidance of above $3.\nWe now expect our return on average equity for the full year to be approximately 15%.\nIf you exclude our deferred tax asset, which doesn't generate profits, our ROE would be about 22%.\nTurning now to our expectations for the fourth quarter.\nWe expect the sales pace of over three sales per community per month as we actively manage pace to ensure cost certainty and a positive customer experience.\nThis pace is higher than our historical average, but below the extraordinarily high base we experienced last year.\nWe expect backlog conversion to be in the mid-40s as we continue to manage through the challenging production environment.\nOur ASP should be above $410,000.\nGross margin should be up more than 100 basis points year-over-year.\nSG&A on an absolute dollar basis should be down about 10%.\nOur interest amortized as a percentage of homebuilding revenue should be under 4%, and our tax rate will be about 25%.\nCombined, this should drive earnings per share up over 20%.\nIn addition, we expect to repurchase over $55 million of debt, bringing our full year total to at least $80 million.\nOur increased land spending in the quarter helped us grow our active lot count to over 19,000.\nWe also increased our option percentage in the third quarter and now control nearly half of our active lots through options, up from less than 30% in the same period last year.\nGiven our current pipeline of deals, we expect to continue to grow our land position to over 20,000 lots by the end of fiscal '21.\nIt's worth noting that most of these deals have been in our pipeline for many months and are under contract at favorable prices.\nIn addition, we remain focused on growing our position, while minimizing risk by maintaining our strict underwriting standards, focusing on products that we built before in some markets that we already know and relying on options to control around half of our lots.\nSo, while land prices have appreciated, we're still finding deals at pencil, allowing us to refill the pipeline and grow our business.\nIn the third quarter, we spent over $140 million on land and development and we expect to spend around $600 million for the full year, with higher land spending and a big increase in our option lot position, we're creating a framework to sustain profitable growth in the years ahead.\nOn Slide 12, we depict our expectations for near-term community count.\nAs you might expect, the supply chain issues so common in the home construction market have also impacted land development activities.\nAs such, predicting the timing of new communities has never been more difficult.\nWhile we'll be actively opening communities every month, we don't expect sequential growth in community counts until next spring.\nFortunately,, we've concentrated our acquisition activities in established new home corridors, so many of our coming soon communities are already generating interest lists.\nWe ended the third quarter with over $600 million of liquidity, up about 50% versus the prior year, with unrestricted cash in excess of $360 million and nothing outstanding on our revolver.\nDuring the quarter, we retired approximately $14 million of our senior notes.\nAnd with two remaining term loan repayments, we're on a clear path to achieve our goal of bringing our total debt below $1 billion before the end of fiscal '22.\nOur net debt to trailing 12-month adjusted EBITDA fell below 3 times, down from 8 times five years ago.\nDuring the quarter, our corporate rating was upgraded by one of the rating agencies and we remain on positive outlook at both S&P and Moody's.\nWe had a terrific third quarter.\nBut instead of repeating the highlights, I'd like to close by putting this quarter in context.\nWe have been diligently and successfully executing against our balanced growth strategy.\nOver the last five years, we've grown EBITDA by more than 60%, improved our return on assets by more than five percentage points and reduced debt by more than $300 million.\nAt the same time, we quietly demonstrated leadership in each of the ESG categories.\nAs satisfying as these results have been so far, we're even more excited about what's in front of us.\nIndustry fundamentals are solid and we're deliberately investing for future growth.\nIn the meantime, we'll have higher prices and gross margins and lower overheads and interest expense to sustain earnings growth.\nAnd we aren't just succeeding for investors.\nWe have charted the most ambitious energy saving course in the industry with our path to net zero energy ready homes, and we've created a growing philanthropic platform to fuse the efforts of our employees with the resources provided by our customers.\nI'm confident that we have the people, the strategy and the resources to create durable value in the coming years.\n",
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"content": "q3 earnings per share $1.22 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: Our discussion today includes certain non-GAAP financial measures, which provide additional information we believe is helpful to our investors.\nThese measures have been reconciled to the related GAAP measures in accordance with SEC regulations.\nPlease consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the SEC.\nContinuing with a clear focus on our business recovery, Barnes Group produced another solid quarter of year-over-year and sequential improvement in orders, organic sales, operating margins and earnings.\nWith total backlog at its highest point since the end of 2019, expanding revenue outlook, strengthening industrial end markets and the progressing aerospace environment, we feel confident about the prospects for the second half of the year.\nMore importantly, our improving financial results continue to be supported by significant investments in growth initiatives, that position us to sustain performance over the long-term.\nIn the second quarter, organic sales were up 31% with sizable gains in both our operating segments.\nIndustrial was particularly strong, while Aerospace continues to build momentum after the significant effects of the pandemic on that industry.\nSimilarly, orders were very good as we generated a book-to-bill of 1.3 times, with Aerospace driving that result.\nOur total backlog stands at $984 million at quarter-end, reflecting a 12% increase from the end of the first quarter.\nAdjusted operating income and margins were up 41% and 40 bps respectively.\nAdjusted earnings per share were $0.45, up 67% from last year.\nAgain, really great results by the team.\nMoving now to a discussion of end-market dynamics, beginning with Industrial.\nOur Industrial segment generated another strong quarter with each of our businesses generating excellent year-over-year organic orders and revenue growth.\nFor the segment, orders were up 37% organically with a book-to-bill of approximately 1 times.\nIndustrial sales grew 42% with organic sales growth of 35%.\nOf note, second quarter total industrial sales were ahead of pre-COVID second quarter of 2019.\nAs a macro level backdrop like last quarter manufacturing PMIs in the U.S. and Euro zone remains strong, with China in the expansion territory, though not as robust as the other regions.\nNow with expanding the ongoing semiconductor issue that's dampening automotive bills, IHS predicts -- still predicts 2021 global production to be up 10% over the last year and up an additional 11% in 2022.\nWith respect to new platform launches and major refresh programs of light vehicles, 2021, 2022 and 2023 are forecast to be sustained at a healthy level.\nWithin our Molding Solutions business, we saw a good orders quarter up 17% organically.\nAutomotive, Packaging and Personal Care, each saw double-digit orders growth, with Automotive being particularly strong.\nMedical mold orders took a dip in the quarter, not an unusual dynamic as these large ticket products can be somewhat lumpy.\nOrganic sales were up 22% year-over-year, while sequential sales were up 13%.\nOn many occasions, you've heard me talk about investments in growth that we're making across the businesses to drive our sales and marketing efforts, innovation, and new product development.\nRecently I discussed the launch of our new vacuum gripper technology in our Automation business.\nAt Molding Solutions, we are also working hard to expand our leading technology-based solutions across multiple end markets.\nA prime example relative to the public health crisis we've all experienced over the last year or so, is our mold technology serving the global medical market and our investment and development of a new product offering known as Pipette Tips.\nPipette tips are a high volume critical item used in the world of laboratory diagnostics for collecting a precise amount of liquid and transferring it to a test apparatus.\nThis market has expanded recently in order to meet the enormous demand brought on by the pandemic.\nOur customers require a technology-based solution that consistently delivers high output rates with extremely tight tolerances.\nThe pipette tip's geometry must be precise to ensure the test results are both accurate and reliable.\nOur Molding Solutions business has developed a mold concept, specifically for production of pipette tips, which not only meets strict technical requirements, but also focuses on superior reliability, and ease of maintenance.\nTo maximize up time in an operation that runs 24 hours a day, seven days a week, the configuration of the mold allows for required maintenance of worn parts to occur right on the machine to replaceable modular units or clusters allowing for minimum disruption and production to come quickly back online.\nDelivering leading technology-based solutions such as the pipette tip mold system, and focusing on customer success allows our Molding Solutions business to demonstrate extraordinary value.\nTo close my Molding Solutions comments, our sales outlook has improved once again, as we now forecast organic sales growth in the mid-teens, a bit better than our prior view.\nAt Force and Motion control organic orders were up over 50% with organic sales up double digits.\nFMC's two major end markets, sheet metal forming and general industrial, both saw robust orders and sales growth.\nOn a sequential basis, sales increased 6%.\nWe continue to see full-year 2021 organic sales growth to be up mid-teens.\nEngineered Components once again generated high double-digit organic orders and revenue growth on a year-over-year basis.\nSequentially, we saw a modest step in orders and sales as automotive semiconductor issues weigh on automotive end markets.\nAs a result of this issue, we saw our second quarter revenue impact of approximately $5 million, very much aligned with the exposure we disclosed in April.\nWe expect the third quarter semiconductor revenue impact of $3 million and another $1 million in the fourth quarter.\nOur general industrial markets remained very healthy and are helping to mitigate some of the impact.\nOur outlook for organic sales growth is now forecast to be up in high-teens, a step up from our prior view of mid-teens growth.\nAt Automation, as economies rebound, the migration toward industrial robotics, a more complex end-of-arm tooling solutions continues to be favorable.\nOn a year-over-year basis, organic orders and sales growth were well into the double digits.\nSequential growth in orders and sales also continues along a healthy trend.\nWe now expect 2021 to deliver organic growth of approximately 20%, better than our April expectation of mid-teens growth.\nTo wrap up on Industrial, clearly our year-over-year growth rates across the segment compared favorably to last year's second quarter, which was the trough quarter relative to the impact of the pandemic.\nComparables gets more difficult over the next few quarters, though we expect to perform well.\nAt Industrial, we see 2021 organic growth in the mid-teens with operating margins of 12% to 13%.\nOur margin expectation is down slightly as we continue to make strategic investments in our people, products and systems.\nHowever, we view these investments as critical to setting us up for long-term growth and profitability.\nAdditionally, in the near-term, we are managing supply chain challenges, which Julie will address in a moment.\nIt's fair to say that the environment continues to improve.\nAirbus and Boeing narrow-body production levels are anticipated to increase meaningfully, although wide-body recovery is still a way off.\nGlobal traffic and capacity trends are improving and that all bodes well for a strengthening aftermarket.\nAt the segment level we've been seeing good sequential sales growth and expect that trend to continue.\nAnd beginning this quarter, we'll see favorable year-over-year comparisons as we move through the year.\nAerospace sales improved 23% over last year and 6% sequentially from the first quarter.\nOEM led the growth while aftermarket was down modestly, which we believe is simply timing.\nA highlight of the quarter was our strong OEM orders which generated a book-to-bill of 2.5 times.\nThat's three quarters in a row with a strong order to book.\nThis reflects our customer's confidence in a narrow body ramp, as most of the order volume relates to the LEAP engine platform.\nOur 2021 outlook for Aerospace is unchanged from our prior view.\nTotal Aerospace sales are expected to be up low-single digits.\nWithin the segment, OEM sales are forecast to be up mid-single digits, MRO down low-single digits, and spare parts down in the mid-teens.\nSegment operating margin is anticipated to be 13% to 14%, slightly higher than our April outlook.\nIn closing, the second quarter finished with excellent results, positive momentum and a healthy outlook for the remainder of the year.\nSeveral growth initiatives are been driven across the organization to help advance our recovery, and position us to execute on our profitable growth strategy.\nWhile supply chain and inflation risks are present, our teams are doing a good job mitigating the impacts, and implementing pricing actions as appropriate.\nWe remain confident in the strength of our end markets and our team's ability to convert that into new business opportunities.\nNow, let me pass the call over to Julie Streich, our new Senior Vice President and Chief Financial Officer, for details on our quarterly performance.\nJulie brings to us a highly qualified business background and proven leadership in corporate finance.\nWe're very happy to have you as part of our team.\nI'm happy to be here and look forward to working with you and the leadership team as we accelerate the ongoing transformation of our portfolio.\nIt's an exciting time for Barnes and its likewise exciting to be part of cresting the go-forward story.\nLet me begin with highlights of our second quarter results on Slide 6 of our supplement.\nSecond quarter sales were $321 million, up 36% from the prior year period, with organic sales increasing 31% and foreign exchange generating a positive impact of 5%.\nAs the impacts of the pandemic lessen, our well-positioned businesses are seeing recovery in almost all our end markets.\nOperating income was $38.5 million versus $10.1 million a year ago.\nOn an adjusted basis, which excludes restructuring charges of $700,000 this year and $17.7 million last year, operating income of $39.2 million was up 41% and adjusted operating margin of 12.2% was up 40 basis points from a year ago.\nInterest expense was $4.5 million, an increase of $600,000 as a result of a higher average interest rate, offset in part by lower average borrowings.\nWe'll see a sequentially lower average interest rate beginning in the third quarter as our debt-to-EBITDA ratio has improved, driven by the recovery in our business and active cash management.\nFor the quarter, our effective tax rate was 25.3%, compared with 89% in the second quarter of 2020, and 37.6% for full year 2020.\nAs compared to the full year 2020 rate, our second quarter tax rate is benefiting from the absence of tax expense related to the sale of the Seeger business in 2020, a net benefit related to certain foreign tax matters in the current year quarter, and a favorable mix in earnings based on tax jurisdictions.\nNet income was $24.5 million or $0.48 per diluted share compared to $600,000 or $0.01 per diluted share a year ago.\nOn an adjusted basis, net income per share of $0.45 was up 67% from $0.27 a year ago.\nAdjusted net income per share in the current quarter excludes $0.01 of restructuring charges and a net foreign tax benefit of $0.04, while the prior-year period excludes $0.26 of restructuring charges.\nNow I'll turn to our segment performance, beginning with Industrial.\nSecond quarter Industrial sales were $235 million, up 42% from a year ago, while organic sales increased 35%.\nAs Patrick noted, the strong growth reflects volume increases across all our SBUs.\nFavorable foreign exchange increased sales by $12.4 million or 7%.\nAs has been the case since June of last year, we have delivered another sequential quarter of sales improvement with second quarter sales up 7% from the first quarter of 2021.\nIndustrial's operating profit was $27.3 million versus an operating loss of $300,000 last year.\nExcluding restructuring costs of $200,000 this year and $15.8 million last year, adjusted operating profit was $27.5 million versus $15.5 million a year ago.\nAdjusted operating profit benefited from the contribution of higher organic sales volumes and the continuing impact of cost actions taken last year.\nPartially offsetting these items were higher personnel costs, primarily incentive compensation, and costs incurred in support of segment growth initiatives.\nAdjusted operating margin was 11.7%, up 230 basis points from a year ago.\nSupply chain concerns including raw material availability, inflation, and increased freight costs continue to be a watch item.\nWe do have raw material escalation clauses in certain long-term contracts, and are able to price newly quoted business to account for increasing costs.\nWe continue to work these issues and are taking steps to mitigate our risk exposures.\nIn the second quarter, we experienced approximately $1.5 million of combined freight and material inflation in the Industrial segment.\nFor the second half of 2021, our Industrial outlook includes $2 million of inflation impacts.\nMoving now to Aerospace.\nSales were $86 million, up 23% from a year ago, driven by a 37% increase in our OEM business.\nOur aftermarket business which continues to be impacted by lingering effects of the global pandemic, experienced a 2% sales decrease, with MRO down 8% and spare parts up 14%.\nWe expect the aftermarket to sequentially improve as we move through the second half of the year.\nOn a sequential basis, total Aerospace sales increased 6% from the first quarter of 2021.\nOperating profit was $11.3 million, an increase of 8%.\nExcluding $400,000 of restructuring cost this year and $1.9 million last year, adjusted operating profit was $11.7 million, down 5%, driven by higher incentive compensation and unfavorable mix.\nAdjusted operating margin was 13.5%, down 400 basis points from a year ago.\nAerospace OEM backlog ended June at $694 million, up 16% from March 2021, and we expect to ship approximately 40% of this backlog over the next year.\nMoving to cash flow performance.\nYear-to-date cash provided by operating activities was $86 million versus $123 million last year, with free cash flow of $68 million, down from $103 million last year.\nCapital expenditures were $18 million, down $2 million from a year ago.\nYear-to-date operating cash flow in 2020 saw a $48 million benefit from working capital, as cash management with a significant focus during the pandemic.\nWhile we have seen a modest working capital improvement in the first half, we won't see the same benefit in 2021 as we did last year as business rebounds.\nRegarding the balance sheet, our debt-to-EBITDA ratio as defined by our credit agreement was 2.9 times at quarter end, down from 3.1 times at the end of last quarter.\nOur second quarter average diluted shares outstanding were $51.1 million.\nDuring the second quarter under a pre-existing 10b5-1 plan, we repurchased 100,000 shares at an average price of $52.29, leaving approximately 3.6 million shares remaining available for repurchase under the Board's 2019 stock repurchase authorization.\nTurning to Slide 7 of our supplement, let's discuss our updated financial outlook for 2021.\nWe now expect organic sales to be up 11% to 12% for the year, an increase from our prior view of up 10% to 12%, driven by strong Industrial growth.\nFX is expected to have about a 2% favorable impact on sales, while divested Seeger revenues will have a small negative impact.\nAdjusting op-- Adjusted operating margin is forecasted to be approximately 13%, consistent with our prior year.\nWe currently expect a small amount of residual restructuring charges to come through, which we will take as an adjustment to 2021 net income.\nAdjusted earnings per share is expected to be in the range of $1.83 to $1.98 per share, up 12% to 21% from 2020's adjusted earnings of $1.64 per share.\nOur current expectation reflects an increase at the lower end of our previous range of $1.78 to $1.98 and we expect second-half earnings per share to be weighted to the fourth quarter.\nRounding out a few other items.\nOur interest expense forecast remains $16 million, while our other expense is forecast at $6.5 million, slightly less than our April outlook.\nEstimated capex of $50 million, average diluted shares of $51 million and a full year tax rate of 30% are all consistent with our prior outlook.\nCash conversion is now anticipated to be greater than 110%, an increase over our prior expectation of 100%.\nIn closing, we continue to drive solid revenue gains across the organization and expect further improvement.\nWith many of our end markets demonstrating sustained recovery, our businesses are positioned to seize upon the opportunities presented by a stronger economy.\nImproving financial performance, good cash generation, and a supportive balance sheet sets us up for a good second half of the year.\nWith a clear focus on executing our profitable growth plan, we'll continue to fund our strategic initiatives and pursue accretive acquisitions that will help us deliver superior performance over the long-term.\n",
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"content": "barnes group q2 adjusted earnings per share $0.45.\nq2 adjusted earnings per share $0.45.\nq2 gaap earnings per share $0.48.\nq2 sales $321 million versus refinitiv ibes estimate of $304.2 million.\n2021 adjusted earnings per share outlook of $1.83 to $1.98.2021 sales growth expectation increased to 13% to 14% with organic sales growth of 11% to 12%.\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 discussion today includes certain non-GAAP financial measures, which provide additional information we believe is helpful to investors.\nThese measures have been reconciled to the related GAAP measures in accordance with SEC regulations.\nPlease consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the SEC.\nFor the third quarter, Barnes Group delivered respectable financial performance as we continue to manage through the challenging environment presented by the ongoing global COVID-19 pandemic.\nWe generated earnings per share toward the high end of our July outlook, and our cash generation continues to be good.\nWe also saw incremental sales growth in both of our operating segments over the quarter, with promising signs of recovery in our industrial business, and the moving on from what we believe was the second quarter revenue trough in our Aerospace business.\nClearly, there remains a lot of uncertainty, but we can see signs of a path to recovery with more clarity.\nGiven our strong management team and thoughtful actions, we expect to drive profitable performance throughout this challenging period, while maintaining a sharp focus on accelerating our key strategic initiatives to position the business for future growth.\nFor the third quarter, total sales decreased 28% over the prior year period with organic sales down 26%, driven by lower volumes given the pandemic's impact on our end markets.\nOn a positive note, total sales did improve 14% sequentially from the second quarter, primarily driven by the performance of our Industrial segment.\nAdjusted operating income decreased 53% compared to a year ago, while adjusted operating margin declined 640 basis points to 11.7%.\nEarnings per share were $0.30, down 66% from last year, obviously, significant declines from a year ago, but somewhat better than expectations we laid out in July.\nMore importantly, total sales improved sequentially through the quarter.\nAt the same time, cash performance was once again solid, and our leverage continues to remain manageable.\nOngoing cost management and further working capital improvements in the quarter also helped to mitigate some of the impact of lower demand.\nMoving now to a discussion of our business segments and end markets.\nAt Industrial, we're seeing some of our end markets exhibiting positive signs of recovery, coinciding with what has been a rapid increase of manufacturing PMIs.\nU.S. and Europe PMIs have risen substantially from the second quarter lows, and China has strengthened to its already favorable reading.\nExiting the third quarter, all had solid PMI readings of 53 or better.\nOverall, segment book-to-bill was slightly better than one times and orders grew 24% sequentially from the second quarter.\nIn our Molding Solutions business, sales of medical molds and hot runners remained solid.\nAnd for the second consecutive quarter, we saw a nice year-over-year pickup in both packaging and personal care orders, reflecting the release of previously deferred projects.\nCorrespondingly, we generated a sequential sales increase in both of these end markets in the quarter.\nIn our automotive hot runner business, while sales were relatively flat to the second quarter, order saw a sequential bump as a few postponed projects were released.\nWe're seeing this market slowly ramping, in part driven by the influence of new electric vehicles.\nIn our Force & Motion Control business, sheet metal forming market saw a modest sequential improvement in orders and sales, while general industrial orders and sales likewise trended positively.\nAt Engineered Components, general industrial end markets experienced the meaningful sequential bump in orders and sales, another positive signal and fully aligned with the trend in manufacturing PMIs.\nOur global automotive production markets saw the most sequential improvement, which was foreshadowed by the positive auto production forecast trend we highlighted last quarter.\nWhile global automotive production is still anticipated to be meaningfully down in 2020, next year's growth is projected to be up in the mid-teens.\nIn our Automation business, we saw a solid quarter of performance with both year-over-year and sequential improvement in orders and sales.\nDemand for our end-of-arm tooling solutions and various automotive applications saw a nice bounce, while precision grippers for medical and pharma applications also remained a bright spot.\nFor the segment, we continued to forecast sequential orders and sales improvement into the fourth quarter as the recovery progresses, albeit at a measured pace.\nMoving now to our Aerospace business.\nIn the third quarter, total Barnes Aerospace sales were down nearly 50% with OEM down 44% and aftermarket down 58%.\nCommercial aviation remained significantly disrupted by the global pandemic, yet passenger traffic has improved from the lows of April.\nIn the short-term, we expect our OEM business to see soft demand for its manufactured components as aircraft production rates of both Boeing and Airbus have been lower.\nAlthough we expect our OEM sales to improve sequentially in the fourth quarter, getting back to pre-pandemic levels is forecasted to take several years.\nIn the aftermarket, lower aircraft utilization and weakened airline profitability will no doubt result in a slow recovery as less maintenance is required and/or gets deferred.\nHowever, as commercial flights return with domestic traveling -- travel happening sooner than international demand, we anticipate volumes in our aftermarket business to gradually pick-up.\nFor the fourth quarter, we forecast flattish sequential aftermarket sales.\nDespite a second consecutive quarter of 50% down sales, Aerospace delivered adjusted operating margin of close to 10%, a tribute to the quality of the team.\nAlso, while addressing the substantial day-to-day challenges of the current environment, Barnes Aerospace improved its position by securing a long-term agreement with GE Aviation for the manufacturer of existing and additional components on the LEAP engine program.\nWith this agreement, we'll employ our expertise and technology in the machining and assembly of complex hot section engine components.\nThe agreement provides for an increase of production share for select parts on LEAP engine programs, extends the term of previous agreements by 10 years for select parts and expands our portfolio of components on LEAP engines.\nInclusive of the contract extension benefit, the estimated sales is over $700 million through 2032.\nJust before I close today, I'd like to take a few minutes to talk about another very important aspect of our business, which is Environmental, Social and Governance or ESG matters and to highlight the progress we are making.\nAt Barnes Group, we are committed to being an exemplary corporate citizen, and we take that responsibility very seriously.\nIn doing so, over the last several years we've worked to further our ESG progress and have recently published our sixth annual ESG corporate social responsibility report.\nYou can find our report and a summary of our ESG efforts on our company website under About BGI.\nAt Barnes, we began our ESG journey several years ago by educating ourselves on the global standards for measuring and reporting sustainability progress.\nBarnes Group's ESG efforts are currently focused on aligning our sustainability actions around the Global Reporting Initiative or GRI.\nThe GRI is a common language used by organizations to report on their sustainability impacts in a consistent and credible way.\nOur teams are engaged in several projects that will illustrate to our varied stakeholders how we are striving to meet those sustainability standards.\nI'm also proud to report that we have recently established environmental targets for 2025.\nAs a company, we will work to reduce the energy we use in our factories as measured in carbon dioxide equivalents by 15%, reduce the amount of water we use by 20% and reduce the amount of industrial process waste we generate from our manufacturing operations by 15%.\nThese efforts are a testament to our Barnes Enterprise System.\nReducing all types of waste and inefficiencies to achieve operational excellence is the hallmark of our operating system and demonstrates our commitment to running sustainable businesses that conserve natural resources, while minimizing the impact of our footprint on the environment.\nSo to conclude, we continue to effectively manage our business as we deal with the disruptive effects of the pandemic on our end markets.\nAcross the company, we've been focused on the safety of our employees, protecting profitability and driving cash performance.\nAt the same time, we are pursuing various opportunities for growth, like the recent GE deal, to better position Barnes Group to leverage the speed at which we exit the current downturn.\nAs difficult as the last couple of quarters have been, I am very proud of the Barnes team and encouraged by the direction of our progress.\nAnd while the level of uncertainty remains elevated, I am very optimistic that our end markets have begun the recovery and that the future looks promising.\nLet me begin with highlights of our 2020 third quarter results.\nThird quarter sales were $269 million, down 28% from the prior year period, with organic sales declining 26%.\nAs you'd expect, the severe demand disruption brought on by the global pandemic continues to impact many of our end markets.\nAs we previously mentioned, we view the second quarter as the sales low point, with modest recovery commencing in Q3 led by Industrial, which is indeed, what we're seeing.\nWe saw a 14% sequential improvement in sales relative to the second quarter.\nHowever, on a year-over-year basis, the pandemic impact remained significant.\nAlso, influencing our sales results, the divestiture of Seeger had a negative impact on sales of 4%, while FX had a positive impact of 2%.\nOperating income was $31.2 million as compared to $67.6 million in last year's third quarter.\nOperating margin was 11.6%, down 650 basis points.\nInterest expense of $3.7 million decreased $1.6 million from the prior year period due to lower average borrowings and a lower average interest rate.\nOther expense decreased by $2.5 million from a year ago as a result of favorable FX.\nThe company's effective tax rate for the third quarter of 2020 was approximately 44% as compared to 23.4% for the full year 2019.\nThe increase in the third quarter's tax rate over last year's is primarily due to a change in the forecasted geography sources or the geographic sources of income with reductions incurring in several low tax jurisdictions, and the impact of global intangible low tax income, commonly referred to as GILTI.\nOur current expectation for the full year 2020 tax rate is approximately 39%, which includes the recognition of tax expense related to the Seeger sale that occurred in the first quarter.\nAs we look out to next year, given where things stand today, we expect our 2021 tax rate to be in the range of approximately 27% to 29%.\nNet income for the third quarter was $0.30 per diluted share compared to $0.89 a year ago.\nLet me now move to our segment performance, beginning with Industrial.\nThird quarter sales were $197 million, down 15% from a year ago.\nOrganic sales decreased 12%, Seeger divested revenues had a negative impact of 6%, while favorable FX increased sales by 3%.\nOn the positive side of the ledger, total Industrial sales increased 19% sequentially from the second quarter.\nIndustrial's operating profit for the third quarter was $24.4 million versus $34.8 million last year.\nLike last quarter, the primary driver is lower sales volume, offset in part by our cost mitigation efforts, which included the previously announced workforce-related actions and the curtailing of discretionary spending.\nOperating margin was 12.4%, down 260 basis points.\nI'll close my Industrial discussion with quarterly organic orders and sales relative to last year.\nMolding Solutions organic orders and sales were down approximately 10%.\nForce & Motion Control organic orders were down mid-teens and sales down approximately 20%.\nEngineered Components organic orders were up 8% with sales down approximately 10%.\nAnd Automation organic orders were up high-teens with sales up low-single-digits.\nClearly the business remains under considerable pressure.\nSales were $72 million, down 49% from last year.\nOperating profit was $6.8 million, down approximately 80%, reflecting the lower sales volume and partially offset by cost actions.\nOperating margin was 9.4% as compared to 23.2% a year ago.\nOn an adjusted basis, excluding $300,000 in restructuring charges, operating margin was 9.9%.\nBetween the volume impact on factory absorption and the unfavorable aftermarket mix, the Aerospace team did a nice job to protect profitability.\nAerospace OEM backlog ended the quarter at $534 million, down 4% from June 2020, and we expect to ship approximately 45% of this backlog over the next 12 months.\nYear-to-date cash provided by operating activities was $163 million, an increase of approximately $2 million over last year-to-date, driven by ongoing working capital improvements.\nWe continue to have good receivable collections, and we began to see reductions in inventory levels.\nYear-to-date free cash flow was $133 million versus $124 million last year.\nAnd year-to-date capex was $30 million, down approximately $8 million from a year ago.\nWith respect to our balance sheet, our debt-to-EBITDA ratio, as defined by our credit agreement, was 2.8 times at quarter end, up from 2.4 times at the end of June.\nThe company is in full compliance with all covenants of our credit agreements and maintained sufficient liquidity to fund operations.\nAs we announced last week, the company has amended on a temporary basis the debt limits allowed under our credit agreements.\nFor the next four quarters, our senior debt covenant maximum, our most restrictive covenant, has increased from 3.25 times EBITDA as defined to 3.75 times.\nGiven the level of uncertainty in several of our end markets, we believe that is a prudent risk mitigation action.\nOur third quarter average diluted shares outstanding was 50.9 million shares.\nOur share repurchase activity remains suspended.\nFor the fourth quarter, we expect organic sales will be lower than last year by approximately 20%, though up approximately 5% sequentially from the third quarter.\nOperating margin is forecasted to be approximately 11%, while adjusted earnings per share are anticipated to be in the range of $0.27 to $0.35.\nForecasted 2020 capex is approximately $40 million, a bit lower than our prior view.\nSo to close, while significant challenges remain in the current business environment, we're focused on managing those items that we can control, whether they be growth opportunities, cost actions or cash management.\nAll things considered, our financial performance demonstrates that focus.\nAs Patrick mentioned, the sentiment is that we're starting to turn the corner on a recovery.\nAnd while much work is still to be done, our efforts on positioning the company to best leverage and improving environment continues.\nOperator, we'll now open the call to questions.\n",
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"content": "compname says operating margin is expected to approximate 11% for q4.\nq3 gaap earnings per share $0.30.\nq3 sales $269 million versus refinitiv ibes estimate of $245.6 million.\nsees q4 2020 adjusted earnings per share $0.27 to $0.35.\nfor q4 of 2020, will continue to be impacted by covid-19 global pandemic.\ncurrent view is for q4 organic sales to be lower than last year's q4 by approximately 20%.\nadjusted earnings per share are anticipated to be in range of $0.27 to $0.35 for q4.\nfull year 2020 capital expenditures forecast of $40 million is down slightly from prior view.\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 discussion today includes certain non-GAAP financial measures, which provide additional information we believe is helpful to investors.\nThese measures have been reconciled to the related GAAP measures in accordance with SEC regulations.\nPlease consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the SEC.\nThen Julie will provide a review of our financial results and details of our updated outlook for 2021.\nBarnes Group delivered a very good third quarter of financial performance with 20% organic sales growth, a 180 basis points increase in adjusted operating margin, and an 80-plus percent increase in earnings per share year-over-year.\nSequentially, each of those metrics improved as well.\nClearly, last year was highly impacted by the global pandemic.\nNonetheless, the demand environment overall improved across the portfolio, as each of our SBUs generated double-digit organic sales growth.\nSimilarly, orders were seasonally good as we generated a book-to-bill of 0.9 times for both industrial and aerospace.\nIndustrial book-to-bill in the third quarter is typically impacted by the summer holiday season, particularly in Europe.\nThat said, the ongoing impact of auto semiconductors lingered, and I'll address that in more detail shortly.\nIn Aerospace, orders were healthy for a fourth straight quarter.\nMoving to our segment discussion beginning with Industrial.\nOrganic sales growth was 17% while organic orders growth was 3%.\nAs we exited the third quarter, manufacturing PMIs in the U.S. and Eurozone remain well in expansionary territory.\nSo, not as is robust as they were entering the quarter.\nChina continues to hover around the neutral 50 mark.\nThe continuing semiconductor issue affecting automotive builds has worsened prompting IHS to make a significant downward adjustment to their global automotive production forecast in September.\nRelative to their prior view, 2021 production was reduced by 5 million units or 6%, and 2022 was reduced by 8.5 million units or 9%.\nThe decrease corresponds for customers expanding shutdowns, and pushing out demand for our products.\nFor 2022, IHS expects global auto production to grow 11% over this year, so still a rebound.\nSupply chain disruptions including expanded raw material lead times, inflation and freight costs have also persisted throughout the quarter.\nAnd we expect them to continue through the remainder of the year, and into the first half of 2022.\nIn spite of the headwinds, the industrial team has done a great job to improve margins both year-over-year and sequentially.\nOperating margin was 13%, up 60 basis points from a year ago and 130 basis points sequentially.\nInflationary pressures have been mitigated to the extent possible through pricing actions and raw material pass-through arrangements.\nOur Barnes Enterprise System has been employed to create various cost savings.\nWhile our July outlook contemplated $2 million of second half inflation pressure, we saw approximately $2.5 million in the third quarter.\nAnd we now forecast a similar amount in the fourth quarter.\nWithin Molding Solutions, organic orders were up low-single digits with medical rebounding of year-over-year and sequentially.\nAutomotive orders were solid up mid-teens, driven by a strong quarter in Asia.\nPackaging and personal care orders were soft compared to a year ago.\nWith respect to organic sales, we generated a 15% increase over the prior year quarter.\nPersonal care and medical saw good sales growth, while automotive was particularly strong.\nHowever, with anticipated supply chain factors in mind, our organic sales growth outlook has been trimmed to the low-teens for the full year, a bit softer than our prior view.\nAt Force & Motion Control, organic orders were up 27% with organic sales up 24%.\nOn a sequential basis, sales and orders were approximately flat.\nOur largest end market with this business sheet metal forming saw a robust orders and sales growth year-over-year.\nAnd the same is true for our industrial end markets within FMC.\nSupply chain disruptions including freight delays are expected to influence near term customer orders.\nNonetheless, our full-year 2021 organic sales growth is up slightly from our prior view with a revised expectation of up high teens.\nEngineered Components once again generated solid organic sales growth on a year-over-year basis, up 15%, primarily driven by industrial end markets.\nOur automotive production end market sales were up modestly.\nThough the third quarter saw semiconductor and supply chain issues intensify, impacting both orders and sequential sales growth.\nThe automotive semiconductor issue impacts this business the most.\nAnd we saw a third quarter pushout of approximately $6 million in revenue, which was doubled what we anticipated.\nWe now forecast our fourth quarter impact of a similar $6 million.\nGeneral Industrial markets remained very healthy and are helping to mitigate some of the semiconductor impact.\nFor Engineered Components, our full-year organic sales growth is now estimated to be up in the mid-teens, a bit lower than our prior year.\nAs noted earlier, with seasonal effects year-over-year organic orders were flat.\nHowever, we continue to expect 2021 to deliver organic growth of approximately 20% on par with our July expectation.\nTo close my industrial discussion, the business delivered really good third quarter performance.\nAs we look forward, the near-term challenges of the current operating environment appear likely to persist.\nThat said, the team is working diligently to lessen the various headwinds space in the business.\nFor the segment we forecast 2021 organic growth in the mid-teens consistent with our prior view.\nWe now anticipate operating margins of 11.5% to 12%, a bit softer than our prior expectation with the decline primarily driven by the current economic environment.\nMoving to Aerospace, sales improved 30% over last year and 8% sequentially from the second quarter.\nOur Original Equipment manufacturing and aftermarket businesses each generated excellent results.\nAdjusted operating margin improved 490 basis points from a year ago and 130 basis points sequentially.\nThe Aerospace environment continues to show recovery progress.\nGlobal passenger traffic and flight activity are expected to increase further as the international markets reopened.\nAerospace freight markets continue to be strong.\nAll of that contributes to a strengthening aftermarket.\nCorrespondingly, our sequential sales growth has been good and we expect that trend to continue.\nSolid order activity continued in the third quarter with total orders of approximately 70% versus a year ago.\nOEM orders were up approximately 80% with the aftermarket being up approximately 50%.\nWithin the aftermarket, MRO was up 40% plus and spare parts up 70%.\nOur 2021 outlook for Aerospace is for total sales to be up low-single digits.\nWithin the segment, OEM sales are forecast to be up mid-single-digits, MRO down low single-digits and spare parts down in the low to mid-teens.\nThe latter a bit better than our July view.\nSegment operating margin is anticipated to be approximately 14%, slightly higher than our prior outlook benefiting from the better spare parts mix.\nIn closing, a solid third quarter financial performance in the face of some accumulating pressures as we look ahead, we're taking the necessary steps to limit the risks noted with our primary focus on pricing initiatives and other actions directed to cost management.\nOverall, we are positive in the ongoing demand we are seeing from our customers, and the underlying strength of our end markets.\nMoving forward, our growth investments in strategic marketing and our sales force, digitalization and innovation should enhance our ability to power up the recovery curve and allow us to deliver further stakeholder value.\nNow, let me pass the call over to Julie for details of our quarterly performance.\nLet me begin with highlights of our third quarter results on Slide 5 of our supplement.\nThird quarter sales were $325 million, up 21% from the prior year period with organic sales increasing 20%.\nAdjusted operating income was $43.9 million, up 39% from $31.5 million last year.\nWhile adjusted operating margin was 13.5% up 180 basis points from a year ago.\nOur adjusted results include a small amount of restructuring in both the current and prior year quarters.\nInterest expense was $4 million, an increase of $300,000 over last year as a result of a higher average interest rate, offset in part by lower average borrowings.\nAs we foreshadowed a quarter ago, we saw sequentially lower interest expense as our debt-to-EBITDA ratio has continued to improve, driven by the recovery in our business and active cash management.\nSequentially, our interest expense was lower by $448,000.\nFor the quarter, our effective tax rate of 27.6% compared with 44.1% in the third quarter of 2020 and 37.6% for full year 2020.\nAs compared to the full year 2020 rates, our third quarter rate is benefiting from the absence of tax expense related to the sale of the Seeger business in 2020, a benefit relating to the tax basis of goodwill at Automation, the positive resolution of a foreign tax matter in the current year quarter and a favorable mix in earnings based on tax jurisdictions.\nThese items were partially offset by a charge relating to U.K. legislative changes.\nNet income was $27.9 million or $0.55 per diluted share compared to $15.4 million or $0.30 per diluted share a year ago.\nNow I'll turn to our segment performance beginning with Industrial.\nThird quarter Industrial sales were $232 million, up 18% from a year ago, while organic sales increased 17%.\nLike last quarter the solid growth reflects volume increases across all our SBUs.\nFavorable foreign exchange increased sales by approximately 1%.\nSequentially sales decreased slightly as they were further impacted by the semiconductor and supply chain issues that Patrick mentioned.\nIndustrial operating profit was $30.1 million, up 23% from $24.4 million last year.\nOperating profit benefited from the contribution of higher sales volumes, offset in part by higher personnel costs, which include incentive compensation higher sourcing costs, inclusive of freight and ongoing costs incurred in support of segment growth initiatives.\nOperating margin was 13%, up 60 basis points from a year ago and 130 basis points sequentially.\nMoving now to Aerospace, sales were $94 million, up 30% driven by a 23% increase in our OEM business and a 46% increase in our aftermarket business.\nOperating profit was $13.6 million doubling the $6.8 million in last year's third quarter.\nExcluding a small amount of restructuring in the current and prior year period, adjusted operating profit was up 95% from a year ago.\nAdjusted operating profit benefited from the contribution of higher sales volumes and favorable productivity offset in part by higher personnel costs including incentive compensation.\nAdjusted operating margin was 14.8%, up 490 basis points from last year and 130 basis points sequentially.\nAerospace OEM backlog ended September at $665 million, down 4% from June 2021 and we expect to convert approximately 40% of this backlog to revenue over the next year.\nBefore moving to our cash flow discussion, I'd like to make you aware of an adjustment to our reported backlog.\nDuring the quarter, we noted that our June backlog included a portion of unshipped orders that had already been recognized in revenue under percentage of completion.\nAccordingly, a downward adjustment of $46 million at Industrial and $19 million at Aerospace was made during the third quarter.\nThis adjustment is reflected in our September ending backlog and no further adjustments are anticipated.\nEarlier reported sales, orders and book-to-bill were not impacted.\nMoving to cash flow performance, year-to-date cash provided by operating activities was $128 million versus $164 million last year with free cash flow of $101 million, down from $134 million last year.\nCapital expenditures were $27 million, down approximately $3 million from a year ago.\nAs a reminder, year-to-date operating cash flow in 2020 saw an approximate $60 million benefit from working capital as cash management was a significant focus during the pandemic.\nRegarding the balance sheet, our debt to EBITDA ratio, as defined by our credit agreement was 2.6 times at quarter end, down from 2.9 times at the end of last quarter.\nOur third quarter average diluted shares outstanding were 51.1 million during the third quarter, we did not repurchase shares and approximately 3.6 million shares remain available under the Board's 2019 stock repurchase authorization.\nTurning to Slide 6 of our supplement, let me provide you with our updated financial outlook for 2021.\nOrganic sales are forecast to be up 11% to 12% for the year consistent with our prior view.\nForeign exchange is expected to have about a 2% favorable impact on sales, while divested Seeger revenues will have a small negative impact.\nAdjusted operating margin is forecast to be approximately 12.5%, down slightly from 13% in our July outlook.\nWe expect a small amount of residual restructuring charges in the fourth quarter which we will take as an adjustment to 2021 net income.\nAdjusted earnings per share is expected to be in the range of $1.83 to $1.93 per share, up 12% to 18% from our 2020 adjusted earnings per share of $1.64.\nThis expectation reflects the decrease at the top end of our previous range of $1.83 to $1.98 related to Q4 headwinds.\nA few other outlook items, our interest expense forecast remains approximately $16 million while other expense is anticipated to be $6 million, slightly less than our July outlook.\nWe expect the full year tax rate of approximately 29% excluding adjusted items, a point lower than our previous estimate.\nEstimated Capex of $40 million is down from our prior view of $50 million, average diluted shares of $51 million is consistent with our prior view.\nAnd cash conversion is now anticipated to be approximately 120%, an increase over our prior expectation of greater than 110%.\nTo close, financially, we delivered a good third quarter.\nLooking forward, as Patrick mentioned, there are some near-term economic pressures to overcome as we close out the year.\nLeveraging the Barnes Enterprise System, our team is focused on executing comprehensive mitigation plan.\nIn the meantime, our cash generation remains solid and our balance sheet supports ongoing growth investments expected to further improve financial performance and long-term shareholder value.\n",
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"content": "compname reports q3 adjusted earnings per share $0.55.\nq3 adjusted earnings per share $0.55.\nq3 gaap earnings per share $0.55.\nq3 sales rose 21 percent to $325 million.\n2021 adjusted earnings per share outlook of $1.83 to $1.93.2021 organic sales growth expectation of up 11% to 12%.\nindustrial end markets, are experiencing some headwinds as supply chain issues remain a near-term challenge.\nforeign exchange is anticipated to have an approximate 2% favorable impact on 2021 sales.\nfy operating margin is now forecasted to be approximately 12.5%.\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: Our discussion today includes certain non-GAAP financial measures, which provide additional information we believe is helpful to investors.\nThese measures have been reconciled to the related GAAP measures in accordance with SEC regulations.\nPlease consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the SEC.\nThe resiliency of Barnes Group was apparent once again this quarter as we grew sequential revenues for the second consecutive quarter and delivered adjusted earnings per share above the high end of our October outlook.\nGiven the historic challenges resulting from the global pandemic for most of 2020, I'm very proud of the many contributions of our 5,000 employees across the globe who stepped up to the challenge by going above and beyond to meet the needs of our customers and support our communities.\nAnd while I am happy with our performance, given the significance of the disruption, we at Barnes Group, remain mindful and respectful of the personal and social hardships caused by the pandemic across the world.\nFrom the onset, our response to the pandemic was structured around four phases.\nFirst and foremost, the health and safety of our employees.\nSecond, adjusting the business for the stark realities of lower demand.\nThird, anticipating and adapting to structural shifts in some of our end markets.\nAnd fourth, making key strategic investments to position Barnes Group for an economic recovery.\nWhile we moved our current -- while we have moved our current focus to Phase 4, we have not lost sight of the first three phases as they continue to be important.\nThrough 2020, one thing that has remained unchanged is our vision to be a leading global provider of highly engineered products, differentiated industrial technologies and innovative solutions serving our diversified end markets.\nFor the fourth quarter, organic sales were down 21%, primarily as a result of lower volumes given the pandemics' continuing impact on our end markets, especially at Aerospace.\nThe fourth quarter saw a 7% increase over the third quarter with both segments generating sequential sales improvement.\nAdjusted earnings per share were $0.36, down 58% from last year.\nThough, as mentioned, just above the high end of our October outlook.\nLooking at the full-year, organic sales were down 22%, while adjusted earnings per share were $1.64, down nearly 50% from a year ago.\nAs difficult as those numbers are, early cost actions and a focus on cash generation, allowed us to maintain double-digit margins, positive earnings and strong cash flow throughout the year.\nAs we turn the page on 2020, our mindset is shifting and our focus has returned to driving growth, both organically and through acquisitions.\nWith a keen focus on our strategic filters, we continue to explore enabling technologies and market-leading businesses that would complement our current portfolio with several potential targets in the pipeline being analyzed.\nWe remain enthusiastic in our pursuit of value adding transactions, that strategically advance our transformation.\nMore immediately, an emphasis on organic investments will target growth-orientated capital expenditures, research and development efforts and further build out of our newly established innovation hub capabilities.\nWhile these investments will influence margins in the short-term, they are instrumental to position the Company more favorably for the long run.\nIt's my expectation that we'll be talking frequently about our innovation and digital initiatives as we progress through 2021.\nMoving now to a discussion of end market dynamics, beginning with Industrial.\nAt Industrial, we see the continuation of favorable trends discussed on our last call.\nManufacturing PMIs in our major geographic markets remain strong and correspondingly, we've seen fourth quarter organic orders at Industrial grow 10% over a year ago.\nSequential Industrial orders were up 9% over the third quarter and segment book-to-bill was slightly better than 1 times.\nSo, as we think about our Industrial expectations for the upcoming year, we feel bullish about the prospects for this part of our business.\nMolding Solutions generated very strong orders in medical end markets, both year-over-year and sequentially, each with well over 50% growth.\nMedical sales lagged a bit in the quarter given a very challenging comparable and the timing of deliveries.\nWe see that is normal given the nature of this business and expect sales to bounce back by the second quarter.\nPackaging orders were very strong on both a year-over-year and sequential basis.\nSales were up over 20% from a year ago.\nMeanwhile, personal care orders took a dip in the quarter and sales were slightly down versus a year ago.\nHowever, sequential sales were strong increasing over 20%.\nOur Synventive business, which is predominantly automotive hot runners, saw a modest increase in orders, both year-over-year and sequentially.\nAlthough sales were relatively flat to a year ago, they were up 20% sequentially.\nAll-in, our expectations for 2021 is organic sales growth to be up in the low-double digits for Molding Solutions.\nSheet metal forming markets also continue to see a rebound, as Force & Motion Control orders were up high-single digits over last year and up high-teens over the third quarter.\nWhile sales were down modestly from a year ago, sequential sales were up in the high-single digits.\nWe forecast Force & Motion Control to generate organic sales growth in the low-double digits for 2021.\nAt Engineered Components, organic orders were up nearly 20% on a year-over-year basis, with organic sales up mid-single digits versus a year ago.\nTotal sales were up high-single digits sequentially, continuing a rebound that we've seen over the last couple of quarters.\nWith General Industrial Markets on the upswing and global automotive production forecasted to be up meaningfully in 2021, we anticipate Engineered Components to grow high-single digits organically.\nThat said, we are very mindful about the current impact semiconductor shortages are having on automotive production and we will monitor that situation carefully as it unfolds.\nLooking next at our Automation business.\nIt continues to demonstrate signs of a positive rebound as mid-single-digit orders growth over a year ago and third quarter were achieved.\nTotal sales growth was strong with both year-over-year and sequential growth of 20%.\nLike last quarter, demand for our end-of-arm tooling solutions in automotive, and medical and pharma applications remain solid.\nWe expect 2021 to deliver low-double-digit organic growth as these markets remain healthy and as we launch new innovative products.\nSpeaking of new products, as I mentioned earlier, our investments in innovation and R&D are aimed at providing a solid foundation for organic growth.\nAs an example, we recently launched our comprehensive vacuum solutions product line with complete gripping solutions, advanced control systems and high-quality components.\nThe vacuum product range consists of about 1,100 items, including high-performance suction cups, vacuum pumps, sensors and related accessories that allow our customers to handle different objects in various industrial sectors with low energy consumption and reduce downtime.\nOverall, for the Industrial segment, we see 2021 organic growth in the low-double-digit range with adjusted operating margins of 12% to 14%.\nMoving now to our Aerospace business.\nFor the fourth quarter, Barnes Aerospace sales were down nearly 40% at OEM and nearly 50% in the aftermarket from the prior year.\nNot surprising as commercial aviation remains significantly disrupted by the global pandemic, our outlook for Aerospace is certainly not as bullish as for our Industrial businesses.\nThat being said, we continue to believe the trough quarter of sales is behind us.\nWith OEM, production levels of narrow-body aircraft are expected to improve from here modestly, although wide-bodies will remain pressured.\nThe journey back to pre-COVID levels will most likely take a few years.\nThe OEM silver lining for the fourth quarter was book-to-bill of 1.6 times relative -- reflective of the strongest orders quarter since the third quarter of 2019.\nOne last point on our Aerospace business, OEM business, in particular, our estimates of OEM sales per aircraft for our major programs are unchanged from our prior view except for the 737 MAX.\nWith the award of the long-term agreement with GE Aviation on the LEAP program, mentioned on last quarter's call, we now forecast approximately $100,000 of sales per aircraft, up from our previous estimate of $50,000.\nFor the aftermarket, many of the factors discussed last quarter, lower aircraft utilization, weakened airline profitability and government imposed travel restrictions are still affecting the industry.\nRecovery will require more widespread vaccine distribution, allowing people to feel more comfortable about flying, combined with the lifting of the various travel restrictions that currently exist.\nOnly then will we see commercial flights return in earnest, likely led by domestic travel, while international flights are expected to take a little longer to resume.\nUntil then, we anticipate aftermarket volume to remain pressured.\nHowever, we do expect aftermarket activity to gradually improve beginning in the second half of 2021.\nWith that as the backdrop, for 2021, we see OEM sales up mid-single digits over 2020, with MRO down mid-single digits and spare parts down in the mid-teens.\nWe anticipate 2021 segment operating margin to be in the range of 13% to 14%, surely compressed by the lower aftermarket expectation.\nIn line with our continued focus on addressing the various topics of interest to our stakeholders, you may recall that last quarter on the topic of ESG, I took a few moments to address our commitment to make Barnes Group a more sustainable, socially responsible and diverse and inclusive Company.\nWhile we've made great progress, there's definitely more work to be done.\nRelated to our ESG efforts, I'm proud to highlight that Barnes Group was recently named as one of America's Most Responsible Companies by Newsweek.\nThis acknowledgment is a testament to our employees across the globe who embrace our Barnes Group values each and every day.\nSo, to conclude, the extraordinary disruption in 2020 required many businesses to play defense, including Barnes Group, securing employee safety, keeping our essential operations running, adjusting to the lower demand -- levels of demand, focusing on costs and preserving liquidity were of paramount importance.\nGiven the circumstances, the financial results achieved are indicative of the quick and decisive actions taken by the strong leadership team and talented workforce at Burns.\nWith the arrival of 2021, we now turn to a more offense minded view, increasing our investments in innovation, research and development and growth programs across the enterprise.\nWhile the high level of economic uncertainty still exists, we are squarely focused on controlling our own destiny, seeking out new opportunities and setting the Company up for long-term profitable growth.\nLet me begin with highlights of our fourth quarter results on Slide 4 of our supplement.\nFourth quarter sales were $289 million, down 22% from the prior year period, with organic sales declining 21% as continuing impacts from the pandemic affect our end markets.\nThe diversified Seeger business had a negative impact of 3% on our net sales for the fourth quarter, while FX positively impacted sales by 3%.\nOperating income was $32.7 million versus $61.3 million a year ago.\nAdjusted operating income was $32.9 million this year, down 48% from $63.5 million last year.\nAdjusted operating margin of 11.4% decreased 580 bps.\nNet income was $17.7 million, or $0.35 per diluted share, compared to $41 million, or $0.80 per diluted share a year ago.\nOn an adjusted basis, net income per share of $0.36 was down 58% from an $0.86 a year ago.\nAdjusted net income per share in the fourth quarter of 2020 excludes $0.01 of residual restructuring charges from previously announced actions with most of the impact reflected in other expense not operating profit.\nFor the fourth quarter of 2019, adjusted net income excludes a favorable $0.05 adjustment related to the finalization of Gimatic short-term purchase accounting and an $0.11 non-cash impairment charge related to the divestiture of Seeger, both in our Industrial segment.\nMoving to 2020 full-year highlights on Slide 5 of our supplement.\nSales were $1.1 billion, down 25% from the prior year.\nOrganic sales were down 22% for the year.\nThe Seeger divestiture negatively impacted sales by 3%, while FX had a minimal positive impact.\nOperating income was $123.4 million versus $236.4 million a year ago.\nOn an adjusted basis, operating income was $144 million this year versus $244.1 million last year, a decrease of 41%.\nAdjusted operating margin decreased 360 bps to 12.8%.\nFor the year 2020, interest expense was approximately $15.9 million, a decrease of $4.7 million as a result of lower average borrowings and lower average interest rates.\nOther expense was $5.9 million, a decrease of $3 million, primarily as a result of lower FX losses this year as compared to last year, partially offset by higher pension expense.\nThe Company's effective tax rate in 2020 was 37.6% compared with 23.4% last year, with the increase largely due to a decline in earnings in jurisdictions with lower rates, the recognition of tax expense related to the completed sale of the Seeger business during the first quarter of 2020, the impact of the global intangible low-taxed income or guilty tax on foreign earnings in the US and tax charges related to prior year's stock awards.\nFor 2020, net income was $63.4 million, or $1.24 per diluted share, compared to $158.4 million, or $3.07 per diluted share a year ago.\nOn an adjusted basis, 2020 net income per share was $1.64, down 49% from $3.21 in 2019.\nAdjusted earnings per share for 2020 excludes $0.27 of restructuring costs and $0.13 of Seeger divestiture adjustments.\nWhile 2019 adjusted earnings per share excludes $0.03 of Gimatic short-term purchase accounting adjustments and an $0.11 non-cash impairment charge related to the disposition of the Seeger business.\nTurning to our segment performance, beginning with Industrial.\nFourth quarter sales were $209 million, down 9% from a year ago.\nOrganic sales decreased 8%.\nSeeger divested revenues had a negative impact of 5%, while favorable FX increased sales by 4%.\nSequential sales were up 6% from the third quarter.\nIndustrial's operating profit for the fourth quarter was $24.5 million versus $30.2 million last year.\nAs has been the consistent theme since the second quarter, the primary driver is lower sales volume, offset in part by our cost mitigation efforts.\nOn an adjusted basis, which excludes a small amount of restructuring charges and Seeger divestiture adjustments, fourth quarter operating income was down 24% to $24.7 million and adjusted operating margin was down 230 bps to 11.8%.\nFor the year, Industrial sales were $770 million, down 18% from $939 million a year ago, with organic sales down 14%.\nThe Seeger divestiture had an unfavorable sales impact of 5%, while favorable foreign exchange had a positive impact of 1%.\nOperating profit of $66.6 million was down 42% from the prior year.\nOn an adjusted basis, operating profit was $85 million, a decrease of 30% from last year.\nAdjusted operating margin was 11%, down 200 bps.\nSales were $80 million for the quarter, down 43% from last year and operating profit was $8.2 million, down 74%, primarily driven by the lower sales volume.\nOperating margin was 10.2% as compared to 22.3% a year ago.\nAll-in, especially considering the meaningful decline in the high-margin aftermarket, the Aerospace team continues to respond well in a challenged environment.\nFor the full-year, Aerospace sales were $354 million, down 36% from a record $553 million a year ago.\nOperating profit was $56.8 million, down 54% from last year's record $122.5 million.\nOn an adjusted basis, which excludes $2.3 million in 2020 restructure charges, operating profit was $59 million and adjusted operating margin was 16.7%.\nAerospace OEM backlog ended the quarter at $572 million, up 7% from the third quarter and we expect to ship approximately 45% of this backlog in 2021.\n2020 cash provided by operating activities was $215 million, a decrease of approximately $33 million versus last year.\nNonetheless, solid performance in the current environment, given our focus on driving working capital improvement.\nFree cash flow was $175 million versus $195 million last year and capital expenditures of $41 million were down approximately $13 million from a year ago.\nRegarding the balance sheet, our debt-to-EBITDA ratio, as defined by our credit agreement, was approximately 3 times at quarter end.\nThe Company is in full compliance with all covenants of our credit agreements and maintained adequate liquidity to fund operations.\nAs a reminder, the Company amended on a temporary basis, the debt limits allowed under our credit agreement.\nThrough the third quarter of 2021, our senior debt covenant maximum, our most restrictive covenant, has increased from 3.25 times EBITDA, as defined, to 3.75 times.\nWe anticipate leverage to peak with our first quarter 2021 results, though, well below the amended covenant level.\nOur fourth quarter average diluted shares outstanding was 51 million shares and our share repurchase activity remains suspended.\nTurning to Slide 6 of our supplement, let's now discuss our initial outlook for 2021.\nWe expect organic sales to be up 6% to 8% for the year.\nFX is not expected to have a meaningful impact.\nAdjusted operating margin is forecasted to be between 12% and 14%.\nWe expect a couple of pennies worth of residual restructuring charges to come through, likely split evenly in the first and second quarters.\nAdjusted earnings per share is expected to be in the range of $1.65 to $1.90, approximately flat to up 16% from 2020's adjusted earnings of $1.64 per share.\nWe do see a higher weighting of adjusted earnings per share in the second half with a 40% first half, 60% second half split.\nIn particular, we see the first quarter of 2021 being the low quarterly point, given delivery schedules in our longer cycle business in the range of $0.27 to $0.32, significantly lower than last year's strong first quarter.\nA few other outlook items.\nInterest expense is anticipated to be between $16.5 million and $17 million.\nOther expense approximately $8.5 million driven by pension, and effective tax rate of approximately 30%.\nCapex of $55 million.\nAverage diluted shares of approximately 51 million shares and cash conversion of over 100%.\nTo close, 2020 certainly was historic in terms of business disruption.\nThe Barnes Group team rose to the occasion to rapidly adapt to the realities of the economic environment with a focus on cost management and cash generation.\nAs Patrick mentioned, it's now time to shift our mindset to growth with necessary investments in key initiatives like innovation and digital that are targeted to help us accelerate through the anticipated recovery.\nOur balance sheet is supportive of such investments and our sales volume and, as our sales volume returns, we expect further margin expansion as well.\n",
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"content": "barnes group q4 gaap earnings per share $0.35.\nq4 adjusted earnings per share $0.36.\nq4 gaap earnings per share $0.35.\nq4 sales $289 million versus refinitiv ibes estimate of $282.8 million.\nsees 2021 organic sales growth of +6% to +8%.\nsees 2021 adjusted earnings per share of $1.65 to $1.90; approximately flat to up 16% from 2020 adjusted eps.\nbarnes group - as 2021 unfolds, anticipate organic revenue growth to return for industrial business, while aerospace is expected to remain pressured.\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: While we are making those statements in good faith, we do not have any guarantee about the results we will achieve.\nDescriptions of the risk factors are included in the documents we filed with the SEC.\nAlso, we will be discussing some non-GAAP financial measures, references to adjusted items including organic net sales referred to measures that exclude items management believes impact the comparability for the period referenced.\nToday, Dave and I will discuss our strong second-quarter results as well as our perspective on how Conagra is positioned to continue to succeed in both the current environment and beyond.\nSo, let's get started.\nI'm very pleased with our strong results for the second quarter.\nOur business continue to perform well both in the absolute and relative to peers.\nOur success to date in fiscal 2021 is not only a testament to our team's ability to adapt to the current environment but a reflection of the work we've done to transform our business over the past five-plus years.\nOur ongoing execution of the Conagra Way playbook perpetually reshaping our portfolio and capabilities for better growth and better margins has enabled us to rise to the occasion during the COVID-19 pandemic.\nAnd that has positioned the business to excel in the future.\nDuring the second quarter, we continue to build on our momentum and our Q2 results exceeded our expectations across the board.\nWe had strong, broad-based sales growth, our margin expansion is ahead of schedule, and I'm proud to announce that we've reached our deleveraging targets earlier than originally planned.\nIn keeping with our Conagra Way playbook, we continue to optimize the business for long-term value creation during the quarter.\nWe made targeted investments in both production capacity and marketing support to drive the physical and mental availability of our products.\nWe also remained committed to sculpting our portfolio through smart divestments with the agreement shortly after the second quarter closed to sell Peter Pan Peanut Butter.\nPeter Pan is a very good business, but it's not an investment priority for Conagra given our other portfolio priorities.\nFinally, we are reaffirming our fiscal 2022 guidance for all metrics.\nAnd none of this would be possible without our exceptional team, particularly our frontline workers.\nSo, before we dive into the details of the quarter, I want to recognize everyone responsible for the continued extraordinary work of our supply chain.\nI'm extremely proud of the thousands of hardworking Conagra team members whose dedication has enabled our industry-leading performance.\nWe remain focused on keeping employees safe while meeting the needs of our communities, customers, and consumers.\nWith that, let's get into the business update.\nAs the table on Slide 7 shows, our second-quarter results exceeded our expectations across the board.\nWe delivered organic net sales growth of 8.1%, adjusted operating margin of 19.6%, and adjusted earnings per share of $0.81.\nThese results enabled us to reach our fiscal '21 net leverage ratio target of 3.6 times ahead of schedule.\nDuring the second quarter, we continued to drive significant growth across our retail business.\nTotal Conagra retail sales grew 10.4% year over year with strong growth across each of our snacks, frozen, and staples portfolios.\nOur results were driven by continued success in expanding our presence with consumers and gaining share.\nTotal Conagra household penetration grew 14 basis points versus a year, ago and our category share increased 26 basis points.\nCritical to our ability to sustain our growing relevancy with consumers is the physical availability of our products, whether through brick and mortar or online.\nAnd Slide 9 demonstrates how our ongoing investments in e-commerce have continued to yield results.\nIn the chart on the left, you can see the step-change in e-commerce growth for total edibles that has occurred since the onset of the pandemic.\nBut what's really impressive about this chart is the sustainability of our e-commerce performance.\nWe've retained a massive portion of the e-commerce sales we gained at the onset of the pandemic, and our results have outpaced total edible e-commerce growth each quarter.\nAs a result of our sustained success, e-commerce continued its recent trend of steadily increasing as a percentage of our total retail sales as you can see on the right.\nWhile e-commerce growth both on an absolute basis and as a percent of overall sales is not a new dynamic for Conagra, this growth has accelerated during COVID-19.\nIn addition to our continued progress in e-commerce, our new innovation generated strong performance during the second quarter.\nWhen we began this journey over five years ago, we've recognized that we had a lot of latent potential in the portfolio, it just had to be modernized.\nSo, we set out to aggressively do just that.\nAnd you'll recall that we established a goal of having 15% of our annual retail sales come from products launched within the preceding three years.\nAs you can see on Slide 10, our innovation performance has continued to exceed our 15% goal.\nWhat's equally important is the consistency of our innovation performance.\nInvestments we've made over the last five years in our innovation capabilities enabled us to continue launching new products since the pandemic began.\nCustomers trust our innovation track record and rely on our new products to drive consumer trial and overall category growth.\nSlide 11 drills down on the strength of our recent innovation performance compared to last year's first half launches.\nThe products we introduced in the first half of this year have achieved 37% more sales per UPC, and 28% more distribution points per UPC during the comparable time period.\nProduct performance highlights include Marie Calendars boast the No.\n1 branded new item in frozen indulgent single-serve meals.\nDuncan Hines has delivered the top 3 highest velocity new items in the single-serve baking, and our modernized Hungry Man brand is outpacing category growth by more than two times.\nAfter a strong first half of fiscal '21, we will introduce even more new products that will build distribution in the second half.\nExpect to hear more about our upcoming product launches at CAGNY next month.\nImportantly, our terrific frozen vegetables business returned to strong growth in the quarter as we brought on our additional capacity investments online.\nSlide 13 digs a bit deeper into our largest frozen brand, Birdseye.\nBirdseye is a cornerstone of the important frozen vegetable segment with a No.\n1 position in the category, more than twice the category share of the closest branded competitor.\nRecall that Birdseye previously faced some supply constraints as we worked to bring new capacity online.\nAnd last quarter, I noted that shipments for the brand were a bit ahead of consumption as retailers started rebuilding their inventories.\nAs you can see in the charts on Slide 13, Birdseye returned to form in Q2 as expected.\nIn addition to strong retail sales growth of 7.2% in quarter, Birdseye gained an impressive 261 basis points of share from Q1 to Q2.\nContinuing to Slide 14, you can see how Birdseye has attracted and retained more new buyers than our competition since the pandemic began.\nFrozen vegetables category remains highly relevant to consumers and we believe the steps we've taken over the past several quarters to modernize the Birdseye brand and expand capacity have positioned us well to build on our category leadership.\nTurning now to another area of strength, our leading portfolio of frozen single-serve meals had another terrific quarter.\nAs you can see on Slide 15, Conagra has outperformed peers, driven category growth, and attracted new buyers since the start of the pandemic.\nAs the chart on this slide shows, we have three of the top brands in this category from both the trial and repeat perspective.\nOur snacks business also continued to see strong growth in the quarter.\nAs you can see on Slide 16, we delivered double-digit retail sales growth on a year-over-year and two-year basis in snacking led by impressive results across the popcorn, sweet treats, and meat snacks.\nWe're not just growing, we're winning versus the competition.\nSlide 17 shows how we grew share year over year in popcorn, meat snacks, hot cocoa, and ready-to-eat pudding and gelatin in the quarter.\nOur staples portfolio also delivered solid results in Q2.\nHistorically, this portfolio has served as a -- primarily as a source of cash for us but it hasn't been looked at as a growth engine.\nBut Slide 18 shows how staples remained highly relevant to consumers in the quarter as people continue to rediscover cooking and the utility, relevance, and value of products in our portfolio.\nOur basket of the total staples category grew retail sales by 12.7% in the second quarter.\nPeople are returning to their kitchens during the pandemic and new, younger consumers are discovering the joy of cooking.\nMany of the brands on this slide including PAM, RoTel, and Hunt's are cooking utilities and ingredients.\nAs we've discussed before, the current environment has resulted in consumers trying or reengaging with our products and coming back again and again.\nAnd that takes us to what we see going forward and how our business is uniquely set up to win.\nOur execution of the Conagra Way playbook over the last five-plus years enabled us to deliver strong performance prior to the onset of COVID.\nAnd we firmly believe that our reshaped portfolio, modernized products, and enhanced capabilities have been foundational to our ability to excel during these highly dynamic times.\nWe all know that the COVID pandemic has driven an increase in at-home eating overall.\nBut for Conagra, it has also meant an acceleration of the consumer trial, adoption, and repeat purchase rates of our products.\nOur results have been strong on both in absolute and relative basis.\nThese dynamics have driven meaningful levels of incremental cash flow for our business.\nThey've also enhance the ROI of our previous disciplined investments in portfolio, capabilities, and the physical and mental availability of our products.\nImportantly, the Conagra Way is perpetual.\nWhile we've adapted to the current environment and deliver superior results, we also continue to look to the future and make smart investments to further strengthen our business.\nOur investments include continuing to modernize our products and packaging, increasing production capacity when category dynamics warrant, supporting on-shelf availability, and increased e-commerce share, and raising consumer awareness.\nTo be clear, these investments are not a reaction to the near-term environment but to see as rooted in our longer-term outlook for the business and our disciplined execution of the Conagra way.\nWe believe that Conagra is in a strong position to continue to win now and for years to come.\nWe expect that our investments, coupled with consumer adoption and the proven stickiness of our products will result in Conagra continuing to deliver long-term profitable growth.\nIn summary, we continue to see solid execution across our portfolio aligned with the Conagra way playbook in Q2 which enabled us to deliver results that exceeded our expectations.\nOur business remains strong in the absolute and relative to competition.\nAnd we expect Conagra to be in an even better position post-COVID as a result of our ongoing disciplined approach to investment and innovation.\nToday, I'll walk through the details of our second-quarter fiscal '21 performance and our Q3 outlook before we move to the Q&A portion of the call.\nI'll start by calling out a few performance highlights from the quarter which were captured on Slide 22.\nAs Sean mentioned, outstanding execution by our teams across the company enabled us to exceed expectations for net sales, margin, profitability, and deleveraging during the second quarter while we continued to invest in the business.\nReported and organic net sales for the quarter were up 6.2% and 8.1%, respectively, versus the same period a year ago.\nWe continued our strong margin performance from Q1 as Q2 adjusted gross margin increased 139 basis points to 29.9%.\nAdjusted operating margins increased 250 basis points to 19.6%.\nAdjusted EBITDA increased 16.7% to $712 million in the quarter.\nAnd our adjusted diluted earnings per share grew 28.6% to $0.81 for the second quarter.\nSlide 23 breaks out the drivers of our 6.2% second-quarter net sales growth.\nAs you can see, the 8.1% increase in organic net sales was primarily driven by a 6.6% increase in volume related to the growth of at-home food consumption.\nThe favorable impact of price mix which was evenly driven by favorable sales mix and less trade merchandising also contributed to our growth.\nThe strong organic net sales growth was partially offset by the impacts of foreign exchange and a 1.7% net decrease associated with divestitures.\nThe Peter Pan peanut butter business is still part of Conagra Brands and thus included in our organic results.\nWe expect the sale of Peter Pan to be completed in Q3 at which point it will be removed from organic net sales growth.\nI will discuss the estimated impact of this divestiture shortly.\nSlide 24 summarizes our net sales by segment for the second quarter.\nOn both the reported and organic basis, we saw continued significant growth in each of our three retail segments: grocery and snacks, refrigerated and frozen, and international.\nThe net sales increase was primarily driven by the increase of at-home food consumption as a result of COVID-19, which benefited our retail segments but negatively impacted our food service segment.\nThe grocery and snack segment experienced strong organic net sales growth of 15.3% in the quarter.\nThe segments we're getting net sales growth outpaced its growth in consumption as retailers continued to rebuild inventories.\nOur refrigerated and frozen segment delivered organic net sales growth of 7.8%.\nThis growth is a testament to our continued modernization and innovation efforts and illustrates the increasingly important role refrigerated and frozen products play in meeting the evolving needs of today's consumers.\nTurning to the international segment.\nQuarterly organic net sales increased 9.1%.\nThis segment experienced particularly strong growth in both Canada and Mexico.\nThis quarter, our food service segment reported a 21.4% organic net sales decline, primarily driven by a volume decrease of 25.3% due to less restaurant traffic as a result of COVID-19.\nSlide 25 outlines the adjusted operating margin bridge for the quarter versus the prior-year period.\nAs you can see, in the second quarter, our adjusted operating margin increased 250 basis points to 19.6%.\nStrong supply chain realized productivity, favorable price mix, cost synergies associated with Pinnacle Foods acquisition, and fixed cost leverage combined to drive 440 basis points in adjusted operating margin improvement more than offsetting the impact of cost of goods sold inflation and COVID-related costs in the quarter.\nCollectively, these drivers resulted in a 139 basis point increase in our adjusted gross margin versus the same period a year ago.\nA&P increased 4.7% on a dollar basis primarily due to increases in e-commerce marketing A&P was flat on a percentage-of-sales basis this quarter versus Q2 a year ago.\nFinally, our adjusted SG&A rate was favorable by 110 basis points primarily as a result of fixed cost leverage on higher net sales, the Pinnacle cost synergies, and temporarily reduced spending as employees work from home and significantly reduce their travel.\nI want to give you some additional perspective on our margin expansion.\nAs I just mentioned, operating margin expanded 250 basis points for the quarter well ahead of our expectations.\nOf this 250 basis point expansion in operating margin this quarter, approximately 60 basis points reflects our ongoing progress toward achieving our fiscal '22 margin target of 18% to 19%.\nWe also saw an approximate 180 basis point margin benefit from price mix in the quarter primarily driven by mix, and to a lesser extent, favorable pricing in lower-trade merchandising.\nWe expect to retain some of this benefit going forward, but exactly how much remains uncertain at this point.\nAdditional 10 basis points of net margin expansion came from favorable fixed cost leverage across the entire P&L and COVID-related SG&A benefits, mostly offset by COVID-related cost of goods sold.\nWe do not expect this net benefit to repeat next year.\nSlide 26 summarizes our adjusted operating profit and margin by segment for the second quarter.\nOur three retail segments, all operating profits increased by double-digit percentages versus the same period a year ago.\nEach retail segment benefited from higher organic net sales and strong supply chain-realized productivity.\nIn the foodservice segment, however, operating profit decreased due to the COVID-related impacts of lower organic net sales and higher input costs that more than offset the impacts of favorable supply chain-realized productivity and cost synergies.\nOverall, we're pleased with the continuation of the strong Q1 margin results into the second quarter which are anchored by core productivity and benefits from the Pinnacle acquisition we expected to see.\nTurning to Slide 27.\nWe've outlined the drivers of our second-quarter adjusted diluted earnings per share growth versus the same period a year ago.\nEPS increased 28.6% to $0.81.\nThe growth in the quarter was primarily driven by the increase in adjusted operating profit associated with the net sales increase and margin expansion, and also benefited from a decrease in net interest expense as we've continued to reduce debt as prioritized.\nSlide 28 highlights our significant progress on the overall synergy capture since the close of the Pinnacle Foods acquisition during the second quarter of fiscal '19.\nWe captured an incremental $27 million in savings during the most recent quarter bringing total cumulative synergies to $246 million.\nAs a reminder, the majority of total synergy to date have been in SG&A.\nCost-of-goods-sold synergies have started to be a bigger portion of our synergy cash for the last two quarters and we expect them to make up a majority of our synergies going forward.\nWe remain pleased with the team's progress in capturing synergies and remain on track to achieve our fiscal '22 synergy targets.\nSlide 29 shows the strong progress we've made to date to achieve our deleveraging targets.\nSince the close of the Pinnacle acquisition in the second quarter of fiscal '19 through the end of the second quarter fiscal '21, we have reduced total gross debt by $2.3 billion resulting in net debt of $9.2 billion.\nWe are pleased to report that at the end of the second quarter, we achieved our net leverage ratio target of 3.6 times, down from five times at the closing of the Pinnacle acquisition and 3.7 times at the end of the first quarter of fiscal '21.\nStrong, consistent improvements in debt reduction, coupled with robust earnings enabled us to achieve this net leverage ratio target ahead of schedule.\nLooking ahead, we will continue to be focused on executing a balanced capital allocation policy.\nWe remain committed to solid investment-grade credit ratings as we continue to be opportunistic using our balance sheet to drive shareholder value such as our increased investment in capex and the recent 29% dividend increase.\nSlide 30 summarizes our outlook.\nWhile we're confident in the quarters ahead and that Conagra will continue to excel beyond the COVID-19 environment, the sustained impact of COVID-19 remains dynamic and continues to make near-term forecasting with specificity a challenge.\nWe expect a continuation of elevated retail demand and reduced foodservice demand compared to historic pre-COVID-19 demand levels.\nWe are currently seeing both of these trends continue in the third quarter to date.\nFor the third quarter, we expect organic net sales growth to be in the range of plus 6% to 8%.\nWe expect Q3 operating margin to be in the range of 16% to 16.5%, implying a year-over-year increase of 30 to 80 basis points.\nThis estimate includes an expected acceleration of our AMC investment in e-commerce marketing that we started in Q2, reducing the estimated year-over-year Q3 operating margin expansion.\nAs a reminder, Q3 operating margins are historically lower than Q2 operating margins given the leverage impact on the seasonality of sales.\nGiven these sales and margin factors along with expected improvement in below-the-line items, we expect to deliver third-quarter adjusted earnings per share in the range of $0.56 to $0.60.\nOur third-quarter guidance also continues to assume that the end-to-end supply chain operates effectively during this period of heightened demand.\nWe are selling the business for approximately $102 million and the expected annualized impact of the divestiture is a reduction of approximately $110 million of net sales and $0.03 of adjusted EPS.\nLastly, we are reaffirming all metrics of our fiscal '22 guidance which also excludes the impact of the pending sale of Peter Pan.\nWe look forward to presenting again next month at CAGNY where we will provide another update on our progress in executing the Conagra Way.\nWe hope you'll join us.\n",
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"content": "q2 adjusted earnings per share $0.81.\nsees q3 adjusted earnings per share $0.56 to $0.60.\nreaffirming its fiscal 2022 guidance, which does not yet include impact of pending sale of peter pan peanut butter business.\nsees q3 adjusted earnings per share is expected in range of $0.56 to $0.60.\norganic net sales growth is expected in range of +6% to +8% in q3.\nultimate impact of covid-19 pandemic on company's full year fiscal 2021 consolidated results remains uncertain.\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: While we are making those statements in good faith, we do not have any guarantee about the results we will achieve.\nDescriptions of the risk factors are included in the documents we filed with the SEC.\nAlso, we will be discussing some non-GAAP financial measures.\nReferences to adjusted items, including organic net sales, refer to measures that exclude items management believes impact the comparability for the period referenced.\nToday, Dave and I will discuss our results for the quarter, our updated outlook for the remainder of the year and why we believe that Conagra continues to be well positioned for the future.\nI'd like to start by giving you some context for the quarter.\nFirst, as you all know, the external environment has continued to be highly dynamic.\nBut our team remained extremely agile in the quarter and executed the Conagra Way playbook.\nWe navigated the ongoing complexity and delivered strong net sales growth anchored in elevated consumer demand that continued to exceed our ability to supply, inflation-driven pricing actions and lower-than-expected elasticities.\nWhile our net sales exceeded our expectations, margin pressure in the second quarter was also higher than expected driven by three key factors.\nFirst, while we anticipated elevated inflation during the second quarter, it was higher than our forecast.\nSecond, we experienced some additional transitory supply chain costs related to the current environment.\nAnd third, in the face of elevated consumer demand that continue to outpace our ability to supply, we elected to make investments to service orders and maximize product availability for our consumers.\nWe expect margins to improve in the second half of the fiscal year as a result of the levers we pulled and continue to pull to manage the impact of inflation.\nWe'll always look to our cost savings programs to offset input cost inflation.\nHowever, given the magnitude of the cost increases, our actions also include additional inflation-driven pricing.\nWe communicated pricing to customers again in December.\nFor the year, we're once again reaffirming our adjusted earnings per share outlook, but our path to achieve that guidance has evolved.\nWe're increasing our organic net sales guidance based on stronger-than-expected consumer demand and lower-than-anticipated elasticities.\nWe're also updating our margin guidance given the increase in our gross inflation expectations for the year and the timing of the related pricing actions.\nTaken together, we continue to believe that elevated consumer demand, coupled with additional pricing and cost savings actions, will enable us to deliver adjusted diluted earnings per share of about $2.50.\nSo with that as the backdrop, let's jump into the agenda for today's call.\nWe'll start with an overview of the quarter before going into more detail on our outlook for the second half of the fiscal year.\nI'll also share some of our thoughts on the structural changes we're seeing in consumer behavior, particularly with younger consumers.\nWe believe these changes are further evidenced in the long-term potential of Conagra Brands.\nLet's dig into the quarter.\nAs you can see on Slide 7, our team delivered solid Q2 results.\nOn a two-year CAGR basis, organic net sales for the second quarter increased by more than 5% and adjusted earnings per share grew by nearly 1%.\nAs I noted earlier, we delivered these results in the face of a highly dynamic and challenging operating environment.\nInput cost inflation came in higher than expected in the quarter.\nIn addition, we made some strategic decisions to service the heightened consumer demand we continue to experience.\nAs the entire industry incurred transitory costs associated with labor shortages, supply issues on material and transportation costs and congestion challenges during our Q2, we chose to invest in our supply chain and service orders.\nThis deliberate decision ensured we could deliver food to our customers and consumers especially during the holiday season.\nMaintaining physical availability is an important part of building trust with customers and maintaining consumer loyalty.\nThe bottom line is that amid the supply disruption seen across the industry, we remain focused on building for the long term.\nWhile the net result of these factors was a negative impact on our margins during the quarter, we're confident that our purposeful approach better positions our portfolio for the future.\nThey've been resilient in navigating this environment, allowing us to remain agile and deliver for our customers and consumers.\nI continue to be impressed by our team's commitment and I'm grateful for their ongoing dedication.\nLooking at Slide 10.\nYou can see that our strong performance in the second quarter was broad based.\nTotal Conagra retail sales were up 14.8% on a two-year basis in the quarter, with double-digit growth in each of our domestic retail domains frozen, snacks and staples.\nHousehold penetration was also up this quarter, building upon the significant number of new consumers we've acquired over the past two years.\nTotal Conagra household penetration was up 59 basis points on a two-year basis and our category share increased 41 basis points.\nIn addition to increasing household penetration and acquiring new consumers, we are retaining our existing consumers, as demonstrated by our repeat rates.\nShoppers continue to discover our incredible products and their tremendous value proposition.\nAs the chart on the right of Slide 11 shows, our consumers keep coming back for more.\nAs we execute our Conagra Way playbook, innovation remained a key to our success across the portfolio in Q2.\nSlide 12 highlights the impact of our disciplined approach to delivering new product and modernizing our portfolio.\nDuring the second quarter, our innovation outperformed the strong results we delivered in the year ago period.\nWe continue to invest in new product quality and it's supporting our innovation launches with deeper, more meaningful consumer connections.\nOnce again, our innovation rose to the top of the pack in several key categories, including snacks, sweet treats, sauces and marinades and frozen vegetables.\nSlide 13 demonstrates how our ongoing investments in e-commerce continued to yield strong results.\nWe again delivered strong quarterly growth in our $1 billion e-commerce business and e-commerce accounted for a larger percentage of our overall retail sales than our peers.\nWe outpaced the entire total edible category in terms of e-commerce retail sales growth during the second quarter, just as we did in the first quarter of 2022 and throughout fiscal 2021.\nAs we mentioned earlier, our strong net sales growth was driven by elevated consumer demand, favorable elasticities and inflation-driven pricing actions.\nOn Slide 14, you can see the extent of our pricing actions in the first half of the fiscal year.\nDuring this period, our on-shelf prices rose across all three domestic retail domains.\nAnd, as Dave will discuss shortly, the pricing flowed through the P&L.\nAs you can see on Slide 15, price elasticity has been fairly low.\nIt's been favorable to our expectations.\nConsumers continued to see the tremendous value of our products relative to other food options, a concept I will elaborate on in a few minutes.\nNow, let's turn to the path ahead.\nYou can see on Slide 17 we currently expect gross inflation to be approximately 14% for fiscal 2022 compared to the approximately 11% we anticipated at the time of our first quarter call.\nThis is a large increase and we're taking actions to offset the increase while still investing in the long-term health of our business.\nTo help manage our increasing inflation, we're taking incremental pricing actions, including list price increases and modified merchandising plans.\nMany of these actions have already been announced to our customers.\nAs a reminder, there is a lag in timing between the impact of inflation and our ability to execute pricing adjustments based on that inflation.\nAs a result, the incremental price increases will go into effect in the second half of the year with the most significant impact during the fourth quarter.\nWhile it's easy to get caught up in the quarter-to-quarter impact of inflation and pricing, it's important to keep focused on the big picture.\nThe long-term success of our business is driven by how consumers, particularly younger consumers, respond to our products.\nAnd when you take a step back to evaluate the broader environment and how our portfolio delivers against the needs of the modern consumer, we believe that Conagra is uniquely positioned for the future.\nAs we've detailed many times before, Conagra's on-trend portfolio filled with modern food attributes is winning with younger consumers.\nAnd our confidence is underpinned by the many changes we're seeing in consumer behavior that are proving to be structural, especially given that these changes are driven by younger consumers that represent the most significant opportunity for long-term value creation.\nYounger consumers represent a large and growing part of the U.S. population and they want to optimize the value that they get for the money they spend on food.\nA large part of optimizing their food spending includes shifting more dollars from eating away from home to eating at home.\nAs they make that trade, they're choosing national brands.\nAnd we believe Conagra is ideally positioned to experience an outsized benefit from these behaviors given the relationship our brands are forming with younger consumers.\nOverall, Conagra is delivering superior relative value to consumers compared to both away-from-home options and store brands.\nLet's take a closer look at these trends, starting with the population changes.\nMillennial and Gen Z consumers are a large and growing cohort.\nThese consumers are starting to settle down, buy homes and start families.\nAs we presented in the past, when people enter the family formation phase, they increase the amount of food they eat at home with an outsized increase in the consumption of frozen foods.\nAnd what we find particularly important about reaching Millennial and Gen Z consumers is that we believe they will remain more value focused than their predecessors.\nFirst, let's talk about the near term.\nAs you can see in the chart on the left, Millennial and Gen Z consumers are earlier in their careers and earning less than the older generations of working-age people.\nThis is natural, but it bodes well for food-at-home trends in the shorter term.\nWe believe that even as foodservice bounces back, younger consumers will be value conscious in their food choices.\nFewer younger consumers are expected to achieve the financial success of the generations before them.\nThe data on the right suggests that Millennials are more likely to earn less than their parents.\nWe believe this means that these savvy consumers will look to stretch their food dollars further even as they age.\nThe data also shows that younger consumers are already eating more at home.\nCompared to the population as a whole, Gen Z and Millennials have decreased restaurant visits more and sourced a larger percentage of their meals at home.\nAs these younger consumers have made the shift to at-home eating, the data shows that they're finding comfort in the quality, reliability and familiarity that national brands provide.\nWe believe this makes a lot of sense.\nNational brands provide value while replicating many of the on-trend flavors and modern food attributes that consumers are used to experiencing in away-from-home dining.\nWhen consumers make trades like away-from-home to in-home eating, trust is paramount.\nIn short, national brands, particularly modernized brands like those in our portfolio, deliver on this trust imperative and that's because they offer superior relative value versus other food options.\nAs consumers seek to stretch their household balance sheets in the face of broad-based inflation, one of the single largest levers available to them is the reduction in spending on food away from home as food-away-from-home prices are typically over three and a half times more expensive than food-at-home prices.\nThis trade will likely become even more important for consumers as food-away-from-home prices have already increased faster than at-home prices in calendar 2021 and they are expected to increase at nearly twice the rate as at-home prices in calendar year 2022.\nOur aggressive modernization of the Conagra portfolio over the past several years has put us in a strong position to capitalize on these structural shifts.\nOur portfolio has shown its competitive advantage with excellent trial, depth of repeat and share gain performance.\nOverall, we believe Conagra is well positioned to leverage these shifts to create meaningful value for shareholders.\nAnd Slide 25 shows you the data to support our claim.\nConagra is attracting more younger consumers than our peers and getting them to repeat at more attractive rates.\nBy appealing to younger consumers now, we're building superior consumer lifetime value.\nImportantly, the data shows that these new, younger buyers are stickier across our portfolio.\nWe believe this comes back to the investments we've made and continue to make in our products and our brands.\nThe Conagra Way has positioned us to win.\nAs I discussed earlier, we're reaffirming our adjusted earnings per share guidance of approximately $2.50 for the full year with a few updates on how we expect to get there.\nWe're increasing our organic net sales guidance to be approximately plus 3%, up from approximately 1%.\nWe're slightly adjusting our adjusted operating margin guidance to approximately 15 and a half percent, down from approximately 16%.\nAnd we're updating our gross inflation guidance to about 14%, up from approximately 11%.\nI'll start by going over some highlights from the quarter shown on Slide 28.\nAs Sean mentioned earlier, there were a number of factors that influenced our results this quarter.\nFirst, we were encouraged to see that consumer demand for our products remain strong.\nAnd second, elasticities were better than anticipated.\nHowever, we also continued to see inflation rise across a number of key inputs and the dynamic macro environment created challenging conditions for the supply chain.\nThe team remained agile in response to these dynamics, including the decision to make additional investments during the quarter to meet the elevated demand and maximize the food supply to our consumers.\nOverall, our actions favorably impacted our top line during the quarter with organic net sales up 2.6% compared to the year ago period.\nAn important part of the top line success we've realized throughout the pandemic is our ongoing commitment to the Conagra Way.\nWe've remained focused on building and maintaining strong brands across the portfolio.\nWe continued these efforts in the second quarter with continued product innovation and by further increasing our spending on advertising and promotion, primarily focusing on e-commerce investments.\nWe show a breakdown of our net sales on Slide 29.\nThe 4.2% decline in volume was primarily due to the lapping of the prior-year surge in demand during an earlier stage in the COVID-19 pandemic as volume increased approximately 1% on a two-year CAGR.\nThe second quarter volume decline was more than offset by the very favorable impact of brand mix and inflation-driven pricing actions we realized this quarter, driving an overall organic net sales growth of 2.6%.\nOn last quarter's call, we noted that the domestic retail pricing actions were just starting to be reflected on shelves at the end of the first quarter.\nThose increases were reflected in our P&L this quarter, driving the 6.8% increase in price mix.\nThe divestitures of our H.K. Anderson business, the Peter Pan peanut butter business and the Egg Beaters business resulted in a 70-basis-point decline and foreign exchange drove a 20-basis-point benefit.\nTogether, all these factors contributed to a 2.1% increase in total Conagra net sales for the quarter compared to a year ago.\nSlide 30 shows our net sales summary by segment both on a year-over-year and on a two-year compounded basis.\nAs you can see, we continue to deliver strong two-year compounded net sales growth in each of our three retail segments, which resulted in a two-year compounded organic net sales growth of 5.3% for the total company.\nYou can see the puts and takes of our operating margin on Slide 31.\nWe drove a 6.2 percentage point benefit from improved price mix, supply chain-realized productivity, cost synergies associated with the Pinnacle Foods acquisition and lower pandemic-related expenses.\nNetted within the 6.2% are the additional investments we made to service orders and maximize product availability.\nThese investments reflect the dynamic environment and actions we've taken to respond to it.\nThis includes decisions to utilize more third-party transportation and warehousing vendors for some of our frozen products, incurring incremental cost to move product around our distribution network to better align with customer order patterns and delaying a plant consolidation productivity program to maximize current production.\nThe 6.2% also includes transitory supply chain costs such as higher inventory write-offs and increased overtime to support operations.\nThe 6.2 percentage point benefit was more than offset by an inflation headwind of 11 percentage points.\nThe second quarter gross inflation rate of 16.4% of cost of goods sold was approximately 100 basis points or $20 million higher than expected, driven by higher-than-anticipated increases in proteins and transportation, which are both difficult to hedge.\nThe combination of the favorable margin levers, our choiceful supply chain investments and inflation headwinds resulted in adjusted gross margin declining by 483 basis points.\nOur operating margin was further impacted by 20 basis points due to our increased A&P investment during the quarter, as I mentioned earlier.\nYou can see how these elevated costs impacted each of our reporting segments on Slide 32.\nWhile each segment was impacted, our Refrigerated & Frozen segment was impacted the most with adjusted operating margin down 707 basis points primarily due to outsized materials inflation and the additional investment incurred to service orders and get food delivered to consumers.\nWe are confident that we will improve overall operating margins in the second half as we execute our additional pricing actions to offset the higher inflation rates.\nAs you can see on Slide 33, our second quarter adjusted earnings per share of $0.64 was heavily impacted by the input cost inflation across our portfolio.\nEven though the benefits of our first quarter pricing flowed through the P&L this quarter, the incremental inflation we incurred in the second quarter created an additional headwind.\nIn response, we announced additional pricing to customers in early Q3 during December.\nAlthough we have yet another lag before this pricing benefits the P&L, we expect to realize benefits from these pricing actions in late Q3 with most of the impact in Q4.\nAlso, our Ardent Mills joint venture had another good quarter and delivered earnings per share benefit versus the prior year.\nWe realized lower net interest expense and a slightly lower average diluted share count due to our share repurchases in prior quarters.\nTurning to Slide 34.\nI want to unpack how Q2 adjusted earnings per share landed versus our expectations.\nOur second quarter adjusted earnings per share came in lower than we originally had anticipated due to two main factors.\nFirst, as previously mentioned, inflation came in higher by approximately 100 basis points of cost of goods sold or approximately $0.02 to $0.03 of EPS.\nWhile we have announced additional pricing actions for the second half to offset the incremental inflation, the timing of these benefits is naturally lagging behind the higher inflation.\nSecond, the cost we elected to incur to service orders, coupled with the additional transitory supply chain costs I described earlier, led to another $0.02 to $0.03 impact on our adjusted EPS.\nWe are forecasting these service and transitory cost dynamics to improve as the second half progresses.\nLooking at Slide 35, we ended the quarter with a net debt-to-EBITDA ratio of 4.3x, which is in line with the seasonal increase in leverage expected for the second quarter.\nWe expect to generate strong free cash flow in the second half of the fiscal year and expect to end the year with a net leverage ratio of approximately 3.7 to 3.8 times.\nWe remain committed to a longer-term net leverage target of approximately 3.5 times and to maintaining an investment-grade credit rating.\nI'll start by saying that we remain confident in our ability to achieve approximately $2.50 in adjusted earnings per share for the full fiscal year.\nAs the macro environment continues to be very dynamic, our expectations for the path to achieve that target have shifted.\nWe are increasing our organic net sales growth guidance to approximately 3% to reflect our stronger-than-expected performance year-to-date as well as our incremental pricing actions in the second half.\nWe are lowering our adjusted operating margin guidance to approximately 15 and a half percent.\nWe expect the incremental sales and pricing actions in the second half to offset the dollar impact of the incremental net inflation and other supply chain costs.\nWe have increased our gross inflation expectations to approximately 14%, largely driven by higher estimated costs versus the previous estimate for proteins, transportation, dairy and resin.\nWe will continue to monitor these input costs closely and will be quick to respond using all available margin levers.\nAs Sean detailed, price elasticity has been favorable to our expectations so far.\nAs we have explained previously, there is a lag in timing between when we experience inflation, take actions, including pricing, to offset the dollar impact of the inflation and when we see those actions flow through our financial results.\nWith respect to the additional pricing actions we have announced for the second half of fiscal '22, we expect to realize a small amount late in the third quarter and the full benefits from these price increases in the fourth quarter.\nWe therefore expect our third quarter margins to be roughly in line with second quarter margins with an increase in operating margins in Q4 as the pricing catches up with inflation and the impact of the lag is reduced.\nOur guidance also assumes that the end-to-end supply chain will continue to operate effectively as the COVID-19 pandemic continues to evolve.\nBefore turning it over to the operator for Q&A, I would like to reiterate that confidence in our ability to reach our earnings goal is based on the strength of our business at its core to manufacture and deliver foods that people enjoy.\n",
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"content": "q2 adjusted earnings per share $0.64.\nreaffirms adjusted earnings per share guidance.\nincreases organic net sales guidance.\n2022 organic net sales growth is expected to be approximately +3% versus prior guidance of approximately +1%.\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: Today, we will discuss Cardinal Health's first quarter fiscal 2022 results.\nPlease note that during our discussion today, our comments will be on a non-GAAP basis, unless they are specifically called out as GAAP.\nDuring the Q&A portion of today's call, we please ask that you try and limit yourself to one question, so that we can try and give everyone an opportunity.\nOur first quarter results were in line with our expectations.\nAs we continue to manage through the global pandemic, we're staying focused on the near-term priorities and long-term strategies to drive growth and momentum across our businesses.\nIn Pharma, we continue to see sequential volume improvement and are encouraged by the profit growth that we saw in the first quarter.\nWe believe our Pharma business, inclusive of our strategic growth areas of Specialty, Nuclear and Outcomes, is well positioned for growth in FY '22 and beyond.\nOur Medical segment continues to be impacted by the disruptions in the global supply chain that we called out last quarter.\nRecently, these pressures have rapidly escalated and we are experiencing significantly elevated product costs due to international freight and commodities.\nWhile we believe the majority of these elevated supply chain costs are temporary, we do not expect them to return to normalized levels this fiscal year.\nAs a result, we are lowering our FY '22 outlook for Medical segment profit to adjust for these increased headwinds.\nWe are taking action to mitigate these impacts across the enterprise and we are reaffirming our FY '22 earnings per share guidance of $5.60 to $5.90 per share.\nWe have been on a journey to simplify our portfolio and strengthen our core businesses, so we are positioned for broad-based sustainable growth as noted in the long-term targets we're announcing today.\nWe are prioritizing investment in our strategic growth areas and in innovative solutions to meet our customers' needs today and tomorrow.\nAnd with our improved balance sheet, commitment to our dividend and now an additional $3 billion share repurchase authorization, we're positioned to return capital to shareholders.\nLooking ahead, we remain confident in our strategy.\nI will review our first quarter results and updated expectations for fiscal '22 before closing with some comments on capital deployment.\nBeginning with total company results; first quarter revenue increased 13% to $44 billion, driven by sales growth from existing customers.\nTotal gross margin decreased 4% to $1.6 billion driven by the Cordis divestiture and the net impact of elevated supply chain costs in Medical.\nAs a reminder, the sale of Cordis was completed on August 2 and impacted the quarter's results by approximately two months.\nSG&A increased 1%, reflecting information technology investments and higher costs to support sales growth, partially offset by the Cordis divestiture and benefits from cost savings initiatives.\nOverall, first quarter operating earnings tracked in line with our expectations, down 15%.\nMoving below the line; interest and other decreased by $2 million, driven primarily by lower interest expense from continued debt reduction actions.\nDuring the first quarter, we exercised a make-whole call provision to redeem $572 million of outstanding June 2022 debt maturities.\nWe continue to expect to repay the approximately $280 million of remaining June 2022 notes upon maturity.\nOur first quarter effective tax rate was approximately 24%.\nAverage diluted shares outstanding were 289 million, about 4 million shares fewer than the prior year.\nThis reflects prior year share repurchases as well as the $500 million share repurchase program initiated in the first quarter and recently completed.\nThe net result for the quarter was earnings per share of $1.29.\nWe ended the first quarter with a cash balance of $2.5 billion and no outstanding borrowings under our credit facilities.\nThis cash balance also reflects our first annual settlement payment into escrow under the proposed opioid settlement agreement.\nNow, turning to the segments; beginning with Pharma on Slide 5.\nRevenue increased 13% to $40 billion, driven primarily by branded pharmaceutical sales growth from large Pharmaceutical Distribution and Specialty customers.\nSegment profit grew 1% to $406 million which reflects an improvement in volumes compared to the prior year quarter which was adversely impacted by COVID-19.\nThis was largely offset by investments in information technology enhancements.\nAs a reminder, last quarter, we began deploying new technology platforms across our Pharmaceutical Distribution business as a part of a multiyear journey to enhance our IT infrastructure.\nThis rollout is tracking according to plan and we continue to expect incremental implementation and depreciation costs through the first three quarters of fiscal '22.\nAs Mike mentioned, during the quarter, we saw broad-based sequential improvement in pharmaceutical demand, including generics.\nWe continue to expect the recovery in generic volumes to pre-COVID levels by the end of the calendar year.\nOutside of volumes, our generics program continued to experience generally consistent market dynamics along with strong performance from Red Oak.\nAnd during the quarter, Pharma saw double-digit contributions from our growth businesses: Specialty, Nuclear and Outcomes.\nTransitioning to the Medical segment on Slide 6.\nMedical revenue increased 5% to $4.1 billion, driven primarily by PPE sales, partially offset by the Cordis divestiture.\nSegment profit decreased 46% to $123 million, primarily due to elevated supply chain costs.\nTo a lesser extent, this also reflects the impact of the Cordis divestiture, as well as net favorability in the prior year attributed to COVID-19.\nAs Mike mentioned, Medical segment profit was negatively impacted by increased product costs due to significant inflationary pressures in our global supply chain, particularly in the areas of commodities and international freight.\nIn commodities, we have seen spikes in some key resins, such as polypropylene, that are inputs into our self-manufactured and sourced products with recent index prices nearly double where they were last year.\nAnd with international freight, we were seeing ocean container costs at roughly 8x to 10x pre-COVID levels.\nWe believe the majority of these headwinds are temporary but we do not expect them to abate this fiscal year.\nWe are taking action, including through pricing and aggressive cost management.\nI will discuss these impacts to our full year Medical outlook shortly.\nTo wrap up the quarter, despite some impact from the Delta variant on elective procedure volumes, overall, our customers continued to manage effectively and total elective volumes exited the quarter near 95% of pre-COVID levels.\nAdditionally, lab testing volumes remained significantly elevated above pre-COVID levels but was not a material driver to the quarter due to the strong performance in the prior year.\nNext, on Slide 8; a few updates to our fiscal '22 outlook.\nWe are reiterating our earnings per share guidance range of $5.60 to $5.90 per share.\nThis reflects updated expectations for the Medical segment as well as lower ranges for our tax rate and share count.\nWe now expect our annual effective tax rate in the range of 23% to 25%.\nWe also now expect diluted weighted average shares outstanding in the range of 280 million to 282 million.\nAs for the segment outlooks on Slide 9; first, we are adjusting our Pharma revenue outlook to low double-digit growth to reflect the strong branded pharmaceutical sales growth that we are seeing from large customers.\nFor Medical, we now expect fiscal '22 segment profit to be down mid-single to low double digits.\nThis change is driven by the significant increases in supply chain cost inflation that I previously discussed which is expected to result in an incremental net headwind of approximately $100 million to $125 million on the year.\nGiven the anticipated timing of realizing these cost increases and our mitigating actions, as well as the timing of selling higher-cost PPE, we expect a sequential decline in Medical segment profit in the second quarter.\nStepping back, the only large operational item that we see meaningfully different today compared to our original fiscal '22 guidance is the incremental impact of elevated supply chain costs in Medical.\nNotably, we do not anticipate any material net impact in Pharma from inflationary supply chain costs.\nAnd as noted last quarter, we still expect the cadence of our earnings per share guidance to be significantly back half-weighted.\nNow, to close; an update on capital deployment.\nWe are focused on deploying capital in a balanced, disciplined and shareholder-friendly manner and we'll continue to allocate capital through the lens of our priorities which are unchanged.\nWe have been on a journey to improve our balance sheet and our portfolio and have made tremendous progress.\nAs we look forward, we see our debt paydown beginning to moderate which will provide an increased ability to be more opportunistic with our return of capital to shareholders.\nOn that note, two important updates.\nOur Board recently approved a new three year authorization to repurchase up to an additional $3 billion of our common stock, expiring at the end of calendar year 2024.\nAnd we now expect approximately $1 billion of share repurchases in fiscal '22 which includes the $500 million of share repurchases executed to date.\nWe believe that capital deployment, along with the future growth that we expect in both our segments, will be a key driver to the double-digit combined earnings per share growth and dividend yield that we are targeting over the long term.\nThroughout the pandemic, we have responded to challenges with resilience and agility, approaching every situation with a focus of delivering for our customers so they can care for their patients.\nWe are continually reviewing our business and seeking areas to improve as we navigate the dynamic macroeconomic environment.\nWe're taking action to mitigate elevated costs and manage through temporary supply chain disruptions in Medical.\nThese actions include pricing adjustments, cutting additional costs throughout the organization and accelerating additional growth opportunities.\nOutside of a continual focus on the customer, we are directing our efforts to the three main areas that will support our long-term target of mid-single to high single-digit growth for the Medical segment.\nFirst, we are simplifying our operating model.\nWe continue to take decisive action to reposition the business for growth.\nWe divested the Cordis business and have begun significantly reducing our international commercial footprint.\nWe have announced and are in the process of exiting 36 initial markets which will allow us to focus on the markets where we have a competitive advantage.\nAdditionally, we are further streamlining our medical manufacturing footprint and modernizing our distribution facilities.\nWe expect these simplification initiatives to contribute to our $750 million enterprise cost savings target and position us to generate sustained long-term growth.\nSecond, we are focused on driving mix through commercial excellence.\nOur Cardinal brand portfolio has significant breadth with leading brands and clinically differentiated products such as Kendall compression, Kangaroo enteral feeding and Protexis surgical gloves, among others.\nWhile we have made important changes to align our commercial organization structure and incentives, we recognize that we are underpenetrated in Cardinal Health brand mix relative to our potential.\nAn increase in private-label penetration across our U.S. and in-channel customer base represents a significant profit opportunity with even further opportunities out of channel and internationally.\nAs we move past the pandemic, we see this as a significant opportunity to both deliver savings for our customers and grow our business over the mid to long term.\nAnd third, we're fueling our Medical segment growth businesses, at-Home Solutions and Medical Services which includes OptiFreight Logistics and WaveMark.\nThese growth businesses are aligned with industry trend and positioned to capture market share and grow double digits in FY '22 and beyond.\nWe continue to invest in technology enhancements and innovative solutions that give our businesses a competitive edge.\nIn OptiFreight, we continue to expand our customer base and offerings.\nAnd in at-Home Solutions which is now a $2.2 billion business, we continue to see volume growth as care is rapidly shifting to the home.\nWe are investing in new technologies to drive operational efficiencies and enhance data visibility.\nMoving to Pharma; we have two primary objectives to achieve our long-term guidance of low to mid-single-digit segment growth: continuing to strengthen our core Pharma Distribution business; and fueling our growth businesses, Specialty, Nuclear and Outcomes.\nWe will continue to strengthen our core business by focusing in three primary areas.\nFirst, supporting our diverse customer base.\nOver 50 years, we honed our distribution expertise and develop a strong customer base across multiple classes of trade with leaders in chain pharmacy, direct mail order, grocery and retail independent customers, all of whom play critical roles in providing healthcare access to their local communities.\nAlong those lines, during the quarter, we extended our distribution agreement with CVS Health through FY '27.\nSecond, we're managing our generics program to ensure consistent dynamics which we continue to see and expect.\nOur generics program is anchored by the scale and expertise of Red Oak Sourcing, a partnership we also recently extended through FY '29.\nThird, we've been investing heavily in our technology to enhance customer experience and drive efficiencies.\nWe are approaching the end of a multiyear investment journey to modernize our IT infrastructure which will yield meaningful working capital improvements and operational efficiencies.\nAs for our second overall Pharma objective, fueling our growth businesses, we continue to expect these three businesses to realize double-digit growth over the next several years.\nAnd as these businesses grow, it will become a bigger portion of the overall Pharma segment.\nIn Specialty, key downstream and upstream initiatives will enable our growth.\nIn oncology, we are competing differently downstream by transforming from a distribution-led orientation to a focus on supporting independent oncology practices with solutions to thrive in a value-based care environment.\nWe are seeing commercial momentum with Navista TS, our technology platform that helps oncology practices improve their performance in value-based care.\nWe have a strong presence in other therapeutic areas, such as rheumatology which today is a $4 billion distribution market growing double digits.\nWe are also encouraged by the anticipated growth in biosimilars as more products come to market such as the FDA's approval for the first interchangeable biosimilar insulin product.\nWe're well positioned to support the next phase of biosimilar growth as adoption increases in areas outside of oncology.\nUpstream, we are expecting strong growth from higher-margin services supporting biopharma manufacturers.\nWe operate a leading 3PL supporting hundreds of manufacturers that continue to see wins and support new products coming to market, such as in the area of cell and gene therapy.\nIn Nuclear, we are expecting continued double-digit profit growth resulting in a doubling of our profits in this business by FY '26.\nWe continue to build out our multimillion dollar center for Theranostics advancement in Indianapolis and are investing to expand our tech capabilities.\nWe're partnering with several companies to grow the pipeline of novel Theranostics.\nFor example, through our agreement with TerraPower, we will produce and distribute Actinium-225, a radionuclide involved in creating targeted therapies for several cancer types.\nAnd in Outcomes, we continue to see and expect strong growth.\nThis business has added new payers and PBMs and is expanding clinical solutions for both independent pharmacies and retail chains to include solutions for medical billing, point-of-care testing and other clinical capabilities.\nWith respect to the enterprise, we continue to aggressively review our cost structure as we work to streamline, simplify and strengthen our operations and execute our digital transformation.\nAs I mentioned earlier, we recently increased our total cost reduction goal to $750 million by FY '23 and we are on track to deliver those savings.\nWe're pairing cost reduction efforts with balanced, disciplined and shareholder-friendly capital allocation with a focus on investing in the business, maintaining a strong balance sheet and returning cash to shareholders.\nLong term, we're targeting a double-digit combined earnings per share growth and dividend yield.\nThese expectations are driven by our growth targets for our segments, our commitment to our dividend and our new $3 billion share repurchase authorization.\nNow, let me provide an update on the proposed opioid settlement agreement and settlement process.\nIn September, we announced that enough states agreed to settle to proceed to the next phase.\nAnd each participating state is offering its political subdivisions the opportunity to participate in the settlement for an additional 120-day period which ends on January 2, 2022.\nAt that point, each of the distributors and the states will have the opportunity to determine whether there is a sufficient participation to proceed with the agreement.\nIf all conditions are satisfied, this agreement would result in the settlement of a substantial majority of opioid lawsuits filed by the state and local governmental entities.\nThis is an important step forward for our company.\nAs we've consistently said, we remain committed to being part of the solution to the U.S. opioid epidemic and believe that settlement would provide relief for our communities and certainty for our shareholders.\nTurning to ESG; these priorities remain critical to achieving a healthier, more sustainable world.\nIn closing, what we do matters and it is our privilege to serve our customers, their patients and their communities around the world.\n",
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"content": "q1 non-gaap earnings per share $1.29.\nq1 revenue rose 13 percent to $44 billion.\nreaffirms fy non-gaap earnings per share view $5.60 to $5.90.\nfy22 non-gaap earnings per share guidance reaffirmed, long-term financial targets announced.\nboard of directors approved a 3-year authorization to repurchase up to an additional $3 billion of cardinal health common shares.\nfirst-quarter revenue for pharmaceutical segment increased 13% to $39.8 billion.\nexpectation that we will see greater inflationary pressures in medical segment for remainder of year.\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: Last night, we released results for our first quarter of fiscal year 2021 copies of which are posted in the Investor Relations section of our website.\nIn order to provide greater transparency regarding our operating performance, we will refer to certain non-GAAP financial measures that involve adjustments to GAAP results.\nAny non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by GAAP.\nI'm very pleased with the exceptional operating results we've reported as we saw a strengthening recovery across our end markets.\nFor the quarter, we generated record adjusted earnings per share of $1.18 and segment EBIT of $140 million.\nThe results were driven by improving demand trends, robust unit margins, disciplined operational execution, and strong performance in our targeted growth initiatives.\nI'd like to recognize the extraordinary employees of Cabot, whose team work and commitment made it possible for us to meet the dynamic needs of our customers while maintaining the safety of our people and our communities.\nThe COVID pandemic has challenged our normal ways of working, but I believe our strong culture of connectivity and collaboration enabled us to distinguish Cabot in the marketplace, and we will continue to build on these strengths into 2021.\nDuring the quarter, we saw strong volumes in the tire and automotive markets as the recovery momentum continued globally with a sharp rebound of the lows experienced last spring.\nWe are pleased to see that miles driven trends have improved, though still generally lagged pre-COVID levels.\nIn terms of automotive builds, a similar trend has taken hold.\nWith both end markets still below prior peaks, we are optimistic about our growth runway as the economic recovery strengthens.\nAs highlighted in previous calls, we experienced real strength throughout 2020 for products sold into the infrastructure, packaging and consumer sectors and this continued in our first fiscal quarter of 2021.\nOur strong product portfolio, global reach and technical support have enabled us to capitalize on favorable infrastructure trends in wire and cable, pipe and geo membranes.\nAdditionally, the COVID pandemic has changed certain consumer behaviors and these trends are supportive of our packaging and consumer-driven applications.\nWhile the underlying end market trends are favorable, there likely was some level of channel replenishment in the quarter as the combination of sharply [Technical Issues] and low inventories in most value chains created upward pressure on orders.\nWe are also seeing tightness across transportation modes globally and the supply chain uncertainty is likely causing customers to build some inventory to mitigate disruptions.\nI would like to spend a little time now on China.\n[Technical Issues] had driven some softening in that market.\nWe are seeing real strength there now.\nChina was the only major economy to avoid a recession in 2020 and the market there was very strong for us in Q1 as PMI hit 57 and industrial production surged.\nAs we look forward, our belief in the fundamentals of the China market is strong and our long-standing strategic assumptions remain sound.\nGiven that almost 40% of the world's tires are produced in China and 50% of the world's silicones, our differentiated position there means we are extremely well-positioned for growth.\nWe believe that the feedstock markets will be in balance over the long-term, which should provide a foundation of stability over time.\nAnd finally we expect environmental pressures will continue to ratchet and Cabot's leadership and sustainability will position us in a differentiated way relative to competition.\nLooking at our segments, Reinforcement Materials generated record EBIT performance in the quarter driven by very strong results in Asia as our focus on margin paid off.\nOur global footprint and focus on operational excellence are the foundations of our customer value proposition and I believe we are seeing benefits of that in our results.\nDuring the quarter we completed the negotiation of our Reinforcement Materials customer agreements for calendar year 2021.\nWe are pleased with the outcome, which was broadly in line with our 2020 agreements in terms of pricing and share.\nThis is a positive development as we negotiated during a period of low volumes and extremely uncertain forward visibility.\nBy maintaining our share we will participate in a demand recovery with our customers.\nWe were also very pleased to see the significant step-up in results in the Performance Chemicals segment.\nThe segment delivered EBIT in the first fiscal quarter of $54 million, up 32% compared to the first fiscal quarter of 2020.\nThis was primarily due to higher volumes across all applications, strong product mix from automotive applications and specialty carbons and compounds, and progress in our targeted market growth initiatives.\nDespite the pandemic we continue to advance critical strategic initiatives that we believe will create long-term value while staying committed to our balanced capital allocation framework.\nIn Xuzhou, China, we're in the process of converting this acquired plant to manufacture specialty carbons.\nThe strategic project will provide growth capacity for a high value specialty carbons grade and complement our footprint so that we are balanced geographically.\nThis project is progressing well and we remain on track for completion in early calendar 2022.\nIn the battery space, the integration of Shenzhen Sanshun Nano into our Energy Materials business is complete and sales of our conductive carbon additives are growing at attractive rates.\nCustomer adoptions and sales with the top 10 global battery producers continue to build momentum and we believe this business will grow to become a meaningful profit contributor for Cabot.\nWe are also making important progress to grow our inkjet business.\nOur investment focus over the last couple of years has been in the space of packaging as that sector begins a transition from analog to digital printing with inkjet technology.\nOur sales are growing in the packaging space and we are well-positioned with product adoptions at many of the leading printer OEMs. We expect the penetration of inkjet technology to accelerate over the next three years and we believe we are extremely well-positioned.\nThese investments are critical in supporting our earnings growth targets and we've been disciplined in our choices and execution so that we balance growth along with cash return to shareholders.\nIn addition to our growth investments, sustainability and ESG leadership have long been a strategic priority for Cabot and their importance is growing in the eyes of our stakeholders.\nI am pleased to highlight two achievements this quarter that demonstrate our industry leading position.\nFirst, we received a Platinum level rating in recognition of our sustainability efforts from EcoVadis.\nEcoVadis is an independent assessment organization that evaluates company's sustainability programs in the areas of environment, labor practices and human rights, ethics and sustainable procurement.\nMany of our customers utilize EcoVadis to confirm performance of their supply chain partners.\nAnd our Platinum rating confirms that Cabot is ranked among the top 1% of companies in its peer group in the manufacturing of basic chemicals.\nWe are also proud of being named one of America's Most Responsible Companies 2021 by Newsweek magazine.\nThis is the second year that Cabot has received this recognition, which was developed in 2020 to highlight the most responsible companies in the United States across 14 industries.\nThis accomplishment recognizes Cabot's reputation and programs in corporate governance, community engagement and management of environmental performance, as well as transparent reporting.\nSustainability, leadership and corporate responsibility are integrated in the business strategy and daily management of Cabot and by leading in this area we will ensure that all stakeholders are part of our success.\nI will start with discussing results in the Reinforcement Materials segment.\nThe Reinforcement Materials segments delivered record operating results with EBIT of $88 million compared to the same quarter of fiscal 2020 driven by improved pricing and product mix in our calendar year 2020 tire customer agreement and with spot customers in the Asia region.\nThis improvement included our ability to raise prices ahead of rising feedstock cost in Asia that shows strong unit margins.\nGlobally volumes were up 1% in the first quarter as compared to the same period of the prior year primarily due to 13% growth in Europe and 9% higher volumes in the Americas as key end market demand continue to recover along with some level of inventory replenishments from the drawdowns earlier in the calendar year.\nAsia volumes were down 8% year-over-year largely due to a schedule planned turnaround and our decision to balance pricing and volume in order to improve margin levels.\nLooking ahead to the second quarter of 2021 we expect stronger year-over-year EBIT in the second quarter as compared to the prior year driven by higher year-over-year volumes.\nLooking sequentially, we expect volumes to remain solid slightly higher than the first fiscal quarter.\nWe anticipate that margins will moderate from the levels seen in the first quarter as [Indecipherable] cost increase and we will not experience the same pricing tailwind in Asia ahead of costs.\nIn addition, we anticipate an increase in fixed costs sequentially as volumes increase and we spend a bit more on maintenance activity.\nNow turning to Performance Chemicals, EBIT increased by $13 million as compared to the first fiscal quarter of 2020 primarily due to higher volumes and improved product mix in specialty carbons and compounds product lines.\nYear-over-year volumes increased by 9% in both the Performance Additives and Formulated Solutions businesses driven by increases across all of our key product lines from higher demand levels and some level of customer inventory replenishment during the quarter.\nWe experienced strong demand related to automotive application, which drove the favorable mix in the specialty carbons and compounds product lines.\nThese favorable impacts were partially offset by weaker pricing and product mix year-over-year in our fumed silica product line.\nLooking ahead to the second quarter of fiscal 2021 we expect stronger year-over-year EBIT in the second quarter as compared to the prior year driven by higher year-over-year volumes.\nLooking sequentially, we expect EBIT will moderate somewhat from the first quarter as raw material costs increase and specialty carbons and compounds product lines and we expect higher costs associated with the draw-down of inventory levels in the quarter.\nMoving to Purification Solutions, EBIT in the first quarter of 2021 was flat compared to the first quarter of fiscal 2020.\nThe reduction in fixed costs resulting from the sale of our mine in Marshall, Texas and the related long-term supply agreement was offset by reduced demand in mercury removal applications and higher costs associated with the reduction of inventory levels related to the transition to a long-term supply agreement.\nLooking ahead to the second quarter, we expect to see a sequential EBIT increase from improved pricing and product mix for specialty applications and lower fixed cost.\nI will now turn to corporate items.\nWe ended the quarter with a cash balance of $147 million, and our liquidity position remains strong at approximately $1.5 billion.\nDuring the first quarter of fiscal 2021, cash flows from operating activities were $21 million, which included a working capital increase of $99 million.\nThe working capital increase was largely driven by growth related to net working capital, as accounts receivables increased with higher sales and inventory increased from purchases of higher cost raw materials.\nThe change in net working capital also included the final payment of $33 million related to the prior year respirator settlement.\nCapital expenditures for the first quarter of fiscal 2021 were $29 million.\nFor the full year, we expect capital expenditures to be between $175 million and $200 million.\nThis estimate includes continued EPA related compliance spend and capital related to upgrading our new China carbon black plant to produce specialty products.\nAdditional uses of cash during the quarter included $20 million for dividend.\nOur operating tax rate was 30% for the first quarter of fiscal 2021, and we continue to anticipate the fiscal year rate will be between 28% and 30%.\nWe are very pleased with the record results in the first quarter of 2021 with volumes recovering from the COVID-related lows we experienced in fiscal 2020 and the great execution across the organization.\nWe achieved record-setting results in Reinforcement Materials and much improved performance in the Performance Chemicals' segment.\nThis is a great start to our fiscal year.\nAs I look at the second quarter, there are some tailwinds that benefited our results in the first quarter that we don't expect to repeat.\nBased on the underlying business performance, we expect adjusted earnings per share in the second quarter to be in the range of $0.90 to a $1.\nWhile I expect our second quarter adjusted earnings per share to moderate from the first quarter, I believe this level of expected earnings in the second quarter reflects how well our businesses are performing in the current environment.\nJanuary volumes were strong and we anticipate the underlying demands in our key end markets will remain robust during the quarter driving year-over-year EBIT growth across all segments.\nOn the cash side, we anticipate our cash and liquidity will remain robust.\nNet working capital increases should moderate from what we saw in the first quarter with more consistent volume levels going forward.\nAs the fiscal year unfolds, we expect the environment will remain uncertain and there are several factors that we will be managing closely.\nThe first is the level and timing of COVID-19 vaccine distribution across the world and its impact on the economic recovery.\nInfection rates remain very high in many parts of the world and the stability of economic growth will depend on favorable trends in reducing the level of infection.\nNext is Global Logistics where we have begun to see some negative impact in terms of availability and cost of transportation in our supply chain.\nThis influence is being felt across global value chains and may take some time to fully stabilize.\nAnd finally, the movement of pricing and input costs particularly in the spot markets in Asia.\nWe have demonstrated our ability to execute well over the past year no matter what the challenge and I have confidence that this will continue in the year to come.\nOur company's true character has been showcased during these times of adversity.\nI am proud of how the team has responded with great resilience and a focus on our customers, our communities and one another.\nOur exceptional first quarter results are a true testament to our company's capabilities and that position us well for a successful 2021.\n",
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"content": "sees q2 adjusted earnings per share $0.90 to $1.00.\nq1 adjusted earnings per share $1.18.\nabout $1.5 billion of liquidity, total debt to ebitda ratio of 2.5x as of december 31, 2020.\nanticipate demand to remain strong in q2 with january levels starting quarter above prior year.\nanticipate increasing raw material & fixed costs sequentially, less customer inventory replenishment than experienced in q1.\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: Last night, we released results for our second quarter of fiscal year 2021, copies of which are posted in the Investor Relations section of our website.\nIn order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to the GAAP results.\nAny non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by GAAP.\nErica will review the business segment and corporate financial results.\nI'm very pleased with the exceptional operating results we generated this quarter as we saw continued strength across our businesses.\nFor the quarter, we generated a second consecutive record adjusted earnings per share of $1.38 and segment EBIT of $149 million.\nAdjusted earnings per share was up 79% over the second fiscal quarter of 2020 largely due to strong volumes across all regions, robust unit margins, disciplined operational execution and strong performance in our targeted growth initiatives.\nThe Cabot team demonstrated great operational flexibility in the face of continued COVID restrictions, weather related interruptions and tightness in the global shipping markets.\nThis operational adaptability was made possible by the extraordinary efforts of our commercial and supply chain teams and the strength of the Cabot manufacturing network.\nDuring the quarter, we saw strong volumes in the tire and automotive markets and continued strength in our infrastructure, packaging and consumer-driven applications.\nWe are pleased to see that automotive builds and passenger car miles driven have improved, though still generally lag pre-COVID levels.\nOn the other hand, truck miles driven are very robust, driving a large replacement tire market.\nWith both automotive and tire markets still expected to be below prior peaks on a 2021 forecast basis, we are optimistic about our growth runway in the coming years.\nIn the near term, COVID cases remain persistently high in certain regions, particularly across Europe, South America and India.\nWhile vaccines are offering promise, the economic recovery will likely remain uneven and challenge to reach its full potential until the public health crisis is fully under control.\nRaw material prices continue to rise across most value chains and our businesses were no different.\nWe effectively implemented price increases to recover these rising costs, which combined with favorable product mix to drive robust unit margins.\nLooking at our major segments, Reinforcement Materials generated record EBIT performance in the quarter of $89 million, driven by robust customer demand and strong Asia pricing.\nResults in Performance Chemicals were up sharply over the prior year with segment EBIT of $58 million compared to $31 million last year, as the business drove double-digit volume growth in both Performance Additives and Formulated Solutions businesses, and benefited from favorable product mix.\nOverall I am very pleased with the way we have navigated the pandemic, and I believe that Cabot is emerging from the COVID crisis a stronger company.\nOur global manufacturing footprint and service capabilities and leading product portfolio are increasingly valued by our customers.\nWhile the recession of 2020 required an intense focus on cost and cash preservation, we continue to sustain our assets and make important investments in sustainability and growth for the long term.\nOne of the most exciting growth investments is in the space of batteries and I would like to take a few minutes to update you on our progress here.\nWe are seeing a real inflection point in terms of demand for electric vehicles and energy storage as pressures to reduce greenhouse gases increase.\nCabot is well positioned and is supporting this transition with our leading portfolio of highly engineered, conductive carbon additives and formulation capabilities.\nOur business is demonstrating strong growth this year and we expect this will continue into the future.\nI will start with some comments about the overall market.\nLithium ion batteries are growing rapidly and expected to grow at a 25% to 30% compound annual growth rate through 2030 with the primary growth driver being electric vehicles as countries establish CO2 reduction goals and accelerate the shift away from internal combustion engines.\nFurther technology improvements in batteries are a necessary enabler of this transition, and the materials industry will play a key role in this pursuit to drive down costs and increase range.\nCabot currently serves this market by offering a range of materials and formulations for use in energy storage applications.\nThese materials can be classified into two groups, conductive carbon additives, which include conductive carbon black, carbon nanostructures and carbon nanotubes and non-carbon additives which include products in our fumed metal oxides business.\nConductive carbon additives are a small part of the battery formulation, but play a very important role.\nThese additives enable electrons to move in and out of the active phase where they're stored during charging and discharging of the battery.\nThere are two types of conductivity required to make this effective, short range conductivity and long range conductivity.\nBased on the different shapes and properties of conductive carbon additives they impart different conductivity performance.\nFor example, carbon nanotubes are more advantaged in providing the long range conductivity, while conductive carbon blacks are more advantaged in providing the short range conductivity.\nTherefore, there is no one single best additive for this application.\nHaving the capability to offer different types of conductive carbon additives and blends of such materials is important in delivering a formulated solution to the customer that addresses their specific needs.\nThere are a few drivers that distinguish Cabot in the conductive carbon additive space.\nFirst, we have an established an unmatched global footprint and application capability to support our customers, as they build manufacturing plants around the world.\nOver the past few years, through the establishment of our Asia Technology Center and the R&D capabilities acquired from the Sanshun acquisition, we have built a leading technical support team.\nThis capability coupled with a global manufacturing footprint positions us favorably in the eyes of our customers.\nSecond, through organic and inorganic investments over the past few years including the recent acquisition of Sanshun, Cabot is the only carbon additive supplier with commercially proven conductive carbon black, carbon nanotube, carbon nano structure and dispersion capabilities.\nThis variety of conductive carbon additives enables us to tailor different formulated solutions for our customers and work with them on next generation technologies.\nAnd third, Cabot has a rich legacy of innovating in demanding technical applications.\nOur experience in the CMP market for semiconductors and inkjet has offered invaluable practices and protocols that will be critical for the battery market.\nIn terms of financial performance, we believe that the battery application will become a material contributor to the Performance Chemicals segment over the next few years.\nThe current conductive carbon additives market for lithium ion batteries which includes both CNTs and conductive carbon black is approximately $400 million in material value.\nWe expect this market will grow to approximately $1 billion in value by 2025.\nOur energy materials business is off to a strong start in fiscal 2021 with forecasted revenue of approximately $80 million for the fiscal year.\nOver the past five years, revenue has grown at a CAGR of roughly 50% which includes the acquisition of our CNT business in China.\nWhile we are making significant investments to drive qualification and further extend our technical capabilities EBITDA is forecasted to be between $15 million and $20 million in fiscal year 2021.\nWe are excited about the promise of this emerging application and will continue to focus our efforts to support customers and realize the potential of energy storage.\nI will start with discussing results in the Reinforcement Materials segment.\nThe Reinforcement Materials segment delivered record operating results with EBIT of $89 million which is up 46% compared to the same quarter of fiscal 2020, primarily due to significantly higher volumes across all regions and improved unit margins driven by favorable spot pricing in the Asia region.\nGlobally, volumes were up 18% in the second quarter as compared to the same period of the prior year primarily due to 30% growth in Asia and 10% higher volumes in the Americas and Europe.\nHigher volumes are driven by key end market demand that continued to recover from COVID related impacts in fiscal 2020.\nResults also benefited from higher margins from continued strong pricing in Asia, which included a second consecutive quarter of price increases ahead of rising feedstock costs.\nLooking ahead to the second half of 2021, we expect volumes to remain strong.\nIn addition, we anticipate higher feedstock cost flow-through in Asia, while fixed costs are expected to be higher due to the timing of planned plant maintenance spending, after delayed spending in 2020 and the first half of this fiscal year.\nNow, turning to Performance Chemicals, EBIT increased by $27 million as compared to the second fiscal quarter of 2020, primarily due to strong volumes across the segment and improved product mix, driven by an increase in sales and into automotive applications.\nYear-over-year volumes increased by 10% in Performance Additives and 14% in Formulated Solutions, driven by increases across all our key product lines from higher demand levels and some level of customer inventory replenishment during the quarter.\nLooking ahead to the second half of fiscal 2021, we expect overall volumes to remain strong.\nHowever we anticipate demand into auto applications will decrease somewhat due to the semiconductor chip shortage, which will unfavorably impact product mix as compared to the first half of the year.\nIn addition, we anticipate higher fixed costs in the second half of the fiscal year due to the timing of spending.\nMoving to Purification Solutions, EBIT in the second quarter of 2021 declined by $1 million compared to the second quarter of 2020.\nThe reduced demand in mercury removal applications was partially offset by a reduction in fixed costs, resulting from the sale of our mine in Marshall, Texas and the related long term supply agreements.\nLooking ahead to the second half of fiscal 2021, we expect EBIT to improve driven by seasonally higher volumes.\nI'll now turn to corporate items.\nWe ended the quarter with a cash balance of $146 million and our liquidity position remains strong at approximately $1.3 billion.\nDuring the second quarter of fiscal 2021, cash flows from operating activities were $65 million which included a working capital increase of $80 million.\nThe working capital increase was largely driven by growth related networking capital as accounts receivables increased with higher sales and inventory increase from purchases of higher cost raw materials.\nCapital expenditures for the second quarter were $40 million, for the full year we expect capital expenditures to be approximately $200 million.\nThis estimate includes continued EPA related compliance spend and capital related to upgrading our new China carbon black plant to produce specialty products.\nAdditional uses of cash during the quarter included $20 million for dividend.\nOur year-to-date operating tax rate was 28% and we forecast our operating tax rate will be between 27% and 29% for the fiscal year.\nWe are very pleased with the record results in the second quarter of 2021 with volumes continuing to recover from the COVID related lows we experienced in fiscal 2020 and great execution across the organization.\nWe achieved another record setting quarter in reinforcement materials and very strong results in the performance chemicals segment.\nThroughout the first half of the year, I am pleased with how well the team has been executing.\nOur manufacturing plants continue to operate effectively in the COVID environment to meet the needs of our customers.\nFurthermore, we achieved an important milestone on our sustainability journey with the completion of the air pollution control project at our Franklin Louisiana plant.\nWe continue the integration of our CNT acquisition in China and our investments in inkjet are on track, to deliver on the promise of growth in the packaging segment.\nAnd finally, we continue to renew our ways at working to drive more efficient and effective processes through the implementation of digital solutions.\nI'm proud of the Cabot team for their work to strengthen our foundation and establish our platform for sustainable growth.\nMoving to our current outlook, we continue to see robust and broad-based demand globally including in our key tire, automotive and industrial end use markets.\nOur current view is that the underlying demand will remain strong during the second half of the year.\nAgainst this demand outlook, we expect some impact from the flow-through of higher raw material costs in Asia, moderating volumes into automotive applications due to the semiconductor chip shortage and higher fixed costs as we perform some maintenance and turnarounds that are necessary to ensure we can meet customer demand in 2022.\nBased on these factors, we expect adjusted earnings per share for the full year to be in the range of $4.70 to $4.95.\nOn the cash side, we anticipate our cash and liquidity will remain robust.\nNetworking capital increases, driven by a sharp recovery in demand and a steady increase in oil prices should moderate in the second half of the year.\nWe expect to see better conversion of our strong EBITDA and to operating cash flow as this happens.\nWe anticipate operating cash flow for the year will cover our cash needs for capital expenditures and dividends.\nOur debt to EBITDA ratio was 2.3 times at the end of March and we expect this will be reduced further by year end.\nThe strength of our culture and the resilience of our employees has never been more apparent than it has during these challenging times.\n",
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"content": "sees fy adjusted earnings per share $4.70 to $4.95.\nq2 adjusted earnings per share $1.38.\nfor h2 of fiscal year, anticipate continued demand strength across our segments.\nfor h2, expect some impact from flow-through of higher raw material costs in asia.\nfor h2, expect some impact from moderating volumes into automotive applications due to semi-conductor chip shortage.\nfor h2, expect some impact from increased fixed costs due to timing of scheduled maintenance activities.\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: Last night, we released results for our third quarter of fiscal year 2021, copies of which are posted in the Investor Relations section of our website.\nIn order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results.\nAny non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by GAAP.\nErica McLaughlin will review the business segment and corporate financial details.\nI'm very pleased with our results this quarter as we generated adjusted earnings per share of $1.35.\nThis marks the second strongest quarterly earnings performance in the company's history.\nDemand across all businesses were strong and we continue to leverage our global network of plants to serve our customers while managing the persistent challenges related to the COVID-19 pandemic and disruptions in international transportation and logistics markets.\nI'm very proud of the entire Cabot team for demonstrating great operating discipline across all aspects of our business and for their resilience in this very dynamic environment.\nOur culture of teamwork and our commitment to commercial and operational excellence serves as the foundation for our strong performance.\nWhile raw material markets remained somewhat volatile during the quarter, we were successful in implementing price increases to maintain robust margins.\nI am also very excited about our continued progress across our portfolio of targeted growth initiatives, particularly in the battery application.\nI believe the battery market presents one of the most compelling new growth opportunities for the materials sector and our strategic investments over the last several years have positioned Cabot very well to capitalize on this unique opportunity.\nOur energy materials business continued to build strong momentum in the quarter as we achieved qualification milestones and began commercial sales to an additional two of the global electric vehicle battery leaders.\nThe Top 8 EV battery producers represent approximately 90% of the industry and we now have commercial sales to six of these Top 8 manufacturers.\nIn addition, we are supplying conductive carbon additives to the Top 5 EV battery producers in China.\nThe Cabot value proposition to the battery market is based on three factors.\nFirst, the breadth of our product line of conductive carbon additives including conductive carbon blacks, carbon nanotubes, carbon nanostructures and blends of conductive carbon additives.\nSecond, the depth of our application knowledge in our global research and development centers allow us to tailor products for our customers and respond quickly in this fast changing environment.\nAnd finally, our global footprint of manufacturing plants and our sales and technical service support.\nAs battery producers expand their manufacturing footprints outside of Asia to support auto OEMs with robust regional supply chains, we see the value of our global footprint becoming even more important for our customers.\nWe believe these capabilities represent a compelling differentiator for Cabot and position our company as a key supplier and innovator to the leading battery manufacturers.\nTransitioning now to cash.\nOperating cash flow in the quarter was $71 million and $157 million year-to-date.\nWhile EBITDA generation has been very strong, conversion to operating cash has been impacted somewhat by higher oil prices, which contributed to over $100 million of the net working capital increase year-to-date.\nWhile oil price volatility can create short-term fluctuations in working capital balances, history has shown that over the long-term, oil driven working capital fluctuations tend to balance out.\nGiven the size and strength of our balance sheet, we can easily absorb these changes in working capital without impacting our long-term capital allocation priorities.\nAs oil prices stabilize, we expect to see a greater level of conversion of our strong EBITDA to operating cash flow.\nThe strength of the balance sheet and our cash flow is reflected in our investment grade credit rating.\nThis has long been a priority for us and we remain committed to this posture.\nWe recently closed on a new $1 billion ESG linked credit facility, which replaces our existing credit facility that was due to mature in October of 2022.\nThe facility includes two ESG metrics centered around our annual sulfur dioxide and nitrogen oxides emission reduction goals.\nThis agreement represents one of the first ESG linked credit facilities in the chemical industry and further reinforces our commitment to sustainability.\nThe facility matures in August of 2026 with key terms largely the same as our prior facility.\nIn addition, during the quarter, we released our 2020 sustainability report, which provides enhanced transparency on our environmental, social, and governance priorities.\nESG leadership is central to our strategy and the interactive digital report summarizes our progress and accomplishments.\nOverall, we had a very strong quarter in terms of financial performance and progress against strategic objectives.\nI will start with discussing results in the Reinforcement Materials segment.\nThe Reinforcement Materials segment delivered strong operating results with EBIT of $85 million, which is up $90 million compared to the same quarter in fiscal 2020.\nThe increase is primarily due to significantly higher volumes across all regions and improved unit margins driven by favorable pricing in the Asia region.\nGlobally, volumes were up 71% in the third quarter as compared to the same period of the prior year due to 146% growth in the Americas, 100% increase in Europe, and up 30% in Asia.\nHigher volumes were driven by key end market demand that continued to recover from COVID-related impacts in fiscal 2020.\nLooking to the fourth quarter, we expect the volumes to remain strong.\nFixed costs are expected to be sequentially higher due to the timing of planned plant maintenance.\nGiven the very strong demand in the last few quarters and limited inventory in most supply chains, our focus has been on supporting our customers' product needs.\nAs a result, we have scheduled a higher than normal amount of maintenance in the upcoming quarter.\nAnother factor that will affect our fourth quarter is the impact of a outage at a plant in the U.S. due to an equipment failure on our recently installed air pollution control system.\nCabot completed this project on schedule according to the consent decree.\nHowever, controlling this level of SOx and NOx emissions is new for the carbon black industry in the U.S. With the start-up of any new technology, there can be unexpected issues and this is the situation we currently face.\nWe anticipate this site will be down for about one month to repair the equipment.\nIn addition, we expect margins to moderate from the third fiscal quarter due to higher feedstock differentials.\nWe anticipate this differentials impact will be approximately $5 million in the fourth quarter and we expect to recover this impact in the first quarter of fiscal 2022 through our DCA mechanisms.\nNow turning to Performance Chemicals, EBIT increased by $33 million as compared to the third fiscal quarter of 2020 primarily due to strong volumes across the segment and improved product mix.\nThe stronger product mix was driven by an increase in sales into automotive applications in our specialty carbons and specialty compounds product lines.\nYear-over-year, volumes increased by 17% in Performance Additives and 20% in Formulated Solutions driven by higher volumes across all our product lines underpinned by higher demand levels in our key end markets.\nLooking ahead to the fourth quarter of fiscal 2021, we expect overall volumes to remain strong with some impact from lower seasonal demand.\nWe anticipate higher costs from planned turnarounds and a net unfavorable impact from planned outages.\nThe first outage is what I just mentioned at a plant in the U.S.\nThis plant supplies both the Reinforcement Materials segment and the Performance Chemicals segment.\nAnother planned outage is related to a specialty compounds plant in Belgium.\nThis plant was severely impacted by the heavy rains and floods in the region in July resulting in this plant remaining offline for the balance of the fourth quarter.\nWith higher maintenance impacting both the Reinforcement Materials and Performance Chemical segments, we estimate the sequential impact of higher maintenance costs for the company to be in the $8 million to $10 million range.\nWe expect this elevated level to return to a more normal level in Q1 of fiscal 2022.\nWith regards to the plant outages, this impact is also across both the Reinforcement Materials and Performance Chemicals segment and we expect the impact across the company to be in the range of $7 million to $10 million in the fourth quarter.\nWe expect to recover insurance proceeds that will help to offset the financial impact from these outages, but we do not anticipate any proceeds to benefit operating results until fiscal 2022.\nMoving to Purification Solutions, EBIT in the third quarter of 2021 increased by $4 million compared to the third quarter of fiscal 2020 driven by volume growth in specialty applications and an insurance reimbursement from a plant outage in the first quarter of this fiscal year.\nLooking ahead to the fourth quarter of fiscal 2021, we expect EBIT to decline due to lower volumes in our mercury removal applications and we will not have insurance proceeds in the fourth quarter.\nI will now turn to corporate items.\nWe ended the quarter with a cash balance of $173 million and our liquidity position remained strong at $1.3 billion.\nDuring the third quarter of fiscal 2021, cash flows from operating activities were $71 million which included a working capital increase of $47 million.\nThe working capital increase was largely driven by the impact of higher raw material costs that cause [Phonetic] higher inventory balances and as we pass these higher costs on in our pricing, which drove accounts receivable higher as well.\nCapital expenditures for the third quarter of fiscal '21 were $46 million.\nFor the full year, we expect capital expenditures to be approximately $20 million.\nThis estimate includes continued EPA-related compliance spend and the capital related to upgrading our new China carbon black plant to produce specialty products.\nWe anticipate the new plant in China will be online in the second half of fiscal '22.\nAdditional uses of cash during the quarter included $20 million for dividends.\nOur year-to-date operating tax rate was 28% and we forecast our operating tax rate will be between 27% and 28% for this fiscal year.\nI'm very pleased with our third consecutive quarter of strong operating results and we are raising our expected full year outlook of adjusted earnings per share to be in the range of $4.85 to $5.05.\nThis is truly exceptional performance for our company and reflects our strong commercial and operational execution and the value of the strategic choices we have made in recent years.\nOur advancing the core strategy is focused on strengthening our industry-leading positions through great execution and by making smart targeted growth investments.\nWe've invested aggressively in our operating platform to build excellence in our commercial and manufacturing operations.\nOn the commercial front, our focus has been on strengthening our capabilities and the disciplines of key account management, data analytics, strategic pricing and voice of the customer and all of these have been underpinned by a world-class CRM platform.\nOn the manufacturing front, our focus has been on overall equipment effectiveness or OEE, energy recovery process and yield optimization, and capital efficiency.\nThrough these actions, we have demonstrated the earnings power of our two high-margin segments in Reinforcement Materials and Performance Chemicals and we have enabled this growth in a more capital-efficient manner.\nOn the growth front, we have a philosophy of building from positions of strength and investing in market spaces where we believe we have a right to win.\nThis led us to invest for breakout growth in conductive carbon additives for batteries and to complete the Sanshun acquisition and we are growing in the battery space as we expected.\nIn addition, our capacity investments in Asia over the years have positioned us as a leader in the region across carbon black, fumed silica, and specialty compounds.\nThese investments are enabling us to drive strong earnings and returns in this high growth area of the world.\nThrough these foundational capability investments and smart growth choices, we have structurally increased the profitability of the company and have moved the EBITDA base to a new level.\nAs I look forward, the underlying performance of our business is very strong and customer demand remains robust.\nOur growth investments are well positioned to take advantage of macro trends in the area of mobility, alternative energy generation and storage, connectivity, and infrastructure reinvestment.\nI feel very good about how Cabot is positioned for fiscal '22 and the coming years.\nThe strength of our culture and the resilience of our employees has never been more apparent than it has been during these challenging times.\n",
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"content": "raises fy adjusted earnings per share view to $4.85 to $5.05.\nq3 adjusted earnings per share $1.35.\nhave been successfully implementing price increases to maintain robust margins as raw material costs have continued to increase.\nas we look ahead to q4 of fiscal year, we expect demand to remain strong across segments.\nas we look ahead to q4 of fiscal year, expect demand to remain strong across segments.\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: Last night,we released results for our fourth quarter of fiscal year 2021, copies of which are posted in the Investor Relations section of our website.\nIn order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results.\nAny non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by GAAP.\nErica will review the business segment and corporate financial details.\nAt this time last year.\nI talked about being prepared to win as the recovery takes hold and I think 2021 is evidence that we were prepared.\nFiscal 2021 was a remarkable year for Cabot as the business recovered from the 2020 COVID lows to deliver record results.\nWe accomplished this through a combination of extraordinary execution and our commitment to driving growth through differentiated investments.\nI would like to spend a little time now recapping the accomplishments of the year.\nThe Cabot operating model is built on the foundations of commercial and operational excellence and our strength in these disciplines drove our outstanding results in fiscal year 2021.\nWe delivered record adjusted earnings per share of $5.02 and total segment EBIT of $550 million.\nAnd our focus on cash, resulted in a record discretionary free cash flow of $353 million.\nThe macro environment in 2021 required resilience and agility and I'm very proud of the Cabot team in how they work tirelessly to support our customers' evolving needs.\nServing our customers and innovating to grow with them is what motivates our team.\nThis was made more challenging in 2021 given the myriad global supply chain disruptions that companies face and the fact that necessary COVID safety protocols continue to evolve and adjust our normal ways of working.\nAdditionally, companies experienced sharply rising input costs, which required dynamic commercial management.\nOur teams worked closely with our customers to manage through this environment and we were successful in our pricing efforts to ensure our margins remained robust and we could invest to support our customers long-term supply needs.\nFiscal year 2021 mark the sixth year of our advancing the core strategy and I'm very pleased with our record of execution and the growth prospects for our company.\nAdjusted earnings per share has grown at a compound annual growth rate of 11% since the inception of our strategy, ahead of our 7% to 10% target.\nA growth focus built around our core segments and disciplined execution have been the hallmarks of our approach.\nAs pleased as we are with the results since 2015, I'm even more excited about the growth opportunities that lie in front of us and the progress we made in 2021.\nOur growth strategy is built on a philosophy of investing from positions of strength and where we have what we call a right to win.\nA few highlights from 2021 are particularly noteworthy.\nOur unmatched portfolio of conductive carbon additives in our strong customer focus model resulted in a doubling of revenue in our battery materials business year-over-year.\nWe are progressing with the specialty carbons conversion of our plants in Xuzhou, China and this investment will provide growth across our broad range of specialty carbon applications and will free up additional capacity to support battery materials.\nOur inkjet business is well positioned to capitalize on the shift in the commercial and packaging segments from analog to digital printing and we achieved multiple OEM qualifications in 2021 that set us up well for growth as inkjet presses penetrate these markets.\nAnd finally, we continue to the execution of a project to build a specialty compounds production line in Cilegon, Indonesia, which will allow us to meet customer demand for black masterbatch in this high growth region.\nWhile growth and execution are highlights from 2021, these accomplishments have been achieved with sustainability at the core.\nWe continued our sustainability journey in 2021 with several noteworthy accomplishments.\nFirst and foremost, we committed to align our disclosures with the recommendations of the Task Force for Climate Related Financial Disclosure or TCFD and we engaged a third party to help us evaluate climate risks and opportunities following the TCFD guidelines.\nWe intend to share the results of this work in the coming months.\nWhile the operating rhythm of 2021 was challenging, I'm very proud of our performance in employee safety.\nOur total recordable incident rates of 0.34 keeps us firmly in the upper echelon of chemical and industrial companies.\nWe also completed a major air emissions control project at our carbon black manufacturing facility located in Louisiana.\nThis investment in control technology will result in improved air quality through the substantial elimination of nitrogen oxide and sulfur dioxide emissions and will ensure that we can support our customer supply needs in a sustainable fashion over the long term.\nIn addition, waste heat from the plant is being recovered and used to generate up to 50MW of cogen power without creating any additional emissions.\nIn August, we announced a new $1 billion revolving credit facility that has pricing that is based on the company's credit ratings, as well as our performance against annual intensity reduction targets for sulfur dioxide and nitrogen oxide emissions.\nThe transaction reinforces our commitment to sustainability and was one of the first sustainability-linked revolving credit agreements in the U.S. chemical industry.\nLastly, as a chemical industry, we need to attract the next generation of talented and diverse candidates into our field of chemistry.\nIn support of this aim, Cabot is taking part in an industry effort to support the Future of STEM Scholars Initiative or FOSSI, which focuses on creating pathways for students at historically black colleges and universities to enter and succeed in STEM careers within the chemical industry.\nThis initiative will have a lasting and transformational impact on the students and our industry and we are proud to be an inaugural sponsor.\nOverall, we had a very successful 2021 in terms of financial performance and progress against our strategic objectives.\nThis well-rounded performance is a testament to the positioning of our portfolio and our exceptional team.\nNow a few comments on the fourth quarter.\nI am pleased to report solid fourth quarter results with adjusted earnings per share of $1.11.\nThis performance was 63% above the same quarter last year despite the effects of the semiconductor chip shortage and ongoing global supply chain disruptions, as well as a higher level of maintenance spending due to the timing of turnarounds.\nWe also continue the momentum of battery materials and ended the year with EBITDA in our previously communicated range of $15 million to $20 million.\nCash flow from operations was strong at $100 million in the quarter despite the impact of higher raw material prices.\nI will start with discussing results in the Reinforcement Materials segment.\nDuring the fourth quarter and full year of fiscal 2021, EBIT for Reinforcement Materials increased by $8 million and $167 million respectively, as compared to the same periods in the prior year.\nThe increases were principally due to higher unit margins and higher volumes.\nHigher margins were driven by higher spot pricing, particularly in Asia.\nThe higher volumes in the fourth quarter and full year of fiscal 2021 were due to a strong recovery in all regions from the COVID related impacts in fiscal 2020.\nThe fourth quarter results were also impacted by higher costs associated with the plant maintenance.\nGlobally, volumes were up 6% in the fourth quarter as compared to the same period of the prior year due to 6% growth in the Americas, 5% increase in Europe and up 7% in Asia.\nHigher volumes were driven by strong demand in all regions as the replacement tire market remain robust.\nLooking at the first quarter of fiscal 2022, we expect a sequential increase in EBIT from a decrease in fixed costs with lower plant maintenance spend and as volumes are expected to increase modestly sequentially as demand for replacement tire remains solid.\nNow turning to Performance Chemicals.\nEBIT increased by $20 million in the fourth quarter and $93 million for the full year as compared to the same periods in fiscal 2020, primarily due to improved product mix, stronger volumes and higher customer pricing.\nThe stronger product mix was driven by an increase in sales into automotive and conductive carbon applications in our specialty carbons and compounds product line.\nPricing improved year-over-year in our fumed silica product lines, particularly in China.\nYear-over-year volumes in the fourth fiscal quarter increased by 2% in performance additives and decreased by 8% in formulated solutions.\nVolumes were impacted during the quarter, largely due to two plant outages as we discussed on last quarter's call.\nThis segment experienced increased maintenance costs in the fourth fiscal quarter as expected, but these higher costs were offset by $7 million of insurance proceeds related to a claim from earlier in fiscal 2021.\nLooking ahead to the first quarter of fiscal 2022, we expect sequential volume growth as one of the impacted plants came back online and a positive benefit from growth in our battery materials product line.\nWe anticipate higher input costs in the first quarter that will temporarily impact results until our latest round of announced price increases and surcharges can be fully implemented to recoup the rising costs.\nMoving to Purification Solutions.\nEBIT in the fourth quarter of 2021 increased by $4 million compared to the fourth quarter of fiscal 2020 and full year EBIT increased $7 million.\nThe increases were driven by lower fixed costs from the sale of the mine in Texas and the related long-term activated carbon supply agreement and the favorable impact from improved pricing in our specialty applications.\nLooking ahead to the first quarter of fiscal 2022, we expect EBIT to decline sequentially due to seasonally lower volumes and higher maintenance costs due to planned turnaround activities.\nI will now turn to corporate items.\nWe ended the quarter with a cash balance of $168 million and our liquidity position remains strong at approximately $1.3 billion.\nDuring the fourth quarter of fiscal 2021, cash flows from operating activities were $100 million, which included a working capital decrease of $4 million.\nCapital expenditures for the fourth quarter of fiscal 2021 were $80 million and additional uses of cash during the fourth quarter were $20 million for dividends.\nDuring fiscal 2021, we generated $257 million of cash flow from operations, including an increase in net working capital of $222 million.\nThe working capital increase was largely driven by the impact of higher raw material costs on our inventory balances and accounts receivable balances as we passed higher costs onto our customers in our pricing.\nThe increase was also partially driven by the growth in our business year-over-year.\nCapital expenditures for fiscal year 2021 were $195 million dollars, which included both our targeted growth investments and the spend related to U.S. EPA compliance projects.\nWe expect capital expenditures in fiscal 2022 to be between $225 million and $250 million.\nThis estimate includes continued U.S. EPA related capital compliance spend and increased spending on growth projects related to high confidence, high return areas of the portfolio.\nThe growth related capital includes completing the conversion of upgrading our new China carbon black plant to produce specialty carbons, which is planned to come online in the second half of 2022.\nIn addition, we are executing on a new specialty compounds unit in Indonesia and have planned growth capital related to capacity expansions in battery materials and inkjet.\nAdditional uses of cash during the fiscal year included $80 million for dividends.\nThe operating tax rate for fiscal year 2021 was 27% and we anticipate our operating tax rate for fiscal 2022 to be in the range of 27% to 29%.\nAs we look ahead to 2022, I'm excited about the growth opportunities in front of us.\nLet me take a couple of minutes to share with you our priorities for the upcoming year.\nFirst, we will finalize our 2022 tire customer agreements and we remain positive about the outcome as security of supply remains the top priority for customers.\nDemand continues to be strong and is projected to be robust in all regions.\nInventories levels are low across the value chain and global transportation flows remain challenging, all of which are placing a greater premium on local supply.\nSecond, we'll continue to advance a broad portfolio of strategic growth investments across the company.\nIn battery materials, we plan to expand capacity at our carbon nanotube facility in Zhuhai, China.\nAdditionally, the aforementioned specialty carbons conversion of our Suzhou plant will provide 50,000 metric tons of growth capacity across specialty carbons and will free up our network to support growth of battery materials.\nWe also expect to complete our new specialty compounds production unit in Indonesia later in the calendar year 2022, which will enable us to build on our strong position in the high growth ASEAN region.\nAnd finally, we intend to build on our track record of execution by delivering earnings growth and strong cash flow, while maintaining our investment grade rating and industry-leading dividend.\nI hope this gives you some color on our priorities for 2022.\nI'll close out my prepared comments today by talking about our outlook for the year.\nClearly, we are pleased with the momentum coming out of fiscal 2021 and we feel very good about how the new year is shaping up.\nWe expect a step-up in Reinforcement Materials starting in the second quarter based on an expected positive outcome from our 2022 customer agreements.\nWe anticipate improved results across all product lines in the Performance Chemicals segment with above-market growth in our battery materials and inkjet product lines.\nBased on this, we expect adjusted earnings per share for the fiscal year 2020 to be in the range of $5.20 to $5.60.\nThe first quarter results are expected to be generally in line with the fourth quarter with results accelerating as we move through the year.\nOn the cash side, we anticipate strong free cash flow from year-over-year earnings growth, partially offset by an increase in working capital to support growth.\nCash flow will be used to fund advantage growth investments, dividends and opportunistic share repurchases.\nOverall, I'm very excited about where we are as a company and where we're going.\nThe growth opportunities we have in front of us are better than they have been at any point during my time as CEO.\nThe long-term fundamentals of our businesses are strong.\nOur end markets remain robust and we continue to execute at a high level.\nLooking ahead, we believe we have a winning formula, a talented team, an excellent portfolio of businesses that for growth and a strong balance sheet, all of which position us to deliver on our strategic objectives and continue to grow and lead in our industry.\n",
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"content": "compname reports fourth quarter diluted earnings per share of $0.50 and adjusted earnings per share of $1.11.\nq4 adjusted earnings per share $1.11.\nsees fy 2022 adjusted earnings per share $5.20 to $5.60.\ncoterra energy qtrly believe robust end-market demand will continue.\ncoterra energy - in our reinforcement materials segment, expect fy to benefit from higher volumes.\ncoterra energy - in performance chemicals segment, anticipate particular strength in battery materials and inkjet packaging in fy.\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 quarter was generally pretty good, and maybe even modestly better than we expected on a recurring basis.\nGAAP earnings were obviously very strong, but positively impacted by a $0.10 per share reserve release, and an $0.08 per share benefit from PPP fees, so about $0.79 for the quarter on a recurring basis.\nThe margin came in a bit better than we forecasted.\nAnd our nonbanking businesses continue to accelerate growth on both the revenue and margin lines.\nOur benefits business was up 12% in EBITDA over the last year.\nWealth management business was up 35%, and the insurance business was up 28%.\nWe also had an ever so slight bit of organic loan growth in the quarter, ex-PPP, which is atypical for us in any first quarter, and loan quality is in as good a shape as I've ever seen it.\nOur consumer lending businesses are very strong right now, and we expect a solid second and third quarter performance there.\nOn the challenges front, margin may continue to contract and we need to rebuild our commercial pipeline, which is recovering slowly from the impact of the pandemic.\nIn general, I think we got a very good start to the year.\nAs Mark noted, the first quarter earnings results were solid with fully diluted GAAP and operating earnings per share of $0.97.\nThe GAAP earnings results were $0.21 per share, or 27.6% higher than the first quarter 2020 GAAP earnings results, and $0.20 per share, or 26% better on an operating basis.\nThe increase was attributable to a significant decrease in the provision for credit losses, higher revenues and lower operating expenses, offset in part by increases in income taxes with fully diluted shares outstanding.\nComparatively, the Company recorded GAAP earnings per share of $0.86 and operating earnings per share of $0.85 in the linked fourth quarter of 2020.\nThe Company recorded total revenues of $152.5 million in the first quarter of 2021, a $3.8 million or 2.6% increase over the prior year's first quarter revenues of $148.7 million.\nThe increase in total revenues between the periods was driven by an increase in net interest income and a higher non-interest revenues in the Company's financial services businesses, offset in part by lower banking noninterest revenues.\nTotal revenues were also up $1.9 million or 1.2% from the linked fourth quarter, driven by increases in net interest income, banking noninterest revenues, and financial services business revenues.\nAlthough several factors contribute to the net -- improvement in net interest income, the results were aided by the recognition of net deferred PPP loan origination fees of $5.9 million in the quarter due largely to the forgiveness of $251.3 million of Paycheck Protection Program loans.\nThe Company's tax equivalent net interest margin was 3.03% in the first quarter 2021 as compared to 3.65% in the first quarter of 2020, and 3.05% in the linked fourth quarter of 2020.\nNet interest margin results continued to be negatively impacted by the significant increase in low-yield cash equivalents between comparable annual quarters.\nAverage cash equivalents increased $1.55 billion between the first quarter of 2020 and the first quarter of 2021, due to the net inflows of stimulus funds and PPP between the periods.\nThe tax equivalent yield on earning assets was 3.15% in the first quarter of 2021 as compared to 3.93% in the first quarter of 2020, a 78 basis point decrease between the capital periods.\nThe Company's total cost of deposits remained low, averaging 11 basis points during the first quarter of 2021.\nNoninterest revenues were down $0.1 million, or 0.2% between the first quarter of 2021 and the first quarter of 2020.\nThe decrease in noninterest revenues was driven by a $2.4 million, or 13.4% decrease in banking-related noninterest revenues, which was largely offset by a $2.3 million or 5.7% increase in financial services business noninterest revenues.\nThe decrease in banking-related noninterest revenues was driven by a $2.2 million decrease in deposit service fees, including customer overdraft occurrences, a $0.2 million decrease in mortgage banking income.\nEmployee benefit services revenues were up $1.2 million, or 4.6% over the first quarter 2020 results, driven by increases in employee benefit trust and custodial fees.\nWealth management revenues were also up $1.1 million, or 14.9% over the same periods due to higher investment management, advisory and trust services revenues.\nInsurance services revenues also increased slightly over first quarter 2020 results.\nThe Company recorded a $5.7 million net benefit in the provision for credit losses during the first quarter of 2021, due to a significant improvement in the economic outlook, and very low levels of net charge-offs.\nConversely, the Company recorded a $5.6 million provision for credit losses during the first quarter of 2020 as the economic outlook worsened due to the pandemic.\nNet charge-offs for the first quarter of 2021 were $0.4 million or 2 basis points annualized, as compared to $1.6 million or 9 basis points annualized of net charge-offs reported during the first quarter of 2020.\nFor comparative purposes, the Company recorded a $3.1 million net benefit in the provision for credit losses during the linked fourth quarter of 2020.\nThe Company reported $93.3 million in total operating expenses in the first quarter of 2021 as compared to $93.7 million in the first quarter of 2020.\nThe $0.4 million, or 0.4% decrease in operating expenses was attributable to a $0.6 million, or 1.1% decrease in salaries and employee benefits, a $1.7 million or 16.4% decrease in other expenses, a $0.3 million or 8.6% decrease in the amortization of intangible assets, a $0.3 million decrease in acquisition-related expenses, partially offset by a $2 million, or 19% increase in data processing and communication expenses, and $0.6 million or 5.2% increase in occupancy expenses.\nThe decrease in salaries and benefits expense was driven by a decrease in retirement-related severance and medical benefit costs, offset in part by increases in merit and incentive-related employee wages and payroll taxes.\nOther expenses were down due to the general decrease in the level of business activities as a result of the COVID-19 pandemic.\nThe increase in data processing and communication expenses was due to the second quarter 2020 Steuben acquisition and the Company's implementation of new customer-facing digital technologies and back office systems during 2020.\nThe increase in occupancy costs was driven by the Steuben acquisition.\nComparatively, the Company recorded $95 million in total operating expenses in the linked fourth quarter of 2020.\nThe Company closed the first quarter 2021 with total assets of $14.62 billion.\nThis was up $689.1 million, or 4.9% from the end of the linked fourth quarter, and up $2.81 billion, or 23.8% from the year earlier.\nSimilarly, average interest-earning assets for the first quarter of 2021 of $12.69 billion were up $377.6 million, or 3.1% from the linked fourth quarter of 2020, and up $2.65 billion or 26.4% from one year prior.\nThe very large increase in total assets and average interest-earning assets over the 12 -- over the prior 12 months was driven by the second quarter 2020 acquisition of Steuben Trust, and large inflows of government stimulus-related deposit funding and PPP originations.\nAs of March 31 2021, the Company's business lending portfolio included 874 first draw PPP loans with a total balance of $219.4 million and 1,819 second draw PPP loans with a total balance of $191.5 million.\nThis compares to 3,417 first draw PPP loans with a total balance of $470.7 million at the end of the fourth quarter of 2020.\nThe Company expects to recognize through interest income the majority of its remaining first draw net deferred PPP fees totaling $3.4 million during the second quarter of 2021, and the majority of its second draw net deferred PPP fees totaling $8.3 million in the third and fourth quarters of 2021.\nEnding loans at March 31, 2021 were $7.37 billion, $47.6 million or 0.6% lower than the linked fourth quarter ending loans of $7.42 billion, but up $502.2 million, or 7.3% from one year prior.\nThe growth in ending loans year-over-year was driven by the acquisition of $339.7 million of Steuben loans in the second quarter of 2020 and the $399.2 million net increase in PPP loans between the periods.\nThe decrease in loans outstanding on a linked quarter basis was driven by a $48.3 million decrease in business lending, due to a decline in PPP loans.\nExclusive of PPP loans, net of deferred fees, the Company's ending loans increased $14.9 million or 0.2% during the first quarter.\nOn a linked quarter basis, the average book value of the investment securities decreased $118.3 million or 3.1% due to the maturity of $666.1 million of investment securities during the fourth quarter, a significant portion of which occurred late in the quarter, offset in part by investment security purchases during the first quarter of 2021 totaling $546.8 million.\nAverage cash equivalents increased $587.5 million or 54.4% due to the continued growth of deposits.\nThe average tax equivalent yield on the investments during the first quarter of 2021 was 1.42%, including [Phonetic] 2.02% tax-equivalent yield on investment securities portfolio and 10 basis points yield on cash equivalents.\nAt the end of the quarter, the Company's cash equivalents balances totaled $2 billion.\nDuring the first quarter, the Company redeemed $75 million of floating rate junior subordinated debt and $2.3 million of associated capital securities, which was initially issued by the Company in 2006.\nCompany's capital reserves remained strong in the fourth quarter.\nThe Company's net tangible equity to net tangible assets ratio was 8.48% at March 31, 2021.\nThis was down from 10.78% a year earlier and 9.92% at the end of 2020.\nThe decrease in net tangible equity to net tangible assets ratio was driven by the stimulus-aided asset growth, the decrease in accumulated other comprehensive income and an increase in intangible assets.\nCompany's Tier 1 leverage ratio was 9.63% at March 31, 2021, which is nearly two times the well-capitalized regulatory standard of 5%.\nThe Company has an abundance of liquidity.\nThe combination of the Company's cash, cash equivalents, borrowing availability at the Federal Reserve Bank, borrowing capacity at the Federal Home Loan Bank and unpledged available-for-sale of investment securities portfolio provided the Company with over $5.67 billion of immediately available sources of liquidity.\nAt March 31, 2021, the Company's allowance for credit losses totaled $55.1 million or 0.75% of total loans outstanding.\nThis compares to $60.9 million or 0.82% of loans outstanding at the end of the linked fourth quarter of 2020 and $55.7 million, or 0.81% of loans outstanding at March 31, 2020.\nThe decrease in the Company's allowance for credit losses is reflective of an improving economic outlook, low levels of net charge-offs, and a decrease in delinquent loans.\nNonperforming loans decreased in the first quarter to $75.5 million or 0 -- 1.02% of loans outstanding, down from $76.9 million, or 1.04% of loans outstanding at the end of the linked fourth quarter 2020, but up from $31.8 million or 0.46% of loans at the end of the first quarter of 2020, due primarily to the reclassified -- reclassification of certain hotel loans under extended forbearance from accrual to non-accrual status between the periods.\nThe specifically identified reserves held against the Company's nonperforming loans were $3.6 million at March 31,2021.\nLoans 30 days to 89 days delinquent totaled $19.7 million or 0.27% of loans outstanding at March 31, 2021.\nThis compares to loans 30 days to 90 days delinquent of $44.3 million or 0.64% one year prior, and $34.8 million or 0.47% at the end of the linked fourth quarter.\nManagement believes the decrease in 30-day to 89-day delinquent loans and the very low amount of net charge-offs recorded in the first quarter was supported by the extraordinary Federal and State Government financial assistance provided to consumers throughout the pandemic.\nFrom a credit risk and lending perspective, the Company continues to closely monitor the activities of its COVID-19-impacted borrowers and develop loss mitigation strategy on a case-by-case basis, including but not limited to the extension of forbearance arrangements.\nAs of March 31, 2021, the Company had 47 borrowers in forbearance due to the COVID-19-related financial hardship, representing $75.6 million in outstanding loan balances, a 1% of total loans outstanding.\nThis compares to 74 borrowers and $66.5 million in loans outstanding in forbearance at December 31, 2020.\nOperationally, we will continue to adapt to the changing market conditions and remain focused on credit loss mitigation, new loan generation and deployment of excess liquidity.\nWe also expect net interest margin pressures to persist to remain well below our pre-pandemic levels.\nFortunately, the Company's diversified noninterest revenue streams, which represent approximately 38% of the Company's total revenues remain strong, and are anticipating to mitigate the continued pressure on the net interest margin.\nIn addition, the Company's management team is actively implementing various earnings improvement initiatives, including revenue enhancements and cost-cutting measures intended to favorably impact future earnings.\n",
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"content": "q1 operating earnings per share $0.97.\nq1 revenue rose 2.6 percent to $152.5 million.\nqtrly gaap earnings per share $0.97.\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 well.\nI'll start with a brief comment on earnings and Joe will provide more detail.\nThe quarter was about as we expected with the reported earnings strength, driven by a reserve release.\nBeyond that, the margin continues to be a headwind but credit [Phonetic], overall deposit fees and the strength of our financial services businesses are tailwinds.\nFrom a business line perspective, commercial is flat, ex-PPP and muni loans, but the pipeline is growing back post-COVID quicker than we expected; that's good news.\nThe mortgage business is strong with the biggest pipeline we've ever had.\nThe payoffs are elevated also.\nSo the book is growing more slowly than it might otherwise.\nThe indirect lending business had a great Q2 with outstandings up 8% over Q1.\nDeposit service fees continue to rebound from the pandemic impact and were up 18% from the depressed Q2 of 2020.\nAnd like the entire industry, deposits are up.\nOur financial services businesses were the star performers of the quarter with combined revenues up 14% and pre-tax earnings of 25% over 2020.\nWe are also pleased to announce, earlier this month, the acquisition of Fringe Benefits Design of Minnesota, a provider of retirement plan administration and consulting services with offices in Minneapolis and South Dakota.\nThe benefits space is very active right now in terms of opportunities and we expect more to come.\nThe benefits of a diversified revenue model have never been so apparent.\nAs we announced last week, our Board has approved a $0.01 per quarter increase in our dividend, which marks the 29th consecutive year of dividend increases and we think a validation of our disciplined and diversified business model.\nAs we announced in March, we have appointed Dimitar Karaivanov as our Executive Vice President for Financial Services and Corporate Development and he began in this role in June.\nHe joined us from Lazard, where he was a Managing Director in the Financial Institutions Group and has over a dozen years of experience in investment banking, serving clients in the banking benefits and FinTech space.\nI've known and worked with Dimitar for nearly his entire career and am thrilled to have him on board supporting our growth initiatives.\nLooking ahead, we will be doing our best to manage the changing winds.\nWe have the headwind in margin pressure but growth, credit, the momentum of our financial services businesses and liquidity deployment are all tailwinds.\nAs Mark noted, the second quarter earnings results were solid with fully diluted GAAP and operating earnings per share of $0.88.\nThe GAAP earnings results were $0.22 per share or 33.3% higher than the second quarter of 2020 GAAP earnings results, and $0.12 per share or 15.8% better on an operating basis.\nThe improvement in earnings per share was led by lower credit-related costs and a significant increase in non-interest revenues, particularly in the company's non-banking businesses.\nComparatively the company recorded GAAP earnings and operating earnings per share of $0.97 in the linked first quarter of 2021.\nThe company reported total revenues of $151.6 million in the second quarter of 2021 a $6.7 million or 4.6% increase over the prior year's second quarter revenues of $144.9 million.\nThe increase in total revenues between the periods was driven by a $5.3 million or 13.7% increase in financial services business revenues and a $1.2 million or 8.6% increase in banking-related non-interest revenues.\nNet interest income of $92.1 million was up $0.2 million or 0.2% over the second quarter 2020 results.\nTotal revenues were down $0.9 million or 0.6% from the linked quarter first quarter driven by a $1.9 million decrease in net interest income, offset in part by higher non-interest revenues.\nAlthough net interest income was up slightly over the same quarter last year, the results were achieved on a lower net interest margin outcome.\nThe company's tax equivalent net interest margin for the second quarter of 2021 was 2.79%.\nThis compares to 3.03% in the first quarter of 2021 and 3.37% one year prior.\nNet interest margin results continue to be negatively impacted by the low interest rate environment and the abundance of low-yield cash equivalents we maintain on the company's balance sheet.\nThe tax equivalent yield on earning assets was 2.89% in the second quarter of 2021 as compared to 3.15% in the linked first quarter and 3.56% one year prior.\nDuring the second quarter, the company recognized $3.9 million of PPP-related interest income, including $2.9 million of net deferred loan fees.\nThis compares to $6.9 million of PPP-related interest income recognized in the first quarter, including $5.9 million of net deferred loan fees.\nThe company's total cost of deposits remained low, averaging 10 basis points during the second quarter of 2021.\nEmployee benefit services revenues were up $3.4 million or 14.2% over the prior year's second quarter, driven by increases in employee benefit trust and custodial fees.\nWealth management revenues were also up $1.9 million or 29.2%, driven by a higher investment management advisory and trust services revenues.\nInsurance services revenues were consistent with prior year's results.\nThe increase in banking-related non-interest revenues was driven by a $2.3 million or 17.6% increase in deposit service and other banking fees, offset in part by a $1 million decrease in mortgage banking income.\nDuring the second quarter of 2021, the company reported a net benefit in the provision for credit losses of $4.3 million.\nThis compares to a $9.8 million provision for credit losses reported in the second quarter of 2020, $3.2 million of which was due to the acquisition of Steuben Trust Corporation with the remaining $6.6 million largely driven by pandemic-related factors.\nDuring the second quarter of 2021, the company reported 3 basis points of net loan recoveries and the post-vaccine economic outlook remain positive.\nIn addition, at the end of the second quarter, there were only 12 borrowers representing $2.4 million in loans outstanding and that remained in the pandemic-related forbearance.\nThis compares to 47 borrowers in pandemic-related forbearance representing $75.6 million at the end of the first quarter, and 3,700 borrowers with approximately $700 million of loans outstanding one year earlier.\nThese factors drove down the expected loan losses resulting in the recording of a net benefit in the provision of credit losses for the quarter.\nThe company recorded $93.5 million in total operating expenses in the second quarter of 2021 as compared to $87.5 million in the second quarter of 2020, excluding $3.4 million of acquisition-related expenses.\nThe $6 million or 6.9% increase in operating expenses was attributable to a $3.2 million or 5.8% increase in salaries and employee benefits, a $1.9 million or 17.8% increase in data processing and communications expenses, and a $0.7 million or 7.7% increase in other expenses and a $0.5 million or 5.3% increase in occupancy and equipment expense, offset, in part, by a $0.3 million or 7.9% decrease in the amortization of intangible assets.\nThe increase in salaries and employee benefits expense was driven by increases in merit-related employee wages, higher payroll taxes, including increases in the state-related unemployment taxes, higher employee benefit-related expenses and the Steuben acquisition.\nOther expenses were up due to the general decrease in the level of business activities, including increases in business development and marketing expenses.\nThe increase in data processing and communications expenses was due to the second quarter 2020 Steuben acquisition and the company's implementation of new customer-facing digital technologies and back office systems between the comparable periods.\nThe increase in occupancy and equipment expenses was driven by the Steuben acquisition.\nIn comparison, the company recorded $93.2 million of total operating expenses in the first quarter of 2021, $0.3 million or 0.3% lower than the second quarter 2021 total operating expenses.\nThe effective tax rate for the second quarter of 2021 was 23.1%, up from 20.3% in the second quarter of 2020.\nThe increase in the effective tax rate was primarily attributable to an increase in certain state income tax rates that were enacted in the second quarter of 2021.\nThe company closed the second quarter of 2021 with total assets of $14.8 billion.\nThis was up $181.1 million or 1.2% from the end of the linked first quarter and up $1.36 billion or 10.1% from a year earlier.\nAverage interest earning assets for the second quarter of 2021 of $13.37 billion were up $680.6 million or 5.4% from the linked first quarter of 2021, and up $2.27 billion, or 20.4% from one year prior.\nThe very large increases in total assets and average interest earning assets over the prior 12 months was driven by the second quarter 2020 acquisition of Steuben and margin flows of government stimulus-related deposit funding PPP originations.\nThe company's ending loan balances of $7.24 billion were down $124.2 million or 1.7% from the end of the first quarter.\nExcluding the net decrease in PPP loans of $126.1 million and the seasonal decrease in municipal loans totaling $41.2 million, ending loans increased $43.1 million or 0.6%.\nAs of June 30, 2021, the company's business lending portfolio included 317 first draw PPP loans with a total balance of $72.5 million and 2,254 second draw PPP loans with a total balance $212.3 million.\nThe company expects to recognize, through interest income, the majority of its remaining first draw net deferred PPP fees totaling $0.9 million during the third quarter of 2021 and the majority of its second draw net deferred PPP fees totaling $9.2 million over the next few quarters.\nOn a linked quarter basis, the average book value of the investment securities portfolio increased $290.2 million or 7.9% from $3.67 billion during the first quarter to $3.96 billion during the second quarter.\nWith this said, the company has largely remained on the sidelines with respect to deploying excess liquidity and for market interest rates to become more attractive.\nDuring the second quarter, the company's average cash equivalents of $2.07 billion represented approximately 16% of the company's average earning assets.\nThis compares to $1.67 billion in average cash equivalents during the first quarter of 2021 and $823 million in the second quarter of 2020.\nThe $408 million or 24.5% increase in average cash equivalents during the quarter was driven by the continued inflow of federal stimulus funds and the origination of second draw PPP loans and first draw PPP loan forgiveness.\nThe company's capital reserves remained strong in the second quarter.\nThe company's net tangible equity to net tangible assets ratio was 9.02% at June 30, 2021.\nThis was down from 10.08% a year earlier, but up 8.48% at the end of the first quarter.\nThe company's Tier 1 leverage ratio was 9.36% at June 30, 2021, which is nearly 2 times the well-capitalized regulatory standard of 5%.\nThe company has an abundance of liquidity with the combination of company's cash and cash equivalents.\nBorrowing availability at the Federal Reserve Bank, borrowing capacity at the Federal Home Loan Bank and unpledged available-for-sale investment securities portfolio provides the company with over $6.1 billion of immediately available sources of liquidity.\nAt June 30, 2021, the company's allowance for credit losses totaled $51.8 million or 0.71% of of loans outstanding.\nThis compares to $55.1 million or 0.75% of total loans outstanding at the end of the first quarter of 2021 and $64.4 million or 0.86% of total loans outstanding at June 30, 2020.\nThe decrease in the allowance for credit losses is reflective of an improving economic outlook, the very low levels of net charge-offs and a decrease in delinquent loans and loans on on pandemic-related forbearance.\nNon-performing loans decreased in the second quarter to $70.2 million or 0.97% of loans outstanding, down from $75.5 million or 1.02% of loans outstanding at the end of the linked first quarter of 2021, but up from $26.8 million or 0.36% of loans outstanding at the end of the second quarter of 2020 due primarily to the reclassification of certain hotel loans under extended forbearance from accrual to non-accrual status between the periods.\nThe specifically identified reserves held against the company's non-performing loans totaled only $2.8 million at June 30, 2021.\nLoans 30 to 89 days delinquent totaled 0.25% of loans outstanding at June 30, 2021.\nThis compares to 0.37% one year prior and 0.27% at the end of the linked first quarter.\nManagement believes the low levels of delinquent loans and charge-offs has been supported by the extraordinary federal and state government financial assistance provided to consumers throughout the pandemic.\nWe remain focused on new loan origination and we'll continue to monitor market conditions to seek the right opportunities to deploy excess liquidity.\nOur pipeline -- loan pipelines increased considerably during the second quarter and asset quality remains very strong.\nWe also expect net interest margin pressures to persist and remain well below our pre-pandemic levels but also believe our abundance of cash equivalents represent a significant future earnings opportunity.\nWe're also fortunate and pleased to have a strong non-banking businesses that supported and diversified our streams of non-interest revenue.\n",
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"content": "compname posts q2 2021 net income of $0.88 per fully-diluted share.\nq2 revenue $151.6 million versus refinitiv ibes estimate of $151.7 million.\nq2 2021 net income of $0.88 per fully-diluted share.\nnet interest income of $92.1 million in q2 of 2021 versus $92.0 million of net interest income recorded in q2 of 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 hope everyone is well.\nI think earnings for the quarter were right in line with our expectations and impacted by the same influences the past several quarters.\nMargin continues to be a headwind, but deposit fees, the strength of our financial services businesses, and credit tailwinds and we saw that this quarter.\nThe bigger story for us in the quarter was loan growth.\nWe had growth in every one of our portfolios this quarter ex-PPP and our pipelines and market activity continue to be very strong.\nWe're encouraged by these trends and have really good momentum right now across all of our credit businesses.\nWe also increased our securities book in the quarter given the market opportunity and that will be additive to future earnings as well.\nI think Joe will provide more detail on that.\nThe recent strength of our financial services businesses continued in the quarter with revenues up 17% and pre-tax earnings up 22% over 2020.\nWe also closed on the acquisition of Fringe Benefits Design of Minnesota, a provider of retirement plan administration and consulting services with offices in Minneapolis and South Dakota.\nTheir performance out of the gate has been exceptional.\nSo we expect that will be a productive addition to our benefits business.\nOur benefits wealth and insurance businesses are all performing extremely well right now in what is a very productive growth, pricing, and M&A environment for those businesses.\nOn the human capital front, as we previously announced, I'm delighted that Maureen Gillan-Myer has joined us as Executive Vice President and Chief Human Resources Officer.\nShe previously held the same role for HSBC USA and will bring tremendous experience, expertise, and business judgment to Community Bank System and we look forward to her contributions to our continuing human capital efforts.\nLastly, earlier this month, we announced an agreement to acquire a Elmira Savings Bank, a $650 million asset bank with 12 offices across the Southern Tier and Finger Lakes regions of New York State.\nIt's a very nice franchise with a very good mortgage business that we expect will be $0.15 per share accretive on a full year basis excluding acquisition expenses.\nSo a very productive low risk transaction.\nWe have targeted a closing date in Q1 of next year.\nLooking ahead, we like our current momentum across the company in all of our businesses.\nAs Mark noted, the third quarter earnings results were solid with fully diluted GAAP and operating earnings per share of $0.83.\nThe GAAP earnings results were $0.04 per share or 5.1% higher than the third quarter 2020 GAAP earnings results, but $0.02 per share or 2.4% below the prior year's third quarter on an operating basis.\nThe decrease in operating earnings per share is driven by decrease in net interest income and higher operating expenses as well as increases in income taxes and fully diluted shares outstanding, offset in part by lower credit-related costs and an increase in non-interest revenues, particularly in the company's non-banking financial services businesses.\nComparatively, the company recorded fully diluted GAAP in operating earnings per share of $0.88 in the linked second quarter of 2021.\nThe company recorded total revenues of $156.9 million in the third quarter of 2021, an increase of $4.3 million or 2.8% over the prior year's third quarter.\nThe increase in total revenues between the periods was driven by a $6.9 million or 16.9% increase in financial services revenues, offset in part by a $2.2 million decrease in banking-related non-interest revenues and a $0.4 million or 0.4% decrease in net interest income.\nTotal revenues were up $5.4 million or 3.5% from the second quarter 2021 results driven by a $0.5 million or 0.5% increase in net interest income, a $1.4 million increase in banking-related non-interest revenues, and a $3.5 million or 8% increase in financial services revenues.\nTotal non-interest revenues accounted for 41% of the company's total revenues in the third quarter.\nAlthough net interest income was down only slightly from the same quarter last year, the results were achieved in a significantly lower net interest margin outcome.\nThe company's tax equivalent net interest margin for the third quarter of 2021 was 2.74% as compared to 3.12% one year prior, a 38 basis point decrease between the periods.\nComparatively, the company's tax equivalent net interest margin for the second quarter 2021 was 2.79% or 5 basis points higher than the third quarter.\nNet interest margin results continue to be negatively impacted by the low interest rate environment and the abundance of low yield cash equivalents being maintained on the company's balance sheet.\nThe tax equivalent yield on earning assets was 2.83% in the third quarter of 2021 as compared to 2.89% in the linked second quarter and 3.28% one year prior.\nDuring the third quarter, the company recognized $4.3 million of PPP-related interest income including $3.7 million of net deferred loan fees.\nThis compares to $3 million of PPP-related interest income recognized in the same quarter last year and $3.9 million in the linked second quarter of 2021.\nOn a year-to-date basis, the company has recognized $15.1 million of PPP-related net interest income.\nThe company's total cost of deposits remained low however, averaging 9 basis points during the third quarter of 2021.\nEmployee benefit services revenues for the third quarter of 2021 were $29.9 million, $4.8 million or 18.9% higher than the third quarter of 2020.\nThe improvement in revenues was driven by increases in employee benefit trust and custodial fees as well as incremental revenues from the acquisition of Fringe Benefits Design of Minnesota during the quarter.\nWealth management revenues for the third quarter 2021 were$8.3 million, up from $6.9 million in the third quarter of 2020.\nThe $1.4 million or 20.8% increase in wealth management revenues was primarily driven by increases in investment management and trust services revenues.\nInsurance services revenues of $9.2 million were up $0.6 million or 7.6% over the prior year's third quarter driven by organic growth factors and the third quarter, acquisition of a Boston-based specialty lines insurance practice.\nBanking non-interest revenues decreased $2.2 million or 11.5% from $19.1 million in the third quarter of 2020 to $16.9 million in the third quarter of 2021.\nThis was driven by a $3.5 million decrease in mortgage banking income offset in part by $1.3 million or 8.3% increase in deposit service and other banking fees.\nOn a linked quarter basis, financial services revenues were up $3.5 million or 8%, reflective of the organic and acquisition-related momentum in these businesses and banking non-interest revenues were up $1.4 million or 8.7% [Phonetic].\nDuring the third quarter of 2021, the company recorded a net benefit in the provision for credit losses of $0.9 million.\nThis compares to a $1.9 million provision for credit losses recorded in the prior year third quarter.\nThe company's net loan charge-offs were only 7 basis points annualized in both periods.\nDuring the third quarter of 2021, economic forecasts were more favorable than the third quarter 2020 economic forecast driven by the post-vaccine economic recovery, which in combination with elevated real estate and vehicle loan collateral values drove down the expected life of loan losses.\nOn a September 2021 year-to-date basis, the company recorded net charge-offs of $1.1 million or 2 basis points annualized.\nThe company recorded $100.4 million in total operating expenses in the third quarter 2021 as compared to $97 million of total operating expenses in the third quarter of 2020, an increase of $3.4 million or 3.6% between the periods.\nOperating expenses exclusive of litigation and acquisition-related expenses increased $7.2 million or 7.7% between the comparable quarters, $5.6 million of which was driven by an increase in salaries and employee benefits due to acquisition-related staffing increases, merit and incentive-related employee wage increases, higher payroll taxes, and higher employee benefit-related expenses.\nOther expenses were up $0.9 million or 8.7% due to the general increase in the level of business activities.\nData processing and communication expenses were also up $0.9 million or 7.2% due to the company's implementation of new customer-facing digital technologies and back office systems between the comparable periods.\nOccupancy and equipment expense decreased slightly due primarily to branch consolidation activities between the periods.\nIn comparison, the company recorded $93.5 million of total operating expenses in the second quarter of 2021.\nThe effective tax rate for the third quarter of 2021 was 21.1% up from 20.3% in the third quarter 2020.\nThe increase in the effective tax rate was primarily attributable to an increase in certain state income taxes that were enacted in the second quarter of 2021.\nThe balance sheet crested the $15 billion total asset threshold during the third quarter due to the continued inflows of deposits, which increased $384.8 million or 3.1% from the end of the second quarter.\nThe company's low yielding cash and cash equivalents remained elevated totaling $2.32 billion at the end of the quarter despite the company purchasing $536.9 million of investment securities during the quarter.\nEnding loans at September 30, 2021 were $7.28 billion, $38.4 million or 0.5% higher than the second quarter 2021 ending loans of $7.24 billion and $176.1 million or 2.4% lower than one year prior.\nExcluding PPP activity, ending loans increased $154.1 million or 2.2% in the third quarter.\nThis increase was driven by growth in all five loan portfolio segments: consumer mortgages, consumer indirect loans, consumer direct loans, home equity, and business lending excluding PPP.\nAs of September 30th, 2021, the company's business lending portfolio included 1,386 PPP loans with a total balance of $165.4 million.\nThis compares to 2,571 PPP loans with a total balance of $284.8 million at June 30th, 2021.\nThe company expects to recognize its remaining net deferred PPP fees totaling $6.3 million over the next few quarters.\nThe company's capital ratios remained strong in the second quarter.\nThe company's net tangible equity [Phonetic] to net tangible assets ratio was 8.59% at September 30th, 2021.\nThis was down from 9.92% a year earlier and 9.02% at the end of the second quarter.\nThe company's Tier 1 leverage ratio was 9.22% at September 30th, 2021, which is nearly 2 times the well capitalized regulatory standard of 5%.\nThe company has an abundance of liquidity.\nThe combination of the company's cash and cash equivalents, borrowing availability at the Federal Reserve Bank, borrowing capacity at the Federal Home Loan Bank and unpledged available for sale investment securities portfolio provided the company with over $6.18 billion of immediately available sources of liquidity at the end of the third quarter.\nAt September 30th, 2021, the company's allowance for credit losses totaled $49.5 million or 0.68% of total loans outstanding.\nThis compares to $51.8 million or 0.71% of total loans outstanding at the end of the second quarter of 2021 and $65 million or 0.87% of total loans outstanding at September 30th, 2020.\nThe decrease in the allowance for credit losses is reflective of an improving economic outlook, very low levels of net charge-offs, and a decrease in specific reserves on impaired loans.\nNon-performing loans decreased in the third quarter to $67.8 million or 0.93% of loans outstanding, down from $70.2 million was 0.97% of loans outstanding at the end of the linked second quarter of 2021, but up from $32.2 million or 0.43% of loans at the end of the third quarter of 2020 due primarily to the reclassification of certain hotel loans under extended forbearance from accrual to non-accrual status between the periods.\nLoans 30 to 89 days delinquent totaled 0.35% of loans outstanding at September 30th, 2021.\nThis compares to 0.36% one year prior and 0.25% at the end of the linked second quarter.\nManagement believes the low levels of delinquent loans and charge-offs has been supported by extraordinary federal and state government financial assistance provided to consumers throughout the pandemic.\nDuring the third quarter of 2021, the company increased its quarterly cash dividend a $0.01 or 2.4% to $0.43 per share on its common stock.\nThis increase marked the company's 29th consecutive year of dividend increases.\nLooking forward, we remain focused on new loans generation and will continue to monitor market conditions to seek the right opportunities to deploy our excess liquidity.\nOur loan pipelines are robust and asset quality remains very strong.\nWe also expect net interest margin pressures to persist to remain well below our pre-pandemic levels but also believe our abundance of cash equivalents represents a significant future earnings opportunity.\nWe're also fortunate and pleased to have strong non-banking businesses that have supported and diversified our streams of non-interest revenue.\nAnd lastly, to echo Mark's comments, we are pleased and excited to be partnering with Elmira Savings Bank.\nElmira has been serving its communities for 150 years and will enhance our presence in five counties in New York's Southern Tier and Finger Lakes regions.\nAt June 30th, 2021, Elmira had total assets of $648.7 million, total deposits of $551.2 million and net loans of $465.3 million.\nWe expect to complete the acquisition in the first quarter of 2022, subject to customary closing conditions including approval by the shareholders of Elmira Savings Bank and required regulatory approvals.\n",
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"content": "community bank system q3 revenue up 2.8% to $156.9 mln.\nq3 revenue rose 2.8 percent to $156.9 million.\nqtrly earnings per share $0.83 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: Joe will do a deeper dive on Q4.\nSo I'll start with a couple of brief observations and then comment on 2020 as a whole.\nFourth quarter earnings and operating performance were just fine, no surprises, it was about as we expected.\nOur operating earnings were up a few pennies over the last year's fourth quarter and $0.01 better than Q3, so modest forward progress.\nLoan growth was slightly negative in the quarter, in fact being typical but deposits just continued to grow, similar to others and were up $100 million for the quarter.\nAsset quality continues to be very good.\nWe did report a spike in NPAs because of a policy judgment around deferrals that Joe will explain further.\n2020 as a whole was certainly a challenging year, however, operating earnings were only up $0.05, or 1.5% in 2019, and hence like that much better than we were expecting earlier in the year.\nThere are a lot of moving parts in the reconciliation between years during the pandemic, there was a significant negative impact from the decline in our core margin and our retail banking revenues, which we were able to offset in a number of other ways principally operating expense reductions and performance of our nonbanking businesses, all of which had a tremendous year.\nThe pre-tax operating earnings of our benefits business was up 11%.\nWealth was up 13%, and insurance was up 16%.\nThe value with a diversified revenue model is readily apparent in 2020.\nFrom an operational perspective, it was an extremely productive year, despite the challenges of the pandemic.\nWe developed and implemented several new digital products and platforms, we consolidated 13 branches and we closed on the acquisition of Steuben Trust in the second quarter.\nThough I'm relatively pleased with 2020 overall and our forward progress, the pandemic is notwithstanding.\nLooking ahead to 2021, our focus will be on effectively countering ongoing margin pressure, improving organic performance, continued growth and investment in our nonbanking businesses and a continuation of our investment in digital and rationalization of analog.\nI also expect the strength of our earnings, balance sheet and capital generation will serve us well going forward as we continue to evaluate high value strategic opportunities across our businesses for the benefit of our shareholders.\nAs Mark noted, the earnings results for the fourth quarter of 2020 were very solid, especially in light of the economic challenges of the industry headwinds we faced throughout the year.\nThe Company recorded $0.86 in fully diluted GAAP earnings per share for the fourth quarter.\nExcluding acquisition expenses, acquisition-related provision for credit losses, unrealized gain on equity securities and gain on debt extinguishment net of tax effect, fully diluted operating earnings per share were $0.85 for the quarter.\nThese results matched third quarter 2020 results and were $0.02 per share higher than the fourth quarter of 2019 fully diluted operating earnings per share of $0.83.\nThe Company recorded total revenues of $150.6 million in the fourth quarter of 2020, an increase of $0.8 million or 0.5% from the prior year's fourth quarter.\nThe increase in total revenues between the periods was driven by an increase in net interest income, higher noninterest revenues in the Company's financial services businesses, and a gain on debt extinguishment, offset in part by a decrease in banking related noninterest revenues.\nTotal revenues were down $2 million or 1.3% from the linked third quarter, driven largely by a $428 million decrease in mortgage banking revenues as the Company pivoted from selling its secondary market eligible residential mortgage loans in the third quarter to holding them for its loan portfolio in the fourth quarter.\nThe Company recorded net interest income of $93.4 million in the fourth quarter, up $0.7 million or 0.7% over the fourth quarter of 2019.\nThe increase was driven by a $2.28 billion or 22.7% increase in average earning assets between the periods offset in part by 66 basis point decrease in net interest margin.\nThe Company's fully tax equivalent net interest margin was 3.05% in the fourth quarter of 2020 as compared to 3.71% in the fourth quarter of 2019.\nNet interest income increased $0.5 million or 0.5% over the linked third quarter while net interest margin was down 7 basis points.\nDuring the fourth quarter, the Company recorded $3.5 million of PPP related interest income as compared to $3 million of PPP related interest income in the third quarter of 2020.\nAt December 31, 2020 remaining net deferred fees associated with the 2020 PPP originations were $9 million, the majority of which the Company expects to realize for interest income in 2021.\nNoninterest revenues were up $0.1 million or 0.1% between the fourth quarter of 2019 and the fourth quarter of 2020.\nEmployee benefit services revenues were up $1.7 million or 7%, from $25 million in the fourth quarter of 2019 to $26.7 million in the fourth quarter of 2020, driven by increases in plan administration, record keeping revenues and employee benefit trust revenues.\nWealth management and insurance services revenues were also up $1 million or 7.3% over the same periods.\nThese increases were partially offset by a $2 million or 11.2% decrease in deposit service and other banking fees, due to lower deposit-related activities fees including overdraft occurrences.\nWe reported $0.9 million loss on mortgage banking activities in the fourth quarter of 2020 as compared to a $0.2 million gain during the fourth quarter of 2019, resulting in a $1.1 million decrease between the periods due to the change in the Company's mortgage banking strategy as noted previously.\nFinally, during the fourth quarter of 2020, we redeemed $10 million of subordinated notes acquired in connection with the 2019 acquisition of Kinderhook Bank Corp.\n, and recorded $0.4 million gain on debt extinguishment.\nThe Company reported a $3.1 million net benefit in the provision for credit losses during the fourth quarter of 2020.\nThis compares to a $2.9 million provision for credit losses during the fourth quarter of 2019.\nThe net benefit recorded the provision for credit losses was driven by several factors, including a $2 million reversal of a previously recorded allowance for credit losses on a purchase credit deteriorated loan, a significant improvement in the economic outlook and a substantial decrease in loans under COVID-19 related forbearance agreements, offset in part by anticipated increases in nonperforming assets and the related specific impairment reserves on those nonperforming assets.\nFor comparative purposes, the Company recorded $1.9 million in the provision for credit losses during the third quarter of 2020, $9.8 million in the second quarter of 2020, including $3.2 million of acquisition related provision for credit losses due to the acquisition of Steuben and $5.6 million of provision for credit losses during the first quarter of 2020.\nDuring the first two quarters of 2020, financial conditions deteriorated rapidly as state and local governments shutdown a substantial portion of the business activities in the Company's markets and unemployment levels spiked.\nThese conditions drove the Company to build its allowance for credit losses during the first quarter, first two quarters of 2020 to account for the expected life of loan losses in the loan portfolio.\nDuring the third quarter, the economic outlook remained unclear as markets were uncertain as to the efficacy, approval and rollout of COVID-19 vaccines.\nWith a greater than anticipated decline in actual unemployment levels as well as the Federal government's approval of COVID-19 vaccine and Congress' recent approval of the additional Federal stimulus funding, the near term economic forecast improved driving a net release the allowance for credit losses during the fourth quarter.\nThe Company reported loan net charge-offs of $1.3 million or 7 basis points annualized during the fourth quarter of 2020, comparatively low net charge-offs in the fourth quarter of 2019 of $2.4 million or 14 basis points annualized.\nOn a full-year basis, the Company reported net charge-offs of $5 million or 7 basis points of average loans outstanding.\nThis compares to $7.8 million or 12 basis points of net charge-offs for 2019.\nThe Company recorded $94.6 million of total operating expenses in the fourth quarter of 2020 exclusive of $0.4 million of acquisition related expenses.\nThis compares to total operating expenses of $94.4 million in the fourth quarter of 2019 exclusive of $0.8 million of acquisition related expenses.\nThe year-over-year $0.2 million, or 0.2% increase in operating expenses, exclusive of acquisition related expenses was attributable to a $1.7 million or 2.9% increase in salaries and employee benefits, a $1.5 million or 13.5% increase in data processing and communications expenses, offset in part by a $2.5 million or 19.4% decrease in other expenses, and a $0.4 million or 11% decrease in the amortization of intangible assets.\nThe increase in salaries and employee benefits was driven by merit-related increases in employee wages and a net increase in full-time equivalent employees between the periods, due to both the Steuben acquisition in the second quarter of 2020 and other factors, but were partially offset by lower employee benefit expenses primarily associated with the decrease in employee medical expenses due to reduced provider utilization.\nThe increase in data processing and communication expenses were due to the Steuben acquisition and the implementation of new customer facing digital technologies and back office workflow systems.\nOther expenses were down through the general decrease in the level of business activities and the result of -- as a result of the COVID-19 pandemic, including travel and entertainment, marketing and business development expenses.\nComparatively, the Company recorded $93.2 million of total operating expenses in the linked quarter -- linked third quarter of 2020, exclusive of $3 million of litigation accrual expenses and $0.8 million of acquisition related expenses.\nThe Company closed the fourth quarter of 2020 with total assets of $13.93 billion.\nThis was up $85.8 million, or 0.6% in the third quarter, up $2.52 billion or 22.1% from a year earlier.\nSimilarly, average interest earning assets for the fourth quarter of $12.31 billion was up $356.8 million or 3% to the linked third quarter of 2020 up $2.28 billion or 22.7% to one year prior.\nA very large increase in total assets and average interest earning assets over the prior 12 months was driven by the second quarter 2020 acquisition of Steuben Trust Corporation, the large inflows of government stimulus-related funding of PPP originations.\nEnding loans at December 31, 2020 were $7.42 billion, up $525.4 million or 7.6% from one year prior, due to the Steuben acquisition and the origination of PPP loans.\nEnding loans, however, were down $42.7 million from 0.6% from the end of the linked third quarter to -- to a decline in business activity in the Company's markets due to seasonal factors with COVID-19 pandemic and PPP forgiveness.\nDuring the quarter, the Company's PPP loan balances decreased $36.5 million or 7.2%, or $507.2 million at September 30, 2020 to $470.7 million at December 31, 2020.\nDuring the fourth quarter, the Company's average investment securities book balances increased $636.9 million or 20.2% from $3.15 billion in the third quarter to $3.78 billion during the fourth quarter due to the purchase of Treasury and mortgage-backed securities during the quarter.\nAverage cash equivalents decreased $227 million or 17%, or $1.3 billion during the third quarter to $1.08 billion during the fourth quarter.\nDuring the fourth quarter, the Company purchased $1.02 billion of Treasury and mortgage-backed securities at a weighted average market yield of 1.38%.\nThe purchases were made to stabilize near term net interest income and hedge interest rate risk against a sustained low interest rate environment.\nThe Company's average total deposits were up $275.9 million or 2.5% on a linked quarter basis and up $2.1 billion or 23.2% over the fourth quarter of 2019.\nTotal average deposits in the fourth quarter were $11.21 billion as compared to $9.1 billion in the fourth quarter of 2019.\nThe Company's capital reserves remain strong in the fourth quarter, the Company's net tangible equity to net tangible assets ratio was 9.92% at December 31, 2020.\nThis was down from 10.01% at the end of 2019, but consistent with the end of the linked third quarter.\nThe Company's Tier 1 leverage ratio was 10.16% at December 31, 2020 which remained over 2 times the well capitalized regulatory standard of 5%.\nThe Company has an abundance of liquidity resources and extremely -- and is extremely well positioned to fund future loan growth, the combination of the Company's cash, cash equivalents and borrowing availability to the Federal Reserve Bank, borrowing capacity at the Federal Home Loan Bank and [indecipherable] available for sale of investment securities portfolio provides the Company with over $5.25 billion of immediately available sources of liquidity.\nFrom a credit risk and lending perspective, the Company continues to closely monitor the activities of its COVID-19 effective borrowers and loss mitigation strategies on a case by case basis, including but not limited to the extension of forbearance arrangements.\nAt December 31, 2020, 74 borrowers representing $66.5 million and less than 1% of total loans outstanding remained in COVID related forbearance.\nThis compares to 216 borrowers representing $192.7 million or 2.6% of loans outstanding were active under COVID related forbearance at September 30,2020 and 3,699 borrowers representing $704.1 million or 9.4% of loans outstanding at June 30, 2020.\nAlthough these trends are favorable, nonperforming loans increased in the fourth quarter to $76.9 million or 1.04% of loans outstanding, up $44.6 million from the linked third quarter and up $52.6 million from the fourth quarter of 2019.\nDuring the fourth quarter, the Company determined that borrowers that were granted loan payment deferrals under forbearance beyond 180 days would be classified as non-accrual loans unless they could demonstrate current repayment capacity or sufficient cash reserves to service their pre-forbearance payment obligation.\nThe substantial majority of these borrowers operate in the hotel sector, including several that operate near the Canadian border, which have been additionally impacted by restrictions like cross border travel.\nThis specifically identified reserves held against the Company's nonperforming loans of $3.9 million at December 31, 2020, $3 million of which was attributed to a single nonperforming hotel loan.\nAs mentioned in prior earnings calls, the weighted average estimate of loans valued in the Company's hospitality loan portfolio prior to the onset of COVID was approximately 55%.\nWe continue to believe that the ultimate losses recognized in the current nonperforming hotel loans will be well contained in the pre-COVID cash flow of these properties, the financial strength of the operators that we have historically planned and the low loan to values on these assets.\nAt December 31, 2020, the level of loans 30 to 89 days delinquent were fairly consistent with pre-COVID levels, loans 30 to 89 days delinquent, totaled $34.8 million or 0.47% of loans outstanding at December 31, 2020.\nThis compares to loans 30 to 89 days delinquent $40.9 million or 0.59% one year prior to $26.6 million, to 0.36% at the end of the linked third quarter.\nNet charge-offs on loans were low at $1.3 million or 7 basis points annualized in the fourth quarter, and $5 million or 7 basis points for the full year of 2020.\nThe Company's allowance for credit losses decreased from $65 million, a 0.87% of total loans outstanding at September 30, 2020 to $60.9 million or 0.82% of total loans outstanding at December 31, 2020.\nThe net $4.1 million of the lease of allowance for credit losses was driven by an improving economic outlook, a substantial decrease in loans forbearance, and a $2 million reversal of a previously recorded allowance for credit losses and the purchase credit deteriorated loan, which is paid off during the fourth quarter.\nAt December 31, 2020, the allowance for credit losses of $60.9 million represent over 12 times the Company's trailing 12 months net charge-offs.\nOperationally, we will continue to adapt to changing market conditions.\nWe remain very focused on asset quality and credit loss mitigation.\nWe anticipate assisting the substantial majority of the Company's 2020 first draw of PPP borrowers' forgiveness requests throughout 2021, and granting new second draw of PPP loans and advances.\nAlthough, we began to redeploy portions of our cash equivalents, balances into investment securities during the fourth quarter to increase interest income on a going forward basis and providing hedge against the sustained low interest rate environment, we also expect net interest margin pressures to persist to remain well below historical levels.\nFurthermore, we anticipate the deposit levels to remain elevated for most of 2021 -- for 2021 especially with potentially more federal stimulus on the horizon.\nAccordingly, we will look to deploy additional overnight cash equivalents into higher yielding earning assets.\nFortunately, the Company's diversified non-interest revenue stream to represent approximately 38% of the Company's total revenues in 2020 remains strong and anticipate to mitigate continued pressure on net interest margin.\nAnd in addition, the Company's managed -- management teams are actively implementing various earnings improvement initiatives including revenue enhancements and cost cutting -- cost cutting measures that favorably impact future earnings.\n",
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"content": "q4 earnings per share $0.86.\nq4 revenue $150.6 million versus refinitiv ibes estimate of $150.8 million.\nq4 operating earnings per share $0.85.\nrecorded net interest income of $93.4 million in q4 of 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 more detailed description of such factors can be found in the filings with the Securities and Exchange Commission.\nJoining us for today's call are Jerry Grisko, President and Chief Executive Officer; and Ware Grove, Chief Financial Officer.\nWith the release of our third quarter results, I am extremely proud of our performance to date.\nOur results in the third quarter and throughout this year continue to demonstrate the strength and resilience of our business.\nWe started this year with a good deal of optimism, especially given the performance of the business since the onset of the pandemic, the steadily increase in demand for our services that were experienced through the second half of last year and the level of confidence about the business climate that we're hearing from many of our clients.\nEven with our optimistic outlook, our performance to date has exceeded our expectations.\nWhile we oftentimes experienced some seasonal slowness in the third quarter, that has not been the case this year.\nThe strong demand for our core essential services that we experienced through the first half of this year has continued through the third quarter, and our results have been bolstered by very strong performance from many of our more project-oriented advisory services that are often viewed by our clients as being more discretionary.\nAnd perhaps most encouraging, the strong performance reflected in our year-to-date results is coming from both of our major practice groups and across nearly all major service lines of our business.\nWithin our Financial Services group, we continue to experience strong performance from our core accounting, tax and advisory businesses.\nAnd in addition, during the third quarter, we saw steady demand for our tax consulting services and robust demand across the board for our advisory services.\nThese results reflect the strength of our current business climate and the overall confidence and optimism of our clients.\nAs our clients take steps to capitalize on opportunities to accelerate growth in the future, these actions should translate into additional project-based advisory work for us.\nWithin our government healthcare consulting business, we are experiencing a rate of growth in the mid-single digits.\nWhile this growth is consistent with our experience since the onset of the pandemic, we would expect to see accelerated growth in the months ahead as more states fully reopen and some delayed work resumes.\nA complementary acquisition that provides actuarial services that we made this past summer, is creating additional opportunities for us to bring even greater value to our government clients in the administration of complex healthcare programs.\nNow turning to our benefits and insurance group.\nWe are also experiencing the continuation of the strong performance that we saw for the first half of the year.\nWe continue to see steady demand for our core employee Benefits, Property & Casualty and Retirement Plan Advisory businesses.\nAs we've discussed on prior calls, we've made substantial investments over the past several years to accelerate organic growth within our employee benefits business by adding to the number of producers.\nWe are very pleased with the results that we are seeing in this area and the impact of our efforts are evidenced in our results today.\nWithin these results, I also want to emphasize the importance of client retention.\nWe continue to see retention rates of over 90% without our employee benefits business and for many of our other businesses within our benefits and insurance group.\nThese levels of client retention speak to the value that our clients receive from our team and our commitment to bring them solutions that are unmatched in our industries.\nWithin our property and casualty business, we continue to see steady demand and production for both the commercial and program components of the business.\nWe've described in the past earnings call how some industries like hospitality, lodging and adventure sports, were disproportionately impacted during the pandemic.\nWe are seeing the return of these businesses.\nAnd while some are not yet back to pre pandemic levels, the trend is positive.\nThe strength of the market is also providing additional lift to our retirement investment services business and an increase in demand for more project-based work, such as our executive recruitment and our compensation consulting services.\nOur payroll business is the one area where we continue to experience some softness.\nAs we've mentioned on previous calls, this business serves a larger number of smaller employers that continue to be disproportionately impacted by current business conditions, including labor shortages.\nOverall, we couldn't be more pleased with our year-to-date results and the performance of our business.\nI will remind you that during our last earnings call, we raised our full year revenue guidance.\nToday, we are pleased to be in a position to raise our revenue guidance and our adjusted earnings per share guidance for the remainder of 2021 and where we'll walk through what we expect in his comments.\nOur results for the third quarter and for the nine months ended September 30 continued to be very strong.\nI want to take a few minutes to talk about the highlights.\nWith revenue up by 18.6% in the third quarter, and up by 14.5% for the nine months, demand for our core services continues to be stable and strong.\nSame unit revenue for the third quarter grew by 8.3% compared with last year.\nAnd for the nine months, same unit revenue grew by 7.3% compared with last year.\nWe are seeing growth in both our Financial Services group as well as the benefits and insurance group.\nIn the third quarter, total revenue in the Financial Services group grew by 20.4%.\nAnd for the nine months, revenue grew by 16%.\nSame unit revenue in the Financial Services group was up by 9.2% in the third quarter.\nAnd for the nine months, same unit revenue was up by 8.7%.\nWe are seeing growth across all major service lines, with particularly strong growth within our advisory business services.\nWithin our benefits and insurance group, total revenue grew by 16.1% in the third quarter.\nAnd for the nine months, total revenue grew by 12.4%.\nSame unit revenue within benefits and insurance grew by 6.6% in the third quarter.\nAnd for the nine months, same unit revenue grew by 4.4%.\nWith the exception of our payroll services, where we are experiencing some slight softness, we are seeing growth in all service lines.\nThe investment in producers that has been underway for some time now is continuing to show positive results.\nThe acquisitions we made last year and through the first nine months this year are performing well.\nThese newly acquired operations contributed 10.3% to total revenue growth in the third quarter and contributed 7.3% to total revenue growth for the nine months.\nAs we presented second quarter earnings earlier this year, we made an adjustment to eliminate the impact of the $30.5 million nonrecurring UPMC settlement that was announced on June 30, plus an adjustment to eliminate the impact of the $6.4 million nonrecurring gain on sale from a divestiture that occurred in the second quarter.\nOn an adjusted basis, for the nine months, adjusted earnings per share was $1.84 compared with $1.41 a year earlier.\nThis is up 30.5%.\nIn the third quarter, earnings per share was $0.41 compared with $0.36 a year ago.\nIn line with our comments during the second quarter call earlier this year, as we began to restore discretionary expenses, such as marketing, travel or as other healthcare benefit costs began to normalize from abnormally low COVID influence levels from a year ago.\nWe cautioned that expense headwinds would impact margin in the second half this year.\nAs a result, margin on income before tax declined in the third quarter from 11.4% a year ago to 10.3% this year.\nThis is not a reflection on the health of the business.\nThis is simply a reflection of the year-over-year pandemic influence impact on these costs, which reflect abnormally low levels a year ago.\nOn an adjusted basis, eliminating the nonrecurring items I mentioned, we are very pleased that margin on income before tax for the nine months has improved by 120 basis points, up to 15.2% versus 14% a year ago.\nTo date this year, we have closed five acquisition transactions that will contribute approximately $72 million of annualized revenue.\nThrough September 30, we have used $74.8 million for acquisition purposes, including earn-out payments on acquisitions closed in prior years.\nFuture earn-out payments are estimated at approximately $6.6 million for the balance of this year, $26.7 million in 2022, $19.3 million in 2023, $22.9 million in 2024 and approximately $6 million in 2025.\nOur continuing priority is to utilize capital to enhance growth through strategic acquisitions, and we continue to have a very active pipeline of potential acquisitions.\nWith our strong cash flow, we also have the flexibility to repurchase shares.\nThrough September 30, we utilized approximately $85 million to repurchase 2.7 million shares.\nAnd since that time, through October 26, we have repurchased an additional 258,000 shares.\nAs a result of these share repurchases, we expect full year share count within a range of 53.5 million to 54 million shares.\nWith strong revenue growth and expansion of margin, cash flow has continued to be strong.\nAt September 30, debt outstanding on our unsecured $400 million credit line was $190.2 million with $201.6 million of unused capacity.\nLeverage under the credit facility was 1.2 times adjusted EBITDA at September 30.\nAs a reflection of cash flow, adjusted EBITDA for the nine months this year was $153.5 million, up 21% from $126.9 million a year ago.\nFocused primarily on facility and office improvements, capital spending through September 30 was $6.5 million, with $3.2 million spent in the third quarter.\nFull year spending may come in between $8 million to $10 million.\nDay sales outstanding on receivables was 88 days at September 30, and this continues to reflect improvements that were gained over the past 12 to 18 months.\nBad debt expense through September 30 this year was approximately 10 basis points of revenue compared with 41 basis points a year ago.\nOur effective tax rate for nine months was approximately 24.5%.\nThere are a number of unpredictable factors that can impact the tax rate either up or down, but we expect the effective rate for the full year within a range of 24% to 24.5%.\nAs we look at the remainder of the year and update guidance on our full year outlook and as you begin to compare expectations to last year, be aware of the year-over-year anomalies to the items that I mentioned earlier.\nHeadwinds with higher expense levels compared to last year on the same items we experienced in the third quarter, such as healthcare and benefits, travel and marketing are expected to persist for the remainder of the year.\nIn addition, consider that we closed several significant business acquisitions in the financial services space in midyear this year.\nThese operations will have a very positive full year impact on both revenue growth and contribution to earnings, and this will provide a significant tailwind for us in 2022.\nHowever, recognizing the typical seasonality of these businesses with higher first half revenue and profitability, we are projecting a slight operating loss in these newly acquired operations in the fourth quarter this year.\nOne other nonoperating item to point out is the impact of the timing of vacation expense accruals.\nIn a normal year, vacation expense accruals are relieved throughout the year.\nLast year, as we work with clients to maintain high levels of service throughout the pandemic conditions, a higher portion of vacation time was delayed into the fourth quarter.\nAs a result, there was a larger-than-normal fourth quarter favorable adjustment last year as vacation expense accrual was relieved.\nThis year, vacation accruals have followed a more normal pattern, so there is no significant favorable adjustment projected in the fourth quarter.\nOf course, there is no full year impact, and this is purely a COVID influenced accounting anomaly that will be unique to the comparison of fourth quarter this year compared to fourth quarter a year ago.\nWith revenue up 14.5% and adjusted earnings per share up 30.5%, the health of our business is very strong.\nAs we consider the unique items described above that are projected to impact the balance of the year-over-year comparisons, our expectations for the full year are as follows: Total revenue growth in 2021 is expected within a range of 12% to 15% over 2020.\nAdjusted earnings-per-share growth is expected within a range of 20% to 24% over the $1.42 earnings per share recorded in 2020.\nWe expect a full year weighted average share count within a range of 53.5 million to 54 million shares.\nAnd unpredictable factors can impact the tax rate either up or down, but we expect a full year effective tax rate within a range of 24% to 24.5%.\nAgain, we are extremely pleased with the performance of the business this year.\nDespite the several headwinds I described that impact the second half comparisons this year, the business is very healthy, and there are considerable growth opportunities as we look ahead.\nAs I discussed last quarter, we started this year with the strongest M&A pipeline that we've seen in our recent history.\nThe annualized revenue contribution from the five transactions that we've already closed this year will provide nice momentum going into 2022.\nIn addition, we continue to have a very strong pipeline, including some larger deals, and there's still opportunity for us to close one or more of these transactions before year-end.\nWhile we are always looking ahead, I'd like to take a moment to talk about the most recent group to join our team.\nF In early September, we completed the acquisition of Shea Labagh Dobberstein, and accounting, tax and advisory services firm based in San Francisco, Bay Area.\nSLD serves privately held businesses, individuals and nonprofit organizations across the West Coast and has offices in San Francisco, San Mateo and Walnut Creek, California.\nThis acquisition is part of our long-term growth strategy on the West Coast.\nSLD complements our existing geographic footprint and increases the visibility of our brand while adding valuable capacity and scale in this growing market.\nMoreover, we always seek to find partners that share our commitment to client service and demonstrate a strong cultural fit and alignment on core values.\nSLD checked all of these boxes and more, and we look forward to working together to bring even greater value to our teams, our clients and to accelerate growth.\n",
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"content": "compname reports q3 earnings per share of $0.41 from continuing operations.\nsees aggregate annual revenue from acquisitions of about $72 million on full year basis (not sees fy revenue about $72 million).\nsees fy gaap earnings per share $1.36 to $1.42.\nq3 same store sales rose 8.3 percent.\nq3 earnings per share $0.41 from continuing operations.\nsees fy revenue up 12 to 15 percent.\nq3 revenue rose 18.6 percent to $282.7 million.\ncbiz sees fy gaap earnings per share of $1.36 to $1.42.\nsees fy revenue about $72 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: Many factors could cause future results to differ materially.\nA more detailed description of such factors can be found in our filings with the Securities and Exchange Commission.\nJoining us for today's call are Jerry Grisko, President and Chief Executive Officer; and Ware Grove, Chief Financial Officer.\nThroughout the past year, I emphasized the fundamental characteristics of our business that I believe enable us to continue to perform well in both favorable and less favorable business climates.\nAs I described on our second quarter call, these characteristics include that approximately 70% of our revenue is generated from essential services, including our tax services, insurance services, payroll services and a host of others that we provide to our clients regardless of economic conditions in the market.\nWe generally retain approximately 90% of our clients from year-to-year.\nWe have a broad geographic footprint.\nWe serve a diverse client base in terms of size and industry.\nWe enjoy strong and constant cash flow and have a substantial amount of variable expenses in our business.\nOur ability to grow throughout the challenging business climate that was 2020 is a testament to those characteristics, the strength of our business model and the agility and resilience of our team.\nAs expected and reflected in our results, some of our businesses performed better than others in more uncertain and volatile business environments.\nGenerally, the essential services described earlier tend to continue to perform well even in more challenging business climates while certain more discretionary services are less predictable.\nMany of our more discretionary services are in higher demand when our clients are pursuing or making decisions around growth, such as acquisitions or significant expansion plans.\nWe saw much of this play out during 2020.\nWithin our Financial Services group, we experienced strong performance from our core tax & accounting business and our litigation support business and continued steady performance from our government healthcare consulting business.\nWe also experienced a slowdown in the second and third quarters in demand for certain of our more discretionary project-oriented services, such as our valuation business and portions of our private equity advisory practice.\nHowever, demand for many of those services began to rebound in the fourth quarter, particularly for those services that are tied to supporting our clients' pursuit of acquisition opportunities.\nOne note on our government healthcare consulting practice.\nOn our last call, we discussed how the rate of growth had temporarily slowed during COVID due to restrictions of access to client facilities and delays in receiving client information.\nIn the fourth quarter, we were pleased to see the rate of growth for that business resume to more normal levels, and we expect demand for the services provided by that business to remain strong throughout 2021.\nTurning to our Benefits and Insurance group.\nWe had a similar experience to our Financial Services group with strong performance from the essential services that we provide, including our employee benefits business, the commercial and personal lines portion of our property and casualty business, the advisory services we provide for our clients on the retirement plans and demand for our upmarket, more robust payroll platform.\nFrom a consolidated view, the solid results that we experienced for those services were somewhat clouded by the softer results from a relatively small portion of our property and casualty business tied to the hospitality and adventure sports, a decline in the number of payrolls processed for some of our smaller clients, particularly those tied to the restaurant industry and a number of other more project-oriented service lines.\nThe encouraging note here is that we expect the portions of that business that were negatively impacted by the soft economic conditions to return to more normal growth levels once the economy improves.\nOne last note as it relates to our Benefits and Insurance business.\nWe have made substantial investments over the past several years in hiring, training and supporting new producers within this group.\nThose investments are essential to drive sustained long-term organic revenue growth.\nThe early report card on those investments is very encouraging.\nAnd as a group, the new producers that we brought into this program are outperforming our projections.\nAs a result, we are continuing to invest in our new producer program and to expand this program to other business lines.\nNow looking forward, we enter into this year in a position of financial strength with a very strong balance sheet, low debt and ready access to capital.\nAs we demonstrated in 2020, we also have a significant amount of variable expenses and considerable discretionary spending items that we can manage to preserve liquidity, if economic conditions are worse than currently anticipated.\nWhile much remains uncertain, we expect client demand for our core essential services to remain strong and for client interest in many of our more discretionary services to increase as business conditions continue to improve.\nBased on our performance in 2020, the financial strength of the business, the cost control measures that we have at our command and our current view of the business climate for 2021, we have elected to reinstate guidance for this year.\nI want to caution that while we are comfortable issuing annual guidance, we do expect more volatility than we ordinarily experience when comparing a given quarter to the same period in the prior year.\nSo we would caution against doing so.\nThese assumptions include the first six to nine months of 2021 will be similar to what we experienced in the second half of 2020, and we expect continued recovery in the M&A market, which impacts many of our more project-based and private equity services.\nWe saw improvement in the fourth quarter and expect this trend to continue throughout 2021.\nThe total revenue growing by 1.6% for the full year and margin on pre-tax earnings from continuing operations increasing by 90 basis points.\nWe were pleased to report earnings per share of $1.42 for the full year, up 11.8% over $1.27 reported a year ago.\nTo recap a few important points.\nAs the impact of the COVID pandemic unfolded, there was considerable risk and uncertainty everywhere.\nWe took a number of immediate actions to protect our liquidity, and we took measures to prudently control expenses with a view toward preserving our ability to serve clients in order that we could emerge as a strong and healthy business ready to resume growth.\nWe have not been completely immune, but with many actions we took, coupled with the dedication of our CBIZ team, we are pleased that our business model has weathered the storm, and we are now a stronger company for the experiences in 2020.\nOur primary concern operating under the pandemic environment was to protect our liquidity.\nPerhaps the best measure of our success in 2020 is the continuing nature of our strong positive cash flow.\nWe ended 2020 with $108 million of outstanding debt on our credit facility, increasing only $2.5 million from $105.5 million at year-end a year ago.\nAfter an active first quarter in 2020, repurchasing 1.2 million shares and closing three acquisitions, we paused both acquisitions and share repurchase activity from mid-March through mid-September until we could develop more confidence with the stability of our cash flow trends.\nFor the full year of '20, we closed seven acquisitions and utilized $89.7 million of capital for acquisition activities.\nWe also deployed $57.6 million to repurchase approximately 2.3 million shares for the full year, including the repurchase of one million shares in the fourth quarter.\nFor the full year, with $147.3 million of capital used for these two purposes, our borrowing increased by only $2.5 million.\nThis results in a leverage ratio of approximately 0.8 times on adjusted EBITDA of $132.1 million, with $286 million of unused capacity.\nGoing into '21, this offers us great flexibility to continue to deploy capital for acquisitions and for continuing our share repurchase activity.\nThrough February 16 to date this year, we have repurchased an additional 600,000 shares, and we intend to continue to repurchase shares.\nWith this recent activity, when combined with shares repurchased in 2020, this has resulted in the repurchase of more than 5% of our shares outstanding.\nWhen you also consider the 1.2 million shares repurchased in the prior year 2019, we have repurchased approximately 4.1 million shares or roughly 7.5% of shares outstanding within the past two years, and we've utilized nearly $100 million of capital for these activities.\nConsidering our strong balance sheet and cash flow attributes, we can repurchase this level of shares without compromising our capacity for acquisitions.\nWith the seven acquisitions closed in 2020, plus an eighth transaction we announced effective on January one this year, collectively these newly acquired operations will generate approximately $48 million of annualized revenue.\nStrategically, these acquired operations will further strengthen Benefits and Insurance services.\nWe'll add an important component to our financial advisory services and we'll add capacity in order to accelerate the rollout of our integrated payroll services platform that focuses on upmarket clients.\nAcquisition-related payments for earn-outs from previously closed transactions are estimated at $13.6 million in 2021.\nIn 2022, we estimate a use of approximately $15.4 million, approximately $9.1 million in 2023, $13 million in 2024 and approximately $800,000 in 2025.\nFor 2020, capital spending for the full year was $11.7 million, of which $2.2 million was in the fourth quarter.\nWe expect capital spending within a range of $12 million to $15 million, looking ahead into 2021.\nDepreciation and amortization expense for the full year of '20 was $23.1 million, $9.6 million of depreciation with $13.5 million of amortization.\nIn the fourth quarter, depreciation and amortization expense was $5.9 million.\nA major concern for us as the pandemic unfolded in 2020 was our clients' ability to pay receivables.\nAs we transition to remote work conditions at the end of the first quarter in 2020, our team did a great job refining and adopting new processes and digital tools for billing and management of receivables.\nThese tools are now a more permanent fixture in our workflow processes and in our communication with clients.\nDays sales outstanding performance on receivables improved this past year despite the volatile conditions and financial stress throughout the economy.\nAt the end of the year, days sales outstanding stood at 72 days compared with 75 days a year earlier.\nAlthough not completely immune to financial stress, this is also good evidence that with our diverse client base, there is no significant concentration of clients in the more severely impacted areas of the economy, such as hospitality, travel, restaurant or entertainment businesses.\nAt the end of the first quarter in 2020, we recorded an additional $2 million of reserve for bad debt.\nWith continuing uncertainty in the economy, although days sales outstanding performance has improved, we continue to carry that level of reserves for bad debt.\nFor the full year of '20, bad debt expense was 45 basis points of total revenue compared with 25 basis points of total revenue for 2019.\nTotal consolidated revenue for the full year was up 1.6%, with same unit revenue declining slightly by 0.4%.\nIn the fourth quarter, total revenue grew by 3.9% and same unit revenue grew by 1.1%.\nWithin Financial Services, total revenue for the full year was up 2.1%, with same unit revenue up 0.8%.\nIn the fourth quarter, total revenue in Financial Services was up 6.6% with same unit revenue up 3.3%.\nTurning to Benefits and Insurance.\nFor the year, total revenue grew by 0.5%, with same unit revenue declining by 3%.\nAnd in the fourth quarter, revenue declined by 0.8% and same unit revenue declined by 3.2%.\nAs I indicated in our third quarter conference call, revenue growth numbers were impacted by a relatively small number of our operations, where the nature of advisory or transactional services was more severely impacted by economic conditions.\nFor the full year, these businesses represented 16% of our total revenue, but collectively, these businesses declined by 12.8% in 2020 compared with the prior year.\nAdjusting total revenue to exclude the impact of these businesses, the remaining core revenue would reflect growth of 4.9% rather than the 1.6% reported.\nSame unit revenue would reflect growth of 2.5% rather than the 0.4% decline reported.\nFourth quarter revenue adjusted to exclude these businesses, grew by 8.3% versus the reported 3.9% and same unit revenue grew by 4.7% versus the reported 1.1%.\nWith pre-tax income margin improving by 90 basis points to 10.7% from 9.8% the prior year, we saw a favorable impact resulting from the cost control measures we took in deferring discretionary items, plus the favorable impact from the natural reduction in travel, entertainment expense and from the lower cost for our self-funded healthcare benefits.\nAmong other things, for 2020, T&E costs came in at approximately 30% of the prior year levels, and healthcare costs came in at approximately 85% of expectations as discretionary and elective medical procedures were deferred.\nAdjusting the reported operating margin to remove the impact of accounting for gains and losses on assets held in the deferred compensation plan, operating income was 11.2% for the full year, up 70 basis points compared with 10.5% in 2019.\nAs Jerry outlined, we think business conditions in 2021 will look very much like the environment we experienced during the second half of 2020.\nOf course, the timing and impact of a successful COVID vaccination rollout is very unclear, and there is still risk and uncertainty ahead.\nConsidering the stability and performance of our core businesses in 2020, together with the impact of recent acquisitions, we think revenue will continue to grow in a similar matter, as I just described.\nWe are projecting total revenue growth in 2021 within a range of 5% to 8%.\nAs a reminder, we do not provide guidance for quarterly results.\nBut as you think about the year ahead, bear in mind, the first quarter last year was a relatively strong quarter before we felt a COVID impact in the second half of March.\nWith the 5% to 8% revenue growth expectation, we are looking to increase earnings per share within a range of 8% to 12% over the $1.42 recorded for 2020.\nConsistent with our longer-term goals, we can manage a number of discretionary items, and we expect to improve margin within a range of 20 to 50 basis points.\nYou will note the effective tax rate was 24.3% in 2020.\nAside from any change in tax law that may arise from the new administration, there are a number of variables that can impact our tax rate, either up or down.\nBut as we look ahead to 2021, we are projecting a 25% effective tax rate.\nOngoing share repurchase activity will impact the fully diluted weighted average share count.\nAt this time, we are estimated 54.5 million fully diluted shares for the full year, down from 55.4 million shares in 2020.\nAs I mentioned, we are continuing to repurchase shares, and we will update this estimate at the end of the first quarter and throughout the year.\nAdjusted EBITDA for 2020 came in at $132.1 million or 13.7% of revenue, a 9.6% increase from the prior year, and we expect to further improve that margin in '21.\nSo in conclusion, we were pleased to see stability in client demand and cash flow as we progress through the year.\nWe have emerged from the challenge of 2020 as a stronger company with stronger processes.\nGoing into 2021, we think our business will continue to reflect the stability, evidenced by the performance this past year.\nWe recognize the uncertainty and risks ahead, and we will plan to update our expectations as conditions dictate throughout the balance of the year.\nFirst, I would like to talk about our unique position in the market and how it allows us to provide solutions to our clients that are unmatched in our industries.\nWhile we have a large number of very capable competitors for many of the services we provide, they are often not aligned and lack the ability to provide the holistic, multidisciplinary solutions that our clients need when analyzing decisions that relate to their most impactful opportunities or greatest challenges.\nWe witnessed the strength of our business model throughout 2020 as we move quickly to collaborate across businesses, service lines and geographies to bring CBIZ's resources and expertise to bear in coordinated services that were responsive to our clients' most pressing needs.\nWe are encouraged by the value that our holistic multidisciplinary solutions approach brings to our clients and are excited for the opportunities that it presents for CBIZ to further distinguish us from our competitors.\nNext, relating to M&A.\nThe acquisition of BeyondPay brings additional implementation capacity to support sales of our upmarket payroll solution and follows another similar acquisition earlier in 2020.\nWe also acquired Borden Perlman Insurance Agency within our property and casualty business.\nBased in New Jersey, Borden Perlman is a leading provider of property and casualty insurance with an over 100-year history of serving clients on the East Coast.\nBoth of these acquisitions provide strategic value, but are also strong cultural fits, which is the most important factor when we consider acquisition opportunities.\nAs Ware mentioned, overall, we completed seven acquisitions in 2020, all of which bring expertise, capacity, talent and a strong client base to our business.\nAs I mentioned earlier, in 2021, we've already completed one acquisition with our core accounting and tax practices with the addition of Middle Market Advisory Group in Denver, Colorado.\nMMA provides tax complying and consulting services to middle market companies and family groups across a number of attractive industries and complements our rapidly growing Colorado practice.\nAcquisitions continue to be an essential component of our growth strategy.\nWhile the M&A market slowed in the second and third quarters of last year, we are seeing activity resume.\nWe are finding that our performance throughout the pandemic allows us to tell a compelling story when it comes to potential partners.\nThe challenges faced by many of our smaller competitors throughout COVID shined a light on the value that CBIZ can bring to our team members and our clients as a result of our scale, breadth and depth of services and expertise.\nAs a result, our pipeline of outstanding acquisition prospects is stronger than it has been in many years, and we have access to capital to be aggressive as we seek to take advantage of many of these opportunities as we can.\n",
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"content": "sees 2021 total revenue up 5% to 8%.\nsees 2021 earnings per share from continuing operations up 8% to 12%.\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: chubb.com for more information on factors that could affect these matters.\nFirst, we have Evan Greenberg, Chairman and Chief Executive Officer; followed by Peter Enns, our Chief Financial Officer.\nAs you saw from the numbers, Chubb had an outstanding quarter, highlighted by record operating earnings and underwriting results, expanded margins and double-digit premium revenue growth globally, the best in over 15 years, powered by commercial P&C and supported by continued robust commercial P&C rate movement.\nChubb was built for these conditions.\nWe have averaged double-digit commercial P&C growth over the past 10 quarters.\nThe breadth of our product and reach, combined with our execution-oriented underwriting culture and our reputation for service and consistency enable us to fully capitalize on opportunity globally.\nAnd conditions such as these size and scale are our friend.\nCore operating income in the quarter was $1.62 billion or $3.62 per share, again, both records.\nOn both the reported and current accident year ex-cat basis, underwriting results in the quarter were simply world-class.\nThe published P&C combined ratio was 85.5% and current accident year was 85.4% compared to 87.4% prior year.\nThe two percentage points of margin improvement were almost entirely loss ratio related.\nCurrent accident year underwriting income of $1.2 billion was up 27%.\nWhile on the other side of the balance sheet, adjusted net investment income of $945 million, also a record, was up nearly 9.5% from prior year.\nPeter will have more to say about cats and prior period development, investment income and book value.\nTurning to growth and the rate environment.\nP&C premiums were up 15.5% globally, with commercial premiums, excluding agriculture, up nearly 21%.\nThe 15.5% growth for the quarter and 12.6% for the first six months were the strongest growth we have seen since 2004.\nGrowth in the quarter was extremely broad-based, with contributions from virtually all commercial P&C businesses globally, from those serving large companies, to midsized and small and most regions of the world and distribution channels.\nWe continue to experience a needed and robust commercial P&C pricing environment in most all important regions of the world, with continued year-on-year improvement in rate to exposure on the business we wrote, both new and renewal.\nBased on what we see today, I'm confident these conditions will continue.\nIn North America, Commercial P&C net premiums grew over 16%.\nNew business was up 24%, and renewal retention remained strong at 96.5% on a premium basis.\nIn our North America major accounts and specialty commercial business, net premiums grew over 13%, with each division, major accounts, Westchester and Bermuda having its largest quarter in history in terms of written business.\nAnd the standout was our middle market and small commercial division, which had the biggest quarter in about 20 years, driven by record new business growth and strong retentions.\nOverall rates increased in North America commercial by a strong 13.5%, which is on top of a 14.7% rate increase last year for the same business, making the two-year cumulative increase over 30%.\nAnd remember, in North America, rates have been rising for almost four years.\nHowever, they have exceeded loss costs for only about two years now.\nLoss costs are currently trending about 5.5% and vary up or down depending upon line of business.\nGeneral commercial lines loss costs for short-tail classes are trending around 4%, while long-tail loss costs, excluding comp, are trending about 6%.\nLet me give you a better sense of the rate increase movement by division and line in North America.\nIn major accounts, rates increased in the quarter by about 16% on top of almost 18% prior year for the same business, making the two-year cumulative increase over 36%.\nRisk management-related primary casualty rates were up almost 9%.\nGeneral casualty rates were up 21% and varied by category of casualty.\nProperty rates were up nearly 12% and financial lines rates were up almost 20%.\nIn our E&S wholesale business, the cumulative two-year rate increase was 39%, comprised of an increase of circa 18% this quarter on top of 18% prior year second quarter.\nProperty rates were up about 16.5%.\nCasualty was up about 21%, and financial lines rates were up over 21%.\nIn our middle market business, rates increased in the quarter over 9.5% on top of over 9% last year, making the two-year cumulative increase 20%.\nRates for property were up over 10.5%.\nCasualty rates were up 11%, excluding workers' comp, and comp rates were down at about 0.5%.\nFinancial Lines rates were up over 17.5% in our middle market business.\nTurning to our international general insurance operations.\nCommercial P&C premiums grew an astonishing 33% on a published basis or 24% in constant dollars.\nInternational retail commercial grew 27% and our London wholesale business grew 60%.\nRetail commercial P&C growth varied by region, with premiums up 36.5% in our European division, with equally strong growth in both the U.K. and on the continent.\nAsia Pacific was up over 29%, while our Latin America commercial lines business grew over 14.5%.\nInternationally, like in the U.S., in those markets where we grew, we continued to achieve improved rate to exposure across our commercial portfolio.\nIn our international retail commercial P&C business, the two-year cumulative rate increase was 35% comprised of increases this quarter and prior year of 16% each.\nTwo territories in particular, the U.K. and Australia, stand out in terms of rate achievement.\nIn our U.K. business, rates increased in the quarter by 18%, on top of a 26% rate increase prior year for the same business, making the two-year cumulative increase 48%.\nIn Australia, the two-year cumulative rate was 42%, comprised of an increase of 23% this quarter, on top of 16% prior year.\nIn our London wholesale business, rates increased in the quarter by 13%, on top of a 20% rate increase prior year, so making the two-year cumulative 36%.\nInternational markets began firming later than the U.S. And again, like with the U.S., rates has exceeded loss costs for about two years now.\nOutside the U.S., loss costs are currently trending 3%, so that varies by class of business and country.\nConsumer lines growth globally in the quarter continued to recover from the pandemic's effects on consumer-related activities.\nOur international consumer business grew 13% in the quarter, and that's on a published basis.\nIt grew 5% in constant dollars.\nBreaking that down for you, international personal lines grew 20% on a published basis, while our international A&H grew 6.5%, but it was essentially flat in constant dollar.\nWithin our A&H book, a nascent recovery in our leisure travel business outside of Asia is beginning to result in growth, although passenger travel activity is still well below pre-pandemic levels.\nIn both our group A&H business, with its employer-based benefits and our consumer-focused direct marketing business, premiums were up mid-single digits, still impacted by the pandemic but beginning to improve.\nNet premiums in our North America high net worth personal lines business were up over 2.5%.\nNonrenewals in California and COVID auto-related renewal credits had almost one point of negative impact on growth in the quarter.\nOur network client segment, the heart of our business, grew almost 8% in the quarter.\nOverall retention remains strong at over 94%.\nAnd we achieved positive pricing, which includes rate and exposure of 13% in our homeowners portfolio.\nLoss cost inflation in homeowners is currently running about 11%.\nLastly, in our Asia-focused international life insurance business, net premiums plus deposits, were up 55% in the quarter, while net premiums in our Global Re business grew up -- grew over 32%.\nIn sum, we continue to capitalize on a hard or firming market for commercial P&C in most areas of the world.\nBoth growth and margin expansion are two trends that I am confident will continue.\nOur organization is firing on all cylinders.\nWe're growing our business and our exposures, and we continue to expand our margins.\nOur leadership employees are energized and driven to win.\nI am confident in our ability to outperform and deliver strong, sustainable shareholder value.\nI'm excited to be in my new position and build upon all that he has achieved -- all he has achieved under his leadership, and I'm honored to be leading the very strong team he has built going forward.\nTurning to our results.\nWe completed the quarter in an excellent financial position and continue to build upon our balance sheet strength.\nWe have over $75 billion in capital and a AA-rated portfolio of cash and invested assets that now exceeds $123 billion.\nOur record underwriting and investment performance produced strong positive operating cash flow of $3.1 billion for the quarter.\nAmong the capital-related actions in the quarter, we returned $2.3 billion to shareholders, including $1.9 billion in share repurchases and $352 million in dividends.\nThrough the six months ended June 30, we returned $3.1 billion, including $2.4 billion in share repurchases and dividends of $704 million.\nWe recently announced a onetime incremental share repurchase program of up to $5 billion through June 2022.\nAs Evan said, adjusted pre-tax net investment income for the quarter was a record $945 million, higher than our estimated range, benefiting from increased corporate bond call activity and higher private equity distributions.\nWe increased the size of our investment portfolio by $2.4 billion in the quarter after buybacks due to strong operating cash flow and high portfolio returns, including $694 million in pre-tax unrealized gains from falling interest rates.\nAt June 30, our investment portfolio remained in an unrealized gain position of $3.3 billion after tax.\nDuring this challenging investment return environment, we will remain consistent and conservative in our investment strategy and do not expect to materially adjust the portfolio asset allocation over the near term.\nWe will be selective but active, and we'll continue to focus on risk-adjusted returns and we will not reach for yields.\nThere are a number of factors that impact the variability in investment income, including the amount of operating cash flow available to invest, the reinvestment rate environment and the assumed prepayment speeds on our corporate bond calls and variability around private equity distributions.\nBased on the current interest rate environment and a normalization of bond calls and private equity distributions, we continue to expect our quarterly run rate to be approximately $900 million.\nOur annualized core operating ROE and core operating return on tangible equity were 11.5% and 17.7%, respectively, for the quarter.\nAnd as a reminder, we continue to present the fair value mark on our private equity funds outside of core operating income as realized gains and losses instead of net investment income as other companies do.\nThe gain from the fair value mark this quarter of $712 million after tax, we have increased core operating ROE by five percentage points to 16.5% and core operating income by $1.59 per share to $5.21.\nBook and tangible book value per share increased by 4.2% and 5%, respectively, from the first quarter due to record core operating income and realized and unrealized gains of $1.4 billion after tax in our investment portfolio, which again primarily came from declining rates and mark-to-market gains on private equities.\nThe increase in book value per share also reflects the impact of returning over $2 billion to shareholders in the quarter.\nOur pre-tax P&C net catastrophe losses for the quarter were $280 million, principally from severe U.S. weather-related events.\nThere was no overall change to our aggregate COVID-19 loss estimate.\nWe had favorable prior period development in the quarter of $268 million.\nThis included a charge from molestation claims of $68 million pre-tax compared with $259 million in the prior year.\nExcluding this charge, we had favorable prior period development in the quarter of $336 million pre-tax, split approximately 30% in long-tail lines, principally from accident years 2017 and prior and 70% short-tail lines.\nFor the quarter, our net loss reserves increased $1.1 billion in constant dollars and our paid-to-incurred ratio was 80%.\nOur core operating effective tax rate was 15.8% for the quarter, which is within our expected range of 15% to 17% for the year.\n",
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"content": "compname reports strong second quarter net income per share of $5.06 and record core operating income per share of $3.62.\nconsolidated net premiums written up 14.3% globally, with commercial p&c lines up 19.9%; best organic p&c growth in over 15 years.\nq2 core operating earnings per share $3.62.\nqtrly p&c combined ratio was 85.5% compared with 112.3% prior year.\nqtrly pre-tax catastrophe losses, net of reinsurance and including reinstatement premiums was $280 million.\np&c net premiums written were up 15.5% globally for quarter.\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: chubb.com for more information on factors that could affect these matters.\nFirst, we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Peter Enns, our Chief Financial Officer.\nWe had a very strong third quarter, highlighted by outstanding P&C premium revenue growth globally of 17% and simply excellent underwriting results on both the calendar and current accident year basis, despite elevated catastrophe losses.\nOur results were powered by double-digit commercial lines growth, strong continued underlying margin expansion, the strength of our reserves and our broad diversification of businesses.\nCore operating income in the quarter of $2.64 per share was up 32% with $250 million over prior year to $1.2 billion, while net income of $1.8 billion was up 53% from prior year.\nFor the year on both a net and core operating income basis, we have produced record earnings.\nAgain, it was an active quarter for natural catastrophes.\nYet, with over $1.1 billion of cats, we reported a 93.4% combined ratio with P&C underwriting income up 58% to $617 million, which speaks to the underlying strength of our businesses, and again, broad diversification of our company's sources of revenue and earnings, both domestically and globally.\nYear-to-date, we have produced $2.4 billion in underwriting income for a combined ratio of 90.4% and that includes $2.1 billion of cat losses, and what is shaping up to be another year of sizable weather-related loss events kind of the new normal brought on by climate change and other societal changes.\nSpeaking again to our underwriting health, on a current accident year ex-cat basis, underwriting income in the quarter was $1.4 billion, up 23% with a combined ratio of 84.8% compared to 85.7% prior year, a quarterly underwriting record.\nIf we exclude the one-time positive adjustment we took last year due to lower frequency of loss because of the COVID-related shutdown, our current accident year combined ratio unaffected improved 2 points.\nThe strength of our balance sheet and conservative approach to loss reserving was again in evidence this quarter as we reported $321 million in favorable prior period reserve development.\nNet investment income in the quarter was $940 million, up 4.5%.\nPeter is going to have more to say about cats and prior period development, investment income and book value.\nTurning to growth in the rate environment.\nAs I said at the opening, P&C premiums were up nearly 17% globally or 15.5% in constant dollar with commercial premiums up 22% and consumer up 4%.\nThe 17% growth for the quarter and 14.2% for the first nine months, topped last quarters and was the strongest organic growth we have seen again since 2004.\nGrowth in the quarter was broad-based with contributions virtually all commercial P&C businesses globally from our agriculture business to those serving large companies to mid-sized and small and most regions of the world and distribution channels.\nThe robust commercial P&C pricing environment remains on pace in most all important regions of the world with continued year-on-year improvement in rate to exposure on the business we wrote, both new and renewal.\nIn North America, total P&C net premiums grew over 17% with commercial premium up about 22.5% excluding agriculture, which had a fantastic quarter in its own right with premium growth of over 40%, commercial P&C premiums were up over 16.5% in North America.\nNew business was up 13% for all commercial lines and renewal retention remained strong at over 97% on a premium basis.\nThe 16.5% commercial premium growth is a composite of 15.5% growth in our major accounts and specialty business and over 18% in our middle market and small commercial business, simply a standout quarter for this division.\nOverall, rates increased in North America commercial lines by over 12%.\nOnce again, loss costs are currently trending about 5.5% and vary up or down, depending upon line of business.\nAnd again, like last quarter, just to remind you, in general, commercial lines loss costs for short-tail classes are trending around 4% though we anticipated this to increase in the future while long-tail loss costs excluding comp are trending about 6%.\nLet me give you a better sense of the rate increase movement in North America.\nIn major accounts, which serves the largest companies in America rates increased in the quarter by just over 13%.\nRisk management-related primary casualty rates were up over 6%.\nGeneral casualty rates were up about 21% and varied by category of casualty.\nProperty rates were up 12% and financial lines rates were up 17%.\nIn our E&S wholesale business, rates increased by 16% in the quarter, property rates were up 13%, casualty was up 20% and financial lines rates were up about 21%.\nIn our middle market business, rates increased in the quarter nearly 9.5%.\nRates for property were up over 11%.\nCasualty rates were up about 9.5% excluding workers' comp with comp rates down 2% and financial lines rates were up 18%.\nTurning to our international general insurance operations.\nCommercial P&C premiums grew 20.5% on a published basis or 16% in constant dollar.\nInternational retail commercial P&C grew nearly 17% or 12% in constant dollar, while our London wholesale business grew over 31%.\nRetail commercial P&C growth varied by region with premiums up almost 28% in our European Division, Asia Pacific was up 15.5%, while Latin America commercial lines grew about 6.5%.\nInternationally, like in the U.S. in those markets where we grew, we continued to achieve improved rate to exposure across our commercial portfolio.\nIn our international retail commercial P&C business, rates increased in the quarter by 15%, property rates were up 11%, financial lines up 33% and primary and excess casualty up 7% and 11% respectively.\nAnd in our London wholesale business rates increased in the quarter by 11%, property up 13%, financial lines up 14%, marine up 8%.\nOutside North America, loss costs are currently trending about 3% though that varies by class of business and country.\nConsumer lines growth globally in the quarter continue to recover from the pandemic's ongoing effects on consumer-related activities.\nOur international consumer business grew almost 10% in the quarter on a published basis or 5% in constant dollar, and breaking that down a little further, international personal lines grew almost 11% on a published basis, while international A&H grew over 8.5% or just 5% in constant dollar.\nLatin America had a particularly strong quarter in consumer with personal lines and A&H premiums up 18.5% and 17.5% respectively, powered by both our traditional and digitally focused distribution relationships.\nNet premiums in our North America high net-worth personal lines business were up just over 1%, adjusted for non-renewals in California and COVID related auto-renewal credit, we grew 3% in the quarter.\nOur true high net-worth client segment, the heart of our business, grew 11% in the quarter.\nOverall, retentions remained strong at 95.7% and we achieve positive pricing, which includes rate and exposure of 14% in our homeowners portfolio.\nThe severity trends in personal lines in the U.S. remain elevated.\nLastly, in our Asia-focused international life insurance business, net premiums plus deposits were up over 52% in the quarter, while net premiums in our Global Re business were up over 22%.\nIn sum, we continue to capitalize on broad-based and favorable market conditions and improving economic conditions.\nAll of our businesses did well or are improving from agriculture to all forms of commercial P&C globally, both retail and wholesale, serving large companies to middle market and small to our improving global personal lines and A&H businesses to our Asia life businesses, to our Global Re business.\nIn one sentence, both growth and margin expansion are two trends that will continue.\nIn the quarter, as you saw, we announced the definitive agreement to acquire the life and non-life insurance companies that house the personal accident supplemental health and life insurance businesses of Cigna and Asia-Pacific for $5.75 billion in cash.\nThis highly complementary transaction advances our strategy to expand our presence in the Asia-Pacific region, including our company's Asia-based life company presence and add significantly to our already sizable global A&H business.\nUpon completion of the transaction, which we expect during 2022, Asia Pacific share of Chubb's global portfolio will represent approximately 20% of the company.\nFor many years, we have admired Cigna's business in Asia including its people, product innovation, distribution and management capabilities.\nThe underlying economics and value creation of the transaction are very attractive, and these businesses will contribute to our company strategically for decades to come.\nThe transaction once again demonstrates our patience in advancing our strategies and confirms our consistent and disciplined approach to holding capital for risk and growth, both organic and inorganic.\nOur company has considerable earning power and a patient hand to deploy capital effectively over time.\nWe return excess of what we need to shareholders in the form of dividends and share repurchases, while we continue to build future revenue and earnings generation capabilities.\nIn conclusion, this was another excellent quarter of growing our business and our exposures, expanding our margins and investing in our future.\nAll in a period with substantial cats, which are not unexpected.\nMy management team and I have never been more confident in our ability to continue to outperform and deliver strong sustainable shareholder value.\nAs you've just heard from Evan, our overall franchise continues to deliver outstanding top line growth, margin improvement and profit growth.\nNow let me discuss our balance sheet and capital management.\nOur financial position remains exceptionally strong, including our cash flow, liquidity, investment portfolio, reserves and capital.\nIt all starts with our operating performance, which produced $3.3 billion in operating cash flow for the quarter and $8.5 billion for the first nine months.\nWe continue to remain extremely liquid with cash and short-term investments of $5.1 billion at the end of the quarter even after our significant capital management actions.\nAmong the capital related actions in the quarter, we returned $1.9 billion to shareholders, including $1.5 billion in share repurchases and $346 million in dividends.\nThrough the nine months ended September 30th, we returned over $5 billion, including almost $4 billion in share repurchases or over 5% of our outstanding shares and dividends of over $1 billion.\nThe agreement to acquire Cigna's A&H and life insurance businesses in Asia-Pacific is not expected to impact our share repurchase and dividend commitments.\nOur investment portfolio of $122 billion continues to be of a very high quality and we have not made any material changes during the quarter to our investment allocation.\nThe portfolio increased $759 million in the quarter and at September 30th our investment portfolio remained in an unrealized gain position of $2.9 billion after-tax.\nAdjusted pre-tax net investment income for the quarter was $940 million similar to last quarter and $40 million higher than our estimated range benefiting from higher private equity distributions.\nAs I noted on the second quarter earnings call, our investment income is based on many factors, and notwithstanding our better than expected results over the last few quarters, we continue to expect our quarterly run rate to be approximately $900 million.\nPre-tax catastrophe losses for the quarter were $1.1 billion with about $1 billion in the U.S., of which $806 million was from Hurricane Ida and $135 million from international events, of which $95 million was from flood losses in Europe.\nOur reserve position remains strong, with net reserves increasing $1.7 billion or 3.2% on a constant dollar basis reflecting the impact of catastrophe losses in the quarter and 2021 growth, in particular from our agricultural business which has a seasonality impact on reserves.\nWe had favorable prior period development of $321 million pre-tax which include $33 million of adverse development related to legacy environmental exposures.\nThe remaining favorable development of $354 million was split approximately 30% in long-tail lines, principally from accident years 2017 and prior and 70% in short-tail lines, principally from our 2020 North American personal lines.\nOur paid-to-incurred ratio was 73% or a very strong 75% after adjusting for cats, PPD and agriculture.\nBook value decreased by $744 million or 1%, reflecting $1.16 billion in core operating income and a net gain on our investment portfolio of $190 million, which was more than offset by foreign exchange losses of $305 million and the $1.9 billion of share repurchases and dividends.\nBook and tangible book value per share increased 0.6% and 0.4% respectively from last quarter.\nOur reported ROE for the quarter and year-to-date was 12.3% and 14.4% respectively.\nOur core operating ROE and core operating return on tangible equity were 8.2% and 12.6% respectively for the quarter.\nAs a reminder, we do not include the fair value mark on our private equity funds in core operating income as many of our peer companies do.\nFor comparison purposes, our core operating ROE increases by 5 percentage points to 13.2% and our core operating income increases by a $1.61 per share to $4.25.\nYear-to-date, our core operating ROE, including the fair value mark on our PE funds would be 13.8%.\n",
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"content": "compname reports third quarter per share net income and core operating income of $4.18 and $2.64, up 59% and 32%, respectively.\nconsolidated net premiums written up 15.8%, with commercial p&c lines up 22%.\nq3 core operating earnings per share $2.64.\nqtrly p&c combined ratio was 93.4% compared to 95.2% prior year.\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, today's call includes discussions of certain non-GAAP financial measures.\nTables reconciling these non-GAAP financial measures are available in the supplemental information package in the Investors section of the company's website at crowncastle.com.\nAs you saw from our results yesterday, we remained on track to generate an anticipated 12% growth in AFFO per share this year.\nWe expect to be at the high end of our long-term growth target in 2022, with 8% AFFO per share growth.\nBeing driven in large part by our expectation at tower core leasing activity will be approximately 50% higher in 2022 than our trailing 5-year average.\nAnd we increased our annualized common stock dividend by approximately 11% to $5.88 per share, marking the second consecutive year of dividend growth that meaningfully exceeds our long-term target.\nGiven that our dividend payout ratio has remained largely unchanged since 2014, our dividend remains the best indicator of how we are performing both financially and operationally.\nOur significant out-performance in 2021 combined with our forecast for 2022 enabled us to raise our dividend 11%, well above our stated goal for the second year in a row.\nIn essence, we've achieved three years of targeted dividend growth in just two years.\nSince we established our common stock dividend in 2014, we have grown dividends per share at a compounded annual growth rate of 9% with growth ranging from 7% to 11% in each year.\nWe aim to provide profitable solutions to connect communities and people.\nAnd our carbon-neutral goal builds on our commitments to deploy our strategy sustainably.\nOur business model is inherently sustainable, shared solutions limit infrastructure in the communities in which we operate and minimize the use of natural resources.\nFurther to the point, our core value proposition, since we began operating more than 25 years ago has centered around our ability to provide our customers with access to mission-critical infrastructure at a lower cost, because we can share that infrastructure across multiple operators.\nIn addition, our solutions help address societal challenges like the digital divide in under-served communities by advancing access to education and technology.\nTo-date, we have invested nearly $10 billion in towers, small cells and fiber assets located in low-income areas.\nAs a way of quantifying how our business model minimizes the use of natural resources, our business in it's just one ton of CO2 per $1 billion of enterprise value, which is 90 times more efficient than the average company in the S&P 500 based on industry estimates.\nAlthough we are proud of our limited environmental impact, we are focused on making even more strides by reducing our energy consumption and sourcing renewable energy to help us achieve our goal of carbon neutrality by 2025.\nWe are excited about this announcement and look forward to continuing to find ways to help our communities and planet while driving significant returns to our shareholders.\nTurning back to our 2022 outlook.\nWe are benefiting from record levels of activity in our tower business with our customers upgrading thousands of existing cell sites as a part of their first phase of 5G build-out.\nAdding to the opportunity, we are seeing the highest level of tower co-location activity in our history with DISH building a nationwide 5G network from scratch.\nI believe our strategy and unmatched portfolio of more than 40,000 towers and approximately 80,000 route miles of fiber concentrated in the top U.S. market, have positioned Crown Castle to capitalize both on the current environment and to grow our cash flows and dividends per share in the near term and for years to come.\nWe are focused on generating this growth while delivering the highest risk adjusted returns for our shareholders.\nBy investing in shared infrastructure assets that lower the implementation and operating costs for our customers while generating solid returns for our shareholders.\nTo execute on this strategy, we are providing our customers with access to our 40,000 towers and 80,000 route miles of fiber help them build out their 5G wireless networks.\nWe are investing in new small cell and fiber assets that meet our disciplined and rigorous underwriting standards to expand our long-term addressable market.\nAnd we are identifying where wireless networks are going and investing early to position the company to capitalize on future opportunities, as we have done with small cells, edge computing and CBRS.\nOne of the core principles underpinning our strategy is to focus on the U.S. market, because we believe that represents the best market in the world for wireless infrastructure ownership, since it has the most attractive growth profile and the lowest risk.\nAnd we believe this dynamic of higher growth and lower risk will continue into the future, which is why we expect our U.S. based strategy will drive significant returns for shareholders.\nWith that in mind, we have invested nearly $40 billion in towers, small cells and fiber assets in the top market that are all foundational for the development of future 5G network.\nWe believe our unique strategy, portfolio of the infrastructure assets and proactive identification of future opportunities provide a platform for sustained long-term dividend growth as wireless network architecture evolves and our customers' priorities shift over time.\nToday, our customers are primarily focusing their investment on macro sites as towers remain the most cost-effective way to deploy spectrum at scale and established broad network coverage.\nWith our high quality towers concentrated in the top markets, we are clearly benefiting from this focus with an expected 6% organic growth for our Tower segment in 2021 and an expected 20% increase in tower core leasing activity next year when compared to these 2021 levels.\nWith history as a guide, we believe the deployment of additional spectrum on existing cell sites will not be enough to keep pace with the persistent 30% plus annual growth in mobile data traffic.\nAs a result, we expect cell site densification to remain a critical tool for carriers to respond to the continued growth in mobile data demand as it enables our customers to get the most out of their spectrum assets by reusing the spectrum over shorter and shorter distances.\nWhen the current cell site upgrade phase shift to densification phase, we believe the comprehensive offering of towers, small cells and fiber will be critical for our customers and provide us with an opportunity to further extend the runway of growth in our business.\nWhile we expect the densification phase of build out will drive additional leasing on our tower assets for years to come, we believe small cells will play an even greater role as the coverage area of cell sites will continue to shrink due to the density of people and therefore the density of wireless data demand.\nWith more than 80,000 small cells on air or committed in our backlog, high capacity fiber assets and the vast majority of the top 30 markets in the U.S. and industry-leading capabilities, we believe we are well positioned to deliver value to our customers as their priorities evolve, driving meaningful growth in our small cell business.\nBigger picture, when I consider the durability of the underlying demand trends we see in the U.S., how well we are positioned to consistently deliver growth through all phases of the 5G build out with significant potential upside in our comprehensive asset base as wireless networks continue to evolve.\nOur proven ability to proactively identify where wireless network architecture is heading and to be an early investor in solutions to help future networks, the deliberate decisions we have made to reduce risks associated with our strategy and our history of steady execution.\nI believe that Crown Castle stands out as a unique investment, that will generate compelling returns over time.\nIn the near term, as I mentioned before, we expect to deliver outsized AFFO per share growth of 12% in 2021.\nWe expect to generate 8% growth in AFFO per share in 2022 at the high end of our long-term growth target and supported by an expected 20% increase in tower core leasing activity and we increased our common stock dividend by 11% for the second consecutive year.\nLonger term, we believe Crown Castle provides an exciting opportunity for shareholders to invest in the development of 5G in the U.S., which we believe is the best market for communications infrastructure ownership.\nImportantly, we provide access to such attractive industry dynamics, while providing a compelling total return opportunity, comprised of a high-quality dividend that currently yields 3.5% with expected growth in that dividend of 7% to 8% annually.\nAs Jay discussed, we delivered another great quarter of results in the third quarter.\nWe remained on track to grow AFFO per share by an anticipated 12% this year.\nWe expect to be at the high end of our growth target in 2022 with 8% AFFO per share growth and we increased our quarterly common stock dividend by 11% for the second consecutive year, meaningfully above our long-term target growth rate while maintaining a consistent payout ratio.\nWe are excited about the outsized growth we are experiencing in the early stages of 5G.\nAnd we continue to believe our portfolio of towers, small cells and fiber provides unmatched exposure to what we believe will be a decade-long build out by our customers.\nOur third quarter results were highlighted by 8% growth in site rental revenues, 11% growth in adjusted EBITDA and 13% growth in AFFO per share when compared to the same period last year.\nRecord tower activity level supported this strong growth, generating organic tower growth of 6.3% and higher services contribution when compared to the same period in 2020.\nLooking at our full-year outlook for 2021 and 2022 on Slide 5.\nWe are maintaining our 2021 outlook with site rental revenues, adjusted EBITDA and AFFO growing 7%, 11% and 14% respectively.\nFor full year 2022, we expect continuing investments in 5G to drive another very good year for us, with 5% site rental revenue growth, 6% growth in adjusted EBITDA and 8% AFFO growth.\nTurning now to Slide 6.\nThe full year 2022 outlook includes an expected organic contribution to Site Rental revenues of $245 million to $285 million or 5%, consisting of approximately 5.5% growth from towers, 5% growth from small cells and 3% growth from fiber solutions.\nTo address feedback we received to provide more detail around our expectations for future leasing -- for the leasing activity, we have introduced a new concept of core leasing activity, which excludes the impact of changes in prepaid rent amortization.\nCore leasing activity is more indicative of current period activity, whereas changes in prepaid rent amortization also include activity from prior periods as prepaid rent received in those prior periods eventually amortizes the zero over the life of the associated contract.\nAlthough we have as consistently provided disclosure on prepaid rent amortization by segment in our supplemental earnings materials.\nWith that definition in mind, we expect 2022 core leasing activity of $340 million at the midpoint or $350 million inclusive of the year-over-year change in prepaid rent amortization.\nThe 2022 expected core leasing activity includes a $160 million in towers, representing a 20% increase when compared to our 2021 outlook and an approximately 50% increase when compared to our 5-year trailing average.\n$30 million in small cells compared to $45 million in $2021 and a $150 million in fiber solutions compared to a $165 million expected this year.\nTurning to Slide 7.\nYou can see, we expect approximately 90% of the Organic Site Rental Revenue growth to flow through the AFFO growth, highlighting the strong operating leverage in our business.\nAs we discussed in July, we expect to deploy an additional 5,000 small cells in 2022, which is the same number we expect to build in 2021.\nWe expect a discretionary capex to be approximately $1.1 billion to $1.2 billion in 2022, including approximately $300 million for towers and $800 million to $900 million for fiber, similar to what we expect in 2021.\nThis translates to $700 million to $800 million of net capex when factoring in $400 million of prepaid rent contribution we expect to receive in 2022.\nThe full year 2022 outlook for capex represents an expected 30% reduction in discretionary capex for our fiber segment relative to full year 2022 when we deployed approximately 10,000 small cells.\nBased on the expected growth in cash flows, for full year 2022 and consistent with our investment grade credit profile, we expect to fund our discretionary capex with free cash flow and incremental debt capacity without the need for new equity for the fourth consecutive year.\nIn addition, we believe our business and balance sheet are well positioned to support consistent AFFO growth through various economic cycles, including during periods of higher inflation and interest rates.\nOur cost structure is largely fixed in nature as you can see, with nearly 90% of the full year 2022 expected Organic Site Rental Revenue growth to flow through to AFFO growth as I referenced earlier.\nAnd we have taken steps to further strengthen our investment grade balance sheet, that now has more than 90% fixed rate debt, a weighted average maturity of more than 9 years and a weighted average interest rate of 3.1%.\nIn conclusion, we are excited about the outsized growth we are generating as a result of the initial 5G build out by our customers, which is translating into back-to-back years of 11% growth in our quarterly common stock dividend.\nThis dividend currently equates to an approximate 3.5% yield, which we believe is a compelling valuation given our expectation of growing the dividend 7% to 8% per year, combined with our high quality, predictable and stable cash flows.\nLooking further out, we believe our unique ability to offer towers, small cells and fiber solutions, which are all integral components of communications networks provides significant optionality to capitalize on the long-term positive industry trends of network improvements and densification and gives us the best opportunity to consistently deliver growth as wireless network architecture continues to evolve and our customers' priorities shift over time.\nWith that, April, I'd like to open the call to questions.\n",
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"content": "compname reports third quarter 2021 results, provides outlook for full year 2022 and announces 11% increase to common stock 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: Actual results could vary materially from such statements.\nEarnings for the quarter were $1.57 per share compared to $0.65 in the prior year quarter.\nAdjusted earnings per share increased to $1.83 in the quarter compared to $1.13 in 2020.\nNet sales in the quarter were up 12% from the prior year, primarily due to increased volumes across all segments, favorable foreign currency translation and the pass through of higher material costs.\nSegment income improved to $433 million in the quarter compared to $298 million in the prior year, primarily due to higher sales unit volumes, favorable price cost mix and the non-recurrence of charges for tinplate carryover costs that we saw in 2020.\nAs outlined in the release, we currently estimate second quarter 2021 adjusted earnings of between $1.70 and $1.80 per share.\nThis estimate includes the results of the European tinplate business, which will be reported as discontinued operations beginning with the second quarter results.\nWe are maintaining our full year adjusted earnings guidance of $6.60 to $6.80 per share.\nAssuming the sale of the European tinplate business closures at the beginning of the third quarter, we expect that the earnings dilution impact over the balance of the year of about $0.50 per share will be offset by improved results in the remaining operations as compared to our original guidance.\nOur expected tax rate for the year remains at 24% to 25%.\nDemand was strong across all major businesses and despite the ongoing challenges posed by the pandemic and severe winter weather in the United States the company continue to convert strong volume growth into record earnings.\nThis performance could not have been possible without great people and our global associates continue to perform extraordinarily in the face of the pandemic, ensuring that our customers receive high quality products and services in a safe and timely manner.\nAnd while it feels that we're turning the corner with widespread vaccinations now available.\nNew streams and increased positivity rates in some jurisdictions remind us that we must remain vigilant in our adherence to recommended behaviors.\nGlobal demand continues to be very strong for the beverage can and we are committed to deploying necessary capital to meet customer needs.\nAs detailed in last night's release, we expect to commercialize 6 billion units a beverage can capacity in 2021 with further investments being made to bring on at least that much more in 2022.\nBefore reviewing the operating segments we thought it would be well to remind you that delivered aluminum in North America sit around $1.28 a pound versus $0.75 a pound last year at this time, so an increase of 70%.\nAnd as we contractually pass through the LME and the delivery premium, reported revenues will reflect both volume increases and the higher aluminum cost this year.\nIn Americas Beverage, demand remained strong across all of the markets we serve with overall segment volumes up 9% in the first quarter.\nWe expect that demand will continue to outweigh supply for the foreseeable future.\nAnd as described to you in February, we have eight production lines in various stages of construction to bring more supply to these markets during 2021 and 2022.\nWhile the CMI no longer publishes industry volumes, we can tell you that our North American volumes increased 12% in the first quarter compared to the same prior year period.\nUnit volumes in European Beverage increased 6% in the first quarter as growth across Northwest Europe and the Mediterranean offset softness in Saudi Arabia.\nSegment income reflects contribution from the volume growth and the two aluminum lines in Seville, Spain, which were down for conversion in last year's first quarter.\nSales unit volumes in European Food increased 6% in the first quarter as the business continues to benefit from strong consumer demand for packaged food.\nSegment income which almost doubled the prior-year amount reflects the above noted volume growth.\n$5 million of favorable foreign exchange and the negative impact of tinplate carryover included in the prior year first quarter.\nAs reported on April 8, 2021, the company entered into an agreement to sell its European tinplate businesses, which includes European Food.\nAnd as Tom said, we expect the sale to be completed in the third quarter and beginning with the second quarter, results will be reflected in discontinued operations.\nAsia-Pacific reported 8% volume growth in the first quarter as both Southeast Asia up 5% and China up more than 30%, continue to show recovery from the pandemic related shutdowns.\nAs described in February, activity levels are returning.\nHowever, we expect there will be virus-related shutdowns and movement control orders from time to time across the region throughout 2021.\nExcluding foreign exchange, results for Transit Packaging were in line with the prior year with industrial demand surging, activity remains extremely strong in Transit and we expect this segment will post full year segment income growth of approximately 25% in 2021 over 2020.\nThere will be a large outperformance in the second quarter against an easy comp with further gains through the end of the year.\nOther operations also reported strong results in the first quarter led by North American Food and our beverage can making equipment businesses.\nIn summary, a great start to 2021.\nWith numerous projects completed last year and several more under way currently, we remain well positioned to continue to capture our share of global beverage can growth.\nImportantly, we continue to convert growth into expanded earnings and cash flow.\nAs Tom discussed, our full year guidance remains unchanged, despite expected dilution from the sale of the European tinplate businesses.\nBetter than expected first quarter performance combined with continued strong demand across beverage and transit will allow us to earn through sale-related dilution and a rising commodity cost environment.\nAnd just before we open the call to questions, we ask you that you limit yourselves to two questions initially so that everyone will have a chance to ask their question.\nBut always as -- feel free to jump back into the queue.\nAnd with that, Dale, we're now ready to open the call to questions.\n",
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"content": "compname reports q1 adjusted earnings per share $1.83.\nq1 adjusted earnings per share $1.83.\nq1 earnings per share $1.57.\nsees q2 adjusted earnings per share $1.70 to $1.80.\nsees fy adjusted earnings per share $6.60 to $6.80.\nqtrly global beverage can volumes grew 8%.\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: Earnings for the quarter was $0.79 per share compared to $1.59 in the prior year quarter.\nAdjusted earnings per share increased to $2.03 in the quarter compared to $1.96 in 2020.\nNet sales in the quarter were up 17% from the prior year, primarily due to the pass through of higher material costs and increased beverage can and transit packaging volumes.\nSegment income improved to $379 million in the quarter compared to $367 million in the prior year, primarily due to higher sales unit volumes.\nAs outlined in the release, we currently estimate fourth quarter 2021 adjusted earnings of between $1.50 and $1.55 per share, and full-year adjusted earnings of $7.50 to $7.55 per share.\nOur expected adjusted tax rate for the year is between 23% and 24% consistent with our nine months rate.\nOur continued best wishes for the continued health and safety of you and your families.\nBefore reviewing the third quarter results, we want to again express our sincere appreciation to our global associates for their continued efforts during the ongoing pandemic, with many of us now vaccinated, we're moving in the right direction, but we should expect the next several months to remain challenging as COVID variance make their way through various populations.\nAgain, we ask all of you to remain vigilant in protecting yourselves, your family members, your associates and your communities.\nDemand remained strong across all product lines and geographies with the exception of Vietnam, where hard lockdown measures by the government essentially curtailed all business and consumer activity for much of the third quarter.\nWe expect Vietnam will slowly reopen during the fourth quarter.\nReported revenues increased 17% during the quarter as higher beverage and transit volumes coupled with the pass through of raw material cost increases offset supply chain challenges.\nIn the face of these challenges, we continue to grow earnings.\nAnd in July, we discussed with you the step change in earnings that we have experienced beginning with last year's third quarter in which EBITDA over the last five quarters averages approximately $100 million more than the previous six quarters.\nOur teams continue to do a great job commercializing new capacity, converting that capacity into income growth and we look forward to more capacity coming online over the next several quarters.\nWe're also pleased to report that our efforts related to the environment and sustainability have not gone unnoticed.\nIn September, ESG ratings provider Sustainalytics again ranked Crown in the top position for mitigating ESG risk within the metal and glass packaging sector.\nAlso during the quarter, the Company joined the Climate Pledge, where we have committed to be net zero carbon by the year 2040.\nThe sale of the European Tinplate businesses was completed on August 31st, and going forward, our share of net profits will be reflected in equity earnings.\nAs discussed previously, we continue to experience inflationary pressure across all businesses.\nMany of our businesses contractually pass through higher costs, including steel and aluminum, but some businesses will have a timing lag to recovery.\nAs cost for pass-through revenues will increase, however, percentage margins will decline due to the denominator effect of one-to-one pass-throughs.\nBefore reviewing the operating segments, we remind you that delivered aluminum here in North America is approximately 75%, 80% higher today than at this time last year.\nLME and delivery premiums are contractual pass-throughs, so reported beverage revenues reflect both the volume increase and the higher aluminum cost.\nAfter reading the various analyst reports on magnesium and related aluminum supply, I would say that many of you have a very good understanding of the situation.\nThe concerns related to magnesium as many of you have noted relate to energy curtailments in China.\nChina has restarted some production recently, so hopefully that eases some of the concerns recently voiced in Europe.\nThere is magnesium production here in the United States, so we have less concern on domestic supply.\nAnd in the near term, we do not believe we have any supply concerns over the next six months, although we continue to monitor our suppliers supply.\nIn Americas beverage, overall unit volumes advanced 4% in the quarter as continued strong demand in North America and Mexico offset a difficult third quarter comparison in Brazil.\nOur third quarter 2021 volumes in Brazil were more than 10% higher than the third quarter of 2019.\nHowever, third quarter 2020 volumes were up 30% over the third quarter of '19, as that country rebounded sharply from the second quarter 2020 pandemic lockdowns.\nA combination of -- we were never going to have enough cans in our inventories compared to the prior year and a pullback in consumer spending related to inflation concerns led to the lower sales this year.\nWe have seen consumer slowdowns in the past in Brazil, however, the market has always recovered to even higher levels.\nLate in the third quarter, we began commercial shipments from the second line in the Bowling Green, Kentucky plant, with the third line in Olympia, Washington, now operational here in early fourth quarter.\nNext month, we will begin operations in the second line in Rio Verde, Brazil, followed by a late first quarter 2022 start-up on the second line in Monterrey, Mexico.\nNew two-line plants in Uberaba, Brazil; and Martinsville, Virginia will come online late in 2022 followed by the new two-line plant in Mesquite, Nevada scheduled for a mid 2023 start-up.\nA lot of activity, but the team is fully committed to continue our growth with a well-balanced customer portfolio.\nUnit volumes in European beverage advanced 5% over the prior year with strong volumes across most operations in this segment.\nInflation offset unit volume growth with freight, utilities and labor being most notable and with inflation expected to remain elevated across Europe, we project the income will decline in the European segment in the fourth quarter and during 2022.\nIn Asia Pacific, unit volumes declined 8% in the quarter owing entirely to a 55% contraction in Vietnam.\nExcluding Vietnam, unit volumes grew 20% in the quarter.\nThe Vietnamese government instituted hard lockdown measures to curb the spread of COVID and its variance.\nAnd for example, a hard lockdown means that you're not allowed to leave your house, and the army will deliver to you all food and essentials.\nAnd while we expect Vietnam will slowly reopen during the fourth quarter, we do expect that from time-to-time we will be subject to various lockdowns or movement control orders as the various countries look to prevent the spread of COVID.\nOur new plant in Vung Tau, Vietnam, is now qualified to begin commercial shipments to customers.\nAs expected, transit packaging had another strong quarter, recording double-digit gains in revenues and segment income, volume growth in steel strap tooling and across protective packaging offset inflationary headwinds, notably freight.\nThe business continues to navigate supply shortages, transportation delays and inflation, and remains well positioned to continue to grow earnings in the fourth quarter and through next year as these conditions ease over time.\nPerformance in our North American food and beverage can making equipment businesses remain firm throughout the third quarter, and earlier in the year we commenced operations at a new food can plant in Dubuque, Iowa.\nAnd during the third quarter, we began commercial shipments from a new two-piece food can line in our Hanover, Pennsylvania plant.\nThese line additions provide much needed capacity to our domestic supply footprint, allowing us to eliminate imports and we expect significant improvement earnings from food in 2022 as these new lines come through their learning curves.\nSo in summary, a very strong first nine months of 2021 with EBITDA up 26%.\nAs described earlier, we have several capacity projects recently completed and are underway and are pleased to reconfirm the 2025 EBITDA estimate of $2.5 billion first provided during the May virtual Investor Day.\nAnd near-term, while we may experience inflation and supply chain related headwinds over the next few quarters, we currently expect 2022 will be another strong year of earnings growth with EBITDA estimated to be approximately $2 billion.\nIn addition to North American food, our beverage can businesses in North America and Brazil and our transit packaging business are all expected to have strong years in 2022, allowing us to earn through the dilution related to the European asset sale and headwinds from a persistent inflationary environment.\nBefore opening the call to questions, there are a number of you in the queue, so we ask that you please limit yourselves to no more than two questions so that others will have a chance to ask their question.\nAnd with that Annie, I think we're now ready to take questions.\n",
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"content": "compname reports q3 earnings per share $0.79.\nq3 adjusted earnings per share $2.03.\nq3 earnings per share $0.79.\nsees q4 adjusted earnings per share $1.50 to $1.55.\nsees fy adjusted earnings per share $7.50 to $7.55.\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: I'll start today with a review of guest cruise operations, along with a summary of our first quarter cash flows.\nThen I'll provide an update on booking trends and finish up with adjusted EBITDA and net income expectations.\nTurning to guest cruise operations.\nDuring the first quarter 2022, we restarted 10 additional ships, resulting in 60% of our fleet capacity in guest cruise operations for the whole of the first quarter.\nThis was a substantial increase from 47% during the fourth quarter 2021.\nAs of today, 75% of our fleet capacity has resumed guest cruise operations.\nAgility to continuously adapt to the ever changing landscape has been one of our greatest strengths during the pandemic.\nIn the first quarter, we continued to demonstrate this scale as we adjusted restart dates to optimize our guest cruise operations.\nAnd we now expect each brand's full fleet to be back in guest cruise operations for its respective summer season where we historically generate the largest share of our operating income.\nI am happy to report that just last week, we announced plans for our Australia restart, commencing at the end of May after the government advised that cruising would be permitted beginning in April.\nFor the first quarter, occupancy was 54% across the ships in service.\nWe never expected to achieve our historical 100-plus percent occupancies for the first quarter since many of these sailings were confirmed just a number of months before departure, which resulted in less than the normal booking lead time.\nHowever, we had anticipated first quarter occupancy would exceed the 58% achieved in the fourth quarter of 2021.\nWe started the quarter with over 55% cabin occupancy booked for the first quarter and expected to improve upon that during the quarter.\nHowever, during the first quarter 2022, as a result of the omicron variant, we experienced an impact on bookings for near-term sailings, including higher cancellations resulting from an increase in pretravel positive test results, challenges in the availability of timely pretravel tests and disruption than omicron caused on society during this time.\nAll of this inhibited our ability to build on our cabin occupancy book position for the first quarter 2022 during the first quarter, resulting in occupancy for the first quarter 2022 at 54% being lower than the 58% occupancy we achieved in the fourth quarter of 2021.\nDespite all that, during the first quarter, we carried over one million guests, which was nearly a 20% increase from the fourth quarter 2021.\nOnce again, our brands executed extremely well with Net Promoter Scores continuing at elevated levels compared to pre-COVID scores.\nRevenue per passenger day for the first quarter 2022 increased approximately 7.5% compared to a strong 2019 despite our lucrative world cruises and exotic voyages being shelved this year.\nOur revenue management teams held on price when we experienced an impact on bookings for near-term sailings, optimizing our longer-term prospects for future revenue and pricing.\nOnce again, our onboard and other revenue per diems were up significantly in the first quarter 2022 versus the first quarter 2019, in part due to the bundled packages as well as onboard credits utilized by guests from cruises canceled during the pause.\nWe had great growth in onboard and other per diems on both sides of the Atlantic.\nIncreases in bar, casino, shops, spa and Internet led the way onboard.\nOver the past 2.5 years, we have offered and our guests have chosen more and more bundled package options.\nIn the end, we will see the benefit of these bundled packages in onboard and other revenue.\nAs a result of these bundled packages, the line between passenger ticket and onboard revenue is blurred.\nFor accounting purposes, we allocate the total price paid by the guests between the two categories.\nTherefore, the best way to judge our performance is by reference to our total cruise revenue metrics.\nOn the cost side, our adjusted cruise cost without fuel per available lower berth day, or ALBD as it is more commonly called, for the first quarter 2022 was up 25%.\nI did say adjusted cruise costs and not net cruise costs, a term we had previously used.\nThe calculation of adjusted cruise costs and net cruise costs are the same.\nThe increase in adjusted cruise costs without fuel per ALBD is driven essentially by five things: first, the cost of a portion of the fleet being in pause status; second, restart related expenses; third, 15 ships being in dry dock during the quarter, which resulted in nearly double the number of dry dock days during the first quarter versus the first quarter 2019; fourth, the cost of maintaining enhanced health and safety protocols; and finally, inflation.\nRemember, that because a portion of the fleet was in pause status during the first quarter and the higher number of dry dock days, we spread costs over less ALBDs.\nThis will again result in a doubling of the dry dock days during the quarter compared to 2019, which will impact adjusted cruise cost without fuel per ALBD during the second quarter.\nWe anticipate that many of these costs and expenses driving adjusted cruise costs without fuel per ALBD higher will end during 2022 and will not reoccur in 2023.\nAs a result of all of the above, we expect to see a significant improvement in adjusted cruise costs, excluding fuel per ALBD, from the first half of 2022 to the second half of 2022 with a low double-digit increase expected for the full year 2022 compared to 2019.\nNext, I'll provide a summary of our first quarter cash flows.\nWe ended the first quarter 2022 with $7.2 billion in liquidity versus $9.4 million at the end of the fourth quarter.\nLooking forward, we believe we remain well positioned given our liquidity.\nThe change in liquidity during the quarter was driven essentially by four things: first, an improved negative adjusted EBITDA of $1 billion due to our ongoing resumption of guest cruise operations despite the impact of the omicron variant.\nWe had thought adjusted EBITDA was going to improve more.\nBut as I said before, the omicron variant inhibited our ability to grow occupancy during the quarter, which limited the improvement in adjusted EBITDA.\nSecond, our investment of $400 million in capital expenditures net of export credits.\nThird, $500 million of debt principal payments.\nAnd fourth, $400 million of interest expense during the quarter.\nNow let's look at booking trends.\nSince the middle of January, we have seen an improving trend in booking volumes for future sailings.\nRecent weekly booking volumes have been higher than at any point since the restart of guest cruise operations.\nDuring the first quarter, we increased our booked occupancy position for the second half of 2022, albeit not at the same pace as a typical wave season due to the omicron variant.\nAs a result, the cumulative advanced book position for the second half of 2022 is at the lower end of the historical range.\nHowever, we believe we are well situated with our current second half 2022 book position given the recent improvement in booking volumes, coupled with closer in booking patterns and our expectation for an extended wave season.\nWe continue to expect that occupancy will build throughout 2022 and return to historical levels in 2023.\nAnd importantly, I am happy to report that prices on these bookings for the second half of 2022 continue to be higher with or without future cruise credits, or more commonly called FCCs, normalized for bundled packages as compared to 2019 sailings.\nOur cumulative advanced book position for the first half of 2023 continues to be at the higher end of the historical range, also at higher prices with or without FCCs normalized for bundled packages as compared to 2019 sailings.\nThis is a great achievement given pricing on bookings for 2019 sailings is a tough comparison as that was a high watermark for historical yields.\nI will finish up with our adjusted EBITDA and net income expectations.\nWe all know that booking trends are a leading indicator of the health of our business.\nWith improved recent booking trends leading the way, driving customer deposits higher, positive adjusted EBITDA is clearly within our sights.\nOver the next few months, we expect ship level cash contribution to grow as more ships return to service and as we build on our occupancy percentages.\nHowever, as I've already said, adjusted EBITDA over the first half of 2022 has been or will be impacted by the restart-related spending and dry dock expenses as 39 ships, over 40% of our fleet, will have been in dry dock during the first half of fiscal 2022.\nGiven all these factors combined, we expect monthly adjusted EBITDA to continue to improve and turn consistently positive at the beginning of our summer season.\nWe continue to expect a net loss for the second quarter of 2022 on both a U.S. GAAP and adjusted basis.\nHowever, we expect the profit for the third quarter of 2022.\nFor the full year, we do expect a net loss.\nLooking to brighter days ahead in 2023, with the full fleet back in service all year, 8% more capacity than 2019 and improved fleet profile with nearly a quarter of our capacity consisting of newly delivered ships, continuing momentum on our outstanding Net Promoter Scores and occupancy returning to historical levels, we are looking forward to providing memorable vacation experiences to nearly 14 million guests and generating potentially greater adjusted EBITDA than 2019.\n",
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"content": "q1 2022 ended with $7.2 billion of liquidity, including cash, short-term investments and borrowings.\nfor cruise segments, revenue per passenger cruise day (\"pcd\") for q1 of 2022 increased approximately 7.5% compared to a strong 2019.\nas of march 22, 2022, 75% of company's capacity had resumed guest cruise operations.\nsince middle of january, company has seen an improving trend in weekly booking volumes for future sailings.\nrecent weekly booking volumes have been higher than at any point since restart of guest cruise operations.\noccupancy in q1 of 2022 was 54%, a 20% increase in guests carried over prior quarter.\nexpects to have each brand's full fleet back in guest cruise operations for its respective summer season.\nbelieves monthly adjusted ebitda will turn positive at beginning of its summer season.\nexpect improvement in occupancy throughout 2022 until it returns to historical levels in 2023.\nexpects adjusted cruise costs excluding fuel per albd for full year 2022, to be significantly higher than 2019.\nanticipates that many of costs and expenses will end in 2022 and will not reoccur in 2023.\nexpects to see a significant improvement in adjusted cruise costs excluding fuel per albd from first half of 2022 to second half of 2022.\ncompany continues to expect a net loss for q2 of 2022 on both a u.s. gaap and adjusted basis.\nexpects a profit for q3 of 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: I'm Arnold Donald, President and CEO of Carnival Corporation & plc.\nToday, I'm joined telephonically by our Chairman, Micky Arison, as well as David Bernstein, our Chief Financial Officer; and Beth Roberts, Senior Vice President, Investor Relations.\nWe are absolutely thrilled to be back doing what we do best, delivering amazing, memorable vacation experiences to our guests.\nOur team members are overjoyed to be back on board and it shows our guests are having a phenomenal time.\nOur onboard revenues for guests are off the charts, and our Net Promoter Scores have been exceptionally strong.\nI've had the pleasure of visiting a number of ships in recent weeks, both here in the U.S. and abroad.\nAnd I can tell you, the ship looks spectacular, and the crew has an amazing energy.\nThere is such an incredible spirit on board.\nOur protocols have been working well, beginning with a seamless embarkation experience and have enabled us to build occupancy levels at a significant pace as we return more ships to service.\nOur brands executed extremely well in this initial phase of our return to serve, particularly given significant restrictions on international travel, hampering our ability to offer our normal content-rich deployment options, as well as the operating requirements in certain jurisdictions that limit our normally high occupancy levels.\nOur itinerary planners came up with creative deployment alternatives, our marketing department made them accessible with little investment, our yield managers priced them appropriately to achieve occupancy targets very close to them, and coupled them with bundled packages to drive exceptionally strong revenue on board.\nAnd despite all the additional protocols, our crew delivered an amazing guest experience.\nThe combination of which enabled us to deliver cruise vacations at scale while producing significant cash from these restricted voyages.\nNow while we normally don't disclose this level of information, we try to find a way to give you a sense of why we're viewing the restart as hugely successful beyond the enthusiasm of our guests and crew and the unprecedented Net Promoter Scores.\nIt became complicated because most of our voyages, while cash flow positive, are programs that could not be compared to 2019.\nAnd in most cases, would normally be priced lower than the 2019 alternatives.\nSo for example, in the U.K., we're only able to offer senior cruises without any ports of call, and that's our version of vacation, which were not comparable in ticket prices to peak season Mediterranean or Baltic sailings offered in the summer of 2019.\nThat said, even with occupancy limitations, these cruises generated cash for our stakeholders.\nThey supported a return for our workforce, and they successfully served guests, resulting in high satisfaction levels.\nNow at Carnival Cruise Line, we were able to offer more comparable itineraries than 2019, our revenue per dims were up 20% compared to 2019 and that's inclusive of the impact of incentives from previous cancellations, and that's despite the quoting nature of the bookings.\nIn fact, Carnival Cruise Lines restarted more ships out of the United States than any of the cruise brand and still achieved occupancy above 70%, all of which combined to generate an even greater cash contribution.\nClearly, Carnival Cruise Line is a brand that continues to outperform.\nWhile the Delta variant and its corresponding effect on consumer confidence has certainly created a myriad of operating challenges for us to navigate in the near term and has led to some booking volatility in August, to-date it has not had a significant impact on our ultimate plan to return our full fleet to guest operations in the spring of 2022.\nOn our last quarterly business update, we said that we expected the environment to remain dynamic and it certainly have.\nOf course, agility has been a key strength of ours over the last 18 months, and we continue to aggressively manage to optimize given this ever-changing landscape.\nIn fact, while by design, we're not yet at 100% occupancy.\nWe have individual sailings with over 4,000 guests.\nTo-date, we have carried over 0.5 million guests this year already.\nAnd on any given day, we are now successfully carrying around 50,000 guests, and expect that number to continue to rise as we introduce more capacity and as we increase occupancy over the coming months.\nThe Delta variant has clearly impacted our protocols, which will continue to evolve based on the local environment.\nIn markets like the U.S., where case counts are higher, we've taken swift actions to reinforce our already strong protocol, such as additional testing requirements and indoor mass requirements with all U.S. sailings operating under the CDC's vaccination requirements.\nOur protocols go above and beyond the terms of the conditional sale order and are much more rigorous than comparable land-based alternative.\nAgain, our highest responsibility and therefore, our top priority is always compliance, environmental protection and the health, safety and well-being of everyone, our guests, the people in the communities we touch and serve and of course, our Carnival family, our team members shipboard and shoreside.\nThe Delta variant has also created some disruption in our supply chain, impacted the timing of opening for some destinations and created a heightened level of uncertainty that has been reflected in the broader travel sector and in our own booking trends.\nWe quickly adjusted our deployment to push out the start date on a few select voyages.\nFor some of our more exotic winter deployments, like our popular world cruises, we rebooked guests for our 2023 departures.\nEffectively, we've managed our near-term capacity to optimize the current environment, just as we indicated we would.\nThe modifications we've made to the pace of the roll of our fleet will optimize our cash position in the near term.\nLooking forward, we continue to work toward resuming full operations in the spring, in time for our important summer season where we make the lion's share of our operating profit.\nOf course, we have ample liquidity to see us through to full operation.\nAnd we continue with a prudent focus on cash management to ensure we have flexibility under a multitude of scenarios.\nThe current environment, while choppy, has improved dramatically since last summer, and it should improve even further by next summer if the current trend of vaccine rollout and advancements in therapies continues.\nFor instance, in markets like the U.K., where vaccination rates are already higher, consumer confidence remains strong, and we are seeing strong momentum.\nSo far, we've announced the resumption of guest cruise operations for 71 ships through next spring, and that's across eight of our nine brands.\nWe're evaluating the remaining shifts through next spring, with a continued focus on maximizing future cash flow while delivering a great guest experience in a way that serves the best interest of public health.\nImportantly, even at this very early stage of our rollout, our ships are generating positive cash flow.\nBased on our current rollout, we expect cash from operations for the whole company to turn positive at some point early next year.\nLooking forward, we believe we have the potential to generate higher EBITDA in 2023 compared to 2019, given despite our modest growth rate, additional capacity and our improved cost structure.\nAs further insight into booking trends, we are well positioned to build on a solid book position and intentionally constrained capacity for the remainder of 2021 and into the first half of 2022.\nWith the existing demand and limited capacity, we are focused on maintaining price.\nEven recently with heightened uncertainty from the Delta variant affecting travel decisions broadly, we continue to maintain price.\nWe have also opened bookings earlier for cruises in 2023, and we're achieving those early bookings with strong demand and good prices.\nAnd based on that success, we've begun to launch 2024 sailings even earlier.\nIn fact, these efforts contributed to the $630 million increase in guest deposits, our long-term guest deposits.\nAnd that's deposits on bookings beyond 12 months, are 3 times historical levels, driven in part by our proactive efforts to open more inventory for sale in outer years.\nNow we expect guests deposits to continue to grow through the restart as we return more ships to service and as we build occupancy levels.\nAgain, these favorable trends continue despite dramatically reduced advertising expense.\nWe continue to focus our efforts on our lower cost channels like direct marketing to our sizable past guest database of over 40 million guests, and earned media, as we build on our multiple new ship launches and restart news flow.\nOf course, and most importantly, we are delivering on our guest experience.\nWord-of-mouth remains the number-one reason people take their first cruise.\nAnd as I mentioned, our Net Promoter Scores are well above historical levels across our ships that have returned to service so far.\nDuring the quarter, we furthered our strong track record of responsibly managing the balance sheet.\nWe completed two refinancing transactions, among other efforts, resulting in a meaningful reduction in annual interest expense.\nWe have many more opportunities for refinancing ahead and are working through them at an aggressive pace.\nAlso importantly, we have continued to make advancements in our sustainability efforts.\nLast week, we published our 11th Annual Sustainability Report, Sustainable from Ship to Shore, which can be found on our sustainability website www.\nIn the report, we build on the achievement of our 2020 goal by sharing more details on our 2030 goals and our 2050 aspiration.\nThe report shares additional light on the six focus areas that will guide our long-term sustainability vision, including climate action, circular economy -- that's wage reduction, sustainable tourism, health and well-being, diversity, equity and inclusion and biodiversity and conservation.\nNow these areas align with United Nations' Sustainable Development Goals.\nClimate action is a top sustainability focus area.\nWe are committed to decarbonization, and we aspire to be carbon neutral by 2050.\nAs we have previously shared, despite 25% capacity growth since that time, our absolute carbon emissions peaked in 2011 and will remain below those levels.\nWe are working toward transitioning our energy needs to alternative fuels and investing in new low-carbon technologies.\nNow because of the pause in guest cruise operations, the 2020 sustainability performance measures are not comparable to prior year data.\nThat said, there is a lot of valuable information on the progress we made in our sustainability journey despite what an incredibly challenging year.\nWe were clearly among the most impacted companies by COVID-19, and I'm very proud of all we've accomplished collectively to sustain our organization through these challenging times, including all we did for our loyal guests, all we did for our other many stakeholders, and all we did for each other within our Carnival family.\nIn many regards, I believe our collective response to the pandemic is strong testimony to the sustainability of our company.\nFor that, I again express my deepest appreciation to our Carnival team members, both shipboard and shoreside, who consistently went above and beyond.\nI'm very humbled by the dedication I've seen in these past 18 months.\nWe continue to move forward in a very positive way.\nThroughout the pause, we've been proactively managing to resume operations as an even stronger operating company.\nOur strategic decision to accelerate the exit of 19 ships left us with a more efficient and effective fleet, and has lowered our capacity growth to roughly 2.5% compounded annually from 2019 through 2025, and that's down from 4.5% pre-COVID.\nWe've opportunistically rebalanced our portfolio through the ship exits as well as a future ship transfer, any modification to our newbuild schedule to optimize our asset allocation, maximize cash generation and improve our return on invested capital.\nWhile capacity growth is constrained, we will benefit from an exciting roster of new ships spread across our brands, enabling us to capitalize on the pent-up demand and drive even more enthusiasm and excitement around our restart plan.\nAnd we will achieve a structural benefit to unit costs in 2023 as we introduce these new, larger and more efficient ships, coupled with the 19 ships leaving the fleet, which were among our least efficient, with the aggressive actions we've already taken, optimizing our portfolio and reducing capacity.\nWe are well positioned to capitalize on pent-up demand and to emerge a leaner, more efficient company, reinforcing our global industry-leading position.\nWe have secured sufficient liquidity to see us through to full operation.\nOnce we return the full operation, our cash flow will be the primary driver to return to investment-grade credit over time, creating greater shareholder value.\nI'll start today with a review of our guest cruise operations along with our third quarter monthly average cash burn rate.\nThen I'll provide an update on booking trends and finish up with some insights into our refinancing activity.\nTurning to guest cruise operations.\nIt feels so great to be talking about operations again.\nWe started the quarter with just five ships in service.\nDuring the third quarter, we successfully restarted ships across eight of our brands.\nWe ended the quarter with 35% of our fleet capacity in service.\nOur plans call for another 27 ships to restart guest cruise operations during the fourth quarter and the month of December.\nSo on New Year's Day, we anticipate celebrating with 55 ships or nearly 65% of our fleet capacity back in service.\nFor the third quarter, occupancy was 54% across the ships in service.\nOur brands executed extremely well.\nOccupancy did improve month-to-month through the quarter and in the month of August, occupancy reached 59% from 39% in June and 51% in July.\nOccupancy for our North American brands reflects our approach of vaccinated cruises, which for the time being, does limit the number of families with children under 12 that can sail with us.\nOccupancy for our European brands reflects capacity restrictions, such as social distancing requirements for our Continental European brands and a 1,000-person cap per sailing for some of the quarter in the U.K. For the full third quarter, our North American brands occupancy was 68%, while for our European brands, occupancy was 47%.\nRevenue per passenger cruise day for the third quarter 2021 increased compared to a strong 2019 despite the current constraints on itinerary offerings which did not include many of the higher-yielding destination-rich itineraries offered in 2019.\nAs Arnold indicated, our guests are having a phenomenal time and our Net Promoter Scores have been incredibly strong.\nAs always, happy guests seem to translate into improved onboard revenue.\nOur onboard and other revenue per diems were up significantly in the third quarter 2021 versus the third quarter 2019, in part due to the bundled packages as well as onboard credits utilized by guests from cruises canceled during the pause.\nWe had great growth in onboard and other per diems on both sides of the Atlantic.\nIncreases in bar, casino, shops, spa and Internet led the way on board.\nOver the past two years, we have offered and our guests have chosen more and more bundled package options.\nIn the end, we will see the benefit of these bundled packages in onboard and other revenue as we did during the third quarter 2021.\nAs a result of these bundled packages, the line between passenger ticket revenue and onboard revenue seems to be blurring.\nFor accounting purposes, we allocate the total price paid by the guests between the two categories.\nTherefore, the best way to judge our performance is by reference to our total cruise revenue metrics.\nAs we previously guided, the ships in service during the third quarter were, in fact, cash flow positive.\nThey generated nearly $90 million of ship level cash contribution.\nThis was achieved with only a two-month U.S.-based restart during the third quarter as our North American brands began guest cruise operations in early July.\nWe expect the ship level cash contribution to grow over time as more ships return to service and as we build on our occupancy percentages.\nFor those of you who are modeling our future results, I did want to point out that due to the cost of a portion of our fleet being in pause status during the first half of 2022, restart related expenses and the cost of maintaining enhanced health and safety protocols, we are projecting ship operating expenses in 2022 per available lower berth day or per ALBD, as it is more commonly called, to be higher than 2019 despite the benefit we get from the 19 smaller, less efficient ships leaving the fleet.\nRemember, that because a portion of the fleet will be in pause status during the first half, we are spreading costs over less ALBDs.\nWe do anticipate that most of these costs and expenses will end with 2022 and will not reoccur in fiscal 2023.\nNow let's look at our monthly average cash burn rate.\nFor the third quarter 2021, our cash burn rate was $510 million per month, which was better than our previous guidance and was in line with the $500 million per month for the first half of 2021.\nThe improvement versus our guidance was due to the timing of capital expenditures, which are now likely to occur in the fourth quarter and some other small working capital changes.\nWith the timing of certain capital expenditures now shifting to the fourth quarter, the company expects its monthly average cash burn rate for the fourth quarter to be higher than the monthly average rate for the first nine months of the year.\nOther good news positive factors impacting the fourth quarter are restart expenditures to support not only the 22 ships that will restart during the fourth quarter but also the additional ships that will restart in the first quarter of 2022, along with the significant increase in dry dock days during the fourth quarter, driven by the restart schedule.\nAll these expenditures have been anticipated, and given the announced restarts, many of them are now occurring in the fourth quarter.\nAlso, during the fourth quarter, we are forecasting positive cash flow from the 50 ships that will have guest cruise operations during the quarter.\nAnd ALBDs for the fourth quarter are expected to be 10.3 million, which is approximately 47% of our total fleet capacity.\nNow turning to booking trends.\nOur booking volumes for the all future cruises during the third quarter 2021 were higher than booking volumes during the first quarter.\nThat trend continued over the first couple of months of the third quarter, such that we expected the third quarter would end at higher booking levels than the second quarter, but we did manage to achieve that because of lower booking volumes in the month of August when the Delta variant impacted travel and leisure bookings generally.\nThe impact on bookings in August was mostly seen on near-term sailings.\nHowever, the impact quickly stabilized in the month of August.\nOur cumulative advanced book position for the second half of 2022 is ahead of a very strong 2019 and is at a new historical high.\nPricing on our second half 2022 book position is higher than pricing on bookings at the same time for 2019 sailings, driven in part by the bundled pricing strategy for a number of our brands, but excluding the dilutive impact of future cruise credits or more commonly known as FCCs.\nIf we were to include the dilutive impact of future cruise credits, pricing on our second half 2022 book position is now in line with pricing at the same time for 2019 sailings.\nThis improved position is a result of positive pricing trends we have seen during the third quarter.\nThis is a great achievement, given pricing on bookings for 2019 sailings is a tough comparison as that was the high watermark for historical yield.\nFinally, I will finish up with some insights into our refinancing activity.\nWe are focused on pursuing refinancing opportunities to extend maturities and reduce interest expense.\nTo-date, through our debt management efforts, we have reduced our future annual interest expense by over $250 million per year.\nAnd we have completed cumulative debt principal payment extensions of approximately $4 billion, improving our future liquidity position.\nThe $4 billion extension results from three things: first, the July refinancing of 50% of our first lien notes were $2 billion.\nSecond, the completion of the European debt holiday amendments, which deferred $1.7 billion of principal payments.\nThe deferred principal payments will instead be made over a five-year period, beginning in April 2022.\nAnd third, the extension of a $300 million bilateral loan with one of our banking partners.\nAs we look forward, given how support of the debt capital market investors and commercial banks have been, we will be pursuing additional refinancing opportunities to meaningfully reduce our interest expense and extend our maturities over time.\n",
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"content": "carnival corporation & plc provides third quarter 2021 business update.\ncarnival corp - booking volumes for all future cruises during q3 of 2021 were higher than booking volumes during q1 of 2021.\ncarnival corp - cumulative advanced bookings for second half of 2022 are ahead of a very strong 2019.\ncarnival corp - voyages for q3 of 2021 were cash flow positive and company expects this to continue.\ncarnival - booking volumes for all future cruises during q3 of 2021 were higher than booking volumes during q1 2021, albeit not as robust as q2 2021.\ncarnival corp - monthly average cash burn rate for q3 of 2021 was $510 million.\ncarnival corp - also opened bookings for further out cruises in 2023, with unprecedented early demand.\ncarnival corp - company expects monthly average cash burn rate for q4 to be higher than the prior quarters of 2021.\ncarnival corp - expects monthly average cash burn rate for q4 to be higher than prior quarters of 2021.\ncarnival corp - expects a net loss on both a u.s. gaap and adjusted basis for quarter and year ending november 30, 2021.\ncarnival - consistent with gradual resumption of guest cruise operations, continues to expect to have full fleet back in operation in spring 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: I'm Arnold Donald, President and CEO of Carnival Corporation and PLC; and today I'm joined telephonically by our Chairman, Micky Arison; as well as by David Bernstein, our Chief Financial Officer; and by Beth, Robert Vice President, Investor Relations.\nWhat a difference a year made.\nWe are clearly on our way back to full cruise operations with with 50 ships now serving guests as we end the fiscal year, and that's up from just one ship, one short a year ago.\nWe've already returned over 65,000 crew members to our ships and thus resuming operations, over 1.2 million guests and counting and still we are [Phonetic] Now we've achieved that while delivering an exceptional guest experience with historically high net promoter scores.\nThese are strong accomplishment, especially in light of the uncertainty we faced just one year ago when vaccines were not yet available and effective protocols to mitigate the spread of the virus were still evolving.\nToday, our team members and the vast majority of guests have received vaccines and many have received boosters.\nWe have [Indecipherable] the effective protocols for COVID-19 and its very enabling occupancy to progress toward historical lows.\nIn fact, occupancies at our Carnival Cruise Line brand which currently operates and generates that are most similar to its normally [Indecipherable] generates are now approaching 90% and that's after the impact of the variants on near-term book.\nAgain, Carnival Cruise Lines continues to outperform with both occupancy and price.\nEven at this early stage, as a company, we are now generating meaningful cash flow at the ship level to date and growth, helping to fund start-up costs for the remaining fleet.\nTotal customer deposits have grown by over $1.2 billion from the prior year alone as our book position continues to build and to strength.\nImportantly, we ended the year with $9.4 billion of liquidity and as essentially the same liquidity level as last year, but with significantly improved cash flow generation ahead, as the aforementioned ship operating cash flows and [Indecipherable] continue to build, with 68% of our capacity now in operation and the remainder planned by spring, we are well positioned for our important summer season, where we historically have the lion's share of our operating profit.\nThroughout 2021, we said that we expected the environment to remain dynamic and it certainly has.\nOf course, [Indecipherable] has been a key strength of ours and we continue to aggressively manage to optimize given this ever changing landscape as we have demonstrated through the Delta variant and now with Omicron, we have navigated near term operational challenges.\nWhile the variants and their corresponding effect on consumer confidence have created some near term booking volatility, out book position has remained resilient.\nAnd in the case of Delta variant, already recovered.\nImportantly, these variants have not had a significant impact on our ultimate plan to return our full fleet to guest operations in the spring of 2022.\nIt is clear we have maximized our return to service in 2021 and we have positioned the company well to withstand the potential volatility on our path to profitability.\nAt the same time, we have not lost sight of our highest responsibility and therefore our top priorities, which is always compliance, environmental protection and the health, safety and well-being of everyone, that's our guests, the people in the communities we touch and serve, and of course, our Carnival family, our team members shipboard and shoreside.\nAnd to that end, we've achieved many important milestone along the way in our return service, or events, broadening our commitments to ESG with introduction of our 2030 sustainability goals and our 2050 aspiration, and that's building on the successful achievement of our 2020 goal, increase our ESG disclosure by incorporating SASB be and TCFD framework in our sustainability report, bolstering our compliance efforts with the addition of a new Board member with valuable compliance experience, a strong addition to our Board of Directors and our Board Compliance Committee, improving our culture through emphasizing essential behaviors and incorporating them into our ethos [Phonetic] through training and development and through every day real time feedback, as we are already among the most diverse companies in the world with a global employee base representing over 130 countries.\nWe're focusing our efforts on diversity and inclusion at every level and in all areas of our operation.\nAnd of course, there are many more operational milestones, such as reopening our eight owned and operated private destinations and port facilities, Princess [Indecipherable] Mahogany Bay, Amber Cove [Indecipherable] Santa Cruz de Tenerife and Barcelona, all delivering an exceptional experience to over 630,000 of the 1.2 million guests that's resuming.\nWelcoming nine new more efficient ships across our world-leading brand, including Mardi Gras powered by LNG.\nMardi Gras is nothing short of a gamechanger for our namesake brand Carnival Cruise Line, premium brand Holland America introduced the new Rotterdam, sister ships to the very successful Koningsdam and Nieuw Statendam.\nFor the U.K., we successfully introduced Iona, also powered by LNG.\nFor Germany, we shortly take delivery about six LNG powered ship AIDAcosma system to the also highly successful AIDAnova.\nAnd for Southern Europe, Costa Firenze and LNG powered Costa Toscana will replace the exit of several less efficient ships.\nNow these new ship Mardi Gras, Iona, Costa Toscana have joined AIDAnova and Costa Smeralda to be the only and with the addition of AIDAcosma shortly.\nThe only six large cruise ships in the world currently powered by LNG, demonstrating our leading edge decarbonization efforts.\nNow while the utilization of LNG is a positive step with the environment, so LNG is inherently 20% more carbon efficient.\nIt is not our ultimate solution.\nWe have announced our net zero aspirations by 2050.\nNow where there is no known answer to zero carbon emissions in our industry at this time, we are working to be part of the solution.\nWe have and expect to continue to demonstrate leadership and executing carbon reduction strategy.\nWe are focused on decreasing our unit fuel consumption today, reducing even the need for carbon offsets.\nOur decarbonization efforts have enabled us to peak our absolute carbon emissions way back in 2011, and that's despite an approximately 25% capacity growth since that time.\nAnd while today based on publicly available information, we believe we are the only major cruise operator to peak our absolute emissions, our entire industry is moving in the right direction.\nAnd as a company with a 25% reduction in carbon intensity already under our belt, we are well positioned to achieve our 40% reduction goal by 200 and are working hard to reach that deliverable ahead of schedule.\nNow in addition to our cutting edge LNG efforts, we have many other ongoing efforts to accelerate decarbonization.\nTo name just a few, they include itinerary optimization and technology upgrades to or existing fleet and an investment of over $350 million in areas such as air conditioning, waste management lighting, and of course, the list goes on.\nWe are actively increasing our shore power capabilities.\nGreater than 45% of our fleet is already equipped to connect the shore power and we plan to reach at least 60% by 2030.\nNow we helped develop the first port with show power capability for cruise ships, leading to the development of 21 ports to date and counting.\nWe are focused on expanding shore power to our high value ports around the world, that includes Miami; Southampton, England; and Hamburg, Germany.\nSo ultimately achieve net zero emissions over time, we are investing in research and development, partly on projects to evaluate and pilot maritime skill battery and fuel cell technology and working with Classification Societies and engine manufacturers to assess hydrogen, methanol as well as bio synthetic fuels, as future low carbon fuel options for our cruise ships.\nAlso, these efforts combined with the exit of 19 less efficient ships are forecasted to deliver upon return to full operation a 10% reduction in unit fuel consumption on an annualized base.\nNow that's a significant achievement on our path to decarbonization.\nOur strategic assist to accelerate the exit of 19 ships vessels with a more efficient and a more effective fleet overall and it's lowered our capacity growth to roughly 2.5% compounded annually from 2019 through 2025, now that's down from 4.5% annually pre COVID.\nWhile capacity growth is constrained, we will benefit from this exciting roster of new ships spread across our brand and they even to capitalize on the pent-up demand and drive even more enthusiasm around our restart plans.\nA enjoy a further structural benefit to revenue from these enhanced guest experiences, new ship, due to the richer mix of premium price balcony cabins, which will increase 6 percentage points to 55% of our fleet in 2023.\nNow of course, as we mentioned before, we've also achieved a structural benefit to unit costs as we deliver these new, larger, more efficient ships, coupled with the exit of 19 less efficient ships, it will help generate a 4% reduction in ship level unit cost going forward, enabling us to deliver more revenue to the bottom line.\nUpon returning to full operation, nearly 50% of our capacity will consist of these newly delivered, larger, more efficient ships, expediting our return to profitability and improving our return on invested capital.\nNow we are clearly resuming operation as a more efficient operating company, and we'll use our cash flow strength to reduce our leverage on our path back to investment grade credit.\nLast quarter, we discussed the initial impact of the Delta variant.\nWe indicated we saw an impact on near-term booking volumes in the month of March.\nBooking volumes have since accelerated sequentially and returned to pre-delta levels in November.\nAnd as we said we would, we maintain price despite the disruption, achieving 4% higher revenue per passenger cruise day in our fourth quarter than in the fourth quarter of 2019.\nIn fact, the Carnival Cruise Line brand where we as I mentioned are able to offer more comparable itineraries to those in 2019 experienced its second consecutive quarter of double-digit revenue growth for the year, while improving occupancy with nearly 60% of its capacity returned to serve.\nNow that's a testament to the fundamental strength in demand for our cruise product, especially when you consider this was accomplished without the benefit of a major advertisement.\nWe expect to build on this momentum with the brands announcement just last week on its Funderstruck campaign, engineered to highlight the joy and following of our Carnival Cruise.\nThat advertising campaign is launching over the holiday, including the activations on Christmas Day and Times Square on New Year's Eve, in time for our [Indecipherable] something that's very present in the news today, Omicron there.\nWe have also experienced some initial impact on near-term bookings, although difficult to measure.\nThat said, we have a solid book position and intensely constrained capacity for the first half of 2022.\nWith the existing demand and limited capacity, we remain focused on maintaining price.\nBookings continue to build for the remainder of 2022 and well into 2023, and we are achieving those early bookings with strong demand.\nIn fact, pricing on our book position for the back half of 2022 improved since last quarter, and that's despite the Delta variant.\nThe current environment while challenging, has improved dramatically since last summer.\nAnd as the current trend of vaccine rollout and advancements in therapies continues, it should improve even further by next summer.\nSo looking forward, we remain on a path to consistently deliver and slow from operations during the second quarter 2022 and generate profit in the second half of 2022.\nImportantly, we believe we have the potential to generate higher EBITDA in 2023 compared to 2019, given despite our modest growth rate, additional capacity and our improved cost structure.\nThroughout the pause, we have been proactively managing to resume operations as an even stronger and more efficient operating company, to maximize cash generation and to deliver double-digit return on investment.\nOnce we return to full operations, our cash flow will be the primary driver to return to investment grade credit over time, creating greater shareholder value, and we continue to move forward in a very positive way.\nAnd for that, I again express my deepest appreciation to our Carnival team members, both shipboard and shoreside, who consistently go above and beyond.\nI am very proud of all we've accomplished collectively to sustain our organization through these challenging time and I'm very humbled by the dedication I've seen from our teams throughout.\nOf course, we couldn't have done it without the overwhelming support from all of you.\nI'll start today with some color on our positive cash from operation followed by a review of guest cruise operations along with a summary of our fourth quarter cash flow, then I'll provide an update on booking trends and finish up with some insights into our financial position.\nTurning to cash from operation.\nI am so happy to report that our cash from operations turned positive in the month of November, ahead of our previous indication, driven by increases in customer deposits and other working capital changes.\nWe all know that booking trend are a leading indicator of the health of our business with solid fourth quarter booking trend leading the way, driving customer deposits higher, positive EBITDA is clearly within our site.\nOver the next few months, we expect ship level cash contributions to grow as more ships return to service and as we build on our occupancy percentage.\nHowever, cash from operations and EBITDA over the next few months will be impacted by restart related spending and dry-dock expenses as 28 ships, almost a third of our fleet will be in dry-dock during the first half of fiscal 2022.\nGiven all these factors combined, we expect both monthly cash from operations and monthly EBITDA to consistently turn positive during the second quarter of fiscal 2022.\nSo 2022 will be a tail to hear.\nWhile we expect the net loss for the first half of 2022, it makes me feel so good to say we expect the profit for the second half of 2022.\nNow let's look at guest cruise operation.\nDuring the fourth quarter, we successfully restarted 22 ships.\nDuring the month of December, we will restart an additional seven ships, so we will be celebrating on New Year's Eve with over two thirds of our fleet capacity in service.\nOur plans call for the remainder of the fleet to restart guest cruise operations by spring, putting us in a great position for our seasonally strong summer period.\nFor the fourth quarter, occupancy was 58% across the ships in service and that was a 4 point improvement over the 54% we achieved last quarter during the peak summer season despite the slowdown in bookings just prior to the fourth quarter from the Delta variant.\nDuring the fourth quarter, we carried over 850,000 guests, which was 2.5 times the number of guests we carried in the third quarter.\nOur brands executed extremely well with net promoter scores continuing at elevated levels compared to pre-COVID scores.\nRevenue per passenger cruise day for the fourth quarter 2021 increased 4% compared to a strong 2019 despite the current constraints on itinerary offering.\nWe had great growth in onboard and another per diems on both sides of the Atlantic.\nIncreases in bar, casino, shops, spot, and Internet led the way onboard.\nOver the past two years, we have offered and our guests have chosen more and more bundled package options.\nIn the end, we will see the benefit of these bundled packages and onboard and other revenue as we did during the second half of 2021.\nAs a result of these bundled packages, the line between passenger ticket revenue and onboard revenue is blurred.\nFor accounting purposes, we allocate the total price paid by the guests between the two categories.\nTherefore, the best way to judge our performance is by reference to our total cruise revenue metrics.\nFor those of you who are modeling our future results based on our planned restart schedule for fiscal 2022, available lower berth days or ALBDs as they are more commonly called, will be approximately $78 million.\nBy quarter, the ALBDs will be for the first quarter $14.1 million.\nFor the second quarter, $17.8 million.\nFor the third quarter, $23 million even.\nAnd for the fourth quarter, $23.1 million.\nFuel consumption will be approximately 2.9 million metric tons.\nThe current blended spot price for fuel is $563 per metric ton.\nI did want to point out that due to the cost of a portion of our fleet being in pause status during the first half of 2022, restart related expenses, the cost of maintaining enhanced health and safety protocols and inflation, we are projecting net cruise costs without fuel per ALBD in 2022 to be significantly higher than 2019 despite the benefit we get from the 19 smaller less efficient ships leaving the fleet.\nRemember that because a portion of the fleet will be in pause status during the first half, we are spreading costs over less ALBDs.\nWe do anticipate that most of these costs and expenses will end with 2022 and will not reoccur in fiscal 2023.\nIn addition, we expect depreciation and amortization to be $2.4 billion for fiscal 2022, while net interest expense without any further refinancings is likely to be around $1.5 billion.\nNext, I'll provide a summary of our fourth quarter cash flows.\nDuring the fourth quarter 2021, our liquidity, increased by $1.6 billion to $9.4 billion at the end of the fourth quarter from $7.8 billion at the end of the third quarter.\nThe increase in liquidity was driven by the $2 billion senior unsecured notes we issued in October to refinance 2022 maturities.\nThe $360 million customer deposit increase added to the total.\nThis was the third consecutive quarter we saw an increase in customer deposits.\nCompletion of a loan we previously mentioned, supported by the Italian government, with some debt holiday principal refund payments added another $400 million.\nWorking capital and other items net contributed $300 million.\nAll these increases totaled $3.1 billion, which was somewhat offset by our cash burn of $1.5 billion.\nSimply, our monthly average cash burn rate of $510 million per month times 3.\nit should be noted that our monthly average cash burn rate for the fourth quarter 2021 was better than planned, driven by lower capital expenditures.\nTurning to booking trends.\nOur cumulative advance book position for the second half of 2022 and the first half of 2023 are at the higher end of historical ranges and at higher prices compared to 2019, with or without FCC's, but normalized for bundled packages.\nThis is a great achievement given pricing on bookings for 2019 sailings is a tough comparison as that was the high watermark for historical yield.\nBooking volumes for the same period during the fourth quarter of 2021 were higher than the third quarter.\nDuring the fourth quarter 2021, we significantly increased our advertising expense compared to the third quarter in anticipation of the full fleet being in operation in the spring of 2022, generating demand and allowing us to improve pricing on our book position.\nHowever, the fourth quarter advertising expense is still significantly below our spending in the fourth quarter 2019.\nFinally, I will finish up with some insights into our financial position.\nWhat a difference a year makes except for our liquidity.\nAs Arnold indicated, we entered 2022 with $9.4 billion of liquidity, essentially the same liquidity level as last year, but with significantly improved cash flow generation ahead as ship operating cash flows and customer deposits continue to build.\nThrough our debt management efforts, we have refinanced $9 billion to date, reducing our future annual interest expense by approximately $400 million per year and extending maturities, optimizing our debt maturity profile.\nWith our 2022 maturities already refinanced, we do not have any financing needs for 2022.\nHowever, we will pursue refinancings to extend maturities and reduce interest expense at the right time.\nGiven our long history of positive strong resilient and growing cash flows, unlike many other industries, in 2023 our focus will shift to deleveraging, driven by cash from operations.\nWe expect to return to investment grade credit over time, creating greater shareholder value.\n",
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"content": "carnival corporation & plc provides fourth quarter 2021 business update.\noration & plc provides fourth quarter 2021 business update.\nq4 2021 ended with $9.4 billion of liquidity.u.s. gaap net loss of $2.6 billion and adjusted net loss of $2.0 billion for q4 of 2021.\nfor cruise segments, revenue per passenger cruise day (\"pcd\") for q4 of 2021 increased approximately 4% compared to a strong 2019.\nmonthly average cash burn rate for q4 of 2021 was $510 million, which was better than expected.\nover last few weeks, we have experienced an initial impact on bookings related to near-term sailings as a result of omicron variant.\ncumulative advanced bookings for second half of 2022 and first half of 2023 are at higher end of historical ranges and at higher prices.\nbooking volumes for same periods during q4 of 2021 were higher than q3 of 2021.\nexpects a net loss for first half of 2022 and a profit for second half of 2022 on both a u.s. gaap and adjusted basis for both periods.\ncash from operations turned positive in month of november.\nexpect consistently positive cash flow beginning in q2 of 2022 as additional ships resume guest cruise operations.\noccupancy in q4 of 2021 was 58%, which was better than 54% in q3 of 2021.\nexpects to continue incurring incremental restart related spend.\ntotal customer deposits increased $360 million to $3.5 billion as of november 30, 2021 from $3.1 billion as of august 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: These statements include management's expectations, beliefs and projections about performance and represents management's current beliefs.\nThere can be no assurance that management's expectations, beliefs or projections will be achieved or that actual results will not differ from expectations.\nDuring today's call, we will provide certain performance measures that do not conform to Generally Accepted Accounting Principles.\nThey provide a detailed breakdown of foreign exchange and non-cash compensation expense items, as well as segment revenue and adjusted EBITDA among other important information.\nFor that reason, we ask that you view each slide as William and Brian comment on them.\nDuring the first quarter, we continued to execute on our strategic plan with the goal of maximizing our near-term performance while strengthening our ability to capture an increasing amount of advertising dollars as the global recovery takes hold.\nOur first quarter revenue results were in line with the guidance we previously provided and for our American segment reflected a tough comparison against our strong performance in the first three months of 2020, which was only minimally impacted by COVID-19.\nWe delivered consolidated revenue of $371 million, down 32% compared to the prior year, excluding China and FX.\nBrian will walk you through the details of our first quarter performance following my remarks.\nLooking ahead, we remain encouraged by the progress being made with regard to vaccination process and the increasing levels of mobility across many of our markets as well as the positive sentiment we are hearing among advertisers.\nAs expected, we are now seeing our business return to year-over-year revenue growth through the balance of the year driven by the rebound in several markets.\nMost important, as a result of the strategic investments we're making in our business, we believe we are now in a stronger position to drive revenue growth as global recovery gains traction.\nThese investments are primarily centered strengthening our ability to monetize our growing digital platform as well as our print assets and elevate our value proposition among the broader universe of advertisers.\nSpecifically, we continue to expand and integrate our RADAR suite of data analytics products into our portfolios while strategically increasing our presence in the programmatic space.\nWe continue to deliver a greater and more valuable set of actionable insights to advertisers while emphasizing selling creative ideas targeting specific audiences.\nPut another way, we are broadening our discussions with clients beyond just the locations of our outdoor footprint to the value of specific audiences we reach with these assets.\nThe pandemic has provided us the ability to demonstrate the usefulness of our data as consumer journeys change, agencies and brands seek to reach them in a seamless manner.\nAs we focus on strengthening our ability to drive revenue growth, we have also remained diligent in managing our costs and cash flow.\nBrian will provide an update on our cost savings initiatives.\nNow, let me provide a brief update on each of our business segments beginning with Americas.\nBased on the information we have, for the second quarter, we expect Americas revenues to be between $265 million and $275 million with adjusted EBITDA margin improving sequentially from the first quarter.\nEntering May, we are seeing a notable uptick in bookings as advertisers become more comfortable with the prospect for more sustained opening of the economy as the vaccination rates improve.\nBased on our data, we can see that audiences are increasingly out and about with the recovery unfold, but there remains some lag between emerging mobility patterns and ad purchasing.\nWe primarily attribute this to the fact that some key ad categories such as amusements and restaurants remain challenged due to capacity restrictions, but we believe they will pick up as the year progresses and restrictions are lifted.\nFurther, while our transit business is showing some improvement, it continues to lag in the recovery process, which is weighing on our performance.\nComprised primarily of airports, this business is well positioned to benefit as travel volume increases.\nLooking ahead, we are continuing to see an increase in the number and value of RFPs.\nCategories showing particular strengths include beverages, insurance, and business services.\nAn example of the big opportunity is centered on maximizing the opening of the economy is reflected in our recently announced partnership with Resorts World Las Vegas.\nIn conjunction with the opening of the resort this summer and the return of convention activity, we launched three full motion digital out-of-home displays offering advertisers premium visibility on the Vegas Strip.\nThey include the latest in cutting edge digital signage and represent one of the largest exterior LED building displays in the U.S. delivering over 135,000 square feet of digital signage.\nWith regard to our technology investments, we added 14 new digital billboards in the first quarter giving us a total of more than 1,400 digital billboards across the United States.\nWe also continue to strengthen our RADAR platform through partnerships aimed at further improving our data analytics and measuring the impact of our assets on consumer decision making.\nWe have strengthened our leading audience attribution solution RADAR-Proof by partnering with Kochava, the leading real-time data solutions company for omni-channel attribution and measurement.\nOur innovative combined offering helps brands better understand out-of-home advertising impact on key metrics such as user engagement, website visits, and app downloads.\nThis is the kind of compelling data that is enabling us to demonstrate the power of our platform in influencing consumers on the move.\nWe're also continuing to make notable progress in the programmatic space.\nRevenue from programmatic increased year-over-year in the first quarter will be although off a small base.\nThrough integration with multiple SSPs, our digital out-of-home ad units are increasingly accessible to digital buyers via the same buyside platform that they utilize to spend their considerable digital budget.\nAnd while it's still early in our programmatic expansion, the progress we're making bodes well for the future.\nTurning to our business in Europe, based on the information we have today, we expect second quarter segment revenues to be between $200 million and $220 million, excluding the impact of foreign exchange.\nAs in the Americas, the pace of recovery varies across Europe, driven by differing rates of vaccination and variants in attitudes to the virus in different parts of the continent, but some of our European markets are picking up momentum in terms of opening up, we're also continuing to see volatility with activity differing from country to country.\nIn our largest market France, the French government introduces additional mobility restrictions at the end of March, following an increase in virus cases and concerns over new variants, delaying the onset of the recovery to the middle of the second quarter.\nRestrictions have started to ease with all schools now open and non-essential retail due to reopen on May 19th.\nMeanwhile, we are continuing to see promising signs in some of our other markets, particularly in the U.K., our second largest market, where the Phase 3 opening is well under way supported by a countrywide vaccination rate exceeding 50%.\nOver the last six weeks, our U.K. business generated bookings ahead of the comparable period in 2019 as we benefit from pent-up demand among advertisers.\nOur U.K. business continued to benefit from the premium locations of our roadside inventory as well as a wide spread scale and audience reach of our digital network.\nI'm proud to also note that our U.K. team was recently awarded Commercial Team of the Year at the coveted Campaign Media Awards.\nThe judges recognized Clear Channel's outstanding performance linked to proactive programs focused on supporting advertisers through the unprecedented challenges presented by the pandemic.\nLooking at the rest of Europe, other countries that are progressing well in terms of opening up include Switzerland and Spain.\nAs with the U.K., we're seeing advertising spend recovering in these markets as inflation rates drop and restrictions are eased.\nThe overall sentiment among European advertisers is very positive reflecting pent-up demand and the need to get in front of consumers.\nAs with the rebound we started to see in the third quarter of last year, following the easing of restrictions, which proved to be temporary, we believe the ad market will rebound again as restrictions are waived weighed in additional markets in the months ahead.\nOur digital footprint continues to expand in Europe.\nWe added 355 digital displays in the first quarter for a total of over 16,500 screens now live.\nSupporting these assets, our RADAR roll out continues to receive positive customer traction in Spain and the U.K. We're also testing radar in Sweden ahead of our launch in the current quarter with additional launches on track thereafter in France and Belgium.\nWe're continuing to roll out our programmatic offering in Europe.\nWe recently launched a branded programmatic proposition called Clear Channel LaunchPAD, which will serve as a customer gateway connecting our premium digital out-of-home inventory to SSPs and digital buying platforms, bringing out-of-home into the omni-channel buying ecosystem.\nClear Channel LaunchPAD is now live in the U.K., Switzerland, Spain, Finland and The Netherlands with plans under way to introduce it across France, Italy, Belgium and Scandinavia.\nSimilar to the Americas, our programmatic platform in Europe will build over time, simplifying the buying process and providing us with an important avenue to leverage our scale and technology to target new advertising partners.\nSo in summary, we remain committed to executing on our strategy to expand the revenue potential of our global portfolio and optimize our ability to take full advantage of the economic recovery.\nWe're now seeing a return to year-on-year revenue growth in the second quarter with indicators pointing to continued improvement in advertiser demand as the year progresses.\nAs William mentioned, as expected, the quarter has been challenging due to the impact of COVID-19 on our business as well as tough comparisons against our strong Q1 2020 performance in Americas.\nHowever, we are beginning to see a rebound in many of our key markets.\nWe aren't back to 2019 levels, but it's certainly nice to see the improvement.\nWe are also continuing to work on reducing costs and addressing our capital structure while investing in our business so that we are in a stronger position as our business begins to benefit from the improving economic environment.\nBefore discussing our results, I want to remind everyone that during our GAAP results discussions, I'll also talk about results adjusted for foreign exchange, a non-GAAP measure.\nWe believe this provides greater compatibility when evaluating our performance.\nAdditionally, we have expanded our disclosure to include more detail on Americas' revenue including breaking out transit revenue.\nWe've also added disclosure on site lease expenses in both the Americas and Europe segments.\nMoving on to the results on Slide 4.\nIn the first quarter, consolidated revenue decreased to 32.7% to $371 million.\nAdjusting for foreign exchange revenue was down 34.8%.\nIf you exclude China and adjust for foreign exchange, the decline in revenue was 31.7%.\nThese results were in line with expectations.\nConsolidated net loss in the first quarter was $333 million compared to a consolidated net loss of $289 million in Q1 of 2020.\nConsolidated adjusted EBITDA was negative $33 million in Q1 of 2021 as compared to consolidated adjusted EBITDA of $51 million in Q1 of 2020.\nExcluding FX, consolidated adjusted EBITDA was negative $27 million in Q1 of 2021.\nThe Americas segment revenue was $212 million in the first quarter of 2021, down 28.4% compared to the prior year with a decline in revenue across all of our products.\nNational was down approximately 33% and local down approximately 25%.\nRevenue continues to be under pressure as a result of the impact of COVID-19, but also the decline was a bit higher than Q4 2020 due to the tougher year-over-year comparisons.\nAs I noted earlier, the Americas team delivered an exceptional quarter in Q1 of 2020 with 8.5% revenue growth over the prior year.\nDirect operating and SG&A expenses were down 21.1% due in part to lower site lease expenses, which declined 22.6% to $83 million related to lower revenue and renegotiated fixed site lease expense.\nAdditionally, compensation costs declined due to cost savings initiatives and lower revenue.\nSegment adjusted EBITDA was $64 million down 40.5% compared to the first quarter of last year with an adjusting EBITDA margin of approximately 30%.\nAs I just noted, we are now breaking out our transit revenue which is primarily comprised of our airports business.\nTransit was down 61.5% and airports decreased 62.4% to $20 million.\nOur billboard and other was down 20.7%.\nRent continues to be a bit more resilient than digital and was down 19.1% with digital down 24.2% in the first quarter of 2020.\nAnd on to Slide 8, within transit, print declined 52.5% and digital was down 72.8%.\nAs a reminder, the first quarter is proportionally the smallest quarter of the year given the seasonally low level of revenue.\nEurope revenue of $150 million was down 29.4% and excluding foreign exchange, revenue was down 35.2% in the first quarter.\nAs expected, the extension of mobility restrictions continued to delay the rebound with the largest revenue reductions occurring in France, U.K., Sweden, and Spain.\nDigital revenue was down 38.9%, excluding the impact of foreign exchange.\nAdjusted direct operating and SG&A expense were down 11.6% compared to the first quarter of last year, excluding the impact of foreign exchange, both direct operating expenses and SG&A expenses decreased in most countries in which we operate with the largest decrease occurring in France and U.K. and Sweden.\nThe largest drivers of the decline in direct operating expenses was lower site lease expense has declined 10% to $93 million after adjusting for foreign exchange.\nThe decline was driven by lower revenue and renegotiated site lease expense.\nAdditionally, SG&A expense was down due to lower compensation attributed to lower revenue, operating cost savings initiatives, and government support and wage subsidies.\nSegment adjusted EBITDA was negative $62 [Phonetic] million after adjusting for foreign exchange.\nThis compared to negative $14 million in Q1 of 2020.\nOur Europe segment consists of the businesses operated by CCI B.V. and its consolidated subsidiaries.\nAccordingly, the revenue for our Europe segment is the same as the revenue for CCI B.V. Europe segment adjusted EBITDA the segment profitability metric reported in our financial statements does not include an allocation of CCI B.V.'s corporate expenses are deducted from CCI B.V.'s operating income and adjusted EBITDA.\nAs discussed above, Europe and CCI B.V. revenue decreased $62 million during the first quarter of 2021 compared to the same period of 2020 to $150 million.\nAfter adjusting for a $12 million impact from movement in foreign exchange rates, Europe and CCI B.V. revenue decreased $75 million.\nCCI B.V. operating loss was $100 million in the first quarter of 2021 compared to $46 million in the same period of 2020.\nLet's move on to Slide 10, and a quick review of other which includes Latin America.\nAs a reminder the prior year results include Clear Media, which was divested in April of 2020.\nLatin American revenue was $10 million in the first quarter, down $9 million compared to the same period last year due the impact of COVID-19.\nDirect operating expense and SG&A from our Latin American business were $13 million, down $3 million compared to the first quarter in the prior year due in part to lower revenue and cost savings initiatives.\nLatin America adjusted EBITDA was a negative $4 million.\nMoving on to Slide 11 and a review of capital expenditures.\nCapital expenditures totaled $18 million in the first quarter, a decline of $18 million compared to the prior year period as we continue to focus on preserving liquidity given the current operating conditions.\nAdditionally, capex was also lower in part due to the sale of Clear Media.\nOn to Slide 12, Clear Channel Outdoor's consolidated cash and cash equivalents totaled $642 million as of March 31st, 2021.\nOur debt was $5.6 billion, up slightly due to the refinancing of the senior notes and cash paid for interest on the debt was $145 million during the first quarter.\nOur weighted average cost of debt was 5.9% as of March 31st, 2021.\nMoving on to Slide 13, as mentioned, we continue to focus on managing our cost base and strengthening our liquidity and financial flexibility.\nIn April 2021, we revised the Europe portion of the international restructuring plan, which we began in the third quarter of 2020 primarily in response to the impact of COVID-19.\nWe expect this plan to be substantially complete by the end of the first quarter of 2023, an estimate that total charges for the Europe portion of the international restructuring plan, including $10 million of charges already incurred will be in a range of approximately $51 million to $56 million.\nSubstantially all charges related to this plan were or are expected to be severance benefits and related costs.\nWe expect a Europe portion of the plan to result in a pre-tax annual cost savings in excess of $28 million.\nAdditionally, we continue to work on negotiating six site lease savings and have achieved $23 million in rent abatements in the first quarter on a consolidated basis.\nAlso, we received European governmental support and wage subsidies in response to COVID-19 of $5 million in the first quarter.\nMoving on to our financial flexibility initiatives as previously announced, we successfully completed an offering of $1 billion of 7.75% senior notes due 2028.\nWe use the net proceeds from the offering to redeem $940 million of our 9.25% senior notes due 2024.\nAdditionally, last week, we entered into a second amendment to the senior secured credit agreement, extending the suspension of the springing financial covenant through December 31st of 2021 and further delaying the step down until September 30th of 2022.\nTurning to Slide 14, and our guidance.\nFor the second quarter of 2021, Americas' segment revenue is expected to be in the range of $265 million to $275 million and adjusted EBITDA margin is expected to improve sequentially over the first quarter of 2021.\nWhile our Europe segment revenue is expected to be in the range of $200 million to $220 million, excluding the impact of foreign exchange.\nAdditionally, we expect cash interest payments of $216 million in the last nine months of 2021 and $334 million throughout 2022.\nWe expect consolidated capital expenditures to be in the $155 million to $165 million range in 2021.\nWe are optimistic about our prospects and may look to accelerate capex spending as appropriate to the balance of the year commensurate with the slope of the recovery.\nWe anticipate our consolidated revenue in the second half of 2021 to reach nearly 90% of 2019 levels excluding China.\nThe recovery is led primarily by our Americas' billboard business and a number of countries in Europe including our U.K. roadside business.\nLastly, we expect ending liquidity for 2021, including unrestricted cash and availability under the company's revolving credit facilities to be approximately $425 million to $475 million, but that could vary based on timing of cash receipts, and our payments.\nLooking ahead, we are encouraged by the pace of the vaccination process and the increasing levels of mobility that we're seeing across the majority of our footprint.\nIn turn interest among advertisers is returning and we are seeing booking activity exceeding 2019 in several U.S. and European markets which bodes well for the year ahead.\nWe remain focused on strategically investing in our technology including expanding our digital platform and further strengthening our data analytics and programmatic resources with the aim of maximizing the potential of our digital board.\nAs we elevate our ability to demonstrate the effectiveness of our assets in influencing consumer decision making and continuing to make our inventory easier to buy particularly among digital ad buyers, we will look to expand our revenue growth potential.\nAs we invest in our technology, we will also continue to take steps to carefully manage our costs and preserve our liquidity as we navigate the evolving macroeconomic climate and focus on driving profitable growth over the long-term.\nAnd now let me turn over the call to the operator for the Q&A session.\n",
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"content": "for q2, expect americas revenue to be between $265 million and $275 million.\nexcluding impact of movements in foreign exchange rates, expect 2021 europe revenue to be $200 million-$220 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: And Scott Wells, Chief Executive Officer of Clear Channel Outdoor Americas, will participate in the Q&A portion of the call.\nThese statements include management's expectations, beliefs and projections about performance and represents management's current beliefs.\nThere could be no assurance that management's expectations, beliefs or projections will be achieved or that actual results will not differ from expectations.\nDuring today's call, we will provide certain performance measures that do not conform to generally accepted accounting principles.\nThey provide a detailed breakdown of foreign exchange and non-cash compensation expense items as well as segment revenues and adjusted EBITDA, among other important information.\nFor that reason, we ask that you view each slide as William and Brian comment on them.\nThis is our third quarter conducting the call remotely.\nAnd once again, we ask that you bear with us in case there are any technical issues during the call.\nIt has certainly been an unprecedented year for many of us and like you, I'm sure we continue to feel the impact of the COVID-19 pandemic on our business.\nBut in the past quarter, we've also seen how robust our business is and how strongly it recovers as and when some kind of normality returns.\nWe delivered better than expected consolidated revenue in the third quarter with reported revenue down 32% compared to the prior year, a substantial improvement compared to the 55% decline we reported in the second quarter.\nExcluding China and FX, the decline would have been 27% better than the low 30% decline guidance we have provided in early August.\nOur performance in Europe was better than anticipated and well demonstrated the resilience of our medium.\nAs audiences returned to the streets, our advertisers returned to our medium.\nUS performance also showed sequential improvement and was in line with our expectations.\nAt the same time, we continue to implement initiatives to align our operating expense base with revenues.\nAs a whole and in the context of the pandemic, the results in the third quarter, especially in Europe were certainly encouraging.\nWe are continuing to leverage our investments in digital screens, in technology and in our footprint to manage through the crisis and ensure we have the flexibility to deal with the uncertainty as governments across all our markets deal with the ongoing challenges of COVID-19.\nOur focus on continued investment for long-term growth is well as demonstrated by the recent announcement of our winning the contract for the rights to advertise in the New York and New Jersey airports.\nWe are proud and excited to have won this significant tender and I congratulate Scott Wells and his team in securing it.\nI'll talk later in more detail about the contract and our confidence in its value to our business.\nNow as we look ahead, based on the information we have as of today, we expect a slight sequential improvement in the Americas revenue and adjusted EBITDA margin in the fourth quarter.\nHowever, we are not able to provide fourth quarter guidance for our European segment.\nThe recent mobility restrictions in our European markets, most notably in the UK and France in the past 10 days have created volatility in customer booking activity significantly limiting our visibility.\nI'm proud of the incredible work our team has done and continues to do to reinforce our solid foundation and drive operational efficiencies in the face of rapidly changing business conditions.\nMoving on, I'll provide an overview of our business, the current environment and views on where we see the out-of-home market going from here.\nSo please turn to Page 4.\nIn the Americas segment, year-over-year revenue was down 32% in the quarter, which is an improvement compared to the 39% decline reported in the second quarter.\nOur Americas business is centered around the top 20 markets, which contributed to the significant growth we were delivering up to and including the first quarter of this year prior to COVID-19.\nHowever, even though our audience levels are returning to normal, the largest markets in the top 20 are those most impacted by advertisers pulling back on our out-of-home spending, especially on the East and West Coast, where national advertisers are most likely to be focused.\nPlease turn to Page 5.\nEurope supported revenue was down 13% against prior year and excluding foreign exchange adjustment was down 18%, which as I noted at the beginning of my remarks is a substantial improvement compared to the 62% decline we saw in the second quarter.\nThe improvement in digital, which accounts for approximately 30% of European revenue and declined 17% excluding FX impact was even larger due to the speed at which advertisers were able to launch campaigns as business quickly returned once lockdowns were eased.\nAs I've stated in the past, our investment in digital is a key component of our strategy.\nOur digital network is a dynamic medium, which enables our advertisers to engage in real time, tactical, contextual and flexible advertising.\nI'd call out the strength of our sales team across Europe, we've done an excellent job responding with agility.\nAs markets opened up, our audiences were moving around again and advertiser interest returned.\nWe also benefited from our strategic focus on roadside locations, which historically account for about two-thirds of our total European revenue and are far less affected by COVID-19 driven restrictions than the transit environment which account for approximately 10% of our European revenue.\nOur UK business was a great example of this, where about 80% of revenue is historically from roadside inventory.\nSince mid-July, up until the recent announcements of new restrictions, our customer booking activity actually exceeded bookings made in the same period last year.\nMoving on to Page 6, and the Americas business.\nWith the outlook in the Americas improving, we remain cautiously optimistic for the near term.\nOur longer-term focus remains on returning to growth, which we believe we can achieve in 2021.\nAs we enter the fourth quarter, our visibility remains limited.\nHowever, we have shifted from playing defense to playing offense, leveraging the investments we've made, and continuing to make in technology.\nEven with the uncertainty created by the recent COVID-19 spikes, we believe our organization is in a stronger position to manage through the instability in the market.\nIn light of that instability, we have expanded our client direct selling initiatives.\nOur focus is on selling creative ideas as opposed to specific billboard locations.\nAs advertisers work to realign their advertising campaigns, we have found that CMO's are more willing to jump on a Zoom call to hear a great idea.\nOur ability to get a foot in the door is improving all the time.\nWe continue to demonstrate to advertisers how our RADAR suite of solutions can help us help them.\nThe audience levels are returning to normal, but travel patterns have changed.\nAudiences are spending more time close to home and less time in city centers, but they're still out and about.\nWith RADAR, we're able to quickly to adjust to these new travel patterns to help our customers understand the best inventory and roadways on which to reach their customers, we target those customers via our mobile ad and measure the success of the campaign.\nMore specifically, in the fourth quarter, we are seeing continued sequential improvements in our business.\nFor the first time since March, we've beaten comps in the number of weeks so far this quarter.\nIn our national business, the number of RFPs is improving and is close to 2019 levels.\nLocal continues to improve and we are seeing continued strength in our perm [Phonetic] inventory.\nWe're currently in the renewal season and most are keeping their locations.\nThat said, we are still waiting for more data to better understand the strength of the holiday season relative to previous years as advertisers continue to delay buying decisions.\nOur largest category business services is holding up well, and is performing at levels equal to last year.\nWe are seeing increases in beverages, with the continued weaknesses in amusements and entertainment.\nAdditionally, our revenue generated by our programmatic platform has rebounded faster than the rest of our business, although programmatic is still a small percentage of total revenue.\nMoving on to Page 7 for a review of the Americas technology initiatives and new contracts.\nDuring this past quarter, we continue to invest in technology and our digital footprint in America.\nWe added 19 new digital billboards this quarter for a total of 57 new digital billboards this year, giving us a total of more than 1,400 digital billboards.\nWe also partnered with Tremor Video to enhance our RADAR offering, which now provides advertisers a coordinated out-of-home and all screen video solution that seamlessly extends into TV, digital or social video campaigns that reach consumers when and where they're ready to engage with brands.\nThis is just the latest of enhancements to the RADAR suite, and we expect to continue to add customer friendly capabilities to RADAR in the coming months.\nIn addition, our data analytics capabilities expanded with our recently announced rollout of a new audience impressions methodology for airport adverstising, developed in partnership with the industry measurement body Geopath, this innovation provides advertisers a more precise understanding of consumers advertising Journeys and behaviors as they traverse airports.\nThe new methodology marks a shift from measuring campaign fully based on passenger count toward a more robust understanding of audience behavior and consumers' likelihood are being exposed to advertising in airports, using the same Geopath data that is used to measure audiences in the traditional roadside out-of-home sector.\nThe data will become available to advertisers through Geopath as well as through RADAR.\nAs I mentioned at the start, we are also delighted that the Port Authority of New York and New Jersey Board has awarded us the largest airport advertising contract in the US to transform JFK, LaGuardia, Newark and Stewart airports into world-class digital media platforms.\nThis is a landmark win for us and demonstrates our confidence in the underlying fundamentals of our business and our focus on long-term profitable growth opportunities beyond the temporary impact of the pandemic.\nThe contract is for 12 years and is contingent upon execution by both parties, which we expect to occur in mid-November.\nWe anticipate the contract will go into effect December 30, 2020.\nWe worked with the Port Authority to align our interests with contract terms that set the stage for both parties to achieve their goals under the current conditions and for years to come and it has the potential to become the new industry model.\nThe deal contains a two-year transition period to account for the impact of COVID-19 and the traffic recovery at Port Authority airport.\nThe actual MAG due each year, as well as capex spend after the two-year transition period will be dependent upon total passenger traffic.\nThe Port Authority of New York and New Jersey airports are gateways to the world.\nAnd as the region and travel recover, we believe our team is best used to lead its historic transformation.\nWith the addition of these high-value marquee airport assets to our footprint, brands will have the unique one-stop shop ability to execute campaigns that reach consumers as they drive, walk or fly throughout at the New York and New Jersey metro area.\nMoving on to Page 8.\nIn Europe, where we are seeing a range of performances within our markets due to the resurgence of COVID-19 cases.\nAs I noted earlier, historically about two-thirds of our revenue in the region is generated by our roadside displays.\nIn October, we continue to see strength in our street furniture and billboard inventory, given the audiences were still on the street.\nIn contrast to continued weakness in transit, our largest categories FMCG and retail improved sequentially.\nIn addition, fashion and beauty are benefiting from the holiday season.\nHowever, our visibility into November and December has been impacted by the spike in new cases and new restrictions, which have led some advertisers to pause their activity.\nOf course, we are keenly aware of the recent developments around the second wave of COVID-19 in Europe and we are monitoring these closely.\nWhile the new restrictions and the uncertain environment will impact our business in the near term, they are not expected to last as long nor are they as limiting in terms of movement as those we saw back in March and April.\nAs a result, we believe the second wave will have a much smaller impact on revenue in the fourth quarter than it did in the second quarter.\nMore importantly, the resilience of the business is clear.\nWhen audiences return, out-of-home business comes back strongly.\nAnd as I said earlier, in the UK and elsewhere, we've seen booking equal or better to the prior year in many weeks during the past quarter.\nTurning to our European technology investments on Page 9.\nIn Europe, we continue to help brands navigate the audience and environmental impact of changing COVID-19 restrictions through the application of smart data.\nFor example, the UK's Return Audience Hub has become a go-to planning portal for advertisers.\nAs I mentioned last quarter, the hub monitors a huge anonymized mobile data set to learn and openly share how the portfolio is delivering audiences compared to pre-lockdown levels.\nClear Channel RADAR is now operational in both Spain and the UK and has further strengthened our ability to help brands engage audiences effectively as mobility patterns evolve.\nWe are seeing early benefits from our implementation of RADAR.\nFor example, in Spain, we've booked campaigns for PepsiCo using proximity to stores and more targeted audience demographic and behavioral data being able to respond to new audience behaviors and mobility patterns through the changes we are seeing as a result of COVID-19.\nWe continue to expand our digital footprint this year, adding 383 digital displays in the third quarter and 699 year-to-date for a total of over 15,000 screens now live.\nAs we continue to expand our digital reach across European cities, we are well positioned to deliver increased flexibility and enhanced contextual relevance at scale, improving our abilities in the brands' needs.\nThis is evidenced by the improving digital revenue trend in the third quarter.\nThroughout our digital transformation, we are committed to making Clear Channel inventory more accessible to both new and existing advertisers.\nAs in the US, we are developing our programmatic capabilities at an increased pace while securing and expanding partnerships with a number of the leading supply side platform partners.\nMost recently, in Spain, we successfully ran our first fully programmatic campaign to car brand Cupra in partnership with SSP Broadsign Reach.\nBroadsign Reach is already live across Holland and Switzerland.\nIn the UK, we just announced the new programmatic partnership with SSP high stack.\nAcross Clear Channel outdoor, we strive to create products and provide services that excite and engage our consumers, communities, advertisers and business partners.\nAs a result, we believe we are well positioned to return to growth in 2021.\nAt the same time, we recognize the pressures of the current environment and we will continue to take steps to preserve liquidity, including balancing the need to defer capital expenditures, and reduce costs while still investing in strengthening our platform.\nPlease turn to Page 10.\nBefore I review our third quarter results, I want to remind you that during our GAAP results discussion, I'll also talk about our results adjusting for foreign exchange, which is a non-GAAP financial measure.\nWe believe this improves the comparability of our results to the prior year.\nAdditionally, as you know, we tendered our shares in Clear Media on April 28, and therefore our Q3 results in 2020 do not include Clear Media.\nHowever, our results in Q3 of 2019 did include Clear Media's results.\nConsolidated revenue for the quarter decreased 31.5% from last year to $448 million.\nAdjusting for foreign exchange, it was down 33.1%.\nIf you exclude China and adjusted for foreign exchange, the decline in revenue was 27%, which was better than the low 30% decline we had projected in early August.\nOur better than expected results are due to a stronger than anticipated rebound in Europe.\nConsolidated net loss declined $77 million to $136 million in the third quarter of 2020 as compared to $212 million in the third quarter of 2019.\nAdjusted EBITDA was $31 million in the quarter, down 78.4% and excluding FX, was down 78.9%.\nNow on to Page 11 to discuss the Americas results.\nThe Americas revenue was down 31.8% during the third quarter from $328 million in 2019 to $224 million.\nAs William mentioned, this is an improvement over the second quarter results, which were down 39%.\nRevenue declines and national and local, as well as digital, improved relative to the second quarter, while the decline in airports increased.\nIn general, our airport inventory is considered premium space.\nSo while advertisers did not immediately reduce the airport advertising campaigns in the beginning of the second quarter, they began pulling ads in the back half of the quarter, and into the third quarter.\nLocal, which accounted for 64% of revenue was down 27.6%, and national, which accounted for 36% of revenue was down 38.2%.\nDigital accounted for 30% of revenue and was down 34.8%.\nThis compares to a 53.7% decline in the second quarter.\nOur long-term contracts for print large format billboard, which we refer to as perms, continue to hold up well, even though total print ad revenue was down.\nBoth direct expenses and SG&A were down 19% in the quarter, primarily due to lower site lease expenses and lower compensation costs, as a result of the decline in revenue and cost reduction initiatives.\nAdjusted EBITDA was $71 million, down 48% from the prior year.\nAs we have stated in the past, our business is a high fixed cost business, and although we are working on reducing expenses throughout the organization, the decline in revenue resulted in a larger reduction in adjusted EBITDA.\nPlease move on to Page 12 to review Europe.\nEurope revenue was down 13.4%.\nExcluding foreign exchange revenue, was down 17.9% in the third quarter.\nThis is a substantial improvement from the 62% decline reported in the second quarter, with all markets contributing to the improvement.\nFrance was up in the quarter due to the new Paris street furniture contract in addition to a partial rebound in the underlying market.\nDigital revenue accounted for 30% of total revenue that was down 16.6%, excluding FX, slightly less than the overall decline.\nAdjusted direct operating expenses and SG&A expenses were down 8.9%.\nThe decline is due to lower site lease expense, in addition to lower compensation expense, primarily related to the decline in revenue, in addition to cost reduction efforts.\nAdjusted EBITDA was a loss of $8 million, due to the decline in revenue and high fixed cost base.\nIn August, we issued senior secured notes through our indirect, wholly owned subsidiary, Clear Channel International BV, which we refer to as CCI B.V. Net proceeds from the note offering provides incremental liquidity for our operations.\nOur European segment consists of the businesses operated by CCI B.V. and its consolidated subsidiaries.\nAccordingly, the revenue for our Europe segment is the revenue for CCI B.V. Europe segment adjusted EBITDA does not include an allocation of CCI B.V.'s corporate expenses that are deducted from CCI B.V.'s operating income and adjusted EBITDA.\nAs I just discussed, Europe and CCI B.V. revenue decreased $34 million during the third quarter of 2020, compared to the same period of 2019, $217 million.\nAfter adjusting for an $11 million impact from movements in foreign exchange rates, Europe and CCI B.V. revenue decreased $45 million.\nCCI B.V. operating loss was $38 million in the third quarter of 2020, compared to operating loss of $16 million in the same period of 2019.\nOn to Page 13 for a quick review of other.\nOur other segment includes Latin America and Clear Media.\nThe 2019 results include Clear Media, which was sold in Q2 of 2020.\nLatin America revenue was $7 million in the third quarter, down $15 million from the prior year.\nThe spike in COVID-19 in Latin America started later in the year, and it is taking longer to control the spread of the virus in Latin America.\nDirect operating expenses and SG&A were $13 million in the third quarter, down $4 million from the prior year.\nAdjusted EBITDA was a loss in the quarter.\nNow on to Page 14 to discuss capex.\nCapital expenditures totaled $26 million in the third quarter, down $34 million from the prior year, as we proactively reduced our capital spend to preserve liquidity and sold our stake in Clear Media.\nEven with this substantial reduction, we did continue to invest in digital in key locations with 19 new digital billboards in the US, and 383 new digital displays in Europe.\nPlease move to Page 15.\nClear Channel Outdoor's consolidated cash and cash equivalents, as of September 30, 2020, totaled $845 million, including $417 million of cash held outside the US by our subsidiaries.\nDuring the third quarter, we transferred a portion of the proceeds from the sale of Clear Media to the US.\nOur debt was $5.6 billion, an increase of just over $500 million during the year, as a result of our drawing on our cash flow revolver at the end of March, and issuing the CCI B.V. notes in August.\nCash paid for interest on the debt during the third quarter was $147 million, up slightly from the prior year, due to the timing of interest payments, partially offset by lower interest rates.\nThe company anticipates having approximately $21 million of cash interest payments in the fourth quarter of 2020, and $350 million in 2021, including the interest on the new CCI B.V. secure notes, with the first interest payment in April of 2021.\nMoving on to Page 16.\nAs William touched upon, we continue to focus on managing our cost base and strengthening our liquidity and financial flexibility, while driving improvements in the top line trends that will return the business to its pre-COVID trajectory.\nThis includes our proactive steps to right-size the business.\nIn addition to the temporary cost saving plans we enacted in the second quarter, we've also initiated restructuring plans throughout the company.\nPlans are expected to generate annualized pre-tax savings of approximately $32 million upon completion, with total charges for the plans in the range of $23 million to $26 million to achieve these savings.\nWhile we remain confident the business will return to pre-COVID levels, we still don't have the visibility yet on timing.\nGiven the uncertainty, we felt it was prudent to take the appropriate steps to work to align the cost base with the current business environment.\nAdditionally, during the third quarter, as previously discussed, we issued $375 million in senior secured notes in August through our indirect wholly owned subsidiary CCI B.V.\nWe continue our site lease contract negotiations with landlords and municipalities to better align fixed site lease expenses, with reductions in revenues.\nWe generated rent abatements of $24 million during the third quarter and $53 million year-to-date.\nWe continue to benefit from compensation cost reductions through actions enacted in the second quarter, the majority of which are temporary.\nWe obtained European government support and wage subsidies of $7 million in the third quarter and $15 million year-to-date.\nWe eliminated and reduced certain discretionary expenses.\nWe deferred capital expenditures, as I just mentioned, and we deferred site lease expenses and other payments to optimize working capital levels.\nFrom a liquidity standpoint given what we know today, we believe that we have sufficient liquidity, including the $845 million of cash at the quarter end, to fund the needs of the business as the economy and our business recover.\nPlease move to Page 17.\nAs William mentioned, in the Americas, we expect to see a slight improvement on a sequential basis in revenue and adjusted EBITDA margin.\nIn Europe, we saw a strong sequential improvement in the third quarter.\nHowever, our visibility in the fourth quarter has been impacted by the recent mobility restrictions put in place in some of our largest European markets, most notably in the UK and France.\nThese restrictions have created volatility in customer booking activity, significantly limiting our visibility and ability to provide guidance.\nAs I mentioned, our team continues to work exceptionally hard through the challenging environment and we are seeing the results of our efforts.\nWe're encouraged by the way we've seen advertisers return to our inventory in the last quarter, demonstrating the resilience of our medium and the value of our locations.\nThey're benefiting from our continued investments in technology and expansion of our digital footprint and are proud of securing new contracts most especially winning the New York and New Jersey Port Authority airports.\nWe remain focused on the strong, medium, and long-term opportunities within our sector and are confident Clear Channel is well positioned to capitalize on these improving trends.\nAs I conclude my remarks, I want to reiterate a few things.\nFirst, as Brian mentioned, the actions we took earlier in the year give us what we believe to be sufficient liquidity to manage through the pandemic, even with the spikes we've seen in the US and Europe.\nSecond, we will continue to identify both temporary and permanent costs reductions to better align our expenses with the current economic environment and expand on our restructuring plans.\nThird, in the third quarter, we delivered better than expected results, with a strong rebound in Europe demonstrating the underlying resilience of our business.\nIn recent weeks, in both some European markets and the US, we have at times equaled or bettered prior year performance.\nWhen infection rates decline and restrictions are lifted and our audience return, our markets come back.\nLooking ahead, the course of the pandemic is still unclear with the second wave in Europe and continued uncertainty in the US.\nAlthough, we expect the next few quarters to remain challenging, we believe in the underlying fundamentals of our industry and our business.\nAs both Brian and I said, given the resilience of our team, investments in our business, and strength of our platform, we expect to deliver a slight sequential improvement in Americas revenue and adjusted EBITDA margin in the fourth quarter.\nWe are not providing fourth quarter guidance for Europe, given the recent mobility restrictions creating significant volatility in our booking activity.\nHowever, we remain cautiously optimistic that we will return to growth in 2021.\nLastly, as we've stated before, we always remain open to dispositions and opportunities that accelerate our path to creating enhanced value for shareholders.\nHowever, given the current economic environment, our focus remains on continuing to own, operate and enhance the value of the current portfolio of assets in order to drive shareholder value as the economies rebound.\nI look forward to providing updates regarding our progress.\n",
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"content": "q3 revenue fell 31.8 percent to $223.7 million.\nclear channel outdoor - committed to restructuring plans to reduce headcount with expected pre-tax annual cost savings of about $32 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: On the call today are William Eccleshare, Chief Executive Officer of Clear Channel Outdoor Holdings, Inc.; and Brian Coleman, Chief Financial Officer of Clear Channel Outdoor Holdings, Inc., who will provide an overview of the third quarter 2021 operating performance of Clear Channel Outdoor Holdings, Inc. and Clear Channel International BV.\nAnd Scott Wells, Chief Executive Officer of Clear Channel Outdoor Americas, will participate in the Q&A portion of the call.\nThese statements include management's expectations, beliefs and projections about performance and represent management's current beliefs.\nThere can be no assurance that management's expectations, beliefs or projections will be achieved or that actual results will not differ from expectations.\nDuring today's call, we will provide certain performance measures that do not conform to Generally Accepted Accounting Principles.\nThey provide a detailed breakdown of foreign exchange, segment revenue, adjusted EBITDA and adjusted corporate expenses, including the impact of share-based compensation and restructuring charges, among other important information.\nFor that reason, we ask that you view each slide as William and Brian comment on them.\nWe delivered very strong results during the third quarter and we entered the fourth quarter with continuing business momentum that we capitalized on the broad base recovery we are seeing across our markets.\nAdvertisers are returning to launch new campaigns and rebuild brand awareness.\nThis rebound, together with new advertisers discovering our medium for the first time, is driving growth in many of our markets ahead of 2019 revenue levels in both our digital and traditional assets.\nOur consolidated revenue in the third quarter increased 33.3% over the prior year.\nExcluding FX, consolidated revenue was $590 million, up 31.8% over the prior year.\nAmerica's revenue was $319 million, up 42.6%, in line with our guidance and 97% to 2019 revenue.\nEurope revenue was $256 million, up 18.2%, which was slightly ahead of our guidance and 97% of 2019 revenue, both excluding FX.\nAs we have highlighted on past calls, we have a resilient business that has consistently demonstrated its ability to bounce back from macro disruptions.\nWe are clearly seeing this occur and we are very pleased with how our business is performing in the current quarter.\nAnd it is with that confidence in our business and liquidity position that we've repaid the $130 million outstanding balance of the revolving credit facility.\nComing out of COVID, advertisers are embracing out-of-home as they recognize the enhanced capabilities we have built into our platform.\nThe power of our assets is only matched by our team of talented and dedicated people and the deep relationships they have maintained across the industry throughout the pandemic.\nGiven the expansion of our digital footprint and the related strategic investments in both data analytics and programmatic that we have made in our platform, advertisers are now utilizing an even stronger set of tools that will allow them to expand this relationship through highly creative addressable and measurable solutions.\nWe are meeting our customers where they are by building on the very best features of out-of-home and elevating what we can do for advertisers and their brands in a compelling manner.\nAnd so, this is an exciting time for our business as we execute on our vision to expand our share of total advertising spend.\nAs we focus on delivering profitable growth, we also remain committed to reducing our overall indebtedness, strengthening our balance sheet and elevating our ability to benefit from the operating leverage in our model.\nAs part of this effort and as momentum builds in our business, we will continue to evaluate disposition opportunities in line with our strategic goals and in the best interest of our shareholders.\nNow let me provide a brief update on each of our business segments, beginning with Americas.\nBased on the information we have for the fourth quarter, we expect Americas revenue to be in the range of $360 million and $370 million, which is above the $345 million we reported in the 2019 comparable period, reflecting the strong momentum in our business as we close out the year.\nIn the current quarter, we are continuing to experience a notable uptick in demand with a strong volume of RFPs.\nNational is increasing over the prior year at a slightly faster rate than local.\nBased on our current revenue bookings, all our small and most medium-sized markets are pacing above Q4 2019.\nWe still haven't fully rebounded in a few markets in California, including San Francisco, although LA, which is our largest market is now above 2019.\nIn our larger markets, in addition to LA, New York, Miami and Dallas are also exceeding 2019 levels, with Houston and Boston plays behind.\nI would also highlight a promising rebound we are seeing in airports across the country.\nWe believe our success is distributed to our teams doing a better job of servicing our customer needs and matching them to the best asset types.\nFor example, our traditional sales team is now selling our airport inventory.\nWe should note at this point, inflation and supply chain issues are not materially impacting our business, but we are of course keeping an eye on macro trends on how they are playing out.\nOur digital billboards business, which continues to lead the recovery, is central to our long-term growth strategy.\nWe deployed 17 new digital billboards in the third quarter, giving us a total of more than 1,500 digital billboards across the United States.\nWe are and we remain at the forefront in driving innovation in the out-of-home industry.\nWe've built a dynamic platform that delivers mass broadcast level reach, along with the sophisticated insights similar to the digital display platforms with the ability to target consumers on the move.\nOur RADAR solutions continue scaling up and opening new opportunities, including with major CPG brands.\nRecently, we were able to match individual consumer behaviors using our RADARProof attribution tool with household purchase data from an ID resolution partner, LiveRamp.\nIn the CPG world, this advancement matters as households, rathan than individuals, often are the decision makers in this product category.\nSo we can now measure the household impact of exposure to our out-of-home advertising.\nFor example, in separate campaigns for a snack brand, a sports beverage and new packaged food brand, we delivered household sales insights about the consumers buying these products and how out-of-home attracts new customers to these brands.\nRADARProof also demonstrates the ability of out-of-home exposure tin increase the lifetime value of repeat brand purchases, a key metric for consumer packaged goods brands.\nFurther, through our strategic expansion into the programmatic space, we continue to see a notable uptick in brands experimenting with programmatic and we are positioned to participate in this opportunity.\nFor instance, these innovations are evident in our recent campaign for Twitch and Mediahub Global to promote their second annual streamable gaming event.\nThe campaign won best use of programmatic with digital out-of-home this year as part of Adweek's Annual Media Plan of the Year Awards.\nOur commitment to technology in improving the buying process and enhancing our ability to demonstrate attribution are key drivers of performance in our Americas business.\nAnd I believe Scott and his exceptional leadership team should be proud of their work in delivering such a strong performance as the business emerges from the pandemic.\nTurning to our business in Europe, based on the information we have today, we expect fourth quarter segment revenue to be between $335 million and $350 million, which is in line with Europe's top-line performance in the fourth quarter of 2019 of $349 million.\nAll amounts exclude movements in FX.\nSimilar to the US, in Europe, we are demonstrating the resilience of our platform and its ability to rapidly return to growth.\nAs we've noted in the past, about two-thirds of our European revenue comes from roadside assets.\nThis has benefited our performance in the current environment, given that we have limited exposures in the transit sector, which has of course seen a greater impact from COVID.\nThis is most evident in the UK where we have continued to deliver revenue ahead of 2019.\nFor the last six months, UK revenue has been ahead of 2019, led by the strength of our street furniture footprint and from the benefits of both new contracts and further development and investment in digital roadside inventory.\nOverall, we are continuing to benefit from pent-up demand across Europe, although orders are still coming in later than pre-COVID.\nBased on current trends, our pipeline across CPG and retail, our largest verticals, is looking strong with fashion and beauty also looking healthy.\nOur digital expansion is also a central part of our growth strategy in Europe.\nWe added 314 digital screens in the third quarter for a total of over 16,900 screens now live, including digital screens in the UK, Italy and Ireland.\nAnd we are further elevating the value proposition of our digital footprint through the roll out of our RADAR suite of solutions, which is now gaining traction in all of our major European markets.\nFor example, in Spain, we are now able to target campaigns based on online behavior in addition to physical store visits and we are having significant success using the tool in the auto category where brands are able to efficiently target likely car buyers.\nIn addition, we recently completed the launch of our programmatic offering, LaunchPAD in Italy.\nAnd we are now executing on our programmatic strategy across the Europe, allowing brands to connect at the right time with consumers through multiple touch points, planned real-time digital out-of-home campaigns and control exactly when, where and at what times the ads are deployed.\nWe are also continuing to selectively pursue contract tenders that meet our strategic objectives in multiple markets.\nIn Sweden, we won a seven-year contract to operate the advertising related to a public buy program in the center of Stockholm, consisting of 350 static and digital panels in prime locations, further strengthening our footprint across the city.\nSo in summary, we are executing at a high level across every facet of our strategic plan.\nThe recovery continues to gain momentum and we are seeing good progress in our business in the current quarter.\nComing out of the pandemic, we are well positioned to maximize our performance as we leverage our digital expansion and the investments we are making in our data analytics and programmatic resources, which is broadening the universe of advertisers we can pursue and strengthening our growth profile.\nAs William mentioned, we continued to see a strong rebound in our business as reflected in our third quarter results and outlook for the fourth quarter and we continue to manage our cost base, including negotiating rent abatements in some of the markets most affected by COVID-19, as well as strengthening our capital structure.\nMoving on to the results on Slide 4.\nIn the third quarter, consolidated revenue increased 33.3% to $596 million.\nExcluding FX, revenue was up 31.8%.\nConsolidated net loss in the third quarter was $41 million compared to a consolidated net loss of $136 million in the prior year.\nAdjusted EBITDA was $136 million in the third quarter, representing a substantial improvement over the prior year, which was $31 million.\nExcluding FX, adjusted EBITDA was $135 million in the third quarter.\nThe Americas segment revenue was $319 million in the third quarter, up 42.6% compared to the prior year and in line with the guidance we previously provided in July.\nRevenue was up across all of our products, most notably print billboards, digital billboards and airport displays.\nDigital revenue rebounded strongly and was up 68.4% to $115 million.\nNational local continue to improve with both up 43%.\nDirect operating and SG&A expenses were up 15.8%.\nThe increase is due in part to a 15.3% increase in site lease expense, driven by higher revenue combined with higher compensation cost driven by improvements in our operating performance.\nThis was partially offset by lower credit loss expense related to our recovery from COVID-19.\nSegment-adjusted EBITDA was $139 million in the third quarter, up 96.7% compared to the prior year with segment-adjusted EBITDA margin of 43.6%, above our guidance in Q3 2019 results due to temporary savings, including site lease savings primarily related to airports as well as lower spending and a reduction in the credit loss expense.\nThis slide breaks out our Americas revenue into billboard and other and transit.\nBillboard and other, which primarily includes revenue from billboards, street furniture, spectaculars and wallscapes, was up 37.6%.\nTransit was up 82.7%, with airport display revenue up 88.7% to $43 million in the third quarter.\nAirport revenue was helped by the return of airline passenger traffic and the new Port Authority of New York and New Jersey advertising and sponsorship contracts.\nDigital revenue rebounded strongly in Q3 and was up 59.5% to $91 million and now accounts for 33.4% of total billboard and other revenue.\nNon-digital revenue was up 28.7%.\nPlease note that as I comment on the percentage change from the prior year, all percentages are excluding movements in foreign exchange.\nEurope revenue was $263 million in the third quarter.\nExcluding movements in foreign exchange, revenue was $256 million, up 18.2% compared to the prior year, ahead of the guidance we provided in our second quarter earnings call.\nAs you may remember, in Q3 2020, restrictions were lifted and the business bounced back quickly, which created tougher comps than in the second quarter.\nRevenue in the third quarter was up across most of our products, primarily street furniture and retail displays and in most countries.\nDigital revenue was up 39.3% to $89 million, excluding FX, a strong performance driven in large part by the rebound in the UK.\nDirect operating and SG&A expenses were up 6.4% compared to the third quarter of last year.\nThe increase was largely driven by a $13 million increase in cost related to our restructuring plan to reduce headcount.\nAs a reminder, costs related to our restructuring plan are not included in adjusted EBITDA.\nSite lease expense declined 3.7% to $99 million, excluding FX, driven by negotiated rent abatements.\nSegment adjusted EBITDA was $30 million excluding movements in foreign exchange in the third quarter as compared to negative $8 million in the prior year.\nMoving on to CCIBV.\nOur Europe segment consists of the businesses operated by CCIBV and its consolidated subsidiaries.\nAccordingly, the revenue for our Europe segment is the same as the revenue for CCIBV.\nEurope segment adjusted EBITDA, the segment profitability metric reported in our financial statements does not include an allocation of CCIBV's corporate expense that are deducted from CCIBV's operating income and adjusted EBITDA.\nCCIBV revenue increased $46 million during the third quarter of 2021 compared to the same period of 2020 to $263 million.\nAfter adjusting for a $6 million impact from movements in foreign exchange rates, CCIBV revenue increased $39 million.\nCCIBV operating loss was $26 million in the third quarter of 2021 compared to $38 million in the same period of 2020.\nLet's move to Slide 9 and a quick review of other, which includes Latin America.\nNote, this is the first quarter that the prior year results do not include our China business.\nLatin America revenue was $15 million.\nExcluding movements in foreign exchange rates, it was $!\n4 million in the third quarter, up $7 million compared to the same period last year.\nDirect operating expense and SG&A from our Latin American business were $14 million, up $1 million compared to the third quarter in the prior year.\nLatin America adjusted EBITDA rounded to zero in the third quarter.\nNow, moving to Slide 10 and a review of capital expenditures.\nCapital expenditures totaled $33 million in the third quarter, an increase of approximately $6 million compared to the prior year period as we ramped up our investment in our Americas business.\nNow onto Slide 11.\nClear Channel Outdoors' consolidated cash and cash equivalents totaled $600 million as of September 30, 2021.\nOur debt was $5.7 billion, up $166 million, due in large part to the refinancing of the CCWH senior notes in February and in June.\nCash paid for interest on debt was $52 million during the third quarter and $264 million year-to-date.\nOur weighted average cost of debt was 5.5% as of September 30, 2021, 60 basis points lower than the prior year.\nAdditionally, as William mentioned, given our improved outlook for both our business and liquidity position, we repaid the $130 million outstanding balance under the company's revolving credit facility with cash on hand on October 26, resulting in a corresponding increase in excess availability under such revolving credit facility.\nFinishing with our guidance on Slide 12.\nAgain, as William noted, for the fourth quarter of 2021, Americas segment revenue is expected to be in the range of between $360 million and $370 million, which is above the $345 million reported in Q4 2019.\nSegment-adjusted EBITDA margin is expected to return to close to Q4 2019 levels of $42.3%.\nQ4's adjusted EBITDA margin is expected to benefit from the top-line improvement, but also from one-time items including site lease savings and temporary cost savings.\nOur Europe segment revenue is expected to be in the range of between $335 million and $350 million, which is in line with Europe's revenue in Q4 2019 of $349 million.\nBoth the guidance and Q4 2019 consolidated revenue are based on 2020 exchange rates and exclude China.\nOur consolidated Q4 revenue guidance is $715 million to $740 million, which is in line with or better than our Q4 2019 consolidated revenue of $717 million.\nAs noted above, guidance in Q4 2019 consolidated revenue are based on 2020 exchange rates and exclude China.\nAdditionally, we expect cash interest payments of $123 million in the fourth quarter of 2021 and $319 million in 2022.\nWe expect consolidated capital expenditures to be in the $150 million to $160 million range in 2021.\nLastly, we are once again increasing our guidance for liquidity as of December 31, 2021, including unrestricted cash and availability under the company's credit facilities.\nWe expect liquidity of approximately $525 million to $575 million, a $50 million increase from the guidance provided in July.\nThis is reflective of our improved performance and our businesses.\nThe guidance also includes a near-term acquisition pipeline of approximately $20 million to $25 million that we could potentially close by year end that represents small selective tuck-in billboard acquisitions in the Americas.\nPlease keep in mind that liquidity could vary based on timing of cash receipts and/or payments at year-end.\nThat concludes my remarks.\nAs I make the transition into the new role of Executive Vice Chairman at the close of the year, and Scott moves to take over as CEO, I am confident that we will continue to build on the momentum we're seeing in our business.\nWe are leading the digital transformation of our industry, innovating our platform and strengthening our ability to serve a large universe of appetizers.\nWe're coming out of COVID with a stronger and more dynamic platform supported by an energized worldwide team focused on growth and execution.\nAs we continue to invest in our technology, while carefully managing our costs, we remain focused on driving profitable growth and evaluating all avenues to delever our balance sheet, including dispositions.\nIt's been a pleasure to have met so many of you and have to engaged in conversations with you regarding our industry, our company and the direction of the global advertising market.\nYou remain of course in very good hands with Scott and the management team as they continue to execute on our plan to fully surface the growth potential and intrinsic value of our assets.\nAnd now, let me turn over the call to the operator for the Q&A session.\n",
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"content": "clear channel outdoor holdings q3 revenue rose 33.3% to $596.4 million.\nq3 revenue rose 33.3% to $596.4 million .\nsees q4 revenue $715 million to $740 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: On the call today are William Eccleshare, Chief Executive Officer of Clear Channel Outdoor Holdings, Inc.; and Brian Coleman, Chief Financial Officer of Clear Channel Outdoor Holdings, Inc., who will provide an overview of the fourth quarter and full year 2020 operating performance of Clear Channel Outdoor Holdings, Inc., and Clear Channel International BV.\nThese statements include management's expectations, beliefs, and projections about performance and represents management's current beliefs, there could be no assurance that management's expectations, beliefs or projections will be achieved or that actual results will not differ from expectations.\nDuring today's call, we will provide certain performance measures that do not conform to Generally Accepted Accounting Principles.\nThey provide a detailed breakdown of foreign exchange and non-cash compensation expense items, as well as segment revenue, adjusted EBITDA, among other important information.\nFor that reason, we ask that you view each slide as William and Brian comments on them.\nDespite the unprecedented challenges brought on by the pandemic and the sporadic nature of the global recovery, we are heartened by the progress being made with regards to development and distribution of vaccine, and we remain confident that our business will return to growth in 2021.\nIt's worth noting that the out-of-home industry has consistently accounted for 5% to 6% of global advertising spend, and was one of the only growing traditional mediums pre-COVID.\nOur industry has proven to be very resilient coming out a previous downturn, and we fully expect this will once again be the case as we emerge from the pandemic.\nLonger term, the digital out-of-home sector is projected to grow at 13% compound annual growth rate from 2022 to 2025, according to data published by MAGNA Global in December 2020.\nWe hope to capture a significant share of this growth, and we believe the actions we've taken during the past 12 months from strengthening our liquidity and implementing cost restructuring efforts, to the adjustments we've made to our sales approaches, to the continued expansion of our digital platform and data analytics product, put us in a stronger position to return to revenue growth as the recovery ultimately takes hold.\nAs we previously noted, while we continue to focus on carefully managing our expenses, we have begun to play offence.\nThroughout the pandemic, we have focused on strengthening our relationships with our advertising partners, with an emphasis on collaborating more closely with them as they tap into the flexibility and immediacy of our platform.\nWe have increasingly utilized our RADAR tweaked solutions to help our customers understand how that target customers have changed their movement patterns.\nIn turn, we have still to demonstrate our ability to deliver real-time content changes depending on audience traffic, as well as weather, day-part and other relevant variables.\nOverall, we are united across our organization in executing a clear strategic plan, and fully capitalizing on the fundamental strength and growth drivers of our global asset base, in order to unlock shareholder value.\nThere are four key components that will continue to define our success now and well into the future.\nAnd we have continued to deliver progress across all of them.\nThese imperatives include, first and foremost, we are continuing to invest in our business, including secure in premier contracts and integrating the right technology to strengthen and expand the effectiveness of our assets.\nWe continue to grow our digital footprint and demonstrated effectiveness in dynamically targeting, influencing and delivering audiences on the move.\nComplementing our digital portfolio, we've added to our data analytics capabilities and further strengthened our RADAR tweak of tools through key partnerships in both the US and Europe, and we continue to expand our integration with programmatic buying platform.\nAll of these investments around monetizing our portfolio by delivering the data, targeting and ease of ad placement that our customers increasingly appreciate.\nWe also finalized our new contract with the Port Authority of New York and New Jersey during the fourth quarter.\nThis venture is aimed at capturing the incredible potential of our platform and technology in a very big way as we emerged in the pandemic and audience travel begins to normalize.\nSecond, we are focused on maximizing revenues by doing what we do best, partnering politely with our customers to deliver compelling advertising solutions, strengthening long-term relationships and remaining agile and flexible.\nIn the US, we're doubling down on our client direct selling initiatives and emphasizing selling creative ideas rather than specific billable locations.\nSimilarly in Europe, we are working with advertisers and agencies to develop unique network solution, which exploit the flexibility of our medium.\nThese approaches along with the integration of RADAR's broadening suite of related data analytics tool are supporting deeper conversations with brands, who are selling the unique strength of our platform.\nThird, we have remained diligent in prudently managing our cost structure and cash flow.\nThese initiatives have included negotiating reductions in site leases, temporary reductions in compensation and reductions in certain discretionary spending, as well as deferring capital expenditures.\nWe've also moved forward with the restructuring plans to reduce headcount throughout our organization.\nAnd fourth, we are committed to maintaining ample liquidity and continuingly -- continually reviewing parts to strengthen our balance sheet over the long term.\nThis includes the recent refinancing of a portion of our debt through the issuance of $1 billion senior notes, which extended our maturity profile and reduced our cash interest expense going forward.\nAnd Brian will provide more details following my remarks.\nThe strength of our assets and our focus on remaining agile in terms of maximizing our inventory in a difficult environment was evident in the fourth quarter as we continued to post sequential improvement in our performance.\nWe delivered consolidated revenue of $541 million, down 27% compared to the prior year.\nExcluding China and FX, the decline would have been 25% in the fourth quarter, an improvement over the third quarter.\nIn Americas, we delivered results ahead of our expectations in both sequential revenue and adjusted EBITDA margin.\nOur performance in Europe reflected the impact of the increased mobility restriction as government thought to contain the second wave of the virus.\nThese results were also ahead of our expectations as we work diligently to adjust our selling approaches and maximize our asset in an unprecedented and volatile climate.\nSimilar to the third quarter, we saw promising signs regarding the resilience of our platform in select markets, particularly in the UK where our business significantly outperformed the roadside market.\nWe believe this reflects both the premium locations of our roadside inventory, as well as the success of our digital screens which generated close to 70% of our fourth quarter revenue in the UK.\nThese results, as well as our progress in continuing to drive operating efficiencies are certainly encouraging given the pandemic related circumstances we have faced globally.\nI'd like to call out all of our employees for their outstanding commitment to our mission and their contributions to our business during this extraordinary operating period.\nWe truly have a first rate talented team laying the groundwork to deliver improved results this year and beyond.\nOur people have adjusted brilliantly to new ways of working and their productivity and commitment through the crisis have been outstanding.\nThere are many steps they are taking to further strengthen our operations while adjusting our approach to serving our clients during the pandemic will pay dividends well into the future.\nLooking ahead, we will be facing a very tough comparable first quarter given our strong performance in the first three months of 2020, and the continued impact of COVID 19.\nThis is also traditionally our smallest quarter in terms of revenue.\nBased on the information we have as of today, we expect Americas segment revenue to be down in the high 20 percentage range as compared to the prior year.\nThe recent mobility restrictions in European countries, following mutations of the virus have continued to cause significant volatility in our European segment booking activity.\nDue to this, for the first quarter of 2021, with the Europe segment revenue to be down in the mid 30% range, as compared to prior year.\nLatin American bookings continue to be severely constrained as the pandemics' impact continues in all four of our markets in the region.\nTurning to our fourth quarter performance.\nIn the Americas segment, while year-over-year revenue was down 25%, we continue to show a sequential improvement, which was better than expected.\nLocal continues to show recovery and we're seeing national rebounding, it is not only the number of sales RFPs increasing, but we're also seeing an increase in the size of those RFPs, which is certainly a good sign.\nAs a reminder, in 2019 National revenue was up 9%.\nWe've begun to gain traction with the large agencies and brands on the ability of the out-of-home medium to deliver results.\nThey were however the first to pullback as the pandemic hit.\nSo we're now beginning to rebuild interest with them, which bodes well as we exit the pandemic.\nIn the US, programmatic purchasing grew encouraging the year-over-year during the fourth quarter, although off a small base.\nAnd we believe programmatic could grow substantially over time.\nWe've built a robust set of SSP partners and a rich network of more than 20 DSPs, providing avenues to sell our inventory alongside other digital media.\nOur early entry into programmatic relative to the rest of the out-of-home industry positions us well as we work to introduce our platform and capabilities to a greater number of brands across the larger media buying universe.\nEurope's fourth quarter revenue, adjusted for foreign exchange, was down 23%.\nWhile our performance was ahead of our internal expectations due to the second wave of COVID and associated travel restrictions, specifically in our largest market, France, we did not deliver sequential improvement.\nDuring the quarter, we continued to benefit from our strategic focus on roadside locations, which accounted for about two-thirds of our total European revenue and are far less affected by COVID-19 driven restriction than the transit environment which has historically accounted for just over 10% of our European revenues.\nSimilar to the Americas, one encouraging outcome of the pandemic is that in Europe, we have witnessed increased opportunities to demonstrate the flexibility, immediacy and creativity of our platform from multiple standpoint, including messaging context, contract flexibility and the ability to use mobile data to better target specific audiences.\nMoving on now to our outlook for the Americas business.\nAs I mentioned, we expect the Americas to be down in the high 20 percentage range as compared to the prior year.\nThis is slightly weaker than the fourth quarter, due in part to the tough comps of 2020, as well as increased pressure on airports.\nAs a reminder, in last year's first quarter, Americas segment revenue was up 8.5% on 2019.\nWe are heartened by the increased audience movement with trends that we're seeing.\nOur data is showing that travel has actually remained close to normal with some weeks even exceeding the same week in the prior year.\nSo audiences are back on the highways and we have no doubt advertisers will ultimately come back to the market.\nThe encouraging news is that, similar to the fourth quarter, we are continuing to see an improvement in the volume and the size of RFPs, and it appears that advertisers are getting more confident and starting to plan for the future in a more structured manner.\nThe beverage vertical continues to improve with the restaurant up versus prior year.\nBut it's also clear that advertisers are continuing to delay decision making and booking campaign later reducing our visibility.\nWe're continuing to leverage our RADAR platform, an expanded portfolio of partner tool to adjust to evolving travel patent to maximize our inventory for our customers, and this is helping to strengthen our relationships and demonstrate the unique attributes of our platform.\nTurning to a review of the Americas technology initiatives and new contracts.\nDuring the quarter we continued to invest in the right technology, including increasing our digital footprint, strengthening our data analytic capabilities and expanding in the programmatic space.\nWe added seventeen new digital billboards in the fourth quarter for a total of 74 new digital billboards in 2020, giving us a total of more than 1,400 digital billboards across the United States.\nWe also continue to strengthen our RADAR platform through partnerships aimed at further improving our data analytics and directly addressing our customers' needs.\nWe entered into a partnership with Bombora, a leading provider of B2B intent data.\nAn out-of-home industry first, we are integrating Bombora data with RADAR viewed audience insights, demographics, and location targeting.\nSo advertisers can now understand how each of our display impacts more than 100 B2B audience segment, making targeting the B2B customer more accessible and measurable.\nOur partnership with Bambora followed the recent addition, the partnerships with Tremor Video and Geopath, which we've also added to the integrated suite of solutions we deliver through RADAR.\nAs an example of the benefits of our technology investment, we leveraged our billable presence in Florida and our RADAR-Connect mobile retargeting capabilities to deliver a campaign for Game Day vodka.\nThe brand reported that the campaign was responsible for 65% of website traffic and achieved a take through rate that was twice the industry average.\nAs repeated case studies have shown, combining billboard ads with mobile is far more effective than just using one or the other.\nThe success was such that Game Day Vodka was subsequently selected as an official committee sponsor by the Tampa Bay Super Bowl Host Committee.\nThis relationship is a very powerful example of RADAR-Connect's ability to take our out-of-home footprint to another level through smart targeting of the right audiences at the right time.\nAs I noted, we are continuing to expand in the programmatic space.\nOur programmatic platform introduces ease and efficiency to the out-of-home sales process by enabling marketers to buy our out-of-home inventory in audience based packages, giving them a level of flexibility closest to the online platforms relative to other traditional ad medium.\nAs I've noticed -- as I've noted on previous calls, it's my firm belief that if you make something easier to buy, you inevitably grow your business and our growth in programmatic presence would certainly ensure that we continue to capture advertising dollars from other media and grow our share of the pie.\nFinally, we are off to a good start with our Port Authority contracts.\nWe have the inventory up and running on our platform and have begun selling at it.\nAs we noted last quarter, the 12 year deal is the largest airport advertising contracts in the US, panning JFK, LaGuardia in Europe, and Stewart Airports.\nWith the addition of these tremendous airport assets, brands will have the unique ability to execute campaigns that reach a vast array of consumers as they drive local site throughout a vast metro area.\nDespite the short-term challenges related to pandemic, we remain confident in the growth potential of these contracts.\nLooking ahead in Europe where we're seeing a range of performances within our markets due to the resurgence of COVID 19 cases, new variants in the virus and related government restrictions, particularly in France and the UK.\nAs I noted earlier, we expect Europe revenues to be down in the mid 30 percentage range as compared to 2020.\nVisibility into the remainder of the quarter continued to be impacted as some advertisers pause their activity pending greater clarity on the pace of the vaccination and timing of market reopening.\nIn addition, advertisers are making buying decisions later in the buying cycle which can delay bookings and impact our visibility.\nHaving said that, it is important to note that the impact of current government restrictions remains well below impact that we saw in March and April of last year.\nAnd longer term, as we've continued to emphasize, the resilience of the business is clear and when audiences returned to the streets, our out-of-home business will rebound soundly.\nAt this point, we believe restrictions across our European market will begin to lift the spring, and we're working closely with our advertisers to develop campaign targeting audiences as they return.\nFor example, in the UK, where the roadmap to lifting lockdowns was reviewed earlier this week, the expected rebound is being marketed as a renaissance moment, highlighting why out-of-home is better positioned than ever to help brands reach and engage audiences as they emerge from their restrictive stay at home orders.\nTurning now to our European technology investments, we continue to make progress in utilizing smart data to help advertisers plan and adjust their campaigns.\nOur sales team has integrated the RADAR technology in Spain and the UK, and advertiser interest has been very positive, particularly as we demonstrate the agility of our platform in using aggregated anonymous data to target audiences, as they return to the street.\nIn Spain, we recently launched RADAR driven campaign, centered on driving consumer interest for Disney Plus and CaixaBank.\nThe Disney Plus campaign is for the many theories one division and targeted in 18 to 45-year-old demographics with interest in comic, cinema and video games.\nAnd the CaixaBank campaign was for their Young ID products and targeted 14 to 30-year-old with interest in music, museums and other cultural locations in Barcelona.\nWe're also rolling out a programmatic offering in Europe, similar to the Americas, our programmatic offering will build over time, simplifying the buying process, providing us with additional revenue stream and a growing avenue to leverage our scale and technology to target new advertising partners.\nOur digital footprint continues to expand in Europe.\nWe added 545 digital displays in the fourth quarter and 1,244 in 2020 for a total of over 16,000 screens now live.\nOverall, we have a broad asset base in Europe, which is enabling us to develop and market scale digital networks with a focus on road side, which can be sold flexibly by time of day and day of week.\nThis aligns well with rising advertiser expectations regarding our scale and the strength of our technology in targeting the right audiences on the move.\nI should also note that we recently secured several key contracts in Europe, including winning the bid to renew the rain contract, covering bus shelters, pull banners and stopping points across the city and we've secured a renewal in Spain for the Madrid outskirts on January 1st of this year.\nAs you would expect, the past year was not particularly active for big tenders given COVID and several were pushed out to this year.\nNevertheless, we were successful in securing these major contracts.\nSo, in summary, we are intently focused on executing on our strategy, which is centered on strengthening our technology with the aim of fully monetizing our digital board and expanding our customer base.\nNotwithstanding the challenges we have faced, the pandemic has also presented us with a number of opportunities to demonstrate the flexibility and immediacy of our platform with a broad range of advertisers as we look to deepen our relationships and accelerate our digital conversion.\nIt remains early in the recovery and as our market gradually open up, we will continue to take steps to preserve our liquidity, including balancing the need to defer capital expenditures, and reduce costs while still investing in strengthening our platform.\nOverall, we believe we remain in a strong position to capitalize as audience ability increases, given the steps we have taken and continue to take throughout the global crisis.\nAs William mentioned, the past year was challenging, but we moved quickly to address our cost base, strengthen our liquidity and improve our financial flexibility.\nAs we look to build a stronger company, we have also continued to make strategic investments in critical areas aimed at strengthening and expanding the effectiveness of our assets, while also refining our sales approach.\nTaking together these initiatives and our improved cost structure place us in a solid position to benefit as the worldwide economy recovers.\nMoving on to the results on Slide 4.\nBefore discussing our results, I want to remind everyone that during our GAAP results discussions, I'll also talk about our results adjusted for foreign exchange, which is a non-GAAP measure.\nWe believe this provides greater comparability when evaluating our performance.\nAdditionally, as you know, we tendered our shares in Clear Media in April of last year, and therefore our Q4 results in 2020 do not include Clear Media.\nHowever, our results in Q4 and full year 2019 did include Clear Media's results.\nIn the fourth quarter, consolidated revenue decreased 27.4% to $541 million.\nAdjusting for foreign exchange, revenue was down 29.3%.\nIf you exclude China and adjust for currency, the decline in revenue was 24.5%.\nThe finish was better than our internal expectations due to stronger-than-expected performance in United States and certain markets in Europe.\nAs William mentioned, this was sequentially better than the third quarter.\nConsolidated net loss in the fourth quarter was $33 million compared to net income of $32 million in the fourth quarter of 2019.\nConsolidated adjusted EBITDA was $101 million, down 51.1%.\nExcluding FX, consolidated adjusted EBITDA was down 52.1% compared to the fourth quarter of 2019.\nFor the full year consolidated revenue decreased 30.9% to $1.9 billion, excluding foreign currency exchange impact, consolidated revenue for 2020 declined 31.4%.\nConsolidated net loss for the full year was $600 million compared to $362 million in 2019.\nAnd consolidated adjusted EBITDA for 2020 was $120 million, down 80.8% compared to 2019.\nExcluding FX, adjusted EBITDA was down 82% for the full year.\nThese are certainly not the results we anticipated delivering when we started 2020.\nBut we do believe the team did an exceptional job responding to the pandemic and taking the necessary steps to adapt to the dynamics in the marketplace.\nNormally during the fourth quarter earnings call I review both the fourth quarter and full year results for each of our business segments.\nBut this year for efficiency, I will focus only on the fourth quarter.\nThe Americas segment revenue was $258 million in the fourth quarter, down 25.3% compared to $345 million last year.\nAs William noted, this marked further sequential improvement compared to the previous two quarters.\nTotal digital revenue which accounted for 32% of total revenue was down 29.6%.\nDigital revenue from billboards and street furniture was down 15.4%.\nDigital revenue as compared to the prior year improved sequentially over the third quarter, which was down 34.8% and print continues to perform a bit better than digital due to our [indecipherable] inventory.\nNational was down 27% and accounted for 37% of total revenue, with local down slightly less at 24%, accounting for 63% of revenue.\nBoth national and local improved over the third quarter.\nOur top-performing categories in the quarter included business services, our largest category, as well as beverages.\nRegionally, we are still seeing strength in our small markets and weakness in the largest cities.\nDirect operating and SG&A expenses were down 16.8%, due in part to lower site lease expenses related to lower revenue and renegotiated fixed-site lease expense, as well as lower compensation costs from lower revenue and operating cost savings initiatives.\nAdjusted EBITDA was $94 million, down 34 -- 35.4% compared to the fourth quarter of last year with an adjusted EBITDA margin of 36.5%.\nEurope revenue of $268 million was down 17.9% and excluded -- excluding foreign exchange, revenue was down 23% in the fourth quarter.\nThis was a bit weaker than the performance in the third quarter as the stricter lockdowns in key European countries, including France impacted our results.\nHowever, our results for the quarter finished ahead of our expectations, which speaks to the execution of our team, as well as the strength of our assets.\nThe level of restrictions varied by country, with seven of our top 10 European markets posting sequential revenue improvements in the quarter, with the majority showing topline declines, less than half of what we saw at the outset of the pandemic and last year's second quarter.\nDigital accounted for 34% of total revenue and was down 18.8% excluding the impact of foreign exchange.\nAdjusted direct operating and SG&A expenses were down 17% compared to the fourth quarter of last year, excluding the impact of foreign exchange.\nThe decline was driven primarily by lower direct operating expenses in large part due to our success in renegotiating fixed lease expenses.\nAdditionally, SG&A expense was down slightly due to lower compensation due to lower revenue, operating cost savings initiatives and government support and wage subsidies.\nAnd adjusted EBITDA was $35 million, down 46.9% from $65 million in the year ago period, excluding the impact of foreign exchange.\nThis was driven by lower revenues in the period.\nIn August, as you know, we issued senior secured notes through our indirect wholly owned subsidiary, Clear Channel International BV, which we refer to as CCIBV.\nNet proceeds from the note offering provides incremental liquidity for our operations.\nOur European segment consists of the business is operated by CCIBV and its consolidated subsidiaries.\nAccordingly, the revenue for our Europe segment is the revenue for CCIBV.\nEurope segment adjusted EBITDA does not include an allocation of CCIBV's corporate expenses, are deducted from CCIBV's operating income and adjusted EBITDA.\nAs discussed above, Europe and CCIBV revenue decreased $59 million during the fourth quarter of 2020 compared to the same period of 2019 of $268 million.\nAfter adjusting for $16.5 million impact from movements in foreign exchange rates, Europe and CCIBV revenue decreased $75 million during the fourth quarter of 2020 compared to the same period of 2019.\nCCIBV operating income was $0.8 million in the fourth quarter of 2020 compared to operating income of $38 million in the same period of 2019.\nNow let's move to Slide 7 and a quick review of other, which includes Latin America.\nAs a reminder, the prior year results include Clear Media, which was divested in April of 2020.\nLatin American revenue was $15 million in the fourth quarter, down $11 million compared to the same period last year.\nRevenue was down due to widespread impact of COVID 19.\nDirect operating expense and SG&A from our Latin American business were $15 million, down $4 million compared to the fourth quarter in the prior year due in part to lower revenue, as well as cost savings initiatives.\nLatin America adjusted EBITDA was $1 million, down $6 million compared to the fourth quarter in the prior year due to the impact on revenue from COVID 19, partially offset by cost savings initiatives.\nNow moving to Slide 8, and review of capital expenditures.\nCapEx totaled $31 million in the fourth quarter, a decline of $62 million compared to the prior year period as we continued to focus on preserving liquidity, given the current operating conditions.\nCapEx was also lower due to the sale of Clear Media, which as I mentioned, occurred in April of 2020, although fourth quarter CapEx did include a small amount related to the port authority contract.\nFor the full year, total CapEx was $124 million, down $108 million compared to the full year 2019.\nAgain the reduced CapEx for the full year was primarily due to our liquidity preservation measures and the divestiture of Clear Media.\nNow on to Slide 9.\nClear Channel Outdoor's consolidated cash and cash equivalents totaled $785 million as of December 31st, 2020.\nOur debt was $5.6 billion, an increase of just over $500 million during the year as a result of our drawing on the cash flow revolver at the end of March and issuing the CCIBV notes in August.\nCash paid for interest on debt was $22 million during the fourth quarter and $324 million during the full year ended December 31st, 2020.\nThis was in line with our expectation and up slightly compared to the prior year due to the timing of interest payments, which was partially offset by lower interest rates.\nOur weighted average cost of debt was reduced from 6.8% in 2019 to 6.1% in 2020.\nMoving on to Slide 10.\nAs mentioned, we continue to focus on managing our cost base and strengthening our liquidity and financial flexibility.\nIn September we announced restructuring plans throughout our organizations.\nIn our Americas segments we completed our restructuring plans in the fourth quarter and we expect annualized pre-tax cost savings of approximately $7 million to begin in 2021.\nHowever, our plans for Europe have been delayed due to the evolving nature of COVID 19 impacts and the complexity of executing the plans.\nWe now expect to substantially complete the plan by the first half of 2022.\nIn conjunction with and in addition to these plans, we expect an additional annualized pre-tax cost savings of approximately $5 million in our corporate operations.\nAdditionally, as I mentioned in my remarks on both the Americas and Europe segments, we continue to work on negotiating fixed-site lease savings and have achieved $28 million in rent abatements in the fourth quarter for a total of $78 million year-to-date.\nAlso, we received European government support in wage subsidies in response to COVID 19 of $1 million in the fourth quarter and $16 million year-to-date.\nThe duration and severity of COVID 19's impacts continue to evolve and remain unknown, as such, we will consider expanding, refining or implementing further changes to our existing restructuring plans and short-term cost savings initiatives as circumstances warrant.\nMoving onto our financial flexibility initiatives, earlier this month we successfully completed an offering of $1 billion of 7.75% senior notes due 2028.\nProceeds from the offering will be used to redeem $940 million of our 9.25% senior notes due 2024, as well as to pay transaction fees and expenses including associated call premium and accrued interest.\nThe timing was right for this offering, giving the strength in the high-yield credit market, as well as our improving outlook.\nIn addition, we've de-risked our maturity profile by refinancing approximately half of our 9.25% notes which were unsecured and represent our next nearest material maturity.\nOur weighted average maturity is now 5.6 years, up from 4.9 years with a run rate cash interest savings of approximately $10 million per year, due to lower coupon rate.\nAll-in-all, the offering speaks to the continued support the financial markets half for Clear Channel Outdoor and reflect our improving outlook, strong global assets and leading market position.\nTurning to Slide 11 and our outlook for the first quarter of 2021.\nAs William mentioned, Americas first quarter 2021 segment revenue is expected to be down in the high 20% range as compared to the prior year.\nThis is slightly weaker than the fourth quarter, due in part to the tough comps.\nWith the first quarter of 2020 when revenue increased 8.5% over the prior year, as well as the continued impact of COVID 19.\nIn our Europe segment we expect revenue to be down in the mid 30% range in the first quarter, historically the first quarter of the year is the smallest quarter for revenue.\nThe weakness is due to the resurgence of COVID 19 cases, new variants of the virus and related government restrictions, particularly in France and the UK.\nLatin America bookings continued to be severely constrained.\nAdditionally, we expect cash interest payments in 2021 of $362 million and $335 million in 2022.\nThe increase in 2021 is primarily due to the interest payments on the CCIBV notes issued in 2020, as well as various timing differences.\nSo, to reiterate, despite the near-term challenges we continue to face and the uncertainty regarding the pace of the worldwide recovery, we are encouraged by the resilience of our business and the fact that infection rates are in decline in the majority of our markets, which together with the vaccination programs gathered pace is leading to a real sense of optimism.\nOur national and local businesses in the US continue to recover.\nAnd in Europe we are confident that the restrictions of starting to lift and our pipeline is strengthening.\nAs we exit the first quarter and the environment continues to improve, we remain committed to executing against our growth strategy and delivering year-on-year growth in 2021.\nWe believe are focused on working closely with our customers to give them real time audience insight they need, including our effort to expand our technology initiatives spanning our digital platform, data analytics capabilities and programmatic capability put us in an even stronger position to return to revenue growth and benefit from our operating leverage as the recovery takes hold in the second quarter and beyond.\nWe are now a stronger and more efficient company in the way that we operate, both in terms of the unique value proposition we deliver and the manner in which we run our business.\nOur people have shown that creativity and commitment and we are poised to maximize the opportunities ahead.\nI look forward to providing updates regarding our progress in the months ahead.\n",
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"content": "for q1 of 2021, we expect americas segment revenue to be down high 20 percentage points.\nfor q1 of 2021, we expect europe segment revenue to be down mid 30 percentage points.\nboth our americas and europe segments are experiencing customer advertising buying decisions later in buying cycle.\nlatin america bookings continue to be severely constrained.\nwill consider expanding or implementing further cost savings initiatives throughout 2021 as circumstances warrant.\nqtrly consolidated revenue $541.4 million, down 27.4%.\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: Overall, the third quarter reflected a continuation of our strategy of investing in our North American assets to further reposition the company with lower cost, sustainable free cash flow and solid returns over longer mine lives.\nAs you can see, it was a quarter with several significant developments and decisions.\nResults were in line with our internal forecast and we're set up to deliver a strong finish to the year and achieve our original production guidance.\nMick will go through the operations in more detail shortly, but I'll quickly touch on a few main points.\nWharf led the pack and achieved its second highest operating cash flow and free cash flow since we acquired the operations 6.5 years ago.\nPalmarejo and Kensington were largely on plan and are on track to deliver strong fourth quarters and Rochester's results reflect steady progress despite devoting 38.5 days, or about 45% of the quarter, to crushing and hauling over-liner material to the new Stage VI leach pad before winter.\nIt's worth pointing out that Rochester's year-to-date results reflect 2.5 months of essentially no stacking on the legacy Stage IV pad as they prioritize activities to support the POA 11 expansion.\nOn the exploration front, results continue to validate our ongoing commitment to these higher levels of investment.\nWe invested $20 million in exploration during the quarter alone.\nThis commitment to drilling has led to double-digit reserve and resource growth over the past few years and we look forward to hopefully delivering further growth again at the end of this year.\nWe anticipate investing $70 million in exploration in 2021, which is nearly 40% higher than the record we set last year and is one of the largest programs in our sector.\nWe remain on track to achieve our full year drill footage targets, yet investing slightly less than originally anticipated, which reflects efficiencies we are realizing from these larger programs.\nWe will plan to provide another exploration update before the end of the year that will focus on exciting new results at our assets in Nevada, both at Rochester and from the Crown district in Southern Nevada where there continues to be a lot of activity.\nSwitching over to our expansion projects, I want to walk through some updates starting with the Rochester POA 11 expansion.\nThis project remains our top priority and is a transformative well-funded source of production and cash flow growth for the company.\nThings are moving right along.\nOverall progress stood at 42% complete at the end of the third quarter.\nIn addition to completing the crushing of over-liner for the new Stage VI leach pad, the team also kicked off foundation work for the Merrill Crowe plant and the crusher corridor during the quarter.\nAs we mentioned on our last conference call, we're experiencing the impact of inflation on remaining unawarded work, like most companies are reporting.\nOverall, we're fortunate to have had the vast majority of our contracts locked in prior to the current spike in costs and supply and labor disruptions.\nWe're trying to mitigate some of these impacts by rescoping and rebidding unawarded contracts, but we currently estimate that we're likely to see a 10% to 15% overall increase to the POA 11 construction costs.\nWe have kicked off detailed engineering and we'll be evaluating the merits of implementing this process improvement over the coming months.\nAssuming we elect to pursue this opportunity, it could potentially extend the timetable for completion and commissioning of the crusher by three to six months.\nIn the meantime, we plan to install pre-screens on the existing crusher during the first half of next year to give us some full scale run time and experience that we can potentially incorporate into the new crusher configuration.\nNow switching over to Silvertip.\nGiven the current inflationary environment and pandemic-driven supply and labor disruptions, it's not an ideal time to be kicking off a new capital project on an accelerated timetable despite multi-year high zinc and lead prices.\nFortunately, Silvertip expansion and restart is still in the early innings, which gives us a lot of flexibility.\nDespite the uncertain macro-environment, which contributed to higher-than-expected capital estimates for an accelerated expansion in restart, one thing we are certain of is the quality and prospectivity of the Silvertip deposit.\nThe exploration results, along with the knowledge and new discoveries the team is generating, have led us in the direction of evaluating a larger Silvertip expansion and restart on a potentially slower timetable.\nTo take advantage of such a high-grade and significant resource, a 1,750 ton per day processing facility isn't likely large enough to maximize Silvertip's value.\nWe're going to take some additional time to evaluate what a larger design and footprint could represent in terms of economics and overall flexibility.\nThis approach will give us time to continue drilling and hopefully keep growing the resource, allow for the dust to settle on many of these current macroeconomic factors and allow us to focus on delivering POA 11 while not straining the balance sheet.\nFinishing out the highlights.\nWe're pleased to announce that we entered into an agreement with Avino Silver & Gold to sell them the La Preciosa project in Durango, Mexico.\nThis transaction offers some real potential synergies to unlock value from that asset with their nearby Avino mine.\nStrategically, the transaction checks a lot of boxes for us with respect to further enhancing our geopolitical risk profile, our metals mix and the timing of our development pipeline.\nWe can deploy some of the fixed cash consideration into the Rochester expansion and into our highly prospective exploration programs.\nThe transaction provides a lot of upside to the asset through the equity ownership we will have, along with contingent payments and two royalties we will retain.\nShifting gears, I want to quickly bring your attention to a set of slides starting on Slide 17 that highlight the great culture and diversity efforts we have at Coeur.\nTo be a high performing organization, a company's culture, strategy and capabilities need to be aligned, something that I believe we've achieved over the past few years.\nTo that end, I want to recognize our Head of Human Resources, Emilie Schouten, for her efforts on DE&I and for recently winning the industry's Rising Star Award from S&P Global Platts.\nWe continue to integrate our ESG efforts into our strategy and overall decision making.\nBefore having Mick provide an overview of our operations, I'd like Hans to follow-up on my Silvertip comment by providing a brief overview of the Silvertip exploration results and why we are so positive about its potential.\nWe bought Silvertip in late 2017 with the recognition that the asset has excellent growth potential.\nWe now have almost 3.5 kilometer of potential growth defined based on step-out drill holes or more than triple what we knew in 2017, as highlighted on Slide 8.\nThis year, we are completing the largest exploration program in the history of the project.\nImpressively, Silvertip accounts for roughly 25% of our $70 million overall budget at Coeur.\nThe site team led by Ross Easterbrook has done an outstanding job managing the 1,000-meter drill program.\nDrilling from underground has given us the ability to conduct exploration year-round and test different parts of the ore body from different angles, which has been a crucial part of the Silvertip growth story.\nUnderground drilling in early 2021 has led to the discovery of the Southern Silver Zone vertical feeder structures and thick manto ore zones and, more recently, vertical feeder structures under the Discovery South Zone.\nThese structures represent significant resource tonnage potential and demonstrate excellent upside.\nWe now have two rigs active underground with plans to add a third rig early next year.\nWe also expect to continue with three surface rigs testing resource growth to the south in the 1.5-kilometer gap between Southern Silver and Tour Ridge zones.\nWith the larger drill budget this year, we expect to continue significant growth at Silvertip, which will give our development team confidence to right-size the future operation to fit the potentially increased scale of the ore body.\nThe team reported last week they've cut the best hole ever with 11 mineralized manto horizons.\nThe hole is located under Silvertip Mountain about 500 meters or 1,500 feet south of the Southern Silver and Camp Creek zones in an area with no resource shapes at this time.\nThis new step-out hole is the significant indicator of the growth potential we expect for 2022 and beyond.\nI'll now pass the call over to Mick.\nBefore diving into operational results, I want to recognize the team for continuing to prioritize health and safety and driving continuous improvement in this area.\nFlipping to Slide 24, I'm proud to report that we recently received the NIOSH Mine Safety and Health Technology Innovation Award for our cross-functional COVID-19 response efforts.\nI'm truly honored to be part of such a great team that is relentless in its efforts to work together and look after the well-being of our people.\nNow turning to Slide 5 to cover the operations and starting off with Palmarejo.\nThe team did an excellent job maintaining higher throughput levels and maximizing recoveries to offset some of the lower grades that we've been experiencing with our resequenced mine plant.\nWe've also continued advancing development while focusing on increasing rehabilitation rates across the mine, which helps ensure that we've appropriately prioritized the health and safety of our workforce.\nQuarterly operating costs remain within guidance helping to counterbalance lower realized prices and generate $15 million of free cash flow.\nWe expect a strong finish to the year at Palmarejo and we're excited to see how much production growth we can achieve here in this fourth quarter.\nSwitching over to Rochester.\nWe crushed just under 1.3 million tons of over-liner for the new Stage VI leach pad during the quarter, completing the necessary requirements for POA 11.\nIt's important to note, when we are generating over-liner, we were not crushing materials stacked on the legacy Stage IV leach pad, which had a knock-on effect for production during the third quarter.\nDespite the near-term production impact, all-time energy and resources used to finish crushing overlay now was an important step toward completing this highly anticipated expansion project.\nNow turning to Kensington.\nProduction was slightly higher during the quarter as better agreed [Phonetic] help to offset lower mill throughput caused by stope sequencing and drill parts availability.\nThe good news is that we anticipate more high grade Jualin material over the coming months and have already received the necessary spare parts for stope drills, leaving us very well positioned for strong production growth in the fourth quarter.\nThe Kensington team did an excellent job balancing multiple priorities and maintaining solid cost controls throughout the quarter, which helped generate nearly $15 million of free cash flow.\nFinishing with Wharf, I want to start by acknowledging the tremendous achievement.\nOn October 3, the team at Wharf celebrated one year without a recordable safety incident, truly an amazing accomplishment.\nFrom a results standpoint, Wharf put together yet another great quarter, which marks back to back periods of strong performance.\nGold production was up 17% and cash flow figures was the second highest since Coeur's acquisition back in 2015.\nWith that, I'll pass the call over to Tom.\nFirst, I wanted to add a bit of color on the non-cash adjustments that impacted our third quarter earnings.\nWe wrote off $26 million of Mexican VAT refunds, to which we strongly believe we are entitled, but like many other multinational companies doing business in Mexico, we have experienced significant challenges from SAT in the Mexican courts in obtaining these payments.\nWe also had a mark-to-market adjustment on our equity investments, primarily related to Victoria Gold.\nHowever, the carrying value of the investment remains above our original cost.\nTurning over to Slide 4, I'll quickly run through our quarterly consolidated financial results.\nRevenue of $208 million was driven by relatively stable metal sales and a lower average realized silver price versus the second quarter.\nOperating cash flow totaled $22 million, which was lower than last quarter but also negatively impacted by changes in working capital.\nRemoving working capital, operating cash flow improved by more than 10% quarter-over-quarter.\nLike most companies, we've seen cost pressures related to consumables and labor across all of our operations.\nWith stronger expected Q4 production, we anticipate operating cash flow levels to continue climbing as we finish out the year.\nTurning over to Slide 12 and looking at the balance sheet, we ended the quarter with approximately $330 million of liquidity, including $85 million of cash and $245 million of availability under our revolving credit facility.\nAlso, it's worth highlighting that these numbers do not include the $140 million of equity investments on our balance sheet.\nWe did draw down modestly on the revolver.\nWe ended the period with a net debt to EBITDA leverage ratio of 1.4 times.\nWe will continue adhering to our disciplined capital allocation framework and remain focused on our goal of keeping net leverage below 2 times and maintaining liquidity of at least $100 million throughout the entire Rochester construction period.\nHowever, we expect the revised timeline for Silvertip, along with the current robust metals price environment, will leave us well positioned to maintain a strong and flexible balance sheet.\nI'll now pass the call back to Mitch.\nBefore moving to the Q&A, I want to quickly highlight Slide 13 that outlines our near-term priorities as we approach the end of the year.\nWith production guidance reaffirmed and a strong expected fourth quarter underway, we're feeling confident about our 2021 results and in our ability to carry this momentum into next year.\nWe'll continue pursuing a higher standard and execute at a high level to deliver consistent results and industry-leading organic growth from our balanced portfolio of North American-based precious metals assets.\n",
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"content": "q3 revenue $208 million versus $229.7 million.\nreaffirms production guidance; updates cost and capital expenditure guidance.\nfull-year 2021 capital expenditures are expected to be slightly lower at about $35 million - $40 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: Our results were released after yesterday's market close.\n2020 was quite the year.\nObviously, COVID-19 was the main headline for everyone and of course we were no exception.\nCOVID had a big impact on the first half of our year by sharply driving down prices and forcing a government-mandated shutdown in Mexico, which impacted us at our Palmarejo mine.\nOf course, prices have strengthened considerably since their April lows and Mexico allowed mining to resume in the second quarter.\nAnd together with solid production and effective cost and balance sheet management, we delivered a strong second half of 2020, which Mick and Tom will talk more about shortly.\nI first want to take a minute to recognize our people for how they've risen to the occasion over the past 12 months.\nWe've asked a lot of everyone and our entire organization has responded incredibly well to the challenges.\nI can't help but have immense pride for how well our culture has served us, the talent we've attracted, the ESG leadership we've established and the overall performance we delivered during such an unprecedented year.\nNow starting off on Slide 3 and 4.\nThere were a lot of highlights and accomplishments last year that led to adjusted EBITDA jumping over 50%, to $263 million and free cash flow climbing to $49 million.\nFor starters, we achieved production guidance at all of our sites and unit costs were at or below full year guidance ranges at each of our primary gold operations.\nPalmarejo's results were truly remarkable, the way they ramped back up mid-year and really never looked back.\nAnd Kensington and Wharf also had fantastic years with both operations breaking their previous free cash flow records.\nRochester finished the year much stronger than it started, with fourth quarter silver production increasing nearly 40%, and gold production up almost 50% quarter-over-quarter.\nAnd just to add a bit more color on Rochester, the big highlight last year was kicking off the expansion and providing the details of this project late in the year.\nThe updated mine plan reflects a reserves-only 18-year mine life with an NPV of $634 million and an anticipated IRR of 31%.\nProduction rates are also expected to double, driving average free cash flow to over $100 million per year.\nUntil this expansion is completed late next year, Rochester will remain in a state of transition while we balance near-term performance with gathering and applying key learnings to ensure Rochester's long-term success.\nDuring this time, we'll also remain focused on further expanding Rochester's silver and gold reserves beyond the 58% and 65% growth we saw last year.\nIt was the largest drilling program in our history, and it was wildly successful.\nGold reserves grew by over 20%, and silver reserves increased by over 40% to the highest levels in Company history.\nWe've now dramatically increased our overall average mine life from just over seven years in 2015 to well over 12 years currently.\nAnd with over $65 million allocated to exploration this year, we expect to see this number extend out even further.\nThese investments in exploration rank among our most attractive capital allocation priorities and should help drive higher returns on invested capital going forward.\nOn top of our reserve success, we made a new discovery in Southern Nevada called C-Horst, located in the Crown district, which has the potential to become a significant asset for the Company.\nWe included several recent drill holes in yesterday's release from C-Horst, including one that was over 216 meters, averaging just about 1 gram per ton of oxide gold.\nAn aggressive drilling program has already begun at C-Horst this year.\nAnd we plan to invest approximately $10 million to continue growing this new discovery.\nAnother big success from last year's exploration program was the substantial resource growth at Silvertip in British Columbia.\nWith only around half of the assays back at the end of the year, total resource tons increased over 40% and we more than tripled the strike length of the high-grade deposit to over 3.5 kilometers.\nWe plan to invest roughly $14 million in exploration at Silvertip this year, aimed at further expanding the resource and beginning to convert some of this material to reserves.\nI'm sticking with Silvertip for a minute.\nWe ended 2020 feeling confident in the resource and in our ability to continue expanding Silvertip's mine life with further drilling.\nWe also have identified and expect to lock down the flow sheet for a straightforward 1,750 ton a day process plant that can reliably deliver consistent recoveries and generate high-quality concentrates.\nThe team is now focused on optimizing capital costs, the mine plan and operating costs to incorporate everything we learned from last year's PFS.\nWe're also working through how best to slot in a potential expansion and restart to maximize the likelihood of success without distracting us from our Rochester expansion.\nOur goal is to end the year with a solid, compelling business case to justify a decision to move forward at silver tip.\nOur three-year outlook reflects strong returns and a step change in production and cash flow.\nIf you didn't get a chance to listen to our Investor Day in December, I encourage you to go to our website, look at the materials or watch the replay to find out more about our culture, strategy and outlook.\nBefore passing the call to Mick, I want to quickly highlight Slides 18 and 19 which provide a good high-level overview of our deep-rooted community relationships.\nWe strive to maintain strong relations with all of our partner communities and other local stakeholders with the goal of a mutual long-term prosperity.\nWow, what a great quarter and a strong finish to the year.\nBuilding on our momentum, we expect to deliver another strong year from our operations in 2021.\nNow taking a look at Slide 6 and 7 and beginning with Palmarejo.\nStrong results during the second half helped us finish the year on a high note, despite being down for roughly 45 days in the second quarter.\nFull-year gold production finished above the high end of its guidance range, while silver production was in line with expectations.\nAdditionally, the team did an excellent job balancing operating and financial results during the year which resulted in the unit costs for both gold and silver to come in below the low end of their guidance ranges.\nTogether, these great accomplishments helped to generate nearly $93 million of free cash flow; Palmarejo's largest free cash flow year since 2017.\nLooking at the year ahead, we plan to increase our mining and throughput rates to help offset some lower grades and expect Palmarejo to have another great year in 2021.\nTurning over to Rochester.\nWe're going to see positive results from our revised stacking plan, which leverages inter-lift liners to maximize the placement of HPGR-crushed ore on shallower portions of the leach pad.\nThis strategy directly led to higher production during the second half of 2020, helping us to achieve the low end of our production guidance for both silver and gold.\nUnit costs came in slightly higher than expected, largely due to additional cyanide dosing as well as higher metallurgical outside services costs for modeling the test work and the consultant support, we used to drive the improvement program in the second half.\nGoing forward, we are continuing to focus on performance enhancements and driving sustained improvements in our results.\nBefore moving on, I want to quickly highlight two important items for Rochester in 2021.\nWe plan to swap out the existing secondary crusher in the second quarter to further optimize gradiation of crushed material at higher throughput rates.\nThis will give us the opportunity to dial in the new unit before it goes into the expanded crusher corridor as part of POA 11.\nWe also plan to begin crushing over liner material for the new Stage VI leach pad during the second half of the year and we have solid plans for both of these projects to mitigate some of the operational impacts.\nIt's important to remember that we are effectively using inter-lift liners and the existing crushing circuit as a full-scale test bed to optimize performance, helping to derisk our ability to achieve the expected results from the expansion in the coming years.\nSwitching over to Kensington.\n2020 was an excellent year for the operation.\nThe team's diligent focus and efforts helped us achieve our full year production and cost guidance, which led to a record $60 million of free cash flow.\nWe expect another strong performance from Kensington in 2021, aided by the inclusion of Eureka and Elmira into the operation's production profile.\nLastly, at Wharf, the team did a great job accomplishing their goals for the year, and achieved guidance by producing over 93,000 ounces of gold at an average cost around $890 per ounce.\nMore importantly, Wharf generated $73 million of free cash flow, shattering its previous record by over 25%.\nLooking ahead, we plan to move some additional tons during 2021.\nWhile this is expected to result in marginally higher costs, we anticipate Wharf will have another great free cash flow year.\nWith that, I'll pass the call over to Tom.\nSlide 5 highlights our fantastic financial results.\nAs Mitch and Mick mentioned, strong performances from Palmarejo, Kensington and Wharf, along with higher realized prices led to significant improvements in our annual financial results.\nMargin expansion from top line growth and prudent cost management helped us generate over $260 million in adjusted EBITDA and nearly $150 million in operating cash flow.\nBoth metrics were over 50% higher year over year.\nThese results showcase the power of our portfolio, especially during the second half of 2020 when our assets generated $86 million of free cash flow.\nThe strong second half more than offset the slower start to the year, leading to nearly $50 million of free cash flow in 2020, our highest annual figure since 2017.\nLooking ahead, as highlighted on Slide 15, we issued our 2021 guidance consistent with our recent Investor Day outlook.\nThese guidance ranges signal another solid year of operating cash flow and EBITDA.\nI do want to flag that we are anticipating a relatively weaker first quarter, driven by, one, our mine plans, production profile and buildup of inventories on our leach pad; secondly, timing of tax payments in Mexico combined to be roughly $30 million to $35 million of cash outflow; and third, annual incentive payouts across the Company.\nTurning over to Slide 13, I wanted to emphasize a few key takeaways from our balance sheet.\nWe bolstered our financial flexibility during the fourth quarter by fully repaying our revolving credit facility borrowings and expanding the capacity of the revolver to $300 million.\nTogether with our significantly improved cash position, this led to nearly $360 million of liquidity at the end of the year.\nLooking at our leverage levels, both total debt and net debt-to-EBITDA decreased steadily during 2020.\nParticularly, our key leverage metric, net debt-to-EBITDA was cut in half year-over-year ending 2020 at 0.7 times.\nWe are targeting a net debt-to-EBITDA ratio of under 2 times, while maintaining at least $100 million of liquidity over the next two years as we complete major construction at Rochester.\nBy using a combination of cash on hand, operating cash flow and debt capacity, we are confident in our game plan, leaving us very well positioned to fund this phase of significant capital investment.\nI'll now pass the call back to Mitch.\nSlide 14 shows our top priorities for 2021.\nAnd by following this road map, we believe we can deliver solid results over the short, medium and long term from our balanced portfolio of North American precious metals assets.\nWith that, let's go ahead and open it up for any questions.\n",
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"content": "full-year 2021 capital expenditures, sustaining are expected to be about $80 million - $100 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: Participating in today's call will be Bruce Schanzer, Chief Executive Officer; Robin Zeigler, Chief Operating Officer; and Philip Mays, Chief Financial Officer.\nThese statements are subject to numerous risks and uncertainties, including those disclosed in the company's most recent Form 10-K to the year ended 2019, as updated by our subsequently filed quarterly reports on Form 10-Q and other periodic filings with the SEC.\nAs you all realize, this has been and continues to be a time of incredible stress, with many folks worrying about contracting a frightening virus, and managing all of the personal challenges this pandemic has engendered.\nAlthough, we usually describe our grocery anchored shopping center assets as being resilient, I can proudly say that the members of team Cedar are most valuable assets, have proven themselves to be even more resilient than our shopping centers, as they have performed their jobs with a characteristic focus on everyday excellence, collegiality, and collaboration.\nSince the outset of the pandemic, we have focused on a number of pressing matters in order for us to emerge from this period on a strong footing as possible.\nFirst and foremost, we have endeavored to help our tenants survive the economic shutdown, and ideally pay their rents or at a minimum agree to a forbearance arrangement, whereby we have the right to collect the rent in the future.\nSecond, we have awaited the reopening of the real estate debt capital markets in order to arrange the refinancing of our $75 million term loan maturing in February 2021, as well as addressing our other upcoming debt maturities.\nThird, we have advanced our redevelopment projects, while exploring joint venture arrangements for the initial phases, especially the recently announced DGS building.\nFourth, we have used this period to take a rigorous zero based approach to many G&A categories, and have identified substantial savings that we anticipate benefiting from not only in 2020, but more generally in 2021 and beyond when we see the full-year impact of some of these measures.\nBefore walking through each of these areas of focus during the pandemic, it is worth reflecting on a remarkable revelation afforded by this period.\nAt Cedar, we have consistently articulated a two pronged long-term business strategy that we have steadfastly pursued for many years through the ups and downs of the market and our stock price performance.\nFirst, we have focused on a core portfolio of grocery anchored shopping centers in the D.C. to Boston corridor, and have therefore systematically divested non-core assets.\nSecond, we have pursued mixed use urban redevelopment projects in high population density submarkets within our D.C. to Boston footprint, with a particular focus on building affordable and market rate workforce housing at these projects.\nRemarkably, the pandemic has highlighted the very trends we have anticipated and been building toward with our two pronged strategic plan.\nSpecifically, the accelerated secular demise in many bricks and mortar retail categories has led to grocery anchored shopping centers being the strongest performing category within retail real estate.\nNotably, our grocer anchors have experienced a growth in sales during this period, and the inline tenants and junior anchors in our centers have benefited from the strong traffic and overall center vitality resulting from the strong grocer performance.\nAdditionally, the pandemic triggered a wave of de-urbanization from center cities and significant pressure on higher end multifamily, while highlighting the inequality of housing opportunities within our cities, and the growing need for attractive and reasonably priced workforce housing.\nThus, the particular multifamily market opportunity which we are targeting with our mixed use projects has grown deeper during this period.\nNow some comments on our four primary focus areas over the last few months.\nThis appears to be among the better collection rates for all retail REITs in the third quarter.\nCedar's relatively high degree of success is a direct result of the tirelessness with which the team approach the challenges presented by the pandemic, as well as the aforementioned decision made when we arrived at Cedar back in 2011 to hone our portfolio to focus on a core portfolio of grocery anchored shopping centers in the D.C. to Boston corridor.\nAt the outset of the pandemic, we formed a cross functional committee within Cedar that engaged with all of our tenants in an effort to make sure that they endure and come out of this crisis as favorably positioned as possible.\nIn addition, this cross functional committee laid the groundwork for a highly detailed and analytical approach that included using legal tools, center and tenant monitoring, as well as repeated tenant outreach.\nAs they say, the proof is in the pudding.\nAnd apparently our approach has proven effective as measured by our rent collections over the past two quarters.\nWe felt this was a prudent move since while we are comfortable that the mortgage debt markets are open and attractive, we didn't want to have to worry about the closing dragging a bit nor do we want to have to deal with the possibility of further dislocation in the capital markets, owing to a second wave in the coming winter months.\nAs Phil will describe, there appear to be interesting and attractive refinancing options for both the term loan, as well as our other near-term financing needs.\nThird, as was announced in July, and discussed at our second quarter earnings call, we have finalized a 20-year built-to-suite office deal with DGS at our Northeast Heights project in Washington D.C.\nThis building will serve as an anchor for the project and also represents the first phase of the project.\nWe have been actively engaged with various debt and equity financing sources and are optimistic that we will be able to finalize an arrangement later this year or early next that will allow us to break ground and get started with this exciting project.\nMore generally, much as our strategic decision early on to focus on grocery anchored to the exclusion of other retail asset types has proven to be a good decision.\nOur particular redevelopments have proven to be well positioned as we begin to hope we come out of this pandemic period.\nFourth, we have taken a zero based approach to our G&A in evaluating many corporate expenses.\nA great example of how this approach has borne fruit is our decision to relocate our headquarters office from a building in Port Washington Long Island, where we rent space on a lease expiring in February of 2021 to the back of a Carman's Plaza Shopping Center in Massapequa Long Island, where we are converting a space that has been essentially unrentable during my tenure into office space, which we will occupy rent free.\nConsidering that our full-year rent expense is approximately $500,000, this is a terrific G&A savings opportunity.\nMore generally, we anticipate reducing year-over-year G&A by an excess of $2 million through the zero based cost savings approach.\nIn sum, we have navigated through this period of unprecedented personal and professional stress remarkably well thus far.\nFirst, we have managed to bounce back from the initial shocks to our business with a collections level this past quarter of 91%, representing among the better performances through the third quarter among retail REITs.\nSecond, we've addressed our near-term debt maturities and are optimistic about closing on a permanent refinancing later this year or in early 2021.\nThird, we are similarly focused on finalizing both the debt and equity financing needs of our redevelopment projects, especially the DGS building, which will position us to commence the project in early 2021.\nLast, we have tightened up our overhead in the face of all distress with full-year G&A savings anticipated to be in excess of $2 million in 2021.\nOur progress to this point is not an accident.\nIt begins with my colleagues on team Cedar, who have conducted themselves with exceptional resilience and professionalism during this time of great stress.\nThey are supported by decisions we have made many years ago to focus strategically on grocery anchored shopping centers in the D.C. to Boston corridor, and on urban mixed use projects with an affordable or market rate workforce housing component.\nIn the coming months and quarters, we look forward to announcing continued progress on all these endeavors, while we hope that there is no second wave, and that this terrible pandemic recedes into the rearview mirror.\nWith that, I give you Robin to provide greater detail on many of these topics.\nNot only are we living in unprecedented times, but we are operating shopping centers in unprecedented times as well.\nWhile our team has been focused on working with tenants through deferral negotiations and the collections process, we are also laser focused on what happens on the other side of this pandemic.\nWhat do our tenants need from their landlord to maximize their ability to survive this pandemic?\nHow can we help our tenants pursue omnichannel operating measures to hedge their risk and pivot into a new operating environment?\nWhat cost savings measures can we put into place that help both the tenants and the landlord from a CAM and capital expenditures standpoint.\nThese are among the topics we are addressing as we deliberately, thoughtfully and strategically advance our operations.\nThe professionalism of our team has been exemplary as they deal with not only ordinary course business challenges of daily operations, but astutely balancing those with the video conferences, field visits, and the ongoing impact from social unrest in some of our urban markets.\nOur centers remained open during the third quarter with 96% of our tenants opened for business.\nThe users that have not reopened are mainly movie theatres, fitness and buffet style restaurants.\nWe have had another successful quarter of rent collections reaching our highest yet collection rates since the inception of COVID of 91%.\nMoreover, October collections are currently at 91%, which does not reflect one high credit anchor that pays at the end of the month, which will take us to approximately 92.5% for October.\nIn order to ensure tenant health and occupancy, we have actively engaged with almost all of our over 800 tenants during the pandemic.\nWe completed 105 deferral and waiver agreements through September 30, 2020, totaling $3 million of deferred rent with a required payback beginning over a period ranging between July 2020 and March 2021.\nThe number of months differed averages four months for an average payback period of 10 months.\n$900,000 of rent was waived as of September 30, 2020, for an average of four months.\nThese agreements were made with tenants in an effort to not only sustain their viability, but also to achieve some landlord favorable concessions including sales reporting, additional lease term and modification of key lease provisions.\nDespite the pandemic our leasing momentum remained strong.\n32 leases were signed this quarter, eight new deals totaling 72,800 square feet, and 24 renewals totaling 167,300 square feet.\nThe new deals executed were at a positive spread of 21.5% and include two anchor deal Shoppers Road at Jordan Lane [Phonetic] at a spread of 44% and America Sprayed at Golden Triangle [Phonetic] at a spread of 23%.\nThe renewals were done at a negative spread of 3.1% when analyzed in total.\nThe negative spread is a result of anchor and junior anchor renewals with home goods at New London mall, Goodwill at Groton and Yes!\nOrganic at Shoppes at Arts District, which were done with the objective of retaining these important anchor and junior anchor occupancies and missed the pandemic.\nThe spread increases to positive 2.8% excluding these three tenants.\nAs of September 30, 2020 our current lease same center occupancy is 91.7%, a 0.2% increase from prior quarter.\nWe continue to have momentum on our redevelopments and value add renovations.\nAt Fishtown crossing Starbucks had their grand opening in September, GameStop and T-Mobile have relocated, Nifty Fifty was delivered in August, and the original Hot Dog Factory was delivered in September.\nWe expect the IGA grocery store facade renovation to be completed by the end of the year and the remaining facade renovation for the rest of the center to be completed in 2021.\nAlso in Philadelphia, we are making progress on site plan amendments to our Revelry project.\nOur original site plan was based on a movie theatre anchor.\nSince the pandemic shutdowns, United Artists Cinema at Revelry has not yet reopened.\nWe are in discussions with the potential replacement anchor tenant for this project, and we expect to regain possession of the theatre space effective in November 2020 incident to the termination of their tenancy.\nWe think that the potential alternate anchor will be a great catalyst for the Revelry redevelopment.\nNortheast Heights continues to progress at a steady pace as well.\nWe contunue last -- I'm sorry, we announced last quarter that our lease was executed with the District of Columbia for a 260,000 square foot office building, including ground floor retail for the Department of General Services.\nThis government agency comprises more than 700 skilled professional employees with expertise in the areas of construction, building management and maintenance, portfolio management, sustainability and security at district owned properties.\nThis office building is slated to be built as part of the first phase of Northeast Heights.\nThe DGS lease structure includes a 20-year 10-month term based on a net rent of $22.52 per square foot and a gross rent of $56.43 per square foot, which includes a TI amortization of $14.09 per square foot.\nPlans are under way to commence construction in early 2021.\nThe DGS building is a central element of Cedar's vision to realize a true metamorphosis for Ward 7 and is emblematic of the type of neighborhood we are endeavoring to create with Northeast Heights.\nAs always, our team remains focused and motivated to continue to create value even during these unprecedented time.\nWith that, I will give you Phil.\nToday we announced sequential quarterly improvements in both FFO and same property NOI.\nFFO increased to $8 million or $0.09 per share, compared to $5.7 million or $0.06 per share reported for the previous quarter.\nSame property NOI decreased 9.1% over the comparable period in 2019, and marked improvement from the 14.6% decrease we reported in the previous quarter.\nBoth of these improvements were driven by our strong cash collections that Bruce and Robin discussed.\nLast quarter, I walked through our cash collections and revenue recognition in a fair amount of detail and received comments that was very helpful in understanding our results.\nAccordingly, I want to take a minute to once again walk through our revenue recognition in detail.\nOur total tenant billings for base rent and recoveries combined for this quarter were $31.6 million.\nDuring the quarter, we collected and recognized as revenue $30.1 million or 91% of these billings.\nAdditionally, we recognized another $1.1 million or 3% as revenue that we determined to be collectible, the majority of which is covered by signed deferral agreements.\nAccordingly for this quarter, we recognize as revenue 94% of our build rent and recoveries for the quarter.\nThe $1.9 million or 6%, that we did not recognize consists of $1.8 million that was not paid by tenants, and which we have determined at this time should be accounted for on a cash basis, and $100,000 that we agreed to waive.\nAs reminder, just because we have placed certain tenants on the cash basis it does not mean we will not collect anything from them.\nWhile some cash basis tenants may fail, we expect some will simply make inconsistent payments or partial payments, which we will recognize as revenue if and when received.\nMoving to the balance sheet.\nOn our prior quarter call, we discussed that we were exploring secured debt to refinance our $75 million term loan that was scheduled to mature in February of 2021.\nAs the secured financing market has opened for pressured anchored shopping centers with high cash collection rates, we have engaged with two financial institutions to assist with placing secured debt.\nWe are working diligently toward closing secured loans in amount equal to or greater than $75 million in early 2021.\nTo that end, earlier this week, we utilized our revolving credit facility and retired the $75 million term loan scheduled to mature in February of 2021.\nOur revolving credit facility matures in September of 2021 and has a one year extension option.\nAccordingly, as Bruce noted, this provides us with flexibility concerning the timing of closing these secured loans.\nAnd they've been a second wave of COVID should again temporarily dislocate the capital markets.\nAnother note worth the balance sheet matters, receivable we now have for deferral agreements.\nAs Robin noted, we have signed deferral agreements for $3 million, of which approximately $250,000 was repaid this quarter, and $250,000 relates to the remainder of the year, resulting in us carrying a $2.5 million receivable for deferral agreements at the end of this quarter.\nThe vast majority of this receivable is scheduled to be repaid in 2021, with approximately $700,000 in each Q1 and Q2 of 2021, and approximately $500,000 in each Q3 and Q4 of 2021.\nThe collection of these amounts will increase our cash flows from operations in 2021, but will not impact earnings as they've already been recognized.\nThis reverse split will not only assist with maintaining compliance with the New York Stock Exchange listing requirements, but will also reset our share price above the $5 minimum requirement of some investment funds and do so while keeping more than 10 million shares outstanding to assist with trading liquidity.\nWith that, I'll open the call to questions.\n",
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"content": "q3 operating ffo per share $0.09.\nqtrly same-property noi decreased 9.1% compared to a 14.6% decrease in prior quarter.\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're really pleased to have you join us.\nThen we'll be happy to take questions.\nBrendan Coughlin, Head of Consumer Banking; and Don McCree, Head of Commercial Banking, are here also to provide color.\nWe also use non-GAAP financial measures, so it's important to review our GAAP results on page 3 and use the information about these measures and their reconciliation to GAAP in the appendix.\nAnd with that, I'll hand it over to Bruce.\nThe second quarter post unprecedented challenges given the impacts from the coronavirus and widespread disruption to people's lives and the economy.\nOnce again, I am pleased that Citizens is rising to the occasion and delivering well for all stakeholders.\nWe are taking great care of customers and colleagues while posting strong results that demonstrate the diversification and resilience of our business model.\nWe also announced further commitments to diversity and inclusion along with initiatives to promote racial equity and social justice.\nOur financial performance in the second quarter featured tremendous revenue generation and strong profitability in our Mortgage business.\nWe made an important investment in acquiring Franklin American Mortgage Company in May 2018 in order to gain scale and diversify origination channels in the business.\nIn addition, we've made investments in talent, customer experience and in digitizing and streamlining the business, which has positioned us well to capture the market opportunities we've seen since the middle of last year.\nThese strong results have been a ballast to windward during the low rate environment and disruptions arising from the pandemic.\nOverall, our fees were up 28% year-on-year and 19% sequential quarter.\nWith stable net interest income, total revenue was up 7% year-on-year and 6% sequential quarter.\nWe did a good job on expenses, which resulted in 5.9% positive operating leverage year-on-year, up 54.9% underlying efficiency ratio and PPNR growth of 15% year-on-year.\n[Indecipherable] charge-offs as our credit cost in Q2 we had a record quarterly earnings of $1.14.\nAs expected, however we again built our credit reserves under CECL given the deterioration in the macroeconomic conditions since the close of the first quarter.\nOur ACL to loans ratio is now 2.01% and that's 2.09% excluding PPP loans.\nIn addition, we are selling a long-duration student loan portfolio, which freed up additional reserves for reallocation.\nWe feel we had good coverage now with the credit risk in both the Consumer and Commercial portfolios, though uncertainty on the path of economic recovery remains.\nThe strong PPNR generation and reduction in commercial line draws during the quarter helped improve our CET1 ratio to 9.6%, which is up from 9.4% in the first quarter.\nWe had a very liquid balance sheet during the quarter with average deposit growth of 12% sequential quarter, 8% spot.\nOur spot LDR at quarter-end was 87.5% or 84.5% excluding PPP loans.\nSo overall, we have a very strong capital, liquidity and funding position that allows us to use our balance sheet in support of our customers.\nWe continue to track low on all of our key strategic initiatives for 2020 and we've been working on refreshing our strategy to incorporate key trends and learnings from the crisis.\nWe aim to take advantage of some of the opportunities we see to come out of the crisis well-positioned for future growth.\nNow, I hope you and your families are coping with the current challenges and remain healthy and safe.\nLet's start with a brief overview of our headlines for the quarter.\nAs Bruce said, this is an outstanding quarter for Citizens against a difficult operating backdrop.\nThis allows us to head into the second half of the year with good momentum and excellent balance sheet strength.\nThe resilience of the franchises is on display as we generated $0.55 of earnings per share on an underlying basis.\nThis was driven by record revenues in fee income given record mortgage fees, which offset headwinds in several other fee categories.\nNet interest income was stable linked quarter given strong loan growth which offset a 22 basis point decline in margin.\nThis was driven by lower rates and higher cash balances that we did well in cutting deposit costs in half.\nWe increased our allowance for credit losses to $2.5 billion, which translates to an ACL coverage ratio of 2.09% ex PPP, up from 1.73% last quarter.\nWe showed excellent balance sheet strength and in the quarter with a stronger CET1 ratio of 9.6%, up 20 basis points linked quarter.\nOur liquidity ratio has also improved as we ended the quarter with an LDR of 84% excluding PPP loans and we remain in compliance with the LCR.\nAlso, our tangible book value per share is over $32 at quarter end, up 4% compared with a year ago.\nNow, let me move to the highlights of our underlying results covered on pages 4 and 5.\nEven in the midst of THE COVID-19 pandemic and another strong reserve build, our results highlight the resilience of our diversified business model.\nOur earnings per share of $0.55 was down $0.41 year-over-year but up $0.46 linked quarter.\nPPNR of $790 million was a record, up 15% year-over-year and 17% linked quarter.\nAnd in addition to another exceptional performance in mortgage banking, we also saw strong underlying performance and IRP and improvement in capital markets results.\nAverage loan growth was 6% in the quarter, reflecting PPP lending and the impact of the commercial line draws we saw last quarter, which benefited NII and helped offset the impact of the more challenging rate environment.\nIf we adjust for the sales, PPP and line draws, average loans were up 1% linked quarter.\nMoving to page 6, I'll cover net interest income, which are quite well despite a lower margin.\nNet interest income was stable linked quarter as the benefit of 8% interest earning asset growth and improved funding costs was offset by the impact of lower rates.\nNet interest margin decreased 22 basis points linked quarter as the impact of lower rates and higher cash balances was partially offset by lower deposit costs and outsized growth in DDA and other lower cost deposits.\nAbout 6 basis points of the margin decline related to higher cash balances in the quarter given strong deposit flows as consumers and small businesses benefited from government stimulus and corporate clients built liquidity.\nWe were especially pleased with our progress on deposit cost, which we drove down 37 basis points during the quarter, a more than 50% decline.\nOur total interest-bearing deposit cost was 48 basis points at the end of the quarter.\nThat compares to 34 basis points back in 3Q 2015 at the end of the last [Indecipherable] period.\nSo clearly we have a near-term opportunity to continue to reduce these costs.\nMoving to page 7, I'll discuss fees, which really shows the benefit from the work we've done to build capabilities and diversify our business.\nNoninterest income was a record, up 19% on a linked quarter basis and 28% year-over-year.\nRecord results in mortgage banking were partially offset by continued headwinds related to COVID-19 and other fee categories.\nOn a sequential basis mortgage banking fees increased by 74% to $276 million reflecting continued strong refi lock volumes and record high gain on sale margins in particular.\nCapital market fees of $61 million, increased $18 million from first quarter reflecting strong DCM activity and a $13 million mark-to-market recovery on loan trading assets.\nForeign exchange and interest rate product revenues increased 5% linked quarter before the impact of CVA.\nInterest rate product sales led the way as clients repositioned for a lower rate environment.\nCVA improvement was $8 million in the quarter.\nTrust and investment services fees were lower by $8 million linked quarter given the rate environment and the effect of the equity market decline on managed money revenue.\nThe service charges and card fee categories were down significantly compared to first quarter reflecting the full quarter impact of the shutdown and impacts from stimulus money to customers.\nOn a positive note, we see debit card activity roughly back to pre-pandemic level and credit card activity in June only down about 10% compared with last year, a significant improvement from the over 30% declines we saw in early April.\nTurning to page 8, underlying non-interest expense declined 2% linked quarter largely driven by seasonal impacts in Q1 on salaries and employee benefits.\nSalaries and employee benefits declined $30 million or 6% linked quarter largely reflecting seasonally lower payroll taxes.\nEquipment and software expense and outside services were higher linked quarter and reflect increased technology spend and investments in growth initiatives.\nNext, let's discuss loan trends on page 9.\nAverage core loans were up 7% linked quarter primarily driven by the full quarter impact of the commercial line draws at the end of the first quarter and the $4.7 billion of PPP lending to our small business customers.\nBefore the impact of loan sales, line draws and PPP loans, core commercial loan growth was up approximately 1% linked quarter.\nThe $7.2 billion of post-COVID commercial line draws in March have been substantially repaid, and were down to $1.8 billion by the end of the second quarter.\nOverall utilization is down to approximately 40% from 50% at the end of the first quarter.\nCore retail loans on a linked quarter basis were stable with growth in education and other retail offset by lower home equity balances and the transfer of approximately $900 million of education loans held for sale.\nWe are building an originate-to-distribute model for our consumer assets, which will generate fee revenue and increase our balance sheet flexibility over time.\nMoving to page 10, deposit growth was exceptionally strong in the quarter.\nWe saw robust average deposit growth of 12% linked quarter and 15 % year-over-year, outpacing loan growth and driving our average LDR down to 89% excluding PPP as consumers and small businesses benefited from government stimulus and clients built liquidity.\nThese strong deposit flows came in lower cost categories with average DDA growth up 25% on a linked quarter basis and 33% year-over-year.\nWe continue to aggressively execute our deposit playbook to manage down our deposit costs across all channels.\nWe were able to cut our interest-bearing deposit costs by roughly half this quarter, down 46 basis points to 48 basis points, and down 82 basis points year-over-year.\nLet's move to page 11 and cover credit.\nWe continue to assess the impact of the COVID-19 pandemic and are closely monitoring the portfolio for areas of potential risk.\nThat said, portfolio performance is progressing largely in line with our expectations but with a somewhat more adverse macro backdrop than we saw at the end of the first quarter.\nNet charge-offs were stable at 46 basis points linked quarter as increases in commercial were partially offset by improvement in retail reflecting the impact of forbearance.\nNon-performing loans increased 27% linked quarter driven by $192 million increase in commercial, reflecting COVID lockdown impacts and an $18 million increase in retail.\nThe non-performing loan ratio of 79 basis point increased 18 basis point linked quarter and 17 basis points year-over-year.\nHowever, in spite of this increase the non-accrual coverage ratio remained strong at 255% at June 30.\nWe increased our CECL credit reserve coverage ratio from 1.73% in 1Q to 2.09% in 2Q excluding the PPP loans.\nThis 46 basis points increase was primarily driven by a net reserve build of $317 million.\nIn addition, approximately $100 million of reserves associated with a planned sale of student loans were reallocated to the remaining loan portfolio.\nIn effect the reserve build was $417 million or 99% of the Q1 build.\nOn page 12, we provide detail on customer forbearance and the PPP lending program.\nWe continue to work directly with our customers to assist them through these challenging times and have seen encouraging trends.\nThe average FICO score of our retail forbearance customers remains high at 725.\nAnd approximately 93% of these loans were current when they entered forbearance.\nWe also continue to work proactively with our commercial clients, [Indecipherable] needed in the form of covenant modifications will offer PPP applications as well as granting selected temporary release on principal and interest payments.\nI'm also pleased to say that through June 30, our customers received $4.7 billion in PPP loans, which has allowed us to help support over 540,000 jobs.\n84% of loans made were below $100,000.\nMoving to page 13 to discuss our CECL methodology and reserves; we have summarized the key aspects of our macroeconomic scenario, which is a foundational element of the CECL reserve estimate.\nAt quarter end, we elected to use the May 13th Moody's Baseline as our base scenario.\nSimilar to last quarter, given the uncertainty of the continued economic outlook, we also considered other Moody's and internal scenarios.\nIn general, our aggregate economic scenario is more severe than that used in 1Q.\nIt assumes the steep drop in GDP in 2Q, is followed by a gradual recovery in the second half of the year and into 2021.\nIf this scenario plays out, provision requirements over the second half of 2020 should be more reflective of net loan growth and incorporate a smaller build.\nHowever, if the pandemic impacts are deeper or it takes longer for the economy to recover, or government programs are less effective than we expect, then we could require further additions to reserve levels.\nOn page 14, as I mentioned earlier, we feel well positioned to manage through the current environment with strong capital and liquidity positions.\nOur CET1 ratio improved to 9.6%, up 20 basis points linked quarter given our strong results and a reduction in risk-weighted assets.\nAdditionally, during the quarter, we issued 400 million of Q1 qualifying preferred stocks, which in combination with the increase in CET1 drove a 40 basis point increase in Tier 1 capital.\nStrong deposit growth outpaced loan growth, which improved our liquidity metrics and drove the spot LDR excluding PPP loans down to 84%.\nTurning to page 15, let's look at reserves and capital versus stress losses.\nOur ACL of $2.5 billion represents a very strong 52%% of our modeled losses using the Fed scenario and is now 38% of the stress losses in the Fed's 2020 DFAST. In addition, when adding excess capital above our preliminary SCB of $3.4 billion to our ACL, the resulting $5.9 billion is 120% of our estimate and 88% of the Fed loss estimates.\nThese levels are further fortified by the additional coverage from the PPNR we regenerate.\nOn average, we've generated approximately 35 basis points of CET1 capacity per quarter over the last six quarters.\nOn page 16, we show a summary of the Fed's stress test results.\nThe Fed estimated our PPNR at 2.3% of average assets, which is well below the peer median of 3.3%.\nWe believe this ignores the steady and significant progress we have made to improve our PPNR since the IPO.\nFor example, our PPNR to assets for 2019 has improved by approximately 37% since the IPO to 3.7%.\nImportantly, this compares to a stable 3.7% in actual PPNR to assets during the first six months realized stress in 2020.\nThe Fed's estimate of our credit losses at 5.6% was right on top of the peer median and down from 6.1% in 2018.\nHowever, our estimated company run severely adverse credit loss rate of 4.2% is significantly lower.\nWe believe that the Fed's modeled results and the 3.4% preliminary SCB is elevated above what our business model would imply.\nAs such and as we indicated in our CCAR release in June, we have submitted a request to the Fed to reconsider our preliminary SCB.\nOn page 17, I want to highlight some exciting things that are happening across the company.\nWhile we are first and foremost focused on helping our clients, we're looking forward and continue to work toward building a better company.\nWe continue to execute on the transformational TOP program and are making steady progress toward our target.\nPlanning is under way to add significant new transformation initiatives, including the end-to-end digitization of customer interactions and operations, as well as other initiatives to adapt to the post-COVID-19 environment.\nWe are also moving forward with our major strategic revenue initiatives while considering new opportunities arising from the current environment in an effort to drive higher revenue growth coming out of the crisis.\nMoving to page 18, we provide some commentary on how key categories are shaping up for full year 2020 compared to the prior year.\nWe expect net interest income to be broadly stable as loan growth is offset by a meaningful decrease in NIM due to lower rates.\nNon-interest income is expected to be meaningfully driven by the exceptionally strong results in mortgage, which more than offset the weakness in other key categories related to COVID-19.\nWe expect several key fee categories to benefit from a return to more normal activity levels in the second half, which will help cushion in moderation in mortgage.\nNon-interest expense is expected to be up modestly particularly given higher compensation tied to stronger mortgage production and impacts from COVID-19, which includes government lending programs and customer relief efforts.\nProvision expense has the greatest potential for variability and remains dependent on the path of the recovery.\nWe expect solid loan growth driven by the impact of higher line draws in commercial during the first half and government programs like PPP as well as increased demand in education and merchant financing.\nOur capital position remains robust with our regulatory capital ratios expected to improve further over the remainder of the year driven by net income growth, a moderation in RWA growth during the second half, and the suspension of our buybacks through year-end.\nLooking forward, we expect to remain well-capitalized and feel confident we can continue to maintain the dividend at the current model.\nNow, let's move to page 19 for some high-level commentary on the third quarter.\nWe expect NII to be up modestly reflecting PPP benefit on NIM.\nExcluding PPP loans, loan growth is projected to be down modestly due to the full quarter impact of a decline in commercial loan line utilization in the second quarter.\nEx-PPP, the NIM is expected to be broadly stable with the benefit of lower deposit costs being offset by ongoing rate headwinds.\nFee income is expected to be down in the mid- to high-single-digit range, reflecting lower mortgage banking fees from record levels, partially offset by recovery in other fee categories.\nNon-interest expense is expected to be up in the low-single-digit range, reflecting higher origination-related cost levels in the mortgage business.\nWe currently expect a small reserve build, but provision expense will be highly dependent on an updated view of the economic recovery and portfolio performance.\nFinally, we expect average loans to be down in the low-single digits given the paydown in commercial line draws during the second quarter.\nExcluding the impact of line draws, PPP and loan sales, we expect loan growth to be broadly stable.\nTo sum up, our profitability, capital, and liquidity position remain strong and we are delivering well on our key initiatives for stakeholders.\nOperator, let's open it up for Q&A.\n",
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"content": "cecl-related reserve build of $317 million, or $0.59 per share, tied to covid-19 impacts.\nsecond quarter 2020 include revenue of $1.7 billion, up 7%.\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: Brendan Coughlin, Head of Consumer Banking; and Don McCree, Head of Commercial Banking are also here to provide additional color.\nWe also reference non-GAAP financial measures.\nWith that, I will hand over to Bruce.\nWe are pleased with the financial performance that we delivered for the fourth quarter and for the full year as we proved adaptable and resilient given the unprecedented challenges of 2020.\nWe continue to demonstrate the diversification and resilience of our business model as our Mortgage and Capital Markets businesses delivered strong fourth quarter performance.\nWe remained highly focused on taking care of customers with our retail branches opened and our teams working on the next round of PPP loans.\nWe feel we're managing our risk well and we continue to make progress on our strategic initiatives, which will position us well for future growth and for franchise value.\nI'll comment briefly on a few of the financial headlines and then I'll let John take you through the details.\nOur underlying Q4 earnings per share was $1.04, our ROTCE was 12.9%.\nBoth are up from a year ago quarter, and we delivered 2% operating leverage year-on-year.\nNote that the full-year operating leverage was 4% and our PPNR growth was 12%.\nQ4 credit provision was $124 million versus $110 million a year ago on a pre-CECL basis as the normalization of provision to more front book origination levels helped drive our strong returns.\nOn the capital front, we maintained a strong ACL ratio of 2.24%, ex-PPP loans and our CET1 ratio was 10%.\nThis strong capital and reserve position gives us a great deal of capital management flexibility in 2021.\nWe announced a $750 million share purchase authorization today and we will commence activity during the quarter.\nWe also will look to put our capital and ample liquidity position to work in finding attractive opportunities for loan growth.\nOur credit metrics all are trending favorable with NCOs, NPAs and criticized assets all lower in the quarter and a further drop in customers in forbearance.\nWe continue to allocate additional reserves to the industry segments most affected by the pandemic and lockdowns and we feel that our coverage overall is very strong.\nWith respect to our guidance for 2021, we assume a steadily improving economy and GDP growth of around 5%.\nRelative to current consensus, we see slightly higher revenue, expenses and PPNR as well as much better performance on credit.\nWe see NCOs at 50 basis points to 65 basis points for 2021 which is relative to 56 basis points in 2020.\nProvision will be less than charge-offs, so how big the reserve release will be is dependent on the path of economic recovery.\nBig picture, we will transition to slightly lower PPNR in 2021 given our outperformance in mortgage in 2020, but this will be more than made up for by lower credit costs, as our earnings and returns bounce back toward pre-COVID levels.\nSo all in all, a very strong year of execution and delivery for all stakeholders by Citizens in 2020 and we feel we are well positioned to do well in 2021 and continue our journey toward becoming a top performing bank.\nWe know we can count on you again in the new year.\nLet's start with a brief overview of our headlines for the quarter.\nThis was an outstanding quarter for Citizens with strong fee income, good expense discipline and prudent credit and continued steady execution against our strategic initiatives.\nFor the full year, we delivered record underlying PPNR, up 12% against the challenging backdrop, driven by record fee income, up 24% with record results across mortgage, capital markets and wealth.\nWe achieved the ambitious TOP6 goal to deliver approximately $225 million of run rate expense savings, including approximately $140 million of in year benefits which supported our ongoing investments in strategic initiatives and financial performance targets.\nTo this end, we improved our efficiency ratio over 200 basis points to 56% by delivering 4% positive operating leverage for the year.\nWe expect further expense benefit of approximately $205 million to $225 million in 2021, which puts the program on track to deliver our total pre-tax run-rate benefit of $400 million to $425 million by the end of 2021.\nStrong loan growth of around 6% reflects increased demand in education and point-of-sale financing as well as PPP loans.\nAverage deposits grew even faster at 13%, a result of government stimulus impact on consumers and commercial clients building liquidity.\nROTCE for the full year was 7.5%, which includes a negative 5.4% impact associated with our reserve build under CECL.\nOur ACL at year-end 2020 more than doubled compared with last year, but our year-end CET1 ratio of 10% was unchanged on the year.\nStrong PPNR funded the ACL bill 6% loan growth and stable dividends.\nAnd finally, our tangible book value per share was $32.72 at quarter end, up 2% compared with a year ago.\nNext, I'll refer to just a couple of slides and give you some key takeaways for the fourth quarter and then outline our outlook for 2021 and the first quarter.\nWe reported underlying net income of $480 million, earnings per share of $1.04 and revenue of $1.7 billion.\nOur underlying ROTCE was 12.9%, up around 400 basis points as a result of our strong revenue performance, expense discipline and improvements in credit as the economy recovers.\nNet interest income on Slide 6 was down only 1% linked quarter due to lower commercial loan balances and lower NIM.\nHowever, despite the challenging rate backdrop, our margin held up well with the 8 basis point decline in linked quarter, driven by 9 basis point impact from elevated cash balances and strong deposit flows.\nLower asset yields were offset by our improved funding mix as we grew low-cost deposits with DDA up 4% and we continue to lower interest bearing deposit costs down 8 basis points to 27 basis points.\nGiven the recent stimulus, we expect continued strong deposit flows in the first quarter.\nSo elevated cash will continue to impact margin in the near term.\nWe will remain proactive in pricing down deposits and pursuing attractive loan growth opportunities in areas like point-of-sale finance and education as well as in attractive commercial segments.\nOn Slide 7 and 8, we delivered solid fee results again this quarter reflecting our ongoing efforts to invest in and diversify our revenue streams.\nMortgage fees were down approximately 30% this quarter due to declines in margins and volumes from exceptional levels last quarter.\nHowever, mortgage fees were nevertheless more than double the levels from a year ago, which continues to provide good revenue diversification benefit in this low rate environment.\nCapital market fees hit record levels, up 52% linked quarter and 33% year-on-year, driven by strong results from M&A advisory and accelerating activity in loan syndications.\nForeign exchange and interest rate products revenue is also strong, up 30% linked-quarter with higher customer activity levels tied to increased variable rate loan originations.\nWe delivered positive operating leverage of 2% year-over-year and improved our efficiency ratio to 56.8% as expenses were well controlled.\nAverage core loans on Slide 10 were down 1% linked quarter reflecting commercial payoffs and decline in loan yields -- line utilization to about 32% versus a historical average of roughly 37%.\nThis was partially offset by growth in retail and in our education mortgage and point-of-sale finance portfolios.\nLooking at year-over-year trends core loans were up approximately 4% due to PPP education and mortgage.\nOn Slide 11 deposit flows have been elevated especially in low-cost categories and our liquidity ratios remained strong.\nAverage deposits were up 3% linked quarter and 16% year-over-year as consumers and small businesses benefited from government stimulus and clients built liquidity.\nWe are very pleased with our progress on deposit costs, which declined 24% or 6 basis points to 19 basis points during the quarter.\nInterest-bearing deposit costs were down 8 basis points to 27 basis points.\nWe continue to drive a shift toward lower-cost categories with average DDA growth of 4% on a linked quarter basis and 42% year-over-year.\nWe expect to drive interest bearing deposit costs down to the low to mid-teens by the end of the year as we execute our deposit playbook to manage costs down across all channels, while improving our overall funding mix.\nMoving on to credit on Slide 12.\nOur metrics were positive this quarter.\nNet charge-offs were down 9 basis points to 61 basis points linked quarter.\nThis is at the lower end of our guidance given better than expected improvement in commercial.\nCommercial charge-offs this quarter primarily from segments most impacted by COVID-19 such as retail, casual dining and energy.\nNonaccrual loans decreased 20% linked quarter with a $302 million decrease in commercial driven by charge offs, returns to accrual and repayment activity.\nIn addition, our commercial criticized loans decreased 18% from $5.7 billion in 3Q to $4.6 billion in 4Q.\nGiven the performance of the portfolio and improvement in the macroeconomic outlook, our reserves came down slightly, but remain robust ending the quarter at 2.24% excluding PPP loans compared with 2.29% at the end of the third quarter.\nThis primarily reflects net charge-offs exceeding reserving needs for new loan originations.\nWe have some detailed credit slides in the appendix for your reference.\nBut I'll note that our reserve coverage for commercial excluding PPP was 2.5% at the end of the year, slightly up from the third quarter.\nAnd within that our coverage for identified sectors of concern increased to a prudent 8.2% at the end of the year from 7.7% at the end of the third quarter.\nThe benefit to reserves from an improving macroeconomic backdrop offset qualitative overlays and further built reserves on these areas of concern.\nWe maintained excellent balance sheet strength as shown on Slide 13.\nIncreasing our CET1 ratio from 9.8% in 3Q to 10% at the end of the year, which is at the top of our target operating range.\nGiven positive credit trends in capital strength, our Board of Directors has authorized the company to repurchase up to $750 million of common stock beginning in first quarter of 2021.\nBefore I move on to our outlook, let me highlight some exciting things that are happening across the company on Slide 15.\nOn the consumer side, we are focused on national expansion the Citizens Access integrating some of our lending businesses to further develop our national value proposition.\nWe recently announced the expansion of our national point-of-sale offering for merchants through our Citizens Pay offering and we are continuing to add new merchants to our point-of-sale platform as we expand into new verticals.\nWe are very excited about an announced expected next week with a major retailer to provide payment options for their customers who wanted transparent and predictable way to finance purchases through a fully digital experience.\nIn addition, we are making great strides in our digital transformation having launched our new mobile app on Android in the fourth quarter and iOS just this month.\nWe've seen our Active Mobile Households increased 15% year-over-year and the majority of our deposit transactions, continue to be executed outside of the branch.\nIn commercial, we have built out a robust corporate finance advisory model and we continue to rank near the top of our peers in customer satisfaction as we help our customers navigate this challenging environment.\nAnd now for some high level commentary on the outlook for 2021 on Slide 16.\nWe expect NII will be down slightly given NIM expected to be down in the high single digits compared to 2020, which should be largely offset by loan growth.\nLoans should be up mid to high single-digits on a spot basis with acceleration in the back half of the year with average loans, up approximately 2%.\nOverall, interest earning assets should be up about 1.5% to 2%.\nThis assumes elevated cash levels come down gradually over the course of 2021.\nFee income is expected to be down high single-digits off the record 2020 level reflecting lower mortgage banking fees from 2020 record levels.\nAt the same time, we expect good performance in Capital Markets, Wealth and other categories that were impacted by COVID-19 last year.\nNon-interest expense is expected to be up just 1.5% to 2% given benefits from our TOP program, partly offset by higher volume related expenses in mortgage and reinvestment in strategic initiatives.\nWe expect net charge-offs will be in the range of 50 basis points to 65 basis points of average loans with a meaningful reserve release to provision.\nNow let's cover the outlook for the first quarter on Slide 17.\nWe expect NII to be down slightly due to day count.\nBoth earning assets and NIM are expected to be broadly stable.\nFee income is expected to be down high single digits reflecting lower mortgage banking fees as margins continue to tighten as far as seasonal impacts.\nNon-interest expense is expected to be up 2% to 3%, reflecting seasonality and compensation.\nWe expect net charge-offs to be in the range of 50 basis points to 60 basis points of average loans.\nWe also expect another quarter with provisions less than charge-offs, based on expected loan growth levels and macroeconomic trends.\nTo wrap up, this was a strong quarter for Citizens and a good finish to the year as we continue to navigate successfully through the COVID-19 crisis and demonstrate the resilience of our franchise.\nWe are well positioned to have another strong year in 2021.\nWith that, I'll hand it back over to Bruce.\nAnd operator, let's open it up to some Q&A.\n",
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"content": "board of directors approves $750 million common stock repurchase program.\nqtrly net interest income of $1.1 billion decreased 1%.\nqtrly provision for credit losses of $124 million compares with $110 million in fourth quarter 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: In second quarter, Cullen/Frost earned $93.1 million or $1.47 per share compared with earnings of $109.6 million, or $1.72 per share in the same quarter of last year and $47.2 million or $0.75 a share in the first quarter of this year.\nBeyond the financials, the second quarter was an extraordinary one for Frost.\nTo add our response to the COVID-19 pandemic, we've been continuing serving customers with appointments in our bank lobbies, to our motor banks, with our online and mobile banking service, to around the clock telephone customer service and at our network of more than 1200 ATMs. I'll talk in more detail about our Houston expansion and our Paycheck Protection Program loans.\nBut for now, I'd like to point out that we have been completing our organic growth initiatives and still achieving the same award winning level of customer service process known for, despite having more than two thirds of our employees working remotely.\nIn fact, during the second quarter, we learned that Frost had achieved its highest ever Net Promoter Score with a jump from 82 to 87.\nAnd that's a score that would be the envy of many well known brands, and it's a testament to our core values and our ability to consistently take care of our customer's needs, especially during trying times.\nMore recently, we learned a process among the banks, that Greenwich and Associates has identified as standouts in their response to the pandemic based on customer surveys.\nIn fact, Frost was one of only two banks to be named a standout in both the small business banking and middle market banking categories.\nI mentioned the Paycheck Protection Program.\nAs of June 30, when PPP loan applications were initially scheduled to end, we had helped nearly 18,300 of our customers get PPP loans, totaling more than 3.2 billion.\nIn the state of Texas, Frost was number three in PPP lending with 5% of the loans in San Antonio, Fort Worth and Corpus Christi, Frost was number one in terms of PPP loans approved and in San Antonio we had more PPP loans in Bank of America, Chase and Wells Fargo, combined.\nWe did well helping businesses of all sizes, but I'm particularly pleased that more than three quarters of our PPP loans were for $150,000 or less, and close to 90% were for 350,000 or less.\nPPP applications have been extended into August and we're still taking anywhere from a few to 50 applications per day.\nThrough July, we've taken an additional 500 applications for over $22 million or an average size of about $45,000.\nMeanwhile, we're setting up processes to help borrowers get their loans forgiven.\nAnd the efforts of Frost bankers have helped save hundreds of thousands of jobs.\nThose results are more reflective of our culture and our philosophy than even the numbers we're reporting today for the second quarter.\nAverage deposits in the second quarter were $31.3 billion, up by more than 20% from the $26 billion in the second quarter of last year, and the highest quarterly average deposits in our history.\nWe're grateful for the confidence our customers has placed in us during these times.\nAverage loans in the second quarter were $17.5 billion, up by more than 20% from the $14.4 billion in the second quarter of last year.\nThat includes our strong showing in PPP loans, but our loan total would have been up approximately 5% even without PPP.\nIn the second quarter our return on average assets was 0.99%, compared to 1.4% in the second quarter of last year.\nOur credit loss expense was $32 million in the second quarter, compared to $175.2 million in this first quarter of 2020 and $6.4 million in the second quarter of 2019.\nThat first quarter provision was significantly influenced by our energy portfolio stress scenario of oil at $9 per barrel for the remainder of 2020.\nOil prices have since stabilized at levels well above that assumption, and the energy borrowing base redeterminations are 95% complete.\nNet charge-offs for the second quarter were $41 million, compared to $38.6 million in the first quarter and $7.8 million in the second quarter of last year.\nAnnualized net charge-offs for the second quarter were 0.94% of average loans.\nSecond quarter charge-offs were related to energy borrowers that have been discussed for several quarters.\nNon-performing assets were $85.2 million at the end of the second quarter compared to $67.5 at the end of the first quarter, and $76.4 at the end of the second quarter last year.\nAt the current level, non-performing assets represent only 22 basis points of assets which is well within our tolerance level and our level lower than our average non-performing assets over the past nine quarters.\nOverall delinquencies for accruing loans at the end of the second quarter were $91 million, or 51 basis points of period end loans.\nThose numbers remain within our standards and comparable to what we've experienced in the last -- past several years.\nThe payment deferrals, we have extended to customers due to the pandemic related slowdown have had some impact on delinquencies.\nTo the end of the second quarter, we granted 90 day deferrals, totaling $2.2 billion.\nOf loans whose deferral period has now ended, which is about $1.1 billion, only $72 million worth have requested a second deferral.\nTotal problem loans, which we define as risk grade 10 and higher were $674 million at the end of the second quarter, compared to $582 million at the end of the first quarter, which happened to be a multi year low.\nA subset of total problem loans, those loans graded 11 and worse, which is synonymous with the regulatory definition of classified totaled $355 million or only 12% of Tier 1 capital.\nEnergy related problem loans were $176.8 million at the end of the second quarter, compared to $141.7 million for the previous quarter, and $93.6 million in the first quarter of last year.\nTo put that into perspective, the year in 2016 total problem energy loans totaled nearly $600 million.\nEnergy loans in general represented 9.6% of our non-PPP portfolio at the end of the second quarter, if you include PPP loans, energy loans were 7.9%.\nAs a reminder, the peak was 16% back in 2015, and we continued to diversify our loan portfolio and to moderate our company's exposure to the energy segment.\nAs expected, and as we discussed in the first quarter call, the pandemics economic impacts on our portfolio have been negative, but manageable.\nDuring our last conference call, we discussed portfolio segments that have had increased impact from economic dislocations brought on by the pandemic.\nBesides energy, we've narrowed these down to restaurants, hotels, aviation, entertainment and sports, and retail.\nThe total of these portfolio segments, excluding PPP loans, represented almost $1.6 billion at the end of the second quarter.\nLike the energy portfolio, we continually review these specific segments, and we have frequent conversations with those borrowers to assess how they're handling current issues.\nCombined with our risk assessments, these conversations influence our loan loss reserve to these segments, which is 2.52% at the end of the second quarter.\nOverall, our focus for commercial loans continues to be on consistent balanced growth, including both core loan component, which we define is lending relationships under $10 million in size, as well as larger relationships, while maintaining our quality standards.\nWe're hearing from customers in all segments that economic impact of the pandemic, as well as the uncertainty ahead and those factors have had an impact on our results.\nNew relationships are up by about 28%, compared with this time last year, largely because of our strong efforts in helping small businesses get PPP loans.\nWhen we ask these businesses why they came to Frost, 340 of them told us that PPP was a key factor.\nThe dollar amount of new loan commitments booked through June dropped by about 3%, compared to the prior year.\nRegarding new loan commitments booked, the balance between these relationships went from 57% larger and 43% core at the end of the first quarter to 53% larger and 47% core so far in 2020.\nAnd that's about where it was this time last year.\nThe market remains competitive.\nFor instance, the percentage of deals lost to structure increased from 61% this time last year to 75% this year.\nOur weighted current active loan pipeline in the second quarter was up 24%, compared with the end of the first quarter.\nThe first quarter numbers were low and reflected the uncertainty about the pandemic's effect.\nOn the consumer side, we continue to see solid growth in deposits and loans, despite the impact from the pandemic, and the reduction in customer visits to our financial centers.\nOverall, net new consumer customer growth rate for the second quarter was 2.2%, compared to the second quarter of 2019.\nSame-store sales, however, is measured by account openings were down by 30% through the end of the second quarter, as lobbies were opened only for -- by appointment only and through driving [Indecipherable].\nIn the second quarter 59% of our account openings came from our online channel, which includes our Frost Bank mobile app.\nOnline account openings in total were 72% higher, compared to the second quarter of 2019.\nThe consumer loan portfolio was $1.8 billion at the end of the second quarter, and it increased by 4.3%, compared to last year.\nOverall, Frost Bankers' have risen to the unique challenges presented by the pandemic and its results in shutdowns with a mix of keeping our standards and sticking to our strategies, along with a truly remarkable amount of flexibility and adaptability.\nOur Houston expansion continues on pace, with four new financial centers opened in the second quarter and two more opened already in the third quarter for a total of 17 of the 25 planned new financial centers.\nThose new financial centers include our location in the Third Ward, where customer response has been enthusiastic.\nEven though our lobbies are open for appointment only.\nOur employees manage those new financial center openings, while most of them are working remotely due to the pandemic, and also while non-stop -- working non-stop to help our business customers stay with PPP loans.\nAnd that commitment and dedication is what Frost workforce philosophy and culture is all about.\nAs I mentioned earlier, we've gained a lot of new business relationships through our PPP efforts.\nAnd customers that are new to us are learning what a longtime customer has always done, that Frost is a source of strength for customers and our communities and also a source and force for good in people's everyday lives.\nI've told our team that their efforts are historic and heroic, and I'm extraordinarily proud of our company and we've been able to help so many small businesses get through these extraordinary times.\nIt's clear that many pandemic challenges remain, particularly here in Texas, we're seeing the spirit and dedication of Frost employees, who live our philosophy and culture every day, gives me optimism that we will help our customers find a way through this situation and come out stronger.\nI want to start out by giving some additional financial information on our PPP loan portfolio.\nAs Phil mentioned, we generated over $3.2 billion in PPP loans during the quarter.\nOur average fee on that portfolio was about 3.2% and translates into about $104 million.\nOur direct origination costs associated with these loans totaled about $7.4 million, resulting in net deferred fees of about $97 million, about 20% of the net fees were accreted into interest income during the second quarter.\nLooking at our net interest margin, our net interest margin percentage for the second quarter was 3.13%, down 43 basis points from the 3.56% reported last quarter, excluding the impact of our PPP loans, the net interest margin would have been 3.05%.\nThe 43 basis point decrease in our reported net interest margin percentage, primarily resulted from lower yields on loans and balances at the Fed, as well as an increase in the proportion of balances at the Fed, as a percentage of earning assets, partially offset by lower funding cost.\nThe taxable equivalent loan yield for the second quarter was 3.95%, down 70 basis points from the previous quarter, impacted by the lower rate environment with the March Fed rate cuts and decreases in LIBOR during the quarter.\nThe yield on PPP loan portfolio during the quarter was 4.13% and had favorable 3 basis point impact on the overall loan yields for the quarter.\nLooking at our investment portfolio, the total investment portfolio averaged $12.5 billion during the second quarter, down about $463 million from the first quarter average of $13 billion.\nThe taxable equivalent yield on the investment portfolio was 3.53% in the second quarter, up 7 basis points from the first quarter.\nOur municipal portfolio averaged about $8.5 billion during the second quarter, flat with the first quarter with the taxable equivalent yield also flat with the first quarter at 4.07%.\nAt the end of the second quarter over 70% of the municipal portfolio was pre-refunded or PSF insured.\nThe duration of the investment portfolio at the end of the second quarter was 4.4 years, compared to 4.6 years last quarter.\nLooking at our funding sources, the cost of total deposits for the second quarter was 8 basis points, down 16 basis points from the first quarter.\nThe cost of combined Fed funds purchased and repurchase agreements, which consists primarily customer repos decreased 80 basis points to 0.15% for the second quarter from 0.95% in the previous quarter.\nThose balances averaged about $1.3 billion during the second quarter, up about $36 million from the previous quarter.\nLooking to non-interest expense, total non-interest expense for the second quarter decreased approximately $3.5 million, or 1.7%, compared to the second quarter last year.\nThe expense decrease was impacted by the $7.4 million in PPP loan origination costs that were deferred and netted against the PPP processing fee, which were amortized into interest income as a yield adjustment over the life of those PPP loans.\nExcluding the favorable impact of deferring those origination fees related to PPP loans, total non-interest expenses would have been up $3.8 million, or 1.9%, compared to the second quarter last year.\nIn addition to the reduced expense run rate during the second quarter, due to the pandemic effect on the business environment, we continue to focus on managing our discretionary spending and looking for ways to operate more efficiently.\nAs we look out for the full-year, adding back to $7.4 million in deferred expenses related to the PPP loans I mentioned previously, we currently expect annual expense growth of something around 6%, which is down 2.5 percentage points from the 8.5% growth guidance we gave last quarter.\nRegarding income tax expense, we did recognize a $2.6 million one-time discrete tax benefits during the quarter related to an asset contribution to a charitable trust during the second quarter.\nExcluding the impact of that item, our effective tax rate on a year-to-date earnings would have been about 3.1%.\n",
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"content": "compname posts q2 earnings per share $1.47.\nq2 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: In the second quarter, Cullen/Frost earned $116.4 million or $1.80 a share compared with earnings of $93.1 million or $1.47 a share reported in the same quarter last year and compared with $113.9 million or $1.77 a share in the first quarter.\nIn the current environment, our company is in a strong position to benefit from the rebound in economic activity, and we will continue our organic growth strategy while taking steps to enhance Frost's experience for our customers and our employees.\nAs expected, economic conditions have continued to weigh on conventional loan demand.\nOverall, average loans in the second quarter were $17.2 billion, a decrease of 1.7% compared to $17.5 billion in the second quarter of last year.\nExcluding PPP loans, second quarter average loans of $14.6 billion represented a decline of 3% compared to second quarter of 2020.\nHowever, we're seeing evidence of loan growth beginning to materialize as non-PPP loans trended up in the month of June, and that upward trend has continued into July.\nAverage deposits in the second quarter were $38.3 billion, an increase of more than 22% compared with $31.3 billion in the second quarter of last year.\nOur return on average assets and average common equity in the second quarter were 1.02% and 11.18%, respectively.\nWe did not report a credit loss expense for the second quarter.\nOur asset quality outlook is stable.\nAnd in general, problem assets are declining in number.\nNew problems have dropped significantly and are at pre-pandemic levels.\nNet charge-offs for the second quarter totaled $11.6 million compared with $1.9 million in the first quarter.\nAnnualized net charge-offs for the second quarter were four basis points of average loans.\nNonaccrual loans were $57.3 million at the end of the second quarter, a slight increase from $51 million at the end of the first quarter and primarily represented the addition of three smaller energy loans, which had previously been identified as problems.\nA year ago, nonaccrual loans stood at $79.5 million.\nOverall delinquencies for accruing loans at the end of the second quarter were $97.3 million or 59 basis points of period-end loans and were at manageable pre-pandemic levels.\nWe've discussed in the past $2.2 billion in 90-day deferrals granted to borrowers earlier in the pandemic.\nAs of the end of the second quarter, there were no active deferrals.\nTotal problem loans, which we define as risk grade 10 and higher were $666 million at the end of the second quarter compared with $774 million at the end of the first quarter.\nI'll point out that energy loans declined as a percentage of our portfolio, falling to 6.98% of our non-PPP portfolio at the end of the second quarter as we continue to make progress toward a mid-single-digit concentration level of this portfolio over time.\nOur teams continue to analyze the non energy portfolio segments that we considered most at risk from pandemic impacts.\nAs of the second quarter, those segments are restaurants, hotels and entertainment and sports.\nThose of these portfolio segments, the total, excluding PPP loans, represented $675.1 billion at the end of the second quarter, and our loan loss reserve for these segments was 8.6%.\nThe credit quality of these individual credits in these segments is currently mostly stable or better compared to the end of the first quarter.\nWe also continue to add to our customer base.\nThrough the midpoint of this year, we added 7% more new commercial relationships than we did in 2020, which included the outsized second quarter of 2020 when PPP activity was so strong.\nLooking at recent trends, our new commercial relationships were 511 in the fourth quarter of 2020, 554 in the first quarter of this year and 643 in our most recent quarter.\nSo we're seeing good momentum in this area.\nWe're also seeing good momentum in the insurance business, particularly in the benefits and property and casualty segment.\nWere up about 6% in both of those in terms of new customers.\nAnd also, as many others, we're seeing good growth in wealth management from assets under management with these good markets, but have also seen an increase of around 3% in new customers.\nIn the time since we began our PPP efforts, just under 1,000 new commercial relationships identified our assistance in the PPP process as a significant reason for moving to Frost.\nNew loan commitments booked during the second quarter, excluding PPP loans, were up by 9% compared to the second quarter last year and up by 45% on a linked quarter basis.\nOur current weighted pipeline is 12% higher than one year ago, 17% higher than last quarter and 38% higher than the same time in 2019.\nThe increases are mostly due to C&I.\nOur current weighted pipeline is as high as it's ever been, so we hope this points for a good third quarter for booking new loans.\nAt the same time, it has to be said that competition is intense.\nIn total, the percentage of deals lost to structure of 56% was down from the 75% we saw this time last year, but that's really more a factor of the increase in price competition rather than more market discipline around structure.\nWe were extremely proud to have completed our 25 branch Houston expansion initiative in the second quarter, and we continue to be very pleased with the results.\nIt represents a tremendous achievement for our outstanding staff.\nLet me update you where we stand through the second quarter, and it excludes PPP loans.\nOur numbers of new households were 141% of target and represents almost 11,000 new individuals and businesses.\nOur loan volumes were 215% of target and represented $300 million -- $310 million in outstandings and about 80% represented commercial credits with about 20% consumer.\nRegarding deposits, at $433 million, they represent 116% of target, and they represent about 2/3 commercial and 1/3 consumer.\nOnce again, I hope that we've shown that the character of the business we're generating through the expansion is very consistent with the overall company.\nAnd its profitability is weighted toward small and midsized businesses and complemented by consumer as well as other lines of business including wealth management and insurance.\nConsumer banking also continues to see outstanding growth.\nIn just the first six months of this year, we've already surpassed our all-time annual growth for new customer relationships.\nThis represents about 13,500 net new checking customers.\nOur previous high was 12,700 for full year 2019 and it's all organic growth.\nWe worked hard to lower barriers to entry for potential customers with improved product offerings and our geographic expansion.\nHouston accounts for about 1/3 of this relationship growth.\nTheir annual growth rate for consumer customers is up over 13%.\nThat compares to 4% in 2018 before we started the expansion.\nWe were excited to announce this month that we launched a new feature called Early Pay Day, which gives customers access to direct deposits up to two days before the money arrives in their account.\nAnd we put this in place in time for customers to see the effect from the IRS Child Tax Credit payments, and we've already heard great comments from customers who've used Early Payday to pay bills.\nThis makes a difference in the lives of people who live paycheck to paycheck, and that was on top of our $100 overdraft grace feature that we rolled out in April.\nAlso, earlier this month, we reached an ATM branding partnership with Cardtronics that will result in us having more than 1,725 ATMs in our network across Texas.\nThat is, by far, the largest ATM network in the state.\nBut just as important, it gives us the largest ATM network in the Dallas-Fort Worth region as we began our expansion in Dallas early next year.\nI mentioned PPP earlier and how our efforts helped thousands of small businesses, and we closed out the second round of PPP with more than 13,000 loans for $1.4 billion.\nAnd combined with the first round, that gives us a PPP program total of more than 32,000 loans and $4.7 billion in deposits -- $4.7 billion in outstandings.\nThe historic effort that Frost Bankers put into helping borrowers get PPP loans has now shifted to the forgiveness process.\nBecause borrowers for the first round are approaching payment dates, if they don't apply for forgiveness, we've increased our communication to them and worked on ways to make the forgiveness application process simpler.\nWe've already submitted 21,000 forgiveness applications and received approval on nearly 19,100 of them for $3 billion.\nThat's close to the entire first round total.\nWe continue to be optimistic about the economy and what lies ahead.\nLooking first at our net interest margin.\nOur net interest margin percentage for the second quarter was 2.65%, down seven basis points from the 2.72% reported last quarter.\nThe decrease was impacted by a higher proportion of earning assets being invested in lower-yielding balances at the Fed in the second quarter as compared to the first quarter, partially offset by the positive impact of the PPP loan portfolio.\nInterest-bearing deposits at the Fed averaged $13.3 billion or 31% of our earning assets in the second quarter, up from $9.9 billion or 25% of earning assets in the prior quarter.\nExcluding the impact of PPP loans, our net interest margin percentage would have been 2.37% in the second quarter, down from an adjusted 2.59% for the first quarter with all of the decrease resulting from the higher level of balances at the Fed in the second quarter.\nThe taxable equivalent loan yield for the second quarter was 4.28%, up 41 basis points from the previous quarter and was impacted by an acceleration of PPP forgiveness during the quarter which accelerated the recognition of the associated deferred fees.\nExcluding the impact of PPP loans, the taxable equivalent loan yield would have been 3.80%, up three basis points from the prior quarter.\nTo add some additional color on our PPP loans, forgiveness payments received accelerated during the quarter, totaling $1.3 billion compared to the $580 million received in the prior quarter.\nAs a result of the accelerated forgiveness, interest income, including fees on PPP loans totaled about $45 million in the second quarter, up significantly from the approximately $30 million recorded in the first quarter.\nGiven our current projections on the speed of forgiveness of the remainder of our PPP loans, we currently expect that the interest income on PPP loans recognized in the third quarter would be less than 1/2 of the $45 million recorded in the second quarter.\nTotal forgiveness payments through the second quarter were approximately $2.7 billion.\nAnd total PPP loans at the end of June were $1.9 billion, down from the $3.1 billion at the end of March.\nAt the end of the second quarter, we had approximately $38 million in net deferred fees remaining to be recognized, and we currently expect a little over 70% of that to be recognized this year.\nLooking at our investment portfolio.\nThe total investment portfolio averaged $12.3 billion during the second quarter, up about $46 million from the first quarter.\nThe taxable equivalent yield on the investment portfolio was 3.36% in the second quarter, down five basis points from the first quarter.\nThe yield on the taxable portfolio, which averaged $4.2 billion was 2.01%, down five basis points from the first quarter as a result of higher premium amortization associated with our agency MBS securities, given faster prepayments.\nOur municipal portfolio averaged about $8.1 billion during the second quarter, down $104 million from the first quarter, with a taxable equivalent yield of 4.09%, flat with the prior quarter.\nAt the end of the second quarter, 78% of the municipal portfolio was pre-refunded or PSF-insured.\nThe duration of the investment portfolio at the end of the second quarter was 4.4 years, in line with the first quarter.\nInvestment purchases during the quarter were approximately $680 million and consisted of about $400 million in municipal securities with a TE yield of about 2.30% and about $190 million in 20-year treasuries with the remainder in MBS securities.\nRegarding noninterest expense, looking at the full year 2021, we currently expect an annual expense growth rate of around 3% from our 2020 total reported noninterest expenses.\nAnd regarding income tax expense, the effective tax rate for the quarter was 11.3%, up from the 6.4% reported in the first quarter as a result of higher earnings, but also impacted by lower tax benefits realized from employee stock option activity in the second quarter as compared to the first.\nWe currently are projecting a full year 2021 effective tax rate in the range of 9% to 9.5%.\nRegarding the estimates for full year 2021 earnings.\nGiven our second quarter results and recognition of lower PPP fee accretion for the remainder of the year, we currently believe the current mean of analyst estimates of $6.33 is reasonable.\n",
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"content": "q2 earnings per share $1.80.\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: In the third quarter, Cullen/Frost earned $106.3 million or $1.65 per share compared with earnings of $95.1 million or $1.50 per share reported in the same quarter of last year.\nAnd this compared with $116.4 million or $1.80 per share in the second quarter.\nWe continue to focus on our organic strategy while the economy works to move past supply chain issues and other lingering effects of the pandemic.\nAverage deposits continued their strong increase in the third quarter and were $39.1 billion, an increase of 19% compared with $32.9 billion in the third quarter of last year.\nOverall, average loans in the third quarter were $16.2 billion compared with $18.1 billion in the third quarter of 2020, but this included the impact of PPP loans.\nExcluding PPP loans, third quarter average loans of $14.8 billion were essentially flat from a year ago but up an annualized 6% on a linked quarter basis.\nAnd looking forward, we're very encouraged about the outlook for loan growth.\nNew loan commitments booked through the third quarter excluding PPP loans were up by 11% compared to the first nine months of last year.\nFor the quarter, new loan commitments were up by 6% on a linked quarter basis.\nWe were especially pleased that the linked quarter increase was due primarily to C&I commitments, which were up 30%.\nOur current weighted pipeline is 41% higher than one year ago and 22% higher than last quarter.\nThe increases are in both C&I, up 22%; and CRE, up 28%.\nThe market continues to be very competitive.\nIn the third quarter, 69% of the deals we lost were due to structure compared to 50% in the quarter before.\nWe also continue to add to our commercial customer base, and we recorded 619 new commercial relationships during the quarter.\nAnd while this was down from the same quarter a year ago when we were experiencing incredible PPP success, it is 2/3 higher than the quarter immediately before the PPP program.\nAs with the second quarter, we did not report a credit loss expense in the third quarter.\nOur asset quality outlook is stable and in general, problem assets are declining in number.\nNew problems have dropped to pre-pandemic levels.\nNet charge-offs for the third quarter totaled $2.1 million compared with $1.6 million in the second quarter.\nAnnualized net charge-offs for the third quarter were five basis points of average loans.\nNonaccrual loans were $57.1 million at the end of the third quarter, a slight decrease from the $57.3 million at the end of the second quarter.\nOverall, delinquencies for accruing loans at the end of the third quarter were $95.3 million or 60 basis points of period-end loans, and these are manageable pre-pandemic levels.\nWhat started out as $2.2 billion in 90-day deferrals granted to borrowers early in the pandemic were completely gone as of the end of the third quarter.\nTotal problem loans, which we define as risk grade 10 and higher, were down slightly to $635 million at the end of the third quarter compared with $666 million at the end of the second quarter.\nIn the third quarter, we continued making progress toward our goal of mid-single-digit concentration level in the energy portfolio over time, with energy loans falling to 6.5% of our non-PPP portfolio at the end of the quarter.\nOur teams continue to analyze the nonenergy portfolio segments that we considered the most at risk from pandemic impacts.\nAs of the third quarter, those segments are represented by restaurants, hotels and entertainment and sports.\nThe total of these portfolio segments excluding PPP loans represented $695 million at the end of the third quarter, and our loan loss reserve for these segments was 8.8%.\nThe credit quality of individual credits in these segments is currently most stable -- mostly stable or better compared to the end of the second quarter.\nWe reported in the second quarter that we had completed our 25-branch Houston expansion initiative, and we're very pleased with the results.\nWe've identified eight more locations to open in the coming months, and that process is underway.\nLet me update you where we stand through the third quarter with the Houston expansion excluding PPP loans.\nOur numbers of new households were 134% of target and represented more than 12,200 new individuals and businesses.\nOur loan volumes were 177% of target and represented $371.4 million in outstandings, and about 80% of this represents commercial credits with about 20% consumer.\nDeposits surpassed $0.5 billion and were 111% of target.\nCommercial deposits accounted for 2/3 of the total.\nIn the meantime, we're also preparing for our upcoming 28-branch expansion project in the Dallas region, which will kick off with the first new financial center opening early next year and continuing into 2024.\nThe Dallas expansion will follow our Houston model, and we will employ the lessons learned during our team's successful rollout.\nI'll continue to emphasize that the business we are generating through our expansion strategy is consistent with the overall company.\nIts profitability is weighted toward small and midsized businesses, but it also has complemented wealth management, insurance, and of course, consumer banking, which continues to see tremendous growth.\nFor example, through the first six months of this year, we had already surpassed consumer banking's all time annual growth for new customer relationships, which was 12,700 in 2019.\nAt the end of the third quarter this year, this had risen to 19,974 net new checking customers.\nThat's already more than 150% of our previous annual record.\nWe've worked hard to lower barriers to entry for potential customers with improved product offerings and physical distribution.\nFor example, besides overdraft grace which we introduced in April and Early Pay Day which we announced in July, we also recently established an ATM branding partnership with Cardtronics that resulting -- resulted in us having by far the largest ATM network in the state.\nIn addition, after over two years of study, we've begun the process of putting in place the infrastructure to add residential mortgages to our suite of consumer real estate products in late 2022.\nHELOC, home improvement and purchase money second loans, which has steadily grown to in excess of $1.3 billion.\nUtilizing best-in-class technology will allow us to provide Frost level of world-class customer service as we build this portfolio over time in response to customer demand.\nFinally, I want to commend our team working on PPP loans.\nNearly 90% of the 32,500 loans or $4.7 billion have already been helped with the loan forgiveness process.\nThat includes upwards of 97% of the first-round loans from 2020.\nOur team continues to put in outstanding work to execute our strategies, whether it's PPP, our expansion projects, or the enhancements we've made to our customer experience.\nI believe we've got the best team in the financial services industry.\nThey are why I continue to be optimistic about our company and our prospects for success.\nLooking first at our net interest margin.\nOur net interest margin percentage for the third quarter was 2.47%, down 18 basis points from 2.65% reported last quarter.\nThe decrease was primarily the result of a higher proportion of earning assets being invested in lower-yielding balances at the Fed in the third quarter as compared to the second quarter, and to a lesser extent, the impact of a lower PPP loan volumes and their related yields compared to the prior quarter.\nInterest-bearing deposits at the Fed averaged $15.3 billion or about 35% of our average earning assets in the third quarter, up from $13.3 billion or 31% of average earning assets in the prior quarter.\nExcluding the impact of PPP loans, our net interest margin percentage would have been 2.27% in the third quarter, down from an adjusted 2.37% for the second quarter, with all of the decrease resulting from the higher level of balances at the Fed in the third quarter.\nThe taxable equivalent loan yield for the third quarter was 4.16%, down 12 basis points from the previous quarter.\nExcluding the impact of PPP loans, the taxable equivalent loan yield would have been 3.74%, down six basis points from the prior quarter.\nTo add some additional color on our PPP loans, total PPP loans at the end of September were $828 million, down from $1.9 billion at the end of June.\nForgiveness payments received during the third quarter were higher than we had projected, resulting in an acceleration in the recognition of the net deferred fees during the quarter.\nAt the end of the third quarter, we had only about $11.5 million in net deferred fees remaining to be recognized, and we currently expect about 75% of that to be recognized in the fourth quarter.\nLooking at our investment portfolio.\nThe total investment portfolio averaged $12.5 billion during the third quarter, up about $209 million from the second quarter.\nThe taxable equivalent yield on the investment portfolio was 3.35% in the third quarter, down one basis point from the second quarter.\nThe yield on the taxable portfolio which averaged $4.1 billion was 2.03%, up two basis points from the second quarter.\nOur municipal portfolio averaged about $8.4 billion during the third quarter, up $230 million from the second quarter, with a taxable equivalent yield of 4.04%, down five basis points from the prior quarter.\nAt the end of the third quarter, 78% of the municipal portfolio was pre-refunded or PSF-insured.\nThe duration of the investment portfolio at the end of the third quarter was 4.5 years, up slightly from 4.4 years in the second quarter.\nWe made investment purchases toward the end of September of approximately $1.5 billion, consisting of about $900 million in MBS agency securities with a yield of about 2%, about $500 million in treasuries yielding 1.07% with the remainder in municipal securities.\nRegarding noninterest expense, looking at the full year 2021, we currently expect an annual expense growth rate of around 3% over our 2020 total reported noninterest expenses, which is consistent with our previous guidance.\nRegarding the estimates for full year 2021 earnings, given our third quarter results and the recognition of lower PPP fee accretion for the fourth quarter, we currently believe that the current mean of analyst estimates of $6.48 is reasonable.\n",
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"content": "q3 earnings per share $1.65.\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 the fourth quarter, Cullen/Frost earned $101.7 million or $1.60 per share, compared with earnings of $117.2 million and $1.82 a share reported in the same quarter a year ago.\nFor the full year, Cullen/Frost earned $435.5 million or $6.84 a share compared with earnings of $446.9 million or $6.90 a share reported in 2018.\nThe lower interest rate environment impacted our results, as you would expect.\nHowever, our team continues to execute our strategy of pursuing consistent above-average organic growth across our enterprise and we are investing for the long term, while maintaining our quality standards.\nOur return on average assets was 1.21% in the fourth quarter compared to 1.48% in the fourth quarter of last year.\nAverage deposits in the fourth quarter of $27.2 billion were up 2.6% compared to the fourth quarter of last year, while average loans were up 5.4%.\nOur provision for loan losses was $8.4 million in the fourth quarter compared to $8 million in the third quarter of this year and $3.8 million in the fourth quarter of 2018.\nNet charge-offs for the fourth quarter were $12.7 million compared with $6.4 million in the third quarter and $9.2 million in the fourth quarter of last year.\nFourth quarter annualized net charge-offs were 34 basis points of average loans.\nNon-performing assets were $109.5 million at the end of the fourth quarter compared with $105 million in the third quarter and $74.9 million in the fourth quarter of last year.\nOverall delinquencies for accruing loan at the end of the fourth quarter were $58.2 million and that was 39 basis points of period end loans.\nAnd those numbers remain well within our standards and comparable to what we've experienced in the past several years.\nAnd overall, our credit quality remains good.\nTotal problem loans, which we define as risk grade 10 and higher were $511 million at the end of the fourth quarter compared to $487 million in the third quarter of this year and $477 million in the fourth quarter of last year.\nThe increase in the fourth quarter related primarily to the energy portfolio.\nEnergy related problem loans were $132.4 million at the end of the fourth quarter compared to $87.2 million for the third quarter and $115.4 million in the fourth quarter of last year.\nThe energy-related problem loan total is mostly attributable to three borrowers with whom we've been working for several quarters.\nEnergy loans in general represented 11.2% of our portfolio at the end of the fourth quarter, up from the previous quarter but well below our peak of more than 16% in 2015.\nOur focus for commercial loans continues to be on consistent, balanced growth, including both the core component, which we define as lending relationships under $10 million in size as well as larger relationships, while maintaining our quality standards.\nThe balance between these relationships went from 52% larger and 48% core at the end of 2018 to 57% larger and 43% core at the end of 2019.\nThe movement toward larger loans in 2019 was mostly due to activity in the fourth quarter, where some quality new energy relationships were added after exiting a number of credits during the year.\nNew relationships increased 4% versus the fourth quarter of a year ago.\nThe dollar amount of new loan commitments booked during the fourth quarter was up sharply, increasing 75% from a year ago and 44% from the prior quarter.\nEven excluding the strong energy growth we saw in the fourth quarter, new loan commitments grew 42% versus a year ago and 20% from the prior quarter and represented good increases in both C&I and CRE.\nThat said, quality deals are hard to come by.\nIn 2019, we booked just 3% more loan commitments compared to 2018 despite looking at 16% more deals.\nIn CRE, we saw our percentage of deals lost to structure increase from 63% in 2018 to 69% in 2019.\nOur weighted current active loan pipeline in the fourth quarter was up by about 9% overall compared to the prior quarter and was driven by a 20% growth in C&I opportunities.\nOf the 10 new financial centers that we've opened so far in the Houston region, four were opened in the fourth quarter.\nWe expect to open one more Houston area financial center in the current quarter on our way to a total of 25 new financial centers and we've already hired more than 150 of the approximately 200 employees we expect to staff this expansion.\nThose new financial center openings benefit both commercial and consumer banking.\nLet's look at our consumer business.\nWe added almost 13,000 net new customers -- consumer customers in 2019, an increase of 48% from a year ago.\nThat represented a 3.8% increase in the total number of consumer customers, all of it representing organic growth.\nIn the fourth quarter 32% of our account openings came from our online channel which includes our Frost Bank mobile app.\nThis channel continues to grow rapidly.\nIn fact, online account openings were 30% higher compared to the fourth quarter of 2018.\nThe consumer loan portfolio averaged $1.7 billion in the fourth quarter, increasing by 1.2% compared to the fourth quarter last year.\nFrost Bankers have done a great job expanding our presence in growing markets.\nOur overall strategy of sustainable organic growth is serving us well.\nThe interest rate environment continues to present challenges to our industry, but we remain focused on the fundamentals and growing our lines of business in line with our quality standards.\n2019 had its share of challenges but also had its share of achievements.\nBesides adding the new financial centers in Houston that I mentioned, we also expanded into a completely new market where we opened our first financial center in Victoria, Texas and we completed our corporate headquarters move to the new Frost Tower in downtown San Antonio and the culmination of a process that began six years ago.\nOur commitment to customer service was confirmed when Frost received the highest ranking in customer satisfaction in Texas in J.D. Power's U.S. Retail Banking Satisfaction Study for the 10th consecutive year and received more Greenwich Excellence and Best Brand awards for small business and middle market banking than any bank in the nation for the third consecutive year.\nThat's a tribute to the dedication of everyone at Frost who works hard every day to take care of our customers and implement our strategies and that dedication is what sets Frost apart from other financial service companies.\nI'll make a few comments about the Texas economy before providing some additional information about our financial performance for the quarter and I'll close with our guidance for full year 2020.\nAll of the Texas macroeconomic numbers I'll mention here are sourced from the Dallas office of the Federal Reserve.\nTexas job growth was a very strong 4% in November and the Dallas Fed now estimates 1.9% Texas job growth for full year 2019.\nDecember statewide unemployment of 3.5% uptick slightly from the historically low 3.4% level seen in each of the six months through November.\nIn terms of employment growth by industry, as of November, construction had the strongest employment growth in Texas with 11.5% growth for the month and growth of 5% for the year-to-date period through November.\nFinancial activities was the industry with the second fastest job growth at 3.5% year-to-date through November.\nEnergy was the only sector that showed meaningfully negative Texas job growth, down 2.7% year-to-date through November.\nAccording to the Dallas Fed surveys, activity in the Texas services sector accelerated again in the fourth quarter and revenue growth in this sector has remained in positive territory every month since December of 2009.\nLooking at individual markets, Houston economic growth remains above the historical average and the Dallas Fed stated that as of November data suggests continued moderate growth ahead.\nJob growth in the Houston region accelerated to a 2.8% rate in the three months through November, compared to a more modest 1.6% rate for the full year through November professional and business services and education and health services led Houston job growth over the three months through November growing at 8.2% and 7.7% respectively over the same period a year earlier.\nRegarding the DFW Metroplex the Dallas Business Cycle Index maintained by the Dallas Fed expanded at a 5% annual rate in the fourth quarter compared to 4.8% in the third quarter, while the Fort Worth Business Cycle Index expanded at a consistent 4.1% rate in the second half of the year.\nFor the DFW Metroplex, November job growth remains strong at a 4.8% annualized rate, and area unemployment remained near multi-year lows at 3.2% in Dallas and 3.3% in Fort Worth.\nThe Austin economy has also remained healthy in November and the Dallas Fed's Austin Business Cycle Index has now been in expansion territory for more than 10 years with index growth remaining at or above the region's historical 6% average for the past nine years.\nIn the three months ending in November, Austin area job growth moderated to 2.4%.\nAustin's unemployment rate remained at 2.7% in November for the fourth consecutive month.\nThe San Antonio region posted strong economic growth in November with the Dallas Fed San Antonio Business Cycle Index, continuing to grow above its long-term average.\nThe San Antonio Business Cycle Index grew at a 5.5% rate in November and San Antonio job growth was 4.7% for the three months through November with area unemployment remaining at 3.1%.\nPermian Basin payrolls remained flat through November and the unemployment rate has ticked up in recent months.\nWhile the rig count has generally declined in recent months, oil production has continued to increase.\nPermian region job declines in the mining, manufacturing and government sectors were offset by job growth in the leisure and hospitality, professional and business services, information and trade, transportation and utility sectors for the year-to-date period through November, resulting in overall flat performance for jobs in the region.\nDespite the lack of job growth in the Permian region, November unemployment remained low at 2.4% for the second consecutive month.\nOur net interest margin percentage for the fourth quarter was 3.62%, down 14 basis points from the 3.76% reported last quarter.\nThe decrease primarily resulted from lower yields on loans and balances at the Fed as well as an increase in the proportion of balances at the Fed as a percentage of earning assets, partially offset by lower funding costs.\nThe taxable equivalent loan yield for the fourth quarter was 4.88%, down 28 basis points from the third quarter, impacted by the lower rate environment with September and October Fed rate cuts.\nThe total investment portfolio averaged $13.6 billion during the fourth quarter, up about $197 million from the third quarter average of $13.4 billion.\nThe taxable equivalent yield on the investment portfolio was 3.37% in the fourth quarter, down 6 basis points from the third quarter.\nOur municipal portfolio averaged about $8.4 billion during the fourth quarter, up about $193 million from the third quarter.\nThe municipal portfolio had a taxable equivalent yield for the fourth quarter of 4.8%, flat with the previous quarter.\nAt the end of the fourth quarter, about two-thirds of the municipal portfolio was PSF insured.\nDuring the fourth quarter, approximately $1.4 billion of our treasury securities that were yielding about 1.51% matured.\nAs insurance against the potential backdrop of flat to down rates for an extended period of time, we made the decision to add duration to our investment portfolio.\nDuring the fourth quarter, we purchased about $1.5 billion in securities to replace the treasuries that matured.\nDuring the quarter, we purchased $500 million in 30 year treasuries yielding about 2.27%, approximately $700 million in agency mortgage-backed securities yielding about 2.37% and about $300 million in municipal securities with a TE yield of 3.3%.\nAs a result of the maturities and purchases I just mentioned, the duration of the investment portfolio at the end of the quarter was 5.4 years compared to 4.3 years last quarter.\nLooking at our funding sources, the cost of total deposits for the fourth quarter was 29 basis points, down 10 basis points from the third quarter.\nThe combined cost of -- the cost of combined Fed funds purchased and repurchase agreements which consists primarily of customer repos decreased 32 basis points to 1.21% for the fourth quarter from 1.53% in the previous quarter.\nThose balances averaged about $1.42 billion during the fourth quarter, up about $126 million from the previous quarter.\nMoving to non-interest expense; total non-interest expense for the quarter increased approximately $21.1 million or 10.6% compared to the third quarter -- excuse me, the fourth quarter last year.\nExcluding the impact of the Houston expansion and the operating costs associated with our headquarters move in downtown San Antonio, non-interest expense growth would have been approximately 6.3%.\nSo again, regarding the estimates for full year 2020 earnings, we currently believe that the FactSet mean of $6.13 is reasonable.\nOur assumptions do not include any rate cuts in 2020.\n",
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"content": "compname reports q4 earnings per share $1.60.\nq4 earnings per share $1.60.\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 Martin Jarosick, Vice President-Investor Relations.\nThese statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict.\nTherefore, actual outcomes and results may differ materially from what is expressed or implied in any statements.\nMore detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website.\nNow, let me introduce Tony Will, our President and CEO.\nStrong nitrogen demand and lower overall production have tightened the global supply demand balance, supporting much higher prices than in recent years.\nAt the same time, energy spreads between North America and high-cost regions have expanded considerably, increasing margin opportunities for our cost advantaged network.\nThese factors helped drive an increase in adjusted EBITDA of nearly 25% compared to last year, and we produced our strongest first half financial results in six years.\nAdditionally, the business continues to generate strong free cash flow, giving us tremendous flexibility as we focus on achieving investment grade metrics and executing our clean energy initiatives.\nThe first half was not without its challenges, including the natural gas-driven production interruptions we described on the first quarter call.\nThe first half also saw a continued demonstration of the harm the UAN industry in the United States faces from subsidized and dumped imports from Russia and Trinidad.\nUntil the last few years, UAN earned a substantial premium to other upgraded nitrogen products due to the higher capital investment required to produce it and the meaningful agronomic and operational benefit it offers to farmers.\nAs you can see from our recent results, UAN now trades at a significant discount to all upgraded nitrogen products due to unfair trade practices.\nWe have taken the necessary steps to address this situation by petitioning the Department of Commerce and International Trade Commission to initiate anti-dumping and countervailing duty investigations.\nWe look forward to the result of the ITC's preliminary vote later this week.\nLooking forward, we are very bullish about the next two years.\nAs Bert will describe in a moment, the need to replenish global coarse grains stocks driving agricultural demand along with the impact of increased economic activity driving industrial demand, should support all-time record global nitrogen demand over the next two years.\nForward energy curves are also very favorable over this timeframe.\nWe expect these factors to help keep the global nitrogen supply and demand balance much tighter than we've seen in recent years, supporting an extended period of higher nitrogen pricing and higher margins for our cost advantaged network.\nLonger term, we believe increased demand for ammonia and its clean energy attributes will become a significant factor in the tighter supply and demand balance, driving further value for our network.\nWe continue to see broad interest in clean hydrogen and ammonia to help meet the world's clean energy needs.\nAs we continue to have discussions with market participants, our focus remains on being at the forefront of this significant opportunity, from positioning our network to be the world's leader for blue and green ammonia production to collaborating with other global leaders where our unique capabilities can provide value.\nWe are pleased with the progress we've made and look forward to additional developments in the coming months.\nThe global nitrogen supply and demand balance remains far tighter than we have seen in recent years, underpinned by strong agricultural and industrial demand plus higher energy prices in Europe and Asia.\nThis has created a highly favorable pricing environment that has persisted into the second half of this year.\nBased on the agricultural and energy outlook we see today, we believe a positive pricing environment for fertilizer will remain in place at least into 2023.\nStrong global nitrogen demand is being led by the world's need to replenish coarse grains stocks.\nThe global coarse grains stocks-to-use ratio was the lowest since 2012, entering this year's spring planting season, commodity prices have risen significantly in response and farmers are incentivized to maximize yield with fertilizer applications.\nGiven this, we expect to see sustained demand in the second half led by India and Brazil.\nWe expect similar strength from North America and Europe leading into the 2022 application season.\nWe had a positive start to meeting this demand a few weeks ago when we launched our UAN Fill Program.\nWe have built a solid order book for the third quarter at an all-equivalent price of $285 per ton, though prices remain at a significant discount to urea for the reasons Tony mentioned.\nFurther out, we expect that high demand for coarse grains, especially from China, will contribute to persistent low global stocks into next year.\nAs a result, we believe that stocks will still need to be replenished at least into 2023, supporting continued strong nitrogen demand.\nIncreased economic activity is also driving higher global industrial demand for nitrogen.\nIn North America, we have seen diesel exhaust fluid sales rise above pre-pandemic levels.\nOur first half DEF sales were a Company record and we expect overall demand will continue to grow.\nWe've also seen higher demand for ammonia and nitric acid from our industrial customers.\nGlobally, industrial related demand in China and from phosphate producers has also increased.\nWhile we expect demand to remain strong for some time, we believe that global fertilizer inventory in the channel today is low and will need to be rebuilt.\nSo far in 2021, high energy costs in Europe and Asia have lowered operating rates and reduced supply availability, particularly for ammonia and urea, further supporting global pricing.\nAs you can see on Slide 9, energy costs in these regions have increased to over $14 per MMBtu and Eastern European producers have become the global marginal producer for the time being.\nThe higher energy cost has steepened the global nitrogen cost curve substantially, increasing margin opportunities for low-cost producers such as CF.\nForward curve suggests CF will benefit from favorable energy differentials for the foreseeable future.\nAs a result, we believe we have a tremendous opportunity ahead of us as we leverage our manufacturing, distribution and logistics capabilities to deliver for our customers.\nFor the first half of 2021, the Company reported net earnings attributable to common stockholders of $397 million or $1.83 per diluted share.\nEBITDA was $994 million and adjusted EBITDA was $997 million.\nThe trailing 12 months net cash provided by operating activities was approximately $1.2 billion and free cash flow was $700 million.\nBased on the outlook Tony and Bert have shared, we are well positioned to build on these results and continue to generate significant free cash flow.\nFirst, we raised our estimate for capital expenditures for 2021 from around $450 million to approximately $500 million.\nThe increase is driven primarily by our decision to pull a significant maintenance event scheduled for next year into this year.\nWe believe that performing this activity in 2021 is best for the asset and reduces the risk of an unplanned outage during the 2022 spring application season.\nGoing forward, we expect capital expenditures to return to the range of $450 million per year.\nWith this additional maintenance project, the high level of previously planned maintenance, and the additional maintenance from severe weather in February, we estimate that gross ammonia production and sales volume will be around 9.5 million tons and 19 million product tons respectively; both at the low end of our forecasts earlier this year.\nLooking into 2022, we have a more typical maintenance schedule and we'd expect to return to approximately 10 million tons of ammonia production and sales volume of 19.5 million to 20 million product tons.\nSecond, we are taking additional steps in line with our focus on achieving investment grade ratings and positioning the Company to execute our clean energy initiatives.\nWe have announced that we will redeem $250 million of our senior notes due June 2023, which will reduce our gross debt to $3.5 billion.\nWe expect to lower our gross debt to $3 billion by or before the maturity of the 2023 notes.\nWe also continue to return cash to our shareholders through quarterly dividend and opportunistic share repurchases at attractive levels.\nWith that, Tony will provide some closing remarks before we open the call to Q&A.\nThey successfully managed many challenges in the first six months of the year, setting us up well for the second half.\nMost importantly, we did this safely with our recordable incident rate at the end of June at just 0.28 incidents per 200,000 labor hours, significantly better than industry averages.\nAs we look ahead, we expect strong agricultural and industrial demand to create all-time record global nitrogen demand.\nForward curve show very favorable energy spreads to Europe and Asia over the same timeframe, which should support robust margins and cash generation.\nWe see good progress on our clean energy initiatives.\nTaken together, we are well positioned to create significant shareholder value in the near and longer term.\nWith that, operator, we will now open the call to questions.\n",
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"content": "compname reports first half 2021 net earnings of $397 million, ebitda of $994 million, adjusted ebitda of $997 million.\nprojects capital expenditures for full year 2021 will be in range of $500 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'm Martin Jarosick, Vice President, Investor Relations for CF.\nThese statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.\nTherefore, actual outcomes and results may differ materially from what is expressed or implied in any statement.\nMore detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website.\nNow let me introduce Tony Will, our President and CEO.\nYesterday, we posted our financial results for the first nine months of 2020, in which we generated adjusted EBITDA of just over $1 billion.\nWe feel good about our position as we near the end of the year.\nThis is because there can be significant shifts across quarters due to weather or other events.\nHowever, that spikiness tends to smooth out over time so a longer time period provides a better picture of actual performance than focusing on an individual quarter.\nAs of today, with two months to go and most of the fall ammonia season still ahead of us, we continue to expect that our full year 2020 results will end up within plus or minus a few percentage points of our 2018 performance for adjusted EBITDA.\nOur outlook hasn't changed since back in February when we first gave our expectations for the full year.\nOverall, the CF team continues to execute exceptionally well.\nAsset utilization remains high, and our sales volumes through nine months are new company record.\nWe also continue to efficiently convert EBITDA into free cash.\nMost importantly, we are operating safely.\nOur 12-month rolling recordable incident rate at the end of September was 0.17 incidents per 200,000 labor hours, which is a new company record and substantially better than industry benchmarks.\nThis is a tremendous accomplishment, and we're extraordinarily proud of our team's unwavering focus on safety, particularly in the face of the pandemic.\nSpeaking of which, our pandemic-related precautionary measures have been working well, and we have not had a single known transmission of the COVID-19 virus within any of our locations.\nWith these precautions in place, we were able to complete safely critical turnaround activity at several locations during the quarter.\nAs we look toward next year, the company is well positioned for the opportunities ahead.\nAs Bert will describe in a few moments, we expect solid global demand and widening energy spreads, which will create greater price realization opportunities during '21 compared to this year.\nGiven our position at the low end of the global cost curve, we believe these dynamics will support continued strong free cash flow generation.\nWe are very excited about our announcement last week and our commitment to the clean energy economy, which provides a real growth platform for the company.\nAs we discussed, hydrogen has emerged as a leading clean energy source to help the world achieve net zero carbon emissions, and ammonia is one of the most efficient ways to transport and store hydrogen.\nBecause CF is the world's largest producer of ammonia, we are uniquely positioned with our unparalleled asset base and technical knowledge to serve this developing demand.\nAs we decarbonize our network and aggressively scale our ability to produce green and low-carbon ammonia, we believe we will be able to realize the clean fuel value for ammonia rather than its nutrient value.\nIn doing so, we expect to realize a substantial premium compared to the value of ammonia as a fertilizer or a feedstock.\nLast Thursday, we announced our first steps in seizing this growth opportunity with the green ammonia project at Donaldsonville as the centerpiece of initial investments.\nWe look forward to sharing our progress and our follow-on steps in the months ahead.\nHen Chris will follow to talk about our financial position and capital allocation before I return for some closing comments.\nYear-to-date, the global nitrogen market has been incredibly resilient in light of the pandemic.\nDemand for agricultural applications has grown in 2020, and industrial demand continues to recover from the disruptions in April and May.\nLooking ahead to 2021, we expect solid global demand led by North America, India and Brazil.\nWe also project improving price dynamics as the global cost curve steepens with rising energy prices and wider energy spreads compared to North America.\nWe are forecasting approximately 90 million planted corn acres in the United States in 2021.\nThis is in line with the levels of the last 10 years and supported by improved farm economics due to higher corn futures, government payments and lower input prices.\nIf weather conditions allow, we would expect to have a strong fall ammonia season due to the farm economics I just described and the attractiveness of ammonia prices today compared to the other nitrogen products.\nWe expect that industrial demand will continue to recover in line with economic activity.\nWe believe industrial demand for ammonia has been mostly tied to the state of the economy due to the pandemic.\nIn contrast, demand for feed-grade urea and diesel exhaust fluid has been relatively resilient.\nOur year-to-date DEF sales volumes are up 6% compared to 2019, which would have been difficult to foresee in April when economic activity and miles driven declined so dramatically.\nOutside of North America, we continue to expect positive demand in most growing regions, particularly India and Brazil.\nWe believe India is likely to exceed nine million metric tons of urea imports through tenders in 2020.\nWe also expect demand for urea imports into Brazil of approximately 6.5 million metric tons will continue to be supported by improved farm incomes and no active domestic urea production.\nAs we look at our cost curve projection for the next year on slide 12, we see opportunities for greater price realizations during 2021 compared to this year.\nIn 2020, the convergence of global natural gas prices in the first half led to a largely flat global cost curve.\nFormally, high-cost producers pursued this temporary margin opportunity available to them, increasing operating rates and pressuring product prices.\nIn recent months, energy prices have risen across the globe but at a much higher rate in Europe and Asia than in North America.\nThese higher gas costs and the steeper global cost curve that results increases opportunities for low-cost producers like CF to achieve greater price realizations.\nIndeed, some of our most profitable years has been when our own natural gas costs were higher but energy spreads were wider.\nWe are well prepared as the nitrogen market dynamics adjust over the coming year and the direction of the global response to the pandemic becomes clearer.\nFor the first nine months of 2020, the company reported net earnings attributable to common stockholders of $230 million or $1.07 per diluted share.\nEBITDA was $982 million, and adjusted EBITDA was $1 billion.\nFor the third quarter of 2020, we reported a net loss attributable to common stockholders of $28 million or $0.13 per diluted share.\nEBITDA was $196 million, and adjusted EBITDA was $204 million.\nAs you know, the third quarter typically has our lowest realized prices, lowest volumes and highest level of maintenance and turnaround activity.\nThis quarter was no different.\nHowever, both our year-to-date and quarterly results reflect the same overall factors: lower year-over-year global nitrogen prices partially offset by lower natural gas and SG&A costs.\nOn a trailing 12-month basis, net cash provided by operating activities was approximately $1.2 billion, and free cash flow was $756 million.\nAt the end of October, cash on the balance sheet was well over $600 million, and we are well positioned to fulfill our commitment to repay the remaining $250 million on our 2021 notes.\nWe expect capital expenditures for 2020 to be approximately $350 million as we maintain our high standards of reliability and safety.\nWe expect our capital budget will return to our typical $400 million to $450 million range in 2021 and beyond.\nEach year, our capital -- capex budget includes not only turnarounds and other sustaining activities, but also investments in improvement projects that allow us to pursue strategic opportunities.\nRecent examples from this lighter include the nitric acid expansion project announced this year and the diesel exhaust fluid unit completed in 2017, both at our Donaldsonville facility.\nThe green ammonia project at Donaldsonville will fit into this improvement portion of our capital expenditure budget over the next three years, which allows us to maintain our overall capex at normal levels.\nThat said, we expect that additional steps we will take to enable the production of green and low-carbon ammonia will require investment beyond this $400 million to $450 million annual range.\nWe are excited to invest in the growth of the company given the expected profile -- expected return profile, and we see a lot of opportunities ahead to do just that.\nSo after the repayment of the $250 million in 2021 notes, we would expect that our primary use of cash in the coming years will be in support of our strategic focus on clean hydrogen and ammonia projects.\nWith that, Tony will provide some closing remarks before we open the call to Q&A.\nOur team continues to demonstrate their focus, operational excellence and the strength of our business during the most unusual of years.\nI also want to recognize the winner of our annual Wilson Award for Excellence in Safety.\nThis year's winner is our Courtright Nitrogen Facility in Ontario for their deployment of wireless technology to better predict and prevent equipment failures.\nThis award is a great reflection of our safety culture at work, and I encourage everyone to view the impressive ideas from this year's finalists, which can be found on our website.\nAs the world focuses on decarbonization, hydrogen will be a key clean energy source, and ammonia is a critical enabler for the storage and transport of hydrogen.\nCF Industries is the world's largest producer of ammonia, and we will leverage our significant competitive advantages, which include the strength of our team, our operational excellence, technical knowledge and unparalleled asset base, advantages that will enable us to deliver green and low-carbon ammonia at scale years faster and billions of dollars less capital-intensive than many others looking at this opportunity.\nThis will propel us to the forefront of hydrogen supply, being a leader in producing clean fuels for a sustainable world and providing a growth platform to create shareholder value.\n",
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"content": "compname reports nine month 2020 net earnings of $230 million, ebitda of $982 million.\nq3 loss per share $0.13.\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 Martin Jarosick, Vice President of Investor Relations.\nThese statements are not guarantees of future performance and will involve risks, uncertainties and assumptions that are difficult to predict.\nTherefore, actual outcomes and results may differ materially from what is expressed or implied in any statements.\nMore detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website.\nNow let me introduce Tony Will, our President and CEO.\nThese results reflect the drastically improving industry fundamentals that we experienced over the course of the year.\nNitrogen prices are at their highest levels in over a decade as strong demand and lower worldwide production have tightened the global supply demand balance considerably.\nAt the same time, energy spreads between North America and high-cost regions have widened dramatically, supporting margin expansion for our cost advantage network.\nThe CF team also continues to perform exceptionally well, navigating a couple of severe weather events in the U.S., our highest levels of turnaround and maintenance activity ever, and a challenging natural gas situation in the U.K. Most importantly, they did so safely.\nOur recordable incident rate at the end of September was just 0.24 incidents per 200,000 labor hours, significantly better than industry averages.\nThese factors have driven substantial cash generation over the last year.\nOur trailing 12-month net cash from operations was $1.7 billion and free cash flow was $1 billion.\nAs we look ahead, we're excited about the opportunities to build on this performance.\nWe have good visibility into the fourth quarter of 2021.\nWe have priced virtually all of our product shipments through the end of the year while also hedging our natural gas requirements.\nWhile there is always some uncertainty about the volume of ammonia that will be applied in Q4, given the dependency on weather, we would expect full year 2021 adjusted EBITDA to land between $2.2 billion and $2.4 billion.\nFurther out, we believe nitrogen industry conditions will remain positive for an extended period.\nAs Bert will describe in a moment, we see very strong demand, constrained global supply and wide energy spreads between North America and Europe to persist for some time.\nThese factors support our ability to continue to generate significant free cash and to deploy that capital to create shareholder value.\nOur priorities remain the same: invest in growth where opportunities offer returns above our cost of capital and return excess capital to shareholders through dividends and share repurchases.\nWe remain focused on disciplined investments and are excited about the two new projects supporting our clean energy growth platform.\nOnce completed, these projects will enable us to produce over one million tons of blue or carbon-free ammonia.\nChris will share more about our announcement yesterday in a moment.\nWe are also pleased to have achieved investment-grade credit ratings, which recognizes and underscores all of the work we have done to remove fixed costs in the business, reduce debt and highlights the positive industry fundamentals for a North American producer.\nOn the balance sheet, we are quickly closing in on our target of $3 billion of gross debt and expect to repay the remaining $500 million outstanding on our 2023 notes on or before their maturity.\nHowever, that still leaves a substantial amount of excess free cash flow we expect to generate.\nAnd as such, the Board has authorized a new $1.5 billion share repurchase program to facilitate the return of capital to shareholders.\nThen Chris will follow to talk about our financial position and clean energy initiatives, before I return for some closing comments.\nThe last six to nine months have seen a dramatic tightening of the global nitrogen supply and demand balance.\nHigh crop prices and increased economic activity continue to drive demand.\nMeanwhile, lower global production and government actions have created a supply constrained global market.\nThe impact of this can be seen on Slides 11 and 12, where both our spot cost curve and 2022 cost curve are much higher and steeper than in recent years.\nAs you can see, the margin opportunities available to our network have expanded greatly due to a widened energy spread between North America and marginal production in Europe.\nWe expect strong global fertilizer demand to last into at least 2023.\nAs you can see on Slide 8, global stocks-to-use ratios for both grains and oilseeds are at their lowest levels in nearly a decade, supporting high crop prices.\nThese prices will support farm profitability in North America, even with higher input prices, incentivizing farmers to plant acres and maximize yield.\nBased on our order book, we expect the fall ammonia application season will be the largest since 2012, demonstrating farmer commitment to planting corn and applying fertilizer.\nWe believe farmers around the world will make similar decisions, with import demand continuing to be led by India and Brazil.\nWe believe global supply will remain constrained in the near term, with relief unlikely to appear anytime soon.\nWe believe inventory in the channel is very low.\nGlobal production has been lower in 2021 due to severe weather in North America, higher maintenance worldwide, and ongoing European shutdowns and curtailments.\nFurther, the Russian and Chinese governments are discouraging nitrogen fertilizer exports through the spring.\nThese factors suggest the potential for strong fertilizer demand to last beyond 2023 even as some regions are unable to secure enough product in this supply constrained environment, resulting in lower yields.\nIf this were to happen, demand would be deferred into future years as it would take more than two growing seasons to replenish global grain and oilseed stocks.\nAs we prepare for the spring application season, we continue to receive substantial interest for any product we offer into the marketplace.\nWe are building a solid order book for the first quarter of 2022 at the prices you see in the market today.\nSimilar to what we did for the fourth quarter, we are adding natural gas hedges as we make first quarter product commitments in order to lock in margin and protect against significant energy price spikes.\nAs a result, we believe we're in a strong position heading into 2022.\nIn this dynamic market, we remain focused on leveraging our manufacturing, distribution and logistics capabilities to serve our customers and look forward to the opportunities before us.\nFor the first nine months of 2021, the company reported net earnings attributable to common stockholders of $212 million or $0.98 per diluted share.\nEBITDA was $984 million and adjusted EBITDA was approximately $1.5 billion.\nNet earnings and EBITDA reflect the recognition of a noncash impairment charges related to our U.K. operations.\nWe continue to monitor market conditions for the U.K. assets, which accounted for two of our gross margin in 2020.\nThe Billingham complex is operating due to recently improved carbon dioxide contracts and industrial contracts that pass through natural gas costs.\nOperations at Ince remain halted.\nFree cash flow -- free cash generation remains strong.\nThe trailing 12 months net cash provided by operating activities was approximately $1.7 billion and free cash flow was $1 billion.\nWe believe we have a good opportunity in 2022 to build on these results based not only on our positive outlook, but also on increased production from our network.\nIn 2021, we completed a record level of maintenance activity that included turnarounds at seven of our 17 ammonia plants.\nWe will return to a more normal level of turnaround activity in 2022.\nAs a result, we expect to return to our typical high ammonia utilization rates, with gross ammonia production between 9.5 million and 10 million tons.\nWe expect to sell everything we produce and achieve sales volume between 19 million and 20 million tons in 2022.\nAs we sell these product volumes into a favorable market environment, we expect to continue to generate substantial free cash flow and create shareholder value.\nAs Tony said, our Board authorized the new $1.5 billion share repurchase program, which becomes effective January 1, 2022.\nWe continue to operate under our existing program, which has enabled us to acquire more than 11 million shares to be repurchased since 2019.\nThis program expires at the end of the year.\nAt the same time, we'll continue to evaluate clean energy initiatives to meet the demand for ammonia's clean energy capabilities that we expect to emerge in the second half of the decade.\nThis includes positioning our network for the production of blue and green ammonia to support the development of a market for low-carbon ammonia.\nConstructing carbon dioxide dehydration and compression units at Donaldsonville and Yard of the City are a necessary step to enable blue ammonia production through carbon capture and sequestration.\nThese projects leverage our existing asset base and represented an efficient use of capital, with a return profile we expect to be above our cost of capital.\nOnce sequestration is initiated, we'll be able to produce more than one million tons of blue ammonia annually while reducing our carbon emissions in a meaningful way.\nWith our strong balance sheet, we also have the flexibility to evaluate additional opportunities in the years ahead.\nWe continue to collaborate with global leaders where we can provide value, including jointly exploring with Mitsui the development of blue ammonia projects in the United States.\nWith that, Tony will provide some closing remarks before we open the call to Q&A.\nTheir commitment and dedication continue to be the foundation of our success.\nWe are excited about what lies ahead for CF Industries.\nIn fact, I think the company is better positioned today than we have ever been in our history.\nWe are again an investment-grade credit issuer.\nWe have the fewest shares outstanding ever.\nWe expect the business to produce between $2.2 billion to $2.4 billion of adjusted EBITDA this year.\nAnd as we look forward to next year, we should have significantly more tons to sell at overall average higher prices than this year.\nSo the business should generate all-time records for free cash flow per share.\nWe see demand for low-carbon ammonia developing that should provide a long-term growth platform for the company.\nAnd with our investments in both green and blue ammonia production, we will be at the forefront of this exciting opportunity.\nTaken together, we have never been in a better position to create value for shareholders.\n",
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"content": "compname reports nine month 2021 net earnings of $212 million, ebitda of $984 million, adjusted ebitda of $1,485 million.\ncf industries holdings - management believes global nitrogen supply will remain constrained with production in key regions affected by high energy prices.\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 Martin Jarosick, Vice President, Investor Relations for CF.\nThese statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.\nTherefore, actual outcomes and results may differ materially from what is expressed or implied in any statements.\nMore detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website.\nNow let me introduce Tony Will, our President and CEO.\nBefore I jump into our financial results, I want to highlight the entire CF team for amazing execution across all areas of our business.\nWe set all-time company best records for safety, ammonia production and sales volumes, despite the challenges that 2020 hurled at us.\nThere was no playbook for how to manage through a global pandemic, yet this team developed and implemented plans to keep our people safe along with everyone who came on to our sites.\nTo date, we have no known transmissions of COVID-19 within any of our facilities.\nOn the safety front, we ended the year with only four recordable injuries and zero lost time injuries across the entire network for the whole year.\nAs is typically the case, safe operations are also more productive.\nAnd we proved that again with an all-time ammonia production record of 10.4 million tons.\nOur sales and logistics team rose to the challenge and set all-time sales and shipping records of over 20 million product tons.\nTruly a remarkable performance by all.\nLooking ahead, we are very optimistic about 2021.\nAs Bert will describe in a moment, the global nitrogen pricing outlook is much more positive than a year ago.\nWith strong commodity crop prices and significantly higher energy prices in Asia and Europe, we are seeing a robust demand environment, coupled with a steeper global cost curve.\nThe current conditions in the Southern Plains in Midwest have thrown another crisis at us, but as usual, the team has done a fantastic job responding to and navigating through these new challenges.\nWe have been able to quickly adjust our plant operations based on close communications with our gas suppliers.\nDisruptions have been widespread across the US nitrogen industry and this should result in further tightening of nitrogen supply for the spring planting season in North America, additional support for an already strong 2021.\nLonger term, we are pleased with the progress we are making on our commitment to the clean energy economy.\nWe continue to advance discussions with technology providers and partners, and we have seen new opportunities develop since our announcement.\nThese underscore how broad the demand for green and low carbon ammonia will be, and also the value of our unique capabilities.\nThen Chris will follow to talk about our financial position and capital allocation outlook before I return for some closing comments.\nGlobal nitrogen dynamics today with low-cost producers like CF are the most positive they have been since 2014.\nStrong demand driven by high commodity crop prices and a steeper global cost curve are creating a tighter nitrogen supply and demand balance.\nAs a result, prices have risen significantly in recent months and are well above 2020 values.\nGlobal demand is robust and broad-based.\nFarmers in North America has seen nitrogen consuming coarse grains reach multi-year highs for both near term and futures contracts.\nFor corn, we have seen lower-than-expected supply and high global demand led by China.\nAs a result, the USDA is projecting that the corn stocks-to-use ratio for the marketing year-over-year will be at its lowest level since 2013.\nThis supports our projection of 90 million to 92 million planted corn acres in the US this year with upside potential.\nThrough the balance of the year, we continue to expect positive demand in most growing regions, particularly India and Brazil.\nWe expect the urea tender volumes in India this year will be well above the five year average and close to the 10 million metric tons of last year.\nFor Brazil, we project 2021 imports of urea to be approximately 6.57 million metric tons, similar to last year.\nAs demand was increasing, the cost curve steepened significantly.\nFrom July 2020 to July -- to December 2020, the Dutch TTF natural gas price and the Asian JKM LNG price both increased about five times greater than the US Henry Hub natural gas price.\nThis had a number of impacts.\nFirst, margin opportunities increased for low cost producers.\nSecond, the significant increase in energy prices for producers in Europe and Asia pressured their margins, not only leading to lower operating rates but creating demand for import ammonia into those regions.\nThis contributed to even tighter global market.\nOver time, we expect the global nitrogen market to tighten further and faster driven by several factors.\nIn the near term, the need to rebuild the stock of commodity crops will underpin demand growth.\nLonger term, a key driver will be emerging demand for ammonia for clean energy applications.\nWe believe this level of global demand will require more production from the highest cost plants until prices rise enough to incent greenfield construction in other parts of the world.\nWe are well positioned as we approach the spring application season and have the flexibility necessary to address any challenges that arise.\nWe believe that the recent weather conditions in the US, or [Phonetic] disruption that we've built our system to overcome.\nWe are looking forward to working with our customers and leveraging our optionality to ensure that these requirements are met as they make -- as our customers make their final preparations for spring.\nFor 2020, the company reported net earnings attributable to common stockholders of $317 million or $1.47 per diluted share.\nEBITDA was $1.32 billion and adjusted EBITDA was $1.35 billion.\nNet cash provided by operating activities was $1.2 billion and free cash flow was approximately $750 million.\nThese results reflect year over year, global nitrogen -- lower year-over-year global nitrogen prices, partially offset by higher sales volume and lower natural gas and SG&A costs compared to the year before.\nThe results also demonstrate our continued efficient conversion of EBITDA into free cash.\nAs you can see on slide 9, we converted more than 55% of our adjusted EBITDA into free cash in 2020, which is the highest rate among our peers.\nOur free cash conversion continues to support our capital structure and allocation priorities.\nThis will lower our gross debt to $3.75 billion.\nAs we remain focused on investment grade and positioning the company to execute our clean energy growth strategy, we will continue to evaluate opportunities to further reduce gross debt over time.\nWe remain excited to invest in the clean energy growth opportunity given the expected return profile.\nWe will also continue to return cash to our shareholders through our quarterly dividend and opportunistic repurchases at attractive levels.\nAs we look ahead to 2021, I want to share some of our expectations for the year ahead.\nWe anticipate that our capital expenditures for 2021 will be in the range of $450 million.\nThis reflects a return to a normal level of planned maintenance and turnaround activities in the year ahead, and the first expenses associated with the Green ammonia project at Donaldsonville.\nWe also expect SG&A levels to return to a level closer to 2019 than 2020.\nOur annual cash interest expense will fall to $175 million with the repayment of the 2021 notes.\nWith our planned maintenance schedule and recent gas driven curtailments, we expect gross ammonia production to be around 9.5 million to 10 million tons.\nThis, along with lower inventories to the start of the year will likely result in lower product tons sold than in 2020.\nAdditionally, based on forward curves, we project our natural gas costs will be somewhat higher in 2021 than in 2020.\nHowever, we expect margins to improve this year given the positive nitrogen pricing outlook that Bert described.\nAs you can see on slide 12, increases in our realized urea price have a much greater impact on EBITDA than higher realized natural gas costs.\nWith that, Tony will provide some closing remarks before we open the call for Q&A.\nTheir commitment to our values and unwavering focus on safety and execution are truly the foundation of our success.\nWe feel very positive about the year ahead.\nAs Bert described, nitrogen industry dynamics for producers in North America are the most favorable we have seen in nearly a decade.\nAnd longer term, the developing demand for ammonia in clean energy applications provides exciting growth prospects for us, where we are uniquely positioned to be a global leader providing clean energy for a better world.\nEconomies will continue to focus on decarbonization, and hydrogen will be a key solution, with ammonia a critical enabler of hydrogen as a clean fuel.\nWe have seen tremendous interest in our strategic direction since our announcement last fall, and see substantial opportunities ahead for clean and low carbon ammonia.\nThis will provide a growth platform for longer-term shareholder value.\n",
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"content": "compname reports full year 2020 net earnings of $317 mln.\ncompname reports full year 2020 net earnings of $317 million, ebitda of $1,316 million, adjusted ebitda of $1,350 million.\nprojects capital expenditures for full year 2021 will be in range of $450 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'd like to give you a sense for how Church & Dwight has reacted to the pandemic.\nThe virus disrupted just about everything.\nConsumer behavior, retailer operations, our supply chain and how we work.\nWe pivoted every aspect of our business to meet the new challenges.\nInitially, we had a daily huddle at 8:00 a.m. seven days a week to address employee safety, production levels, co-packer operations and shipment patterns.\nToday, we meet five days a week.\nWe increased our communications with retailers and changed our marketing messages.\nWe moved people to focus on the online class of trade to create and upload new content.\nTo speed up our reaction time, we created new data feeds of POS data and retailer in stock levels.\nWe added more co-packers to our supply chain network.\nWe conduct weekly surveys of our consumers.\nAnd all of our efforts are paying off.\nThe agility and resilience of the Church & Dwight team shows up in our results.\nOur priorities continue to be employee safety, meeting the needs of consumers and retailers, helping the communities where we live and ensuring the strength of our brands.\nOur plant, warehouse and laboratory employees have done an exceptional job in keeping safe, which has contributed to our ability to operate our supply chain.\nThe rest of our employees are working remotely and doing a super job running the company.\nWe have been supporting our communities through monetary and product donations, including the contribution of personal protective equipment.\nIn June, we began producing hand sanitizer in our U.K. plant for both donations and employee usage.\nWith respect to consumers and retailers, we are taking steps to increase both short and long-term manufacturing capacity, and we continue to work closely with suppliers and retail partners to keep pace with increased demand.\nA good example is our installation in Q2 of a new liquid laundry line in our York plant, which was quite a feat given the obstacles presented by COVID.\nAnd as I mentioned before, we've added more co-packers to ensure steady supply for other categories.\nNow let's talk about the results.\nQ2 was an exceptional quarter.\nReported sales growth was 10.6%.\nGross margin expanded by 220 basis points, and adjusted earnings per share was $0.77.\nRevenue, gross margin, earnings and operating cash flow were all significantly higher than Q2 last year, driven by the increase by a significant increase in demand for many of our products.\nOrganic sales grew 8.4%, driven by higher consumption, restocking of retailer inventories and lower couponing.\nOur exceptional first half is a testament to the diverse set of categories that we compete in and the strength of our brands.\nRegarding e-commerce, even more consumers have moved online.\nOur online sales increased by 75% in Q2 as all retailer.coms have grown.\nWe began the year targeting 9% online sales.\nIn Q1, 10% of our sales were online.\nIn Q2, it was 13%, and we expect second half online sales to be equally strong.\nWe continue to conduct research on the purchasing habits of U.S. consumers.\nOf the categories that we are following, there is continued consumer worry about the ability to leave the house and concern that stores and websites will run out.\nConsumers report that they are consolidating shopping trips and continue to stockpile to ensure that they have enough product for a couple of weeks at a time.\nSimilar to last quarter, I now want to talk about consumption and shipments.\nYear-to-date shipment and consumption patterns are back in balance for our brands in the 15 categories that we compete.\nWe do have some additional opportunities in gummy vitamins and ARM & HAMMER baking soda as shipments are still well behind consumption.\nIn Q2, we saw a double-digit consumption growth in gummy vitamins, women's hair removal, cleaners and baking soda.\nOn the other hand, restrictions on consumer mobility drove double-digit consumption declines for WATERPIK, TROJAN condoms and BATISTE dry shampoo.\nPeople are just not socializing due to government restrictions under mobility, which has a big effect on some personal care categories.\nJuly consumption for the U.S. business is tracking to be over 10%, led by our gummy vitamin brands, OXICLEAN additives and baking soda.\n1/3 of our July consumption growth is attributed to our gummy business.\nIn July, and I think this is important, only two of our 15 brands, that would be BATISTE and TROJAN, showed negative consumption.\nIn contrast, in the month of May, eight of our 15 key product lines showed negative consumption.\nSo consumption is trending positively.\nJuly shipments for the U.S. business are tracking to be up high single digits.\nShipments of gummy vitamins, OXICLEAN additives, baking soda and WATERPIK are all up double-digit in July.\nOur gummy vitamins have been on fire.\nConsumption for May, June and July has been averaging up over 40%.\nAnd there is an increased consumer focus on wellness, and it is likely that we will reach a permanently higher level of consumption.\nWe are looking at third parties to supplement our existing capacity right now.\nYou may recall that we announced our exit from private label early in Q1, and that turned out to be a timely decision because it helped free up capacity for our brands.\nRegarding our laundry and litter businesses, consumption is recovering.\nYou will recall that there was massive pantry loading in laundry and litter in the month of March.\nThe laundry pantry loading appears to be absorbed as our consumption improved from being down low single digits in the quarter to up approximately 10% in July year-over-year.\nSimilarly, ARM & HAMMER litter improved from negative consumption in Q2 to up approximately 5% in July.\nSo our two big categories are recovering nicely.\nIn the water flosser category, WATERPIK is starting to recover from the steep decline in April when consumption was down 55%.\nQ2 consumption was down significantly due to retailer closures, deprioritization of water flossers by some retailers and closure of dental offices.\nRemember that dental professionals are an important source of water flosser recommendations, which influences first-time buyers.\nThe most recent surveys indicate that 95% of dental offices are now open, although most are at a reduced capacity.\nThe good news is monthly consumption of WATERPIK water flossers is now positive.\nAlthough our Lunch & Learn activity continues to be significantly curtailed, we intend to address this with incremental advertising in the second half.\nThe FLAWLESS brand has had strong consumption growth in May, June and July due to reduced consumer access to salons.\nThe launch of our new full-body device, NU RAZOR, was perfectly timed.\nFLAWLESS is one of our brands that could benefit from the at-home grooming trend, and we tend to strongly support FLAWLESS with advertising in the second half.\nPrivate label shares is something we track closely.\nAs you know, our exposure to private label is limited to five categories, and the private label shares were generally unchanged in Q2, and it was also true in Q1.\nBecause of the virus, consumer trends are emerging, which affect our business, including a focus on cleaning, personal wellness and new grooming routines.\nThese consumer trends may endure over the long term, and if they do, we believe we are well positioned.\nOur international business came through with slightly positive organic growth in the quarter, driven by strong growth in our GMG business, that stands for Global Markets Group.\nIn particular, China and Asia-Pacific turned in a remarkably strong performance in the second quarter.\nAnd in July, our GMG business is off to a strong start.\nAnd we're seeing strong POS recovery in Canada and Europe as well is starting to recover.\nOur Specialty Products business has had three straight quarters of organic growth, and we expect continued organic growth for our Specialty Products in the second half.\nNow turning to new products.\nInnovative new products will continue to attract consumers even in this economy.\nIn Q2, we launched a new ARM & HAMMER laundry detergent called CLEAN & SIMPLE, which has only six ingredients plus water and this compares to 15 to 30 ingredients for the typical liquid detergent, and has the cleaning power comparable to our best-selling consumer favorite, which is ARM & HAMMER with OXICLEAN.\nHowever, because of retailer stocking issues in the second quarter, we eliminated advertising, trade and couponing support that we had planned, and we pushed it to the second half.\nWe're excited to report today that we have another big product launch this year.\nThe second launch is in the clumping litter category.\nThis month, we began shipping ABSORBx, which is a revolutionary new ARM & HAMMER lightweight litter made from desert dry materials.\nIt absorbs wetness in seconds to trap and seal odors fast.\nABSORBx is 15% lighter than our existing lightweight, and it's 55% lighter than our regular clumping litter.\nWe have a significant amount of advertising, trade and couponing planned for the second half to get behind this exciting new launch.\nAnd by the way, here's a fun fact, our friends at Clorox just posted to their website a new litter variant called Ultra Absorb.\nAnd we'll take that as a complement.\nImitation is the greatest form of flattery.\nNow let's turn to the outlook.\nWe had an exceptional first half, and we were running well ahead of our original full year earnings per share outlook.\nWe reinstated our earnings per share outlook with 13% growth, which is far above our evergreen target of 8% annual earnings per share growth.\nAs in prior years, when we find ourselves in this position, we use the opportunity to invest in our future, which we intend to do in the second half.\nYou may recall that just last year, we had this exact same opportunity to invest, and our earnings per share was down 4% in Q4 2019 as a result.\nThis year, we just got to a similar point much earlier.\nIt's important to note that we continue to take the long view in running Church & Dwight.\nNow in conclusion, there are lots of reasons to have confidence in Church & Dwight.\nThe great thing about our company is we are positioned to do well in both good and bad economic times.\nThe categories in which we play are largely essential to consumers.\nWe have a balance of value and premium products.\nOur power brands are number one or number two in their categories, and we have low exposure to private label.\nWe're coming off one of the best first halfs we've ever had and are entering this downturn in a position of strength and with a strong balance sheet.\nAnd with a strong balance sheet, we continue to be open to acquire TSR accretive businesses.\nAnd finally, we have the resources, the common sense and the ambition to ensure that our brands perform well in the future.\nAnd next up is Rick to give you details on the second quarter.\nWe'll start with EPS.\nSecond quarter adjusted EPS, which excludes an acquisition-related earn-out adjustment, grew 35% to $0.77 compared to $0.57 in 2019.\nThe earnings per share increase was largely driven by higher sales due to continued high consumer demand for our products and higher gross margins.\nAs we discussed in previous calls, the quarterly earn-out adjustment will continue until the conclusion of the earnout period.\nReported revenue was up 10.6%, reflecting a significant increase in consumer demand for our products due to COVID.\nOrganic sales were up 8.4%, driven by a volume increase of 4.9% and positive product mix and pricing of 3.5%.\nOrganic sales growth was driven by higher consumption, lower couponing and recovery of retailer and stock levels.\nNow let's review the segments.\nOrganic sales increased by 10.7% due to higher volume and positive price mix.\nWe typically try to break down the organic growth for you.\n6% is consumption growth, reflecting strong, tracked and untracked in e-commerce growth, 1% from lower couponing, and then approximately 3.5% from improving retail and stock levels.\nOverall, growth was led by ARM & HAMMER liquid laundry detergent, VITAFUSION and L'IL CRITTERS gummy vitamins, ARM & HAMMER clumping cat litter and baking soda and OXICLEAN stain fighters.\nConsumer International delivered 0.6% organic growth due to positive price and product mix offset by lower volume.\nGrowth was driven by BATISTE Dry shampoo, FEMFRESH feminine hygiene portfolio and ARM & HAMMER liquid laundry detergent, launch detergents in the Global Markets Group business, partially offset by Europe and Mexico domestic market declines.\nOf note, Asia-Pacific had strong performance in the quarter.\nFor our SPD business, organic sales increased 3% due to higher volume, offset by lower pricing.\nAnd demand for our products continues to grow in the poultry industry.\nTurning now to gross margin.\nOur second quarter gross margin was 46.8%, a 220 basis point increase from a year ago due to a reduction in trade, couponing and improved productivity.\nIn terms of the gross margin bridge versus year ago, positive price and volume and mix contributed 220 basis points.\nProductivity added 140 basis points, offset by higher manufacturing costs of 110 basis points which was driven by 110 basis points related to COVID supply chain costs and then improved commodity costs were offset by higher manufacturing costs.\nFinally, a drag of 20 basis points from the prior year FLAWLESS accounting impact and a 10 basis point drag from FX is how we get to 220 up for the quarter.\nMoving now to marketing.\nMarketing was down $6.8 million year-over-year.\nMarketing expense as a percentage of net sales decreased 180 basis points to 10.2%.\nDue to retailer out of stocks, marketing spend was significantly reduced and shifted to the back half to support new products.\nFor SG&A, Q2 adjusted SG&A increased 30 basis points year-over-year, primarily due to higher incentive comp, intangible costs related to acquisitions and investments in R&D and IT.\nAnd for net operating profit, the adjusted operating margin for the quarter was 21.5%.\nOther expense all in was $14.7 million, a slight decline due to lower interest expense resulting from lower interest rates.\nAnd for income tax, our effective rate for the quarter was 19.6% compared to 18.7% in 2019, an increase of 90 basis points, primarily driven by lower stock option exercises.\nAnd now turning to cash.\nFor the first six months of 2020, cash from operating activities increased 70% to $599 million due to higher cash earnings and a decrease in working capital.\nThis includes deferring an $81 million income tax payment in line with the CARES Act.\nWithin the quarter, we fully repaid the revolving credit line that was accessed in Q1 during the early days of COVID.\nAs of June 30, cash on hand, was $452 million.\nOur full year capex plan has gone from $80 million to $100 million as we begin to expand manufacturing and distribution capacity, primarily focused on laundry, litter and vitamins.\nAnd now turning to the outlook.\nCompany is now reinstating the 2020 outlook, given we have half the year behind us and strong sales growth in July.\nHowever, due to quarterly volatility in retailer orders and consumer consumption, we will only provide a full year outlook.\nWe now expect approximately 9% to 10% full year 2020 sales growth and approximately 7% to 8% organic sales growth.\nAdjusted earnings per share growth is expected to be 13% above the high end of our original 7% to 9% outlook.\nThis implies a front-end loaded year and flat earnings per share in the second half as the company has shifted promotional and advertising dollars from the first half to the second half in support of new products.\nTurning to gross margin.\nThe first half gross margin expanded 150 basis points.\nWe expect that second half will contract by a similar amount.\nHalf of it is simply the year-over-year impact of acquisition accounting.\nThe balance reflects incremental COVID costs as well as WATERPIK tariffs, new product support that Matt mentioned, incremental manufacturing and distribution capacity investments.\nAnd so net, that means we'll be slightly below our original full year margin outlook.\nAs you heard from Matt, we intend to make incremental investments in the back half of 2020.\nSome examples here include a new third-party logistics provider, outside storage to handle surge inventories.\nPreliminary engineering on capacity decisions.\nVMS outsourcing costs as well as other investments around automation, consumer research and analytics.\nLastly, consistent with how we've been managing throughout the crisis, our outlook may continue to adapt, and we may continue to defer trade couponing in advertising even into next year, depending on consumption, the resurgence of COVID-19 or supply constraints.\nAnd with that, Matt and I would be happy to take any questions.\n",
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"content": "compname reports q2 adjusted earnings per share $0.77 excluding items.\nq2 adjusted earnings per share $0.77 excluding items.\n2020 full year outlook raised from original outlook.\n2020 reported sales growth forecast raised to 9-10%.\n2020 organic sales growth forecast raised to 7-8%.\n2020 adjusted earnings per share growth forecast raised to 13%.\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: But before we begin, I'd like to recognize all Church & Dwight employees around the world for their continued dedication to keeping our company going during the pandemic, especially our supply chain and R&D teams as during this quarter the company faced the complexities of raw material shortages and labor shortages at our suppliers and third-party manufacturers.\nNow let's talk about the results.\nQ2 was another solid quarter for the company.\nReported sales growth was 6.4%, organic sales growth -- grew 4.5% and exceeded our 4% Q2 outlook.\nThe 4.5% organic growth is impressive considering Q2 2020 organic sales growth was 8.4%.\nAdjusted earnings per share was $0.76 and that's $0.07 better than our outlook.\nThe earnings per share beat is attributed to two things, one, a temporary reduction in marketing, and two, our revenue growth handily exceeded our outlook.\nAnother item that is noteworthy is we overcame a tax rate which was much, much higher than expected in Q2.\nWe grew consumption in 13 of the 16 categories in which we compete, and in some cases on top of big consumption gains last year.\nAnother way to look at this is to compare our Q2 consumption on those 16 categories to 2019, a pre-COVID year, we have higher consumption in 14 of those 16 categories compared to Q2 2019.\nRegarding brand performance, nine of our 13 brands saw a double-digit consumption growth and I'll name them for you: gummy vitamins, stain fighters, cat litter, condoms, battery powered toothbrushes, depilatories, dry shampoo sailing spray and water flossers.\nNow although many of our brands delivered double-digit consumption growth it is not reflected in our 4.5% organic sales growth as shipments were constrained by supply issues which we do expect to lessen by Q4.\nIn Q2, online sales as a percentage of total sales was 14.2%.\nOur online sales increased by 7% year-over-year.\nBut remember, this is on top of the 75% growth in e-commerce that we experienced in Q2 2020 versus '19.\nWe continue to expect online sales for the full year to be 15% as a percentage of total sales.\nWith 70% of American adults having at least one vaccine shots so far, the US has been opening up consumers becoming more mobile.\nIn recent days however, it appears that trend could slow down due to the delta variant combined with many people still being unvaccinated.\nOutside the US, many countries continue to enforce periodic lockdowns and we expect that to continue.\nAs described in the release we faced shortages of raw and packaging materials.\nLabor shortages at suppliers and third-party manufacturers have reduced their ability to produce.\nAnd transportation challenges have further contributed to supply problems.\nBesides shortages, we are dealing with inflation.\nSignificant inflation of material and component costs is affecting our gross margin expectations, which Rick will cover in his remarks.\nDue to a lower case fill rate we pulled back on Q2 marketing, especially for household products.\nWe expect the supply issues to begin to abate in Q4.\nThe higher input costs and transportation costs are expected to continue though for the rest of the year.\nOn past earnings calls we described how we expected categories and brands to perform in 2021.\nOverall, our full year thinking is generally consistent.\nTo name a few categories, demand for vitamins, laundry additives, and cat litter is expected to remain elevated in 2021.\nCondoms, dry shampoo, and water flosses are recovering and experiencing year-over-year growth as society opens up and consumers have greater mobility.\nBaking soda and oral analgesics are expected to decline from COVID highs.\nNow I'm going to talk about the divisions.\nConsumer Domestic business grew organic sales 2.8%.\nThis is on top of 10.7% organic growth in Q2 2020.\nLooking at market shares in Q2, five out of our 13 power brands met or gained share.\nOur share results are clearly impacted by our supply issues.\nI'll comment on a few of the brands right now.\nVITAFUSION gummy vitamins saw great consumption growth in Q2, up 10%.\nConsumers have made health and wellness a priority.\nIt appears that new consumers are coming into the category and they're staying.\nSo here's a supporting statistic.\nIn the last year, VITAFUSION household penetration is up 17%.\nThat means the brand is now in one out of every ten households.\nNext up is WATERPIK.\nWATERPIK grew consumption 72% in Q2 as it continues to recover from COVID lows and benefits from the heightened consumer focus on health and wellness.\nWATERPIK is also benefiting from dental offices returning to pre-COVID patient levels.\nWe expect the frequency of our Lunch 'n Learn program to return to normal levels in the second half of this year.\nBATISTE dry shampoo grew consumption 37%.\nDry shampoo is recovering as stores have reopened and consumers are becoming more mobile.\nSimilarly TROJAN delivered 11% consumption growth.\nSociety has been opening up.\nAs restaurants, bars and clubs have reopened people are hooking up again.\nHere's a fun fact that might be a contributing factor.\nIn Q2, TROJAN launched on TikTok with explosive uptick from consumers with over 47 million views.\nNext I want to discuss International.\nDespite intermittent lockdowns in our markets, our international business came through with 10.4% organic growth in the quarter, primarily driven by our strong growth in our Global Markets Group.\nAsia continues to be a strong growth engine for us.\nWATERPIK, BATISTE, and ARM & HAMMER led the growth for the international division in the quarter.\nOur Specialty Products business delivered a positive quarter with 11.8% organic growth.\nThis was driven by higher pricing and volume.\nMilk prices remain stable and demand is high for our nutritional supplements.\nAt the prior year quarterly organic growth for specialty products was 3%.\nSo 11.8% is an impressive result.\nNow, turning to new products.\nInnovative new products will continue to attract consumers.\nIn the household products portfolio, we introduced OXICLEAN laundry and Home sanitizer.\nIt's the first and only sanitizing laundry additive that boost stain fighting and eliminates 99.9% of bacteria and viruses.\nIn the personal care portfolio, VITAFUSION launched Elderberry gummies, Triple immune gummies, and Power Zinc gummies to capitalize and increased consumer interest in immunity.\nWATERPIK launched WATERPIK ION, a water flosser which is 30% smaller with a long lasting lithium-ion battery.\nIt is specifically designed for smaller bathrooms spaces.\nTo capitalize on its earlier success, WATERPIK SONIC FUSION, the world's first flossing toothbrush was upgraded to SONIC FUSION 2.0 with two brush head sizes and two speeds, and that's doing extremely well.\nAnd finally, FLAWLESS is taking advantage of the at-home beauty and self-care trends with at home manicure and pedicure solutions.\nNow let's turn to the outlook.\nSince we last spoke to you in April, unplanned cost inflation has grown by another $35 million.\nIn addition to the price increases on 33% of our portfolio that we announced in April, we have just announced price increases on other categories, which means we have now priced up 50% of our portfolio.\nOf course there is a lag in the positive impact of these increases which impacts our earnings outlook.\nWe now expect to be at the lower end of our range of adjusted earnings per share growth of 6% to 8% as a result of heightened input costs.\nAlthough we expect to be at the low end of the range, it's really important to remember that we are comping 15% earnings per share growth in 2020.\nWe expect full year reported sales growth of 5% with 4% full year organic sales growth.\nIt's also important to call out that we are committed to maintaining the long-term health of our brands by ensuring sustained high levels of marketing investment in the second half.\nIn conclusion, July consumption continues to be strong.\nWe are navigating through significant supply challenges and cost inflation.\nWe believe we are well positioned for 2022 with the pricing actions we have taken.\nWe expect our portfolio of brands to do well both in good and bad times and in uncertain economic times such as now.\nWe have a strong balance sheet and we continue to hunt for TSR accretive businesses.\nNext up is Rick to give us details on Q2.\nWe'll start with EPS.\nSecond quarter adjusted EPS, which excludes the positive earn-out adjustment was $0.76, down 1.3% to prior year.\nAnd as we discussed in previous calls, the quarterly earn out adjustment will continue until Q4, which is the conclusion of the earn out period.\n$0.76 was better than our $0.69 outlook primarily due to continued strong consumer demand for many of our products as well as a temporary reduction in marketing spend as supply chain shortages were impacting customer fill rates, which we expect to recover in Q4.\nThe $0.76 includes a $0.04 drag from a higher tax rate and a $0.04 drag from the VMS recall costs.\nReported revenue was up 6.4%.\nOrganic sales were up 4.5% driven by a volume increase of 4.3%.\nMatt covered the topline and I'll jump right into gross margin.\nOur second quarter gross margin was 43.4%, a 340 basis point decrease from a year ago.\nThis was right in line with our outlook for down 350 basis points for the quarter.\nGross margin was impacted by a 480 basis points of higher manufacturing costs primarily related to commodities, distribution, and labor costs.\nTariff costs negatively impacted gross margin by an additional 50 basis points.\nThese costs were partially offset by a positive 40 basis point impact from price volume mix and a positive 140 basis point impact from productivity programs as well as a ten basis point positive impact from currency.\nMoving to marketing, marketing was down $5.3 million year-over-year as we lowered spend to reduced demand until fill rates could recover.\nMarketing expense as a percentage of net sales decreased 100 basis points to 9.2%.\nWe continue to expect full year marketing expense as a percentage of net sales to be approximately 11.5% in line with historical averages.\nFor SG&A, Q2 adjusted SG&A decreased 140 basis points year-over-year with lower legal costs and lower incentive comp.\nOther expense all in was $11.4 million, a $3.3 million decline to the lower interest expense from lower interest rates.\nAnd for income tax, our effective rate for the quarter was 24% compared to 19.6% in 2020, an increase of 440 basis points, primarily driven by lower stock option exercises.\nYou will hear in a minute this also impacts our full year tax rate.\nAnd now to cash.\nFor the full -- for the first six months of 2021 cash from operating activities decreased 42% to $344 million due to higher cash earnings being offset by an increase in working capital.\nAccounts payable and accrued expenses decreased due to the timing of payments.\nAs a reminder, in the year-ago numbers there was an $80 million benefit in Q2 related to the timing of US federal income tax payments shifting from the second to the third quarter in the prior year.\nWe expect cash from operations to be approximately $90 million for the full year.\nAs of June 30th, cash on hand was $149.8 million.\nOur full year CapEx plan is now $140 million as we continue to expand manufacturing and distribution capacity, primarily focused on laundry, litter, and vitamins.\nThe decrease from our previous $180 million is project timing related.\nFor Q3 we expect reported sales growth of approximately 3%, organic sales growth of approximately 1.5% entirely due to supply chain constraints.\nWe expect gross margin expansion in the quarter led by our price increases.\nAdjusted earnings per share is expected to be $0.70 per share, flat from the last year's adjusted EPS.\nA strong operating performance is offset by higher tax rate.\nAnd now for the full-year outlook, we now expect full-year 2021 reported sales growth to be approximately 5%, organic sales growth to be approximately 4%.\nOur consumption is strong and outpacing shipments.\nWe expect our customer fill level to improve by Q4.\nTurning to gross margin, we now expect full year gross margin to be down 75 basis point.\nThis represents an incremental impact from our last guidance due to broad based inflation on raw materials and transportation costs.\nOur April outlook expected gross margin to be flat for the year, and $90 million of inflation from our original guidance.\nNow we're absorbing $125 million of incremental costs for the full year.\nThis additional $35 million of inflation drives the change in our gross margin outlook.\nWe've taken another round of pricing actions with over 50% of our global brands having announced price increase.\nWhile some of this benefit helps the second half of 2021, most of the benefit is in 2022.\nAs a reminder, we price to protect gross profit dollars, not necessarily margin.\nThe $35 million movement versus our previous outlook is primarily non-commodity related, transportation, labor, third-party manufacturers, and other raw material price increases make up the majority.\nCommodities are also up.\nAnd while we have 80% of our commodities hedged, let me give you a sense of what's going on with major commodities.\nOver the past few months, second half expectations for resins have moved up considerably.\nFor example, previously in our forecast it was based on HDPE being up 30% in the second half of the year, now it's up 60%.\nPolypros [Phonetic] moved from being up 40% to now 90%.\nIn addition, transportation costs such as diesel have continued to rise.\nWe previously expected second half diesel to be up 18% and now it's of 27%.\nCartons and corrugate previously were single digit, now they're low double digit.\nSo that's the latest Bank [Phonetic] on commodities and now we'll move to tax.\nOur full year tax rate expectations are now 23%, higher versus our last expectations due to lower stock option exercises.\nThis is a $0.04 drag versus our previous outlook.\nWe now expect adjusted earnings per share to be at the lower end of our previous range of 6% to 8%.\nOur brands continue to go from strength to strength as strong consumption in organic sales growth lapped almost 10% organic growth a year ago.\nWhile inflation is broad based, we have taken pricing actions to mitigate, which gives us confidence in margin expansion in the back half.\nAnd with that, Matt.\nAnd I would be happy to take any questions.\n",
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"content": "church & dwight co q2 adjusted earnings per share $0.76 excluding items.\nq2 adjusted earnings per share $0.76 excluding items.\nsees fy sales up about 5 percent.\nsees 2021 adjusted earnings per share now at lower end of 6-8% range.\nexpect q3 net sales to be comparable to q2 net 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: The pandemic has given us an opportunity to display our agility as a company.\nWe increased our communications with retailers.\nWe changed our marketing messages.\nWe shifted investments to categories that are most important to consumers.\nAnd we set new production records for VITAFUSION, ARM & HAMMER laundry and ARM & HAMMER baking soda.\nAnd we've moved people to focus on the online class of trade.\nSo we've been proactive in seizing the opportunities presented by the crisis and are increasing manufacturing capacity in our plants and externally with new co-packers.\nThe agility and resilience of the Church & Dwight team is showing up in our results.\nOur priorities continue to be employee safety, meeting the needs of consumers and retailers, helping the communities where we live and ensuring the strength of our brands.\nOur plant, warehouse and laboratory employees have done an exceptional job in keeping safe, which has contributed to our ability to operate our supply chain.\nOur office employees continue to work remotely and are doing a super job running the company.\nSo now let's talk about the results.\nQ3 was another exceptional quarter.\nReported sales growth was 13.9% and adjusted earnings per share was $0.70.\nRevenue, earnings and operating cash flow were all significantly higher in Q3 than last year, driven by the significant increase in demand for many of our products.\nOrganic sales grew 9.9%, driven by higher consumption.\nRegarding e-commerce, we were already strong pre-COVID and well positioned online.\nIn Q3, our online sales increased by 77% as all retailer.coms have grown.\nOne example would be gummy vitamins.\nIn 2019, 8% of our full year sales were online.\nThis year, we expect full year to be about 14% online.\nRecall, we began the year targeting 9% online sales as a percentage of global consumer sales.\nIn Q1, it was 10% online; Q2, 13%; and Q3, also 13%.\nSo we expect the full year to be actually close to 13% as well.\nWe continue to conduct research on the purchasing habits of U.S. consumers.\nThere's no surprises here, actually.\nThere is continued consumer concern that stores will run out of stock and websites will face delivery issues.\nConsumers report that they are consolidating shopping trips and continue to stockpile to ensure that they have enough product for a couple of weeks at a time.\nIf we look at year-to-date shipment and consumption patterns, our brands remain generally in balance in the 15 categories in which we compete.\nWith respect to our brands, we had broad-based consumption growth in Q3.\nWe saw a double-digit consumption growth in VITAFUSION and L'IL CRITTERS gummy vitamins, ARM & HAMMER baking soda, OXICLEAN, FLAWLESS, ORAJEL, NAIR, FIRST RESPONSE pregnancy kits and cleaners.\nIn Household, our laundry business consumption was up 4% and ARM & HAMMER cat litter was up 8%.\nWater flossers is another bright spot as consumption turned slightly positive in Q3.\nAlthough our Lunch & Learn activity continues to be significantly curtailed, we intend to continue to address this with incremental advertising.\nIn addition to VITAFUSION and L'IL CRITTERS, water flossers is another brand we expect to benefit from the heightened consumer focus on health and wellness.\nBATISTE dry shampoo remains impacted by social distancing, with consumption down 10%, but improved sequentially compared to Q2 when consumption was down 22%.\nTROJAN consumption was down 6% in Q3, but also improved sequentially when we were down 15% in Q2.\nThere's no doubt that consumers have made health and wellness a priority.\nVITAFUSION and L'IL CRITTERS gummy vitamins saw the greatest consumption growth of any of our categories in Q3, up 49%.\nThe category consumption was even higher.\nOur expectation is that consumer demand for gummy vitamins will remain high.\nAnd we have new third-party capacity coming online in late Q4 to take advantage of this trend.\nConsumers are focusing on health and wellness, but also, cleaning, home cooking and new grooming routines.\nAt a recent investor conference, you may have heard me cite consumer research that suggests it takes 66 days to form a new habit.\nAnd only time will tell if all of these new behaviors will translate into permanently higher levels of consumption.\nBut if they do endure over time, we believe we are well positioned.\nNow a few words about private label.\nAs you know, our exposure to private label is limited to five categories.\nPrivate label shares have remained generally unchanged for the first, second and third quarters of this year.\nOur international business came through with double-digit organic growth in the quarter, driven by strong growth in our GMG business, that's our Global Markets Group, and Canada.\nIn October, our GMG business is off to another strong start, and we continue to see strong POS recovery in Canada and Europe.\nAfter three consecutive quarters of growth, our Specialty Products business contracted 3.4% in Q3, primarily due to the poultry segment.\nNow turning to new products.\nInnovative new products will continue to attract consumers even in this economy.\nVITAFUSION gummy vitamins launched a number of new products.\nAnd to capitalize on increased consumer interest in immunity, we launched POWER ZINC and Elderberry gummies.\nWe've launched ARM & HAMMER CLEAN & SIMPLE, which has only six ingredients plus water compared to 15 to 30 ingredients for typical liquid detergents.\nAnd in the second half, we launched ARM & HAMMER ABSORBx clumping cat litter, a new litter, which is 55% lighter than our regular litter.\nNow let's turn to the outlook.\nWe're having an exceptional year.\nWe now expect full year adjusted earnings per share growth of 13% to 14%, which is far above our evergreen target of 8% annual earnings per share growth.\nGiven our strong performance, we have raised our full year outlook for sales growth to be approximately 11% and organic sales growth to be approximately 9%.\nAs mentioned many times in the past, we take the long view in managing Church & Dwight in order to sustain our evergreen model.\nIn the second half, we took the opportunity to increase our marketing spend behind our new products and we made incremental investments in the company.\nAs we wind up the year, we are putting together our 2021 plan.\nIt's safe to say that we have a high degree of confidence that we will meet our evergreen model in '21.\nIn February, we'll provide our detailed outlook for next year.\nNow in conclusion, I would like to remind everyone of the many reasons to have confidence in Church & Dwight.\nThe great thing about our company is we are positioned to do well in both good and bad economic times.\nThe categories in which we play are largely essential to consumers.\nAnd we have a few categories that stand to benefit from the current environment.\nWe have a balance of value and premium products.\nOur power brands are number one or number two in their categories.\nAnd we have low exposure to private label.\nWe're coming off some of the best growth quarters we've ever had.\nAnd with a strong balance sheet, we continue to be open to acquiring TSR-accretive businesses.\nWe believe our company is stronger and more agile than ever.\nAnd finally, we have the resources, the common sense and the ambition to ensure that our brands perform well in the future.\nNext up is Rick to give you details on the third quarter.\nWe'll start with EPS.\nThird quarter adjusted EPS, which excludes an acquisition-related earnout adjustment, grew 6.1% to $0.70 compared to $0.66 in 2019.\nAs we discussed in previous calls, the quarterly earnout adjustment will continue until the conclusion of the earnout period.\nStronger-than-expected sales performance allowed the company to spend incrementally on marketing.\nReported revenue was up 13.9%, reflecting a continued increase in consumer demand for our products.\nOrganic sales was up 9.9%, driven by a volume increase of 10.2%, partially offset by 0.3% of unfavorable product mix and pricing, primarily driven by new product support.\nVolume growth was driven by higher consumption.\nNow let's review the segments.\nOrganic sales increased by 10.7%, largely due to higher volume.\nOverall, growth was led by VITAFUSION and L'IL CRITTERS gummy vitamins, WATERPIK oral care products, ARM & HAMMER liquid laundry detergent and OXICLEAN stain fighters.\nWe commonly get asked to bridge the Nielsen reporting to our organic results.\nThis quarter, tracked consumption was 7.7% for our brands compared to an organic sales increase of 10.7%.\nIn this environment, one might assume that is restocking retailer inventory.\nThat is not the case.\nWe had 400 basis points of help from strong growth in untracked channels, primarily online, and 100 basis point drag from couponing to support new products.\nThe good news is, as you heard from Matt, consumption and shipments are in balance, both low double digits.\nConsumer International delivered 11.6% organic growth due to higher volume, offset by lower price and product mix.\nThis was a great recovery for our international business from a flat Q2.\nGrowth was primarily driven by the Global Markets Group and Canada.\nFor our SPD business, organic sales decreased 3.4% due to lower volume, offset by higher pricing.\nThe lower volume was primarily driven by the nondairy animal and food production in sodium bicarbonate business.\nTurning now to gross margin.\nOur third quarter gross margin was 45.5%, 110 basis point decrease from a year ago.\nGross margin was impacted by 110 basis point drag from tariffs and a 90 basis point impact from acquisition accounting.\nIn addition, to round out the Q3 gross margin bridge is a plus 100 basis points from price/volume mix; plus 160 basis points from productivity programs, offset by a drag of 80 basis points of higher manufacturing costs, inflation and higher distribution costs; as well as a drag of 90 basis points for COVID costs.\nMoving now to marketing.\nMarketing was up $45.7 million year-over-year as we invested behind our brands.\nMarketing expense as a percentage of net sales increased 230 basis points to 13.8%.\nFor SG&A, Q3 adjusted SG&A decreased 30 basis points year-over-year, primarily due to leverage from strong sales growth.\nOther expense all in was $12.3 million and $3.9 million decline due to lower interest expense from lower interest rates.\nAnd for income tax, our effective rate for the quarter was 17.3% compared to 21.6% in 2019, a decrease of 430 basis points, primarily driven by higher tax benefits related to stock option exercises.\nAnd now turning to cash.\nFor the first nine months of 2020, cash from operating activities increased 29% to $798 million due to significantly higher cash earnings and an improvement in working capital.\nAs of September 30, cash on hand was $549 million.\nOur full year capex plan continues to be approximately $100 million as we begin to expand manufacturing and distribution capacity, primarily focused on laundry, litter and vitamins.\nAs I mentioned back at the Barclays conference in September, we do expect a step-up in capex over the next couple of years to approximately 3.5% of sales for these capacity-related investments.\nIn addition, as you read in the release, due to the strong cash position, the company may resume stock repurchases in the future.\nFor Q4, we expect reported sales growth of approximately 9%, organic sales growth of approximately 8%.\nAnd as Matt mentioned, we have strong consumption across many of our categories.\nTurning to gross margin.\nWe previously called 150 basis point contraction in the second half.\nNow we're saying down 190 basis points.\nThe change is primarily due to nonrecurring supply chain costs.\nWe also expect significant expense, and we have called flat for the year in terms of a percent of sales, which implies a step-up in Q4.\nWe also anticipate a lower tax rate.\nAs a result, we expect Q4 adjusted earnings per share to be $0.50 to $0.52 per share, excluding the acquisition earnout adjustment as we exit 2020 with momentum.\nAnd now for the full year outlook, we now expect approximately 11% for the year 2020 sales growth, which is above our previously 9% to 10% range.\nWe're also raising our full year organic sales growth to approximately 9%, up from our previous 7% to 8% outlook.\nWe raised our cash from operations outlook to $975 million, which is up 13% versus year ago.\nTurning to gross margin.\nWe expect gross margin to be down 20 basis points for the year, primarily due to the impact of acquisition accounting, COVID costs, incremental manufacturing and distribution capacity investments and the higher tariffs on WATERPIK.\nAs to tariffs, remember back in 2018, we got caught up in Tier two tariffs for which we were granted an extension in 2019.\nThat exemption expired and was not extended as of Q3 2020.\nWe continue to work on mitigating that impact.\nAnother word or two on gross margin.\nPreviously, I have said the first half of the year was plus 150 basis points on gross margin and the second half was down 150 basis points on gross margin.\nAnd so our outlook as of last quarter was flat for the year.\nAnd then also last quarter, you heard me walk through investments we were making in the second half of 2020.\nExamples here included a new third-party logistics provider, outside storage to handle surge inventories, preliminary engineering on capacity, VMS outsourcing costs as well as other investments around automation, consumer research and analytics.\nNow we're calling down 190 basis points for the back half or down 20 basis points for the year, and that implies down 250 basis points for the quarter.\nWe have some supply chain nonrecurring costs.\nHere are a few examples.\nFirst, because of our outsized growth, I mentioned last quarter, we're adding a new 3PL distribution center.\nIn the quarter, we again had stronger sales.\nAnd as such, had duplicative outside storage locations and the new 3PL distribution center that wasn't operational.\nSo for a period of time, we had duplicative costs.\nWe're also in the process of going through make first buy decisions.\nAnd that will trigger a couple of asset write-offs likely in Q4.\nWe have lean training across the plants.\nAnd finally, due to the great results this year, higher incentive comp cost that flow through COGS.\nSo our full year tax rate expectations are 19%, and we also raised our adjusted earnings per share growth to 13% to 14%.\nNow that we're through the outlook, I also want to spend a minute on FLAWLESS.\nAs you saw in the release, we had an earnout benefit of approximately $50 million in the quarter in reported earnings.\nWe exclude any of the earnout movements in adjusted EPS.\nSome color on that swing.\nAs a backdrop, we bought that business for $475 million upfront and a $425 million earnout tied to year-end 2021 sales.\nThat sales target represented in excess of 15% CAGR for three years off of a baseline of $180 million of trailing sales.\nThe revised 3-year CAGR for this business is closer to 8%.\nAnd as such, the earnout liability comes down and earnings go up.\nWe're still positive on this business.\nAnd the strong consumption growth these past six months is a great indicator for the future.\nAs you heard from Matt, the company is well positioned as we enter 2021.\nAnd with that, Matt and I would be happy to take any questions.\n",
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"content": "q3 adjusted earnings per share $0.70 excluding items.\nsees q4 sales up about 9 percent.\nsees 2020 reported sales growth raised to 11%.\n2020 organic sales growth raised to 9%.\n2020 adjusted earnings per share growth raised to 13%-14%.\n2020 cash from operations raised to $975 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: But before we begin, I would like to recognize all Church & Dwight employees around the world for their continued dedication to keeping our company going, especially our supply chain and R&D teams as during this quarter, the company faced the complexities of widespread raw material and labor shortages at our suppliers and at our third-party manufacturers.\nNow let's talk about the results.\nQ3 was a solid quarter.\nReported sales growth was 5.7%, organic sales growth grew 3.7% and exceeded our 1.5% Q3 outlook.\nThe 3.7% organic growth rate in the quarter is impressive, considering the prior year Q3 2020 organic sales growth was 9.9%.\nSo that's growth on top of growth.\nThe adjusted earnings per share was $0.80, and that's $0.10 better than our outlook.\nWe grew consumption in 12 of the 16 categories in which we compete, and in some cases, on top of big consumption gains last year.\nRegarding brand performance, five of our brands saw a double-digit consumption growth, and I'll name them for you: vitamins, ARM & HAMMER cat litter, Scent Boosters, BATISTE and ZICAM.\nAnd although many of our brands experienced double-digit consumption growth, it's not all reflected in our 3.7% organic sales growth as shipments were constrained by supply issues.\nIn Q3, online sales as a percentage of total sales was 14.3%.\nOur online sales increased by 2% year-over-year.\nNow keep in mind, this is on top of 100% growth in e-commerce that we experienced in Q3 2020 versus 2019.\nAnd we continue to expect online sales for the full year to be above 15% as a percentage of total sales.\nNow as described in the release, Hurricane Ida's impact was substantial, which resulted in limited availability of raw materials and caused our fill levels to continue to be below normal.\nLabor shortages at suppliers and third-party manufacturers have constrained their ability to produce.\nTransportation challenges have further contributed to supply problems.\nNow the good news is that over the past 18 months, we have made our supply chain more resilient by qualifying dozens of new suppliers and co-packers, which provides, of course, both short-term and long-term benefits.\nAnd in a few minutes, Rick will tell you about our plans to expand capacity in 2022, with a significant increase in capex next year to support our growth plans.\nNow due to the lower than normal case fill rate, we pulled back on Q3 marketing compared to the prior year, and we expect the supply issues to begin to abate in the first half of 2022.\nOur biggest issue is widespread inflation.\nWe're dealing with significant inflation of raw and packaging materials, labor, transportation and component costs which is compressing our gross margin.\nThese conditions are expected to continue well into 2022, and Rick will cover gross margin in his remarks in a few minutes.\nOn past earnings calls, we described how we expected categories to perform in 2021.\nOverall, our full year thinking is generally consistent.\nJust to name a few categories, demand for vitamins, laundry additives and cat litter has remained elevated in 2021.\nThe condoms, dry shampoo and water flosser categories have recovered and are experiencing year-over-year growth as society opens up and consumers have greater mobility.\nBaking soda and oral analgesics have declined from COVID highs as expected.\nSo now I'm going to talk about each business.\nFirst up is Consumer Domestic.\nSo the Consumer Domestic business grew organic sales 2.8%, and this is on top of 10.7% organic growth in Q3 2020.\nLooking at market shares in Q3, six of our 13 power brands gained share, and our share results are clearly impacted by our supply issues.\nI will comment on a few of the brands right now.\nVitafusion gummy vitamins saw a huge consumption growth in Q3, up 24%.\nConsumers have made health and wellness a priority.\nIt appears that the new consumers that came into the category are staying, because if we look at the last year, Vitafusion household penetration is up almost 10%.\nBatiste dry shampoo grew consumption 36% in the quarter and grew share to over 40%, first time that's happened.\nDry shampoo is recovering as stores have reopened and consumers are becoming more mobile.\nNext up is Waterpik.\nWaterpik consumption declined in the quarter due to the year-over-year timing of a major online retailer sales event.\nBut the good news is that Waterpik continues to have strong consumption year-to-date and continues to benefit from the heightened consumer focus on health and wellness.\nIn Household Products, ARM & HAMMER liquid laundry held share despite leading with price.\nARM & HAMMER scent boosters continue to gain share, going the other way was unit dose share, which declined due to supply issues.\nThe good news in unit dose is that we are now self-reliant with reliable in-house production.\nAnd also in household products, ARM & HAMMER cat litter grew consumption 11%, while gaining 50 basis points of market share.\nNext up is International.\nDespite disruptions due to COVID, our International business came through with 2.3% organic growth, primarily driven by strong growth in the Global Markets Group.\nAsia continues to be a strong growth engine for us.\nSTERIMAR, FEMFRESH, Vitafusion and L'il Critters led the growth for the International business.\nNow the next one is Specialty Products.\nOur Specialty Products business delivered a very strong quarter with 18.5% organic growth, but this was on an easy comp.\nThe prior year quarterly organic growth for Specialty Products was actually down 3.4%.\nSo 18.5% is a really nice rebound.\nAnd this was driven by both higher pricing and volume.\nMilk prices remained stable and demand is high for our nutritional supplements.\nNow let's talk about pricing.\nIn response to the rising costs, we have already taken pricing actions in 50% of our portfolio, effective July one and October 1.\nThe volume elasticities have been slightly better than expected since the July price increases.\nWe will be announcing pricing actions effective Q1 2022 on an additional 30% of the portfolio.\nThat means that as of Q1 2022, we expect to have raised price on approximately 80% of our global portfolio of brands.\nDue to our expectation of incremental cost increases, we continue to analyze additional pricing actions that can be put in place next year in 2022.\nNow let's turn to the outlook.\nSignificant inflation of material and component costs and co-packer costs impacted our gross margin in Q3.\nLooking forward, we expect input costs and transportation costs to remain elevated in Q4 and we expect significant incremental cost increases in 2022.\nOur earnings per share expectations are unchanged.\nWe expect adjusted earnings per share growth of 6% this year.\nIt's important to remember that we are comping 15% earnings per share growth in 2020.\nWe expect full year reported sales growth of 5.5%, with 4% full year organic sales growth.\nIt's also important to call out that we are committed to maintaining the long-term health of our brands by ensuring a healthy level of marketing investment in Q4 and in 2022.\nAs many of you know, we typically target 11% to 12% marketing spend.\nQ3 was 12.3%, and we expect Q4 to be approximately 13%.\nJust to wrap things up, October consumption continues to be strong.\nWe're navigating through significant supply challenges and cost inflation.\nWe expect our portfolio of brands to do well, both in good and bad times and in uncertain economic times such as now.\nWe have a strong balance sheet, and we continue to hunt for TSR-accretive businesses.\nAnd next up is Rick to give you more details on Q3.\nWe'll start with EPS.\nThird quarter adjusted EPS, which excludes the positive earnout adjustments, was $0.80, up 14.3% to prior year.\nWe don't expect any further adjustments to the earnout.\nThe $0.80 was better than our $0.70 outlook, primarily due to continued strong consumer demand and higher-than-expected sales as well as lower incentive comp and lower marketing spend as supply chain shortages were impacting customer fill rates.\nWe also overcame a higher tax rate year-over-year.\nReported revenue was up 5.7% and organic sales were up 3.7%.\nMatt covered the details of the top line.\nI'll jump right into gross margin.\nOur third quarter gross margin was 44.2%, a 130 basis point decrease from a year ago.\nThis was below our previous outlook of expansion as we faced incremental pressure from the effect of Hurricane Ida on material costs and distribution.\nGross margin was impacted by 500 basis points of higher manufacturing costs, primarily related to commodities, distribution and labor.\nTariff costs negatively impacted gross margin by an additional 40 basis points.\nThese costs were partially offset by a positive 250 basis point impact from price/volume mix and a positive 120 basis point impact from productivity.\nMarketing was down $10 million year-over-year as we lowered spend to reduce demand until fill rates could recover.\nMarketing expense as a percentage of net sales was healthy at 12.3%.\nFor SG&A, Q3 adjusted SG&A decreased to 180 basis points year-over-year with lower legal costs and lower incentive comp.\nOther expense all-in was $12.1 million, a slight decline due to lower interest expense from lower interest rates.\nAnd for income tax, our effective rate for the quarter was 20.4% compared to 17.3% in 2020, an increase of 310 basis points, primarily driven by lower stock option exercises.\nWe continue to expect the full year rate to be 23%.\nAnd net of cash.\nFor the first nine months of 2021, cash from operating activities decreased 18% to $653 million due to higher cash earnings being offset by an increase in working capital.\nWe continue to expect cash from operations to be approximately $950 million for the full year.\nAs of September 30, cash on hand was $180 million.\nOur full year capex plan is now $120 million, down from the original $180 million in the outlook due to project timing.\nThis capex moves out a year, and we now expect capex in 2022 to exceed $200 million.\nFuture is bright as we continue to expand manufacturing and distribution capacity, primarily focused on laundry, litter and vitamins.\nOn October 28, the Board of Directors authorized a new stock repurchase program up to $1 billion.\nAs you read in the release, this is a sign of our confidence in the company's future performance and the expectations of our robust cash flow generation.\nOur number one priority for capital allocation remains acquisitions, and given our low leverage ratios, we have confidence to do both.\nThrough October, we purchased approximately $130 million worth of shares.\nAnd in Q4, we will likely get ahead of our 2022 planned purchases as well.\nAnd now for the full year outlook.\nWe now expect the full year 2021 reported sales growth to be approximately 5.5% and organic sales growth to be approximately 4%.\nOur consumption is strong and outpacing shipments.\nWe expect our customer fill levels to improve throughout Q4.\nTurning to gross margin, we now expect full year gross margin to be down 170 basis points, previously down to 75 basis points.\nThis represents an incremental impact from our last guidance due to broad-based inflation on raw costs and transportation costs.\nThat was exacerbated by Hurricane Ida.\nIn our prior outlook, we had discussed $125 million of higher cost versus our plan.\nThat number today is $170 million, and the majority of that increase in the last 90 days relate to transportation, labor, and other increases.\nAs a reminder, we price to protect gross profit dollars, not necessarily margin.\nThe $45 million movement versus our previous outlook is primarily noncommodity-related.\nCommodity spot pricing today is elevated compared to spot pricing just three months ago.\nAnd now for the full year.\nWe expect adjusted earnings per share to be 6%.\nOur brands continue to go from strength to strength as strong consumption and organic sales growth lap almost 10% organic growth a year ago.\nAnd while inflation is broad based, we have taken pricing actions to mitigate, which gives us confidence over the long term.\nFor our Q4 outlook, we expect reported sales growth of approximately 3%.\nWe expect organic sales growth of approximately 2% due to the supply chain constraints and our SPD business to return to a more normal growth rate.\nAdjusted earnings per share is expected to be $0.61 per share, up 15% from last year's adjusted EPS.\nAnd with that, Matt and I would be happy to take any questions.\n",
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"content": "sees fy sales up about 5.5 percent.\nq3 adjusted earnings per share $0.80 excluding items.\nsees fy adjusted earnings per share growth at 6%.\nexpect supply availability issues to begin to abate in first half of 2022 for most of our brands.\nexpect significant incremental cost increases in 2022.\nchurch & dwight - on october 28, authorized a new stock repurchase program under which up to $1 billion of company's common stock may be repurchased.\nchurch & dwight - now expect fy gross margin to decrease 170 basis points and adjusted operating profit margin expansion of 70 basis points.\nchurch & dwight - faces complexities of raw material, labor shortages at plants, suppliers, third-party manufacturers, exacerbated by hurricane ida.\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, let me remind you that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call.\nIn addition, management may also discuss non-GAAP operating performance results during today's call, including earnings, interests, deprecation and amortization, or EBITDA and adjusted EBITDA.\nI will begin with highlights for the quarter, and Dave and Nick will follow up with some additional operating detail.\nAt the outset, I would like to say, although I am very gratified by the company's results in the first quarter, comparisons to the pandemic year of 2020 are analytically difficult.\nThe pandemic clearly disrupted the hospice industry.\nThe U.S. government stepped in to help with the relaxation of sequestration and several other operational modifications.\nThe net effect of the pandemic and the government's actions was to allow VITAS to report an increase in adjusted net income of 25.7% in 2020.\nBut VITAS had a patient base and its median length of stay fell to 11 days.\nThe most complex issue still facing VITAS is the disruptive impact that the pandemic has had on traditional hospice referral sources and low occupancy in senior housing.\nThis disruption continues to impact our admissions and traditional patient census patterns.\nFortunately, admissions in hospitals have largely normalized and some of our senior housing referral sources are beginning to show improvement in occupancy and related referrals.\nI firmly believe senior housing will recover.\nHowever, senior housing is in the early stages of recovery and we do not have enough data points to accurately predict when senior housing referrals will return to pre-pandemic levels.\nWith that said, VITAS is performing in line with our previous guidance.\nRoto-Rooter operating results continue to be exceptional.\nStrong residential plumbing and drain cleaning demand has been more than adequate to compensate for the slight weakness we continued to observe with our commercial accounts.\nWe have now had three consecutive quarters of record demand for our Roto-Rooter residential services.\nResidential revenue totaled $144 million in the first quarter of 2021, an increase of 32% when compared to the prior year quarter and a 7.2% sequential growth when compared to the fourth quarter of 2020.\nCommercial revenue totaled $46.9 million in the quarter, an 8.4% decline when compared with the first quarter of 2020.\nAlthough our Commercial demand has not yet normalized to pre-pandemic levels, this decline has shown significant improvement when compared to the Commercial unit-for-unit revenue declines of 29.1%, 11.6% and 9.8% in the second, third and fourth quarters of 2020, respectively.\nAggregate Roto-Rooter activity, which includes branch operations, independent contractors, as well as franchise fees and product sales, Roto-Rooter generated consolidated first quarter 2020 revenue of $212 million, an increase of 18.9%.\nWith that, I would like to turn this teleconference over to David.\nLet's turn to VITAS segment first.\nVITAS' net revenue was $316 million in the first quarter of 2021, which is a decline of 6.5% when compared to the prior year period.\nThis revenue decline is comprised primarily of a 7.1% decline in days of care.\nOur days of care was negatively impacted 111 basis points by the 2020 leap year.\nOur first quarter 2021 revenue included a geographically weighted average Medicare reimbursement rate increase, including the suspension of sequestration on May 1, 2020, of approximately 2.8%, offset by acuity mix shift, which reduced revenue by approximately $9.1 million or 2.7% in the quarter when compared to the prior year revenue and level of care mix.\nIn addition, the combination of a lower Medicare cap and other counter-revenue changes offset a portion of the revenue decline by approximately 50 basis points.\nOur average revenue per patient per day in the first quarter of 2021 was $198.95, which, including acuity mix shift, is basically equal to the prior year period.\nReimbursement for routine home care and high acuity care averaged $170.14 and $991.77, respectively.\nDuring the quarter, high acuity days of care were 3.5% of our total days of care, 71 basis points less than the prior year quarter.\nIn the first quarter of 2021, VITAS accrued $1.5 million in Medicare Cap billing limitations.\nThis compares to a $2.5 million Medicare Cap billing limitation we recorded in the first quarter of 2020.\nOf VITAS' 30 Medicare provider numbers, 27 of these provider numbers currently have a Medicare Cap cushion of 10% or greater.\nOne provider number has a cap cushion between 5% and 10%.\nOne provider number has a cap cushion between 0% and 5%.\nAnd one provider number currently has a fiscal 2021 Medicare cap billing limitation liability.\nThis is based on actual Medicare revenue and admissions in the first six months of the Medicare Cap fiscal year.\nVITAS' first quarter 2021 adjusted EBITDA, excluding Medicare Cap, totaled $58.3 million in the quarter, which is a decrease of 3.3%.\nAdjusted EBITDA margin in the quarter, excluding Medicare Cap, was 18.4%, which is a 66 basis point improvement when we compare it to the prior year period.\nNow let's turn to Roto-Rooter.\nRoto-Rooter generated quarterly revenue of $212 million in the first quarter of 2021, an increase of $33.7 million or 18.9% over the prior year quarter.\nAs Kevin noted earlier, total Roto-Rooter branch commercial revenue totaled $46.9 million in the quarter, a decrease of 8.4% over the prior year.\nThis aggregate commercial revenue decline consisted of drain cleaning revenue, declining 5.8%, plumbing revenue, declining 5%, and excavation, declining 19.5%.\nWater restoration for commercial increased 8.8%.\nOur total Roto-Rooter branch residential revenue in the quarter totaled $144 million, an increase of 32% over the prior year period.\nThis aggregate residential revenue growth consisted of drain cleaning, increasing 29.5%, plumbing expanding 34.9%, excavation increasing 35.8% and water restoration increasing 28.7%.\nIn the first quarter, our average daily census was 18,050 patients, a decline of 6.1% over the prior year.\nAs Kevin discussed earlier, this decline in average daily census is a direct result of the disruptions across the entire healthcare system that impacted traditional admission patterns in the hospice starting in March of 2020.\nOur hospital generated emissions have largely normalized to pre-pandemic levels.\nHowever, referrals from senior housing, specifically nursing homes and assisted living facilities, continue to be disrupted.\nAs Kevin mentioned, we have seen stabilization in pockets of improvement in senior housing admissions.\nHowever, it remains too early to reasonably project the pace and time line for senior housing admissions to return to pre-pandemic levels.\nIn the first quarter of 2021, total admissions were 18,135.\nThis is a 2.5% decline when compared to the first quarter of 2020.\nHowever, These 18,135 admissions in the first quarter of 2021 compared favorably to the sequential admissions of 16,822, 17,973 and 17,960 in the second, third and fourth quarters of 2020.\nIn the first quarter, our home-based preadmit admissions decreased 1.5%.\nHospital directed admissions expanded 2.4%.\nNursing home admits declined 26.2%.\nAnd assisted living facility admissions declined 13.1% when compared to the prior year quarter.\nOur average length of stay in the quarter was 94.4 days.\nThis compares to 90.7 days in the first quarter of 2020 and 97.2 days in the fourth quarter of 2020.\nOur median length of stay was 12 days in the quarter, which is two days less than the 14-day median in both the first quarter of 2020 and the fourth quarter of 2020.\nI will now open this teleconference to questions.\n",
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"content": "anticipates providing updated 2021 earnings guidance in july 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: Before we begin, let me remind you that the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call.\nIn addition, management may also discuss non-GAAP operating performance results during today's call, including earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA.\nI will begin with highlights for the quarter, and David and Nick will follow up with additional operating detail.\nFirst, let's start with the obvious.\nOperating two separate and distinct service business segments with 17,000 employees during a national pandemic brings unique, unpredictable and abrupt challenges.\nFortunately VITAS and Roto-Rooter have been classified as essential services allowing Chemed to operate during the pandemic.\nMaintaining operations in this environment is far from business as usual.\nFirst and foremost, our number one focus has been and will remain on the safety and well-being of our employees, patients and customers.\nWe will maintain this focus regardless of the cost to safely operate during the pandemic.\nApril 2020 was probably the most challenging month, we have ever seen significant operating issues emerge daily, triggered primarily from incredibly fast-moving and sometimes contradictory federal, state and local government regulations.\nLogistical operating issues were identified, analyzed and solutions for put in practice immediately.\nWe were able to develop and continuously refine effective work arounds on supply chain issues, labor and scheduling issues, patient access restrictions, employee safety, healthcare protocols, technology solutions as well as information security protocols allowing our employees to continuously serve our local communities in a safe agile manner.\nWe closely followed the myriad of federal, state and local regulations in the development and implementation of infrastructure necessary to safely allow our field, support and corporate support staff to safely limit as much as practical, physical interaction among our 17,000 employees.\nOn the VITAS segment, the federal government and specifically HHS and CMS have been exceptionally supportive in terms of relaxing regulations, allowing the use of telehealth capabilities where appropriate and providing pragmatic flexibility in caring for our 19,000 plus patient census.\nAs most of you are aware on March 27, 2020 the CARES Act was signed in the law.\nThe CARES Act includes financial support for healthcare providers to maintain operational capacity as well as assist providers with issues caused by the coronavirus panic.\nOn April 10, 2020, VITAS without application received $80.2 million of CARES Act funds, that was formulaically determined by the federal government based on our 2019 Medicare fee-for-service revenue.\nThese CARES Act funds are specified to be used to prevent, prepare for and respond to the coronavirus, and shall reimburse the recipient for healthcare-related expenses or loss revenues that are attributable to coronavirus.\nThe ability of VITAS to retain and utilize the full $80.2 million from the relief fund will depend on the magnitude, timing and nature of the economic impact of COVID-19 within VITAS, as well as the guidelines and rules of the relief fund program.\nThis financial support is material for VITAS in maintaining its operational capacity at the safely care for our 19,000 patients.\nIn our first quarter earnings conference call, I stated we anticipated disruption within our patient referral and addition patterns due to significant healthcare system service restrictions in the coming quarter.\nThis disruption did materialize in our second quarter 2020 admissions declined 3.8% over the prior year.\nHowever, the admissions trend did materially improve throughout the quarter.\nOur April 2020 admissions were challenging and had a decline of 6.6%, may improve slightly with admission decline of 5.8%.\nJune showed significant improvement generated in admissions growth of 1.1%.\nRoto-Rooter operations were also severely impacted at the start of the pandemic.\nIn late March 2020, we observed significant disruption in our Roto-Rooter commercial business.\nAs a reminder, historically, commercial services represented approximately 28% of Roto-Rooters consolidated revenue.\nWe made the decision for Roto-Rooter to maintain full staffing and operating capacity with no employee layoffs, as we entered the second quarter.\nThis decision could maintain our full operating strength was potentially an expenses strategic move and we monitored our demand metrics daily.\nThe decision to operate at full capacity is a classic risk reward calculation weighing brand awareness, customer satisfaction and the financial needs of our employees.\nWe also wanted to positioned to capitalize on any potential snapback in commercial and residential demand, both to protect existing marketing share as well as maximize our opportunities to grow market share.\nI believe this is proven to be the correct strategic course.\nRoto-Rooter services demand began to show weekly improvement beginning in the later part of April, and had strengthened unabated throughout the remainder of the second quarter.\nThis is reflected in our monthly performance with Roto-Rooter and unit-for-unit commercial revenue declining 38.6% in April, improving slightly to 31.8% decline in May and declining 19.7% in June.\nOur residential services have proven to be exceptionally resilient, with our unit-for-unit residential revenue declining a modest 1.6% in April, increasing 11.7% in May and 18.7% in June.\nAll this translated into Roto-Rooter -- I mean unit-for-unit basis, having the second quarter 2020 commercial revenue declining 29.1%, residential revenue increasing 10.4% and Roto-Rooter consolidated unit-for-unit revenue declining a modest 1.6% when compared to the prior year quarter.\nAlthough, we did have a modest decline in unit-for-unit revenue in the second quarter.\nIncluding acquisitions Roto-Rooter generated consolidate revenue -- consolidated revenue growth of 8.6%.\nOverall Roto-Rooter solid revenue growth with excellent adjusted EBITDA margins and adjusted EBITDA growth.\nRoto-Rooter's adjusted EBITDA in the second quarter of 2020 totaled $46.8 million, an increase of 20.7%.\nThe adjusted EBITDA margin was 26.8%, which is a 269 basis point increase when compared to, I'm sorry, excuse me.\nThe have increase in Roto-Rooter's adjusted EBITDA margin is a contributed to our residential services, having a higher margin than commercial services, as well as increased residential excavation and water restoration services, which have a significantly higher direct contribution margin compared to commercial plumbing and drain cleaning services.\nI'm very appreciative of the hard work, creative solutions and willingness of our 7,000 employees to adjust our operational routines and embrace new procedures.\nWith that, I would like to turn the teleconference over to David.\nVITAS' net revenue was $327 million in the second quarter of 2020, which is an increase of 4.7% when compared to our prior year period.\nThis revenue increase is comprised primarily by 2.8% increase in days of care, a geographically weighted average Medicare reimbursement rate increase, including the suspension of sequestration on May 1 of 2020 of approximately 5.4% and acuity mix shift, which reduced the blended average Medicare rate increase by approximately 310 basis points.\nThe combination of increased Medicare Cap and a decrease in Medicaid net room and board pass-throughs, as well as reductions in other contra revenue activity, reduced total revenue growth in additional 42 basis points in the quarter.\nOur average revenue per patient per day in the second quarter of 2020 was $194.02, which including the impact from acuity mix shift is 2.3% above the prior year period.\nReimbursement for routine home care and high acuity care averaged $165.22 and $985.23, respectively.\nDuring the quarter, high acuity days of care were 3.5% of our total days of care, 69 basis points less than the prior year quarter.\nThis 69 basis points mix shift and high acuity days of care reduce the increase in average revenue per patient per day from 5.4% to 2.3% in the quarter.\nVITAS accrued $5.8 million in Medicare Cap billing limitations and then second quarter of 2020.\nThis $5.8 million of Medicare Cap, includes approximately $2.3 million of cap liability attributed to the pandemic.\nThe suspension of sequestration resulted in additional 2% increase in reimbursement effective May 1 of 2020.\nIn Medicare, provider numbers that we're in a Medicare cap liability situation, there is 2% reimbursement increase was effectively eliminated by a corresponding increase in Medicare cap liability in those markets.\nIn addition, disruption in Medicare admissions and these Medicare cap liability markets resulted in a further increase in the projected fiscal 2020 Medicare Cap billing limitation.\nThe second quarter 2020 gross margin excluding Medicare Cap increased cost for personal protection equipment or PPE disinfecting facilities and increased costs for additional paid off or PTO for our front-line employees was 27.2%, which is a 352 basis point margin improvement when compared to the second quarter of 2019.\nThis increase in gross margin for VITAS is attributed to increased reimbursement from the elimination of sequestration on May 1, 2020.\nA level of care mix shift to higher margin routine home care as well as efficiencies from utilizing telehealth were appropriate.\nAnd from cost from reduced admissions volume intake and reduced high acuity hospital referred admissions that have short length of stay and in some cases negative gross margins.\nNow let's turn to the Roto-Rooter segment.\nRoto-Rooter generated quarterly revenue of $175 million in the second quarter of 2020, an increase of $13.9 million or 8.6% over the prior year quarter.\nAnd a unit-for-unit basis, which excludes the Oakland and Hoffman Southwest acquisitions completed in July 2019 and September 2019 respectively.\nRoto-Rooter generated revenue of $158 million for the second quarter of 2020 a modest decline of 1.6% over the prior year quarter.\nTotal Roto-Rooter commercial revenue, excluding acquisitions, decreased 29.1% in the quarter.\nThis aggregate commercial revenue decline consisted of drain cleaning revenue decreasing 31.2%, commercial plumbing and excavation declining 28%, and commercial water restoration declining 20.3%.\nTotal residential revenue, excluding acquisitions increased 10.4%.\nThis aggregate revenue growth for residential consisted of residential drain cleaning increasing 10.2%, plumbing and excavation expanding 14.4% and commercial water restoration increasing 4.3%.\nRoto-Rooter's gross margin in the quarter was 51.2%, a 247 basis point increase when compared to the second quarter of 2019.\nNow let's look at consolidated Chemed.\nAs of June 30, 2020 Chemed had total cash and cash equivalents of $20.4 million and no long-term debt.\nOn our guidance, historically Chemed earnings guidance has been developed using previous year's key operating metrics, which are then modeled and projected out for the calendar year.\nCritical within these projections is the understanding of traditional pattern correlations among key operating metrics.\nOnce, we complete this phase of our projected operating results, we would then modify the projections for the timing of price increases, changing the commission structure, wages, marketing programs and a variety of continuous improvement initiatives that our business segments plan on executing over the coming year.\nThis modeling exercise also takes into consideration anticipated industry and macroeconomic issues outside of management's control but are somewhat predictable in terms of their timing and impact on our business segments operating results.\nThe 2020 pandemic has made accurate modeling and providing meaningful earnings guidance for Chemed exceptionally challenging.\nFederal, state and local government authorities are forced to make swift decisions within our healthcare system, labor pools and general economy.\nThese governmental decisions have the potential for an immediate and material impact on VITAS and Roto-Rooter operating results.\nHowever over the past four months, Chemed has been able to successfully navigate within this rapidly changing environment and produce operating results that we believe provide us with the ability to issue meaningful guidance for the remainder of the calendar year.\nHowever, this guidance should be taken with the recognition the pandemic will continue to materially disrupt all aspects of our healthcare system and general economy to such an extent that future rules, regulations and government mandates could materially impact our ability to achieve this guidance.\nWith that said, revenue growth for VITAS in 2020, prior to Medicare Cap is estimated to be in the range of 5% to 7%.\nOur Average Daily Census in 2020 is estimated to expand approximately 2% to 4%.\nAnd our full-year adjusted EBITDA margin prior to Medicare Cap is estimated to be 19% to 20%.\nWe are currently estimating $17 million for Medicare Cap billing limitations for the calendar year 2020.\nWe also anticipate the $80.2 million of CARES Act funds that Chemed just -- Kevin described earlier that our formulaically calculated by the federal government based upon our 2019 Medicare fee-for-service revenue will be adequate to cover our increased costs specifically related to operating our healthcare unit during the pandemic, as well as any incremental Medicare Cap billing limitations that are triggered from declines in Medicare admissions.\nI should also note that Chemed's full year adjusted earnings per share guidance eliminate any financial benefit from the CARES Act funds that relate to lost revenue.\nWe anticipate returning any unused CARES Act to the federal government at the end of the pandemic measurement period.\nRoto-Rooter is forecasted to achieve the full year 2020 revenue growth of 9% to 10%.\nAdjusted EBITDA for Roto-Rooter for 2020 is estimated to be in the range of 23% to 25%, Based upon this discussion, our full-year 2020 adjusted earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock options, cost related to litigation, CARES Act funds used for lost revenue and other discrete items is estimated to be in the range of $16.20 to $16.40.\nThis 2020 full year, calendar year guidance assumes an effective corporate tax rate of 25.2% and as a comparison Chemed's 2019 reported adjusted earnings per diluted share were $13.96.\nThe interdisciplinary team approach that is the foundation of the hospice benefit has never been more evident for our organization across the country, then through this entire pandemic.\nCoordination of our entire team from our sales team providing pandemic relevant education to our disrupted healthcare partner through our admissions teams responding to referrals, enabling our clinical care teams to provide care around the clock with the support of our care coordination centers, home medical equipment division and back office support has been remarkable.\nAll of this enabled us to care for 19,185 patients each day within the quarter, while bringing on the service 16,822 patients who needed high quality hospice care during this pandemic.\nWe lived our internal model that we've been sharing during the pandemic, which is, yes, we can, and together we will.\nNow let's discuss our second quarter 2020 operating metrics.\nAs I mentioned in the second quarter, our average daily census was 19,195 patients, an increase of 2.8% over the prior year.\nTotal admissions in the quarter were 16,822.\nThis is a 3.8% decline in admissions when compared to the second quarter of 2019.\nAdmissions performance in the quarter was primarily impacted by the level of disruption, which occurred at each of our referring partners across the healthcare continuum.\nFor example, admissions from hospitals were pressured due to the reduction in available bed capacity and elective procedures, resulting in fewer patients accessing and subsequently being discharged from hospitals.\nAdmissions from physician offices, whom were disrupted but were able to remain operational through telehealth interactions saw an increase due to the number of patients choosing to access the disrupted healthcare system through their primary or specialty physician practice along with medical offices.\nLastly, placement of admissions in the nursing homes and assisted-living facilities were significantly impacted due to the barriers and the restriction of access toward new residents.\nThese types of admission difficulties are reflected in our actual admission results based upon our patient's pre-admit location.\nIn the second quarter, our admissions increased 7.1% in our home-based preadmit locations.\nHowever, this admission group -- admission growth was more than offset by the combination of hospital admissions declining 4%, nursing home management's decreasing 22.8% and assisted living facility admissions declining 10.2% when compared to the prior year quarter.\nOur average length of stay in the quarter was 90.9 days.\nThis compares to 91.1 days in the second quarter of 2019, in 90.7 days in the first quarter of 2020.\nOur median length of stay was 14 days in the quarter, which is two days less than the 16 day median in the second quarter of 2019 and equal to the first quarter of 2020.\nMedian length of stay is a key indicator of our penetration into the high acuity sector of the market.\nFirst, we will continue to prioritize the safety of our employees, patients and their families as we have successfully done since March.\nWe have and will continue to source PPE and we are comfortable with the inventory levels to sustain employee need based upon patient and local circumstances.\nAdditionally, we will continue to utilize the infrastructure we lifted up to manage testing requirements for certain facilities across the country to allow us to safely access our partners' facilities to care for existing patients and placement of new patients when appropriate.\nOur entire team will continue to collaborate safely with our local healthcare partners to successfully navigate patients and their families on to the hospice benefit during this unique time.\nLastly, and most importantly, our team will stay committed to persevere and provide care to all the patients and families in need in the communities we serve.\nI will now open this teleconference to questions.\n",
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"content": "sees fy 2020 adjusted earnings per share $16.20 to $16.40 excluding items.\nroto-rooter is forecasted to achieve full-year 2020 revenue growth of 9% 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: Before we begin, let me remind you that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call.\nIn addition, management may also discuss non-GAAP operating performance results during today's call, including earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA.\nI will begin with highlights for the quarter, and Dave and Nick will follow up with additional operating detail.\nI will then open up the call to questions.\nOperating two distinct business units during our global pandemic has been exceptionally challenging.\nFortunately, we have begun to return to normalcy.\nThe pandemic had created unique problems, logistical hurdles and forced our operations to make significant changes in field and home office procedures.\nMany of these changes have been institutionalized and will become part of our normal operating procedures post-pandemic.\nI could not be prouder of our management team.\nBoth VITAS and Roto-Rooter met these pandemic challenges head-on, produced excellent operating results that are well positioned for growth in the coming years.\nIn April 2020, the first full month of the pandemic, Roto-Rooter experienced an immediate and severe drop in demand for all plumbing and drain cleaning services.\nThis drop was short-lived.\nStarting in May 2020, Roto-Rooter saw a spike in residential plumbing and drain cleaning demand.\nThis increase in demand was sustained throughout 2020 and has continued unabated in the first six months of 2021.\nCommercial demand has also improved up pandemic lows and have now normalized close to pre-pandemic levels.\nFor the remainder of 2021, I anticipate Roto-Rooter's residential demand to remain at the current run rate, coupled with increased commercial demand as the country returns to normalized pre-pandemic consumer behavior.\nThe Great Recession, and now a global pandemic.\nIn each of these crises, Roto-Rooter remained operating and materially increased market share, revenue and operating margin.\nJust as important, Roto-Rooter has held on to the increases in revenue market share and margins in past crisis.\nRoto-Rooter is well positioned post-pandemic, and we anticipate continued expansion of market share by pressing our core competitive advantages in terms of brand awareness, customer response time and 24/7 call centers and Internet presence.\nFor VITAS, the most significant issue remaining from the pandemic is the disruption to senior housing occupancy and the related hospital referrals.\nRecent admissions' data suggest senior housing has entered into the early stages of recovery, and our updated guidance anticipates steady improvement in the senior housing referred hospice admissions in the second half of 2021, with a further acceleration in senior housing admissions anticipated in the fourth quarter.\nWith that, I would like to turn this teleconference over to David.\nLet's turn to VITAS.\nVITAS' net revenue was $312 million in the second quarter of 2021, which is a decline of 4.7% when compared to the prior year period.\nThis revenue decline is comprised primarily of a 6.3% reduction in our days of care, offset by a geographically weighted Medicare reimbursement rate increase of approximately 1.8%.\nAcuity mix shift did have a net impact of reducing revenues approximately $3.8 million in the quarter or 1.2%.\nThe combination of a lower Medicare Cap billing limitation and other contra-revenue charges offset a portion of the revenue decline by roughly 90 basis points.\nVITAS did accrue $2 million in Medicare Cap billing limitations in the second quarter of 2021, and this compares to a $5.7 million Medicare Cap billing limitation in the second quarter of 2020.\nOf our 30 Medicare provider numbers, right now 27 of these provider numbers have a Medicare Cap cushion of 10% or greater.\nOne of our provider numbers has a cap cushion between 0% and 5%, and two of our provider numbers currently have a fiscal 2021 Medicare Cap billing limitation liability.\nLet's take a look at Roto-Rooter.\nRoto-Rooter generated revenue of $220 million in the second quarter of 2021, which is an increase of $45.6 million or 26.1% over the prior year quarter.\nTotal Roto-Rooter branch commercial revenue totaled $50.3 million in the quarter, an increase of 31.8% over the prior year.\nThe aggregate commercial revenue growth consisted of our drain cleaning revenue increasing 39.8%, plumbing increased 32.4% and excavation expanding 25.8%.\nWater restoration also increased 8.3% on the commercial side.\nOn the residential side, total residential revenue in the quarter totaled $149 million, an increase of 23.7% over the prior year period.\nThe aggregate residential growth consisted of drain cleaning increasing 20.6%, plumbing expanding 30.7% and excavation increasing 22.4%.\nWater restoration also increased 23.1%.\nBasically increases across the board, all segments, both commercially and residential.\nNow let's look at Chemed on a consolidated basis.\nDuring the quarter, Chemed repurchased 250,000 shares of stock for roughly $122 million, which equates to a cost per share of $487.53.\nAs of June 30, 2021, there was approximately $312 million of remaining share repurchase authorization under this plan.\nWe've also updated our 2021 earnings guidance as follows: VITAS' full year 2021 revenue prior to Medicare Cap is estimated to decline approximately 4.5% when compared to 2020.\nOur average daily census in 2021 is estimated to decline approximately 5%.\nThis guidance anticipates senior housing occupancy will begin to normalize to pre-pandemic occupancy, starting in the second half of calendar year 2021.\nVITAS' full year adjusted EBITDA margin prior to Medicare Cap is forecasted to be 18.3%, and we are currently estimating $7.5 million for Medicare Cap billing limitations in calendar year 2021.\nThat's an improvement from the initial $10 million of Medicare Cap we estimated at the start of this year.\nRoto-Rooter is forecast to achieve full year 2021 revenue growth of 15% to 15.5%.\nRoto-Rooter's adjusted EBITDA margin for 2021 is estimated to be between 28% and 29%.\nSo based upon this discussion, our full year 2021 adjusted earnings per diluted share, excluding noncash expense or stock options, any tax benefits we receive from stock option exercises as well as costs related to litigation and other discrete items, is estimated to be in the range of $18.20 to $18.50.\nThe revised guidance compares to our initial 2021 guidance of adjusted earnings per diluted share of $17 to $17.50.\nIn the second quarter, our average daily census was 17,995 patients, a decline of 6.3% over the prior year.\nThis decline in average daily census is a direct result of pandemic-related disruptions across the entire healthcare system.\nThis negatively impacted traditional hospice admission patterns, starting in March of 2020.\nOur hospital generated admissions have largely normalized to pre-pandemic levels.\nReferrals from senior housing, specifically nursing home and assisted living facilities continue to be disrupted.\nDuring the second quarter, we have seen admission stabilization and pockets of improvements in senior housing admissions.\nHowever, it remains too early to accurately project the pace and timeline for senior housing admissions to fully return to pre-pandemic levels.\nIn the second quarter of 2021, total VITAS admissions were 16,840.\nThis is a slight improvement when compared to the second quarter of 2020 admissions.\nMore importantly, admissions in the second quarter of 2021 exceeded discharges by 315 patients.\nThis is the first quarter since the pandemic began that our patient admissions have exceeded patient discharges.\nThis is the strongest indication to date that we are now beginning the process of rebuilding census to pre-pandemic levels.\nIn the second quarter, our hospital directed admissions expanded 7.8% and emergency room admits decreased 9%.\nTotal home-based preadmit admissions decreased 9.3%, nursing home admits declined 9.9%, assisted living facility admissions declined 17.5% when compared to the prior year quarter.\nOur average length of stay in the quarter was 94.5 days.\nThis compares to 90.9 days in the second quarter of 2020 and 94.4 days in the first quarter on 2021.\nOur median length of stay was 14 days in the quarter, which is equal to the second quarter of 2020 and is a 2-day improvement when compared sequentially to the first quarter of 2021.\nIt's now time for us to consider any questions that come before the teleconference.\n",
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"content": "sees fy adjusted earnings per share $18.20 to $18.50 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 begin, let me remind you that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call.\nIn addition, management may also discuss non-GAAP operating performance results during today's call, including earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA.\nKevin McNamara, President and Chief Executive Officer of Chemed Corporation; Dave Williams, Executive Vice President and Chief Financial Officer of Chemed; and Nick Westfall President and Chief Executive Officer of Chemed's VITAS Healthcare Corporation subsidiary.\nSherri is retiring at the end of the year, and this is her last introduction to our quarterly conference call.\nI will begin with highlights for the quarter.\nAnd David and Nick will follow up with additional operating detail.\nOur third quarter 2021 operating results released last night, reflect very solid performance for both VITAS and Roto-Rooter.\nOn a go-forward basis, I would like to share with you some of the macro issues we are dealing with as we approach the end of the second year of the pandemic.\nFor VITAS, the most important issue, we are managing labor.\nStaffing of license professionals has been exceptionally challenging to ensure adequate mix of license healthcare workers on a market by market basis.\nThis is particularly challenging during the pandemic, as we deal with dynamic fluctuations in patient census in every market.\nTurnover within our license staff remains above our pre-pandemic rates, but we are seeing indications of normalization, as we continue to expand our hiring and retention initiatives in many markets.\nBeyond managing our staffing levels, we are observing increasing pressure on salaries and wages.\nTo date, we've managed these pressures with increased paid time off or PTO, we view it as inevitable that healthcare wages will increase if we continue to have a nationwide systemic imbalance in supply and demand for license healthcare professionals.\nFortunately, for VITAS and the hospice industry, there is a natural hedge against the inflationary pressures on costs, specifically labor.\nThe annual increase in the Medicare and Medicaid hospice reimbursement rates is based primarily on inflation in the hospital wage index basket, as measured by the federal government's Bureau of Labor Statistics.\nTypically, the annual inflation measured as of March 31 is used to determine the following October 1 reimbursement increase.\nThis should give the hospice industry reasonable stability in operating margins in an inflationary environment, albeit with a six month lag from the inflation measurement to the actual reimbursement increase.\nThe second critical challenge for VITAS is the continued disruption to senior housing occupancy and the latest hospice referrals.\nA recent admission data suggests senior housing is in the process of recovery pre-pandemic nursing home base patients represented 18% of our total average daily census or ADC.\nThe nursing of ADC ratio hit a low of 14.3% in the first quarter of 2021.\nIn the second quarter of 2021 nursing home base patients increased 60 basis points to 14.9%.\nAnd then, the third quarter of 2021, our nursing home patients represented 15.6% of our total ABC.\nOur updated 2021 guidance anticipates sequential improvement in senior housing base patients in the fourth quarter of 2021 with acceleration in senior housing admissions anticipated in 2022.\nFor Roto Rooter, our must significant challenge has been to increase manpower.\nWe've expanded technician manpower by 8% in 2021.\nHowever, based on our current demand levels, we continue to remain understaffed in many of our markets.\nTechnician compensation plays a role in recruiting new employees as well as retention of our existing employee base.\nOur average 2021 technician and field sales force compensation is over $81,000 per year.\nMost of our technicians are paid out on a commission basis of revenue generated.\nAs a result, pricing for our services is a critical component in increasing technician wages.\nWe're anticipating passing to inflationary price increases in all our markets in the fourth quarter of this year.\nDemand for plumbing, drain cleaning, excavation, and water restoration services remain at record levels.\nI want to give additional color on the depth and breadth of this increase in demand.\nLet's compare Q3 2021 revenue to Q3 2019.\nExcluding the HSW acquisition, which was completed in September 2019, under this unit for unit comparison, residential services have experienced incredible growth.\nIn aggregate, residential branch revenue increased 46.2% over this two-year period.\nOn a service segment basis, residential plumbing revenue increased 37.1%; drain cleaning expanded 36%; excavation increased 65.6%; and water restoration increased 48.1%.\nCommercial demand has been more challenging, however, commercial revenue has experienced a significant recovery since the 40% decline in commercial demand noted in April 2020.\nOverall, commercial revenue declined 3.1% over this 2-year period.\nOn an individual service segment basis, commercial plumbing service declined 4.9%, drain cleaning expanded 1.8% excavation declined 10.2%, and water restoration increased 7%.\nWe anticipate continued strengthening in commercial demand in the fourth quarter of 2021, as well as throughout 2022.\nOver the past 20 years, the country has faced 9/11, the Great Recession, and now a global pandemic.\nIn each of these crises, Roto-Rooter remained operating and materially increased market share revenue and operating margin.\nJust as important, post-crisis, Roto-Rooter held on to these increases in revenue market share and margins.\nRoto-Rooter is well positioned postpaid pandemic, and we anticipate continued expansion of market share, by pressing our core competitive advantages in terms of brand awareness, customer response time, 24-7 call centers and Internet presence.\nWith that, I would like to turn the teleconference over to David.\nVITAS's net revenue was $317 million in the third quarter of 2021, which is a decline of 5.8% when compared to the prior year period.\nThis revenue decline is comprised primarily of a 5.3% decline in days of care, partially offset by a geographically weighted average Medicare reimbursement rate increase, including the suspension of sequestration of approximately 1.2%.\nOur acuity mix shift had a net impact of reducing revenue approximately $3 million or nine-tenths of 1% in the quarter, when compared to the prior-year revenue and level of care mix.\nThe combination of Medicare Cap and other contra-revenue changes, negatively impacted revenue growth, an additional 80 basis points.\nVITAS accrued $100,000 in Medicare Cap billing limitations in the quarter.\nThis compares to $4.1 million reversal of Medicare Cap billing limitations in the third quarter of 2020.\nOf our 30 Medicare provider numbers, 27 of these provider numbers currently have a Medicare Cap cushion of 10% or greater.\nOne provider number has a cap cushion between 0% and 5%.\nAnd two of our provider numbers have a fiscal 2021 Medicare Cap billing limitation liability.\nRoto-Rooter, generated quarterly revenue of $221 million in the third quarter of 2021, which is an increase of $30.1 million or 15.7% when compared to the prior year quarter.\nRoto-Rooter's branch residential revenue in the quarter totaled $151 million, which is an increase of $22.2 million or 17.2% over our prior year period.\nThis aggregate residential revenue growth consisted of drain cleaning, increasing 11.7%, plumbing expanding 17.4%, excavation increasing 14.1%, and water restoration increasing 28%.\nRoto-Rooter branch commercial revenue in the quarter totaled $52.3 million, which is an increase of $4.7 million or 10% over the prior year.\nThe aggregate commercial revenue growth consisted of drain cleaning increasing 17.6%, plumbing increasing 9.3%, and commercial excavation declining 1.3%.\nWater restoration also increased 9.4%.\nNow, let's turn to Chemed on a consolidated basis.\nDuring the quarter, we repurchased 350,000 shares of Chemed stock for $164 million, which equates to a cost per share of $467.80.\nAs of September 30 of 2021, there is approximately $148 million of remaining share repurchase authorization under this plan.\nChemed restarted its share repurchase program in 2007.\nSince that time, Chemed has repurchased approximately 15.2 million shares, aggregating approximately $1.7 billion, at an average share cost of $113.04.\nIncluding dividends over the same period, Chemed has returned approximately $1.9 billion to shareholders.\nWe have updated our full-year 2021 guidance as follows: VITAS was 2021 revenue, prior to Medicare Cap, is estimated to decline approximately 5% when compared to the prior year period.\nAverage daily census in 2021, is estimated to decline 5.5%.\nIn our full-year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 18.8%.\nWe're currently estimating $6.6 million for Medicare Cap billing limitations release calendar year 2021.\nRoto-Rooter is forecasted to achieve full-year 2021 revenue growth of 17.3%.\nRoto-Rooter's adjusted EBITDA margin for 2021 is estimated to be between 28.5% and 29%.\nBased on the above full-year 2021 adjusted earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, cost related to litigation and other discrete items, is estimated to be in the range of $19 to $19.20.\nThis compares to our initial 2021 adjusted earnings guidance per diluted share of $17 in $17.50.\nThis revised 2021 guidance assumes an effective corporate tax rate on adjusted earnings of 25.1%.\nThis compares to Chemed's 2020 reported adjusted earnings per diluted share of $18.8.\nIn the third quarter, our average daily census was 18,034 patients, a decline of 5% over the prior year and 0.2% increase when compared to the second quarter of 2021.\nThis year-over-year decline in average daily census is a direct result of pandemic related disruptions across the entire healthcare system since March of 2020.\nOur hospital generated emissions have largely normalized to pre-pandemic levels.\nReferrals from senior housing, specifically nursing homes and assisted-living facilities, continue to be disrupted.\nDuring the third quarter, we've seen admission stabilization and pockets of improvement in senior housing admissions.\nHowever, it remains too early to accurately project the pace and time line for senior housing admissions to fully return to pre-pandemic levels.\nIn the third quarter of 2021, total VITAS admissions were 17, 598.\nThis is a 1.9% decline when compared to the third quarter of 2020 admissions and a 4.5% sequential increase when compared to the second quarter of 2021.\nIn the third quarter, on a year-over-year basis, our hospital directed admissions declined 0.8%.\nTotal home-based pre-admit admissions decreased 8.3%, nursing home admits declined 0.2%, and assisted living facility admissions declined 8.6%.\nWhen you compare our third quarter 2021 admissions to the second quarter of 2021, we generated solid sequential improvement with hospital directed admissions improving 2%, total home based pre-admit admissions increasing 16.3%, nursing home admits expanding 8.9%, and assisted living facility admissions increasing 5% sequentially.\nOur average length of stay in the quarter was 96 days.\nThis compares to 97.1 days in the third quarter of 2020 and 94.5 days in the second quarter of 2021.\nOur median length of stay was 13 days in the quarter and compares to 14 days in the third quarter of 2020, and is equal to the second quarter of 2021.\nI will now open this teleconference to questions.\n",
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"content": "sees fy adjusted earnings per share $19.00 to $19.20 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: They will be joined by Scott Oaksmith, Senior Vice President, Real Estate & Finance.\nAs you'll hear today, we believe that the deliberate set of strategic decisions we've made in recent years and our targeted actions during the pandemic, along with the dedication and hard work of our franchise owners to navigate the impact of the pandemic, drove impressive results that position us well to further capitalize on growth opportunities in 2021 and beyond.\nThroughout my remarks today, I'll provide comparisons not only to prior year, but also to 2019, which we believe are more meaningful in analyzing performance trends as the prior year's quarter results were impacted by the pandemic.\nIn the first quarter of 2021, we once again delivered results that significantly outperformed the industry, our chain scale segments and local competition, and we expanded our adjusted EBITDA margins to 69%.\nOur domestic systemwide year-over-year RevPAR change surpassed the industry by 23 percentage points, declining 4.4% and 18.7% as compared to the same quarters of both 2020 and 2019 respectively.\nAnd we continued to achieve sequential quarter-over-quarter improvement.\nIn addition, we generated steady month-over-month growth in our choicehotels.com and other proprietary digital channels revenue contribution mix throughout the quarter.\nWe also benefited from our most loyal customers, Choice Privileges Diamond Elite members, who contributed an even higher percentage of overall revenue for the quarter as compared to 2020 and 2019.\nThese results have helped us increase RevPAR index versus our local competitors by over 6 percentage points in the first quarter as compared to 2019.\nWe achieved that through notable lifts in both weekday and weekend RevPAR index and up significantly across all location types as reported by STR.\nFor over a year, we've observed significant RevPAR share gains against the competition as compared to 2019 giving us further optimism about our future revenue trajectory.\nHowever, our April RevPAR results are truly remarkable, marking near returns to 2019 levels.\nAided by our strong value proposition and continued outperformance, demand for new franchise contracts grew significantly in the first quarter.\nLikewise, our franchise owners are remaining with Choice as seen in our industry-leading voluntary franchisee retention rate and owners who choose to build and develop hotels in the current environment increasingly seek our brands.\nFor the first quarter we awarded nearly 90 new domestic franchise agreements and over 50% increase over the same period of 2020.\nOf the total new domestic agreements, over 80% were for conversion hotels.\nThese hotels historically open about three to five months after contract execution.\nThroughout the first quarter, we also continued to grow our effective royalty rate, a reflection of the continued strengthening of the value proposition we provide to our franchise owners.\nThese results and our optimism for the future led us to reinstate the dividend at the pre-pandemic level and resume our share repurchase program.\nUnderpinning our first quarter success are the deliberate decisions and strategic investments that we've made in our product portfolio, our value proposition, our platform capabilities and other franchisee facing tools.\nThese investments allowed us to not only capitalize on demand that historically has driven our core business, but also enabled us to attract new travel demand to new market locations and our key segments such as extended stay and upscale.\nIn fact, we believe we are now better positioned to increase our share of travel demand in the years to come than we were prior to the onset of the pandemic.\nWe pride ourselves on investing in our high-quality well segmented portfolio of brands and this sets us apart with our franchise owners.\nWe constantly monitor changing consumer preferences and strategically manage our portfolio to ensure we are building the brands of tomorrow in key strategic segments that provide a compelling return on investment.\nLast year we launched our newest mid-scale extended stay brand Everhome Suites to provide franchisees with another opportunity to capitalize on this fast-growing segment in the hotel industry and help drive returns in practically any economic environment.\nAs hotel financing starts to rebound, we anticipate developers increased demand for this new product.\nIn fact, in April, we met with over 25 developers and toward the new model room for this exciting brand and interest is very high.\nWe also proactively reinvested into the future of our product portfolio with Comfort's Move to Modern refresh program, which has been recently completed and the launch of the new Comfort prototype this quarter to help the brand family maintain its leadership position in the upper mid-scale segment for years to come.\nAnd we remain focused on growing our strategic conversion brands specifically, Clarion Pointe, a relatively new brand extension to the Clarion brand has experienced a five-fold increase of its portfolio and the Ascend Hotel Collection has increased the number of its domestic rooms by over 25% since the end of 2019.\nBased on our strong track record of organic growth, we believe these internal investments will continue to drive attractive returns for years to come.\nAt the same time, we continue to invest in our value proposition capabilities.\nWe enhanced our pricing and merchandizing tools to further enable our franchise owners to reach their target customers and effectively drive top line revenue to their hotels while reducing their total cost of ownership.\nThese tools are contributing to the outperformance our brands are experiencing.\nWe also provided our guests with additional travel options by signing strategic agreements with new travel partners such as Penn National Gaming.\nFinally, the decisions we've made to better align our cost structure in the post-pandemic environment that are here to stay, position us well to capitalize on opportunities as travel demand recovers, while allowing us to continue to invest for the long-term.\nWe have maintained competitive share gains since the onset of the pandemic and we expect our momentum to continue, while uncertainty remains we are observing positive signs of recovery that give us confidence for 2021 and beyond.\nWith the vaccine rollout pace accelerating and consumer confidence at its highest level since the pandemic began, Americans are feeling more optimistic about the prospect of traveling again.\nIndeed recent studies point to a significant uptick in consumers intent to travel in the next six months.\nWe've observed that throughout the first quarter and particularly in the month of April, our customers are planning their travel further in advance as witnessed by the lengthening of average booking windows.\nWe are also pleased to see that our first quarter experienced over 400 basis points weekday occupancy index share gains as compared to 2019.\nAs discussed on our prior calls, we believe the share gains are partially driven by long-term consumer trends, such as remote work, virtual learning and early retirements which afford more Americans flexibility in where and when they travel for leisure.\nAdditionally, we are seeing sequential quarter-over-quarter improvements in our business travel booking trends.\nAs a matter of fact, even our group travel is showing signs of recovery with the sports segment bookings expectations for this year already exceeding 2019 levels.\nWe continue to observe positive trends and rising outlooks across most key domestic economic indicators.\nAdditionally stimulus checks from the recent financial relief package, high household savings and business reopenings all point to a continued recovery for our small business franchise owners and middle class consumers, our core customers.\nI'll now provide a brief update on our key segments where are all of our brands achieved RevPAR index gains as compared to 2019 versus their local competitors through the first quarter.\nOur Extended Stay segment is a significant growth engine for the company.\nThe acquisition of the WoodSpring Suites brand in 2018 and our strategic investments in the Extended Stay segment, allowed us to nearly quadruple the size of the portfolio over the past five years, with the segment now representing 10% of our total domestic rooms.\nIn the first quarter the Extended Stay segment rapidly expanded by 44 units year-over-year from the first quarter of 2020 and now stands at nearly 455 domestic hotels with a domestic pipeline of 310 hotels.\nWe expect this Extended Stay unit growth rate to further accelerate in the future.\nOnce again, our purpose-built brand tailored for long-term guests outperformed the competition in this cycle resilient segment.\nThe WoodSpring Suites brand is our first brand to experience RevPAR levels that exceeded our 2019 results.\nFor the first quarter as compared to 2019, WoodSpring reported over 3% RevPAR growth, driven by a more than 4% increase in average daily rate and an average occupancy rate of 74%, a truly remarkable achievement.\nThe brand's pipeline continues to expand year-over-year and reached nearly 150 domestic hotels at the end of March 2021.\nOur Suburban Extended Stay brand experienced 10% year-over-year domestic unit and pipeline growth.\nAt the same time our MainStay Suites mid-scale extended stay brand captured over 13 percentage points in RevPAR index gains versus its local competitors as compared to 2019.\nThe brand's portfolio expanded to over 90 domestic hotels open a 26% increase year-over-year.\nThe increased developer interest we are seeing reaffirms that our strategic commitment and continued investments in this highly cycle-resistant segment are driving a competitive advantage.\nGiven these results, we remain optimistic about the growth potential of our Extended Stay portfolio.\nOur mid-scale brands represent over two-thirds of our total domestic portfolio and over half of the total domestic pipeline.\nAs we celebrate Comfort's 40th anniversary this year, the brand's continued growth and performance success is proved positive that we invest for the long-term.\nOur efforts to transform the brand are paying off, specifically the Comfort Family achieved RevPAR index gains versus its local competitors of nearly 10 percentage points and a RevPAR change that was nearly 11 percentage points more favorable than the upper mid-scale chain scale in the first quarter as compared to 2019.\nIn March, we officially launched the much anticipated rise and shine prototype which maintains Comfort's low cost to build advantage over its competition and is designed to meet guest expectations for an elevated experience.\nThe Comfort brand family reached over 260 hotels in its domestic pipeline, over one quarter of which are hotels awaiting conversions, which we believe will fuel the brand's growth in the near term.\nAnd finally, Clarion Pointe, ended the first quarter by achieving a milestone of the 30th hotel opened in the United States and more than 20 additional hotels awaiting conversion in the near term.\nOur upscale portfolio achieved impressive year-over-year growth in the first quarter, where we increased our domestic upscale room count by 22% and marked the highest number of openings in a given quarter, matching the company's all-time record.\nIn addition, developer interest in our upscale brands remained high as we more than quadrupled the number of domestic franchise contracts in the first quarter year-over-year.\nThe Ascend Hotel Collection leads the industry as the first and largest soft brand.\nThe brand grew its domestic room count by nearly 26% year-over-year and expanded to nearly 380 hotels open around the globe.\nAscend Hotels achieved the following performance in the first quarter as compared to the same period of 2019.\nThe brand outperformed the upscale segment RevPAR change by 19 percentage points.\nIt achieved RevPAR index gains of 12 percentage points against its local competitors and it recorded average daily rate index gains of 11 percentage points.\nThis performance further enhance the brand's attractiveness to developers looking for a smart conversion opportunity which was showcased in the brand's strong franchise agreements activities for the quarter.\nOur upscale Cambria Hotels brand continues its positive momentum, growing its portfolio size by 14% to 57 units with 18 projects under active construction at the end of March.\nThe brand continues to build on its success with four hotels already opened year-to-date and five additional planned to open through the end of the summer.\nConsumer confidence in Cambria Hotels drove the brand RevPAR share gains versus its local competitors to 16 percentage points in the first quarter as compared to 2019.\nThese results are proof of Choice Hotels value proposition in the upscale segment for our current and prospective owners.\nWe're also committed to enhancing our value proposition by growing our platform business.\nIn the first quarter, we further expanded our attractive upscale platform and successfully on-boarded 22 Penn National Gaming Casino resort properties, representing nearly 7,000 rooms joining our Ascend Hotel Collection.\nThis strategic agreement will offer our more than 48 million Choice Privileges members the opportunity to earn and redeem points at these Penn properties by booking their stays directly on choicehotels.com.\nWe are proud of everything we've accomplished this quarter, but we certainly could not have done it without the dedication of our associates and the strength of our award-winning culture, focused on diversity, equity and belonging.\nI'm especially pleased to say that Choice was recently named by Forbes as one of the best employers for diversity and one of America's best mid-size employers, as well as one of the best places to work by comparably.\nOur strategic approach, resilient business model, high quality well segmented portfolio brands and strong balance sheet will help us to further capitalize on growth opportunities in 2021 and beyond.\nWith that, I'll hand it over to our CFO, Dom?\nI hope you and your families are all well.\nToday, I'd like to provide additional insights around our first quarter results, update you on our liquidity profile and approach to capital allocation and finally share our thoughts on the outlook for the road ahead.\nTaking a closer look at our results for the first quarter 2021, total revenues excluding marketing and reservation system fees were $91.4 million.\nAdjusted EBITDA totaled $63.1 million driven by improving RevPAR performance and our ability to realize adjusted SG&A savings of 20% and our adjusted EBITDA margin expanded to 69%, a 330 basis point increase year-over-year.\nAs a result, our adjusted earnings per share were $0.57 for the first quarter.\nLet's take a closer look at our three key revenue levers, beginning with RevPAR.\nOur domestic systemwide RevPAR outperformed the overall industry by 23 percentage points for the first quarter, declining 18.7% from 2019, compared to 2020, our first quarter 2021 RevPAR declined only 4.4%.\nAt the same time, our first quarter results exceeded the primary chain scale segments in which we compete as reported by STR, by over 8 percentage points versus 2019.\nOur domestic systemwide occupancy rate has seen significant improvement since mid-March 2021.\nIn fact, starting in mid-March, we've experienced our highest occupancy levels since the start of the pandemic, with systemwide occupancy rates exceeding 70% on numerous days.\nWe are optimistic that these demand trends will remain elevated, especially throughout summer and will further strengthen the financial health of our franchisees.\nThe trends of improving RevPAR performance have continued into the second quarter.\nOur April performance was significantly stronger with a RevPAR decline of approximately 4% and an occupancy rate increase of 80 basis points versus 2019 levels.\nThese trends give us even greater optimism for our 2021 performance.\nWe've long focused our brand strategy on driving growth across the higher value and more revenue intense upscale, extended stay and mid-scale segments and the investments we've made are paying off.\nIn the first quarter, these strategic segments helped us achieve material RevPAR change outperformance against our respective industry chain scales and drove gains versus our local competitors.\nSpecifically when compared to first quarter 2019, our upscale portfolio increased its RevPAR index relative to its local competitive set by 14 percentage points.\nOur extended stay portfolio outperformed the industry's RevPAR change by an impressive 38 percentage points and grew versus its local competitive set by 10 percentage points.\nAnd finally the RevPAR change for our mid-scale and upper mid-scale portfolio exceeded these segments by 9 percentage points.\nFor the first quarter 2021 versus the same period of 2019, all of our brands achieved RevPAR index gains versus their local competitors.\nIn fact, we were able to increase our overall RevPAR index against local competitors by over 6 percentage points, notably through our franchisees' ability to maintain rate integrity.\nMore specifically, our average daily rate improved from the prior quarter and our average daily rate index increased 3.7 percentage points as compared to 2019.\nWe've also observed firsthand that our investments in pricing optimization capabilities for our franchisees are paying off.\nAt the same time, we continue to grow the overall size of our franchise system and open the highest number of hotels in any first quarter in the past 10 years.\nAcross our more revenue intense brands in the upscale extended stay and mid-scale segments we observed stronger unit growth, increasing the number of hotels by 2.4% year-over-year and improving the growth from fourth quarter 2020.\nFor full year 2021, we expect our overall unit growth trend to continue.\nFurthermore, we expect the unit growth of the more revenue intense segments to accelerate versus 2021 and range between 2% and 3%.\nAided by our strong value proposition and outperformance, demand for our brands continue to gain momentum since the beginning of the year with over half of the domestic agreements executed in the month of March.\nSpecifically, we saw an increase in demand for our conversion brands with domestic conversion contracts up 76% year-over-year.\nOur royalty rate remains a significant source of our revenue growth, which is driven by the attractive value proposition we provide to our franchisees, their continued desire to be affiliated with our proven brands and our pipeline.\nThe company's domestic effective royalty rate exceeded 5% for the first time ever in a quarter and increased 7 basis points year-over-year for the first quarter compared to the prior year.\nWe expect to maintain the historical growth trajectory of this lever in 2021 as owners seek Choice Hotels proven capabilities of delivering strong top line revenues to their hotels, while helping them maximize return on investment.\nI'd now like to turn to our liquidity profile and share capital allocation update.\nOur strong results have led to an even stronger liquidity position for the company.\nAt the end of first quarter 2021, the company had approximately $823 million in cash and available borrowing capacity through its revolving credit facility, even though our cash generation tends to be weaker in the first quarter, due to the seasonality of our business and other cash outlays.\nGiven the continuing improvements in our operations, our strong liquidity and credit profile and our increasing optimism for 2021 and beyond, our Board has approved the reinstatement of our quarterly dividend at the pre-pandemic level beginning in July 2021.\nAdditionally, the Board has also approved the resumption of the company's share repurchase program.\nBoth actions highlight the confidence we have in our business to continue generating strong levels of cash and are a testament to our impressive results, while reflecting our continued commitment to driving long-term shareholder value and returning excess capital to our shareholders.\nNevertheless, our capital allocation philosophy remains unchanged.\nWe will continue to be disciplined stewards of capital and take steps that we believe will maximize shareholder value.\nChoice's primary objective in this area has always been to increase organic growth by strategically investing back into the business.\nWe will continue to monitor the environment for other investment opportunities and evaluate capital returns in the context of our leverage levels, market conditions and our overall capital allocation strategy.\nI'd like to offer some thoughts on what lies ahead.\nWhile we are not providing formal guidance today, we currently expect RevPAR change for the remainder of the year to be stronger than first quarter 2021 results versus both 2020 and 2019.\nOur view is reinforced by the following: First, we continue to see consumers' desire to travel climbing aided by the vaccine rollout and improving domestic economic environment and higher levels of consumer savings.\nSecond, we are pleased that our domestic RevPAR change has continued the pattern of sequential improvement with significantly stronger April RevPAR results versus 2019 and trends continuing into May.\nWe currently expect strong travel demand trends to continue.\nFinally, we continue to be optimistic given other positive trends such as demand increases in key urban locations and our share gains in business travel, combined with the continued resilience of leisure demand.\nWe will continue to evaluate the impact of COVID-19 across the business and we'll provide further updates in August during our next earnings call.\nIn closing, we remain optimistic that Choice Hotels is well positioned to succeed in 2021 and beyond.\nOur resilient, primarily asset light franchise-focused business model which has historically delivered stable returns throughout economic cycles and provided a degree of cushion from market risks will continue to benefit us in the long run.\nOur investments for the long-term that propel our future forward coupled with our strategic approach, disciplined capital allocation strategy and strong balance sheet will allow us to continue to capitalize on opportunities during the recovery and drive outsized returns for years to come.\nAt this time, Pat and I would be happy to answer any questions.\n",
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"content": "compname posts q1 adjusted earnings per share $0.57.\nq1 adjusted earnings per share $0.57.\nnot providing formal guidance for q2 or full year 2021.\nchoice hotels international - currently expects revpar change for remainder of 2021, as compared to both 2019 and 2020, to outperform q1 2021 results.\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: Actual results may differ materially from those indicated in forward looking statements, and you should consult the company's Forms 10-Q, 10-K and other SEC filings for information about important risk factors affecting the company, that you should consider.\nThese forward looking statements speak as of today's date, and we undertake no obligation to publicly update them to reflect subsequent events or circumstances.\nHe'll be joined by Scott Oaksmith, Senior Vice President, Real Estate and Finance.\nWe appreciate you taking your time to join us.\nI'm pleased to report that Choice Hotels has continued to deliver strong results that once again significantly outperformed the industry and gained share across all segments in which we compete.\nOur June and July RevPAR results exceeded 2019 levels by approximately 5% and 15%, respectively.\nA truly remarkable achievement.\nFor almost 1.5 years, we've maintained significant RevPAR index share gains against the competition as compared to 2019.\nIn fact, this quarter, we increased RevPAR index versus our local competitors by nearly five percentage points as compared to 2019, through notable lift in both weekday and weekend RevPAR index as reported by STR.\nRetaining these elevated competitive share gains even as the broader industry recovers illustrates that our strategic investments are working and gives us further optimism about our future revenue trajectory.\nOur goal is not simply to return to our 2019 performance levels but rather to capitalize on current and future investments to fuel our long term growth and drive our performance to new levels.\nAs previously discussed, we were very intentional in our approach to investing prior to the pandemic to drive growth across the more revenue intense hotel segments.\nWhile we reduced our overall spend in 2020 due to the pandemic, we continue to invest in key strategic areas.\nMore importantly, in today's stronger demand environment, we see an outsized opportunity to continue or even accelerate strategic investments to capture a greater share of travel demand.\nWhat gives us optimism is that the bold investments we've continued to make are paying off.\nThese include launching and enhancing brands in each of our strategic segments, namely expanding our upscale positioning, strengthening our mid scale leadership role and rapidly growing our extended stay portfolio.\nWe're also improving our guest delivery at the hotel level, while strengthening our marketing and reservation systems and franchisee tools that have contributed to the outperformance our brands are demonstrating.\nWe are also bolstering our platform capabilities through the strategic partnerships that drive incremental revenue to our existing portfolio, allowing us to play in nontraditional segments, such as gaming and all inclusive resorts among others.\nI will now outline more specifically why we are confident that we can continue to increase our share of travel demand in the years to come.\nFirst, we strengthened our existing brands and launched new brands to appeal to the customer of tomorrow in key segments that provide a compelling return on investment.\nOur strategic investments in the extended stay segment allowed us to quadruple the size of the portfolio over the past five years to reach 460 domestic units with a domestic pipeline of over 300 hotels.\nLast year, we launched our newest mid scale extended stay brand, Everhome Suites, to provide franchisees an opportunity to capitalize on the best performing segment of the hotel industry.\nThe interest level from multi-unit developers backed by institutional capital for this new product is high, similar to what we are seeing with our WoodSpring Suites brand.\nIn our mid scale segment, we have reinvested in the future of our brand portfolio with Comfort moved to modern transformation.\nThe Comfort portfolio grew its domestic unit count by 2.5% in the second quarter year over year and recently celebrated the highest number of openings since 2014, while achieving RevPAR index gains versus its local competitors in the second quarter.\nClarion Pointe has already experienced a fivefold increase of its portfolio since the end of 2019, ending the first half of the year with over 30 hotels open in the U.S. and more than 20 additional hotels awaiting conversion this year.\nAt the same time, we rapidly grew our upscale segment.\nSpecifically, we've increased the number of domestic upscale rooms by nearly 25% since the end of 2019, driven by impressive growth of both Cambria and the Ascend Hotel Collection.\nWe also continue to invest in capabilities to further enhance our owners' value proposition and drive the bottom line results through value added programs and resources to achieve higher levels of profitability.\nNotably, we enhanced our pricing and merchandising tools to further enable our franchise owners to reach their target customers and effectively drive top line revenue.\nThe company is currently outpacing the rate recovery seen following prior recessions.\nAnd finally, we continue to propel our future forward by expanding our platform capabilities through signing strategic agreements with new travel partners in adjacent business segments.\nThese platform expansion strategies enabled us to attract new franchisees and guests to the core brand portfolio and supplement investments in strategic brand growth with increases to high margin affiliation fee streams.\nAs discussed on our prior calls, we've been anticipating long term consumer and demographic trends to drive a significant uptick in travel demand, and we've been making investments to capitalize on them.\nSpecifically, we are benefiting from trends, such as Americans rediscovering domestic destinations and the continued rise of road trips and increase in workers retiring early and the trend of work from anywhere, which affords Americans flexibility in where and when they travel for leisure.\nWe now know that the pandemic has only accelerated these trends, and we believe that our business will therefore benefit in an outsized way from additional travel demand coming to our key segments.\nThe investments we've made allowed us to capitalize on demand that has historically propelled our core business and also enabled us to attract and capture a larger share of leisure demand with customers, who are new to our brands, driving more revenue this year than in 2019.\nAt the same time, we're benefiting from our most loyal customers, Choice Privileges, Diamond Elite members, who are experiencing our new and refreshed brands and who contributed an even higher percentage of overall revenue for the quarter as compared to 2019.\nNot only are our customers planning their travel further in advance, as witnessed by the continued lengthening of average booking windows, but we continue to see a slightly greater share of revenue coming from longer lengths of stay.\nWhile our expectation to capture a larger share of consumers' wallet among leisure travelers is already coming to fruition, we also see continuing momentum in our business travel trends with additional runway for growth.\nWe have seen sequential quarter over quarter and month over month increases in our business travel booking trends in the second quarter 2021.\nLikewise, with our recent refresh of the Comfort brand family and further upscale penetration, we are well positioned not only to recover our existing business customers but to expand our guest base as business travel rebounds.\nAs a matter of fact, our group travel bookings reached 90% of our 2019 levels in the first half of the year with key segments, strongly rebounding and lead volumes steadily rising close to 2019 levels.\nThe results we achieved confirm our focus to grow in our strategic segments, which will further fuel the long-term revenue intensity of our system.\nI'll now provide a brief update on our key segments where all of our select service brands achieved RevPAR index gains versus their local competitors in the second quarter as compared to 2019.\nOur extended stay segment, a significant growth engine for the company, expanded by over 45 hotels in the second quarter year over year and now represents over 10% of our total domestic rooms.\nFor the second quarter, as compared to 2019, WoodSpring Suites reported 16% RevPAR growth.\nAnd the brand's pipeline continues to expand, reaching 155 domestic hotels.\nOur suburban extended stay portfolio expanded to nearly 70 domestic hotels open, representing 15% unit growth year over year.\nAdditionally, franchise agreements awarded for the brand in the first half of the year exceeded levels reported in the same period of 2019.\nAt the same time, our MainStay Suites, mid scale extended stay brand, continued to capture nearly 14 percentage points in RevPAR index gains versus its local competitors as compared to 2019 and the brand's portfolio of over 90 domestic hotels open experienced 27% year over year unit growth.\nWe are especially pleased with a significant increase in developers' interest in new construction extended stay projects year over year as hotel financing begins to rebound.\nThe high developer activity and interest reaffirm that our strategic commitment and continued investments in this highly cycle resilient segment are driving a competitive advantage.\nOur mid scale transient brands represent over two over three of our total domestic room portfolio and over half of the total domestic pipeline.\nSpecifically, the Comfort family achieved a RevPAR change that was nine percentage points more favorable than the upper mid scale chain scale in the second quarter as compared to 2019.\nIn the first half of the year, the Comfort portfolio opened the highest number of the brand's conversion hotels in the past decade, while increasing domestic new construction agreements by 20% year over year.\nWith newly updated properties from coast to coast, a recently refreshed brand identity and the new Rise & Shine prototype revealed this spring, the future is certainly bright for Comfort.\nOur upscale portfolio achieved impressive year over year growth in the second quarter, where we increased our domestic room count by 24%, marking a record for domestic openings in the first half of the year for the company, including 22 Penn National Gaming properties.\nThe Ascend Hotel Collection leads the industry as the first and largest soft brand.\nThe brand grew its domestic room count by 28% year over year and expanded to nearly 390 hotels open around the globe.\nIn addition, Ascend Hotels outperformed the upscale segment RevPAR change by 26 percentage points for the quarter as compared to 2019.\nOur upscale Cambria Hotels brand continues its positive momentum, growing its portfolio size by 14% to 58 units with 17 projects under active construction at the end of June and approximately 10 additional hotels planned to open this year.\nThese results are proof of Choice's value proposition in the upscale segment for our current and prospective owners.\nThe recovery is not just about travelers returning, it's also about continuing to drive forward our efforts to improve the unit economics of our franchises.\nI've been traveling a lot since late March across the country.\nAnd every time I speak with our franchise owners, they are optimistic about the progress of their business recovery and the outlook for the remainder of the year.\nThe close relationship we've had with our franchisees has always been strong, but the pandemic was an opportunity for us to strengthen this bond.\nSpecifically, our owners are very pleased with the new pricing tool we recently introduced that has helped drive their top line outperformance versus competitors and with several initiatives we launched that reduce their total cost of ownership.\nOur franchisees are also benefiting from our strong business delivery.\nWith such a powerful value proposition, it's no surprise why Choice has an industry leading voluntary franchisee retention rate and our franchise owners continue to seek and develop our brands.\nAided by our strong value proposition for our current and future owners, we also experienced significant demand for new franchise contracts.\nIn the first half of the year, we awarded 200 new domestic franchise agreements, a 32% increase over the same period of 2020.\nLikewise, demand for our conversion brands throughout the first half of the year has increased by over 40% year over year.\nIn addition, our development and franchise service team that is fully dedicated to driving diverse ownership of Choice franchise hotels among underrepresented and minority owners has awarded nearly a dozen franchise contracts in the first half of the year while growing and cultivating the number of women owners.\nWe also continued to strengthen our platform business portfolio, which represents a highly revenue intense extension for Choice.\nOur guests are increasingly engaging with our travel partners and continuing to benefit with additional travel options, while our more than 49 million Choice Privileges members have the opportunity to earn and redeem points at our travel partners properties by booking their stays directly on choicehotels.com.\nIn fact, we are seeing an increase in our domestic loyalty program sign-ups in the second quarter 2021 as compared to 2019.\nWe are committed to enhancing our value proposition by further strengthening the platform portfolio and continuing to establish new strategic partnerships.\nIn closing, I'm proud to say that our culture centered around diversity, equity and belonging is being recognized.\nThis year, we've been named one of the best employers for diversity by Forbes, the Best Place to Work for LGBTQ equality by the Human Rights Campaign for the ninth consecutive year and one of the best places to work for people with disabilities, earning a perfect score on the Disability Equality Index for the second year in a row.\nWith that, I will hand it over to our CFO.\nI hope you and your families are all well.\nToday, I'd like to provide additional insights around our second quarter results, update you on our liquidity profile and capital allocation and share our thoughts on the outlook for the road ahead.\nThroughout my remarks today, I'll provide financial performance and RevPAR comparisons to 2019, which we believe are more meaningful in analyzing trends as the prior year's quarter results were significantly impacted by the pandemic.\nFor second quarter 2021 as compared to the same period of 2019, total revenues, excluding marketing and reservation system fees, were $142.4 million.\nAdjusted EBITDA increased 9% to $111.8 million, driven by improving RevPAR performance and continued cost discipline.\nOur adjusted EBITDA margin expanded to 79%, an 8% increase.\nAnd as a result, our adjusted earnings per share were $1.22 for the second quarter, a 3% increase versus the same period of 2019.\nLet's now take a closer look at our three key revenue levers beginning with royalty rate.\nThe continued increases in our effective royalty rate remains a significant source of our revenue growth, which is driven by the attractive value proposition we provide to our franchisees, their continued desire to be affiliated with our proven brands and our pipeline.\nThe company's domestic effective royalty rate once again exceeded 5% for the second consecutive quarter, growing seven basis points for the second quarter 2021 compared to the same period of 2020, a reflection of the continued strengthening of the value proposition we provide to our franchise owners.\nWe expect to maintain the historical growth trajectory of this lever for full year 2021 as owners seek Choice Hotels' proven capabilities of delivering strong top line revenues to their hotels while helping them reduce their total cost of ownership and maximize return on investment.\nOur domestic system wide RevPAR outperformed the overall industry by 20 percentage points for the second quarter, declining only 1% from 2019, while occupancy increased by 20 basis points as compared to the same quarter of 2019.\nAt the same time, our second quarter results continue to exceed the primary chain scale segments in which we compete as reported by STR by nearly seven percentage points versus 2019.\nWe are proud to report that our June RevPAR results exceeded 2019 levels by approximately 5%, driven by a nearly 3% increase in average daily rate and a two percentage point increase in occupancy.\nThe trends of improving RevPAR performance have continued into the third quarter.\nOur July performance was significantly stronger with RevPAR growth of approximately 15%, driven by occupancy levels of 70% and an average daily rate increase of 10% versus 2019 levels.\nIn fact, July RevPAR for our upscale, extended-stay, upper mid scale, mid scale and economy segments all surpassed 2019 pre-pandemic levels.\nAnd we saw month over month acceleration in performance across all of our segments.\nThese trends give us continued optimism for the remainder of the year.\nAs discussed in the past, we've long focused our brand strategy on driving growth across the higher value and more revenue intense, upscale, extended-stay and mid scale segments, and the investments we've made are paying off.\nThese strategic segments continue to help us achieve material RevPAR change outperformance against our respective industry chain scales and drove gains versus our local competitors.\nSpecifically, when compared to second quarter 2019, our upscale portfolio increased its RevPAR index relative to its local competitive set and outperformed the industry's RevPAR change by nearly 13 percentage points.\nOur extended-stay portfolio grew RevPAR by 10% in the second quarter year over year, driven by occupancy levels of 82% and a 2% increase in average daily rate.\nThe segment outperformed the industry's RevPAR change by more than 31 percentage points.\nAnd finally, the RevPAR change for our mid scale and upper mid scale portfolio exceeded these segments by eight percentage points.\nLet me also highlight just a few impressive performance achievements for our brands in the second quarter as compared to the same period of 2019.\nOur WoodSpring brand reported 16% RevPAR growth, reaching an average occupancy rate of nearly 86% and experiencing a nearly 6% increase in average daily rate.\nAscend Hotels grew June RevPAR by nearly 5%, driven by an over 12% average daily rate increase and achieved RevPAR index gains of 11 percentage points against their local competitors, while our Cambria Hotels drove the brand's RevPAR share gains versus their local competitors to 14 percentage points.\nQuality, our largest brand in the portfolio, recorded nearly 2% RevPAR growth driven mainly by a 1.2% increase in average daily rate.\nAnd finally, suburban extended-stay grew its occupancy by over four percentage points.\nAcross the Choice system, we were able to increase our overall RevPAR index against local competitors by nearly five percentage points, driven by both our franchisees' ability to grow rate and occupancy gains.\nFinally, we continue to grow the overall size of our domestic franchise system and exceeded 2019 levels for conversion openings through the first half of the year.\nAcross our more revenue intense brands in the upscale, extended-stay and mid scale segments, we observed stronger unit growth, increasing the number of hotels and rooms by 2.5% and 3.1% year over year, respectively, and increasing the growth rate from the first quarter of 2021.\nFor full year 2021, we expect our overall unit growth trend to continue.\nFurthermore, we continue to expect the unit growth of the more revenue intense segments to accelerate versus 2020 and range between 2% and 3%.\nAided by our strong value proposition and outperformance, demand for our brands continue to gain momentum since the beginning of the year with more than one of three of the total domestic agreements executed in the month of June.\nIn fact, development activity for our extended-stay and upscale domestic franchise contracts throughout the first half of the year exceeded 2019 levels by nearly 60% and 14%, respectively.\nAt the same time, our developers are increasingly optimistic about the long-term fundamentals of the lodging industry.\nNearly 40% of total domestic franchise agreements awarded in the second quarter were for new construction contracts, which increased by over 20% in the second quarter year over year.\nIn fact, demand for our new construction brands continued to accelerate throughout the first half of the year with more than half of the total new construction contracts executed in June alone.\nI'd now like to say a few words about our liquidity profile and provide a capital allocation update.\nOur strong results have led to an even stronger liquidity position for the company.\nAt the end of second quarter 2021, the company had approximately $908 million in cash and available borrowing capacity through its revolving credit facility.\nWe are also pleased to report cash flow from operations of $102.3 million for the second quarter of 2021, a 28% increase versus second quarter 2019.\nToday, our gross debt to EBITDA leverage levels remain well within our target range of three times to four times.\nOur impressive results, combined with our confidence in continuing to generate strong levels of cash and our optimism for the future led us to reinstate the quarterly dividend at the pre-pandemic level and resume our share repurchase program.\nIn June and July 2021, we returned over $14 million back to our shareholders in the form of cash dividends and repurchases of our common stock.\nThese actions reflect our continued commitment to driving long-term shareholder value and returning excess capital to our shareholders.\nWe will continue to monitor the environment for other investment opportunities and evaluate capital returns in the context of our leverage levels, market conditions and our overall capital allocation strategy.\nBefore closing, I'd like to offer some thoughts on what lies ahead.\nWhile we are not providing detailed guidance today, we currently expect the third quarter RevPAR to grow in the mid to high single digits as compared to 2019.\nAssuming elevated consumer sentiment remains and the broader RevPAR and economic recovery trends continue, we expect to see our 2021 adjusted EBITDA approaching 2019 levels, even with potential incremental investments in the back half of the year.\nOur view is reinforced by our strong year to date financial performance, broader macro and consumer trends in our recent domestic June and July RevPAR results and our continued investments to support growth for the remainder of 2021 and beyond.\nWe will continue to evaluate the impact of COVID-19 across the business, and we'll provide further updates in November during our next earnings call.\nIn closing, we remain confident that our strategic approach and resilient business model coupled with our disciplined capital allocation strategy and strong balance sheet will help us further capitalize on growth opportunities and drive outsized returns for years to come.\nThe investments that we have made and will continue to make will allow us to execute on our ambitious long term growth plan.\nAt this time, Pat and I would be happy to answer any questions.\n",
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"content": "q2 adjusted earnings per share $1.22 excluding items.\nchoice hotels international -not at this time providing guidance for q3 or fy given precise impact of covid-19 on co's future results is still unknown.\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: They will be joined by Scott Oaksmith, Senior Vice President, Real Estate and Finance.\nWe appreciate you taking the time to join us.\nI'm pleased to report that Choice Hotels continued to deliver strong RevPAR growth in the third quarter that once again significantly outperformed the industry.\nWe also continue to gain share across all segments in which we compete.\nAs a result of these performance trends, we expect to surpass 2019 RevPAR and adjusted EBITDA levels for full year 2021.\nBy continuing to implement our long-term strategy, we have positioned Choice Hotels to further benefit from post-pandemic trends that favor leisure travel, limited service hotels and longer stays.\nAdditionally, our business traveler demand has returned to levels similar to the third quarter of 2019.\nThe third quarter was exceptional, our strongest quarter of the year.\nOur RevPAR increased 11.4% compared to the third quarter of 2019, surpassing our prior quarterly RevPAR guidance.\nIn fact, RevPAR has now exceeded 2019 levels for five consecutive months, with trends continuing into the fourth quarter.\nFor over 1.5 years, we've maintained significantly higher RevPAR index share gains against the competition compared to 2019.\nWe continued this trend in the third quarter, increasing RevPAR index versus our local competitors by nearly four percentage points as compared to 2019, reflecting continued growth in both weekday and weekend RevPAR index as reported by STR.\nChoice's ability to continue to gain share even as the broader industry recovers, demonstrates that our strategic investments are paying off and gives us further confidence in our future revenue trajectory.\nBecause of our strategic investments, both before and during the pandemic, we are in a stronger position today to capitalize on outsized growth opportunities over the long term, which we expect will create value and drive our performance to new levels.\nWhat's most impressive is that we continue to drive strong performance through both rate improvement and occupancy share gains.\nChoice's average daily rate growth has been stronger than the industry in the third quarter due to our new revenue management tool and broader capabilities.\nIn addition, our robust merchandising strategy has allowed us to drive occupancy share gains versus our local competitors.\nWe continue to make major investments that are enhancing our owners' performance and contributing to our brand's outperformance.\nEarlier this year, we launched our new revenue management capability designed to improve the ability of our franchise owners to effectively drive top line revenue.\nThis tool marks a step change improvement that we were able to put in the hands of our franchisees at a critical juncture in the recovery.\nAs the first mobile-enabled revenue management app, it allows our franchisees to more effectively manage their channels rates and inventory by adapting to local market trends in real time through repricing and competitive rate shopping multiple times during the day, and they can do this from virtually anywhere.\nThis enhanced capability has contributed to choice taking significant RevPAR index share specifically driving average daily rate index gains versus local competitors, and we expect this trend to continue.\nThe acceptance of rate recommendations by our franchisees has been significantly higher than our prior tool, demonstrating our owners' confidence in the solutions that we are providing.\nThis tool, combined with expert advice from our experienced revenue management consultants is helping our franchise owners to swiftly execute the right pricing strategy, which is particularly important in an inflationary environment.\nAt the same time, we continue to improve the unit economics for our franchisees, concentrating on investments like housekeeping upon request that lower their cost of ownership while driving continued performance improvements.\nRecently, we deployed a new digital registration capability, which is integrated with our property management system.\nThis cost-effective cloud-based solution is designed to simplify the hotel registration process for front desk staff, save on labor, speed up check-in and improve our guests' overall experience.\nMoreover, our recent brand investments are designed to appeal to the guest of tomorrow while providing a compelling return on investment for our franchisees.\nJust a few weeks ago, we introduced a new Cambria hotel prototype option designed for secondary and leisure markets.\nWe're excited about the future growth opportunity for Cambria as we expect this prototype will allow developers the flexibility to build at a reduced cost, expanding the markets available for growth while retaining our design forward experience.\nI will now provide a brief update on our key segments, where 11 out of our 12 brands achieved RevPAR index gains versus their local competitors in the third quarter as compared to 2019.\nOur strategic investments in the extended-stay segment allowed us to quadruple the size of the portfolio over the past five years to reach 467 domestic units with a domestic pipeline of nearly 310 hotels.\nThis segment, a significant growth engine for the company, expanded by over 45 hotels in the third quarter year-over-year and now represents over 10% of our total domestic rooms.\nIn addition to strong unit growth, we've also driven impressive RevPAR growth across our extended stay brands.\nSpecifically, when compared to the third quarter of 2019, our extended-stay portfolio grew RevPAR a by over 18%, driven by occupancy levels of 82% and a 9% increase in average daily rate.\nAnd outperformed the industry's RevPAR change by over 20 percentage points.\nThe WoodSpring Suites brand celebrated a key milestone with the recent opening of its 300th hotel.\nThe brand's pipeline expanded by over 20% year-over-year as of the end of September, reaching nearly 160 domestic hotels which further exemplifies developer demand for this brand, given its cycle resilience.\nWe expect that WoodSpring's robust pipeline will provide a strong platform for future growth of the brand.\nBroadly speaking, we are pleased with the significant increase in developers' interest in extended stay projects.\nIn the third quarter, we executed two dozen extended-stay domestic franchise agreements, an 85% increase year-over-year and a 20% increase compared to 2019 levels.\nIn addition, the first hotel for our newest extended-stay brand, Everhome Suites is currently under construction and scheduled to open next summer, with nearly 20 additional projects already in the pipeline.\nOur mid-scale brands, which represent over 2/3 of our total domestic room portfolio and approximately half of the total domestic pipeline continued to outperform the segment's RevPAR growth.\nOur mid-scale and upper mid-scale portfolio grew RevPAR by nearly 10%, driven by average daily rate growth of over 9% and outpaced the industry's mid-scale and upper mid-scale segment growth by nearly seven percentage points when compared to third quarter 2019.\nOur flagship brand, Comfort, recently celebrated the highest number of conversion hotel openings since 2014, while increasing new construction agreements threefold in the third quarter year-over-year.\nThe Comfort brand's domestic unit growth of over 2% and and RevPAR index outperformance versus local competitors demonstrate the attractiveness of this iconic brand to hotel developers and guests alike.\nOur upscale portfolio achieved impressive growth in the third quarter year-over-year as we increased our domestic room count by nearly 22%, driven by both Cambria and the Ascend Hotel Collection.\nThe upscale portfolio also achieved a record for domestic openings in the first three quarters of the year.\nThe Cambria brand continued its positive momentum, growing by over 9% to 58 units year-over-year with 17 projects under active construction at the end of September, and five additional hotels planned to open this year.\nIn August, we celebrated the Cambria opening in the heart of one of the world's premier wine regions, Napa Valley.\nOur upscale portfolio increased its RevPAR index relative to its local competitive set and outperformed the industry's RevPAR change by 15 percentage points while increasing the average daily rate by 11% when compared to the third quarter of 2019.\nThis progress shows the attractiveness of Choice Hotels value proposition in the upscale segment for current and prospective owners.\nThe strong performance across our entire brand portfolio confirms our focus on growing in our strategic segments which we believe will further fuel the long-term revenue intensity of our system.\nTurning now to demand trends.\nWe continue to achieve gains in our weekday occupancy index share during the third quarter compared to 2019.\nAs discussed on our prior calls, we believe that these share gains are partially driven by long-term consumer trends, such as remote work and an increase in early retirements, which afford Americans flexibility as to when and where they travel for leisure.\nIn fact, we observed our guests extending their trips into shoulder days of the weekend, giving us further optimism about future travel trends following the historically busy summer travel season.\nIn addition, we continue to observe a greater share of revenue coming from longer stays as compared to 2019.\nSimilar to our broader occupancy share gains, these weekday demand gains were achieved through our merchandising capabilities and strategy with targeted promotions at the right time of the week, during the right time of the year and for the right customer.\nThe investments we've made have allowed us to capitalize on demand that historically propelled our core business while attracting and capturing an even larger share of leisure demand.\nWhile our most loyal Choice Privileges members continue to spend more at our hotels during the third quarter, we were also successful in appealing to those who are new to our brands, increasing their revenue contribution as compared to 2019 levels.\nWe also see continuing momentum in our business travel trends, with anticipated additional runway for growth.\nWe've continued to witness sequential quarter-over-quarter increases in our business travel bookings in the third quarter of 2021, with overall business performance similar to 2019 levels.\nAs a company with a strong emphasis on a customer-first approach, Choice is always looking for innovative ways to better serve the changing needs of today's consumers and anticipate the expectations of the guest of tomorrow.\nFor example, we are the first lodging company to launch a collaboration with Bakkt a trusted digital asset marketplace, enabling us to cater to guests with more currency options and more ways to redeem this currency.\nOur more than 50 million Choice Privileges loyalty members can now unlock new redemption opportunities by converting their rewards points to cash and then use it to buy Bitcoin, transfer their points to a friend or even redeem them online or in-store anywhere, Apple Pay or Google Pay is accepted.\nTurning now to our franchisee business delivery and demand for our brands.\nIn addition, we drove growth as compared to 2019 and 2020 through increased revenue contribution in the third quarter from choicehotels.com and other proprietary digital channels.\nBusiness delivery through these channels significantly improves our owners' profitability as they deliver strong rates at the lowest cost.\nAs a result, these channels remain a key focus area for enhancing our value proposition.\nWith such a powerful value proposition, it is no surprise why Choice maintains an industry-leading franchisee voluntary retention rate and our franchise owners continue to seek and develop our brands.\nAided by our strong value proposition for our current and future owners and our record outperformance, we also continue to experience demand for new franchise contracts.\nIn the third quarter, we awarded 89 new domestic franchise agreements, a 10% increase over the same period of 2020.\nSpecifically, we're very pleased to see that demand for our new construction brands in the third quarter increased by over 50% year-over-year.\nAnd we are also excited to announce that our WoodSpring brand expanded internationally at the end of October, entering the Canadian market with a more than 15 unit commitment from a well-known developer and operator.\nIn addition, a team within our development and franchise service departments that is fully dedicated to driving diverse ownership of Choice franchise hotels among underrepresented and minority owners has awarded 18 franchise contracts year-to-date through September, bringing the total agreements executed to over 280 since the program began over 15 years ago.\nI'm proud to say that more than half of the 18 agreements this year were awarded to women entrepreneurs.\nNone of these accomplishments would have been possible without the resilience and hard work of our dedicated associates.\nWe are committed to continuing to invest in and support our associates, and we are proud to be the hotel industry's only company to recently earn recognition as a Best Work-life Balance Employer by Comparably.\nIn closing, I'm confident in our continued ability to create value and deliver results for our owners and shareholders through our effective strategic investments, impressive performance and award-winning culture centered around diversity, equity and belonging.\nWith that, I will hand it over to our CFO.\nI hope you and your families are all well.\nToday, I'd like to provide some additional insights on our third quarter results, update you on our liquidity profile and capital allocation and share our thoughts on the outlook for what lies ahead.\nAs we discussed in the previous quarter, we are comparing our financial performance and RevPAR results to 2019, which we believe offers a more meaningful basis for analyzing trends as the prior year's quarterly results were significantly impacted by the pandemic.\nFor third quarter 2021 as compared to the same period of 2019, total revenues, excluding marketing and reservation system fees, were $166.5 million, an 8% increase.\nAdjusted EBITDA rose 18% and to $133.2 million, driven by improving RevPAR performance, revenue intense unit growth and strong effective royalty rate growth, coupled with continued cost discipline.\nOur adjusted EBITDA margin expanded to 80%, a rise of seven percentage points.\nAnd as a result, our adjusted earnings per share were $1.51 in for the third quarter, an increase of 10% versus 2019.\nLet's now turn to our three key revenue levers beginning with royalty rate.\nOur effective royalty rate remains a significant source of our revenue growth.\nThe company's domestic effective royalty rate increased by eight basis points year-over-year to approximately 5% compared to the third quarter of 2020.\nThis performance reflects the continued strengthening of the value proposition we provide to our franchise owners, their continued interest in being affiliated with our proven brands and the promising prospects in our pipeline.\nIt also provides further validation of our long-term past, current and future investments on behalf of our franchisees.\nWe expect to maintain the current growth trajectory of this lever for full year 2021 and grow at our historical rate in the future as owners continue to seek Choice Hotels' proven capabilities of delivering strong top line revenues that maximize return on investment while helping them reduce their total cost of ownership.\nOur domestic systemwide RevPAR outperformed the overall industry by 16 percentage points for the third quarter, increasing 11.4% over 2019.\nSpecifically, our average daily rate grew by nearly 9%, and our occupancy levels increased by nearly two percentage points compared to the same quarter of 2019.\nOur third quarter results showed that we continue to outpace the primary chain scale segments in which we compete as reported by STR by six percentage points versus 2019.\nImportantly, our strong RevPAR trends have continued into the fourth quarter.\nAs you know from our prior calls, we've long focused our brand strategy on driving growth across the higher value and more revenue intense, upscale, extended-stay and mid-scale segments.\nThe investments we've made continue to pay off as these strategic segments have enabled us to materially outperform the industry in RevPAR growth and achieve gains versus our local competitors.\nLet me highlight just a few impressive performance achievements for our brands in the third quarter.\nJust a reminder, we're comparing the growth figures with the same period of 2019.\nOur WoodSpring brand achieved 23% RevPAR growth, reaching an average occupancy rate of nearly 86% and experiencing an 11% increase in average daily rate.\nAscend Hotels saw their growth in average daily rate of over 17% and outperformed the upscale segment's RevPAR growth by over 20 percentage points.\nAt the same time, the Comfort family grew RevPAR by over 8% on reflecting a 9% increase in average daily rate.\nFinally, both our Cambria and MainStay Suites brands captured 12 percentage points in RevPAR index gains versus their local competitors.\nMore specifically, our average daily rate and occupancy improved from the prior quarter, and our average daily rate index and occupancy index continue to increase compared to 2019 as a result of our investments in revenue management tools for our franchisees and the merchandising capabilities and strategy we have put in place.\nOur third revenue lever is units and rooms growth, which benefits from the absolute size of our portfolio and the revenue intensity of the totals.\nTo ensure the quality of our brand portfolio over the long term, we continue to terminate underperforming economy hotels at the bottom end of the portfolio as well as quality hotels that are unable to maintain the standards of a mid-scale brand.\nWe believe that these actions will not only ensure an even stronger brand portfolio over the long term, but we also expect these targeted terminations to be an opportunity for royalty revenue growth as we plan to replace these hotels with higher quality and more revenue-intense units.\nNevertheless, we continue to grow the overall size of our domestic franchise system.\nAcross our more revenue intense brands in the upscale, extended-stay and mid-scale segments, we observed stronger unit growth, increasing the number of hotels by 2% and rooms by 2.6% year-over-year.\nOur developers are increasingly optimistic about the long-term fundamentals of the lodging industry.\nIn fact, 1/3 of total domestic franchise agreements awarded in the third quarter were for new construction contracts representing an increase of more than 50% versus the same quarter of the prior year.\nAt the same time, demand for our conversion brands year-to-date through September increased by 25% year-over-year.\nLet me share a few highlights on specific brands.\nThe Ascend Hotel Collection leads the industry as the first launch and today, the largest soft brand expanding its domestic room count by 27% year-over-year.\nAt the same time, Clarion Point has nearly doubled its portfolio year-over-year ending the third quarter with nearly 35 hotels open in the U.S. and 15 additional hotels awaiting conversion this year.\nOur MainStay Suites mid-scale extended-stay brand portfolio expanded to nearly 100 domestic hotels open, representing more than 30% unit growth year-over-year.\nAnd finally, our suburban extended stay portfolio of 70 domestic hotels open experienced 13% year-over-year unit growth.\nNow a few words about our liquidity profile and an update on capital allocation.\nAs a result of our strong performance, the company has an even stronger liquidity position.\nMore specifically, at the end of the third quarter of 2021, the company had over $1 billion in cash and available borrowing capacity through its revolving credit facility.\nWe are also pleased to report cash flow from operations of $142.8 million for the third quarter 2021, a 53% increase versus the third quarter 2019.\nToday, our gross debt-to-EBITDA leverage levels remains at the low end of our target range of three to 4 times.\nAt the end of third quarter 2021, our net debt-to-EBITDA leverage level was at 1.8 times.\nThese impressive results combined with our strong liquidity and confidence in our ability to generate strong levels of cash, leave us well positioned to continue to grow our business and return excess cash flow to shareholders well into the future.\nYear-to-date through October, we have returned over $35 million back to our shareholders in the form of cash dividends and repurchases of our common stock.\nWe will continue to monitor the environment for other investment opportunities and evaluate capital returns in the context of our leverage levels, market conditions and our overall capital allocation strategy.\nFinally, let's turn to our expectations for what lies ahead.\nWe currently expect full year domestic RevPAR to surpass 2019 levels and grow at approximately 1% as compared to full year 2019.\nAssuming the broader RevPAR and economy recovery trends continue, we now expect to see our 2021 adjusted EBITDA exceed 2019 levels and range between $382 million and $387 million, even with planned incremental investments in the fourth quarter.\nOur view is reinforced by our third quarter results which extend our strong year-to-date financial performance, broader macro trends and our continued investments to support growth for the remainder of 2021 and beyond.\nWe will continue to evaluate the impact of COVID-19 across the business, and we'll provide further updates in February during our next earnings call.\nIn closing, we remain confident in our long-term strategic approach and resilient business model, coupled with our disciplined capital allocation strategy and strong balance sheet, we believe these strengths will allow us to further capitalize on growth opportunities and drive outsized returns for years to come.\n",
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"content": "q3 adjusted earnings per share $1.51 excluding items.\nq3 revenue rose 4 percent to $323.4 million.\ndomestic revpar for 2021 expected to surpass 2019 levels and grow at approximately 1%, as compared to full-year 2019.\nadjusted ebitda for 2021 is expected to exceed 2019 levels and range between $382 million and $387 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: Molly Langenstein, our CEO and president, also joins me today.\nYou should not unduly rely on these statements.\nI'm excited to share our second-quarter results as they underscore the incredible progress we continue to make in our turnaround strategy despite pandemic challenges.\nOur earnings per share of $0.21 is the best second-quarter performance we have posted since 2013.\nThis return to profitability was driven by our turnaround action plan that grew sales, expanded gross margin, and diligently controlled our expenses.\nOur robust second-quarter sales growth of 54% was across all three brands and was propelled by our meaningful enhancements in product and marketing, which continues to significantly drive full-price selling, reduced markdowns, and increased gross margin.\nSoma achieved the highest second-quarter sales results in the brand's history.\nNot only did Soma post a 53% sales growth over last year's second quarter, comparable sales grew a remarkable 38% over the second quarter of 2019.\nIn fact, we have had four consecutive quarters of comp growth at Soma.\nCongratulations to the Soma team.\nSoma remains on track to delivering an incremental 100 million in sales this year.\nAccording to NPD research data, Soma's growth outpaced the market in non-sports bras, panties, and sleepwear for the past 12 months compared to the same period in 2019.\nIn addition, as customers' preferences have shifted to comfort, soma strategically increased its wireless bra assortment, taking more market share than any other brand for the last 12 months compared to the same period in 2019.\nWe believe this data, along with our recent performance, is a strong indication that Soma is well-positioned to capture additional market share and explode into a billion-dollar brand by 2025.\nThe business strategies put in place in Soma around inventory, product, marketing and digital are working.\nAnd we are confident applying this proven playbook at Chico's and White House Black Market will continue their sales momentum.\nExciting things are indeed happening at both Chico's and White House Black Market, as indicated by second-quarter sales growth of 59% and 48%, respectively.\nAt both apparel brands, customers are enthusiastically responding to our elevated quality and styling enhancements, which are leading to meaningfully faster sell-through rates, higher productivity and more full-price sales and better-maintained margins.\nOur second-quarter results once again highlight the incredible progress we are making on our five strategic priorities.\nSo let me take a few minutes to update you on each.\nPriority number one, continuing our ongoing digital transformation.\nOver the last two and a half years, we have successfully transformed into a seamless digital-first, customer-led company, adding resources and making strategic investments in talent and technology.\nWe have been thrilled with the trajectory of our digital sales over this time frame.\nAs our store revenues continue to rebound, our second-quarter digital sales grew 23% over 2019 levels.\nStyle Connect and My Closet continue to gain traction.\nAnd customers using this proprietary digital tools are more engaged and have our highest conversion rates, UPTs, and average order values.\nThese tools continue to drive new multichannel customer growth, and these customers are our most valuable, spending more than three times a single-channel customer.\nAfterpay, the popular benefit launched in time for holiday last year, allowing for customers to pay for their purchases in installments, has also proven to be a terrific UPT and sales driver and is beating our expectations.\nPriority two, further refining products through styling, fabric, and innovation.\nAt each of our brands, we are leveraging customer data and insights, and continually elevating our product to take market share and drive results.\nCustomers are clearly responding across all three brands.\nContinual newness and creating comfortable, beautiful solutions are core to the Soma brand.\nWe are feeding a conveyor belt of innovation for wireless and sports bras, ensuring she has the absolute right bra for everything she does in her life.\nSleepwear and panties continue to be strong and drove double-digit growth over last year and 2019 levels.\nChico's customers are continually responding to our newness, comfort features, novel technology, and innovative fabrics with pronounced acceleration in the quarter in denim, pants, dresses, knits, and woven tops.\nWhite House Black Market also continued to benefit from elevated styling and quality improvements, and customers responded to our new pants and short programs as well as knits and dresses.\nCongratulations to the apparel teams for a great quarter.\nNext, driving significant increased customer engagement through digital storytelling.\nThrough our enhanced customer data analytics and insights, we have elevated and targeted our marketing efforts, which are driving brand awareness, generating traffic, and acquiring new customers.\nWe continue to allocate more resources to digital storytelling, social influencers, and other social efforts.\nOur social media customer engagement continues to grow and customers are responding to influencers and associates.\nWe continue to acquire new customers and their average age continues to trend younger than existing customers, which reinforces the runway for all three brands.\nPriority four, maintaining our operating and cost discipline.\nOur most meaningful second-quarter accomplishment was our gross margin performance.\nIn fact, we posted our highest gross margin rate in 13 consecutive quarters.\nThis was driven by strength in full-price sales and the corresponding reduction in promotions.\nOur on-hand inventories remain strategically lean, down 27% versus last year's second quarter and down 20% compared to the second quarter of 2019.\nScarcity of products and social proofing continued to drive a sense of urgency for customer purchasing.\nThese factors should continue to strengthen gross margin performance.\nHowever, we are facing certain headwinds in the back half of the year that will impact gross margin and sales, including cost pressures from logistics, sourcing, fulfillment, and the labor market.\nThese considerations are included in our guidance that David will cover later in the call.\nAnd finally, our last priority, delivering higher productivity in our real estate portfolio.\nWe delivered strong store growth during the quarter, and stores continue to be an integral part of our overall strategy as data indicates that digital sales are higher in markets where we have a strong retail presence.\nPrudent store growth makes sense where the investment delivers profitable returns.\nWe have successfully opened 47 Soma shop-in-shops inside Chico's stores, which are exceeding expectations, driving new customers to both brands, and further expanding our digital business.\nMore of these shop-in-shops are scheduled going forward with a total of 70 expected by first quarter of next year.\nAt the same time, we continue to rationalize and tighten our real estate portfolio for higher store productibility standard.\nAccordingly, we will continue to shrink our store base, primarily as leases come due, lease kickouts are available or buyouts make economic sense.\nWe have lease flexibility with nearly 60% of our leases coming up for renewal or kick out available over the next two to three years.\nWe are still on track to close 13% to 16% of our remaining store fleet through the end of fiscal 2023, with 45 to 50 of those closures occurring this fiscal year.\nDuring the quarter, we closed nine stores, bringing our year-to-date closings to 18, and we ended the quarter with 1,284 boutiques.\nWe are very pleased with our company's return to profitability, posting diluted earnings per share of $0.21 for the second quarter, compared to a $0.40 loss per share from last year's second quarter and a $0.02 loss per share for the second quarter of fiscal 2019.\nQ2 is our best quarter earnings performance since 2013.\nSecond-quarter net sales totaled $462 million compared to $306 million last year.\nThis 54% increase reflects meaningful improvement in product and marketing, which drove full-price selling as well as a recovery in-store sales as our stores were temporarily closed or operating at reduced hours last year, partially offset by 29 net store closures in the last 12 months.\nLooking at the second quarter compared to 2019, our comparable sales were basically flat, declining just 1.6% with Soma improving 38% and Chico's and White House Black Market declining 14% and 5%, respectively.\nTotal company on-hand inventories compared to 2019 declined 20%, with Soma up 19%; and Chico's and White House Black Market down 32% and 49%, respectively, illustrating that the strategic investments in Soma's growth and our turnaround strategy in Chico's and White House Black Market are working.\nSecond-quarter gross margin was 38.4% compared to 14.6% last year, which included the impact of significant non-cash inventory write-offs.\nThis year, we meaningfully expanded our margin rate as a result of disciplined inventory control, strategically reduced promotions, and more full-price selling.\nThis was our highest gross margin rate in 13 consecutive quarters.\nSG&A expenses for the second quarter totaled $146 million or 30.9% of sales, an improvement of more than 400 basis points from last year's second quarter and nearly 300 basis points better than the second quarter of 2019.\nWe have continued our cost discipline and reduction initiatives, enabling us to realize leverage in the current year.\nRegarding our financial position, we continue to build cash, and our balance sheet continues to strengthen.\nWe ended the quarter with over $137 million in cash and marketable securities, an increase of nearly $35 million over the first quarter.\nBorrowings on our $300 million credit facility remained unchanged from fiscal year end at $149 million.\nOur financial position liquidity continues to be bolstered by improving retail sales and a lean expense structure that better aligns cost with sales.\nIn addition, during the second quarter, we received a $16 million income tax refund related to the $55 million income tax receivable reported in the first quarter, and we expect to receive the balance of the $55 million in the third quarter.\nWe anticipate building cash throughout the remainder of fiscal 2021.\nIn the second quarter, we continued our lease renegotiation initiatives with A&G Real Estate Partners, securing year-to-date commitments of approximately $15 million, and incremental savings from landlords, the majority of which will be realized this fiscal year.\nThis is in addition to the $65 million in abatements and reductions negotiated last year for a total savings to date of $80 million.\nNow turning to our outlook.\nDuring the balance of fiscal '21, we expect improving year-over-year demand, but recognize that there is economic uncertainty as we continue to manage through the pandemic.\nIn addition, we are facing macro supply chain headwinds in the back half of the year that we expect will impact sales and gross margin, including higher freight cost, extended transit times, and product supplier handover delays driven by the pandemic.\nAccordingly, given this uncertainty, we are not providing specific guidance, but instead offering high-level outlook expectations for the third quarter and fiscal year.\nFor the third quarter, we expect consolidated year-over-year sales improvement in the 18% to 22% range, gross margin rate improvement of 13 to 15 percentage points over third quarter last year, SG&A as a percentage of sales to improve 500 to 600 basis points year over year and an income tax rate of 34% to 35%.\nFor the full fiscal year, we expect consolidated year-over-year net sales improvement in the 32% to 35% range, gross margin rate improvement of 20 to 22 percentage points over fiscal 2020, SG&A as a percent of sales to improve 500 to 600 basis points year over year and an income tax rate of 34% to 35%.\n",
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"content": "compname posts q2 earnings per share $0.21.\nq2 earnings per share $0.21.\ncompname says consolidated year-over-year net sales improvement between 18% to 22% for q3.\ncompname says expects consolidated year-over-year net sales improvement between 32% to 35% 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: You should not unduly rely on these statements.\nHe comes to us with a wealth of retail financial experience and we are pleased to have him on board and on the call today.\nWe achieved another great quarter and the momentum continues.\nThird quarter earnings per share of $0.15 repr-+esent the companies best third quarter performance since 2016 and demonstrates the extraordinary progress we continued to make in our turnaround strategy.\nThe return to third quarter profitability was driven by healthy year over year comparable sales growth meaningful gross margin expansion.\nIn fact, the best third quarter gross margin performance since 2014 and continued diligence expense management.\nThe robust year-over-year third quarter comparable sales increase of 28% was driven by significant digital and store outperformance across all three brands propelled by the meaningful quality, fit, and fabrication enhancements in our products.\nWe have continued to significantly drive full-price selling, reduce markdowns and increase gross margin quarter-over-quarter.\nDramatic improvement is continuing at Chico's and White House Black Market as indicated by our third quarter comp sales increase of 23% and 33% respectively on significantly lower inventory levels.\nBoth apparel brands are driving meaningfully faster sell-through rates, higher productivity, more full-price sales, and better-maintained margins.\nExisting and new customers are enthusiastically responding to our updated fabric, fit, and new product offering.\nThe apparel brands generated their best third quarter gross margin performance in more than five years.\nSoma posted a 30% comp sales increase over last year's third quarter on top of an 11% comp sales increase in the third quarter of 2019.\nMarking five consecutive quarters of comp sales growth.\nTo continue driving this business forward, we have invested in the necessary inventory capital and staffing.\nTwelve months of trailing data from market research NPD Group shows that solid growth continues to outpace the market in non-sports bra, panties, and sleepwear.\nWe believe this data along with our recent performance is a strong indication that Soma is well-positioned to continue capturing additional market share on our journey to becoming a billion-dollar brand.\nOur third quarter performance highlights the remarkable progress we are making on our five strategic priorities.\nLet me take a few minutes to update you on each.\nFirst, continuing our ongoing digital transformation.\nOver the last two and a half years we have successfully transformed Chico's FAS into a seamless digital-first customer-led company as evidenced by the trajectory of our digital sales over this time.\nEven as store revenues have continued to rebound.\nDigital sales have remained very strong.\nThe investments we have made in talent and technology have paid off.\nOur proprietary digital tools continue to gain traction.\nAnd customers using these tools are more engaged and have higher conversion rates and average order value.\nThese tools continue to drive year-over-year new multi-channel customer growth and these customers are our most valuable spending three times a single-channel customer.\nWe continue to leverage our online outfitting experiences, style connect in my closet, and customer engagement growth every quarter.\nApproximately 3 million customers representing nearly half of our active customer file are now enrolled in file connect.\nMy closet is a personalized experience enabling customers to augment their closet by coordinating their wardrobe for past purchases.\nGenerates conversion at four and a half times the site average and significantly higher average order value than those not using the feature.\nWe are continually enhancing our personalization efforts to drive engagement, conversion, and orders, including our Shop The Look feature launched last year.\nAfter pay allowing for customers to pay for their purchases in installments has also proven to be a terrific UPT and sales driver.\nSince it launched about a year ago.\nIt continues to exceed our expectations.\nBuy Online Pick Up in the store has also remained popular and is still growing double-digit.\nSecond, further refining our product.\nOn the product front, we are doing two key things at each of our brands to take market share and drive results.\nFirst, leveraging our customer data and insights.\nAnd second, constantly innovating and elevating our assortment.\nCustomers are clearly responding across all three brands.\nAt Chico's, denim and our new pant selections are a big hit, which she is pairing with wovens, sweaters, and our great no-iron shirt to make a complete outfit.\nShe is responding to our elevated fabrics and new comfort features in bottoms.\nWhite House black market continues to benefit from elevated styling and quality improvements as well.\nWe had an outstanding response to our new denim fit and fabric with year-over-year denim revenues nearly doubling for the quarter.\nShe is pairing denim with our three new key White House Black Market jackets silhouette that is versatile for every occasion.\nContinually creating comfortable beautiful solutions are core to the Soma brand.\nWe offer a full broad menu of solutions so she can find the absolute right bra for all of her needs.\nYear over year bra revenues was up 38% in the quarter boosted by the fact that our customers returned to the stores or in-person fittings.\nSleepwear and panties continue to be strong and drove double-digit growth over last year and 2019 levels.\nNext driving customer engagement.\nThrough enhanced customer data analytics and insight, we have elevated and targeted our marketing efforts, which are driving brand awareness, generating traffic, and acquiring new customers.\nWe continue to allocate more resources to digital, storytelling influencers, and other social efforts.\nWe are elevating our content including using more organic and user-generated content.\nOur social media customer engagement continues to grow and customers are responding.\nFor example, our weekly Facebook live selling events are engaging and continue to gain traction and generate sales.\nIn the third quarter, our apparel brand had over 2.3 million views in social selling live videos and real.\nWe continue to acquire new customers with the customer count up nearly 8% from the prior-year third quarter.\nAnd their average age continues to trend younger than existing customers.\nThis data reinforces the runway for all three brands.\nPriority for maintaining our operating and profit discipline.\nOne of our most meaningful third quarter accomplishments was our gross margin performance.\nWe achieved our highest third quarter gross margin rate since 2014, driven by strength in full-price sales and the corresponding reduction in the promotion, strategic inventory management, and improved leverage of occupancy cost on higher sales.\nContinued cost discipline efforts and sales leverage resulted in the third quarter SG&A and rate lower than both the third quarters of 2020 and 2019.\nIn fact, we posted our best SG&A rate performance since 2018.\nAnd finally, delivering higher productivity in our real estate portfolio.\nDoor traffic was very healthy and we delivered strong store sales growth during the third quarter.\nStores continue to be an integral part of our overall strategy as data indicates that digital sales are higher in markets where we have a strong retail presence.\nFood and store growth for the portfolio brands makes sense where the investment delivers profitable returns.\nWe have successfully opened 64 Soma shop-in-shop inside Chico's stores, which are exceeding expectations, driving new customers to both brands, lifting store productivity, and further expanding our digital business.\nWe plan to open nine more shops-in-shop in the fourth quarter.\nAt the same time, we continue to rationalize and tighten our real estate portfolio as appropriate in order to deliver overall higher store profitability.\nWe will make decisions to close stores when it is accretive to the overall portfolio.\nThis remains a dynamic process.\nFor example, at the beginning of the year, we expected to close 45 to 50 locations.\nThis fiscal year but have reduced that number to 37 due to a combination of favorable store performance and successful lease negotiation.\nI'm excited to be part of Chico's team and look forward to engaging with all of you in the investor and analyst community.\nOur momentum continued in Q3 and we posted another quarter of profitable growth with diluted earnings per share of $0.15 for the quarter, compared to a $0.48 loss per share in last year's third quarter and a $0.7 loss per share for the third quarter of fiscal 2019.\nI will note that on a non-GAAP basis before onetime charges diluted earnings per share for the quarter was $0.18.\nThis year's third quarter marks our best third quarter earnings performance since 2016 with all three brands leveraging a shared platform contributing meaningfully to sales growth, gross margin expansion, and significantly higher operating income.\nThird quarter net sales totaled $453.6 million, compared to $351.4 million last year.\nThis 29% increase reflects a comparable sales increase of 28% and is driven by meaningful improvement in product and enhanced marketing efforts, which drove full-price selling partially offset by 31 net store closures in the last 12 months.\nAt the brand level, Chico's comparable sales grew 23%, White House Black Market comp sales grew 33.4%, and SOMA comp sales grew 30.2% over 2020.\nLooking at the third quarter compared to 2019, our comparable sales continue to improve reaching close to 97% of pre-pandemic 2019 levels with Soma increasing 44% in Chico's and White House Black Market down 16% and 5% respectively.\nI would note that this level of sales growth was achieved with much lower on-hand inventories compared to 2019 with Chico's inventories down 46% and White House Black Market inventory is down 39%.\nReinforcing the higher productivity achieved by managing inventory with a focus on overall profitability.\nThe third quarter gross margin was 40.7%, compared to 22% last year, and 35.3% in 2019.\nThe current year gross margin rate was our best performance in 18 consecutive quarters and reflected higher full-price sales and improved occupancy leverage.\nThis improvement was achieved despite supply chain challenges and related costs that continue to impact the retail sector.\nMoving down the P&L, SG&A expenses for the third quarter totaled $162.5 million or 35.8% of sales, compared to 43.6% of sales in 2020, and 37.3% of sales in 2019.\nContinued cross-discipline and expense reduction initiatives coupled with improving sales have enabled us to realize meaningful leverage that would give us more financial flexibility as we continue to grow all three brands.\nOn a year-to-date basis, I would like to highlight that both profitability and cash flow have improved significantly since last year and 2019.\nIn addition to giving us much more flexibility, higher free cash flow generation will provide us with fuel to invest behind a strategy that is working.\nFueling growth will be a key capital allocation priority going forward.\nOn a year-to-date basis, we generated $89 million of EBITDA through the third quarter, which is significantly higher than EBITDA of $65 million for all of fiscal 2019.\nFor the current year nine months, we posted earnings per share of $0.29, compared to a loss of $2.43 per share in the prior year nine months, and a loss of $0.7 for the same period in 2019.\nNow let's shift to the balance sheet.\nOur cash position and total liquidity remain strong.\nProviding us with the flexibility to manage the business and make investments to further fuel our momentum.\nWe ended the quarter with cash and marketable securities of $137.5 million.\nA slight increase over the second quarter balance even after reducing borrowings on our long-term credit facility by a third with a $50 million debt repayment.\nOn hand inventories for the quarter remain very lean down 13% relative to 2020 and down 19% relative to 2019.\nOur inventory has never been more productive and delivered a very high gross margin for us especially in the apparel brands where on-him inventory was down 38% to last year and down 43% to 2019.\nTurning to real estate.\nIn the third quarter, we continued our lease renegotiation initiative with A&G Real Estate Partners securing incremental commitments of $7 million bringing our total year-to-date commitments to $22 million in rent reductions from landlords.\nThis is in addition to the 65 million introductions negotiated last year for a total savings of $87 million since we commenced the renegotiation program in 2020.\nThese renegotiated store leases will provide an occupancy tailwind and further enhance store profitability going forward.\nAs Molly noted, we are continuing to right-size our store base.\nPrimarily at leases come due lease checkouts are available for buyouts make economic sense.\nWe have flexibility with approximately 60% of our leases coming up for renewal for kick-outs available over the next two to three years.\nDuring the third quarter, we closed five stores bringing our year to date closing to 23 and we ended the quarter with 1,279 boutiques.\nGoing forward, we will continue to actively manage our real estate portfolio to enhance overall store profitability.\nNow turning to our fourth quarter outlook, given the strength of customer demand for all three of our brands, we are confident that our momentum will be sustained as we get further into the quarter.\nWe expect fourth quarter total sales to continue to accelerate closer to 2019 and reach $495 million to $510 million.\nWe expect fourth quarter gross margin rate as a percent of sales to be a part of 2020 and 2019 and in the range of 33% to 34.5%.\nThis expectation incorporates continued inventory management with faster sell-through rates and higher full-price sales as well as higher supply chain costs.\nWe are continuing to manage our expense structure and expect that the SG&A rate as a percent of sales to be in the range of 32.3% to 32.8%.\nWe expect our effective tax rate to be approximately 33% for the quarter, which will give us a rate of 24% for the full year.\nAnd we expect to deliver dilutive earnings per share a flat to $0.5 for the fourth quarter putting us well above 2020 and 2019 for both the quarter and the full year.\nBefore we go on to Q&A, I would like to leave you with three key thoughts.\nFirst, our turnarounds have accelerated due to our strategic initiatives and continued cost discipline.\nSecond, all three of our brands are contributing meaningfully to sales growth and profitability.\nAnd last, we have greatly improved the fundamental operating model of the business and have created a sustainable tailwind that will allow us to successfully navigate the current macro environment and continue on a path of profitable growth well into the future.\n",
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"content": "compname reports q3 earnings per share of $0.15.\nq3 earnings per share $0.15.\nq3 adjusted earnings per share $0.18 excluding items.\nq3 sales $453.6 million versus $351.4 million.\nsees consolidated net sales of $495 million to $510 million 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: Molly Langenstein, our CEO and president, also joins me today.\nAlthough 2020 and pandemic uncertainty created a sales environment that was challenging as reflected in our results, we successfully navigated this extraordinary landscape while also creating a solid foundation that we believe positions us for our return to growth in 2021 and the years ahead.\nWe rapidly accelerated our transformation to a digital-first company, fast-tracking numerous innovation and technology investments, which drove higher consumer engagement and year-over-year digital sales increase of nearly 20%, led by Soma's digital sales increase of 72%.\nAs a brand, Soma generated comparable sales growth for the last seven months in fiscal 2020.\nAnd according to the NPD Group, for the 12 months ended January 2021, Soma's growth exceeded that of the U.S. apparel market and the market leader for nonsport bras and panties and was in the top five brands overall in the sleepwear market.\nI am also pleased to report that Soma sales for the back half of fiscal 2020 were the highest in the history of the brand.\nWe believe this is compelling evidence Soma is well positioned to accelerate recent market share gains.\nOur enhanced marketing efforts drove traffic as well as new customers to our brands, and newly acquired customers were retained at a meaningfully higher rate than fiscal 2019.\nThe average age of our new customers dropped 10 years for Chico's and eight years for Soma.\nAnd the average age for the new White House black market customers complemented the current target customer, reinforcing the runway for all three brands.\nOur new apparel selections resonated with customers.\nWe relaunched Zenergy in Chico's with new fabrication, styling and marketing and also increased our gifting assortment in key item depth, which showed positive results.\nAt White House black market, we pivoted to casualization and launched Lux Weekend, new runway leggings and a focus on denim that customers love.\nWe significantly enhanced our liquidity and financial flexibility by amending and extending our credit facility to $300 million and ended the year with a solid cash position.\nWe obtained landlord commitments of $65 million in rent abatements and reductions and further rationalized our real estate position by permanently closing 40 underperforming locations over the last year.\nAnd we substantially streamlined our organization and permanently reduced our cost structure to more efficiently support our business.\nThese efforts resulted in approximately $235 million of annual savings in fiscal 2020 or 23% greater than our original plan.\nChico's FAS is a company of three unique brands, and we believe we are poised to take market share in each of these businesses when the pandemic-related consumer pause lifts.\nWe are optimistic about store traffic rebounding as vaccines become more widely available and have, in fact, seen this correlation prove out.\nWe believe Soma, in particular, has the opportunity for significant growth.\nToday, the intimate apparel and loungewear market is a nearly $7 billion business in the U.S. and is forecasted to reach over $11 billion by 2025.\nSoma's compelling position in intimates and a seven month of comparable sales growth, give us confidence that Soma is on track to take a meaningful piece of this market and become one of the largest intimate apparel brands in the country.\nAt the same time, we believe there is opportunity to optimize and strengthen both Chico's and White House black market.\nThe disruption in the competitive set has left white space that we can strategically take.\nAt Chico's, we expect to reinvigorate growth through loyalty, community and design.\nAt White House black market, we expect to drive consumer enthusiasm for the brand by a focus on fabric, fit and fashion that meets our customer where she is in her lifestyle today.\nIn order to maximize the opportunities in each of our brands, we are targeting five key focus areas for 2021.\nFirst, continuing our ongoing digital transformation.\nSecond, further refining product through fit, quality, fabric and innovation.\nThird, driving increased customer engagement through marketing.\nNumber four, maintaining our operating and cost discipline and finally, further enhancing the productivity of our real estate portfolio.\nAllow me to elaborate on each of these.\nNumber one, continuing our ongoing digital transformation.\nOver the last year and a half, we prioritized digital as the primary sales channel for all three of our brands, making major strategic investments in talent and technology to pivot up to a digital-first company.\nWe are enabling her to shop how she chooses in a way that is personalized and simplified across every touch point of her shopping experience.\nInnovative launches that we consider meaningful competitive advantage includes Style Connect, our digital styling tool; My Closet, a personal closet feature; and social proofing.\nEach of these tools have gained traction and driven engagement and conversion.\nIn the fourth quarter, Style Connect orders nearly doubled from last year.\nWe have successfully enrolled 42% of our active customer file in Style Connect, representing almost three million customers.\nOur prioritization to digital also incorporates mobile POS, AI search engine optimization and enhanced navigation touch points across all brands.\nWe have also accelerated the launch of new leading edge digital selling and fulfillment tools to drive greater online customer demand.\nWe will be rolling out more innovations in 2021, including an optimized mobile-first experience.\nWe continue to leverage our digital investments, converting single channel customers to the omnichannel customers as the average omnichannel customer spend is nearly three and a half times more than a single channel customer.\nNumber two, further refining products through fit, quality, fabric and innovation.\nAt each of our brands, we are laser-focused on our customer, continually elevating our products so we can capture the greatest market share.\nAt Soma, innovation is at our core, while beautiful solutions that extend to wellness and comfort are synonymous with our brand.\nOur products serve our customers' lifestyle and promote health, including a great night sleep and loungewear to live in.\nWe fuel our bra and panty franchises and are positioned to further expand our market share and drive results.\nWe have a growing customer base with the most meaningful growth in our under 34 age group, as a result of more inclusive branding and evolved product assortment.\nTo continue capturing a broader audience, we will integrate our digitally native and younger TellTale brand onto the Soma site, which we successfully tested in the fourth quarter.\nAt our apparel brand, as the world shifts toward comfort and work from home, we see increased interest in our core franchises of effortless chic pants and tops at Chico's and denim with plenty of stretch, legging and feminine tops at White House black market.\nAs women emerge from their homes and continue to reinvent their wardrobe, we have developed improved fabrics and integrated new technology and comfort features to adapt to her needs.\nNumber three, driving increased customer engagement through marketing.\nOur goal is to increase brand awareness, drive engagement, generate traffic and acquire new customers through continuous marketing improvement.\nWe are especially excited about our partnership with Salesforce, which enables us to better leverage the unified view of our millions of customers and act on our robust customer data that has been collected for more than three decades.\nWe can track every omnichannel customer journey and interaction, connect every commerce channel, create more engaging personalized and targeted marketing and messaging using predictive intelligence and adjust marketing in real-time based on trends or customer actions.\nThe Salesforce relationship also creates a data foundation to support the rollout of our enhanced loyalty program in the second half of this year.\nAnd our loyalty program already has some of the highest participation rates in retail at over 90%.\nWe also have some of the most loyal and long-tenured customers in retail.\nOur Chico's customers averaged well over 12 years with us.\nWhite House black market customers average nine and Soma customers average over six, demonstrating we have the ability to retain new customers for a very long period of time.\nWe will continue to elevate our marketing efforts with more digital storytelling, the use of social influencers and to build upon our organic social efforts and wider-by communication.\nNumber four, maintaining our operating and cost discipline.\nWe will continue to improve our sourcing, logistics and operational processes to drive efficiencies and speed and lower cost.\nWe have teams focusing on a wider range of areas from further diversifying the supply chain, lowering dependence on agents, increasing the use of 3D design, and streamlining outbound shipping and ship from store processes, just to name a few.\nOver the last year, we have reduced our supplier base by 20%, and agents currently represent 32% of the business, and we expect to lower that to about 18% by 2022.\nAnd finally, number five, further enhancing the productivity of our real estate portfolio.\nStores continue to be an important part of our omnichannel strategy, and digital sales are higher in markets where we have our retail presence.\nSoma is certainly a great example of that.\nWhile Soma is now a digital-first business, it is supported by 259 boutiques.\nIn alignment with driving Soma to be one of the largest intimate apparel brands in the country, we are excited about opening Soma shop-in-shops in a number of Chico's boutiques.\nWe have opened 10 so far this year, and we will open 40 more by early May.\nOur marketing data indicates that Soma and Chico's in-store cross-shop opportunities are abundant.\nAnd we believe the shop-in-shop format will deliver meaningful brand awareness and generate both store and digital sales in markets where we are underpenetrated.\nIn addition, we plan to convert eight White House black market locations into Soma Boutiques.\nWe will also continue rationalizing and tightening our real estate portfolio, reflecting our emphasis on digital and our priority or higher profitability standards.\nWe are currently driving store sales with less inventory and increased productivity.\nWe've closed 40 underperforming locations since the beginning of fiscal 2020 and ended the fiscal year with 1,302 boutiques.\nWe will continue to shrink our store base to align with these standards, primarily as leases come due, lease kick-outs are available or buyouts make economic sense.\nWe have strong lease flexibility with nearly 60% of our leases coming up for renewals or kick-outs available over the next three years.\nTo further improve store productivity, we anticipate closing 13% to 16% of our remaining store fleet over the next three years, with 40 to 45 of those closures occurring in fiscal 2021.\nThe vast majority are expected to be mall-based Chico's and White House black market stores.\nThis means from the beginning of fiscal 2019 through the end of fiscal 2023, we will close up to a total of 330 stores, well ahead of our original multiyear closure target of 250 stores.\nOur balance sheet remains solid.\nWe ended the fiscal year with $109 million of cash and cash equivalents after paying $38 million in fourth-quarter rent settlements.\nAnd we navigated the fourth quarter without increasing debt levels on our newly amended credit facility, which matures in October 2025.\nAs you recall, last year, we renegotiated over 90% of our store leases, resulting in commitments of $65 million in rent abatements and reductions.\nOn a cash basis, approximately $44 million of these savings were realized in fiscal 2020, with the majority of the balance expected to be realized in fiscal 2021.\nThis $65 million represented about 25% of our annual rent expense, which we felt was a reasonable request at the time.\nHowever, with the effect of the pandemic now extending well beyond original expectations this month we are launching Phase 2 of our lease renegotiation process, going back to our landlords for additional reductions.\nPhase 2 will focus on the continuing COVID impact on our stores.\nWe will again work with A&G Real Estate Partners to obtain what we expect will be meaningful rent concessions.\nWe will provide an update on this initiative during our first-quarter earnings call.\nIn the fourth quarter, we permanently closed eight stores, bringing our net year-to-date closures to 39.\nAs of fiscal year-end, we have closed 123 stores since the beginning of fiscal '19.\nTurning to fourth-quarter performance.\nNet sales totaled $386.2 million compared to $527.1 million last year.\nThis 26.7% decrease reflects a comparable sales decline of 24.9% as well as the impact of 39 net store closures in the year, partially offset by a double-digit growth in digital sales.\nFor the fourth quarter, we reported a net loss of $79.1 million or $0.68 per diluted share, which included $35.9 million or $0.32 per diluted share and significant after-tax noncash charges outlined in today's release.\nThe majority of these charges related to a $32.1 million or $0.28 per share deferred tax asset valuation allowance.\nGross margin in the fourth quarter was 19% of net sales compared to 32.5% last year.\nThe rate decline primarily reflected lower maintained margin in our apparel brands and deleverage of fixed occupancy cost.\nLower apparel maintained margin rates primarily reflected the impact of declines in average unit retails, with higher sales driving promotional activity and increased markdowns mix versus last year.\nAlso keep in mind that fourth-quarter occupancy cost, a component of gross margin, does not reflect the meaningful savings from rent reductions as these reductions are being recognized pro rata over remaining lease terms.\nI'm pleased with how swiftly our team pivoted at our assortment and managed inventory.\nWe believe our inventory is current and properly balanced with the influx of new seasonally appropriate receipts.\nWe ended the year with inventories down over 17% from the prior fiscal year-end.\nAnd weeks of supply are substantially less than last year.\nMore importantly, our inventory is appropriately targeted.\nOur apparel inventories are down over 20%, and some inventories are up 2% year over year.\nAs we look ahead to the first half of fiscal '21, we are planning year-over-year apparel inventories down more than 30%, and Soma inventories up over 30% as we continue to cannibalize on the momentum in this rapidly growing business.\nSG&A expenses for the fourth quarter totaled $136.2 million, an improvement of $40.8 million from last year, reflecting our ongoing expense reduction initiatives to align our cost structure with sales.\nThe effective fourth-quarter tax rate was a provision of 20.4% compared to a benefit of 21.6% from last year's fourth quarter.\nThe current year effective tax rate primarily reflects the deferred tax asset valuation allowance charge, partially offset by the favorable rate differential due to the benefits provided under the CARES Act.\nThe fourth-quarter valuation allowance is a noncash charge as a result of ongoing pandemic-related uncertainty, surrounding future realizability of the related deferred tax assets.\nOur financial position liquidity are being bolstered by strong digital performance across all brands.\nRetail store sales and a significantly leaner expense structure that better aligns cost with sales.\nIn addition, our fiscal year-end balance sheet reflects a federal income tax receivable of approximately $35 million that we expect to realize in the second quarter of fiscal '21.\nTurning to our outlook.\nHowever, we believe it would be helpful to have a view into our planning for the coming year and are providing color.\nAt this time, we expect to benefit from the COVID-19 vaccine rollout, particularly given our customer base and are planning for consolidated sales trends to improve in the back half of the year.\nAs Molly noted, we are seeing traffic trends in proven areas where vaccines are becoming more widely available.\nFor planning purposes, consolidated sales trends for the first half of the year are expected to be largely in line with our reported fiscal 2020 results.\nLooking at each brand, we expect continued strong performance at Soma, with performance at Chico's and White House, consistent with market expectations.\nIn addition, we expect our ongoing investment in the digital channel to deliver continued sales growth.\nWe expect cost savings realized in fiscal 2020 to be maintained in fiscal '21.\nWe are continuing to implement supply chain efficiencies and intend to maintain stringent inventory controls, with fiscal 2021 first half inventories planned down roughly 30% to last year.\nThese actions are expected to deliver significant improvement in current margin levels.\nWe believe the actions we have taken, combined with our solid financial position, increased flexibility under our credit facility and our competitively positioned brands, enable us to emerge as a stronger company in 2021 and beyond.\n",
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"content": "compname reports q4 loss per share $0.68.\nq4 loss per share $0.68.\nq4 sales $386.2 million versus $527.1 million.\nfiscal year-end total inventories down over 17% and store inventories down 25%.\nnot providing specific fiscal 2021 first-quarter or full-year financial guidance at this time.\nqtrly comparable sales was a decline of 24.9%.\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 review the Safe Harbor statements.\nDuring the call today, we may also discuss non-GAAP financial measures.\nAdditionally, the content of this conference call may contain time sensitive information that is accurate only as of the date of this earnings call.\nWe do not undertake and specifically disclaim any obligation to update or revise this information.\nI will now turn the conference over to our CEO and chief investment officer, Mohit Marria.\nJoining me on the call today are Choudhary Yarlagadda, our president and chief operating officer; Rob Colligan, our chief financial officer; and Vic Falvo, our head of our capital markets.\nThis quarter we took many proactive steps toward portfolio optimization and the expansion of Chimera's core earnings.\nKey drivers of our performance include recirculation of mortgage loans and the refinancing of credit at lower interest rates.\nThe housing market continues to be robust across America.\nAnd though longer term interest rates have risen since year end, the interest rates available for residential mortgage remain very low by historical measures.\nHome prices are increasing at their fastest pace since the first quarter of 2006 and on a year-over-year basis the S&P Case-Shiller index reported 11.2% increase in home price appreciation.\nStrong housing demand coupled with a limited supply of homes available for sale provide strong tailwinds in housing finance.\nHome price appreciation is an important metric when evaluating future mortgage credit performance.\nInterest rate on 10-year U.S. Treasuries rose 83 basis points this quarter, while short term interest rates remain near zero.\nThe yield curve deepened over the period with a spread between two-year and 10-year treasury notes doubling to 158 basis points on market concerns of future inflation expectations.\nFederal Reserve policy remained unchanged this quarter, and the Fed indicated it's believed that recent signs of inflation are expected to be short term in nature and are elevated due to pandemic related issues.\nCredit spreads on fixed income products tightened as investors continue to seek higher yielding investments for their portfolios.\nThe BMO's high yield index ended the quarter tighter by 57 basis point while spreads AAA rated securitized reperforming loans tightened by an approximately 15 basis points.\nThe current market conditions have presented a unique opportunity to optimize Chimera's liability structure, locking in low cost financing for many quarters into the future.\nAs part of our call optimization strategy, this quarter we exercise our call rights on six outstanding deals representing $4.1 billion of residential mortgage loans.\nIn February, we issued $2.1 billion CIM 2021-R1 and $233 million CIM 2021-NR1.\nThe mortgage loans for both securitizations were from call and the termination of three CIM securitization previously issued in 2016.\nThese securitizations created $1.9 billion of new securitized debt at a weighted average cost of 2.04%.\nThe terminated debt had $1.7 billion outstanding with the previous cost of 5.2%, a savings of more than 300 basis points.\nIn March, we issued $1.5 billion CIM 2021-R2 and $240 million CIM 2021-NR2.\nThe mortgages for both securitizations from the call and termination of three CIM securitizations.\npreviously issued in 2017 and 2018.\nThe March securitizations created $1.5 billion of new securitized debt, at a weighted average cost of 2.24%.\nThe terminated debt had $1.2 billion outstanding, with a previous cost of 4.22%, a savings of about 200 basis points.\nThe high advance rate on these four securitizations enabled us to release equity, locked in from the prior securitizations and lower our costs of securitized debt by 265 basis points.\nThe retained tranches from those securitizations were financed with non mark-to-market repo.\nWe expect to see the full benefits of all four securitizations in the new quarter.\nFor the month of April we issued $860 million CIM 2021-R3 and $117 million CIM 2021-NR3.\nThe mortgages for both securitizations were from the call and termination of three CIM deals previously issued in 2017.\nThe April securitizations created $813 million of new debt at a weighted average cost of 2.12%.\nThe terminated debt had $682 million outstanding, with a previous cost of 4.14%.\na savings of 200 basis points.\nThe R3 and NR3 deals closed in late April.\nSecuritizations of assets is a critical component of Chimera's business model.\nIt provides low cost, long term non-recourse debt for mortgage assets on our balance sheet.\nSecuritized debt represents nearly 70% of Chimera's liabilities structure.\nWe expect all the new securitizations issued this year to provide durable portfolio income for many years to come.\nAt the end of March, Chimera paid off $4 million, 7% secured financing, and retired for cash the associated warrants on approximately 20 million shares.\nThe cash cost on the warrants came at a 10% discount to the value of our common stock and then eliminated any future equity dilution on these shares.\nThe equity recaptured from our first quarter of securitizations enabled us to terminate this debt early and rebalance our liability structure.\nOur secured financing now stand at $4 billion down for $4.6 billion at quarter end.\nThe weighted average rate on our secured financing at the end of March was 2.7%, down 70 basis points from 3.4% at year end.\nThe optimization of our securitized debt combined with a continued improvement in our secured financing positions Chimera's portfolio to reap long term benefits, while maintaining little recourse leverage.\nOn the asset side of the balance sheet, this quarter Chimera purchase and securitized NR CIM 2021 J1 and J2 deals, a total of $884 million prime jumbo loans.\nSeparately, through a series of transactions, we purchased $166 million high yielding business purpose loans.\nThe weighted average coupon on these loans was 8.5% and has an expected portfolio yield of 7%.\nThese loans are short duration and are currently being financed in our loan warehouse.\nOur agency CMBS portfolio continues to perform well as expected, as increased rate volatility during the quarter we proactively managed to our agency CMBS portfolio.\nThis quarter we sold $182 million Ginnie Mae project loans, generating $14 million in realized gains.\nIn addition, seven Ginnie Mae project loans were called during the quarter totaling $146 million.\nUnlike traditional agency pass-throughs, Ginnie Mae project loans carry explicit call protection, and due to this feature we collected approximately $14 million in interest income through P-pay penalties.\nAs we look forward into the second quarter, the housing market remains strong and provides added benefit for improved credit performance.\nChimera's portfolio with seasoned low loan balance loans continue to generate solid top-line performance, while demonstrating little sensitivity to prepayments.\nThrough the end of April, we have re securitized $5.1 billion loans, lowered our cost of financing and freed up capital to help pay down higher cost debt.\nAnd over the remainder of 2021, we have eight additional deals with approximately $1.7 billion unpaid balance for potential resecuritizations.\nChimera's portfolio is currently structured to offer shareholders an attractive dividend relative to our low recourse leverage.\nAs we near the post pandemic world, Chimera is well positioned to grow our portfolio with additional income opportunity.\nI'll review Chimera's financial highlights for the first quarter of 2021.\nGAAP book value at the end of the first quarter was $11.44.\nGAAP net income for the first quarter was $139 million or $0.54 per share.\nOn a core basis.\nnet income for the first quarter was $87 million or $0.36 per share.\nEconomic net interest income for the first quarter was $136 million.\nFor the first quarter, the yield on average interest earning assets was 6.4%.\nOur average cost of funds was 3.3%.\nAnd our net interest spread was 3.1%.\nTotal leverage for the first quarter was 3.6:1, while recourse leverage ended the quarter at 1.1:1.\nFor the quarter, our economic net interest return on equity was 15%.\nAnd our GAAP return on average equity was 17%.\nExpenses for the first quarter, excluding servicing fees and transaction expenses were $18.6 million, up slightly from last quarter.\nThat concludes our remarks.\n",
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"content": "compname reports q1 earnings per share of $0.54.\nq1 gaap earnings per share $0.54.\nq1 core earnings per share $0.36.\nqtrly book value of $11.44 per common 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: Before we begin, I'd like to review the safe harbor statement.\nDuring the call today, we may also discuss non-GAAP financial measures.\nAdditionally, the content of this conference call may contain time-sensitive information that is accurate only as of the date of this earnings call.\nWe do not undertake and specifically disclaim any obligation to update or revise this information.\nI will now turn the conference over to our president and chief executive officer, Matthew Lambiase.\nI'll make some brief comments, then Mohit will discuss the changes in the portfolio and Rob will then review our financial results.\nI believe the first six months of 2020 will go down in the financial history books as one of the most volatile periods in modern times.\nThe U.S. economy went from excellent to dismal in the span of just a few months and the financial markets, especially fixed income, experienced record volatility and record intervention from the government.\nIn our space, many levered investors were caught off guard by the swiftly falling asset price, and they were forced to sell at the low point of the market.\nFortunately, Chimera was able to navigate through this difficult period by executing transactions which enabled us to retain our high-yielding and unique mortgage credit portfolio.\nIt's important to understand that it will be very difficult, if not impossible, to recreate our portfolio in the current low interest rate environment and its retention affords Chimera the ability to pay a meaningful dividend, which we would not have if the assets had been sold.\nIn the quarter, we took several actions that helped us augment our liquidity.\nWe issued a $374 million three-year convertible bond, we entered into a $400 million three-year revolving loan facility arranged by Ares Capital and we executed three new mortgage securitizations, totaling over $1 billion, which significantly reduced our loan warehouse exposure and helped reopen the mortgage securitization market, which is a primary source for Chimera's long-term financing.\nAdditionally, during the period, we negotiated longer-term and non-mark-to -- longer-term and non-mark-to-market repo finance facilities for our mortgage loans and credit-related assets.\nWe now have approximately 75% of our credit borrowings on longer-term facilities and over 50% of them have no mark-to-market or limited mark-to-market arrangements.\nWhile these actions have had the short-term effect of increasing financing costs, we believe the benefits over the long-term are significant.\nWe've strengthened our balance sheet, enabling us to further withstand additional market volatility, continue to produce attractive spread income and to make new investments when we see attractive asset opportunities.\nThis position is enviable, given the uncertain economic conditions and the low return environment that we're currently operating within.\nThe Federal Reserve has stated that they expect to keep the Fed funds rate zero bound for the next two years and that they will continue to buy large quantities of assets to support the financial markets and the U.S. economy.\nWe are present -- presently witnessing the effects of these actions.\nThe 10-year treasury yield is now roughly 55 basis points and a rate on a new 30-year mortgage dipped below 3% for the first time in history.\nCurrent market expectations are that we'll be in this low rate environment for several years to come, and that the returns on all financial assets will be also low into the future.\nWhile the Federal Reserve's asset purchases have not been directly focused on residential mortgage credit, their purchases have started solidifying the markets and senior mortgage bonds have witnessed significant price appreciation.\nWe would expect that over time, deeper credit subordinate residential bonds could see similar moves.\nChimera's portfolio of higher-yielding legacy assets should become ever more valuable as the Fed continues to buy assets and returns in the market become ever more scarce.\nResidential mortgage credit, due to the size of the market and the slow recovery of pricing, offered some of the best opportunities in the fixed income market.\nThe economics for loan securitization continues to be attractive as the credit curve remains steep.\nSenior front-end bonds are well bid, creating an opportunity to securitize loans and retain higher-yielding, back-end subordinate investments.\nThese subordinated bonds have high relative yield and the potential for meaningful appreciation should markets normalize.\nWe have executed three securitizations in the period and retained the subordinate tranches from those deals.\nLooking forward, we believe that there will be ample supply of loans for sale from the GSEs and banks, and this supply will create opportunities for us to make new investments for our portfolio.\nGiven the current low yield and low return environment, we think being able to create investments through securitization will allow us to continue to produce attractive results in this challenging market.\nWhile this has been a very difficult period to navigate through, we believe Chimera is well-positioned for the future.\nWe have materially reduced our exposure to mark-to-market risk on our repo financings, which should help us manage through bouts of volatility in the future.\nWe have been able to retain our legacy portfolio of assets, which will allow us to continue to produce meaningful dividends for our investors in what may be an extended period of low interest rates.\nThe retained portfolio also has the potential for book value appreciation if pricing returns to historical levels.\nAnd finally, we believe there are attractive opportunities currently available in the residential loan market and we have a team and a history of being able to use securitization to successfully create high-yielding investments for our portfolio.\nAs a result of unprecedented monetary and fiscal support provided by the government, the second quarter saw a material improvement in both the equity and fixed income markets.\nParts of the equity markets are flat to up year-to-date while treasury rates were stable in Q2.\nWith rates stable and the Fed rhetoric for a lower rate for the foreseeable future, volatility has subsided.\nThe crowding out effect created by the Fed's market intervention has been positive for all highly rated fixed income securities.\nThe Federal Reserve was mostly focused on agency securities and did not purchase residential mortgage credit.\nThe shortage of legacy credit assets available, after a slow start in April, new issue securitization volumes were brisk in the second quarter.\nSenior tranches of securitized residential product improved steadily with the strongest performance in the latter half of the second quarter.\nDuring the quarter, we focused on the liability side of our balance sheet and entered into three non-mark-to-market facilities to finance $2 billion of our non-agency portfolio.\nIn addition, we have limited mark-to-market on $611 million of non-agency securities.\nAs a result of these transactions, approximately 54% of our non-agency borrowings are not subject to full mark-to-market risk.\nAs of quarter end, the weighted average term to maturity has increased to 698 days from 223 days in the first quarter.\nTo reduce the risk on our warehouse lines, we completed three securitizations, totaling approximately $1.1 billion in seasoned, reperforming mortgage loans.\nMoving loans from warehouse to securitization is an important aspect of our portfolio strategy as it reduces the mark-to-market risk and improves risk metrics for the company.\nAfter the completion of this quarter's securitization, our residential mortgage loan warehouse stands at $263 million and is financed for one year without mark-to-market risk.\nCIM 2020-R3 issued in May had $438 million underlying loans with a weighted average coupon of 5.28% and a weighted average loan age of 150 months.\nThe average loan size in the R3 securitization was $127,000 and the average FICO was 651 with an average LTV of 80%.\nWe sold $329 million senior securities with a 4.2% cost of debt.\nChimera retained a May 2022 calendar call option for the R3 securitization.\nCIM 2020-R4 had $276 million underlying loans, with a weighted average coupon of 4.78% with a weighted average loan age of 168 months.\nThe average loan size in the R4 was $127,000.\nThe average FICO was 598 with an average LTV of 75%.\nWe sold $207 million senior securities with a 3.2% cost of debt.\nChimera retained a June 2022 calendar call option on the R4 securitization.\nIn early July, Chimera completed a second rate of securitization of the year.\nWe issued CIM 2020-R5 with $338 million underlying loans with an average coupon of 4.98%.\nThe R5 securitization had a weighted average loan age of 149 months and an average loan size of $152,000.\nThe loans had a weighted average FICO of 678 with an average LTV of 70%.\nWe sold $257 million of investment-grade securities with a 2.05% cost of debt, more than 200 basis points tighter than our early May deal.\nAnd in late July, we issued $362 million CIM 2020-J1, our first jumbo securitization of the year.\nOverall, we are pleased with the current investment portfolio and its long-term prospects.\nWe were able to navigate through this difficult period by executing transactions, which enables us to retain our high-yielding and unique mortgage credit portfolio.\nStrong credit performance, strength of institutional buying, and the tightening of new issue credit spreads were all positive components of Chimera's long-term securitization strategy.\nWe have 13 existing CIM securitization totaling $7.5 billion available for call and refinancing over the next 12 months.\nThis provides an additional avenue for portfolio performance and complements potential new investment opportunities.\nWe are continually monitoring our outstanding securitization for the best timing and the opportunity to execute our call optimization strategy and maximize long-term portfolio performance for our shareholders.\nOur Agency CMBS continue to provide attractive spread income and liquidity for the portfolio while providing superior call protection relative to residential agency pass-throughs in this low rate environment.\nLastly, the reduction in mark-to-market achieved this quarter leaves us with plenty of dry powder to make new credit investments.\nI'll review Chimera's financial highlights for the second quarter.\nGAAP book value at the end of the second quarter was $10.63 per share.\nOur GAAP net loss for the second quarter was $73 million or $0.37 per share.\nOn a core basis, net income for the second quarter was $76 million or $0.32 per share.\nOur economic net interest income for the second quarter was $121 million.\nFor the second quarter, our yield on interest-earning assets was 5.7%, our average cost of funds was 3.3%, and our net interest spread was 2.4%.\nTotal leverage for the second quarter was 4.3:1 while recourse leverage ended the quarter at 1.8:1.\nExpenses for the second quarter, excluding servicing fees and transaction expenses were $17 million, down from last quarter, primarily related to lower compensation expenses.\nWe currently have approximately $850 million in cash and unencumbered assets.\nThis is after we've paid both our preferred and common dividends in full.\nWe continue to monitor liquidity closely and look for attractive financing options to support our portfolio.\n",
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"content": "chimera investment q2 core earnings per share $0.32.\nq2 core earnings per share $0.32.\nq2 gaap loss per share $0.37.\nqtrly gaap book value of $10.63 per common 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: Before we begin, I'd like to review the safe harbor statements.\nDuring the call today, we may also discuss non-GAAP financial measures.\nAdditionally, the content of this conference call may contain time-sensitive information that is accurate only as of the date of this earnings call.\nWe do not undertake and specifically disclaim any obligation to update or revise this information.\nI will now turn the conference over to our CEO and chief investment officer, Mohit Marria.\nJoining me on the call today are Choudhary Yarlagadda, our president and chief operating officer; Subra Viswanathan, our new chief financial officer; Kelley Kortman, our chief accounting officer; and Vic Falvo, our head of capital markets.\nThis quarter, we continued to make significant progress toward optimization of our liability structure.\nFor the six months of 2021, we successfully refinanced 12 legacy CIM securitizations supporting more than $5.6 billion of loans.\nThe results of these transactions has lowered our overall cost of debt by approximately 245 basis points, and we expect this cost savings to continue to benefit our shareholders in the future.\nThe National Association of REALTORS recently reported sales of existing homes at 5.9 million annual units, with a median sale price of more than $363,000, up more than 23% from a year ago.\nDemand for single-family homes remain strong, while the inventory of homes available for sales persist near record low levels.\nAccording to Black Knight data and analytics, in June, the national delinquency rate hit its lowest level since the onset of the pandemic and is now back below the pre-great recession average.\nThe 30-plus day delinquency rate was reported at 4.4% of outstanding loans, down 42% on a year-over-year basis.\nStrong demand for existing homes, higher home prices, and lower delinquency rates provide strong fundamental support for Chimera's large portfolio of seasoned low-loan balance mortgages.\nInterest rates on government bonds experienced a both flattening move in the second quarter.\nOver the period, the yield on 10-year treasury notes fell by 27 basis points while the yield on two-year treasury rose by nine basis points.\nInterest rates on money market instruments, including overnight repo remained near zero.\nInvestor demand for higher-yielding fixed income products were strong and spreads on credit products continue to trend tighter.\nAccordingly, the Bloomberg Barclays U.S. Corporate High Yield Index ended the quarter at 3.75%, its lowest yield ever.\nTighter credit spreads, coupled with low-absolute interest rates, have presented attractive market opportunities to refinance our existing securitized debt and secured financing at significantly lower costs.\nAs part of our continued call optimization strategy, this quarter, we called and refinanced six CIM legacy deals, representing more than 1.5 billion of loans.\nThe new securitization successfully optimized our liabilities through the extraction of capital and lowering cost of debt.\nOur April deals, CIM 2021-R3 and NR3 on a combined basis, had a total of 813 million of securitized debt supported by 977 million of loans.\nThe combined advance rate was 83%, enabling us to extract 125 million of capital while lowering our cost of debt for these loans by 200 basis points to 2.12%.\nChimera retained 164 million of subordinate and IO securities as investments from these deals.\nThe new securitizations have a calendar call dates.\nThe R3 financing will be callable beginning April 2024 and the NR3 financing is callable beginning April of 2022.\nIn June, we issued 546 million CIM 2021-R4.\nThe deal consisted of 464 million securitized debt, representing an 85% advance rate and a 1.97% cost of debt for these loans.\nThe R4 freed up 98 million of capital and provided cost savings of approximately 180 basis points.\nChimera retained 82 million of subordinate and IO securities as investments.\nThe R4 financing has a calendar call date beginning June 2024.\nWe have provided additional details on Page 8 of our earnings supplement to further assist you in the analysis of this quarter's CIM securitizations.\nSecuritizations has long been a cost-effective and efficient financing vehicle for Chimera.\nIn the first half of 2021, Chimera's resecuritization activity enabled us to take out capital, reduce the size, and lower the cost of our outstanding credit financing.\nAnd in conjunction with this year's resecuritizations, we have also refinanced several of our outstanding secured credit facilities.\nWe have made meaningful improvements with the average cost of our secured financing for residential credit assets in the second quarter at 3.5%, down from 4.9% at year end.\nWe've always been extremely prudent and diligent when making our long-term investment decisions.\nOur Agency CMBS portfolio is constructive with explicit prepay protection.\nAs interest rates have fallen and maintained near historic lows, we have been active in managing our Agency CMBS to determine the best course of action between long-term hold and gain on sale securitization or reaping benefits through explicit prepay penalties.\nThis quarter, through the combination of prepay penalties received from our Ginnie Mae project loans and early pay downs of non-agency credit, we generated onetime nonrecurring income of 38 million.\nOur prepay penalties we received this year is proof of concept for many of the positive convexity attributes we have regularly discussed over the years.\nNow at the midpoint of 2021, I believe we have made a meaningful impact on our balance sheet.\nWe have resecuritized debt supporting 5.6 billion of loans through seven separate securitizations, lowered our cost of securitized debt by over 245 basis points, lowered the cost of our repo credit facilities by 140 basis points since year end, retired high-cost debt and warrants incurred during the pandemic, issued three jumbo prime securitizations totaling 1.2 billion, purchased more than 200 million of high-yielding fix and flip loans and increased our quarterly dividend by 10% to $0.33.\nSecuritizations of loans locking stable long-term financing for our loan portfolio.\nWe have successfully refinanced many of our outstanding legacy deals, and we have an additional five deals with 1 billion of unpaid principal balance that are or will become callable over the next six months.\nLooking forward, we continue to seek opportunities to further improve our liability structure.\nAnd as always, stay the course as a patient long-term investor focus on investments to provide our shareholders with stable book value and a sustainable and attractive risk-adjusted dividend.\nI'll now review Chimera's financial highlights for the second quarter of 2021.\nGAAP book value at the end of the second quarter was $11.45 per common share.\nGAAP net income for the second quarter was 145 million or $0.60 per share on a fully diluted basis.\nOur core earnings for the second quarter was 130 million or $0.54 per share.\nEconomic net-interest income for the second quarter was 173 million.\nThe yield on average interest-earning assets was 7% for the second quarter, while our average cost of funds was 2.6%, resulting in a net-interest rate spread of 4.4%.\nTotal leverage for the second quarter was 3.3 to one, while our recourse leverage ended the quarter at 1.0 to one.\nFor the quarter, our economic net-interest return on equity was 19%, and our GAAP return on average equity was 18%.\nExpenses for the second quarter, excluding servicing fees and transaction expenses, were 15 million, down approximately 3 million from last quarter.\n",
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"content": "q2 gaap earnings per share $0.60.\nq2 core earnings per share $0.54.\nquarter-end gaap book value of $11.45 per common 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: Before we begin, I'd like to review the safe harbor statement.\nDuring the call today, we may also discuss non-GAAP financial measures.\nAdditionally, the content of this conference call may contain time-sensitive information that is accurate only as of the date of this earnings call.\nWe do not undertake and specifically disclaim any obligation to update or revise this information.\nI will now turn the conference over to our president and chief executive officer, Matthew Lambiase.\nI'll make some brief comments, then Mohit will discuss the changes in the portfolio, and Rob will review our financial results.\nChimera continues to work remotely, and I'm happy to report that the team is safe and our remote work environments have been successful.\nOver the past six months, we've taken many steps to strengthen our balance sheet, protect our desirable credit assets, and stabilize the earnings stream of our portfolio.\nThese steps included selling agency mortgage-backed securities, selectively selling agency CMBS, negotiating new non-mark-to-market financing arrangements, and lowering the company's overall recourse leverage.\nThe actions taken over the period enabled us to participate in the market recovery of asset prices from the depressed levels that we experienced in March.\nFor the quarter, Chimera's book value appreciated 12% to $11.91 per share.\nWe generated $0.33 of core earnings, and we paid $0.30 in common dividend, resulting in nearly 15% economic return for the period.\nThe rebound in residential mortgage prices this quarter can be attributed to a very strong housing market, which has been boosted by a generational lull in U.S. interest rates.\nThe COVID-19 pandemic has had a dramatic effect on the housing in the United States.\nThe market for single-family homes is thriving as many families are fleeing cities for more spacious quarters in the suburban and rural areas of the country.\nFamilies across America are seeking additional living space for home offices, home classrooms, and safe outdoor environments.\nlabor force is currently working full time from home.\nDemand for single-family homes is booming.\nThe rate of existing-home sales rose in September to 6.5 million homes, the highest level since 2006.\nAnd the available inventory of existing home sales has decreased nearly 20% from the previous year to 1.5 million homes.\nAt the current pace of home sales, all-in inventory currently on the market could be sold in less than three months.\nMuch of this housing demand is driven by record-low borrowing rates orchestrated by the Federal Reserve.\nSince March, the Federal Reserve has increased its balance sheet by 75% to over $7 trillion, helping to provide low interest rates and ample liquidity to the mortgage market.\nThe average rate for 30-year mortgages was recently reported at 2.8%, the lowest rate on record, which dates back to 1971.\nAdditionally, fiscal stimulus from the federal government for COVID-19 relief has added over $3 trillion into the economy and has helped many mortgage borrowers through this difficult economic period.\nBoth political parties in Washington are currently discussing additional fiscal stimulus packages, which, if enacted, we believe, will help continue to support troubled borrowers and be constructive for both the housing and the mortgage market.\nA robust housing market, paired with low mortgage rates and the government support, provide a very strong pace for owning residential mortgage credit.\nAs of quarter-end, nearly 90% of Chimera's investment portfolio was allocated to mortgage credit.\nThe mortgage securitization market has also returned to near pre-pandemic level and in some cases better as a result of lower interest rates and comparable advance rates.\nThis quarter, Chimera completed three securitizations while committing to purchase $640 million of mortgage loans.\nDue to the improving housing fundamentals and better credit conditions, investor demand for highly rated senior mortgage securities is very strong.\nChimera is a frequent issuer of these securities, which enables us to secure long-term, non-mark-to-market financing for our credit portfolio assets.\nOur investment team continues to find opportunities and is successful adding to our portfolio for future securitizations.\nThe housing market is one of the few bright spots in the U.S. economy, and higher housing prices can contribute to better mortgage credit fundamentals.\nIn a world of low investment returns, having a high-yielding portfolio with a favorable credit profile is an enviable position to be in.\nWe believe that Chimera's portfolio is well-positioned to take advantage of these positive trends and to continue to produce strong dividend income for our shareholders in the quarters ahead.\nThe 10-year treasury ended the quarter with a yield of 68 basis points, down from 1.92% at the start of 2020.\nThe overall magnitude of this rate movement has generated price appreciation in 10-year treasury notes of approximately 10 points since the beginning of the year.\nOur agency CMBS investments over the last five years have primarily been Ginnie Mae project loans.\nThese securities carry government guarantees, and due to explicit prepayment lockout and penalties, the Ginnie Mae permanent loan certificates are longer-duration assets.\nThe price performance of these assets has greatly benefited as treasury rates have fallen.\nDuring the third quarter, we acted on the strong price performance and selectively sold $659 million securities from our agency CMBS portfolio.\nWith the sale, we harvested approximately $65 million in gain and plan to reallocate capital into mortgage credit.\nThe objective of the reallocation is long-term optimization of the portfolio income for the benefit of our shareholders.\nWe continue to monitor our agency CMBS holdings relative to their market values and their explicit call protection to maintain a right-sized and optimal portfolio of our agency CMBS.\nOur remaining agency CMBS holdings at quarter-end was $1.8 billion, comprising 10% of Chimera's total investment portfolio.\nThe new issue market for securitized products remained strong in the third quarter, and spreads on certain parts of the capital structure have approached pre-COVID-19 levels.\nTighter spreads and low absolute interest rates create compelling opportunities for frequent and well-recognized issuers like Chimera to meet investor demand for securities.\nFor the third quarter, Chimera closed three securitized transactions totaling a little over $1 billion.\nThe senior note from all three deals carried investment-grade ratings.\nIn July, we issued CIM 2020-R5 with $338 million loans from our existing loan warehouse.\nThe underlying loans in the deal had a weighted average coupon of 4.98% and a weighted average loan age of 149 months.\nThe average loan size in the R5 transaction was $152,000 and had an average LTV of 70%.\nThe average FICO score for the borrowers was 678.\nWe sold $257 million senior securities from this deal and retained $81 million in subordinated notes and interest-only securities.\nOur cost of investment-grade debt for CIM 2020-R5 was 2.05% with a 76% advance rate.\nSeparately, in two transactions, we securitized pools of prime jumbo mortgage loans and a pool of agency-eligible investor mortgage loans.\nCIM 2020-J1 was our first prime jumbo securitization for 2020.\nThe deal had $362 million loans with a weighted average coupon of 3.76% and a weighted average loan age of six months.\nThe average loan size was $732,000 and had an average FICO of 766 and an average LTV of 67%.\nCIM 2020-INV1 was our first agency-eligible investor loan securitization for 2020.\nThis deal size was $335 million with a weighted average coupon of 4.31%.\nIt had an average loan size of $332,000.\nThe loans had an average FICO of 765 with an average LTV of 64%.\nThe J1 and the INV1 securitizations are not consolidated on our balance sheet.\nWe invested $22 million in these transactions for our non-agency RMBS portfolio.\nDuring the third quarter, we committed to purchasing over $400 million of seasoned reperforming loans.\nAnd post quarter-end, we securitized the loans into CIM 2020-R6.\nStrong investor demand for senior notes enabled us to move quickly from purchase to securitization.\nThe deal priced on October 30 and is expected to close in early November.\nWe will report the details of this transaction on our fourth-quarter 2020 earnings call.\nWe continue to invest in residential business purpose loans.\nThese loans, commonly referred to as fix and flip, provide an attractive, high-yielding, short-duration assets for our portfolio.\nThe market for these loans continues to expand and is well supported by a positive housing market and repeat business purpose borrowers.\nFor the year, we successfully purchased approximately $135 million in business purpose loans and ended the quarter with approximately $210 million on the balance sheet.\nThe average coupon on this portfolio was 8.57% with a weighted average LTV of 80%.\nOur investment portfolio is well-positioned as we approach year-end.\nThe market trends in single-family housing are positive, and the securitization market is strong.\nAt quarter-end, we had $412 million loans on our mortgage warehouse for potential future securitizations and have ample liquidity to and opportunistically acquire new pools of loans.\nOn the liabilities side of our balance sheet, we have taken steps this year to lower the impact of mark-to-market risk on our secured financing.\nRecourse leverage is materially lower on the year and currently stands at 1.3 times capital.\nWe have ample liquidity to make new investments.\nAnd as part of our call optimization strategy, we actively monitor our outstanding securitizations for optimizing our long-term debt structures.\nAnd as of September 30, Chimera has $5.8 billion of outstanding securitized debt in 16 separate deals that is either currently callable or will be callable through the end of 2021.\nI'll review Chimera's financial highlights for the third quarter.\nGAAP book value at the end of the third quarter was $11.91.\nAnd GAAP net income for the third quarter was $349 million or $1.32 per share.\nOn a core basis, net income for the third quarter was $80 million or $0.33 per share.\nEconomic net interest income for the third quarter was $125 million.\nFor the third quarter, the yield on average interest-earning assets was 6%.\nOur average cost of funds was 3.5%, and our net interest spread was 2.5%.\nTotal leverage for the third quarter was 3.7 to 1, while recourse leverage ended the quarter at 1.3 to 1.\nExpenses for the third quarter, excluding servicing fees and transaction expenses, were $17 million, in line with last quarter.\nWe continue to closely monitor liquidity and have approximately $1 billion in cash and unencumbered assets as we look for new investments and financing options to support our portfolio and to optimize investment returns.\n",
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"content": "chimera investment q3 core earnings per share $0.33.\nq3 core earnings per share $0.33.\nq3 gaap earnings per share $1.32.\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 Scott Buckhout, CIRCOR's president and CEO; and Abhi Khandelwal, the company's chief financial officer.\nThese expectations are subject to known and unknown risks, uncertainties and other factors and actual results could differ materially from those anticipated or implied by today's remarks.\nYou can find a full discussion of these factors in CIRCOR's Form 10-K, 10-Qs and other SEC filings also located on our website.\nCIRCOR delivered solid first-quarter results as our portfolio of mission-critical products continues to perform.\nWhile our end markets are not fully back to pre-pandemic levels, strong orders performance in the quarter gives us the confidence to raise our 2021 earnings guidance.\nStarting with some financial highlights on Slide 2.\nWe booked orders of $227 million in the quarter, which were up 34% sequentially and 7% versus prior year on an organic basis.\nWe saw strong sequential increases in demand in both businesses, with industrial up 25% and A&D up 55%.\nWe ended the quarter with $421 million of backlog, up 11% versus prior quarter.\nRevenue in the quarter was $181 million, down 8% organically, driven by lower industrial backlog entering 2021, the timing of large defense order shipments and slowly recovering demand in commercial aerospace.\nAdjusted operating income was $12 million, representing a margin of 6.9%, up 110 basis points from prior year.\nWe expect strong margin expansion as we progress through 2021, driven by higher volume in virtually all regions and end markets, our continued actions on pricing, ongoing simplification across the company, and productivity.\nThe company delivered $0.24 of adjusted earnings per share and generated free cash flow of negative $21 million, both in line with our expectations.\nOur cash performance in the quarter is consistent with typical seasonality due to the concentration of annual disbursements in the first quarter.\nStarting with industrial on Slide 3.\nIndustrial organic orders were up 11% versus last year and 25% sequentially.\nWe're seeing recovery in virtually all of our end markets.\nRegionally, we saw particular strength in EMEA, China and rest of Asia.\nNotably, we booked two large international downstream orders in the quarter, which we will deliver over the next 12 months.\nWe delivered a strong book-to-bill ratio of 1.3 in the quarter.\nIndustrial revenue was $121 million, down 6% versus last year and 9% from prior quarter.\nThe year-over-year decline was a result of starting the year with a lower backlog and some COVID-related customer issues.\nThe sequential decline was largely driven by normal seasonality.\nAdjusted operating margin was 8.1%, an improvement of 380 basis points versus last year.\nThe margin improvement was driven by the non-repeat of the COVID-related write-off from Q1 2020, partially offset by lower sales volume.\nAdjusting for the impact of this receivable write off, organic decrementals in the quarter were 32%.\nWe expect industrial margins to expand through the year as volume increases and our price and productivity initiatives cut in.\nTurning to Slide 4.\nOur aerospace and defense segment booked orders of $73 million in the quarter, flat versus last year and up 55% sequentially.\nVersus prior year, favorable defense orders offset the ongoing COVID-19 impact on our commercial business.\nThe sequential improvement was driven by the timing of large defense program orders for the Joint Strike Fighter, as well as the CVN-80 and 81 aircraft carriers.\nRevenue in the quarter was $60 million, down 10% year over year and 23% from prior quarter.\nVersus prior year, sales were down due to lower commercial revenue.\nSequential sales were lower due to seasonality and the timing of defense shipments for the Joint Strike Fighter, Dreadnought submarines and F-16 spares.\nOrders and revenue in our defense business will continue to be lumpy, but we have a strong backlog, and we are well-positioned on growing platforms.\nWe're excited about the growth trajectory of the business.\nFinally, operating margin was 18% in the quarter, down 130 basis points year over year.\nThe margin decline was driven by lower sales volume and unfavorable mix.\nOrganic decremental margins in the quarter were 29%.\nWe remain confident in our ability to expand operating margins throughout the year with higher volume, ongoing price actions and productivity.\nTurning to Slide 5.\nOur free cash flow was negative $21 million in the quarter.\nAs Scott mentioned, this was in line with the typical seasonality of our cash flow and timing of annual disbursements.\nWhile capex was relatively flat, our cash flow from operations improved versus prior year as a result of our exit from upstream oil and gas.\nWe ended the quarter with $461 million of net debt, up slightly, driven by our cash flow in the quarter.\nIn 2021, we will continue to use free cash flow generated from operations to further pay down debt.\nWe expect to improve net debt to adjusted EBITDA leverage by greater than one turn by end of the year.\nNow I'd like to share our expectations for second quarter and update our outlook for the full year.\nIn the second quarter, we expect revenue to be down 2% to 4% organically.\nScott will cover this in more detail in the upcoming slides, but let me provide the key highlights.\nWhile we are seeing industrial demand recover across virtually all of our end markets, we expect deliveries to be heavily weighted to Q3 and Q4.\nSimilarly, in aerospace and defense, we expect a large portion of our recent orders in backlog to ship in the second half of the year.\nCommercial aerospace will continue to recover slowly, as aircraft production rates and fleet utilization improves throughout the year.\nWe're expecting adjusted earnings per share of $0.30 to $0.35 in the second quarter, which implies approximately 75% of our full-year earnings that are expected in the second half.\nThis earnings profile was directionally in line with last year and was driven by the natural seasonality in our businesses.\nMarkets recovering from COVID-19 through the year and project shipment timing in aerospace and defense and industrial.\nFinally, 2Q free cash flow is expected to be breakeven to slightly negative, driven by the timing of milestone payments on large projects.\nBased on our first-quarter performance and expectations for second quarter, we have high confidence in delivering our 2021 commitments.\nWe now expect organic revenue growth at the high end of our original guidance and higher adjusted earnings per share of $2.10 to $2.30.\nThe increase is mostly driven by industrial, which is now expected to grow low to mid-single digits and increase confidence in our aerospace and defense outlook.\nFree cash flow generation remains a top priority.\nAnd we still expect to convert 85% to 95% of adjusted net income into free cash flow for the year.\nNow I'll hand it back to Scott.\nLet's start with our industrial outlook on Slide 7.\nAs Abhi mentioned, we saw recovery in the first quarter across virtually all industrial end markets with orders back to pre-COVID levels.\nGeographically, we saw sequential improvement in North America and EMEA, while orders growth in China, India and rest of Asia remains strong.\nWe saw strong sequential and year-over-year orders growth in our short-cycle end markets.\nIn addition, we saw strength in our long-cycle businesses, with activity increasing overall and several large project orders across the portfolio.\nSo far in Q2, we continue to see momentum in our end markets with quoting activities at high levels and strong orders so far in the quarter.\nFor Q2 industrial revenue, we expect a moderate improvement year over year, with growth ranging between 1% and 4%.\nWe continue to see improvement across our short-cycle end markets as consumer demand increases.\nIn addition, the aftermarket remains strong with a mid-single-digit increase expected in the second quarter.\nOur longer cycle end markets, including downstream, commercial marine and midstream oil and gas, are showing positive momentum, and we're encouraged by our deal pipeline and quoting activity.\nFinally, pricing is expected to be a benefit of roughly 1%, consistent with prior quarters.\nMoving to aerospace and defense.\nOrders in Q1 were up sequentially and flat versus prior year, driven by timing of large defense program orders, which are inherently lumpy.\nFor the aftermarket, we expect improvements in defense spares and MRO activity through the year.\nIn our commercial aerospace business, we saw a modest improvement sequentially and expect a slow recovery to continue.\nRevenue in the second quarter is expected to be flat to down 5% versus prior year.\nDefense revenue is expected to be up 0% to 5% with strong volume on our top OEM programs.\nRevenue from our other OEM programs and defense spares is expected to be relatively flat in the quarter.\nBased on customer orders and timing of requirements, we expect stronger shipments in all major defense categories in the second half of the year.\nCommercial revenue is expected to be down between 10% and 15%.\nOur market position with Boeing and Airbus remains strong, and we expect revenue to improve through the year, in line with aircraft production rates and fleet utilization.\nFinally, pricing is expected to be a benefit of 3% in the quarter with additional price increases coming in the second half.\nWe expect full-year pricing to be in line with last year.\nBefore we get into Q&A, I'd like to close by providing an update on the strategic priorities that I've shared for 2021, investing in people, accelerating growth, expanding margins and allocating capital effectively.\nThese strategic priorities guide what our team works on every day, and I wanted to take a moment to highlight some actions we've taken in the first quarter.\nWe remain focused on investing in growth.\nAir Force T-X trainer jet and a high-speed impact kinetic switch module for a next-generation missile system for the U.S. Navy.\nOn the industrial side, we launched the CIRCORSmart app, our first mobile application and the start of a significant digital solution offering for our customers.\nThe mobile app allows a customer to scan a QR code affixed to the product, pull up performance data, user guides and contact information for technical support and aftermarket orders.\nOver time, we'll add more capabilities to the app.\nWe expect more than 50% of industrial's product shipments to have a QR code attached by the end of the second quarter.\nThis enhances the customer experience and provides an opportunity for incremental high-margin aftermarket growth.\nWe're expecting to launch 45 new products in 2021, with revenue generated from new products launched in the last three years accounting for approximately 10% of our total 2021 revenue.\nWe're also expanding our aftermarket presence in aerospace and defense.\nWe're in the process of opening a Waterfront Service Center in Virginia.\nThis will improve customer support and increase our operational efficiency.\nFinally, the CIRCOR operating system is driving operational improvements across the company.\nFor example, I recently visited one of our aerospace and defense sites, which produces components for the Joint Strike Fighter.\nBy implementing the CIRCOR operating system, the team has improved on-time delivery to 95%, improved product quality and cost and significantly lowered working capital as a percentage of sales.\nOver the last three years, the business has grown 55% and expanded operating margins by 670 basis points.\nThis is just one example of the power of the CIRCOR operating system and our efforts to enhance operations.\nContinued execution on our strategic priorities will deliver long-term value to our customers, employees, suppliers and shareholders.\n",
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"content": "compname reports q1 loss per share of $0.35.\nq1 adjusted earnings per share $0.24.\nq1 gaap loss per share $0.35.\nq1 revenue $181 million versus refinitiv ibes estimate of $187.9 million.\nsees q2 adjusted earnings per share $0.30 to $0.35.\nsees fy adjusted earnings per share $2.10 to $2.30.\nexpects q2 reported revenue to increase from 0%-2% and q2 organic revenue to decline 2%-4%.\nnow expects 2021 organic revenue growth in range of 2 to 4%.\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 Scott Buckhout, CIRCOR's president and CEO; and Abhi Khandelwal, the company's chief financial officer.\nThese expectations are subject to known and unknown risks, uncertainties and other factors and actual results could differ materially from those anticipated or implied by today's remarks.\nYou can find a full discussion of these factors in CIRCOR's Form 10-K, 10-Qs and other SEC filings also located on our website.\nCIRCOR delivered another solid quarter, and we're entering the back half of the year with high confidence that we'll achieve our 2021 guidance.\nOur Q2 performance was highlighted by 27% organic orders growth in our Industrial business as both short- and long-cycle demand remained strong.\nWe saw continued recovery across virtually all Industrial regions and end markets with orders exceeding pre-COVID levels.\nBook-to-bill in Industrial was 1.2, consistent with the first quarter.\nDespite some headwinds from inflation and COVID-related supplier issues, we delivered revenue and earnings in line with guidance.\nOur free cash flow conversion was 115%, a sign that our efforts to improve working capital are taking hold.\nBased on our strong orders performance in the first half, our $436 million backlog and all the work we've done to streamline our operations, we're well-positioned for a very strong second half.\nAnd finally, we made significant progress on our strategic priorities.\nI'll talk more about this later.\nI'm excited about the momentum the team is building, especially around growth and margin expansion.\nLet's start with the financial highlights on Slide 2.\nOrganic orders of $210 million in the quarter were up 4% versus prior year.\nWe saw a strong year-over-year increase of 27% in Industrial driven by improvements in virtually all of our end markets.\nAs expected, orders were down 31% in Aerospace & Defense due to the timing of large defense orders.\nOur backlog remained strong at $436 million, up 4% sequentially.\nOur backlog in Industrial is $248 million, up 26% since the end of last year.\nOrganic revenue was $190 million, down 2% versus prior year and up 5% sequentially.\nRevenue came in as expected given the timing of orders and lead times across our portfolio.\nSequentially, Industrial was up 7% as revenue starts to ramp from strong orders in Q1 and Q2.\nA&D was in line with prior quarter driven by timing of defense deliveries and a slowly improving commercial market.\nAdjusted operating income was $14.6 million, representing a margin of 7.7%, up 80 basis points from previous quarter and down 80 basis points from prior year.\nFinally, we delivered $0.35 of adjusted earnings per share and generated free cash flow of $8 million as the team continues to drive working capital improvements across the company.\nMoving to Slide 3.\nIndustrial organic orders were up 27% versus last year and 1% sequentially.\nRegionally, order growth was led by North America and Asia, and we saw improved project orders as customers start to increase capex spending.\nOur book-to-bill ratio for the quarter and for the first half was 1.2, which will support double-digit second-half revenue growth and represents a revenue inflection point post-COVID.\nAs expected, Industrial organic revenue was down 1% versus last year and up 7% sequentially.\nBy region, we saw year-over-year strength in both EMEA and China, partially offset by lower revenue in North America.\nOutside of these isolated issues, revenue was in line or better than expectations across our end markets.\nAdjusted operating margin was 8%, down 200 basis points versus last year, which reflects the downstream volume and aftermarket mix challenges in the quarter.\nOperating leverage, simplification and continued strategic pricing will drive strong second-half margin expansion.\nTurning to Slide 4.\nAerospace & Defense orders of $54 million were down 31% versus last year and 26% sequentially.\nOrders were lower versus prior year due to a large multiyear defense order for the Virginia class submarine.\nVersus prior quarter, the lower orders were driven by the timing of large orders for the Joint Strike Fighter and CVN-80 and 81 aircraft carriers.\nLumpy defense orders were partially offset by a modest sequential and year-over-year improvement in commercial aerospace.\nAs expected, revenue in the quarter was $61 million, down 5% year over year and up 1% from prior quarter.\nLooking to the back half, we're expecting double-digit organic revenue growth as we ramp deliveries on key defense programs.\nFinally, operating margin was 19.9% in the quarter, down 120 basis points year over year.\nThe margin decline was driven by lower aftermarket revenue.\nSequentially, margins expanded 210 basis points due to pricing actions and material productivity.\nWe remain confident in our ability to expand margins through the remainder of the year with higher defense and aftermarket volume.\nTurning to Slide 5.\nFree cash flow in the quarter was $8 million, a significant improvement versus prior year.\nWorking capital was a source of cash primarily driven by improved AR collections through the quarter and the timing of customer down payments.\nWe paid down $40 million of debt in Q2 with free cash flow and the proceeds from the sale of a noncore industrial product line.\nWe ended the quarter with $451 million of net debt, and we are on track to improve our leverage by greater than one turn this year.\nIn the third quarter, we expect revenue to be up 8% to 10% organically.\nFor Industrial, deliveries will be heavily weighted to Q3 and Q4 as we ship the backlog that we built in the first half.\nIn A&D, the growth in the back half is driven by the ramp in defense program deliveries and a modest recovery in commercial aerospace.\nScott will cover this in more detail in the upcoming slides.\nWe're expecting adjusted earnings per share of $0.55 to $0.60 in the third quarter, a 53% to 67% increase versus prior year.\n3Q free cash flow conversion is expected to be between 120% and 140%.\nInflation will be a headwind in the third quarter and second half, but we expect material productivity to offset any cost increases.\nFor the year, we are reaffirming the guidance that we provided during the first-quarter earnings call.\nOrganic revenue growth is expected to be in the range of 2% to 4%, with adjusted earnings per share of $2.10 to $2.30.\nFree cash flow conversion remains at 85% to 95%.\nWe have high confidence in our second-half margin outlook, and we expect to exit the year with 4Q operating margin of 13% to 15% for the company.\nAs we head into the back half of the year, we are closely monitoring the impact of COVID-19 variants in our global end markets and operations.\nNow I'll hand it back to Scott to discuss our market outlook.\nLet's start with our Industrial outlook on Slide 7.\nAs Abhi mentioned, in the second quarter, we saw continued recovery across virtually all Industrial end markets with orders exceeding pre-COVID levels.\nIn Q3, we expect double-digit order growth versus prior year with a seasonal sequential decline.\nFor Q3 Industrial revenue, we expect solid improvement year over year with growth between 7% and 11%.\nImprovement across our short-cycle end markets is expected to lead revenue growth as shorter lead time products in our backlog ship in Q3.\nAftermarket remained strong with a double-digit increase expected in the third quarter.\nOur longer-cycle end markets are expected to be up 5% to 9%.\nIn downstream, we're expecting revenue more or less in line with last year.\nWe're encouraged by the orders and quoting activity we saw through July, and we've addressed the supplier issues that impacted us in Q2.\nIn Commercial Marine, orders and revenue are increasing as shipbuilding activity picks up from historically low levels.\nFinally, pricing is expected to net roughly 1%, consistent with prior quarters.\nMoving to Aerospace & Defense.\nOrders in the second quarter were down sequentially and versus prior year driven by the timing of large defense program orders.\nQ3 orders are expected to be in line with prior year, and we're expecting a significant increase in Q4.\nRevenue in the third quarter is expected to be up 12% to 15% versus prior year.\nGrowth in defense revenue was primarily driven by strong volume on smaller OEM programs such as the Boeing P-8 Poseidon and various missile switch programs.\nRevenue from our top OEM programs is expected to be up low to mid-single digits with growth across nearly all of our major platforms.\nYear to date, aftermarket revenue has been trending below our expectations driven by delayed government spending.\nLooking forward, we expect sequential growth in spares and MRO activity in both Q3 and Q4.\nCommercial aerospace is expected to be up between 15% and 20% in the third quarter.\nRevenue from commercial air framers will be up roughly 50%, mostly driven by increased A320 volume and favorable comparisons to last year.\nAftermarket is expected to be up roughly 30%, in line with increased aircraft utilization.\nIn both cases, narrow-body volume continues to lead the recovery.\nFinally, pricing is expected to be a net benefit of 3% for defense and 5% for commercial due to price increases secured earlier in the year, a higher level of spot orders and an increase in commercial aftermarket volume.\nOur full-year pricing outlook remains in line with last year.\nAs we did last quarter, I'd like to provide an update on our previously shared strategic priorities.\nThese priorities continue to guide what our team works on every day.\nWe're investing in growth.\nWe launched 21 new products through the first half of the year and remain on track to deliver 45 new products in 2021.\nOn the Aerospace & Defense side, we launched a new brushless DC motor and brake assembly, which actuates the vertical stabilizers and aileron flight control surfaces on a high-altitude, long-endurance surveillance drone operated by the U.S. Air Force.\nOn the Industrial side, we introduced a new control valve that was entirely designed, sourced and manufactured in India, the first of its kind for CIRCOR.\nThis flue gas desulfurization valve is not only compliant with the new clean air regulations for Indian power plants, but also positions CIRCOR as the sole local partner providing a total solution.\nNext, our regional expansion strategy is gaining traction.\nOur Industrial team recently won a large multiproduct pump order with Daewoo Shipbuilding in Korea.\nBy providing a complete solution, we were able to secure a position on a long-term submarine program and strengthen our relationship with the Korean Navy.\nOn margin expansion, we're building on our CIRCOR operating system and simplification program by kicking off 80/20 at three of our largest Industrial businesses.\nWe're still early in the process, but we're excited about the structured approach to accelerate margin expansion at CIRCOR.\nFinally, as Abhi covered earlier, we made progress in reducing our total debt.\nWe'll continue to use free cash flow to pay down debt for the remainder of 2021.\nBefore we move to Q&A, I want to highlight a recent customer perception study for our Industrial business.\nIt was an independent global survey with participation from roughly 70 of our largest customers.\nThe results confirm that our strategic priorities are aligned with our customers.\nOur Net Promoter Score of 67 is exceptional and is a testament to our product quality and technical customer support.\nGiven the mission-critical nature of our products and the high cost of failure, our customers have a strong preference to buy OEM spare parts, and price is one of the least important buying criteria.\nThis study illustrates the power of our differentiated product portfolio and confirms that our strengths are aligned with our customers' top priorities.\n",
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"content": "circor delivers strong second quarter results and reaffirms 2021 guidance.\nq2 adjusted earnings per share $0.35.\nq2 revenue $190 million versus refinitiv ibes estimate of $189.2 million.\nsees q3 adjusted earnings per share $0.55 to $0.60.\nreaffirms fy adjusted earnings per share view $2.10 to $2.30.\nsees q3 revenue up 10 to 12 percent.\nfor full year of 2021, circor reiterated its guidance of organic revenue growth of 2 to 4%.\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 the call, today, are Scott Buckhout, CIRCOR's president and CEO, and Abhishek Khandelwal, the company's chief financial officer.\nThe slides we'll be referring to today are available on CIRCOR's website at www.\nThese expectations are subject to known, and unknown risks, uncertainties, and other factors.\nFor a full discussion of these factors, the company advises you to review CIRCOR's Form 10-K, 10-Qs, and other SEC filings.\nThe company's filings are available on its website at circor.com.\nActual results could differ materially from those anticipated, or implied by today's remarks.\nThese non-GAAP metrics exclude certain special charges and recoveries.\nCIRCOR delivered a strong third-quarter despite unprecedented macro challenges.\nThe work we've done to transform our portfolio during the last three years has paid off.\nWe now have a stronger more resilient portfolio of essential products.\nOur diversification across geographies, and markets, and products is mitigating the ongoing weakness of the pandemic.\nIn addition, we've been able to raise prices through the downturn because our product portfolio has strong market positions and differentiated technology.\nWe're executing well through the downturn.\nOur continued focus on productivity and cost resulted in a companywide decremental of 19% in the quarter.\nThe $45 million cost plan for 2020 that we communicated in May remains on track.\nOur pricing initiatives remain on the plan in both Aerospace & Defense and industrial.\nThe CIRCOR operating system is delivering improved operating performance across most metrics, and we expanded the margin of our aerospace & Defense business by 360-basis-points in the quarter despite the lower volume.\nFinally, we continue to take actions that best positioned CIRCOR to take advantage of a market recovery.\nWith 13 new product launches in Q3, we remain on track to deliver on our commitment to launching 45 new products this year.\nWe continue to invest in front-end resources and strategic growth initiatives.\nWe're closely collaborating with suppliers and customers to ensure alignment as markets change.\nAnd finally, we continue to focus on deleveraging the balance sheet.\nNow, I'd like to provide some highlights from the third quarter.\nPlease turn to Page 4.\nWe booked orders of $167 million, down 19% organically due to the impact of COVID-19 on our Industrial and Commercial Aerospace businesses.\nDefense orders relatively low in the quarter due to the timing of large defense programs.\nThe growth outlook for defense remains strong.\nSales came in as expected at $187 million flat to the prior quarter and down 15% organically.\nWe continue to believe Q3 is the bottom for sales and orders.\nWe expect sequential improvement across both businesses in Q4, which we'll talk about in more detail later in the call.\nAdjusted operating income was slightly more than $17 million, representing a margin of 9.3%, up 80-basis-points from the prior quarter, and down 130-basis-points from last year driven by lower sales volume in industrial.\nThe Companywide decremental was 19% in the quarter, which is significantly lower than our contribution margin driven by productivity, aggressive cost actions, and price.\nBefore I review the outlook for our end market.\nLet's begin by reviewing our segment results.\nAll figures up from continuing operations and exclude divestitures.\nStarting with industrial on Slide 5.\nIn Q3, Industrial segment orders were down 23% organically due to the impact of COVID-19 on most end markets.\nDownstream orders were especially impacted in the quarter, due timing of capital projects and maintenance turnaround delays.\nExcluding our Downstream business, orders an industrial were down 15% organically.\nThe benefit of the industrial portfolios regional diversity was evident in the quarter.\nWe saw sequential improvement in Germany, India, and China with orders increasing in the low double-digit range, partially offsetting pressure in North America.\nWhile oil and capital projects remain depressed, we experienced a sequential improvement in the aftermarket side of the business on a global basis.\nAs expected, the industrial segment had sales of $124 million flat to the prior quarter, and down 18% organically.\nThe EOM margin was 7.9% down 210-basis-points sequentially, and a decline of 460-basis-points versus last year.\nThe margin decline versus the prior year was primarily driven by lower sales volume and the impact on productivity associated with the need to maintain social distancing.\nAmong other safety protocols on the factory floor, which was partially offset by cost actions and price.\nIn addition, one of our facilities in North America experienced a COVID-19 outbreak which forced us to idle the factory for most of August, and impacted our EOM by approximately $1.5 million in the quarter.\nAdjusted for the $1.5 million of COVID impact, the industrial margin would have been 9.1%, and the decremental would be approximately 30%.\nTurning to Slide 6.\nIn Q3, in our Aerospace & Defense segment, we delivered orders of $59 million, down 9% organically.\nOrders were impacted by the timing of large defense programs in the quarter and the continued impact of COVID-19 on Commercial Aerospace.\nWhile the timing of large defense programs resulted in lower orders in the quarter, the business remains strong overall, and we remain confident in the segment's strong growth outlook going forward.\nSales for the Aerospace & Defense were $62 million flat to the prior quarter, and down 9% organically.\nStrengthened defense platforms partially offset the impact of COVID-19 on Commercial Aerospace.\nThe Aerospace & Defense operating margin was 23.7%, up 360-basis-points versus the prior year, and 260-basis-points sequentially.\nWith $6 million lower revenue, the Aerospace & Defense team delivered $1 million of incremental operating income, driven by price, productivity, and other aggressive cost actions.\nTurning to Slide 7.\nFor Q3, the effective tax rate was approximately 13% lower than the 14.8% in the prior quarter, due to a change in the statutory tax rate where CIRCOR operates.\nFor Q4, the tax rate is projected to be approximately 15%.\nThe Company took a non-cash charge of approximately $42 million to create a valuation allowance against its remaining U.S. deferred tax assets.\nThis non-cash charge was acquired in the GAAP accounting rules, primarily due to recent U.S. tax law changes, and losses in the U.S. from our divested businesses.\nThis charge does not impact our non-GAAP tax results for the quarter and is not expected to have an impact on our future non-GAAP tax results.\nLooking at special items and restructuring charges, we recorded a total pre-tax charge of $13 million in the quarter.\nThe acquisition-related amortization and depreciation were a charge of $12 million with the remaining million dollars being associated with restructuring activities in the quarter.\nInterest expense for the quarter was $8 million, down $4 million, compared to last year.\nThis was a result of lower debt balances and a favorable interest rate of 25-basis-points.\nOther income was a million-dollar charge in the quarter, primarily due to foreign exchange losses, partially offset by pension income.\nCorporate costs in the quarter were $7.2 million, in line with previous guidance provided.\nTurning to Slide 8.\nOur free cash flow from operations was flat in the third quarter.\nRight in line with what we guided in our Q1, and Q2 earnings call.\nAt the end of the third quarter, our net debt was at $468 million.\nThis represents a year-over-year debt reduction of $120 million dollars.\nIn Q3, we paid $52 million, and the revolver further reducing our debt balance and interest expense.\nWe expect to generate strong free cash flow in the fourth quarter and intend to use that cash to continue to pay down debt.\nNow I will hand it back over to Scott, to provide some color on our end markets, and outlook.\nNow, I'll provide an overview of what we're seeing in our end markets.\nPlease turn to Page 9.\nLet's start with the industrial.\nAs Abhishek mentioned, the impact of COVID-19 continued through the third-quarter across most major industrial end markets.\nFor Q3, orders were down 7% on a sequential basis with both for market and aftermarket orders coming in slightly lower than Q2.\nLarge projects remain weak, due to ongoing delays in capital spending.\nRegionally, we saw weakness in North America and most of Europe, offset by strength in Germany, China, and India across most major sectors.\nAs we mentioned in last quarter's earnings call, we believe that Q3 marks the bottom and we expect industrial segment orders and revenue to improve sequentially in Q4.\nBoth market and aftermarket orders are expected to increase double digits sequentially.\nFrom an end market perspective, we expect slight sequential improvement in many of our larger end markets.\nPower generation is showing early signs of improvement globally.\nDownstream Oil & Gas orders are improving as high priority capital projects, and certain maintenance activity moves forward.\nOur shorter cycles of chemical processing in markets that are more closely linked to consumer demand are showing slow improvement.\nFor industrial revenue in Q4, we expect a moderate improvement sequentially with growth ranging from flat to up 10%.\nWhile year-over-year revenue is expected to be down between 5% and 15%.\nMost OEM and aftermarket end markets are expected to improve in Q4, compared to Q3.\nDownstream Oil & Gas revenue is expected to be up sequentially, due to the timing of project shipments and higher aftermarket activity in the quarter.\nRegionally, we're seeing pockets of economic improvement in China, India, and Germany, which we expect to continue.\nCommercial Marine and midstream Oil & Gas are expected to remain at low levels, due to depressed activity and shipbuilding, low ship utilization, and ongoing project delays in midstream Oil & Gas.\nOverall, we expect Aerospace & Defense orders in Q4 to be in line with Q3 sequentially, and down versus the prior year driven by the timing and defense program orders, and ongoing COVID related headwinds in the Commercial business.\nFor Aerospace & Defense revenue in Q4, we expect a significant sequential improvement from Q3.\nDefense revenue should see sequential growth of 20% to 25%, and year-over-year growth of 15% to 20%.\nGrowth in the quarter is driven by strong shipments across our Submarine portfolio, our missile portfolio, and for the Joint Strike Fighter.\nCommercial revenue is expected to grow sequentially between 15% and 25%, but we'll be down year over year between 40% and 45%.\nThe sequential improvement is driven by slightly improving shipments across a variety of business jet, regional jet, and other civil platforms, partially offset by lower shipments to Boeing and Airbus.\nThe outlook for price remains strong with a net 4% increase for Defense and Commercial Aerospace, driven by improved price management.\nTo summarize, as the pandemic continues to significantly impact the global economy, CIRCOR remains committed to delivering long-term shareholder value.\nOur portfolio transformation is largely complete.\nWe've completely exited upstream Oil & Gas, and the new CIRCOR is diversified across geographies, end markets, and product technologies.\nOur portfolio of products has differentiated technology and strong market positions in the niches where they compete.\nAs a result, we're able to raise prices across the portfolio despite the current market conditions.\nWe remain focused on execution.\nThe $45 million cost plan for 2020 is on track.\nOur focus on productivity and cost resulted in a companywide decremental of 19% in the quarter, and the CIRCOR operating system is delivering improved operating performance across most metrics.\nFinally, we continue to take actions that best positioned CIRCOR to take advantage of a market recovery.\nWe remain on track to deliver on our commitment to launching a record of 45 new products this year.\nWe continue to invest in front-end resources and strategic growth initiatives.\nWe're closely collaborating with suppliers and customers to ensure alignment as markets change, and we continue to focus on deleveraging the balance sheet.\nThey've been doing an excellent job working every day to ensure that we continue our momentum and meet our customers' needs.\n",
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"content": "q3 revenue $187 million versus refinitiv ibes estimate of $186.9 million.\nremain on track to achieve $45 million 2020 cost reduction 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: I'm joined today by Scott Buckhout, CIRCOR's president and CEO; and Abhi Khandelwal, the company's chief financial officer.\nThese expectations are subject to known and unknown risks uncertainties and other factors, and actual results could differ materially from those anticipated or implied by today's remarks.\nYou can find a full discussion of these factors in CIRCOR's Form 10-K, 10-Qs and other SEC filings also located on our website.\n2020 was another transformational year for CIRCOR.\nAnd despite the continued challenges presented by COVID-19, our team made significant progress on executing our strategic plan.\nI'm proud of the resilience and efforts of the entire CIRCOR team in navigating such a challenging year while continuing to deliver for our customers and shareholders.\ns we saw throughout the year, our diversified product portfolio across multiple end markets and geographies helped mitigate the impact of a weaker macro environment.\nOur defense business delivered strong results for the year, which mostly offset lower demand for our commercial products.\nOur differentiated technology and market positions enabled us to increase prices across the portfolio.\nWe executed well throughout this year's downturn and exited the year with positive momentum.\nWith the health and safety of our employees as our foundation, we focus on the things we control.\nWe achieved decremental margins of 25% for the year through value-based pricing and difficult but necessary cost actions of $45 million.\nAerospace and defense improved their margins by 290 basis points despite lower volume.\nNotably, aerospace and defense won 20 new programs, including 60 defense and four in commercial.\nWe continue to implement the CIRCOR operating system across the company, resulting in improved operational performance.\nCIRCOR is well positioned to take advantage of an eventual market recovery in 2021 and beyond.\nWith the sale of instrumentation and sampling and distributed valves earlier in the year, our exit from upstream oil and gas is complete.\nWe continue to invest in innovation, launching 49 new products in 2020 versus 33 in 2019.\nWe delivered on our free cash flow commitments throughout the year and ended with strong free cash flow of $20 million in the fourth quarter.\nAnd finally, we reduced our debt by $126 million or 22%.\nI want to highlight some new mission-critical technology we introduced in 2020.\nOn the defense side, our new missile arming switches are designed to operate in more severe environments with respect to temperature, radiation and G-force.\nWe launched self arming switches in support of various missile programs, including hypersonic applications.\nOn the commercial side, we introduced a switch, which activates the aircraft's location transmitter in case of an in-flight emergency.\nIn industrial, we launched a series of new gas pressure reduction systems to help our customers in Marine, Medical and public utility industries.\nThese systems help our customers transport and manage high-pressure industrial gas, LNG and CNG, biomethane fuels and medical oxygen.\nNow, I'd like to provide some financial highlights from the fourth quarter.\nWe booked orders of $168 million in the quarter, which was flat sequentially and down 25% organically.\nSequentially, industrial was up 12% in the quarter.\nA&D had lower orders sequentially, down 21% and due to the timing of large naval program orders that pushed into 2021.\nRevenue in the quarter was $208 million, up 10% sequentially, driven by strong defense deliveries, mainly on U.S. Naval programs and moderate growth across most end markets in industrial.\nAdjusted operating income was $23 million, representing a margin of 11.2%, up 200 basis points from the prior quarter.\nMargin improvement was driven by sequential volume recovery, pricing, cost actions and productivity.\nAs a result of improved operating income, the company delivered $0.66 of adjusted earnings per share.\nFinally, we generated strong free cash flow of $20 million during the fourth quarter, as we exited the year with operational cash flow unencumbered by transformation disbursements.\nWe are providing both comparisons due to the significant impact of COVID-19 on our end markets and year-over-year comparison.\nStarting with industrial on Slide 4.\nIn Q4, industrial segment orders were up 12% sequentially, down 22% organically.\nThe industrial segment saw a sequential recovery in all major end markets, driven by opening economies.\nRevenue in the quarter was $131 million, up 4% from prior quarter and down 13% organically.\nSequential improvement was primarily driven by strength in aftermarket sales across the portfolio.\nWe exited the year with an operating margin of 9%, a sequential improvement of 160 basis points, driven by price increases and cost actions taken throughout the year.\nLower sales volume continued to drive a lower operating margin versus prior year.\nTurning to Slide 5.\nOur aerospace and defense segment booked orders of $47 million in the quarter, down 21% sequentially and down 33% versus prior year.\nBoth declines are primarily driven by timing of large defense program orders and the ongoing impact of COVID-19 on our commercial business.\nWe remain confident in the segment's growth outlook in 2021.\nRevenue in the quarter was $78 million, up 25% from prior quarter.\nStrong defense deliveries mostly offset the COVID-19 impact, on commercial Aerospace, resulting in only 3% lower revenues versus by year.\nFinally, operating margin was 24% in the quarter, roughly flat sequentially and year over year.\nPricing, up 3%, combined with factory and cost actions drove strong margins in line with prior year despite lower revenue.\nMoving to Slide 6.\nFor Q4, the effective tax rate was approximately 14%.\nThe company took a non-cash charge of approximately $15 million to record a valuation allowance against its remaining deferred tax assets in Germany.\nThis non-cash charge is acquired under GAAP accounting rules.\nThis charge does not impact our non-GAAP after tax results for the quarter and is not expected to have an impact on our future non-GAAP after tax results.\nLooking at special items and restructuring charges, we recorded a total pre-tax charge of $13.4 million in the quarter.\nThe acquisition-related amortization and depreciation was a charge of $12 million with the remaining charges associated with restructuring activities in the quarter.\nInterest expense for the quarter was $8.5 million, down $2.3 million compared to last year as a result of lower debt balances.\nOther income was approximately $1 million, primarily driven by pension income.\nFinally, corporate costs were $7.8 million in the quarter.\nTurning to Slide 7.\nAs Scott mentioned previously, our free cash flow was $20 million in the fourth quarter, up 11% compared to 2019.\nFree cash flow was positively impacted by improved operating income and lower working capital, particularly inventory.\nReducing working capital remains one of our top priorities, and we expect further improvement in 2021.\nWe used the proceeds from the sale of our instrumentation and sampling business to reduce our net debt to $443 million, a reduction of $126 million or 22% year over year.\nFree cash flow generated in 2021 will be used to further pay down debt and we continue to target leverage ratio of two to two and a half tiems net debt to adjusted EBITDA.\nNow, I will hand it back over to Scott to provide some color on our end markets.\nLet's start with our industrial outlook on Slide 8.\nAs Abhi mentioned, signs of order recovery were evident in the fourth quarter across most major industrial end markets after hitting the bottom in Q3.\nGeographically, we continue to see growth in China and India, and we started to see signs of recovery in Europe and North America in the quarter.\nDownstream orders were up sequentially, driven by an increase in aftermarket orders, but down significantly versus last year due to a difficult compare.\nWe're expecting Q1 industrial revenue to come in between down 1% and up 4% year over year.\nWe expect to see a normal seasonal dip in revenue sequentially in Q1 versus Q4.\nWe're starting to see improvement in our short-cycle end markets, including machinery manufacturing, chemical processing and wastewater as consumer demand starts to improve.\nWe're also expecting a mid-single-digit increase in aftermarket as global economies open up and consumption increases.\nDownstream oil and gas revenue is expected to be down as refiners continue to manage capex.\nWe're seeing a similar customer capex dynamic across midstream oil and gas, power generation and building construction, but to a lesser degree.\nWe expect these end markets to improve further as the year unfolds.\nPricing is expected to be a benefit of roughly 1%, consistent with prior quarters.\nMoving to aerospace and defense.\naerospace and defense orders in Q4 were down sequentially and versus prior year.\nBoth declines were primarily driven by the timing of large defense program orders and the ongoing impact of COVID-19 on our commercial businesses.\nWe expect order strength across our defense programs to continue through 2021, driven largely by the joint strike fighter and multiple missile and drone programs.\nWe expect a modest improvement in commercial orders as aircraft utilization improves and OEM production rates increased through the year.\nWe remain confident in this segment's growth outlook in 2021.\nRevenue in the first quarter is expected to be down 7% to 12% versus prior year.\ndefense revenue is expected to be down 1% to 5% due to the timing of large defense shipments and lower U.S. defense spares orders leading into the quarter.\nWe anticipate growth of 5% to 10% from our other OEM group, which includes products for drones, missiles and helicopters.\nin the Rafal fighter and jet in Europe.\nCommercial revenue is expected to be down between 35% and 40%, in line with the broader commercial aerospace market.\nOur market position on both Boeing and Airbus aircraft is strong, and we expect revenue to improve throughout the year in line with aircraft utilization and production rates.\nPricing is expected to be a benefit of 1% in the quarter, but in line with 2020 for the full year.\nNow, I'll hand it over to Abhi to discuss our guidance.\nBefore jumping into full-year guidance, I'd like to share a few more expectations for the first quarter.\nIn addition to the revenue guidance that Scott provided, we're expecting incremental margins of 30% to 35% in industrial and decremental margins of 30% to 35% in aerospace and defense.\nDecremental margins in aerospace and defense are slightly higher than our full-year 2020 decrementals due to the expected mix of OEM and aftermarket revenue.\nWe're also planning for corporate cost of $8.5 million, higher than our expected full-year run rate, due to the timing of certain expenses, such as RFPs.\nInterest expense is expected to be roughly $8.5 million in Q1.\nFinally, free cash flow for Q1 will be negative due to seasonality of annual disbursements.\nNow, moving to full-year 2021 guidance.\nWe are expecting organic revenue growth of 0% to 4%, and with aerospace and defense expected to grow at low to mid-single digits and industrial at low single digits.\nWe are planning for a continued slow recovery in commercial Aerospace, where we expect to be better than 2020, but remain significantly lower than pre pandemic levels.\nOur defense business remains healthy as we continue to win new business and deliver on growing U.S. defense programs.\nIn our industrial end markets, we expect to see modest recovery with downstream activity improving in the back half of 2021.\nWe're expecting adjusted earnings per share of $2 to $2.20, a 40% to 54% increase versus 2020.\nThis improvement is driven by top-line growth and improved margins from price increases, structural cost out in 2020 and ongoing productivity.\nFinally, we're planning to deliver free cash flow as a percent of adjusted net income of 85% to 95%.\nWe feel that this guidance reflects what we are seeing in our end markets and the operational improvements that we can control within the four walls of CIRCOR.\nWe're confident in our ability to deliver these results, not only for our shareholders but for our customers, suppliers and employees.\nNow I'll hand back to Scott to wrap up.\nTo summarize, we remain focused on delivering our strategic priorities.\nIn 2021, we're taking actions to further improve our customers' experience and our operational and financial performance.\nWe remain focused on attracting, developing and retaining the best talent while fostering a diverse and inclusive culture.\nWe continue to invest in growth through innovative new products, aftermarket support technology to enhance our customers' experience and regional expansion.\nValue-based pricing continues to be a top priority, leveraging our differentiated technology and our strong market positions in the niches where we compete.\nThe CIRCOR operating system will continue to drive operational improvement and margin expansion.\nAnd by enhancing free cash flow through efficient working capital management, we'll continue to delever the balance sheet.\n",
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"content": "compname reports q4 adjusted earnings per share $0.66.\nq4 adjusted earnings per share $0.66.\nq4 revenue $208 million versus refinitiv ibes estimate of $207.6 million.\nfor 2021, expects organic revenue growth in range of 0 to 4%.\nfor 2021, adjusted earnings per share is expected to be in range of $2.00 to $2.20.\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 Alexis Jones, Lead Principal for Investor Relations.\nIn our remarks today, David and Brian will cover a number of topics, including Cigna's third quarter 2021 financial results, as well as an update on our financial outlook for 2021.\nWe use term labeled adjusted income from operations and adjusted earnings per share on the same basis as our principal measures of financial performance.\nBefore turning the call over to David, I will cover a few items pertaining to our financial results and disclosures.\nRegarding our results, in the third quarter, we recorded an after-tax special item benefit of $35 million or $0.10 per share for integration and transaction related costs.\nAdditionally, please note that when we make prospective comments regarding financial performance, including our full-year 2021 outlook, we will do so on a basis that includes the potential impact of future share repurchases and anticipated 2021 dividend and does not assume any impact from any business combinations or divestitures that may occur after today, such as our recently announced planned divestiture of life accident and supplemental benefits businesses outside of the U.S., which we expect to close in 2022.\nSo, let's jump in.\nDuring the quarter, we delivered adjusted revenue of $44 billion and adjusted earnings per share of $5.73 per share, all while continuing to reinvest back in our business to fund growth, expansion and ongoing innovation, and we continue to return significant value to our shareholders.\nThese results reinforce we are delivering for our customers, our patients, clients provider partners, as well as for you, our shareholders.\nWith our high performing health service portfolio and sharp focus on executing our strategy, we are confident in our ability to continue driving growth and are again raising our full-year 2001 guidance for adjusted earnings per share and revenue.\nOur performance is strong considering the ongoing impact of the pandemic on medical costs, as well as the higher claims we've experienced among the special enrollment period or SEP customers within our individual business.\nAs it relates to our MCR in the quarter, our commercial business did improve from the second quarter to the third quarter and our Medicare Advantage business also improved sequentially.\nWe continue to execute a series of actions in 2021 and 2022 to further improve our MCR, and Brian will walk through this in more detail in a few moments.\nSeparately, in early October we also announced an agreement with Chubb to sell our life, accident and supplemental benefits business in our International Markets platform in seven countries for $5.75 billion.\nWe expect to realize about $5.4 billion in net after-tax proceeds and complete the transaction in 2022 following regulatory approvals.\nGuided by our strategy and similar to our 2020 divestiture of our Group Insurance business, this transaction unlocks the value of a best-in-class leading asset, while also enabling us to even more sharply focus our business on health and well-being services.\nSo overall, our performance for the quarter reflects our clear strategy and strong execution and delivering attractive results and importantly, our ongoing commitment to prioritize and support the evolving health and well-being needs of those we serve.\nNow, I'll walk through some additional detail for our Evernorth in U.S. Medical businesses.\nA year ago, we launched Evernorth to the marketplace as our health service platform, focused on servicing health plans, employers, government organizations and healthcare providers.\nSince that time, Evernorth has established itself with unique partnerships and innovative services that are resonating with multiple buyer groups.\nOur Evernorth pharmacy and our medical offerings through our U.S. medical platform are the two primary gateways through which most of our clients and customers form their base relationship with us.\nWrapping around these two exceptionally strong platforms are our additional suites of innovative health services Evernorth, including benefits management, care solutions and intelligent solutions.\nThese help us to expand and deepen existing relationships.\nIn the third quarter, Evernorth retained and expanded our relationship with the Department of Defense TRICARE pharmacy program and we did seven-year contracts.\nIt's our privilege to serve almost 10 million active duty service members, retirees and their families.\nEvernorth will continue supporting TRICARE pharmacy operations including specialty pharmacy services, military pharmacy claims and retail network pharmacies.\nThe new contract also allows for expansion of specialty and care coordination services through 2029.\nAs we look to the balance of the year and into 2022, Evernorth will continue to grow revenue and earnings.\nTurning to our U.S. medical platform.\nIn U.S. commercial, our teams are leveraging and deploying the innovative solutions from Evernorth to expand our service offerings and address the evolving needs of our clients and customers.\nFor example, in our U.S. commercial platform, we are leveraging Evernorth and the live capabilities to expand virtual care options for our customers through their employers, with primary, urgent, behavioral and dermatology care as part of these value-based arrangements during virtual visits and the live physicians are leveraging our Evernorth Intelligence capabilities, enabling them to provide more connected and coordinated experience, and we continue to expand our capabilities with MDLIVE as we recently launched a virtual first health plan for employers.\nAnother great example of Evernorth in U.S. commercial partnering to bring more value to our health plan clients is a new arrangement we have with University of Pittsburgh Medical Center Health plan.\nWe will make in network care available to UPMC customers who live, work or travel outside the network service area.\nUPMC has been an Evernorth pharmacy client for 16 years and this agreement illustrates how we are collaborating across our enterprise to deliver greater affordability and differentiated value for health plan clients.\nWe are pleased how the market continues to recognize the value we're delivering through our broad suite of solutions and as such, we continue to grow through both our U.S. commercial and Evernorth platforms.\nWithin Medicare Advantage, consistent with our strategy, we continue to grow in our existing markets and are expanding into new geographies.\nOur progress is further supported by our overall value of our offerings.\nFor 2022 calendar year, 89% of our Medicare Advantage customers will be in four star or greater plans nationally.\nThis is the highest level we've ever achieved and it marks the fifth year in a row we've improved our STARS performance.\nAnd in our individual and family plan business, we've driven strong growth in this year, increasing customers by 47% through the third quarter.\nA substantial portion of this growth did come from the extended special enrollment period.\nAnd as I previously noted, some of the MCR impact in the third quarter was driven by the medical costs among those we added during the outpaced SEP growth.\nWe do expect this will moderate in 2022.\nWe are positioning ourselves to build on this momentum in the individual family plan business by expanding our addressable markets, again as we enter in three new states and 93 new counties in 2022.\nThese new markets offer the potential to reach an additional 1.5 million customers.\nThe continued strength of our results and the growth we are generating through the execution of our strategy gives us confidence we will deliver against our commitments in 2021.\nWe will deliver earnings per share in line with our long-term targets and revenue growth well above our long-term targets for yet another year.\nWe will also deliver earnings per share within our long-term target range in 2022.\nSpecifically for 2021, we are committed to delivering our increased guidance for full-year adjusted earnings per share of at least $20.35.\nFor full year 2021, we remain on track for generating at least $7.5 billion of cash flow from operations and we expect to return more than $7 billion to shareholders in 2021 through dividends and share repurchase.\nLooking into 2022, we expect to grow earnings per share by at least 10% off of our increased 2021 guidance of at least $20.35 per share.\nWe anticipate a number of tailwinds, including core growth in our business and additional contribution from margin expansion in our U.S. medical business as we drive pricing actions, execute affordability and efficiency initiatives and benefit from the return of Medicare risk adjustment revenue to more normalized levels.\nWe're also expecting year-over-year headwind as we plan for net investment income to be more in line with historical levels.\nAnd of course, the rate and pace of ongoing strategic investments will vary from year to year.\nIn short, 2022 will be another strong year for Cigna.\nNow to briefly summarize.\nAs we demonstrated through the quarter and throughout 2021, we are delivering for our customers, patients, clients and provider partners as they experience the ongoing challenges of the pandemic.\nWe are also taking significant value-enhancing actions such as divesting a portion of our international business, returning substantial amounts of capital to our shareholders and continuing to strategically invest in our capabilities and strategic partnerships, all of which position us to continue to advance our long-term growth agenda and continue to deliver shareholder value.\nToday, I will review key aspects of Cigna's third quarter results, including the ongoing impact of COVID-19 on our business and I will discuss our updated outlook for the full year.\nDuring the quarter, total medical costs were higher than our expectations within our U.S. Medical segment, driven largely by the impact of the Delta variant in our U.S. commercial business and increased medical costs for special enrollment period customers in our U.S. individual business.\nImportantly, I would remind you that approximately 80% of our revenues are from service-based businesses that are not significantly exposed to medical cost fluctuations.\nOur balanced portfolio and multiple levers for value creation resulted in Cigna's overall revenue and earnings exceeding our third quarter expectations.\nThis strong third quarter performance coupled with capital deployment activities led to an increased outlook for full year 2021, which I will discuss shortly.\nNow turning to enterprise results.\nKey consolidated financial highlights in third quarter 2021 include adjusted revenue growth of 9% to $44.3 billion, adjusted earnings growth of 20% to $1.9 billion after tax, and adjusted earnings-per-share growth of 30% to $5.73.\nResults in the third quarter reflect strong top and bottom line growth with contributions across all of our businesses with overall performance above our expectations.\nI'll now discuss our segment level results and will then provide an update on the details of our outlook as well as our capital positioning.\nRegarding our segments, I'll first comment on Evernorth.\nThird quarter 2021 adjusted revenues grew 13% to $33.6 billion.\nAdjusted pharmacy script volume increased 8% to 411 million scripts and adjusted pre-tax earnings grew 7% to $1.5 billion compared to third quarter 2020.\nEvernorth's strong results in the quarter were driven by organic growth, including strong volumes in retail and specialty pharmacy along with ongoing efforts to improve affordability for the benefit of our clients, customers and patients and deepening of existing relationships, partially offset by significant strategic investments to support ongoing growth, including our virtual care platform and technology capabilities.\nOverall, Evernorth continues to create differentiated value for clients and customers, while driving overall revenue and earnings growth that exceeded our original expectations through the first three quarters of 2021.\nTurning to U.S. Medical.\nThird quarter adjusted revenues were $10.5 billion and adjusted pre-tax earnings were approximately $1 billion.\nOverall, our U.S. Medical earnings exceeded our expectations during the third quarter, reflecting the impact of favorable net investment income and increased specialty contributions, partially offset by higher claim costs due to the net impact of COVID-19 and increased medical costs for special enrollment period customers in our individual business.\nThe net effect of these claim cost impacts produced a medical care ratio of 84.4% in the third quarter.\nLooking ahead, we are actively managing overall medical costs and our MCR with the range of actions, including continuing to leverage our insights from our strong data and analytics capabilities to address key drivers and identify opportunities such as guiding customers to more effective and efficient sites of care, continued disciplined in our pricing and rate actions and we're also continuing to promote preventative care and access to behavioral services to provide meaningful support to patients and moderate overall medical costs over the longer-term.\nTurning to membership, w ended the quarter with 17 million total medical customers, an increase of approximately 368,000 customers year-to-date.\nIn U.S. Medical, the year-to-date customer growth was driven by net growth in select and new markets within U.S. commercial and continued organic growth in Medicare Advantage and Individual within U.S. government.\nIn our international markets business, third quarter adjusted revenues were $1.6 billion and adjusted pre-tax earnings were $250 million.\nThese results were in line with our expectations.\nCorporate and Other operations delivered a third quarter adjusted loss of $275 million.\nOverall, Cigna's broad portfolio of services continues to serve the needs of our customers and clients.\nCigna remains committed to delivering value for all of our stakeholders, leveraging our well-positioned businesses.\nNow turning to our updated outlook for full year 2021.\nWe are raising our adjusted earnings per share guidance for full-year 2021 to at least $20.35 per share, reflecting the strength of the quarter, the favorable impact of our year-to-date share repurchase and acknowledgment of the ongoing fluidity of the broader environment.\nThis represents earnings per share growth of at least 10% from 2020, consistent with our long-term earnings per share growth range of 10% to 13%, even with the ongoing challenges associated with COVID-19 and while having significantly increased our dividend in 2021.\nAs we look forward, it is clear that COVID-19 will continue to have an impact in the fourth quarter and in 2022.\nAnd as time progresses, COVID-related impacts and the ongoing performance of the business are becoming more intertwined.\nTherefore, we no longer believe it constructive to continue to quantify the impact of COVID-19.\nThese dynamics are fully contemplated in our 2021 expectation for adjusted earnings per share of at least $20.35 and our 2022 expectation for earnings per share growth of at least 10% off this 2021 guidance.\nWe now expect full-year 2021 consolidated adjusted revenues of at least one $172 billion, representing growth of at least 11% from 2020, when adjusting for the divestiture of our Group Disability and Life business.\nI would note this revenue growth rate significantly exceeds our projected long-term average annual growth goal of 6% to 8% and represents a third consecutive year of significant revenue outperformance since our combination with Express Scripts in late 2018.\nI will now discuss our 2021 outlook for our segments.\nFor Evernorth, we continue to expect full-year 2021 adjusted earnings of at least $5.8 billion, representing growth of at least 8% over 2020, reflecting the significant value we create for our customers and clients.\nFor U.S. Medical, we continue to expect full-year 2021 adjusted earnings of at least $3.5 billion.\nUnderlying this updated outlook, we now expect the 2021 medical care ratio to be in the range of 84% to 84.5%, which includes our expectations for elevated medical costs for Individual special enrollment period customers.\nRegarding total medical customers, we continue to expect 2021 growth of at least 350,000 customers.\nNow, moving to our 2021 capital management position and outlook.\nWe expect our businesses to continue to drive strong cash flows and returns on capital even as we continue reinvesting to support long-term growth and innovation.\nFor full-year 2021, we continue to expect at least $7.5 billion of cash flow from operations, reflecting the strong capital efficiency of our well-performing businesses.\nYear-to-date, as of November 3, 2021, we have repurchased 26.5 million shares for $6.3 billion and we now expect full-year 2021 weighted average shares of approximately 342 million shares.\nThis includes the impact of the $2 billion accelerated share repurchase that we announced in the third quarter.\nOn October 27th, we declared a $1 per share dividend payable on December 22nd to shareholders of record as of December 7th.\nOur balance sheet and cash flow outlook remains, benefiting from our highly efficient service-based orientation that drives strategic flexibility, strong margins and attractive returns on capital.\nSo now to recap.\nResults in the third quarter reflect strong top and bottom line growth with solid contributions across our businesses.\nCigna has shown the ability to deliver value through dynamic environments with our breadth of businesses and multiple earnings levers we continue to support our customers, clients and coworkers and deliver on our financial commitments.\nWe now expect 2021 full-year adjusted earnings of at least $20.35 per share, representing growth of at least 10% from 2020 consistent with our long-term earnings per share growth rate range of 10% to 13%, and we expect to grow 2022 adjusted earnings per share at least 10% off our raised 2021 guidance.\n",
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"content": "cigna sees fy 2021 adjusted rev to be at least $172 bln.\nqtrly earnings per share $4.80; qtrly adjusted earnings per share $5.73.\nsees fy 2021 adjusted revenues to be at least $172 billion; sees fy 2021 consolidated adjusted income from operations at least $6.96 billion.\nadjusted income from operations for 2021 is now projected to be at least $20.35 per share.\nmedical care ratio of 84.4% for q3 2021 compares to 82.6% for q3 2020.\nsees fy 2021 medical care ratio of 84.0% to 84.5%.\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: I'm Ralph Giacobbe, senior vice president of investor relations.\nIn our remarks today, David and Brian will cover a number of topics, including Cigna's fourth quarter and full year 2021 financial results, as well as our financial outlook for 2022.\nWe use the term labeled adjusted income from operations and adjusted earnings per share on the same basis as our principal measures of financial performance.\nBefore turning the call over to David, I will cover a few items pertaining to our financial results and disclosures.\nFirst, as previously disclosed with our Form 8-K filing and investor call on January 24, we announced changes in our segment reporting effective for the fourth quarter of 2021.\nThese changes were made to align with the company's organizational structure as a result of the pending divestiture of Cigna's international life accident and supplemental benefits businesses in seven Asia Pacific markets.\nEffective in the fourth quarter, Cigna's results will be reported through the following three groups: Evernorth, Cigna Healthcare, and corporate and other operations.\nThe international health business to be retained by Cigna will join our U.S. commercial and U.S. government offerings in a new segment called Cigna Healthcare.\nThis segment replaces the prior U.S. medical segment.\nSecond, regarding our results.\nIn the fourth quarter, we recorded an after-tax special item charge of $119 million or $0.36 per share related to a strategic plan to further leverage the company's ongoing growth to drive operational efficiency through enhancements to organizational structure and increased use of automation and shared services.\nWe also recorded an after-tax special item charge of $70 million or $0.21 per share for integration and transaction-related costs.\nAdditionally, please note that when we make prospective comments regarding financial performance, including our full year 2022 outlook, we will do so on a basis that includes the potential impact of future share repurchases and anticipated 2022 dividends.\nAlso, our full year 2022 outlook assumes that the pending divestiture of Cigna's international life accident and supplemental benefits businesses will close in the second quarter of 2022, but does not assume any impact from other business combinations or divestitures that may occur after today.\nFinally, I would like to announce our intention to host an Investor Day in June where we will discuss our long-term strategic growth and value creation story.\nWe look forward to sharing more details in the coming weeks.\nAs we step into 2022, our clients, customers, and patients continue to face a rapidly changing landscape with new COVID variants, changing testing and treatment protocols, and pressures on the global economy.\nThroughout these challenges, we remain focused on addressing and balancing the evolving needs of all of our stakeholders.\nAs a result, our 70,000-plus colleagues around the world continue to deliver differentiated value for those we serve and also continue to grow our businesses.\nToday, I'll share a perspective around our 2021 performance and the sustained growth opportunities we see for our organization in the year ahead.\nAnd Brian will provide additional details about our 2021 financial results and our 2022 outlook.\nWith that, let's get started.\nIn 2021, we grew full-year adjusted revenues to $174 billion, a second consecutive year of growth above our long-term target.\nWe delivered full-year adjusted earnings-per-share growth of 11% and to $20.47, and we returned over $9 billion to shareholders in dividends and share repurchases.\nAdditionally, we continue to invest in our capabilities to ensure we are positioned for sustained growth in 2022 and beyond.\nOur growth is and will continue to be fueled by our two high-performing platforms: Evernorth, our health services business, including pharmacy, care, benefits, and intelligence services; and Cigna Healthcare, which includes our portfolio of U.S. commercial, U.S. government, and international health businesses.\nOur Evernorth and Cigna Healthcare platforms complement each other through the breadth of their capabilities and the ability to serve multiple buyer groups.\nHere, we typically lead with either a medical or pharmacy solution and then we build on those relationships by innovating and delivering new services.\nWe have a proven track record with this approach, a diverse, high-performing portfolio of solutions, and a sustained commitment to continued innovation to expand that portfolio.\nAdditionally, we are positioned so that accelerated growth in one area can compensate for temporary pressure in another business within our portfolio.\nWe see this as extremely valuable in a dynamic environment.\nRelative to our 2021 performance, it was a very strong year for Evernorth.\nWe grew adjusted revenues by 14% in 2021 as Evernorth's corporate clients, health plans, governmental agencies, and healthcare delivery system partners increasingly recognized the value of our health services, including in our specialty pharmacy business, which I'll discuss in more detail in just a moment; in our virtual health capabilities, which have been expanded through MDLIVE to include urgent and dermatology care as well as behavioral health services; in our core pharmacy services portfolio, which continues to generate outstanding results for our clients; and we are further broadening our reach through deeper and new partnerships.\ngovernment, and international health businesses.\nAs we previously discussed, we also experienced elevated medical costs.\nWe had higher claims costs in our commercial insured and stop-loss businesses and continued higher claims from our special enrollment Perry customers within the individual business.\nThese included the impact of elevated COVID costs for testing treatment of vaccines.\nThe elevated trend continued throughout the year.\nAs a result, our medical care ratio for Cigna Healthcare was 84% for full year 2021.\nAs Brian will discuss in further detail, we took targeted pricing and affordability actions earlier in 2021 for 2022 impact, as we continue to prioritize margin expansion for 2022.\nAs I highlighted earlier, the breadth and complementary nature of our portfolio enabled us to exceed our revenue and earnings per share outlook and return over $9 billion of capital to our shareholders.\nLooking forward to 2022, we expect to continue to capitalize on emerging growth opportunities and achieve sustained attractive performance.\nWe see additional opportunities to drive growth by leveraging Evernorth capabilities to respond to three forces that we believe are fundamentally reshaping the future of healthcare.\nThey are pharmacological innovation, the increased recognition of the link between mental and physical health; and third, the growing trend toward alternative sites of care.\nI'll start by highlighting how Evernorth will lead the way to capitalize on the first trend, pharmacological innovation.\nNew drugs represent one of the most promising areas for medical innovation in the coming years.\nAnd we're seeing good dramatic growth in specialty pharmaceuticals, gene therapies, and vaccines.\nThese potentially life-saving and life-changing advances also bring intensifying pressures on affordability.\nThis creates significant opportunity for Evernorth to provide customers, patients, and clients with the most innovative new therapies in ways that are accessible, affordable, and predictable.\nBy 2025, for example, 66 biologic drugs currently in the market will have the patents expire, opening the door for increased biosimilar competition and an increasing opportunity to decrease healthcare spending by an estimated $100 billion.\nImportantly, this trend is already unfolding in 2022 and will accelerate further in 2023.\nWe are positioned to lead and fully intend to capture a large portion of those savings for the benefit of our customers, patients and clients by combining and coordinating capabilities that include our Accredo capability, which provides differentiated specialty pharmacy care for a number of specific conditions.\nI'd also highlight that today, specialty pharmacy already drives only one-third of our North revenue, and Accredo is one of the fastest-growing parts of our health service portfolio.\nAdditionally, leveraging Express Scripts, which draws upon its expertise in delivering improved affordability, leveraging a broad network, supply chain expertise as well as clinical and service capabilities.\nManaging biologics and specialty drugs is also a priority focus for our Cigna Healthcare business.\nLast year, we launched an innovative program to leverage biosimilars in the medical benefit that included incentives that improve access for integrated clients and customers.\nThis illustrates just one way we will continue to leverage Evernorth's capabilities to drive greater affordability and value for our Cigna Healthcare clients and customers.\nEvernorth will also continue to grow from the significant demand for more mental health services as well as the rapidly changing access to care models.\nFor example, Evernorth is continuing to expand our virtual care services by leveraging our MDLIVE platform as well as expanding our behavioral care network.\nWe know how important it is for both patients as well as clients.\nOur Evernorth research reinforces that total healthcare costs decrease when people who are diagnosed with behavioral conditions receive coordinated, sustained treatment.\nFor Cigna Healthcare in 2022, we expect to drive customer growth in each of our U.S. commercial market segments and grow earnings as we continue executing on our affordability and pricing actions throughout 2022.\nAdditionally, Cigna Healthcare will continue to partner and leverage our Evernorth innovations.\nFor example, we're continuing to expand digital experiences to help our customers connect with the highest performing and most affordable medical care.\nOur recent approach we developed for patients diagnosed with orthopedic and musculoskeletal conditions provide highly personalized and actionable information to guide their choices and support improved healthcare outcomes and affordability.\nIn the U.S. government business, as we've noted previously, we are operating in a more competitive environment stepping into 2022.\ngovernment business for 2022.\nFor Medicare Advantage, we will start the year with flat membership.\nLooking forward to 2023, we are confident in our position to accelerate growth further, as our customer satisfaction metrics are high, our Star's ratings are very strong, and we steadily expanded our addressable market by entering new geographies.\nIn our individual and family plan business, as noted previously, 2021 customers grew meaningfully in part due to the extended special enrollment period.\nWe expect a decline in customers in 2022, in part driven by our product and price positioning that will adjust for the special enrollment surge we saw in 2021.\nWe do continue to view this as an attractive long-term opportunity.\nAnd to support that growth, we continue to enter new markets.\nFor 2022, we entered three new states and 93 new counties.\nWith these markets, for example, we have the ability to reach an additional 1.5 million additional customers.\nIn international health, we are sharpening our focus, and we'll continue developing our services for the globally mobile as well as go deeper into domestic health and health services.\nOne of the key ways we will do this is with innovative partnerships such as Honeysuckle Health, an analytics-driven health service company establishing our joint venture with the nib Group in Australia.\nNow taken as a whole, 2022 will be another year of attractive growth for our company.\nOur earnings per share outlook of at least $22.40 and the increase of our quarterly dividend by 12% reinforces the sustained growth and strength of our businesses.\nNow before I wrap up, I want to reinforce a key aspect of our sustained performance is our positioning strategically to further expand our reach in addressable markets over time.\nHere, we will leverage organic partnerships and targeted inorganic opportunities to further strengthen our proven growth platforms.\nWe see three areas of continued focus here.\nFirst, in U.S. government, we will seek additional growth opportunities and our ability to win in these markets is further enhanced by our current and expanding Evernorth service capabilities.\nSecond, we will further expand our Evernorth service portfolio.\nThis includes, for example, our Evernorth care capabilities, including virtual home and behavioral services.\nAnd third, in international health, our decision to divest our life accident supplemental benefits business in seven markets reinforces our discipline to focus on the health portion of our portfolio.\nNow to wrap up.\nLooking back at 2021, our business performed in a dynamic environment.\nWe delivered adjusted earnings per share of $20.47 and returned over $9 billion of capital to our shareholders in dividends and share repurchase.\n2022 will be another year of growth across our business, and we will continue to invest in innovation to position us for sustained long-term growth.\nToday, I'll review key aspects of Cigna's fourth quarter 2021 results, and I'll provide our outlook for 2022.\nKey consolidated financial highlights for full year 2021 include adjusted revenue growth of 9% to $174 billion or growth of 12% when adjusting for the sale of the group disability and life business.\nAdjusted earnings of $7 billion after tax and adjusted earnings-per-share growth of 11% to $20.47.\nWe delivered these results despite an elevated medical care ratio in the quarter partly driven by COVID-19-related claims.\nOur enterprise revenue and earnings per share results were slightly better than our expectations, reflecting the resilience and breadth of our portfolio, with particularly strong performance in Evernorth.\nRegarding our segments, I'll first comment on Evernorth.\nFourth quarter 2021 adjusted revenues grew 15% to $35.1 billion, while adjusted pre-tax earnings grew to $1.6 billion.\nEvernorth's strong results in the quarter were driven by organic growth, including strong volumes in specialty pharmacy and retail, along with ongoing efforts to improve affordability and deepening of existing relationships.\nIn the quarter, we also continued to increase the level of strategic investments to support ongoing growth of the Evernorth portfolio, such as our Accredo specialty pharmacy, our virtual care platform, and our technology, including digital capabilities.\nOverall, Evernorth delivered a strong year, focusing on driving value for clients and customers, while achieving strong revenue and earnings growth above its long-term growth targets.\nmedical segment plus our retained international health business.\nOverall, fourth-quarter adjusted revenues were $11.2 billion, adjusted pre-tax earnings were $472 million and the medical care ratio was 87%.\nDuring the fourth quarter, we experienced elevated medical costs, driven in large part by dynamics related to COVID, including higher testing, treatment, and vaccine costs, specifically the higher-than-expected fourth-quarter costs are attributable to three primary areas: higher stop-loss claims, particularly in policies with lower attachment points that were triggered by the cumulative impact of COVID and non-COVID costs throughout the year; continued pressure on our individual business, particularly the special enrollment period customers who were added in mid-2021; and higher claim costs in our commercial insured book.\nThe elevated medical costs were partly offset by better-than-expected net investment income and fee-based specialty contributions, neither of which are reflected in the medical care ratio metric.\nFor full year 2021, we finished with the medical care ratio of 84%.\nThe unfavorable fourth quarter medical costs informed and sharpened our 2022 assumptions.\nWe now expect full year 2022 medical costs to run above the corresponding 2022 baseline at a relative level that is consistent with full year 2021.\nThis 2022 medical cost outlook is now higher than our previous expectations.\nIn specific to stop-loss, we assume the pressure experienced in the fourth quarter will persist in 2022, and we will take appropriate future pricing action as this book of business renews throughout the year.\nHelping to offset these pressures, as we step into 2022, our targeted pricing actions we've taken in our U.S. commercial business as we saw claim costs emerge in 2021, higher U.S. commercial enrollment and retention than previously expected in our fee-based business and incremental affordability actions, which I'll elaborate on in just a few moments.\nWe ended the year with 17.1 million total medical customers, an increase of approximately 430,000 customers for the full year.\ngovernment and international health.\nOverall, Cigna Healthcare supported and delivered for our customers, clients, and partners during a challenging year and is well-positioned to both grow membership and expand margins in 2022.\nTurning to corporate and other operations.\nThe fourth-quarter adjusted loss was $115 million and now includes positive earnings contributions from our international life accident and supplemental benefits businesses held-for-sale pending divestiture.\nAs Ralph noted, during the fourth quarter, we reported a special item charge of $119 million after tax related to actions to improve our organizational efficiency.\nThese actions will capitalize on our scale and the progress we have made through automation, increased use of digital tools, and continued innovation to better enable us to grow and expand in this dynamic marketplace.\nOverall, Cigna's 2021 results reflect our balanced portfolio and our commitment to accretive capital deployment to augment our organic growth.\nAs we turn to 2022, our affordability initiatives, pricing actions, and focus on operating efficiencies will drive income growth and margin expansion in Cigna Healthcare.\nThis performance coupled with continued growth in Evernorth and accretive capital deployment, will drive attractive earnings per share growth.\nFor the full year 2022 outlook, I'd like to first remind you that our outlook assumes the divestiture of our international life accident and supplemental benefits businesses will close in the second quarter of this year.\nIn total for the company, we expect consolidated adjusted revenues of at least $177 billion, representing growth of approximately 4%, excluding the impact from previously announced divestitures.\nWe expect full-year consolidated adjusted income from operations to be at least $6.95 billion or at least $22.40 per share, consistent with our prior earnings per share commentary.\nWe project an expense ratio in the range of 6.9% to 7.3%, further improving upon our operational efficiency and ensuring continued affordable solutions for our clients and customers.\nAnd we expect a consolidated adjusted tax rate in the range of 22% to 22.5%.\nI'll now discuss our 2022 outlook for our segments.\nFor Evernorth, we expect full year 2022 adjusted earnings of approximately $6.1 billion.\nThis represents growth of about 5% over 2021, within our targeted long-term income growth range, reflecting strong growth in Accredo specialty pharmacy, all while we continue to increase investments in order to drive new innovative solutions to the market.\nFor Cigna Healthcare, we expect full year 2022 adjusted earnings of approximately $3.9 billion.\nThis outlook reflects the strength of our value proposition and focused execution in our business, driven by organic customer growth and disciplined pricing in order to expand margin.\nWithin our U.S. commercial book, organic customer growth is driven by national, middle market and select market segments.\nWe expect Medicare Advantage customers to be relatively flat compared to 2021, reflecting the competitive backdrop.\nAnd as David shared, we expect a decrease in our individual customers.\nWe expect the 2022 medical care ratio to be in the range of 82% to 83.5%.\nAs I noted earlier, this outlook assumes total medical costs will be above baseline in 2022.\nImportantly, we are actively managing overall medical costs with a range of affordability actions, including identifying opportunities such as guiding customers to more effective and efficient sites of care.\nFor example, we focused our Evercore subsidiary on an incorporating site of care review to our existing processes.\nThese improvements encourage the use of non-hospital settings, which can substantially reduce cost for customers while increasing patient satisfaction.\nThis action has contributed to results within our commercial book of business, where we are now seeing fewer than 20% of all knee and hip replacements occur in an inpatient hospital setting, down from over 75% in 2019.\nWe are also continuing to promote preventive care, the targeted use of virtual care through our MDLIVE subsidiary, and access to behavioral services to provide meaningful support to patients and moderate overall medical costs over the longer term.\nThrough these affordability initiatives and our disciplined pricing actions, we expect to expand margins in 2022, while growing our medical customer base.\nNow moving to our capital management position and outlook.\nWe expect our businesses to continue to drive strong cash flows and returns on capital, even as we increase strategic reinvestment to support long-term growth and innovation.\nIn 2021, we finished the year with $7.2 billion of cash flow from operations.\nAdditionally, we returned over $9 billion to shareholders via dividends and share repurchase in 2021, a significant increase from 2020.\nAnd now framing our capital outlook for 2022.\nWe expect at least $8.25 billion of cash flow from operations, up more than $1 billion from 2021, reflecting the strong capital efficiency of our well-performing business.\nThis positions us well to continue creating value through accretive capital deployment in line with our strategy and priorities.\nWe expect to deploy approximately $1.25 billion to capital expenditures, an increase from our 2021 capex levels.\nThe investments will be heavily focused on technology to drive future growth.\nWe expect to deploy approximately $1.4 billion to shareholder dividends, reflecting our meaningful quarterly dividend of $1.12 per share, a 12% increase on a per-share basis.\nAnd we expect to use the proceeds from the divestiture of our international life accident and supplemental benefits businesses, primarily for share repurchase.\nOur guidance assumes full year 2022 weighted average shares to be in the range of 308 million to 312 million shares.\nYear to date, as of February 2, 2022, we have repurchased 2.5 million shares for $581 million.\nOur balance sheet and cash flow outlook remains strong, benefiting from our highly efficient service-based orientation that drives strategic flexibility, strong margins and attractive returns on capital.\nSo now to recap, our full year 2021 consolidated results reflect strong contributions from our focused growth platforms, led by Evernorth.\nOur 2022 outlook reflects meaningful contributions from each of our two largest segments, Evernorth and Cigna Healthcare, along with accretive capital deployment.\nWe are confident in our ability to deliver our 2022 full-year adjusted earnings of at least $22.40 per share, consistent with our prior earnings per share commentary.\nFinally, as Ralph noted, we are looking forward to speaking with you in more detail at our upcoming Investor Day in June.\n",
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"content": "adjusted income from operations is projected to be at least $6.95 billion in 2022, or at least $22.40 per share.\nsees 2022 adjusted revenues at least $177 billion.\nsees 2022 medical care ratio 82.0% to 83.5%.\nqtrly special items include an after-tax charge of $119 million, or $0.36 per share, related to a strategic plan.\nboard of directors declared a 12% increase in the quarterly dividend rate, to $1.12 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: Going right into our results.\nOur first-quarter adjusted EBITDA of $513 million represented a 79% increase over last quarter, reflecting our first full quarter of results from the former AM USA assets, as well as stronger steel pricing, offset by reduced third-party pellet sales due to the annual maintenance of the Great Lake flocks.\nIn the Steelmaking segment, we sold 4.1 million net tons of steel products, which included 28% hot rolled, 18% cold-rolled, and 33% coated, with the remaining 21% consisting of stainless, electrical, plate, slab, and rail.\nThis mix is generally in line with what we expect to see going forward.\nOur aggregate average selling price of $900 per ton in Q1 is certainly the low point for the year in our forecast, and is lower than our Q4 2020 average, solely because of the different mix associated with the former AM USA plants.\nOn the cost side, our performance came in as expected.\nRelative to last year, we are seeing decreases in costs for coke and coal, as well as benefits from decreasing scrap use and higher productivity from using our HBI products in-house.\nThis has been offset by higher prices for scrap, alloys, and natural gas.\nWe also saw higher labor costs due to increased profit sharing.\nDD&A was $217 million for the quarter, and we expect about $840 million on a full-year basis now that purchase price accounting has been further refined.\nAn important moving piece this year in our cost structure will be iron ore costs.\nWe certainly benefit on the former AM USA side from transferring pellets at cost.\nBut during the first and second quarters, we are working through the pellet inventory previously purchased from legacy Cleveland-Cliffs.\nThese pellets were purchased at a margin prior to the acquisition.\nAnd therefore, the higher cost runs through our income statement in 2021, and the resulting impact is not included in the add-back for inventory step-up.\nThis short-term anomaly had a negative impact on our first quarter of approximately $50 million and will be a $40 million headwind in Q2.\nAfter that, the impact will be negligible, creating nearly a $100 million EBITDA tailwind going forward in comparison to the first half of 2021.\nWe experienced the same anomaly in 2020 as a result of the AK acquisition.\nAs for synergies, we have already identified and set in motion $100 million in cost synergies from the AM USA acquisition, some of which will take effect later this year.\nWe are well-positioned to reach our target of $150 million of annual run-rate savings by the end of this year for a total of $310 million from the two combined acquisitions.\nAs far as cash flow, Q1 contains several previously discussed one-time items that will not recur going forward.\nAs was contemplated in the acquisition of AM USA, we had a significant investment in working capital of nearly $650 million during the quarter, due, first, to the completion of the unwind of the ArcelorMittal AR factoring agreement, as well as other acquisition-related cash impacts.\nWe are now completely done with this, and receivables have been rebuilt.\nSecond, we saw a working capital build related to receivables, corresponding to the rising steel price environment.\nAlso, we made our deferred pension contribution related to the CARES Act of $118 million in January.\nWith the passage of the most recent stimulus bill and the extended amortization feature, future cash pension contributions will be reduced by an average of $40 million per year over the next seven years.\nFor the remaining three quarters of this year, we will be generating record levels of free cash flow.\nIn future years, we expect certain cash outflow items to be lower than in 2021.\nSustaining capex will be approximately $525 million annually.\nInterest expense will be lower due to reduced debt.\nAnd pension contributions will also be lower without deferral payments and with the new stimulus benefit.\nIn addition, working capital impacts will likely revert to neutral over time, unlike the large build we project this year.\nUpon releasing our Q4 earnings, we guided to a substantial EBITDA improvement from Q1 to Q2.\nAnd by the end of March, we had enough pricing visibility to disclose a $1.2 billion adjusted EBITDA guide for Q2.\nThe increase from the first quarter is driven primarily by pricing, offset by higher incentive compensation and profit-sharing and higher raw material pricing for scrap and alloys.\nOn the liquidity side, we currently have $200 million in cash and $1.6 billion of availability under our current credit facility.\nOur ABL debt balance is currently $1.6 billion, and we expect to have this paid off by the end of the year.\nOur pay down of this instrument will come penalty-free, and every dollar that has reduced in ABL debt will be added to our liquidity.\nIn closing, we find ourselves well-positioned to take advantage of a healthy steel market and also take care of a significant portion of our debt balance in very short order.\nBased on what we are seeing in the market, we believe our estimates supporting $4 billion of adjusted EBITDA for the year are conservative relative to today's forward curve.\nAnd it was an immensely successful quarter for our integration, culture change, and clearly, our profitability.\nOur attitude toward commercial and steel pricing is the main reason behind the massive numbers we are showing for the quarter and guiding for the balance of the year, including $513 million of EBITDA in Q1, $1.2 billion EBITDA next quarter, and $4 billion EBITDA for 2021.\nThe steel industry is capital-intensive and return on invested capital is necessary.\nIf we lose track of that, we would not be able to address issues like equipment reliability, workplace safety, or the environment.\nWe are not greedy.\nThat's why steel prices are where they are and that will continue going forward.\nRight now, the America consumers are consuming, and they are consuming a lot.\nThe stimulus money provided to the majority of the population is being redirected right back into the economy, and that's great for flat-rolled steel producers like Cleveland-Cliffs.\nThis money is being spent on consumer goods like HVAC and appliance and cars, evidenced by the skyrocketing AUTOSAR in March.\nThe so-called experts that long predict the demise of the domestic steel industry have been proven completely wrong.\nWhen Cleveland-Cliffs bought AK Steel and AM USA or when the COVID recovery began, they had an easier window of opportunity to fix their failed thesis.\nUnfortunately, their addiction to negativity is apparently the only thing that they care about.\nThese folks just don't want to see our industry thrive, and they clearly don't care about the well-paying middle-class jobs we generate and sustain in the United States.\nFor the record, from our proximate years, the median yearly pay of our 25,000 Cleveland-Cliffs employees is $102,000.\nAnd we are hiring because we're growing.\nMake no mistake, we are adding jobs.\nSince December 9, 2020, we have already added 710 new employees to our workforce.\nAs we always do at Cleveland-Cliffs, we are putting our money where our mouth is, and bringing back the America that we love, with a vibrant manufacturing sector, a thriving middle class, and with opportunities for all people that believe in education and hard work.\nThe main factor supporting this new way of doing the steel business are the following.\nPrior to our acquisitions of AK Steel and AM USA, they were both buying iron ore pellets from Cleveland-Cliffs under take-or-pay type of contracts.\nAs a result, their top concern was filling up their steel order book so they could satisfy their purchase requirements with us.\nAnd in many cases, that involved being aggressive on pricing their end product so they could move material.\nWe and the business we acquired are no longer burdened by this, which leads me to number two, a more disciplined supply approach.\nAs I have stated in the past, we can be flexible with our production and can walk away from bad deals, automotive, contract, spot, or otherwise, much more easily.\nThis industry has been plagued in the past by volume for volume's sake.\nBut with our transformative acquisitions, we have all started to see rationality in the marketplace.\nAnd don't forget, the U.S. dominates the world in environmental performance.\nOf all the world CO2 emissions from the steel industry, the U.S. comprises just 2%, while China is responsible for 64%.\nWe have also the lowest CO2 emissions per ton of steel produced among the nine largest steelmaking nations, due to both the prevalence of EAF production and the massive use of pellets in blast furnaces.\nThis leads me to my final factor, the one that will drive mid-cycle, hot-rolled coil pricing higher for the long term, the scarcity of prime scrap.\nEAFs make up more than 70% of steel production in our country.\nThis U.S. reality is unique among all major steel-making countries.\nEAFs have long taking advantage of the large pool of scrap here in our country.\nHowever, with all the new capacity coming from the EAF side of the business, their scrap feedstock has become stretched, although thin.\nIn order to make flat-rolled products in EAFs, you need prime scrap and metallics, both of which actually originate from the integrated rock.\nOn top of that, manufacturers have become more efficient at processing high-grade steel, generating less prime scrap to be sold back to the system.\nThe United States is a net exporter of scrap, but it is also a net importer of prime scrap.\nCombine that with China's growing needs for imported scrap, which will outpace their own generation in the near term, and the U.S. EAFs have a big problem.\nObsolete and lower grades of scrap will likely be OK, as higher prices incentivize collection.\nBut that's not the case for prime scrap.\nLower-grade scrap is good for rebar, but it's not good or not enough for the production of more sophisticated flat-roll steel products.\nThis scarcity points to significantly higher prices for scrap.\nMeanwhile, we at Cleveland-Cliffs, will continue to enjoy the steady cost structure of our iron feedstock, our own 100% internally sourced pellets, with decades of iron ore reserves ahead, and our in-house production of HBI, fed by our online and pellet plant.\nWe formulated this view in 2016, and that has been the driving force behind our strategy for the past five years, including the construction of our HBI plant and our two transformational acquisitions executed last year.\nIt is actually interesting to see other companies get into the same conclusion five years later.\nAt the time, Cleveland-Cliffs has already started to enjoy the benefits of our investments of the past years.\nOur direct reduction plan has had a remarkable past few months since the start-up in December of 2020 and has already exceeded our expectations thus far on HBI production and shipments.\nWe produced 120,000 tons of recast in the month of March and expect to reach our annual run rate of 1.9 million tons this quarter.\nWhile we have already shipped some HBI tonnage to select outside clients and at a very good prices, we have thus far used most of the product internally at our own EAFs, blast furnaces, and BOFs, as planned.\nOperational results have been above our own expectations in all times of internal usage of our HBI.\nParticularly at our EAFs, HBI currently makes up between 20% and 30% of their melt.\nMore importantly, our HBI has effectively eliminated our needs to buy prime scrap.\nWe only need to buy lower grades at this point, substantially lowering our cost structure.\nIt has also lowered our greenhouse gas emissions and improved our iron and chrome yields.\nThe original intention for the Toledo direct reduction plant when Cleveland-Cliffs was just an iron company was to exclusively sell HBI to third parties.\nBut that dynamic has changed with our two acquisitions of last year.\nGiven our expectations for the scrap market, our HBI is an incredibly important Cleveland-Cliffs internal resource and differentiating factor, both now and going forward.\nThis is why I'm happy we did not sign long-term contracts to supply HBI to third parties.\nI did not need them to build the plant.\nI don't have them now, and I don't want long-term supply contracts going forward.\nFor the record, the consistent performance we get out of our HBI in all of our plants, both in quality and environmental, is one of the most positive factors differentiating Cleveland-Cliffs from the rest of our competitors, both integrated and mini-mills.\nOn the steel operations side, things have been progressing nicely.\nOur Middletown outage was a success.\nWe completed the blast furnace repair in less than 14 days.\nAnd the BOF vessel maintenance was finished ahead of schedule, and we do not have any major outages scheduled in Q2.\nWe are focused on getting steel out of the door.\nDespite all we hear about supply shortage of electronic parts and other components in automotive, we really have not seen a huge impact on volumes to this end market.\nWe have been running our coating lines at full capacity in response to outstanding demand and are restarting our Columbus Coatings galvanizing line.\nThat will increase our output of galvanized products starting in this second quarter and will help our clients take care of their own high demand.\nFor the small amount of automotive tonnage that has been deferred, we have been able to divert that substrate to higher-margin customers linked to the spot market.\nWe completed all of our April 1 automotive contract renewals with nice price increases and plan to continue to see significant improvement in these margins going forward.\nAll of our actions support immense cash flow generation for this year and beyond.\nAnd that cash will be used to pay down debt.\nUnder our latest forecast, we expect to generate a record level of free cash flow in the last nine months of 2021, which will put us at a figure of less than 1 times EBITDA leverage by the end of the year.\n",
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"content": "compname reports first-quarter 2021 results and increases guidance for full-year 2021 adjusted ebitda to $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: Our second-quarter numbers for revenue, net income, and EBITDA were all quarterly records.\nThey clearly demonstrate our operational and commercial success in integrating the two acquisitions into Cleveland-Cliffs as well as a sustainable steel environment, supported by strong and resilient demand for our products.\nThis being said, our Q2 record numbers: revenue of 5 billion; net income of 795 million; and adjusted EBITDA of 1.4 billion, should not be our all-time records for long.\nWith the lagged and fixed pricing mechanisms we have in place with our customers, we have enough visibility to be confident that these records should be broken again here in the third quarter.\nDrilling down specifically on our adjusted EBITDA, the 1.4 billion performance represented a 165% increase over the past quarter, primarily due to increased steel pricing fixed-price contract improvements, favorable product mix, and higher volumes.\nUnlike most of the American steel industry, we have been relatively well shielded from inflationary forces thus far due to our self-sufficiency in raw materials, namely pellets, and HBI.\nMore specifically, our overall cost per ton barely moved compared to the first quarter.\nIn the Steelmaking segment, we sold 4.2 million net tons of steel products, which included 33% hot-rolled, 17% cold rolled, and 30% coated, with the remaining 20% consisting of stainless, electrical, plate, slab, and rail.\nDue to lighter automotive demand pool related to the chip shortage, we were able to sell more tons of higher-margin material into the spot market.\nDirect automotive shipments were about 1.2 million tons during the quarter, about 300,000 tons less than what we anticipated back in March.\nThis contributed to an inventory build of about $300 million during Q2, which, along with rising receivables due to rising prices, produced another working capital build during the second quarter.\nOur free cash flow generation will certainly be further increased in the third quarter.\nWe expect to generate 1.4 billion in cash from our expected 1.8 billion in adjusted EBITDA for the third quarter.\nThese numbers result from continued rise in prices on our HRC linked contracts and spot sales, offset by higher employee-related costs and the planned outage at our largest blast furnace, Indiana Harbor No.\nFurthermore, we are increasing our full-year adjusted EBITDA guidance to $5.5 billion.\nOur free cash flow expectation still includes minimal federal cash tax disbursement as a result of our NOL position.\nGiven our immense profitability so far this year, we have been able to effectively utilize our sizable NOL balance, and we'll continue to utilize it for the rest of the year.\nWith these NOLs rapidly being used, we expect to become a federal cash taxpayer again at some point either later this year or early next year.\nOur main priority with this free cash flow continues to be the paydown of debt.\nThe level of free cash flow we are expecting has created a generational opportunity to completely derisk our balance sheet, and we are taking full advantage.\nIn the second quarter, we made open market bond repurchases and completely redeemed the remaining 400 million of our 2025 unsecured notes, the only bond we had that was callable this year.\nOur debt-to-cap ratio is currently at a nine-year low.\nAnd we have already repaid another 455 million in debt during just the first 20 days of July.\nAs the year progresses and into next year, we will be rapidly and methodically reducing our debt balance, and we expect to reach net debt zero sometime next year.\nWith that, I'll turn it to Lourenco.\nThe best way to understand the new Cleveland-Cliffs is by comparing Q2 results with Q1.\nOur revenue line increased by $1 billion and our cost of goods sold increased by just $100 million.\nThe seamless and complete integration of both AK Steel and ArcelorMittal USA into Cleveland-Cliffs has generated a new and very efficient business model, geared toward value creation.\nDemand for steel is very strong across all sectors, and strong demand supports strong prices.\nQ4 2020 was supposed to be the peak for steel prices, then Q1 2021, and then again in Q2.\nWell, we are in Q3, and the reality is demand is relentless.\nMost of our customers are experiencing record profits and learning that higher prices are good for pretty much everyone in the supply chain.\nActually, some of the customers who were complaining earlier this year about rising steel prices then turned around and decided to accept the reality.\nThey cut deals with Cleveland-Cliffs at that time, and are now just plain happy.\nOthers probably will be unhappy for a long time.\nAlso, as new electric arc furnace capacity continues to be brought to operation in the United States and abroad, the notion that prime scrap is precious metal will be better understood.\nIron ore fundamentals are strong as well, keeping the price of pig iron imported by the mini views elevated, and also pushing up the pricing of steel offered by foreign sources.\nRussia is restricting exports of ferrous materials, including pig iron, of which they are the largest exporter of to the United States.\nChina continues to say that they want to cut emissions, which they can do by either cutting steel production to reduce sinter usage or using more scrap or both.\nWith all that, the trend on the price of prime scrap is also upward.\nSeparately, investments toward decarbonization will need ROI, return on investment, unless you operate in Europe, in Japan, or in Canada.\nSteel companies in these countries and continent are being awarded general subsidies and free money, like the grants.\nCanadian and European steel producers are so happy to advertise as they get their gifts and handouts from their respective governments.\nThat's another compelling reason why imports need to be held in check, as other countries take advantage of a totally uneven playing field.\nWith their much worse environmental performance than ours in major government subsidies that we don't get here in the United States.\nChina is not our only problem, our so-called friends are bad, too.\nWhile all of our relevant Q2 figures represent company records revenue: net income, adjusted EBITDA, I would add, we haven't reached our full potential yet.\nDue to previously agreed upon sales contracts, so far this year, we have sold a significant chunk of our volume well below price levels that would make us comfortable.\nOur most important commercial priority through the end of this year will be to improve these contracts.\nWe know the real value we provide to the clients, including, but not limited to, our ability to manage complex just-in-time requirements in several different highly specified products.\nWe also know the unique technological capabilities that we have and the limitations of others in the steel industry that cannot match what we do, particularly at the massive scale that we do.\nSimply stated, it's time to be awarded a better return on our capital invested to serve these clients, and we are well underway to achieve that.\nBeing the largest supplier of steel by a lot to the automotive industry, we are obviously affected by the supply chain issues they have experienced, all related to things other than steel.\nNevertheless, our Q2 results were actually better than our guidance, among other reasons, because we were able to take advantage of the reduced demand from these customers and managed to divert automotive volume to spot buyers or to other contract clients willing to pay market-level prices.\nWhen stated like that, it sounds simple.\nBut reorganizing both the melt schedules and deliveries of these materials was a challenge that our team did a great job overcoming during the quarter.\nEven with all the difficulties in finding available rail cars, trucks, and truck drivers during the quarter, we were still able to increase our shipment volume in comparison to Q1.\nOne thing that should not be holding up anything any longer is COVID-19.\nBrilliant scientists have developed not one, but several truly groundbreaking vaccines that would stop the virus and its tracks and any current variants.\nBut we need enough people taking the vaccines.\nWith the safety of our workforce always a top priority.\nearlier this month, we instituted a companywide vaccination bonus program that offers a cash bonus of $1,500 to each vaccinated employee if the level of vaccination of their working sites achieved 75%.\nIf the level of vaccination of the site achieves 85%, the cash bonus paid to each employee of the site doubles to $3,000.\nUpon announcement of the program, we saw an immediate uptick in vaccination rates.\nAnd some of the locations are already at the first threshold, with two locations already at a second threshold of 85%.\nProtection from the virus is just as important as any other safety mandates we have in any of our locations, and we are willing to spend real money to ensure each of our facilities reach herd immunity.\nIn order to meet current market demand, our assets need to be well staffed, and well maintained.\nThis process involves preplanned maintenance outages, including the one taking place at Indiana Harbor later in this quarter from September 1st to October 15th.\n7 is the largest blast furnace in North America, and for reference, produced 33% more hot metal per day than our two blast furnaces at Cleveland works combined.\nThe outage includes repair to two BOF converters in the steel shop and a partial reline in several upgrades to the blast furnace.\nSome of these upgrades are related to our ongoing work toward decarbonization, such as further enhancements to our ability to use massive amounts of both HPI SP stock and natural gas as supplemental reduction at Indiana Harbor No.\nAnother success story of the past quarter is our Toledo Direct Reduction plant.\nWe reached our nominal capacity within six months of start-up.\nAnd thus far in July, we are producing at a 2.1 million tons annualized rate, well above nameplate of 1.9 million tons per year.\nOur timing could not be better.\nPrime scrap is scarce.\nAnd every day the price of scrap goes up, our cost savings from HBI becomes more significant.\nOn top of that, we have actually used the vast majority of our internally consumed HBI in our blast furnaces, enhancing hot metal output, and allowing us to capture additional margin on incremental steel tonnage produced and sold to clients.\nAlong with the productivity benefits, this action alone reduced our implied carbon emissions by 163,000 tons during the quarter.\nDirect reduction and degrade pets are critical to the future evolution of a clean and environmentally friendly steel industry.\nCleveland-Cliffs sees decarbonization as part of our license to continue to exist.\nAs you can see in our recently published sustainability report, we are well on our way to achieving our targets through the combination of natural gas usage, HBI production and internal usage, and carbon capture.\nThere's a lot of talk about hydrogen as a reduction in Europe, with little recognition that we already use hydrogen in the United States through the use of natural gas.\nNatural gas composition is 95% CH4, methane, and 4% C2H6, ethane.\nNatural gas is used in our blast furnaces as a partial replacement for coke.\nThat means we emit good old H20 when we reduce our iron ore.\nAnd CO2 ambitions are cut by more than half when compared to reduction exclusively by coke or coke plus PCI.\nAlso, our direct reduction plant uses 100% of natural gas as a reduction.\nThe total amount of natural gas, we currently use in our eight blast furnaces and in our direct reduction plant eliminates the need for 1.5 million tons of coke per year, the equivalent of two coke batteries.\nAnd we continue to explore and increase the use of natural gas throughout the entire footprint.\nActually, our direct reduction plant was designed and built to be able to use up to 70% hydrogen.\nBut in order to make hydrogen a viable reduction, serious cost improvements and breakthrough technical developments are still needed.\nEurope does not have abundant natural gas, other than in Russia.\nSo they have embraced the hydrogen route, even with the current uncertainty surrounding the economical use of hydrogen.\nThat might not take them anywhere as far as emissions control, but is actually a great shortcut for free money and more subsidies from government to companies.\nAnd we all know how these things end.\nReplacing blast furnaces with AIF is not a solution either.\nThere are technical reasons.\nNo major steelmaking nation runs entirely on EAFs.\nWhen producing flat-rolled steels, EAFs need a significant amount of virgin material, like pig iron, prime scrap, DRI, HBI, and even oxygen injection just to try to mimic the blast furnace BOF route.\nIn reality, even here in the United States, soon to achieve 75 participation of EAFs, we may be near a peak, particularly in further investments in direct reduction are not made.\nJust don't count on Cleveland-Cliffs for that.\nThis ship has sailed when we acquired ArceloMittal USA and AK Steel, and successfully integrated both into a single unit company named Cleveland-Cliffs.\nAt this point, we are very comfortable using our degrade pellets to exclusively supply our plant in Toledo our blast furnace great pellets to supply our own blast furnaces.\nTo wrap up, Cleveland-Cliffs is doing well, actually, very well.\nAs of today, our leverage is already below one-time EBITDA.\nAnd we expect to be at net debt zero sometimes next year.\n",
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"content": "expects third-quarter 2021 adjusted ebitda of about $1.8 billion and free cash flow generation of $1.4 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: So many of those listening today know him already.\nIn his previous role as Senior Vice President of Finance and Treasurer here at Cleveland-Cliffs, Celso was instrumental to our business and financial transformation.\nOver the past five years, he has led all of our capital structure efforts, being the key person behind the execution and financing for our transformational acquisitions and managed our liquidity through the pandemic.\nPrior to Cliffs, Celso had a very successful career as an investment banker, first at Jefferies and then at Deutsche Bank.\nAlso, if you couldn't tell by his last name, Celso is my son.\nDuring the last several years, Keith Koci and I have been preparing Celso for this job.\nWith Keith now in charge of our new business unit as president of Cleveland-Cliffs Services, we could not have a better or more prepared professional to lead our financial organization.\nI am humbled by the opportunity to serve as Cliffs' CFO, fully aware of not only our rich 174-year legacy, but also our position of immense influence as the largest flat-rolled steel producer in the United States.\nI also fully expect that given my family name and the high standards set by our CEO, the expectations for me will be even greater than for anyone else in this seat.\nI am prepared to deliver.\nMy experience here at Cliffs over the past five years has taught me that strategic and financial opportunities exist at all points in the cycle.\nMy priorities as CFO are simple: one, allocate capital in a way that strengthens our business; two, maintain and enhance our financial flexibility; three, deleverage the capital structure; four, evaluate and execute opportunistic M&A and capital market transactions, always with a focus on long-term shareholder returns; and five, continue our five-year track record of share outperformance relative to our peer group and the broader market.\nWith those introductory remarks aside, I will jump right into our third-quarter results.\nWe reported another quarter of record revenues of $6 billion, record net income of $1.3 billion and record adjusted EBITDA of over $1.9 billion, ahead of the guidance we recently set of $1.8 billion.\nOur 42% quarter-over-quarter growth in adjusted EBITDA was primarily driven by continued price increases on our index linked and spot shipments.\nThese sharp increases on the revenue side were only partially offset by gradual increases on the cost side, including for labor, natural gas, and additional repairs and maintenance, most notably the reline of Indiana Harbor No.\n7, the largest blast furnace in North America.\nAnd even though it was clearly a one timer, we did not add back to EBITDA, the vaccination bonus payment of $45 million that was awarded and paid out to our workforce under our very successful vaccination incentive bonus program, which resulted in over 75% of our workforce fully vaccinated against COVID-19.\nIn the Steelmaking segment, we sold 4.2 million net tons of steel products with a mix of 32% hot-rolled, 18% cold rolled and 31% coated steel, with the remaining 19% consisting of stainless, electrical, plate, slab, and rail.\nOur automotive percentage of revenue was 20% compared to 33% just two quarters ago, clearly reflecting the reduced volumes and the legacy annual prices from that sector.\nBoth of which should dramatically improve next year.\nWe expect the trends on pricing and costs in Q3 to carry over into Q4, with higher prices from both index-linked contracts and some of our repriced automotive contracts, offset by similar cost impacts we experienced in Q3.\nShipments will likely be lighter in Q4 due primarily to seasonality and lower automotive shipments.\nOffsetting this, we will be moving up to the fourth quarter, some planned maintenance outages originally scheduled for next year, including the Dearborn hot end and both blast furnaces at Burns Harbor, along with a few other associated rolling and finishing facilities.\nThese outages are being accelerated to this year in anticipation of a strong automotive recovery in 2022.\nAll these events considered, our fourth quarter production should be reduced by approximately 300,000 net tons compared to the third quarter.\nOur free cash flow generation came in at $1.3 billion for the quarter, slightly lower than our original guidance due to slow demand pull from automotive, leaving more inventory to close out the quarter than we expected.\nThe remaining outage period at IH7 as well as the additional outages we scheduled for the fourth quarter should allow us to reduce these inventory levels during Q4.\nThis free cash flow generated during Q3 was returned entirely to shareholders in the form of a stock buyback, executed via the complete redemption of our $58 million common share equivalent preferred stock.\nWith only one quarter's worth of free cash flow, we completely redeemed our preferred shares.\nI will note that because of the weighted average calculation and the fact that the prefs were outstanding during a portion of Q3, the full $58 million share reduction is not baked into our Q3 earnings per share just yet, we will see a further reduction of diluted share count in the fourth quarter.\nWith the prefs now completely out of the way, we have resumed our aggressive debt reduction activities.\nIn only the last three weeks since the end of Q3, we have already generated approximately $500 million in free cash flow and have allocated all of it toward debt repayment under the ABL.\nUpon closing of the FPT acquisition next month, all excess free cash flow will continue to be allocated toward further debt reduction.\nBy next quarter, our LTM adjusted EBITDA should exceed our overall net debt balance, resulting in less than one turn of overall net leverage for the foreseeable future at any reasonable HRC pricing assumption going forward.\nBecause of our strong profitability this year, at some point in the fourth quarter, we will have utilized the majority of our tax NOL balance, leading to an expected Q4 cash tax rate of around 10%.\nPrior to the acquisitions of AK Steel and AM USA, we once expected to be utilizing these NOLs for several more years, but the significantly higher profit generation following the acquisitions will result in the consumption of the majority of the $2.5 billion NOL balance within a year of closing the December 2020 transaction.\nEven with the additional cash tax outflow and payments related to the CARES Act FICA deferrals from last year to this year, free cash flow should remain remarkably healthy in Q4.\nThe $775 million price of the previously announced acquisition of FPT is equivalent to less than two months of our free cash flow generation.\nWrapping up, the financial position of the company is on stronger footing today than it has been during my entire time here at Cliffs and the trend should continue into Q4 and 2022.\nThe fixed price contract business we have with high-end clients, such as the automotive OEMs, gives us significant downside protection if spot prices trend lower.\nTherefore, even under the current bearish futures curve for HRC, our average selling price should be much higher next year than it has been this year, leading to the expectation of another year of outstanding EBITDA, cash flow generation and debt reduction in 2022.\nVery few companies can show the magnitude of growth Cleveland-Cliffs has delivered during the last couple of years.\nWe were a $2 billion revenue company in 2019, became a $5.3 billion revenue company in 2020 and expected to be a $20 billion-plus company in 2021.\nAll this growth was achieved preserving and enhancing our profitability as demonstrated by our Q3 numbers of $1.9 billion of adjusted EBITDA and $6 billion in revenues for an EBITDA margin of 32%.\nThese numbers have gone primarily from the 55% of our business that is linked to an index price with a smaller contribution from the fixed price contracts that were signed before the market price recovery of last year.\nIn the fourth quarter, this will begin to change.\nAnd even more so, you see next year, when the bulk of our annual fixed contracts for automotive as well as appliances, stainless, electrical use plate and tin plate all reprice at significantly higher levels.\nThat should protect our profitability into next year, even assuming spot prices go down next year.\nThis being said, we do not believe we will see still spot prices returning back to historical low levels.\nAnd the main reason for that is prime scrap.\nPrime scrap is what electric -- furnace mills, old ones or brand-new, need to produce flat-rolled steel.\nWe have seen a looming shortage of this type of scrap coming for several years, which partially motivated our $1 billion investment in our direct reduction plant four years ago.\nWe were planning to supply HBI to EAF mini mills.\nAnd that was in the past, but not anymore.\nAt this time and going forward, we also plan to use more prime scrap ourselves in our BOFs.\nThat will allow us to stretch our hot metal without building new production capacity.\nBuilding new capacity is a common mistake the steel industry insists in making time and time again.\nCleveland-Cliffs is different, and we are not going to add capacity ourselves, but we are definitely seeing what others do, and we act accordingly.\nWith that in mind, a few days ago, we announced the acquisition of FPT.\nWhile the majority of scrap companies we looked at had a prime scrap mix of 10%, 15%, FPT stood out with an outsized 50% of prime scrap in the mix.\nFPT is actually one of the largest processors of prime scrap in the country, representing 15% of the entire merchant market in the United States.\nPrime scrap is a byproduct of manufacturing, including automotive.\nAnd Cleveland-Cliffs is the largest supplier of steel to this automotive and other flat-rolled consuming manufacturers.\nAs such, we can offer a compelling proposition for their scrap uptake, keeping the life cycle of our steel in a closed loop between Cleveland-Cliffs and the OEM.\nFurthermore, the main theme for the steel industry is decarbonization and melting clean, low impurity scrap is a good way to reduce carbon emissions.\nThat applies to both EAFs and BOFs.\nThe BOF is often overlooked as a user of scrap.\nBut in our footprint, it's actually where we consume the most.\nThe use of higher amounts of scrap in the BOF boosts liquid steel output for the same amount of hot metal, which is what we call the liquid pig iron from the blast furnace.\nSo the more scrap used in the BOF, the less coke needed in the blast furnace per ton of crude steel produced.\nWith ample access to our own prime scrap, we can optimize our productivity with a higher scrap charge, while significantly reducing our carbon emissions.\nOn top of that, during the last 50 years, the supply of prime scrap in the United States has been steadily shrinking.\nWe expect that [Inaudible] trends to continue as yields continue to improve, and unfortunately, China continues to dominate manufacturing.\nFinally, all of the new flat-rolled capacity coming online in the United States is from the EAF side, which means that demand for prime scrap and metallics will continue to increase.\nThat is very conservatively another nine million tons or 40% growth of demand for these products over the next four years.\nWith our decision to use our HBI internally at Cleveland-Cliffs and primarily in our blast furnaces, there is a zero response in supply to this massive growth in demand for prime scrap and metallics coming from the EAFs.\nPig iron may be the most likely alternative but they still choose emissions that comes attached to pig iron, whether imported or mainly in North America, effectively create a negative impact to the Scope 3 emissions associated to these EAFs.\nIn that regard, we fully expect that in a not-so-distant future, the Scope 3 emissions will have to be reported as much as our Scope 1 and 2 already are reported today.\nThat would create a level playing field for all steelmakers integrated and EAFs.\nMoving forward, this is a good opportunity to remind everyone that no other steel company in North America has more capabilities in modern ones, by the way, than Cleveland Cliffs when it comes to producing flat-rolled steel.\nThat's particularly true regarding automotive.\nPeople tend to confuse old plant names like Indiana Harbor, Cleveland Works or Burns Harbor with old plants.\nIn fact, old plant names actually carry pretty modern state-of-the-art equipment.\nFor example, our hot-dipped galvanizing line at Rockport Works was built in the '90s, and it's 80 inches wide and that is six foot, eight inches wide, or 2,032 millimeters before a metric system, more than two meters wide.\nThere is no other facility on the continent that can produce what we make there.\nThe same is true for the six footers at Tek and Kote in New Carlisle, Indiana and Columbus, Ohio.\nAlso, our advanced high strength steel capabilities at Cleveland Works are second to none, and the automotive OEMs know that.\nOur pickling line tandem cold mill and galvanizing line in Dearborn, Michigan, by the way, another six footer, specialized in exposed panels, were both built in 2011.\nOne more time, Dearborn Works was built by Ford Motor Company in the early part of the 20th century.\nBut the PLTCM and the hot-dipped galvanizing line are only 10 years old.\nOur level of technological sophistication and our ability to produce all kinds of automotive flat-rolled products, including stainless steel, are the reasons why Cleveland-Cliffs is by far the biggest supplier of automotive still in this country.\nA couple of our competitors will be spending billions of dollars and working very hard to build capacity during the next three years.\nWe don't need to because we already have the capabilities we need.\nThat's why Cleveland-Cliffs supplies 2.5 times more steel to the automotive industry than the second largest supplier or more than the second plus the third combined.\nAnother important accomplishment during the quarter was the consistent performance of our direct reduction plant in Toledo.\nThe plant continues to operate above nominal capacity and to exceed our expectations, not only on production but also in quality and cost.\nCase in point, our all-in cash cost of HBI in Q3 was $187 per net ton, a number much better than the cost projected when we first approved the construction of the plant a few years ago.\nThis figure is also much better than the price our competitors pay for both prime scrap and imported pig iron.\nAlso differently from our original plan, HBI sales to outside EAF mills are not significant and maybe discontinue completely very soon.\nWe actually have already decided to use the majority of our HBI in our blast furnaces, not even in our own EAFs.\nThat allows us to improve better cost and productivity while improving our coke rates and reducing our CO2 emissions.\nAlso, as a consequence of our HBI using our blast furnaces, we have already idled the coke batteries at Middletown Works and that coke is not needed at this time.\nAnother operational change, we started to implement in the third quarter involves our Minorca mine and pellet plant which we acquired as part of the ArcelorMittal USA acquisition.\nBased on our tasks, we will soon be shifting our DR-grade pellet production away from Northshore and into Minorca, where we will not have to deal with the unreasonable royalty structure at Northshore.\nAs we plan to no longer sell pellets to third parties in the coming years, Northshore will become a swing operation, which we will keep idle every time we decided to do so.\nIn any event, we will continue to be able to feed our Toledo plant with a consistent feed of DR-grade pellets but from Minorca and not from Northshore.\nAs also explained earlier, we continue to generate plenty of cash and should see a meaningful reduction in debt during the fourth quarter, even after paying for the FPT acquisition.\nBased on our expected EBITDA for this year, our 2021 full-year leverage is already at a very comfortable level of less than one time EBITDA.\nWith the new sales contracts we have already signed, our ability to continue to pay down debt is even stronger than what we announced last quarter.\nThe $45 million that we paid in vaccination bonus this quarter was by far our best use of cash.\nAnd we are pleased that we reached above 75% vaccination rate across our entire footprint, beating by a large margin the percentage of vaccinated local population in all communities we operate.\nWe are keeping our workforce safe, healthy and compensating them to do so.\nSoon, we look forward to welcoming another 600 Cliffs employees from the FPT acquisition.\nWe can't wait to bring them into our company and our way of doing business.\n",
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"content": "believe that our average sales price next year should be higher than 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: Life at Cleveland-Cliffs has been intense, and we have a number of developments to discuss today.\nWe completed the acquisition of ArcelorMittal USA on December 9, 2020.\nAnd a couple of weeks earlier, we completed the construction and begun operating our direct reduction plant in Toledo, Ohio.\nWe have also, one more time, with our financial expertise to good use and took advantage of opportunities presented by the capital markets to improve our balance sheet.\nAnd last but not least, we have recently announced our public commitment to aggressively reduce our greenhouse gas emissions 25% by 2030.\nI will begin with the most transformational theme, the acquisition of ArcelorMittal USA including the totality of INtech and INCoats, which ArcelorMittal previously shared ownership with Nippon Steel.\nThe very first point I would like to make is the most important part of the acquisition, and that is the people that are now working for Cleveland-Cliffs.\nI could not be more pleased with the buy-in we have received from the workforce previously working for ArcelorMittal.\nNot just from the leadership team, but also from the employees at the shop floor.\nIf there is a single reason why we are doing so well as we integrate the new assets to our existing footprint, that is the buy-in from these new Cleveland-Cliffs employees.\nThat came also with the normal support and help coming from the employees that were it does before, included the ones that joining Cliffs from AK Steel.\nIt is fair to say that the entire workforce and that includes our union partners, all recognize that Cleveland-Cliffs' unique business model is now the envy of the steel industry, and they seem to be proud of that.\nWe have proof ideas without strategy are nothing.\nAnd strategy without execution is irrelevant.\nBut one can only execute if the people involved believe and buy in.\nOur great workforce, integrated and unified under a common strategy and disciplined execution, is the reason why we have been so successful.\nOur competitive advantage is also predicated on a few things.\nWe operate the entire production flow from the extraction of iron ore out of the ground all the way to manufacturing of complex auto parts and components.\nSaid another way, Cleveland-Cliffs has reinvented the meaning of the word integrated, as in integrated steel mill.\nThe word now includes mines, pellet plants, direct reduction, blast furnaces, DOFs DAFs, ALDs, hot strip mills, plate mill, cold rolling mills, electrolytic thinning lines hot-dip galvanizing lines, electro galvanizing lines, cold and hot stamping, precision welding, laser manufacturing, and complex tooling.\nAll these resources give Cleveland-Cliffs full control on costs and quality, and results includes having a tangible competitive advantage over our competitors.\nAlso, as we process in our downstream facilities is still produced by other companies, we have a window into what others are actually capable or not capable to do in automotive.\nSuch insights was a determinant factor in guiding our decision to acquire AM USA.\nThe assets we acquired from AM USA are complementary to the ones we already had from AK Steel, and that will save us from spending a significant amount in capex to make the AK Steel assets able to produce certain grades that we can produce in Indiana Harbor or Cleveland works.\nFor the ones I would like to talk about who is gaining market share from him in the steel business, let me remind you one thing.\nOne year ago, Cleveland-Cliffs was producing fairly zero tons of steel.\nAnd we are now, one year later, the largest flat-rolled steel company in North America.\nThat is a pretty sizable gain in market share, I believe.\nEven more importantly, in comparing what we have at Cleveland-Cliffs with what we see from others, we feel extremely comfortable that our leadership position in automotive is very solid.\nThe acquisition of AM USA elevated our participation in automotive to five million tons per year.\nOn top of that, we also supply 1.5 million tons of automotive-grade blast to ArcelorMittal Nippon Steel in Calvert, Alabama.\nEven with increasing tons from 3 million to 5 million, we actually reduced our percentage of participation in the auto sector from 70% as AK Steel stand-alone to 40% as the combined Cleveland-Cliffs, allowing us to benefit faster from higher market prices for steel.\nWe also supply 100% of our iron ore needs in-house, and that is extremely important.\nThe steelmaking assets we acquired both from AM USA and from AK might have been historically at a competitive disadvantage on that regard, due to having to purchase pellets from us.\nBut now, the advantage is kept all within Cleveland-Cliffs.\nAnother point to consider.\nDifferently from the scrap-based nonunion shops, we do not pay our employees based on tons produced.\nUnlike these other steel producers, our business model does not prioritize the production of tons.\nAnd we are not in the pursuit of capacity utilization either.\nWe prioritize value over volume.\nWe prioritize delivering on time, and we accommodate the demands of our clients, particularly automotive clients.\nWe, in 2021, are applying to the newly acquired assets the same methodology we applied to AK Steel in 2020.\nAnd that will bring the new assets to the same high level of delivery performance we have established at AK Steel since we implemented our way of doing business last year.\nOur clients know that and appreciate the changes and improvements we have been implementing.\nOur asset optimization process is off to a great start as well.\nWe have already started moving slabs and coils between the former AK former AM facilities to reduce logistics costs and to improve our customers' delivery requirements.\nThis material movement continues to be optimized and we should increase over time.\nWith that and several other initiatives, we are well on the way to reach our synergy target of $150 million by the end of this year.\nNext, on to our Toledo plant.\nWe are delighted to have completed construction of the most modern direct reduction plant in the world and to begin production of HBI late last year.\nThose who have been following us are well aware of the value proposition this product brings to both Cleveland-Cliffs and to the entire industry.\nOur natural gas-based HBI is not only a cost-competitive premium alternative to imported [Inaudible] and scrap but will also reduce Scope two greenhouse gas emissions in our industry as a whole.\nAdditionally, once hydrogen becomes commercially available, our plant is already capable of using up to 30% of hydrogen as a partial replacement for natural gas with no equipment modification needs, and up to 70% with minor modifications, which would even further reduce emissions from the baseline.\nWe are progressing through our planned ramp-up period, steering through a cold winter and making the appropriate adjustments to bring the plant up to its full production level by the second quarter.\nWe are currently making HBI exclusively for our own internal use, and we will start to ship product to third-party customers later in March.\nThe timing of the start-up of HBI plant is extraordinarily positive for us with the obvious scarcity of domestic prime scrap in the marketplace.\nThis scarcity of scrap should only grow as new EAFs start up in the United States, and we will have more bias for the same scrap.\nGood for our HBI and good for Cleveland-Cliffs.\nWe are also benefiting from a favorable steel price environment.\nThis is particularly true since we acquired AM USA.\nThis latter acquisition has given us more exposure to spot HRC prices.\nThen when we only owned AK Steel, with a case outsized percentage of fixed price automotive contract sales in the product mix.\nWith our very relevant position as a player in the newly consolidated U.S. domestic market, we are taking a disciplined approach to supply.\nWe will continue to manage our customer needs and will not restart capacity on a whim just to add tonnage to the spot market.\nThat would not be good for anyone, including Cliffs' business and our workforce.\nAs I said, we don't pay our people based on tons produced with the practice that has impacted this industry.\nWe let our order book guide our production levels.\nRight now, the order book is in a good place, particularly for consumer goods, as well as from stainless steel clients and service centers in general.\nDemand from automotive remains strong, and auto OEMs continue to struggle to keep up with resilient consumer demand.\nSo far, we have seen only minor short-term demand impact from a widely publicized cheap shortage, all of which, as we have been told by our automotive clients, will be made up for during the year.\nIn the meantime, we have been selling more steel to select service centers and manufacturing clients outside the automotive sector, enhancing our presence with these clients.\nThis is actually a very positive demand development for these select clients.\nBecause they are increasing their business with Cleveland-Cliffs, a company that is very accustomed with producing high-quality steel and delivering on time, and also very good for us because we are accelerating the benefit from higher steel market prices ahead of annual contract renewals with automotive clients.\nThe value over volume philosophy also guides our near-term production decisions.\nAs has been publicized, we will be taking our Middletown facility down for a 45-day maintenance outage to do some work inside the blast furnace, but not a full reliance.\nIn order to continue to meet our strong customer demand, we have restarted the smaller Cleveland No.\n6 blast furnace to make up for the lost Middletown production.\nOnce Middletown comes back, we will have another maintenance outage at Indiana Harbor No.\nWe currently have 10 blast furnace in our portfolio and are keeping between six and eight points in simultaneous operations.\nAt any given time, we will probably have some maintenance to perform.\nWe will manage all of these assets appropriately, without having any shortfalls with our customers, while also not what in the market with steel.\nValue over volume is a simple philosophy that we will carry on into the future, and it is why you are not going to hear me talk about capacity utilization or even market share, except in automotive, but just because our leadership position on this one segment is still up.\nOnly as most liked of the recent steel price run-up positively impacted our fourth-quarter adjusted EBITDA performance of $286 million.\nDue to how contract prices work and usually applies lagging mechanisms and the fact that we only controlled the AM USA assets for the last 23 days toward the end of the year, our steel profitability in the fourth quarter of 2020 has not benefited or improved from these strong prices just yet.\nAs a result, our EBITDA performance will dramatically improve in the first quarter of 2020.\nIn addition, we can confidently say that the second quarter will look even better than the first quarter, this very good first quarter that we are in now, as rising prices become further reflected, HBI shipments pick up pace and external pellet sales pickup with the reopening of the Great Lakes.\nThis current steel pricing environment has also highlighted the competitive advantages that our unique business model.\nAs we all know, EAF uses scrap as their primary feedstock.\nThe price for a ton of busheling scrap in the Midwest has almost doubled from where it was a little over a year ago.\nMeanwhile, the cost of our primary iron feedstock, iron ore pellets we produce ourselves out of our own mine, is basically the same as it has been for the past five years.\nBecause of this, Cliffs has actually been your proverbial low-cost producer.\nTo make it clear, this is not even a tie I care to have because there is so much more to making steel than a low production cost.\nYou cannot reach safety first if you are obsessed with tons per employee.\nYou can't invest capital to protect the environment if you are governed by your production cost number.\nAnd you will not pay your workforce well if cash cost is your main metric.\nThis is actually a capital-intensive industry, and we must work to generate return on invested capital and not for bragging rights based on a questionable and not always true low-cost position.\nHopefully, this current environment is a lesson on the blank statements made comparing cost positions, and we can put that subject to rest for good.\nAs I said, we don't believe this current scrap dynamic will be short lived.\nChina has publicly stated their target of doubling EAF capacity from 100 million metric tons to 200 million metric tons over the next five years.\nThe increase alone is bigger than the size of our entire domestic steel industry and will require a lot of scrap.\nBy 2025, China will be producing two and a half to three times more steel via the EAF route than the United States.\nHowever, to move from where they are today to the level that they plan to be, China does not have the infrastructure in place to collect and deliver all that scrap, and the void will be filled by imported scrap into China.\nThat will come in large part from the United States, which has, by far, the largest and most mature scrap infrastructure in the world.\nThis is something we at Cleveland-Cliffs predicted several years ago and one of the reasons why we built our direct reduction plant.\nWith the already very large existing EAF capacity in the United States, the new EAF furnaces being built by the domestic mills here in the U.S., and the massive new EAF capacity coming online in China, all fighting for the same amount of scrap available.\nWe at Cleveland-Cliffs feel very comfortable with the powerful company we have built and with our self-sufficient [Inaudilble] business model.\nThe capital structure, underlying this best-in-class business model, was improved once again two weeks ago.\nAs you may recall, last April, at the beginning of the pandemic, when the automotive industry was out of operations, we issued a tranche of high-component secured bonds as insurance capital.\nNow that business conditions have normalized, we sought to reduce the outstanding amount of these secured notes as much as possible.\nAnd the only method to achieve that was by using the 35% equity cost provision from the indenture of the notice.\nThe sole focus of issuing the small number of 20 million shares was to use this claw-back provision and retire the maximum amount possible of these high-coupon notes without paying a make-whole panel.\nThis coincided with a block sale of about half of ArcelorMittal's CLF common shares that they received as part of the payment we made to them when we acquired AM USA.\nThese secondary shares were already outstanding and had no impact on share count.\nWe also successfully placed $1 billion of unsecured notes, the lowest coupons we have ever achieved as a high-yield issuer, respectively, 4.625% and 4.875% for eight- and 10-year issue.\nThese outstanding coupons and the same-day deal price execution, after spending just a few hours in the market, are a clear and unequivocal demonstration of the leveraged finance market support to our business model, strategy, and execution.\nAnd at the end of the day, with this capital markets activity, we replaced secured debt with unsecured debt, lowered interest expense, cleared our maturity runway entirely all the way to 2025, and further improved our liquidity by using a portion for ABL repayment.\nFinally, in January, we publicly announced our commitment to reduce greenhouse gas emissions by 25% by the year 2030, covering both the Scope one and Scope two emissions.\nWhile we have transformed as a business, we will continue to operate Cleveland-Cliffs on the same environmentally responsible manner we have always done.\nClimate change is one of the most important issues impacting our industry and our plants.\nOur commitment includes using more natural gas to reduce our iron ore as we do in our direct reduction plant producing HBI, implementing clean energy and carbon capture technologies, and becoming more transparent on disclosing our products.\nBefore I get into the specific results that were foreshadowed with our pre-announcement a month ago, I will first discuss our new business segmentation.\nYou saw in today's release that we are now split into four segments, but the bulk of the operational and commercial activity will take place in our steelmaking segment.\nThe foundation for this is driven by how the management team views our business.\nThe strategic rationale behind our two major acquisitions was to form one large and competitive, fully integrated steel company, which is exactly what this segment represents.\nThis segment captures effectively all of the production activity that begins at our mine sites, including our pellet plants and other raw materials operations, and ends with our steel and finishing plants.\nProducts sold for this segment include slabs, hot rolled, cold rolled, coated, galvanized, stainless, electrical, tinplate, plates, rail, forgings, pellets, and HBI.\nOur downstream units will remain as separate segments due to the different commercial nature of these businesses, though they remain an important piece of our integrated entity.\nBecause of this reporting change, we will not have any significant, noticeable intersegment eliminations going forward, other than the small impact from the finished steel sold to our downstream segments resulting in a much smoother and cleaner model.\nAs for our results, our fourth-quarter adjusted EBITDA of 286 million represented 127% increase over last quarter and 158% increase over last year's fourth quarter.\nThe sequential increase was driven by the following: increased steel shipments, higher prices, better costs due to increased production volumes, and reduced idle costs, the stub period contribution from the AM USA assets, and increased third-party pellet prices.\nIn the steelmaking segment, of our 1.9 million net tons of shipments, we shipped 1.25 million net tons from the AK side and picked up the remaining 600,000 from our 23 days of ownership of AM USA.\nWe expect to more than double this amount in the first quarter with total shipments of approximately 4 million net tons.\nYou will notice our average net selling price declined in the fourth quarter compared with the prior quarter, which was purely related to mix.\nThe AM USA assets we acquired do not sell stainless or electrical steels, which carry a much higher average selling price, bringing the overall average down.\nOur shipments during the quarter were 44% coated, 22% hot rolled, 18% cold rolled, and 16% other steel, which includes stainless, electrical, slabs, plate, and rail.\nThird-party pellet sales during the fourth quarter were about 2.0 million long tons which consists of approximately 1.6 million long tons sold to AM USA prior to the acquisition date.\nGoing forward, our external pellet sales volume should be 3 million to 4 million long tons per year, with the remainder of our output being used internally by our blast furnaces and direct reduction facility.\nOur steel supply contracts are roughly 45% annual fixed price with resets throughout the year, and 55% HRC index-linked.\nThat latter piece further breaks down to about 40% on pricing lag, split between monthly and quarterly, with the remaining 15% on a spot basis that currently have lead times up to three months for hot-rolled and four months for cold-rolled, and coated products.\nAs Lourenco noted, given this structure and the short stub period for the new AM USA acquisition, the recent run-up in steel prices should accelerate in our results in the first quarter and continue its advancement into the second quarter.\nWhen we completed the AM USA acquisition, we upsized our ABL facility from 2 billion to 3.5 billion, which is currently more than fully supported by our inventory and receivable balances.\nThis has provided us with a sizable liquidity balance of 2.6 billion as of this week, of which approximately 850 million is earmarked for bond redemptions set to take place in March related to the capital markets transactions we completed earlier in February.\nMost of the other significant changes to our balance sheet, like PP&E and goodwill, are attributable to standard acquisition accounting.\nAs for cash flow, our fourth quarter was impacted primarily by changes in working capital, most notably receivables and inventory.\nBecause of the factoring arrangement AM USA had in place prior to the acquisition that was terminated at closing, we began rebuilding the receivable balance in December, which was factored into our valuation for the acquisition.\nWe will continue to build working capital in the first quarter, after which it will then normalize and become a source of cash for the remainder of the year.\nOur fourth-quarter capital expenditures of 147 million took into account spending for the AM USA assets during the last 23 days of the year and included $61 million related to the Toledo plant, where we have about 60 million in run-out spend going into 2021.\nThis is included in our 600 million to 650 million capital budget for 2021, which includes about 500 million in sustaining capex, as well as other small projects such as the new precision partners plant in Tennessee, walking beam furnaces at Burns Harbor, and the Powerhouse at Cleveland Works.\nIn closing, with the completion of our two transformative acquisitions and the recent capital structure activity we completed two weeks ago, the company is on solid financial ground with no cash taxes to pay and manageable capex, interest, post-employment obligations, we are primed to generate significant free cash throughout 2021.\nWe will use this excess free cash flow to continue to reduce our debt balance, and we will have ample opportunity to do so in the current market environment.\nWhat a year 2020 was, and what a phenomenal company we have formed during 2020.\nRather than panic during the most challenging days of the pandemic, we went on the offensive and took advantage of the amazing opportunities out there to improve not only ourselves but also to change for good the steel business environment in the United States.\nAs the new Biden administration starts to work toward infrastructure, manufacturing, environmental responsibility, and good pay middle-class union jobs, we believe we have just built the perfect company to thrive in these challenging times that we are in.\nWe are ready to make our market on the industry with our 25,000 employees all rowing in the same direction, and we can't wait to show you what we can accomplish.\n",
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"content": "cleveland-cliffs - with contribution of steel sales from cleveland-cliffs steel llc for full quarter, expect q1 steel product shipments of about 4 million net tons.\nfull-year 2021 capital expenditures are expected to stay in range of $600 million to $650 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 start by highlighting some of our full-year financial accomplishments in 2021.\nOur revenues of $20.4 billion, net income of $3 billion, adjusted EBITDA of $5.3 billion, and free cash flow of $2.1 billion were all-time annual records in our company's history.\nThe M&A consolidation that we executed in 2020 was a huge driver of the industry market conditions that led to the outstanding annual results that we achieved in 2021.\nWith this record annual profitability, we put the cash we generated to good use.\nWe reinvested in our business, acquired the leading prime scrap processor in North America, delevered our balance sheet, and reduced our diluted share count by 10% last year.\nJust to give you an idea of how 2022 is going so far, on a year-over-year basis, we have already generated more adjusted EBITDA in January of 2022 alone than we did in the entire first quarter of 2021.\nNow, focusing back on our Q4 2021 results.\nLast quarter, we generated adjusted EBITDA of $1.5 billion on 3.4 million tons of steel shipments, the second-best quarterly performance in our company's history, only behind the previous quarter's $1.9 billion adjusted EBITDA on 4.2 million tons shipped.\nThe main driver of this quarter-over-quarter decline in EBITDA from Q3 to Q4 was this shipment reduction.\nAdditionally, service centers and distributors pulled even less tons than usual during this already typically weak period in late November and December.\nRemaining steadfast in our disciplined supply strategy and based on this rebound we expected and are already seeing from our automotive clients this year, we elected to move up several operational maintenance outages originally planned for 2022 into the fourth quarter of 2021.\nThese actions reduced our sequential quarter-over-quarter steel production by 675,000 crude tons in Q4, ultimately also impacting our unit costs.\nPartially offsetting the volume and cost impacts were higher selling prices in Q4, which rose by approximately $90 per ton from $1,334 to our highest level of the year of $1,423 per net ton.\nThis is also only an early indication of the success we have achieved in renewing our fixed price sales contracts as only a portion of our contract renewals were already in place during Q4 of 2021.\nRemember, the majority of our renewals were not in place until January 1, 2022.\nAs this year progresses, the selling prices we report every quarter going forward will continue to demonstrate the successful renewal of these fixed-price contracts, and that will be even more evident if the index HRC price continues to drop.\nFor context, if we applied the contracts we have in place now in 2022 to the fourth quarter of 2021, holding all else constant, our Q4 2021 adjusted EBITDA would have been nearly $500 million higher.\nThis level of fixed contracts is the key differentiator in favor of Cleveland-Cliffs relative to all other steelmakers in the United States and gives us significant visibility into our cash flows for 2022.\nDespite the lower shipments and additional inventory build, we generated $900 million of free cash flow in Q4 of 2021.\nOf this $900 million, we used $761 million to acquire FPT and use the remaining $150 million or so to pay down debt.\nSo, in other words, with only one quarter's worth of free cash flow, we were able to pay for a meaningful acquisition and still had enough cash flow left over in the quarter to pay down some debt.\nNow, speaking of our debt, we have already accomplished a lot more than we originally expected in terms of improving our leverage.\nWe keep a close eye on our overall debt levels on a dollar basis, but we also look at our overall leverage on a total debt-to-last 12 months adjusted EBITDA basis.\nWith total debt and LTM adjusted EBITDA at essentially the same level, at the end of 2021, we are at a total leverage of only one time.\nBy next quarter, our LTM-adjusted EBITDA will likely be even higher, which will continue to further reduce our overall leverage metrics.\nAs a reminder, our leverage was over four times in 2019, pre-COVID and before our transformation.\nWhile overall leverage is in great shape, we will continue to simplify our capital structure by paying down debt, replacing existing bonds with cheaper ones, and extending debt maturities.\nThe significant free cash flow we anticipate in 2022 should allow us to pursue the dual goals of repurchasing shares and reducing debt.\nWe have already redeemed our convertible notes in 2022 and several other tranches of our bonds become callable this year at pre-negotiated prices, including the two tranches of secured notes we issued in 2020.\nWe fully intend to redeem or refinance these notes at some point in 2022.\nAs expected, last year, we built a substantial amount of working capital, which should be worked down throughout this year.\nGiven this increased collateral base, we were able to take advantage of these asset levels and upsized our ABL facility last quarter, increasing our available liquidity by $1 billion to our current level of $2.6 billion.\nOn another very important note on the balance sheet, our net pension and OPEB liabilities saw a $1 billion reduction during Q4, primarily due to actuarial gains and strong asset performance, leading to a $1.3 billion or nearly 30% net reduction during 2021.\nAlso importantly, in the rising rate environment that we are in today, we have meaningful potential for further pension and OPEB liability reductions.\nJust for reference going forward, for every 50-basis-point increase in our discount rate, our expected liabilities would decline by about $500 million, all things equal.\nLooking ahead, even under today's pessimistic HRC futures curve, we would expect higher overall average selling prices in 2022 than we saw in 2021 when HRC averaged $1,600 per ton.\nOn the cost side, we expect to see increases related to energy and materials, with the largest annual change in coal and coke.\nCountering this, we have been offsetting our coke usage by increasing the usage of HBI in our blast furnaces and increasing the percentage of scrap in the charge of our BOFs.\nOur capex budget for this year is $800 million to $900 million, an increase from the previous year, primarily due to an additional reliability and environmental projects, inflation and the reline of one of our Cleveland blast furnaces, which will be out for over 100 days during Q1 and Q2.\nFull-year DD&A should be about $900 million.\nExclusive and one-time items, our 2022 SG&A expense should be around $520 million, which includes higher wages and also $40 million of FPT overhead.\nNow that we have effectively exhausted our tax NOLs, our cash tax rate should be in the 15% to 20% range, with our book tax rate at 21%.\nOur first full calendar year as the new Cleveland-Cliffs was an absolute success, and we could not have accomplished all the great results we were able to accomplish without the hard work and commitment of our 26,000 employees, approximately 20,000 represented by the USW, the UAW, the Machinists, and other unions.\nWe believe in manufacturing in the United States and in good-paying middle-class jobs.\nWe really appreciate the work of each one of our employees and the unions representing them.\nWe could not have done all that without you.\nAs great as 2021 was for Cleveland-Cliffs, we would have done even better if the automotive industry had resolved their supply chain problems.\nThe shortage of microchips cut their opportunity to build 18 million cars or more in 2021.\nAnd the automotive sector ended the year with a much smaller 13 million units.\nWhen we at Cleveland-Cliffs realized in the third quarter of 2021 that our automotive clients were still not performing up to the level that they were guiding us to build inventories for them, we then made the decision to move up to Q4 some important maintenance jobs originally scheduled for the first four months of 2022.\nThat decision, albeit correct, has clearly impacted our Q4 results.\nNow with the first month of 2022 behind us, we are starting to see improved deliveries to our automotive clients.\nWhile it is just a one-month data point, deliveries to automotive clients in January were stronger than each of the previous three months: October, November, and December.\nAnd our adjusted EBITDA in January was a solid $588 million.\nFurthermore, as the microchip shortage improves during 2022, the automotive companies will need a lot more steel this year than in 2021.\nThis steel comes primarily from Cleveland-Cliffs.\nWe are, by a huge margin, the largest supplier of steel to the automotive industry in the United States.\nLet's make this abundantly clear to our investors.\nThere is no other steel company, integrated or mini mill, in the U.S. or more broadly in North America capable of supplying all the specs and all the tonnage we supply the American automotive industry.\nCleveland-Cliffs already has all the equipment and technological capabilities that other companies are only now spending several billions of dollars to try to replicate by building new melt shops and new galvanizing lines.\nWe typically sell 5 million tons of steel directly to automotive manufacturers and also sell another 2 million to 3 million tons through intermediaries.\nPut another way, almost half of our steel sales ends up in automotive functions.\nAnother interesting fact, even though we have not deliberately tried to grow our automotive market share in 2021, we have actually increased our market share through tons resourced by our clients.\nWhile the clients do not tell us why they are taking the order away from another steel company and reassigning this specific item to Cleveland-Cliffs, we can only assume that these other steel companies are not meeting the automotive industry's high standards.\nThat's probably why these competitors have to invest several billions of dollars to play catch-up.\nCleveland-Cliffs does not have to spend this type of money and will not.\nWith our capex needs in 2022 relatively low and strong confidence in our cash flows, we are very comfortable putting in place the $1 billion share buyback program just announced.\nAnother differentiating big feature of our way of doing business is the predictable pricing model that we have in place with automotive and tin plate and some select clients in other sectors as well.\nThis feature eliminates the worst cancer in our industry, which is self-inflicted volatility.\nGoing forward, we will work with more clients to move sales under this model.\nReal clients don't need indexes.\nThey need reliable suppliers and fair prices.\nWe currently sell about 45% of our volumes under annual fixed-price contracts, by far, the highest in our industry and we want this number to continue to grow.\nThe harm caused by the volatility of steel pricing is most damaging for smaller service centers, who leave out of their inventory values.\nIronically, these same folks are the ones who create volatility in the first place, panic buying, double and triple ordering when supply is tight, and then halting purchases altogether when inventories are temporarily adequate, perpetuating a never-ending cyclicality.\nWe are convinced that it is in everyone's best interest to limit volatility in our industry.\nAnd that's not only desirable but also feasible.\nThat's why we are moving away from sales to smaller players, further concentrating on the larger clients, which already make up the vast majority of our sales.\nAt this point, all important clients of Cleveland-Cliffs are being offered index-free deals to continue to do business with us.\nMarrying stable costs with stable prices up and down the supply chain can create a much healthier business environment for steel in the United States.\nAnother ongoing important matter for the future of Cleveland-Cliffs is our commitment to ESG.\nThat was evident with our purchase of FPT, the national leader in prime scrap, which was completed in the fourth quarter.\nThe integration of FPT has gone remarkably well, and we are grateful for the buy-ins of the 600 employees of FPT, they are now employees of Cleveland-Cliffs.\nSince closing the deal on November 18, we have made substantial moves securing a number of additional sources of prime scrap uptake.\nMost notably, the largest automotive stamping plant in the country.\nThis particular stamping plant alone generates more than 150,000 tons of prime scrap per year.\nOur agreement replaced an incumbent scrap company, who had been servicing this stamping plant for decades, even before this scrap company was acquired by a mini mill several years ago.\nOur deal was made possible with a compelling proposition.\nThis automotive manufacturer buys the steel primarily from Cleveland-Cliffs, and now we can feed their scrap directly back to our steelmaking shops.\nThis is not just recycling steel, it's a real closed loop.\nA closed-loop is a key piece of our automotive clients' environmental strategy, as well as a key piece of our own environmental strategy at Cleveland-Cliffs.\nOn the carbon emission side, we continue to lower our usage of coal and coke by increasing the utilization of HBI as a significant part of the burden in our blast furnaces.\nWhile our flagship direct reduction plant in Toledo was originally built to supply third parties EAFs with HBI, this HBI is now being exclusively used in-house within Cleveland-Cliffs; the vast majority in our blast furnaces, playing a central role in lowering both our coke rate and our CO2 emissions.\nFurthermore, we are currently working with Linde, our largest supplier of industrial gases, to implement the utilization of hydrogen in Toledo.\nAs you may know, our state-of-the-art direct reduction plant was originally designed and built with the possibility of using up to 70% of hydrogen in the mix as reductant gas.\nWe expect to report on the usage of hydrogen and the production of the first hydrogen-reduced HBI in steel in 2022.\nThe same goes for our iron ore pellets, another key competitive advantage we have and a driver of lower emissions relatively to foreign competition that uses primarily sinter feed ore in their blast furnaces.\nGoing forward, we will be limiting the tonnage of iron ore pellets we sell to third parties.\nIron ore is a finite resource and the time and cost it takes to get permits and extend life of mine is incredibly cumbersome.\nIn addition, iron ore pellets are Scope 1 emission for Cleveland-Cliffs, but they are Scope 3 emissions for the clients we sell them to.\nUnfortunately, the Scope 3 emissions are not accounted for, not counted in anyone's reduction targets and surprisingly, at least for now, no one really seems to care about Scope 3 emissions, therefore, producing fewer tons of pellets automatically reduce our Scope 1 emissions.\nAnd that's good enough for us, at least until Scope 3 becomes a topic of concern.\nAlso, with the use of additional scrap in our BOFs, our iron ore needs are not as high as before, and we no longer need to run our mines full out.\nWhen determined where to adjust production, our first look is at our cost structure because we are now able to produce DR-grade pellets at Minorca and mainly due to the ridiculous royalty structure we have in place with the Mesabi Trust.\nWe will be idling all production at our Northshore mine, starting in the spring, carrying through at least to the fall period and maybe beyond.\nAt Northshore, no production, no shipments, no royal payments.\nWith more scrap in the BOFs, we need fewer tons of hot metal to produce the same tonnage of liquid steel.\nAs a consequence, the Northshore idle could go longer than currently planned.\nAs another consequence of our strategy of hot metal stretching, we have dramatically lowered our needs for coke and coal.\nWe already announced last quarter that we idled our coke battery at Middletown.\nNow that our coke needs have been reduced even more, in the second quarter of 2022, we will also permanently close our Mountain State Carbon coke plant.\nThis action will not only further improve our carbon footprint but will also save us approximately $400 million in capex originally planned for this facility over the next few years.\nEven though jobs are going to be eliminated at Mountain State Carbon, we have enough job openings at other nearby Cleveland-Cliffs facilities.\nAnd we can ensure all good employees will have other employment opportunities within our company.\nOn that note, the last piece of our environmental strategy relates to how we operate our eight blast furnaces.\nOur presence in highly specified automotive grade materials, particularly exposed parts, necessitates the use of blast furnaces.\nEAFs continue to be unable to demonstrate that they can compete and produce the entire spectrum of specs demanded by the car manufacturers.\nThat's the main reason why all the major steel suppliers located in countries with a strong presence of automotive manufacturing like in Japan, in South Korea, in Europe, and here in the United States, are not mini-mills operating areas.\nThey are all integrated steel mills with blast furnaces and BOFs.\nCleveland-Cliffs is the one here in the United States.\nAnd we do not use the sinter, we use only pellets and HBI in our blast furnaces, enabling us to establish the new world benchmark in low coke rates and low emissions.\nThis is particularly relevant when our automotive clients, with a worldwide presence, compare Cleveland-Cliffs against their other well-known automotive steel suppliers from countries like Japan, South Korea, Germany, Austria, Belgium, or France, among others.\nOur full control over the entire supply chain from pellets to HBI to prime scrap creates a huge differentiation in favor of Cleveland-Cliffs, one that is impossible to replicate in Asia or in Europe.\nThat said, we also produce a lot of steel that goes to less quality intensive end users.\nA blast furnace reline is a capex-heavy undertaking, albeit totally expected in our multiyear projections.\nUnder this evaluation process, we also take into consideration other upgrades to the upstream hot end, as well as the capital related to extending the life of mine of our iron ore mines.\nWith all that, in some cases, the capital requirements of a new EAF compared to the avoidance of reinvesting in a blast furnace reline and its associated supply chain could come out close to a wash, particularly because we at Cleveland-Cliffs already have the rolling and coating capabilities in place.\nIf and when that happens, the wash or better, we might consider an EAF as a replacement to a blast furnace reline in the future.\nOne final piece on the environmental to note.\nOf all CO2 emissions generated in the United States, the emissions related to the production of steel represent just 1% of the total.\nOne more time, just 1%.\nThis number is 15% in China and 7% worldwide.\nBut here in the United States, it is just 1%.\nThe steel industry in the United States is the most environmentally friendly in the entire world.\nMeanwhile, transportation, particularly affected by automotive tailpipe emissions, is responsible for 29%, while energy is responsible for another 25%.\nThis is where the importance of steel made in U.S.A. is most significant as our very small emissions footprint, again, just 1%.\nWe will play a critical role in improving the emissions of these two sectors, which, combined, are responsible for more than 50% of all CO2 emissions in the United States.\nFor one, Cleveland-Cliffs has been prepared for the transition from ICE to electric vehicles long before EV's rapid adoption.\nAnd we have the right steels necessary to meet the automotive industry target of 50% EV adoption by 2030.\nOn the energy side, we need more renewables, like solar and wind, and both are steel-intensive.\nCliffs is the only producer in the United States of the electrical steels needed for the modernization of the electrical grid, which received $65 billion in funding under the recently passed infrastructure bill.\nOur non-oriented electrical steels, we call it NOES, is used for motors in both hybrids and BEVs.\nThe infrastructure bill also includes another $7.5 billion earmarked for charging stations for electric vehicles.\nEach charger uses approximately 50 pounds of GOES, grain-oriented electrical steel, and we are talking about half a million of charging stations, plus the equivalent amount of transformers to tie down these charging stations into the grid.\nWith all that and no other producer of GOES or NOES in North America other than Cleveland-Cliffs, in 2022, we have a more than full order book for electrical steels.\nAnd that's just the beginning of the EV revolution, which will certainly progress between now and 2030.\nWith all we at Cleveland-Cliffs are doing related to carbon emissions, I can't believe so many companies are being given a free pass by the investment community, despite not doing much more than just saying they will be carbon-neutral by 2050.\nWhat I have just laid out here are real, concrete, undeniable measures to reduce emissions, and we are implementing them all companywide at Cleveland-Cliffs.\nWe will continue to be able to track our progress in 2022, 2023, 2030, and beyond.\nAnd we will watch how much others will actually do here in the United States and abroad.\nThe future, and specifically, 2022, is clearly bright for Cleveland-Cliffs.\nUnderlying demand remains strong, infrastructure-related spending has started, particularly regarding electrical steels.\nAnd the chip shortage affecting the automotive has begun to ease, leading to meaningful pent-up demand for cars and trucks.\nThat should benefit Cleveland-Cliffs a lot more than any other steel company in the United States.\nIn the meantime, we will take full advantage of the market's lack of appreciation or lack of understanding of our business by buying back our stock, all to the benefit of our loyal shareholders.\n",
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"content": "compname reports full-year and fourth-quarter 2021 results and announces $1 billion share repurchase program.\nq4 revenue $5.3 billion versus $2.3 billion.\nas of february 8, 2022, company had total liquidity of approximately $2.6 billion.\nexpect to see higher average selling prices for our steel in 2022 than 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: Slides for today's call are posted on our website and we invite you to follow along.\nParticipants are cautioned not to place undue reliance on these statements, which reflect management's opinions only as of today, November 4, 2020.\nInformation on potential factors and risks that could affect our actual results of operations is included in our SEC filings.\nThe company undertakes no obligation to revise or publicly release the results of any revision to the statements made in today's call, other than through filings made concerning this reporting period.\nIn addition, today's discussion will include references to non-GAAP measures.\nClean Harbors believes that such information provides an additional measurement and consistent historical comparison of its performance.\nStarting on Slide 3.\nWe delivered exceptional results in Q3.\nAnd I can't say enough about the efforts of our team in driving these outstanding performance.\nSince the outset of the pandemic in March, everyone from really the top levels of the organization to our frontline workers have excelled in response to this challenge, and it's truly been a team effort.\nAt its core, Clean Harbors is a crisis response company and we can still thrive in difficult environments like the one we have all faced over the past eight months.\nAnd the resiliency of our organization and the versatility of our business model clearly were evident here in Q3.\nRevenue, while down year-over-year due to the unprecedented market conditions, was up nearly $70 million on a sequential basis.\nThis growth was driven by an accelerated recovery in several core lines of business in our Environmental Services segment.\nAt the same time, we also saw a strong sequential pick up within Safety-Kleen.\nAdjusted EBITDA of $161.2 million included $13.3 million in government programs, primarily from the revised CEWS legislation in Canada.\nThe high level of EBITDA supported by controlled capital spending resulted in adjusted free cash flow of $123.5 million, a quarterly record for the company.\nMike will review the P&L in more details in his remarks.\nTurning to our segment results on Slide 4.\nEnvironmental Service revenues declined 10% from a year ago but were up 6% from Q2.\nAs many of our service businesses bounced back from the early days of the pandemic, adjusted EBITDA grew 16%.\nThis increase was attributable in part to our cost reduction efforts, productivity improvements and a healthy mix of higher margin work.\nThe two government programs accounted for $10 million of adjusted EBITDA in this segment.\nRevenue from our COVID-19 decon work totaled $29 million and our team has now completed a total of more than 9,000 COVID-19 responses.\nThough incineration utilization dipped to 80% due to the timing of turnarounds and a production lag from some of our customers, we continue to execute on our strategy to capture high-value waste streams across our network.\nThis resulted in an average price per pound increase of 5% from the year earlier period.\nLandfill volumes declined 6% as strong base business largely offset the lack of remediation and waste project opportunities.\nMoving to Slide 5.\nSafety-Kleen revenue was down 18% from a year ago, but up 17% sequentially due to the recovery in both the branch and the SK Oil businesses.\nThe lifting of local restrictions across much of North America led to a sharp increase in vehicle miles driven, generating higher lubricant demand.\nThe recovery in demand for base oil and lube products enabled us to restart three of our rerefineries during Q3.\nGiven the declining market value of waste oil, we maintained high charge-for-oil rates used for motor oil and increased our collection volumes to 50 million gallons.\nThat is 16% ahead of Q2.\nSafety-Kleen's adjusted EBITDA declined 15%, mostly due to the lower revenue.\nThis decline was partly offset by our cost reduction initiatives, as well as the government assistance programs that provided $2.5 million to this segment in Q3.\nParts washer services we're off 10% in the quarter, which was promising given that we originally expected the SK branch business to be at 85% of normal levels in Q3.\nPercentages of blended products and direct volumes came in as expected, but at lower volumes overall.\nTurning to capital allocation on Slide 6.\nIn light of the pandemic, our strategy has been more about capital preservation to ensure that we exit this global crisis well positioned for growth, and I am confident that we will.\nCapex spend was extremely low in the quarter and we will continue to proceed with caution on every internal dollar spend.\nThat being said, we continue to invest in certain projects, particularly at our plants that we believe will generate a strong return.\nIn terms of M&A activity, opportunities are available, and we have been exercising patience, though, as we believe that we can be more opportunistic going forward in light of the pandemic.\nIn terms of share repurchases and debt repayment, we are active on both fronts in Q3.\nLooking ahead, we enter the final quarter of 2020 in great shape.\nOn the sales side, we are working closely with customers to help drive a measurable recovery in many of our core businesses.\nOur national footprint, reputation for safety, and emergency response capabilities have been competitive differentiators for us.\nOn the bottom line, our prudent cost actions and careful capital spending have helped us generate record margins and cash flow -- free cash flow in the past two quarters.\nOur decontamination business continues to serve as a natural hedge against further slowdowns in other parts of our company.\nWithin Environmental Services, we expect strong incineration utilization in Q4 based on the lower planned turnaround days and the availability of waste in the marketplace.\nWe anticipate our offerings within Industrial Services and Tech Services to close out the year on an upward trajectory.\nField Services remains on track for a phenomenal year due to the COVID-related revenues, which we expect to exceed $100 million.\nWithin Safety-Kleen, we remain below normal demand levels, but we've seen a vast improvement from the lows of the April-May timeframe.\nWe're continuing to monitor and manage the impacts of localized COVID outbreaks.\nObviously, new shelter-in-place mandates could derail our recovery in the Safety-Kleen branch business, but to-date, we have seen nice steady recovery since both the U.S. and Canada reopened.\nFor Safety-Kleen Oil, our primary rerefineries are all back online, and base oil pricing is stable due to the supply conditions brought about by recent hurricanes along the Gulf Coast.\nWe continue to actively manage our charge-for-oil rates as we seek to further grow our collection volumes to supply our network.\nSo in conclusion, we are encouraged about our overall prospects as we enter the final quarter of 2020.\nOur Q3 results confirm the resiliency of this company.\nDespite the economic uncertainties that all companies are facing in today's environment, we are confident that we have put our company in the best position possible to succeed as we close out 2020.\nOur company clearly delivered outstanding results this quarter.\nI want to echo Alan's remarks about the organization.\nWe have an outstanding team that is able to meet the needs of our customers during a crisis like the pandemic in ways most companies cannot.\nIt's not just the decontamination work where we are heading into locations that others have evacuated for safety reasons.\nIt is the fundamental DNA of Clean Harbors and how this company measures up to challenges.\nWe excel at generating new revenue streams, meeting customer needs during times of disruption and improving operational efficiencies, all while doing it safely and under rapidly evolving health protocols.\nI said it to open my remarks last quarter and they're worth repeating.\nI couldn't be more proud of the way our organization had met the challenges of this pandemic head on.\nTurning to Slide 8 and our income statement.\nOur third quarter results exceeded the expectations we set when we resumed guidance in August.\nRevenue declined 13% year-over-year, but on a sequential basis, was up nearly $70 million.\nPreparing for the possibility of a protracted downturn, we have continually -- we have continued to aggressively manage our cost structure.\nThese comprehensive efforts, combined with assistance we received from government programs, mostly Canada this quarter, resulted in a 310 basis point improvement in gross margins.\nAdjusted EBITDA increased to $161.2 million from a year ago.\nExcluding the government assistance, adjusted EBITDA would have been $147.9 million, down only 6% year-over-year, despite revenues being 13% lower.\nAdjusted EBITDA margins of 20.7% was 310 basis points -- was up 310 basis points from last year's third quarter, which speaks to the effectiveness of our actions.\nWe have now improved our adjusted EBITDA margins on a year-over-year basis for 11 consecutive quarters.\nGiven our lower revenue, our SG&A total was down in the quarter, but our performance also demonstrated the benefits of our cost reduction and productivity efforts.\nWe lowered SG&A by nearly $16 million or 13% in Q3.\nOf that total, $2.8 million was related to the impact of CARES and CEWS.\nI would like to point out that these programs have been critical to support headcount levels higher than they would have otherwise been both here and in Canada.\nIn the quarter, we saw the full impact of the series of productivity programs and cost actions we initiated in Q2.\nOur ability to rapidly flex down our structure and maintain expenses at a lower level, even as revenues were coming back, was a key factor in our strong third quarter results.\nFor full year 2020, we are targeting SG&A of approximately 14.5% of revenue, continuing a positive trend that began several years ago.\nDepreciation and amortization in Q3 was up slightly at $74.5 million.\nFor the full year, we continue to expect depreciation and amortization in the range of $285 million to $295 million, which is slightly below last year.\nIncome from operations increased by 4%, reflecting the higher gross profit and our overall effectiveness at managing the business.\nEarnings per share was $0.99 in Q3 versus $0.65 a year ago or $0.90 versus $0.72 on an adjusted basis.\nTurning to Slide 9.\nWe concluded Q3 with our balance sheet in great shape.\nCash and short-term marketable securities at September 30 exceeded $530 million.\nOur liquidity increased even though we paid back the remaining $75 million of funds we had drawn on the revolver under the abundance of caution when the pandemic began.\nOur payables and receivable balance grew in the quarter, along with the business, but both categories remain well below last year levels and our collections team is doing an outstanding job keeping cash coming in the door.\nOur debt obligations decreased to below $1.56 billion with the paydown of the revolver.\nLeverage on a net debt basis now sits at 1.9 times for the trailing 12 months ended 9/30, which is our lowest level in nearly a decade.\nOur weighted average cost of debt remains at an attractive 4.2% with a healthy blend of fixed and variable debt.\nLast week, we renewed our revolving credit facility with our lending group, led by Bank of America, and we're grateful for their continued strong support.\nWe put a new five-year $400 million lending facility in place.\nWe typically uses asset-backed loan agreement only for letters of credit.\nTurning to cash flows on Slide 10.\nCash from operations in Q3 was nearly flat with prior year at $143.9 million.\nCapex, net of disposals, was down more than 60% to $20.4 million, reflecting our COVID response plan to be extremely cost prudent with our capital.\nThe result was record adjusted free cash flow in Q3 of $123.5 million, which is 35% ahead of 2019.\nFor the year, we continue to target capex, net of disposals and excluding the purchase of our headquarters, in the range of $155 million to $175 million.\nDuring the quarter, we stepped up our share repurchases as we bought back 400,000 shares at an average price of just over $55 for a total buyback of $22.2 million in Q3.\nYear-to-date, we have we repurchased slightly above 700,000 shares.\nOf our authorized $600 million share repurchase program, we have $245 million remaining.\nMoving to guidance on Slide 11.\nGiven our performance, and based on current market conditions, we are raising our 2020 guidance.\nWe now expect 2020 adjusted EBITDA in the range of $530 million to $550 million.\nWhile this guidance assumes continued localized outbreaks of the virus, it does not assume a national shelter-in-place order due to COVID-19.\nThis also -- this guidance also assume $3 million to $5 million of government subsidy money in Q4.\nHere's how our full-year 2020 guidance translates from a segment perspective.\nIn Environmental Services, we expect adjusted EBITDA to grow in the low-teens percentage above 2019's level of $446 million.\nGrowth and profitability within incineration, contributions from the expected $100 million-plus of decontamination work, government assistance programs, and a rebound in the majority of our services business and comprehensive cost measures, are driving this positive result.\nFor Safety-Kleen, we anticipate adjusted EBITDA to decline in the high-teens percentage from 2019's $282 million.\nWe expect the branch business to remain below pre-COVID levels in Q4, but we -- but continuing to improve from Q2 levels as it did in Q3.\nAt the same time, we expect SK Oil to continue its recovery from Q2 where we temporarily closed our rerefineries.\nWe have continued to be successful at aggressively managing the front end of our rerefining spread.\nIn our Corporate segment, we expect negative adjusted EBITDA to be up a few percentage points from 2019's $188 million due to increases in 401(k) contributions, environmental liabilities, severance and bad debt, mostly offset by lower incentive compensation and cost savings.\nBased on our current EBITDA guidance and working capital assumptions, we now expect 2020 adjusted free cash flow in the range of $250 million to $270 million.\nWe believe this puts us in an enviable position to execute the cost allocation strategy that Alan outlined.\nTo summarize, the company delivered an exceptional quarter both operationally and financially.\nWe enter the last quarter of the year with fairly strong momentum across our facilities network, including our rerefineries and within the majority of our service businesses.\nFor the most part, the macroeconomic end markets we serve continue to improve.\nChemical and industrial production, which paused a bit in Q2, began to resume in Q3.\nAs more parts of the economy have reopened in the U.S. and Canada, vehicle miles driven has increased.\nWe see a steady march forward to close out the year, albeit with normal seasonality in some of our businesses.\nWe also are beginning to see some project and turnaround work pushed out until 2021, along with new opportunities such as PFAS actually benefit us down the road.\nBut overall, we believe the short term and longer-term trends within both our operating segments favor us.\nWe look forward to closing out 2020 on a strong note and we are well-positioned as we head into 2021.\n",
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"content": "q3 adjusted earnings per share $0.90.\nq3 earnings per share $0.99.\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: slides for today's call are posted on our website, and we invite you to follow along.\nParticipants are cautioned not to place undue reliance on these statements, which reflect management's opinions only as of today, February 24, 2021.\nInformation on potential factors and risks that could affect our actual results of operations is included in our SEC filings.\nThe company undertakes no obligation to revise or publicly release the results of any revision to the statements made in today's call other than through filings made concerning this reporting period.\nIn addition, today's discussion will include references to non-GAAP measures.\nClean Harbors beliefs that such information provides an additional measurement and consistent historical comparison of its performance.\nStarting on slide three.\nWe concluded 2020 with a strong fourth quarter.\nOur Environmental Services segment outperformed our expectations, driven by a combination of factors, including the level of high-value waste in our disposal network, greater-than-expected COVID decontamination work and ongoing cost controls.\nTotal fourth quarter revenues were in line with expectations as our Safety-Kleen business remained constrained by the effects of the pandemic.\nAdjusted EBITDA in Q4 increased to $136.1 million, which included $5.6 million in benefits from government programs, primarily from Canada.\nFor the full year, adjusted EBITDA grew by 3% to $555.3 million, with annual margins growing to 17.7%.\nWe generated record adjusted free cash flow of $265 million, a noteworthy accomplishment considering the economic disruption caused by the pandemic.\nWithout question, the success we achieved in 2020 is a direct result of the dedication, flexibility and perseverance of our exceptional team.\n2020 was a challenging year on many levels.\nTurning to our segment results, beginning with Environmental Services on slide four.\nRevenue, while down year-over-year due to a market -- due to market conditions, was up on a sequential basis.\nTypically, Q4 is a seasonally weaker quarter for us, but the $18 million increase from Q3 is evidence that many of our markets are on the road to recovery.\nWe also saw strong disposal and recycling volumes to close out the year.\nAdjusted EBITDA grew by 13% from a year ago, with margins up nearly 400 basis points.\nThis was driven by a combination of business mix, cost savings and $3.9 million in benefits from government assistance programs in Q4.\nRevenue from our COVID-19 decon work totaled $31 million in Q4.\nFor the full year, our team completed nearly 14,000 responses and was an essential resourcing and protecting our customers' people and facilities.\nIn Q4, we benefited from a record level of drums collected as well as some high-value complex waste streams we received into our network.\nThis resulted in an average price per pound increase of 16% from the year earlier period when we saw more bulk streams.\nIncineration utilization in the quarter was 84% due to a higher-than-expected number of maintenance days.\nLandfill volumes were down 37% in the quarter as the lack of remediation and waste projects opportunities intensified with the resurgence of the pandemic.\nHowever, our strong base landfill business largely offset that decline with a 42% increase in our average price per ton.\nMoving to slide five.\nSafety-Kleen revenue was down 15% from a year ago, but was flat sequentially as the ongoing recovery offset normal year-end seasonality.\nVehicles miles driven had been on a nice upward trajectory throughout the summer, but plateaued a bit in Q4, with the COVID-19 surge resulting in some new local restrictions in areas such as California, and all across Canada.\nMost of our core services in the SK branch business were down year-over-year as a result, but flat from Q3.\nSafety-Kleen's adjusted EBITDA declined 21%, mostly due to the lower revenue and business mix.\nThis decline was partly offset by our cost reductions initiatives as well as the government assistance programs that provided $1.4 million of benefits in Q4.\nWaste oil collections were 49 -- no, excuse me, were 49 million gallons in Q4 with a healthy average charge for oil, given the lack of available outlets for generators.\nOn the SK oil side, we saw typical seasonal softening of the demand for base oil and lube products.\nHowever, due to lower production levels in the traditional refinery space, available base oil and lubricant supply shrank in the quarter, resulting in a rising price environment that should benefit us here in 2021.\nPercentages of blended products and direct volumes came as expected and consistent with prior year.\nTurning to slide six.\nLooking back at 2020 from a capital allocation standpoint, our strategy due to the pandemic was focused on capital preservation, which served us well.\ncapex in Q4 was slightly higher than the prior year, but our full year spend was down from 2019.\nMoving forward, we expect to focus on internal growth capital on our plants and other assets that we believe generate the best returns.\nFrom an M&A standpoint, our opportunity pipeline is healthy, as businesses emerge from the pandemic, and we gain a clear light -- line of sight on our end markets.\nWe prudently increased our level of share repurchases in Q4 and had an active repurchase program for the year, and Mike will provide the detail on our buyback shortly.\nLooking ahead, we're beginning 2021 in excellent shape, both operationally and financially.\nThe markets we serve are on an upward trajectory.\nFor our lines of business that have been held back by the pandemic, such as waste projects and remediation, we expect a measurable recovery this year.\nIn 2021, we expect to pursue growth opportunities through our core suite of offerings and by capitalizing on market conditions.\nAnd Mike is going to talk about our new sustainability report in a moment.\nBut let me say that we expect to take full advantage of the growing market acceptance of our sustainable offerings in 2021 and beyond.\nWe provide a broad array of green solutions that go well beyond our role as the largest collector and recycler of waste oil.\nWithin Environmental Services, we entered the year with higher deferred revenue and given the availability of waste in the marketplace, expect strong incineration performance in 2021.\nWe anticipate our offerings within Industrial Services and Tech services to grow from last year.\nWe expect Field Services to generate $25 million to $35 million of COVID-related revenues in 2021.\nWithin Safety-Kleen, we remain below normal demand levels as we kick off 2021.\nHowever, later this year, we anticipate a steady recovery in the SK branch business.\nFor Safety-Kleen Oil, our rerefineries are producing well.\nAnd as I mentioned, pricing for both base oil and blended products is favorable to start the year.\nWe will continue to actively manage our charge for oil rates, while focusing on growing collection volumes to supply our rerefinery network and take advantage of market conditions for recycled fuel oil.\nAs I look at 2021, the underlying dynamics in both our operating segments remain positive, and we expect a strong sales growth year with healthy free cash flow as a result.\nI anticipate another great year for the company in 2021.\nBefore I take you through the financials, let me comment briefly on our first ever sustainability report, which is available on the IR section of our website.\nWe're proud of this document, which we created based on the Sustainability Accounting Standards Board framework.\nThe document highlights the integral role that sustainability plays in our business decisions as well as our environmental, social and government goals and benchmarks for 2030.\nThe At a Glance page of the report shown on slide eight is an overview of some of the -- of our ESG benchmarks.\nI want to reiterate the point that Alan made about ESG and sustainability as foundational to our business.\nFor many customers, we are their sustainability solution.\nWhen companies generate potentially harmful byproducts, they call Clean Harbors to safely remove and dispose of them.\nWhen they accidentally release chemicals into the environment, they call Clean Harbors to help clean it up.\nWhen they have waste oil, solvents, precious metals or paint, they call Clean Harbors to recycle.\nThe new report also highlights the vital role our employees play in our performance.\nWe strive to create a diverse and inclusive culture, one that values the unique backgrounds, perspectives and experiences of our people.\nWe are committed to building a sustainable culture through training programs that enable our employees to have -- to enjoy long and successful careers at Clean Harbors.\nI encourage everyone to take a look through the report.\nIt provides the detailed picture of how closely intertwined sustainability is with our entire organization, culture and business model.\nWe ended 2020 on a high note with another strong financial performance.\nIf you asked me back in April, when the pandemic began, what level of revenue, adjusted EBITDA and adjusted free cash flow we would have delivered this year, these would have not been the numbers.\nOur Q4 adjusted EBITDA results exceeded the guidance we provided in November.\nRevenue declined 9% year-over-year, but was up in the third quarter despite Q4 typically being a sequentially lower quarter due to seasonality.\nOur efforts to control costs and grow our highest margin businesses, combined with some further government program assistance, resulted in 180 basis point improvement in gross margin.\nAdjusted EBITDA grew 3% to $136.1 million.\nOur Q4 adjusted EBITDA margin rising 190 basis points from last year speaks to the effectiveness of the actions we have taken this year.\nWe have improved our adjusted EBITDA margins on a year-over-year basis for 12 consecutive quarters.\nFor the full year, our adjusted EBITDA margins grew 17.7% -- grew to 17.7%.\nIf you excluded the $42.3 million of government assistance, those margins would have been 16.3% or a 50 basis point improvement from 2019.\nSG&A total costs were down in the quarter based on our lower revenue and cost controls.\nBut on a margin basis, we're essentially flat.\nFor the full year, SG&A as a percentage of revenue was 14.3%, which beat our target of 14.5%.\nFor 2021, using the midpoint of our guidance range, we would expect SG&A to be up in absolute dollars from the prior year and essentially flat on a percentage basis.\nDepreciation and amortization in Q4 was down to $71.4 million.\nFor the full year, our depreciation and amortization was $292.9 million, which was within our expected range.\nFor 2021, we expect depreciation and amortization in the range of $280 million to $290 million.\nIncome from operations in Q4 increased by 18%, reflecting a higher gross profit, cost controls and mix of revenue.\nFor the full year, our income from operations rose 10% to $251.3 million.\nTurning to slide 10.\nWe conclude the year with our balance sheet in terrific shape.\nCash and short-term marketable securities at December 31 were $571 million, up nearly $40 million from the end of Q3.\nOur debt was at $1.56 billion at year-end, with leverage on a net debt basis at 1.8 times, our lowest level in a decade.\nOur weighted average cost of debt is 4.2%, with a healthy mix -- healthy blend of fixed and variable debt.\nWith the recent revolver we put in place, we have no debt maturities until 2024.\nTurning to cash flows on slide 11.\nCash from operations in Q4 was $113.2 million.\ncapex, net of disposals, was up slightly to $43.6 million.\nThat combination resulted in adjusted free cash flow in Q4 of $69.6 million.\nFor the year, we hit our net capex target, excluding the purchase of our headquarters, with $165.6 million of spend.\nThat helped us deliver record annual adjusted free cash flow of $265 million, which is toward the high end of our guidance range.\nFor 2021, we expect net capex in the range of $185 million to $205 million, which is higher than prior year.\nOur net capex as a percentage of revenue ranks as one of the lowest among our specialty waste peers.\nDuring the quarter, we increased the level of our share repurchases as we bought back 500,000 shares at an average price just under $71 for a total buyback of $35 million.\nIn 2020, we repurchased slightly over 1.2 million shares of our authorized $600 million share repurchase program, we have just under $210 million remaining.\nMoving to guidance on slide 12.\nBased on our 2020 results and current market conditions, we expect 2021 adjusted EBITDA in the range of $545 million to $585 million.\nThat amount in 2021 should be about $16 million to $18 million compared with $18.5 million in 2020.\nLooking at our guidance from a quarterly perspective, we expect Q1 adjusted EBITDA using our revised definition to be 5% to 10% below prior year levels given the record Q1 results we posted in 2020 prior to the pandemic taking hold and the deep freeze we are experiencing in the Midwest and the Gulf here in February.\nHere is how our full year 2021 guidance translates from a segment perspective.\nIn Environmental Services, we expect adjusted EBITDA to decline in the mid-single digits on a percentage basis from 2020.\nWe expect to benefit from growth and profitability within incineration, a rebound in the majority of our service businesses, along with our comprehensive cost measures, but not enough to fully offset the decline in high-margin decontamination work as well as the large contribution from government assistance programs in 2020 that totaled $27.1 million in this segment.\nFor Safety-Kleen, we anticipate adjusted EBITDA to increase in the mid- to high single digits on a percentage basis from 2020.\nDespite the fact this segment received $12.2 million in government assistance last year.\nWe expect a mild rebound in the branch business weighted toward the second half of the year post vaccination.\nAt the same time, we expect SK Oil to deliver a vastly improved performance in 2020, given the current base oil industry supply dynamics as well as our ability to aggressively manage our rerefining spread and collect more gallons of waste oil.\nIn our Corporate segment, we expect negative adjusted EBITDA to be flat with 2020, which includes $3 million of governance assistance.\nFor 2021, our EBITDA guidance assumes receiving $2 million to $3 million of Canadian government assistance.\nWe are not assuming any additional CARES money in 2021 at this time, but we are reviewing the new program.\nBased on our EBITDA guidance and working capital assumptions, we now expect 2021 adjusted free cash flow in the range of $215 million to $255 million.\nWe believe this puts us in a great position to execute on our capital allocation strategy.\nIn summary, although the pandemic is still with us, we entered the new year with strong momentum in multiple service businesses and most importantly, across our facilities network.\nIndustrial production in the U.S. is back on the rise by all indications, particularly in the chemical space.\nThe Chemical Activity Barometer, published by the American Chemistry Council, show that industry levels have been climbing sequentially from May to January, and January was the first time in 10 months that the activity levels were above the prior year, which is a great sign for us.\nIn addition, our rerefinery business is off to a great start, given the current market conditions.\nWe expect some of the project and turnaround work that was pushed out in 2020 to benefit us this year and the overall sales pipeline remains strong.\nWhile we are seeing COVID cases decline sharply in recent weeks, we anticipate continued opportunities for near-term decontamination work and disposal of vaccination waste volumes.\nOverall, the number of favorable industry and regulatory trends should support our business moving forward.\nAnd while we don't give specific revenue guidance, we certainly expect aline growth in 2021.\n",
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"content": "sees 2021 adjusted ebitda in range of $545 million to $585 million, based on anticipated gaap net income in range of $105 million to $146 million.\nperformance in quarter was again led by our environmental services segment, where we achieved better-than-expected results.\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 will start today's call with remarks from Bill Berry, Continental's Chief Executive Officer and Jack Stark, President and Chief Operating Officer.\nBill and Jack will be joined by additional members of our team, including Mr. Harold Hamm, Chairman of the Board; John Hart, Chief Financial Officer and Chief Strategy Officer; and other members of our team.\nFinally, on the call, we will refer to certain non-GAAP financial measures.\nI hope everyone is well.\nThis significant free cash flow is being dedicated to shareholder capital returns in the form of an increased quarterly dividend to $0.15 per share, continued focus on debt reduction and resumption of our $1 billion share repurchase program.\nWe appreciate our investors support and hope this continues to provide confidence in Continental being the best investment opportunity in the industry and the most shareholder return-focused company in any industry.\nDuring the second quarter, we generated a company record-breaking $634 million of free cash flow, reducing net debt by $284 million ending the quarter with $4.59 billion.\nYear-to-date, we've generated $1.34 billion in free cash flow, while reducing our net debt by $892 million.\nWe distributed $40 million to shareholders with our previous $0.11 quarterly dividend.\nWe exceeded our production guidance for the quarter, delivering 167,000 BOE a day and just over -- barrels of oil a day and just over 1 billion cubic feet of gas per day.\nWe delivered exceptional performance and efficiencies from our assets in the Bakken and Oklahoma, which Jack will provide more details.\nWith respect to hedging, we remain unhedged on crude oil.\nOn gas, we have about approximately 50% of our volume hedged through year-end with a combination of swaps and collars that provide a flow around three powertrain retaining price upsize of over $5.\nFor 2022, we have no gas hedges beyond the first quarter and no hedges at all in 2022.\nWhile we remain bullish on commodity prices given the volatility of price cycles and potential impact of government reaction to COVID variants, we continue to believe it is inappropriate for the industry to overproduce into a potentially oversupplied market, particularly with respect to crude oil.\nAs I highlighted last quarter, we remain focused on our strategic vision with four key elements I'd like to briefly discuss today.\nFree cash flow commitment and capital discipline, strengthening the balance sheet, and corporate and cash returns to shareholders.\nLet me start with our commitment to free cash flow and capital discipline.\nOur cash flow generation is robust and competitively advantaged versus our peers given our unhedged crude oil profile as shown in Slide 4.\nIn the first half of the year, we have year-to-date already generated the free cash flow we were projecting for the entirety of 2021.\nWe're announcing the potential to generate approximately $2.4 billion of free cash flow at current strip prices this year, which equates to an approximately 19% free cash flow yield.\nGiven our discipline response to rising commodity prices, our capex budget for 2021 has not changed and our reinvestment rate is trending toward 35%.\nWith regard to strengthening the balance sheet, our net debt reduction is tracking toward $1.8 billion in 2021, which will bring our year-end net debt close to $3.7 billion.\nWe expect to meet or exceed our leverage target of one-time net debt to EBITDA this year, but are not finished there.\nOur intention is to reduce absolute debt to one-time at $50 to $55 WTI, which equates to approximately $3 billion in debt.\nAlongside our strong inventory and commodity optionality, we are confident our net debt outlook is one of the many powerful attributes for both the company and our shareholders.\nAnd we believe our current credit metrics are reflective of investment grade.\nSo let me now discuss corporate returns and cash returns to investors.\nWe're generating strong corporate returns and projecting to deliver 18% return on capital employed in 2021.\nAdditionally, we're committed to disciplined and significant shareholder returns through net debt reduction and prioritizing cash returns using the multiple vehicles we have to return cash to investors, including our dividends and share repurchases.\nWe're committed to growing our dividend in a competitive and sustainable manner.\nThat is why we increased our quarterly fixed dividend by 36% versus last quarter to $0.15 a share.\nThis has tripled our original dividend rate and equals to an approximately 1.7% annualized dividend yield, which we believe is competitive with industry peers and shows ongoing growth in cash returns.\nWe are resuming our share repurchase program of $1 billion, which began in 2019 with $317 million of purchases previously executed $683 million of capacity remains.\nGiven our significant shareholder alignment you can be confident that shareholder capital returns will remain a significant priority for our company.\nThe combined shareholder capital returns in the form of the annualized dividend and projected net debt reduction by year-end 2021 alone would equate to 53% of the company's projected full year 2021 cash flow from operations, and 16% of the current -- company's current capital market.\nShare repurchases would be additive to these figures depending on the timing of additional share repurchases, which we expect to be in the near future.\n2021 guidance updates, let me share with you a little bit on where we are on that.\nAs we look ahead to the remainder of 2021, several of our key metrics are materially outperforming our original guidance such that we have updated for the following.\nNatural gas production in 2021 is now expected to range between 900,000,001 BCF a day.\nProduction expense is projected to be $3 to $3.50 per BOE better than the original guidance of $3.25 to $3.75.\nAdditionally, as reflected on Slide 16, we have improved our guidance on DD&A and crude and gas differentials.\nI also want to highlight our continued focus on ESG.\nWe recently released our 2020 ESG updates, which can be found on our website, www.\nESG has always been a key part of our DNA and something we have highlighted as a means to steward our company.\nOur ESG efforts remain focused on continuously improving and our approach is to look at all operational impacts, including land, water, and air.\nWe believe it is essential all countries and all economic participants do their part to improve the ESG in the same way, in order to better our world.\nIn closing, I did want to provide an update on the launch of the new futures contract Midland WTI American Gulf Coast, which will start trading on the Intercontinental Exchange by year end.\nThis is a combination of recommendations by the AGS Best Practices Task Force led by Harold Hamm, along with efforts by Magellan and Enterprise Products, and will be an exciting opportunity for U.S. producers seeking greater transparency, more liquidity, and access to global markets.\nAppreciate you joining our call.\nToday, I'm going to share some highlights from the outstanding results our teams delivered this quarter, and there are three key takeaways I want to leave you with.\nFirst, our assets are performing with remarkable consistency and predictability, delivering their terms in excess of 100% from our Bakken and 60% to 80% from our Oklahoma drilling programs, assuming $60 WTI and $3 NYMEX gas.\nSecond, we are on track to reduce our weighted average cost per well year-over-year by approximately 10%, and 70% to 80% of these savings are structural.\nThird, our capital efficiencies are reaching record levels and we expect to deliver a projected return on capital employed of approximately 18% for 2021.\nOur assets also provide optionality to respond to changing market conditions.\nFor example, the decision to focus up to 70% of our rigs on our Oklahoma natural gas assets in the second quarter of last year has proven to be very strategic.\nOur second quarter 2021 natural gas production in Oklahoma was up approximately 10% over the first quarter of 2020, while NYMEX natural gas prices, more than doubled over this same period of time.\nWith today's improved crude prices, we are exercising this optionality once again in migrating up to 75% of our rigs to a more oil weighted portfolio in the back half of this year.\nAs Bill highlighted, our well production remains unhedged and our shareholders are receiving the full benefit of the improved crude oil price.\nSo let's get into the quarterly highlights.\nDuring the quarter, we brought on 108 gross operated wells with 70 in the Bakken and 38 in Oklahoma.\nEarly performance from our 2021 Bakken wells is right on track as shown on Slide 8.\nThis chart compares the average performance of our 2021 wells with average performance of 488 Continental operated wells completed over the prior four years, grouped by program year.\nOver the last four years, we have also reduced our cycle time for putting Bakken wells online by 50% and dropped our completed well costs by approximately 30% driving our capital efficiencies in the Bakken to record levels.\nToday, we are producing approximately 45% more BOE per $1,000 spent in the first 12 months than we did in 2018.\nOur Bakken differentials are also improving, driven by demand for Bakken crude and the expansion of DAPL, which was put into operation on August 1.\nWith this expansion, there is approximately 1.6 million barrels of pipeline and local refining takeaway capacity from the Bakken excluding rail.\nBottom line, considering all of these improvements and the bullish market fundamentals, we are potentially entering one of the most profitable chapters in the history of the Bakken for Continental and its shareholders.\nBefore leaving the Bakken, I should point out that 11 of our second quarter Bakken completions were located in our Long Creek unit.\nThese 11 wells are excellent producers as shown on Slide 9, equally impressive by the well costs that are coming in below original estimates at approximately 6.1 million per well.\nRecent results are bellwether for things to come, as we continue developing a total of 56 wells in this unit, and we expect to complete about 30% of these wells by year-end 2021, 50% in 2020 and the remaining 20% in early 2023.\nIn Oklahoma, we continue to see excellent results from our really both our oil and gas condensate wells as illustrated on Slide 10.\nThese charts show the average well performance by year in all four of our SpringBoard project areas over the last 2.5 years.\nThe SpringBoard I -- in SpringBoard I and II, you can see that the average well performance has improved over time with great repeatability in both the condensate and oil windows.\nThis includes 155 operating wells of which 70% were oil well and 30% were condensate wells.\nNow the chart on the lower left of Slide 10 shows impressive performance from our operated oil wells in SpringBoard III and IV.\nThis is a small dataset, so we chose to break the average annual performance by producing formation to provide more color on the results we have seen to-date.\nThe chart includes seven Woodford and four Sycamore wells that we completed over the last 2.5 years.\nThe key observations from this chart is that the seven Woodford wells are performing in line with SpringBoard I and II oil wells, while there is four Sycamore wells that were completed in 2019 are significantly outperforming.\nEven more impressive is that we're on track to reduce our completed well cost by approximately 17% year-over-year.\nSince 2018, our teams have reduced completed well costs in Oklahoma by a total of 40%, which as in the Bakken has driven our capital efficiencies to record levels in Oklahoma.\nAs shown on Slide 11, we are producing approximately 80% more BOE per $1,000 spent in the first 12 months than we did in 2018.\nIn the Powder River Basin, our drilling is proceeding right on schedule.\nOur drilling teams are doing a great job and have met and exceeded our early expectation for drilling days and costs.\nWe have six wells waiting on completion and expect to have some results to share later this year.\nWe currently have two rigs drilling through year end.\nLooking ahead, we are maintaining our oil production guidance for the year, and I should point out that our second quarter production was boosted by accelerating the completion of select third quarter wells and putting them online in the second quarter.\nIn the fourth quarter, we are projecting a December exit rate of approximately 165,000 barrels of oil per day.\nWe currently have eight rigs drilling in the Bakken, two in the Powder and five in Oklahoma, and are considering adding up to one rig in the Bakken and two in Oklahoma by year end.\nIn closing, I'll mention that our exploration teams at Continental continue to generate new opportunities within and outside of our core operating areas.\nLater this year, we plan to do some exploratory drilling to test a couple of these new opportunities.\nDetails must remain confidential, but I can tell you that with success, each of these opportunities could add significantly to our deep inventory.\nSo with that, we are now ready to begin the Q&A session -- section of our call.\n",
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"content": "increased its 2021 annual natural gas production guidance to 900 to 1,000 mmcfpd.\ncontinental resources - now projects generating $3.8 billion of cash flow from operations, $2.4 billion of free cash flow for 2021 at current strip prices.\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 will start today's call with remarks from Bill Berry, Continental's Chief Executive Officer; John Hart, Chief Financial Officer and Chief Strategy Officer; And Jack Stark, President and Chief Operating Officer.\nAdditional members of our senior executive team, including Mr. Harold Hamm, Chairman of the Board, will be available for Question and Answer.\nFinally, on the call, we will refer to certain non-GAAP financial measures.\nI hope moving the earnings date was not an inconvenience for any of you.\nWe did this to be able to share several exciting things with you today.\nFirst, is our record free cash flow for the quarter of $669 million.\nClearly, 2021 is going to be a record year for us in terms of free cash flow generation.\nSecond, we have expanded both our shareholder capital and corporate returns.\nThis includes increasing our dividend by 33% from $0.15 to $0.20 per share with our return on capital employed and increasing to approximately 21%.\nThird, is the exciting news that we now have strategic positions in four leading basins across the Lower 48 with a $3.25 billion acquisition of Delaware assets from Pioneer, providing our company and shareholders with material, geologic and geographic diversity.\nLike our first quarter Powder River Basin acquisition, this transaction is accretive on key financial metrics, and the acquired assets will complement our existing deep portfolio in the Bakken, Oklahoma and Powder River.\nAnd fourth, we are now post this transaction, we have been fully returned to fully investment grade.\nAnd as we've indicated on previous calls, we believe Continental has more alignment with shareholders than any other public E and P company.\nWe focus every day on maximizing both shareholder and corporate returns.\nThe Permian Basin acquisition will be an integral contributor to these shareholder return plans.\nThis is an outstanding asset with 92,000 acres, over 1,000 locations, 50,000 net royalty acres.\nThe acquisition also comes with about 55,000 BOE per day from PDP and anticipated volumes from wells in progress.\nAnd finally, and possibly most importantly, this Permian transaction is projected to add up to 2% to our return on capital employed annually over the next five years.\nThe acquisition of these assets strongly supports the tenants of Continental's shareholder return on investment and return of investment, dividends and share repurchases.\nThese are all driven by a continued commitment to strong free cash flow.\nOur plans for low single-digit production growth are the foundation for being able to deliver strong free cash flow.\nDuring the third quarter, we took additional steps to increase returns to shareholders with our third dividend increase in as many quarters and executing on $65 million in share repurchases.\nWhile we will be taking on some additional debt to pay for the transaction, our net debt-to-EBITDAX target remains the same, less than one.\nWe expect to exit this year at a quarter annualized net debt-to-EBITDA of about 1.3 and expect to be below 1-0 1.0 by year-end 2022, assuming $60 and strip gas pricing.\nWe are unwavering in our commitment to reduce debt.\nOur 2021 cash flow generation remains very competitive versus our peers in the broader market, as shown on Slide seven.\nThis is even after our stock has nearly tripled year-to-date.\nWe see the potential to generate $2.6 billion of free cash flow this year, which equates to about 14% free cash flow yield at current prices.\nThis is significantly above the majority of our industry peers and the broader market, indicating further upside in the value of our stock.\nAs we look to 2022, we expect to provide updates on capital budget and operations, including the pending integration of our newly acquired Permian assets early next year.\nWe are confident this acquisition will further enhance our free cash flow generation.\nOur ESG performance is top of mind for me, and I want to update you with regards to our ESG performance year-to-date.\nIn the third quarter, we achieved a 98.9% gas capture rate, up from 98.3% in 2020.\nIn support of our industry-leading ESG gas capture stewardship, we have deferred approximately $45 million in revenue in 2021.\nAdditionally, we have achieved zero recordable injuries among our employees, through the third quarter 2021.\nCongratulations to the team on an outstanding performance.\nWe're proud of our teams and their exceptional commitment to continuously operate with integrity in a safe and environmentally responsible manner.\nWe'll spend the remainder of the call discussing some of the specifics on our recently announced and highly accretive expansion into the Permian Basin.\nJohn will highlight the compelling financial aspects of our expansion, and Jack will provide details regarding the outstanding geologic attributes and fully integrated nature of the deal.\nOur new position in the Permian as shown on Slide four, was driven by our geology-led corporate strategy and is built on a strong foundation of geoscience and technical operation skills, coupled with the management team fully aligned with shareholders.\nThis transaction increases Continental's operational footprint in the area with our current acreage position across the Permian now approximately 140,000 net acres.\nLater on the call, Jack will provide details regarding this expanded Permian footprint, along with the tremendous success our teams have had growing our top-tier corporate portfolio of Lower 48 assets.\nApproximately, 75% of the price of this asset is covered by PDP value and wells in progress at current strip prices, leaving significant upside value and undeveloped acreage.\nOn a pro forma basis and at current strip prices, we expect to generate at least $3 billion of cash flow in 2022.\nOur pro forma free cash flow in '22 is projected to be about 17%.\nThis compares very favorably to our 2021 projected free cash flow yield of about 14%.\nLike our other assets, the fully integrated nature of this asset offers a multifaceted value proposition including minerals and water infrastructure that we control and provides tremendous optionality and upside in the future, as shown on Slide four.\nThe transaction has been unanimously approved by the company's Board of Directors and is effective as of October 1, with an expected closing date in the fourth quarter.\nAs Bill mentioned, today's acquisition is immediately financially accretive on cash flow and free cash flow per share, earnings per share, return on capital employed and cash margin.\nThis transaction has a number of benefits to Continental shareholders.\nLet's discuss a few of those items.\nThis transaction is credit-enhancing due to projected cash flow and rapid debt paydown benefiting our credit metrics while enhancing our commodity optionality and geographic diversity.\nIt is beneficial to the ongoing trajectory of our credit rating.\nI will discuss agency views momentarily.\nThis transaction includes a healthy amount of PDP, benefiting our EBITDAX by approximately $900 million per year at current strip prices, enhancing our credit metrics.\nAdditionally, we are projecting an incremental $500 million of free cash flow from the acquired asset in 2022 at current strip prices based on estimated '22 production and capital spending.\nCombined with our legacy assets, we expect 2022 free cash flow of at least $3 billion at strip prices for Continental.\nWe have significant flexibility in how we plan to finance the transaction.\nAs of September 30, we had approximately $700 million of cash on hand with expectations for strong free cash flow moving forward.\nOur revolver remains fully undrawn.\nOn October 29, we extended our revolver maturity to October 2026.\nAnd increased available commitments to $1.7 billion.\nWe intend to utilize available cash and our revolver to fund a significant amount of this transaction.\nRemaining acquisition financing will be derived from debt capital markets and/or bank term facilities.\nWe will not issue additional equity as a means to fund this deal.\nThis financing approach amplifies the accretive nature of this transaction on a per share basis.\nOur credit metrics also remained strong with net debt to EBITDAX projected to increase only slightly from 0.9 times in the third quarter to 1.3 times initially with the transaction but is expected to drop below 1 times during 2022 at current strip prices.\nOur target is to reduce net debt back to current levels or approximately $4 billion by year-end '22.\nWe plan to utilize 2022 cash flow to pay off the revolver funding, rebuild our cash position and pay off our '23 and '24 bond maturities at the earliest possible opportunity.\nAs you may have noted, the rating agencies have been supportive of this transaction and our plans.\nFitch has upgraded us to BBB.\nMoody's has upgraded us to Baa3 and S and P has maintained a positive outlook to upgrade to IG.\nThis positions us with two agencies at investment grade, making us fully investment-grade eligible, and one agency with a positive outlook to investment grade.\nWe are pleased with this progress as our objective is three investment-grade ratings.\nAs we have discussed in previous quarters, and as you will note in the Form 10-Q with the rise in natural gas prices, the company has elected to lock in a portion of associated cash flows through natural gas hedges at attractive prices.\nSubsequent to September 30, we have continued to layer in natural gas hedges for the second quarter of 2022 through year-end 2023.\nWe've utilized a combination of swaps and collars with an average swap of $371 and an average foot of $325 at an average collar of $496.\nThese positions are summarized in our 10-Q along with our prior positions.\nWe are largely in hedged for oil, as we believe market fundamentals are supportive of price participation due to supply and demand rebalancing.\nWe have remained capital disciplined with a projected reinvestment ratio of approximately 40%.\nReflecting back on our original guidance in February, we were projecting at that time, $1 billion of free cash flow with a reinvestment rate of 58%.\nWith our free cash flow now up approximately 160% from our original guidance, we have decided to reinvest a modest amount of additional capital this year or just under 10% of that incremental cash flow figure.\nThis is due to the associated capex from the pending Permian acquisition, additional leasehold acquisitions and incremental gas-focused activity in order to meet domestic and global natural gas consumer demand, given an undersupplied market outlook this winter.\nI'll start out by saying that the Permian assets we acquired are excellent addition to our existing portfolio.\nThey contain the key strategic components common to all of Continental's assets, including the right rocks, excellent economics, a significant contiguous acreage position with high working interest and net revenue interest, mineral ownership, surface ownership, operated water infrastructure and significant upside potential through continued operating efficiencies, technology and exploration.\nI'll touch on each of these briefly here.\nFirst and foremost, it's all about the rocks.\nReferring to Slide four, these assets contain proven, stacked oil-rich reservoirs as well as other high potential reservoirs we intend to explore and develop in the future.\nWe estimate that these assets contain an inventory of over 650 gross wells targeting three primary reservoirs, including the third Bone Spring, the Wolfcamp A, Wolfcamp B, and we think there are over 1,000 locations when you consider other known producing reservoirs that underlie this acreage.\nOn an economic basis, these assets complement our existing inventory very well delivering rates of return from 50% to well over 100% at $60 WTI and $3 NYMEX.\nThe 92,000 net leasehold acres being acquired are largely contiguous, as you can see on Slide four and highly concentrated.\nContinental will operate 98% of this acreage with an average working interest of approximately 93% per well, and over 90% of this acreage is held by production.\nThe acquisition also includes 50,000 net royalty acres.\nApproximately 70% of these royalty acres directly underlie our leasehold, which raises the average net revenue interest for wells drilled on this acreage to around 80%.\nThe acquisition also includes significant water infrastructure and surface ownership, including 31,000 surface acres, approximately 180 miles of pipeline, water facilities and disposal wells that can be expanded to accommodate growth.\nThis will provide immediate operating efficiencies and cost benefits to our operations.\nThe acquisition also includes approximately 55,000 BOE per day of production, which is inclusive of 10 wells in progress on a pro forma basis, and approximately 70% of this production is oil.\nThe last point I'll make on these assets is that they are in the early stage of development, which is exactly what we like.\nThe initial phase of testing and reservoir delineation is complete and the properties are teed-up for full field development.\nAnd as in all of our plays, we see significant opportunity to improve well performance and financial returns through optimized density and wellbore placement, operational efficiency gains and asset growth through exploration.\nMost importantly, we've expanded our operations into two additional world-class oil-weighted basins, the Powder River Basin and Permian Basin.\nThrough Grassroots leasing, trades and strategic acquisitions, we now own or have under contract approximately 140,000 net acres in the Texas portion of the Permian Basin and approximately 215,000 acres -- net acres in the Powder River Basin.\nDuring this time, we also expanded -- or we also added approximately 47,000 net acres in the heart of our springboard assets in Oklahoma.\nCombined, these assets have tremendous resource potential, adding well over one billion barrels of net resource potential to our industry-leading assets in the Bakken and Oklahoma, providing Continental shareholders a deep and geologically diverse oil-weighted inventory that will drive strong returns and profitability for decades to come.\nThis company has a long well-established track record of having an exceptional capability of transferring our unique geologic and operational expertise to new and existing basins.\nWe have created significant inflection points for the company in the past with our entry into the Bakken and Oklahoma positions.\nWe now see our position in the Permian and Powder River as an additional inflection point, representing significant complementary step changes to the company's portfolio.\nWith that, we're ready to begin the Questions and Answers section of the call.\n",
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"content": "delivering record free cash flow & strategic expansion into permian basin.\n$1.20 per adjusted share (non-gaap)) in 3q21.\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 a consolidated basis, the company reported net sales for the second quarter of $406 million and adjusted EBITDA of $15 million.\nA few highlights to mention.\nOur Paperboard business continued to see strong demand.\nBased on that strong demand, we implemented previously announced price increases across our SBS portfolio.\nWe successfully completed our largest major maintenance outage of 2021 in April at our Lewiston, Idaho mill, which impacted the business by $22 million.\nAs previously discussed, our tissue business saw lower shipments, reflecting market trends.\nConsumers destock their pantries and retailers work through elevated inventory levels.\nBoth industry data and our own sales orders point to a bottoming out of shipments in April.\nWe started seeing a recovery in May.\nWith the decrease in orders and elevated pull price levels, we took downtime on our tissue assets to meet demand and reduce inventories, which impacted our fixed cost absorption.\nWe also announced an indefinite closure of Anina Wisconsin tissue mill and an exit from the away-from-home tissue market.\nThese actions will result in a lower overall cost structure of our tissue business.\nIn comparing the first quarter to second quarter 2021 raw material inflation was largely offset by the previously announced price increases in SBS and mix.\nAnd finally, we maintained ample liquidity of $297 million at quarter end and reduced net debt by $4 million.\nAs noted during previous quarters, we remain focused on our top priorities during COVID, the health and safety of our people and safely operating our assets to service customers.\nWe're monitoring the latest trends and are adjusting protocols and policies to keep our people safe.\nLet's discuss some additional details about both of our businesses.\nAs you recall, we estimate that approximately 2/3 of paperboard demand is derived from products that are more recession-resilient and 1/3 is driven by more economically sensitive or discretionary products.\nWe continue to experience strong demand from our folding carton customers, and a recovery in food service segments.\nDemand for food packaging products and retail paper place has remained healthy throughout the pandemic.\nWe're also pleased with the market reception of our sustainability focused brands with NuVo Cup and ReMagine folding carton.\nBoth are playing a role in our favorable market position and our order books continue to be robust.\nWe are diligently working to implement the previously announced price increases.\nSince the beginning of this year, Fastmarkets RISI, a third-party industry publication recognized price increases that totaled $130 per ton in folding carton and $100 per ton in cup, including the latest increases in July of $30 per ton in folding and $50 per ton in carton.\nTypically, it takes us up to two quarters before realizing most of these price changes in our financials.\nWe will discuss the estimated impact to our 2021 results later in our comments.\nWe completed our largest planned maintenance outage for 2021 during the second quarter.\nThe economic impact from this outage to our adjusted EBITDA was $22 million, within our previously discussed range of $21 million and $24 million.\nOur industry view remains largely the same.\nThe market for tissue in the U.S. is traditionally 2/3 at home and 1/3 away from home with around 10 million tons per year of total demand.\nAs consumers spend more time at home in 2020, there was a shift toward at-home consumption.\nThroughout the pandemic, we witnessed consumer pantry loading and retailers responding by placing higher orders with existing suppliers and seeking out tertiary suppliers, both domestic and international to need demand.\nWe believe that this could have led to more than a month of excess inventory in the supply chain by the end.\nLet me share some data in context pertaining to demand trends that we witnessed in the first half of this year.\nConsumers started to return to a more normal lifestyle in Q1 and Q2 as vaccines were becoming available and restrictions were being eased.\nThis led to a reduction of at-home tissue purchases and destocking of consumer pantries.\nBased on IRI market data, consumer purchases based on dollar sales bottomed out in March.\nDue to these consumer trends, retailers were faced with higher inventories in Q1 and into Q2.\nIn response, they reduced orders to manage their inventories.\nBased on Fastmarkets RISI data, retailer shipments of finished goods bottomed out in April.\nThis is consistent with our order patterns.\nBoth external data and our own internal order patterns are indicating that we're in a demand recovery period, which we believe will continue for balance of the year.\nWe believe the industry's long-term trends are healthy, and we expect continued growth in overall consumption and private brands continuing to gain share.\nLet me provide some additional detail on our tissue volume trends.\nWe shipped 10.2 million cases in the second quarter, which was down approximately 36% and 13% compared to the second quarter of 2020 and first quarter of 2021, respectively.\nOur low point for shipments was 3.1 million cases in April.\nSince then, we've had more month-over-month growth in May and June.\nWe expect this improvement trend to continue throughout the fourth quarter.\nWe're also closely monitoring channel and customer trends to ensure that we're aligned with areas in the market with the highest long-term growth potential.\nTo adjust to reduce demand, high inventory levels and high coal prices, we took significant asset downtime in the second quarter, which negatively impacted our profitability.\nWe will continue to manage our production levels in Q3 and Q4 to service demand reduce inventory and minimize cost.\nAdditionally, in the second quarter, we announced the indefinite closure of our Neenah, Wisconsin site with production ceasing in July.\nWhile our people in Neenah operated a site well, the assets were not economically viable.\nRetail volume from Neenah is being shifted to other lower-cost facilities, such as our Shelby, North Carolina mill.\nBy closing Neenah, we're also exiting the away-from-home market, where we had a small and subscale position.\nWhile the decision was the right one for the business, it is difficult on our people and in the community.\nThe consolidated company summary income statement shows second quarter 2021, the second quarter of 2020 and the first half of each year.\nIn the second quarter of 2021, our net loss was $52 million.\nDiluted net loss per share was $3.10 and adjusted loss per share of $1.07.\nThe adjustments incorporate the impacts from the Neenah site closure as well as other adjustments.\nThe impact of the Neenah aclosure activities in the quarter was $41.7 million.\nThe noncash portion of the charge, $36.9 million was primarily a fixed asset impairment, but also included inventory and other reserves.\nThe cash portion of the charge was for employee pay during a worn notification period and severance-related expenses of $4.9 million.\nWe anticipate that we will have similar employee-related cash expenses in the third quarter, slightly above $4 million.\nThese estimates reflect our best assessment at this time, and we will update them as appropriate as we monetize the assets at Neenah.\nThe corresponding segment results are on slide seven.\nOur Paperboard business completed a major maintenance outage in the second quarter of 2021 that impacted us by $22 million, while consumer products saw lower production and demand.\nIn our comments during the second quarter, we mentioned that our adjusted EBITDA could be close to breakeven for the second quarter of 2021 relative to the first quarter of 2021 adjusted EBITDA of $54 million.\nWith $15 million of adjusted EBITDA for the second quarter, we came in better than our initial expectations.\nThe improved performance relative to expectations included the impact of the Neenah closure better tissue demand, cost mitigation efforts and better SBS price realization.\nSlide eight is a year-over-year adjusted EBITDA comparison for our Pulp and Paperboard business in the second quarter.\nWe have and are continuing to implement the previously announced price increases as well as experiencing some positive mix benefits with similar sales volumes as last year.\nOur costs were impacted by the major maintenance outage of $22 million as well as inflation in raw material inputs and freight.\nYou can review a comparison of our second quarter 2021 performance relative to first quarter 2021 performance on slide 14 in the appendix.\nPrice and mix were a limited part of the story for tissue.\nOur sales of converted products in the second quarter were 10.2 million cases, representing a unit decline of 36% versus prior year.\nOur production of converted product in the quarter was 9.6 million cases or down 40% versus the prior year.\nWith the actions that we took at Neenah, drawdown of inventory and lower incentive comp accruals in SG&A, we were able to partially offset some of the raw material inflationary headwinds.\nWe anticipate the financial impact from raw material inflation will increase in the coming quarters.\nYou can review a comparison of our second quarter 2021 performance relative to the first quarter of 2020 on slide 15 in the appendix.\nWe also have finished goods production and other financial data on a quarterly basis on slide 16 for both businesses.\nSlide 10 outlines our capital structure.\nOur liquidity was $296.5 million at the end of the second quarter.\nWith the cash flow headwinds of the second quarter behind us, we believe we will generate more free cash flow in the back half of 2021 to further reduce our net debt.\nMaintenance financial covenants do not present a material constraint on our financial flexibility, and we do not have near-term debt maturities.\nSlide 11 provides a perspective on our third quarter outlook and other key drivers for full year 2021.\nOur expectations assume that we continue to operate our assets without significant COVID-related disruptions.\nAs previously discussed, demand visibility in tissue as well as inflation expectations have and will continue to be unpredictable.\nI would like to focus my comments for the third quarter expected adjusted EBITDA of $40 million to $48 million and build up to that range from our second quarter adjusted EBITDA of $15 million.\nThe planned major maintenance outage at Lewiston in April is behind us with a negative impact of $22 million.\nAnd we recently completed the planned outage at Cypress Bend this past weekend with an anticipated impact of $3 million to $5 million.\nThe difference of the adjusted EBITDA impact between the second and third quarters resulted in an expected increase of adjusted EBITDA of $17 million to $19 million.\nPreviously, announced SBS pricing is expected to positively impact us during the quarter by $9 million to $11 million.\nWe estimate that raw material cost inflation will negatively impact our business by $9 million to $13 million in the third quarter relative to the second quarter.\nWhen comparing the second quarter to our expectations for the third quarter, we believe that our previously announced SBS price increase could largely offset raw material inflation.\nTissue shipments are expected to grow by 10% to 15% relative to the 10.2 million cases shipped in the second quarter.\nWe shipped 3.7 million cases in July relative to our average monthly shipments of 3.4 million in the second quarter and our low point of 3.1 million cases in April.\nThe recovery in tissue shipments is occurring, and we expect it to continue through the rest of 2021.\nAs we expect to reduce inventories, we anticipate production being slightly below demand.\nWith the closure of Neenah, we are exiting the away-from-home tissue business, which was approximately 100,000 to 150,000 cases per month and will mildly impact our converted shipment volume trend lines and comparisons.\nWe will also receive the benefits during the third quarter from the Neenah closure.\nWhile we are not providing specific annual guidance for 2021, there are several drivers, assumptions and variables we'd like to provide to you with an update relative to 2020.\nWe are expecting continued positive impact from the previously announced SBS price increases were expected to result in year-over-year benefits of $40 million to $45 million.\nIn our Paperboard business, planned major maintenance outages are expected to reduce our earnings for 2021 compared to 2020 by $25 million to $27 million, which is down from our previous guidance.\nWe are moving our head box project at Lewiston from the third quarter of 2021 into 2022 to accommodate our strong paperboard demand.\nWe have updated our guidance, including some adjustments to 2022 on slide 20, which reflects our current plan.\nOur current view can -- is that our tissue volume decline year-over-year will be above 20%, which is not adjusted for the impact of our exit from the away-from-home business.\nIn total, from 2020 to 2021 input cost inflation, including pulp, packaging, energy, chemicals and freight is expected to be $60 million to $70 million relative to our previous estimate of $65 million to $75 million.\nThe majority of this inflation is in pulp.\nThe Neenah site recently generated negative adjusted EBITDA.\nAnd by closing the site, we will avoid these losses and lower our overall cost structure by moving production to other sites.\nThese actions will also help realize the benefits of the Shelby investment.\nIn total, the benefit on a combined basis is expected to exceed $10 million annually with full benefit realization occurring in the fourth quarter.\nFor the full year 2021, we are also anticipating the following: we expect interest expense between $36 million and $38 million; depreciation and amortization between $104 million and $108 million; capital expenditures between $50 million and $55 million, which is slightly lower than prior expectations; and our effective tax rate is expected to be slightly higher than previous expectations at 26% to 27%.\nI would like to reiterate my comments from last quarter regarding the actions that we're taking across the company to proactively address our market-driven headwinds and tailwinds.\nIn our Paperboard business, we're benefiting from the implementation of previously announced price increases and are maximizing production to meet demand.\nThis includes moving some maintenance and a head box installation from 2021 to 2022.\nIn our tissue business, we're working with customers to offset higher costs through product and other changes.\nIn addition to the market recovery in tissue demand, we're focused on growing our volume through various sales initiatives that have been discussed in previous quarters.\nAcross both businesses, we're taking steps to reduce both short- and long-term costs.\nAs previously discussed, we continue to focus on generating cash to reduce our net debt.\nLast quarter, I spoke about performance improvement efforts focused on improving core operations in the medium to long term, aimed at achieving the full profit potential of Clearwater Paper over the next several years.\nGiven the inflation and competitive pressures in our industry, we are working to find ways like this effort to combat margin compression and achieve margin expansion.\nWe're in the planning phases currently, and I look forward to updating you when we're in the execution phase.\nLet me remind you of why I think these businesses are well positioned in the long run.\nFor our Paperboard division, we believe that the key strengths of this business are the following.\nFirst, we operate well-invested assets with a geographic footprint, enabling us to efficiently service our customers.\nWe have a diverse customer base, which serves end markets that have largely stable demand.\nSecond, not being vertically integrated enables us to focus on independent customers with unparalleled service and quality commitment.\nThird, we will lead to product and brand development, the business is well positioned to take advantage of trends toward more sustainable packaging and food service products.\nLastly, our Paperboard business has demonstrated an ability to generate good margins and solid cash flows.\nOur Consumer Products division is a leader within the growing private branded tissue market.\nFrom our vantage point, we believe the key strengths of this business are the following.\nFirst, we have a national footprint with an ability a wide range of product categories and quality tiers, which is an attractive sales proposition to our customers.\nOur expertise in manufacturing, supply chain and transportation is a key differentiator.\nSecond, there are long-term trends away from branded products to private brands.\nPrivate brand tissue share in the U.S. rose to over 30% recently, up from 18% in 2011.\nWhile these trends are impressive, we're still a long way from where many European countries are where private brands represent over half of total tissue share.\nLastly, tissue is an economically resilient and need-based product.\nHistorically, demand has not been negatively impacted by economic uncertainty.\nAfter we get beyond the COVID-related distortions in the market, we're optimistic that this business will generate meaningful cash flows over the long run.\nWe're committed to improving our business to be successful both in the near and long term, and we believe that we will come out of 2021 a better and stronger operation than where we started.\nOur balance sheet is well positioned to support us with strong liquidity, limited financial maintenance covenants and debt maturities, which are a few years away.\nWe're again with our Board to develop a medium- to long-term capital allocation plan.\nWe look forward to sharing more on these ideas, which include internal investments, external investments and return of capital to shareholders as we get closer to our 2.5 times target leverage ratio.\n",
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"content": "q2 loss per share $3.10.\nq2 adjusted non-gaap loss per share $1.07.\nq2 revenue $406 million versus refinitiv ibes estimate of $420.7 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: Joining me on the call today are Arsen Kitch, President and Chief Executive Officer; and Mike Murphy, Chief Financial Officer.\nFinancial results for the third quarter of 2021 were released shortly after today's market close, along with the filing of our 10-Q.\nOn a consolidated basis, the company reported net sales of $450 million, adjusted net income of $9 million, and adjusted EBIT of $50 million.\nA few highlights to mention, our paperboard business continue to see strong demand.\nBased on that demand, we implemented previously announced price increases across our SBS portfolio.\nAs per our expectations, we saw improving trends and tissue orders and shipments.\nWe completed the last of our major maintenance outages for the year at our Cypress Bend, Arkansas terminal.\nWe also completed the closure of the high cost Neenah tissue mill and our exit from the away-from-home tissue segment.\nWe saw accelerating inflation across both of our businesses, particularly in energy, chemicals, wood fiber and transportation, as pulp reached its peak and started to ease.\nAnd finally, we maintained ample liquidity of $270 million at quarter end and reduce net debt by another $7 million.\nAs noted during previous quarters, we remain focused on our top priorities during COVID, the health and safety of our people and safely operating our assets to serve as customers.\nWe're monitoring the latest trends and are adjusting protocols and policies to keep our people safe.\nLet's discuss some additional details about both of our businesses.\nThe industry continues to experience strong backlogs even with a higher SBS pricing that has been reported by Fastmarkets RISI, the third-party industry publication.\nWe have benefited from these industry dynamics and previously announced price increases.\nSince the beginning of this year, Fastmarkets RISI has reported price increases for the US market that totaled $250 per ton in folding carton and cardstock.\nThis includes a $50 per ton increase in October for both grades.\nWe'll continue to see strong demand from our folding carton customers and a recovery in the foodservice segments.\nWe're also pleased with the reception of our sustainability focused brands of NuVo cup and ReMagine folding carton.\nBoth are helping our customers differentiate themselves in the market.\nIt typically takes us a couple of quarters for price changes to be fully reflected in our financials.\nIt is also worth noting that our portfolio includes additional grades and price mechanisms that are not reflected in RISI's reporting.\nWe will discuss the estimated impact of our previously announced pricing to our 2021 financials later in our comments.\nFinally, we completed a planned maintenance outage at our Cypress Bend, Arkansas mill during the third quarter.\nThe financial impact from this outage to our adjusted EBITDA was $5 million.\nWe continue to operate in a difficult market environment.\nAs previously discussed, COVID led to significant volatility in tissue demand and retailer behavior in 2020 and 2021.\nWith that said, let me provide you with our point of view on the overall market.\nIn North America, we view tissue demand as being approximately 10 million tons with annual demand growth of 1% to 2%, slightly exceeding population growth.\nPre-COVID, the market was about two-thirds at home and one-third away from home.\nUsing that math, the at home market is six million to seven million tons, of which approximately two-thirds is branded and one-third is private branded.\nWe operate in the private branded market, which is approximately two million tons and has grown more quickly than the branded market.\nIn terms of the retailer, environment, clubs and the mass merchandisers have gained share at the expense of traditional grocers over the years.\nAs a reminder, we have greater exposure to grocery than the overall market.\nIn terms of supply, tissue capacity additions have primarily targeted the private branded space with capacity growth exceeding demand growth.\nTo the best, we believe that private branded manufacturers will operate a depressed capacity utilization levels in the next several years.\nLet me share some context pertaining to demand trends that we witnessed in the first nine months of the year.\nConsumers started to return to a more normal lifestyle in the first half of the year, as vaccines were becoming available and restrictions lessened.\nThis led to a reduction of at home tissue purchases and destocking of consumer pantries.\nBased on IRI market data, consumer purchases measured in dollars bottomed out in March.\nDue to these consumer trends, retailers were faced with higher inventories in the first quarter and into the second quarter.\nIn response, they reduced orders to manage their inventories.\nBased on RISI data, retailers shipments of finished goods bottomed out in April.\nThis is largely consistent with our order patterns.\nWe observed demand recovery at the retailer level throughout the third quarter.\nThere was a demand uptick in August, related to the emergence of the Delta variant that led to higher orders than we anticipated.\nSeptember order patterns return to more normal levels, but we observed another uptick in orders in late October.\nThis volatility is a reminder of the unpredictable nature of our market during COVID.\nLet me provide some additional detail on our tissue volume trends.\nWe ship 12.3 million cases in the third quarter, a 21% increase from the 10.2 million cases shipped in the second quarter.\nThis was a bit higher than our guidance of 10% to 15% growth, partly driven by the August demand uptick.\nWe expect demand to be flat in the fourth quarter relative to the third quarter.\nBut there's a high degree of uncertainty in consumer and retailer behavior as we head into the holidays.\nWe will continue to selectively take asset downtime as needed to manage inventories and our cost structure, particularly while coal prices are at elevated levels.\nThe consolidated company summary income statement shows third quarter 2021 -- the third quarter of 2020 in the first nine months of each year.\nIn the third quarter 2021, our net income was $2 million, diluted net income per share was $0.11, and adjusted net income per share was $0.55.\nThe adjustments incorporate the impacts from the Neenah mill closure as well as other adjustments.\nThe impact of the Neenah closure activities in the quarter was $5.4 million, which was related to severance and related expenses.\nCorresponding segment results are on slide seven.\nSlide eight is a year-over-year adjusted EBITDA comparison for our Pulp and Paperboard business in the third quarter.\nWe benefited from our previously announced price increases and a mild mix improvement with similar sales volumes as last year.\nOur costs were impacted by $5 million of major maintenance outage expenses, and higher inflation and maintenance expenses.\nYou can review a comparison of our third quarter 2021 performance relative to second quarter 2021 performance on slide 14 in the appendix.\nPrice/mix were a limited part of the story for tissue.\nOur sales have converted products in the third quarter were 12.3 million cases representing a unit decline of 15% versus prior year.\nOur production of converted product in the quarter was 11.4 million cases are down 25% versus the prior year.\nPlease note that we largely exited the away from home tissue segments in the third quarter of this year, which historically represented 3% to 4% of our overall case volume.\nWhile inflation pressure was significant, the action that we took it at Neenah helped offset some of the higher costs that we face.\nYou can review a comparison of our third quarter 2021 performance relative to second quarter of 2021 on slide 15 in the appendix.\nWe also have finished other operational and financial data on a quarterly basis on slide 16 for both businesses.\nSlide 10 outlines our capital structure, our liquidity was $270 million at the end of the third quarter.\nDuring the third quarter, we reduced net debt by $7 million.\nMaintenance financial covenants do not present a material constraint on our financial flexibility.\nAnd we do not have near-term debt maturities.\nWe've continued to target the net debt to adjusted EBITDA ratio of 2.5 times, which we expect to achieve by 2023.\nSlide 11 provides a perspective on our fourth quarter and full year 2021 outlook the key drivers.\nOur expectations assume that we continue to operate our assets without significant COVID related disruptions.\nAs previously discussed, demand visibility and tissue, as well as inflation expectations have and will continue to be unpredictable.\nBut that said, our expectation for the fourth quarter is adjusted EBITDA of $48 million to $56 million.\nLet me walk you through the build up to that range from our third quarter adjusted EBITDA $50 million.\nPreviously announced SBS prices is expected to positively impact us during the quarter by $7 million to $9 million which is helping to offset inflation.\nRaw material and freight cost inflation is expected to negatively impact us by $7 million to $12 million.\nThere are no planned major maintenance outages, which will benefit us, given the $5 million Q3 outage.\nTissue shipments are expected to be flat, while we take additional asset downtime to manage inventories.\nWe are expected to achieve the full run rate benefit of the Neenah closure, which we previous previously stated as being more than $10 million annualized.\nIf we take actuals for the first nine months and add our expectations for the first quarter, we expect adjusted EBITDA of $167 million to $175 million for the full year 2021.\nWe wanted to comment on some of the key drivers for 2021 relative to 2020.\nWe are expecting continued positive impact from previously announced SPS price increases, which are expected to result in year-over-year benefits of $53 million to $55 million.\nIn our paper board business, planned major maintenance outages are expected to reduce our earnings for 2021 compared to 2020 by $27 million.\nOur guidance for 2022 planned major maintenance outages is on slide 20.\nWe expect to have additional major maintenance outages in 2023.\nAnd we'll provide an update when we refine our estimates.\nOur current view is that our tissue volume decline year-over-year will be above 20%, which is not adjusted for the impact of our exit from the away-from-home business.\nIn total, from 2020 to 2021, input cost inflation, including pulp, packaging, energy, and chemicals, as well as freight is expected to be $80 million to $85 million relative to our previous estimate of $60 million to $70 million.\nIncreasing energy, chemicals and fiber prices, drove our inflation expectations higher.\nWhile pulp pricing has started to decrease, we do not expect for that to have a material impact on our financials until early next year.\nThe Neenah mill recently generated negative adjusted EBITDA by closing the site, we will avoid these losses and lower our overall cost structure by producing our retail volume at other lower cost sites.\nThese actions are helping us to fully realize the benefits of the Shelby North Carolina mill investment.\nIn total, the benefit from the Neenah closure is expected to exceed $10 million annually.\nFor the full year 2021, we are also anticipating the following.\nInterest expense between $36 million and $38 million; depreciation and amortization between $104 million and $107 million; capital expenditures of approximately $42 million and $47 million, which is lower than our prior expectations; and historical average of around $60 million, excluding extraordinary projects, and our effective tax rate is expected to be 26% to 27%.\nIt has certainly been an interesting with robust SBS market conditions, significant inflationary headwinds and volatility and tissue demand.\nAs we mentioned previously, we believe that supply and demand drive near to medium term pricing and margins.\nOur paperboard business is benefiting from these dynamics, while tissue remains challenged.\nI'm proud of how our people have managed these challenges and opportunities.\nWe're committed to a strong finish in 2021 in positioning Clearwater Paper for future success.\nFor the last couple of quarters, I spoke about performance improvement efforts, focused on our core operations in the medium to long term.\nThese efforts are well underway and are aimed at offsetting inflationary and competitive pressures that we face in our industry.\nIt is important for us to invest in these efforts to maintain and grow our cash flows in the long run.\nWe're encouraged by the work to-date as we start moving from planning to execution, and believe that we are well positioned to combat margin compression in the next several years.\nLet me remind you, why I think these businesses are well positioned in the long run.\nFor our paperboard division, we believe that the key strengths of this business are the following.\nFirst, we operate well-invested assets with a geographic footprint, enabling us to efficiently service our customers.\nWe have a diverse customer base, which serves end markets that have largely stable demand.\nSecond, not being vertically integrated enables us to focus on independent customers with unparalleled service and quality commitment.\nThird, we believe through product and brand development, the business is well positioned to take advantage of trends toward more sustainable packaging and food service products.\nLastly, our paperboard business has demonstrated an ability to generate good margins and solid cash flows.\nOur Consumer Products division is a leader within the growing private branded tissue market.\nFrom our vantage point, we believe the key strengths of this business are the following.\nFirst, we have a national footprint with an ability to supply a wide range of product categories and quality tiers, which is an attractive sales proposition to our customers.\nOur expertise in manufacturing, supply chain and transportation is a key differentiator.\nSecond, there are long-term trends away from branded products to private brand.\nPrivate brand tissue share in the US rose to over 30% recently, up from 18% in 2011.\nWhile these trends are impressive, we're still a long way from where many European countries are in which private brands represent over half of total tissue share.\nLastly, tissue is an economically resilient and an essential need-based product.\nHistorically, demand has not been negatively impacted by economic uncertainty.\nWe are optimistic that this business will generate meaningful cash flows over the long run.\nWe're committed to improving our business to be successful both in the near and long-term, and I firmly believe that we will come out of 2021, a better and stronger operation than where we started.\nIn addition, in addition to appropriately sustaining our asset base, our capital allocation plan is focused on paying down debt and improving our cost structure and operating performance.\nAs Mike mentioned earlier, with this plan, we will achieve our near-term target leverage ratio of 2.5x by 2023.\nOur long-term capital allocation prioritizes maintaining a strong and flexible balance sheet with a focus on shareholder value.\nWe will share additional perspectives on our long-term capital allocation prioritization when we reach our near term leverage ratio target.\n",
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"content": "compname posts q3 earnings per share of $0.11.\nq3 earnings per share $0.11.\nq3 adjusted non-gaap earnings per share $0.55.\nq3 revenue $450 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 hope you and your families are continuing to stay safe and well.\nNow a few reminders before we go into the results.\nThese statements are based on management's current expectations, but may differ from actual results or outcomes.\nIn addition, we may refer to certain non-GAAP financial measures.\nI'll start by covering our top line commentary, with highlights from each of our segments.\nKevin will then address our total company results as well as our FY '21 outlook.\nFinally, Linda will offer her perspective, and we'll close with Q&A.\nFor the total company, Q2 sales increased 27%, with growth in every reportable segment.\nIt reflects about one point of net benefit from the July acquisition that gives us a majority share in our Saudi Arabia joint venture and unfavorable foreign currency exchange rates.\nOn an organic basis, Q2 sales grew 26%.\nI will now go through our results by segment.\nIn our Health and Wellness segment, Q2 sales were up 42%, reflecting double digits increases in two of three businesses.\nOur Cleaning business had double-digit sales growth behind strong ongoing demand across our portfolio.\nConsumption remains high and, importantly, we're continuing to see increases in household penetration and repeat rates among existing and new users, driven by new routines developed from the prolonged pandemic as well as strategic brand investments.\nWhile we expect tough comparisons as we lap these very high growth rates, we'll continue to work to retain the larger base of loyal consumers we've built for our cleaning and disinfecting products even after a critical mass of the population has been vaccinated.\nWe're continuing to make progress on our supply expansion, including a new line of wipes plant coming online this quarter.\nWe're also continuing to identify new sources of supply for other products experiencing constraints, including our disinfecting spray products.\nAs we're able to better meet consumer demand for our base products, we're looking forward to bringing back our Clorox compostable wipes, along with a stream of exciting innovation in the coming months.\nOur Professional Products business had another quarter of double-digit sales growth behind continued high demand for our cleaning and disinfecting products.\nIt's worth noting, though, that while demand from businesses such as healthcare facilities has remained high, we've seen softer demand from businesses negatively impacted by ongoing mobility restrictions, like commercial cleaning and foodservice institutions.\nThat's why we're leaning into other out-of-home spaces through strategic alliances, and are encouraged by our progress.\nWhile not yet a meaningful contributor in Q2, our out-of-home partnerships are expanding.\nWe're excited to announce a new multi-year deal with the NBA, an existing partner.\nLastly, within this segment, our sales in Vitamins, Minerals and Supplements business decreased in Q2.\nThis is a business where results have not been consistent, and we clearly have more work to do.\nAs you remember, we relaunched RenewLife last fall.\nWhile we've seen improvements in all outlet consumption, it is not yet delivering the consistent results we want.\nWith more than half American consumers saying they intend to continue taking vitamins and supplements, we continue to believe in the attractiveness of this category.\nNow turning to Household segment.\nQuarterly sales were up 20%, with growth in all three businesses for a third consecutive quarter.\nGrilling sales were up double digits, driven by continued strong consumption, which reflects the dramatic rise in in-home meal occasion as people continue to spend more time at home.\nBehind our strategic collaboration with retailers, we've been able to grow household penetration for a third consecutive quarter, including among millennials and low-income consumers.\nAs we begin planning for the next growing season, we're building on our innovation through expanded distribution of our new Kingsford pellets and bringing new flavors to our Kingsford product lineup.\nWith consumer spending more on their backyard and growth, we feel optimistic about the future of this business.\nCat Litter sales were up by double digits in Q2, supported by innovation and continued strong performance online.\nOur Fresh Step with Gain Original Scented Litter with the power of Febreze as well as our Fresh Step Clean Paws litter continued to perform very well, and we're supporting them through a new advertising campaign.\nA record number of people have become pet parents since the onset of the pandemic in 2020, making this yet another example of how our diverse portfolio is particularly suited to the times.\nGlad sales increased in Q2 behind strong demands across our portfolio of trash bags, wraps and food bags as people continue to spend more time at home.\nOur latest innovation, Glad ForceFlex with Clorox trash bags, launched in September and is building distribution quickly, earning positive reviews.\nIn our Lifestyle segment, Q2 sales were up 9%, with double-digit growth in two of three businesses.\nBrita sales were up by double digits for a fourth consecutive quarter behind continued strong shipments of pitchers as well as filters.\nJust as with wipes and sprays, we're continuing to work through supply chain constraints in our Brita business, which has been impacting our shares.\nWe feel good about the long-term prospects of this business, especially since once people buy a Brita pitcher, they tend to stay in our franchise with continued purchases of filters.\nImportantly, as household penetration for Brita keeps growing, we're building brand loyalty among these consumers.\nThe Food business had double-digit sales increase for a third straight quarter behind ongoing strong consumption of our Hidden Valley Ranch products, particularly dry seasonings and bottled dressings.\nWith more and more people eating at home during the pandemic, household penetration has grown to an all-time high, including above-average growth among millennials.\nWe're building on this momentum with a stream of innovation, including Hidden Valley Secret Sauces and, most recently, Hidden Valley plant-based ranch dressing, which is being supported by strong advertising investments.\nBurt's Bees sales decreased by double digits as the business continued to be impacted by mobility restrictions as well as changes to consumer shopping and usage habits as a result of the pandemic.\nThis quarter, unseasonably warm weather also impacted lip balm sales.\nDespite these challenges, we're making progress in the fast-growing online channel, where the brand had double-digit growth in Q2, and we remain confident in the long-term trajectory of this business.\nQ2 sales grew 23%, driven by double-digit shipment growth in all major regions.\nThe growth reflects about nine points of benefit from the Saudi acquisition and about four points of unfavorable foreign currency headwinds.\nOrganic sales grew 18%.\nThe recent investment we made to create a dedicated international supply chain for Clorox disinfecting wipes is starting to pay off, giving us the ability to not only meet ongoing elevated demand in existing markets, but also to expand to new countries.\nThis is a strategic growth platform for the company, and we're supporting it through additional advertising investments.\nWe hope you and your families are well.\nOur sales growth for the second quarter was broad-based, resulting in double-digit growth in each reporting segment for the first half of our fiscal year.\nAdditionally, this led to profitable growth for the first half, which enables us to capitalize on our momentum and continue investing behind our global portfolio to strengthen our competitive advantage.\nTurning to our second quarter results.\nSecond quarter sales were up 27%, driven by 23 points of organic volume growth, three points of favorable price/mix and one point of net benefit from acquiring majority control of our Saudi joint venture, partially offset by FX headwinds.\nOn an organic basis, sales grew 26%.\nGross margin for the quarter increased 130 basis points to 45.4% compared to 44.1% in the year ago quarter.\nSecond quarter gross margin included the benefit of strong volume growth as well as 160 basis points of cost savings and 140 basis points of favorable price/mix.\nThese factors were partially offset by 420 basis points of higher manufacturing and logistics costs, which, similar to last quarter, included temporary COVID-19 spending.\nSecond quarter gross margin results also reflect about 50 basis points of negative impact from higher commodity costs, primarily from resin.\nSelling and administrative expenses as a percentage of sales came in at 14.6% compared to 14.5% in the year ago quarter.\nAdvertising and sales promotion investment levels as a percentage of sales came in at about 10%, where spending for our U.S. retail business coming in at about 11% of sales.\nThis reflects higher investments across our portfolio, strengthening our value proposition to support higher levels of household penetration and lasting brand loyalty among new and existing consumers.\nOur second quarter effective tax rate was 21%, which was equal to the year ago quarter.\nNet of these factors, we delivered diluted net earnings per share of $2.03 versus $1.46 in the year ago quarter, an increase of 39%.\nTurning to our updated fiscal year outlook.\nWe now anticipate fiscal year sales to grow between 10% to 13%, reflecting the strength of our first half results and higher expectations for the back half.\nWith our overall demand for our products remaining quite strong, we now expect back half sales to be about flat, on top of 19% growth in the year ago period.\nWe also anticipate about one point of contribution from our Saudi joint venture, offset by one point of foreign exchange headwinds.\nOn an organic sales basis, our outlook assumes 10% to 13% growth.\nWe now expect fiscal year gross margin to be down slightly, reflecting higher commodity and manufacturing and logistics costs as well as temporary costs related to COVID-19.\nThese factors are expected to be partially offset by higher sales.\nAs a reminder, we expect gross margin contraction over the balance of the fiscal year, primarily from two factors: first, we are lapping very strong operating leverage from robust shipment growth during the initial phase of the pandemic; and second, we're facing commodity headwinds this year versus last year's commodity tailwinds.\nAs a reminder, our gross margin expanded 250 basis points in the back half of fiscal year '20.\nWe continue to expect fiscal year selling and administrative expenses to be about 14% of sales, reflecting ongoing aggressive investments and long-term profitable growth initiatives and incentive compensation costs, consistent with our pay-for-performance philosophy.\nAdditionally, we continue to anticipate fiscal year advertising spending to be about 11% of sales.\nWe spent about 10% in the front half of the year and continue to anticipate about 12% in the back half in support of our robust innovation program.\nWe continue to expect our fiscal year tax rate to be between 21% to 22%.\nNet of these factors, we now expect fiscal year '21 diluted earnings per share to increase between $8.05 and $8.25 or 9% to 12% growth, reflecting strong top line performance, partially offset by a rising cost environment.\nWe now anticipate fiscal year diluted earnings per share outlook to include a contribution of $0.45 to $0.50 from our increased stake in our Saudi Arabia joint venture, primarily driven by a onetime noncash gain.\nI'm pleased we've raised our fiscal year '21 outlook.\nOf course, it's important to note, we continue to operate in a highly dynamic environment and are monitoring headwinds that could result in impacts moving forward.\nIn closing, I'm also pleased with our broad-based strong results in the first half, which enables us to continue investing in our brands, capabilities and new growth opportunities, all in support of our ambition to accelerate long-term profitable growth for our shareholders.\nI hope you and your families are well.\nIt's great to be here today showing Clorox's results for the first half of our fiscal year.\nMy messages this quarter largely reinforce what we discussed in Q1, with the most important point being that our global portfolio of leading brands continues to play a critical role in people's everyday lives.\nMy first message is that our first half results are rooted in purpose-driven growth.\nOur purpose as a company is to champion people to be well and thrive every single day.\nAnd our portfolio of leading brands is the bedrock of our ability to deliver on that promise.\nOur first half results reinforce the important role our brands play in addressing people's everyday needs.\nWe continue to see broad-based strength in our portfolio, with double-digit sales growth for most of our businesses.\nClorox disinfecting products continue to be in high demand among consumers, businesses and healthcare settings.\nAnd as people spend more time at home, we're continuing to see strong performance in other parts of our portfolio.\nKingsford is a great example.\nAs Lisah mentioned, our Grilling business delivered double-digit sales growth in the quarter.\nAnd with a recharge strategy emphasizing innovation, I'm optimistic about the long-term prospects of this business.\nThey understand that, more than ever, people and communities need us.\nI'm so grateful for their passion and commitment.\nMy second message is that Clorox will stay in the driver seat, continuing our posture of 100% offense to make the most of the opportunities in front of us while navigating an ongoing dynamic environment.\nThere's no question, Clorox has built significant momentum over the last year, and we have every intention of extending that longer term.\nOur brand portfolio is especially relevant for this environment and for the consumer trends I mentioned last quarter, which we expect to persist beyond the pandemic, prioritizing hygiene and health and wellness, caring for pets and accelerating digital behaviors related to practically every aspect of their lives.\nMore than ever, as home is where the heart is, it's also where consumers are directing their investments with spending across many categories to support quality of in-home experiences.\nThis certainly bodes well for our portfolio.\nWe continue to see strong levels of household penetration.\nImportantly, what we mentioned last quarter about repeat rates across our portfolio is playing out.\nWe're accelerating purchase frequency.\nAnd repeat users are the source of most of our sales growth across our portfolio.\nIn addition, our strategic investments are creating a virtuous cycle around engaging and retaining new and existing users, resulting in a consumer retention rate of nearly 90%.\nAs I mentioned, 100% offense will help us extend this momentum, which, as a reminder, includes: investing more across our portfolio to retain the millions of people buying our brands; expanding our public health support to more out-of-home spaces; increasing capital spending for immediate and future production capacity, including wipes expansion in international; and partnering with our retailers to grow our categories.\nGiven the dynamic environment we continue to face, 100% offense also means actively planning for challenges and disruptions in the near and long term, including an inflationary cost environment, elevated competition in light of category tailwinds and accelerating advancements in digital technology that we expect to impact all areas of our business.\nWhat's important is we'll continue to make strategic choices that position us to achieve our ambition to accelerate long-term profitable growth.\nAnd finally, my third message is this.\nAs we continue to address immediate priorities related to unprecedented demand, we're also accelerating our progress against our strategy to deliver long-term shareholder value.\nOur IGNITE Strategy continues to put people at the center of everything we do and helps us make the most of our strategic advantage in the near and long term.\nAddressing unprecedented consumer demand for much of our portfolio continues to be an immediate priority.\nWe continue to make progress on a number of businesses.\nWe're bringing in more third-party supply sources and launching our new wipes line in our Atlanta facility in the third quarter.\nImportantly, simplification is our mantra, and we're seeing the benefit of focusing on fewer SKUs, which we expect to continue beyond the pandemic.\nAs I mentioned earlier, we're growing Clorox Disinfecting Wipes international, supported by a dedicated supply chain.\nOur expansion plans are going very well, and we expect to double the number of countries where Clorox wipes are sold.\nAnother immediate priority is to continue supporting people's safety when they're outside their homes through strategic alliances to support public health.\nWe're expanding our programs with Uber Technologies and Enterprise Holdings.\nWe recently established a multi-year deal with the NBA and look forward to pursuing similar opportunities with other organizations.\nAnd as the pandemic continues to take a toll in the economy, we know that far too many people feel financial pressure from unemployment and less discretionary spending.\nWe're mindful of the role we can play to support those who are particularly value-sensitive, and we'll continue to deliver superior value through meaningful innovation.\nImportantly, we're also making progress in laying the foundation for long-term growth.\nWe will continue to invest strongly in our global portfolio of leading brands, particularly behind robust innovation that differentiates our products and deliver superior value.\nWe will continue to reimagine how we work to ensure a strong culture, with a highly engaged team that works simpler and faster on strategic priorities.\nI'm proud of how we've been operating during the pandemic, including accelerating our speed to market.\nAnd finally, as we've said before, we view ESG as a contributor to competitive advantage, which is why it's embedded in our business.\nAchievements this quarter include: being included in the 2021 Bloomberg Gender-Equality Index; achieving 100% renewable electricity in the U.S. and Canada four years early; signing on to the Energy Buyer Federal Clean Energy Policy statement, which calls for a 100% clean energy power sector; and donating $1 million to Cleveland Clinic to establish the Clorox public health research grant in support of science-based public health research.\nWe are grateful to play a role in supporting people and communities as we continue to navigate the global pandemic.\nIt only strengthens our resolve in pursuing purpose-driven growth, ensuring a strategic link between our impact on the world and long-term value creation for our shareholders.\n",
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"content": "compname posts q2 earnings per share $2.03.\nq2 earnings per share $2.03.\nfiscal year 2021 sales are now expected to grow between 10% and 13%.\nnow anticipates fiscal year 2021 diluted earnings per share to increase between 9% and 12%, or $8.05 to $8.25.\nfy 2021 diluted earnings per share outlook now estimates contribution of 45 to 50 cents from co's increased stake in its saudi joint venture.\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 John Faucher, Chief Investor Relations Officer.\nActual results could differ materially from these statements.\nI will provide commentary on our Q1 performance as well as our latest thoughts on 2021 guidance before turning it over to Noel to discuss our 2021 priorities.\nWe will then open it up for Q&A.\nAs usual, we request that you limit yourselves to one question so that as many people as possible get to ask a question.\nWe started 2021 in positive fashion with strong organic sales growth despite a very difficult comparison, which included some consumer pantry loading in March of last year.\nOur net sales grew 6% in the quarter, organic sales growth of 5% was driven by 0.5% organic volume growth and a 4.5% increase in pricing.\nForeign exchange was a 1% tailwind in the quarter.\nWhile the tough comparisons, particularly impacted our trends in developed markets, which were flat on an organic sales basis in the quarter, we delivered double-digit organic sales growth in emerging markets with volume up 5.5% and pricing up 6%.\nWe also delivered organic sales growth in three of our four categories; Oral Care, Home Care and Pet Nutrition, while Personal Care organic sales declined due to difficult comparison.\nWe believe our strategy to deliver more impactful premium innovation, which Noel and Pat Verduin talked about at CAGNY, is bearing fruit, and we will continue to focus in this area to drive future growth.\nOur efforts on premiumization and pricing along with our focus on productivity, like our funding-the-growth initiatives, drove improvement year-over-year in our gross margin despite a worsening raw materials environment.\nThis gross margin expansion was a key factor in allowing us to deliver base business earnings-per-share growth in line with our full year guidance despite higher logistics costs, incremental advertising spending and investment to build capabilities.\nIn the first quarter, our gross profit margin was 60.7% on both a GAAP basis where we were up 50 basis points year-over-year, and a base business basis where we were up 40 basis points.\nFor the first quarter, pricing was 170 basis points favorable to gross margin, while raw materials were 310 basis point headwind.\nThis is a large impact for the first quarter and it was driven by increases in the cost of raw materials like resins, fats and oils, agriculture-related costs and the transactional impact from foreign exchange.\nProductivity was a 180 basis point benefit.\nOur SG&A was up 90 basis points as a percent of sales for the first quarter on both a GAAP and base business basis.\nThis was primarily driven by a 50 basis point increase in advertising to sales as we drove strong activation on brand building, innovation and e-commerce.\nOur SG&A ratio was also impacted by increased logistics costs, primarily in the U.S. and investments behind growth and innovation.\nExcluding advertising and logistics, our SG&A ratio declined year-over-year.\nFor the first quarter, on a GAAP basis, our operating profit was up 5.5% year-over-year, while it was up 5% on a base business basis.\nOur earnings per share was down 4% on a GAAP basis and up 7% on a base business basis.\nOur free cash flow was down year-over-year in the quarter against a very difficult comparison.\nThe decline was primarily driven by the negative impact of accounts payable and other liability, which was mostly due to changes in the timing of payables and income tax payments.\nA few comments on our divisional performance.\nOur volume declines in the quarter were primarily due to a combination of category deceleration in the face of difficult comparisons as we cycled last year's COVID pantry loading, logistics issues related to a warehouse transition on our U.S. business that impacted our shelf availability and our market shares and the winter storms in February.\nThough logistics issues lessened over the last month of the quarter, service levels improved, and we expect service levels to return to normal by the end of the second quarter.\nPricing grew mid-single-digits in the quarter as our efforts in revenue growth management for pricing growth across all our categories.\nThe combination of higher raw materials costs, higher underlying logistics costs and costs related to remediating the company's specific logistics issues, pressured margins in the North America division.\nDespite these headwinds, we continue to invest in advertising, particularly behind premium innovation like Colgate Renewal and the Colgate Optic White Overnight Teeth Whitening Pen and behind the continued strength of Colgate Optic White Renewal.\nLatin America net sales were up 2% as 9.5% organic sales growth was mostly offset by the negative impact of foreign exchange.\nWe continue to deliver broad-based organic sales growth in Latin America with organic sales growth in all three categories and in every hub.\nAs we highlighted at CAGNY, our innovation in Latin America is driving growth in the premium segment of the toothpaste category.\nIn Brazil, Colgate Total is gaining share behind Colgate Total Anti-Tartar, and our Natural Extracts line is gaining share, particularly behind Charcoal.\nOur toothpaste value share is flat year-to-date in Brazil and measured channels and is up year-over-year in e-commerce.\nEurope net sales grew 6% in the quarter.\nOrganic sales were down 2%.\nVolume declined 3.5% in the quarter as we lap strong shipments in the year ago period, which was driven by COVID-related demand and pantry loading.\nPricing was plus 1.5% as we took pricing across all categories to help offset raw material inflation.\nWe're launching equity campaigns across our core oral care equity; Colgate, meridol and elmex, and we're excited about the launch of Sanex Microbiome, which Pat talked about at CAGNY.\nWe delivered 16.5% net sales and 11% organic sales growth in Asia Pacific led by volume growth across our biggest markets; Greater China, India and the Philippines.\nWhile China and India benefited from comparisons that included COVID-related shutdowns in 2020, our innovation continues to drive improved underlying performance, particularly in e-commerce.\nOver the next several quarters, we will begin to rollout more premium innovation in brick and mortar in China like our Colgate Enzyme Whitening Toothpaste, leveraging the success we have had online in transforming our portfolio.\nAfrica/Eurasia net sales grew 8.5% as we delivered strong organic sales growth throughout the division.\nVolume grew 5% in the quarter, while pricing was up 8%.\nForeign exchange was a 4.5% headwind.\nThis growth was led by our toothpaste and manual toothbrush businesses, although we also delivered organic sales growth in personal and home care.\nOur business in Turkey delivered strong sales and market share performance, and launched significant premium innovation in naturals, charcoal and whitening.\nHill's started the year with another quarter of strong net sales and organic sales growth despite lapping significant growth in the year ago period.\nDeveloped markets led the growth, particularly the U.S., Canada and Europe led by e-commerce.\nEmerging markets grew organic sales greater than 20% in the quarter through a combination of volume and pricing growth.\nWe're very excited about our Hill's equity campaign addressing pet obesity.\nThis global campaign is leveraging digital, in-store, in-office and traditional media assets to drive growth in our weight control products across both our prescription and wellness businesses.\nAnd now for guidance.\nWe still expect organic sales growth to be within our 3% to 5% long-term target range.\nAs we think about our current organic growth assumptions versus where we were three months ago, we're probably a little more cautious on developed markets.\nAs you've seen from the scanner data, our categories moved negative more quickly than we had anticipated, and we expect that to continue in the short-term.\nHopefully, this allows for some of the volatility to play itself out sooner in the year, and we will see trends stabilize more quickly.\nComing into this year, in categories where consumption rose last year due to COVID, we expected 2021 consumption levels to be below 2020, but above the levels we saw in 2019.\nThat is the case so far across our developed markets businesses, although year-to-date these categories are slightly weaker than expected.\nCategories like toothpaste where usage did not spike in relation to COVID, should normalize more quickly as we move past some of the aggressive pantry loading in March and April of last year, and we're beginning to see that happen -- and the scanner data has returned to growth in the last several weeks.\nWe are encouraged by how we started the year in emerging markets.\nWe saw broad-based organic sales growth in our emerging markets across all the divisions and with a good balance of volume and pricing.\nComps will get more difficult as we go through the year, but we believe we have solid momentum.\nPlease note that given widespread COVID outbreaks in countries like Brazil, Mexico and India, we could still see an impact from government actions to stem the spread of COVID and other disruptions related to COVID, and this is not in our guidance.\nUsing current spot rates, we expect foreign exchange to be a low-single-digit benefit for the year, although slightly less favorable than when we gave guidance in January.\nAll in, we still expect net sales to be up 4% to 7%.\nOur gross margin guidance remains unchanged as we expect our gross profit margin to be up year-over-year in 2021 on both the GAAP and base business basis.\nAs we mentioned on our 2020 year-end call, raw materials began the year moving higher and faster than we had expected.\nThis trajectory has continued through the first quarter, as you all know.\nWe are still laser focused on driving our gross margin higher, but the significant increase in costs across our materials base obviously requires additional pricing and productivity.\nAdvertising is still expected to be up on both a dollar and a percent of sales basis.\nLogistics also continues to be a headwind, particularly in the U.S. where costs also have risen faster than anticipated.\nWe expect these costs to remain elevated in the near-term, but to moderate later in the year.\nOur tax rate is expected to be between 23.5% and 24.5%.\nWe point out that our guidance does not account for any changes in U.S. corporate tax rates given the recent change in administration.\nOn a GAAP basis, we still expect earnings-per-share growth in the low-to-mid single-digit.\nOn a base business basis, we continue to expect earnings-per-share growth in the mid-to-high single-digit.\nThe adverse moves in foreign exchange and raw materials have moved to slightly lower in that range over the past few months, but it is still early in the year.\nI'll keep my commentary brief since we've -- so we'll have plenty of time for the Q&A.\nI think the results for the quarter really speak for themselves.\nObviously, we're really pleased with our performance in the first quarter.\nDespite the significant volatility and headwinds, we delivered strong results around the world and up and down our P&L.\nWhile we've made progress on our strategic areas we've been discussing, we still have a lot to do in the balance of the year.\nHere are key priorities for the remainder of 2021.\nContinue to drive broad-based growth.\nOur priorities here are the same as we've discussed for the past several years.\nWe need to grow volume and pricing.\nWe need organic sales growth in every category and in every division in both emerging and developed markets.\nIn order to do this, we'll continue to ramp up our breakthrough and transformational premium innovation.\nWe delivered high-single-digit growth in toothpaste in the first quarter despite lapping solid growth in the year ago period, which help us drive high-single-digit growth in our oral care business.\nWe're driving growth through innovation like Colgate Renewal in the U.S., Colgate Enzyme Whitening Toothpaste in China and our Natural Extracts line in Colgate Total Anti-Tartar line in Latin America.\nAs Pat and I discussed at CAGNY, this is a marathon not a sprint, but we're making good progress which will continue as we shift our resources, continue to build new skills and even adapt how we motivate our teams.\nPricing is also an important element of growth.\nAnd behind our revenue management efforts, we continue to drive strong pricing as we look to increase our price index versus the market as well as offsetting rising costs.\nYou're hearing about rising costs from every company this quarter, and we're seeing inflation on pretty much every line of the P&L, but especially raw materials, warehousing and logistics.\nNaturally, our pricing plans are focused.\nWe just discussed, we're battling the cost inflation across the board.\nWe are also driving savings through funding the growth and other efficiency initiatives, which helped offset these headwinds, an effort Stan, our new CFO, is spearheading for us.\nWe do not expect these headwinds to abate any time soon, so we have to continue to invest in marketing and building capabilities for future growth, while delivering on our earnings guidance.\nWe know we need to be disciplined and efficient in this area.\nThe third is maintaining our focus on building out the key pillars of our long-term strategy, while simultaneously managing through all of the volatility.\nThat includes building our capabilities on innovation, e-commerce, digital and data and analytics, progressing on ESG including increasing our commitments on DE&I and advancing our 2025 sustainability targets, and then ultimately navigating to return to work for most of our office-based employees.\nWe are building a team and a culture at Colgate that is focused on adapting and changing to this volatile world.\nWe're embracing new strategies and new ways of working, and it's paying off.\nWe've had a good start to 2021 and we're looking to maintain our momentum through the rest of the year.\nSo with that, we'll go ahead and open up to questions.\n",
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"content": "company reiterated its financial guidance for full year 2021.\ndelivered positive pricing in every division in quarter.\nexpects fy 2021 organic sales to be up within its long-term targeted range of 3% to 5.\ncolgate-palmolive - looking ahead, seeing volatility in consumer demand and currencies as well as increases in raw material prices and logistics costs.\nexpects fy 2021 net sales to be up 4% to 7% including a low-single-digit benefit from foreign exchange.\nnorth america net sales decreased 0.5 percent in quarter.\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 John Faucher, Chief Investor Relations Officer.\nActual results could differ materially from these statements.\nI will provide commentary on our Q2 performance as well as our latest thoughts on 2021 guidance before turning it over to Noel to provide his thoughts on the current operating environment and how we will continue to deliver on our growth trajectory.\nWe will then open it up for Q&A.\nAs usual, we request that you limit yourself to one question, so that as many people as possible get to ask a question.\nAs we report results at the halfway point of 2021, we remain pleased, but not satisfied with our performance so far as we navigate through what can charitably be described as a complicated year.\nFor both the second quarter and on a year-to-date basis, we delivered growth in organic sales, net sales, operating profit and net income.\nThis is despite difficult comparisons as we lapped last years strength in categories like liquid hand soap and dish soap.\nWe are also dealing with the impact of COVID restrictions in several markets, economic and political uncertainty, strong competitive activity, and of course, significantly heightened raw material and logistics headwinds.\nWe expect that all of these factors will continue to impact our business through the second half of this year.\nBecause of that, we remain focused on delivering impactful innovation, leveraging our revenue growth management capabilities to deliver on pricing and driving productivity up and down the income statement.\nAll of these are crucial to deliver long-term sustainable growth that will help us as we look to deliver TSR at the high end of our peer group.\nWe delivered 5% organic sales growth in the second quarter, which marked our 10th consecutive quarter, delivering organic sales growth either in or above our targeted range of 3% to 5%.\nAs we have discussed before, the key to delivering against our long-term targets is delivering balanced growth, which we did once again in the quarter by delivering both volume and pricing growth.\nWe delivered growth in both developed markets with 3% organic sales growth and emerging markets, which delivered 7% organic sales growth.\nWe delivered organic sales growth in every division in North America.\nOur largest category, Oral Care, delivered organic sales growth of nearly 10%, with organic sales growth across toothpaste, manual toothbrushes and electric toothbrushes, and organic sales growth in every division.\nInnovation continues to be a vital contributor to our Oral Care business, as we benefit from new products across all of our divisions.\nProducts like Co by Colgate, Colgate Elixir toothpaste, and Colgate enzyme whitening toothpaste are all delivering consumer desired benefits and premiumizing our portfolio.\nPet Nutrition delivered organic sales growth of 15%.\nPersonal Care and Home Care declined on an organic sales basis year-over-year in the quarter as expected, but net sales remain above 2019 levels.\nNet sales increased 9.5% in the quarter, which was our highest net sales increased in almost 10 years.\nForeign exchange was a 4.5% benefit to net sales as we lap the peak of last year's COVID-driven strength in the dollar.\nAfter a strong gross margin performance in 2020 and in Q1, our gross margin declined in the second quarter due to the rapid acceleration of raw material costs across our business and the lapping of lower promotional levels in Q2 2020.\nWe took additional pricing in the second quarter, which will help offset raw material costs in the second half of the year and we will continue to layer in additional pricing where possible.\nWe expect raw material costs to remain elevated throughout 2021, but we do expect some sequential lessening of inflation as we get into the fourth quarter.\nOur efforts on premiumization and pricing, along with our focus on productivity, like our funding the growth initiatives, will also help us as we look to improve our gross margin performance.\nIn the second quarter, our gross profit margin was 60%, which was down 80 basis points year-over-year on both a GAAP basis and a base business basis.\nYear-to-date, our gross margin of 60.4%, down 10 basis points.\nAgain, that is on a GAAP and base business basis.\nFor the second quarter, pricing was 90 basis points favorable to gross margin, less than in the first quarter as we lapped lower promotional spending in the year-ago period when many of our markets reacted to COVID restrictions by pulling back on promotional activity.\nRaw materials were at 370 basis point headwind as we continue to see significant pressure from resins, fats and oils and agriculture-related costs, and many other materials.\nThis includes a slightly favorable transactional impact from foreign exchange.\nProductivity was a 200 basis point benefit.\nOur SG&A was up 100 basis points as a percent of sales for the second quarter on both a GAAP and base business basis.\nThis was primarily driven by an increase in logistics costs and also by a 30 basis point increase in advertising to sales.\nExcluding advertising and logistics, our SG&A ratio declined year-over-year as our net sales growth and savings programs drove leverage on our overheads.\nFor the second quarter on a GAAP basis, our operating profit was up 5.5% year-over-year, while it was up 2.5% on a base business basis.\nOur earnings per share was up 12% on a GAAP basis and up 8% on a base business basis.\nOur free cash flow was down year-over-year in the quarter as we continue to lap very strong working capital performance in the year-ago period.\nAs we discussed previously, our capital expenditures are also up year-over-year as we invest behind growth, productivity and our sustainability strategy.\nA few comments on divisional performance.\nNorth American net sales declined 4% in the second quarter with organic sales down 4.5% and a modest benefit from foreign exchange.\nVolumes were down 8.\n5% in the quarter, driven by Home Care and Personal Care, which saw strong growth in the year ago period, driven by COVID-related demand.\nPricing across Home Care and Personal Care was positive as we worked to offset higher raw material costs.\nOral Care organic sales grew mid-single digits, driven by innovation and pricing.\nI mentioned Co by Colgate before, which is helping us further expand into the beauty and direct-to-consumer channels.\nWe are pleased with the initial performance of the Colgate Keep manual toothbrush.\nIt comes with an aluminum handle and by using our replaceable heads, consumers can use 80% less plastic compared to similarly sized Colgate toothbrushes.\nWe're also excited about our Tom's of Maine relaunch, which is bringing new graphics and advertising to a historic natural segment brand.\nOur logistics issues that we discussed on the first quarter call continue to negatively impact our promotional timing, but service levels have improved and we expect our promotional cadence will normalize as we go through the third quarter.\nLatin America net sales were up 12.5% with 8.5% organic sales growth and a 400 basis point benefit from foreign exchange.\nAll three categories delivered organic sales growth in the quarter with Oral Care organic sales growth in the high teens.\nBrazil and Mexico both grew organic and net sales double digits in the quarter.\nOur strong innovation performance was led by core innovation behind Colgate Total Reinforced Gums in Mexico, which apparently sounds much better in Spanish and Portuguese than English and several Charcoal variance in Brazil.\nVolume was plus 2.5% in the quarter despite a sizable negative impact due to political unrest in Colombia, our third largest market in Latin America.\nWe believe this disruption, which negatively impacted our distribution network for some time is largely behind us, but political disruption will remain a risk, not just in Columbia, but in several markets.\nPricing was up 6% despite lapping lower promotional spending in Q2 2020 as well as some incremental pricing in the year-ago period as we look to offset foreign exchange.\nEurope net sales grew 15% in the quarter.\nOrganic sales grew 5% driven by mid-teens growth in Oral Care, offset by declines in personal and home care as we lap COVID-related demand in the year-ago period.\nVolume grew 7% in the quarter, offset by a 2% decline in pricing as we lap lower promotions in the year-ago period as store traffic declined in Q2 2020 due to COVID restrictions.\nI mentioned Colgate Elixir toothpaste before and we're very excited about this truly differentiated product.\nWe designed it with more of a beauty esthetic, including skincare inspired ingredients, a unique clear recyclable bottle and liquid glide technology that allows the pace to leave the bottle leaving no messy tube or cap.\nThis product began rolling out across the division in Q2 with further launches this quarter.\nWe delivered 7.5% net sales and 1% organic sales growth in Asia Pacific this quarter, with organic growth in oral care partially offset by a decline in home care.\nVolume growth of 3.5% was partially offset by negative pricing as we cycled lower promotional levels in the year-ago period given COVID-related lockdowns across the region, with the biggest impact coming on our South Pacific business.\nWe have additional pricing planned in the second half across the division to offset raw material cost inflation.\nVolume growth was led by India, despite the impact of COVID related disruption in May.\nAnd Thailand, driven by naturals innovation in the Colgate Vedshakti and Colgate Panjaved line as we lapped COVID-related disruptions in the year-ago period.\nOur volume in China declined on growth on the Colgate business, which was more than offset by weakness in sales for our Hawley & Hazel joint venture, which is primarily related to inventory reductions in our distributor network.\nAfter Eurasia continued its strong performance trend in the third quarter with net sales growth of 15.5%, as we delivered strong organic sales growth throughout the division once again.\nVolume grew 9.5% in the quarter, while pricing was up 3.5%.\nForeign exchange was a 2.5% benefit in the quarter.\nOral Care delivered high teens organic sales growth and we are relaunching several of our naturals businesses with new packaging and flavors.\nHill's strong growth continued in the second quarter with 18% net sales growth and 15% organic sales growth.\nBoth developed and emerging markets delivered 10% volume growth as our increased investment around the globe is driving this highly differentiated brands.\nIn particular, we are seeing good results from our Hill's master brand campaign to end Pet obesity as well as our new campaign for Hill's Pet Essentials, our vet-distributed wellness product in Europe.\nAnd now for guidance.\nWe still expect organic sales growth to be within our 3% to 5% long-term target range.\nThere is no meaningful change in our category expectations at this point.\nThe categories that benefited from COVID-related demand are behaving in line with our expectations with sales below 2020 levels, but ahead of 2019 levels.\nPlease note that given widespread COVID outbreaks in many of our markets, we could still see an impact from government actions to stem the spread of COVID and other disruptions related to COVID, and this is not in our guidance.\nUsing current spot rates, we expect foreign exchange to be a low-single digit benefit for the year, although slightly less favorable than when we gave guidance in April.\nAll in, we still expect net sales to be up 4% to 7%.\nWe have reduced our gross margin guidance for the year and we now expect gross margin to be down year-over-year for the full year on both the GAAP and base business basis given the additional cost inflation we have seen.\nWe expect the gross margin percentage to improve sequentially in the second half, which would leave us down modestly for the year.\nAs I mentioned above, we are taking many steps to mitigate the impact of these costs, including additional pricing, optimizing trade spending, accelerating FTG where available and many others.\nAdvertising is still expected to be up on both a dollar and a percent of sales basis.\nLogistics will continue to be a headwind as costs also have risen faster than anticipated, particularly in the U.S.\nWe still expect these costs to moderate somewhat as we go through the balance of the year.\nOur tax rate is now expected to be between 23% and 24% for the year on both a GAAP and base business basis.\nOn a GAAP basis, we still expect earnings-per-share growth in the low-to-mid single digits, but most likely toward the lower end of that range.\nOn a base business basis, we continue to expect earnings-per-share growth in the mid-to-high single digits.\nAgain, we would expect to land at the lower end of that range.\nSo the overriding message I want to lead with you today is that our strategy to reaccelerate profitable growth by focusing on our core adjacencies all over the world, new channels and markets is really working, as we like to say nothing moves in a straight line, but we now have 10 straight quarters of organic sales growth at or above our long-term target range.\nYear-to-date, we at the high end of the range despite difficult comparisons and continued volatility in the business.\nWe're making good progress on our journey, but we still have more work to do.\nAnd as I look back at my comments to you over the past 18 months that we've been dealing with the implications of COVID, there's one consistent theme that we keep coming back, managing through this crisis with an eye on the future.\nThis is still very appropriate theme, although obviously some of the elements have changed.\nThe prevalence of the vaccine in many developed markets gives us a sense of guarded optimism, but we've highlighted that many emerging markets which represent almost half of our revenues, the availability of the vaccine remains very low, case rates are high, and governments continue to put in restrictions to help stop the spread of the virus.\nWe remain hopeful that we will get to a post-COVID sooner rather than later, but we're not there yet.\nWe will continue to manage to the retail and supply chain disruptions, changes in consumer behavior and government actions to stem the spread of the virus, all while doing our best to protect the health and safety of our employees, which remains our number one priority.\nBut there are changing headwinds as well.\nLast year, we were faced with adverse foreign exchange movements, heightened consumer and customer demand, supply chain volatility and uncertainty for our customers about changing business models and retail environments.\nThis year, we're faced with unprecedented cost increases for raw materials like resin, fats and oils and many others.\nLogistic networks are taxed, whether it's the trucking and warehousing here in the U.S., or ocean freight coming from Asia to the rest of the world, and we're seeing some political disruption in markets like Colombia and Myanmar.\nSo 18 months into the COVID, many of the challenges are the same, some have changed, but our approach remains we will manage through the crisis with an eye on the future, and so far we feel we've done a pretty good job.\nBut we know the markets look forward at our potential, not backwards at our achievements.\nWe know that to deliver top-tier TSR, we need to balance organic sales growth both volume and pricing, all four of our categories and across all of our divisions.\nWe've talked to you a lot about our changes in strategy that will enable us to continue delivering this balanced growth.\nFirst is our focus on breakthrough and transformational innovation.\nOur emphasis is on faster growing channels and markets continues to pay off to growth in e-commerce, direct-to-consumer, discounters, club stores and pharmacies.\nWe're supporting these products with increased focus on our digital media and emerging data analytical capabilities.\nBut we have to deliver gross margin expansion to fund our brand investment, while we know -- while we now expect gross margin to be down modestly for 2021, it comes on the heels of strong gross margin expansion in 2020 and in the face of unprecedented increases in raw material prices.\nWe will continue to leverage our robust revenue growth management program and drive productivity so we can return to gross margin expansion.\nWe have made progress in our journey to improve our mix, but we have further upside potential on this given the benefits we provide to consumers and the fact that our brands under indexing pricing relative to the category across many geographies.\nWe're working to accelerate our productivity programs like funding the growth wherever possible to try and create additional offsets.\nAll this should help us in our drive to return to gross margin expansion.\nAnd while the raw material inflation is obviously negatively impacting our gross margin performance this year, we're optimistic that this raw material inflation could drive an improvement in emerging market fundamentals.\nAgain, we need to first get through the difficulty surrounding COVID, but on the back of our continued rebound in emerging market organic sales growth, particularly in Latin America, we have some optimism that we could see some additional GDP growth and therefore higher category growth on the back end of this movement in commodities.\nWe have seen some of the emerging market currency stabilize for the first time and what seems like several years, and are optimistic this may be a first step.\nAnd since our last call, we have released our 2025 sustainability strategy.\nThis comprehensive plan highlights the actions we're taking around climate, plastics, sourcing, diversity equity and inclusion, and all the other areas that are vital to the future, not only of our Company, but our communities and our planet.\n",
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"content": "qtrly net sales increased 9.5%, organic sales increased 5.0%.\nexpect difficult cost environment to continue in back half of year.\ndespite significant raw material and logistics cost headwinds, we delivered another quarter of increased operating profit.\nstill expects 2021 net sales to be up 4% to 7% including a low-single-digit benefit from foreign exchange.\ncolgate-palmolive - on gaap basis, now expects increased advertising investment & earnings per share growth at lower end of its low to mid-single-digit range in 2021.\ncolgate-palmolive - on non-gaap basis, now expects increased advertising investment & earnings per share growth at lower end of its mid to high-single-digit range 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: This is John Faucher, Chief Investor Relations Officer.\nActual results could differ materially from these statements.\nI will provide commentary on our Q3 performance, as well as our latest thoughts on 2021 guidance before turning it over to Noel to provide his thoughts on how we will continue to deliver on our growth trajectory.\nWe will then open it up for Q&A.\nAs usual, we request that you limit yourself to one question, so that as many people as possible get to ask a question.\nOur focus on innovation, premiumization, pricing and productivity allowed us to deliver solid Q3 and year-to-date results despite a very difficult operating environment.\nWe continue to deliver against our targets because we are executing consistently on the strategy Noel laid out at CAGNY back in 2019.\nWe are focused on delivering consistent, sustainable, profitable growth; both volume and pricing growth, growth in all of our categories, growth in all of our divisions, emerging and developed markets.\nAnd this has enabled us to deliver 11 straight quarters with organic sales growth in line with or above our long-term target of 3% to 5%.\nThis is despite very difficult comparisons and a challenging operating environment.\nThe current operating environment is challenging in many different ways.\nConsumer mobility is limited in many markets, particularly in Asia, due to government restrictions to stop the spread of COVID-19, which is having a negative impact on category growth.\nThese restrictions have also led to temporary closure of manufacturing facilities across many industries as you've heard in the news and from other companies.\nWe are not immune to these restrictions, although, given the essential nature of our categories, we produce products that people and their pets use on a daily basis to lead healthier lives.\nWe have been able to resume production throughout our network, although, sometimes at a lower-than-normal level.\nThis did have a slight impact on sales in the third quarter and we expect a modest impact in the fourth quarter as we ramp production back up.\nWe are fortunate to have a flexible and resilient global supply chain that has helped us to offset some of the effects of the supply chain challenges, albeit sometimes with additional logistics costs.\nSpeaking of logistics, the stress on global logistics networks is creating shortages of raw materials, lengthening shipment times, increasing costs and adding additional uncertainty.\nAll of this is on top of the significant increases in raw material costs and continued movement in foreign exchange.\nThese challenges will continue into next year but we will continue to meet them head on.\nOur net sales grew 6.5% in the quarter, driven by 4.5% organic sales growth and a 2% benefit from foreign exchange.\nOur organic sales growth in the third quarter was led by Oral Care, where we were up mid-single-digits, and Pet Nutrition, where we were up double-digits.\nWe delivered organic sales growth in Home Care, despite a difficult comparison, which puts our Home Care business at double-digit growth on a two-year stack.\nAs expected, organic sales in Personal Care declined mid-single-digits as we lapped the COVID-related growth in liquid hand soap in the year ago period but sales remain above 2019 levels.\nWe grew volume 1.5% in the quarter.\nPricing grew 3% in the quarter, up sequentially from Q2, despite a more difficult 4.5% comparison as we continued to layer in new pricing to try to offset accelerating raw materials costs.\nPricing was up in every category and every division.\nRaw materials continued to increase in Q3, putting further pressure on our gross margins, despite additional pricing and productivity efforts.\nOur gross margin was down 180 basis points in the quarter.\nPricing was a 110 basis point benefit to gross margin, while raw materials were a 510 basis point headwind, despite a slight benefit from transactional foreign exchange.\nProductivity was favorable by 220 basis points.\nOn a GAAP and Base Business basis, our SG&A was up 50 basis points on a percent of sales, driven by significant increase in logistics costs as advertising was up on a dollar basis, but flat on a percent of sales basis.\nExcluding logistics and advertising, our overheads were down slightly on a dollar basis and down nicely on a percent of sales basis.\nWe continue to increase our investments in capabilities like digital, e-commerce and data and analytics, but this was more than offset by sales leverage and tight expense controls.\nFor the third quarter, on a GAAP basis, our operating profit was down 5% year-over-year, while it was down 3% on a Base Business basis.\nOur earnings per share was down 7% on a GAAP basis and up 3% on a Base Business basis.\nA few comments on our divisional performance.\nNet sales in North America grew 1% in the third quarter with organic sales growth of 0.5% and 50 basis points of favorable foreign exchange.\nVolumes were flat in the quarter, despite a negative nearly 400 basis point impact from lower liquid hand soap volumes, while pricing was slightly favorable.\nWe made significant progress on our North American business in the quarter with solid Oral Care growth, driven by mid-single-digit growth in toothpaste, which led to improved toothpaste market share performance through the quarter.\nPersonal Care and Home Care were both down as we lapped COVID benefits in the year-ago period, although EltaMD and PCA Skin delivered strong growth in the quarter.\nNorth America operating margins were negatively impacted by raw materials and higher logistics costs.\nThe impact of plant closures on our global supply chain required us to incur additional air freight charges to fulfill customer orders in the quarter.\nWe also incurred some additional manufacturing costs in the quarter that should help improve the long-term profitability of the division.\nLatin America net sales were up 11% with 8% organic sales growth and a 300 basis point benefit from foreign exchange.\nAll three categories delivered organic sales growth in the quarter with Oral Care organic sales growth in the high-single-digits.\nVolume was plus-2.5% in the quarter, while pricing was up 5.5%.\nBrazil and Mexico led the growth in the quarter, while Colombia delivered double-digit growth following last quarter's political unrest.\nThe Naturals segment continues to be a key driver of growth for us across Latin America, particularly Colgate Natural Extracts Charcoal and we recently launched Colgate Zero Toothpaste in Brazil.\nOur strong Latin America pricing growth highlights the success of our revenue growth management program with a combination of list price increases, premium innovation and trade promo adjustments.\nEurope net sales grew 1% in the quarter with organic sales minus-1% and foreign exchange adding 2%.\nVolume was down 1% and pricing was flat.\nOral Care organic sales grew high-single-digits, while Personal Care organic sales were down sharply, driven by difficult liquid hand soap comparisons due to COVID-related consumption in the year-ago period and a decline in Filorga duty-free sales.\nColgate Elixir Toothpaste continued to drive growth in the quarter along with strong contributions from elmex and meridol.\nAsia-Pacific net sales grew 1% and organic sales declined 0.5% in the quarter, with volume down slightly and pricing and foreign exchange, both slightly positive.\nOral Care saw low-single-digit organic sales growth in the quarter, while Personal Care and Home Care were down due to difficult COVID comparisons.\nWe did see government-imposed mobility restrictions negatively impacting category volumes in several markets, including many in Southeast Asia.\nIndia and the Colgate China business both delivered strong volume growth behind robust innovation in the ayurvedic segment in India, and in e-commerce in China.\nOur Hawley & Hazel JV saw significantly improved performance in Q3 versus Q2 with trends also improving sequentially during the quarter.\nAfrica/Eurasia net sales grew 1% in the quarter with organic -- with an organic sales decline of 1% lapping double-digit organic growth in the year-ago period, more than offset by a 2% positive impact from foreign exchange.\nVolumes were minus-4.5% while pricing was plus-3.5%.\nThe organic sales growth decline in the quarter was driven by Personal Care as we lapped double-digit growth in the year-ago period due to COVID-related demand and pricing.\nOral Care organic sales in the quarter were flat as disruptions in the global supply chain had a negative impact on product availability.\nHill's strong growth continued in the third quarter with 20% net sales growth and 19% organic sales growth with strong growth in both emerging and developed markets.\nOrganic sales growth was driven by double-digit volume growth and high-single-digit pricing through list price increases and our premiumization strategies.\nAnd now for guidance.\nWe still expect organic sales growth for the year to be within our 3% to 5% long-term target range.\nAs I mentioned previously, we have seen an impact from government actions to stem the spread of COVID-19, including reduced consumer mobility and supply chain interruptions.\nWe are managing through these issues, but we would expect modest headwinds from this to continue in the fourth quarter.\nUsing current spot rates, we expect foreign exchange to be a low-single-digit benefit for the year, although slightly less favorable than when we gave guidance in July.\nPlease note that at current spot rates, foreign exchange would have a negative impact on Q4.\nAll in, we still expect net sales to be up 4% to 7%.\nGiven the continued pressures from raw materials, we are projecting a greater decline in gross margin than when we last gave guidance in July.\nFourth quarter gross margin is expected to be roughly in line with the third quarter, although the raw material situation remains very difficult.\nWe continue to take additional steps to mitigate the impact of these cost headwinds, including additional pricing, optimizing trade spending, accelerating FTG where available, and many others.\nWe are focused on recouping the gross margin we have lost due to cost inflation over time and are planning to take the actions necessary to do so.\nAdvertising is still expected to be up on a dollar basis, but flat on a percent of sales basis.\nGiven the issues surrounding logistics networks on a global basis, our logistics costs will continue to be a headwind, particularly in the U.S. and Africa/Eurasia.\nOur tax rate is now expected to be between 22% and 23% for the year on both a GAAP and Base Business basis.\nOn a GAAP basis, we still expect earnings-per-share growth in the low-to-mid single-digits and, as we said on the second quarter call, toward the lower end of that range.\nOn a Base Business basis, we continue to expect earnings-per-share growth in the mid-to-high single-digits.\nAgain, we would expect to land at the lower end of that range.\nSo what I take away from our performance, I guess, both in the third quarter and on a year-to-date basis is that we continue to make good progress on our strategic and operational journey despite the significant volatility we are encountering across our entire business.\nAt the heart of this is our strategy to deliver broad-based sustainable profitable growth; every division, every category, both volume and pricing.\nThat's our aspiration and over the past few years, we have changed our mindset about how we drive growth.\nWe're more proactive in attacking the opportunities for growth, think core, premium adjacencies, faster alternative channels and markets.\nAnd of course, we've talked a lot about building capabilities, think digital, data, e-commerce, innovation.\nAll of these are helping us mine these important areas of growth.\nWhile lapping our most difficult comparisons in over a decade, we delivered organic sales growth at the high end of our long-term target range of 3% to 5%.\nAnd on a two-year basis, both pricing and volume growth increased sequentially in the quarter.\nImportantly, this growth has been driven by our two most important categories: Oral Care and Pet Nutrition.\nOral Care organic sales were up mid-single-digits in Q3 against the mid-single-digit comparison and are up high-single-digits year-to-date.\nWe're driving this growth through more impactful innovation, share growth in faster growth channels like e-commerce and pharmacies, and higher more efficient marketing spending.\nOur premiumization strategy is paying off with our focus on breakthrough and transformational innovation, changing how we interact with the people who use our products.\nA great example of this is how we've changed our approach to whitening.\nIn the U.S,, you're familiar with Optic White Renewal, which has done incredibly well.\nOutside the U.S., the story needs to be more about just hydrogen peroxide levels.\nIn China, it's about enzyme-based whitening.\nIn other markets, we have whitening products targeted toward consumers who love tea or coffee or consumers who love wine or tobacco.\nWe're targeting a whitening opportunity much more broadly with new technologies, formulations and delivery systems, expanding our growth potential.\nPet Nutrition organic sales growth was up 19% in the quarter against an 11% comparison and is now up 14% year-to-date through quarter three.\nThis growth is driven by Hill's science-based equity messaging behind our core.\nIt's driven by meaningful premium innovation and the continued expertise of our digital and e-commerce teams.\nThe launch of Prescription Diet Derm Complete through [Phonetic] its breakthrough therapeutic nutrition for both food and environmental sensitivities has led to share gains in the category and is being rolled out internationally over the next few quarters.\nHill's goal of ending pet obesity, where a study show over 50% of pets are overweight, is the impetus for our Hill's master brand campaign.\nThis campaign has been rolled out globally and has driven growth in both our therapeutic and wellness anti-obesity products.\nIn this type of environment, we couldn't deliver the results without -- this year without the amazing work done by Colgate people every day.\nOur customer development organization is reacting quickly to the changing cost environment so we can take pricing as part of the revenue growth management initiative.\nMarketing and R&D are working together to accelerate the launch of premium innovation to drive mix and profitability.\nAnd most importantly, our global supply chain team has delivered these results despite freight and logistics disruptions, plant closures, congested ports and supplier outages.\nImportantly, all of the efforts we have put into building capabilities over the past few years is not just about driving growth, it's also about creating an organization that can respond more rapidly to all these challenges we face around the world.\nFor example, our focus on data and analytics is helping our revenue growth management program pinpoint the best opportunities for incremental pricing as costs continue to rise.\nWe're getting this pricing out in the market more quickly and the data that drives that process gives our people on the ground more confidence in their decisions.\nOur investment in e-commerce and digital marketing continues to pay off.\nIn our six largest e-commerce markets for Oral Care, we finished the third quarter with year-to-date net sales already ahead of '22 net sales -- 2020 net sales, and toothpaste share growth in five of the six markets.\nWe've implemented new media buying strategy to drive efficiencies, both online and offline, and launched a 4-tier training program to enable 14,000 of our employees to help drive our digital strategy.\nAs I've said, the key through all of this is that we recognize that the strategy is working.\nAnd while we address the pressing issues of raw materials, logistics and supply chain, we can't lose sight of our long-term areas of focus.\nOur Innovation calendar for 2022 will show an increase in the percentage of innovation that is breakthrough and transformational.\nWe've announced our new sustainability and social impact strategy this year, which includes 11 new targets and actions in areas like zero-waste, climate change, using less plastic, as well as Bright Smiles, Bright Futures and our diversity, equity and inclusion efforts.\nAnd we will continue to build our people and capabilities through new ways of working that are truly changing how Colgate people do their jobs.\n2021 has been very challenging year for us and many of these challenges will continue in 2022, but I'm confident of the changes that Colgate people put in place over the past several years, which will allow us to continue to deliver our goal of sustainable profitable growth.\n",
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"content": "confirmed its financial guidance for full year 2021.\nqtrly net sales increased 6.5%, organic sales increased 4.5%.\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: The year is off to a good start.\nIn the first quarter, we generated earnings of $2.43 per share, a 59% increase over the fourth quarter, primarily driven by strong credit quality.\nOur ROE grew to over 18% and our ROA was 1.68%.\nI am pleased to report that we are hearing more optimism among our customers and colleagues across our markets.\nStimulus payments to individuals and enhanced unemployment benefits, along with PPP loans to small- and medium-sized businesses have provided much needed relief to those that are struggling.\nAlso, the Infrastructure Bill that is being considered is expected to spread spending over many years.\nThis fiscal stimulus and the ramp up in the vaccine distribution, in combination with ample liquidity and low borrowing costs, has the potential to spur substantial activity.\nThe economic metrics are improving quickly and the outlook for the back half of the year is for strong economic growth.\nAs the economy continues to reopen and pre-pandemic conditions return, many businesses are beginning to experience accelerating activity.\nI remain very proud of the unwavering commitment of our team to serve our customers, communities and each other.\nWe've again stepped up our efforts to support those affected by the pandemic.\nLast month, Comerica and the Comerica Charitable Foundation pledged approximately $16 million to support small businesses and communities impacted by COVID.\nThis support is in addition to the $11 million committed in 2020.\nAs you know, last year, we funded $3.9 billion in the first round of PPP loans.\nAlso, so far this year, through the hard work of colleagues across the Bank, we further assisted businesses by funding close to $1 billion in the second round of PPP.\nIn addition, in the first quarter, we processed over $600 million in PPP loan repayments, mainly through forgiveness.\nTurning to our first quarter financial performance on Slide 4.\nCompared to the fourth quarter, average loans decreased with seasonally lower home purchase volumes impacting our Mortgage Banker business.\nAlso, total line utilization across nearly all businesses have remained low.\nHowever, our loan pipeline has continued to grow.\nAverage deposits increased over $1 billion to another all-time high as customers received additional stimulus payments.\nNet interest income was impacted by $17 million in lease residual adjustments in an expiring legacy portfolio.\nExcluding this impact, pre-tax pre-provision net revenue increased 5% despite the shorter quarter and the decline in loan volume.\nThis increase in PPNR was due to continued robust fee generating activity in our expense discipline.\nAs far as credit, our conservative culture, diverse portfolio, as well as deep expertise has served us well.\nStrong credit performance and an improvement in our economic forecast resulted in a negative provision of $182 million.\nThe credit reserve remains healthy at 1.59%.\nNet charge-offs were only 3 basis points.\nThrough the cycles, our net charge-offs have typically been at or below our peer group average, including during the past year as we navigated the pandemic.\nWith more confidence in the economic recovery and an estimated CET1 ratio of 11.09%, we plan to restart share repurchases.\nIn the second quarter, we expect to make significant strides toward our 10% target, giving careful consideration to earnings generation, as well as capital needs to fund future loan growth.\nOur ongoing goal is to provide an attractive return to our shareholders, which includes a dividend that currently has a yield of about 4%.\nTurning to Slide 5, average loans decreased approximately $800 million.\nAs Curt mentioned, the biggest driver was Mortgage Banker, which declined from its record high in the fourth quarter due to lower purchase volumes.\nEnergy decreased as higher oil prices are resulting in improved cash flow and capital markets activity.\nWe had expected National Dealer loans would begin to rebound in the first quarter.\nHowever, supply chain issues, most notably with computer chips have STIMI [Phonetic] production.\nIn addition, March auto sales were the second highest of all-time for that month, further depleting inventory.\nDealer loans were $1.5 billion below the first quarter of 2020.\nWe remain confident in the floor plan balances will eventually rebuild to historical levels.\nEquity Fund Services was a bright spot, increasing over $200 million with strong fund formation.\nTotal period end loans reflected decreases of $900 million in Dealer and $700 million in Mortgage Banker.\nLine utilization for the total portfolio declined to 47%.\nWe feel good about the pipeline, which now sits above pre-pandemic levels.\nIt increased to nearly every business line and loans in the last stage of the pipeline nearly doubled over the fourth quarter.\nUltimately, we would expect this to translate into loan growth.\nAs far as loan yields, there were $17 million in lease residual value adjustments, mostly on aircraft and an expiring legacy portfolio.\nWe have not done business in this segment for many years and no further adjustments are expected.\nExcluding the 14 basis point impact from the residual adjustment, loan yields increased 3 basis points with the benefit of accelerated fees from PPP forgiveness.\nContinued pricing actions, particularly adding rate floors when possible as loans renew, offset the decline in LIBOR.\nAverage deposits increased 2% or $1.1 billion to a new record as shown on Slide 6.\nConsumer deposits increased nearly $1 billion, primarily due to seasonality and the additional stimulus received in January.\nCustomers continue to conserve and maintain excess cash balances.\nWith strong deposit growth, our loan-to-deposit ratio decreased to 69%.\nThe average cost of interest-bearing deposits reached an all-time low of 8 basis points, a decrease of 3 basis points from the fourth quarter and our total funding cost fell to only 9 basis points.\nSlide 7 provides details on our securities portfolio.\nPeriod end balances are up modestly as we recently began to gradually deploy some of our excess liquidity by opportunistically increasing the size of the portfolio.\nLower rates on the replacement of about $1 billion in payments received during the quarter resulted in the yield on the portfolio declining to 1.89%.\nYields on repayments averaged approximately 235 basis points, while recent reinvestments have been in the low-180s.\nWe expect to mostly offset the yield pressure on MBS in the near term with a modestly larger portfolio.\nHowever, maturing treasuries will likely be a slight headwind in the back half of the year, depending on the mix of MBS and treasuries we would likely replace them with, as well as market conditions.\nTurning to Slide 8, excluding the impact of the lease residual adjustment and two fewer days in the quarter, net interest income was roughly stable and the net interest margin would have increased 2 basis points.\nAs far as the details, interest income on loans decreased $28 million and reduced the net interest margin by 8 basis points.\nThis was primarily due to the $17 million of lease residual adjustments, which had a 9 basis point impact on the margin, as well as two fewer days in the quarter, which had a $7 million impact.\nLower loan balances had a $5 million impact and were partially offset by a $3 million increase in fees related to PPP loans.\nOther portfolio dynamics had a $2 million unfavorable impact and included lower LIBOR, partially offset by pricing actions.\nLower securities yields, as I outlined in the previous slide, had a $2 million or 1 basis point negative impact.\nContinued prudent management of deposit pricing added $3 million and 1 basis point to the margin and a reduction in wholesale funding added $1 million and 1 basis point.\nAverage balances of the Fed were relatively steady and remain extraordinarily high at $12.5 billion.\nThis continues to weigh heavily on the margin with the gross impact of approximately 41 basis points.\nCredit quality was strong and metrics are moving in the right direction as shown on Slide 9.\nNet charge-offs were only $3 million or 3 basis points.\nNon-performing assets decreased $34 million and at 64 basis points of total loans, they are about only half of our 20-year average.\nInflows to non-accrual were also very low.\nCriticized loans declined $366 million and comprised 5% of the total portfolio.\nPositive migration in the portfolio, combined with growing confidence and improving economic forecast, resulted in a decrease in our allowance for credit losses.\nOf note, both the social distancing-related segments, as well as the Energy portfolio have performed better-than-expected.\nHowever, we continue to apply a more severe economic forecast to these areas.\nOur total reserve ratio is very healthy at 1.59% or 1.72% excluding PPP loans and remains well above pre-pandemic levels.\nNon-interest income increased $5 million as outlined in Slide 10, sustaining the positive trend we've seen for the past year.\nDerivative income increased $11 million as volumes remain robust, particularly for energy hedges, combined with a $10 million benefit from a change in the credit valuation adjustment.\nNote that we have made a change in reporting, we have combined foreign exchange and customer derivative income, which was previously included in other non-interest income into a combined derivative income line item.\nPrior periods have been adjusted to reflect this change.\nWarrants and investment banking fees moved higher and we had smaller increases in fiduciary and deposit service charges.\nPartly offsetting this, commercial lending fees decreased $6 million with the seasonal decline in syndication activity.\nDeferred comp asset returns were $3 million, a $6 million decrease from the fourth quarter and are offset in non-interest expenses.\nNote, card fees remained elevated.\nThey were over 20% higher than a year ago due to government card and merchant activity spurred by the economic stimulus and changes in customer behavior related to the COVID environment.\nAll in all, another strong quarter for fee income.\nTurning to expenses on Slide 11, which decreased $18 million or 4%.\nStarting with salaries and benefits, which were up $11 million due to seasonal factors.\nThis increase was driven by annual stock compensation and payroll taxes resetting.\nProviding a partial offset was a decrease in deferred comp, as well as a reduction due to two fewer days in the quarter and seasonally lower staff insurance costs.\nAll other expenses decreased $29 million.\nAs discussed last quarter, strong investment performance in 2020 has resulted in an $8 million reduction in pension costs, which is included in other non-interest expense.\nIn addition, effective January 1, we adopted a change in the accounting method for our pension plan.\nPrevious quarters have been adjusted, specifically fourth quarter pension expense was reduced by $8 million.\nThis change also decreased AOCI and increased retained earnings at year-end by $104 million, which resulted in a 16 basis point increase to our CET1 ratio.\nFinally, we realized seasonal decreases in advertising and occupancy, lower operating losses and FDIC expense, as well as smaller decreases in other categories.\nOur strong expense discipline is assisting us in navigating this low rate environment as we invest for the future.\nOur CET1 ratio increased to an estimated 11.09% as shown on Slide 12.\nAs always, our priority is to use our capital to support our customers and drive growth while providing an attractive return to our shareholders.\nIn this regard, we have maintained a very competitive dividend yield.\nAs far as share repurchases, we have a long track record of actively managing our capital and returning excess capital to shareholders.\nWith more confidence in the path of the economic recovery, we plan to resume share repurchases in the second quarter.\nWe expect to make significant strides toward our CET1 target of 10%.\nSlide 13 provides our outlook for the second quarter relative to the first quarter.\nIn addition, we have provided expected trends for the second half of the year relative to the second quarter outlook.\nIn the second quarter, excluding PPP loans, we expect loan volume to be stable.\nWe expect growth in several lines of business led by middle market as a result of increasing M&A, as well as working capital and capex needs.\nHowever, this will be offset by continuing headwinds in Mortgage Banker, National Dealer and Energy.\nIn line with the MBA forecast, Mortgage Banker is expected to decline as refi volumes begin to cool with higher rates.\nWe expect National Dealer to continue to decrease as auto inventory levels are challenged by strong demand combined with supply issues.\nAlso, Energy loans are expected to remain on the current declining trend as higher oil prices are driving improved cash flow and capital markets activity.\nAs far as PPP loans, it is difficult to predict.\nHowever, we believe loan forgiveness will pick up toward the end of the second quarter and the bulk should be repaid by year-end.\nExcluding PPP loan activity, we believe loans should grow across nearly all business lines in the second half of the year.\nThis is based on our robust pipeline and expectations that the economy will continue to strengthen.\nWe expect average deposits to remain strong with the second quarter benefiting from the latest federal stimulus.\nThese record levels are expected to wane in the back half of the year as customers start to put cash to work.\nAs far as net interest income, the $17 million lease residual adjustment we took in the first quarter will not recur.\nThat aside, all other factors, including PPP are expected to offset each other in the second quarter.\nFor example, headwinds from lower reinvestment yields on securities should be offset by a modestly larger portfolio.\nAs we move into the second half of the year, we expect pressure on securities yields and swap maturities to be roughly offset by non-PPP loan growth.\nIn addition, lower PPP loan volume and accelerated fees are expected to be a headwind.\nOf course, PPP activity is difficult to predict and may result in variability.\nCredit quality is expected to remain strong.\nAssuming the economy remains in the current path, we expect our allowance should move toward pre-pandemic levels.\nWe expect non-interest income in the second quarter to benefit from higher card fees driven by recent stimulus payments, as well as increased syndication fees following lower seasonal activity in the first quarter.\nAlso, we expect growth in fiduciary income reflecting annual tax-related activity and new business generation.\nThis growth is expected to be more than offset by a decline in derivatives and warrants income from elevated levels, as well as deferred comp, which is not assumed to repeat.\nAs we progress through the year, we believe customer-driven fee categories in general should grow with improving economic conditions.\nHowever, card fees are expected to be a headwind as the benefit from growing merchant and corporate volumes could be more than offset by lower government card activity due to the absence of further individual stimulus payments.\nWe expect expenses to be stable in the second quarter.\nSalary and benefit expenses are expected to decrease in the second quarter with lower stock comp, as well as lower payroll taxes, partly offset by annual merit and one additional day.\nOffsetting this decrease, we expect a rise in outside processing tied to growth in card fees, as well as seasonally higher marketing and occupancy expenses.\nAs far as the second half of the year, by maintaining our focus on expenses, we expect to offset higher tech spend.\nIn addition, we expect increases in certain line items due to seasonality and revenue growth.\nFinally, as I indicated on the previous slide, we plan to restart share repurchases in the second quarter.\nAs I mentioned at the beginning of the call, we are off to a good start and we expect the economy will continue to improve throughout this year.\nWe believe firming manufacturing conditions, increasing business and consumer confidence, as well as pent-up demand will support strong economic growth.\nIt is hard to believe that just over a year ago we drastically changed the ways in which we work and live.\nWe have demonstrated the resilience of our business model as we embraced our core values and rose to the occasion to support our customers, communities and each other.\nOur success is anchored by our ability to provide our expertise and experience to build and solidify deep, enduring relationships, particularly during challenging times.\nI'm extremely proud of the work our team has done to ensure we continue to deliver the same high-level of service.\nWe are focused on delivering a more diversified and balanced revenue base with an emphasis on fee generation, and our progress is demonstrated in our results as non-interest income has increased in each of the past four quarters.\nOur robust card platform is a great example has helped position us for the recent and likely ongoing changes in customer behavior.\nAlso, our fiduciary business is growing with strong collaboration between Wealth Management, Commercial and Retail Bank divisions.\nIn February, we increased the breadth and scale of our Trust Alliance business through the acquisition of a small group with expertise in this area.\nIn addition, we are committed to maintaining our strong expense discipline.\nOur technology investments are enhancing the customer and colleague experience, helping to attract and retain customers and improving colleague efficiency.\nFinally, our disciplined credit culture and strong capital base continue to serve us well.\nThese key strengths provide the foundation to continue to deliver long-term shareholder value.\n",
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"content": "compname reports q1 earnings per common share of $2.43.\nqtrly earnings per common share $2.43.\nqtrly provision for credit losses decreased $165 million to a benefit of $182 million versus 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: Today we reported earnings of $211 million, an increase of 87% over the second quarter.\nOur customers continue to act prudently, conserving cash and adjusting their operations, driving a reduction in loans and taking deposits to a new record.\nLower loan balances along with strong credit metrics and an improving yet uncertain economic path resulted in the allowance for credit losses remaining near 2% and a provision of $5 million.\nAs far as revenue, the impact from lower interest rates waned, card fees remained robust and other fee income categories began to recover.\nExpenses are well controlled and included a $4 million increase in charitable contributions.\nROE returned to double-digits at nearly 11% and our book value per share grew to $53.78, the seventh consecutive quarterly increase.\nWe remain focused on continuing to enhance shareholder value.\nBased on recent conversations I've had with employees and customers, sentiment appears to be modestly better, reflecting cautious optimism and a sense of hope for the future based on our country's overall economic resiliency.\nWe've begun to see some signs of improving conditions.\nHowever, it is very difficult to predict the pace of the recovery.\nThis is reflected in our loan portfolio, where overall, we are starting to see some positive trends.\nBalances begin to grow mid-quarter and increased modestly month-over-month in September.\nAlso, our pipeline has begun to rebuild, although it remains well below pre-COVID levels.\nOn a full quarter average basis, loans decreased $1.5 billion in the third quarter.\nThe largest contributor was a $910 million drop in average National Dealer loans in conjunction with significant decline in dealer inventory levels in the second quarter, which have yet to recover.\nThis is due to supply backlogs following the manufacturing shutdown combined with the rebound in sales activity.\nWe anticipate loans will rebound next year as auto inventory returns to normal levels.\nDeposits continue to show strong broad-based growth with average balances increasing $4.5 billion, including $3.2 billion and non-interest-bearing deposits.\nGovernment stimulus programs have provided tremendous liquidity.\nIn addition, as we've seen in other times of economic uncertainty, our relationship-based customers are maintaining a building cash in safety or their Comerica accounts.\nThe resulting increase in liquidity drove our total average assets to a record $84.3 billion.\nAs expected, net interest income declined $13 million as lower interest rates had a $15 million impact.\nIn this ultra-low rate environment, we continue to carefully manage loan and deposit pricing to attract and maintain customer relationships.\nComerica has a strong credit culture with conservative credit underwriting which has served us well in times of economic stress.\nDuring the current period of unprecedented disruption, our portfolio has performed well, and we believe this will continue to be a differentiator for us in the industry.\nCriticized loans remained stable and non-performing assets are well below historic norms.\nAlso, net charge-offs decreased only 26 basis points.\nHowever, given the difficulty in predicting the path of economic recovery, our credit reserve remains at over $1 billion.\nWe are staying close to our customers in addressing their needs.\nAt the current level, we believe our reserves are appropriate and that we are well positioned.\nNon-interest income increased as customer activity began to rebound, including continued strong contribution from our card platform.\nOf note, following robust activity in the second quarter, derivative income declined $10 million.\nWe have continued to maintain our expense discipline.\nExcluding the impact of deferred comp and an increase in charitable contributions, expenses declined.\nOur capital remained strong with an estimated CET1 of 10.3%.\nWe remain focused on deploying our capital to support growth, while maintaining our very attractive competitive dividend.\nTurning to Slide 4.\nAverage loans decreased $1.5 billion, which compares favorably to results for the industry as indicated by the H8 data for large banks.\nAs Curt mentioned, National Dealer declined $910 million due to low inventory levels impacting floor plan loans.\nAs far as corporate banking, you may recall that large companies drew on lines earlier this year to build liquidity buffers in a time of great uncertainty.\nThis resulted in an increase of nearly $800 million in second quarter average balances.\nCorporate banking line utilization has returned to pre-pandemic levels with average balances down nearly $500 million in the third quarter.\nGeneral middle market loans declined about $400 million, while deposits increased nearly $2 billion.\nCustomers have been prudently cutting cost as well as reducing working capital and capex requirements to improve their cash flow in this challenging environment.\nFor the portfolio as a whole, line utilization decreased to 47% at period end.\nOn the other hand, with full quarter effect of PPP, loans grew in business banking and the small business segment captured in retail banking.\nAlso, our Mortgage Banker business, which serves mortgage companies, was at an all time high, increasing over $300 million due to very robust refi and home sale activity.\nLoan yields were 3.13%, a decrease of 13 basis points from the second quarter.\nLower rates were the major driver.\nOne month LIBOR, the rate we are most sensitive to, declined 19 basis points.\nThis was partly offset by pricing actions we are taking, particularly adding LIBOR floors when possible as loans renew.\nA mix shift in balances, including the full quarter impact of lower yielding PPP loans, also had a negative impact on yields.\nDeposits increased 7% or $4.5 billion to a new record of $68.8 billion, as shown on Slide 5.\nThe larger driver continues to be non-interest-bearing deposits and growth has been broad-based with increases in nearly every business line.\nAs Curt mentioned, customers are conserving and maintaining excess cash balances.\nPeriod end deposits increased over $700 million.\nThe largest contributor was technology and life sciences as robust fundraising added liquidity and customers reduced cash burn.\nWith strong deposit growth, our loan-to-deposit ratio decreased to 76%.\nThe average cost of interest-bearing deposits was 17 basis points, a decrease of nine basis points from the second quarter.\nOur prudent management of relationship pricing in this low rate environment, our large proportion of non-interest-bearing deposits as well as the floating rate nature of our wholesale funding drove our total funding cost only 14 basis points for the quarter.\nAs you can see on Slide 6, we've put some of our excess liquidity to work by increasing the size of the portfolio.\nWe added $1.75 billion in treasuries and $500 million in mortgage-backed securities.\nIn addition, we continue to reinvest prepays, which remained elevated at around $1 billion for the quarter.\nYields on recent purchases have been around 140 basis points.\nThe additional securities combined with lower rates on the replacement of prepays resulted in the yield on the portfolio declining to 2.13%.\nOf note, we have not seen a significant impact on the portfolio's duration or the unamortized premium, which remains relatively small.\nTurning to Slide 7.\nNet interest income declined $13 million to $458 million and the net interest margin was 2.33%, a decline of 17 basis points relative to the second quarter.\nThe major factors were lower rates, which had a negative impact of $15 million or seven basis points in the margin, and the increase in excess liquidity reduced the margin by nine basis points.\nTaking a look at the details.\nInterest income on loans declined $26 million and reduced the margin 13 basis points.\nLower interest rates on loans alone had an impact of $21 million and 11 basis points in the margin.\nLower balances had a $14 million impact, and the mix shift in portfolio, including the full quarter of lower yielding PPP loans had a four basis point impact on the margin.\nPartly offsetting this were higher loan fees in the margin, primarily PPP-related as well as one additional day in the quarter.\nAs discussed on the previous slide, we had lower yields and higher balances in our securities portfolio, which together had a $2 million and two basis point negative impact.\nHigher deposits of the Fed added $1 million, but had a negative impact of nine basis points on the margin.\nDeposit cost declined by $5 million and added three basis points to the margin, primarily a result of a prudent management of deposit pricing, as I previously mentioned.\nFinally, with a reduction in balances and lower rates, wholesale funding cost declined by $9 million, adding four basis points to the margin.\nWe received the full quarter benefit of debt repayments we made in the second quarter, and we prepaid $750 million in FHLB advances in July and August.\nAs a reminder, given the nature of our portfolio, our loans reprice very quickly.\nSo the bulk of the impact from lower rates has now been absorbed.\nAlso, we continue to closely monitor the competitive environment and our liquidity position as we manage deposit pricing.\nOverall, credit quality was strong, as shown on Slide 8.\nNet charge-offs were $33 million or 26 basis points, including recoveries of $20 million.\nCriticized loans remained relatively stable with an increase of only $27 million and comprised 6.5% of the total portfolio.\nNon-performing loans remained low at 62 basis points, and the bulk of the $54 million increase in the third quarter was attributed to energy loans.\nIn summary, we are leveraging our experience and expertise working closely with our customers and carefully reviewing their current and projected financial performance.\nWe have adjusted risk ratings as appropriate.\nWe started this cycle from a position of strength with very low non-performing and criticized loans, and migration so far has been manageable.\nTurning to Slide 9.\nThe economy began to improve to the quarter.\nHowever, the path to full recovery remains uncertain due to the unprecedented impacts of the COVID-19 pandemic.\nFor this reason, our CECL modeling in late third -- in the third quarter did not significantly change and included the recession that we have been experiencing, followed by a slow recovery.\nMore severe assumptions were used to inform the qualitative adjustments made for certain segments.\nThis combined with the reduction in loan balances, resulted in a slight decrease in our allowance for credit losses, which remains above $1 billion.\nOur credit reserve ratio was 2.14%, excluding PPP loans.\nOur credit reserve coverage for NPLs was strong at 3.2 times.\nAgain, we are well positioned with a relatively high credit reserve and low non-performing assets, as illustrated.\nWe believe our disciplined underwriting and diverse portfolio are assisting us in managing through this pandemic recession.\nEnergy loans are outlined on Slide 10.\nThey decreased $251 million to $1.8 billion at quarter end and represent 3.5% of our total loans.\nE&P loans make up nearly 80% of the energy portfolio.\nAnd energy services, which is considered the riskiest segment, was only $46 million.\nThe allocation of reserves to energy loans remained above 10%.\nWhile non-accrual loans increased, criticized loans decreased $102 million and net charge-offs decreased to $9 million.\nCharge-offs are net of $14 million in recoveries, which are unlikely to repeat in the near-term.\nFall redeterminations are just beginning, and we expect a small increase in the borrowing bases as higher energy prices were offset by lower production inventory.\nWith more than 40 years of serving this industry, we have deep expertise and remain focused on working with our energy customers as they navigate the cycle.\nSlide 11 provides detail on segments that we believe pose higher risk in the current environment.\nNote, we continue to review the portfolio refining our assessment.\nAs a result, we have removed casinos and sports franchises from this group as we no longer see elevated risk.\nThat aside, period end loans in the social distancing segment decreased $145 million or 5%.\nAs expected, criticized loans increased $102 million, yet remained manageable at 10% of the segment and non-accruals remained very low.\nWe believe we are well reserved as we have applied a more severe economic forecast to the segment.\nWe have deep expertise and a long history of working in the cyclical automotive sector.\nProduction has been ramping back up and auto sales have rebounded.\nSimilar to the social distancing segment, while loans decreased about $250 million, the criticized portion increased, yet non-accruals decreased and remained low.\nOur leverage loans tend to be with middle market relationship-based customers with sponsors, management teams and industries we know well, and we avoid the covenant-light deals.\nBalances increased to $85 million and criticized and non-accrual loans were slightly higher.\nAs far as payment deferrals, they provided a cushion as customers adjusted to the environment.\nNow that they've acclimated, initial deferrals have expired, a new request of a nominal.\nTotal deferrals at September 30 dropped only 70 basis points of total loans.\nNon-interest income increased $5 million, as outlined on Slide 12.\nImproved economic conditions had a positive impact on deposit service charges and card fees.\nDeposit service charges were up $5 million with increased cash management activity.\nAlso, card fees remained very strong and increased $3 million due to higher consumer volumes and merchant activity spurred by the economic stimulus as well as changes in customer behavior related to COVID.\nCommercial lending fees grew with increased syndication activity and unutilized line fees.\nAs expected, customer derivative income declined following very robust activity in the second quarter, which related to the rapid decline in interest rates and volatile energy prices that have since stabilized.\nDerivative income also included a $6 million unfavorable credit valuation adjustment compared to an unfavorable adjustment of $3 million in the second quarter.\nSecurities trading income decreased $2 million, but remained at an elevated level and reflects fair market adjustments for investments we hold related to our technology and life sciences business.\nSimilarly, investment banking fees declined, yet continue to be relatively strong.\nDeferred comp asset returns were $8 million, a $6 million increase from last quarter, which is offsetting non-interest expenses.\nAlso, bank-owned life insurance increased with the receipt of the annual dividend.\nTurning to expenses on Slide 13.\nSalaries and benefits increased $8 million.\nThis included the increase in deferred comp of $6 million that I just mentioned as well as seasonally higher staff insurance.\nA catch up on maintenance projects, which we expect to continue in the fourth quarter as well as seasonal taxes resulted in an increase in occupancy costs.\nAs previously announced, we increased our charitable contributions to assist businesses and communities impacted by the pandemic.\nSince early March, Comerica, together with Comerica Charitable Foundation, has distributed over $9 million to over 150 non-profit and other community service organizations.\nOutside processing decreased $4 million, primarily related to lower PPP loan initiation volumes.\nIn addition, operational losses and legal-related costs declined $3 million.\nOur expense discipline is well ingrained in our company and is assisting us in navigating this low rate environment as we invest for the future.\nOur capital levels remained strong, increasing to an estimated CET1 of 10.26%, as shown on Slide 14.\nWe were focused on maintaining our attractive dividend and deploying our capital to drive growth, while we maintain strong capital levels with the CET1 target of 10%.\nIn addition, the dividend is supported by strong holding company cash.\nSlide 15 provides for our outlook for the fourth quarter relative to the third quarter.\nWe are assuming a continued gradual improvement in GDP and unemployment.\nAlso, while we do expect to see some modest forgiveness in PPP loans by the end of the year, there is a great deal of uncertainty.\nTherefore, we exclude any impact from forgiveness on loans, net interest income and expenses from this outlook.\nStarting with loans, we expect National Dealer balances to increase as auto inventory levels begin to rebuild.\nMortgage Banker is expected to decline somewhat from its record high with seasonally lower purchase and refi volumes.\nIn addition, we believe the recent stabilization of balances that we've seen in certain business lines, such as the middle market, large corporate and energy, should continue.\nHowever, on a quarter-over-quarter basis, average balances in these businesses are expected to be lower.\nWe expect average deposits to remain strong and stable as customers continue to carefully manage their liquidity.\nThis expectation includes -- excludes the benefit from any further government stimulus programs.\nOverall, net interest income is expected to be relatively stable.\nAs we've already absorbed the bulk of the effect from the decline in rates, we estimate the net effect of lower rates alone will be $5 million or less.\nThe impact from reduced loan balances, lower interest rates on loans and lower yields on securities is expected to be mostly offset by additional rate floors on loans, a decrease in deposit rates to an average of 14 basis points, as well as the full quarter benefit of third quarter actions to increase our securities portfolio and reduced wholesale borrowings.\nAgain, this outlook excludes any benefit from PPP loan forgiveness.\nCredit quality is expected to be solid with net charge-offs increasing from the low third quarter level, which did include strong recoveries.\nAlthough the pace of the economic recovery remains uncertain, with our credit reserve at about 2% of loans in the third quarter, we believe we are well positioned to manage through it.\nWe expect non-interest income to decline as we do not expect the third quarter levels of deferred comp, securities trading income or BOLI to repeat.\nWe believe several customer-driven fee categories should grow with improving economic conditions.\nBut this is expected to be offset by card volume decreasing as recent elevated activity receipts.\nAs far as expenses, we expect a rise in technology costs as we catch up on initiatives that were delayed due to COVID.\nWe are committed to investing in our futures that we are well positioned coming out of the pandemic.\nIn addition, we expect an increase related to seasonal staff insurance.\nMostly offsetting these increases, charitable giving should revert to a normal level, and we do not expect the level of deferred comp to repeat.\nWe continue to focus on controlling expenses as we closely manage discretionary spending.\nFinally, our capital levels are healthy, and we remain focused on managing our capital with the goal of providing an attractive return to our shareholders.\nI will close with Slide 16.\nOver our 170-year history, Comerica has successfully managed through many challenging times.\nUsing our experience and expertise to help our customers and communities navigate stressful situations and achieve long-term success is at the heart of Comerica's relationship banking strategy.\nThe unwavering dedication of our team to assist our customers as well as support each other and our communities continues to be a source of pride.\nOur long-standing corporate mission is to attain balanced growth and profitability by providing a higher level of banking.\nFundamental to our success in accomplishing this mission is our key strengths, which are outlined here.\nWe have long-tenured employees who have deep expertise in the industries they serve.\nWe have a strong presence in the major metropolitan areas of Texas, California and Michigan, and these markets provide significant growth opportunities along with customer diversity.\nThere are abundant collaboration opportunities among our three divisions; Commercial Banking, Retail Banking and Wealth Management.\nOur robust leading-edge cash management suite continues to evolve to meet the ever-changing needs of our customers.\nWe have a strong credit culture.\nOur consistent conservative underwriting approach and prudent customer selection resulted in superior credit performance through the last recession.\nIt also -- it is also assisting us in weathering the current environment, as evidenced by our strong credit metrics this quarter.\nWe are committed to maintaining our expense discipline while investing for the future.\nFinally, our capital position is strong.\nAnd our first priority is to use it to support growth, while providing an attractive return to our shareholders.\nNow we'd be happy to take questions.\n",
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"content": "third quarter 2020 net income of $211 million, $1.44 per share.\nqtrly net interest income decreased $13 million to $458 million versus q2.\nqtrly provision for credit losses decreased $133 million to $5 million versus q2.\nsees q4 net interest income relatively stable versus 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: As we all know, 2020 was a very trying year.\nAnd I could not be more proud of the unwavering commitment of our team to serve our customers, communities and each other during this unprecedented time.\nIt has been truly remarkable.\nWhen I assumed the role of Chairman in January, the fundamentals of the economy were strong.\nAnd I was looking forward to working with our executive team to execute our relationship banking strategy.\nThen in March, our focus shifted due to COVID.\nDespite the many challenges the pandemic posed, we have proven our resilience and achieved many important accomplishments along the way.\nThis includes the Bank and the Comerica Charitable Foundation, together providing $11 million in assistance to local communities and businesses.\nWe funded $3.9 billion in PPP loans to small and medium-sized companies.\nWe were able to quickly enable the majority of our employees to work remotely and introduce programs to provide support, such as Promise Pay and Dependent Care Stipends.\nAs consumers' desire to utilize digital channels increased, we enhanced our online capabilities for deposit accounts as well as loan originations.\nAlso, we achieved our 2020 environmental goals set in 2012 to meaningfully reduce our water, waste, paper and GHG emissions.\nOur commitment to corporate responsibility was recognized, including receiving high marks from Newsweek, DiversityInc.\n, Civic 50, CDP and Corporate Nights.\nThe compassion and tireless efforts of our colleagues across the Bank has allowed Comerica to persevere and remain in a strong position as we move forward.\nSlide 4 provides a review of our 2020 financial results, which included solid loan performance and a record level of deposits.\nThis growth, combined with prudent management of loan and deposit pricing and action we took to deploy excess liquidity, helped offset the pressure of rates dropping to ultra-low levels.\nIn light of the swift deterioration of the economy, we significantly increased our credit reserve and took a large provision in the first quarter.\nWhile we saw some negative credit migration through the year, it has been manageable.\nAnd our net charge-offs for the year were 38 basis points or 14 basis points excluding energy.\nA true testament to our relationship banking strategy and deep credit experience.\nCard fees and securities trading income were strong, while other fees such as deposit service charges and commercial lending fees were impacted by the slowdown in economic activity.\nExpenses remained well controlled and included COVID-related cost.\nWe maintained our strong capital levels and booked -- our book value grew 7% to over $55 per share.\nIn summary, a solid performance, particularly considering the difficult environment.\nOur fourth quarter performance is outlined on Slide 5.\nWe generated earnings of $215 million or $1.49 per share, a 3% increase over the third quarter, driven by an increase in revenue and strong credit quality.\nCompared to the third quarter, loans essentially performed as we expected.\nWhile lower on a quarter-over-quarter basis, average loans increased in December relative to November by nearly $300 million excluding PPP loan repayments.\nOur loan pipeline continue to grow through the year to pre-COVID levels at year end.\nAverage deposits increased by nearly $1.5 billion to an all-time high with 55% of the growth derived from non-interest-bearing accounts.\nCustomers continue to prudently manage their cash, cutting costs and reducing leverage.\nYet, they remained cautiously optimistic that the economy will pick up in the back half of this year.\nNet interest income increased $11 million benefiting from our continued careful management of loan-to-deposit pricing, combined with the contribution from fees related to PPP loan forgiveness.\nThis was partly offset by lower loan balances.\nIn addition, lower yields on our securities portfolio were mostly offset by actions we took in the third quarter to deploy a portion of excess liquidity by increasing the size of the portfolio.\nAs far as credit, our metrics remained strong and our provision was a credit of $17 million.\nCriticized loans declined and net charge-offs were only 22 basis points.\nPositive portfolio migration and the slight improvement in the economic forecast resulted in a reduction of the credit reserve to just under $1 billion or nearly three times non-performing assets.\nThrough the cycles, our credit performance relative to the industry has been a key differentiator.\nAnd I believe we will continue to outperform.\nNon-interest income increased $30 million or 5% as customer activity continued to rebound.\nThis included strong derivative income and commercial lending fees.\nWe continue to maintain our expense discipline as we invest for the future.\nWhile expenses were higher in the fourth quarter, this was primarily driven by performance incentives as well as outside process related to our card platform.\nOur capital levels remained strong.\nOur CET1 ratio increased to 10.35%, above our target of 10%.\nAs always, our priority is to use our capital to support our customers and drive growth, while providing an attractive return to our shareholders.\nTurning to Slide 6.\nAverage loans decreased approximately $600 million or 1%, which compared favorably to the industry HA data.\nLoans in Corporate Banking and General Middle Market decreased as customers are performing well, prudently managing their business to increase cash flow and reduce debt.\nFor the fourth consecutive quarter, energy loans decreased and are at the lowest level since 2011.\nThe U.S. rig count is less than half of what it was a year ago.\nHowever, it has been gradually increasing since late summer as oil prices began to recover.\nTechnology and Life Sciences loans declined about $180 million, mainly due to M&A and increased liquidity, driven by fundraising activity and companies reducing cash burn.\nEquity Funds Services, which provides capital call lines to investment companies increased $244 million as activity has picked up with new fund formation.\nNational Dealer increased $190 million as inventory levels are rebuilding, yet remains $2 billion below fourth quarter 2019.\nMortgage Banker reached a new record with strong activity in both refi and home sales.\nPeriod end loans were stable and included a decline in PPP balances of $298 million, primarily due to loan forgiveness.\nLine utilization at year end for the total portfolio remained relatively low at 48%.\nLoan yields increased seven basis points with accelerated fees from PPP forgiveness and continued pricing actions, particularly adding LIBOR floors when possible as loans renew.\nAverage deposits increased 2% or $1.5 billion to a new record of $70.2 billion, as shown on Slide 7.\nThe largest driver continues to be non-interest-bearing deposits and growth has been broad-based with increases in nearly every business line.\nCustomers continue to conserve and maintain excess cash balances.\nPeriod end deposits increased over $4.4 billion.\nTiming of monthly benefit activity in our government prepaid card business increased balances by $2.2 billion at quarter end.\nHowever, this does not include the latest stimulus payments, which were received in early January.\nWith strong deposit growth, our loan-to-deposit ratio decreased to 72%.\nThe average cost from interest-bearing deposits reached an all-time low of 11 basis points, a decrease of six basis points from the third quarter and our total funding cost fell to only 10 basis points.\nAs you can see on Slide 8, the average balance of the securities portfolio increased.\nThis was due to the third quarter purchase of $2.25 billion in additional securities, primarily treasuries, as we took some action to put some of our excess liquidity to work.\nThe additional securities combined with lower rates on the replacement of prepays, which totaled about $1 billion, resulted in the yield on the portfolio declining to 1.95%.\nWe expect repayments of MBS to continue to be about $1 billion per quarter and yields on reinvestments to be in the low-to-mid 100 basis point range.\nTurning to Slide 9.\nNet interest income increased $11 million to $469 million and the net interest margin was up three basis points to 2.36%.\nInterest income on loans increased $6 million, adding four basis points to the margin.\nHigher fees, mostly related to PPP loan forgiveness and continued pricing actions as loans renew, together added $10 million and four basis points to the margin.\nOther portfolio dynamics, including higher non-accrual income, added $1 million.\nThe decrease in loans had a $5 million unfavorable impact.\nLower securities yields had a $6 million or three basis point negative impact.\nThis was mostly offset by the higher balance, which added $5 million.\nAverage balances of the Fed increased over $500 million, impacting the margin by one basis point.\nOur extraordinarily high Fed balances of $13 billion continue to weigh heavily on the margin with the gross impact of approximately 43 basis points.\nFinally, prudent management of deposit pricing added $5 million and three basis points to the margin and lower rates on wholesale funding added $1 million.\nGiven the nature of our portfolio, our loans reprice very quickly as rates dropped earlier last year, so the bulk of the impact from lower rates has been absorbed.\nAlso, while deposit rates are at record lows, we continue to manage deposit pricing with a close eye in the competitive environment and our liquidity position.\nOverall, credit quality was strong, as shown on Slide 10.\nGross charge-offs were only $39 million, a decrease of $14 million from the third quarter.\nNet charge-offs were $29 million or 22 basis points.\nNon-performing assets increased $24 million, yet remained below our historical norm at 69 basis points of total loans.\nInflows to non-accrual were about half of the amount of the third quarter and the lowest level of any quarter since the pandemic began.\nCriticized loans declined $459 million and comprised 6% of the total portfolio.\nWe believe our disciplined underwriting and diverse portfolio are assisting us in managing through the pandemic conditions.\nPositive migration in the portfolio combined with a modestly improved economic outlook resulted in a small decrease in our allowance for credit losses.\nAs the path to full economic recovery remains uncertain due to the unprecedented challenges of the COVID-19 pandemic, our reserve ratio remains elevated at 1.90% or 2.03%, excluding PPP loans.\nWe are well positioned with a relatively high credit reserve and overall improving credit quality.\nSlide 11 provides detail on segments that we believe pose higher risk in the current environment.\nPeriod end loans in the social distancing segment declined slightly.\nCriticized loans were stable and non-accruals remain under 1%.\nThis segment has performed better than expected, but issues can be lumpy and sudden and resulted in net charge-offs of $21 million in the fourth quarter.\nThe new round of PPP will certainly be helpful for customers that are challenged by the current environment.\nEnergy loans decreased 13% to $1.6 billion at quarter end, representing 3% of our total loans.\nOil prices have increased and credit quality has improved with reductions in criticized, non-accruals and net charge-offs.\nWe have seen a little more capital markets activity and fall redeterminations resulted in only a slight decrease in borrowing basis due to lower reserves.\nAdditional information can be found in the appendix.\nWhile we are pleased with the performance of these segments, we have applied a more severe economic forecast to them, and believe we are well reserved.\nNon-interest income increased $13 million, as outlined on Slide 12, continuing the positive trend we've seen since post the shutdown of the economy earlier last year.\nFourth quarter includes increased customer activity in most categories.\nCustomer derivative income increased $8 million with higher volume due to interest rate swaps and energy hedges, combined with the change in the impact from the credit valuation adjustment.\nSpecifically, there was an unfavorable adjustment of $6 million in the third quarter and a favorable adjustment of less than $1 million in the fourth quarter.\nCommercial lending fees increased $5 million with the seasonal pickup in syndication activity and higher unutilized line fees.\nWe had smaller increases in fiduciary, foreign exchange and letters of credit.\nAlso, card fees remained very strong due to government card and merchant activity spurred by the economic stimulus and changes in customer behavior related to the COVID environment.\nSecurities trading income, which includes fair market adjustments for investments we hold related to our Technology and Life Sciences business, decreased $5 million from elevated levels generated over the last couple of quarters.\nNote, deferred comp asset returns were $9 million, a $1 million increase from the third quarter and are offsetting non-interest expenses.\nAll in all, a strong quarter for fee income.\nTurning to expenses on Slide 13.\nSalaries and benefits increased $14 million with higher performance-based incentives, severance, staff insurance expense and technology-related labor.\nNote that on a full year basis, salary and benefit expense was stable with a reduction in incentive compensation, offsetting annual merit, higher deferred comp and COVID-related costs.\nWe realized a $7 million increase in outside processing due to card activity, technology spend as well as PPP program costs.\nOccupancy increased $2 million due to a catch-up in maintenance projects that were delayed due to COVID as well as seasonal expenses.\nThere is also a seasonal increase in advertising expense.\nOur strong expense discipline is well ingrained and is assisting us in navigating this low rate environment as we invest for the future.\nOur capital levels remained strong, as shown on Slide 14.\nOur CET1 ratio increased to an estimated 10.35%, above our target of 10%.\nAs always, our priority is to use our capital to support our customers and drive growth, while providing an attractive return to our shareholders.\nIn this regard, we've maintained a very competitive dividend yield.\nAs far as share repurchases, we have a long track record of actively managing our capital and returning excess capital generated to shareholders.\nAs we sit here today, a great deal of uncertainty remains about the ultimate pace of the economic recovery, whether it be faster or slower than economists forecast.\nFor that reason, we have paused for share repurchases and look forward to starting the program as soon as we deem it prudent to do so.\nSlide 15 provides our outlook for the first quarter relative to the fourth quarter as well as some color in the year ahead.\nIn the first quarter, we expect National Dealer loans to continue to increase at a moderate pace as auto inventory rebuilds.\nAlso, middle market is expected to grow as a result of increased economic activity.\nHowever, this will be more than offset by Mortgage Banker declining from its record high due to seasonally lower purchase and refi volumes.\nEnergy is expected to decrease due to higher oil prices driving improved cash flow and capital markets activity.\nAs far as PPP loans, we expect the pace of loan forgiveness could potentially exceed the second round of fundings.\nLooking past the first quarter, excluding PPP loan activity and based on improving economic conditions, we expect loans to grow throughout the year.\nWe expect average deposits to remain strong in the first quarter as customers continue to carefully manage their liquidity.\nAs far as net interest income, continued management of loan and deposit pricing is expected to be accretive, albeit to a lesser degree than we've seen so far.\nWe are currently in the process of deploying some excess liquidity by repaying $2.8 billion of FHLB advances over an eight week period, which will provide a modest lift.\nThese benefits are expected to be more than offset by reduced loan balances, lower yields on securities, slightly lower LIBOR as well as two fewer days in the quarter.\nAs we move through the year, assuming there is no change from rates that we experienced in the fourth quarter, we expect quarterly pressure on securities yields and swap maturities to mostly -- to be mostly offset by loan growth, excluding PPP impacts.\nWe expect net charge-offs to increase from low levels we've seen recently.\nHowever, with our credit reserve at year end at over 2% of loans, excluding PPP, we believe we are well positioned to manage through this period of economic uncertainty.\nWe expect non-interest income in the first quarter to benefit from higher deposit service charges, fiduciary and brokerage fees.\nAs deferred comp is difficult to predict, we assume it will not be repeated.\nWe expect a seasonal decline in syndication activity.\nAlso, card, warrants and securities trading income are expected to decline from elevated levels.\nAs we progress through the year, we believe that customer-driven fee categories in general should grow with improving economic conditions.\nWe expect expenses to be lower in the first quarter.\nOur pension expense is expected to decline $9 million in the first quarter to get to the new run rate for 2021.\nThe decline is primarily due to strong investment performance in 2020.\nAs I mentioned, we do not forecast deferred comp of $9 million to repeat.\nAlso, marketing and occupancy expenses are expected to be seasonally lower, and there are two less days in the quarter.\nPartly offsetting all of this, first quarter includes annual stock comp and associated higher payroll taxes.\nWe remain focused on maintaining our expense discipline while we invest in the future.\nTherefore, on a full year basis, we expect higher salary expense related to normal merit and incentive comp as well as higher tech spend will be mostly offset by lower pension and deferred comp returns.\nWe expect a 22% tax rate, excluding discrete items.\nFinally, as mentioned on the previous slide, we remain focused on maintaining our strong capital levels and providing an attractive return to shareholders.\nWhile difficult and uncertain conditions persist, I am confident that our team will continue to adapt and thrive as we have over the past year.\nWe expect the economy will improve in 2021.\nWe believe firming trade and manufacturing conditions, increasing business and consumer confidence as well as pent-up demand will support solid economic growth, particularly in the back half of the year.\nComerica has a long history of successfully managing through challenging times.\nWe have demonstrated our resiliency and unwavering dedication to provide a high level of customer service as we navigate the COVID pandemic.\nWe maintain a culture that drives continuous efficiency improvement.\nWe believe this will assist us in preserving our cost base as the economy improves, and we continue to invest in our future.\nOur discipline credit culture and strong capital base continues to serve us well.\nUtilizing our deep expertise and experience to help our customers navigate these difficult times builds and solidifies long-term relationships.\nThese key strengths provide the foundation to continue to deliver long-term shareholder value.\nThis has been demonstrated by our ROE, which increased over 11% in the fourth quarter and our book value per share, which grew 7% over the past year as well as the current dividend yield, which remains above 4%.\n",
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"content": "compname reports q4 net income of $1.49 per share.\nq4 2020 net income $1.49 per share.\nqtrly net interest income increased $11 million to $469 million.\nq1 2021 average deposits to remain strong.\nsees decline in net interest income with lower average loan balances, libor and security yields as well, in q1 2021 versus q4 2020.\nqtrly provision for credit losses decreased $22 million to a benefit of $17 million versus q3.\nq4 net interest income $469 million versus $544 million in q4 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: I'd like to begin the call with a few highlights from CMC's historic fiscal 2021, then I'll turn comments to our fourth-quarter results before providing updates on our strategic projects and current market environment.\nI'm pleased to report that fiscal 2021 marks the best financial performance in our company's 106-year history.\nCMC generated its highest ever earnings from continuing operations, as well as record consolidated core EBITDA.\nBoth the North America and Europe segments also reported record results.\nI'm also pleased to discuss our newly authorized share repurchase program and increased quarterly dividend payment, which should provide meaningful cash distributions to our shareholders.\nCMC's exceptional fiscal-2021 performance translated to a return on invested capital of 14%, more than double the average for the three-year period proceeding our fiscal 2019 rebar asset acquisition.\nWe believe this sharp increase clearly demonstrates the dramatic strategic transformation CMC has undertaken in recent years.\nNot only has our bottom line grown significantly, but the returns on capital deployed have created tremendous value for our shareholders.\nWe believe our record performance in fiscal 2021 was also a testament to our team's ability to respond quickly to robust market conditions.\nCMC shipped more product out of our mills than ever before, with six of our 10 mills setting all-time shipment records and seven achieving best-ever production levels.\nOur team continues to demonstrate their ability to optimize facilities and further increase the productivity of CMC's assets.\nThis showed at several plants as improvements across a variety of KPIs, including optimized melt yields and energy consumption and melt shops, higher tons per hour in rolling mills, as well as shortened lead times and shipping base.\nEfficiency gains at our mills, combined with strong cost management throughout the entire North America vertical value chain, enabled CMC to achieve a year-over-year reduction in control of costs on a per ton basis.\nTo underscore the strength of this accomplishment, particularly with an inflationary environment, I would point out that over the same time frame, the Census Bureau's producer price index increased almost 10%.\nIt was also a time frame in which the entire U.S. economy was challenged by supply chain disruptions and labor shortages.\nLate in fiscal 2021, CMC commissioned its third rolling line in Europe.\nThis is an important strategic growth investment we've been discussing for some time.\nI'm pleased to share that the project was completed well under budget and production was ramped up more quickly than anticipated.\nBoth achievements are a testament to the capabilities of our Polish team.\nThis new asset ran at a high rate of production during the latter part of the fourth quarter and was a meaningful contributor to Europe's segment earnings.\nDuring the year, CMC also made significant progress on our network optimization effort.\nFollowing the full closure of CMC's former Steel California operations, we're now capturing an annual EBITDA benefit of approximately $25 million, while continuing to serve the West Coast market effectively and efficiently with bar source from lower-cost CMC mills.\nWhen these actions complete, we are halfway to our stated target of $50 million on an annual optimization benefits.\nOn the sustainability front, CMC published its latest report in June, featuring enhanced disclosures and a commitment to achieve ambitious environmental goals by the year 2030.\nCMC has been sustainable since its inception 106 years ago as a single location recycling operation in Dallas, Texas, and we have carried that legacy forward into the 21st century.\nSlide 6 of the supplemental posted materials provides a clear illustration of CMC's industry leadership position as an environmental steward.\nGoing forward, we intend to publish our sustainability report on an annual basis, reflecting our commitment to transparency and timely measurement against our stated environmental goals.\nTurning to fourth-quarter performance.\nCMC generated earnings from continuing operations of $152.3 million or $1.24 per diluted share.\nExcluding the impact of a small one-time charge related to the write down of a recycling asset, adjusted earnings from continuing operations were $154.2 million, or $1.26 per diluted share.\nThis level of adjusted earnings represents a 21% sequential increase and a 62% year-over-year increase, driven by strong margins on steel products and raw materials, as well as robust demand from nearly every end market we serve.\nDuring the quarter, CMC generated an annualized return on invested capital of 20%, which is far in excess of our cost of capital and a clear indication of the economic value we are creating for our shareholders.\nI would now like to provide a quick update on the status of CMC's key strategic growth projects.\nI've already mentioned strong execution to date on both our network optimization initiative and the rolling line in Europe.\nWe are proud of the progress made on each.\nThe only comment to add is that during the two months of commercial production at our new rolling line, EBITDA on an annualized basis far exceeded the $20 million target used to justify the project.\nThe timing of start-up could not have been better.\nWe have stepped into a very strong market with both demand and pricing at healthy levels.\nConstruction of our revolutionary third micro mill the Arizona 2 remains on schedule for an early calendar 2023 start-up.\nAt this point, we have completed earthwork and now are pouring foundations and beginning vertical construction.\nAs a reminder, this plant will be the first micro mill in the world capable of producing merchant bar, as well as rebar.\nIt will also be the first in North America capable to connect directly to an on-site renewable energy source.\nWe believe these capabilities, combined with a micro mills inherent low-cost and low-carbon footprint, will define a new level of operational and environmental excellence in long product steel making.\nWhen CMC announced the construction of Arizona 2 in August of 2020, we also indicated that a meaningful portion of the investment costs would be funded through the sale of the land underlying our former Steel California operations.\nOn September 29, CMC entered into an agreement to sell that parcel for roughly $300 million.\nI would note that the sale price was much higher than the figure we estimated in August 2020 when we gave an expected net investment figure of $300 million for Arizona 2.\nPaul will provide more detail on this in a moment.\nNow turning to market conditions, first in North America.\nWe are seeing strong activity levels within nearly all our end markets.\nAt the mill level, demand for rebar, merchant bar and wire rod is robust.\nRebar is being supported by continued construction growth, particularly in our core geographies.\nPeople are moving in, businesses are investing and state-funded infrastructure spending is healthy, which is reflected in residential, nonresidential and public construction spend data.\nThese factors have also benefited our shipments of wire rod.\nIn addition to construction, CMC's merchant product is sold into a number of end market applications and nearly all are growing on a year-over-year basis.\nAs you know, construction is by far CMC's largest end market, and our best leading indicator is our volume of downstream project bids.\nActivity levels have been very strong for the last two quarters, driven by a good blend of private and public sector work.\nProject owners are also awarding high volumes of new work, which has allowed CMC to replenish our downstream backlog following the lull that occurred in late 2020.\nIn fact, we've actually built backlog over the summer months, a period that typically entails a seasonal runoff.\nPicture in Europe looks very similar to North America.\nConstruction activity is strong with new residential construction starts increasing by double-digit percentages on a year-over-year basis.\nThe Central European industrial sector continues to grow, highlighted by the current 14-month trend of expansionary PMI readings for both Poland and Germany.\nCMC is now even better positioned to capitalize on this growth with production from our new rolling line, which allows our Polish operations to produce each of our three major product groups simultaneously.\nSupply conditions in Central Europe are tight, which has driven margins sharply upward from the historic lows of fiscal 2020 and early fiscal 2021.\nThe new rate of $0.14 per share of CMC common stock is payable to stockholders of record on October 27, 2021.\nThe dividend will be paid on November 10, 2021.\nAdditionally, as announced yesterday, the board of directors also authorized a new share repurchase program of $350 million.\nPaul will provide additional details regarding our capital allocation strategy during his remarks.\nAnd with that as an overview, I will now turn the discussion over to Paul Lawrence, vice president and chief financial officer, to provide some more comments on the results for the quarter.\nI'm pleased to review with you our outstanding fourth-quarter results.\nAs Barbara noted, we reported record earnings from continuing operations of $152.3 million or $1.24 per diluted share, more than double prior-year levels of $67.8 million and $0.56, respectively.\nResults this quarter include a net after-tax charge of $1.9 million related to the write-down of recycling assets.\nExcluding the impact of this item, adjusted earnings from continuing operations were $154.2 million or $1.26 per diluted share.\nCore EBITDA from continuing operations was $255.9 million for the fourth quarter of 2021, up 45% from a year-ago period and 11% on a sequential basis.\nBoth of our North America and Europe segments contributed significantly to year-over-year earnings growth, while core EBITDA per ton of finished steel reached a record level of $155 per ton.\nThe fourth quarter marked the tenth consecutive quarter in which CMC generated an annualized return on invested capital at or above 10%, which is above our cost of capital.\nNow I will review the results by segment.\nNorth American segment recorded adjusted EBITDA of $212 million for the quarter, an all-time high, compared to adjusted EBITDA of $174.2 million in the same period last year.\nThe largest drivers of this 22% improvement were significant increase in margins on steel products and raw materials, as well as solid volume growth.\nPartially offsetting these benefits was an increase in controllable costs on a per ton of finished steel basis.\nPrior to the fourth quarter of fiscal '21, CMC had achieved seven consecutive quarters of year-over-year reductions to our controllable costs per ton.\nSelling prices for steel products from our mills increased by $300 per ton on a year-over-year basis and $106 per ton sequentially.\nMargin over scrap on steel products increased by $103 per ton from a year ago and $41 per ton sequentially.\nThe average selling price of downstream products increased by $44 per ton from the prior year, reaching $1,014.\nThis increase did not keep pace with underlying scrap costs leading to a year-over-year decline in margins.\nAt this point, I'd like to spend a moment to discuss the pricing dynamics of our downstream backlog.\nThe average price per ton of our downstream shipments is a function of the volumes and price points on the hundreds of fixed price projects that comprise the total backlog at any given time.\nThe average price of our total backlog will move up or down over time based on the new work we are awarded and the older work that is being completed.\nCurrently, we are in an environment in which our backlog is repricing upward with new work coming in at much higher prices than the completed work it is replacing, reflecting a margin above current spot rebar prices.\nWe expect this upward pricing trend in our backlog will translate into the average shipment price increasing throughout much of fiscal '22.\nCMC does not give price guidance, but we can say absent a run-up of scrap cost, the margin benefit of our backlog repricing is expected to be significant in future periods.\nShipments of finished product in the fourth quarter increased 2% from a year ago.\nDemand for rebar out of our mills remains strong, but as shipments declined modestly from the prior year due to a shift in our mix toward merchant and wire rod.\nVolumes of merchant and other steel products hit a record level during the quarter, increasing 29% on a year-over-year basis and were 20% higher than the trailing three-year average.\nDownstream product shipments were impacted by a reduced backlog we had at the beginning of the year and resulted in a 3% volume decline from the fourth quarter of fiscal 2020.\nBarbara mentioned, our backlog was replenished during the latter half of fiscal '21 and has actually grown on a year-over-year basis for the past several months.\nTurning to Slide 10 of the supplemental deck.\nOur Europe segment generated record adjusted EBITDA of $67.7 million for the fourth quarter of 2021, compared to adjusted EBITDA of $22.9 million in the prior-year quarter.\nImprovement was driven by expanded margins over scrap, strong volumes across our range of products and contributions from our new rolling line.\nI should note that the prior-year period included a roughly $11 million energy credit that the current period does not.\nWe expect to receive a similar sized credit during the first quarter of fiscal '22.\nMargins over scrap increased by $119 per ton on a year-over-year basis and were up $27 per ton from the prior quarter.\nTight market conditions provided the backdrop to achieve the segment's highest average selling price in more than a decade, reaching $763 per ton during the fourth quarter.\nThis level represented an increase of $317 per ton compared to a year ago and $99 per ton sequentially.\nEurope volumes increased 21% compared to the prior year and reached their highest level on record.\nThe strength was broad-based with shipments of rebar, merchant bar and other steel products increasing by double-digit percentages on a year-over-year basis.\nPolish construction market remains robust with new residential activity growing strongly.\nConsumption of our merchant and wire rod products has been supported by an expanding Central European industrial sector.\nAs Barbara mentioned, the ramp-up of our third rolling mill helped CMC capitalize on these strong conditions and increased volumes during the quarter.\nTurning to capital allocation and our balance sheet.\nThe new share repurchase program equates to roughly 9% of our market capitalization and will replace the previous program enacted in 2015.\nThese actions highlight the confidence that CMC's board and senior leadership have in the earnings capability of CMC, as well as our future prospects.\nOur intention is to target a cash distribution to shareholders that represent a meaningful portion of free cash flow and is competitive with sector peers.\nWe plan on executing against this target by utilizing share repurchases to supplement our dividend payments.\nWe believe this approach will allow CMC's strategic flexibility in our deployment of capital, as well as provide a mechanism to directly return excess cash flow with shareholders during the periods of strong performance.\nCMC's rebalanced capital allocation framework with its greater emphasis on cash distribution should in no way impede on our first priority, which is pursuing value-accretive growth.\nWe expect to fully fund our current strategic growth projects with organic cash generation while simultaneously providing enhanced cash returns to shareholders and maintaining a high-quality balance sheet.\nOur capital allocation priorities are laid out explicitly in simple terms on Slide 14.\nWe have proven ourselves as excellent stewards of capital and generator of economic value.\nWe believe our best use of capital is the execution of attractive value-creating growth.\nAs we look beyond the completion of the slate of strategic initiatives outlined during our investor day last year, we are encouraged by the pipeline of attractive strategic growth projects that are currently being explored.\nHowever, we believe that given the robust and stable cash flows we expect to generate through the cycle, CMC will have the ability to both fund attractive growth and return elevated levels of cash to our shareholders.\nWe always look to optimize our debt costs.\nHowever, given the current slate of our balance sheet, we do not believe delevering is in the best advantageous strategy to us at this time.\nOverarching our entire capital allocation strategy is our objective to maintain a strong balance sheet that provides strategic flexibility and gives CMC the wherewithal to navigate any economic environment.\nMoving to the balance sheet.\nAs of August 31, 2021, cash and cash equivalents totaled $498 million.\nIn addition, we had approximately $699 million of availability under our credit and accounts receivable programs.\nDuring the quarter, we generated $134 million of cash from operations despite a $48 million increase in working capital.\nThe rise in working capital was driven by the significant increase in both scrap input costs and average selling prices.\nLooking past these factors, our days of working capital have decreased from a year ago.\nOur leverage metrics remain attractive, and we have improved significantly over the last two fiscal years.\nAs can be seen on Slide 17, our net debt-to-EBITDA ratio now sits at just 0.8%, while our net debt to capitalization is at 17%.\nWe believe a robust balance sheet and overall financial strength provides us the flexibility to fund our strategic growth projects, navigate economic uncertainties and pursue opportunistic M&A while returning cash to shareholders.\nCMC's effective tax rate for the quarter was 21%.\nFor the year, our effective tax rate was 22.7%.\nAbsent enactment of any new corporate tax legislation, we forecast our tax rate to be between 25% and 26% in fiscal '22.\nLastly, I would like to provide CMC's fiscal '22 capital spending outlook.\nWe currently expect to invest between $450 million to $500 million this year with a little over half of which can be attributed to Arizona 2.\nWe are entering the middle phase of mill construction when investment and on-site activity is anticipated to be the highest.\nAs we indicated in the past, proceeds from the sale of our Rancho Cucamonga land are expected to be used to offset much of the cost of the state-of-the-art mill.\nTotal gross investment for Arizona 2 is forecast to be approximately $500 million.\nAgainst which, we'll apply roughly $260 million net after-tax proceeds from the land transaction.\nThis nets out to be $240 million of spend for the new mill, compared to the $300 million net investment figure we had previously provided.\nThe difference as Barbara previously mentioned, is due to the higher-than-expected valuation on the land sale.\nThis concludes my remarks, and now I will turn back to Barbara for the outlook.\nWe entered fiscal 2022 confident about what lies ahead.\nBased on our current view of the marketplace and our internal indicators, we anticipate continued strong financial performance.\nSigns point to healthy demand in our key end markets, and we expect supply/demand conditions to remain favorable, supporting good margin levels.\nAdditionally, several of the sector trends we've discussed previously are likely to provide tailwinds in an already growing domestic construction market.\nThese trends include the regional population migration, which has been occurring for many years, but accelerated over the course of the pandemic, as well as supply chain hardening.\nExceptionally strong new single-family construction activity in CMC's core geographies is likely to be followed by the buildout by municipalities and private businesses of local infrastructure to support expanded or newly formed communities.\nThe positive tone of our outlook is mirrored by the latest cement consumption forecast from the Portland Cement Association and consensus nonresidential forecasts compiled by the American Institute of Architects.\nThe PCA expects growth in cement consumption of 2.2% in fiscal 2022 and 1.4% in 2023.\nThe AIA consensus outlook for private nonresidential spending anticipates an increase of roughly 5% in 2022.\nMore near term, in looking to the first quarter of fiscal '22, we expect shipments to follow a typical seasonal trend, which has historically equated to a modest decline from fourth-quarter levels.\nMargins on steel products, as well as controllable cost per ton should generally -- be generally consistent on a quarter-over-quarter basis.\nAt this time, we will now open the call to questions.\n",
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"content": "q4 adjusted earnings per share $1.26 from continuing operations excluding items.\nq4 earnings per share $1.24 from continuing operations.\nanticipate strong operating and financial performance will continue in fiscal 2022.\ndeclared quarterly dividend $0.14 per share of cmc common stock, represents 17% increase over previous 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: If not, it may be found on our Investor Relations website at ir.\nOur discussions today will include non-GAAP financial measures.\nOur entire executive leadership team is available during the Q&A session.\nChipotle's third quarter results highlight strong momentum in our business, fueled by a multi-pronged growth strategy and a passionate team that's delighted to see more guests coming back into our restaurants.\nWe continue to retain about 80% of digital sales but have now recovered nearly 80% of in-restaurant sales.\nWhile COVID impacts will likely persist for a few more quarters, we are hopeful that the worst is behind us and society can shortly return to a more normal environment.\nFor the quarter, we reported record quarterly sales of $2 billion, representing 21.9% year-over-year growth, which was fueled by a 15.1% increase in comparable restaurant sales.\nRestaurant level margin of 23.5% was 400 basis points higher than the 19.5% we reported last year.\nEarnings per share adjusted for unusual items of $7.02, representing an increase of 86.7% year-over-year.\nDigital sales growth of 8.6% year-over-year, representing 42.8% of sales and we opened 41 new restaurants, including 36 with a Chipotlane.\nAnd I'm pleased to report that Q4 is off to a great start.\nThese results highlight that our key strategies continue to resonate with guests and allow us to win today, while we create the future.\nWhile we regularly get asked, what's next, I believe our current growth drivers have plenty of runway and will be critical to us reaching our longer-term goal of 6,000 restaurants in North America with AUVs above $3 million and improving returns on invested capital.\nTo remind everyone, we're focusing on five key areas.\nNumber one, opening and running successful restaurants with a strong culture that provides great food with integrity, while delivering exceptional in-restaurant and digital experiences.\nNumber two, utilizing a disciplined approach to creativity and innovation.\nNumber three, leveraging digital capabilities to drive productivity and expand access, convenience, and engagement.\nNumber four, engaging with customers through our loyalty program to drive transactions in frequency.\nAnd last but certainly not least, number five, making the brand visible, relevant, and loved.\nLet me now provide a brief update on each of these, starting with operations.\nWell-trained and supported employees consistently preparing delicious food and delivering excellent guest experiences are at the heart of our success.\nWe're fortunate to have amazing employees at our restaurants who have stayed focused on safety, reliability, and excellent culinary, despite the dynamic and challenging environment.\nWe are extremely proud of Chipotle's world-class employee value proposition that includes industry-leading benefits, attractive wages, specialized training and development, access to education, and a transparent pathway to significant career advancement opportunities.\nWe believe these efforts are helping to attract and retain great employees, which is more important than ever given the challenging labor environment we're all experiencing today.\nOver the past 18 months, we've made operational adjustments to adapt to our constantly changing environment in support of our in-restaurant business as well as our record-breaking digital business.\nAs a result, we've had to allocate labor as needed among the different roles, including the DML and the frontline, depending on available staff to accommodate the needs of our customers and our restaurant teams.\nThis flexibility has allowed us to keep our frontline open, given our ability to divert orders on the digital line as needed to overcome periodic staffing challenges.\nThis is part of the normal business balancing that occurs at the discretion of on-site managers and has not had a material impact on our business in the past.\nThis was through pre-pandemic and is more relevant now as dining room volumes recover.\nThe good news is that I believe we're finally getting back to pre-pandemic operations and I couldn't be more excited.\nWe're fortunate to have a dedicated digital make line and a dedicated dining room serving line.\nOur frontline represented nearly 60% of our business or $1.1 billion of sales for the quarter.\nIt is big and it is growing.\nWe are committed to ensuring guests on the frontline get the customized meal they want, made with real ingredients, excellent culinary, and faster than anywhere else.\nWe still have some work to do, but our goal is to provide exceptional throughput as speed of service is a foundational element of convenience that our guests truly value.\nTherefore, we are committed to teaching, training, and validating the five pillars of throughput every day during every shift to ensure we meet our high standards and provide a great guest experience.\nWhile taking good care of guest is always a top priority, utilizing our stage gate process to continue innovating is critical to our growth.\nThe great news is that Chipotle's delicious food that you feel good about eating, which creates an emotional connection with our customers and they love to see ongoing innovation from us.\nAs a result, we introduced new menu items on a regular cadence as it helps bring in additional customers, drive frequency with existing users, and gives us an opportunity to create buzz around the brand.\nRecently, we launched Smoked Brisket for limited time across all our U.S. and Canadian restaurants.\nOur culinary team spent the last two years developing the perfect Smoked Brisket recipe that is unique to our brand and pairs flawlessly with our fresh, real ingredients.\nThis is our third new menu item this year, following on the success of our Cilantro-Lime Cauliflower Rice and handcrafted Quesadilla.\nEarly customer feedback on this entree, which is expected to last through November, has been very positive and we're delighted to see an increase in both check size and transactions.\nQuesadillas, which we launched as a permanent digital exclusive offering in March, continues to perform well and is also helping attract new customers to Chipotle.\nBy the way, if you haven't had a chance to try the brisket quesadilla, you really are missing out.\nAnd we're far from being done.\nPlant-Based Chorizo is currently being tested in a couple of markets and our talented culinary team is in the early stages of developing other exciting menu items.\nAll that being said, our stage gate process is not limited to new menu innovations.\nWe use it for many parts of the business, including development.\nAs you know, we validated a new restaurant expansion in Canada earlier this year, impressive unit economics with AUVs and margins, equal to or above those in the U.S. led us to accelerate development in this market.\nWe've opened one new restaurant in Canada year-to-date and have several more planned before year-end, including our first ever Chipotlane that's scheduled to open next week.\nSimilarly, we are now in the early stages of using this process to learn, iterate, and eventually validate expansion in Western Europe.\nCOVID slowed our ability to execute several critical initiatives, however, with restrictions easing, we're making nice progress and have implemented some of our digital assets as well as begun to test alternative formats and explore new trade areas.\nThe recent openings have exceeded expectations.\nSo while we continue to view international expansion as a medium to longer-term opportunity, I remain quite optimistic about its future contributions to the Chipotle story.\nA more near-term pillar of growth has been our ongoing digital transformation, which is helping Chipotle become a real food-focused digital lifestyle brand.\nDuring the third quarter, digital sales grew nearly 9% year-over-year to $840 million and represented 43% of sales.\nWe're not surprised to see the mix moderate as the world continues to reopen.\nHowever, we're pleased to see our digital sales dollars continue to grow despite lapping tough comparisons.\nIn fact, our year-to-date digital sales of nearly $2.7 billion are just slightly below the $2.8 billion we achieved during all of last year.\nDigital is proving to be sticky as it's a frictionless and convenient experience that has been aided by continuous technology investments to improve operational execution, innovation, and the customer value proposition.\nAs a result of the pandemic, many new consumers were introduced to Chipotle via our digital channels and are now using us for alternative occasions.\nThe thing I love about having two separate businesses is that they serve different needs that will likely prove to be incremental and complementary over the long run.\nThis is reinforced by the fact that different guests are accessing Chipotle through different channels.\nCurrently, about 65% of our guest use in-restaurant as their main access point, nearly 20% use digital as their primary channel, and the remaining 15% to 20% use both channels.\nWe're encouraged by this dynamic as it gives us several future opportunities, including the ability to convert more of our in-restaurant guests into higher frequency digital users.\nNot only are we pleased with the level of digital sales and overall mix, but we're also delighted to see that our highest margin transaction, digital pickup orders, is gaining traction.\nThis channel represented slightly more than half of digital sales in Q3.\nAs always, we're not being complacent and continue to look for ways to enhance convenience and access through alternate restaurant formats, digital-only menu offerings, and leveraging our large and growing loyalty program.\nSpeaking of the loyalty program, we're excited to have more than 24.5 million members, many of whom are new to the brand.\nThis gives us a large captive audience to engage with and distribute content that promotes our values, as well as motivates our super fans.\nWe continue to leverage our CRM sophistication by focusing a lot more on personalization and using predictive modeling to trigger journeys, primarily for new and lapsed customers.\nThese personalized messages are more brand-related as opposed to offers or discounts, which is allowing us to optimize program foundation and economics.\nAll these efforts, along with the use of enhanced analytics, are allowing us to consistently attract more visits from loyalty members than non-members.\nNo doubt the loyalty program has moved from a crawl to the walk stage, and we still have a lot of room to grow.\nOffering new ways to engage with Chipotle is essential to the ongoing evolution of our digital business.\nOur first enhancement was Rewards Exchange, which provides greater customization and flexibility to redeem rewards and allows guests to earn rewards faster.\nMore recently, we announced Extras, an exclusive feature that gamifies Chipotle rewards with personalized challenges to earn extra points and/or collect achievement badges in order to drive engagement.\nAs the program grows, so does our ability to provide sophisticated and relevant communications to our guests, which will ultimately deepen the relationship between members and the brand.\nWe are pleased with our progress to-date, but believe with ongoing investments and further leveraging of data-driven insights, we can get even better.\nAmplifying all the growth initiatives I've mentioned thus far are the collective efforts of the marketing team, which are designed to make Chipotle more visible, more relevant, and more loved.\nWe believe that real food has the power to change the world and using custom creative across a wide variety of media channels that allow us to drive culture, drive difference, and ultimately, drive a purchase.\nFor example, we use numerous campaigns to stay relevant via important sporting events such as the basketball championships, where we hit $1 million worth of free burritos in our TV advertising.\nWe also utilize social media, including our website, to authentically highlight real food for real athletes during the broadcast from Tokyo.\nAnd, of course, to celebrate the launch of Smoked Brisket, we offered an exclusive peek to our loyalty members prior to a full launch, supported by a media plan across online video, digital, and social media platforms as well as traditional TV spots.\nAll of these helped attract new guests into the Chipotle family as well as increase frequency of existing users.\nWe're fortunate to have an innovative marketing team that wants to be a leader, not a follower, and our marketing organization is built on a culture of accountability that encourages new ideas, that's committed to experimentation, and is ruthless on measuring returns, and isn't afraid to pivot to different opportunities if they don't perform to our high standards.\nEvery day this team is focused on driving sales today, while enhancing our brand for tomorrow.\nChipotle is committed to fostering a culture that values and champions our diversity, while leveraging the individual talents of all team members to grow our business, elevate our brand, and cultivate a better world.\nOur team has proven their ability to be resilient and successfully execute against macro complexities.\nAs a result, I believe, we are better positioned to drive sustainable, long-term growth than we were before the pandemic, which makes me even more excited about what we can accomplish in the years ahead.\nWith that, here's Jack to walk you through the financials.\nWe're pleased to report solid third quarter results with sales growing 21.9% year-over-year to $2 billion as comp sales grew 15.1%.\nRestaurant level margin of 23.5% expanded 400 basis points over last year, and earnings per share adjusted for unusual items was $7.02, representing 86.7% year-over-year growth.\nThe third quarter had a GAAP tax benefit that I'll discuss shortly, which is partially offset by expenses related to a previously disclosed modification to our 2018 performance share and transformation expenses, which netted to positively impact our earnings per share by $0.16 leading to GAAP earnings per share of $7.18.\nAs we look ahead to Q4, there remains uncertainty on several fronts, including COVID-related impacts as well as inflationary and staffing pressures.\nBut given our strong underlying business momentum, we expect our comp to be in the low-to-mid double digits, which is encouraging considering that will be about 200 basis points less than pricing contribution during Q4 versus Q3 as we've lap some of our delivery menu price increases.\nAnd our brisket LTO will be for a partial quarter as compared to the full quarter of carne asada last year.\nLet me now go through the P&L line items, beginning with cost of sales.\nOur supply chain team has done an outstanding job, navigating the numerous industrywide disruption, which led to food costs being 30.3% in Q3, a decrease of 200 basis points from last year.\nThis is due primarily to leverage from menu price increases, which were partially offset by higher costs associated with beef and freight that unfortunately are continuing to worsen.\nIt's hard to predict how much of these headwinds will ultimately be temporary versus permanent but they are likely to persist for the foreseeable future.\nIn addition, Q4 will also include the higher cost brisket LTO, which collectively will result in our food costs being in the low-31% range for the quarter.\nLabor costs for the third quarter were 25.8%, an increase of about 40 basis points from last year.\nThis increase was driven by our strategy to increase average nationwide wages to $15 per hour, which is partially offset by menu price increases, sales leverage, and a one-time employee retention credit.\nGiven ongoing elevated wage inflation and greater new unit openings, we expect labor costs to be in the mid-26% range in Q4.\nOther operating costs for the quarter were 15.1%, a decrease of 170 basis points from last year due primarily to price and sales leverage.\nMarketing and promo costs for the quarter were 2.4%, about 20 basis points lower than we spent last year.\nWhile Q3 tends to be a seasonally lower advertising quarter, the timing of some initiatives also shifted into Q4 this year.\nAs a result, we anticipate marketing expense to be around 4% in Q4 to support Smoked Brisket and for the latest brand messaging under our Behind The Foil campaign.\nFor the full year 2021, marketing expense is expected to remain right about 3% of sales.\nOverall, other operating costs are expected to be in the mid-16% range for the fourth quarter.\nLooking at overall restaurant margins, we expect Q4 to be in the 20% to 21% range.\nOur Q4 underlying margin would be around 22% when you normalize marketing spend and remove the temporary headwind from the brisket LTO.\nAnd the remaining cost pressure will continue to evaluate and take appropriate actions on menu prices to offset any lasting impacts.\nOur value proposition remains strong, which we believe gives us a lot of pricing power.\nDespite these challenges, we remain confident in our ability to drive restaurant level margins higher as our average unit volumes increase.\nG&A for the quarter was $146 million on a GAAP basis or $137 million on a non-GAAP basis, including $7.6 million for the previously mentioned modification for 2018 performance shares, and $1.6 million related to transformation and other expenses.\nG&A also includes about $100 million in underlying G&A, about $28 million related to non-cash stock compensation, about $8.5 million related to higher performance-based bonus accruals and payroll taxes and equity vesting, and stock option exercises, and roughly, $600,000 related to our upcoming all-manager conference.\nLooking to Q4, we expect our underlying G&A to be right around $101 million as we continue to make investments primarily intact to support ongoing growth.\nWe anticipate stock comp will likely be around $27 million in Q4, although this amount could move up or down based on our actual performance.\nWe also expect to recognize around $5.5 million related to performance-based bonus expense and employer taxes associated with shares that vest during the quarter as well as about $1.5 million related to our all-manager conference.\nOur effective tax rate for Q3 was 14.7% on a GAAP basis and 19.7% on a non-GAAP basis.\nBoth rates benefited from our option exercises and share vesting at elevated stock prices.\nIn addition, our GAAP tax rate included a return to provision benefit for additional NOL generated on our 2020 federal income tax return and carried back to prior years.\nFor Q4, we continue to estimate our underlying effective tax rate to be in the 25% to 27% range, though it may vary based on discrete items.\nOur balance sheet remains healthy as we ended Q3 with $1.2 billion in cash, restricted cash and investments with no debt along with a $500 million untapped revolver.\nDuring the quarter, we repurchased $99 million of our stock at average price of $1,813 and we expect to continue using excess free cash flow to opportunistically repurchase our stock.\nHowever, opening more Chipotles continues to be the best return we can generate.\nDuring Q3, despite a few delays in opening timeline, we opened 41 new restaurants with 36 of these including a Chipotlane.\nWhile we're experiencing construction inflationary pressures, subcontractor labor shortages, critical equipment shortages and landlord delivery delays, our development team is doing an excellent job opening these new restaurants.\nIn fact, we currently have more than 110 restaurants under construction, and while timing is somewhat unpredictable, this gives us confidence in ending the year at or slightly above the 200 new restaurants with now more than 75% including a Chipotlane versus our prior expectation of 70%.\nAlso, the team has done a nice job building a robust new unit pipeline, which we believe will allow us to accelerate openings in 2022.\nBut because of the challenges I just mentioned and how they could impact the timeline, we will provide 2022 opening guidance during our Q4 call.\nAs of September 30th, we had a total of 284 Chipotlanes, including 12 conversions and 8 relocations.\nThey continue to enhance access and convenience for our guests, while demonstrating stellar performance.\nAnd while it's early days, Chipotlane conversions and relocations are yielding encouraging results.\nWe will leverage our stage gate process to learn and refine our strategic approach to accelerating our Chipotlane portfolio.\nYou can see why we remain optimistic about our future.\n",
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"content": "compname reports q3 earnings per share of $7.18.\nq3 earnings per share $7.18.\nq3 revenue rose 21.9 percent to $2.0 billion.\nq3 adjusted earnings per share $7.02 excluding items.\nqtrly comparable restaurant sales increased 15.1%.\nqtrly digital sales grew 8.6% year over year to $840.4 million.\nqtrly food, beverage and packaging costs in q3 were 30.3% of revenue, decrease of 200 basis points compared to q3 of 2020.\nqtrly restaurant level operating margin was 23.5%, an increase from 19.5% in q3 of 2020.\nfor q4 expect comparable restaurant sales to be in low to mid double-digits range.\nsees q4 2021 comparable restaurant sales growth in low to mid double-digits range.\nsees for fy 2021 at or slightly above 200 new restaurant openings.\nsees an estimated underlying effective q4 2021 tax rate between 25% and 27% before discrete 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: Such statements express our forecasts, expectations, hopes, beliefs and intentions on strategies regarding the future.\ncummins.com, under the heading of Investors and Media.\nI'll start with a summary of our second quarter financial results and our market trends by region and then finish with a discussion of our outlook for 2021.\nMark, will then take you through more details of both our second quarter financial performance, and our forecast for this year.\nDemand remained strong in the second quarter, as the global economy continued to improve, driving strong sales growth across most businesses and regions, resulting in solid profitability.\nWe are encouraged by economic trends across a number of our key end markets, which point to strong demand for the remainder of this year, and extending into 2022.\nIn North America freight activity continues to grow, leading to elevated spot and contract rates and driving fleet profitability, and a rising backlog of truck orders.\nLeading indicators for non-residential construction, continue to improve and fiscal support for investment and capital projects is robust, led by North America and Europe.\nIron ore, copper and thermal coal prices also remain high, supporting a positive outlook for mining.\nCummins is well positioned to benefit, as these markets gain momentum due to our leading global position across a number of end markets, and we continue to see demand our products outpace our competition.\nBefore getting into our results.\nI want to take a moment to highlight a number of partnerships and strategic milestones, and the evolution of our next generation technologies.\nIn May, we formed a partnership with the Iberdrola, a leading global producer of renewable power to accelerate the global growth of business opportunities in the electrolyzer market, and especially in Europe with a focus on the Iberian Peninsula.\nThe Alliance will help position Cummins as a leading supplier of electrolyzer systems for large scale projects in Europe.\nAs part of our alliance, Cummins will be the electrolyzer supplier for a 230 megawatt project for a leading fertilizer producer that will serve as a benchmark for large PEM scale electrolysis globally.\nWe signed a globe, a joint venture with Sinopec and Enze fund in June which will accelerate the affordability and availability of green hydrogen in China to development of hydrogen generation projects, and increasing manufacturing capacity of electrolyzers and other key products in the green hydrogen supply chain.\nAs one of the largest hydrogen suppliers in China, Sinopec's annual hydrogen production reaches 3.5 million tons, accounting for 14% of total -- China's total hydrogen production.\nChina's embrace of green hydrogen is great for the planet, and Cummins and Sinopec joining together to realize the potential of green hydrogen is a huge leap forward for scaling our innovative PEM electrolyzer systems.\nWe recently announced a strategic collaboration with Chevron to develop commercially viable business opportunities in hydrogen and other alternative energy sources.\nThe MoU provides the framework for Chevron and Cummins to initially collaborate on four main objectives.\nFirst, advancing public policy that promotes hydrojet -- hydrogen as a decarbonizing solution for transportation and industry; building market demand for commercial vehicles and industrial applications powered by hydrogen; developing infrastructure to support the use of hydrogen for industry and fuel cell vehicles; and fourth, exploring opportunities to leverage Cummins electrolyzer and fuel cell technologies at one or more of Chevron's domestic refineries.\nThe partnership with Chevron allows us to scale low carbon fuel delivery and build hydrogen corridors for use by fuel cell vehicles.\nIn addition, we can work with Chevron to decarbonize parts of their operations using our green hydrogen technology.\nFinally, last week, Cummins announced the signing of an MoU with Air Products to work together to begin the transition of Air Products' heavy-duty tractor fleet to zero emissions vehicles in the Americas, Europe and Asia.\nCummins will provide hydrogen fuel cell electric powertrains integrated into selective -- selected OEM partners' heavy-duty trucks for use by Air Products.\nThe project will take a phased approach to transition Air Products fleet to hydrogen fuel cell electric powertrains, starting with five demonstration units to be delivered in Europe and North America by the end of next year.\nFollowing successful demonstration, the project includes ramp-ups, which -- with a total of 2,000 trucks to be delivered by the middle of the decade.\nThis represents among the largest orders for fuel cell vehicles to-date, and we will be working with a partner that has deep expertise in the generation, transportation and use of hydrogen.\nWe've now deployed more than 2,000 fuel cells and 600 electrolyzers around the world as we continue the development of our hydrogen business.\nIn addition to accelerating our revenue momentum via these important strategic partnerships, we are also building out our electrolyzer capacity, targeting the regions which we expect to be at the forefront of green hydrogen production and commercial adoption.\nSite selection search within the Guadalajara area of Castilla-La Mancha in Spain is currently underway for Cummins new approximately $60 million PEM electrolyzer manufacturing plant that will house system assembly and testing for approximately 500 megawatts per year of electrolyzer production and will be scalable to more than one gigawatt per year.\nCummins-Enze, the JV we signed in conjunction with Sinopec, will be located in Foshan, Guangdong province in China.\nThe JV will initially invest $47 million to locate a manufacturing plant to produce PEM electrolyzers.\nThe plant will open with a manufacturing capacity of 500 megawatts of electrolyzers per year, but will also be scalable to more than one gigawatt per year.\nThese investments, in addition to our build-outs underway at our current facilities in Belgium and Canada, will position us to have nearly two gigawatts of capacity by the middle of the decade with the flexibility to scale up as demand accelerates.\nIn the battery electric space, we continue to produce and sell fully electric powertrains in first-mover markets such as transit, school bus and yard spotters.\nCummins is collaborating with PepsiCo's Frito-Lay on a electric demonstration truck for a pickup and delivery application that has been running daily routes since last November.\nThis truck will be showcased at the upcoming North American Council for freight efficiencies electric truck demonstration.\nWe are well positioned with our deep market expertise in electric powertrain technology and are continuously evaluating how we can adapt and improve to meet customer demand and market trends as the technology matures.\nThis includes next-generation battery electric systems to balance the durability needs of our customers while focusing on delivering products at a compelling price point.\nWe are also continuing to explore new partnerships to enhance our capabilities, improve our cost position and drive more volume and scale into the business.\nIn addition to these important milestones for our New Power business, we are investing in our Engine and Components businesses to develop advanced diesel and alternative fuel products, which will be critical to meeting customer and regulatory requirements in the coming years.\nWe announced the signing of an LOI to acquire a 50% equity interest in Momentum Fuel Technologies.\nThe joint venture between Rush Enterprises and Cummins will produce Cummins-branded natural gas fuel delivery systems for the commercial vehicle market in North America, combining the strength of Momentum Fuel Technologies compressed natural gas fuel delivery systems Cummins powertrain expertise and the engineering and support infrastructure of both companies.\nWe have seen increasing interest over last year and expect natural gas powertrains to become an increasingly popular choice for end users due to both a compelling total cost of ownership as well as the environmental benefit of such powertrains, especially when utilizing renewable natural gas sources.\nWe also began testing of a hydrogen-fueled internal combustion engine for heavy-duty truck applications, building on Cummins' existing technology leadership in gases fuel applications and powertrain leadership to create a new power solution to help customers meet the energy environmental needs of the future.\nThe hydrogen engine program can potentially expand the technology options available to achieve a more sustainable transport sector complementing our capabilities in hydrogen fuel cell, battery electric and renewable gas powertrains.\nWe are committed to bringing customers the right solution at the right time.\nDoing so requires us to maintain a broad portfolio of power solutions to meet our diverse customers' needs and to minimize total carbon emissions throughout the energy transition.\nNow I'll comment on the overall company performance for the second quarter of 2021 and cover some of our key markets, starting with North America before moving on to our logos international markets.\nRevenues for the second quarter of 2021 were $6.1 billion, an increase of 59% compared to the second quarter of 2020.\nEBITDA was $974 million or 15.9% compared to $549 million or 14.3% a year ago.\nEBITDA increased as a result of stronger global demand and higher joint venture income, partly offset by significantly higher premium freight and other costs associated with supply chain disruptions in addition to higher compensation costs.\nOur global markets experienced an unprecedented shock from the impact of COVID-19 during the second quarter of last year.\nAnd while we have been encouraged by the ongoing recovery across all of our global markets, our industry continues to experience significant constraints across the supply chain, leading to an extended period of inefficiencies and higher costs.\nDespite these supply chain impacts, though, we are continuing to deliver strong financial performance while supporting our customers.\nThe ability to supply our customers remains our key focus now.\nAnd while we are optimistic that the supply chain constraints will ease with time, they are likely to persist through the end of the year.\nOur second quarter revenues in North America grew 74% to $3.5 billion, driven by higher industry build rates across all on-highway markets.\nIndustry production of heavy-duty trucks in the second quarter was 67,000 units, an increase of 180% from 2020 levels.\nWhile our heavy-duty unit sales were $23,000, an increase of 217% from 2020.\nIndustry production of medium-duty trucks was 29,000 units in the second quarter of 2021, an increase of 94% from 2020 levels, while our unit sales were 22,000 units, an increase of 85% from 2020.\nWe shipped 42,000 engines to Stellantis for use in the Ram pickups in the second quarter of 2021, an increase of 272% from 2020 levels.\nRevenues for Power Generation grew by 48% due to higher demand in recreational vehicle, standby power and data center markets.\nOur international revenues increased by 42% in the second quarter of 2021 compared to a year ago.\nSecond quarter revenues in China, including joint ventures, were $2.1 billion, an increase of 8% due to higher sales in power generation and mining markets.\nWe also experienced a higher penetration rate with our joint venture partners in the heavy and medium-duty on-highway markets as they prepare for broader implementation of NS VI in July of this year.\nIndustry demand for medium and heavy-duty trucks in China was 566,000 units, a decrease of 4%, but still well above replacement, driven by continued pre-buy of NS V trucks, ahead of the broader implementation of the new NS VI standards in July of this year.\nOur sales and units, including joint ventures, were 85,000 units, a decrease of 5% versus the second quarter of 2020.\nThe light-duty market in China decreased 8% from 2020 levels to 614,000 units, while our units sold, including joint ventures, were 38,000, a decrease of 28%, driven by supply chain constraints, particularly in these lighter displacement vehicles.\nIndustry demand for excavators in the second quarter was 97,000 units, a decrease of 5% from very high 2020 levels.\nOur units sold were 16,800 units, a decrease of 7%.\nThe demand for power generation equipment in China increased 47% in the second quarter, driven by growth in data center markets and other standby power markets.\nWe continue to hold a leading market position in the data center segment, driven by strong end-user relationships and a compelling product offering in that space.\nSecond quarter revenues in India including joint ventures were $392 million, an increase of 219% from the second quarter of 2020, despite experiencing a terrible second wave of COVID-19 during this period.\nIndustry truck production increased by 468%, while our shipments increased 535%, as our joint venture partner continued to gain share.\nDemand for power generation and construction equipment rebounded strongly in the second quarter, compared to a very low base a year ago.\nWe remain encouraged by the continued economic recovery, driven by anticipated government infrastructure spending.\nIn Brazil, our revenues increased 175%, driven by increased demand in most end markets.\nNow let me quickly cover our outlook for 2021.\nBased on our current forecast, we are maintaining full year 2021 revenue guidance of up 20% to 24% versus last year.\nEBITDA is still expected to be in the range of 15.5% to 16%.\nAnd the company expects to return 75% of operating cash flow to shareholders in 2021, in the form of dividend and share repurchases.\nAnd summing up the quarter, strong demand across many of our key markets drove continued sales growth in the second quarter and resulted in solid profitability.\nWe have secured important new partnerships in our New Power segment.\nAt the same time, we continue to invest in bringing new technologies to customers, outgrowing our end markets and providing strong cash returns to our shareholders.\nCummins Filtration is a premier filtration platform and a technology leader specializing in filtration products used in heavy-medium-duty and light-duty trucks, industrial equipment and power generation systems.\nThe business generated revenues of approximately $1.2 billion in 2020, and remains well positioned for continued growth, sustained margin performance and strong free cash flow generation.\nCummins Filtration has a strong global footprint with leading positions in North America, India and China.\nAnd a significant presence in other key markets supported by long-standing local partnerships.\nWe are exploring a range of options to unlock significant shareholder value, including the separation of Filtration into a stand-alone company with a dedicated management team, who are well positioned to drive the business forward and diversify its business, leveraging strong technology portfolio and footprint.\nThe execution of this exploration process is dependent upon business and market conditions, of course, along with a number of other factors and considerations.\nAnd any costs associated with the evaluation of these alternatives for the Filtration business has been excluded from our financial outlook.\nWe plan to share a lot more about this and other elements of our strategy, during our Analyst Day on February 23rd.\nOur purpose in delaying this event from November this year, until spring, is to be able to hold it in person.\nAnd we will provide more details as we get closer, to the February 23rd date.\nThere are four key takeaways from our second quarter operating results.\nFirst, underlying demand remains strong, outpacing supply and increasing backlogs in some of our largest markets.\nNumber two, global supply chains remain constrained due to the elevated levels of demand and complications arising from COVID, resulting in higher premium freight costs and other associated inefficiencies than we anticipated three months ago.\nWe delivered solid profitability and cash flows in the first half of the year despite the continued cost headwinds associated with tight supply chain.\nAnd for the full year, we are maintaining our revenue and profitability guidance.\nAnd fourthly, we returned $860 million to shareholders in the quarter through cash dividends and share repurchases and $1.48 billion for the first half of the year, consistent with our plan to return 75% of operating cash flow to shareholders this year.\nNow let me go into more details on the second quarter.\nSecond quarter revenues were $6.1 billion, an increase of 59% from a year ago when the impact of COVID-19 was at its most severe.\nSales in North America grew 74% and international revenues rose 42%.\nCurrency positively impacted revenues by 3%, driven primarily by a weaker US dollar.\nEBITDA was $974 million or 15.9% of sales for the quarter compared to $549 million or 14.3% of sales a year ago.\nEBITDA increased primarily due to the benefits of higher volumes and stronger earnings from our joint ventures in China and India, partially offset by higher product coverage costs and higher compensation expenses primarily variable compensation.\nGross margin of $1.5 billion or 24.2% of sales increased by $588 million or 110 basis points, primarily driven by the higher volumes, global supply chain tightness continued in the second quarter and resulted in approximately $100 million of additional freight, labor and logistics costs.\nWe expect these costs to remain elevated in the second half of the year with demand projected to remain strong, supply tight and some increase in logistics and transportation costs.\nSelling, general and administrative expenses increased by $130 million or 28% due to higher compensation expenses.\nAnd research expenses increased by $87 million or 46% from a year ago.\nAs a reminder, due to the significant uncertainty at the onset of COVID-19, we implemented temporary salary reductions in April of last year that lasted through the end of September last year.\nSalary reductions resulted in approximately $75 million of pre-tax savings for the company in the second quarter of 2020 across gross margin, selling, admin and research expenses.\nIn addition, our variable compensation plan worked as designed, flexing down in the face of weaker economic conditions last year and flexing up with stronger financial performance this year.\nAll operating segments experienced higher compensation costs than a year ago for these two primary reasons.\nJoint venture income was $137 million in the second quarter, up from $115 million a year ago.\nStrong demand for trucks and construction equipment in China as well as a broad recovery in other international markets led to the improved profitability versus a year ago.\nOther income increased by $30 million from a year ago due to a number of positive items, including a one-time $18 million gain on the sale of some land in India, which benefited our Distribution segment.\nNet earnings for the quarter were $600 million or $4.10 per diluted share compared to $276 million or $1.86 from a year ago, primarily due to stronger after-tax earnings driven by stronger volumes.\nThe gain on the sale of land in India contributed $0.05 of earnings per share this quarter.\nThe effective tax rate in the quarter was 21.4%.\nOperating cash flow in the quarter was an inflow of $616 million, compared to an outflow of $22 million a year ago.\nStronger earnings and dividends received from joint ventures more than offset increases in working capital.\nI'll now comment on segment performance and our guidance for 2021, which is unchanged from three months ago.\nFor the Engine segment, second quarter revenues increased by 75%, driven by increased demand for trucks in the U.S. and construction equipment in U.S. and Europe.\nEBITDA increased from 10.5% to 16.1% of sales, primarily driven by higher volumes and lower product coverage expense, which more than offset higher costs and inefficiencies associated with global supply chain challenges.\nAnd although, supply chain costs in this segment remain elevated from a year ago, they did improve a little from first quarter levels.\nWe expect full year revenues to be up 23% to 27%, and EBITDA margins to be in the range of 14.5% to 15% for the Engine segment.\nIn Distribution, revenues increased 20% from a year ago.\nAnd EBITDA increased as a percent of sales from 10% to 10.5%, primarily due to stronger performance in North America.\nWe have maintained our outlook for segment revenue growth to be up 6% to 10%, and EBITDA margins to be 9% at the midpoint of our guidance.\nIn the Components business, revenues increased 73% in the second quarter, driven primarily by stronger demand for trucks in North America.\nEBITDA increased from 12.3% of sales to 15.1%, due to the benefits of stronger volumes, partially offset by higher product coverage costs.\nFor the full year 2021, we expect Components revenue to increase 30% to 34% and EBITDA to be 17%, at the midpoint.\nIn the Power Systems segment, revenues increased 47% in the second quarter, driven by stronger global demand for power generation and mining equipment.\nEBITDA increased from 11.7% to 12.2% of sales, primarily due to the benefits of higher volumes and lower product coverage expenses.\nWe are maintaining our Power Systems guidance of revenues up 16% to 20%, and EBITDA margin in the range of 11% to 11.5% of sales.\nIn the New Power segment, revenues increased to $24 million, up 140%, due to stronger sales of battery electric systems and fuel cells.\nEBITDA losses for the quarter were $60 million, in line with our expectations, as we continue to invest in new products and scale up ahead of widespread adoption of the new technologies.\nFor Full year, we currently project New Power revenues of $110 million to $130 million and EBITDA losses to be in the range of $190 million to $210 million.\nTotal company guidance remains unchanged, with revenues to grow between 20% and 24%.\nAnd EBITDA margin to be between 15.5% and 16%, for the full year.\nEBITDA perfect for the first half of the year was 16%.\nSome of the key factors expected to influence second half profitability, are the piece of improvement in truck production in North America, the rate of decline in demand in China, and the performance of the global supply chain.\nWe now expect earnings from joint ventures to be up 10% in 2021, compared to our prior year guidance of down 5%.\nStronger-than-expected demand in China truck and construction markets, especially in the second quarter, is the primary reason for the increase in our forecast.\nSo joint venture earnings are expected to ease in the second half of the year with industry truck sales expected to decline following the broader adoption of the new National Standard VI on highway emissions regulations in China in July.\nAnd we also anticipate a softening of demand for construction equipment coming off all-time high levels in the first half of the year.\nOur effective tax rate is expected to be approximately 21.5%, excluding discrete items, down from our prior guidance of 22.5% due to the mix of geographic earnings, capex -- capital expenditures were $125 million in the quarter, up from $77 million a year ago.\nAnd we expect our full year capital expenditures to be at the high end of our range of $725 million to $775 million for the full year.\nWe returned $869 million to shareholders through dividends and share repurchases in the second quarter, bringing our total cash returns to $1.48 billion for the first half -- excuse me for my dry throat.\nTo summarize, we delivered strong results in the second quarter despite continued supply chain constraints and elevated costs.\nDemand currently exceeds supply in a number of important markets, pointing to strong demand for our products into 2022.\nWe continue to extend our leadership position through advancing the technologies that power the profitability of our customers today and will continue to do so for some time to come.\nThis sets the company up to further increase the earnings power of our core business while we continue to invest in a range of new technologies and develop new partnerships that position the company for additional growth.\nOur strong balance sheet focused on improving performance cycle-over-cycle and consistent cash flow generation means that we can sustain important investments for the future through periods of economic uncertainty and distribute excess cash to shareholders.\nOut of consideration to others on the call, I would ask that you limit yourself to one question and a related follow-up.\nAnd if you have additional questions, please rejoin the queue.\nOperator, we are now ready for our first question.\n",
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"content": "q2 earnings per share $4.10.\nq2 revenue $6.1 billion versus refinitiv ibes estimate of $6 billion.\nsees fy revenue up 20 to 24 percent.\nalso announcing exploration of strategic alternatives for its filtration business.\npotential strategic alternatives to be explored include separation of cummins filtration business unit into a stand-alone company.\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: Joining in for the Q&A session are Brad Griffith, our Chief Commercial Officer; as well as George Schuller, our Chief Operations Officer.\nBefore we get started, I'll remind everyone that the remarks we make today represent our view of our financial and operational outlook as of today's date, November 5, 2020.\nThese expectations involve risks and uncertainties that could cause the company's actual results to differ materially.\nA discussion of these risks can be found in our SEC filings located online at investors.compassminerals.com.\nOur remarks today also include non-GAAP financial measures such as adjusted EBITDA and free cash flow.\nThere are several reasons for that delta, primarily related to delayed ordering of Plant Nutrition products in our North and South American markets.\nThose timing issues were driven by very dry weather in both Brazil and key North American markets, as well as extreme wildfires in the western part of United States.\nWe also reported an unfavorable non-cash inventory adjustment related to an error in bulk stockpile measurements at our Ogden, Utah, SOP facility, which Jamie will discuss in more detail shortly.\nBecause we expect these third quarter market disruptions to be short-term, I'll focus my remarks instead on our year-to-date performance.\nOn a consolidated basis, operating earnings for the year-to-date period increased 19% and EBITDA rose 10% compared to 2019 results.\nIn addition, we generated over $188 million of cash flow from operations, which is a 93% increase from 2019.\nThese are very strong results given the fact that we experienced a mild winter and all of our deicing markets in the first quarter as well as the operational challenges stemming from the global pandemic beginning in March.\nAs many of you have heard me say before, our number one priority as a management team is ensuring our employees go home at the end of their shift as healthy as when they arrived.\nOur focus on this Zero Harm culture has been as critical to our ability to navigate the current pandemic as it is toward the sustainability of our organization.\nAnd anyone who has spent their career in mining knows the value of this focus, benefits all stakeholders, as it has been proven time and time again that over the long-term, the safest operations are also the most productive operations.\nThis quarter, we continued to see a decline in our total case incident rate or TCIR, in addition to achieving a multi-year low for our 12-month rolling TCIR average.\nI'm very happy to share that our TCIR in September was among the lowest of any month in the history of the company.\nI would also like to specifically commend the employees at our Ogden facility for their exemplary safety performance.\nThey're very near to achieving 1 million exposure hours with no lost time safety incidents.\nAs a leading indicator for operational success, this continuous improvement in our safety metrics speaks volumes about the discipline and commitment to safe and responsible operations our employees bring to their jobs each and every day.\nI may sound like a broken record here, but it's a song I'm really glad to sing.\nOur Goderich mine continued to deliver very strong year-over-year production results.\nFor the quarter, production volumes were 53% ahead of third quarter 2019 results, while the cost to produce these tons declined 24%.\nOn a year-to-date basis, production tons have increased 28% from 2019 levels and production costs are down 11%.\nThese steadily improving metrics highlight the strength of our continuous mining platform there, which will help to ultimately secure Goderich's position as the leading salt mine in North America from both the cost and volume perspective as we continue to build our new mine plan there over the long-term.\nOur Cote Blanche mine has also demonstrated strong performance year-to-date.\nNot to mention, an impressive dose of moxie, by meeting the challenges posed by not one but four significant hurricane events in 2020.\nThese storms resulted in seven lost production days during the third quarter and another four lost production days in October.\nThe preparations made by our team to protect the site and the safety of our people meant we've been able to resume production efficiently and effectively after each event.\nAs another testament to our operational agility, we expect to make up most if not all the lost production from those unplanned outage days by the end of the year.\nThis quarter, the Salt segment also delivered early benefits from our enterprisewide optimization effort, particularly in terms of lower logistics costs.\nOur logistics team has worked diligently to reshape our network of partners to maximize efficiencies across our operations to deliver cost savings, while maintaining strong service levels for our customers.\nKeep in mind that we typically move more than 12 million tons of bulk materials using multiple transportation modalities each year.\nTheir work has helped to offset the impact of some of the short-term freight rate inflation, we are experiencing this year.\nOur commercial teams have also been highly engaged in the enterprisewide optimization effort, looking for opportunities to adjust and improve customer mix as well as pricing levels.\nThese efforts were largely responsible for the 8% year-over-year increase achieved for consumer and industrial average selling prices this quarter.\nThese achievements were important drivers for the margin expansion we've reported that helped us overcome the impact of lower sales volumes due to mild winter weather so far in 2020, as well as the COVID-19 impacts on non-deicing salt sales.\nBefore moving on, I'd like to provide a final update on the 2020-2021 North American highway deicing bid season.\nGiven the mild weather during last winter, it came as no surprise that the bid season was competitive, as we noted in our second quarter call, with total bid tenders down roughly 15%.\nWe've essentially completed all bidding activity and have achieved 4% growth in our contracted bid volumes with a price decline of 11% compared to prior bid season results.\nConsequently, these bid season results along with slightly elevated customer inventories had us trailing our full year salt volume guidance by about 250,000 tons for 2020.\nUltimately, our deicing salt sales are driven by winter weather, and we expect the production and logistics cost improvements we've made provide offsets to lower bid season prices.\nSimilar to the hurricanes hitting Louisiana, our Plant Nutrition business, particularly in North America, faced some unforeseen circumstances this past quarter, including extreme wildfires and drought.\nThe spoke from these events has delayed the harvest of key crops, particularly tree nuts.\nThis has also delayed the fall fertilizer application season and thus, we believe that a portion of expected third quarter 2020 sales volumes have been pushed into the fourth quarter.\nRecent conversations with customers have reinforced our confidence that underlying demand remains robust for the remainder of 2020, particularly given that some of these harvests are expected to be very strong translating into nutrient deficiencies for the soil and thus the need for our products.\nSimilarly in Brazil, we experienced some timing issues with sales volumes in the third quarter.\nAfter a very strong second quarter, we believe some of our agriculture product sales were accelerated.\nAdditionally, the hot and dry weather in that geography has also been unfavorable.\nSo we believe a portion of what we expected to sell in the third quarter has now shifted into the fourth quarter.\nOn a positive note, South American farmer economics continue to be very attractive, particularly for soybeans.\nIn fact, a record level of the soy crop in Brazil has already been forward sold, which means farmers need yield and thus will need our specialty plant nutrients to support that yield.\nAs a result of these underlying positive market fundamentals in Brazil and North America, we're keeping our sales volume ranges for 2020 unchanged for both the Plant Nutrition North and South America segments.\nAgainst the backdrop of the challenges we've all faced in 2020, I'm even more impressed with the efforts of our employees to engage and execute on our enterprisewide optimization effort.\nThis effort is focused on five broad value streams namely; operations, commercial, logistics, procurement and working capital.\nI referenced previously in my comments some of the early benefits coming through our Salt segment results from certain of these value streams.\nWe also highlighted last quarter the progress we're making with engaging our employees through our organizational health focus, as well as a compaction project at Goderich mine to essentially recycle salt fine waste into salable product at a minimal incremental cost.\nToday, I'd like to share a little detail regarding a very exciting project at our Ogden, Utah facility.\nAs many of you know, our solar evaporation pond-based SOP production at this site is among the lowest cost processes globally for the specialty form of potassium.\nAnything we can do to expand our ability to produce with that low-cost feedstock further increases our competitive advantage domestically and globally.\nIn a typical year, the very convinced brines from which we extract both salt and SOP feedstock has been two months in the final evaporation stage.\nAfter draining those ponds, we then spent 10 months harvesting, which is essentially scooping up the material from dry pond beds and transporting the material to the production plant.\nThe goal of our optimization project is to extend the evaporation season and decrease the length of the harvest period.\nDoing so is expected to materially increase the yield of feedstock from the ponds, by insourcing our harvest and haul activities using pond-appropriate equipment, we can do just that.\nThe change in equipment allows us to work faster and deliver more tons per load of material to our Salt and SOP plant.\nCurrently, under this new equipment setup, we're delivering 28% more tons per load for SOP and about 14% more for salt.\nAs a result, we're able to shorten our harvest season to eight months and extend our evaporation season to four months, which ultimately provides us with more and higher quality SOP feedstock.\nFurther this new equipment is expected to be safer for our ponds, further reinforcing our sustainable harvest practices.\nThis project highlights our ability to look at old problems and generate new and innovative solutions to help ensure the long-term sustainability and growth of our company.\nAs we continue to execute on the many projects throughout these value streams, over the next couple of years, we expect to fundamentally improve the earnings potential of Compass Minerals.\nIn the near-term, we continue to aggressively work to overcome the various external factors, which have reduced our earnings compared to our original outlook for 2020.\nJust to level set a bit, we entered the year with a strong expectation for around 20% EBITDA growth using the midpoint of our guidance provided in February.\nWe now estimate a combined negative impact of this original forecast of about $45 million from several factors, which were largely outside of our control.\nThese include mild winter weather in the first quarter, a Brazilian currency that progressively weakened throughout the year and COVID-19 impacts, including both the cost of preventative measures at our sites and demand impacts on certain customer and industrial products.\nDespite these external challenges, through a laser focus on cost and buttressed by our improved operational performance, we still expect to deliver EBITDA growth for the full year and additional growth in 2021.\nThis is possible because of the underlying resilience of the markets we serve with our essential products, the strength of our advantaged assets and the dedication of our employees to drive improvements through our optimization effort.\nWe've also stayed on course with our strategic priorities and maintained close contact with our customers throughout these unprecedented times.\nI've recently had the chance to talk with a number of them personally, about their own challenges in growth opportunities and through their perspective, have an even greater appreciation for the essential nature of our products and the important role we serve for our customers as well as the communities where we operate.\nAll of these things generate great excitement for me and the entire Compass team.\nNow let's hear from Jamie who will discuss the third quarter results and outlook in more detail.\nI'll start on Slide 9 with some comments on our consolidated results, which were challenged by several factors as Kevin discussed.\nFirst, sales volumes were lower in each of our segments versus the third quarter of 2019.\nHowever, we're actually performing quite well on a year-to-date basis, due to a number of timing issues across all three segments which pulled sales into the first half of 2020.\nSalt segment sales volumes are down just 9% on a year-to-date basis, which is more than explained by the weak winter weather we experienced during the first quarter of 2020.\nAs a reminder, first quarter 2020 snow events were 24% below the 10-year average and 30% below 2019 levels.\nThis weak weather caused customers to take their minimums in the second quarter and therefore put pressure on our third quarter early fill orders.\nOn a year-to-date basis, Plant Nutrition North America sales volumes are up 20% versus the 2019 period, which you may recall with very challenging due to the excessive rainfall in our served markets.\nOur Plant Nutrition South America segment generated a 5% year-over-year increase in sales volume on a year-to-date basis as strong and early demand for plant nutrients in the first half of the year offset third quarter sluggishness.\nOur third quarter Salt operating results helped offset the lower year-over-year third quarter operating earnings and EBITDA results in both of our Plant Nutrition businesses.\nLower year-over-year third quarter sales volumes in both Plant Nutrition segments and an inventory adjustment charge in the Plant Nutrition North America segment were the primary drivers of the decline.\nDespite the challenges we faced, we delivered double-digit consolidated earnings growth as well as strong free cash flow of $126 million through the first nine months of 2020.\nWe discuss our Salt segment third quarter 2020 results on slide 10.\nThird quarter revenue declined 11% compared to the prior year on a 13% drop in sales volume, slightly offset by a 1% increase in average selling prices.\nVolumes declined for both our highway deicing and consumer and industrial sales.\nIn addition to lower year-over-year pre-season demand for deicing products, we are still experiencing some slack in demand for other consumer and industrial products due to COVID-19 challenges.\nAverage salt selling prices in the third quarter of 2020 increased 1% compared to third quarter 2019 results.\nA shift in sales mix toward lower price chemical sales pushed highway deicing pricing down 8%, while consumer and industrial average selling prices increased 8%, largely due to strategic price increases implemented as a result of our enterprisewide optimization effort.\nOn a net price basis, we actually achieved a 5% improvement in average selling price versus third quarter 2019 results, with highway deicing average net price flat to prior year results and consumer and industrial net price up 8%.\nImproved production and logistics costs in the 2020 third quarter more than offset lower revenue and resulted in year-over-year increases of 21% for operating earnings and 17% for adjusted EBITDA.\nIn addition to improved Goderich production, we have aggressively implemented initiatives across logistics and procurement that are driving our costs lower.\nBeyond the logistics improvements Kevin mentioned, we have rationalized our spending patterns to reduce waste.\nWe've also upgraded our global sourcing efforts with comprehensive negotiation of agreements with key contractors and optimization of raw material pricing across all businesses to achieve more favorable scale.\nThese efforts contributed to the expansion of the Salt segment EBITDA margins of 30% compared to 23% in the third quarter of 2019.\nWhile these initiatives are expected to drive sustainable improvements for all segments over time, we're pleased to see these early benefits in our Salt results.\nTurning to our Plant Nutrition North America results, which we discuss on Slide 11.\nWe reported a 21% year-over-year decline in revenue on a 22% decline in sales volumes and a 2% higher average selling prices.\nAs already noted, the extreme wildfire conditions in the Western US have delayed the start of the application season and we believe they have shifted the timing of SOP sales for the fourth quarter this year.\nEarnings for this segment were further reduced by an inventory adjustment due to an error we identified in our measurement of our bulk stockpiles with standard SOP at our Ogden, Utah facility.\nThis is the product that we stockpile and then process through our compaction system into the various high value grades of SOP that our customers demand.\nWhile we regularly estimate the size of our stockpiles, this can be difficult to assess due to the size and limited accessibility of our storage domes in silos.\nAs we depleted our standard SOP inventory, we detected a stockpile shortfall which occurred over a period of time, as these particular domes had not been zeroed out or fully emptied for several years.\nOnce we identified the issue, we reviewed our processes and are implementing several additional operational control enhancements that will improve our estimates going forward and prevent this from occurring in the future.\nIt is important to note that we have determined that this inventory adjustment is not material to any single prior period, and furthermore, this adjustment has no impact on our 2020 free cash flow, and we don't expect these operational enhancements to impact our ability to serve our customer demand or the future profitability of the Plant Nutrition North America segment.\nWe discuss our Plant Nutrition South America segment results on Slide 12.\nThis segment delivered a 5% year-over-year increase in third quarter 2020 revenue in local currency, driven by increases in average selling prices for both agriculture products and chemical solutions products.\nThese price improvements offset a year-over-year decline in agriculture and chemical solutions sales volumes.\nAs we noted on our second quarter earnings call, demand came early for many of our specialty Plant Nutrition products due to a very attractive grower economics for the Brazilian farmer.\nTherefore, some of that pull forward in Q2 is showing up as weakness here in the third quarter.\nHowever, we continue to see strong third quarter year-over-year revenue growth in our direct-to-grower sales channel on flat volumes and improved product sales mix.\nBoth direct-to-grower and B2B sales volumes were also impacted by the late start of the spring rains in the Cerrado region in the Central of Brazil.\nThese dry conditions delayed fertilizer applications and we believe they are therefore pushing some of our sales volumes into the fourth quarter.\nIn local currency, third quarter 2020 operating earnings and EBITDA declined 9% and 7% respectively, which was mostly attributable to lower volumes in our B2B business compared to the prior year quarter and continued aggressive investment in our direct-to-grower sales force.\nWe discuss our outlook for our segments on Slide 13.\nWhile we have reduced our full year Salt sales volume guidance, we still expect an increase in our Salt sales volumes and revenue in the fourth quarter compared to prior year.\nOur EBITDA margin for this business is expected to contract, due to the reduction in average awarded bid prices for our North American highway deicing customers.\nUltimately, our average reported highway deicing sales price will be impacted by the sales mix we achieved in the quarter based on winter weather activity.\nIn an average winter scenario, we're expecting highway deicing average selling prices to decline about 8% compared to prior year and the Salt segment overall is expected to see a price decline of around 5%.\nWe continue working to offset the impact on our operating margins with both value creation and cost containment through our enterprisewide optimization effort.\nWe expect improved sales demand sequentially and year-over-year for both of our Plant Nutrition businesses.\nIn North America, our sales and earnings are expected to be driven by a rebound in SOP sales to Western US markets that have been negatively impacted by wildfires and dry conditions.\nThe fourth quarter is also typically the strongest selling season for micronutrients.\nAnd that seasonality should drive modest improvements in sequential price results.\nIn Brazil, given the fact that so many soybean growers forward sold their crops, achieving strong yields will be important and we anticipate a strong rebound in sales volumes in the fourth quarter.\nAdditionally, the spring rains in many of these important growing regions is now well under way which bodes well for our fourth quarter results.\nAlthough we expect increases in sales volumes compared to 2019 fourth quarter results, the weaker currency is expected to keep our reported US GAAP results flat with prior year.\nIn local currency, however, we expect to deliver 20% to 25% EBITDA growth compared to prior year.\nFull year outlook items are found on Slide 14.\nDue primarily to the modest reduction in our full year salt sales volumes, weaker Brazilian currency and the ongoing COVID-19 operational and commercial impacts, we have decided to update our full-year adjusted EBITDA guidance.\nExcluding the inventory adjustment, we are now expecting to deliver $330 million to $345 million of adjusted EBITDA for the full year 2020.\nNow finishing up on Slide 15.\nWe are very pleased to report that we still expect strong free cash flow generation of around $125 million for the full year despite the headwinds Kevin and I have discussed today.\nOur net debt to adjusted EBITDA ratio is expected to end the year below 4 times as we continue to make progress improving our balance sheet and maintaining a very strong liquidity position.\nAs we enter these last two critical months of 2020, we remain focused on keeping our people safe, controlling our costs, optimizing our operations and delivering our essential products to satisfied customers around the world.\nWith that, I will ask the operator to begin the Q&A session.\n",
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"content": "full-year 2020 adjusted ebitda outlook of $330 million to $345 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: Today, we will discuss our recent results and our outlook for 2021.\nJoining in for the Q&A session are Brad Griffith, our Chief Commercial Officer, as well as George Schuller, our Chief Operations Officer.\nBefore getting started, I would remind everyone that the remarks we make today represent our view of our financial and operational outlook as of today's date, February 17, 2021.\nThese expectations involve risks and uncertainties that could cause the company's actual results to differ materially.\nA discussion of these risks can be found in our SEC filings located online at investors.compassminerals.com.\nOur remarks today also include certain non-GAAP financial measures.\nI'll start today by giving a top-line overview of our financial and operating results for 2020 before providing some thoughts on the impacts of our enterprisewide optimization efforts, as well as our path forward.\nAs we look back on the year from a broader perspective, 2020 introduced personal and professional challenges to each and every one of us.\nI'm incredibly grateful to the men and women of our company for staying laser-focused on operating safely and responsibly, continuing to bring forward new ideas for improvement and remaining committed to delivering for our customers, communities and our shareholders during this extremely difficult time.\nWe'll provide more color on those shortly.\nWe're taking steps internally to further girth our preparedness for such events.\nThat said, I continue to believe strongly that our team's prudent management and unwavering commitment to our enterprisewide optimization efforts underpinned longer term transformational benefits that we started to see throughout our operations, and fully expect to positively impact our financial results in the future.\nOne key factor we simply cannot control, but rather we must manage through, is the weather.\nWe estimate the weak winter weather season in both the first quarter and fourth quarter of last year negatively impacted our full-year 2020 operating income by approximately $40 million to $45 million.\nOther external factors adversely affecting our business during the calendar year included the wildfires in California and drought conditions in South America, both of which impacted demand timing from our Plant Nutrition customers and multiple hurricanes in the Gulf Coast, which required multiple brief but unplanned shutdowns at our Cote Blanche mines.\nIn addition, our South American Plant Nutrition business experienced stronger year-over-year agriculture sales volumes and, in local currency, achieved a 16% increase in fourth quarter operating earnings versus 2019.\nHowever, the Brazilian currency weakened by approximately 33% during the year compared to the U.S. dollar, which ultimately hurt our bottom-line in terms of U.S. results.\nAs we look at full year 2020 on a consolidated basis, net income for the year decreased by approximately 5% and adjusted EBITDA decreased by approximately 8% when compared to 2019 results.\nOn the positive side, we continue to generate strong positive cash flow from operations totaling over $175 million for the full year.\nWe also took an aggressive approach to managing our capital plan and I'm pleased we were able to come in 13% below the midpoint of our original guidance for a total spend of roughly $85 million for the year.\nOur free cash flow for the full year was just over $90 million and we returned at $99 million to shareholders through our dividend program, which reflects our confidence in the company's ability to deliver cash flow through varying economic and weather-related cycles.\nAs a result, we formally relaunched what is designed to be a targeted and expedient process for the sale of both of our Chemical and Plant Nutrition businesses in South America.\nWe intend to use the proceeds from these transactions to continue reducing our debt, further enhance our liquidity and continue our focus on meeting our customer demand for our essential products.\nGiven the sensitive nature of these matters, we will not be fielding any questions on this topic, but we'll provide more information as it becomes appropriate to do so.\nWith our multi-year runway of ample liquidity, no material debt maturities due for over three years, capital plan flexibility and improving execution capabilities, our near-term priority is to deploy any incremental free cash flow after dividends, whether from organic generation or strategic transactions, toward continuing our deleveraging process and paying down our debt to further enhance our equity valuation.\nNow moving to our Salt segment.\nFull-year adjusted EBITDA margins increased approximately 3 percentage points to 29% despite our adjusted EBITDA being lower by 2%.\nWe also saw continued improved production performance at our flagship Goderich mine.\nOn a full year basis, production tons out of Goderich have increased 17% from 2019 results and production costs are down 16%.\nIn addition, during the fourth quarter of 2020, the team was able to achieve its highest production month since its conversion to continuous mining and haulage.\nThese steadily improving production metrics highlight a sentiment you've heard me communicate before that we've not yet reached our full long-term potential at this operating assets.\nI am confident our progress will continue as we build out our new mine plan, helping to ultimately secure Goderich's position as the leading salt mine in North America from both a cost and volume perspective.\nWhen coupled with enhancements that are designed to provide long-term flexibility and optionality to our logistics and procurement teams, we set a course to capture significant value during stronger seasonal demand by meeting the needs of current and new customers alike.\nOur Cote Blanche mine also demonstrated strong year-over-year operating performance, while managing through four significant hurricane events in 2020.\nThese storms resulted in approximately 11 lost production days during the year.\nThe preparations made by our team to protect the site and ensure the safety of our people allowed us to resume production efficiently and effectively after each event.\nThis culture of resilience that permeated throughout the organization in 2020 is perhaps best reflected in the operational agility of our Cote Blanche team who were still able to achieve their full year-end production targets, despite having navigated a record hurricane year in the Gulf.\nIn addition, given the recent announcement of a nearby competitor closing its facility, we are carefully analyzing opportunities to capture value for our portfolio by enhancing relationships with our existing customers, while also potentially putting us in a position to cultivate some new relationships.\nI'd also like to give a particular call out to our logistics team, which has worked diligently on reshaping our network of partners to maximize efficiencies across our operations, while maintaining strong service levels for our customers.\nAs I mentioned previously, our Plant Nutrition business, particularly in North America, faced some unforeseen circumstances of its own this past year, including extreme wildfires and drought.\nThe resulting conditions from those events delayed the harvest of key crops, particularly tree nuts along with the fall fertilizer application season.\nOur team worked to ensure we were well-positioned to capture those sales volumes in the fourth quarter, ultimately, delivering strong year-over-year revenue growth of 16%.\nGiven this strength, we were able to partially offset some of the unexpected higher costs that we experienced during the year.\nOur Potassium+ product continues to be the SOP market share leader in North America and recent pricing dynamics have reinforced our confidence that near term underlying demand remains robust.\nWe anticipate upcoming harvest in certain key markets to be very strong, which further translates into nutrient deficiencies for the soil and the need for our products.\nWhen coupled with much more positive global backdrop for all fertilizers and the recent surge in pricing, we anticipate steady demand from our North American customers in 2021.\nI would also like to point out that our micronutrients products line was able to achieve a full-year gross sales record in 2020 since their acquisition.\nOur South American Plant Nutrition business continued to achieve measured growth in local currency, with sales revenue up 18% for the full year 2020.\nOur customers on the agricultural side have experienced very attractive fundamentals and we anticipate these sales trends to continue in 2021.\nBut as has been a recurring theme, the weaker currency has hurt our results in U.S. dollar terms.\nAgainst the backdrop of the challenges we've all faced in 2020, I'm even more impressed with the efforts of our employees to engage and execute on our enterprisewide optimization effort.\nAs a reminder, this effort is focused on five broad value streams, namely; operations, commercial, logistics, procurement and working capital.\nI referenced previously, in my comments, some of the early benefits coming through our Salt segment results from certain of these value streams.\nIn prior quarters, we highlighted our harvest haul project at our Ogden facility in Utah, the salt mines compaction project at Goderich and the progress we're making with employee engagement through our organizational health focus.\nI would now like to highlight some optimization benefits we're experiencing in procurement.\nIn 2020, we completely transformed that department, moving from a decentralized and transactional function to a centralized high-standard team focused on operations excellence through global strategic sourcing mindset and a performance-driven culture.\nWe implemented a category management function, a team concept built to bring together procurement with all relevant areas within that segment.\nEach team in a category is a cross-functional and cross-regional aligned to business needs and extensive engagement with stakeholders.\nDuring its initial year in this new structure, the department executed over 65 initiatives, driving as much as 10% annualized savings in a number of specific procurement categories such as contractor services, packaging raw materials and equipment spare parts.\nIn addition to cost savings, this new procurement strategy is expected to reduce the risk of supply chain disruption and provide a market advantage when our customers require a more sustainable and responsible supply chain.\nThis high degree of focus from our team is expected to produce long lasting benefits and help expand our margins.\nAs we worked to both navigate external challenges and drive internal improvements over the course of 2020, there was no area of focus given more attention than our responsibility to keep our employees safe and healthy.\nAs many of you have heard me communicate before, our number one priority as a management team is ensuring our employees go home at the end of their shift as healthy as they arrived.\nOur focus on this Zero Harm culture has been critical in our ability to navigate the current pandemic.\nFor the year, we achieved another step change decline in our Total Case Incident Rate or TCIR.\nIn addition to achieving a multi-year low for our 12 months rolling TCIR average in 2020, we ended the year with an average of 1.53 and I'm happy to share that our TCIR in December was among the lowest of any month in the history of the company, coming in at 1.23.\nAs a leading indicator for operational success, this continuous improvement in our primary safety metric highlights our commitment to conducting business in a responsible manner that protects the health, safety and security of all of our employees, contractors and the communities in which we operate.\nThe COVID-19 pandemic remains an ongoing challenge and we continue to take actions to mitigate its impacts.\nIn addition, we faced another slow start to the winter season in our served markets.\nYet our talented workforce, advantaged assets and efficient procurement and logistics operations continue to perform with excellence through this adversity, supporting our global customers with essential products proving our resilience as an organization.\nWhile our overall financial performance in 2020 was below our expectations, we were aggressive in our efforts to mitigate the various external headwinds we faced.\nWe now estimate a combined negative impact to our original operating earnings forecast of roughly $67 million due specifically to weak winter weather in both the first and fourth quarters, a Brazilian currency that progressively weakened throughout the year and COVID-19 impacts, including both cost preventative measures at our sites and reduced demand within certain higher-margin end markets.\nWhile these factors were out of our control, be assured, we are acutely focused on identifying steps we can take to help insulate our businesses from the severity of similar impacts in the future.\nAgain, what has allowed us to effectively navigate through the past year is the underlying resilience of the markets in which we serve with our essential products, the strength of our advantaged assets and the dedication of our employees to drive improvements through the optimization effort.\nWe've also maintained close contact with our customers and remained on course with our previously communicated strategic priorities.\nI continue to be excited about the future prospects of our company and confident of long-term value our team, at Compass Minerals, can deliver.\nFirst, a quick review of our consolidated results.\nOur fourth quarter 2020 consolidated sales revenue and operating income, both declined year-over-year as late winter weather coupled with lower highway deicing average gross sales price pressured Salt results.\nLower year-over-year SOP pricing, along with elevated SOP production costs more than offset Plant Nutrition North America sales volumes improvements.\nFor the full year, sales revenue and operating income were also lower as we dealt with over $100 million in sales revenue impact and more than $40 million of operating earnings and tax due to weak winter weather.\nWe also had elevated SOP costs and lower SOP pricing, which were partially offset by stronger year-over-year SOP sales volumes.\nLooking now at our Salt segment results.\nTotal sales in the quarter were $228.5 million, down from $310.9 million in the fourth quarter of 2019, largely due to lower weather-driven demand for deicing products and the effects of customer carryover inventories.\nAlthough the snow event activity was similar to last year's December quarter, this year's winter had been slow to develop with most of the fourth quarter snow events occurring at the tail end of December.\nThis winter weather impact, combined with high customer inventory levels, resulted in lower deicing salt sales to highway, commercial and big-box retailers.\nTotal Salt segment sales volumes dropped to 23% compared to fourth quarter of 2019.\nWithin our Salt segment, highway deicing experienced a 25% sales volume decline and consumer and industrial sales volumes dropped 16% year-over-year.\nLooking at our sales by end-use, rather than by business unit, most of the volume weakness was attributable to lower deicing demand.\nIn other words, combined sales of most of our non-deicing products, such as water conditioning, chemical processing and food and agriculture were not impacted by the weather and were generally flat with the prior year fourth quarter, even after taking into account some lingering slack in demand due primarily to COVID-19 challenges.\nHighway deicing prices were down 11% versus the prior year quarter at $59.20 per ton.\nHowever, consumer and industrial average selling prices increased 1% to $169.30 per ton as a broad-based price increases across all non-deicing product groups was mostly offset by lower sales mix of our higher priced deicing products.\nOperating earnings for the Salt segment totaled $50.2 million for the fourth quarter versus $80.5 million last year, while EBITDA for the Salt segment totaled $67.6 million compared to $96.5 million in the prior year quarter.\nDespite the challenging environment I just described, we are pleased to report minimal EBITDA margin compression in our Salt segment this quarter as our enterprisewide optimization efforts helped lower our unit cash costs and tightened our spending control on SG&A, which helped offset lower average selling prices.\nWhen stepping back and looking at our fourth quarter Salt costs, we ended up at $41 per ton, which is flat with the 2019 fourth quarter.\nHowever, on a mix-adjusted basis, our unit cost is about $1.25 per ton lower than prior year.\nSo we absorbed a 25% decline in year-over-year fourth quarter Salt sales volume and we were still able to decrease our mix adjusted Salt unit costs versus the prior year.\nImproved production and logistics costs in our North American highway business for the full year 2020 helped to offset a 12.4% lower salt revenue and resulted in adjusted operating income declining just 6% and an adjusted EBITDA decrease of only 2% year-over-year.\nIn addition to improved Goderich mine production, we continued to diligently and aggressively implement initiatives across the organization design to ultimately drive revenue higher and costs lower.\nThese efforts contributed to the expansion of the Salt segment adjusted operating margin to nearly 21% from about 19% last year and, at the same timem driving adjusted EBITDA margin to 29.3% compared to 26.1% for the full year 2019.\nWhile these initiatives are expected to drive sustainable improvements for all segments over time, we continue to be pleased to see these early benefits in our Salt results.\nIt's also worth noting that these benefits have been muted a bit, given the difficult weather backdrop and the real value creation potential will be more obvious under better business conditions.\nTurning to our Plant Nutrition North America segment.\nFourth quarter total sales revenue increased 15.9% from the prior year to $88.7 million.\nWe achieved this by delivering a 23% increase in sales volumes, partially offset by a 6% lower average selling prices.\nAs we have discussed in recent quarters, the extreme wildfire conditions in the Western U.S. delayed the start of the fall application season and, as we expected, shifted the timing of SOP sales volumes for the 2020 fourth quarter.\nWhile we always price to drive the appropriate value proposition for our customers, we continue to maintain our market share for our premium Potassium+ SOP product.\nPlant Nutrition North America operating earnings and EBITDA for the fourth quarter were pressured by short-term cost increases associated with feedstock inconsistency, unplanned downtime and related maintenance costs at our SOP facility in Utah, which weighed significantly on the quarterly and full-year results.\nIn turn, our Plant Nutrition North America EBITDA margin compressed to about 20% in the quarter compared to nearly 34% in the prior year, with operating margins declining about 10 percentage points quarter-over-quarter.\nStrong full year sales volumes, partially offset by lower sales prices, helped us deliver a 16.2% improvement in 2020 full year Plant Nutrition North America revenue versus 2019.\nThese revenue results, coupled with the short-term fourth quarter cost pressure and the previously disclosed $7.4 million inventory adjustment in the third quarter, resulted in a $10.4 million decline in operating income and a $14.6 million decrease in full-year EBITDA.\nExcluding the inventory adjustment, full-year operating margin would have been 8.1% compared to 10.9% in 2019, while full-year EBITDA margin would have been 25% versus 32.5% last year.\nBecause the inventory adjustment is non-recurring and our SOP cost pressure is short term in nature, we expect a sharp rebound in the Plant Nutrition North America EBITDA and operating margin percentages in 2021.\nOur Plant Nutrition South America segment delivered a 24% year-over-year increase in fourth quarter 2020 revenue and an 18% increase for the full year, both in local currency.\nThis was driven by increases in average selling prices for both agriculture and chemical solutions products, along with stronger year-over-year agro sales volume.\nFourth quarter agro revenue was up about 29% versus 2019 and up nearly 23% for the full year.\nEven more impressive was our fast growing Ag B2C business unit where strong sales volumes and price drove a 37% increase in both our 2020 fourth quarter and full year revenue when compared to prior year, again, all in local currency.\nStrong demand began in early 2020 for many of our Specialty Plant Nutrition products due to the very attractive economics for Brazilian farmers and that trend continued as we finished 2020 and moved into the beginning of 2021.\nIn local currency, our Plant Nutrition South America fourth quarter and full year 2020 operating earnings increased 16% and 35%, respectively, while EBITDA increased in lockstep by 15% and 25%, as well.\nWhile we're obviously disappointed with our fourth quarter and full year 2020 results, it's important to again point out that the combination of weak winter weather, Brazilian currency devaluation and COVID-19 impacts in both mitigation costs and end market deterioration negatively affected our 2020 full-year operating income by nearly $70 million.\nDespite this impact, we were able to hold year-over-year adjusted EBITDA margins flat at 21% and generate more than $175 million cash flow from operations and $90 million of free cash flow.\nI would now like to shift gears and spend a few minutes on our 2021 outlook.\nAs a reminder, when we work through our annual planning process, we utilize an underlying assumption of average winter weather and how that would translate through our upcoming bid season.\nThere are multiple scenarios we run, but at the end of the day, we focus on what we can control and then manage through the consequences of what the weather and other opportunities or challenges bring by adjusting our plan dynamically throughout the year.\nWe are extremely disciplined in our approach to capital spending and closely monitor the supply and demand dynamics of both the salt market, particularly in North America, and the specialty fertilizer market where our high-value Potassium+ SOP product has a leading market share in North America.\nShould those factors dictate a supply response, we feel strongly that we can quickly adjust to make rational economic decisions and still be ready to meet our customers' needs.\nWe're optimistic about 2021 as we look for normalized sales volumes in our Salt business and the expectation of even better agriculture fundamentals in both North and South America.\nThe initial benefits of our optimization efforts have started to register throughout our various segments and while we're not providing specific guidance on the expected benefits, we continue to believe that the long-term commercial and operational advantages from these efforts will be meaningful to our bottom-line.\nFor the full year 2021, we are expecting consolidated adjusted EBITDA of between $330 million and $360 million, which is a year-over-year increase of about 20%.\nWhile the midpoint of our guidance is at the lower end of last year's full-year guidance, it's important to note that weak winter weather impacts, like those in 2020, are never immediately reset as prior bid season pricing almost always has a significant influence on the following years' average selling prices.\nOur annual operating plan anticipates approximately $100 million in 2021 capital spending, as well as free cash flow at levels similar to 2020.\nWe are forecasting a significant increase in Salt volumes as winter weather normalizes in both North America and the U.K., and we're expecting high-single-digit sales volume growth for our Plant Nutrition South America segment.\nWithin Plant Nutrition North America, we expect to see volumes down slightly compared to 2020 as we continue to monitor the growing season and balance our customer needs, given the recent ramp-up in pricing.\nImportantly, we will continue working to offset any 2021 headwinds through a dual focus on value creation and cost containment through our enterprisewide optimization effort.\nWhile our net debt to adjusted EBITDA ratio ended 2020 at about 4.3 times, it is expected to end 2021 below 4 times.\nWe expect to also continue to make progress improving our balance sheet and maintaining a very strong liquidity position with very little in near-term debt maturities.\nIn summary, while 2020 has been a year marked by challenges, not only for our company, but globally, our business model worked and our people withstood the test.\nWe exercised flexibility, managed external factors beyond our control, executed our plan and worked on our long-term strategy, while continuing to return cash to shareholders.\nAs we enter the new year, we remain focused on keeping our people safe, optimizing our operations, containing costs and delivering our essential products to satisfied customers around the world.\nWith that, I will ask the operator to begin the Q&A session.\n",
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"content": "assuming average winter weather activity, expects modest salt segment revenue growth for h1 2021 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: Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website.\nWe appreciate your interest in CMS Energy.\nOver the past five months, I have been on the -- the virtual road and have had the opportunity to meet with many of you to share our investment thesis, which delivers for all our stakeholders.\nThis thesis is grounded in our commitment to the triple bottom line of people, planet and profit and enable the excellence you have come to expect from CMS Energy.\nMany of you have asked what will change under my leadership.\nAnd I want to reemphasize, we've changed leadership not the simple proven investment thesis we delivered year in and year out.\nLooking forward, we're committed to leading the clean energy transformation with our net zero carbon and methane emissions plans, which are supported by our clean energy investments in our current progressive integrated resource plan.\nFurthermore, we are recognized as top tier for ESG performance earning top ratings among our peers.\nWe continue to mature our industry-leading lean operating system the CE Way eliminating waste and improving our performance.\nI love this system.\nOver the past several years, we have used it across the business to drive efficiencies, improve employee engagement and deliver sustainable cost performance.\nI've seen it, I've worked it, and we have plenty of gas that are left.\nToday we are crafting the next horizon what I call CE Way 2.0, which layers in greater use of automation and analytics and begins to position CMS Energy, as a leader in digital.\nAnother key differentiator of CMS Energy is Michigan's Top-tier regulatory construct that has 10-month forward looking rate cases in constructive ROEs.\nThis all leads to our adjusted earnings per share growth of 6% to 8% and combined with our dividend provides a premium total shareholder return of 9% to 11%.\nAt CMS Energy, we wake up every day to get after it, deliver for our customers in all conditions, rain, snow, sleet wind.\nAnd for you, our investors, we never quit.\nThis year is no different.\nNow, let's get into the numbers.\nIn the first quarter, we delivered $1.21 of adjusted earnings per share.\nThis is up significantly, $0.35 from last year, primarily from incremental revenue to fund needed customer investments and sustained cost performance.\nAs a reminder, our full year dividend is $1.74, up 7% from last year.\nWe are reaffirming our 2021 guidance for the year of $2.83 to $2.87 of adjusted earnings per share and our long term earnings and dividend per share growth of 6% to 8% with the bias to the midpoint.\nAt CMS Energy was committed to our promises to our co-workers, the communities we serve, and our planet, as we are to delivering our financial commitments.\nDuring my discussions with many of you, the topic of ESG often comes up.\nI'm proud of our leadership in this space.\nWe continue to enhance our commitments and our efforts are being recognized with top tier ratings.\nWe remain a AA rated company by MSCI and have ranked top quartile for global utilities by Sustainalytics since 2013.\nThis is a deep commitment that began well before it was a trend.\nOur commitment -- our commitments to net zero methane emissions by 2030 and net zero carbon emissions by 2040 are among the most aggressive in the industry.\nAs our industry approach is a cleaner energy future, and we retire our legacy generating units, it is critical that we honor the contributions and service of our co-workers, as well as address the economic impact on those communities.\nNow, I began my career on the generation side of our business.\nI have walked the halls, climbed the stairs of every one of our generating plants, shaking hands, drink coffee with the men and women, who work every day to provide energy for our customers.\nAnd I'm proud of the honorable and equitable way, we have cared for both our co-workers and our communities, as we retire these units from service.\nWe've built a playbook for success.\nIt began with the retirement of our seven coal plants in 2016.\nThat work will continue with the retirement of Karn 1 and 2 in 2023.\nOur leadership and track record in this space is something I'm proud of and we'll continue, as we look to the future.\nThis ensures ensure success for all stakeholders, including our investors.\nOur main focus is on the E of ESG.\nWe have a strong record of delivering across all three.\nIn my 20 years of service, I believe our culture has never been stronger.\nEvery single day, our co-worker show up with a heart of service for our customers, our communities, and ultimately you, our investors.\nOur culture anchored by our values is thriving across our company and it's why we're recognized for top quartile safety performance, industry leading employee engagement, Forbes Best Employer for Women, Best for Vets by Military Times and Best Places to Work for LGBTQ Equality in the Corporate Equality Index.\nAnd earlier this month, we were ranked by Forbes, as the number one utility in the country, as Best Employers for Diversity.\nOur leadership, commitment and top tier ESG performance should provide you with the confidence that our long track record will continue to deliver value for customers and investors.\nTurning to recent updates.\nI want to highlight our continued growth in renewables with several exciting announcements.\nWe are pleased to announce the recent commission approval of our Heartland Wind project in March, which will be online in December of next year.\nThis project adds 201 megawatts of new capacity, as a part of our renewable portfolio standard earning a 10.7% return.\nI'm also pleased to share that we received approval for the first tranche of our current Integrated Resource Plan, which adds nearly 300 megawatts of new solar through two projects that we expect to come online in 2022.\nWe are evaluating the second tranche of our current IRP, another 300 megawatts of solar expected to come online in 2023.\nAnd the third tranche 500 megawatts of solar expected to come online in 2024 for a total of 1,100 megawatts.\nWe're on track to file our next Integrated Resource Plan in June.\nIt has been a popular topic in -- in our meetings with many of you, while we're still finalizing the details, the focus of our upcoming IRP will be to accelerate the decarbonization of our fleet, ensure reliability and affordability and add renewable and demand side resources in a way that makes sense for our customers and investors, while maintaining a healthy balance sheet.\nI'm excited for this next IRP.\nIt serves as yet another proof point that we are leading the clean energy transformation.\nAs part of our clean energy transformation -- part of our clean energy transformation includes retirement of our remaining coal fleet.\nOn Slide 7, you will see our plan to decarbonize is both visible and data driven.\nThe meaningful reduction of carbon emissions in our plan will drive our ability to achieve net zero carbon emissions by 2040.\nOver the past few months, I've been asked quite a bit about the future of our gas business.\nAs I've shared with many of you our gas business and system is critical to providing affordable and reliable heating here in Michigan.\nBut it doesn't mean, we're -- we're sitting on our tails here.\nIn fact, we are actively working to decarbonize our gas system.\nNow this aligns very well with the recent announcement from the Biden administration.\nOur first step is to reduce fugitive methane emissions, which is well under way, as we accelerate the replacement of vintage mains and services both plants approved by the commission will decrease our missions and achieve our net zero methane goal.\nOur decarbonization plans also leverage energy efficiency to reduce carbon usage and put renewable natural gas on our system, which will help decarbonize most difficult sectors, such as agriculture.\nBy replacing vintage mains and services with plastic piping, we will be positioned to deliver hydrogen or other clean molecules to our customers in the future.\nAs we would grow our renewable portfolio and decarbonize our generation fleet and gas delivery system, we remain committed to delivering against the triple bottom line of people, planet and profit.\nIt demonstrates our consistent industry leading performance for nearly two decades.\nAs much as things change, one thing stays consistent, year in and year out we have and we'll continue to deliver.\n2020 proved this, 2021 will be no different marking 19 years of consistent, predictable financial performance.\nAs Garrick highlighted, we're pleased to report our first quarter results for 2021.\nIn summary, we delivered adjusted net income of $348 million or $1.21 per share.\nFor comparative purposes, our first quarter adjusted earnings per share was $0.35 above our Q1, 2020 results, largely driven by rate relief, net of investment-related expenses, better weather and sustained cost performance from our 2020 efforts at the utility.\nOur enterprises and parent and other segments were slightly down as planned due to the absence of a one-time cost reduction item in 2020 and higher funded -- funding related costs respectively.\nThis modest negative variance was more than offset by strong origination growth at EnerBank, which exceeded its Q1, 2020 earnings per share contribution by $0.06 in 2021 as planned and is tracking toward the high end of our guidance for the year of $0.22 per share.\nThe waterfall chart on Slide 10 provides more detail on the key year-to-date drivers of our financial performance versus 2020 and highlights our latest estimates for the major year-to-go drivers to meet our 2021 earnings per share guidance range.\nTo elaborate on the year-to-date performance, while weather in the first quarter of 2020 has been below normal to-date, which has led to lower volumetric gas sales, it has been better than the historically warm winter weather experienced in the first quarter of 2020.\nAnd the absence of that weather has led to $0.08 per share of positive variance period-over-period.\nFrom a rates perspective, given the constructive regulatory outcomes achieved in the second half of 2020 for our electric and gas businesses, we're seeing $0.26 per share of positive variance.\nAs a reminder, our rate relief estimates are stated net of investment related costs, such as depreciation and amortization, property taxes and funding costs.\nIt is also worth noting that our 2021 financials reflect the accelerated amortization of deferred taxes, as part of our 2020 gas rate order settlement.\nOn the cost side as noted during our fourth quarter earnings call, we budgeted substantial increases in our operating and maintenance expenses in 2021 versus the prior year to fund key initiatives around safety, reliability, customer experience and decarbonization and in alignment with our recent rate orders.\nAs you can see, we're $0.02 per share above our spend rate in the first quarter of 2020 as planned, and I'm pleased to report that we're seeing sustained cost performance from 2020, as well as increased productivity in 2021, largely attributable to the CE Way.\nThat said, we do expect to see the bulk of the planned O&M increases to materialize later in the year.\nThe balance of our year-to-date performance is driven by the aforementioned drivers at our non-utility segment and non-weather sales, which though slightly down at about 1% below the first quarter 2020 continue to exhibit favorable mix with the higher margin residential class, up 2% versus Q1 of 2020.\nAnd I'll remind you that our total electric sales exclude one large low margin customer.\nAs we look ahead to the remaining nine months of 2021, we are cautiously optimistic about the glide path illustrated on this slide to achieve our full year earnings per share guidance.\nAs always, we plan for normal weather, which in this case translates to $0.12 per share of negative variance given the above normal weather experienced in the second and third quarters of 2020.\nThe residual impact of the aforementioned rate relief, which equates to $0.22 per share of pickup and is not subject to any further MPSC actions.\nAnd the continued execution of our operational and customer-related projects, which we estimate as an incremental $0.18 per share of spend versus the comparable period in 2020.\nWe have also seen the usual conservatism in our utility, non-weather sales and our non-utility segments.\nAll in, we are pleased with our strong start to the year and are well positioned for the remaining three quarters of 2021.\nAnd needless to say, we will be prepared to flex costs up or down, as the fact pattern evolves over the course of the year.\nAs we look out over the long term, we are in the early stages of executing our $13.2 billion five-year customer investment plan at the utility, which is highlighted on slide 11 and will provide significant benefits for our customers, the communities we serve and our investors.\nAs a reminder, we have budgeted over $2.5 billion of investments in 2021.\nThe vast majority of which is earmarked for safety, reliability and clean energy projects.\nWe are on track thus far, and recently filed an electric rate case in March that enumerate our customer investment priorities for the 2022 test year, which are summarized on the right hand side of the page among other key details related to the filing.\nWe expect an order from the commission by the end of the year.\nDespite the substantial customer investments that we intend to make on our electric and gas system over the next several years, as you know we take great pride in taking out costs in a sustainable way to maintain affordable bills for our customers, and we have the track record to prove it.\nThe left hand side of slide 12 summarizes the key components of our cost structure, which we have successfully managed over the past several years, while investing significant capital on behalf of customers.\nIn fact from 2017 to 2019, we reduced utility bills, as a percentage of customer wallet by 1%, while investing roughly $19 billion of capital in the utility over that timeframe.\nAs we look ahead, we have several highly actionable event driven cost reduction opportunities, which will provide substantial savings in the years to come.\nThe planned expiration of our Palisades power purchase agreement and the recently approved amendment to our MCV PPA will collectively generate roughly $150 million of power supply cost recovery savings.\nAnd as you'll note, our initial estimates for the potential savings for the MCV contract amendment of approximately $50 million proved conservative with the revised estimate of over $60 million in savings, per the commission's order in March.\nAlso the planned retirements of our five remaining coal unit should provide another $90 million of savings in aggregate, exclusive of any potential fuel cost savings, which will create meaningful headroom and bills for future customer investments.\nLastly, I'd be remiss if I didn't mention our annual O&M productivity delivered through the CE Way, which last year generated roughly $45 million of savings and serves as a critical tool to our long term and intra-year financial planning.\nTo that end, many of you've asked about proposed changes in corporate tax policy and its potential impact to our plan.\nThough at this point, the final details remain unclear, trust that we are evaluating the potential effects and we'll leverage the CE Way and other cost reduction opportunities, including potential offsetting tax credits that are also being proposed, as part of the legislation to minimize the impact to customers, while executing our capital plan.\nAs we've said before, it is our job to do the warring for you, and we are uniquely positioned over the next several years to manage any potential headwinds.\nWith our unparalleled track record on cost management, driven by our highly engaged workforce coupled with a robust customer investment backlog and top tier regulatory construct, we are confident that we can deliver on our ambitious, operational, customer and financial objectives for the foreseeable future.\nAnd with that we'll move to Q&A.\nMr. Racho, please open the lines.\n",
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"content": "compname announces first quarter earnings results of $1.21 per share, reaffirms 2021 guidance.\nq1 adjusted earnings per share $1.21.\nq1 earnings per share $1.21.\ncompname says reaffirmed its guidance for 2021 adjusted earnings of $2.83 - $2.87 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: Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website.\nI'm going to start today with the end in mind, strong quarter and a great first half of the year, giving us confidence as we target the high end of the guidance range.\nRejji will walk through the details of the quarter, and I'll share what the strong results mean for 2021 earnings.\nNeedless to say, I'm very pleased.\nAn important gene sale of EnerBank at 3 times book value, moving from noncore to the core business with a strong focus on regulated utility growth.\nThe sale of the bank provides for greater financial flexibility, eliminating planned equity issuance from 2022 to 2024.\nAnd in the end, Reggie will share how we have reduced our equity issuance need for 2021 in today's remarks.\nFurthermore, with the filing of our integrated resource plan, you can see the path for more than $1 billion into the utility, again, without equity issuance.\nNot only is there visibility to that investment, that's certainly in the time line for review.\nI'm excited about this IRP.\nIt's a remarkable plan.\nMany have set net zero goals.\nWe have industry-leading net zero goals and this IRP provides a path and is an important proof point in our commitment.\nWe are leading the clean energy transformation.\nIt starts with our investment thesis.\nThis simple but intentional approach has stood the test of time and continues to be our approach going forward.\nIt is grounded in a balanced commitment to all our stakeholders and enables us to continue to deliver on our financial objectives.\nWith the sale of EnerBank and the plan to exit coal by 2025, our investment thesis gets even simpler.\nBut now it's also cleaner and leaner.\nWe continue to mature and strengthen our lean operating system, the CE Way, which delivers value by reducing cost and improving quality, ensuring affordability for our customers, and our thesis is further strengthened by Michigan's supportive regulatory construct.\nAll of this supports our long-term adjusted earnings per share growth of 6% to 8%, and combined with our dividend, provides a premium total shareholder return of 9% to 11%.\nAll of this remains solidly grounded in our commitment to the triple bottom line of people, planet and profit.\nAs I mentioned, our integrated resource plan provides the proof points to our investment thesis, our net zero commitments and highlights our commitment to the triple bottom line by accelerating our decarbonization efforts, making us one of the first utility in the nation to exit coal or increasing our renewable build-out, adding about eight gigawatts of solar by 2040, two gigawatts from the previous plan.\nFurthermore, this plan ensures reliability, a critical attribute as we place more intermittent resources on the grid.\nThe purchase of over two gigawatts of existing natural gas generation allows us to exit coal and dramatically reduces our carbon footprint.\nExisting natural gas generation is key.\nAnd like we've done historically with the purchases of our Zeeland and Jackson generating stations.\nThis is a sweet spot for us where we reduce permitting, construction and start-up risk.\nIt is also thoughtful and that is not a 40- to 50-year commitment that you would get with a new asset, which we believe is important, as we transition to net zero carbon.\nAnd, yes, on other hand, our plan is affordable for our customers.\nIt will generate $650 million of savings, essentially paying for our transition to clean energy.\nThis is truly a remarkable plan.\nIt is carefully considered and data-driven.\nWe've analyzed hundreds of scenarios with different sensitivities and our plan was thoughtfully developed with extensive stakeholder engagement.\nI couldn't be more proud of this plan and especially the team that put it together.\nWe've done our homework, and I'm confident it is the best plan for our customers, our coworkers, for great state of Michigan, of course, you, our investors to hit the triple bottom line.\nThe Integrated Resource Plan is a key element of Michigan's strong regulatory construct, which is known across the industry as one of the best.\nIt is a result of legislation designed to ensure a primary recovery of the necessary investments to advance safe and reliable energy in our state.\nIt enables us and the commission to align on long-term generation planning and provide greater certainty as we invest in our clean energy transformation.\nWe anticipate an initial order for the IRP from the commission in April and a final order in June of next year.\nThe visibility provided by Michigan's regulatory construct enables us to grow our capital plan to make the needed investments on our system.\nOn Slide six, you can see that our five-year capital plan has grown every year.\nOur current five-year plan, which we'll update on our year-end call includes $13.2 billion of needed customer investment.\nIt does not contain the upside in our IRP.\nThe IRP provides a clear line of sight to the timing and composition of an incremental $1.3 billion of opportunity.\nAnd as I shared on the previous slide, the regulatory construct provides timely approval of future capital expenditures.\nI really like this path forward.\nAnd beyond our IRP, there is plenty of opportunity for our five-year capital plan to grow given the customer investment opportunities we have in our 10-year plan.\nOur backlog of needing investments is as vast as our system, which serves nearly seven million people in all 68 counties of Michigan's Lower Peninsula.\nWe see industry-leading growth continuing well into the future.\nSo where does that put us today?\nThe bank sale and now the IRP filing provide important context for our future growth and positioning of the business.\nLet me share my confidence.\nFor 2021, we are focused on delivering adjusted earnings from continuing operations of $2.61 to $2.65 per share, and we expect to deliver toward the high end of that range.\nFor 2022, we are reaffirming our adjusted full year guidance of $2.85 to $2.87 per share.\nGiven the strong performance we are seeing this year, the reduced financing needs next year and continued investments in the utility, there is upward momentum as we move forward.\nNow many of you have asked about the dividend.\nWe are reaffirming again no change to the $1.74 dividend for 2021.\nAs we move forward, we are committed to growing the dividend in line with earnings with a target payout ratio of about 60%.\nIt's what you expect, it's what you own it, and it is big part of our value.\nI will offer this.\nOur target payout ratio does not need to be achieved immediately, it will happen naturally, as we grow our earning.\nFinally, I want to touch on long-term growth rate, which is 6% to 8%.\nThis has not changed.\nIt's driven by the capital investment needs of our system, our customers' affordability and the need for a healthy balance sheet to fund those investments.\nHistorically, we've grown at 7%.\nBut as we redeploy the proceeds from the bank, we will deliver toward the high end through 2025.\nI'll also remind you that we tend to rebase higher off of actuals.\nWe have historically either met or exceeded our guidance.\nAll in, a strong quarter, positioned well for 2021 with upward momentum and with EnerBank and the IRP, it all comes together nicely positioned for the long term.\nBefore I walk through the details of our financial results for the quarter, you'll note that throughout our materials, we have reported the financial performance of EnerBank as discontinued operations, thereby removing it as a reportable segment and adjusting our quarterly and year-to-date results in accordance with generally accepted accounting principles.\nAnd while we're on EnerBank, I'll share that the sale process continues to progress nicely, as the merger application was filed in June with the various federal and state regulators will be evaluating the transaction for approval, and we continue to expect the transaction to close in the fourth quarter of this year.\nMoving on to continuing operations.\nFor the second quarter, we delivered adjusted net income of $158 million or $0.55 per share, which excludes $0.07 from EnerBank.\nFor comparative purposes, our second quarter adjusted earnings per share from continuing operations was $0.09 above our second quarter 2020 results, exclusive of EnerBank's earnings per share contribution last year.\nThe key drivers of our financial performance for the quarter were rate relief, net of investment-related expenses, recovering commercial and industrial sales and the usual strong tax planning.\nYear-to-date, we delivered adjusted net income from continuing operations of $472 million or $1.64 per share, which excludes $0.19 per share from EnerBank and is up $0.37 per share versus the first half of 2020, assuming a comparable adjustment for discontinued operations.\nAll in, we're tracking well ahead of plan on all of our key financial metrics to date, which offers great financial flexibility for the second half of the year.\nThe waterfall chart on Slide nine provides more detail on the key year-to-date drivers of our financial performance versus 2020.\nAs a reminder, this walk excludes the financial performance of EnerBank.\nFor the first half of 2021, rate relief has been the primary driver of our positive year-over-year variance to the tune of $0.36 per share given the constructive regulatory outcomes achieved in the second half of 2020 for electric and gas businesses.\nAs a reminder, our rate relief figures are stated net of investment-related costs, such as depreciation and amortization, property taxes and funding costs at the utility.\nThe rate relief related upside in 2021 has been partially offset by the planned increases in our operating and maintenance expenses to fund key initiatives around safety, reliability, customer experience and decarbonization.\nAs a reminder, these expenses align with our recent rate orders and equate to $0.06 per share of negative variance versus 2020.\nIt is also worth noting that this calculation also includes cost savings realized to date, largely due to our waste elimination efforts through the CE Way, which are ahead of plan.\nWe also benefited in the first half of 2021 from favorable weather relative to 2020 in the amount of $0.06 per share and recovering commercial and industrial sales, which coupled with solid tax planning provided $0.01 per share of positive variance in aggregate.\nAs we look ahead to the second half of the year, we feel quite good about the glide path to delivering toward the high end of our earnings per share guidance range, as Garrick noted.\nAs always, we plan for normal weather, which in this case, translates to $0.02 per share of negative variance, given the absence of the favorable weather experienced in the second half of 2020.\nWe'll continue to benefit from the residual impact of rate relief, which equates to $0.12 per share of pickup.\nAnd I'll remind you, is not subject to any further MPSC actions.\nWe also continue to execute on our operational and customer-related projects, which we estimate will have a financial impact of $0.21 per share of negative variance versus the comparable period in 2020 given anticipated reinvestments in the second half of the year.\nWe have also seen the usual conservatism in our utility non-weather sales assumptions and our nonutility segment performance, which as a reminder, now excludes EnerBank.\nAll in, we are pleased with our strong start to the year and are well positioned for the latter part of 2021.\nTurning to our financing plan for the year.\nI'm pleased to highlight our recent successful issuance of $230 million of preferred stock at an annual rate of 4.2%, one of the lowest rates ever achieved for a preferred offering of its kind.\nThis transaction satisfies the vast majority of funding needs of CMS Energy, our parent company for the year and given the high level of equity content ascribed to the security by the rating agencies, we have reduced our planned equity issuance needs for the year to up to $100 million from up to $250 million.\nAs a reminder, over half of the $100 million of revised equity issuance needs for the year are already contracted via equity forwards.\nIt is also worth noting that given the terms and conditions of the EnerBank merger agreement in the event EnerBank continues to outperform the financial plan prior to the closing of the transaction, we would have a favorable purchase price adjustment related to the increase in book equity value at closing, which could further reduce our financing needs for 2021 and provide additional financial flexibility in 2022.\nClosing out the financing plan, I'll also highlight that we recently extended our long-term credit facilities by one year to 2024, both at the parent and the utility.\nLastly, I'd be remiss if I didn't mention that later today, we'll file our 10-Q, which will be the last 10-Q owned by Glenn Barba, our Chief Accounting Officer, who most of you know from his days leading our IR team.\nGlenn announced his retirement earlier this year after serving admirably for nearly 25 years at CMS, which included him signing over 75 quarterly SEC filings during his tenure.\nAs we've highlighted today, we've had a great first half of the year.\nWe are pleased to have delivered such strong results.\nWe're positioned well to continue that momentum into the second half of the year as we focus on finalizing the sale of the bank and moving through the IRP process.\nI'm proud to lead this great team, and we can't wait to share our success as we move forward together.\nThis is an exciting time at CMS Energy.\nWith that, Rocco, please open the lines for Q&A.\n",
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"content": "reaffirms fy adjusted non-gaap earnings per share view $2.61 to $2.65 from continuing operations.\nreaffirms fy adjusted earnings per share view $2.85 to $2.87.\nq2 adjusted earnings per share $0.55 from continuing operations.\nq2 earnings per share $0.55 from continuing operations.\n",
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